Author: admin

Don’t count the venerable – if bankrupt – department store and mall anchor tenant, J.C. Penney out just yet.

One week after we reported that J.C. Penney (docket #20-20182, in the U.S. Bankruptcy Court for the Southern District of Texas) was on the verge of liquidation after talks with its two largest landlords had collapsed, today the company’s lenders reached a tentative deal with mall landlords Simon Property Group and Brookfield Property Partners to buy the bankrupt chain. The deal, valued at $1.75 billion, would rescue the beleaguered department store chain from bankruptcy proceedings, averting a liquidation that would have threatened roughly 70,000 jobs and represented one of the most significant business collapses following the coronavirus pandemic, Joshua Sussberg, a Kirkland & Ellis LLP lawyer representing the company, said during a brief court hearing Wednesday, confirming an earlier Reuters report.

The landlords are poised to put $300 million toward the rescue and have agreed to a nonbinding letter of intent with J.C. Penney, he said. The operating company they are acquiring would assume $500 million of debt. The deal also calls for new financing from existing lenders; in the end, J.C. Penney will have about $1 billion of cash to fund its business when the deal closes, Sussberg said.

The financing includes a commitment for $2 billion of new asset-based lending led by Wells Fargo, as well as $500 million of so-called takeback debt from existing first-lien lenders, he said. The deal would split J.C. Penney into an operating company and two real estate holding companies.

The restructured retailer is expected to operate about 650 stores, according to Reuters: hedge funds and private-equity firms financing J.C. Penney’s bankruptcy, meanwhile, would take ownership of 161 of those stores and separate distribution centers after forgiving portions of the Plano, Texas-based company’s $5 billion debt load, Sussberg said. These lenders, led by H/2 Capital Partners, would own those assets in two separate real estate investment trusts.

The Wall Street Journal reported earlier that the deal is valued at about $800 million, with the mall owners taking about 490 of the chain’s 650 stores. Lenders would swap some of their debt for control of another 160 locations and the distribution centers, which would be rented back to the landlords, the Journal reported.

“The transaction between the lenders, the company, and Simon and Brookfield contemplates a $1.75 billion total enterprise, plus a post-closing earn-out and a significantly negotiated working capital adjustment,” Sussberg said in the hearing.

J.C. Penney plans to move at “lightning speed” to seek approval of the deal from a bankruptcy judge in early October, Sussberg said. “We are in a position to move this into the endzone,” he told U.S. Bankruptcy Judge David Jones, noting that previous talks were in the “red zone” before faltering and then gaining renewed traction.

The iconic 118-year-old retailer, which went public at the start of the Great Depression, filed for bankruptcy in a Texas court in May after the pandemic forced it to temporarily close its then nearly 850 stores. Should it survive, J.C. Penney will have withstood unprecedented economic turmoil stemming from the pandemic and bankruptcy proceedings that have felled other retailers during less fraught times. In recent years, Toys ‘R’ Us Inc and Barneys New York Inc failed to reorganize under bankruptcy protection and liquidated.

A deal is not yet completed, Sussberg cautioned. Talks with the landlords have hit roadblocks before, and the parties engaged in screaming matches as recently as Wednesday, he said. Negotiations continued during phone calls moments before the court hearing, he added.

If the tentative deal falls apart, J.C. Penney would resume its course for liquidation. Sussberg expressed optimism a deal would be codified and the judge encouraged the parties to keep working to seal an agreement.

“Time, as we’ve mentioned over and over again, is not our friend,” Sussberg said. “It is important — for this transaciton to stay together and for all these stores to stay open and for the 70-plus-thousand employees to stay employed — for us to move with lightning speed.”

J.C. Penney’s survival has hinged on sale negotiations, which have consumed the summer and drawn urgent directives from the company’s bankruptcy judge for parties to set aside what he labeled egos and negotiating postures to consummate a deal to save the beleaguered retailer. The talks dragged on for weeks in part amid haggling over lease terms, Reuters sources said. In late August, the discussions with Simon and Brookfield reached an impasse, prompting J.C. Penney to ask lenders to take control of its retail operations in addition to the real estate investment trusts they envisioned owning. After further discussions, the company reached a deal with Simon and Brookfield to buy the retail operations.

Any deal would require approval from the company’s bankruptcy judge and potentially be subject to competing bids in a court-supervised auction. This means that private equity firm Sycamore Partners and Saks Fifth Avenue owner Hudson’s Bay may have another say in the final transaction; the two vied for J.C. Penney’s retail business earlier this summer.

So why are Simon and Brookfield doing a deal with one of the biggest clients? Because as Reuters explains, the deal reflects a dramatic shift following the pandemic that is pushing them to rescue faltering retailers occupying malls they own across the United States. The demise of large tenants such as J.C. Penney would deprive them of rent and also potentially trigger contract clauses allowing other retailers to pay them less or break their leases altogether, further darkening malls.

Simon, the largest mall operator in the United States, has already this year negotiated separate deals to rescue the two-centuries-old men’s apparel clothier Brooks Brothers and denim retailer Lucky Brand from bankruptcy. Brookfield in May said it would devote $5 billion to non-controlling investments designed to revitalize retailers struggling in the wake of the coronavirus outbreak. In effect, Brookfield is paying rent to itself to avoid even more rent shortfalls.

Authored by Jonathan Turley,

A conservative student organization has flagged a quiz at Vanderbilt University where students were asked “Was the Constitution designed to perpetuate white supremacy and protect the institution of slavery?” A student who answered “false” was marked wrong by the professor.  The class is taught by Professors Josh Clinton, Eunji Kim, Jon Meacham, and Dean John Geer entitled PSCI 1150: U. S. ELECTIONS 2020. 

Meacham is a regular guest on MSNBC and CNN and other networks as well as a contributing editor for The New York Times Book Review.

The question posed to students is shown below:

“Was the Constitution designed to perpetuate white supremacy and protect the institutional of slavery?

The faculty would only accept “true” as the answer.

The statement is wrong on a number of levels. There is no question the Constitution did not end our deeply shameful history of slavery. However, even with the Declaration of Independence figures like John Adams and Thomas Jefferson sought to address slavery.  The decision was made to accommodate slave states to secure the Declaration. The same political calculus was behind the infamous the Three-Fifths Compromise found in Article 1, Section 2, Clause 3 of the United States Constitution.

Thus, the Constitution did indeed perpetuate and protect the institution of slavery with its inherent white supremacy values.  However, that was not the “design” of the Constitution. The Three-Fifths Compromise was a fight over representation and taxation.  The decision to leave slavery unaddressed was based on the same political expediency. It was wrong. It is no excuse to secure the independence of most citizens at the cost of leaving enslaved others.  It was and remains the original sin of our nation. The design of our Constitution should have guaranteed freedom from all men and women.

Yet, the actual design of the Constitution was the Madisonian vision of shared and limited government.  It was founded on the philosophical work of figures ranging from John Locke to Montesquieu. The assertion that the design was to perpetuate slavery is revisionist and wrong.

Notably, one can teach the transcendent issue over slavery — and its perpetuation under the Constitution — without rewriting history to fit this narrative. It is also troubling that these professors would penalize students who hold an alternative view. Even if this were arguably correct, it would be at best a question upon which many would disagree. The question comes across as a reinforced group think or orthodoxy — a rising concern for many of us in higher education.

Indeed, Meacham has previously stated that the Constitution was designed to achieve democratic change and evolution:

“It’s about openness to changing circumstances and data. If you can’t recognize that circumstances have shifted and a preexisting opinion is worth revising, you can’t be an heir of 1776. Woodrow Wilson said the Constitution was supposed to be Newtonian, but was in fact Darwinian. Its genius was to change and evolve. If we can’t change and evolve as citizens and leaders, then we are undoing the American Revolution. The road to totalitarianism lies in unquestioning certitude.”

Meacham has repeatedly stressed that the design was meant to institutionalize gradual democratic change.  He agreed with the assertion that “America’s Founders wrote a Constitution designed to make change a slow and deliberative process.” He stated “Yes, they did, and it has served us rather well over time—not perfectly, God knows, but it has enabled us to muddle along for well over two centuries, always expanding, not contracting, individual liberty under law.”

Indeed, Meacham stressed equality as the design of the Constitution, even if unachieved: 

“This shift found its fullest expression in what became the most important sentence in the English language: ‘We hold these Truths to be self-evident, that all Men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness.’ I think that sentence has changed more lives around the world than any other. The eras we commemorate and want to emulate are the ones when we’ve more generously applied the implications of that sentence.”

Meacham has previously defined the Constitution’s purpose in other ways like resisting figures like Trump: “the Founders would have been stunned that it took this long to get a president like this. They designed this document for demagogues.”

That Meacham would have failed this question.

I reached out to the professors and the university about this story.  The faculty did not respond. Vanderbilt sent the following opaque response that did not expressly deny the facts of this story:

“Consistent with our commitment to the principles of free speech and academic freedom, Vanderbilt has long fostered an environment in which diverse ideas and opinions can be expressed in our efforts to both model, and teach, the principles of civil discourse. The question was posed to stimulate discussion. Students were in fact not rewarded or penalized for their answers. It is unfortunate that the intent behind and purpose of the academic exercise have been misconstrued. We appreciate that our students, faculty and staff have historically engaged in respectful dialogue and we hope this continues.”

It is not clear what is meant by students not being “rewarded or penalized for their answers” when this student was marked off for answering “false.” For that student, there was not a “dialogue” but a decision that the student was wrong for believing that the design of the Constitution was developed to perpetuate slavery and white privilege. For some of us, that is like telling students that they are wrong in believing that the United Nations charter was designed to perpetuate colonialism or capitalism. That is the start more of a diatribe than a dialogue.

Real Vision senior editor Ash Bennington is joined by managing editor Ed Harrison to discuss the market plumbing that’s fueling the wild price action on Wall Street. Ed and Ash first break down the tremendous pressures on banks, which find themselves in a cash-strapped economy lending to businesses with drastically-curtailed incomes. Ed then weighs the notion that central banks are ‘cartels’ in that they have a monopoly on the money supply. Ed and Ash then analyze the true effect of QE, exploring whether it will actually spur lending growth rather than just inflating asset prices. In the intro, Peter Cooper discusses the JOLTS report and the woes of commercial real estate.

Just days after Amazon published a scathing letter slamming President Trump for not allowing the American multinational tech company to get the $10 billion Joint Enterprise Defense Infrastructure (JEDI) contract, which instead was awarded to Microsoft, Amazon’s board has just appointed former NSA head and retired general of the US Army Keith B. Alexander as a director. 

Alexander will also serve on the board’s audit committee, according to Bloomberg on Wednesday. The company which has long faced criticism and scrutiny over its deep CIA ties and collaboration, especially given its prior $600 million contract with the CIA for cloud computing services, will now have a well-known national security state hawk who was commander of US Cyber Command from May 2010 to March 2014.

Crucially his tenure as Director of the National Security Agency went for nearly a decade, from August 2005 to March 2014. From there he founded a cybersecurity technology company in 2014, of which he’s still leads as Co-CEO and president, called IronNet Cybersecurity, Inc.

This is the very NSA chief who was the face of the agency’s mass sweeping up of Americans’ communications exposed by Edward Snowden’s leaks. The US Court of Appeals for the Ninth Circuit earlier this month ruled the invasive NSA program was “illegal” and that US officials lied about it.

At the forefront of the years-long attacks on Snowden, who took refuge in Russia while being sought by US authorities on espionage, was Gen. Alexander, who made consistent media appearances to publicly charge that “Snowden betrayed us” and that he “stole secrets”. 

For those keeping score, not only does Amazon own the The Washington Post and oversees the CIA’s Commercial Cloud Enterprise, it now has on its powerful board of directors the most visible figure from the NSA who illegally spied on Americans for the better part of a decade. 

“Alexa, what is everyone in the world doing right now?”

— Btcn Ftrs (@BtcnFtrs) September 9, 2020

And concerning Amazon’s sour grapes, which it’s very much putting out there for public attention, the irony is thick. Here are some choice lines from last Friday’s press release:

We strongly disagree with the DoD’s flawed analysis and imagine it’s important for our nation that the federal government and its elected leaders administer procurements objectively and in a fashion that’s free from political affect. The query we proceed to ask ourselves is whether or not the President of the USA must be allowed to make use of the finances of the Division of Protection to pursue his personal private and political ends?

And more:

On JEDI, President Trump reportedly ordered former Secretary Mattis to “screw’” Amazon, blatantly interfered in an active procurement, directed his subordinate to conduct an unorthodox “review” prior to a contract award announcement and then stonewalled an investigation into his own political interference. 

Meanwhile, from the annals of the deep state…

This is indeed straight up deep state stuff, seeming to confirm every suspicion that surfaced when years ago Amazon teamed up with the CIA.

Again, Amazon literally accused Trump of unprecedented corruption in a public letter and less than a week later it effectively brings the NSA on board.

Hollywood couldn’t even write this script — brought to you by the CIA, NSA, and the richest man in the world Jeff Bezos. 

China’s embassy in Britain is urging Twitter to launch an investigation into how ambassador to the UK Liu Xiaoming’s official Twitter account was hacked on Wednesday. 

An embassy statement said of his verified Twitter account that “anti-China elements” launched a “vicious” hack in order to embarrass the ambassador and the embassy.

Earlier in the morning Ambassador Xiaoming appeared to retweet a bizarre ‘foot fetish’ pornographic video:

Liu Xiaoming’s been a naughty boy. He’s done a Ted Cruz. https://t.co/8SZtkbMw1d

— Elliot J. Cornish (@ElliotJCornish) September 9, 2020

The Chinese embassy in Britain issued the following official statement: 

“Recently, some anti-China elements viciously attacked Ambassador Liu Xiaoming’s Twitter account and employed despicable methods to deceive the public,” according to a spokesperson.

The retweet was soon taken down after the Chinese government apparently regained access to the official account.

The ambassador’s next tweet cast the alleged hackers’ actions as “despicable” and “abominable behavior”:

A good anvil does not fear the hammer. https://t.co/4nb7lECEXM

— Liu Xiaoming (@AmbLiuXiaoMing) September 9, 2020

The strange incident is reminiscent of the awkward 2017 case of Ted Cruz’s verified account ‘liking’ a porn video, which Cruz subsequently blamed on a staff member. 

The like had remained for nearly an hour before being undone by Cruz’s team in the middle of the night, but not before making national news, a “mistake” which Cruz said would be dealt with internally. 

President Trump unveiled a ‘short’ list of 20 potential Supreme Court nominees on Wednesday – a move which will put pressure on the Biden camp to do the same, according to USA Today.

“My nominee will come from the names I have shared with the American public,” in the event of a vacancy, said Trump, adding “Joe Biden has refused to release his list, perhaps because he knows the names are so extremely far-left.”

“Apart from matters of war and peace, the nomination of a Supreme Court justice is the most important decision an American president can make,” Trump added – saying that presidential candidates “owe the American people” a list of potential Supreme Court picks.

Supreme Court appointments are one of the few issues that majorities of both Biden supporters (66%) and Trump supporters (61%) see as “very important” to their vote in November, per a summer @pewresearch survey. #SCOTUS https://t.co/m0Ww3gPv0I pic.twitter.com/kD4ywHaK2c

— John Gramlich (@johngramlich) September 9, 2020

The move comes nearly two months after Justice Ruth Bader Ginsburg, 87, disclosed that she is receiving treatment for a resurgence of liver cancer. Ginsburg was previously treated for pancreatic cancer in 2019 and 2009.

Trump’s list includes Sens. Tom Cotton of Arkansas, Ted Cruz of Texas and Josh Hawley of Missouri – who has already turned down the potential nomination.

The most serious nominee, however, is believed to be Judge Amy Coney Barrett – who Trump nominated to the US Court of Appeals for the 7th Circuit.

Other leading contenders for Trump’s third high court nomination include Judge Amul Thapar of the 6th Circuit appeals court, a favorite of Senate Majority Leader Mitch McConnell, and Judge Neomi Rao, a relatively recent appointee to the District of Columbia Circuit appeals court and a favorite of many conservatives.

Trump’s first two Supreme Court nominees have solidified the court’s conservative majority. Associate Justice Neil Gorsuch, 53, was confirmed in April of 2017 to succeed the late Associate Justice Antonin Scalia, who had passed away 14 months earlier. Associate Justice Brett Kavanaugh, 55, was confirmed in October of 2018 after a bitter battle that included allegations of sexual assault in high school, charges that he denied. –USA Today

“By the end of my first term, we will have confirmed a record number of federal judges, over 300, all of whom will faithfully uphold our Consitution as written,” Trump said on Wednesday.

“What has always made America exceptional is our reverence for the impartial rule of law,” he added. “Equality under the law is the bedrock of our society, it is the principle that inspired American heroes to abolish slavery and end segregation, secure civil rights, and build the most free and just nation in history.”

While much attention has fallen in recent days on SoftBank and the fact that the Japanese Venture Capital conglomerate has increasingly been acting as a hedge fund, using a recently hired Deuteche Bank prop trader to build a stake in public equities and then supercharging returns by also buying calls on these securities, nothing has been said about those market makers that have been critical in not only enabling the daytrading retail public – which thanks to Robinhood and government stimulus checks has grown by millions in recent months – to engage in a similar call-buying frenzy as we explained previously, but also profiting from it.

Which is why we were surprised to read that none other than David Silber, the head of institutional equity derivatives at Citadel Securities decided to preemptively come to the defense of said market-makers – perhaps sensing that when there is a real crash, all those who lose money from daytrading calls (and occasionally puts) will demand punishment for parties that enabled this euphoric splurge – and in an interview with Bloomberg in which he sought to downplay the role of those benefitting from the retail option frenzy which was instrumental for the recent “gamma” meltup, said to stop blaming options for the recent market drop.

Ironically, instead of calming the market, he may have kicked an entirely new hornets’ nest.

Speaking to Bloomberg, Silber concedes that “increased retail trading, along with separate buying by large institutions, contributed to swings in Nasdaq 100 shares – whipping up volatility as dealers hedged against options price drift known as gamma, but he claimed that “many other things are at work” while refusing to comment on any specific trader or investor.

First, we present some of the highlights from his interview:

On the bout of volatility:

The moves in the market can be more one way or the other based on gamma positioning and you’ve probably seen some of that as many dealers are currently short options due to market demand.

Other potential factors include retail stepping back a bit to reevaluate as the market takes a breather, as well as some profit taking from the near 80% increase we had seen since the lows earlier this year.

In a testament to the option-driven frenzy, in July we first reported that in a “historic inversion”, the average daily volumes of options traded exceeded shares traded for the first time.

Additionally, as Bloomberg adds, more options on stocks like Apple and Tesla traded than did options on the largest S&P 500-tracking exchange-traded fund, which trades under the ticker SPY::

That “is a definite shift in market dynamics — where single stock volume out-paces index volume, with the retail world driving that, perhaps. And then you add on top of it, the story of the large institutional investor, which adds in a new element from a risk perspective.”

On options market growth:

“Options market dynamics are becoming a larger part of the equity market, but I would not confuse them for being the largest part or the only part of the equity market,” he said by phone. “The large Nasdaq run up that we’ve seen, as well as uncertainty around the virus, elections and international trade, there are many factors that lead to investor sentiment and buying versus selling dynamics in addition to what is getting all the attention right now.”

On volatility dynamics:

“The Nasdaq selloff over the last few days has been fairly orderly, you’ve not seen implied volatility take another leg up and yesterday we actually saw implied vols tick a bit lower in a new spot down, vol down regime. The implication is that some of this might have even been in the market already and that a pullback isn’t that big of a surprise. What you find though are people now looking for what’s leading or causing that pullback, and that’s where things like growing retail participation and the large institutional buyer start to drive the narrative. So while certainly a part of it, is it the only thing happening in the market right now? No.”

All of this is roughly accurate, but what David predictably forgot to mention Citadel’s role in all of this.

As a reminder, the Chicago market-maker accounts for more than a quarter of all U.S. equity options volume. In other words, if there is one hub to the option-driven frenzy of recent weeks, it is Citadel. And, by extension, if there is any one entity that stands to make a killing from the unprecedented option trading frenzy, it is Citadel.

There’s more: while it is already known that Citadel – which recently was fined by FINRA for frontrunning client orders – is the top source of revenue for the “free” retail brokerage Robinhood, accounting for roughly 60% of Robinhood non-directed, as well as almost 50% of all market and limit orders, it has also solidly planted itself as the top client when it comes to buying Robinhood’s option flow.

In other words, while SoftBank was crafting the perfect gamma trap, nobody was more intimately aware of the option trading patterns of US retail investors – who many argue were as much if not a greater factor than SoftBank in the liliquid August meltup – than Citadel.

Is it possible that Citadel – which in addition to a giant market maker is also one of the biggest hedge funds in the world and clearly benefits from rising prices and “The Biggest “Gamma Squeeze” In History” – was also involved in the marketwide meltup, with or without advance knowledge of what retail daytraders/SoftBank traders were doing?

Finally, we would be remiss if we did not point out that Akhsay Naheta – who is currently Head Of SoftBank’s public equity asset management team and was the “brains” behind the SoftBank gamma meltup – worked not too long ago at Deutsche Bank, so Citadel’s David Silber was previously Managing Director at – you guessed it – Deutsche Bank.

As Bloomberg reported earlier this year, Citadel’s institutional options group was launched in January, and under David Silber it firm assembled a seven-person team “to win order flow from institutional investors.”

“We are digging into every part of equity options execution and examining what we can do more efficiently to create a better experience for clients and improve market transparency,” Silber said in a February interview.

The company says it has over 1,200 institutional clients, with about 40 signed on to trade equity options. Such relationships have helped make Citadel Securities one of the largest trading firms in the world, generating $3.5 billion of revenue in 2018 from markets including stocks, Treasuries and derivatives.

One wonders if SoftBank is among Citadel’s institutional clients and just what the terms of such a contract would be; one also wonders if Citadel – which, again, was recently fined by FINRA for frontrunning order flow – and which has the best overview of both retail and institutional option order flow decided to take advantage of this unprecedented insight into the global derivative market, just how would that manifest, we wonder.