Pershing Square

First it was the JCPetanic, then the JCPanic, then it became the JCPandemonium, and moments ago, the situation at the doomed retailer was downgraded once again, this time simply to JCPathetic, as the cash-burning, slow motion circus crash lurches from farce to farce, the latest news being that in a long overdue move, Bill Ackman has thrown in the towel on JCPenney and has resigned from the board. Does this mean Ackman will next be offloading his nearly 40 million JCP shares next, and just who will buy them if that is the case, we shall find out shortly. Also, maybe the company can provide an update on what is really important: its nearly (or maybe it is now more than) $2 million per day cash burn rate.

Yesterday's NYPost story about JCP CIT-related credit problems may or may not have been a plant (by a persuasive billionaire nemesis - who knows...) but Citi's Deborah Weinswig isn't hanging around to find out either way, and moments ago slashed its JCP price target from $20 to $11, and cut its rating from Neutral to Sell.

• Headlines only idiots, Schrodinger and Goebbels could love:
  • China Manufacturing Gauge Shows Unexpected Strength (WSJ)
  • China's factory activity shrank for a third straight month in July to its lowest level in nearly a year as new orders fell (Reuters)
• For nuns and analysts alike, bank commodity earnings are a mystery (Reuters)
• US spying comes under fresh attack (FT)
• Summers Backed Yellen for Fed Before Rivals Now Prove More Alike (BBG)
• Good Luck Leaving Your Wireless Phone Plan (WSJ)
• Spain's Rajoy says he was wrong to trust treasurer in party funding scandal (Reuters)
• Shell's Profit Falls on Shale Write-Down (WSJ)
• Why Rand Paul and Chris Christie went to war  (Politico)
• Sony Returns to Profit Aided by TV Business (WSJ)

• Ackman Says Pershing Square Takes 9.8% Stake in Air Products (BBG) - So is APD Carl Icahn's biggest ever short yet
• Latest Hilsenplant: Summers Hedges His Doubts on Fed's Bond Buying (WSJ)
• China Stocks World’s Worst Losing $748 Billion on Slump (BBG)
• U.S. Spy Program Lifts Veil in Court (WSJ)
• Abenomics on the rock again: Japan July manufacturing PMI shows growth at 4-month low (Reuters)
• EADS to be renamed Airbus in shake-up (FT)
• Goldman's GSAM has significantly increased its exposure to European equities (FT) - there is a reason why this is Goldman's worst division
• Japanese Megabanks Post Mega Profit Gains (WSJ) - when one excludes MTM impact from rate surge of course
• Ex-workers sue Apple, seek overtime for daily bag searches (Reuters)
• Hong Kong Yuan Deposits Snap Eight-Month Increase on Cash Crunch (BBG)
• Downtown NYC Landlords Remake Offices in Shift From Banks (BBG)

• Whale of a Trade Revealed at Biggest U.S. Bank With Best Control (BBG)
• ECB backs away from use of ‘big bazooka’ to boost credit (FT)
• Turkish unions join fierce protests in which two have died (Reuters)
• Europe Floods Wreak Havoc (WSJ)
• Beheadings by Syrian Rebels Add to Atrocities, UN Says (BBG)
• RBA Sees Further Rate-Cut Scope as Aussie Remains High (BBG)
• China’s ‘great power’ call to the US could stir friction (FT)
• J.C. Penney Continuing Ron Johnson’s Vision on the Cheap (BBG)

Nearly three years ago, following the publishing of "Is The SEC's Insider Trading Case Implicating FrontPoint A Sting Operation Aimed At S.A.C. Capital?" which exposed the key aspects of SAC's insider trading strategy, and which linked SAC, and the hedge fund world in general, to expert networks three weeks before virtually anyone outside of the 2 and 20 (or 3 and 50 as the case may be) world had heard of them and before they became a household euphemism for insider trading, we expected the full rabid fury of the world's best paid legal team to fall upon us. It didn't, which meant only one thing: we were correct, or they had bigger fish (to avoid harpooning) on their mind. Turns out it was both.

Did Carl Icahn just take his feud with Bill Ackman to the next level? He very well might have, and the stakes have never been higher...

• Obama Signs Bill Enacting Budget Deal to Avert Most Tax Hikes (BBG)
• GOP Leaders Take Political Risk With Deal (WSJ)
• Basel Becomes Babel as Conflicting Rules Undermine Safety (BBG)
• Portugal Faces Divisions Over Austerity Measures (WSJ)
• The Fiscal Cliff Deal and the Damage Done (BBG)
• Cliff deal threatens second term agenda (FT)
• Deposits stable in euro zone periphery in November (Reuters)
• Fresh Budget Fights Brewing (WSJ)
• China Poised for 2013 Rebound as Debt Risks Rise for Xi (BBG)
• Who's Afraid of Italian Elections?  (WSJ)
• China services growth adds to economic revival hopes (Reuters)
• Asian Economies Show Signs of Strength (WSJ)
• Japan’s Aso Targets Myanmar Markets Amid China Rivalry (Bloomberg)

Just hours after Ackman announced his joining Einhorn's alleged Herbalife short, we jokingly tweeted our expectation of bandwagon-following 'value' investors imminent herding...

Ackman joins Einhorn in the HLF short. Next up: Titney Wilson

— zerohedge (@zerohedge) December 19, 2012

And sure enough, with the holidays providing just enough time to read the 300 pages and to form his own "blindingly obvious" conclusion, Whitney Tilson has jumped in short HLF. We can only imagine the cost of borrow and wonder on the post-OPEX timing of a short squeeze given the huge short interest and the fact that HLF has recently hired Boies, Schiller, and Flexner to defend its business model. HLF is trading up 2% in pre-market.

• This is signal, the rest is noise: Russia's Putin set for stand-off with EU on Syria, energy (Reuters)
• Boehner's Budget 'Plan B' Collapses (WSJ)
• Boehner has few options in "fiscal cliff" mess (Reuters)
• Maya "end of days" fever reaches climax in Mexico (Reuters)
• Monti Praised by Merkel Favored Less by Taxed Italians (BusinessWeek)
• China probes Yum Brands' KFC over safety of chicken productsa (Reuters)
• Looting in Aregentina: 400 Border Guard officials deployed to Bariloche over looting (BAH)
• Regulatory 'Whale' Hunt Advances - Comptroller Expected to Take Formal Action Regarding JPM's Trading Fiasco (WSJ) - but no punishment
• U.K. Banks Seen Sacrificing Lending to Meet BOE Demand (Bloomberg)
• US banks face rise in bad loans cover (FT)
• Daily Gun Slaughter in U.S. Obscured by Newtown Rampage (BBG)
• China Restricts Bond Sales by Risker Companies (BBG)

I recently received the following question from a friend of mine and wanted to share my thoughts with my market pals, and throw this out for feedback.  I would be particularly interested in hearing from my derivatives friends who are much more technically informed than I am on the subject.

“I was looking at something today that I thought you would probably have some comment on:  have you noticed how wide the out months on the VIX are versus the one or two month?  How are you interpreting this?”

From my viewpoint this has been a key debate/driver in the equity derivatives world for a good while now (I started having this discussion in early 2011 with some market pals and the situation has only grown more extreme since then).

This is what the most brand name US hedge funds bought and sold in the third quarter.

• RBA Cuts Rate to 3.25% as Mining-Driven Growth Wanes (Reuters)
• Republicans Not Buying Bernanke’s QE3 Defense (WSJ)
• Spain ready for bailout, Germany signals "wait" (Reuters)
• EU says prop trading and investment banking should be separated from deposit taking (Reuters)
• Call for bank bonuses to be paid in debt (FT)
• Spanish Banks Need More Capital Than Tests Find, Moody’s Says (Bloomberg) ... as we explained on Friday
• "Fiscal cliff" to hit 90% of US families (FT)
• The casualties of Chesapeake's "land grab" across America (Reuters)
• U.K. Government Needs to Do More to Boost Weak Economy, BCC Says (Bloomberg)
• World Bank Sees Long Crisis Effect (WSJ)
• UBS Co-Worker Says He Used Adoboli’s Umbrella Account (Bloomberg)
• And more easing: South Korea central bank switches tack to encourage growth (Reuters)

Q2 hedge fund reporting season has come and gone. Below is a summary of the key funds, and who held what at the end of June.

There was a time when Bill Ackman, constantly misperceived as a retail investing genius, blew up an entire fund solely dedicated to investing in Target, mostly via calls as in something out of Whitney Tilson's wettest dream (incidentally, another "investor" who could not get enough of JCP at $27), Pershing Square IV (full hilarious letter from Pershing Square Capital Punishment to the PSIV investors here). His current massive investment in JCP is luckily not a standalone fund, but it is now certainly stalked by the ghost of PSIV as JCP literally blew up overnight and any hope of the rumored "10-15 return" that Ackman predicted in the stock has now gone up in smoke. Oh well: there is always the gamble on Procter and Gamble.