This morning we are getting news that the Alibaba dog and pony show has been so well received that they are going to stop it. Who needs to bother marketing the company when the thing sells itself? Come’ on. This thing has sexy written all over it. Technology company? Check. Social media? Check. E-commerce? Check. Electronic payments? Check. Throw in the added bonus of Alibaba being a way to play the burgeoning Chinese consumer and you have a poster perfect IPO.

And who can blame all the investors lining up to buy this thing? In this day and age, everyone is embracing technology with a gusto.

I hear even these guys use Alibaba – though the Dalai Lama is more of a Facebook/Amazon guy out of principle (with a little thrown in there for good measure.)

It is a testament to today’s environment that this IPO can be floated so easily. This is going to be the largest IPO in history. Facebook only sold a measly $16 billion of stock on its trading debut. Even financial juggernut VISA only managed to float just a shade under $20 billion dollars.

Alibaba is going to issue over $24 billion dollars of stock. The valuation of the entire company will be over $155 billion. That will make it the biggest IPO in both total valuation and shares floated… ever.

The public is of course clamouring to eat this crap up. I don’t have an opinion on how it is going to trade in the days after the IPO. Trying to handicap this mania is like betting on which meth fuelled teenage boy is going to win the drag race through the middle of town at 2 o’clock in the morning. Yeah, with a little analysis you might be able to pick a winner, but the better bet is to assume it will end badly.

The real takeaway I want to leave you from this rant is this; in the past year or so, the stock market was going up because companies were buying back shares with the money they received from the cheap debt they floated. The supply of equities was, at the margin decreasing, as stock was bought back. Even as the stock market rallied, companies had very little faith in the economic recovery continuing, so they were loath to issue new shares to finance business expansion. Usually a strengthening equity market is used as a source of capital as the economy improves.

Instead this cycle saw very little corporate equity issuance. And when you combine that with the buybacks financed with cheap debt, the supply of equities was constrained. This caused the stock market to rally even farther than would be typical.

But that has changed. Companies are increasingly floating equity to an eager public. I have noticed this new development with the constant stream of new issue notifications I receive from my brokers. During 2013 and for the first half of 2014, even though the equity market rallied, there was very little new issue business. However over the past quarter it has exploded.

Now this doesn’t mean that stocks are destined to go down. But I do know that the supply will start to weigh on the market. At the very least, pushes to new highs will be met with selling instead of more buying like has been the trend over the last few years.

The supply demand picture for equities has changed, and not for the better…

Don’t look now

Don’t look now, but yields are breaking higher across the globe.

I am a big bear on bonds and it looks like the market might finally be agreeing with me. I still contend that QE programs are inflationary and that the ECB balance sheet expansion announcement will mark the bottom in yields.

Complacency watch

I am creating a new section of this journal called “Complacency Watch.” In this section I will highlight signs of the increasingly complacent attitude towards risk.

Today’s edition features the former Bond King himself – PIMCO’s Bill Gross.

Sept. 11 (Bloomberg) – While the idea of using leverage may still invoke memories of the 2008 financial crisis, the billionaire manager of the world’s biggest bond fund says it makes sense now to borrow money to magnify returns in the credit markets. “It’s probably a good time to lever in a mild sort of way,” Bill Gross, who co-founded Pacific Investment Management Co., said in a television interview today. For the next three to five years, investors should expect “the ability to borrow short and to lend long, much like banks do.”

Yup, with credit spreads at all time lows and short term rates being at zero for the past five years – it is “probably a good time to lever up” – albeit in a “mild sort of way.” Nothing like suggesting that investors should take their investing acumen from the banks who have been so great at navigating through the previous credit cycles…

Positions </p>