361 Capital Weekly Research Briefing

361 Capital portfolio manager, Blaine Rollins, CFA, previously manager of the Janus Fund, writes a weekly update looking back on major moves, macro-trends and economic data points. The 361 Capital Weekly Research Briefing summarizes the latest market news along with some interesting facts and a touch of humor.

361 Capital is a provider of alternative investment mutual funds, separate accounts, and limited partnerships to institutions, financial intermediaries, and high-net-worth investors.


361 Capital Weekly Research Briefing
June 11, 2012

Timely perspectives from the 361 Capital research & portfolio management team
Written by Blaine Rollins, CFA

“Talking about a rescue makes no sense; Spain is not going to be rescued”
(Mariano Rajoy, Prime Minister of Spain – 4/12/2012)
“What is being requested is financial assistance. It has nothing to do with a rescue”
(Luis de Guindos, Finance Minister – 6/9/2012 weekend comment)

Spain ties Italy 1-1 on Sunday. Spain beats Europe 100b-0 on Saturday
The Spanish PM and Finance Minister out played their world championship soccer team over the weekend by receiving 100b at only a 3% borrow rate with no real strings attached, except that they have to repay the money. The only negative for Spain is that this new borrowing jumped senior to the rest of its obligations which might make it a bit less trusting to new lenders/debt buyers. Disclosed internal communication show that Spain meant to go in playing hardball as they suggested that a total Spain bank meltdown would cost 500b and if Italy followed another 700b. As Prime Minister Rajoy texted to Finance Minister de Guindos: “España no es Uganda.” At least Germany will still have a chance to beat Spain for the Euro Championship later this month.

Some follow up comments to the Spanish situation…

  • “66% of Germans are opposed to supporting Spanish banks with German money” (Emnid poll, BILD)
  • The cut-rate loan should help to curb a Spanish bank run in the short run, and Madrid would be wise to use this latest opportunity to finally clean up the banking problems it has dodged for several years. That means owning up to the real extent of its bank shortfalls, rather than surprising markets as it did with its recent news that Bankia (Spain’s third largest bank) will need 19 billion in new capital. (WSJ)
  • We view this as a positive near-term development for Spain, and in particular for its banks. But it does not solve Spain’s overall fiscal and macroeconomic challenges, which remain substantial…A one-off loan of less than 100bn or 10% of GDP is not, by itself, a major threat to Spain’s debt sustainability. The threat to Spain’s debt sustainability instead comes from the lack of a medium-term plan to stabilize its debt-to-GDP ratio over the next 5 or so years. The weekend’s announcements will do little to change that. (Goldman Sachs)

A Big UP week for the financial markets. Interesting ETF movers:

  • Spain/EWP +9.3% (but watch what it does this week)
  • Italy/EWI +6.0% (ditto)
  • Home Construction/ITB +5.5%
  • Semiconductors/SMH +5.3%
  • Financials/XLF +4.8% (a big bounce but was the low made last week?)
  • Small Cap/IWM +4.3% > Nasdaq/QQQ +4.1% > Large Cap/SPY +3.8% (broad based rally)
  • Wal-Mart/WMT +4.1% (a 12 year high = very defensive U.S. market)
  • High Yield Bonds/HYG +0.8%
  • China/FXI -1.5% (China cut rates but few believe that it will help)
  • Gold/GLD -1.9%
  • 20+ Yr U.S. Treasury/TLT -4.0%

Even McDonald’s is getting indigestion from its Chinese operations during May…
Asia/Pacific, Middle East and Africa reported a comparable sales decrease of 1.7% for May. Positive results in Australia were more than offset by negative results in Japan and, to a lesser extent, China. (and MCD traded to 2012 lows on the week.)

And high end wine sales to Asia have fallen significantly…
Berry Bros. & Rudd, a major merchant of en primeur with offices in Europe and Asia, expects to sell just £15 million ($23 million) worth of wines this season. Two years ago, it sold £105 million worth of the 2009 vintage, and last year, it sold £67 million worth of the 2010 wines. Farr Vintners, which has offices in both London and Hong Kong, said it has sold less than £3 million of en primeur wines to Asian buyers this year, down from the more than £22 million two years ago. (WSJ)

Saturday Night Live skit or Actual News…
A strike by Greek municipal employees is threatening to derail the crucial June 17 national election, which could determine whether the debt-crippled country continues to use the euro. The POE-OTA union, which represents thousands of people who work for cities, villages and other municipalities, says its members are paid far less for doing elections-related work than other government employees. (The Australian)

Meanwhile, the Greek youth are returning to the countryside…
Thirteen years after abandoning rural Greece for a career in graphic design, Spiridoula Lakka finds herself in the last place she expected to end up — watering a patch of lettuce and herbs in her sleepy village. As Greece sank into its worst economic crisis since World War Two, Lakka had already given up her dream of becoming a web designer. Even waitressing seemed impossible. She faced a simple choice: be stranded without money in Athens, or return to the geriatric village where she grew up plotting to escape. At age 32, Lakka, an office clerk who also juggled odd jobs, joined a growing number of Greeks returning to the countryside in the hope of living off the land. It’s a reversal of the journey their parents and grandparents made in the 1960s and ’70s. (Ekathimerini)

Looks like retail and institutional customers weren’t the only ones with Day 1 FB losses…
UBS is sitting on losses that could be as high as $350 million stemming from its investment in the Facebook initial public offering, and is preparing legal action against Nasdaq as a result, people familiar with the matter told CNBC…These people said UBS wanted 1 million shares, but when it did not receive confirmations, it repeated the order multiple times and was left with much more than it intended…Apparently, UBS tried to unload the stock at $35 a share, but could not catch a bid and sold some of the positions under $30 a share. (CNBC)

An interesting real estate issue in S. California which is causing prices to run higher…
Many people who bought at the top of the cycle are so deeply underwater, they can’t get the price they need to sell and are therefore not bothering to put their homes on the market. “We know negative equity holds back home sales, but it also holds back the listing of sales,” said Sam Khater, an economist with CoreLogic, a company that tracks the mortgage market. “Today it is holding the market back.” The lack of available homes is maddening for those consumers who thought 2012 would be the year to buy. In Southern California, inventories have plunged over the last year. The number of homes listed for sale in April fell 35% in Los Angeles County and was down 42% in Orange, 39% in San Bernardino, 42% in Riverside, 53% in Ventura and 43% in San Diego counties, according to online brokerage Redfin. (LA Times)

Meanwhile, mortgage rates are hypnotizingly low…


There must be an election in the near future…

  • “The truth of the matter is that, as I said, we’ve created 4.3 million jobs over the last 27 months, over 800,000 just this year alone. The private sector is doing fine. Where we’re seeing weaknesses in our economy have to do with state and local government—oftentimes, cuts initiated by governors or mayors who are not getting the kind of help that they have in the past from the federal government and who don’t have the same kind of flexibility as the federal government in dealing with fewer revenues coming in.” (President Obama, Friday morning)
  • “It’s absolutely clear the economy is not doing fine. That’s the reason I had a press conference. That’s why I spent yesterday, the day before yesterday, this past week, this past month and this past year talking about how we can make the economy stronger. The economy is not doing fine. There are too many people out of work. The housing market is still weak, too many homes underwater and that’s precisely why I asked Congress to start taking some steps that can make a difference.” (President Obama, later Friday morning)
  • “It is an outrage to have the president of the United States stand up and say to hardworking governors — Democrats and Republicans in this country — that state and local government hiring is moving in the wrong direction, and we’re to blame,” (N.J. Governor Christie)
  • “We have an impasse on economics, and it seems to me that it might take the election to break this impasse”. (Rep. Paul Ryan on Bloomberg)
  • “The explosive path of Federal debt underscores the need for major changes to current policies” (CBO, 2012)
  • “My point is that you have to recognize that banks will lose money on occasion, because that’s the way the system eliminates unproductive capital. Implicit in creating growth and productivity comes some degree of failure. If you have banks that are ‘too big to fail’, it implies you are using the government as a buttress to prop up otherwise unproductive failing institutions.” (Alan Greenspan on CNBC)

Now more unemployed with college degrees…
In a significant shift in the labor market, the majority of people who are unemployed have some college education, reversing the situation that prevailed for decades. In 1992, only 37% of the unemployed had some college experience. (WSJ)

In other words, love your job…
American International Group Inc. Chief Executive Officer Robert Benmosche said Europe’s debt crisis shows governments worldwide must accept that people will have to work more years as life expectancies increase. “Retirement ages will have to move to 70, 80 years old,” Benmosche, who turned 68, last week, said during a weekend interview at his seaside villa in Dubrovnik, Croatia. “That would make pensions, medical services more affordable. They will keep people working longer and will take that burden off of the youth.” (Bloomberg)

A good chart on the outlook for tax rates for those wanting to plan ahead…


The final report on MF Global…
“As attempts were made to transform MF Global into a full-service global investment bank, management failed to add to its Treasury Department and technology infrastructure, which was needed to meet the demands on global money management and liquidity,” Mr. Giddens said. “My investigation has concluded that management’s actions, along with the lack of sufficient monitoring and systems, resulted in customer property being used during the liquidity crisis to fund the extraordinary liquidity drains elsewhere in the business, including margin calls on European sovereign debt positions.” (James. W. Giddens, MF Global trustee)

If you drive a gas guzzler, here is a worrisome chart…


And from Twitter: @denisleary: “12 yr olds on Facebook. What could go wrong?”
A study by Consumer Reports found that 5.6m children under 13 were using Facebook in America alone. Another survey of American parents found that adults often knew that their children were less than 13 when they joined Facebook. In many cases, the parents helped them to set up their accounts. (Economist)

Blaine Rollins, CFA, is managing director, senior portfolio manager and a member of the Investment Committee at 361 Capital. He is responsible for manager due-diligence, investment research, portfolio construction, hedging and trading strategies. Previously Mr. Rollins served as Executive Vice President at Janus Capital Corporation and portfolio manager of the Janus Fund, Janus Balanced Fund, Janus Equity Income Fund, Janus Aspen Growth Portfolio, Janus Advisor Large Cap Growth Fund, and the Janus Triton Fund. A frequent industry speaker, Mr. Rollins earned a Bachelor’s degree in Finance from the University of Colorado, and he is a Chartered Financial Analyst.

In the event that you missed a past Research Briefing, here is the archive…




This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. Your Questions About Mortgage Rates Trends commented on Mar 29

    […] function setIframeHeight(iframeName) { var iframeEl = document.getElementById? document.getElementById(iframeName): document.all? document.all[iframeName]: null; if (iframeEl) { iframeEl.style.height = "auto"; // need to add to height to be sure it will all show var h = alertSize(iframeName); iframeEl.style.height =h + "px"; } } function alertSize(frameId) { var myHeight = 0; frame = document.getElementById(frameId); if( typeof( window.innerWidth ) == 'number' ) { //Non-IE var getFFVersion=navigator.userAgent.substring(navigator.userAgent.indexOf("Firefox")).split("/")[1]; var FFextraHeight=parseFloat(getFFVersion)>=0.1? 16 : 0; myHeight=frame.contentDocument.body.offsetHeight+FFextraHeight; } else if( document.documentElement && ( document.documentElement.clientWidth || document.documentElement.clientHeight ) ) { //IE 6+ in 'standards compliant mode' innerDoc = (frame.contentDocument) ? frame.contentDocument : frame.contentWindow.document; myHeight= innerDoc.body.scrollHeight + 10; //myHeight = document.documentElement.clientHeight; } else if( document.body && ( document.body.clientWidth || document.body.clientHeight ) ) { //IE 4 compatible myHeight = document.body.clientHeight; } return myHeight; } #split {}#single {}#splitalign {margin-left: auto; margin-right: auto;}#singlealign {margin-left: auto; margin-right: auto;}#splittitlebox {text-align: center;}#singletitlebox {text-align: center;}.linkboxtext {line-height: 1.4em;}.linkboxcontainer {padding: 7px 7px 7px 7px;background-color:#eeeeee;border-color:#000000;border-width:0px; border-style:solid;}.linkboxdisplay {padding: 7px 7px 7px 7px;}.linkboxdisplay td {text-align: center;}.linkboxdisplay a:link {text-decoration: none;}.linkboxdisplay a:hover {text-decoration: underline;} function opensplitdropdown() { document.getElementById('splittablelinks').style.display = ''; document.getElementById('splitmouse').style.display = 'none'; var titleincell = document.getElementById('titleincell').value; if (titleincell == 'yes') {document.getElementById('splittitletext').style.display = 'none';} } function closesplitdropdown() { document.getElementById('splittablelinks').style.display = 'none'; document.getElementById('splitmouse').style.display = ''; var titleincell = document.getElementById('titleincell').value; if (titleincell == 'yes') {document.getElementById('splittitletext').style.display = '';} } How The Delayed Financing Rule Works: The Buy & Refi SolutionCOUNTRYWIDE’S VIP LOANS361 Capital Weekly Research Briefing […]

  2. cheap affordable wigs commented on Sep 18

    … [Trackback]

    […] Find More Information here on that Topic: thereformedbroker.com/2012/06/12/361-capital-weekly-research-briefing-3/ […]

  3. thenaturalpenguin.com commented on Sep 22

    … [Trackback]

    […] Info to that Topic: thereformedbroker.com/2012/06/12/361-capital-weekly-research-briefing-3/ […]

  4. sex dolls commented on Sep 25

    … [Trackback]

    […] Find More here on that Topic: thereformedbroker.com/2012/06/12/361-capital-weekly-research-briefing-3/ […]

  5. cannabis for sale online commented on Nov 21

    … [Trackback]

    […] Find More Information here to that Topic: thereformedbroker.com/2012/06/12/361-capital-weekly-research-briefing-3/ […]

  6. Quality formula commented on Nov 24

    … [Trackback]

    […] Find More on on that Topic: thereformedbroker.com/2012/06/12/361-capital-weekly-research-briefing-3/ […]

  7. Automated regression testing solutions commented on Nov 28

    … [Trackback]

    […] Read More Information here on that Topic: thereformedbroker.com/2012/06/12/361-capital-weekly-research-briefing-3/ […]

  8. 메이저놀이터 commented on Dec 09

    … [Trackback]

    […] Find More to that Topic: thereformedbroker.com/2012/06/12/361-capital-weekly-research-briefing-3/ […]

  9. Devops commented on Dec 09

    … [Trackback]

    […] Information on that Topic: thereformedbroker.com/2012/06/12/361-capital-weekly-research-briefing-3/ […]

  10. half price hotel after midnight commented on Dec 15

    … [Trackback]

    […] Find More Information here to that Topic: thereformedbroker.com/2012/06/12/361-capital-weekly-research-briefing-3/ […]

  11. Harold Jahn Utah commented on Dec 19

    … [Trackback]

    […] Here you can find 57567 additional Information to that Topic: thereformedbroker.com/2012/06/12/361-capital-weekly-research-briefing-3/ […]

  12. replica watches commented on Dec 31

    … [Trackback]

    […] Read More Info here to that Topic: thereformedbroker.com/2012/06/12/361-capital-weekly-research-briefing-3/ […]

  13. online banking commented on Jan 03

    … [Trackback]

    […] Here you can find 80405 additional Info to that Topic: thereformedbroker.com/2012/06/12/361-capital-weekly-research-briefing-3/ […]

  14. Digital transformation company commented on Feb 05

    … [Trackback]

    […] Information on that Topic: thereformedbroker.com/2012/06/12/361-capital-weekly-research-briefing-3/ […]