Sunday, October 25, 2015

Ferrari’s Recent IPO: Mere Luxury Problem?

Even though they are one of the most aspired automakers on the planet, does the recent Ferrari IPO debut on the NYSE a mere “luxury problem” for the world’s 99-percent?

BY: Ringo Bones 

Even relatively well-off households whose average income is around 250,000 US dollars are still too cautious to actually own one even though they still covet one in their dreams, most of us 99-percenters are viewing the luxury sports car maker Ferrari as a mere “luxury problem” economists around the world had been closely watching its initial public offering debut at the New York Stock Exchange back in Wednesday October 21, 2015. Cautious hedge fund managers say Ferrari’s strong debut doesn’t necessarily bode well for IPOs but everyone has a reason to be optimistic given that the Italian luxury sports car maker’s stock managed to trade above its IPO price. 

Ferrari NV sparkled on its first day of trading back in Wednesday October 21, 2015 as the luxury sports car maker celebrated the first step toward becoming an independent company. The stock traded as high as 60.97 US dollars or 17-percent above the 52 US dollar-a-share price of its initial public offering that managed to raise 893-million US dollars for parent company Fiat Chrysler Automobiles NV. Shares managed to close at 55 US dollars – up 5.8 percent. 

Currently, about 9-percent of Ferrari is publicly traded, creating a scarcity premium that is sustaining the share price, according to investors and analysts and thus fueling the caution of some of the overall health of IPOs currently traded on the NYSE. But nevertheless, they cheered on the success of Sergio Marchionne, chief executive of Fiat Chrysler and chairman of Ferrari, in convincing investors that when it comes to valuations, Ferrari has more in common with luxury goods makers like Hermรจs International SCA than high-end car makers like BMW AG.   

Back in Wednesday October 21, 2015 – red Ferraris lined the street in front of the New York Stock Exchange where Mr. Marchionne rang the opening bell without deviating from his trademark black sweater over a collar shirt. His one concession to adjusting his preferred wardrobe for the occasion was a small Ferrari pin with a yellow backdrop and the black prancing horse that has become the symbol of one of the world’s most-recognizable brands. 

Sunday, October 11, 2015

Will There Be A Credit Bubble?

As this year’s IMF meeting went underway in Lima, Peru – will there be an impending “credit bubble” because central banks around the world had been keeping the cost of borrowing money too low for far too long?

By: Ringo Bones

As this year’s annual IMF meeting was hosted by Peru and was held in the capital city Lima, IMF’s managing director, Christine Lagarde recently calls for the world’s central banks to be more courageous after warning of the financial risk of the low borrowing costs that lasted since the 2008 as a part of the economic stimulus used to counter the global credit crunch. In a way, various central banks around the world had been busy printing money for a little over 7 years now and a 3-trillion US dollar corporate credit crunch now looms as debtors face that “day of reckoning” – the day when the US Federal Reserve finally decides to increase the cost of borrowing money. 

During the IMF annual meeting, which for this year was held in Lima, Peru, the IMF flashes its warning lights on the emerging market credit bubble which is around 18 trillion US dollars. With plunging commodity prices and the recent Chinese economic slowdown, will a “credit bubble” seems inevitable? 

Ina recent interview, US Federal Reserve chair Janet Yellen said that during the minutes of their September meeting, many of the top brass at the Fed had reached a conclusion that the US jobs market is robust enough to withstand an interest rate increase yet reached a consensus of choosing not to increase for fear that the decision could have a deleterious effect on the global economy – especially on emerging markets. Are low interest rates here to stay given that the Fed might not increase it until the middle of 2016?