For the past 50 or so years, the quickest way for a sharp young sociopath to get rich has been to join an investment bank or hedge fund. The former were riding a “regulatory capture” gravy train that became ever-more-lucrative as new government agencies morphed into subsidiaries of Wall Street. Said another way, when financial assets are being artificially inflated by excessive liquidity, it’s easy to make money by shuffling this ever-appreciating inventory back and forth, and to look very smart while doing so. But those days are ending with a bang...
Moments ago, the 2016 edition of the Sohn Investment Conference started, a feeding frenzy for traders and hedge fund managers such as Gundlach, Einhorn and Chanos who descend on this popular annual "round table" to pitch their best and worst ideas. As always, the moment a company's name is mentioned in a bullish or bearish context, its stock is sure to surge or slump, as the headline-hungry algos immediate pounce in the current reactionary market environment. But is following the advice of these hedge fund gurus such a good idea?
It's over. After months of arguing that everything will be ok as investors flee the troubled company, it is now officialy over:
SUNEDISON FILES FOR BANKRUPTCY AFTER ACQUISITION BINGE, SECURES $300M IN NEW DIP FINANCING
It's been a rough stretch for the 2 and 20 crowd. And it just got rougher.
Having opened his position in AAPL in Q3 2013, Carl Icahn's projections, prognostications, and positioning have all lent credence (for CNBC watchers) to buying into the "no brainer" stock. However, it appears the plunge in the stock of the last few months has taken the shine of Icahn's glee as, according to his fund's latest 13F, he dumped 7 million shares (or aound 14% of his position) in Q4 2015. In addition, Greenlight's David Einhorn dumped 44% of his holding in Tim Cook's releveraging firm.
"HY primary markets are all but shut except for very high quality issuers. And if this trend continues for a while (the probability of which in our opinion is very high), we could envision a world where enterprises, big and small, find it harder to acquire financing across all industries, leading to widespread defaults, even outside of commodities."
Some things to ignore; some things not to ignore. The inevitable will occur. Supply and demand will cross. The question is will Wall Street notice? Some of the analysts caught the cross in early 2014 but most didn’t.
David Einhorn's Confession: "We Lost Money Every Quarter; Never Had A Year Where So Little Went Right"Submitted by Tyler Durden on 01/19/2016 12:11 -0400
"2015 began with David’s favorite football team, the Green Bay Packers, blowing the conference championship game and a chance at the Super Bowl despite looking like the better team on the field, and holding the ball with a 12-point lead with less than 5 minutes to go. The Packers ended 2015 by getting blown out by the Arizona Cardinals 38-8 in a game where they looked like they didn’t even belong in the league. Our year felt a lot like that. Let’s get some of the gory facts out of the way: We lost money every quarter."
...the Swiss canton of Zug is asking its citizens to delay paying their taxes for as long as possible, because the cantonal government doesn’t want to take in a pile of cash, only to end up paying the bank interest on all the tax revenue.
“To the intelligent man or woman, life appears infinitely mysterious, but the stupid have an answer for everything.” ~Edward Abbey
Cynical short-sellers are targeting some of Wall Street's most famous short-sellers. Amid plunges in the stock prices of David Einhorn's Greenlight Capital and Dan Loeb's Third Point reinsurance entities, Bloomberg reports that bearish investors have piled in pushing short interest (as a percent of shares outstanding) to its highest since 2009.
As one hedge fund favorite long crashes (Chipotle is down 9% in the pre-market), so another hedge fund favorite short is about to spike (once it reopens for trading). JAB Group has decided that now is the time to offer a 78% premium to current prices to buy Keurig Green Mountain for $92 (note that is still down over 40% from its highs a year ago). The stock is currently halted at $51.51 leaving the 12% short interest biting their nails at the prospect of major losses and a good 'volkswagen-ing'.
Why are the worlds’ most successful investors having so much trouble lately? The short answer is that the markets they used to understand have been replaced by something very different. In this new, post-market world, money managers can’t separate signal from noise and end up on the wrong end of wild swings in commodities, currencies and interest rates. And now their clients are figuring this out.
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