MOAR Cause For Concern: Sovereign Bonds Yields For PIGS Diverge From Non-Bankrupt Countries in Europe

That’s a truly fucked up headline. I hope you’d come to expect these sort of things from me, by this time, at this point in the game. We’ve all been playing in a hall of mirrors, imbued with smoke, since 2007. The narrative changes, in the tiniest of ways, but the overall theme remains constant. Central banks, in concert with large banking institutions, work towards the never-ending task of inflating asset prices. One of the truest enemies of this storyline is the fragility of the European Union.

On paper, all nations are the same, just like a grande olde communist block. But, in truth, Germany and France are the only countries able to withstand hard times. Even during the panic wrought days of 2011, when the currency was in crisis, French sovereign yields spiked hard, as the wolves circled the wagons in search for weak prey.

I’ll cut to the chase. The acronym PIGS stands for the weakest of the lot (Portugal, Italy, Greece, Spain). When their sovereign yields diverge from Germany, it usually means there’s some stress in the banking system. It is the proverbial canary in the coal mine.

Portuguese yields are now +319 bps above Germany, the highest in quite some time.

Additionally, all of the PIGS yields are rising, while non-EU member Switzerland plunge.

The ultimate fear index is flashing red. Hide the kids. No one is safe.

We are undergoing a significant spike in volatility, as all of the cocaine addled hedge fund managers scramble to ‘lock in’ their -3% loss for the year, before heading out to the Hamptons to perform the ancient ritual act of Prima Noctis upon their subjects. Put buyers are getting anxious. As such, VXX tits has inflated.

Overall, it’s a dreadful day for equities, with all sectors in the red and 75% of stocks lower.

Gold is higher by 0.7%, but the miners are lower. This usually occurs when markets are in distribution mode. Investors are selling their hot money gold stocks, in order to raise cash. This doesn’t affect the price of gold itself, because most of the hot money is allocated in higher beta gold plays.

Lastly, treasuries continue to be a safe-haven for large money managers. As captain of the ark, I can tell you there are only a few spots left on the grande ship, right next to the Venus Flytraps and antelopes.

Cashin started off talking about the same old stuff to the same old stuff, until he dropped a nuclear bomb on the exchange. He’s hearing the Chinese strategic oil reserve is almost full. The scary part of this whole damned crazy rumor is that he’s also hearing it amounts to 800,000 barrels per day (SHOTS FIRED!).

Oil is shrugging off greasy talk like this, off by just 0.7% for the session.

Crude is down 1.5%, but many oil stocks are up. Gold is strong, which is helping the miners. American markets have a tendency to rally after terror events. That’s American for ‘fuck you, we’re not scared of you,’ in Wall Street terms.

Still, there are many things wrong with the tape, stemming from negative rates to a rapidly increasing yen to the looming BREXIT vote. This morning’s deals (Bluecoat, LinkedIn) helped to get the wheels turning at many greedy as sin money management firms. As we speak, there are people buying YELP and TWTR now, thinking they’re next. We both damn well know that neither of them are getting a bid any time soon.

I wouldn’t be surprised to see stocks stage a rally today, although I won’t be chasing it. I’m on the ark, counting my gold bricks, waiting for the storm to come.

Oh yeah, European markets are being ravaged on BREXIT fears. So predictable.

File this one under ‘who gives a shit’?

Talk to me about Chinese frauds or maybe pharmaceutical scams and I’ll listen. But Faced book? Really? Come on, son.

“Facebook is losing an extensive amount of relevancy,” Left said in a phone interview Monday morning. “I am short Facebook.”

LinkedIn “was a monopoly in their respective space, whereas I see Facebook losing share to Snapchat and overstaying its welcome in other niches,” Left said. “I am not saying Facebook is a ‘bad company’ (it) just will not be a $330 billion company in a year.”

For the sake of humanity as we know it, I hope Mr. Left is right. Still, there’s nothing interesting about this call.

Ricky Sandler from Eminence Capital recently upped his LNKD position from a mere 400,000 shares to 1,200,000. His firm made over $70 million today.

And RBC Capital analyst, Mark Mahaney, just upgraded LNKD last week, citing a turn around.

RBC Capital Mkts upgrades LNKD to Outperform from Sector Perform and sets target price at $160. Firm noted their online recruitment survey work + updated Marketing Solutions market analysis makes them view co as still well positioned against several large TAMs. They upgrade with the stock still reasonably valued & still deep in correction territory.

Boy did they nail it.

Social media hasn’t been this interesting since Facebook embarrassed themselves with that pathetic IPO debut of theirs. The MSFT for LNKD deal is illuminating who the market thinks is the next one to go.

Share of NFLX are up a little. But the stock prices of both YELP and TWTR are taking off. My guess, Google would be interested in YELP and FB would complete their social media hegemony by acquiring TWTR.

No action, thus far, in the shares of Z or TRIP.

Finally, one of these giant companies is putting their money to work, in favor of moronic share buybacks. I love this deal.

Congrats to both MSFT and LNKD longs.

Microsoft has agreed to acquire LNKD for $196 per share, or $26.2bill, in an all cash transaction. The CEO of LNKD will remain onboard running the company.

The stock is higher by almost 50% on the deal.

On March the 10th, 2015, Bain Capital acquired Bluecoat, ticker BCSI, for $2.4 billion. Today, they sold the same piece of shit company to the bagholders at SYMC for $4.65 billion.

According to the WSJ, Bain had “bolstered” Bluecoat with a few cloud acquisitions. Nevertheless, the mark up is sweet, given the time period by which Bain has been saddled with Bluecoat has been less than a year.

Management at Symantec, obviously feeling guilty for paying so much, defended the price tag.

Buying Blue Coat last year “would have been impossible,” operationally, as the company was in the process of divesting itself of Veritas, said Thomas Seifert, Symantec’s chief financial officer.

“If you look at what we’ve paid, it’s well within the range of what an IPO valuation would have been,” he said in a separate interview. “With this IPO path in mind, we think we paid fair value for what we’re receiving.”

This, of course, is total nonsense, as the cyber security space sucks and has traded down, hard, for the better part of the past two years. Look at FEYE for proof.

In the time that Bain acquired Bluecoat until now, industry leader, Palo Alto Networks’, share price has dropped by 25%, while Fireye traded down an astounding 69%.

Tip of the hat to the salesmen at Bain for getting this deal done.

DA Davidson believes that whoever bought a frac sand stock on Friday is a moron of the first magnitude. The sector is up by 100% since December and the fundamentals haven’t improved all that much since then.

They’ve taken liberties to downgrade EMES, FMSA, SLCA and HCLP this morning.

Truth be told, the gains enjoyed in the frackers are a gift, a wild eyed generosity bestowed upon an indigent people by lunatics.

DA Davidson believes their frac sand coverage universe is trading well ahead of fundamentals for a growing industry that is still in flux. The group has moved nearly 100% since their Dec. 4, 2015 initiations and current valuations and/or estimates are devoid of reality; firm would recommend selling the group in favor of a less frothy entry. Further, they believe the group is grossly misunderstood and suffering from a recency bias that disguises a number of sell-side inconsistencies about the space: 1) assuming anything is “Normalized” in an industry that is this new and never been in a steady state; 2) assuming peak margins don’t equate to painfully compressed multiples; 3) underestimating how attractive adding new capacity is, even at mid-single digit FOB margins (17%-25% returns on investment); and 4) assuming a “Secular” sand demand theme will be met with a rising cost curve.

It’s time to get off the beach and into the shade.