Opening Bell: 6.8.17

Bill Gross remains less than optimistic; Amazon wants to eat your lunch; Paul Singer is a “pain in the ass”; weed pizza; and more.
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Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis (BBG)
”If there’s a common factor it’s the expansion of credit,” Gross said on Bloomberg TV Wednesday. “And the credit that’s being generated by central banks. Money is being pumped out into the system and money that is yielding less than nothing seeks a haven not only in bonds that are under-yielding but in stocks that are overpriced.” Gross said in the current environment “you basically tell your investors that it’s a changed world, that returns are going to be lower and that if you want to sleep at night, to accept the market as it is. Low volatility requires low returns.”

Five Reasons Stock Pickers Are Off to a Fast Start: Facebook, Amazon, Apple, Alphabet, Microsoft (WSJ)
The best-performing funds by definition pick the best-performing stocks. While funds in the past have had large holdings of big tech firms, what’s unusual about 2017 is that the biggest stocks are doing particularly well, meaning investors must make more outsize bets to beat their benchmarks. The average price gain for the S&P 500’s 10 largest U.S. stocks was 12% through the first five months of this year, the second-highest mark for that group over the past two decades.

House Set to Pass Bill Rolling Back Wall Street Rules (WSJ)
The Trump administration, which has been supportive of Mr. Hensarling’s efforts, can make only limited changes to Dodd-Frank without congressional action. It has signaled it is taking a less aggressive tack on key issues than the House. For instance, on the Volcker rule, only Congress can repeal it altogether. Treasury Secretary Steven Mnuchin, unlike Mr. Hensarling, has said he supports keeping the rule in effect, though he is pushing financial regulators to make complying with it easier. White House National Economic Council Director Gary Cohn, a former top executive at Goldman Sachs Group Inc., has criticized a stricter leverage ratio by pointing out that it can curb the loans banks make.

The Last Hedge Fund Pit Bull (II)
The fact that Elliott turned the screws on Aarconic places the hedge fund at the belligerent end of the activist spectrum, one out of step with other prominent activists who recently have been able to avoid nasty proxy battles. Yet the maneuver was no surprise to those who know Singer and his firm. “It's utterly consistent with other Elliott negotiations,” says a former hedge fund executive. “They area pain in the ass to negotiate with. They retrade at the last minute all the time.”

Tech companies invade banks’ territory with customer loans (FT)
Stephan Aarstol had a cool product (paddle boards) and a cool equity investor (Mark Cuban, owner of the Dallas Mavericks). Yet the San Diego entrepreneur, fresh from a 2012 appearance on Shark Tank, could not get a single bank to lend him money to order more boards from plants in Thailand and China. But then he got a $25,000 loan offer from Amazon, where he was selling through the company’s third-party marketplace, using its network of warehouses to store, package and ship orders. A few months later came another offer: $140,000. “Holy cow, this was like, easy money,” says Mr Aarstol, founder of Tower.

Qatari currency at weakest since ’98; peg under ‘unprecedented pressure’ (FT)
Chris Turner, global head of strategy at ING, said the pressure on the riyal was “unprecedented”. Previous speculative attacks on gulf currency pegs have proved to be temporary, but they have generally been motivated by external economic factors such as weak oil prices, and Mr Turner said “the fact that the current pressure is political and triggered by fellow GCC members is alarming”.

Snap Is Most-Shorted Tech IPO of 2017 as Lockup Expiration Nears (BBG)
“It looks like short sellers are positioning themselves for a dramatic selloff in Snap’s stock price after the lockups expire,” Anthony DiClemente, an analyst at Nomura Instinet, wrote in a research note on Wednesday. DiClemente noted that there are more than $1 billion in Snap shares sold short, and with so few shares left to borrow, the cost to finance short positions has risen to 37 percent, compared to a 1 percent fee in May.

Infrastructure Boost Becomes Invisible in U.S. Growth Forecasts (BBG)
Morgan Stanley economists, coming to terms with the delays, this week removed the infrastructure plan from their economic calculations, citing “little clarity from the administration.” They also pushed out the implementation of tax reform to the first half of 2018 from the second half of 2017.

Now on the menu in Quincy: Marijuana-laced ‘bar pizza’ (The Patriot Ledger)
Got a prescription for pizza? At Quincy’s medical marijuana dispensary, they’ve got just the thing. Ermont Inc., the South Shore’s first dispensary, began selling marijuana-laced frozen pizzas several weeks ago and has already sold more than 200 out of its shop in the back of an industrial lot. The dispensary had already offered a menu of chocolate bars, cookies and muffins, but the pizzas are the first medicated treats that could reasonably be considered a meal.

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Only about six weeks remained until the trade was set to expire, and another company needed to default for J.P. Morgan to make money and the bullish hedge funds to lose out. Some traders took to calling Mr. Iksil a "caveman" for stubbornly pursing the trade. Mr. Iksil continued to bet against the index, however, and it soon weakened, causing a buzz among unhappy rivals, these traders say. "We called the trade the 'pain trade' and the 'widow maker'; it kept going down for no reason," said a trader at another firm, who called his broker and says he was told it was Mr. Iksil who was doing all the bearish trading. "It felt like Bruno was trying to wipe everyone out." Then on Nov. 29, in something of a shock, AMR Corp., American Airlines' parent company and one of the companies in the index, filed for bankruptcy protection. "People freaked out," recalls a hedge-fund trader. The index weakened significantly, allowing J.P. Morgan to rack up about $450 million in total profits from the trade, according to traders. Rival firms suffered similar-size losses. It capped a successful year for Mr. Iksil and his group, though the profits would be more than offset this year when they shifted to a more bullish tack on corporate credit, losing $2 billion-plus in the process. Goldman to Cash Out $1 Billion of Facebook Holding in IPO (Bloomberg) The investment bank and its funds will sell 28.7 million of the 65.9 million shares they own, more than twice the amount initially planned, Menlo Park, California-based Facebook said yesterday in a filing. The shares are being offered in a range of $34 to $38 apiece, meaning the stock being sold in this week’s IPO is valued between $975 million and $1.09 billion. 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Greek Euro Exit Would Risk Asia Crisis-Style Rout, Zeti Says (Bloomberg) A Greek exit from the euro could cause contagion comparable to the Asian financial crisis, according to Malaysia’s central bank Governor Zeti Akhtar Aziz, who had first-hand experience of that turmoil. “The worst-case scenario is what we saw in Asia,” Zeti, 64, said in an interview with Bloomberg Television in Istanbul yesterday. “When one economy collapses, then the market usually moves on to focus on the next one, then there will be a contagion that will affect different countries that probably don’t deserve those kinds of consequences.” Strippers in Paris Go on Strike, Say Wages 'Miserable' (Reuters) The Crazy Horse, one of the most popular establishments of its kind in the world, said it was forced to cancel performances this week for the first time since the cabaret was created in 1951. The night club, which declined to give details on salary demands or current wages, said in a statement that it had always taken the wellbeing of its artists very seriously and that talks were continuing to resolve the dispute. "It's an exceptional place which has the specialty of presenting a fully naked show," Suzanne, one of the dancers, told RTL radio. "What's wrong is that we are asked to work 24 days per month for a pay that is worse than miserable," she said. JPMorgan’s Trading Loss Is Said to Rise at Least 50% (NYT) The trading losses suffered by JPMorgan Chase have surged in recent days, surpassing the bank’s initial $2 billion estimate by at least $1 billion, according to people with knowledge of the losses. When Jamie Dimon, JPMorgan’s chief executive, announced the losses last Thursday, he indicated they could double within the next few quarters. But that process has been compressed into four trading days as hedge funds and other investors take advantage of JPMorgan’s distress, fueling faster deterioration in the underlying credit market positions held by the bank. A spokeswoman for the bank declined to comment, although Mr. Dimon has said the total paper trading losses will be volatile depending on day-to-day market fluctuations. Several on FOMC Said Easing May Be Needed on Faltering (Bloomberg) The Federal Reserve signaled further monetary easing remains an option to protect the U.S. economy from the danger that lawmakers will fail to reach agreement on the budget or Europe’s debt woes worsen. Several members of the Federal Open Market Committee said new actions could be necessary if the economy loses momentum or “downside risks to the forecast became great enough,” according to minutes of the Federal Open Market Committee’s April meeting released yesterday in Washington. 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