Alibaba Is On An Acquisition Spree, Plus IMF Lowers Global Growth Forecast…Again

by 4 years ago

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“Highly unsustainable” — The International Monetary Fund, in a newly-drafted description of Greece’s current debt situation. Tell us something we don’t already know.

 

MARKET SNAPSHOT
Big Picture

  • U.S. stocks finished in the green, with the energy sector leading the way and financials following closely behind

Alternatives to Watch

  • Oil jumped over 4% again, this time after reports stated that Russia and Saudi Arabia reached an agreement on a production freeze (break out the champagne?)

Market Movers

  • Och-Ziff Capital Management, one of the few publicly-traded hedge funds out there, plummeted 24% after the Justice Department announced it would push the company to plead guilty in a bribery probe—and that’s never good

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WORLD MACRO

IMF Lowers Global Growth Forecast…Again

Once…twice…three times…do we have four? The IMF does. Yes, for the fourth time in the past year, the IMF issued a dour outlook on the global economy, this time right before the world’s top economic policymakers meet this week in Washington. The organization anticipates that global growth will expand by 3.2% this year, a downward revision of 0.2% since its last forecast three months ago. And even this new figure could be overly optimistic, with the IMF citing emerging market uncertainty, China’s slowdown and the events unfolding in Europe—mainly Britain’s potential exit from the European Union. Even the U.S. wasn’t immune: 2016 growth expectations were also lowered from 2.1% to 1.9%, while Brazil’s economy is expected to contract 3.8%. Not great, Bob!

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CORPORATE PRIMER

Deutsche Bank Draws The Line

North Carolina has quickly become the center of controversy following its new law that (among other things) eliminates anti-discrimination protections based on sexual orientation. You may remember that PayPal halted expansion plans in the state last week to protest the law, and now Deutsche Bank is following suit. Yesterday, the giant German bank stated that “as a result of this legislation we are unwilling to include North Carolina in our U.S. expansion plans for now.” What this means: $9 million of planned spending and 250 new jobs are now off the table. If this is just the beginning, North Carolina could have a long road ahead of it.

Valeant Gets Warned

Valeant Pharmaceuticals always seems to be in the headlines for the wrong reasons—and this time isn’t any different. Centerbridge Partners, a large distressed debt fund, owns a huge amount of Valeant bonds, and it’s letting the world know about it…in the form of a notice of default to Valeant (basically a letter indicating it doesn’t think it’ll get its money back). Why the warning? Valeant already failed to file its annual report on time, which is typically a sign that all is very much not well financially speaking. Bottom line: Centerbridge wants to be sure it’ll get paid, and it’s not very sure right now—a reality that has investors heading for the exits again, sending shares down nearly 5% after hours.

Alibaba and the Acquisition Spree

Alibaba is behaving a lot like a teenage girl who just got her first credit card. Yesterday, the Chinese e-commerce giant dropped a cool billion dollars to acquire Singaporean e-commerce startup Lazada, putting its total bill at over $3.6 billion in acquisitions since 2015. Riding the globalization trend, Alibaba is looking to get its foot in the door in emerging markets, offering Lazada infrastructure and logistics capabilities that are lacking in not-so-industrialized Singapore.

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OTHER STORIES

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ECONOMIC CALENDAR

  • Monday: Alcoa (+/-) Earnings
  • Tuesday: Import/Export Prices
  • Wednesday: JPMorgan Chase Earnings; Retail Sales; Producer Price Index; Business Inventories; Beige Book
  • Thursday: Bank of America, Wells Fargo, Delta, Progressive Earnings; Consumer Price Index; Weekly Jobless Claims
  • Friday: Citigroup, Charles Schwab, Seagate Earnings; Industrial Production; Consumer Sentiment; Empire State Manufacturing Survey

INFLATION ALL DAY, EVERY DAY

We hear a lot about the Fed and its 2% inflation goal. But how about 500%? Ridiculously high inflation in Venezuela has led to such a shortage of basic goods that hotels are asking guests to bring their own toilet paper. Here’s what’s going on in “Little Venice” (warning, it’s not pretty):

  • Inflation in Venezuela is expected to increase by 481% in 2016 and by another 1,642% in 2017. No, those aren’t typos. And yes, there is an official word for it: hyperinflation.
  • The IMF has been all over today’s Brew, so why not one more shout-out: the IMF predicts that Venezuela’s unemployment rate will be 17% in 2016 and close to 21% in 2017. For some perspective, the last time we’ve seen those numbers in the U.S. was during the Great Depression.
  • Believe it or not, the news only gets worse. The Venezuelan government has $5 billion in debt payments due next fall, 95% of Venezuela’s exports are oil and President Maduro has made massive public spending his forte. Ouch.

INTERVIEW QUESTION OF THE DAY

What digit is most frequent between the numbers 1 and 1,000 (inclusive)? (Answer)

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BUSINESS TERM OF THE DAY

Naked Shorting — No, it’s not shorting stocks in the nude. Naked shorting is the illegal practice of short selling shares that have not been absolutely determined to exist. Ordinarily, traders must borrow a stock before they sell it short. But due to various loopholes in the rules and discrepancies between paper and electronic trading systems, naked shorting continues to occur.

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FOOD FOR THOUGHT

Did you know that at Facebook’s F8 conference, Mark Zuckerberg revealed that Facebook Messenger and WhatsApp now combine to process three times more messages than SMS on a daily basis? That’s a mind-boggling 60 billion messages per day versus a comparatively meager 20 billion SMS messages.

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