Municipals - Broker profits and Percentage Held by individual investorsPartying Like Its 1999

“Morgan Stanley’s US quant team has an eye on the market cauldron, and the simmering has a late nineties feel to it.”  Furthermore, “pure growth factors — long term growth rate forecasts, trailing sales growth, R&D spending, headcount growth — are the top performers, with momentum also working well; valuation factors have done poorly at selecting growth stocks.”  Bloomberg argues the current bull market looks pretty good compared to the 90s bull: “while gains are extending to almost every industry, they’ve only been enough to push valuations to close to half the level when the bubble popped in 2000…The broad-based nature of the rally is certainly different than what it was 15 years ago…During the stretch that lasted from March 1995 to March 2000, computer and software makers surged 754 percent, compared with 200 percent in the next-best industry, banks.  By contrast, since March 2009, consumer-discretionary shares have jumped 324 percent, banks are up 259 percent, and industrial companies have risen 243 percent.”  Meanwhile, Jim Paulsen of Well Capital Management advocates a “barbell strategy of getting long cyclical growth and goosing it with high-yield utilities…Paulsen’s theme is that rising commodity prices are going to lead to higher interest rates.  As basic material prices move higher on demand Paulsen thinks the utilities will get bid higher by investors looking to long yield.”  Also, “some market observers are starting to worry about small-cap stocks, thanks to its big gains.”  But you should stop worrying and start meditating: “to help revive their employees, a growing number of firms are turning to the age-old technique of Transcendental Meditation (TM), which involves accessing the deepest, quietest level of the mind by speaking a silent mantra.  It is said to reduce anxiety and increase clear, focused thinking.”

The Cycle: Mom And Pop → Munis → Distressed Debt → Hedge Funds → ETFs → Mom And Pop

“More client-hungry hedge fund managers are looking to put their investment strategies to work in exchange-traded funds, a move that could exponentially expand their pool of investors but require them to slash investment management fees.  That is a tradeoff many managers of smaller hedge funds are willing to make, hoping Mom and Pop investors can fuel their growth.”  Meanwhile, Mom and Pop investors now own “45% of all municipal bonds directly and another 28% through mutual funds, amounting to a combined $2.7 trillion,” and they are “paying about twice as much (alt) in trading commissions as they would for corporate bonds, according to a study for The Wall Street Journal.”  Also, “activism is rarely good news for creditors” (alt): “activist hedge funds are increasingly pushing companies to take steps the activists believe will improve shareholder returns, including raising debt, boosting share repurchases and dividends or breaking a company apart.  While those moves can lift stock prices, they also can drain cash and put a company’s credit rating at risk.”  Also, “[bond] investors have poured $622.5 million into Colombia’s bond market since the start of the year, the biggest inflow into any emerging-market country so far in 2014…Colombia has seen significantly more inflows than its peers, as the only other emerging economies with bond inflows this year — South Korea, Poland and Greece — all have had less than $200 million come into their bond markets.”  Meanwhile, Puerto Rico’s $3bn general obligation bonds hit the market today, “the sale gives the island of 3.6 million people enough cash through June 2015 and time to revive a shrinking economy.”  Given the high risk involved, “these new bonds are aimed at the hedge-fund crowd more than your typical muni-investor, and Puerto Rico is making that institutional bias explicit by requiring a minimum investment of $100,000 to get in on the deal.”

Former Ambassador Offers Insight Into Putin

“Stephen Sestanovich, a former U.S. ambassador-at-large for the former Soviet Union, says Russian president Vladimir Putin’s dramatic steps in Ukraine have been improvised as part of a visceral response to the downfall of president Viktor Yanukovich.”  Furthermore, “Putin’s Ukraine policy has not gone as he had hoped,” there is “a surprising stream of leaks even among insiders talking about the poor coordination of policymaking” (i.e. finger pointing), “Russia’s goal has always been to make Ukraine a friendly and subordinate power,” and “there’s no reason for Putin to back away from business as usual in U.S.-Russian relations if the United States and Europe will be prepared to go along.”  Meanwhile, someone at Forbes believes that in the event of Russian annexation of Crimea (or maybe a Crimean parliamentary “Declaration of Independence”), ethnic minorities in the region could benefit from an online property exchange: “Something like,, Yahoo! Real Estate, or could be run for a limited time…anyone who wanted to cross the divide could list their property…people could exchange their properties as soon as they’re matched with someone from the other side.”

USA: Morgan Stanley, Goldman Said To Swap Fees For Deal Credit

Can one really put a price on rank, reputation and glory?  Investment banks seem to think so : “Morgan Stanley and Goldman Sachs Group both decided last month that it was worth losing millions of dollars in fees to get credit on a big merger they didn’t work on…they each agreed to cut the fees they were due in exchange for being able to claim the league-table credit.  The trade highlights the importance of league tables to investment banks — which use them to pitch for new business — and the lengths to which banks will go to climb the rankings.”


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