Opening day . . . anyone need car parking?

Yesterday was opening day for another US baseball season, it was also the day that Bronx Parking Development Corp, the operator of parking garages at New York’s Yankee Stadium missed a $6.9 million interest payment to bondholders. Bronx Parking had issued $237.6 million of municipal bonds in 2007 through New York City’s Industrial Development Agency to build three garages and renovate two others at Yankee Stadium to ensure the storied franchise remained in it's current home. It was the the first time Bronx Parking Development Corp. has skipped a payment to investors, and the next scheduled one is for $8.1 million on Oct. 1. It would seem that parking hasn't been the no-brainer one normally associates with NYC and the company has hired Willkie Farr & Gallagher to serve as bankruptcy counsel. What are we to make of this? Well clearly the company was over leveraged and secondly bond traders will now be trolling through various prospectuses issued through New York City’s Industrial Development Agency to ascertain any inter-conectivity of obligations (unlikely) or more importantly the degree to which the Agency is responsible for any misleading statements etc. I don't trade "Muni's" but this will send shock waves through the market not because of the size of the payment missed or because the underlying assets won't cover the capital involved, but rather because we're still in the midst of a bond bubble looking for an excuse to burst.

I said yesterday I had faith in the US housing market because of all the cash the Fed had pumped in via the various iterations of QE. The key to this has been the recent purchases of mortgage backed securities (MBS) which has allowed issuers to source funds by taking advantage of the "put option" that has resulted from QE. More evidence of this today when Fannie Mae reported that it earned a record net income of $17.2bn in 2012. Additionally fewer households fell behind on their mortgage payments during 2012 and the delinquency rate was down to 3.3% by the end of the year compared with 5.5% in March 2010. Thats a big turnaround suggesting to me that the Fed must be coming closer to at least slowing the rate of asset (e.g. MBS) purchases. The trick now is to balance the Muni sector with the MBS sector so as to create a path to normalcy. I remain somewhat sceptical as to a smooth exit and believe we have at least one more US shock in the offing.

My M&A belief waxes and wanes, but I like to see companies such as Dish Network Corp. (DISH), the third-largest U.S. pay-TV provider raising new funds for possible acquisitions. Yesterday they said they's raise $1 billion in debt "for purposes that may include wireless transactions or acquisitions of airwaves."Dish made an offer to buy all of Clearwire Corp. (CLWR)’s outstanding shares for $3.30 back in early January as part of its' wireless strategy. Sprint Nextel Corp. (S) also got involved offering $2.97 a share. It's unclear what will become of that battle but I'm betting that even if Dish fails to secure all of Clearwire they get some spectrum or take their business elsewhere and buy part or all of another wireless operator. Either way M&A is happening in Telco and that should help markets.

M&A cheer has yet to get to Europe, in fact today Verizon denied that it’s considering a bid for Vodafone, disputing a report that said it was discussing a plan with AT&T Inc. to make a joint offer for the U.K. carrier. Seeing Vodafone as a target would certainly bring a smile to my face as I can still remember the company's swashbuckling run of acquisitions in the 90's culminating in a number of high profile questionable moves such as buying Mannesman in Germany. Who knows what could happen in this space, but if I were an M&A banker I'd make sure I had regulators on side because as we've seen in recent history the EU is not very transaction friendly and will use any excuse to come down hard on exterior corporations looking for a foothold in the "zone".

Rain is falling here in Sydney, so my bikes are likely to get another day off the road. Yesterday I took the opportunity to head down to the LBS to grab some new lube and some cleaning liquid for the workshop. The shop was short on cleaners and offered me a cleaning pack containing frame cleaner and degreaser. The cost: AUD39! I use a degreaser I get from my local mega DIY store which is about 6 bucks for 4 litres when on special, so I had no interest in this arrangement and took the lube and some frame shine only. Australia is a bit like this, retail remains somewhat under pressure from the internet, but not so much that it passes on more competitive prices. I know the same cleaner pack is £14.99 on the net. I'm sure the shop would point to their rent, plant and equipment, but while I'm willing to pay for some of that I expect a certain value add and acknowledgement that I'm not a complete chump unable to use a computer. Leaving this aside I highly recommend Juice Lubes Frame Juice for after wash shinning. It leaves your frame with a non stick surface that dirt finds it a lot harder to stick to. Check it out:


Ciao!

Stats are more than numbers . . .

Bad data has started to hit the street and for investors the old adage of sell in May and go away could be the wise move. Last year that tactic didn't work and as people's memories are now building up an immunity to being out of the market it will be interesting to see what effect the recent stat releases will have on trading in the coming weeks.

The US ISM fell to 51.3 in March from 54.2 in February, the market had expected 54. The only redeeming news was from the housing market where construction grew 1.2% after a 2.1% decline in January. Housing is the main beneficiary of the Fed's largesse and I remain bullish on the space. Businesses in the North East are starting to report a tightening of available office space in cities such as Boston. I am waiting on some further numbers but would say that the market is well aware of this and conditions have been priced in to a degree. NY interests me as new floor area seems to be coming on to the market steadily and therefore might not have the same lift yet as other business areas who have been out of the construction cycle.

Japan for all the bravado of the recent moves remains less than bubbly. The Bank of Japan’s quarterly Tankan report showed a reading of minus 8 (up from from minus 12 in December) in the large manufacturing sector on the back on the weaker JPY.

The trend is fine but it didn't stop the rot yet as evidenced by the slump in Japanese vehicle sales which fell the most in six quarters after government subsidies ended. No doubt many say that these figures are already in the market and have been the basis for the recent moves by the BoJ to weaken the JPY. I wouldn't argue too much with this only to say that the market now has priced in a recovery from these horrible numbers and anything less than a complete bounce will lead to renewed negativity.

Meanwhile the Chinese PMI rose slightly from 50.1 in February to 50.9 in March. Many readers will know that I am not 100% convinced as to the accuracy of China's statistics and therefore would advise investors to look more closely at the trade numbers instead. China is not so domestically focused as some would have us believe.

At least in M&A China has been given some outlet for it's reserves beyond US T-Bonds. Taiwan will let Chinese banks own as much as 20% of some financial institutions, raising a limit on mainland ownership from 5%. Good news if you own Taiwanese financials. It's been talked about for some time, so some of it is in the price. If I were a HK investment banker I'd be sending a present to the Taiwanese government as they have effectively under-written my job for a further year.

Much the same goes in respect of Nasdaq OMX, who offered as much as $1.2bn in cash and deferred stock for a electronic bond trading platform from BGC Partners, an interdealer broker. I was beginning to get M&A jitters last week, but it's this type of activity that helps me sleep with markets at these levels. I'm not sure that BGC will put the money back into the market, but at least they have plenty now to fight another day.


Goldman Sachs clearly believe in leverage again. They've decided to create an entirely separate holding company to raise external equity capital. I'm sure they got tired of top Investment Bankers leaving the "family" and decided that given the current regulatory restriction and market opportunities that they needed to do something. They'll offer shares in a new unit, Goldman Sachs Liberty Harbor Capital LLC as soon as is practicable and effectively side-step Volcker Rule by calling it a BDC (Business Development Corporation). Other banks seem afraid to follow once again proving that you can't beat GS for "balls" in the face of regulatory pressure. Good for them and their investors.

For those who follow my Strava feed you will have noticed that I did a bit of riding over the Easter vacation here in Sydney. The most solid hit-out I had was the 800+m of climbing over only 41kms between Mt Irvine to Blackheath west of Sydney. Only another 35k's on Sunday before my riding partner had a mechanical, but enough was enough. The Cannondale need a solid 2hrs of cleaning here on Monday due to the fine red dust that was coating the drive train. I really can't emphasise enough how important it is to keep this powder out of your bike's workings. It's spotless now ready to be taken in for the yearly service which will cover headset, bottom bracket and cables.

On Monday I did another 65kms with some mates here in Sydney and decided that my legs needed a rest today. I rode the Pinarello and can only say that I advise people to slow down when it rains and your realise that your carbon wheels breaking surface takes 2 - 3x as much distance to bring you to a stop compared with Aluminium. I survived well enough, but lost the peloton for a stretch as a I battled to avoid the limited holiday traffic.

In racing "The hell of the North" . . . Paris Roubaix is here:

Sunday will be epic. I dare you not to watch. Maybe some late night research for me in front of the TV reading through office rental stats in the US while watching the hardest one day race on the calendar. Ciao!