Bob Chapman

Herbalife: Media Materially Misstates FTC Outcome, Icahn Files Potentially Questionable Statement with SEC

In the classic "pyramid" scheme, participants attempt to make money solely by recruiting new participants into the program. The hallmark of these schemes is the promise of sky-high returns in a short period of time for doing nothing other than handing over your money and getting others to do the same. But, like most news that goes out incorrectly, nobody noticed the retraction and nobody cared. Here’s what Dow Jones’ official retraction of the morning’s news looked like when it was issued later in the morning, with Herbalife stock already trading up nearly 15%

Massive Raw Gold Shortage In China - Supply And Demand Crunch Looms

Asian demand is especially strong in the increasingly important China. The Chinese strong cultural affinity and love affair with gold (primarily due to a distrust of Chinese paper money) shows no signs of abating. Indeed, it may be accelerating as was seen in the recent figures from the Shanghai Gold Exchange and customs in China and now reports (including from CNTV – the national TV station of the People's Republic of China) of shortages of raw gold or unrefined gold. China, now the largest producer of gold in the world is seeing its gold mines struggle to cater for surging Chinese demand. The raw gold trade has been growing by up to 30% per annum and demand has leapt in recent months leading to a developing raw gold shortage in China. The industry in China expects only 27,000 tonnes of raw gold can be delivered this year. That is way below the estimated demand of 50,000 tonnes. A potential supply shortage of 23,000 tonnes of gold is a large amount of gold in the small gold bullion market which is tiny versus equity, bond and derivative markets. It is infinitesimal when compared to the $4,000 billion a day traded in currency markets.

Frontrunning: October 21

  • Banks Clueless on Foreclosure Mess Severity: Jonathan Weil (Bloomberg)
  • New York Fed Faces `Inherent Conflict' in Mortgage Buybacks (Bloomberg) - as we speculated first, the FRBNY gets dragged into this as not pursuing action would be dereliction of fiduciary duties to taxpayers by Maiden Lane
  • Geithner suggests major currencies "in alignment": report (Reuters)
  • Geithner's Goal: Rebalanced World Economy (WSJ)
  • Chinese growth slows to 9.6% (FT)
  • On the "cash on the sidelines" BS and on Google's 2.4% effective tax rate (Bloomberg)
  • Osborne vows not to backtrack on cuts (FT) as UK unveils dramatic austerity measures  (FT)
  • Greek, Portugal Bonds Lead Peripherals Lower After Spanish Sale (Bloomberg)
  • We See Totally Surreal Markets (Bob Chapman, h/t John)

Frontrunning: October 14

  • The Fed itself says QE2 would have little/no effect (St Louis Fed) - then again this is not FRBNY, but the ultra hawkish St Louis Fed. Trench warfare within Fed is intensifying
  • Dollar Slide Causes Fresh Scramble for Risk (FT)
  • U.S. is currency war's "tomb maker": China economist (Reuters)
  • This will make China happy: Germany Warns of Trade War Over Yuan (WSJ)
  • The Next Bubble (NYT)
  • Fed's Lacker Says Making Jobs an `Imperative' Risks Inflation (Bloomberg)
  • The Fed seeks to boost jobs, but it could have bad side effects for consumers (Barrons)
  • Yuan Bond Sales Climb to Record Led by Railways: China Credit (Business Week)
  • China's Leaders Prepare to Meet as Elders Slam Censorship of Wen (Bloomberg)
  • Spain's Santander Funds at Higher Rate to Inferior Banks (Bloomberg)
  • LVMH Sales Rise 23% Confirming Luxury Recovery (WSJ)

Wexford Goes Activist on Energy Partners Ltd

Wexford Capital, a $6 billion hedge fund run by distressed investor Charles Davidson, went activist on Energy Partners Ltd, sending out one of the only activist letters we have seen in months. Wexford, which states it has a large position in EPL's common stock (although not as large as it did last time around, its holdings have dropped from 9.5% to 8.4%) as well as the 9.75% Senior Notes due 2014 and FRNs due 2013, has presented a list of demands.

There Can Be Only One!!!

We all know about West vs. East, 2-Pac vs. Notorious B.I.G., LA vs NY, etc... How does this express itself in the HF community where most managers are either grads of Steinberg-Dietrich Hall (that Huntsman hall phallic monstrosity will never take the place of the brick facade that Saul Steinberg's Reliance renovated with a whole pile of hard-earned, scandal-free dollars) or ex-Yale Lacrosse players, yet where on occasion you may find the odd Westsider... And they can be quite floral....