Holiday Bell: 9.1.17

Introducing the MAGA ETF; subprime is back, baby; Steve Cohen is once again raising eyebrows; floating masses of fire ants are stalking the waters around Houston; millennials are killing language as we know it; and more.
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By Gage Skidmore from Peoria, AZ, United States of America (Make America Great Again hat) [CC BY-SA 2.0], via Wikimedia Commons

By Gage Skidmore from Peoria, AZ, United States of America (Make America Great Again hat) [CC BY-SA 2.0], via Wikimedia Commons

New ETF plans to 'make America great again' (Reuters)
The Point Bridge GOP Stock Tracker exchange-traded fund will list under the ticker “MAGA,” according to a filing with U.S. securities regulators this week, an apparent reference to the slogan repeatedly used by U.S. President Donald Trump. The "MAGA" fund will invest in a group of S&P 500 .SPX companies with employees or political action committees that donate significant money to back Republican candidates for office.

‘Nonprime has a nice ring to it’: the return of the high-risk mortgage (FT)
Plenty of people told Perl, 68, that he couldn’t bring this stuff back so soon after the global financial crisis, and after regulators all over the US radically tightened rules on mortgages. People said he was risking his net worth, that he’d “be sued into oblivion”. “How many times we hear that, Kyle?” he asks, turning to his protégé, 39-year-old Kyle Gunderlock, who was a VP of sales at Perl’s old firm and is now president of the new one. “‘You guys are going to get f***ing arrested,’ is the one I always remember,” says Gunderlock.

Amazon Puts Bond Traders on Edge in Once-Quiet Corner of Market (BBG)
As conventional wisdom had it, grocers could resist the onslaught of e-commerce that was decimating industries such as clothing and electronics. After all, shoppers want to touch their avocados and see their T-bones. But now, just days after Amazon.com Inc. officially entered the grocery business, that confidence is shaken. The bonds that financed Apollo Global Management’s purchase last year of upscale grocer Fresh Market plunged to new lows this week. The cost of buying contracts to protect against a default in Albertsons Cos.’s debt has jumped. Bonds of Bi-Lo Holdings have lost almost half their value this year.

Correlation crash clears way for stockpickers (FT)
The passive investment trend has not been reversed, but it has at least been ameliorated. As a result, asset management stocks have outperformed the broader US stock market so far this year. Charles Schwab’s Liz Ann Sonders argues that as long as correlations remain low and sector dispersions high, “the conditions will remain ripe for active [management] to continue to make up some lost relative ground versus passive”.

Steven Cohen raises eyebrows by using auditor to sell fund assets holding up SEC settlement (MarketWatch)
SAC Capital’s Steven Cohen, faced with a Securities and Exchange Commission deadline to liquidate his funds as part of an insider-trading settlement, has turned to an affiliate of his firm’s auditor to take the remaining investments off his hands. The move appears to fly in the face of SEC auditor independence rules that prohibit business relationships between auditors and their clients—rules that apply not only to the organization under audit, but the audit client’s affiliates as well.

Did Buffett Kill Value Investing? (Irrelevant Investor)
Prior to the publication of Superinvestors, the Fama French Value index had outperformed the S&P 500 in 89% of all rolling twenty year periods, and since then, that number has fallen to 62%. There is a big difference – a huge difference in fact – between the Fama French Index and real value investing via old school stock selection. Nevertheless, it is interesting that in the 33 years since 1984, value, which I think people just assume beats the index, has failed to do just that.

The Great Equity-For-Debt Swap (Jesse Felder)
Simply reducing equity liability by increasing debt liability doesn’t change the overall liability and thus the valuation. It just changes the structure of those liabilities. The ‘great shrinking stock market’ is almost exactly offset by the ‘massive growing corporate bond market’ and the end result is a sharp increase in corporate leverage. I have no doubt that investors celebrating all of these leveraged buybacks and takeovers today will reconsider this gleeful response during the next bear market.

What To Do When Facing A Floating Ball Of Fire Ants (NPR)
Among the many scenes of devastation coming out of areas flooded by Tropical Storm Harvey, images of floating rafts of these ants have gone viral on social media. The ants are common in the areas of the southern United States hit by floods. The floodwaters lift the ants from their ant hills on the ground, and clinging together, they are capable of drifting for miles until they find dry land to reestablish a colony on.

During a summer of crisis, Trump chafes against criticism and new controls (WaPo)
Trump was especially upset that Cohn went public with his complaints about the president’s handling of Charlottesville, even after Trump listened to Cohn vent during a private meeting on Aug. 18 in Bedminster, N.J. The president has been quietly fuming about Cohn for the past week but has resisted dismissing him in part because he has been the face, along with Treasury Secretary Steven Mnuchin, of the administration’s tax-cut strategy.

Kushners’ China Deal Flop Was Part of Much Bigger Hunt for Cash (BBG)
As 2015 drew to a close, there were no serious offers, and many in the company figured the plans were all but dead. Then Donald Trump began his meteoric political rise, and Jared Kushner was right on his coattails. Discussions heated up. Sheikh Hamad bin Jassim Al Thani, the Qatari businessman who had once run that nation’s sovereign-wealth fund, had earlier declined to even take a meeting with the Kushner Cos. executives, according to people familiar with the talks. In 2016, Al Thani agreed to invest $500 million from the private fund he runs, contingent on investment from others, which failed to materialize.

The Fake-News Fallacy (New Yorker)
In recent times, Donald Trump supporters are the ones who have most effectively applied Grierson’s insight to the digital age. Young Trump enthusiasts turned Internet trolling into a potent political tool, deploying the “folk stuff” of the Web—memes, slang, the nihilistic humor of a certain subculture of Web-native gamer—to give a subversive, cyberpunk sheen to a movement that might otherwise look like a stale reactionary blend of white nationalism and anti-feminism. As crusaders against fake news push technology companies to “defend the truth,” they face a backlash from a conservative movement, retooled for the digital age, which sees claims for objectivity as a smoke screen for bias.

Have Smartphones Destroyed a Generation? (The Atlantic)
Around 2012, I noticed abrupt shifts in teen behaviors and emotional states. The gentle slopes of the line graphs became steep mountains and sheer cliffs, and many of the distinctive characteristics of the Millennial generation began to disappear. In all my analyses of generational data—some reaching back to the 1930s—I had never seen anything like it. What happened in 2012 to cause such dramatic shifts in behavior? It was after the Great Recession, which officially lasted from 2007 to 2009 and had a starker effect on Millennials trying to find a place in a sputtering economy. But it was exactly the moment when the proportion of Americans who owned a smartphone surpassed 50 percent.

Yes, Google Uses Its Power to Quash Ideas It Doesn’t Like—I Know Because It Happened to Me (Gizmodo)
The most disturbing part of the experience was what came next: Somehow, very quickly, search results stopped showing the original story at all. As I recall it—and although it has been six years, this episode was seared into my memory—a cached version remained shortly after the post was unpublished, but it was soon scrubbed from Google search results. That was unusual; websites captured by Google’s crawler did not tend to vanish that quickly. And unpublished stories still tend to show up in search results as a headline. Scraped versions could still be found, but the traces of my original story vanished. It’s possible that Forbes, and not Google, was responsible for scrubbing the cache, but I frankly doubt that anyone at Forbes had the technical know-how to do it.

Will $6 Avocado Toast Help Walmart Compete With Amazon’s Whole Foods? (Eater)
With digital behemoth Amazon plowing through every food retail space it can, from restaurant delivery to grocery stores, many retailers are scrambling to keep up or reinvent themselves. Walmart, for instance, acquired online market and grocer Jet in early August amid rumors of Amazon’s impending purchase of Whole Foods. In its partnership with Grown, Walmart is trying to push the notion that it is the largest seller of organic food in the country, despite Amazon's Whole Foods takeover.

Just smile: In KFC China store, diners have new way to pay (Reuters)
Customers will be able to use a “Smile to Pay” facial recognition system at the tech-heavy, health-focused concept store, part of a drive by Yum China Holdings Inc to lure a younger generation of consumers.

My girlfriend and I meow at each other. It’s not as unusual as it sounds. (WaPo)
Coming home late on a Tuesday evening after hours of reporting and running errands, I dropped my bag right at the door. Settling into a seat at the kitchen table, I turned my exhausted gaze to my girlfriend, who was sitting at her laptop. When she looked up, I could tell she was ready to begin the daily recap of who we called, what projects we accomplished, and how many buckets we sweated on the subway. Except that’s not how our conversation started. “MEYYYYOWWWWW,” I wailed mournfully.

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(Getty Images)

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