Good morning, and welcome to Thursday! Here’s what you need to know:
Yellen’s warning. The Fed chair presented her economic outlook to Congress overnight. She said a “high degree of monetary accommodation” remained warranted, but the part of her testimony that got people talking was her assessment of the US housing market. She said data had “remained disappointing so far this year” and that the recent flattening “prove more protracted than currently expected”. Some are seeing this as a departure from the more upbeat tone on the US recovery, which of course the whole world is watching.
Markets are up. The Dow (+0.78%) and the S&P 500 (+0.30%) were up for the session with Yellen’s reassurance. This might help recover some of the losses in yesterday in Asia, where the Nikkei was down almost 3%, and the ASX was down 0.83%. The NASDAQ fell 0.78%, however, with a few select stocks getting clobbered, notably Groupon, down 23%, after analyst revisions. Twitter hit new lows, below its IPO price, a source of amusement for some:
Ha! $TWTR traded at… Wait for it… $29.95!!! :) *drops mic*
— Timothy Connolly CFA (@SconsetCapital) May 7, 2014
Australia’s jobs day. The ABS reports April employment at 11.30am AEST. The market expects 9,500 jobs were added for the month, but there’s some x-factor at work because of the late Easter falling close to the ANZAC Day weekend, which practically shut the country down for the week. China’s trade balance is also out this morning and tonight we get the ECB decision, with no change in rates expected.
The infrastructure budget. The mantra of senior Australian government ministers ahead of next Tuesday’s budget is now “wait and see the full package”, amid mounting criticism – including from a growing group of Coalition MPs about some of the measures expected, especially the deficit tax. Assistant Minister for Infrastructure Jamie Briggs spoke to Business Insider yesterday and he confirmed the following: there’ll be at least an extra $5 billion for infrastructure, as well as “significant” funding for the so-called “asset recycling” program. This will give the states a whopping 15% kickback on infrastructure projects that are funded by sales of existing assets like ports and electricity. He also flagged significant private sector involvement in the infrastructure program – something to watch for next Tuesday.
Tax promises. Joe Hockey has gone to the Fin to say the government never promised no new taxes before the last election, pointing to the paid parental leave scheme which is funded by a 1.5% levy on bigger companies. Make of this what you will against the Prime Minister’s repeated statements, with the paid parental leave scheme on the table, that there would be, you know, no new taxes.
NAB results. The run of good results for Australia’s major banks continues, with Cameron Clyne’s (not for long!) outfit reporting a statutory net profit of $2.86 billion this morning, an increase of 15.8%, or $390 million on the March half results last year. The dividend was 99c and like Westpac there was a big reduction in bad debt. (Anyone notice nobody gets angry about the banks going gangbusters these days?)
Andreessen’s economics. Netscape founder and investor Marc Andreessen had a series of eight tweets giving his take on market valuations, elaborating on the efficient market hypothesis which states that at any time the market has priced in all available information. The killer line: “Efficient Market Hypothesis is correct if for ‘all information’ you substitute ‘all information, theories, noise, and bullsh*t’.”
How to shred a company in 56 slides. David Einhorn from hedge fund Greenlight Capital gave a most amusing presentation at the Ira Sohn investment conference this week methodically tearing apart a company called athenahealth. By the time he finished speaking the stock was down 7%; it was down 14% that session, and fell again the next day. Conventional market talk in Australia is sometimes so conservative that you wish sometimes people would speak their minds properly like this – it’s not as if the talent and the views aren’t there. Here’s the presentation, which everyone should be able to enjoy.
Bonus item: These soccer robots are supposed to be able to play against professionals in about 35 years’ time. For now, they are cute but rather stupid.
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