Crimea voted to secede from Ukraine and join Russia. So what? The bears expected that this would be the beginning of a major international crisis that would finally take the markets lower. As a result, they spent last week buying puts and going short. Well, the Crimean vote occurred yesterday, and the region which is for the most part ethnically Russian, did what most people expected that it would do. US President Obama said that the US would not recognize the vote and implement some economic sanctions. I ask, what would happen if Quebec voted to secede from Canada? Would the bears be licking their chops? Would Obama not recognize that vote and target French Canadian assets for sanction? In the fullness of time; when it comes to Crimea, who cares? As long as Ukraine can remain independent, which it will, and most likely align with Europe, which is highly probable, then the goings on with Putin and Crimea are less worrisome.
Alibaba Set to Go Public in US with IPO
It appears that Alibaba will be selling stock to the public in a US listed IPO. This will be good for Yahoo (YHOO), a stock that we have owned not for its current operations but for its “break-up” value. The value of Yahoo is the company’s unmonetized investments in Alibaba and Yahoo Japan holdings. I discussed this in greater detail in My Gut Feeling on January 29, 2014. Expect Yahoo to move higher on the Alibaba news not just today but into and through the IPO.
NCAA Tournament Brackets Revealed
Many people will be focused on the NCAA Men’s Basketball tournament brackets today. Even Berkshire Hathaway’s (BRK/A, BRK/B) Warrant Buffet is getting into the act by offering $1 billion dollars to anyone who correctly picks every single game. Out here in the suburbs of Las Vegas, I made two simple and small wagers for Louisville and Michigan State to take the championship. I cannot believe that Louisville got a #4 seed. It deserves much better. I think it will take a while for its new conference, the American Athletic Conference, to get some respect. The most overrated team in the tournament remains Syracuse which will not go as far as it did last year.
This week there will be a slew of secondary but nevertheless important economic data points, such as: Industrial Production, Capacity Utilization, CPI, Housing Starts, New Home Sales, Philly Fed Index and of course, the weekly unemployment claims.
Stock Market Poised to Rise
Overnight there was very little in the way of negative reaction in US index futures to the Crimean vote. By the time we woke up, it was apparent that the shorts did not get their gift of a coordinated global sell-off. So, they had no choice after bidding up puts and volatility and selling futures last week other than to cover their negative bets. Hence the markets will open to the upside today. The extent, to which we rise today, is uncertain, as we always have to be on the lookout for a fade to an early Monday rise. However, we should expect a solid bullish advance. By the end of the month, do not rule out S&P 500 (SPX) eclipsing the 1,900 level.
I will be heading back East later today, something that I would prefer to avoid given the weather differential. As a result, I will resume My Gut Feeling on Wednesday.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long YHOO — although positions can change at any time.
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