General Motors

Meetings between public company managements and investors are the bedrock of the fundamental investment process.  The reason for that, however, is often lost in translation.  It is not, for example, because most investors or analysts are systematically better at reading “Body language” about the quarter or new products.  Seriously – they aren’t.  No – the reason that management meetings are useful is because, over time, managements let down their guards and act like regular people.  And in those moments, truth – about character, about wisdom, about judgment – comes rolling out.  Today we offer up a personal highlight reel of examples from +20 years of management meetings. Between the earnings forecast and the actual results sit only two things: time and management.  Time is uniform; management quality is not. 

It turns out that when peddling a flaming paperweight (recall "Total Karma Recall: Fisker Pulls All Cars Due To Fire Risk", "As Another Fisker Karma Spontaneously Combusts, "Green" Dreams Go Up In Smoke" and of course "Fisker Karma Is First Car To Burn Underwater"), even if it is a very pretty and streamline paperweight, not even $529 million (or perhaps due to) in government subsidies can lead to a Hollywood ending and everlasing prosperity. As the WSJ reports, "The founder and executive chairman of electric-car start up Fisker Automotive Inc. said he resigned Wednesday because of "disagreements" over business strategy with the ailing company's management." The founder, "said in an email sent to a small number of journalists that has "left the company." Reached by phone, Mr. Fisker confirmed that he sent the email and that he had resigned."

• Cardinals head to conclave to elect pope for troubled Church (Reuters)
• Hyperinflation 'Unthinkable' Even With Bold Easing: Abe (Nikkei)
• Ryan Plan Revives '12 Election Issues (WSJ)
• Italy 1-yr debt costs highest since Dec after downgrade (Reuters)
• Republicans to unveil $4.6tn of cuts (FT) - Obama set to dismiss Ryan plan to balance budget within decade
• CIA Ramps Up Role in Iraq (WSJ)
• Hollande Hostility Fuels Charm Offensive to Show He’s No Sarkozy (BBG)
• SEC testing customized punishments (Reuters)
• Judge Cans Soda Ban  (WSJ)
• Hungary Lawmakers Rebuff EU, U.S. (WSJ)
• Even Berlusconi Can’t Slow Bulls Boosting Euro View (BBG) - luckily the consensus is never wrong
• Funding for Lending ‘put on steroids’ (FT)
• Investigators Narrow Focus in Dreamliner Probe (WSJ)
• With new group, Obama team seeks answer to Karl Rove (Reuters)

• One in four Germans would back anti-euro party (Reuters)
• EU Chiefs Seeking to Stave Off Euro Crisis Turn to Cyprus (BBG)
• Ryan Says His Budget Would Slow Annual Spending Growth to 3.4% (BBG)
• Goldman leads decline as Wall Street commodity revenues plummet (Reuters)
• South Korea and US begin military drills (FT) and North Korea cuts off hotline with South Korea (Reuters)
• Karzai Inflames U.S. Tensions  (WSJ)
• Algorithms Get a Human Hand in Steering Web (NYT)
• Meeting Is Set to Choose Pope (WSJ)
• More U.S. Profits Parked Abroad, Saving on Taxes (WSJ)
• Banks rush to redraft pay deals (FT)
• Fugitive Fund Manager Stuffed Underwear With Cash, Fled (BBG)
• Post-Newtown Gun Limits Agenda Narrows in U.S. Congress (BBG)
• China Hints at Shift in One-Child Policy (WSJ)

• French unemployment rises again to highest since 1999 (Reuters)
• BoJ rejects call for monetary easing (FT)
• North Korea threatens pre-emptive nuclear strike against US (Guardian)
• Firms Race to Raise Cash (WSJ)
• Time Warner Will Split From Magazine Unit in Third Spinoff (BBG) - slideshows, kittens, "all you need to knows" coming to Time
• U.S. economy, world's engine, remains in "neutral": Fed's Fisher (Reuters)
• BOE Keeps QE on Hold as Officials Weigh More Radical Measures (BBG)
• Jobs start to go as US sequestration cuts in (FT)
• BofA Times an Options Trade Well  (WSJ)
• Congress Budget Cuts Damage U.S. Economy Without Aiding Outlook (BBG)
• Dell’s Crafted LBO Pitch Gets Messy as Investors Circle (BBG)
• Dell says Icahn opposes go-private deal (Reuters)
• Portugal Rating Outlook Raised to Stable by S&P on Budget Plan (BBG)
• China’s Richer-Than-Romney Lawmakers Reveal Reform Challenge (BBG)

• As ZH has been saying for months... Draghi Will Need to Push the Euro Down Some More (WSJ) ... but careful with "redenomination risk"
• Senate Report Said to Fault JPMorgan (NYT)
• EU Opens Way for Easier Budgets After Backlash (BBG)
• China Moves to Temper Growth - Property Bubble Is a Key Concern (WSJ)
• China bets on consumer-led growth to cure social ills (Reuters)
• Italian president mulls new technocrat government (Reuters)
• Grillo says MPS won't back technocrats (ANSA)
• The Russians will be angry: Euro Chiefs Won’t Rule Out Cyprus Depositor Losses (BBG)
• China Bankers Earn Less Than New York Peers as Pay Dives (BBG)
• Investors click out of Apple into Google (FT)
• Community colleges' cash crunch threatens Obama's retraining plan (Reuters)
• Alwaleed challenges Forbes over his billions - Calculation of $20bn net worth is flawed, says Saudi prince (FT)
• Guy Hands Dips Into Own Pockets to Fund Bonuses at Terra Firma (BBG)
• North Korea to scrap armistice if South and U.S. continue drills (Reuters)

• Must defend against Chinese colonial expansion and get the Nigerian oil: U. S. Boosts War Role in Africa (WSJ)
• BOJ nominee Kuroda sets out aggressive policy ideas (Reuters)
• China becomes world’s top oil importer (FT)
• Baby Cured of HIV for the First Time, Researchers Say (WSJ)
• Obama to nominate Walmart's Burwell as White House budget chief (Reuters)
• Wal-Mart Anxious to Combat Amazon’s Lead in Web Vendors (BBG)
• Nasdaq executing trades at a loss (FT)
• Spending cut debate casts pall over Obama's second-term agenda (Reuters)
• Russell Indexes to Reclassify Greece as Emerging Market (BBG)
• Bond Bears Collide With Swaps Showing Low Rates (BBG)
• Buffett Deputies Leaving Billionaire in the Dust Get More Funds (BBG)
• Brazil's leftist president fights to win back business (Reuters)
• U.S. Special Forces train Syrian Rebels in Jordan (Le Figaro)
• Carlos Slim Risks Losing World’s Richest Person Title as Troubles Mount (BBG)

You know America is in trouble when a company that does nothing but create TV-style shows of college-age women in next-to-no clothes goes bankrupt but sure enough the company behind the "Girls Gone Wild" videos filed Chapter 11 today to protect itself from $10.3 million debt claimed by Steve Wynn’s Wynn Las Vegas LLC (after losing a slander lawsuit suggesting Wynn knowingly tricked high-end gamblers) and a $5.8 million award won by a woman who says the company used naked images of her without permission in the “Girls Gone Wild Sorority Orgy” DVD series. The bankruptcy enables the company "to restructure its frivolous and burdensome legal affairs," and just like GM and UA (the company states reassuringly) it will be business-as-usual for Girls Gone Wild. In perhaps the clearest analog for America, the company had $16.3mm in debt and $50k in assets - now that is leverage-able wealth-effect.

Usually, when the administration needs a distraction from just how broke and insolvent in reality the country is, it sends the stock market soaring higher. As such it is beyond ironic that as the S&P is set to hit an all time high, Detroit - that shining symbol of the Obama administration's bailout of General Motors - effectively goes broke.

MICH. GOV SNYDER TO ANNOUNCE STATE TAKEOVER OF DETROIT

• Italy Political Vacuum to Extend for Weeks as Bargaining Begins (BBG)
• Italian impasse rekindles eurozone jitters (FT)
• On Spending Cuts, the Focus Shifts to How, Not If (WSJ)
• Obama spending cuts strategy focused on waiting game (Reuters)
• BOE’s Tucker Says He’s Open to Expanding Asset-Purchase Program (BBG)
• Fed Faces Explaining Billion-Dollar Losses in Stress of QE3 Exit (BBG)
• Carney warns over lack of trust in banks (FT) - here's a solution: moar bank bailouts!
• Bundesbank tells France to stick to budget (FT)
• China to tighten shadow banking rules (FT)
• Saudis Step Up Help for Rebels in Syria With Croatian Arms (NYT)
• After election win, Anastasiades faces Cyprus bailout quagmire (Reuters)
• Just for the headline: Singapore’s Darwinian Budget Sparks Employer Ire (BBG)

• G20 struggles over forex, at odds over debts (Reuters)
• Alwaleed Sells Airbus A380 to Invest in Middle East Firms (BBG)
• GOP Stalls Vote on Pick for Pentagon (WSJ)
• ECB officials rebuff currency targeting as G20 meets (Reuters)
• Not good for the reflation effort: Muto leads as Japan PM close to choosing nominee for Bank of Japan chief (Reuters)
• M&A Surges as Confidence Spurs Deals in Computers to Consumer (BBG)
• JPMorgan’s head of equity prop trading Gulati to launch own fund (FT)
• Tiffany & Co. sues Costco over engagement rings labeled ‘Tiffany' (WaPo)
• JPMorgan Said to Fire Traders, Realign Pay Amid Slump (BBG)
• Broker draws Tullett into Libor scandal  (FT)
• Airbus drops Lithium-Ion batteries for A350 (Reuters)

Because humor is always the best and only cure to pervasive central planning that has made a mockery of traditional investing and capital allocation, and because nobody delivers unlimited sheer, unadulterated humor quite as well as one James J. Cramer when he is "recommending" stocks, here is the full text of Jim Cramer's "The Winners of the New World" speech delivered in February 2000. Because it really never is different this time.

• U.S. Wants Criminal Charges for RBS (WSJ)
• Bernanke Seen Buying $1.14 Trillion in Assets in 2014 (BBG)
• Irish banks at mercy of international paymasters (Reuters)
• Do badly, and we will let you do even worse: Rehn Signals EU May Ease Spain Budget Goal in Austerity Retreat (BBG)
• Too Soon to Celebrate for Europe's Banks (WSJ)
• Army says political strife taking Egypt to brink (Reuters)
• Media Firms Probed on Data Release (WSJ) - No Criminal Charges Seen
• Japan’s Government Proposes First Spending Cut in 7 Years (BBG)
• Nazi Goebbels’ Step-Grandchildren Are Hidden Billionaires (BBG)
• Goldman seeks to reduce China exposure (FT)
• More than 70% of Chinese airports generate losses (People's Daily)

Two days ago we presented the complete hedge fund performance for 2012, in which it was clear that David Einhorn's Greenlight had a Q4 that did not go quite as expected, primarily as a result of AAPL plunging in the quarter, and his hated GMCR soaring, leaving his fund with a 8% return for the year (and -5% for the quarter), well below the general market and some of his far more vocal hedge fund peers. Those curious just what it is that caused this underperformance, here is the complete Greenlight Q4 letter discussing not only why Einhorn is doubling down in AAPL, why he still likes Marvell, Computer Sciences and Vodafone, as well as his continuing negative outlook on Iron ore, and the Yen. He closed out positions in WLP, MCO, DIA, ITX and PBI. In summary: "At quarter end, the largest disclosed long positions in the Partnerships were Apple, Cigna, General Motors, gold and Vodafone Group. The Partnerships had an average exposure of 114% long and 70% short."

Two fundamental beliefs have driven economic policy around the world in recent years. The first is that the world suffers from a shortage of aggregate demand relative to supply; the second is that monetary and fiscal stimulus will close the gap. Is it possible that the diagnosis is right, but that the remedy is wrong? That would explain why we have made little headway so far in restoring growth to pre-crisis levels. And it would also indicate that we must rethink our remedies. Policymakers initially resorted to government spending and low interest rates to boost demand. As government debt has ballooned and policy interest rates have hit rock bottom, central banks have focused on increasingly innovative policy to boost demand. Yet growth continues to be painfully slow. Why? What if the problem is the assumption that all demand is created equal? Put differently, the bust that follows years of a debt-fueled boom leaves behind an economy that supplies too much of the wrong kind of good relative to the changed demand.