Active Managers Just Had Their Worst Quarter In 18 Years: Here’s Why

According to BofA’s Savita Subramanian, just 19% of funds outperformed the S&P 500 in the 1Q. According to the bank, this was the the lowest quarterly hit rate in our data history spanning 1998 to today. The average fund lagged by 1.9ppt, marking a record spread of underperformance.

Even worse, growth funds saw only a 6% hit rate, the worst since at least 1991.  According to BofA, “the average fund lagged by the widest margin we have recorded in our quarterly data: – 3.5ppt.”

It wasn’t quite as bad for value managers who had a better hit rate (19.6%), and Core funds saw the highest quarterly hit rate of 29%.

But March results were the worst in a string of months, with hit rates dropping from to January’s 34% to February’s 27% to March’s 21%.

What caused this dramatic (and latest) underperformance by the large-cap mutual fund community who are after all paid to outperform the market? Here is BofA’s explanation why it has become so difficult to outperform the market.

Correlations, dispersion, reversals, positioning…

 

The recipe for distress may boil down to a few factors. Heightened correlations (Chart 1) and low alpha opportunity (Chart 2) continued to hurt, as stock selection thrives when intra-stock correlations are low and alpha is abundant.

 

 

But these contributors to underperformance have been in place for a while – the lit match taken to active returns last quarter was likely the massive reversal – by the market, by sectors, by styles and by stocks – occurring within the quarter. Momentum investors were stymied by the fact almost nothing worked during both halves of the quarter except valuation, a now out of vogue attribute after several years of underperforming. And crowded positions proved particularly damning in the 1Q, with the 10 most crowded stocks underperforming the 10 most neglected stocks by almost 7ppt, an atypically high spread.

With activist central banks having made a mockery of fundamental investing and intervening daily in capital markets either directly or verbally, we don’t expect this trend of dramatic active management underperformance to change in the coming months. Which means more active managers angry at passive indexers, which means more “robo advisors”, etc.


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Is Bernie Sanders as Big a Joke Candidate as Donald Trump?

On April 1 (of all days), Bernie Sanders, the independent Vermont senator who won big in the Democratic primary in Wisconsin last night, gave an interview to New York’s Daily News.

The transcript portrays a guy who, though a mayor, congressman, and senator for more years than most of us have been alive, seems to have a firm grasp of virtually no real facts, deep analysis, or basic understanding of legislative processes and legal authorities about anything.

At least that’s the response from the centrist liberal media, which we can safely assume prefers Hillary Clinton to the self-defined (though poorly) “democratic socialist.” Vox and Slate have come out against Sanders’ many mistakes, gaps in knowledge, etcetera, the Wash Post’s Jonathan Capeheart found no fewer than “9 things Bernie Sanders should have known about in that Daily News interview” but didn’t.

Among Sanders’ parade of horribles, says Capeheart, was answering “I don’t know,” when asked whether President Obama was correct in taking authority to conduct drone strikes against ISIS from the CIA and giving it to the military.

Paris was attacked. Istanbul was attacked. Brussels was attacked and is basically a bedroom community for terrorists seeking to destabilize Europe. And several African nations have been terrorized by Islamic State affiliates. That Sanders “[doesn’t] know the answer” to whether the president has the right policy against the Islamic State is unacceptable.

Let the record show that, though I will never vote for Bernie Sanders, I like it whenever a presidential candidate admits the limit of his or her knowledge.

Capeheart and the other critics have similar things to say about Sanders’ responses to queries about breaking up the banks and prosecuting banktards for crimes against humanity and all the rest: “He should have been able to lecture his interrogators into a stupor with his detailed knowledge. Instead, Sanders sounded slightly better than a college student caught off-guard by a surprise test in his best class just before finals.”

Well, sure. He should have had better answers. Or at least more stupefying ones.

I have no sympathy for Bernie Sanders, whom I think is an economic illiterate (innumerate?) and still talks like he just came, dazzled, from the original New York debut of Waiting for Lefty. If you grew up in or around New York City and are over the age of 50, every other person you knew growing up was some version of him. Maybe an Italian or Irish Catholic instead of Jew, or even a self-hating WASP, but FFS, the world was once lousy with people holding exactly the same worldview as Bernie does.

But it also doesn’t take a genius to see what’s going on here and, in a similar way, with criticisms of Donald Trump’s policy chops (short version: He has none).

Centrist Democrats in the media are absolutely dumbfounded by the ability of Bernie Sanders to connect not just with embryonic-hippie college students but large swaths of Democratic primary voters (how many contests has he won in a row now?). Hillary Clinton should be sewing up the Donkey Party nomination right about now and, while the Super Delegates (and Jimmy Carter!) will give her more than enough cushion to mail it in until the DNC this summer, there’s no question that Sanders has revealed a serious problem within the Democratic Party. Indeed, it’s almost as serious as the problem that is cleaving apart the GOP.

Simply put: Many Democrats aren’t buying what Hillary Clinton and the party establishment is selling any more than the Republicans are buying what their party’s establishment is selling. Clinton has a long track record not of serving the gays, the poors, the immigrants, and all the rest for whom her heart currently bleeds. She has spent far too much time servicing the wealthys, the powerfuls, and the well-connecteds. Like poor Jeb Bush, she has some real last-name-association issues, especially in an era where even conservative Republicans are assailing NAFTA and free trade as one of the major problems in today’s overburdened, over-regulated, over-bailed-out economy. On top of that, Clinton was an Amtrak-style train wreck as secretary of state, presiding over (if not cheerleading for) any number of stupid interventions here, there, and everywhere.

She is still running as if her lengthy resume is enough to silence all critics, without realizing that our experiences over the past 20 years are precisely the reason why 54 percent of Americans think unfavorably of her. Clinton and her pals in the press are right to call out Sanders on his stupidities (Vox, for instance, rightly notes that Sanders’ “fair trade” ideas would doom the wretched of the Earth to even worse poverty). But they are all still working under the assumption that Sanders is somehow illegitimate because he is not Clinton.

To their minds, he is precisely the sort of crypto-commie Sandalista who voted for McGovern and before that, Gene McCarthy (RFK was too right-wing, back in the day, and as the protagonist of Steve Erickson’s Rubicon Beach put it, there was a moral difference between supporting the candidate who merely recited poetry and the one who actually wrote it). Just as Donald Trump is the gargoyle version of exactly what the Republican Party has been preaching for decades now, Bernie Sanders is the return of the repressed when it comes to all the Democratic blather about helping the poor, taking it to those Wall Street fat cats, and, what was it that Obama told Joe the Plumber…? Oh yeah, income redistribution, spreadin’ the wealth around.

The 2016 election is to date the most insane spectacle in my (relatively short!) lifetime, filled with situational Democrats and Republicans making serious runs for those parties’ nominations, the quick dismissal of a money-rich favorite named Bush, discussions of sex organs, and who knows what fresh hell once the second hour of John Stossel’s Libertarian Party candidates debate airs this Friday at 9 P.M. Eastern on Fox Business.

The 2016 election is also the most clarifying political spectacle in my lifetime. Precisely because of the interlopers, Sanders and Trump, each of the major parties is being held to account for its promises and rhetoric stretching back decades—and their nearly complete inability to deliver on any of the promises Republicans and Democrats made in exchange for our votes. The Democrats were going to create a fairer America, one with less poverty and more opportunity and less war (because they understand the world better than dummy conservatives). The Republicans were going to shrink the size, scope, and spending of the federal government. Instead, they delivered the exact opposite, while also forcefully demonstrating the incompetence of the same.

As it happens—and as a libertarian—I think conservative and liberal, Republican and Democratic agendas are misguided, incoherent, and destined to fail. But I was never the intended audience for such loose talk and false promises. The folks who were are the ones willing to burn down the two parties that have failed them so completely and so utterly.

What is it that Bob Dylan sang in the great, cryptic tune “Jokerman”? 

Well, the rifleman’s stalking the sick and the lame
Preacherman seeks the same, who’ll get there first is uncertain
Nightsticks and water cannons, tear gas, padlocks
Molotov cocktails and rocks behind every curtain
False-hearted judges dying in the webs that they spin
Only a matter of time ’til night comes steppin’ in

There’s no telling what comes next in American politics. Most likely, the two parties, no matter how low they drive voter identification, will stumble on as night comes steppin’ in like Dylan’s rifleman and preacherman. One of them will reach the White House in November, but who’ll get there first is uncertain, yes.

And so is this: Will the rest of us—the plurality that identifies as independent, the plurality that is identified by Gallup as libertarian, and others—excavate the smoldering ruins of the Dems and Reps and build a future in which politics is subjugated to its proper role in our lives, our liberties, and our pursuits of happiness?

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Stocks Surge From Day’s Lows To Highs In Minutes, Tracking Oil Tick For Tick

In recent weeks, oil traditionally jumped following DOE data that showed inventory builds because, well, gasoline and distillate inventories had gone down. Today, oil jumped… actually jumped for the second time in just over 12 hours on the same exact catalyst first reported by API last night, when DOE confirmed that in the past week there was a substantial drawdown, something previously ignore when it was to the upside; and as we said earlier unlike in recent weeks however, algos decided to ignore the build in all other categories including gasoline, distillates and Cushing, and simply decided to surge higher because finally the one thing they had been waiting for so long, finally took place.

The result: WTI has rose as high as $37.60 before starting to fade.

That however is irrelevant for S&P algos, which soared from today’s lows to intraday highs in the span of minutes, using oil as the momentum ignition catalyst, and never looking back.

And now you know what stocks went from low of the day to highs, in the span of minutes.


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Life in Prison for Stealing Candy Bars in New Orleans?

Jacobia Grimes, 34, allegedly stole some candy bars, Life for $31 of candy bars?totaling $31, from a Dollar General store in New Orleans last December. He was caught by the manager and arrested without a struggle.

He’s done this before, a lot of times, actually. Grimes has tallied 24 arrests in the past 20 years, and his five previous convictions for theft led the District Attorney’s office to charge him under a statute that makes his latest petty crime a felony under the law. That felony charge, which normally includes a maximum sentence of two years, is boosted to 20 years to life because of Louisiana’s “habitual-offender law.”

The Advocate‘s John Simerman reports that when Criminal District Court Judge Franz Zibilich learned of Orleans Parish DA Leon A. Cannizzaro Jr.’s decision to charge Grimes’ candy bar theft as a felony during his arraignment, the judge asked, “Isn’t this a little over the top?” Judge Zibiloch added, “It’s not even funny…twenty years to life for a Snickers bar,” but mandatory minimum sentencing rules remove the judge’s ability to exercise his/her discretion.

According to Simerman, Cannizzaro’s office “often takes advantage of such charging decisions to ratchet up the possible consequences for criminal defendants, sometimes as leverage to elicit guilty pleas.”

Cannizzaro took great exception with that characterization, writing in a letter to the Advocate that in addition to theft, Grimes had been previously convicted of “crimes such as illegal possession of stolen things, unauthorized use of a moveable, possession of drug paraphernalia, obscenity and distribution of false drugs.” 

Cannizzaro added:

Where were all the “reformers” after those convictions?

The DA’s Office has repeatedly requested funding to place similarly situated offenders in its diversion program. This would allow such offenders to get out of jail, receive mental health and substance abuse counseling, and avoid the consequences of another conviction on their records. The city, however, has routinely denied these requests. As such, the DA’s Office must choose between the lesser of two evils — putting this defendant back on the street without any rehabilitation or putting him in jail.

Nola.com has described Louisiana as “the world’s prison capital,” with a per-capita incarcerated population “nearly five times Iran’s, 13 times China’s and 20 times Germany’s.”

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Crude Jumps After DOE Confirms Biggest Oil Inventory Draw Since January; Cushing, Gasoline, Distillates Rise

Following yesterday’s API data, which showed the biggest draw of 2016 with a 4.6 million reduction in oil inventories, everyone was keenly looking forward to today’s DOE data. Moments ago the DOE indeed confirmed the API data, reporting that in the past week oil inventories declined by 4.949MM, more than the API print, down from last week’s 2.3MM and well below the expected 2.850MM increase.

This was the largest draw since the first week of January.

However, while in the recent past the crude builds were offset be declines in gasoline and distillate reductions, this time it was a mirror image, as first Gasoline rose by 1.438MM, above the -1.1MM draw, while Distillate increased by 1.799MM, above the -850K draw expected.

This happened even as Refinery utilization rose 1.0% W/W, above the 0.35% expected, operating at a 91.4% of capacity in the past week.

As a result Cushing holdings rose by 0.3MM, rising to 66.3MM barrels and once again approaching its operational capacity.

 

Some more headlines from the report:

  • GASOLINE STOCKS +1.4M TO 244.0M APR 1 WK
  • CUSHING STOCKS +0.3M TO 66.3M BARRELS IN APR 1 WK
  • JET FUEL DEMAND -3.1% VS SAME 4 WEEKS LAST YEAR
  • DISTILLATE DEMAND -6.8% VS SAME 4 WEEKS LAST YEAR
  • GASOLINE DEMAND +4.2% VS SAME 4 WEEKS LAST YEAR
  • DISTILLATE STOCKS +1.1% IN APR 1 WEEK, +28.4% YR/YR
  • CRUDE OIL STOCK EX SPR -0.9% APR 1 WK, +9.8% Y/Y
  • GASOLINE STOCKS +0.6% IN APR 1 WEEK, +6.1% YR/YR
  • TOTAL PRODUCT DEMAND +1.5% VS SAME 4 WEEKS LAST YEAR

On the news, initially spiked on the draw headline, then erased all gains, and has since then once again resumed rising seemingly determined to regain the $37/barrell level.


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“Someone” Intervenes To Hold USDJPY Above 110

Update: literally seconds ago, when the USDJPY tumbled below 110, we asked “how much longer will Kuroda sustain this battering before Japan is forced to do something even more ridiculous” and we may have gotten the answer when minutes after the USDJPY dipped below 110, some unknown “buying force” emerged out of nowhere and pushed the pair right back up over the critical support level.

Is the BOJ telegraphing that “you shall not pass” the 110 support?

 

* * *

Yesterday, a concerted seller of the USDJPY tried, and briefly succeeded, to push this all-important carry pair below 110. It promptly rebounded, however, once stops were forcefully activated to the short side at this key support level. Moments ago 110 was once again tested, and as of this moment, there has been no snap back rebound as the USDJPY has now tumbled to levels last seen in October 2014, and may continue sliding without any support levels in sight.

 

While we understand that it may be critical for “global stabeeleetee” as per the Shanghai Accord, to keep the USD weak, we wonder how much longer will Kuroda sustain this battering before Japan is forced to do something even more ridiculous than his January foray into NIRP.

Meanwhile, the dollar, after spiking in the overnight session is suddenly tumbling, putting pressure on European stocks as the EURUSD surges once again, putting just as much pressure on Mario Draghi who too will have to ask himself how long before the ECB has to intervene again.


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China’s Latest Problem: Surging Subprime-Housing Loans

Residential real estate is a slippery slope for China (especially when this frequently recurring bubble is in its bursting phase) . A critical problem the country is dealing with right now is the fact that it is now confronted with the realization that blind construction spending, building out ghost cities year in and year out, has resulted in a glut of vacant housing. There are two main issues China faces with an oversupply of vacant housing. First, it means that new construction has been slow, ultimately putting downward pressure on GDP.
   
Construction growth has plummeted from the highs of just six years ago, and that is helping put a drag on overall GDP.

 

The second issue, as we discussed earlier, is that real estate makes up a stunning amount of Chinese household assets. As home prices decline, so does investor and consumer confidence, which also ultimately makes its way to the real economy. In fact the impact on the average resident is far greater than when the Chinese stock bubble burst.

 

The solution for China has been to ease credit conditions, and relax tax laws to help kick start the housing market again. However, this has (predictably) lead to massive sub-prime loan exposure and the accompanying non-performing loans that go with that.
   
The ease of credit conditions resulted in mind-boggling $520 billion in new loan creation in January.

 

Of course, much like the US, the drive to inflate housing prices via cheap debt has created an unprecedented amount of NPL’s – NPL’s which incidentally, are eventually going to be part of debt-for-equity swap designed to hide just how insolvent banks really are.

We’d love to stop there, and leave it at your typical bank bailout discussion. Unfortunately, as the Wall Street Journal reports, the problem has become much more wide-spread than just banks.

In China, home buyers typically put down 30% of the cost of a home (as a result of a reduction in down payment requirements in late 2015 when the government decided to once again reflate the housing bubble at all costs). Sometimes, however, the funds to fund even that are unavailable, even with banks dropping helicopter type money. Where are potential buyers getting the money to complete the purchase you ask? Well, from other “investors” of course. As Chinese equities have plummeted, investors have turned to peer-to-peer lending as a way to make money.

Chinese P2P lenders loaned $143mm in January, up from roughly $47mm in July of 2015. The problem is that what these vehicles have done is successfully expose even more people to the world of soured loans in China. 

As the following chart shows, P2P lending has exploded higher in recent years.

 

With all that being said, China has accomplished one thing (other than record bad debt), Tier I housing prices are in fact reflated, however it appears at the expense of the lower tiered markets.

 

The WSJ has more

Government efforts to tackle a glut of vacant housing in China by spurring home lending have triggered a bigger problem: a surge in risky subprime-style loans that is generating alarm.

 

* * *

Some economists see parallels between Beijing’s mixed messaging on the housing market and its attempts last year to first talk up a stock-market rally and then control the fallout as shares reversed direction. As a way to help support the broader economy, Chinese regulators made it easier for individuals to borrow to buy stocks, and then scrambled to rein in margin financing.

 

Now, a sense of déjà vu is looming over the housing market. “Having encouraged borrowing to help reduce the house glut, the government is now realizing the risks and trying to correct itself,” said China economist Zhu Chaoping at UOB Kay Hian Holdings Ltd., a Singapore-based brokerage.

 

Based on calculations from data from the central bank and consultancy Yingcan, lending from peer-to-peer online firms for down-payment loans made up 0.19% of new mortgage loans in 2015. But that doesn’t give the whole picture, as banks offer the loans under other labels and developers also make such loans.

 

China Construction Bank Corp., the largest provider of residential mortgages among Chinese lenders, said the rate of nonperforming loans in residential mortgages in 2015 was 0.31%, up from 0.21% in 2014. The bank’s overall nonperforming-loan ratio reached 1.58% last year. 

 

Industrywide, nonperforming loans rose to 1.67% of total loans last year from 1.25% in 2014, according to official data. But analysts estimate the true ratio this year could be 8% or more. In the U.S., 14.6% of subprime loans made in 2005 defaulted, according to the Federal Reserve Bank of Chicago. 

 

Outside China’s megacities, developers offer interest-free down-payment loans to entice buyers. “Our housing sales picked up last year because buyers had a lower down-payment burden to bear, and that is mainly due to us helping to pay for the down payment upfront,” said one Sichuan-based developer.

 

Housing Minister Chen Zhenggao in mid-March said in some small or midsize cities, rural migrants make up a third of home buyers.

 

Many home buyers pool the life savings of parents and in-laws to come up with the down payment, setting up for widespread economic pain if price increases fail to materialize.

 

Down-payment loans are duping young people,” said Jiang Yan, a 32-year-old Shanghai resident, using a term roughly translated as “a greater fool” to describe a spiral of buyers paying irrational prices for assets in the belief they can be sold on for an even crazier price.

All of this goes back to what we wrote about one week ago in “China Tries To “Suddenly” Pop Latest Housing Bubble While Reflating Stock, Car Bubbles

Who knows: perhaps China will be successful. Over the weekend, Suzhou, in the eastern Chinese province of Jiangsu, banned buyers from using credit cards on down payments of property purchases, according to a report in Suzhou Daily, the local-government affiliated newspaper.

Let that sink in for a second: Chinese were using credit cards to fund down payments.

The reason is that new home prices in Suzhou posted their 3rd-biggest monthly surge among 100 major Chinese cities in March, and the city was No. 2 in property-price increases for Feb. The reason why buyers had to use credit cards is because they remain unable to borrow from real-estate agencies, P2P platforms.  The paper adds that banks asked to scrutinize mortgage appliers’ marital status to prevent them securing loans through fake divorce claims, paper said.

Meanwhile, China’s Uwin reported that Shanghai new home sales plunged -60.4% in the past week, with the average new home price dropping -3.4%.

Perhaps the only question is if China has indeed popped its housing bubble (again), which asset class will soar next?


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French Farmers Dump 90,000 Bottles Worth of Spanish Wine Because…Spanish!

Among the many wonders of the European Union was the creation of a vast, free trade zone in which member countries could more or less import and export goods with, er, impunity (not the right word, as it implies something negative about economic exchange).

French farmers, among the most-subsidized being on the planets, have long been mindful of any and all threats they believe might undermine their way of life. And so, this:

A group of French farmers stopped two Spanish tucks on Monday at the toll gate of Le Boulou in southern France near the border.

The farmers then dumped the wine the vehicles were transporting, according to the Spanish Federation of Freight Transportation (CETM).

The assault took place in front of television crews and French police who “allowed the demonstrators to act with impunity”, the CETM, which represents truckers, said in a statement….

“These events, which unfortunately occur regularly, are a cause of concern for the Spanish government, as they represent a flagrant violation of several basic principles of the European Union, such as the free circulation of goods between member states,” [the Spanish foreign minister] added.

According to local.fr, a news site, about 10 percent of French farms are on the brink of bankruptcy, which their owners blame on competition. In recent months, aggrieved farmers have taken similar actions against trucks carrying German and Spanish produce.

Spanish bulk wine generally sells for less in France because they are considered inferior goods. One hundred liters costs €30-40 ($34-45), which is about half of what domestic plonk goes for.

This sort of anti-trade thinking is so European, right? It’s a good thing that here in the good ol’ U.S. of A. we understand gains from trade and both major parties understand that allowing cheaper goods into our markets allows us more and better choices, and to concentrate on higher-value goods and services that we’re better at, right?

Or just substitute the United States for France and Mexico or China for Spain and pretend it’s a story about all the major-party candidates still running for president, each of whom is anti-free-trade to greater or lesser degrees.

Hat tip: Corax, a phenomenal English-language, crowd-sourced, libertarian news aggregation site based in Sweden. Find them on Facebook, too. I cannot recommend this site highly enough, especially if you’re interested in global news.

And with that, here’s a Reason TV classic that looks at last night’s big Democratic winner in Wisconsin, Bernie Sanders, who in 2011 waged a war on Chinese-made bobbleheads because, well, making bobbleheads of Millard Fillmore is a job for goddamn Americans, that’s why!

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Greeks Confiscate Largest Amount Of Gold Ever Smuggled

To some gold may not be “money”, but to a group of Greeks it was worth far more than merely pet rocks.

According to Ekathimerini, customs officials at the Greek-Turkish border crossing of Kipoi have confiscated the largest amount of gold that anyone has ever attempted to smuggle out of the country.

The loot was found hidden in a taxi and consisted of 18 bars of unrefined gold, weighing 33.5 kilos, along with four crosses made of oure gold (11.6 grams). The gold was found last Friday during a police check on cars planing to cross the border.

The suspects hid seven gold bars and the four crosses in the car’s passenger armrest while the other 11 bars were concealed in their luggage.

 According to Greek media, the value of the gold is estimated at 800,000 euros, which translates into 200,000 euros in unpaid tax revenue for the Greek state.

The undisclosed number of suspects, whose identity was not revealed, have appeared before a prosecutor, authorities said.

It is unclear if Greece will sell the confiscated gold to repay creditors.

This is not the first time a major gold smuggling attempt was busted in Greece. in April 2013, a German was caught at the Athens International Airport after allegedly trying to smuggle nearly half a ton of gold and silver out of Greece, according to airport officials.

The suspect was preparing to board a Lufthansa flight for Germany. The airline uncovered silver tablets in a cargo container and customs officials then found gold and banknotes.

The man arrested at Athens International Airport was said to be carrying 7kg (15lbs) of gold tablets and almost 300,000 euros (£255,000) in cash in his luggage.

Customs officials also believe he attempted to smuggle out another 425kg of silver.

 

A source within the Greek police told the BBC that their investigation would focus on the man’s links to any gang involved in money-laundering.

In the most recent case, it is unclear, but would be interesting to find out, who in Turkey the smuggled gold was intended for, and where it would proceed from there. Recall that as reported here last year, Turkey was an instrumental cog in the massive gold-for-oil triangle that involved Iran, Turkey and Dubai, when during the peak of the Iran embargo, Tehran bartered oil in exchange for gold which was then used to pay for various critical imports.


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Alibaba Surpasses Walmart As Largest Retail Company In The World

We may not have the exact numbers yet, but in a filing with the SEC on Tuesday, China’s online retail behemoth Alibaba Group announced that it had “become the largest retail economy in the world” at the end of its fiscal year on March 31, “as measured by gross merchandise volume (GMV) on its China retail marketplaces.” As IBT notes, the company has yet to declare its financial results for its last quarter and the complete fiscal year, but the announcement makes it clear that BABA surpassed the $482.1 billion in 2015 revenues reported by Wal-Mart Stores Inc. for its fiscal year ended Jan. 31. To wit:

Alibaba Group Holding Limited announced on April 5, 2016 that as of March 31, the end of its fiscal year 2016, it has become the largest retail economy in the world as measured by annual gross merchandise volume (GMV) on its China retail marketplaces. PricewaterhouseCoopers (PwC) has performed agreed upon procedures on data relevant to Alibaba Group’s GMV

As a reminder, two weeks prior to the SEC filing, Alibaba’s Executive Vice Chairman Joe Tsai announced in a blog post on March 21 that “with 10 days remaining in our fiscal year ending March 2016, Alibaba’s China retail marketplace platforms surpassed RMB 3 trillion [yuan] in GMV. That is about [$]476 billion in U.S. dollars and, if the platforms we operate were a province, we would rank as the 6th largest provincial economy in China.”

Inferring a full year’s revenue from that number suggests that Alibaba closed the books with roughly $490 billion, or about $8 billion in sales more than America’s flagship discount retailer.

According to another statement from Alibaba, its online trading volume had reached about 10 percent of the total retail volume in China and directly generated 15 million jobs as well.

“We used 13 years to demonstrate the power of a different business model compared with brick-and-mortar retailers,” the statement said, according to the China Daily.

For now WMT’s market cap remains modestly bigger, even if BABA’s LTM multiple of 19x is about 4 turns greater than Wal-mart’s. As for the $275 billion Amazon, well that’s a different story entirely…


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