Biderman's Trim Tabs to non-subscribers (me) is on three week lag. However his question about the offering calendar seems to have been answered:
news.ft.com
Oct 13th, 2003
L1 GROWS A SURPRISINGLY LOW $744 MILLION LAST WEEK AS NEW OFFERINGS SLUMP CONTINUES. FOUR NEW CASH TAKEOVERS OVER $100 MILLION. U.S. EQUITY FUND FLOWS RESUME BIG TIME.
The estimated net change in the trading float of shares (L1) rose only $744 million over the five days ended October 9, the smallest one-week gain since the $474 million increase over the five days ended July 24. Perhaps in response to the subdued gain in L1, the overall market capitalization rose $538 billion, or 3.9%, over the past fortnight. New offerings continued to slump, and only $2.97 billion were sold. This coming week, Dealogic reports that just eight new offerings totaling about $1 billion are currently scheduled. This figure may or not mean anything, since well over half of all new offerings this year have been “overnight” deals.
The prime time for new offerings runs from now through the week before Christmas, and the underwriting community can create and sell between $5 billion and $10 billion of new shares each week. Yet over the past fortnight, only $500 million of new shares has been sold daily.Are we missing something when we say that new offerings should be pouring forth given the apparent bearishness of corporate America? Either the Jewish New Year’s holiday following a $10.6 billion new offering surge brought a slump in new offerings that will end this week, or something is occurring of which we are not aware.
REVERSING $1.7 BILLION TAUBMAN ATTEMPTED ACQUISITION HIDES FOUR DECENT-SIZED NEW CASH TAKEOVERS.
Five new cash takeovers were announced last week, four of which were valued between $145 million and $420 million. The collapse of the Taubman-Simon deal, worth $1.7 billion, created a negative number. Is this the beginning of a new trend, or are a few mid-sized deals simply being completed during the same week?
NEW ANNOUNCED BUYBACKS IN SINGLE DIGITS LAST NINE WEEKS, FIRST TIME SINCE WE HAVE BEEN TRACKING.
While new cash takeovers experienced a small resurgence, new stock buybacks remained an endangered species. Just five were announced last week. The overall dollar amount was respectable, since one was a $3 billion replenishment by Sears. Fewer than ten new buybacks, however, have been announced during each of the last nine weeks. Such a streak has never occurred since we began tracking the number of new buybacks at the beginning of 2002. Previously, the longest streak of fewer than ten buybacks per week lasted for three weeks in March 2002. Remember, we are right at the beginning of earnings season, and new buybacks are typically announced at the same time that earnings are released.
INSIDER SELLING SLOWS DURING EARNINGS SEASON, RESUMES BIG TIME AT END OF MONTH.
Historically, insider selling slows during earnings season. Many companies impose a black-out period beginning a few weeks before earnings are released and ending 48 hours afterwards. Thus, we reduce our daily insider selling estimate to $200 million daily from the $400 million daily it had been averaging.
The Thomson Financial September Insider Trading Update reported that the ratio of insider selling to insider buying remained over 20:1 during the five months from May to September. This is the longest period that ratio has remained over 20:1 since insider selling data became available at the beginning of 1990. Moreover, Thomson reports that aggregate insider buying is also at historic lows.
WITH CAPACITY AT $10 BILLION WEEKLY, SIZE OF NEW OFFERING CALENDAR KEY TO MARKET’S FUTURE.
The current capacity of the new offering calendar in the U.S. is roughly $10 billion weekly. The future of the U.S. stock market depends on how closely the new offering calendar approaches this figure over the next few weeks. The conventional earnings-based paradigm claims that the future of the stock market depends upon what companies say about their immediate futures as they release September-quarter earnings. We say that companies are already saying what they think about the future by buying few of their own shares and selling them heavily.
VOLATILITY INDEX PLUNGES TO 18.26, A FIVE YEAR LOW.
There is no question that a bubble exists. Besides the indicators we always follow, the VIX on Thursday reached 18.26, near its lowest levels ever. Second, The Wall Street Journal reported last Friday that bulletin board volume is now as high as it was in March 2000. Third, a reporter who called last week to ask about the impact of late trading and market timing on mutual fund inflows said that mutual fund investors who wanted to return to the equity market after getting out in 2001 were nervous about the “scandal.” What struck me about this conversation was not our discussion of market timing but that she had talked to several investors who were planning to return to the stock market after they got out near the bottom.
WAGES AND SALARIES SURGE LAST TWO WEEKS TO 4.8% ADJ. Y/O/Y GAIN. FLUKE?
Wages and salaries paid to the more than 100 million U.S. residents subject to withholding rose an adjusted 4.8% over the past fortnight. This pace is well above gains earlier in the year and is likely due to statistical noise, since the past fortnight includes the end of September and the beginning of October.
BOTTOM LINE: WE TURN BEARISH FROM AGGRESSIVELY BEARISH. WE WILL RESUME AGGRESSIVE STANCE WHEN NEW OFFERING CALENDAR AGAIN TOPS $1 BILLION DAILY.
We will turn bearish from aggressively bearish. Thus we will buy back 1/2 our model portfolio’s shorts. We are concerned about the slump in new offerings, but we are not concerned enough to turn neutral.
The last time we returned to a less aggressive stance, we heard that some were waiting for us to capitulate so that they would be sure that the top had come. We would respond that if that is what is required to prick the bubble, great!
We will remain bearish but will risk less until the new offering calendar resumes at close to full speed.
-Charles Biderman |
