Apple and Twitter Valuation

While Apple has been hugely successful in selling phones and tablets, it has little traction in social networking, which has become a major engine of activity on the Web and on mobile devices. Social media are increasingly influencing how people spend their time and money — an important consideration for Apple, which also sells applications, games, music and movies.

Apple has considered an investment in the hundreds of millions of dollars, one that could value Twitter at more than $10 billion, up from an $8.4 billion valuation last year, these people said. They declined to be named because the discussions were private.

Subterfuge

What are the costs of subterfuge to the good life?

Santos

Santos last week urged policy makers to consider lower borrowing costs and to step up daily dollar purchases.
“I have asked the central bank to study a cut in interest rates, and evaluate a more aggressive purchase of dollars to increase our international reserves,” Santos said in a July 20 speech to mark Colombian Independence Day. “This will also help us confront the phenomenon of revaluation.”
Colombia’s central bank has often ignored advice from Santos and his predecessor, Alvaro Uribe. In June, policy makers kept their daily dollar purchases unchanged at $20 million, even after Santos urged them to increase the amount.
In January, the central bank raised its benchmark interest rate a quarter point, after Santos said such a move wouldn’t be “appropriate.”

The Scope of LIBOR

The LIBOR is widely used as a reference rate for many financial instruments, such as:

forward rate agreements
short-term-interest-rate futures contracts
interest rate swaps
inflation swaps
floating rate notes
syndicated loans
variable rate mortgages
currencies, especially the US dollar
They, thus, provide the basis for some of the world's most liquid and active interest-rate markets.

For the euro, however, the usual reference rates are the Euribor rates compiled by the European Banking Federation, from a larger bank panel. A euro Libor does exist, but mainly for continuity purposes in swap contracts dating back to pre-EMU times. LIBOR is an estimate and not interred in the legally binding contracts of an LLC. It is, however, specifically mentioned as a reference rate in the market standard International Swaps and Derivatives Association documentation, which are used by parties wishing to transact in over-the-counter interest rate derivatives.

The Libor is used by the Swiss National Bank as their reference rate for monetary policy. In the United States in 2008, around 60 percent of prime adjustable rate mortgages and nearly all subprime mortgages were indexed as to the Libor. In 2012, around 45 percent of prime rate|prime adjustable rate mortgages and more than 80 percent of subprime mortgages were indexed to the Libor. American municipalities also borrowed around 75 percent of their money through financial products that were linked to the Libor.In the UK, the three-month GBP Libor is used for some mortgages—especially for those with adverse credit history.

Policy Makers sit on the sidelines?

The San Bernardino and Stockton episodes are representative of a national crisis: Crippling household-debt burdens and foreclosures have been dragging down the economy for the past five years. Renegotiation of underwater mortgages by the private sector has been almost nonexistent. Despite strong evidence that frictions related to securitized mortgages are preventing the efficient restructuring of household-debt burdens, policy makers have largely sat on the sidelines.

Long Bond Sale

The long bonds were sold on July 12 at a yield of 2.580 percent, down from the previous mark of 2.72 percent at a June 14 sale. The 10-year note auction the day before drew a yield of 1.459 percent, compared with the previous low of 1.622 percent set last month.

Stocks Pessimism Posts Longest Streak Since 2011 Market Bottom

Stocks Pessimism Posts Longest Streak Since 2011 Market Bottom

Bearish sentiment in a survey of individual investors has surpassed the historical average for the longest stretch since October, when stocks began a rally that lifted the Standard & Poor’s 500 Index (SPX) 24 percent.

A poll by the American Association of Individual Investors showed 44.4 percent of respondents say American stocks will fall over the next six months. That’s the eighth consecutive week that pessimism stayed above the 25-year average of 30 percent.

Concern Europe’s debt crisis will deepen and the recovery weaken have erased as much as $1.8 trillion from U.S. equities since March. The last time the proportion of bears topped the average for this long was in the 14 weeks through Oct. 20, 2011, just after the S&P 500 bottomed at 1,099.23. The benchmark measure for U.S. stocks went on to surge as much as 29 percent, reaching a four-year high of 1,419.04 on April 2.

“Individual investors tend to get in when the markets are red hot and they tend to get out when the markets are at the bottom,” Robert Carey, who helps oversee $53 billion as chief investment officer of Wheaton, Illinois-based First Trust Portfolios, said in a telephone interview. “It’s been one series of issues after another, but, ultimately, fundamentals will weigh out and overwhelm any sentiment that people have.”

The S&P 500’s price-earnings ratio slid to a two-year low of 11.9 times annual profit on Oct. 3 before the level of bearishness by individual investors climbed above its historical average. The multiple has since rebounded 16 percent and is trading at 13.8 times profits in the past year.

Record High

The reading reached an all-time high of 70.3 percent on March 5, 2009, four days before the S&P 500 bottomed at a 12- year low of 676.53. The benchmark stocks index has since surged 102 percent as corporate profits exceeded analysts’ estimates and the Federal Reserve carried out two rounds of bond purchases known as quantitative easing.

That shows pessimism may increase before it becomes a signal to buy, according to Jeffrey Coons, president of Manning & Napier Advisors Inc. in Fairport, New York, which manages $44 billion.

“We’re not in an extreme environment of fear where you have readings you could look at in a contrarian way,” Coons said in a phone interview. “This low level of bullishness is another example of that pent-up demand for stocks. But we don’t really have the types of extremes that could give you that catalyst for fear reversal.”

‘Three Corrections’

The AAII’s weekly survey showed 28.7 percent of respondents were bullish on equities in the week ended June 27, the 13th consecutive time that optimism stayed below its historical average of 39 percent. The survey, which had 293 participants, has been conducted since July 1987.

The last time the percent of bulls was below average for this long was in the 14 weeks from December 2007 through March 2008. The S&P 500 went on to lose 38 percent that year.

“We’ve had three corrections since the second quarter of 2010, and each time we’ve asked whether we’re going to relive 2008 and it’s never happened,” Carey said. “It’s not that we can’t have more selling and short-term downdrafts, but for investors with a longer-term horizon, there are a lot of bargains in the market.”

Respondents in the AAII survey said the thing most likely to change their outlook on stocks would be resolution to the European sovereign debt crisis. Other events that would potentially damp pessimism included stronger U.S. economic growth and Congress addressing the so-called fiscal cliff, or the scheduled expiration of tax cuts and implementation of spending cuts at the end of this year.

Negative Catalysts

Potential negative catalysts were Europe’s crisis worsening and slower expansion in either the U.S. or China, the world’s two largest economies, the survey showed.

While bearish sentiment by individual investors has climbed, Wall Street strategists left their forecasts untouched for seven straight weeks through June 27. The average projection for the benchmark stocks measure at the end of this year slipped by 0.5 percent to 1,391 from the prior week, according to the average projection of 13 forecasters surveyed by Bloomberg on July 2.

Investors should bet on companies that have sales around the world, according to Kate Moore, the New York-based senior global equity strategist at Bank of America Corp. She listed Priceline.com Inc. (PCLN), Cairn Energy Plc (CNE) and Bank of China Ltd. (3988) as some of the firm’s recommended stocks.

“Investors are incredibly reluctant to take equity risk,” Moore said in a television interview on July 28 on Bloomberg Television’s “In the Loop” with Deirdre Bolton. “You have to be able to be an investor and not a trader, because the trading environment is going to be very rough for the next couple of weeks.”

To contact the reporter on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

Economic Statistics or Wall Street pundits never give a clear picture?

Stock markets can soar or falter in an instant. One day the European debt crisis is receding, the next day the region’s on the brink of disaster. Economic statistics never give investors the whole picture.