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Einhorn Warns “This may rank among the most perilous times, absent war, in modern American history” (Q3 Letter)

Einhorn Warns “This may rank among the most perilous times, absent war, in modern American history” (Q3 Letter)



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David Einhorn’s Q3 2020 letter to investors.

Dear Partner:The Greenlight Capital funds (the “Partnerships”) returned 5.9%1 in the third quarter compared to 8.9% for the S&P 500 index.We have always ended our quarterly letters with a quote that may or may not have something to do with the rest of the letter. This quarter, we start with one from Marcus Aurelius:The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane.The coming elect ion will settle (or attempt to settle) which side is in the majorit y. This may rank among the most perilous times, absent war, in modern American history. The pandemic has exposed and exacerbated deep-rooted inequities. Peaceful protests for social change by day have sometimes devolved into rioting and looting at night. As the police have been unable to keep some cit ies safe, protests have been met with armed opposition fro m vigilantemilitias. Violence and death have ensued. The pandemic has compounded the public safety problem by making it impractical to arrest any but the most violent offenders, as jailing creates a public health risk. It isn’t difficult to envision this tempest exploding after the election, no matter which side wins. According to Politico, 44% of Republicans and 41% of Democrats believe there would be at least “a little” justification for violence if the other party’s nominee wins the election.2A poll by Rasmussen Reports found that 34% of likely voters believe a civil war is likely in the next 5 years.3 While this is probably too pessimistic, it likely reflects a rising tail risk.At the national level, the political parties are unable to find common ground on almost anything. The winning side tells the losing side that “elections have consequences” and uses that rationale to change rules that had previously maintained political balance and stability. This dynamic has been escalating over the past few election cycles, creating dysfunction in governance. The current president acts as if he only represents the states (and people) that voted for him. The opposition threatens to retaliate should they gain control by eliminating the filibuster, adding two new states that will alter the electoral map in their favor and packing the Supreme Court with addit ional seats. This tit-for-tat and related social unrest create risk. The political center is collapsing.1Source: Greenlight Capital. Please refer to information contained in the disclosures at the end of the letter.2

Page 2GREENLIGHT®The only common ground between the two parties seems to be money-printing. Over $3.3trillion has been printed year-to-date, which represents nearly 22% of all U.S. dollars in existence at the end of 2019.4 Unsurprisingly, gold is outperforming. Investors who have argued against gold for decades are now buying some.As for the question of sanity, we are now in the midst of an enormous tech bubble. We prematurely identified what we thought was a bubble in early 2016. Part of our thinking at the time was that the height of the 1999-2000 bubble was a once-in-a-career experience and that investors would not repeat that level of insanity. Clearly, we were mistaken.Four years later, there is a consensus that we are in a bubble. Barron’s recently ran this on the cover:4

Page 3GREENLIGHT®All the signs of a bubble are there, including: •an IPO mania;•extraordinary valuations and new metrics for valuation;5•a huge market concentration in a single sector and a few stocks; •a second tier of stocks that most people haven’t heard of at S&P 500-type market capitalizations; •the more fanciful and distant the narrative, it seems the better the stock performs; •outperformance of companies suspected of fraud based on the consensus belief that there is no enforcement risk, without which crime pays;•outsized reaction to economically irrelevant stock splits; •increased participation of retail investors, who appear focused on the best-performing names;•incredible trading volumes in speculative instruments like weekly call options and worthless common stock;6 and•a parabolic ascent toward a top. There are many anecdotes of toppy behavior. We will share one: We recently received a job application with the email subject, “I am young, but good at investments” from a 13-year-old who purports to have quadrupled his money since February.Some analysts and commentators are comparing this bubble to the prior one. Have the valuations reached the prior insanity’s? Is the IPO mania just as large? Are the companies better today? Are they growing faster? Have the specific events that popped the last bubble happened? Are they likely to happen soon?We believe these questions are a fool’s errand. The bubbles will never be exactly the same. In 2000, the Nasdaq peaked at 5,000. Why not 4,000? Why not 10,000? Or 20,000? Would there really have been a difference? If the Nasdaq had peaked at 3,500 instead of 5,000, the losses would have been 65% instead of 80%. Had it peaked at 3,500, it would be easier to argue that this bubble has surpassed that one. Had it peaked at 20,000, it would be easier to argue that there is still a long way to go. This analysis is arbitrary. Is a bubble only dangerous when it has exceeded the prior one on every metric? What matters in a bubble is market psychology, not valuat ion. Valuat ion is irrelevant; that’s what makes it a bubble. Jeremy Grantham has done so me of the best work on bubbles and by his criteria this one is a “Real McCoy.” The question at hand is where are we in the 5Our recent favorite is price to sales ratio divided by sales growth. We have previously critiqued the so-called PEG ratio (P/E divided earnings growth). This ratio is the PEG ratio on steroids and amounts to nonsense. This goes into the category of “every behavior can find a rationalization.” 6Take Hertz common stock, for example. Hertz traded 1 billion shares, or 6x the outstanding, in a single day a couple of weeks ago on the news that the company had obtained DIP financing. Historically, in a bankruptcy like this, the shares would be promptly delisted by the exchange to protect retail investors. However, there appears to be too much money to be made here churning extraordinary volumes of worthless securities.

Page 4GREENLIGHT®psychology of this bubble? On March 10, 2000, nobody knew that it was the top. Even by September 2000, it wasn’t clear. There was no obvious event that marked the top. Only in hindsight do people try to back fit an explanation.Bubbles tend to topple under their own weight. Everybody is in. The last short has covered. The last buyer has bought (or bought massive amounts of weekly calls). The decline starts and the psychology shifts from greed to complacency to worry to panic. Our working hypothesis, which might be disproven, is that September 2, 2020 was the top and the bubble has already popped. If so, investor sentiment is in the process of shifting from greed to complacency. We have adjusted our short book accordingly including adding a fresh bubble basket of mostly second-tier companies and recent IPOs trading at remarkable valuations. As for the third quarter, in many ways it was more of the same. The Russell 1000 Pure Growth index advanced 15% while the Russell 1000 Pure Value index fell 1%. Year to date,the relat ionship is +39% vs. -23%. This remains an enormous headwind to our strategy. However, we fared better this quarter. Our longs contributed 15%, our shorts lost 12% and macro added 3%.Green Brick Partners (GRBK) was the primary driver of this quarter’s results. The shares advanced from $11.85 to $16.10. Housing appears to be a major beneficiary from the pandemic, as low interest rates combined with an expanded preference for single-family detached housing has spurred demand. GRBK is well-positioned in secularly growing markets including Dallas, Atlanta, Colorado Springs and Vero Beach. In the second quarter, the company earned $0.66 per share, shattering consensus estimates of $0.42. The company’s record backlog and strong order rate bode well for future earnings. Current consensus of $1.88 per share this year suggests EPS growth of over 60% year-over-year. We believe the shares remain deeply undervalued at 9x estimates, as business momentum continues to accelerate.We established medium-sized new lo ng posit ions in SYNNEX Corporation (SNX), ams AG (Switzerland: AMS) and NCR Corporation (NCR). Historically an IT hardware distributor, SNX began scaling a Business Process Outsourcing (BPO) division in 2014 through a series of acquisit io ns. Both business segments have attractive organic growth prospects, strong management and good reputations with customers. In January, SNX announced it would spin off the BPO business in the second half of the year. We believe the spin-off will create significant value for shareholders. While IT hardware distributors have low margins and trade at below market P/E mult iples, established BPOs have higher margins and trade at premium P/E mult iples. We believe the spin-off will reveal that the sum of the parts is worth more than the whole. We acquired our shares at an average entry price of $126.29, or just over 10x FY2021 consensus earnings per share. SNX shares ended the quarter at $140.06.

Page 5GREENLIGHT®AMS designs and manufactures advanced sensor solutions and is a leading supplier of optical sensing so lut ions for structured light 3D sensing, which is used in smartphones forfacial recognit ion. In an effort to accelerate growth, AMS acquired Osram, which makes LEDs used in cars and other devices. In the midst of funding the acquisit ion, AMS shares fell sharply over concerns about auto sales. However, we believe this is a strategically soundacquisit ion, and cost synergy realization, strong smartphone sales and a recovery in Osram’s business will drive the company’s earnings higher in the coming quarters. We acquired our stake at an average entry price of CHF 16.71 per share, or less than 7x our estimate of 2022 earnings. Shares ended the quarter at CHF 20.93.NCR sells and services ATMs, self-checkout terminals and other point-of-sale terminals to banks, retailers and restaurants. In 2018, new management embarked on a multi-year strategy to convert its perpetual license software sales to a recurring “software as a service” fee model. Earlier this year, the stock dropped by more than 50% as the pandemic caused many of NCR’s customers to defer purchases. However, many o f its customers, including mass merchants, grocers, convenience stores, gas stations and quick-service restaurants, have held up well this year. Over the long term, we believe NCR is well-positioned as banks and stores shift activity from human tellers and cashiers to more ATMs and self-checkout options. We expect outsized earnings growth in 2021 due to both pent-up customer demand as well as further progress on management’s strategic initiatives. We purchased our shares at $18.89, or around 8x consensus 2021 EPS estimates. The shares ended the quarter at $22.14.We did not have any significant portfolio exits.We had one analyst addit ion and one analyst departure during the quarter. Chad Gex joined us in August as a research analyst based in London. Chad was previously a Global Equit y Analyst at USS Investment Management, the in-house manager of the UK’s largest pension scheme. Prior to that, he was a Senior Research Analyst for investment fund manager AllianceBernstein. A Manhattan native, Chad worked early on in his career as a sell-side equity research associate for Sanford C. Bernstein in New York. Welcome, Chad!Analyst Philipp Endemann left to be a portfolio manager at another fund. We thank him for his contributions – and for introducing us to Chad! This marks the third time in recent yearsthat a departing analyst has passed the baton to a friend. A few people are working from the office, which has been open since late summer. Most continue to work from ho me. Our annual Partner Dinner will not be an in-person event this year. We are working on potential alternate arrangements and will share details with you as soon as we have them. At quarter-end, the largest disclosed long positions in the Partnerships were AerCapHoldings, At las Air Worldwide Holdings, Brighthouse Financial, Change Healthcare and

Page 6GREENLIGHT®Green Brick Partners. The Partnerships had an average exposure of 138% long and 80% short.“If you could actually read my mind, you’d know I’m laughing at your gullibility for taking this carnival barker seriously about anything.” – Gertrude the PigBest Regards,Greenlight Capital, Inc.

The post Einhorn Warns “This may rank among the most perilous times, absent war, in modern American history” (Q3 Letter) appeared first on ValueWalk.

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United Airlines adds new flights to faraway destinations

The airline said that it has been working hard to "find hidden gem destinations."



Since countries started opening up after the pandemic in 2021 and 2022, airlines have been seeing demand soar not just for major global cities and popular routes but also for farther-away destinations.

Numerous reports, including a recent TripAdvisor survey of trending destinations, showed that there has been a rise in U.S. traveler interest in Asian countries such as Japan, South Korea and Vietnam as well as growing tourism traction in off-the-beaten-path European countries such as Slovenia, Estonia and Montenegro.

Related: 'No more flying for you': Travel agency sounds alarm over risk of 'carbon passports'

As a result, airlines have been looking at their networks to include more faraway destinations as well as smaller cities that are growing increasingly popular with tourists and may not be served by their competitors.

The Philippines has been popular among tourists in recent years.


United brings back more routes, says it is committed to 'finding hidden gems'

This week, United Airlines  (UAL)  announced that it will be launching a new route from Newark Liberty International Airport (EWR) to Morocco's Marrakesh. While it is only the country's fourth-largest city, Marrakesh is a particularly popular place for tourists to seek out the sights and experiences that many associate with the country — colorful souks, gardens with ornate architecture and mosques from the Moorish period.

More Travel:

"We have consistently been ahead of the curve in finding hidden gem destinations for our customers to explore and remain committed to providing the most unique slate of travel options for their adventures abroad," United's SVP of Global Network Planning Patrick Quayle, said in a press statement.

The new route will launch on Oct. 24 and take place three times a week on a Boeing 767-300ER  (BA)  plane that is equipped with 46 Polaris business class and 22 Premium Plus seats. The plane choice was a way to reach a luxury customer customer looking to start their holiday in Marrakesh in the plane.

Along with the new Morocco route, United is also launching a flight between Houston (IAH) and Colombia's Medellín on Oct. 27 as well as a route between Tokyo and Cebu in the Philippines on July 31 — the latter is known as a "fifth freedom" flight in which the airline flies to the larger hub from the mainland U.S. and then goes on to smaller Asian city popular with tourists after some travelers get off (and others get on) in Tokyo.

United's network expansion includes new 'fifth freedom' flight

In the fall of 2023, United became the first U.S. airline to fly to the Philippines with a new Manila-San Francisco flight. It has expanded its service to Asia from different U.S. cities earlier last year. Cebu has been on its radar amid growing tourist interest in the region known for marine parks, rainforests and Spanish-style architecture.

With the summer coming up, United also announced that it plans to run its current flights to Hong Kong, Seoul, and Portugal's Porto more frequently at different points of the week and reach four weekly flights between Los Angeles and Shanghai by August 29.

"This is your normal, exciting network planning team back in action," Quayle told travel website The Points Guy of the airline's plans for the new routes.

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Walmart launches clever answer to Target’s new membership program

The retail superstore is adding a new feature to its Walmart+ plan — and customers will be happy.



It's just been a few days since Target  (TGT)  launched its new Target Circle 360 paid membership plan. 

The plan offers free and fast shipping on many products to customers, initially for $49 a year and then $99 after the initial promotional signup period. It promises to be a success, since many Target customers are loyal to the brand and will go out of their way to shop at one instead of at its two larger peers, Walmart and Amazon.

Related: Walmart makes a major price cut that will delight customers

And stop us if this sounds familiar: Target will rely on its more than 2,000 stores to act as fulfillment hubs. 

This model is a proven winner; Walmart also uses its more than 4,600 stores as fulfillment and shipping locations to get orders to customers as soon as possible.

Sometimes, this means shipping goods from the nearest warehouse. But if a desired product is in-store and closer to a customer, it reduces miles on the road and delivery time. It's a kind of logistical magic that makes any efficiency lover's (or retail nerd's) heart go pitter patter. 

Walmart rolls out answer to Target's new membership tier

Walmart has certainly had more time than Target to develop and work out the kinks in Walmart+. It first launched the paid membership in 2020 during the height of the pandemic, when many shoppers sheltered at home but still required many staples they might ordinarily pick up at a Walmart, like cleaning supplies, personal-care products, pantry goods and, of course, toilet paper. 

It also undercut Amazon  (AMZN)  Prime, which costs customers $139 a year for free and fast shipping (plus several other benefits including access to its streaming service, Amazon Prime Video). 

Walmart+ costs $98 a year, which also gets you free and speedy delivery, plus access to a Paramount+ streaming subscription, fuel savings, and more. 

An employee at a Merida, Mexico, Walmart. (Photo by Jeffrey Greenberg/Universal Images Group via Getty Images)

Jeff Greenberg/Getty Images

If that's not enough to tempt you, however, Walmart+ just added a new benefit to its membership program, ostensibly to compete directly with something Target now has: ultrafast delivery. 

Target Circle 360 particularly attracts customers with free same-day delivery for select orders over $35 and as little as one-hour delivery on select items. Target executes this through its Shipt subsidiary.

We've seen this lightning-fast delivery speed only in snippets from Amazon, the king of delivery efficiency. Who better to take on Target, though, than Walmart, which is using a similar store-as-fulfillment-center model? 

"Walmart is stepping up to save our customers even more time with our latest delivery offering: Express On-Demand Early Morning Delivery," Walmart said in a statement, just a day after Target Circle 360 launched. "Starting at 6 a.m., earlier than ever before, customers can enjoy the convenience of On-Demand delivery."

Walmart  (WMT)  clearly sees consumers' desire for near-instant delivery, which obviously saves time and trips to the store. Rather than waiting a day for your order to show up, it might be on your doorstep when you wake up. 

Consumers also tend to spend more money when they shop online, and they remain stickier as paying annual members. So, to a growing number of retail giants, almost instant gratification like this seems like something worth striving for.

Related: Veteran fund manager picks favorite stocks for 2024

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President Biden Delivers The “Darkest, Most Un-American Speech Given By A President”

President Biden Delivers The "Darkest, Most Un-American Speech Given By A President"

Having successfully raged, ranted, lied, and yelled through…



President Biden Delivers The "Darkest, Most Un-American Speech Given By A President"

Having successfully raged, ranted, lied, and yelled through the State of The Union, President Biden can go back to his crypt now.

Whatever 'they' gave Biden, every American man, woman, and the other should be allowed to take it - though it seems the cocktail brings out 'dark Brandon'?

Tl;dw: Biden's Speech tonight ...

  • Fund Ukraine.

  • Trump is threat to democracy and America itself.

  • Abortion is good.

  • American Economy is stronger than ever.

  • Inflation wasn't Biden's fault.

  • Illegals are Americans too.

  • Republicans are responsible for the border crisis.

  • Trump is bad.

  • Biden stands with trans-children.

  • J6 was the worst insurrection since the Civil War.

(h/t @TCDMS99)

Tucker Carlson's response sums it all up perfectly:

"that was possibly the darkest, most un-American speech given by an American president. It wasn't a speech, it was a rant..."

Carlson continued: "The true measure of a nation's greatness lies within its capacity to control borders, yet Bid refuses to do it."

"In a fair election, Joe Biden cannot win"

And concluded:

“There was not a meaningful word for the entire duration about the things that actually matter to people who live here.”

Victor Davis Hanson added some excellent color, but this was probably the best line on Biden:

"he doesn't care... he lives in an alternative reality."

*  *  *

Watch SOTU Live here...

*   *   *

Mises' Connor O'Keeffe, warns: "Be on the Lookout for These Lies in Biden's State of the Union Address." 

On Thursday evening, President Joe Biden is set to give his third State of the Union address. The political press has been buzzing with speculation over what the president will say. That speculation, however, is focused more on how Biden will perform, and which issues he will prioritize. Much of the speech is expected to be familiar.

The story Biden will tell about what he has done as president and where the country finds itself as a result will be the same dishonest story he's been telling since at least the summer.

He'll cite government statistics to say the economy is growing, unemployment is low, and inflation is down.

Something that has been frustrating Biden, his team, and his allies in the media is that the American people do not feel as economically well off as the official data says they are. Despite what the White House and establishment-friendly journalists say, the problem lies with the data, not the American people's ability to perceive their own well-being.

As I wrote back in January, the reason for the discrepancy is the lack of distinction made between private economic activity and government spending in the most frequently cited economic indicators. There is an important difference between the two:

  • Government, unlike any other entity in the economy, can simply take money and resources from others to spend on things and hire people. Whether or not the spending brings people value is irrelevant

  • It's the private sector that's responsible for producing goods and services that actually meet people's needs and wants. So, the private components of the economy have the most significant effect on people's economic well-being.

Recently, government spending and hiring has accounted for a larger than normal share of both economic activity and employment. This means the government is propping up these traditional measures, making the economy appear better than it actually is. Also, many of the jobs Biden and his allies take credit for creating will quickly go away once it becomes clear that consumers don't actually want whatever the government encouraged these companies to produce.

On top of all that, the administration is dealing with the consequences of their chosen inflation rhetoric.

Since its peak in the summer of 2022, the president's team has talked about inflation "coming back down," which can easily give the impression that it's prices that will eventually come back down.

But that's not what that phrase means. It would be more honest to say that price increases are slowing down.

Americans are finally waking up to the fact that the cost of living will not return to prepandemic levels, and they're not happy about it.

The president has made some clumsy attempts at damage control, such as a Super Bowl Sunday video attacking food companies for "shrinkflation"—selling smaller portions at the same price instead of simply raising prices.

In his speech Thursday, Biden is expected to play up his desire to crack down on the "corporate greed" he's blaming for high prices.

In the name of "bringing down costs for Americans," the administration wants to implement targeted price ceilings - something anyone who has taken even a single economics class could tell you does more harm than good. Biden would never place the blame for the dramatic price increases we've experienced during his term where it actually belongs—on all the government spending that he and President Donald Trump oversaw during the pandemic, funded by the creation of $6 trillion out of thin air - because that kind of spending is precisely what he hopes to kick back up in a second term.

If reelected, the president wants to "revive" parts of his so-called Build Back Better agenda, which he tried and failed to pass in his first year. That would bring a significant expansion of domestic spending. And Biden remains committed to the idea that Americans must be forced to continue funding the war in Ukraine. That's another topic Biden is expected to highlight in the State of the Union, likely accompanied by the lie that Ukraine spending is good for the American economy. It isn't.

It's not possible to predict all the ways President Biden will exaggerate, mislead, and outright lie in his speech on Thursday. But we can be sure of two things. The "state of the Union" is not as strong as Biden will say it is. And his policy ambitions risk making it much worse.

*  *  *

The American people will be tuning in on their smartphones, laptops, and televisions on Thursday evening to see if 'sloppy joe' 81-year-old President Joe Biden can coherently put together more than two sentences (even with a teleprompter) as he gives his third State of the Union in front of a divided Congress. 

President Biden will speak on various topics to convince voters why he shouldn't be sent to a retirement home.

According to CNN sources, here are some of the topics Biden will discuss tonight:

  • Economic issues: Biden and his team have been drafting a speech heavy on economic populism, aides said, with calls for higher taxes on corporations and the wealthy – an attempt to draw a sharp contrast with Republicans and their likely presidential nominee, Donald Trump.

  • Health care expenses: Biden will also push for lowering health care costs and discuss his efforts to go after drug manufacturers to lower the cost of prescription medications — all issues his advisers believe can help buoy what have been sagging economic approval ratings.

  • Israel's war with Hamas: Also looming large over Biden's primetime address is the ongoing Israel-Hamas war, which has consumed much of the president's time and attention over the past few months. The president's top national security advisers have been working around the clock to try to finalize a ceasefire-hostages release deal by Ramadan, the Muslim holy month that begins next week.

  • An argument for reelection: Aides view Thursday's speech as a critical opportunity for the president to tout his accomplishments in office and lay out his plans for another four years in the nation's top job. Even though viewership has declined over the years, the yearly speech reliably draws tens of millions of households.

Sources provided more color on Biden's SOTU address: 

The speech is expected to be heavy on economic populism. The president will talk about raising taxes on corporations and the wealthy. He'll highlight efforts to cut costs for the American people, including pushing Congress to help make prescription drugs more affordable.

Biden will talk about the need to preserve democracy and freedom, a cornerstone of his re-election bid. That includes protecting and bolstering reproductive rights, an issue Democrats believe will energize voters in November. Biden is also expected to promote his unity agenda, a key feature of each of his addresses to Congress while in office.

Biden is also expected to give remarks on border security while the invasion of illegals has become one of the most heated topics among American voters. A majority of voters are frustrated with radical progressives in the White House facilitating the illegal migrant invasion. 

It is probable that the president will attribute the failure of the Senate border bill to the Republicans, a claim many voters view as unfounded. This is because the White House has the option to issue an executive order to restore border security, yet opts not to do so

Maybe this is why? 

While Biden addresses the nation, the Biden administration will be armed with a social media team to pump propaganda to at least 100 million Americans. 

"The White House hosted about 70 creators, digital publishers, and influencers across three separate events" on Wednesday and Thursday, a White House official told CNN. 

Not a very capable social media team... 

The administration's move to ramp up social media operations comes as users on X are mostly free from government censorship with Elon Musk at the helm. This infuriates Democrats, who can no longer censor their political enemies on X. 

Meanwhile, Democratic lawmakers tell Axios that the president's SOTU performance will be critical as he tries to dispel voter concerns about his elderly age. The address reached as many as 27 million people in 2023. 

"We are all nervous," said one House Democrat, citing concerns about the president's "ability to speak without blowing things."

The SOTU address comes as Biden's polling data is in the dumps

BetOnline has created several money-making opportunities for gamblers tonight, such as betting on what word Biden mentions the most. 

As well as...

We will update you when Tucker Carlson's live feed of SOTU is published. 

Tyler Durden Fri, 03/08/2024 - 07:44

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