Best Buy

With the star (and legend) of John Paulson long dead and buried, and his Disadvantage Minus fund an embarrassment, wrapped in a monkeyhammering, inside a humiliation, there are few "groupied" HF managers left. One of them is Dan Loeb, who still manages to generate positive Alpha regardless of how Beta does, another one used to be William Ackman (not so much anymore, especially not with the whole JCP fiasco), some others are David Tepper, Seth Klarman, and a few others, but nobody has quite the persistent clout and following of young master, and poker maestro, David Einhorn, and his fund Greenlight. Below we breakdown his latest just released 13F, which as a reminder shows, his holdings as of September 30. Key changes: Einhorn cut his holdings in Best Buy, Carefusion, Compuware, Expedia, Hess and UnitedHealth, and started new, small, positions in Yahoo, Babcock and Wilcox, Aecon and Knight Capital. More importantly, he cut his top position, Apple, by nearly 30% from 1.45 million to 1.09 million shares, cut modestly his second biggest position Seagate, added materially to GM, making it his third position, added to Cigna at #4 and added modestly to the GDX Gold Miners ETF. Sad to say, unless he has changed his portfolio dramatically since September 30, Einhorn is likely not doing too hot, especially in the last week or two.

• Japan grapples with own fiscal cliff (Bloomberg)
• Japan Protests After Four Chinese Vessels Enter Disputed Waters (Bloomberg)
• Asian Stocks Rise as Exporters Gain on China, U.S. Data (Bloomberg)
• An obsolete Hilsenrath speaks: Fed Keeps Rates Low, Says Growth Is Moderate (WSJ)
• ECB Said to Push Spain’s Bankia to Swap Junior Debt for Shares (Bloomberg)
• Spain’s Bad Bank Seen as Too Big to Work (Bloomberg)
• China postpones Japan anniversary events (China Daily)
• Carney Says Rate Increase ‘Less Imminent’ on Economy Risk (Bloomberg)
• Credit Suisse to Cut More Costs as Quarterly Profit Falls (Bloomberg)
• Obama offers a glimpse of his second-term priorities (Reuters)
• Draghi defends bond-buying programme (FT)

• OECD: Japan Public Debt in 'Uncharted Territory' (WSJ)
• Germany holds firm on Greece as IMF pressure mounts (Reuters)
• Schäuble and Lagarde clash over austerity (FT) - it would be great if someone actually implemented austerity...
• Merkel hints at tax cuts for growth boost (FT)
• Hollande Robbed of Growth Engine as Companies Cut Investment (BBG)
• Romney Narrows Gap With Obama in Swing State Polling (BBG)
• Sluggish Growth Seen Into Next Year (WSJ)
• Softbank Founder Has 300-Year Plan in Wooing Sprint Nextel (BBG)
• Singapore Forgoes Currency Stimulus on Inflation Risk (Bloomberg) - as does China day after day
• Sharp Jabs Dominate Combative Vice-Presidential Debate (WSJ)
• Japan and China Agree to Hold Talks on Rift After Noda Call (Bloomberg)

• Romney dominates presidential debate (FT)
• What Romney’s Debate Victory Means (Bloomberg)
• Obama Lead Shrinks in Two Battlegrounds (WSJ)
• "Everything will fall apart unless the Spanish conditions are extremely tough" German policy-maker (Telegraph)
• Draghi Stares at Spain as Brinkmanship Keeps ECB Waiting (Bloomberg)
• RBS facing loss after Spanish property firm collapse (Telegraph)
• Burdened by Old Mortgages, Banks Are Slow to Lend Now (WSJ)
• The Woman Who Took the Fall for JPMorgan Chase (NYT)
• European Banks Told to Hold On to $258 Billion of Fresh Capital (Bloomberg)
• Europe Weighs More Sanctions as Iran’s Currency Plummets (Bloomberg)

If you answer 'yes' to more than five of the questions below, you might be a conspiracy theorist.  You also may be on the government’s terror watch list.  Be very alarmed and report it to the authorities immediately should you discover your neighbors engaged in such uncivilized thought.

Retail has long been a source of both low-skill entry-level jobs and well-paid careers. Yes, people love to browse and stroll down the mall or shopping district, and this social/novelty function will continue. But can retailers make money off of people browsing? If retail contracts, what does this do to skyhigh commercial property valuations? The same can be asked of cubicle-farm office parks. As telecommuting and contract labor expand, the need for energy-wasting office parks and long commutes will also decline. Technology cannot be stopped, and neither can the drive to cut costs by cutting what can be cut, labor. We can legislate certain aspects of how technology is used, and fiddle with tax incentives and trade restrictions, but we cannot make people drive somewhere to go shopping or stop the 3-D printing/fabrication revolution. What all this calls into question is the entire financialization (debt-based)-consumerist model of "growth" and employment. Decades ago, young men were employed to pump gasoline at gas stations; these jobs all went away as self-service fueling became the norm. At least one state (Oregon, I believe) mandates that all gasoline is pumped by an employee of the station. This rule has created hundreds of jobs that are not necessary in terms of market-demand but that are certainly welcome.

Connecting the dots between my anecdotal observations of suburbia and a critical review of the true non-manipulated data bestows me with a not optimistic outlook for the coming decade. Is what I’m seeing just the view of a pessimist, or are you seeing the same thing? A few powerful men have hijacked our economic, financial and political structure. They aren’t socialists or capitalists. They’re criminals. They created the culture of materialism, greed and debt, sustained by prodigious levels of media propaganda. Our culture has been led to believe that debt financed consumption over morality and justice is the path to success. In reality, we’ve condemned ourselves to a slow painful death spiral of debasement and despair.

“A culture that does not grasp the vital interplay between morality and power, which mistakes management techniques for wisdom, and fails to understand that the measure of a civilization is its compassion, not its speed or ability to consume, condemns itself to death.” – Chris Hedges

It's been a while since the ridiculous "China bails out Europe" rumor made the scene: in fact, the last time we can find with definitive confirmation was back in September of 2011, just before the bottom fell out of Europe, and when the FT, based on "anonymous sources" tripped over itself to report that "[insert European country] is in talks with China to buy bonds, assets." Sure enough, now that Merkel came, and saw, but hardly conquered Beijing, it is the turn of China's Wen Jiabao to add his 10 pips to the EURUSD rumormill: Reuters reports: "China is prepared to buy more EU government bonds amid a worsening European debt crisis that is dragging on the world economy, Premier Wen Jiabao said, in the strongest sign of support for its biggest trading partner in months." Naturally, considering how often this rumor (re)appeared in the past it will be excusable if nobody but the dumbest vacuum tubes fall for it this time, especially considering that the Chinese economy itself is going down in flames faster than the October Iron Ore contract. And lest there be any confusion, China's commitment is about as definitive as a Best Buy LBO "preunderwritten" with a Jefferies highly confident letter: "China is willing, on condition of fully evaluating the risks, to continue to invest in the euro zone sovereign debt market, and strengthen communication and discussion with the European Union, the European Central Bank the IMF and other key countries to support the indebted euro zone countries in overcoming hardships," [Wen] said after meeting Merkel." Ah, conditional aid. The kind that gets Mario Monti to break out the petulant ex-Goldman child act and refuse to leave the Belgian catered dining room until the beggees succumb to his technocratic platitudes. Needless to say, we'll believe China's "continued" investment in Europe when we see it.

• Ringing endorsement: Lithuania to Adopt Euro When Europe Is Ready, Kubilius Says (Bloomberg)
• Credit Agricole net plunges 67% on losses in Greece and a writedown of its stake in Intesa Sanpaolo SpA (Bloomberg)
• Europe finally starting to smell the coffee: ECB Urging Weaker Basel Liquidity Rule on Crisis Concerns (Bloomberg)
• Japan Cuts Economic Assessment (Reuters)
• France’s Leclerc Stores to Sell Fuel at Cost, Chairman Says (Bloomberg)
• China Eyes Ways to Broaden Yuan’s Use (WSJ)
• Berlin and Paris forge union over crisis (FT)
• Brezhnev Bonds Haunt Putin as Investors Hunt $785 Billion (Bloomberg)
• Republicans showcase Romney as storm clouds convention (Reuters)
• ECB official seeks to ease bond fears (FT)
• German at European Central Bank at Odds With Country’s Policy Makers (NYT)

• So Draghi was bluffing after all: ECB Said To Await German ESM Ruling Before Settling Plan (Bloomberg)
• German finance ministry studying "Grexit" costs (Reuters) - it would be bigger news if it wasn't
• Money Funds Test Geithner, Bernanke Resolve as Schapiro Defeated (Bloomberg)
• Top Merkel MP says Greek deal can't be renegotiated (Reuters)
• China Eyes Ways to Broaden Yuan's Use (WSJ)
• Armstrong ends fight against doping charges, to lose titles (Reuters) - Dopestrong?
• Need more socialism: Public confidence in France's Hollande slips (Reuters)
• Seoul court rules Samsung didn't violate Apple design (Reuters)
• France, Germany Unify Approach to Greek Talks (WSJ)
• Stevens Sees Mining Boom Peaking, RBA Ready to Act (Bloomberg)

• Merkel's Dilemma: Risk Euro Zone or Her Government (WSJ)... as first suggest by ZH 2 months ago, with only one resolution: referendum
• Russia warns West over Syria after Obama threats (Reuters)
• Consider keeping Bernanke, Romney adviser Glenn Hubbard says (Reuters)... Glenn Hubbard is the star of the movie Inside Job
• Spain Deficit Goals at Risk as Cuts Consensus Fades (Bloomberg)
• Czech Austerity Revolt Threatens Cabinet as Slump Bites (Bloomberg)
• Greek cuts to be deeper than trailed (FT)
• Akin rebuffs Romney, Republican calls to quit Senate race (Reuters)
• Obama Leads Romney in Poll Showing Disdain for Congress (Bloomberg)
• Greece needs more time to reform, PM Samaras tells paper (Reuters)
• UK banks face scandal over toxic insurance products (Reuters)
• Iceland Shelves Monetary Tightening as Krona Seen Appreciating (Bloomberg)
• India Considers $35 Billion Debt Revamp After Biggest Blackout (Bloomberg)

In the last two days, the venerable Best Buy has not only shot itself in the foot, but in the arm and leg - and potentially head too. Implicitly cutting hopes for a MBO-at-a-premium by hiring a new CEO (with de minimus turnaround experience), the company's earnings and conference call has confirmed that they will suspend their share repurchase scheme, reduced its annual earnings expectations, and has withdrawn guidance for fiscal 2013. As we warned the day of the Schulze-vaporware-MBO comment (which saw a spike from $17.63 to $23.55 at its highs that day) this was nothing but hot air and now it seems increasingly likely that not just the 68mm shares that Schulze owns now getting crushed 30% from those highs just over a week ago, but as AAPL has added a total BBY in market-cap this morning - and with the stock at near 10-year lows - we are afraid the commercial real-estate business will have some excess inventory very soon.

• German central bank warns country’s financial health not a given (WaPo)
• Secret Libor Committee Clings to Anonymity After Rigging Scandal (Bloomberg)
• Peru Declares State of Emergency to Quell Violent Mining Protests (Dow Jones)
• Euro-Area Economic Adjustment Only Half Complete, Moody’s Says (Bloomberg)
• Wall Street Leaderless in Rules Fight as Dimon Diminished (Bloomberg)
• China Swaps Drop From Three-Month High as PBOC Adds Record Cash (Bloomberg)
• China invest $1 billion in U.S. Cheniere's LNG plant, Blackstone to act as intermediary buffer (FT, Reuters)
• Romney Offers Lukewarm Support for Fed Audit - Hilsenrath (WSJ)
• U.K. Unexpectedly Posts Deficit as Corporation Taxes Plunge (Bloomberg)
• Obama issues military threat to Syria (FT)
• Merkel Allies Signal Concessions on Greece Before Samaras Visit (Bloomberg)
• Chinese banks warned of foreign exchange risks (China Daily)

Just two short weeks ago, we noted that Best Buy's 'news' regarding take-overs, take-unders, LBOs, MBOs, or whatever it was - was an opportunity to fade the initial spike. Today's reality-check is cracking the stock down over 7% on heavy volume - as while founder Schulze (who left in June) restates his desire to pursue his proposal, he was 'schocked' that the company has just named a new CEO - signaling the company's desire to keep operating as a going concern as a public company.

• 'Pussy Riot' band members found guilty (Al Jazeera)
• Merkel Says Germany Backs Draghi’s ECB Aid Conditionality (Bloomberg)
• Now, the reverse psychology: Hilsenrath: Fed 'Hawks' Weigh In Against More Action (WSJ)
• London Firings Seen Surging As Finance Firms Add NY Jobs (Bloomberg)
• Facebook Second-Worst IPO Performer After Share Lock-Up (Bloomberg)
• Kocherlakota Says FOMC Goes Too Far With 2014 Rate Pledge (Bloomberg)
• China Said to Order Action by Banks as Developer Loans Sour (Bloomberg)
• Australian Treasury Dismisses AUD Intervention Calls (Dow Jones)
• Brevan Howard Loses Third Founder As Rokos Said To Leave (Bloomberg)
• Japan eyes end to decades long deflation (Reuters)... for 30 years now
• Ex-Morgan Stanley Executive Gets Nine Months in China Case (Bloomberg)