Fast and Furious: All eyes on Scotland, Alibaba [BABA] IPO
WASHINGTON, September 18, 2014 – It’s fast and furious out there on Wall Street, almost like last year’s action film of the same name. (No reference to the Eric Holder scandal that the press says never happened.)
The Fed has already weighed in with its September Scooby-Doo style “Who, me?” report, confirming QE ends after next month’s final reduced tranche while still hedging on that likely 2015 interest rate hump day. No point in taking a position before our fall elections, eh?
Speaking of elections, Scotland is heading en masse to the polls to make either its smartest or dumbest national decision in centuries, depending on one’s point of view (or investment portfolio). Look for chaos to reign supreme if those prickly Scots pull a Braveheart and issue a final “Adios” to the sunsetting British Empire.
And yes indeed, as we’ve been proclaiming all week, tonight’s the night—the night the Alibaba [BABA] IPO will be priced, with trading to begin tomorrow morning, whenever, but almost certainly not at the 9:30 a.m. opening bell on the NYSE.
Excitement is in the air today, but not always the good kind. The U.S. interest rate hike still looms, and bonds are already pricing that in. Winners here, in slo-mo, would seem to be the major banks, along with those massive but largely forgotten moneybags known as the insurance companies. Languishing for years, these cash-, bond-, and real estate-flush corporate behemoths are likely to get on a relative tear, and soon, since they live on conservative investments which having been yielding a whole lot for some 6 years and counting.
The Scotland situation is hard to predict. Voting down the independence referendum will confirm the international status quo, although investors speculating on the opposite outcome are likely to get clobbered.
On the other hand, voting for independence will ultimately transform the UK into kind of a rump state, splitting off as well the UK’s vast North Sea oil industry and sending it off with Scotland in control—a big chunk of the UK economy. However, the Shetland Islands—not really Scottish—aren’t too keen on this, and they retain some measure of control here. It’s complicated.
More complicated still are those pesky currency issues. Will Scotland stick with the British pound even if it splits? Will it join the Eurozone? No one really knows.
Ditto those big international banks like RSB, which have vowed to head for London if those Highlanders get too testy. It goes on and could roil the markets with absolute negative chaos. But we shall see.
In any event, polls close at 6 p.m. EDT, give or take an hour, and the Brits forbid any reports on outcomes until after that time. Word is we may not hear the results until Friday morning, although nobody is telling us whose Friday morning.
But hold onto your hats. We ain’t done yet. There’s that small matter of the Alibaba IPO. As we’ve shared before, neither you nor the Maven are getting any, which may or may not be a good thing.
Negative stuff has crept into the optimistic picture here over the last few days as the issue has priced up slightly while shares on offer have modestly but ominously been increased.
Last night and today, we also learn that there’s an unusual arrangement in this offering. To wit, certain insiders are actually going to be allowed to flip their incredibly inflated shares right away tomorrow, violating the almost sacrosanct custom whereby insiders have a fairly lengthy “lockup” time before they can begin to dump those cheaply-purchased-years-ago shares.
Allegedly, the brokerage firms/investment banks bringing BABA public have carefully accounted for this, but who knows how much a depressive effect this overhang of shares might have on the pop most new investors are hoping for when the stock opens for trading.
Don’t miss the next thrilling episode. What a week!
Still light on ideas. We dumped out Yahoo! (YHOO) shares over the past two days as the stock began to wobble. It’s been our proxy for the Alibaba we can’t get. YHOO has been weak today, a sort of sell-on-the-news phenomenon, although its current 42-ish price is where many analysts thought it would go prior to the opening.
Today, however, some brokerages are saying that BABA could actually pop as high as $95 per share tomorrow, although we personally doubt that. Nonetheless, it could, so we’re back in to a minimal position in YHOO just in case. We’re down at the moment, but, as they like to say in movie and TV promos, tomorrow “changes everything.”
Otherwise, maybe it’s time to start sneaking into long-moribund insurance giants like AIG, given the interest rate shifting we noted above.
If you’re not involved in these areas, get as cash-y as you feel comfortable with. Tomorrow—which is also options expiration day(!)—is likely to be a barnburner, one way or the other.
As those ancient TV auto safety spots used to exhort: “Stay Alert! Stay Alive!”
See you tomorrow. Or maybe briefly tonight if that Scottish vote comes in.