Last night as I was scrolling through my old research articles, I came across this great picture from the BehaviorGap.com website. I think I clipped it in 2010 from Ritholz’s Big Picture blog.

http://themacrotourist.com/images/Azure/greedSep1814.png

At that time the S&P 500 was around 1,050 and no one wanted to own stocks.

If you need help figuring out where we are on the curve today, then I am sorry but I can’t help you…


All ’Baba all the time!

Today we get the much anticipated Alibaba stock listing. Of course we should all be giddy with excitement about the floating of the largest IPO ever.

We know it will go well because Cramer tells us so:

Alibaba is different, @jimcramer says. The allocation “is as tight as a drum, and that’s important.” @CNBC $BABA

And the fact that the internet is plagued with info graphics like this should be no cause for concern:

http://themacrotourist.com/images/Azure/babaInfoSep1814.png

I didn’t have room to list the 10 reasons on this post, but rest assured, they were good ones.

And please don’t pay any heed to analysis such as this:

http://themacrotourist.com/images/Azure/largestIPOSep1814.png</p>

I am sure that Alibaba will be different – Cramer says so and he doesn’t usually get the big things wrong.

http://themacrotourist.com/images/Azure/Cramer.png

IPO’s are surefire ways to make money. In fact, the bigger the better!

http://themacrotourist.com/images/Azure/bigIPOSep1814.png

And these old fuddy duddies that are worried about the Alibaba share structure are nuts! When has a Chinese company ever reneged on a deal and ripped off US investors?

Alibaba Group Holding Ltd.’s corporate structure is “dangerous,” and shareholders will have no legal recourse should problems emerge at the Chinese e-commerce giant, an influential emerging-markets fund manager cautioned Thursday.
“You have a dual share class, where the minority, the founders, have control of the key assets of the company, and if something goes wrong and they decide to take all the pay away, there’s nothing you can do about it,” Mark Mobius, head of emerging markets at Franklin Templeton Investments, told CNN Money.
‘That kind of structure is quite risky, and it’s probably not a good idea to go after it.’

Pshaw! That dinosaur doesn’t know what he is talking about.

Doesn’t he know about the 10 reasons to go long on the IPO? Doesn’t he know that this is the sexiest IPO since Facebook? In fact, it’s even better because it is Chinese! Do you know how many Chinese consumers there are? Alibaba is the gateway to all this wealth! We are all going to be rich if we invest in ’Baba!

On this topic I will leave you with the foolish words of another crotchety old investor who is probably not smart enough to take down any of this red hot Alibaba issue…

“When you locate a bargain, you must ask, ‘Why me, God? Why am I the only one who could find this bargain?’” – Charlie Munger


Scotland…

This morning as I awoke to the news that Scotland had voted to stay in the United Kingdom I saw that Spanish Prime Minister Rajoy had sent out a video message;

“we are all very happy that Scotland will continue to be with us,” given that its citizens have avoided “the serious economic, social, institutional and political consequences that its separation from the United Kingdom and Europe would have meant.”

He is happy that the Scots avoided the consequences of independence? Really? Or maybe he is happy that this result might have bought him a couple of more years before his citizens demand the same independence that the Scots were “smart” enough to avoid?

I really hope that the Scots voted to remain part of the UK for the right reasons, and it wasn’t just the scare tactics of the economic and political elite that stopped them from voting YES.

But we all know that it really probably had something to do with this:

http://themacrotourist.com/images/Azure/scottishSep1914.png

This is of course the Scottish Commonwealth athletic uniform. If I was forced to wear that uniform, I too might be ready to declare independence.

And now that the nasty business of the referendum is behind them, the Scots can go back to the hard hitting stories that they are accustomed to… Like this one.

http://themacrotourist.com/images/Azure/shatSep1914.png

I know I shouldn’t, but the 15 year old boy in me just finds this funny. You have to love Scotland.


The ECB never had a horse

A couple of days ago the ECB announced the results from their latest LTRO program. This was the program that Draghi announced earlier in the summer that was going to be executed in two different tranches. The problem with this program was that there was all sorts of stipulations about what the banks could do with the money. Fearful that pushing credit into the system would just produce a US style result of the rich getting richer, the ECB was determined to try to guide the credit into specific areas of the economy.

The trouble is that when you put those sorts of conditions on it, there is way less demand for the credit. The ECB was hoping that the LTRO would be between €100 and €300 billion. The actual result came in at an abysmal €82.6 billion.

I kept a tweet from after the announcement that summed up the situation perfectly:

http://themacrotourist.com/images/Azure/usefulSep1914.png</p>

The ECB is learning the hard way that during a balance sheet recession, there is very little demand for new credit. The money needs to be force fed into the system.

And herein lies the problem. The Germans don’t want the expansion of the ECB’s balance sheet, so Draghi is forced to come up with all of these politically acceptable ways to conduct easing operations.

He has pledged to expand the balance sheet to the levels from the summer of 2012.

http://themacrotourist.com/images/Azure/ECBTotalSep1914.png

But if his LTRO programs are going to be so poorly received, he is going to have to figure out alternative ways to push credit into the system.

I worry that the market has probably given him too much credit for being able to follow through with his pledges. At the very least, it will most likely be a slow affair that is plagued by set backs.

Contrast that to the PBOC (People’s Bank of China) that can instantly alter their balance sheet in any means they see fit. Even the Fed is able to expand and contract their balance sheet at their discretion within their mandate.

Europe is not only suffering from a massive deflationary vicious circle, but they are also plagued with political constraints that make arresting that feedback loop all the more difficult.

For now I am going to take Draghi at his word when he pledged to expand the ECB’s balance sheet. However, the first tranche of the LTRO does little to assuage my concerns.


Positions

As I planned a couple of days ago, now that the Scottish referendum is behind us, I am going to pick up some Talisman Energy and Ithaca.

http://themacrotourist.com/images/Azure/PositionsSep1914.png