another site
Following China’s gravely disappointing retail sales growth (as shadow banking credit contracts), US retail sales growth spiked 0.8% MoM (after a revised 0.1% drop in September)
However, core retail sales rose only 0.3% MoM (below expectations).
Everything rose except furniture and home furnishings -0.3%, and food service and retail places -0.2%
Finally, the YoY growth in Control Group Retail Sales was 4.5% – the weakest since April…
via RSS https://ift.tt/2zeEsYV Tyler Durden
Authored by David Robertson via RealInvestmentAdvice.com,
Technology has touched our lives in so many ways, and especially so for investors. Not only has technology provided ever-better tools by which to research and monitor investments, but tech stocks have also provided outsized opportunities to grow portfolios. It’s no wonder that so many investors develop a strong affinity for tech.
Just as glorious as tech can be on the way up, however, it can be absolutely crushing on the way down. Now that tech stocks have become such large positions in major US stock indexes as well as in many individual portfolios, it is especially important to consider what lies ahead. Does tech still have room to run or has it turned down? What should you do with tech?
For starters, recent earnings reports indicate that something has changed that deserves attention. Bellwethers such as Amazon, Alphabet and Apple all beat earnings estimates by a wide margin. All reported strong revenue growth. And yet all three stocks fell in the high single digits after they reported. At minimum, it has become clear that technology stocks no longer provide an uninterrupted ride up.
These are the kinds of earnings reports that can leave investors befuddled as to what is driving the stocks. Michael MacKenzie gave his take in the Financial Times late in October [here]:
“The latest fright came from US technology giants Amazon and Alphabet after their revenue misses last week. Both are highly successful companies but the immediate market reaction to their results suggested how wary investors are of any sign that their growth trajectories might be flattening.”
Flattening growth trajectories may not seem like such a big deal, but they do provide a peak into the often-tenuous association between perception and reality for technology. Indeed, this relationship has puzzled economists as much as investors. A famous example arose out of the environment of slowing productivity growth in the 1970s and 1980s [here] which happened despite the rapid development of information technology at the time. The seeming paradox prompted economist Robert Solow to quip [here],
“You can see the computer age everywhere but in the productivity statistics.”
The computer age eventually did show up in the productivity statistics, but it took a protracted and circuitous route there. The technologist and futurist, Roy Amara, captured the essence of that route with a fairly simple statement [here]:
“We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” Although that assertion seems innocuous enough, it has powerful implications. Science writer Matt Ridley [here] went so far as to call it the “only one really clever thing” that stands out among “a great many foolish things that have been said about the future.”
Gartner elaborated on the concept by describing what they called “the hype cycle” (shown below).
The cycle is “characterized by the ‘peak of inflated expectations’ followed by the ‘trough of disillusionment’.” It shows how the effects of technology get overestimated in the short run because of inflated expectations and underestimated in the long run because of disillusionment.
Amara’s law/ the hype cycle
Ridley provides a useful depiction of the cycle:
“Along comes an invention or a discovery and soon we are wildly excited about the imminent possibilities that it opens up for flying to the stars or tuning our children’s piano-playing genes. Then, about ten years go by and nothing much seems to happen. Soon the “whatever happened to …” cynics are starting to say the whole thing was hype and we’ve been duped. Which turns out to be just the inflexion point when the technology turns ubiquitous and disruptive.”
Amara’s law describes the dotcom boom and bust of the late 1990s and early 2000s to a tee. It all started with user-friendly web browsers and growing internet access that showed great promise. That promise lent itself to progressively greater expectations which led to progressively greater speculation. When things turned down in early 2000, however, it was a long way down with many companies such as the e-tailer Pets.com and the communications company Worldcom actually going under. When it was all said and done, the internet did prove to be a massively disruptive force, but not without a lot of busted stocks along the way.
How do expectations routinely become so inflated? Part of the answer is that we have a natural tendency to adhere to simple stories rather than do the hard work of analyzing situations. Time constraints often exacerbate this tendency. But part of the answer is also that many management teams are essentially tasked with the effort of inflating expectations. A recent Harvard Business Review article [here] (h/t Grants Interest Rate Observer, November 2, 2018) provides revealing insights from interviews with CFOs and senior investment banking analysts of leading technology companies.
For example, one of the key insights is that “Financial capital is assumed to be virtually unlimited.” While this defies finance and economics theory and probably sounds ludicrous to most any industrial company executive, it passes as conventional wisdom for tech companies. For the last several years anyway, it has also largely proven to be true for both public tech-oriented companies like Netflix and Tesla as well as private companies like Uber and WeWork.
According to the findings, tech executives,
“…believe that they can always raise financial capital to meet their funding shortfall or use company stock or options to pay for acquisitions and employee wages.”
An important implication of this capital availability is,
“The CEO’s principal aim therefore is not necessarily to judiciously allocate financial capital but to allocate precious scientific and human resources to the most promising projects …”
Another key insight is, “Risk is now considered a feature, not a bug.” Again, this defies academic theory and empirical evidence for most industrial company managers. Tech executives, however, prefer to, “chase risky projects that have lottery-like payoffs. An idea with uncertain prospects but with at least some conceivable chance of reaching a billion dollars in revenue is considered far more valuable than a project with net present value of few hundred million dollars but no chance of massive upside.”
Finally, because technology stocks provide a significant valuation challenge, many tech CFOs view it as an excuse to abdicate responsibility for providing useful financial information. “[C]ompanies see little value in disclosing the details of their current and planned projects in their financial disclosures.” Worse, “accounting is no longer considered a value-added function.” One CFO went so far as to note “that the CPA certification is considered a disqualification for a top finance position [in their company].”
While some of this way of thinking seems to be endemic to the tech industry, there is also evidence that an environment of persistently low rates is a contributing factor. As the FT mentions [here], “When money is constantly cheap and available everything seems straightforward. Markets go up whatever happens, leaving investors free to tell any story they like about why. It is easy to believe that tech companies with profits in the low millions are worth many billions.”
John Hussman also describes the impact of low rates [here]:
“The heart of the matter, and the key to navigating this brave new world of extraordinary monetary and fiscal interventions, is to recognize that while 1) valuations still inform us about long-term and full-cycle market prospects, and; 2) market internals still inform us about the inclination of investors toward speculation or risk-aversion, the fact is that; 3) we can no longer rely on well-defined limits to speculation, as we could in previous market cycles across history.”
In other words, low rates unleash natural limits to speculation and pave the way for inflated expectations to become even more so. This means that the hype cycle gets amplified, but it also means that the cycle gets extended. After all, for as long as executives do not care about “judiciously allocating capital”, it takes longer for technology to sustainably find its place in the real economy. This may help explain why the profusion of technology the last several years has also coincided with declining productivity growth.
One important implication of Amara’s law is that there are two distinctly different ways to make money in tech stocks.
One is to identify promising technology ideas or stocks or platforms relatively early on and to ride the wave of ever-inflating expectations. This is a high risk but high reward proposition.
Another way is to apply a traditional value approach that seeks to buy securities at a low enough price relative to intrinsic value to ensure a margin of safety. This can be done when disillusionment with the technology or the stock is so great as to overshoot realistic expectations on the downside.
Applying value investing to tech stocks comes with its own hazards, however. For one, several factors can obscure sustainable levels of demand for new technologies. Most technologies are ultimately also affected by cyclical forces, incentives to inflate expectations can promote unsustainable activity such as vendor financing, and debt can be used to boost revenue growth through acquisitions.
Further, once a tech stock turns decidedly down, the corporate culture can change substantially. The company can lose its cachet with its most valuable resource — its employees. Some may become disillusioned and even embarrassed to be associated with the company. When the stock stops going up, the wealth creation machine of employee stock options also turns off. Those who have already made their fortunes no longer have a good reason to hang around and often set off on their own. It can be a long way down to the bottom.
As a result, many investors opt for riding the wave of ever-inflating expectations. The key to succeeding with this approach is to identify, at least approximately, the inflection point between peak inflated expectations and the transition to disillusionment.
Rusty Guinn from Second Foundation Partners provides an excellent case study of this process with the example of Tesla Motors [here]. From late 2016 through May 2017 the narrative surrounding Tesla was all about growth and other issues were perceived as being in service to that goal. Guinn captures the essence of the narrative:
“We need capital, but we need it to launch our exciting new product, to grow our factory production, to expand into exciting Semi and Solar brands.” In this narrative, “there were threats, but always on the periphery.”
Guinn also shows how the narrative evolved, however, by describing a phase that he calls “Transitioning Tesla”. Guinn notes how the stories about Tesla started changing in the summer of 2017:
“But gone was the center of gravity around management guidance and growth capital. In its place, the cluster of topics permeating most stories about Tesla was now about vehicle deliveries.”
This meant the narrative shifted to something like, “The Model 3 launch is exciting AND the performance of these cars is amazing, BUT Tesla is having delivery problems AND can they actually make them AND what does Wall Street think about all this?” As Guinn describes, “The narrative was still positive, but it was no longer stable.” More importantly, he warns, “This is what it looks like when the narrative breaks.”
The third phase of Tesla’s narrative, “Broken Tesla”, started around August 2017 and has continued through to the present. Guinn describes,
“The growing concern about production and vehicle deliveries entered the nucleus of the narrative about Tesla Motors in late summer 2017 and propagated. The stories about production shortfalls now began to mention canceled reservations. The efforts to increase production also resulted in some quality control issues and employee complaints, all of which started to make their way into those same articles.”
Finally, Guinn concludes, “Once that happened, a new narrative formed: Tesla is a visionary company, sure, but one that doesn’t seem to have any idea how to (1) make cars, (2) sell cars or (3) run a real company that can make money doing either.” Once this happens, there is very little to inhibit the downward path of disillusionment.
Taken together, these analyses can be used by investors and advisors alike to help make difficult decisions about tech positions. Several parts of the market depend on the fragile foundations of growth narratives including many of the largest tech companies, over one-third of Russell 2000 index constituents that don’t make money, and some of the most over-hyped technologies such as artificial intelligence and cryptocurrencies.
One common mistake that should be avoided is to react to changing conditions by modifying the investment thesis. For example, a stock that has been owned for its growth potential starts slowing down. Rather than recognizing the evidence as potentially indicative of a critical inflection point, investors often react by rationalizing in order to avoid selling. Growth is still good. The technology is disruptive. It’s a great company. All these things may be true, but it won’t matter. Growth is about narrative and not numbers. If the narrative is broken and you don’t sell, you can lose a lot of money. Don’t get distracted.
In addition, it is important to recognize that any company-specific considerations will also be exacerbated by an elemental change in the overall investment landscape. As the FT also noted, “But this month [October] can be recognised as the point at which the market shifts from being driven by liquidity to being driven by fundamentals.” This turning point has significant implications for the hype cycle: “Turn off the liquidity taps at the world’s central banks and so does the ability of the market to believe seven impossible things before breakfast.”
Yet another important challenge in dealing with tech stocks that have appreciated substantially is dealing with the tax consequences. Huge gains can mean huge tax bills. In the effort to avoid a potentially complicated and painful tax situation, it is all-too-easy to forego the sale of stocks that have run the course of inflated expectations.
As Eric Cinnamond highlights [here], this is just as big of a problem for fiduciaries as for individuals:
“The recent market decline is putting a growing number of portfolio managers in a difficult situation. The further the market falls, the greater the pressure on managers to avoid sending clients a tax bill.”
Don’t let tax considerations supersede investment decisions.
So how do the original examples of Amazon, Alphabet and Apple fit into this? What, if anything, should investors infer from their quarterly earnings and the subsequent market reactions?
There are good reasons to be cautious. For one, all the above considerations apply. Further, growth has been an important part of the narrative of each of these companies and any transition to lower growth does fundamentally affect the investment thesis. In addition, successful companies bear the burden of ever-increasing hurdles to growth as John Hussman describes [here]:
“But as companies become dominant players in mature sectors, their growth slows enormously.”
“Specifically,” he elaborates, “growth rates are always a declining function of market penetration.” Finally, he warns,
“Investors should, but rarely do, anticipate the enormous growth deceleration that occurs once tiny companies in emerging industries become behemoths in mature industries.”
For the big tech stocks, wobbles from the earnings reports look like important warning signs.
In sum, tech stocks create unique opportunities and risks for investors. Due to the prominent role of inflated expectations in so many technology investments, however, tech also poses special challenges for long term investors. Whether exposure exists in the form of individual stocks or by way of major indexes, it is important to know that many technology stocks are run more like lottery tickets than as a sustainable streams of cash flows. Risk may be perceived as a feature by some tech CFOs, but it is a bug for long term investment portfolios.
Finally, tech presents such an interesting analytical challenge because the hype cycle can cause perceptions to deviate substantially from the reality of development, adoption and diffusion. Ridley describes a useful general approach: “The only sensible course is to be wary of the initial hype but wary too of the later scepticism.” Long term investors won’t mind a winding road but they need to make sure it can get them to where they are going.
via RSS https://ift.tt/2RPTlrm Tyler Durden
The world’s largest shipper A.P. Moller-Maersk sounded the alarm on Wednesday by announcing there would be a tremendous “price to be paid” for President Trump’s trade war as global demand has now plummeted to its lowest level in more than two years.
Chief Executive Soren Skou told the Financial Times that it expected global container trade to decline by .5% to 2% in 2019 and 2020 due to increased tariffs between the US and China.
“The impact right now on US-China trade is that Chinese imports to the US have gone up and US exports to China have gone down...Obviously, there will be a price to be paid sometime in the first quarter . . . There will be no real impact until after Chinese new year [in February],” Skou said in an interview.
The demand outlook for 2019 looks rather gloomy, as top US importers have been quickly stocking up on Chinese goods before new import tariffs take effect on January 01, this could mean that container demand plummets sometime between January and March 2019 – something that Skou warned about above.
The US has introduced tariffs of 10% to 25% on $250 billion worth of Chinese imports, prompting Beijing to retaliate with tariffs of their own. Trump has threatened China with a full-blown trade war in 2019, a move that would crush the global economy.
In August, we first reported that freight data via Goldman identified global trade momentum was slowing since late 2017, and that July readings suggested an alarming continuation, and in some cases acceleration, of this trend.
The deceleration in shipping rates has closely tracked a tightening in global financial conditions, particularly evident in EM data, which in turn has largely been a manifestation of the ongoing escalation in the trade war.
Earlier this month, we outlined even more evidence from Reuters shows the cost of chartering commercial ships has collapsed even further. More specific, rates for container ships have sunk 27% from a multi-year peak while raw material vessel rates have fallen 10% from a five-year high, adding to the mounting evidence that slowing global trade could soon usher in a worldwide recession around 2020.
The Harper Petersen Charter Rate Index, which is published on a weekly basis, tracks rate levels in US Dollars of container ships, had dropped well over 27% from June when it was at a seven-year high to 499.
As shown below, the S&P500 usually has a tantrum when container rates collapse…
And there you have it, the world’s largest shipping company has proof that Trump’s trade war with China could lead to economic turbulence in early 2019.
via RSS https://ift.tt/2RXytPe Tyler Durden
The New York Times has painted a 5,300 word picture of an out-of-control Facebook’s desperate and incompetent damage control measures in the wake of multiple scandals.
Based on interviews with over 50 current and former company executives, lawmakers, government officials, lobbyists and congressional staff members – most of whom spoke on the condition of anonymity – the Times illustrates how Facebook resorted to mercenary tactics when it came to combatting criticism over everything from Russian ad-spending during the 2016 US election, to the Cambridge Analytica scandal, to the platform’s blind eye towards corrupt governments using the social network to commit atrocities around the world.
as evidence accumulated that Facebook’s power could also be exploited to disrupt elections, broadcast viral propaganda and inspire deadly campaigns of hate around the globe, Mr. Zuckerberg and Ms. Sandberg stumbled. Bent on growth, the pair ignored warning signs and then sought to conceal them from public view. –NYT
In one instance, COO Sheryl Sandberg was “seething” after Facebook’s former security chief, Alex Stamos, informed the board of directors that the company had not contained the “Russian infestation.” The admission resulted in a “humiliating boardroom interrogation of Ms. Sandberg,” who was livid that Stamos’s admission had exposed the company legally (as opposed to ignoring or covering up the issue).
And after a failed charm offensive – including an attempt to make CEO Mark Zuckerberg more likeable and less robotic – Facebook “went on the attack.” After the left began to blame the company’s lax oversight of Russian ad spending for Hillary Clinton’s 2016 election loss, Facebook hired a GOP opposition-research firm “to discredit activist protesters, in part by linking them to the liberal financier George Soros.”
In October 2017, Facebook also expanded its work with a Washington-based consultant, Definers Public Affairs, that had originally been hired to monitor press coverage of the company. Founded by veterans of Republican presidential politics, Definers specialized in applying political campaign tactics to corporate public relations — an approach long employed in Washington by big telecommunications firms and activist hedge fund managers, but less common in tech.
Definers had established a Silicon Valley outpost earlier that year, led by Tim Miller, a former spokesman for Jeb Bush who preached the virtues of campaign-style opposition research. –NYT
One of the leaders of Facebook’s malicious efforts to depict the company’s liberal critics as sinister Soros-funded operatives was the consulting firm of long-time GOP consultant @Timodc, currently a personality for @PodSaveAmerica https://t.co/YvmMglJ3jP pic.twitter.com/bnEWqpUB4Y
— Glenn Greenwald (@ggreenwald) November 14, 2018
Really starting to think the Pod has not Saved America
— Kate Aronoff (@KateAronoff) November 15, 2018
They also leveraged business relationships to persuade “a Jewish civil rights group to cast some criticism of the company as anti-Semitic” after activists used an “anti-Semitic trope” while protesting the company during a Congressional hearing.
In July, organizers with a coalition called Freedom from Facebook crashed a hearing of the House Judiciary Committee, where a company executive was testifying about its policies. As the executive spoke, the organizers held aloft signs depicting Ms. Sandberg and Mr. Zuckerberg, who are both Jewish, as two heads of an octopus stretching around the globe.
Eddie Vale, a Democratic public relations strategist who led the protest, later said the image was meant to evoke old cartoons of Standard Oil, the Gilded Age monopoly. But a Facebook official quickly called the Anti-Defamation League, a leading Jewish civil rights organization, to flag the sign. Facebook and other tech companies had partnered with the civil rights group since late 2017 on an initiative to combat anti-Semitism and hate speech online.
That afternoon, the A.D.L. issued a warning from its Twitter account. –NYT
“Depicting Jews as an octopus encircling the globe is a classic anti-Semitic trope,” wrote the ADL, adding “Protest Facebook — or anyone — all you want, but pick a different image.”
Facebook also threw everything they had at Capitol Hill, wooing Democratic allies in Washington and eventually favoring a bill called the Stop Enabling Sex Traffickers Act, which held internet platforms responsible for sex trafficking ads on their sites. While Google fiercely opposed the bill, Facebook quickly supported it in an effort to curry political capital.
Lashing out at Google and Apple
Tim Miller, the GOP consultant from Definers, argued in a 2017 interview that tech firms should “have positive content pushed out about your company and negative content that’s being pushed out about your competitor.”
And when the Cambridge Analytica data harvesting scandal broke – resulting in rebukes from Apple CEO Tim Cook and Google executives (“We’re not going to traffic in your personal life,” said Cook), Mark Zuckerberg went ballistic – “who later ordered his management team to use only Android phones —arguing that the operating system had far more users than Apple’s,” according to the Times.
Facebook then went on the offensive against the fellow tech giants.
On the advice of Joel Kaplan – a well-connected Republican friend, Bush administration official, and former Harvard classmate of Sandberg, Facebook began to go after Google and Apple.
Mr. Kaplan prevailed on Ms. Sandberg to promote Kevin Martin, a former Federal Communications Commission chairman and fellow Bush administration veteran, to lead the company’s American lobbying efforts. Facebook also expanded its work with Definers.
On a conservative news site called the NTK Network, dozens of articles blasted Google and Apple for unsavory business practices. One story called Mr. Cook hypocritical for chiding Facebook over privacy, noting that Apple also collects reams of data from users. Another played down the impact of the Russians’ use of Facebook.
The rash of news coverage was no accident: NTK is an affiliate of Definers, sharing offices and staff with the public relations firm in Arlington, Va. Many NTK Network stories are written by staff members at Definers or America Rising, the company’s political opposition-research arm, to attack their clients’ enemies. –NYT
Playing politics
After Mark Zuckerberg’s extremely robotic appearance in front of Congressional committees amid the fallout from the Cambridge Analytica scandal, Sandberg spearheaded the company’s Washington campaign – leveraging her Democratic ties, while also seeking to woo Republicans who had accused the company of bias. “Her top Republican target was Mr. Burr, whose Senate committee’s Russia investigation had chugged along … While critics cast Facebook as a serial offender that had ignored repeated warning signs about the dangers posed by its product, Ms. Sandberg argued that the company was grappling earnestly with the consequences of its extraordinary growth.”
While Facebook had publicly declared itself ready for new federal regulations, Ms. Sandberg privately contended that the social network was already adopting the best reforms and policies available. Heavy-handed regulation, she warned, would only disadvantage smaller competitors.
Some of the officials were skeptical. But Ms. Sandberg’s presence — companies typically send lower-ranking executives to such gatherings — persuaded others that Facebook was serious about addressing its problems, according to two who attended the conference.
Meanwhile, Facebook has – at least in one instance – relied on Democratic Senator Chuck Schumer of New York to advance their interests. Schumer, whose daughter Alison joined the firm out of college and is now a market manager out of the company’s New York Office, went to bat for the company – confronting Virginia Democrat Mark Warner, who had co-introduced legislation to compel Facebook and other internet firms to disclose who had bought political ads on their sites.
Back off, he told Mr. Warner, according to a Facebook employee briefed on Mr. Schumer’s intervention. Mr. Warner should be looking for ways to work with Facebook, Mr. Schumer advised, not harm it. Facebook lobbyists were kept abreast of Mr. Schumer’s efforts to protect the company, according to the employee. –NYT
At the end of the day, Facebook has revealed themselves to be not only ill equipped to handle Russian troll farms and protect user data – they’re also clearly willing to do whatever it takes to salvage their image, even if it means betraying their liberal culture and attacking their own side of the aisle.
via RSS https://ift.tt/2OLb0i9 Tyler Durden
Normally 13Fs are among the most useless pieces of actionable information for investors, because not do they encourage imitation instead of original thought – and why imitate an industry that has failed to outperform the market for 8 years in a row – but they also reveal a portfolio snapshot in time that was a month and a half ago, a fact which the savviest investors put to good use to sell into the copycat retail bid, but also exclude the entire short book of a given hedge fund.
This time around, the just released torrent of 13Fs is especially worthless as they fail to account for the October market collapse which sent stock tumbling the most in 7 years and forced countless fund managers to drastically reorganize their portfolio (assuming they haven’t been redeemed to death).
Still, one can sometimes find glimmers of relevant information or at least patterns of activity across the hedge fund universe when comparing and contrasting what hedge funds did at the end of last quarter. The first thing to note is that former hedge fund darlings, Facebook and NXP Semiconductors, two stocks which were among the top 10 most widely held hedge fund stocks as recently as March 31, were among the biggest losers from the Q3 13F parade.
Separately, as we reported earlier, banks were among the winners after a big bet from Warren Buffett, who not only bought new stakes in JPM and PNC, but also became the largest shareholder in Bank of America, Bank of New York, Wells Fargo and US Bancorp while adding to its Goldman position. Buffett also sold out of Walmart and Sanofi in the quarter.
But back to Facebook which in the same quarter as its historic Q2 earnings fiasco, in which the company lost over $100 billion in market cap in the manner of minutes, a procession of hedge funds including Third Point, Jana and Sachem Head sold off their positions in the social network in Q3, while David Tepper, Stanley Druckenmiller’s family office, and Philippe Laffont’s Coatue Management reduced their stakes according to Bloomberg. Third Point, Jericho, Magnetar and Moore Capital were among funds that exited their stakes in NXP Semiconductors after its deal with Qualcomm was terminated.
And while AAPL earlier today entered a bear market from its all time highs just over a month ago, losing over $200 billion in market cap in the process, some funds added new Apple stakes in the quarter including Tiger Global, Appaloosa and Columbus Circle, while Renaissance Technologies exited its position.
Elsewhere:
Finally, courtesy of Bloomberg, here are the biggest changes in the holdings of some of the marquee money managers as of Sept. 30:
ADAGE CAPITAL PARTNERS GP
ANCORA ADVISORS
APPALOOSA MANAGEMENT
BALYASNY ASSET MANAGEMENT
BAUPOST GROUP
BERKSHIRE HATHAWAY
BLUECREST CAPITAL MANAGEMENT
BLUE HARBOUR GROUP
BRIDGEWATER ASSOCIATES
CITADEL ADVISORS
CLINTON GROUP
COATUE MANAGEMENT
CORVEX MANAGEMENT
DUQUESNE FAMILY OFFICE
ELLIOTT MANAGEMENT
EMINENCE CAPITAL
ENGAGED CAPITAL
FAIRHOLME CAPITAL
GLENVIEW CAPITAL
GREENLIGHT CAPITAL
HIGHFIELDS CAPITAL MANAGEMENT
ICAHN ASSOCIATES
IMPALA ASSET MANAGEMENT
JANA PARTNERS
LAKEWOOD CAPITAL
LAND & BUILDINGS INVESTMENT MANAGEMENT
LONE PINE CAPITAL
MAGNETAR FINANCIAL
MARCATO
MAVERICK CAPITAL
MARSHALL WACE
MELVIN CAPITAL MANAGEMENT
MOORE CAPITAL MANAGEMENT
NEUBERGER BERMAN GROUP
OAKTREE CAPITAL MANAGEMENT
OMEGA ADVISORS
PAULSON & CO.
PERSHING SQUARE
POINT72 ASSET MANAGEMENT
POINTSTATE CAPITAL
RAGING CAPITAL
RENAISSANCE TECHNOLOGIES
SANDELL ASSET MANAGEMENT
SENATOR INVESTMENT
SOROBAN CAPITAL
SOROS FUND MANAGEMENT
STARBOARD VALUE
STEADFAST CAPITAL
TEMASEK HOLDINGS
TIGER GLOBAL MANAGEMENT
THIRD POINT
TRIAN
TUDOR INVESTMENT
VALUEACT
VIKING GLOBAL INVESTORS
WHALE ROCK
Source: Bloomberg
via RSS https://ift.tt/2Dr2hzR Tyler Durden
US futures pared earlier gains, European stocks slumped and the pound tumbled after the Brexit crisis returned with a bang to the forefront after a series of British ministers quit in protest at Theresa May’s Brexit deal, plunging the U.K. government into crisis and sparking fresh fears about a May ouster and a hard Brexit.
Today’s turmoil started around 4am ET when Brexit Secretary Dominic Raab announced his resignation on Twitter, the highest profile of several departures on Thursday morning. “No democratic nation has ever signed up to be bound by such an extensive regime, imposed externally without any democratic control over the laws to be applied, nor the ability to decide to exit the arrangement,” he said in his resignation letter. His, and subsequent resignations, threw into doubt May’s ability to secure Parliament’s support for her plan and even to survive as leader.
Today, I have resigned as Brexit Secretary. I cannot in good conscience support the terms proposed for our deal with the EU. Here is my letter to the PM explaining my reasons, and my enduring respect for her. pic.twitter.com/tf5CUZnnUz
— Dominic Raab (@DominicRaab) November 15, 2018
The pound, which rebounded strongly on Wednesday after May announced she had won cabinet support for the withdrawal draft, tumbled 3 big figures almost instantly on the news, dropping as much as 1.9%, its biggest plunge since 2017.
“The reaction is sterling shows that the chance of no Brexit deal has spiked,” said Tim Graf, Head of Macro Strategy for EMEA at State Street Global Markets. “It also introduces thoughts of a leadership challenge (for British Prime Minister Theresa May) which seems likely now.”
While the prime minister defended her plan as the only way to protect the union of the U.K when addressing law makers in the House of Commons, the renewed threat that May could be replaced and Britain could crash out of the EU with no deal is an unpredictable and high-risk scenario for markets. As the resignations rolled in, the FTSE 100 Index trimmed gains as trading volumes soared to double the 30-day average while gilts surged. European stocks, which started the session in the green, pared all gains and dropped to yesterday’s lows, down 0.4%.
“The truth is no one can accurately predict how this will play over the next few days and weeks,” said Epworth Investment Management Chief Investment Officer Stephen Beer. “However, in some important respects, nothing has changed since the referendum. It remains the case that Brexit is likely to be economically worse for the U.K. than remaining in the European Union. What we have now is more people realizing that.”
S&P 500 had been solidly up before they pared much of their advance, although they have since rebounded to near session highs once more. The yen rose, and gold and the Swiss franc were steady, suggesting the market was not too concerned by the latest Brexit turmoil.
The S&P 500 had fallen for a fifth straight day overnight, with financial stocks hit by fears of tighter regulations once the Democratic Party takes control of the House of Representatives. U.S. stocks were also pressured by concerns that earnings growth might be peaking, trade tensions and a slowing global economy – factors that had triggered a rout in riskier assets in October.
The European turmoil followed a relatively calm Asian session with the MSCI Asia index rising 0.8%, as Hong Kong shares jumped after Tencent earnings beat expectations while Chinese equities rose 1.4%, cheering news that China and the United States were back in contact about their bitter trade disputeas after a report that Chinese officials had sent a letter to the White House outlining a series of potential concessions to the Trump administration, despite subsequent reports that the offering by China was insufficient to meet Trump’s demands. Japanese stocks edged lower while the Australian dollar jumped after a strong local jobs report.
There was some good news overnight: in a closely watched question-and-answer session late on Wednesday Federal Reserve Chairman Jerome Powell played down recent turbulence in equities, saying volatility was only one of many factors that the Fed takes into account. Then again, Powell’s admission confirmed that the Fed put is hundreds of points lower than the S&P’s latest price, which likely means that stocks have a long way to fall before Powell gets truly concerned about the Fed’s beloved “wealth effect.”
UK turmoil also boosted demand for safe-haven German government bonds. Ten-year Bund yields fell over three basis points to 0.36 percent, the lowest in over two weeks.
“While it’s difficult to pin-point a specific event for the risk-off move, recent themes appear to be keeping markets cautious include oil’s recent plummet, Apple’s fall, U.S. political gridlock, China’s slowing growth, tightening liquidity, a hawkish Fed, earnings peak, Italian jitters, and Brexit uncertainty,” wrote economists at ANZ.
Elsewhere, West Texas crude resumed its slide following Wednesday’s rebound from a record losing streak. Emerging-market shares rallied and their currencies strengthened.
“If U.S. stocks are to bounce back, economic indicators will be key,” said Junichi Ishikawa, senior forex strategist at IG Securities in Tokyo. “Focus will be on today’s U.S. retail sales data, which will provide a view of how private consumption -the main component of economic growth- is faring.” U.S. retail sales for October will be released today at 830am ET.
Market Snapshot
Top Overnight News from Bloomberg
Asian equity markets were eventually mostly higher after the region gradually shrugged off the cautious lead from the losses stateside, where weakness in tech and financials saw all US majors finish in the red. ASX 200 (+0.1%) and Nikkei 225 (-0.2%) were lower throughout most the session as financials lagged although the Australian benchmark staged a late rebound and just about turned positive at the close, while sentiment in Tokyo remained pressured by a firmer currency and as blue-chip banking stocks declined post-earnings. Elsewhere, Hang Seng (+1.7%) and Shanghai Comp. (+1.4%) weathered a choppy start as outperformance in tech kept Chinese markets afloat after a beat on earnings from Hong Kong index-giant and China’s largest tech firm Tencent Holdings. Finally, 10yr JGBs were flat with only minimal support seen despite the losses in Tokyo stocks and with price action also muted following mixed results in today’s 5yr JGB auction. China’s government is said to have sent a written response to the US concerning trade reforms, which reports noted offered insufficient concessions.
Top Asian News
European indices are mixed, with the FTSE MIB (-0.5%) lagging alongside broad underperformance in Italian assets. Furthermore, Prysmian (-4.3%) have also weighed on the index after a guidance cut and STMicroelectronics (-2.5%) are lower in sympathy with AMS (-1.3%) who cut guidance pre-market. FTSE 100 (+0.1%) is bucking the trend as recent Brexit updates are weighing on Cable. However, upside for the index is being capped by losses in RBS (-7.3%) and Barclays (-6.0%) in the wake of the rate implications of today’s Brexit turmoil. Elsewhere, Antofagasta (+2.1%) are lower following board approval of expansion to the Los Pelambres copper mine. In contrast Royal Mail (-5.2%) are in the red after reporting lower half year pre-tax profit.
Top European News
In FX, all eyes were on GBP as the Post-UK Cabinet approval of the withdrawal draft has been extremely short-lived, as Brexit Minister Raab resigned due to reservations over the proposal, followed by McVey (Work and Pensions Secretary and other not as high profile (so far) Government officials. Significantly weaker than forecast retail sales data merely compounded the misery for Sterling, but probably won’t be the final straw amidst reports of more MPs and aides considering their position and an official leadership challenge against PM May. Cable collapsed from 1.3000+ through 1.2900 and the recent 1.2828 low to circa 1.2750 at one stage, with only the November base at 1.2696 protecting the ytd trough (1.2662) aside from any psychological or sentimental support at 1.2700. Meanwhile, Eur/Gbp rallied from around 0.8700 to 0.8845, breaching some interim chart resistance at 0.8766 on the way, and without much effort, before partially retracing. EUR – Although the single currency is benefiting from the Gbp’s demise, it has lost ground vs the Usd after running into offers at 1.1350, but is holding in well above recent lows not far from 1.1200 and may be relatively contained by hefty option expiries at 1.1300 and 112.50-60 in 1.5 bn and 1.6 bn respectively. AUD – The clear G10 outperformer and retaining the bulk of its overnight gains vs the Greenback on the back of an upbeat Aussie jobs report – Aud/Usd currently around 0.7260 within a 0.7300-0.7230 range, and with the Aud/NZD cross back above 1.0650 as the Kiwi pivots 0.6800 against the Usd. DXY – The Dollar is mixed vs major counterparts and broadly weaker against EM currency, but the index has rebounded firmly above 97.000, largely due to the aforementioned Pound rout and knock-on effects.
In commodities, gold (+0.9%) prices have extended gains above USD 1200/oz as the dollar continues to fall from the 16-month highs that were reached at the start of the week. Separately, copper has been boosted following China sending a written response to US trade reforms, although it has been noted that it offers insufficient concessions. Brent (-0.1%) and WTI (-0.2%) initially traded higher, and were mostly unaffected by the larger than expected build in API inventory. but have since reverted into negative territory following the dollar beginning to strengthen again. Of note reports that Russia have cut oil output to 11.38mln BPD for the first two weeks of November. Markets will be looking ahead to the EIA weekly data later today.
US Event Calendar
d
via RSS https://ift.tt/2QJZIwq Tyler Durden
Indications suggest that the Paris-led effort to impose E.U.-level taxes on cross-border digital services has stalled. Opponents correctly painted the effort as a blatant tax grab against American tech giants like Facebook, Google, and Amazon—noting also that it would apply to revenue, rather than profits. But it was the objection by low-tax E.U. nations like Ireland that has apparently scuttled the effort to pass the plan in December. Just don’t think for a second, writes Veronique de Rugy, that the fight is over.
from Hit & Run https://ift.tt/2PuwvsL
via IFTTT
Saudi Arabia public prosecutor Sheikh Shaalan al-Shaalan said on Thursday that the kingdom will seek the death penalty for five suspects among the 11 charged in the killing of journalist Jamal Khashoggi, confirming suspicions that members of the murder squad purportedly sent to “interrogate” Khashoggi will now themselves face beheadings as the Saudi Royal Family closes ranks around the Crown Prince, per the FT.
As for Mohammed bin Salman who runs the day to day affairs of the world’s top oil exporter and is the de facto head of OPEC, the prosecutor said had “no knowledge” of the mission, effectively absolving him of any domestic suspicion, if not international.
The charges were handed down after the kingdom dismissed five senior intelligence officers and arrested 18 Saudi nationals in connection with Khashoggi’s disappearance. The Saudi insider-turned-dissident journalist disappeared on Oct. 2 after entering the Saudi Arabian consulate in Istanbul to pick up documents that would have allowed him to marry his fiance. Khashoggi was a legal resident of Virginia.
According to the Saudi prosecutor, five people charged are believed to have been involved in “ordering and executing the crime,” according to CNN.
The prosecutor said that the former Saudi deputy intelligence chief, Ahmed al-Assiri, ordered a mission to force Khashoggi to go back to Saudi Arabia and formed a team of 15 people.
They were divided into three groups, the Saudi Public Prosecutor said: a negotiation team, an intelligence team and a logistical team.
It was the head of the negotiating team who ordered the killing of Khashoggi, the prosecutor said.
The Saudis stuck by latest (ever changing) narrative that the Washington Post columnist was killed after a mission to abduct him went awry. The deputy chief of intelligence ordered that Khashoggi be brought back to the kingdom, Shaalan said. The team killed him after the talks failed and his body was handed to a “collaborator” in Turkey, he said.
Asked whether Saud al-Qahtanti, an aide to Prince Mohammed, had any role in the case, Shaalan said that a royal adviser had a coordinating role and had provided information. The former adviser was now under investigation, the prosecutor said, declining to reveal the names of any of those facing charges.
Al-Shaalan did reveal that a total of 21 suspects are now being held in connection with the case. Notably, the decision to charge the 5 comes after National Security Advisor John Bolton repudiated reports that a recording of Khashoggi’s murder made by Turkish authorities suggested that Crown Prince Mohammad bin Salman was behind the murder plot.
But as long as OPEC+ is planning to do “whatever it takes” to boost oil prices, the US’s willingness to give the Saudis a pass could always be tested if crude prices again turn sharply higher.
via RSS https://ift.tt/2Fpjgov Tyler Durden
In April 2018, federal agents raided the Arizona homes of Michael Lacey and James Larkin, the longtime publishers of an alt-weekly empire and founders of the classified-ads site Backpage.com.
“There were 20 to 25 agents on the property in flak jackets, all with guns,” says Lacey, whose wife’s family had been visiting at the time; an armed agent had pulled her nearly 80-year-old mom naked from the shower. After more than a week in jail, Lacey and Larkin were released on $1 million bond apiece but confined to Maricopa County and forced to wear ankle monitors. The Backpage homepage now declares the site seized by the FBI and other federal agencies, writes Elizabeth Nolan Brown.
from Hit & Run https://ift.tt/2DFZLqk
via IFTTT
Theresa May’s draft Brexit plan isn’t dead yet – but its chances of survival certainly aren’t looking good.
With only 10 days until a hoped-for EU summit, the government of Theresa May lost a key senior official Thursday morning when Brexit Secretary Dominic Raab, the senior cabinet official who would have been responsible for selling the plan to the House of Commons, tendered his resignation, saying he could not in good faith support May’s draft plan.
In his resignation letter, Raab (the second Brexit secretary to quit May’s government in the past six months) said he couldn’t support the deal for two reasons: Its treatment of Northern Ireland would be a “very real” threat to the integrity of the UK, and the indefinite backstop would effectively grant the EU veto power over when the UK could leave.
Today, I have resigned as Brexit Secretary. I cannot in good conscience support the terms proposed for our deal with the EU. Here is my letter to the PM explaining my reasons, and my enduring respect for her. pic.twitter.com/tf5CUZnnUz
— Dominic Raab (@DominicRaab) November 15, 2018
Raab’s resignation doesn’t necessarily mean that May is toast – he said in his letter that his respect for the leader “remains undimmed.” But signs that Raab’s departure could trigger a cascade of resignations have already emerged as, roughly an hour after news of Raab’s resignation broke, Esther McVey, May’s secretary of state for work and pensions, also resigned (though her departure from May’s government was somewhat less surprising).
Earlier this morning I informed the Prime Minister I was resigning from her Cabinet pic.twitter.com/ZeBkL5n2xH
— Esther McVey (@EstherMcVey1) November 15, 2018
By resigning, McVey and Raab can now vote in Parliament against May’s deal. The question will now turn to whether
via RSS https://ift.tt/2Px6IjN Tyler Durden