WASHINGTON, September 30, 2014 – Lately it seems as if every trading day contains at least one major news item, sometimes shocking, sometimes astounding, occasionally expected. So it is with Tuesday’s market.
The last day of September brings news that online retailer/auctioneer eBay (EBAY) intends to split the ubiquitous PayPal service off from the mothership, leaving it to navigate the increasingly treacherous rapids of the consumer payment revenue river on its own.
Sources are characterizing the move as a “split,” which doesn’t really tell us much about how it will be accomplished. Will we get a spinoff? A PayPal partial or total IPO? Something else? Will it be tax-advantaged to current eBay shareholders? All should become clear relatively soon, but stay tuned.
Corporate buccaneer Carl Icahn, at least should be pleased. He’s been agitating eBay for just such a move as a way to increase “shareholder value.” Which is shorthand for improving Carl Icahn’s net worth. But what the heck. If you don’t have Icahn’s money in these situations, you can just as easily hitch a ride on his wealth train by getting into share’s he’s fiddling with as soon as you find out he’s there.
This tactic doesn’t always work, of course. But for better or worse, or whatever the morals of the situation, Icahn wins more often than he loses. And as we’ve seen, Wall Street is no place for moral scruples, so why not hitch a ride on this one—that is, if you see any remaining value in it. eBay is up a whopping 8% this morning on the news. But we’ll need to see what the real deal actually is in order to figure out if there’s any more juice in this play.
Insofar as determining PayPal’s future as a standalone, that’s tough. Long envious of PayPal’s innovative and central role in consumer debt/payment, others, including long shots like Bitcoin, have been trying to muscle into this lucrative business. As a result, PayPal no longer has a monopoly in this arena.
Worse, Apple’s aggressive, ongoing launch of its new Apple Pay portable electronic device payment technology could potentially put a real dent into PayPal’s game, likely weakening a standalone PayPal further.
On the other hand, freed from eBay budget and innovation constraints, maybe PayPal can involve and compete better on its own. But in any case, it looks like we’ll get a chance to see what a liberated PayPal can do starting sometime in 2015.
On other fronts, the market opened up today, likely happy about the eBay/PayPal news, but also due to mildly upbeat news on the financial front which alleges to find the economy strengthening. Although you’d never know that comparing your current paycheck and what it buys with the price of ground chuck at your local Safeway. (Or is that Albertsons?)
Hong Kong still simmers. It’s clear those wily Chicoms in Beijing are a little puzzled as to what to do with these less-than-enthusiastic new cadres they took on from Great Britain well over a decade ago. If Beijing was smart, they’d leave Hong Kong denizens alone, the better to keep that cash flowing into the Workers’ Paradise.
That said, though, it’s not in the nature of Communists to reward disloyalty to party oligarchs. That might also encourage mini-secessionist movements in other more remote areas of the Chinese empire, which we forget is actually an unwieldy amalgam of peoples who are not always on board with Beijing’s plans for them, a little like Texas is not on board with Obama’s plan to make the Lone Star state a Democrat province of California before turning it back over to the Mexicans.
Beijing fears, with considerable reason, that letting Hong Kong “win” will only encourage other separatists and secessionists, perhaps most notably its own home-grown cadre of Islamofascists, some of whom are just itching to launch a beheading raid on Beijing’s clearly atheist infidels.
In the end, who knows how Beijing will ultimately respond. One suggestion: just adhere to that treaty with Britain, which allegedly guarantees residents of the former Crown Colony the right to self-government within China extending for 50 years after the signing of the original treaty. That would be finessing the deal for sure, employing an elegant punt into the future that even secret Party member Barack Obama would approve.
This way, Beijing could simply claim it was being a good world citizen by adhering to terms of the original treaty, not “capitulating” to the “lawless hooligans” demanding autonomy. The treaty effectively gives them that for at least 30 more years. Something like this in the U.S. is often construed as having “plausible denial.”
Then again, Communists don’t think that way, generally. For them, it’s their way or the highway, so we shall see. Today, at least, the market is distracted by eBay and the still-strengthening dollar.
As of noonish today, the market is flat-do-down, lacking all conviction as Yeats might say, particularly on this, the last day of the third quarter. God only knows what fresh hell might be brewing for October.
Still hanging loose. Maybe the Maven will pick up a little more SH today, the sluggish S&P 500 short ETF, as a way of hedging current holdings. His re-entry into Yahoo! (YHOO) is looking a little better today as it struggles to get back to its recent circa $43 high with little news as to what it intends to do with its Alibaba (BABA) loot.
With regard to Alibaba, the stock seems to be recovering nicely today after its Monday hit, likely due as much to extended IPO flipping action as it was to that possibly cataclysmic news out of Hong Kong which still has the potential to really sock it to international markets.
Interest-rate sensitive investments are a bit iffy now, too, as PIMCO continues to see significant outflows from its bond funds at the beginning of its uncertain new post-Bill Gross era. PIMCO muckety-mucks are trying to keep nervous institutional investors on board. And indeed, PIMCO is deep with experienced and accomplished fund managers who might do even better now that they’re freed from close encounters with Bill Gross’ now infamous tirades.
But then, you never know. Instinctively jittery bond investors are not always easy to please, and with all that money wandering around potentially looking for a new home, bond prices are likely to remain unstable while encouraging sympathetic weakness in stocks as well.
In short, it’s still a swell idea, at least temporarily, to sit on a lot of cash right now. That provides near zero returns, of course. But such a move is only temporary. And, if the lack of return bothers you, you can always park some of your cash stash into one of those no-commission short term Treasury ETFs such as Schwab’s SCHO. Yes, the price will fluctuate a bit. But it’s better than current pathetic returns on a moneymarket fund.
Have a good one.