Monthly Archives: January 2013

What Price Did Carl Icahn Pay For Transocean Shares

Topic: Transocean (SIX: RIGN)

Judging by the following two charts, demand surged around the turn of the year in Transocean shares. The explanation: Between January 1st and January 9th (Chart 1) Carl Icahn must have bought the lions share of the options and shares  in Transocean at an average price around 42-46, I would guess, based on traded volume (Chart 2) and charts indicating where volatility spiked.


Chart 1

The first chance you would have had to act on the news that he’d invested was at 50! On January 14th, at the open, that information was in the public domain. 50 was the opening price. Today we’re at around 53 and I saw an article asking if you should follow Icahn into this stock because of the “Carl Icahn Acquires 5.61% of Transocean’s Shares” news hitting the wires today.

2 Month Transocean Chart

Chart 2

The fact is: He held over 3% of Transocean as of Janury 13th. Whatever he bought since is a lot less than he already held. I’m sure he’s someone who is very well aware of when the public is informed and I’m sure he also knows very well, why he published the demand for a USD 4 dividend today only, and not before. If his average price was 44 for the first tranche (say 4%, before the purchases announced today) and the remaining 1.6% were bought at 52, he’s average entry price would be CHF 46,30. So he’s up 13% at the very least.

Now knowing that he averages somewhere between 20-35% a year for his fund (2011: 35% – 2012: +20%) and knowing that he’s sitting on a profit of at least 13% already, – but likely closer to 20%! – , it’s a tough call: He’s already generated significant alpha for himself and the market is looking streched, overbought according to several veterans, i.e. the technical measures they follow. But he has firepower left and the markets trend is up and Transocean had been oversold (looking at the long term chart 3). 52-54 was the major resistance in the last 24 months! A quick move to 60 isn’t that far fetched for the coming months. More likely than a retreat to 40-44, in my opinion.

Transocean - Long Term Chart

Chart 3

Please feel free to post comments or email me at should you have the desire to do so.

Largest Global Banks Going Long(er) Equities

HSBC another powerhouse to announce that it has increased its exposure to equities:

More equities. HSBC strategists have lowered the probability of below-trend growth, and increased the probability of above-trend growth. They’re lifting their equity allocation by 8% and believe that stocks are still priced below fair value. Equity markets should benefit from rising price/earnings ratios, the key drivers of equity returns in their scenarios. They also appear good value on a longer-term basis, the strategists say. HSBC said last week in a separate note that European equities, especially, are still undervalued. Germany’s DAX  on Friday closed at its highest level in five years.

Why Equities Are Well Bid

I see three big reasons for the strong bid in large cap stocks (in Switzerland in particular)

1. SNB (Swiss National Bank) investing in index funds / highly rated companies / blue chips. Few dozen billion across different equity markets across the world. Investors such as the SNB are, in my opinion, leading to large caps being overweighted/overbought. Small and mid caps could be the better long-term risk reward trade.

2. Banks (for example UBS) increasing exposure – partly due to new rules allowing equities in addition to sovereign bonds. Today Axel Weber gave CNBC this quote: “We have been moving to an overweight of equity,’. Weber also said UBS has invested more in stocks and corporate bonds, for which he sees upside.

3. Cash on the sidelines / large caps breaking through key upside levels. Many managers underperformed last year due to being underweight, and are off to another bad start 2013. One large cap after the other is breaking out. Today Novartis. Few days ago Nestlé. Roche. They’re all going from strength to strength.

Equity investors are considerably more optimistic than economists and may be positioned for disappointment

Very interesting remarks from Barry Knapp over at Barclays Capital this morning:

Equity market valuation is a powerful driver of returns in the long term, but the market seems to reach fair value for about an instant on the way up and the way down. With that in mind, we suspect a repeat of the 2011 and 2012 corrections due to a deterioration in the growth outlook may not wait for spring this year. Our economics team recently cut its 4Q12 GDP forecast to 1.5% from 2.5%, and while some may be willing to look past this report, because volatile components such as trade and inventories are contributing negatively, the macro surprise index is falling again and the effect on consumer cash flow of a massive tax hike is just beginning. Additionally, it is looking increasingly likely that the sequestration spending cuts will be allowed to go into effect in March. It appears to us that the $200bn in fiscal tightening, predominately tax hikes, is imbedded in private economist forecasts, but the sequestration-related cuts are not. Further, based on the experience in Europe in 2012, the risk is that fiscal multipliers will prove larger than estimated. Given equity market earnings forecasts and valuations, we think equity investors are considerably more optimistic than economists and may be positioned for disappointment as the economic outlook slips back towards trend, despite a world awash in central bank liquidity.

CHF: Reduced Safe Haven Value – Overvalued Swissie

Recent comments by several big banks underscore what we’ve been seeing in currency markets: The Swissies’ safe have value is falling and currency hedges in place are being reduced.

As an example I’ve quoted two strategist comments from this week:

We also recommend going short GBP/USD and long USD/CHF to reflect reduced safe haven value for UK and Swiss assets as the euro area gradually heals. /source: Barclays Capital, 17-01-2013

Even with the SNB protecting its EUR/CHF1.200 ‘floor’, the CHF is hugely overvalued and a main factor for this is safe haven demand due to the crisis. It is natural then to expect EUR/CHF to rise as confidence in the cohesion of EMU builds. We expect that EUR/CHF will continue to creep higher towards the 1.2500 area medium-term on the anticipation that EMU is nearer to a finding a solution for the crisis. / source: Rabobank, 15-01-2013


Cautious tone from Bank Sarasin and also Rabobank to be seen though:


According to our calculations, the trade-weighted franc is more than 8% too expensive, and despite the overvalued franc, investors should guard against excessive euro euphoria. Full normalisation of EUR/CHF also appears unlikely based on risk considerations, with investors still willing to pay a risk premium on the franc in 2013. After all, important elections are due several euro-zone countries and this means deficit nations’ commitment to implement reforms will be tested anew. / source: Bank Sarasin, 17-01-2013

However, a re-emergence of tension in the Eurozone is still very possible and this could send EUR/CHF rapidly back towards 1.20. 2011 peaks for EUR/CHF lie near 1.2475. / source: Rabobank, 15-01-2012



Why High-Dividend Strategies Are Currently En Vogue

  1.  Low economic growth (and generally uncertain growth prospects). In phases of low economic growth dividends make up a larger proportion of total return than in times of above average growth.
  2. Demographic situation: In the industrialized economies the average age of the population is rising and the proportion of the population generating income is sinking.
  3. Low interest rates mean that investors need yield from other sources.
  4. Investors looking for safe investments in high-quality bonds (i.e. 5 year treasuries) argue that the historical data shows no evidence of large negative returns. We would argue that’s exactely the reason banks got into trouble with their risk models. They were looking in the rear mirror and steering. If you look at returns of countries that have needed debt restructuring the picture changes considerably!

Interested in the other side of the argument?



Future of Swiss Publishing Houses – Interview with Hans Voigt – Tamedia Losing Out?

If you own shares in Tamedia or NZZ todays Interview with Hans Voigt is a must read! (German only:

Just a few of the many interesting comments by Hans Voigt, ex-“20 Minuten” Editor-in-Chief:

Q: How much longer will newspapers be printed?

A: “20 Minuten” for another 4 years. “Blick am Abend” for another 3 years. Then the state owned railway company “SBB” (Swiss Federal Railways) will have a decent WLAN that will provide strong competition by allowing easier access to mobile offerings. (paraphrased) Regional newspapers like the “Bieler Tagblatt” and the “Aargauer Zeitung” will exist in print for another 20 years, the “Landbote” and “Thurgauer Zeitung” also.

Q: And the “Tages-Anzeiger”? (TamediaSIX: TAMN)

A: Difficult. Maybe 10, 15 years. The “Tages-Anzeiger” is neither national or regional. (outtake of the answer)

Q: Is the paywall a model for the future?

A: For the NZZ (“Neue Zürcher Zeitung”) as a national media title with a wealthy clientele it could work. With regional newspapers such as the “Aargauer Zeitung” aswell. Regional information shouldn’t be given away for nothing, there’s a willingness by readers to pay. Otherwise I’m sceptical. If you put in place a paywall the brand has lost its digital future. […] **

** source:


He also notes missing innovation culture in the large publishing houses. The people in charge of human capital are being more cost-controlling than is good for the future of the companies. He compares their problem to those of record companies, the music industry in general in the face of the mp3 revolution. He thinks a lot of the future winners in internet publishing will be from outside the established publishing companies.

I suspect that some of the lessons the writers of “Built To Last” noted will apply to swiss publishing houses. Companies who can’t create a culture of innovation or that can’t generate the ideas themselves or buy new companies cheaply will pay a relatively high price and grow slower than those that risk and innovate as part of their culture.

As a reminder: Tamedia and Ringier forked out CHF 195 million each in September 2012 to buy the (online jobs portal) from Tiger Global, the New York based hedge and private equity fund, which in turn had invested in 2007. The swiss publishing houses spent CHF 390 million for a company with turnover of under CHF 46 Million.

Incidentally Tamedia investors have lost close to 60% of their investment since 2000! Last year, when the broad Swiss Performance Index returned over 17%, the company’s share price lost close to 12%, a massive 29% underperformance.

Multinational Corporations & Pleonexia (Tax-Dodging)

Daily-Mail headline today: Google and the £6billion Bermuda tax shelter: Web giant’s haven revealed as Cameron urges global crackdown

The ancient Greeks had a word for it – pleonexia – which means an overreaching desire for more than one’s share. Aristoteles named pleonexia as one of three forms of injustice.

Zuberbühler Associates advises corporate clients against elaborate unethical tax-dodging as the likelihood of a sharp backlash is rising and will endanger the longevity of the accrued wealth and/or brand value.

The founding partner of Zuberbühler Associates bases this policy on his interpretation of the ethics code the CFA programme teaches and personal judgement.

Read more about Googles tax dodging: