• Tim Knight from...
    12/21/2014 - 09:37
    The five remaining equity bears on Earth are all saying the same thing: "We'll get 'em in 2015." To which I ask: why? What's going to change?

Medallion

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Drivers For $40-Billion-Uber Face Death Threats In Greece





Having raised money at a mind-numbingly bubblicious $40 billion valuation this week (which as a reminder is triple the value of the entire NYC tax medallion business), we thought the pushback from the world's tax-driving unions was at least worth noting as they resist 'disruption'. Nowhere is that pushback more evident than in Greece, where as KeepTalkingGreece reports, the President of Attica Taxi Association (SATA) said that taxi drivers cooperating with Uber “should be hanged at Syntagma Square” for being traitors.

 
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The Yellow Cab Bubble Pops: Taxi Medallion Prices Tumble 17% From Last Year's Record Highs





A little over a year ago, we presented a "Yellow" asset, which was "the best performer of the past year." It wasn't gold: it was yellow cab medallions.  As we wrote then, "the best returning asset class traded in the NY Metro area is yellow but doesn't change hands on Wall Street.... over the last 12 months New York City taxi medallions have risen 49% in price, besting the relatively humdrum returns of the S&P 500 (up 21%), the NASDAQ (22%) and the Dow (18%).  Medallions – essentially the right to operate a for-hail taxi in New York City – now trade for as much as $1.3 million, an all-time record."  In retrospect it was also the perfect time to cash out on the "yellow" euphoria. According to the NYT, "the average price of an individual New York City taxi medallion fell to $872,000 in October, down 17 percent from a peak reached in the spring of 2013, according to an analysis of sales data. Previous figures published by the city’s Taxi and Limousine Commission — showing flat prices — appear to have been incorrect, and the commission removed them from its website after an inquiry from The New York Times."

 
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How RenTec Made More Than $34 Billion In Profits Since 1998: "Fictional Derivatives"





From 1998 to 2013, Barclays and Deutsche Bank sold 199 basket options to hedge funds which used them to conduct more than $100 billion in trades. The subcommittee focused on options involving two of the largest basket option users, Renaissance Technology Corp. LLC (“RenTec”) and George Weiss Associates. The hedge funds often exercised the options shortly after the one-year mark and claimed the trading profits were eligible for the lower income tax rate that applies to long-term capital gains on assets held for at least a year. RenTec claimed it could treat the trading profits as long term gains, even though it executed an average of 26 to 39 million trades per year and held many positions for mere seconds. Data provided by the participants indicates that basket options produced about $34 billion in trading profits for RenTec alone, and more than $1 billion in financing and trading fees for the two banks.

 
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Uber Launches War Against Yellow Cabs, Cuts New York Fares By 20% As Ali-Baba Launches Chinese Uber Competitor





Curious what Uber is spending the record $1.2 billion in cash it raised in its most recent funding round (which valued it at a whopping $18.2 billion)? The answer: subsidies. In a page right out of Amazon's playbook, the management of Uber has found that the best use of proceeds now that it may have finally saturated addressable markets, is to use its cash on hand to fund sub-equilibrium pricing losses and in the process, hopefully, put its competition out of business. Earlier today, the Uber blog announced that UberX is "now cheaper than a New York City taxi."

 
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Frontrunning: December 3





  • With website improved, Obama to pitch health plan (Reuters)
  • Joe Biden condemns China over air defence zone (FT)
  • Tally of U.S. Banks Sinks to Record Low (WSJ)
  • Black Friday Weekend Spending Drop Pressures U.S. Stores (BBG)
  • Cyber Monday Sales Hit Record as Amazon to EBay Win Shoppers (BBG)
  • Ukraine's Pivot to Moscow Leaves West Out in the Cold (WSJ)
  • Investment banks set to cut pay again despite rise in profits (FT)
  • Worst Raw-Material Slump Since ’08 Seen Deepening (BBG)
  • Democrats Face Battles in South to Hold the Senate (WSJ)
  • Hong Kong reports 1st case of H7N9 bird flu (AP)
  • In Fracking, Sand Is the New Gold (WSJ)
 
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Returning 2706% In The Past 40 Years, The Best Performing "Yellow" Asset Is...





Medallions – the yellow metal plates that essentially represent the right to operate a for-hail taxi in New York City – now trade for over  $1.3 million, an all-time record.  Part of this dynamic is fixed supply – there are just 13,336 medallions available for a city of 8.3 million people.  There is also a macroeconomic point, with a stronger NYC economy for those inhabitants who can afford the service... is this the real impact of trickle-down economics? Or yet another distortion?

 
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Today's Market-Moving News: Blackened Chicken On A Wavy Cracker





Tonight at 7 pm Ben Bernanke will be speaking at the National Economists Club Annual Members Dinner. As Credit Suisse's Carl Lantz notes, nobody knows the topic or the title of the speech: we can only assume it is some variation of the now trite and generic "BTFATH" coming from the Fed endlessly for the past 5 years. However, we do know one thing: the menu of the dinner that will accompany Bernanke's remarks. We are certain that in a world in which a tweet by a 70 year old billionaire moves markets as much as a statement by a current or future uber CTRL-Peers, it is the details of what the glorious chairman eats that is the most marking-moving event du jour, and as such the menu will be today's most important "fundamental" news. Jon Hilsenrath will follow up with his detailed analysis shortly.

 
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This "Yellow" Asset Is The Best Performer Of The Past Year (Hint: Not Gold)





The best returning asset class traded in the NY Metro area is yellow but doesn't change hands on Wall Street. As ConvergEx's Nick Colas notes, over the last 12 months New York City taxi medallions have risen 49% in price, besting the relatively humdrum returns of the S&P 500 (up 21%), the NASDAQ (22%) and the Dow (18%).  Medallions – essentially the right to operate a for-hail taxi in New York City – now trade for as much as $1.3 million, an all-time record.    Part of this dynamic is fixed supply – there are just 13,336 medallions available for a city of 8.3 million people.  There is also a macroeconomic point, with a stronger NYC economy for those inhabitants who can afford the service.  The more surprising observation, however, is that new technology in the form of in-car credit card machines and more recently smartphone hailing apps both materially increase the value of owning a medallion.  In a world where every technology is deemed “Disruptive”, here’s a case where the status quo has actually reaped much of the reward.

 
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Austerity At The Olympics: Each "Gold" Medal Contains 1.34% Gold





As every Olympic athlete knows, size matters. The London 2012 medals are the largest ever in terms of both weight and diameter - almost double the medals from Beijing. However, just as equally well-known is that quality beats quantity and that is where the current global austerity, coin-clipping, devaluation-fest begins. The 2012 gold is 92.5 percent silver, 6.16 copper and... 1.34 percent gold, with IOC rules specifying that it must contain 550 grams of high-quality silver and a whopping 6 grams of gold. The resulting medallion is worth about $500. For the silver medal, the gold is replaced with more copper, for a $260 bill of materials. The bronze medal is 97 percent copper, 2.5 percent zinc and 0.5 percent tin. Valued at about $3, you might be able to trade one for a bag of chips in Olympic park if you skip the fish.

 
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Rentec's RIEF Collapses In 2009, Even Firm Admits It May Be Medallion Fodder





Rentech's RIEF investors can't be too happy. After underperforming the S&P by about 30%, and seeing AUM in the once fabled quant fund evaporate, they now have to contend with disclosure that there is "no assurance that trading of the Medallion Funds may will not have a negative effect on the trading of RIEF." Luckily for a now-retired Jim Simons (speaking of, what non-extradition countries has the billionaire code-breaker taken to vacationing in these days?), those same RIEF investors sure do seem to have a lot of patience.

 
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East Setauket Update: RenTec June Letter, Medallion Not Bleeding RIEF Dry, Jimbo Happy To Explain What Is Going On... To Fields Medal Recipients





Just when people were convinced that the ongoing SEC investigation up in Stony Brook may forever end the good old cash exuberant days, where quantum physicists and voice pattern recognitionists somehow generated billions in P&L, Jim comes out and surprises everyone with a RIEF performance of up 0.88% MTD (excluding today's trading, one imagines). Oh, and he seems to enjoy patronizing all non-quant RIEF investors.

 
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East Setauket Update: RenTec June Letter, Medallion Not Bleeding RIEF Dry, Jimbo Happy To Explain What Is Going On... To Fields Medal Recipients





Just when people were convinced that the ongoing SEC investigation up in Stony Brook may forever end the good old cash exuberant days, where quantum physicists and voice pattern recognitionists somehow generated billions in P&L, Jim comes out and surprises everyone with a RIEF performance of up 0.88% MTD (excluding today's trading, one imagines). Oh, and he seems to enjoy patronizing all non-quant RIEF investors.

 
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