Opening Bell: 4.27.17

Wall Street is buzzing about the possibility of Gary Cohn someday replacing Janet Yellen (CNBC)
"The buzz among those who claim Cohn confides in them is that he would like to eventually replace" Yellen, assuming Trump decides to move in a different direction when the chair's term ends in early February, Beacon Policy Advisors said in its daily report for clients Tuesday.

Wells Fargo, JPMorgan Wary of Auto Loans, But Pack Them in Bonds (BBG)
At least one Wall Street bank has steered clear of underwriting bonds backed by subprime auto loans. Bank of America Corp., which bought the biggest maker of risky mortgages as the housing bubble was bursting, has consciously avoided the subprime auto bond market out of fear that its reputation could suffer in a downturn, according to a person with direct knowledge of the matter. In consumer auto lending, Bank of America focuses on prime customers.

The Hedge Fund Manager Who’s Shorting America’s Malls (WSJ)
The exact size of Mr. Yip’s bet isn’t known. It makes up more than half the assets of Alder Hill Management, which manages about $200 million, said people familiar with his fund. When Mr. Yip cast a critical eye on regional malls’ debt in 2015, the CMBX 6 index was trading near its full value, implying a very low probability of defaults. Mr. Yip visited malls in Connecticut, Louisiana and elsewhere while on work trips and vacations, sometime taking his family along with him. He would walk three times around each shopping center, studying its mix of stores and chatting with store owners, workers and shoppers.

“All the best people left banking years ago” (EFC)
“A lot of people who had successful careers – the most talented people of my generation – have left the industry to do other things,” said Kerim Derhalli, the ex-Deutsche MD who himself has exited banking to run Invstr, a social network for amateur investors, when we spoke to him earlier this year. “The people who are hanging on are getting paid less every year as margins and volumes collapse. Their incomes are falling and their lifestyles are having to adjust, but they stay because they’re still getting paid much more than they would doing a comparable job in a different industry.”

Deutsche Bank outpaced by US rivals in investment banking (FT)
On an underlying basis, Deutsche said revenues in its global markets business were up 9 per cent, while sales in its corporate and investment banking arm were flat. By contrast, Deutsche’s US rivals managed to boost their investment banking revenues 21 per cent on average in the first quarter. Andrew Coombs, an analyst at Citi, said the numbers for Deutsche’s investment bank were “weak”.

Guy Hands on investing in a time of Trump: ‘The most difficult environment I have ever seen’ (MarketWatch)
This is the most difficult investing environment that I have seen in my lifetime as an investor. I started in 1982 — it’s more difficult than any time since 1982. And it’s because we don’t have that trajectory anymore. The world had an established view about how politics was done, how economics was done and that disappeared last year, because of Brexit, because of Trump.

Factor Investing – Tilting at Windmills (PragCap)
Factor picking has become the new stock picking. And when it comes to factor investing the asset manager still has to pick the right stocks that will match whatever “factor” they’re trying to replicate. So, factor investing is actually just stock picking by a different name. And there is clear evidence that asset managers are not very good at picking stocks whether they’re growth, value or whatever. As a result, tilting to factors in the stock market is a lot like tilting at windmills.

'Fist bumps' at hedge funds over Trump's tax plan (Reuters)
"Who needs to worry about carried-interest going away if you have a 15 percent pass-through tax rate," said hedge fund manager Jim Chanos, who runs Kynikos Associates. "This should really be called the 'Put Rich Guys Back on Top Tax Act of 2017.'"

Gett Acquires Juno for $200 Million to Challenge Uber (BBG)
The deal marks the end of Juno’s program to distribute restricted stock units to drivers, according to Keren Kessel, a spokeswoman for Juno. She said eligible drivers will receive a payout “based on an independent valuation” of their stock. She declined to provide details on how much drivers should expect to receive. Drivers won’t be offered stock units in the future but may be eligible for cash bonuses based on how much they drive, Kessel said.

“To get back to fair value, the S&P 500 would need to drop by 50%” (Finanz und Wirtschaft)
Q. So why do you think this is bubble-like behavior?
James Montier: Because I do not think people are rationally buying equities expecting very low future returns. I think they are buying them because they expect good returns. And when the returns do not materialize, that is probably when a correction or a crash will occur, because people will be disappointed.

POLICE: DRUNK MAN KNOCKED DOWN 300-POUND ROBOT IN MOUNTAIN VIEW (ABC7)
Police arrested a man accused of being drunk and knocking down a robot that was built to prevent crime near Terra Bella and Linda Vista Avenue in Mountain View. The 300-pound robot named K5 spins and occasionally whistles, so it's hard to understand why someone would want to knock it down.