WASHINGTON, March 28, 2013 — With security personnel and equipment seemingly outnumbering the population of Nicosia, Cyprus banks reopened this morning allowing customers to make limited withdrawals for the first time in almost two weeks, although small withdrawals had been available via ATM machines in the interim.
The European Central Bank (ECB) reportedly sent a transport plane to Cyprus loaded with more than $6 billion worth of Euros according to some sources. Some demonstrations had occurred in Cyprus yesterday, but if spotty reports are to be relied upon, the long lines of individuals—particularly the elderly, many of whom don’t have or use ATM cards—were queued up early at the banks, which were to open for approximately six hours today.
Upsetting reports were surfacing yesterday that Russian oligarchs—who, along with negligent Cypriot monetary officials may have significantly added to the problem by parking huge deposits in tiny Cyprus—might actually have slipped many of those deposits away in spite of allegedly strict controls meant to block this. Details are shadowy and we’re developing a report on this for our other column, The Prudent Man, as we try to corroborate details.
If so, this might account for the mild public reaction of Russia’s usually surly president, Vladimir Putin to the Cypriot banking crisis, part of whose solution was an attempt by the EU to rein in the problem caused by the Russians and make them pay for part of their allegedly evil financial ways.
On the domestic front, jobless claims popped up again, proving that the current recovery, such as it is, will be fitful at best. The market seemed not to care, at least circa 10:30 a.m. EDT. After a nasty early dip, the Dow has been up between 20-30 points and other averages seem at least benign. Today will be an odd trading day in any event. Bonds close early (see note below) and when the market itself closes, it won’t reopen again until Monday due to tomorrow’s traditional Good Friday break.
In other words, the first calendar quarter of 2013 closes today, so we’d assume that all the traditionally wacky quarter end trading and window dressing of portfolios is already complete. So the HFTs will rule the roost today, and they seem, at least at the moment, to be in a bullish mood. That said, who knows what the machines are thinking in background?
Today’s market moves:
We waited to post this report until the Pinnacle Foods (PF) IPO opened for trading. We’d put in for a substantial amount of shares, as we indicated in earlier columns, but weren’t certain until the last moment whether we’d gotten any, particularly since the issue had gotten hotter over the course of yesterday evening after it was priced at $20: the top of its estimated range.
For us, the pricing had presented a bit of a dilemma, as these days, one usually likes to see these IPOs priced just a bit above the top of the range, indicating likely oversubscription and continued interest. But we decided to take a shot at a reduced number of shares anyway, hoping for the best as evening reports indicated increasing interest in the deal.
In the end, we didn’t get a single share in our large account, which is where we usually bid for IPOs. Oddly, however, we were gifted with 100 shares in a smaller account, although we didn’t discover this until after the stock had opened. So we’re sort of happy. But we’re irritated as usual that the Big Boys likely got all they wanted, proving that the 1% is alive and well and largely impervious to bad things no matter what happens in the economy. It would have been nice to have more shares, but that’s the way the allocations work.
(UPDATING: For a nice, upbeat interview with Pinnacle CEO Bob Gambort, link to CNBC here.)
As we’ve just mentioned, our above-the-range price tactic for gauging IPO demand is pretty good, although it’s admittedly a rather crude tool. Plus, it doesn’t always work, of course, as we learned a few days ago when the IPO of telco West Corporation (WSTC) was too aggressively priced at $20 per share, a buck over the top of its estimated range. When the stock opened, if it traded at that price even once, we didn’t see it. It’s been down 5-7% since then, even though it boasts a good-sized dividend. Fortunately, we only took down 100 shares of this one.
This was one of those cases where the company, the vulture capitalists, and the underwriters got greedy and screwed the buyers, which sometimes happens when you play this game.
As far as the rest of today’s trading is concerned, as we near the noon hour, we’re now up even higher, with the Dow up over 40 and the S&P and NASDAQ up slightly in excess of 4 points apiece.
Trading is exceedingly thin, though, again mostly being conducted by the machines, so we’re no eager to go shopping. We did buy a few more shares of Two Harbors, a REIT that’s tended to be good to our portfolio. It took a hit today due to going ex-dividend, plus offering a tiny special dividend to current holders of shares in its recently launched subsidiary IPO Silver Bay (SBY).
The latter is an unusual experiment with an uncertain future. SBY is buying up scads of single family homes in order to transform them into rentals. Presumably, they’ll eventually sell them when the real estate market starts looking somewhat normal which we predict will occur somewhere between 2015-2020. That’s assuming this Administration doesn’t tax us to death and assuming the Iranian Islamofascists or the North Korean kleptomonsters don’t figure out a way to fry this planet to a crisp in the meantime.
Meanwhile, SBY will be doing its thing. If SBY gets more company—venture capitalists have been doing this sort of thing for awhile now, but REITs have been slow to warm up to it—the U.S. might get the still substantial overhang of dead properties functional again which could help out the economy. Skeptics of SBY say this is a bad bet, but we’ll just have to wait and see. Meanwhile, we picked up some SBY yesterday so those few extra shares we’re going to get from TWO won’t be hanging around all by themselves.
TWO is doing interesting things itself, venturing into the mortgage servicing industry in addition to buying real estate. The way things are being done in the mortgage industry is slowly changing without any assist from the Feds. Maybe that’s the way it should be, given the debacles that were and are Fannie Mae and Freddie Mac. Size matters.
We’re outta here now for a long weekend, after our final note. Have a wonderful Easter holiday weekend, and we’ll see you back here on Monday, which may or may not be a very interesting April Fool’s Day on Wall Street.
NOTE, repeated from yesterday:
U.S. Markets have a short week this week because of the Good Friday holiday. Bond markets will close early at 2 p.m. THURSDAY, while equity markets will keep their usual hours. On FRIDAY, all markets will be closed for trading.
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.
Any positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.
Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.
References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.
Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington Times Communities. For Terry’s investing and political insights, visit his Communities columns, The Prudent Man and Morning Market Maven, in Business.