WASHINGTON, March 22, 2013 – Cyprus lawmakers raced today to come up with a viable Plan B to rescue their already-underwater banking system. Members of the troika—the European Central Bank (ECB), the European Commission (EC), and the International Monetary Fund (IMF)—huddled with Cypriot President Nicos Anastasiades Friday morning to take a look at new legislation to be debated in Parliament later in the day. They continue to threaten a cutoff in funds if lawmakers don’t act soon.
As if not facing enough pressure from the troika, Anastasiades as well as Parliament also faces the wrath of their constituents, hundreds of whom continued protests Friday outside the Parliament building. Most if not all of them stand to see their bank deposits scalped in nearly any deal Cypriot lawmakers cut with the Eurozone to obtain desperately needed bailout funding of €10 billion, or $13 billion, without which Cypriot banks will certainly fail.
Supposedly, the latest plan on the table would do away with the hated “bank tax” initially floated last weekend. But many critics and economists see no way for Cyprus to completely get around the proposed levy.
CNBC reports that another alternative being discussed in Cyprus is “the creation of a ‘solidarity fund’ of state, church and pension fund assets and the introduction of capital controls on its lenders to prevent capital flight when its banks re-open next Tuesday.”
The German government—a key player in any monetary bailout scheme—is said to be in favor of nationalizing the pension plans of Cypriot state-owned companies, something that likely would be even more unpopular than the bank tax, and yet another proposed solution that is likely to make pensioners world wide sit up and take notice, just as the bank deposit tax notion did.
The seemingly inflexible German position is popular right now with a German electorate that has already seen a significant portion of their own taxes go toward other bailouts in the troubled Southern reaches of the Eurozone. And that’s not lost on the current government, as German elections are coming soon.
Dave Fry of ETF Digest had a wry observation in his “Dave’s Daily” column Thursday evening, noting “the former EU head, Jean-Paul Juncker stated upon his retirement this year, ‘We know what we have to do, we just don’t know how to get re-elected if we do it.’ That pretty much sums things up globally.”
More specifically, it also sums up what’s been going on in Washington since 2008. There used to be a saying: “No guts. No glory.” That still holds true with today’s generation of gutless politicians around the world. This, essentially, is the real reason why the turmoil that commenced in late 2007 has yet to be solved.
Wall Street, which threw a hissy fit yesterday over the Cypriot mess as well as poor quarterly results from bellwether stocks like Oracle (ORCL) and Federal Express (FDX), looks to make a recovery attempt at this morning’s opening bell. So let’s take a look at what we might need to do today.
–AP contributed to this report.
Trading today’s markets:
The IPO smorgasbord we described yesterday was indeed priced last night and has gone public this morning. The battle plan changed a bit for the Maven last night as final pricing shifted about.
Earlier, Wednesday evening, nursing home specialty REIT AVIV priced its IPO up at $20 per share, above the initial offering band, usually a good sign (except, of course, when the stock is named “Facebook” [FB]). And so it was for AVIV. We’d asked for 300 shares but were cut back to 100, not uncommon when a particular IPO attracts wide interest.
Thus far, we’re happy. The stock took off modestly but nicely after it opened Thursday, and it’s currently trading around $22.55 per share at 11:00 a.m. today, up about 12.6%. Given that we don’t flip these IPOs for reasons already explained in yesterday’s “Prudent Man” column, we hope this will hold or increase over the next month or so, which will determine whether we sell or hold.
As for the other issues we mentioned in yesterday’s reports, as of 11 today, results are still a little early to call. Marin Software (MRIN), which we were contemplating taking a pass on, suddenly heated up as it priced at $14 per share, one dollar over the top end of its proposed offering band of $11-13. We tried for a few hundred shares but were cut back again, landing only 100, though we won’t complain. The stock popped nicely this morning when it opened trading, and is currently trading just under $18 per share, roughly a 27% jump. Again, we hope most of this will hold.
We decided to take a pass on Five Oaks (OAKS) a new mortgage REIT that stubbornly kept its pricing high. Most new mortgage REITs tend to drop from their IPO price, with many investors wanting to wait to see if they really pay out a good dividend, most of which don’t commence for at least 90 days from the IPO. Skeptics were winners this morning, and, after pricing its IPO at the high end of $15, shares are modestly down about fifty cents. OAKS is actually an interesting play and we may try it later, but right now, skipping this one proved the prudent choice.
Our remaining choices are a mixed bag. We decided to try just 100 shares of cloud software company West Corporation (WSTC) when we found their pricing a bit off-putting. Glad we cut that back. That stock opened down from its $20 final pricing, and is currently trading at about $18.60 a share, down nearly 8%.
Meanwhile, the Graphic Packaging (GPK) secondary issue—the stock was already publicly traded—was priced down sharply last night from an originally-intended $7.50 per share to a flat $7.00, well below its market close last night. That seemed a little suspicious to us, particularly given that the number of shares offered by selling shareholders was increased by about 5 million. Nevertheless, we made decent money on GPK’s previous secondary last fall, so we cut back our request a bit and ended up grabbing 300 shares at $7.00. The stock is now trading at around 7.18 giving us a small gain. That said, it took us a while to make some money on the previous secondary, so we’re prepared to be patient here. A number of analysts like the stock at these levels.
So, our scorecard for the last two days filling our March Madness IPO shopping cart: Two fairly big winners (MRIN and AVIV); one modestly winning secondary (GPK); one loser, for at least today (WSTC); and one losing no-show (OAKS) which we passed on now but may get interested in later.
The Maven should note: he considered chickening out of even these, given the weekend’s potential for headline risk due to the Cyprus mess and whatever else the troublemaking North Koreans and Iranians decide to cook up next. The market will almost certainly correct soon, as it’s tried to do twice this week, and such a correction leaves IPOs particularly vulnerable as they don’t really have solid, publicly traded track records. But we decided to have a go anyway, as there’s still time, given our unique 30-day windows, to recover in time to make the “sell in May and go away” sweepstakes which, these days, tend to start happening not long after Tax Day.
The IPOs were enough action for us this morning, so we’re likely to sit tight, except maybe to take a few profits from stocks we haven’t already sold. In our major trading portfolio, we’re sitting on about 25% cash and that’s fine for now.
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.