Opening Bell: 10.20.17

Wall Street’s Robots Still Have a Lot to Learn About Being a Human Trader (BBG)
Back in the 1990s, Paul Tudor Jones assigned a team of coders to a project dubbed “Paul in a Box.” The effort sought to break down the DNA of the hedge fund manager’s trading -- how he sizes up markets and generates ideas -- to train a computer to do the same. The code created then was upgraded many times and is still used at his firm, Tudor Investment Corp. But it never took over.

Jim Grant's Botched Bridgewater Takedown (II)
Industry gadflies had whispered it for years. Prime brokers had questioned over beers who they traded through. Bankers, perhaps grouchy that they were, finally, passé, claimed over lunch that their returns didn't add up. Journalists, hungry to make a name as the next Woodward, begged their recalcitrant editors – me included – to let them investigate. “If we publish that, you either win a Pulitzer or you bankrupt this company,” was my stock response. Jim Grant, on the other hand, just went out and did it.

Hedge fund king sues Barclays over £650m ‘rigging’ (Evening Standard)
Red Kite, one of the biggest metals traders in the world, claims Barclays told its own traders price-sensitive information about the funds’ positions in the copper market. Barclays bet against Red Kite, manipulating prices on the London Metal Exchange in the process, claims the hedge fund.

Lyft Is Said to Explore I.P.O. as It Raises $1 Billion Led by Alphabet (NYT)

Lyft has had talks with investment banks about an initial public offering next year, according to two people briefed on the discussions. To bolster itself ahead of any public offering, Lyft on Thursday said it had raised $1 billion in financing led by CapitalG, a venture investment arm of Google’s corporate parent, Alphabet. The funding values Lyft at $10 billion before the introduction of new capital — a significant jump from the company’s last valuation of $6.9 billion.

WeWork: A $20 Billion Startup Fueled by Silicon Valley Pixie Dust (WSJ)
Similar investor hopes surrounded IWG, the flexible workspace provider, which was called Regus when it went public in 2000. Demand plummeted in the dot-com bust, leaving it with high fixed lease costs and sinking rents from subtenants. Its U.S. business sought bankruptcy protection. IWG is valued at around $5,600 for each desk, compared with WeWork’s $135,000 per desk.

Paul Singer: Efficient Markets Need Guys Like Me (WSJ)
There is a fair debate to be had about the appropriate balance of power between public corporations and their shareholders. But the debate has been badly skewed by a false narrative. “Anti-activist” advisers have attempted to drive a wedge between activist investors and index funds by suggesting that activists are interested only in short-term gains at the expense of long-term value. This divisive framing is objectively false and has done harm to the goal of generating sustainable returns for all investors. SEE ALSO: Activist Investor Elliott Zeros In on BHP CEO

Poking Holes in the Market Bubble Hypothesis (CS Investing)
A less obvious factor that is producing higher P/E ratios today is how accounting practices penalize certain growth investments. When a company builds a new plant, GAAP accounting spreads that cost over its useful life—often 40 years—so the cost gets expensed through 40 years of depreciation as opposed to just flowing through the current income statement. But when Amazon hires engineers and programmers to help it prepare for sales that could double over the next four years, those costs get immediately charged to the income statement. When Alphabet invests in autonomous vehicles for rewards that are years and years away, the costs are expensed now and current earnings are reduced.

An Evening in Wonderland (Josh Brown)
The big rumor going around last night is that Goldman Sachs is going to launch market-making in crypto currency for their clients in the third quarter of 2018. I don’t know if that’s true or not, but multiple people who don’t know each other are saying it. And why wouldn’t they? If that’s what their customers are asking for (and they are), then of course they will. This is the institutionalization of something that right now is still on the fringes of finance.

Bald eagle spotted eating black cat on downtown Norfolk sidewalk (The Virginian-Pilot)
A black cat apparently crossed the wrong path Tuesday afternoon – and ended up as lunch for a bald eagle. Dozens of people crowded around as the eagle ate the cat on the sidewalk. Traffic stopped in front of Advance Auto Parts at 26th Street and Monticello Avenue as drivers took a closer look.