Goldman Now Pitching Most Shorted Stocks

For over a year we have discussed that in Bernanke’s centrally-planned markets, in which the risk-return formula is now wholly absent the former, the best source of “alpha” (purely in the context of recognizing that the market has become a complete and total joke) for over a year has been going long the most shorted companies. And as we reminded just over a month ago, the most shorted stocks have returned double the broader market in the past year alone. Which is why we were not surprised to see that none other than Goldman yesterday, issued research formalizing none other than going long the most shorted stocks in a piece titled “Investors focused on the results of high short interest stocks.” Since Goldman is legendary for flipping at inflection points, especially with a 1+ year delay after the strategy has been working flawlessly, this probably means that going long the most shorted stocks is no longer a viable source of “alpha.”

From Goldman:

 

Short interest as a percent of S&P 500 market cap is currently 2.1%, in line with the average over the past year. While the share of market cap held short stayed flat, the short interest ratio (days to cover) has risen steadily since April 2012 as volumes remained low.

 

 

This week, investors focused on how stocks with high short interest as a share of market cap are trading this earnings season. Of the top 50 reported S&P 500 companies ranked by short interest, short interest ranges from 6% to 31% of market cap. Short interest for the median S&P 500 stock is 2.1% of float cap.

 

High short interest stocks reported a similar frequency of earnings beats and misses. Revenue results skewed more positive. 26% of S&P 500 companies beat revenue expectations while 36% of high short interest stocks exceeded consensus expectations by one standard deviation or more.

 

High short interest stocks were more likely to outperform the market on the next trading day than the typical S&P 500 stock indicating that there may be short covering post-earnings results. 58% of the high short interest names outperformed the S&P 500 one day after reporting results versus 47% for all reported S&P 500 companies.

 

However, performance of the median high short interest stock is similar to the median S&P 500 stock since the start of earnings season. Since October 4, the median high short interest stock returned 4.6% while median S&P 500 stock returned 4.1%.

 

Next week, six stocks with over 10% of float share held short are expected to report: Frontier Communications (FTR), IntercontinentalExchange (ICE), Windstream Holdings (WIN), Chesapeake Energy (CHK), Dun & Bradstreet (DNB), and Cablevision Systems (CVC).

 

Of course, if indeed this means that buying the most shorted stocks is no longer a “sustainable” strategy, that would be ok as it implies one small step toward returning to a normal, credible, non-manipulated market: something that both we and David Einhorn openly lament. Recall from David Einhorn’s Advice On How To Trade This Equity Bubble:

Finally, there are the market participants whose investment process appears to be “bet on whatever has made money most recently.” They’ve noticed that stocks with large short-interest ratios have materially outperformed over the last year and they continue to invest accordingly. When “high short interest” becomes a viable stock-picking strategy and conventional valuation methods no longer apply for many stocks, we can’t help but feel a sense of déjà vu. We never expected to find ourselves in an environment like this again, given the savings that were lost when the internet bubble popped.

Alas, we are smack in the middle of the same bubble once again, and will be until the Chairman keeps playing the musical chairs dance ever faster and faster until finally everyone drops dead.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/y0v1kmZLu7w/story01.htm Tyler Durden

Open Thead: Why the Hell Not? Plus: Subscibe or Die!

It’s been a long
time since we had an open thread. So here’s one. Have at it.

And as long as you’re hanging out here, why not:

Related:
Reason’s founders discuss 45 years of the magazine
.

from Hit & Run http://reason.com/blog/2013/11/02/open-thead-why-the-hell-not-plus-subscib
via IFTTT

Administration Officials Worried Obama’s Promise that People Could Keep Their Plans Wasn’t Right, and Let Him Make It Anyway

We already know that administration policymakers
were aware that President Obama’s promise that people who like
their plans can keep them under Obamacare was not true, because
estimates built into early regulations indicated that many plans
would lose their grandfathered, protected status.

A
report
in today’s Wall Street Journal indicates that
senior White House advisers were also concerned that the promise
could not be fulfilled, but decided to let the president make it
anyway: 

When the question arose, Mr. Obama’s advisers decided that the
assertion was fair, interviews with more than a dozen people
involved in crafting and explaining the president’s health-care
plan show.

But at times, there was second-guessing. At one point, aides
discussed whether Mr. Obama might use more in-depth discussions,
such as media interviews, to explain the nuances of the succinct
line in his stump speeches, a former aide said. Officials worried,
though, that delving into details such as the small number of
people who might lose insurance could be confusing and would
clutter the president’s message.

“You try to talk about health care in broad, intelligible points
that cut through, and you inevitably lose some accuracy when you do
that,” the former official said.

The former official added that in the midst of a hard-fought
political debate “if you like your plan, you can probably keep it”
isn’t a salable point.

So they apparently decided the president should repeatedly make
a promise that wasn’t true, and whose impacts would be felt by
millions of Americans, simply because they hoped that would make it
easier to sell the legislation they wanted to pass. 

from Hit & Run http://reason.com/blog/2013/11/02/administration-officials-worried-obamas
via IFTTT

Administration Officials Worried Obama's Promise that People Could Keep Their Plans Wasn't Right, and Let Him Make It Anyway

We already know that administration policymakers
were aware that President Obama’s promise that people who like
their plans can keep them under Obamacare was not true, because
estimates built into early regulations indicated that many plans
would lose their grandfathered, protected status.

A
report
in today’s Wall Street Journal indicates that
senior White House advisers were also concerned that the promise
could not be fulfilled, but decided to let the president make it
anyway: 

When the question arose, Mr. Obama’s advisers decided that the
assertion was fair, interviews with more than a dozen people
involved in crafting and explaining the president’s health-care
plan show.

But at times, there was second-guessing. At one point, aides
discussed whether Mr. Obama might use more in-depth discussions,
such as media interviews, to explain the nuances of the succinct
line in his stump speeches, a former aide said. Officials worried,
though, that delving into details such as the small number of
people who might lose insurance could be confusing and would
clutter the president’s message.

“You try to talk about health care in broad, intelligible points
that cut through, and you inevitably lose some accuracy when you do
that,” the former official said.

The former official added that in the midst of a hard-fought
political debate “if you like your plan, you can probably keep it”
isn’t a salable point.

So they apparently decided the president should repeatedly make
a promise that wasn’t true, and whose impacts would be felt by
millions of Americans, simply because they hoped that would make it
easier to sell the legislation they wanted to pass. 

from Hit & Run http://reason.com/blog/2013/11/02/administration-officials-worried-obamas
via IFTTT

The Truth About E-Cigarettes: Safe, Effective, and…Fun?

 

Electronic cigarettes are a safe, effective, and fun way to
prevent cancer among smokers of tobacco prodcuts – or people who
want to suck down flavored water vapor that often doesn’t even
include nicotine.

So why are so many people – including folks at the FDA – so
hell-bent on banning or heavily regulating e-cigarettes?

Reason TV’s Tracy Oppenheimer cuts through the fog with the
video documentary, originally released on Tuesday, October 29.

Here’s the original write-up:

Electronic cigarettes are creating a frenzy among politicians,
health experts, and the media. Local bans on
using e-cigarettes indoors are popping up all over the country,
andmany interest
groups are clamoring for top-down FDA regulations, which are
expected to be released in the coming weeks.

“E-Cigarettes currently exist in a complete no-man’s land,” says
Heather Wipfli, associate director for the USC Institute for Global Health.
Skeptics such as Wipfli worry about the lack of long-term data
available because the product is so new.

But according to the Consumer
Advocates for Smoke-Free Alternatives Association
’s Greg
Conley, calls for regulation are “a perverse interpretation of the
precautionary principle.” The precautionary principle holds that
until all possible risks are assessed, new technologies shouldn’t
be allowed to move forward.

Conley points to preliminary studies, like this one from
Drexel University, which confirm these smokeless, tobacco-less,
tar-less products are not a cause for concern – or at least not a
cause for the same concerns that accompany traditional cigarettes
and second-hand smoke.

“That [Drexel University] professor concluded that there was
absolutely no worry about risks to bystanders from e-cigarette
vapor,” says Conley.

The ingredients of e-cigarettes certainly have very little in
common with tobacco cigarettes. Nicotine, the only ingredient found
in both products, is mainly used to wean smokers off traditional
cigarettes and is not one of the harm-inducing ingredients
associated with lung cancer in smokers. The other ingredients in
the “e-juice” at the core of e-cigarettes are propylene glycol,
vegetable glycerin, and food flavorings— all of which are used in
other food products.

“All we are doing is steaming up food ingredients to create a
vapor,” says Ed Refuerzo, co-owner of The Vape Studio in West Los
Angeles. The Vape Studio is one of the many boutique
e-cigarette shops popping up that might be significantly affected
or even shut down by both local legislation and FDA
regulations.

Conley says it’s the currently unregulated customizability of
the e-juice that allows these small businesses to thrive. “The
availability of liquids is what is allowing a lot of these small
stores to open and prosper because they are able to mix their own
liquid and sell it to consumers without having to go through a big
manufacturing process,” says Conley.

The higher costs of complying with regulations would most likely
be passed on to consumers, which would impact people who are
looking towards e-cigarettes as an effective way to quit
smoking. 

“We’re using technology, and that’s what we do in America, we
use technology to solve really complicated problems,” says Craig
Weiss, president and CEO of NJOY. NJOY
is a leading manufacturer of electronic cigarettes  - and a
donor to Reason Foundation, the nonprofit that publishes Reason TV.
Weiss says that despite regulations, the potential of the industry
is only just starting to be realized.  

“The electronic industry is growing at quite a dramatic pace.
It’s more than doubled each of the last four or five years,” says
Weiss. “This piece of technology could have such an potential
impact on the world.”  

For more on the industry and NJOY, watch this
ReasonTV interview with
Weiss:

 

from Hit & Run http://reason.com/blog/2013/11/02/the-truth-about-e-cigarettes-safe-effect
via IFTTT

Lucy In The Sky With Obamacare

Not even Paul and John would have any clue what the message is or what is going on in this psychedelic, Yellow Subamrine-inspired TV ad slot for Obamacare titled “Fly With Your Own Wings”, part of the Cover Oregon campaign (funded by US taxpayers). Perhaps: enroll in Obamacare, get a lifetime supply of LSD for free…

 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ZuutNJ1KxP4/story01.htm Tyler Durden

Virginia Governor’s Race: Can Cuccinelli Beat McAuliffe – and What About Libertarian Sarvis?

The Virginia governor’s race is being widely
viewed as a bellwether about…something. It pits the ultimate FOB
(does anyone still remember what that means?) Terry McAuliffe (D)
against the conservative Attorney General Ken Cuccinelli (R), with
a suprisingly popular Libertarian candidate, Robert Sarvis, polling
near on in double digits (read Reason’s
inteview with him
).


The latest poll
, from Emerson College, has McAuliffe at 42
percent, Cuccinelli at 40 percent, and Sarvis at 13 percent. Not
long ago, McAuliffe was winning in a total rout. Other polls show
the race tightening before the election Tuesday, though nothing as
tight as Emerson’s.
RealClearPolitics’ average
has McAuliffe up by about 8 points
and Sarvis just over 10 percent (important because cracking double
digits would guarantee the LP ballot access through 2016).

Depending on who you ask, it’s about how awful the GOP is
overall and their foolhardiness in shutting down the federal
government (which is hugely important to the Old Dominion’s
economy). Or it’s about just how disastrous the Obamacare debacle
really is, or how inexperienced and dirty McAuliffe really is; how
brave and stand-up Cuccinelli is (he was a leader in bringing legal
action against Obamacare) or how insanely socially conservative he
is; or how reckless the Libertarian Party is (depending on whom you
ask, the LP is either gifting the election to McAuliffe or showing
the deepening appetite for a third-party to the Dems and Reps.

I suspect that there’s a mix of all of the above at play in the
race. But this is certainly worth hammering home: The notion that a
third-party candidate, in this case a Libertarian, in any way,
shape, or form “costs” a Democrat or Republican an election is a
category error.

This type of argument was made most famously to
explain the outcome of the 2000 election, which was supposedly
thrown to George W. Bush by Green Party candidate Ralph Nader. The
methodology to prove this is simple: You take the spread between
the major party players and then see if a third-party candidate
more votes than that, and blame them. Don’t you see that Nader
obviously tossed the election to Bush, because all of Nader’s
voters would have turned out even if he wasn’t running and would
have voted for Gore…?

There’s a basic logic that seems persuasive, but it glosses over
too many things to really be convincing. In the 2000 election, it
skims over the fact that if Al Gore had been a semi-decent
candidate, he should have won in a rout. He was the VP of a flawed
but effective administration that had overseen a massive and
general increase in wealth (even despite the tech bubble bust at
the very end of the 1990s). This was a guy who had various scandals
of his own on top of Bill Clinton’s and then made the bizarre
decision to show up in orange-face for a
presidential debate
 and also vaguely physically threaten
Bush at the end of one too. However close – and ultimately
arbitrary – the final vote tally was, Al Gore lost the election
because he was a rotten candidate that voters (and yes, ultimately
the Supreme Court) rejected.

The whole “third party are spoilers” presupposes that the
two major parties have a prior claim on votes and voters, which is
simply wrong. This sort of logic typically get
trotted out by conservatives
around election time, when they
suddenly realize that small-L libertarians exist and vote on issues
that go beyond patently unconvincing promises to reduce the size,
scope, and spending of government at any given level. Candidates
such as Cuccinelli, who is by all accounts extremely socially
conservative, are a tough sell to libertarian-minded voters
(45
percent
of whom say they identify with the Republican
Party). 

Which is another way of saying: If GOP candidates aren’t
convincing to libertarians, don’t blame libertarians. Don’t
conservatives believe in personal responsibility? Take a look at
the man in the mirror then. Blame a party that has never lived up
to its limited government rhetoric or its insistence that
government should leave people alone as much as possible (in
Virginia, this meant among other things, having Republican
legislators vote against a plan to get the government out
of the liquor business. Really).

Libertarians are incredibly consistent in what they
believe and getting their vote is pretty easy: All you have to do
is present a credible plan to cut the role of government across the
board. As leading libertarian Republican Sen. Rand Paul (R-Ky.)

has concisely put it
, you have to “embrace liberty in both the
economic and personal spheres.” As I noted in a recent
Time.com column
, this isn’t complicated, but it has often
proved a bridge too far for Republicans. That’s their problem and
it may well spell their doom going forward, as libertarian-minded
voters gain numbers and influence:

If the Republicans can’t figure out a way to accommodate broadly
popular, socially tolerant libertarian policies on gay rights, drug
legalization, and more, they will not just lose the race for the
White House in 2016, but quite possibly their status as a major
party.


More here.

Related and highly relevant: Scott Shackford on
which candidate is “losing”
more votes to Sarvis
.

from Hit & Run http://reason.com/blog/2013/11/02/virginia-governors-race-can-cuccinelli-b
via IFTTT

Virginia Governor's Race: Can Cuccinelli Beat McAuliffe – and What About Libertarian Sarvis?

The Virginia governor’s race is being widely
viewed as a bellwether about…something. It pits the ultimate FOB
(does anyone still remember what that means?) Terry McAuliffe (D)
against the conservative Attorney General Ken Cuccinelli (R), with
a suprisingly popular Libertarian candidate, Robert Sarvis, polling
near on in double digits (read Reason’s
inteview with him
).


The latest poll
, from Emerson College, has McAuliffe at 42
percent, Cuccinelli at 40 percent, and Sarvis at 13 percent. Not
long ago, McAuliffe was winning in a total rout. Other polls show
the race tightening before the election Tuesday, though nothing as
tight as Emerson’s.
RealClearPolitics’ average
has McAuliffe up by about 8 points
and Sarvis just over 10 percent (important because cracking double
digits would guarantee the LP ballot access through 2016).

Depending on who you ask, it’s about how awful the GOP is
overall and their foolhardiness in shutting down the federal
government (which is hugely important to the Old Dominion’s
economy). Or it’s about just how disastrous the Obamacare debacle
really is, or how inexperienced and dirty McAuliffe really is; how
brave and stand-up Cuccinelli is (he was a leader in bringing legal
action against Obamacare) or how insanely socially conservative he
is; or how reckless the Libertarian Party is (depending on whom you
ask, the LP is either gifting the election to McAuliffe or showing
the deepening appetite for a third-party to the Dems and Reps.

I suspect that there’s a mix of all of the above at play in the
race. But this is certainly worth hammering home: The notion that a
third-party candidate, in this case a Libertarian, in any way,
shape, or form “costs” a Democrat or Republican an election is a
category error.

This type of argument was made most famously to
explain the outcome of the 2000 election, which was supposedly
thrown to George W. Bush by Green Party candidate Ralph Nader. The
methodology to prove this is simple: You take the spread between
the major party players and then see if a third-party candidate
more votes than that, and blame them. Don’t you see that Nader
obviously tossed the election to Bush, because all of Nader’s
voters would have turned out even if he wasn’t running and would
have voted for Gore…?

There’s a basic logic that seems persuasive, but it glosses over
too many things to really be convincing. In the 2000 election, it
skims over the fact that if Al Gore had been a semi-decent
candidate, he should have won in a rout. He was the VP of a flawed
but effective administration that had overseen a massive and
general increase in wealth (even despite the tech bubble bust at
the very end of the 1990s). This was a guy who had various scandals
of his own on top of Bill Clinton’s and then made the bizarre
decision to show up in orange-face for a
presidential debate
 and also vaguely physically threaten
Bush at the end of one too. However close – and ultimately
arbitrary – the final vote tally was, Al Gore lost the election
because he was a rotten candidate that voters (and yes, ultimately
the Supreme Court) rejected.

The whole “third party are spoilers” presupposes that the
two major parties have a prior claim on votes and voters, which is
simply wrong. This sort of logic typically get
trotted out by conservatives
around election time, when they
suddenly realize that small-L libertarians exist and vote on issues
that go beyond patently unconvincing promises to reduce the size,
scope, and spending of government at any given level. Candidates
such as Cuccinelli, who is by all accounts extremely socially
conservative, are a tough sell to libertarian-minded voters
(45
percent
of whom say they identify with the Republican
Party). 

Which is another way of saying: If GOP candidates aren’t
convincing to libertarians, don’t blame libertarians. Don’t
conservatives believe in personal responsibility? Take a look at
the man in the mirror then. Blame a party that has never lived up
to its limited government rhetoric or its insistence that
government should leave people alone as much as possible (in
Virginia, this meant among other things, having Republican
legislators vote against a plan to get the government out
of the liquor business. Really).

Libertarians are incredibly consistent in what they
believe and getting their vote is pretty easy: All you have to do
is present a credible plan to cut the role of government across the
board. As leading libertarian Republican Sen. Rand Paul (R-Ky.)

has concisely put it
, you have to “embrace liberty in both the
economic and personal spheres.” As I noted in a recent
Time.com column
, this isn’t complicated, but it has often
proved a bridge too far for Republicans. That’s their problem and
it may well spell their doom going forward, as libertarian-minded
voters gain numbers and influence:

If the Republicans can’t figure out a way to accommodate broadly
popular, socially tolerant libertarian policies on gay rights, drug
legalization, and more, they will not just lose the race for the
White House in 2016, but quite possibly their status as a major
party.


More here.

Related and highly relevant: Scott Shackford on
which candidate is “losing”
more votes to Sarvis
.

from Hit & Run http://reason.com/blog/2013/11/02/virginia-governors-race-can-cuccinelli-b
via IFTTT

Remy: The Healthcare Mash (It Was a Keyboard Smash!)

 

Watch the latest Reason TV collaboration with Remy!

Originally released on October 30, this video is now over the
100,000-view mark at YouTube, a testament to Remy and producer Sean
Malone’s talents – and the ongoing trainwreck that is
Obamacare.

More links, videos, and downloadable versions at Reason.tv.

Here’s the original writeup for the vid:

Remy channels Bobby “Boris”
Pickett
 for this Healthcare.gov-Halloween
mash-up. 

Written and performed by Remy. Video by Sean Malone. 

About 1.50 minutes. Scroll below for lyrics and and downloadable
versions.

Subscribe to Reason
TV’s YouTube channel
 to get automatic notifications when
new material go live. Follow Reason on Twitter at @reason.

Follow Remy on Twitter at @goremy and on You Tube here.

For all of Remy and Reason’s collaborations, go
here
.

Lyrics:

He was working on his laptop late one night
when his eyes beheld a ghoulish site
He could not log in despite several tries
then suddenly to no one’s surprise

(he did the Mash)
He did the Healthcare Mash
(the Healthcare Mash)
it was a keyboard smash
(he did the Mash)
the website was trash
(he did the Mash)
He did the Healthcare mash

Who could design such a site so flawed and so sloppy?
The code is so ancient, perhaps it was Hammurabi
He’d try to apply but the site would suspend
I’ve seen a eunuch with a more functional front end

(he did the Mash)
He did the Healthcare Mash
(the Healthcare Mash)
it was a keyboard smash
(he did the Mash)
He tried to clear his cache
(he did the Mash)
He did the Healthcare mash

Hundreds of millions of dollars were spent
for a website that has trouble loading
How could the government’s web designers
create a site with such awful coding?

(they did the Mash)
Ahh, they did the Healthcare Mash
(the Healthcare Mash)
it was a keyboard smash
(they did the Mash)
they spent all of our cash
(they did the Mash)
They did the Healthcare Mash

from Hit & Run http://reason.com/blog/2013/11/02/remy-the-healthcare-mash-it-was-a-keyboa
via IFTTT

Baylen Linnekin Warns Against Washington State’s Wrongheaded GMO Labeling Initiative

GMO food

Much of the labeling fight that’s going on these days is not so
much about a consumer’s right to adequate information as it is
about a select group forcing the government to unfairly stigmatize
foods they don’t like and that they’re competing against. Take
Washington State’s mandatory GMO labeling ballot initiative, I-522,
which goes before voters in the state next week. A recent report by
Washington State’s independent Academy of Sciences concluded that
I-522 would likely raise grocery prices in the state. Instead of
mandatory labeling, writes Baylen Linnekin, consumers who support
GMO farming or don’t care about GMOs should be free to seek out
foods they want. And if there’s enough support among those
consumers for private “Contains GMO” labeling, then those labels
will likely appear.

View this article.

from Hit & Run http://reason.com/blog/2013/11/02/baylen-linnekin-warns-against-washington
via IFTTT