Greenlight

UPDATE: Sell-off stalled for now as S&P caught up with risk-asset's early warning for now.

S&P 500 Futures are picking up speed to the downside on rising volume which takes it back to its 50DMA (as we note AAPL has also broken its 50DMA intraday now). Has the market finally grasped that in order for the Fed to greenlight QE stocks have.to.drop and that frontrunning QE by constantly buying stocks ahead of the ramp simply will not work? We'll know soon enough.

No. No way. If we have to go through one more year of endlessly repetitive and utterly worthless European bullshit, rumors, headlines, and other subterfuge whose only point is to extend and pretend the fact that Europe is utterly broke, just so the effete Greek citizens can pretend they give a rat's ass about their independence, when in reality they will gladly pay 80% of their salary to keep European banks solvent simply to retain the illusion that their retirement funds are still worth more than diddly squat, we are done.

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.

My favorite football introductory book is an out-of-print book by Joe Namath, FOOTBALL for Young Players and Parents.  You may enjoy my favorite lines as you get in the mood for the Super Bowl

• BOJ Should Be Allowed $643 Billion Fund to Buy Foreign Bonds, Iwata Says (Bloomberg)
• Banks Hoarding ECB Cash May Double Company Defaults (Bloomberg)
• China Police Open Fire on Tibetans as Protests Spread (Bloomberg)
• Sarkozy Presidential Rival Hollande Would Lower Retirement Age, Lift Taxes (Bloomberg)
• IMF takes tougher stance over Greek debt (FT)
• Iran threatens to act first on EU embargo (FT)
• PM says ‘no complacency’ on economy (FT)
• George Soros: How to pull Italy and Spain back from the edge (FT)
• Japan's NEC to slash 10,000 jobs (Reuters)
• Obama Planning Corporate Tax Overhaul (Bloomberg)

Anyone wondering why FSLR just jumped, it is because as was just made known, David Einhorn's Greenlight has decided to close its FSLR position, after bleeding that particular corpse dry. "Our largest winner by far was our short of First Solar (FSLR) which fell from $130.14 to $33.76 paper share and was the worst performing stock in the S&P 500." Einhorn also announces that he was among the "evil" hedge funds who dared to provide market clearing transparency and buy CDS on insolvent European governments: "We also did well investing in various credit default swaps on European sovereign debt." As for losers, Einhorn and Kyle Bass can commiserate: "For the second year in a row, our biggest loss came from positions designed to capitalize on eventual weakening of the Yen." He summarizes the global economic environment as follows: "The global environment is very complicated. On the one hand the Federal Reserve has taken a much-needed break from quantitative easing (at least for the moment). Accordingly, inflation in oil and food has abated, providing relief to the US economy. Bearish forecasts that the US was headed back into recession proved wrong for the third time since the end of the last recession. On the other hand, Asia appears to be in much worse shape than it was at this time last year and could be a drag on the world economy going forward. Very few people trust any of the economic data coming out of China, making it difficult to gauge the situation there. Some of the smartest people we know have very dim views. The Chinese have been a leading growth engine for the last two decades and are largely credit with leading the world out of the recession in 2009. A change in their economic circumstances could really upend things." Yet the best thing is his summary of the current investing climate in our utterly and hopelessly reactionary broken markets.

There were only two questions that mattered, going into the EU summit.

1. Would leaders at the summit come up with any actions of their own to help end the immediate crisis?
2. Falling short of this, would any of their actions give enough confidence to the European Central Bank to allow it step up its role and be a lender of last resort to all troubled eurozone countries, but especially to wobbly Italy? In other words, could the conservative ECB now give itself the greenlight to print euros and buy up bonds from the world’s third largest issuer?

The answer to the first question is very clear: NO. The answer to the second question is, unfortunately, another question. “Who the heck knows?” Time to consider plan B.

Presenting, with little comment, Whitney Tilson's disappointing underperformance for October (and YTD):

Our fund rose 7.0% in October vs. 10.9% for the S&P 500, 9.7% for the Dow and 11.2% for the Nasdaq.  Year to date, it’s down 24.5% vs. +1.3% for the S&P 500, 5.5% for the Dow and 1.9% for the Nasdaq.

It is just us, or does it seem manager performance is increasingly negatively correlated with the frequency of appearances on CNBC?

With the near record October hope rally a distant memory now, the hope that hedge funds participated in it is also just that. Alas, while most hedge funds exhibited a more than 1x beta on the way down in August and September, most were lucky to get half the upside on the way up in October at best. While there are some outlier surprises, unfortunately it is the ones with an abysmal Sharpe Ratio, so for investors who enjoy huge drawdowns and massive month-to-month vol, they probably lucked out in October. Everyone else: better luck next time. Some very notable let downs: Brevan Howard: -1.25%, Tudor: -2.44%, Moore Global: -2.23%, Landsdowne: -0.50%, Bluecrest: 0.43%, Perry: 3.39%, King Street: -0.04%, Blue Mountain: 0.73%, Fortress Macro: -2.19% and last and probably least JAT Capital: -13.7%.

• High pressure on Sarkozy-Merkel talks (Reuters)
• Noda to "watch" "one-sided moves" in the USDJPY to parity soon enough - Yen to Reach Record Amid ‘Downfall’ of West, Sakakibara Says (Bloomberg)
• Eurobond Debate Rises in Germany, France (WSJ)
• China official paper calls for widening of yuan trading band (Reuters)
• China Economy Slowing ‘Significantly,’ Conference Board Says (Bloomberg)
• BOE's Miles: No Need for More QE (WSJ)
• Christine Lagarde: Don’t let fiscal brakes stall global recovery (FT)
• Zoellick: Governments should deal with global debt woes (Reuters)
• On Midwest Bus Tour, Obama Jabs at GOP (WSJ)
• U.S. debt still safest place for China reserves: top banker (Reuters)

Well that didn't take long. Just over two months after Einhorn's Greenlight bought a stake in Yahoo, he has now dumped the full amount. From his just issued letter to clients: "The Partnership bought Yahoo! (YHOO) earlier this year based on a sum of the parts analysis, which included putting substantial value on its Chinese assets. Shortly after the purchase, the value of the Chinese assets came into doubt as the CEO of the Chinese unit hived-off a valuable subsidiary into a corporation that he personally controls. From there, the finger pointing started in every direction. This wasn't what we signed up for. We exited with a modest loss." Well, the whole was less than the sum of the parts in this case. Oops. For this another modest gains and losses, but mostly losses explaining why the fund is down 5% YTD, read the full letter below.

For those who may not have noticed it, the headline says "deficit" and pertains to Japan: once upon a time a booming export economy. The reason: the ongoing collapse in export trade, after May exports dropped by 10.3% from a year ago, and just better than April severe economic contraction of 12.4%. Consensus was for an 8.4% decline. The net result was a monthly deficit of 853.7 billion yen, or $10.7 billion, the second biggest inverse surplus ever. And just like in Europe, where things are going to go from insolvent to perfectly solvent any minute now... just not yet... so in Japan the economic renaissance which will cause the economy to surge (unclear how: no new monetary stimulus, and the recently announced fiscal stimulus of Y500 billion in new loans will do precisely nothing to boost anything except for some corrupt bureaucrats Swiss bank accounts) is coming any minute.... just not yet. Bloomberg says: "Shortages of power and parts have disrupted production and slowed overseas sales, prompting Japanese companies including Honda Motor Co. to forecast weaker earnings. Higher unemployment in the U.S. and weakening demand in Asia indicate Japan won’t be able to rely on global demand to pull itself out of a slump caused by the quake." And the understatement of the weekend comes from BNP economist Azusa Kato: "The state of the global economy is a little worrying. Both the U.S. and Europe aren’t doing that great and emerging economies are also tightening at an incredible pace, increasing uncertainty." Surely this enough is enough to explain why futures are up, since the Fed has no option but to do QE3. Alas, as the dumber by the minute algos continue to not realize, the market has to plunge from here (just like what crude has been doing for the past 2 weeks), before the Fed gets the greenlight to engage in Operation Twist 2.

Alas, the market still refuses to acknowledge that the S&P will need to drop below 1000 (and whatever the appropriate level for the RUT is) for Bernanke to greenlight QE 3 which will in turn send everything to the moon (better have those collocated algos ready and steady). Judging by the post-speech reaction, markets may finally be getting it, just as Bernanke is also getting that he is dealing with a heroin addict who will not settle with methadone (aka "extraordinary" and "extended").

Jim Chanos is short China and solars. I say it's time to short Chanos...

At one point, the music will stop, but for now, I agree with Britney Spears, you got to keep on dancing till the world ends. And despite what those bears on Zero Hedge think, the world isn't ending anytime soon...