Dealbreaker

Dan Kamensky Could Have Made 11,950% And Not Gone To Jail, Will Instead Probably Lose 100% And ...

Fri, 22 Jan 2021 20:21:03 GMT

Ten cents per share extra now seems a very small price to pay.

Former hedge fund manager and judicially-designated thief, liar and not nice person Dan Kamensky is probably going to jail. This is because he tried to browbeat his bank into not making a bid on something he wanted for more than he wanted to pay, while at the same term serving on the creditors committee whose constituents would be very well served, indeed, by someone other than Kamensky’s Marble Ridge Capital paying more for those things.

All of that being said, Kamensky sure was right to fight for a piece of Neiman Marcus’ e-commerce business. This may be a vindication even hollower than Bill Ackman’s vis-à-vis Herbalife, but it’s a sort of vindication all the same.

Mytheresa Group GmbH, the European luxury e-commerce platform and former Neiman Marcus Group Ltd. subsidiary, went public Wednesday at a $2.2 billion valuation…. With Neiman struggling in 2019 with coming debt maturities, its private equity owners agreed to split up ownership of Mytheresa in a broad settlement with its creditors. But Mr. Kamensky and some others held out for more….
Mytheresa’s strong IPO, however, is a win for other Neiman creditors who took part in the settlement Mr. Kamensky pushed for, as well as for Ares and CPPIB.

So, you know, in the big picture, Kamensky really did have his fellow creditors’ best interests in mind. On the other hand, he wasn’t right about everything, as Mytheresa went for a good deal more than he expected, and several orders of magnitude more than the 20 cents per share Kamensky was willing to pay.

The initial public offering far exceeded the $1 billion value expected by Marble Ridge Capital LP and its founder Dan Kamensky….

Mytheresa shares started trading Thursday at $35.85, and ended their first day at $31, up 19% from the offering price on the New York Stock Exchange.

Maybe he should have just paid the 30 cents and avoided the alleged felonies.

Mytheresa IPO Nets $2.2 Billion Value, Vindicating Neiman Marcus Holdout [WSJ]
Mytheresa IPO Is Less Fashion-Forward Than It Looks [WSJ]

David Beckham Has Still Got It

Fri, 22 Jan 2021 14:21:20 GMT

Victoria, not so much.

You might get a kick out of this story.

David Beckham hung up his cleats seven years ago, but he is still putting up big numbers: Since 2019, Beckham and his wife Victoria have paid themselves $19.9 million (about $55,000 a day) from their various media interests.

The hefty payout packages have reportedly drawn the equivalent of a red card from auditors and creditors.

Posh Awash in Loss
David Beckham Ventures Limited, the company that manages Beckham’s image deals and his stake in Major League Soccer’s Inter Miami CF, reported a £600,000 increase in annual revenue to £16.2 million in 2019 (the latest numbers available in yesterday's report). That was good for £11.3 million in pre-tax profits.

But Victoria’s turn at entrepreneurship — through her interest in luxury goods purveyor Victoria Beckham Holdings Limited — has resulted in something of an own goal:

Despite a £2.5 million jump in sales, pre-tax losses at Posh’s luxury fashion business ballooned to £16.5 million in 2019.
Victoria was forced into an “extensive cost-cutting program” to survive the pandemic.
The Beckhams can bend a soccer ball, but apparently not credit covenants. Victoria and her private-equity partners were forced to inject £9.2 million in cash to pay down a loan whose terms had been breached.

Gilded Age
On top of monetizing his likeness on billboards around the globe, David Beckham has been investing in video games. Last fall he took a “significant minority interest” in budding e-sports company “Guild ESports,” which subsequently went public.

The Takeaway: Six years after being dubbed People magazine’s 2015 “Sexiest Man Alive,” David can still take those looks to the bank. Victoria’s business could use a little extra spice.

Opening Bell: 1.22.2021

Fri, 22 Jan 2021 13:55:44 GMT

Are you sick of hearing about SPACs yet?; 97-year-old man gets five years for defrauding God; Trump needs a new lawyer; and more!

Biden to sign executive orders to boost food benefits, workers’ rights as part of Covid relief push [CNBC]
One White House measure urges the federal government to offer any relief it can through “existing authority,” National Economic Council Director Brian Deese told reporters Thursday night…. The president will urge the Treasury Department to adopt tools to more efficiently deliver the direct payments approved by Congress to eligible people. The White House said up to 8 million people did not receive the first $1,200 stimulus check passed in March….
Biden has moved to boost the economy through executive orders while he tries to get the $1.9 trillion aid package passed by Congress.

SPACs Rescued Wall Street From the Covid Doldrums [WSJ]
The boom wasn’t all SPACs, but those surging deals helped lift several banks. Citigroup Inc. went from sixth place in initial public offerings to third place, according to Dealogic, in large part because it was second in helping launch new SPACs. Its equity-underwriting revenue increased 83% in the fourth quarter and 64% for the year, big gains for a bank that is historically stronger in the debt world.
And smaller Jefferies Financial Group Inc., a big SPAC supporter, put out a quarter one analyst said was “unlike any earnings report that we have seen.” It more than tripled its equity underwriting fees to $341 million.

Fed regional bank presidents given new 5-year terms [Reuters]
The reappointments, along with those of the sitting vice presidents, were recommended by the local boards of directors that oversee each regional bank and accepted by the board.

Vatican bank's former chief found guilty of money laundering, sentenced to nearly 9 years in prison [CNN]
Angelo Caloia, has been sentenced to nearly nine years in prison for money laundering and aggravated embezzlement…. The Vatican court also convicted the two lawyers. Gabriele Liuzzo, 97, received the same sentence as Caloia. Liuzzo's son, Lamberto Liuzzo, age 55, was handed a five years, two month term…. All three denied wrongdoing during the trial, which started in 2018.

Morgan Lewis ordered to turn over Trump docs in tax probe; firm will end representation [ABA Journal]
“We have had a limited representation of the Trump Organization and Donald Trump in tax-related matters,” a Morgan Lewis spokeswoman told Law.com, Bloomberg Law and Thomson Reuters Legal. “For those matters not already concluded, we are transitioning as appropriate to other counsel….”
On Tuesday, Judge Arthur Engoron of New York ordered Morgan Lewis to produce documents that he had reviewed and marked as “not privileged” in the tax probe by New York Attorney General Letitia James.

Alphabet is shutting down Loon, its ambitious internet balloon venture [CNN]
Loon, the Alphabet subsidiary that used giant balloons to beam internet to people in remote areas around the world, has announced that it is winding down its operations…. "While we've found a number of willing partners along the way, we haven't found a way to get the costs low enough to build a long-term, sustainable business," [CEO Alastair Westgarth] wrote.

Devon Dalio's death in Greenwich ruled an accident by medical examiner [Greenwich Time]
Dalio, 42, died of smoke inhalation and thermal injuries in the Dec. 17, the M.E.’s office said Thursday afternoon. No other information was released on the crash…. Police said they had no further information to provide on Dalio’s death or the crash. Capt. Mark Zuccerella said the case was still under investigation.

Look Ma…

Thu, 21 Jan 2021 18:15:00 GMT

…no, I’m not being detained.

This story is brought to you by The Daily Upside. For more crisp and insightful content, you can sign up for the free Daily Upside newsletter here.

He may not have been holding a newspaper with the date on it, but Alibaba founder Jack Ma was seen yesterday after a suspicious three month disappearance from public life.

Representatives from the Jack Ma Foundation confirmed that Ma gave a virtual speech for a charitable event celebrating China's rural educators.

A Picture is Worth $58 Billion
Speculation about Ma’s whereabouts has swirled since he deviated from the party line — “that's what Xi said” — while making a speech in October.

Ma, who has a history of advocating for greater market freedoms, was feared to have gone one step too far by accusing China’s financial regulators of stifling innovation in the tech sector.

Ma and two top executives from Ant Group (the financial affiliate of Alibaba) were swiftly summoned to a closed-door meeting with Chinese regulators.
President Xi Jinping then pulled the plug on Ant's $34 billion IPO, which would have been the largest in history.

A Sigh of Relief: Despite the fact Ma stepped down from his formal role at Alibaba in 2019, yesterday's appearance was clearly meaningful for investors: Alibaba shares soared 8.5%, adding $58 billion to the company's market cap.

Ruling With An Iron Fist
This is not the first time Xi has been forceful with companies that grew too large too quickly.

In 2018, China forced HNA Group to dump holdings in hotels, finance and technology, and refocus on its core airline businesses. It also seized control of Anbang Insurance, steering it back towards core operations after the company expanded into investment products.

Not Out Of The Woods: In December regulators outlined a plan which will require Ant to curtail certain operations and put up significant amounts of capital to support its financial operations.

Play With Elon Musk’s Fire, Get Burned

Thu, 21 Jan 2021 17:57:52 GMT

Whether it’s a decade in a Sardinian jail or whatever the Chinese do to people whose cars explode in parking garages.

In the end, Elon Musk chose not to defy the authorities: There would be no Teslaquila. In its place would sit, much delayed, outrageously priced and wildly oversold all the same, the much-less mellifluously monikered Tesla Tequila. This titular flexibility means that no one’s premium electric car-branded liquor would be seized and dumped by Mexican appellation authorities or, I dunno, some other consequence of violating international product naming laws.

In a similarly legalistic vein, the second-richest man on earth sold 20,000 flamethrowers cheekily dubbed “Not a Flamethrower.” Alas, even the Italian authorities were not fooled by this gambit, much to the dismay of his customers.

[Max] Craddock had been arrested in the Sardinian port city of Olbia in June 2018 after trying to board a private party bus with a collectible flamethrower from Elon Musk’s latest startup, The Boring Company…. When Craddock managed to get a lawyer, she told him the judge would probably just let him go with a warning. Instead, the magistrate ordered him back to his cell. That was when Craddock, pictured below, learned possession of a flamethrower in Italy can carry a 10-year prison sentence….
A few months later, author John Richardson was sitting down to work at his home in London when there was a loud knock at the door. He opened it and five police officers barged in wearing tasers and tactical gear…. “I was like, ‘what’s going on here?’ ” Richardson recalled. “Then something clicked and I said, ‘Is this about the flamethrower?’ ”….
More than 1,000 flamethrower purchasers abroad have had their devices confiscated by customs officers or local police, with many facing fines and weapons charges. In the U.S., the flamethrowers have been implicated in at least one local and one federal criminal investigation. There have also been at least three occasions in which the Boring Company devices have been featured in weapons hauls seized from suspected drug dealers.

Of course, another Musk customer has another reason to be quite peeved at the billionaire right now, for at least a flamethrower—whatever its legal status—is, you know, supposed to burst into flames.

A Tesla Model 3 exploded in an underground residential parking garage in Shanghai on Tuesday, Chinese media reported.
No people were injured in the fire, Tesla said in a statement to Chinese media. Preliminary analysis indicates the accident was caused by an impact to the underside of the car, the automaker added in the reports.

Suffice it to say, when anything made by one of Musk’s companies catches fire, whether it’s supposed to or not, it’s pretty bad news.

Elon Musk said it was ‘Not a Flamethrower’ [TechCrunch]
Tesla Model 3 reportedly explodes in Shanghai parking garage [CNBC]
Elon Musk Falls To Second Richest Person In The World After His Fortune Drops Nearly $14 Billion In One Day [Forbes]

So You’re Saying There’s A Company With Half Its Assets In British Hotels Whose Founder Is ...

Thu, 21 Jan 2021 16:47:25 GMT

The short-sellers have come for Vivion.

Spending hundreds of millions of dollars on hotels in the years and weeks before the coronavirus upended travel is the kind of thing that might catch a short-seller’s attention. The fact that most of these hotels were in the U.K., a country struggling not only to contain the pandemic but also to figure out what, exactly, Brexit means might pique this interest a little further. Throw in the arrest of the company’s controlling shareholder, and there are hardly enough Vivion Investments bonds available to lend to meet the demands of those desperate to bet against that sort of trifecta.

Speculators are predicting more pain for a firm that has more than half its real-estate portfolio tied to British hotels as the U.K. suffers through yet another national lockdown…. As much as 16% of the company’s 1 billion euros ($1.2 billion) of bonds are currently on loan to investors seeking to profit if the price drops….
JPMorgan Chase & Co. strategists cited the potential for the tax investigation to leave the Dayan family facing a hefty bill as a central reason for issuing a “sell” recommendation on Vivion’s bonds this week…. The founder may need to raise cash by calling for repayment of a loan to the company or selling assets to the firm at an inflated price, they said.

Hedge Funds Target Firm That Bet $2 Billion on Hotels Pre-Covid [Bloomberg]

Opening Bell: 1.21.21

Thu, 21 Jan 2021 14:30:00 GMT

Fannie/Freddie flop; Klarman’s complaints; 2021 the year of the SPAC ETF; Starboard seeks scalps; and more!

Hedge Funds’ Bets on Fannie and Freddie Cause Pain [WSJ]
Investors including John Paulson, Anchorage Capital Group, Discovery Capital Management LLC, Blackstone Credit, Perry Capital, Bill Ackman’s Pershing Square Capital Management LP and PointState Capital LP have been involved in the trade. Many funds are now expected to have lost money on the investment…. The trade seemed likely to pay off four years ago, when Treasury Secretary Steven Mnuchin stated his goal was to move the companies out of government control. But as the months passed, the likelihood declined significantly. Last week, Mr. Mnuchin said it wasn’t happening on his watch….
“We’re back to square one in terms of getting them out of conservatorship,” said David Barrosse of Washington, D.C.-based policy-analysis firm Capstone LLC, which counts hedge funds as its clients. “Investors are severely disappointed that more wasn’t done before the end of the Trump administration.”

Baupost’s Seth Klarman compares investors to ‘frogs in boiling water’ [FT]
“With so much stimulus being deployed, trying to figure out if the economy is in recession is like trying to assess if you had a fever after you just took a large dose of aspirin,” he wrote. “But as with frogs in water that is slowly being heated to a boil, investors are being conditioned not to recognise the danger….”
The Fed’s policies and programmes “have directly contributed to exceptionally benign market conditions where nearly everything is bid up while downside volatility is truncated”, he added. “The market’s usual role in price discovery has effectively been suspended.”

Bridgewater’s CEO on Inequality, Uncertainty, and Polarization [Bloomberg]
You could imagine a Japan-like recession/depression for the next 20 years or a 1970s stagflation [low growth with high inflation], and those very divergent outcomes have implications for how different assets perform…. The steps needed to get our country on the right path are clear. It’s not about politics, it’s more about leadership.

Third SPAC ETF Launch Taps Into Blank-Check Company Boom [WSJ]
The hedge fund Morgan Creek Capital Management and the financial-technology company Exos Financial plan to launch the SPAC ETF on Tuesday, the companies said. The new Morgan Creek-Exos SPAC Originated ETF will trade under the ticker SPXZ and consist of a mix of firms that recently went public by merging with a SPAC plus shell companies that are still seeking startups to take public…. The new ETF will be the third focused on the sector created in the past few months, joining the Defiance Next Gen SPAC Derived ETF and the SPAC and New Issue ETF, run by Tuttle Tactical Management.

Biden Is Expected to Tap Michael Barr as Comptroller of the Currency [WSJ]
[Michael] Barr, who would serve as comptroller of the currency, was assistant treasury secretary for financial institutions during the Obama administration. In that role, he helped craft the 2010 Dodd-Frank Act, a sweeping overhaul of financial regulation that followed the 2008-09 financial crisis…. “We need to undo the damage caused by the last four years of policy,” he said last June. “Rebuilding a strong Consumer Financial Protection Bureau and building resilience in the financial system with stronger capital and liquidity regulations, for example.”

Starboard Seeks to Take Control of Corteva Board, Oust CEO [WSJ]
Starboard, led by CEO Jeff Smith, has privately nominated eight directors to Corteva’s 12-person board, the people said. Starboard is aiming to oust Corteva Chief Executive Jim Collins over what the activist says is mediocre performance. It has an unnamed replacement in mind…. Starboard has been in on-and-off talks with the company since the fall and nominated board members before the deadline to do so in late December, the people familiar with the matter said. Efforts to head off a proxy fight at the annual meeting in the spring have so far been unsuccessful.

Royal Caribbean Won’t Go Down Without A Fight

Wed, 20 Jan 2021 16:12:49 GMT

And Carnival has a bold plan for 2022.

This story is brought to you by The Daily Upside. For more crisp and insightful content, you can sign up for the free Daily Upside newsletter here.

There’s an old saying “the two happiest days in a boat owner’s life: the day you buy the boat, and the day you sell the boat.” The expression certainly applies here.

In an effort to stay afloat during turbulent times, Royal Caribbean is jettisoning a full operating subsidiary - yesterday announcing a deal to sell the Azamara cruise line to private equity firm Sycamore Partners for just over $200 million

Going Down With The Ship
We won't rehash the full recent cruise line narrative. The pandemic pain persists and Royal Caribbean is expected to post a $2 billion loss for the latest quarter.

Deal Drivers: But despite the economic pain, Royal Caribbean finance chief Jason Liberty told the WSJ the deal “wasn’t driven by financial reasons.” Instead, Liberty said the deal will help prioritize the “minds and time of management” and consolidate the portfolio:

Royal Caribbean also owns the Celebrity Cruises and Silversea brands, which overlap with the high-end Azamara clientele.
At just 1.5% of total capacity, Azamara operated just three ships. More of a flotilla than a fleet.

Popular Strategy: Last week Carnival said it was on track to sell 19 older ships representing 13% of its total capacity.

Looking Ahead
We're still a long way away from returning to all-you-can-eat buffets and packing into over-crowded cruise ship pools. Most of Royal Caribbean's sailings across the globe are canceled until at least April 30.

The return of U.S. cruises will hinge on the CDC, which has told operators they’ll need to apply two months in advance before they want to start passenger trips again.

The Takeaway: Carnival has bold plans for 2022. The publicly-traded cruise operator is currently marketing its "nudist cruises" where travelers will be permitted to parade around in their birthday suits. Read more about the "Bare Necessities" cruise here.

Opening Bell: 1.20.21

Wed, 20 Jan 2021 14:30:00 GMT

Trump trumped; Elliott’s China adventure ends; closing the ring; Dov Charney needs $20 million; Cohen cancels; and more!

The Financial Minefield Awaiting an Ex-President Trump [NYT]
In his earlier dark moments, Mr. Trump was able to rescue businesses he runs with multimillion-dollar infusions from his father or licensing deals borne of his television celebrity. Those lifelines are gone. And his divisive presidency has steadily eroded the mainstream marketability of the brand that is at the heart of his business…. Without a new lender, or a new line of revenue that does not require a large investment of time and money, the soon-to-be-former president is likely to face hard choices, including possibly being pinched into selling underperforming golf courses or his hotel in the Old Post Office Building in Washington.

Hedge fund Elliott Management to shutter Hong Kong office [Reuters]
The 44-year-old firm told investors the Hong Kong workforce was being moved to London and Tokyo…. The Hong Kong closure does not signal a shift in investment priorities, the source said, however. Although the decision is being made largely for efficiency reasons, it coincides with rising political tension in the Asian financial hub.

Jack Ma, Alibaba’s Billionaire Co-Founder, Resurfaces After Months of Lying Low [WSJ]
“Jack Ma participated in the online ceremony of the annual Rural Teacher Initiative event on January 20,” the billionaire’s foundation said in a statement…. The Hong Kong-listed shares of Alibaba Group Holding Ltd., which Mr. Ma co-founded, jumped on the news and closed 8.5% higher Wednesday.

London’s Raucous Trading Ring Calls Time on 144-Year History [Bloomberg]
The trading floor known as “the Ring” fell silent last year, as Covid-19 spread through the city of London…. The exchange and its members insisted the closure was temporary -- until now. On Tuesday, the LME laid out a proposal to close the Ring for good and shift permanently to an electronic trading system for establishing the world’s benchmark prices for industrial metals…. “It’s the end of a very long era and a very sad day,” Nick Fellowes, managing director at Amalgamated Metal Trading Ltd., said by phone. “We still have serious concerns about how the exchange will continue to operate efficiently during periods of illiquidity and uncertainty.”

American Apparel Founder’s Fraud Claim Tossed in Hedge Fund Suit [Bloomberg Law]
A securities fraud claim brought by the former CEO of American Apparel Inc. is precluded by a Delaware court order requiring him to repay around $20 million that he borrowed from a hedge fund in an attempt to regain control of the company, a California appeals court said Tuesday.

‘Pharma Bro’ Shkreli loses 2nd bid for early prison release [AP]
A federal judge has rejected convicted pharmaceutical executive’s Martin Shkreli’s second request to be let out of prison early, showing skepticism about his claim in court papers that mental health issues have weakened his immune system and made him more susceptible to contracting the coronavirus….
Matsumoto also rejected the argument that Shkreli should be let out because coronavirus-related lockdowns were impeding his ability to communicate with the lawyers representing him in a civil lawsuit brought by the Federal Trade Commission.

Steve Cohen responds to ‘cancel culture’ tweet after Mets’ Jared Porter firing [N.Y. Post]
One user asked him: “Caving to cancel culture is abhorrent, now that [Porter’s] life has been ruined, what is his path to redemption Mr. Cohen?”
“I have no idea. I have an organization of 400 employees that matter more than any one individual,” Cohen replied. “No action would [have] set a poor example to the culture I’m trying to build.”

Hedge Fund Worker Loses Bid to Stop Extradition Over Brexit [Bloomberg Tax]
The man was among five people wanted in European countries whose application was dismissed Wednesday by a British court. They had argued that because the U.K. hasn’t been a part of the European Arrest Warrant program since the Brexit transition period ended Jan. 1, the court no longer had the power to rule on those extradition requests.

Kyle Bass Barred From Making Stuff Up About Lawyers For REIT He Accuses Of Making Stuff Up

Tue, 19 Jan 2021 19:46:53 GMT

Is it a good idea to piss off the judge presiding over your case this much? It seems like it might not be a good idea.

Whether or not Hayman Capital Management’s Kyle Bass can say what he likes about real-estate investment trust manager United Development Funding—and those things include that it is a worthless Ponzi scheme engaged in all sorts of self-dealing, among others—remains an open question. What has been rather definitely settled, by a rather pissed-off judge, is that Kyle Bass and his representatives cannot say what they like about UDF’s lawyers, at least without being rather roundly sanctioned.

“I don’t like lawyers to, without any evidence whatsoever, attack another lawyer and accused them of dreadful things like being mobster attorneys, potential perjurers, and guilty of judicial terrorism,” said [Dallas County Judge Ted] Akin… “The thing I object to is the way the lawyers have been personally attacked,” Judge Akin said at the December hearing, according to the transcript. “I find it reprehensible, and in my 57 years I have never seen anything as bad as this case….”
“The question is, how do I get Mr. Bass’s attention and the lawyers’ attention to stop behavior like this,” Akin continued at the hearing. “I don’t know what it will take… I want the lawyers henceforth to devote their time to the facts in the case, not attacking the lawyers in this case.”

‘Reprehensible’: Kyle Bass’s Hayman Capital Lambasted by Dallas Judge [II]

New RenTech Boss Is Sorry You’re Too Stupid To Understand Why Losing Between A Quarter And A ...

Tue, 19 Jan 2021 17:04:10 GMT

Peter Brown & co. do not suffer fools gladly, most especially those fools it is causing to suffer.

In all probability (which is something they, in all probability, understand much better than you), you are not as smart as the stupidest person who works at Renaissance Technologies, a hedge fund with more STEM Ph.Ds than most equivalent university departments, and where even the receptionists and landscapers are likely to have an advanced degree in something or other. So it is perhaps understandable, if a bit tiresome, that your puny brain cannot understand why a firm that has literally perfected printing money might have lost between 20% and 30% of the money you’ve entrusted it with. So allow Peter Brown to open his tenure at undisputed King of the Nerds put it as simply as his own massive cranium will allow. Try to keep up, dummies.

“Although recent performance has been terrible and worse than prior performance would have suggested was likely for 2020,” the letter says, “in track records as long as ours, some risk-return ratios every bit as bad as the ones we are now seeing are not shocking….”
"Obviously, large positive or negative returns are more likely when volatility is high, as that is basically the definition of volatility,” according to the letter….

Reassured, morons, now that we’ve literally spelled it out for you?

In its letter, Renaissance likened the poor performance to “a run of five heads anywhere in the next 10 thousand flips” of a coin, calling an excessive focus on the returns of any one year “selection bias.” The firm said the probabilities of such awful one-year performances for the three funds was 1% or lower, but “the probability of seeing at least one year as bad as 2020 within our track records,” given their length, is reasonably high.
Even good investments “perform horribly from time to time,” the letter said.

Well, not all of them, and sure, we may have earned ourselves 76% last year in a fund that never, ever fails to record a double-digit gain and certainly never loses money, but that’s not what you signed up, stupid, is it? You signed up for a fund that usually does pretty well, but every decade or so posts a giant loss that means you’d have been better off in an S&P 500 index fund for the duration. And please, please, don’t ask us to explain exactly how this happened, because you’ve simply no chance of understanding, and we’re not going to do it, anyway.

Renaissance rarely sends letters to investors providing extended commentary about its performance and keeps many of its trading viewpoints closely guarded. It is careful not to share many details of its trading with others, even with its own clients, lest its secret escape…. “The losses suggest they consistently loaded up on certain risk factors that kept going against them,” said Andrew Sterge, chief executive of Closed End Trading LLC, based in Wayne, Pa. “Did they intend to load on these factors or was it an accident? The letter doesn’t say.”

Renaissance Says Losses Should Have Been Expected at Some Point [WSJ]

California Boy Dan Loeb Has Become A True New Yorker

Tue, 19 Jan 2021 14:30:00 GMT

In that he has bought a place in Florida.

Dan Loeb, as we’ve noted, is a California boy, through and through. Growing up in Santa Monica, when Loeb wasn’t at the mall or shredding some half-pipe, you’d find him in the warm bosom of the Pacific, sitting on a surf board, waiting for the next big wave. (Or, you know, dorking out over the stock market so much your teachers gave you a lame nickname for it.)

His boyhood beaches are, alas, far from New York, and the Hamptons in winter are a cold and grey place. His 200-foot yacht isn’t always available, either, as it’s often been rented out by those hell-bent on killing every last coral reef in the Caribbean. Plus, people like him are now required to own at least one place in South Florida, and he can certainly afford it.

6440 NBR LLC sold the six-bedroom, 13,386-square-foot home at 6440 North Bay Road to a Delaware entity named after the address. Sources confirmed the buyer is Loeb, founder and CEO of Third Point, a New York-based hedge fund…. The mansion features a gym, wine cellar, home theater, elevator, rooftop deck, separate entrance for the guest quarters, and a pool and dock, according to the listing. It had been on and off the market since 2015, most recently asking $23.5 million in September. The property has 100 feet of water frontage.

Billionaire hedge funder Dan Loeb buys waterfront Miami Beach estate: sources [TheRealDeal]

Opening Bell: 1.19.21

Tue, 19 Jan 2021 12:38:41 GMT

Warren to run CFPB after all; China survives China virus; Office Depot still playing coy; Elon Musk: cat killer; and more!

Biden selects Gensler for SEC chair, Rohit Chopra to lead CFPB [The Hill]
[President-elect Joe] Biden will nominate former Commodity Futures Trading Commission (CFTC) chairman Gary Gensler to lead the SEC and Federal Trade Commission member Rohit Chopra to lead the [Consumer Financial Protection Bureau], the transition announced…. Chopra, who Biden has put forward to lead the CFPB, helped Massachusetts Sen. Elizabeth Warren (D) establish the office prior to her time serving in the upper chamber.

Yellen Will Urge Lawmakers to ‘Act Big’ to Avert a Protracted Downturn [WSJ]
“Economists don’t always agree, but I think there is a consensus now: Without further action, we risk a longer, more painful recession now—and long-term scarring of the economy later,” Ms. Yellen says in the text of remarks to the Senate Finance Committee…. “Neither the President-elect, nor I, propose this relief package without an appreciation for the country’s debt burden. But right now, with interest rates at historic lows, the smartest thing we can do is act big.”

‘We Need to Stabilize’: Big Business Breaks With Republicans [NYT]
Tim Ryan, the chief executive of PWC, who said his firm was among those suspending donations to members who voted against certification, called for the country to come together. “I believe this is the best country in the world, and we can’t let all that go to hell in a handbasket,” he said…. “If we can’t come together, can’t stabilize, or if it got worse, it wouldn’t be good for business….”
“It’s not just a break with Trump but potentially with the Republican Party,” said Richard Edelman, chief executive of the global corporate communications firm Edelman. “It’s not OK what’s going on in America, and businesspeople are going to hold you to account.”

China’s Growth Beats Estimates as Economy Powers Out of Covid [Bloomberg]
China’s economy roared back to pre-pandemic growth rates in the fourth quarter as its industrial engines fired up to meet surging demand for exports, pushing the full-year expansion beyond estimates and propelling its global advance…. That leaves the world’s second-largest economy driving global growth and potentially passing U.S. GDP sooner than previously expected…. The revival makes China the only major global economy to have expanded last year….

Office Depot Rebuffs Takeover Offer From Staples [WSJ]
ODP has concluded that a sale of its retail and consumer-facing e-commerce operations to Staples or a joint venture is preferable to a full takeover, according to a letter sent by ODP’s chairman to an official of the private-equity firm that controls Staples. It said in the letter, seen by The Wall Street Journal, that such a deal would afford the same cost savings as a full-company sale but be less likely to attract prolonged regulatory scrutiny.
Staples’ recent bid marks the third time it has tried to acquire its main bricks-and-mortar rival.

Covid-19’s Blow to Business Travel Is Expected to Last for Years [WSJ]
Delta Air Lines Inc. Chief Executive Ed Bastian this past week said on an investor call that the airline’s recent customer surveys forecast around 70% of pre-pandemic corporate travel will resume by 2023, including international trips.
In the near term, the travel business still faces painful adjustments. “Perhaps by the end of 2021, our assessment is that domestic business could be in the range of down 50% to 60%” from the pre-pandemic level, Southwest Airlines Co. CEO Gary Kelly said at an industry conference last month.

Singapore Exchange Hosts Whisky-Linked Securities [Wealth Briefing Asia]
Rare Cask Holdings Pte, a wholly-owned subsidiary of PrimePartners Corporate Finance Holdings, today said that it had listed asset backed securities, linked to casks of whisky, on Singapore’s Hg Exchange.
The digital ABS will enable accredited investors to own a portion of the portfolio of “Casks of Distinction” until their maturity and bottling…
“The first trade of Scotch Whisky on Liv-ex was 16 bottles of Macallan Highland Single Malt Reflexion in 2016 for £495 per bottle. Just two years later, the same whisky traded at £600 per bottle - cementing a 21.2 per cent return over a two-year period. Now in 2020, that same bottle has a market price of £725 – another 20 per cent increase over two years.”

Jamie Lynn Spears blames Elon Musk and Tesla for killing her cats [CNN]
"We have now lost — I don't want to tell you how many cats — because they don't hear the Tesla crank and unfortunate things happen and it's really devastating and tragic for everyone involved," she said in her Instagram post, according to multiple news reports that preserved the video.
"Elon Musk, let's figure this out," she said. "You owe me a couple cats."

Here’s What’s Keeping Jamie Dimon Up at Night

Mon, 18 Jan 2021 13:55:00 GMT

Here’s a hint - it rhymes with “snare.”

This story is brought to you by The Daily Upside. For more crisp and insightful content, you can sign up for the free Daily Upside newsletter here.

Fourth quarter earnings season kicked off in earnest last week, and soon one of the most tumultuous years in financial markets history will be fully in the books.

Some of America’s largest banks set the tone on Friday with results befitting of 2020: equal parts optimism and existential worry.

The Early Reports
Buoyed by a reversal of loan loss reserves, Wells Fargo and Citigroup each bested earnings expectations.

Then there was JPMorgan. The bank revealed it turned a record $12.1 billion profit in Q4 and many analysts were swooning over the numbers. Colorful analyst Jim Cramer called it “one of the greatest quarters I have ever seen.”

Prime Strength: The majority of JPMorgan’s customers are what they call “prime” borrowers who have, according to CEO Jamie Dimon, “a lot more income” than an average bank customer. Dimon noted these customers continued to pay down their credit card balances at an “extraordinary” pace.
JPMorgan reported a 20% increase in trading revenues, meaning it successfully captured the volatility you may have seen in your brokerage account.

Still, investors were turned off by tepid loan growth and a still cautious outlook from Dimon, sending shares down nearly 2% on the day.

FinTech Drama
Responding to a question from an analyst, Jamie Dimon expressed concern about the growth of competition from emerging fintech players.

Making note of Visa, PayPal, Ant Financial, Tencent, Facebook, Google, Apple and Amazon, Dimon acknowledged there is a long list of talented companies he is “scared ****** of". Exact quote.

The Takeaway: There is good reason to be worried. Square, founded just over a decade ago, now has a market cap on par with that of Goldman Sachs.

Axios Wants To Teach You How To Write

Fri, 15 Jan 2021 15:34:42 GMT

Because bullet points are tough to perfect.

According to The Wall Street Journal, media startup Axios is set to launch its first software product in February.

The platform, called AxiosHQ, will help businesses draft internal newsletters in the “just-the-facts” style that Axios is known for.

Tell Me, But in Bullet Points
After raising $57 million in venture capital, Axios has had a big few years with its high-profile political coverage and HBO show. Now, Axios wants a taste of recurring revenue and the valuation that comes with it.

Tool Specifics: AxiosHQ will help businesses streamline internal communications with a writing template that users can fill in. The software will provide a “Smart Brevity” score that gives feedback on how clear and succinct the writing is.

Users will have the ability to consult an independent team of editors at Axios.
Once the memo is sent, management will be able to track engagement analytics like open rates.
Speculating here: Extra points for starting briefs with “hope all is well” and closing with “tx.”

CEO James VandeHei has called the Axios style “exponentially more efficient” than traditional writing. With a starting price of $10,000 per year for AxiosHQ, one would hope so.

Diversify, Diversify, Diversify
Several news companies have had success selling their internal software as a subscription service:

The Washington Post’s technology platform, Arc, is used by around 90 companies and nets the company between $10,000 and $150,000 per customer.
Chorus, Vox Media’s publishing platform, was developed by the company for internal use. Now it’s used by 350 companies and is a growing part of Vox’s operations.

The Takeaway: So far Axios has 20 paying customers signed on including AT&T and Delta Air Lines.

Opening Bell: 1.15.21

Fri, 15 Jan 2021 13:30:00 GMT

TWO TRILLION DOLLARS; RenTech founder retires; black edge comes to Florida; London’s lamentations; and more!

Biden unveils $1.9T plan to stem COVID-19 and steady economy [AP]
The legislative proposal would meet Biden’s goal of administering 100 million vaccines by the 100th day of his administration, and advance his objective of reopening most schools by the spring…. Biden proposed $1,400 checks for most Americans, which on top of $600 provided in the most recent COVID-19 bill would bring the total to the $2,000 that Biden has called for….
“The crisis of deep human suffering is in plain sight, and there’s not time to waste,” Biden said. “We have to act and we have to act now.”

James Simons Steps Down as Chairman of Renaissance Technologies [WSJ]
“I believe it is time: This transition has been many years in the making,” Mr. Simons said in a letter to clients a few weeks ago. Mr. Simons, who will be 83 in April, will continue to serve on the board…. Over the years, Mr. Simons has played an increasingly reduced role at his firm while focusing on science, education and other philanthropies. He resigned as Renaissance’s chief executive in 2010 and the firm has been run by computer programmer Peter Brown in recent years.
Now, Mr. Brown has taken the reins as chairman. He faces an immediate challenge: dealing with investors unhappy with the poor performance by some of Renaissance’s funds, all of which are run using predictive models that the firm almost never interferes with.

Exxon reportedly investigated by the SEC over valuation of key asset [CNBC]
The whistleblower complaint, filed by an employee, alleged that Exxon pushed staff toward inaccurate forecasts including the rate at which wells could come online…. The report follows a difficult year for Exxon, and the oil and gas industry more broadly. In December, Exxon said that it will write down the value of its assets by up to $20 billion in the fourth quarter.

Point72 to Expand With Florida Offices as Managers Head South [Bloomberg]
Point72 Asset Management will open an office at 360 Rosemary in West Palm Beach before the end of June, according to Tiffany Galvin-Cohen, a spokeswoman for the firm. It’s also scouting a location in Miami that it expects will be ready in the latter half of the year…. The firm is adding the offices to accommodate current and prospective employees who want to move south. The locations will initially hold a total of about 45 people, mainly investment staff. Point72, which employs 1,600 workers globally, has no plans to cut space in its Stamford, Connecticut headquarters or in its Hudson Yards offices in New York City

London Fund Managers See Post-EU Threat to $2 Trillion Business [Bloomberg]
“There’s definitely a risk that that political sway may carry,” Jack Inglis, chief executive officer of the London-based Alternative Investment Management Association, said at an event late last year. “By punishing the U.K. you’re actually punishing many, many other countries as well along the way, but that is potentially where the discussions could go….”
“There might be a shift there, which obviously would be fundamental because that’s always been the model -- that you have your distribution staff in the region, and you have a centralized investment hub in London or New York,” she said.

Fannie, Freddie Taxpayer Stake Won’t Be Restructured Under Trump [WSJ]
Advisers close to President-elect Joe Biden have said he would be in no hurry to privatize the companies, which guarantee roughly half of the $11 trillion U.S. mortgage market. Instead, Mr. Biden would focus on ways to use the companies to boost housing affordability and promote homeownership, the advisers said…. Thursday’s changes to the companies’ bailout agreements allow the firms to retain roughly $280 billion, or the equivalent of what they are required to maintain as part of new, banklike capital rules set by the FHFA in November….
Treasury officials said Thursday they were unwilling to significantly restructure the government’s senior stakes in the firms, now valued at roughly $230 billion, saying the issue should be subject to further study. That move effectively means it will be up to a Biden-led Treasury Department to tackle the question.

Second London Hedge Fund Worker Facing Extradition over Tax Scandal [Bloomberg]
Prosecutors in Cologne want Duet Group’s Vijaya Sankar as part of a probe relating to Cum-Ex trading, his lawyer, Syed Rahman, said by email. Sankar will argue in a London court Friday that Brexit should stop his extradition.
The 44-year-old’s hearing comes just a day after Guenther Klar, who had worked for Sanjay Shah’s Solo Capital, lost his fight against extradition to Belgium.

Jay Clayton’s Legacy At Risk Because He Either Didn’t Read Or Didn’t Care About The Law

Thu, 14 Jan 2021 21:11:39 GMT

At least, one whistleblower attorney really hopes so.

If one thing consistently animated the otherwise naturally inanimate Jay Clayton during his tenure atop the Securities and Exchange Commission, it was an abiding distaste for whistleblowers. Whether motivated by laziness or snitches-get-stitches sensibility about one’s duty of loyalty to one’s employer, it is possibly the only thing the otherwise amorphous white-shoe attorney ever really believed it. So you could be absolutely certain that if there was anything Clayton was going to get done as the clock ran down on his patron’s term and the whistleblower complaints began to horrifying flood his office, it was going to be pushing through his plan to change the SEC’s whistleblower-award determination scale to “whatever the fuck I feel like,” which he did.

Many arguments were raised as to the inadvisability of this, but they of course missed the point, because the things that made the new system inadvisable in the eyes of those making them—that they might discourage would-be whistleblowers—was of course the very thing that made it attractive to Jay Clayton in the first place. Unfortunately for those current and future Securities and Exchange Commissioners of a similar mind, Clayton—in spite of his Ivy League legal education—shares something with fellow Donald Trump nominee Judy Shelton (who is, incredibly, still a nominee, since the president got around to renominating her in between inciting an insurrection against the government he nominally leads), which is to say a less-than-perfect grasp of the law. Or, at least, this guy hopes so.

Jordan Thomas, who chairs the whistleblower representation practice at law firm Labaton Sucharow LLP… is challenging two aspects of the changes. One is the SEC’s clarification that it has the discretion to consider the potential dollar amount of the final payout as a factor in calculating the award, bringing more uncertainties to the process, he said.
Another is the SEC’s new rule that a law-enforcement or separate regulatory action doesn’t qualify as a “related action” if the SEC determines that a separate award program has more direct or relevant connection to the separate action—potentially limiting an award, the complaint said.
Mr. Thomas argues that the SEC had no statutory authority to enact these changes and the regulator adopted the amendments “without providing a reasoned explanation and despite the enormous harms it will cause the whistleblower program,” among other reasons, according to the complaint.

Whistleblower Lawyer Sues the SEC Over Bounty Program Rule Changes [WSJ]
Whistle-Blowing Soars to Record With Americans Working From Home [Bloomberg]
Trump renominates Judy Shelton in last-ditch bid to reshape Fed [The Hill]

RenTech Can’t Be Wrong, So The World Must Be

Thu, 14 Jan 2021 19:49:15 GMT

I mean, no objection with the second clause, but...

Last year was one of the best hedge fund in history’s best years ever. Renaissance Technologies’ Medallion Fund, which firm co-founder and piss collector Robert Mercer would probably sacrifice several toes for a larger stake in, enjoyed what appears to be its third-strongest year since inception in 2020, which is saying something for a fund that’s got an annualized return of 39.1% since 1988. But last year it did almost twice that, rising 76%.

The funds RenTech runs for those not employed at the firm? Not so much.

The Renaissance Institutional Equities Fund, which launched in July of 2005, lost 22.62 percent through December 25, according to HSBC’s weekly scoreboard of hedge fund performance. A newer fund, Renaissance Institutional Diversified Alpha, fell even more: It fell 33.58 percent through the same time period, HSBC reported…. Renaissance launched RIDA in February of 2012, and 2020 was its worst year since then, the report said.

This dichotomy, endlessly pointed out and parodied, got so bad that Jim Simons & co. decided to move some of the brains behind Medallion on to these more plebeian products to narrow the gap. This has not worked. But, more to the point, it shouldn’t, according to one of the lucky few who needn’t suffer the indignities of RIEF or RIDA. Indeed, as far as he can see, they worked perfectly; it’s everything else that fucked up.

“There is nothing wrong with the models. it’s just the world is wrong.”

This is a curious opinion of a product designed to make people money, but go on.

“The unpredictable patterns of risk behavior created by the disruption of Covid and the idiosyncratic distribution of stimulus money created an unprecedented pattern of stock price movements that couldn't possibly be adapted to by quantitative strategies,” he added.

Apart from, you know, Medallion, which somehow managed to do 100,000 basis points better. But this is a fatuous comparison, this person who definitely has no ulterior motive underlying that claim.

“There is just no reason for Medallion and RIEF to be in any way correlated,” he said. “The only thing they have in common is that they are operated using the same software and have the same senior management team….”

Oh, is that all they share? Apples and oranges, then. Nothing to see here.

Renaissance’s Medallion Fund Surged 76% in 2020. But Funds Open to Outsiders Tanked. [II]

HSBC Violates Your Natural/Moral/Legal/Constitutional/Biblical Right To An HSBC Bank Account ...

Thu, 14 Jan 2021 17:02:32 GMT

It definitely says “Thou shalt not cancel my checking account in absence of a mask” in one or all of those.

Brace yourself for all manner of uninformed and/or specious and/or misleading and/or misguided and/or bad faith arguments about various Constitutional amendments and how they entitle individuals to the specific financial services they desire while dressed as a Viking and spitting biohazard at those obligated by law and their whiteness to provide, to say nothing of a maddening torrent of misuses of the word “Orwellian” by those who have never read a book, let alone any of his.

'If you do visit us, please wear a face covering and maintain a safe distance from others. If individuals put themselves or our colleagues at risk, without a medical exemption, we reserve the right to withdraw their account.'

Oh, wait, just kidding: This is happening at HSBC branches in a marginally more civilized country whose government hasn’t completely broken down yet.

HSBC has threatened to shut down the bank accounts of customers who refuse to wear a face mask in its UK branches.

Mouth-breathing yahoos, please feel free to continue to put Jackie Uhi’s U.S. colleagues at all the risk you’d like, as is your god-given right as an American idiot.

HSBC threatens to shut down bank accounts of customers who refuse to wear a face mask in its UK branches [Daily Mail]

European Cuisine Ain’t What It Used To Be

Thu, 14 Jan 2021 14:17:19 GMT

Soon we’ll be eating insects for the sake of the environment.

This story is brought to you by The Daily Upside. For more crisp and insightful content, you can sign up for the free Daily Upside newsletter here.

Heads up - this story could make you feel antsy.

The European Food Safety Authority has declared the yellow mealworm (the larval form of the mealworm beetle) safe for human consumption, paving the way for its arrival at the dinner table.

Insect Invasion
According to the UN, more than two billion people around the globe (primarily in Asia, Africa, and South America) already consume insects as part of their regular diet.

Crawling In This Direction: In the west, the market for insects (while still small) is evolving quickly. In 2017 the European Commission said it would allow the use of insects in fish feed, and in 2018 Brussels established a formal regulatory framework for the sector.

Yesterday's announcement from the EU Food Safety Authority pertained to an application from French insect farmer Micronutris — one of the early players in the space. Micronutris plans to use mealworm larvae as a protein additive in snacks, bars, and other foods.

Now, analysts say the insect farming business is buzzing with potential:

Analysts at Barclays believe the market for insect protein could rise to roughly $8 billion by 2030 from $1 billion today.
EU-based venture capital firms poured $177 million into insect startups last year, and food giants such as Cargill and Nestlé are racing to catch up.

Sustainability Play
With more and more focus being placed on the sustainability of food production, many analysts see potential in insects. Advocates point to high nutritional value and the relatively small amount of energy needed to produce insects at scale.

The Takeaway: No need to bug out quite yet - yesterday's safety news is just the first step in the authorization process. It will be some time before insects hit grocery store shelves.