Spanish Consumer Prices Drop Most Since 2009 as ECB Plans Action Slumping oil prices pushed Spanish consumer prices down by the most in more than five years in December as euro-region policy makers consider boosting monetary stimulus.
Prices dropped 1.1 percent from a year earlier, the most since July 2009, the Madrid-based National Statistics Institute said today. The decline, based on a European Union measure, was the sixth in a row and bigger than the 0.7 percent drop forecast by economists in a Bloomberg News survey.
Greek Vote for President Fails, Reviving Uncertainty A parliamentary vote to elect a president in Greece failed, hitting stock markets in Europe’s most precarious countries and setting off worries that new Greek political upheaval could reignite a long-simmering debt crisis.
Russian Economy Contracts Russia’s economy contracted for the first time in more than five years in November, taking a step toward a full-scale recession next year, data from the economy ministry showed.
Russia’s gross domestic product shrank 0.5% on the year in November after showing growth close to zero in the preceding month, data from the economy ministry showed Monday. It was the economy’s first contraction over a 12-month period since late 2009. The economy grew by 0.6% in the first 11 months of this year, the data showed. (…)
In an attempt to beef up banks, Moscow decided on Monday to pump in one trillion rubles ($1.8 billion) into the banking system.
“We need to act quickly as the situation on the financial market is, as one calls it, versatile, volatile, complicated,” Prime Minister Dmitry Medvedev said Monday, Russian news agencies reported. “That is why we need this extra capitalization to reach banks, as soon as we have made the decision and the money is high, to make the situation calm, stable.” (…)
This, in Russian, is called a bailout.
Poroshenko to Meet With Putin, Merkel, Hollande as Truce Wobbles
Russian President Vladimir Putin, German Chancellor Angela Merkel and French President Francois Hollande will hold talks on Jan. 15 with the Ukrainian leader in the Kazakh capital, Astana, Poroshenko said at a news conference yesterday. Ukraine doesn’t have the resources to mount an offensive against separatist forces, even as it wants to regain control over the two breakaway regions, he said in Kiev.
“There’s no military solution in Donbas,” Poroshenko said, referring to the area of eastern Ukraine where pro-Russian rebels are pitted against government troops. “If someone wants to have a go — take up weapons and face the bullets of the Russian military machine, the strongest on the continent — let’s see how that ends.”
Oil Firms Pull Back on Rigs as Prices Fall
Rigs drilling for oil in the U.S. last week dropped by 37 to 1,499, Baker Hughes said Monday. This follows a 10-rig drop the previous week and a 29-rig decline the week before that. (Charts from Zerohedge)
There “Is” Blood: Energy Services Firm Civeo Cuts Headcount 45% & Guidance By 30%, Suspends Dividend
In what we suspect will be the first of many, Houston-based Civeo (which provides workforce accomodation to the oil industry) has crashed over 20% after-hours (after being down over 65% since September already) following the total carnage of its earnings report.
- *CIVEO HAS CUT U.S., CANADA HEADCOUNT BY 45%, 30% FROM EARLY ’14
- *CIVEO SEES 2015 REV $540M-$600M, EST. $817.3M
Shenzhen to restrict new car sales Move by southern city to further curb China car market growth
(…) Under the new rules, announced on Monday and effective immediately, only 100,000 new licence plates will be issued annually in Shenzhen via a combination of auctions and lotteries. About 3.1m private cars are registered in the city of 15m people.
Twenty per cent of Shenzhen’s quota will be reserved for electric cars, in line with the central government’s efforts to combat congestion and pollution. The city, which borders Hong Kong, is home to BYD , China’s best known maker of new-energy vehicles. On Tuesday, China’s finance ministry extended a subsidy programme aimed at boosting sales of electric cars for another five years. (…)
More than 80 per cent of China’s population lives in areas where per capita GDP is less than $4,500, compared with figures of $13,000 or higher in cities such as Shenzhen.
Eurozone Private-Sector Lending Improves
Private-sector lending was down 0.9% in November on an annual basis, the ECB said in its monthly report. That was a modest improvement from October’s 1.1% decline.
The broadest measure of money supply, M3, rose 3.1% on an annual basis last month, the ECB said, up from October’s 2.5% rise and better than the 2.6% rise economists had expected.
Despite the improvement, M3 growth remained below the reference value of 4.5% that the ECB considers consistent with its goal of maintaining a medium-term inflation rate of just under 2%.
SENTIMENT WATCH
Russell 2,000 (Smallcaps) Finally Breaks Out
From Zerohedge, FYI:
Investors Pile Into ETFs at Record Pace Investors poured cash into U.S.-based stock exchange-traded funds at the fastest pace on record this year, according to research firm Lipper.
Investors poured cash into U.S.-based stock exchange-traded funds at the fastest pace on record this year, according to research firm Lipper. (…)
In fact, just last week, investors piled into U.S.-based stock funds at a record clip as the Dow Jones Industrial Average surged to another historic high, passing the psychologically-important 18,000 level.
Startup Values Set Records Valuations placed on tech startups world-wide stretched to record heights in 2014 and accelerated at an exceptional pace, even when compared with the late 1990s dot-com boom.
This year, venture capitalists, mutual funds and big banks bestowed valuations of $1 billion or more on about 40 startups world-wide, doubling the number of such companies at the start of the year, according to research firm Dow Jones VentureSource.
Adjusted for inflation, the current roster of 70 “billion dollar” startups globally is nearly twice as large as the number during the boom years 1999 and 2000. (…)
Perhaps more astonishing than the dollar figures was how fast they were achieved. In November, investors paid $1.2 billion for a stake in Uber Technologies Inc. that valued the five-year-old car-hailing service at $41.2 billion, almost 12 times the price set by venture capitalists last year. The valuation of Pure Storage Inc., a vendor of data-storage equipment, tripled to $3 billion in April after less than a year. Slack Technologies Inc. was valued at $1.1 billion in October only a year after releasing its popular work-collaboration product. (…)
The prevailing theory behind the investment rush: Technology is overtaking nearly every major industry, from city transportation and hospitality to education and health care. And real businesses are being built, bullish backers say, not the revenue-less startups from those heady dot-com days in the late 1990s, when excitement over the Internet led to a tech-stock bubble that burst in early 2000.
Many of the companies in today’s billion-dollar club, such as Uber, Xiaomi, home-rental site Airbnb Inc., Web storage company Dropbox Inc. and data-mining startup Palantir Inc. are said to be generating tens if not hundreds of millions of dollars annually. (…)
Billionaire venture capitalist Peter Thiel , an early investor in Facebook, says on balance the field of startups doesn’t feel overvalued. The sum of billion-dollar-plus valuations in the U.S.—at roughly $160 billion—would still be less than half of Google Inc. ’s $365 billion market cap, he says.
Others are less sanguine.
“Without question in some sectors there is a pricing balloon bubble in late stage,” said Peter Fenton, a partner at Benchmark, an early investor in Uber, Dropbox and Snapchat. (…)
The pricing party is being partly driven by the endowments, foundations and pension funds that back venture firms like Benchmark. Low interest rates and the prospect of juicy returns—inspired by success stories like Facebook, Google and Apple Inc. —are encouraging these firms to pour money into venture capital.
Venture firms have raised more than $32 billion this year, up 60% from last year’s total, though still well below the $121 billion (inflation adjusted) raised in 2000, according to VentureSource.
The latest figure, however, doesn’t include the dry powder from mutual funds such as BlackRock, T. Rowe Price and Wellington Management, or from hedge funds and big banks, all of which are bidding up prices. (…)
Underscoring the pricing ladder, in the time span between when the WhatsApp deal was announced and when it closed, investors in Snapchat boosted its valuation to $10 billion from $1.5 billion. Yik Yak—a year-old, revenue-less messaging app—had its valuation rise from $10 million to around $400 million.
Slack Technologies founder and CEO Stewart Butterfield said he was astounded by the number of venture capitalists eager to bid up his company’s valuation to the billion-dollar mark in October. “We had to step back to decide if we were driving this or this was happening to us,” Mr. Butterfield said. (…)
At least 30 companies have gone public in the U.S. with lower prices than they were worth in private stock sales or option grants in the prior 90 days, according to Valuation Advisors, which conducts valuations for private companies. (…)
Investors Struggle to Get Into Private Equity Funds Pension funds, endowments and wealthy individuals that invest with private equity are finding it increasingly hard to get into the most sought-after funds, according to data and industry participants.
(…) Pension funds, endowments and wealthy individuals that invest with private equity are finding it increasingly hard to get into the most sought-after funds, according to data and industry participants.
Private-equity firms, which raise money from such investors and then put it to work in various investment strategies, are generally filling their coffers faster this year from clients. The proportion of private-equity funds that reached or exceeded the maximum amount the firms set out to raise this year is at its highest level since at least 2009, according to a snapshot of funds for which private-equity tracker Preqin has data. (…)
The New Mexico State Investment Council, for example, plans to cut the number of private-equity funds in its portfolio to about 60 from 120 over the long-term.
(…)
There will be blood. It happened with the dot.coms, it happened with hedge funds, it happened with commodities, it is now happening with tech startups and private equity funds. Rear-view mirror investing. Plus ça change…
And this (my emphasis):
Shake Shack Files for IPO Burger chain Shake Shack filed for an initial public offering on Monday, saying it plans to use some of the proceeds to pay off debt and grow its restaurant base.
(…) The IPO could value Shake Shack at more than $800 million, based on the trading of one of the company’s publicly traded peers. Habit Restaurants trades at about 55 times its 2013 adjusted earnings before interest, taxes, depreciation and amortization, according to FactSet. Both companies earned about $15 million by that measure. (…)
Revenue in the first nine months of 2014 surged 41%, to $84 million, over the same period last year, while its profit decreased 20%, to $3.5 million. Same-store sales growth—dubbed “same Shack sales” by the company—has moderated this year from 2013, rising in the low-single-digit percentages in the first three quarters of 2014. The company said in the IPO filing it has been focused on new-store openings.
As of Sept. 24, that growth had been slowing down among the 12 Shake Shacks open more than two years. “Same Shack sales growth” slowed to 3.0% as of Sept. 24 from 5.5% the prior year.
The company distinguishes the revenues and profit margins at its Manhattan locations vs. its non-Manhattan locations, saying the volumes in Manhattan Shake Shacks have historically been higher because of “the population density and overall familiarity with the Shake Shack brand.” Since most of its future growth is expected to occur outside of Manhattan, the company says investors are better off judging the company by its non-Manhattan numbers.
While the company has a relatively straightforward business, its IPO has a complex structure.
According to the filing, Shake Shack plans to use the IPO proceeds to buy interests in a private partnership owned by investors including Mr. Meyer and private-equity firms Leonard Green & Partners LP and Select Equity Group LP, all of which own more than 5% of Shake Shack. (Alliance Consumer Growth, which invested in 2013, also owns a stake of at least 5%.)
That partnership then will use some of the money it receives to repay a credit facility led by J.P. Morgan Chase & Co., which is a lead bank on the IPO with Morgan Stanley .
The credit facility will be used in part to fund a $22 million payout to private investors before the IPO.
Some of the money going to the partnership also will be used to fund new restaurants and renovate existing ones, the company said. It said it plans to open 10 new U.S. Shake Shacks a year starting in 2015 for the “foreseeable future.”
After the IPO, the private investors also will continue to get payments from Shake Shack equal to 85% of certain tax benefits the company might receive, an arrangement known as a “tax receivable agreement,” according to the filing. The company said it expects the payments to be significant.
Robert Willens, an independent tax analyst in New York, said the arrangements are common and can be controversial. But, he said, if they are “fully disclosed and…reflected in the IPO price, it’s probably not that objectionable.”
(…)
BTW:
There are Shake Shacks in Lebanon. And Saudi Arabia, Russia, and other countries. There are 27 international Shake Shacks in all, and they are licensed locations, not company operated. The filing says the international locations paid license fees of approximately $3.5 million in fiscal 2013. More could be coming. As the filing says: “we continue to attract substantial interest from potential international licensees around the world and have identified opportunities to expand our licensing footprint in existing and new international markets.”
I like Shake Shack burgers but I will pass on the stock. Too many strange condiments…
Let’s admit that Bernanke’s gambit has worked. Let’s also admit that it may be getting to far…
The two steps combined would have the same effect as a 1.5-percentage-point cut in banks’ reserve-requirement ratio, the banking officials said. (…)
Barron’s is not all bad. From another