Month: October 2016

David Einhorn Slams Elon Musk, Central Bankers In His Latest Letter

In David Einhorn’s latest letter, in which we find that Greenlight had a solid quarter in Q3, generating a 3.4% return which boosted the hedge fund’s YTD return to 3.8%, we also learn that the poker playing-head of Greenlight is not a fan of Elon Musk; Einhorn also lashes out at the Fed although since Greenlight’s antipathy toward the Federal Reserve has been well known for years, this is not exactly new.

Einhorn starts off by quoting from Dave Pell: “It’s pretty amazing that we live in an age when a CEO of two public companies can give a talk about colonizing Mars and shareholders don’t see that as a warning signal”, and added that “It’s not so amazing when one considers that those same complacent shareholders have been willing to look past years of over-promising and under-delivering from a promotional CEO. Elon Musk’s ability to spin a yarn and keep a story going seems to mesmerize his investors, blinding them to the challenges the company is facing.”

Something tells us TSLA is one of Einhorn’s more prominent shorts. And speaking of shorts, in the next part of the letter Einhorn then lashes out at central bankers, in typical fashion:

In contrast, we have central bankers who are determined to see flashing lights that aren’t there. We are more than seven years into an economic recovery, yet central bankers behave as if we’re still in crisis. Not only are experimental emergency policies being maintained, they are being expanded despite little evidence that they are needed or helpful. The newest manifestation comes from Japan, where the central bank has committed to monetize the entire government bond market if needed to keep the ten-year rate at zero. Leading economists are currently destigmatizing the idea of fiscal policy stimulus financed by direct money printing, so that goes into the coming attractions queue.

Einhorn next engages in everyone’s favorite exercise: just what “data” is the “data-dependent” Fed reacting to:

With U.S. unemployment at 5% and the core CPI rising 2.2% over the last year, it is difficult for the “data dependent” Fed to further rationalize emergency rates based on its official dual mandate. It appears that the real criteria for raising rates are:

  • Market forecasters fully expect a rate increase.
  • The most recent move in the S&P 500 was positive.
  • There is no trouble in foreign economies or financial markets.
  • There are no potentially destabilizing geopolitical events, including foreign elections.
  • The Cubs win the World Series.

 

At the most recent Federal Reserve meeting, Chairwoman Janet Yellen indicated that the case for raising rates had strengthened, and three governors voted to do so, yet the Fed decided to wait.

Einhorn’s conclusion is spot on:

“Clearly there is little appetite for normalizing policy, even under normal conditions. Instead of defending the continued easy money policy, Chairwoman Yellen recharacterized it as only “modestly accommodative.” She also denied that the U.S. election drove the decision, which makes her politically neutral enough to moderate a presidential debate.”

In light of today’s FBI developments, and should Hillary lose the election, perhaps the next Fed move will be a rate cut should the market proceed to tumble having priced in a Clinton election.

His full letter is below.

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Supreme Court to Weigh in on Transgender Bathroom Panic

bathroomsThe Supreme Court announced this afternoon it will hear the case of a transgender student in Virginia fighting with his school district over which bathrooms and facilities he should be allowed to use.

The transgender teen, Gavin Grimm, has been ordered by the school board in Gloucester County, Virginia, to refrain from using the male restrooms or facilities at his school. They do offer unisex bathrooms, but Grimm is fighting for the right to use the mens’ room.

Grimm’s argument (and the argument by the Department of Education and Department of Justice) is that denying him access to the bathroom of his chosen gender expression is a form of sex discrimination under Title IX of the Education Amendments of 1972. Opponents argue against such a broad reading.

Title IX has nothing to say about how to treat transgender students and that become part of the conflict. Under a previous Supreme Court precedent (known simply by the “Auer deference” as shorthand), government agencies are generally given deference from the courts to determine how to implement statutes or regulations unless they do something that is contradictory to what the law clearly says.

Some federal courts have agreed with Grimm (and the Obama administration) that such federal deference should apply here, but some schools (and states) have resisted, and other judges have ruled that the administration hasn’t followed proper procedures. It seemed inevitable that the Supreme Court would eventually get involved. The court put a temporary stay on the most recent ruling (in Grimm’s favor) while it considered whether to take the case.

Today they said yes. The school district asked the Supreme Court to consider the entire concept of the Auer deference precedent, but the court said it will not do so. The Supreme Court will consider whether the Auer deference should apply to the letters sent out by the administration to attempt to resolve this culture war conflict and, much more importantly, whether the administration is correct that Title IX obligates school systems to respect the chosen genders of transgender students to use sex-segregated facilities that match the way they present themselves.

More information about the case from SCOTUSblog here.

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Supreme Court to Weigh in on Transgender Bathroom Panic

bathroomsThe Supreme Court announced this afternoon it will hear the case of a transgender student in Virginia fighting with his school district over which bathrooms and facilities he should be allowed to use.

The transgender teen, Gavin Grimm, has been ordered by the school board in Gloucester County, Virginia, to refrain from using the male restrooms or facilities at his school. They do offer unisex bathrooms, but Grimm is fighting for the right to use the mens’ room.

Grimm’s argument (and the argument by the Department of Education and Department of Justice) is that denying him access to the bathroom of his chosen gender expression is a form of sex discrimination under Title IX of the Education Amendments of 1972. Opponents argue against such a broad reading.

Title IX has nothing to say about how to treat transgender students and that become part of the conflict. Under a previous Supreme Court precedent (known simply by the “Auer deference” as shorthand), government agencies are generally given deference from the courts to determine how to implement statutes or regulations unless they do something that is contradictory to what the law clearly says.

Some federal courts have agreed with Grimm (and the Obama administration) that such federal deference should apply here, but some schools (and states) have resisted, and other judges have ruled that the administration hasn’t followed proper procedures. It seemed inevitable that the Supreme Court would eventually get involved. The court put a temporary stay on the most recent ruling (in Grimm’s favor) while it considered whether to take the case.

Today they said yes. The school district asked the Supreme Court to consider the entire concept of the Auer deference precedent, but the court said it will not do so. The Supreme Court will consider whether the Auer deference should apply to the letters sent out by the administration to attempt to resolve this culture war conflict and, much more importantly, whether the administration is correct that Title IX obligates school systems to respect the chosen genders of transgender students to use sex-segregated facilities that match the way they present themselves.

More information about the case from SCOTUSblog here.

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FBI Investigates More Clinton Emails, Paul Krugman Can’t Even Right Now, Halloween Costume Craziness: P.M. Links

  • ComeySo, the FBI is investigating some additional Hillary Clinton emails, after discovering something amiss during a separate investigation of Anthony Weiner’s sexting. This storyline has officially jumped the shark.
  • Paul Krugman is losing his mind, so that’s something. Donna Brazile, too.
  • One university says warpaint “threatens our sense of community.”
  • University of Texas discourages Halloween costumes that appropriate other cultures.
  • Nobody at Yale thinks conservative students are welcome.
  • Erika Christakis on censorship and Halloween costumes, one year later.

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Weekend Reading: Stuck In The Middle – Again

Submitted by Lance Roberts via RealInvestmentAdvice.com,

I have written previously about being stuck in a trading range.

“Over the past couple of months, we have continued to drift from one economic report, or Central Bank meeting, to the next. Each report and meeting have continued to leave market participants confused as to what is going to happen next.

 

Is the economy improving? Or not?

 

Will the Fed hike rates? Not?

 

The bulls and the bears have met at the crossroad. However, neither is ready to commit capital towards their inherent convictions. So, for 43-days, and counting, we remain range bound waiting for what is going to happen next.”

Chart updated to present:

sp500-marketupdate-102716-2

The problem with going nowhere is that it makes managing money much more difficult. With the market having broken the bullish trend line from the February lows, as shown below, along with remaining overbought with a sell signal in place, the risk to the downside outweighs the potential for a further advance currently. With downtrend resistance from the previous highs pushing prices lower, the risk of a break below 2125 is elevated. Being a bit more cautious given the current technical backdrop will likely be prudent.

sp500-marketupdate-102816

While there are many simply suggesting just to buy into passive indexes and hold them, the brutal reality to such strategies have destroyed the ability for many to ever actually reach their investment goals.

However, despite the weight of evidence suggesting the markets are currently in a third bubble since the turn of the century, the commentary to ignore the outcomes related to such asset inflations is actually quite astonishing. Such is the result of a market seemingly immune to declines due to continued support, or at least belief thereof, from Central Banks.

But, just as was witnessed following “The Great Depression,” the bursting of the next asset bubble will likely once again drive participants away from the market for an entire generation, or longer. The problem for individual investors is the “trap” that is currently being laid between the appearance of strong market dynamics against the backdrop of weak economic and market fundamentals. Ignoring the last two to chase the former has historically not worked out well.

Alas, that is a story for another day, for now, we remain “stuck in the middle” waiting on an election outcome.

In the meantime, here is what I am reading this weekend.

Fed / Economy

Markets

Interesting Reads

“There are two hedges I know of; one is cash and the other is knowledge.” — Bruce Berkowitz

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Now Hillary Makes Conspiracy Theory Credible: 50% Believe


Via The Daily Bell

Now Hillary Makes Conspiracy Theory Credible: 50% Believe

Half Of Americans Believe 9/11 Conspiracy Theories … “The United States is a strongly conspiratorial society.”  …   A majority of Americans believe that the government is concealing information about the 9/11 attacks, one new survey suggests.  And that’s not the only conspiracy theory believed by a wide swath of Americans: Around 40 percent believe the government is hiding information about aliens, the John F. Kennedy assassination and global warming. – The Huffington Post

Before, those who believed in 9/11 conspiracy theories hovered around 20-30 percent according to the mainstream media. Now it’s up to 50 percent, according to this article.

Hell, it’s probably more like 60-70 percent anyway. There is perhaps a hard core of 30 percent of people living in the US who will likely never acknowledge anything wrong with the system or people in power.

But for most citizens, we’ve long suggested the current election is destroying the credibility of the ruling classes and their facilities: the “system” in other words.

Whatever in government that was supposed to be credible, from the IRS, to the FBI, to the Justice Dept., Congress and the presidency itself, has been visibly damaged by Hillary’s election campaign.

You’d have to be virtually blind – or a staunch partisan of a mythical “USA” – not to notice that the Democratic front-runner has committed actions for which anyone else would have been significantly punished.

And not just Hillary of course but those surrounding her including Bill Clinton and the Foundation that allows them to trade political favors for cash.

Then there’s the mainstream media. The media has investigated little or none of the malfeasance and worse (murders?) surrounding the Clintons, and thus newspapers, magazines and TV, already deprived of viewers and ad revenue, have been further damaged by an obvious, ongoing lack of credibility.

More:

Conspiracy theories about the JFK assassination abound, and scientists say these ideas have become embedded in the very culture surrounding his death, with heaps of TV shows, books and movies on them.

“We found clear evidence that the United States is a strongly conspiratorial society,” study lead author Christopher Bader, a sociologist at Chapman University in California, said in a statement.

In order to denigrate suspicion of the government, the study suggests that people’s views regarding conspiracies have to do with their own emotional makeup. In other words, “paranoid” people believe in “conspiracies.”

This canard worked better when the number of those voicing conspiracy theories was in the single digits, according to surveys. When half or more than half of the public begins to believe in them, something else is going on.

Neither the article nor the study (presumably) acknowledges that the CIA came up with the idea of calling people “conspiracy theorists” if they advance theories that the US government is corrupt and secretly tyrannical.

The conduct of this past campaign and the Clinton’s evident criminality has reinforced all that is wrong with the US in the views of many and, additionally, has made it clear that even the deepest suspicions of how the US operates are justified.

We can come away with two realizations from this.

The first is that despite Hillary’s possible election, the US as a valid and valuable entity is shattered in the eyes of many. This is actually a good development in our view given that the US (and its British controllers) has not been positive for freedom or peace in the world at least since the end of the Civil War.

The second conclusion, which is not a popular one but which we have voiced before, is that the disaffection of the American public was SUPPOSED to be heightened by the Hillary campaign.

The idea here is that chaos and  paranoia is supposed to be endlessly increased until the US, like other nation-states, virtually shatters and more aggressive globalism can be introduced in the wake of the disintegration.

Western nation-states currently have strong cultures. These cultures need to be torn down if true globalization is to be introduced.

The banking elites of this world, mostly located in the City of London, are determined to introduce this chaos, it seems. In Europe chaos is mounting thanks to the introduction of the artificial “immigration crisis.”

In the US, Hillary has served in the place of immigration, cracking the US culture as thoroughly as millions of young Muslim males. Next on the agenda? Possible economic collapse and “world-war” style military activities.

Conclusion: Yes, it sounds grim … and even conspiratorial. But there is much you can do to secure your safety and prosperity – and that of your family’s and even your community’s. You have to realize the civil society you believe in is vanishing (or never existed). And you have to act.

Now Hillary Makes Conspiracy Theory Credible: 50% Believe

Hate Speech as a Weapon: Reporters Are Charged for Covering Disturbances 

Government to Run Out-of-Control As Basic Income Expands in France

 

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White House Says Obama Had No ‘Advance Warning’ Of FBI’s Clinton Probe

As the news keeps trickling in, the latest information is that the FBI’s letter to Congressmen came without Obama being previously forewarned.

The White House on Friday said it was not given any prior notice on the FBI’s announcement that it was investigating additional emails relating to Hillary Clinton’s use of a private email system.

“We did not have advance warning,” White House spokesman Eric Schultz told reporters traveling with President Barack Obama to a campaign event for Clinton in Orlando, Florida. Schultz said news of the Federal Bureau of Investigation probe has not affected Obama’s support for Clinton.

“I don’t think anything has surfaced to changed the president’s opinion and views of Secretary Clinton,” he said.

To be sure, as John Podesta himself complained moments ago, the fact that this news appears just 11 days before a presidential election is “extraordinary”, and what makes it even more extraordinary is that the FBI, aware of what was about to happen, proceeded with throwing this live grenade into the presidential election without even conferring with the president.

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Markets ‘Turmoil’ After Comey Crashes Clinton Party

Mainstream media today…

 

Betting markets saw Hillary odds slide…

 

Here is the reaction across asset classes to the FBI headline…

 

And of course, there is the Peso…

 

VIX spiked above 17 on the headlines… Another day with no closing ramp…

 

US Stocks markets dumped en masse at the FBI headline…

 

S&P 500 cash closed near a very critical level…

 

On the week, Small Caps were the worst as Trannies and The Dow clung to gains… (worst week for Russell 2000 since Feb 2016 to lowest in almost 4 months)

 

With one day left in the month, Small Caps are the ugliest (set for the worst month since January!)

 

Healthcare was slugged after MCK's comments to 7 month lows…

 

The USD Index tumbled on the FBI headlines today, dragging it back into the red for the year…

 

Treasury yields were mixed today (short-end rallied down 2-3bps, long-end unch) with a notable 10bps steepening on the week in 2s30s…

 

Copper was the week's biggest winner and crude crumbled to a $48 handle close…

 

Copper was up 5 days in a row this week for the best week in almost 8 months…

 

And crude dropped to near one-month lows…

 

Charts: Bloomberg

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140+ Arrested, 300+ Officers Reportedly Involved in Crack Down on Dakota Pipeline Protest Camp

Police in Cannonball, North Dakota descended on a camp protesters put up on property recently purchased by the company building the Dakota Access Pipeline which is supposed to run from the Bakken oil fields in North Dakota to an oil tank farm in Illinois, making 141 arrests according to the local sheriff.

More than 300 riot cops were involved in the operation, according to an account from protesters organizing as the Camp of Sacred Stones, which reported at least eight ATVs, five armored vehicles, and two helicopters as part of the operation to take down the 1851 Treaty Camp, named after a treaty protesters and tribal leaders argue had made the land unceded Dakota territory that was part of the Standing Rock Reservation. It was reportedly the first time protesters had placed themselves directly in the path of the proposed pipeline.

In a statement, Morton County Sheriff Kyle Kirchmeier claimed protesters had “escalated unlawful behavior this weekend by setting up illegal roadblocks, trespassing onto private property and establishing an encampment,” which had “forced law enforcement to respond at this time,” as NBC News reports. According to the AP, protesters used burned vehicles and sheets of plywood to block a state highway as well as a local bridge.

One woman at the protest fired three shots, “narrowly missing a sheriff’s deputy,” a spokesperson for the North Dakota State Emergency Services said. Authorities say law enforcement officials did not fire at anybody, while protesters say pepper spray and percussion grenades were used against them as well as shotguns with less lethal ammunition and a sound cannon, and that at least one protester was tased and another hit in the face by a rubber bullet. No serious injuries were reported, according to the AP.

The governor of North Dakota issued an emergency declaration for Morton County, where mass protests over the pipeline have coalesced, activating the Emergency Management Assistance Compact, the product of a Clinton era law creating interstate agreements for emergencies, and bringing law enforcement to Morton County from at least five other states.

The Standing Rock Sioux tribe has gone to court to challenge the Army Corps of Engineers’ decision to grant permits related to the pipeline, according to the AP, which reports that a judge last month declined to order construction be suspended while a number of federal agencies have stepped in to order construction be suspended around Lake Oahe on the Missouri River. Construction has continued on privately-owned land.

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An Angry John Podesta Issues A Statement On “Reopening” Of FBI Probe

While Hillary has yet to address today’s stunning letter by FBI director Comey, who reported that the Federal Bureau of Investigations has “opened” a probe into Hillary Clinton’s email as a result of “findings” on what the NYT reported was an electronic device belonging to Anthony Wiener, a clearly angry John Podesta, Clinton’s recently hacked campaign chair, issued the following statement in Response to FBI Letter to GOP Congressional Chairmen

In response to the letter sent by FBI Director James Convey to eight Republican committee chairman in Congress, Hillary for America Chair John Podesta released the following statement Friday:

 

Upon completing this investigation more than three months ago, FBI Director Comet’ declared no reasonable prosecutor would move forward with a case like this and added that it was not even a close call. In the months since, Donald Trump and his Republican allies have been baselessly second-guessing the FBI and, in both public and private, browbeating the career officials there to revisit their conclusion in a desperate attempt to harm Hillary Clinton’s presidential campaign.

 

FBI Director Comey should immediately provide the American public more information than is contained in the letter he sent to eight Republican committee chairmen. Already, we have seen characterizations that the FBI is ‘reopening’ an investigation but Comey’s words do not match that characterization. Director Comey’s letter refers to emails that have come to light in an unrelated case, but we have no idea what those emails are and the Director himself notes they may not even be significant.

 

It is extraordinary that we would see something like this just 11 days out from a presidential election.

 

The Director owes it to the American people to immediately provide the full details of what he is now examining. We are confident this will not produce any conclusions different from the one the FBI reached in July.”

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