13F

Here are some of the things that David Einhorn likes and does not like, having just started his speech at the Ira Sohn Conference:

• Martin Marietta - stock plunges 10% and triggers circuit breaker.
• France - "a french default is not out of the question" - France not limit down yet. He says that a return to the Franc is not out of the question.
• Einhorn likes GJF.NO - "Norway is the only country which can finance itself."
• Einhorn likes Cairn Energy as it trades at discount to assets in just Britain and India.
• Says China is misunderstood and is not an investment opportunity: not enough money to feed the economy and banks aare becoming illquid; money is leaving the country
• Also does not like Japan for all the usual Kyle Bass and Andy Xie reasons. The Yen will continue strengthening.
• Einhorn likes AMZN, calls it "elephant in the room", but questions profit growth.
• Einhorn likes Dena Co, and Gree Inc in Japan
• Einhorn is short DKS
• Einhorn, who is long about $870MM AAPL as per last night's 13F, likes AAPL. Stunner.

Sometimes, when one desperately chases alpha at any cost, all one needs to see is a somewhat credible asset manager, in this case Bill Ackman's Pershing Square, invest a massive amount of cash in a given company, to decide to invest alongside. In this case the company is JCPenney, and the amount in question invested by Ackman being $1.3 billion (at last check his third biggest positions after GGP and CP). Usually this strategy, elsewhere known as herding, 13F chasing, or alphacloning, works, until it doesn't. In the case of JCPenney it just didn't, after the company just blew up in real time dropping a tape bomb, missing on the top and the bottom, cutting the forecast, and for good measure also eliminating the dividend. End result: Ackman just lost nearly $200 million after the stock imploded by nearly 15% after hours, and all those who blindly piggybacked along without doing their homework (such as Whtiney Tilson whose 4th largest cash position is JCP), went for the ride.

For all the totally inexplicable facetime T2's Whitney Tilson gets on prime time financial comedy air, one would imagine that the man runs billions and billions. Instead, as per the just released 13F, Tilson's fund has a grand total of $345MM in long AUM as of March 31. So far so good, however that does not explain why the manager has a Sharpe ratio of roughly 0.00 in the past 3 years. Well, now we know: of the $345 MM total, a ridiculous $104 Million is in call options! In other words, not only is Tilson nothing but a bullish bet that copycats various other select hedge fund portfolios, it is a mega-levered one at that, with what appears ridiculously high theta! It get's worse: as it turns out, another $24MM or so is... in Warrants. Yup: all levered products without actually owning the underlying, leading to massive monthly swings in actual P&L. In other words, real assets held by Tilson amount to $217 Million. And one wonders why the fund can be up 20% one month and down 30% the next... or how Tilson can spend hours a day on TV.

A month ago we ended up with the hilarious situation where the US was actively considering releasing petroleum from the Strategic Petroleum Reserve even as China was demonstratively and concurrently adding to its strategic inventory. Now, as the developed world is seeing day after day of gold hammering on amusing flights of fancy that central banks won't be forced to engage in more and ever bigger rounds of monetary dilution, and where the seller apparently has no regard for getting a "good" price, but merely seeks to crash the bid stack slams various PM prices, we see the same inversion with gold. Because as Bloomberg reports, "Mainland China's gold imports from Hong Kong surged more than sixfold in the first quarter, to 156 metric tons, adding to signs that the country may displace India as the world's largest consumer of the precious metal on an annual basis." And the punchline: "The purchases through Hong Kong may signal that the mainland is accumulating reserves, London-based brokerage Sharps Pixley Ltd. said in February. The nation last made its reserves known more than two years ago, stating them at 1,054 tons." Yep ladies and gents: the PBOC is very grateful that it can add hundreds of tons of gold to its reserve holdings in a stealthy operation which it will announce only after its conclusion, at which point, like true 13F chasing lemmings, retail will send gold soaring. But in the meantime, dear hedge funds worried about your margin calls and 1 month performance reports, please proceed calmly along with the lemming herd, and keep pushing gold lower and cheaper for our new Chinese overlords, and for everyone else who, without P&L timing constraints, takes delight in such brief arbitrage opportunities.

From Morgan Stanley: "In our mind, many of the approaches to algorithmic execution were developed in an environment that is substantially, structurally different from today’s environment. In particular, the early part of the last decade saw households as significant natural liquidity providers as they sold their single stock positions over time to exchange them for institutionally managed products... While the time horizon over which liquidity is provided can range from microseconds to months, it is particularly shorter-term liquidity provisioning that has become more common." Translation: as retail investors retrench more and more, which they will due to previously discussed secular themes as well as demographics, and HFT becomes and ever more dominant force, which it has no choice but to, liquidity and investment horizons will get ever shorter and shorter and shorter, until eventually by simple limit expansion, they hit zero, or some investing singularity, for those who are thought experiment inclined. That is when the currently unsustainable course of market de-evolution will, to use a symbolic 100 year anniversary allegory, finally hit the iceberg head one one final time.

There is one name one won't find on Third Point latest 13F. Curiously, it is the same name that is now Third Point's fifth largest position as of February 29, 2012. As we said: every hedge fund is now in it. More importantly, we wonder, when will Apple, which is effectively an Alphaclone of itself, start charging its shareholders 2 and 20 for the privilege of owning its stock?

The fine folks at Street of Walls have been kind enough to provide us with their latest 13F breakdown which looks at the position changes across America's 30 largest and most important hedge funds. While we have already focused on some of the more entertaining ones, and tracked the recent rush back into gold, those curious about what the latest hedge fund hotel stocks are (aside from Apple of course) are encouraged to peruse the following exhaustive report.

The man whose fund is a pale shadow of his once invincible self, especially around the time he could tell Goldman which securities to short for him, with hapless and gullible Euros on the other side (but, hey, Goldman makes a market) continues to be the laughing stock of the market, following the latest 13F (with $13.9 billion AUM compared to $20.7 billion as Sept 30) release by Paulson. And considering the complete lack of liquidity in the market in Q4 (which is only getting worse now), the portfolio unwind of Paulson's holdings explains some very acute securities moves in November and December of 2011. Particularly the collapse in gold, which contrary to what economist Ph.D.s will tell you, was not due to technicals, or fundamentals, but due to Paulson dumping another 20% of his GLD, which is now just $2.6 billion as a share class, compared to $4.6 billion as of June 30, we for one can't wait for him to dump it all so that there is no more "Paulson overhang" in gold. Of course since this is a gold share class, it won't happen as long as Paulson & Co survives, but one can dream. What is far more laughable is that in the fourth quarter, Paulson dumped his entire Bank of America common stake (of which he had 64 million shares), his entire Citi common of 25 million shares (worth $627 million at Sept 30) and more than half of both his Capital One and SunTrust stakes, which went from $880 million to $401 million, and from $546 million to $210 million. He also cut almost his entire stake in Wells Fargo which went from $575 million to $96 million. That sure is some conviction in the always appropriately named "Recovery Fund." It is oddly ironic that precisely these stocks are the ones that have soared in Q1 as the Paulson overhang has been lifted.

While all the focus has been on Greece in recent days, the global nature of the debt crisis came to the fore yesterday and overnight. This was seen in the further desperate measures by the BOJ and Moodys warning that the UK could lose its AAA rating. Some of us have been saying for some years that this was inevitable but markets remain myopic of the risks posed by this. Possibly the greatest risk is that of the appalling US fiscal situation which continues to be downplayed and not analysed appropriately. President Obama unveiled a massive $3.8 trillion budget yesterday and he is to increase Federal spending by 53% to $5.820 trillion by 2022.  The US government is projected to spend over $6 trillion a year by 2022.  Still bizarrely unaccounted for is the ticking time bomb of unfunded entitlement liabilities - Social Security and Medicare, which Washington continues to deal with by completely ignoring them. While Washington and markets are for now ignoring the fiscal train wreck that is the US. This will change with inevitable and likely extremely negative consequences for markets – particularly US bond markets and for the dollar.

Whereas we have already noted that Dan Loeb's Third Point closed 2011 unchanged due to a disappointing December, today we note that according to his latest monthly performance update Loeb appears to have opened a major new position in the bonds of recently troubled Norwegian financial company Eksportfinans ASA. The chart below compares his October and December top holdings in which it is obvious that as of December 31, Third Point's third largest position is in the bonds of the private guarantor, which recently got in trouble following its downgrade to junk status in late November as Oslo withdrew its support. the result was a sharp drop lower in the bonds of the company, which traded down by 20 points on the news. So what is Loeb seeing here that makes him confident the bonds, all $33 billion of them, the bulk of which are Samurai, or yen-denominated, will surge sooner or later: another TBTF scenario, bond call play, or something else? One thing is certain: the 13F chasing lemmingrati will promptly jump in these bonds and take them much higher even if absolutely clueless why.

That Ray Dalio, famed head of the world's largest (and not one hit wonder unlike certain others) hedge fund has long been quite bearishly inclined has been no secret. For anyone who missed Dalio's must see interview (and transcript) with Charlie Rose we urge you to read this: "Dalio: "There Are No More Tools In The Tool Kit." For everyone who is too lazy to watch the whole thing, or read the transcript, the WSJ reminds us once again that going into 2012 Dalio's Bridgewater, which may as well rename itself Bearwater, has not changed its tune. In fact the CT hedge fund continues to see what we noted back in September is the greatest threat to the modern financial system: a debt overhang so large, at roughly $21 trillion, that one of 3 things will have to happen: a global debt restructuring/repudiation; global hyperinflation to inflate away this debt, or a one-time financial tax on all individuals amounting to roughly 30% of all wealth. That's pretty much it, at least according to mathematics. And according to Bridgewater. From the WSJ: "Bridgewater Associates has made big money for investors in recent years by staying bearish on much of the global economy. As the new year rings in, the hedge fund firm has no plans to change that gloomy view...What you have is a picture of broken economic systems that are operating on life support," Mr. Prince says. "We're in a secular deleveraging that will probably take 15 to 20 years to work through and we're just four years in." So basically scratch everything between 2012 and 2028? But, but, it was that paragon of investment insight Jim "Bloody Ridiculous Investment Concept" O'Neill keeps telling us stocks will go up by 20%... stocks will go up by 20%....stocks will go up by 20%...

While we have extensively covered the blood feud between Bank of America, and its archnemeis, the mysteriously titled Walnut Place in the past (see here and here and here and here and most importantly here) which just happens to be the entity that successfully scuttled Bank of America's "proposed" $8.5 billion settlement with a bevy of so called litigants (among which BlackRock, PIMCO and the New York Fed for god's sake - the very entities who survival depends on BAC's continued existence) who in realty were merely subversive agents seeking to settle $424 billion in misrepresented mortgage CFC trusts just so the status quo would not be impaired, we never asked one simple question: just who is Walnut Place? Now, courtesy of Reuters, we know, and the revelation is quite stunning, because it means that the person who potentially has the biggest short in Bank of America either via equity or CDS (which do not have to be publicly desclosed) is the legendary head of Baupost: Seth Klarman. Reuters reports: "Walnut Place, a group of undisclosed investors who oppose Bank of America Corp's $8.5 billion mortgage bond settlement, is the Baupost Group, a distressed debt fund, according to an attorney for the bank. "Walnut Place is actually a made up name," Theodore Mirvis, an attorney with Wachtell, Lipton, Rosen & Katz who represents Bank of America, said at a hearing in New York state Supreme Court Thursday. The "real" firm, which sued Bank of America and Bank of New York Mellon BKNYK.UL, as trustee, over mortgage-backed securities trusts is Baupost -- "known as a distressed debt or sometimes a vulture fund," Mirvis said." As a reminder, Baupost is one of the world's biggest hedge funds at $23 billion, and unlike other fly-by-night one hit wonders, is not down 47% YTD. In fact, the mere name of Seth Klarman being long or short a stock has typically had a huge impact on the stock price. And since by implication in his continued efforts to destabilize the proposed settlement, Klarman is either short BAC, or long the beneficiaries of ongoing, and successful, litigation such as MBIA, this means that the pain for BAC is about to magnified as the traditional 13F clones jump on board the pair trade, and short BAC while going long MBIA et al (incidentally this is half the thesis that we presented back in September 15, when we said to... go long MBIA and short Bank of America).

Following a widely publicized bounce in the Paulson & Co. performance in October, a time in which even the since retired beta chaser extraordinaire Bill Miller probably made money, and following the mocked by Zero Hedge 13F announcement that John Paulson had sold gold exposure to buy even more Bank of America stock, we now learn that the fund's LPs have once again resumed crash positions, with the performance of his fund dropping back to 2011 lows at -46% through November. Bloomberg brings us details: "Paulson’s Advantage Plus Fund, which seeks to profit from corporate events such as takeovers and bankruptcies and uses leverage to amplify returns, declined 3.6 percent last month. The fund’s gold share class dropped 2.7 percent in November and 29 percent this year. Paulson & Co., which is based in New York and manages $28 billion, has lost money this year on investments including Citigroup Inc., Bank of America Corp. and Sino-Forest Corp., the Chinese forestry company accused by short-seller Carson Block of overstating timberland holdings. Paulson’s biggest funds, Advantage Plus and Advantage ... have $11 billion in combined assets. The dollar-denominated Advantage Fund fell 3.3 percent in November and 32 percent this year. Its gold share class slumped 1.5 percent last month and 13 percent in 2011. Paulson investors can choose between dollar- and gold-denominated versions for most of the firm’s funds." Perhaps it would be easier for Bloomberg to track what the former Bear trader has actually made money on in 2011. We are confident they would be surprised by the list.

Anyone who held only cash all year, and followed our advice to do the inverse of the ridiculously overly publicized in every possible venue "Tilson trade" (as in buy GMCR and short NFLX) on November 11, can now unwind, having made not only their year, but guaranteed themselves a place in the top 0.01% performing hedge funds in the world in 2011, with a 50% return in two work weeks, and likely the opportunity to raise their AUM by billions in 2012 as everyone else still flounders with ridiculous momentum, 13F mimicry and beta chasing strategies. We can only hope and pray that Whitney makes it once again all too public what his next trade will be.

It is a bad day for people named Paulson. We are not sure if John Paulson, who has not updated the HSBC hedge fund performance tracker through November although was quite happy to do so in October when the market could only rip higher, is more apologetic in his latest letter for the fact that his sold gold holdings to buy even more Bank of America stock, which as everyone knows is about to have a 4 handle, or because somehow his gold fund has managed to return just 1%, even as the shiny object itself has a solid 20% YTD return. Frankly we don't care; LPs in the fund, however, should... although as Paulson has repeatedly stated he has barely seen any redemption requests despite his abysmal performance, so at the end of the day it appears that everyone has gotten what they want. The bulk of the attached Paulson Q3 letter, procured courtesy of ValueWalk, says nothing of note, except to regurgitate some repeatedly stated facts about gold stocks being cheap, and to note that Martin Feldstein has joined the fund as an advisor side by side such "luminaries" as Alan Greenspan, Ed Altman and Chris Thornberg. What is notable, is that Paulson has presented investors with a company matrix of five large banks (their identities are quite simply once one looks at the fund's most recent 13F) which he believes will generates ludicrous potential returns. The last time he did this was for Bank of America. Our advice: short these with leverage.