Category Archives: Economy and Meltdown

Apple Cash Balance Rises At Slowest Pace In 30 Months

For a company that recently had a $600 billion market cap, for which scale is everything, and for which every sentence begins with “if you exclude its cash, its multiple is” two things have to be consistent: it has to keep growing its cash, and said growth has to be proportional to the firm’s scale. For Apple, in Q3 the first condition was satisfied… but just barely. Total cash and equivalents did rise from $117.2 billion to $121.3 billion, but the rate of sequential increase, which was only $4.1 billion, was the slowest increase in cash and equivalents since March 2010, when Apple’s total cash load was a far more modest $41.7 billion, as was its market cap. While AAPL continues to be a growth juggernaut, in its pursuit to appease Wall Street with dividends and other guimmicks, is it starting to lose the big picture, which is and always has been about generating cash flow? And how long until the organic growth to cash generation is not even enough to cover the dividend outflow? What happens if and when AAPL actually has cash decline in one quarter? Finally, is it time for the infamous Braeburn Capital to show Simon Potter who truly is boss?

Total cash:

Sequential change:

After Retracing All After Hour Losses, AAPL And AMZN Resume Downward Direction

After some significantly volatile after-hours action, the wunderkinds of the Nasdaq have reverted back up to their VWAPs as all is well once again and the media narrative can play out… AAPL volume is not heavy (remember we said option-skews were near-record levels – implying everyone and their mum owns downside protection and will be unloading into the open tomorrow). QQQs are suffering more than AAPL for now – implying that’s where the hedges went. AMZN’s move was even more impressive wrigging back up to VWAP. Who is the marginal buyer here? As we post, both are leaking back from VWAP’s safe harbor…


AAPL return to VWAP and fade…


AMZN return to VWAP and fade…

It's Been A Wild Ride

The last few years have been a wild ride in the world’s equity markets. None wilder than the US equity markets. The only fly in the ointment is that we’ve seen this kind of ‘wild ride’ before, the kind of unbridled nothing-can-stop-us-now, its-all-priced-in, Central-Bank-sponsored rallies that have been the bread-and-butter of every BTFD’er since March 2009. Presented with little comment – this time it’s different, we really hope…



and if that wasn’t enough – here is the last six months…


and as we noted here recently – this is not just a price pattern, this is a valuation boost pattern too: post-QE Peak P/E appears to have hit us once again…


(h/t @Not_Jim_Cramer)

Taxman Strips Exotic Dancers' Write-Down

In what will likely cause riots on the streets of New York City, the Court of Appeals has upheld that strip clubs could not longer claim a tax exemption as its stage and couch dances did not merit a ‘musical arts performance’ exemption. As Bloomberg BusinessWeek reports: “It is not irrational for the tax tribunal to decline to extend a tax exemption to every act that declares itself a ‘dance performance,’” the Court of Appeals said in a 4-3 decision. The sticking point, apparently, was the fact that the ‘private dances’ were the same as those supposedly ‘choreographed’ on stage (which doesn’t seem such a bad thing to us?) but like the Tax Tribunal we haven’t observed them or have personal knowledge of such VIP-room activity entertainment. The majority said qualifying the dances as artistic performances would “allow the exemption to swallow the general tax” and one judge added “I find this particular form of dance unedifying — indeed, I am stuffy enough to find it distasteful; perhaps, for similar reasons I do not read Hustler magazine; I would rather read the New Yorker,” noting that the former was insufficiently ‘cultural and artistic’.


Indeed, a club presenting performances by women gyrating on a pole to music, however athletic or artistic, seems quite irrational; oh wait.


Seems quite highbrow, athletic, and artistic to us?


Via Bloomberg BusinessWeek:

A New York strip club can’t claim a tax exemption on entrance and performance fees on the grounds that it presents “musical arts performances,” the state’s highest court ruled.

The New York Court of Appeals in Albany today upheld a lower court’s ruling that Nite Moves, an adult “juice bar” in Latham, New York, didn’t prove to tax authorities that its stage and couch dances merited the exemption granted to artistic performances.


“It is not irrational for the tax tribunal to decline to extend a tax exemption to every act that declares itself a ‘dance performance,’” the Court of Appeals said in a 4-3 decision.

While the state imposes a sales tax on any admission charge greater than 10 cents for the use of a “place of amusement,” the Legislature created an exemption for “dramatic or musical arts performances,” according to the ruling.


Nite Moves, which calls itself an “upscale non-alcoholic juice bar,” argued its performances entitled the adult- entertainment business to the exemption, according to the ruling.

The club, which was required to show that its fees were admission charges for choreographed dance routines, failed to prove that performances on either the main stage or in private rooms qualified for the tax break, the Court of Appeals said.


Private Dances


The state’s Tax Appeal Tribunal discredited an expert presented by the club who said the performances were choreographed, finding that her testimony was compromised by her opinion that private dances were the same as those on the main stage although she didn’t observe them or have personal knowledge, according to the ruling.


The tribunal is a panel of three commissioners appointed by the governor that heads the state’s Division of Tax Appeals, created by the legislature in 1986 to resolve tax and licensing disputes, according to its website.


Court of Appeals Judge Robert S. Smith disagreed with the majority, saying the tribunal’s ruling “makes a distinction between highbrow dance and lowbrow dance that is not to be found in the governing statute and raises significant constitutional problems.”


Hustler Tax


“Like the majority and the tribunal, I find this particular form of dance unedifying — indeed, I am stuffy enough to find it distasteful,” Smith wrote in his dissent. “Perhaps, for similar reasons I do not read Hustler magazine; I would rather read the New Yorker. I would be appalled, however, if the state were to exact from Hustler a tax that the New Yorker did not have to pay, on the ground that what appears in Hustler is insufficiently ‘cultural and artistic.’”


The majority said qualifying the dances as artistic performances would “allow the exemption to swallow the general tax” since other forms of entertainment not specified by the Legislature would ask to be spared from the levy.


Why Did The Bundesbank Secretly Withdraw Two-Thirds Of Its London Gold?

Two days ago we reported that the German Court of Auditors demanded that the German Central Bank, the Bundesbank, verify and audit its official gold holdings consisting of 3,396 tons, held mostly offshore, namely New York, London and Paris, at least according to official documents. It also called for repatriation of 150 tons in the next three years to perform a quality inspection of the tungsten gold. Today, in a surprising development, via the Telegraph we learn that none other than the same Bundesbank which is causing endless nightmares for all the other broke European nations due to its insistence for sound money, decided to voluntarily pull two thirds of its gold holdings held by the Bank of England. According to a confidential report referenced by the Telegraph, Buba reclaimed 940 tons, reducing its BOE holdings from 1,440 in 2000 to 500 in 2001 allegedly “because storage costs were too high.” This is about as idiotic an excuse as the Fed cancelling its reporting of M3 in 2006 because “the costs of collecting the underlying data outweigh the benefits.” So why did Buba repatriate its gold? Ambrose Evans-Pritchard has an idea.

The shift came as the euro was at its weakest, slumping to $0.84 against the dollar. But it also came as the Bank of England was selling off most of Britain’s gold reserves – at market lows – on orders from Gordon Brown.


Peter Hambro, chair of the UK-listed gold miner Petropavlovsk, said the Bundesbank may have withdrawn its bullion in self-protection since it did not, apparently, have its own specifically allocated bars in London. “They may have decided that the Bank of England had lent out too much gold, and decided it was safer to bring theirs home. This is about the identification. Can you identify your own allocated gold, or are you just a general creditor with a metal account?”


The watchdog report follows claims by the German civic campaign group “Bring Back our Gold” and its US allies in the Gold Anti-Trust Committee that official data cannot be trusted. They allege central banks have loaned out or “sold short” much of their gold.


The refrain has been picked up by German legislators. “All the gold must come home: it is precisely in this crisis that we need certainty over our gold reserves,” said Heinz-Peter Haustein from the Free Democrats (FDP).

Speculation aside, the fact that central banks, and even banks of central banks (i.e., the BIS), have long lent out gold, is no secret to anyone, traditionally to satisfy short-term physical gold confirmation claims upon a spike in demand, usually associated with a liquidity shortage (when the value of gold as monetary collateral truly shines). The problem with this rehypothecation scheme is what happens when the counterparty suddenly finds themselves insolvent, the gold has since been re-re-rehypothecated, and nobody really knows whose gold it is any more. This becomes a drastic problem when a counterparty in a collateral chain suddenly goes broke… like MF Global did last year, and the lawsuits started flying trying to determine whose gold is where. Needless to say, it was the London office of MF Global that was at fault for breaching a rehypothecation chain (because only in London was there no collateral haircut limit on rehypotehcation), and once physical delivery demands arose, nobody could locate bar XYZ with a given serial number.

That, or the Bundesbank merely foresaw the ultimate unwind of the failed European mercantilist experiment at the start, and refused to leave its most precious asset in the hands of the banker oligarchy which it knew would do everything in its power to procure said gold once the feces hit the fan. Sure enough, BUBA’s ‘non-denial’ denial confirms this too:

The Bundesbank said it had full trust in the “integrity and independence” of its custodians, and is given detailed accounts each year. Yet it hinted at further steps to secure its reserves. “This could also involve relocating part of the holdings,” it said.

Yet what is left unsaid in all of the above is that Germany has done nothing wrong! It simply demanded a reclamation of what is rightfully Germany’s to demand.

And here is the crux of the issue: in a globalized system, in which every sovereign is increasingly subjugated to the credit-creating power of the globalized “whole”, one must leave all thoughts of sovereign independence at the door and embrace the “new world order.” After all this is the only way that the globalized system can create the shadow cloud of infinite repoable liabilities, in which we currently all float light as a binary feather, which permits instantaeous capital flows and monetary fungibility, and which guarantees that there will be no sovereign bond issue failure as long as nobody dares to defect from the system in which all collateral is cross pledge and ultra-rehypothecated… for the greater good. Until the Buba secretly defected that is.

And this is the whole story. Because by doing what it has every right to do, the German Central Bank implicitly broke the cardinal rule of true modern monetary system (never to be confused with that socialist acronym fad MMT, MMR or some such comparable mumbo-jumbo). And the rule is that a sovereign can never put its own people above the global corporatist-cum-banking oligarchy, which needs to have access to all hard (and otherwise) assets at any given moment, on a moment’s notice, as the system’s explicit leverage at last check inclusive of the nearly $1 quadrillion in derivatives, is about 20 times greater than global GDP. This also happens to be the reason why the entire world is always at most a few keystrokes away from a complete monetary (and trade) paralysis, as the Lehman aftermath and the Reserve Fund breaking the buck so aptly showed.

We are confident that little if anything will be made of the Buba’s action, because dwelling on it too much may expose just who the first country will be (or  already has been) when the tide finally breaks, and when it will be every sovereign for themselves. Because at that point, which will come eventually, not only Buba, but every other bank, corporation, and individual will scramble to recover their own gold located in some vault in London, New York, or Paris, or at your friendly bank vault down the street, and instead will merely find a recently emptied storage room with humorously written I.O.U. letters in the place of 1 kilo gold bricks.