The Looming SPAC Meltdown [Forbes]
The SPAC boom of 2020 is probably the biggest Wall Street story of the year, but almost no one has noticed the quiet force driving this speculative bubble: a couple dozen obscure hedge funds like Polar Asset Management and Davidson Kempner, known by insiders as the “SPAC Mafia.” It’s an offer they can’t refuse. Some 97 percent of these hedge funds redeem or sell their IPO stock before target mergers are consummated…. Though they’re loath to talk specifics, SPAC Mafia hedge funds say returns currently run around 20%....
There’s only one loser in this equation. As always, it’s the retail investor, the Robinhood novice, the good-intentions fund company like Fidelity. They all bring their pickaxes to the SPAC gold rush, failing to understand that the opportunities were mined long before they got there—by the sponsors who see an easy score, the entrepreneurs who get fat exits when their companies are acquired and the SPAC Mafia hedge funds that lubricate it all.

Dow futures extend losses following Wednesday’s sell-off [CNBC]
“This is the perfect day that describes what we’re calling the ‘Covid air pocket.’ We have a linearity issue, which is that you can’t get there from here without going through a lot of bad news and some slowdown in the real economy,” Alicia Levine, chief strategist at BNY Investment Management, said…. Thursday morning will bring another look at how the labor market recovery is faring amid rising cases of Covid-19. Economists surveyed by Dow Jones expect the reading for initial jobless claims to come in at 710,000, roughly flat compared with the prior week.

Is the Traditional Christmas Nightmare for Funding Markets Over? [WSJ]
In recent years, short-term borrowing costs in U.S. dollars, particularly for investors overseas, have often surged in December as major banks rein in activity to prevent regulatory charges…. This year, the chance of a sudden blowup looks low. But with so much riding on a combination of central bank support and regulatory happenstance, the conditions that made it so could be fleeting. Christmas panic in dollar funding is likely to be canceled this year, but the tradition can’t be consigned to history yet.

Banks May Be Office Landlords’ New Problem Tenants [WSJ]
Public-sector tenants have been a bright spot for real-estate owners. Less exposed to the business cycle, they have doubled their usual share of overall leasing activity in Europe since the pandemic began, data from real-estate services giant CBRE shows. Tech companies’ share was 17.9%, in line with the average between 2012 and 2019…. Banks look far more cautious. Finance companies’ share of overall European leasing activity dipped to 9% during the second and third quarters, from their 17% average.

AQR to Liquidate Some Funds After ‘Persistent Outflows’ [II]
Next month, the alternative investment firm plans to shut down several liquid alternative mutual funds, including a multi-strategy alternative fund, high- and low-volatility funds, and a volatility risk premium strategy, and according to Securities and Exchange Commission filings….
Sources say AQR is shutting down funds because there hasn’t been enough demand from investors to justify the products. Indeed, the funds are small. According to Morningstar, the multi-strategy alternative fund, similar in strategy to AQR’s Delta hedge fund, had $33 million in assets. Delta had $1.2 billion as of September 30. The AQR Style Premia Alternative LV Fund had $39 million at the end of October, while the AQR Volatility Risk Premium Fund had $11.5 million, Morningstar said. Both are being liquidated.

Fannie, Freddie Should Hold $280 Billion in Capital, FHFA Says [WSJ]
The decision sets a high hurdle for the companies. Based on their combined size earlier this year, Fannie and Freddie would have to hold about $283 billion. At present, they hold roughly $35 billion and would need to make up the difference through a combination of retained earnings and possible future stock sales…. The FHFA is seeking to put the companies—which guarantee about half the $11 trillion mortgage market—on a sound financial footing before returning them to private ownership. It is unclear if there is enough time to carry out those plans ahead of the Jan. 20 inauguration of President-elect Joe Biden, who is considered unlikely to continue the effort.

China Borrows at Negative Rates for the First Time [WSJ]
The deal was worth €4 billion, the equivalent of $4.74 billion, and split between 5-, 10- and 15-year bonds. The 5-year bonds were priced late Wednesday to yield negative 0.152%, while the 10- and 15-year securities were sold with positive yields of 0.318% and 0.664%, respectively…. Public debt has ballooned around the globe as countries raise funds to fight the pandemic. Moody’s projects that China’s public-sector debt, including borrowings by governments and state-owned enterprises, will rise to 185%-190% of gross domestic product in 2020-2021 from 167% in 2019.

Beaten-up Paramount rejects buyout, but is taking offers [TheRealDeal]
“Our board and management team remain open-minded,” Paramount chairman and CEO Albert Behler said in a letter to Bow Street managing partners Akiva Katz and Howard Shainker.
Paramount, which has a market value of $2 billion, is much smaller than office behemoths like Vornado and SL Green Realty and could still be acquired.

Related

By AntanaCoins (Own work) [CC BY-SA 3.0], via Wikimedia Commons

Opening Bell: 10.13.20

Fodder for China virus conspiracy theories; not-so-Perfect Home for sale; SPACs SPACs SPACs SPACs; and more!

lake mead

Opening Bell: 9.23.20

September stutter; SPAC strikes; water woes; Elon equivocates; and more!

Bill ackman beach

Opening Bell: 6.12.20

The roller coaster rolls on; Ackman, Loeb raising money; M&A and IPOs; and more!

Opening Bell: 8.14.15

Flash crash trader out on bail; Hedges funds screwed on China; Tsipras needs a friend; "Man Clogs Casino Pipes With Counterfeit Chips Worth $2.7 Million"; and more.

jaws

Opening Bell: 11.12.20

Work-from-home tax; Jaws SPAC eats seniors; better than gold; and more!

Bill ackman beach

Opening Bell: 9.3.20

Ackbnb on ice; USND > USGDP; that vibration you feel is Jack Bogle spinning in his grave; and more!

coronavirus

Opening Bell: 8.18.20

Hedge funds not feeling sick about missing vaccine rally; Jeff Smith hears people are throwing money at SPACs; GM fantasizes about becoming Tesla; and more!

Opening Bell: 06.22.12

Citigroup Leads Wall Street Banks In Moody’s Downgrade Dismissal (Bloomberg) Moody’s two-grade cut of Citigroup’s ratings was unwarranted, arbitrary and failed to recognize the lender’s financial strength, the New York-based bank said in a statement. Investors shouldn’t rely on “opaque” credit ratings, it said. “Moody’s approach is backward-looking and fails to recognize Citi’s transformation over the past several years,” said the bank. “Citi believes that investors and clients have become much more sophisticated in their credit analysis over the past few years, and that few rely on ratings alone -- particularly from a single agency -- to make their credit decisions.” Moody's Downgrade of Banks ‘Absurd,’ Says Dick Bove (CNBC) “This is one of the most absurd things that Moody’s has ever done perhaps in the history of the company,” said Dick Bove, Vice President of Equity Research in the Financial Sector at Connecticut-based Rochdale Securities. JPMorgan Trading Loss Drove Three-Level Standalone Cut (Bloomberg) “It illustrates the challenges of monitoring and managing risk in a complex global organization and highlights the opacity of such risks,” Moody’s said. Ratings Downgrade Cuts Deeply At Morgan Stanley (NYT) In an e-mail sent to staff members after the downgrade was announced, Mr. Gorman tried to reassure employees about the bank’s future. “While we do not believe that this outcome reflects all of the transformative changes we have made to the firm, there is an acknowledgment in Moody’s decision today that real progress has been made at Morgan Stanley, in what is an extremely difficult environment for our industry,” he wrote. Hedge Funds Mask Identities (WSJ) It is the latest in-vogue accessory among hedge-fund managers: a "masked fund." Bridgewater Associates has "ZQPGGAV00000," John Paulson has "Paulson Fund 1" while Cliff Asness's AQR Capital Management prefers "805-1355888867." The cryptic monikers, more product barcodes than real handles, enable the hedge-fund managers to shield the identities of their funds from the prying eyes of regulators and outsiders in forms filed with the Securities and Exchange Commission...The practice, allowed under a new SEC instruction that lets firms preserve the anonymity of their clients in certain cases, has irked some investors and their advisers. They argue that hiding funds' identities in regulatory filings undermines Washington's efforts to make the reticent world of hedge funds more transparent and hinders investors' efforts to keep tabs on the firms that manage their assets. Emails Ties Goldman Manager, Rajaratnam (WSJ) A current Goldman managing director exchanged emails with Galleon founder Raj Rajaratnam ahead of a daily "morning meeting" at Galleon, according to previously undisclosed emails and wiretapped phone call transcripts reviewed by The Wall Street Journal. In the emails, the Goldman manager offered what he called "tiddie biddies" about some top technology firms, including Apple and Intel Corp. Anderson Cooper Berates Photo-Snapping Airplane Passenger (LAT) "Normally I would just be like, 'We're not going to win this one,' but I've lately become emboldened," Cooper said in an interview. "I grabbed the guy on the shoulder and I said something to the effect of, 'Bitch, what ... are you doing?'" Pimco’s Gross Warns Of Risk Assets (Bloomberg) Gross, who manages $261 billion for the Pimco Total Return Fund (PTTRX), said in a Twitter post that risk markets are vulnerable as the “monetary bag of tricks empties.” Spanish Plan Is Flawed, Says IMF (WSJ) The euro zone needs to quickly set up a mechanism that allows it to directly recapitalize weak banks, "in order to break the negative feedback loop that we have between banks and sovereigns," IMF Managing Director Christine Lagarde said after a meeting with the bloc's finance ministers in Luxembourg. Ms. Lagarde also called for "creative and inventive" measures from the European Central Bank, suggesting that the bank could restart its bond-buying program to keep struggling countries' funding costs in check or further cut already-low interest rates. Einhorn Enters $1 Million Buy-In Poker Tournament For Charity (Bloomberg) Einhorn, who finished 18th in the World Series of Poker’s main event in 2006, is among at least 42 entrants for the July 1-3 charity event in Las Vegas, known as the Big One for One Drop. Angry Moms Take On Nutella (Bloomberg) Laura Rude-Barbato, a coffee shop owner in Imperial Beach, California, used to feed her children Nutella several times a week [because she for some reason didn't realize that a chocolate spread might be filled with sugar]. It was easy to identify with the advertising that depicted a frenzied mom serving up the chocolate-hazelnut spread with the tagline “breakfast never tasted this good,” said Rude-Barbato. Then she noticed the 10.5 grams of sugar per tablespoon. “I had no idea,” she says. “I might as well have been giving my kids a brownie for breakfast.” Rude-Barbato kicked the Nutella habit, then joined a class action lawsuit in a federal court in California that claimed Ferrero SpA’s U.S. unit misled consumers via labeling and marketing into thinking Nutella was healthy.