"As you know, the environment for global macro fundamentals-based trading continues to be challenging. That factor, combined with the lack of certainty over when a recovery will take hold, led us to conclude that the time was right to return capital to you."
It has been a cruel summer, with lots of leverage, for Bill Ackman and his Pershing Square hedge fund.
In August, hedge funds blamed risk-parity funds for their dramatic underperformance. In September, the underperformance continued however this time, with risk-parity funds supposedly buying stocks, one can't blame them. To be sure, some such as Ackman whose 20 million shares of Valeant are hurting badly, will blame the Martin Shkrelis of the world for the biggest biotech tumble in years, but others may have to bite the bullet and admit it is their own lack of ability to come up with alpha in a centrally-planned "market" that is the reason.
Good news! Bad news is again great for stocks, and overnight we had just the right amount of bad news from Japan, China and Europe to send stocks surging on the first day of the final quarter.
- Charting the Market: New Month, Same China (BBG)
- China jitters send stocks tumbling (Reuters)
- Oil falls on weak China factory data (Reuters)
- Euro zone factory growth eases in August despite modest price rises (Reuters)
- Euro-Area Joblessness Falls to Lowest Level Since Early 2012 (BBG)
- Clinton friend advised on U.S. politics, foreign policy (Reuters)
- Korea exports slump as Asia's woes deepen (Reuters)
Just like the last time when Chinese flash PMI data came out at the lowest level since the financial crisis, so overnight when both the official Chinese manufacturing and service PMI data, as well as the Caixin final PMI,s confirmed China's economy has not only ground to a halt but is now contracting with the official manufacturing data the lowest in 3 years and the first contraction in 6 months, stocks around the globe tumbled on concerns another major devaluation round by the PBOC is just around the corner with the drop led by the Shanghai Composite which plunged as much as 4% before, the cavalry arrived and bought every piece of SSE 50 index of China's biggest companies it could find, and in a rerun of yestterday sent it to a green close, with the SHCOMP closing just -1.23% in the red. So much for the "no interventions" myth. We wonder which journalist will take the blame for today's rout.
Well, David Einhorn has clay feet, just like you and me, so.........naturally..........this very public announcement came within days of the stock's highest point in history
Nowhere is this new "glamour" bubble more visible than in the divergence between these "sexy" names built up on nothing but hype, or as David Einhorn would call them "story" stocks, and good old "resource" companies: those engaging in such "old economy" activities as energy and materials.
Spot the NFLX earnings day...
"Mr. Varoufakis, who kept reminding everyone that he is a professor of game theory, believed that the European leaders would prefer to make concessions now rather than manage the disruption of a Greek default. He must not be familiar with the Tyler Durden school of negotiation: the first rule of using game theory is you do not talk about using game theory. What’s more obvious is that Syriza didn’t understand what the game is."
As we discussed at the beginning of last month, the “revolver raids” have already begun for some heavily indebted US shale companies who were set to see their credit lines cut after banks performed their bi-annual review in April, which is based on where crude has traded over the preceding 12 months. Those credit lines will be assessed again in October and according to a UBS survey of the banks who have helped finance the oil & gas industry, the outlook is not good
The markets may have overshot, rising beyond levels warranted by the underlying fundamentals. Oil inventories are still at 80 year highs. The 487 million barrels of oil sitting in storage will take quite a while to drawdown. Crucially, oil production is still exceeding demand, leaving oil markets well-supplied.
Einhorn just found his next target: U.S. onshore E&Ps or the oil fracking companies.
In what was perhaps the most uneventful Ira Sohn book-talking conference in years, some of the biggest hedge fund names came, and as expected, talked their book. There were few surprises, perhaps with the exception of David Einhorn who may have pulled an Ackman and revealed his disdain for Pioneer Natural Resources, which sent the name and the fracking sector lower if only briefly. Indicative of the broader state of the "market" Einhorn was also the only person who pitched a short.
Greenlight's David Einhorn has come out swinging at the Fed-fueled fracking frenzy and, after pointing out facts that are extremely widely known, and have been explained innumerable times here, sent Shale stocks tumbling... led by the so-called "MotherFracker" - Pioneer Natural Resources... Einhorn concludes, "Either way the frackers are fracked."