Friday, December 18, 2015

The fine print......

I always enjoy writing about things I've never seen happen before.....unfortunately, they are happening with regularity now.  Last week the Third Avenue Focused Credit Fund (a mutual fund in the family of Third Avenue Funds) froze redemptions.  That's right, you can't get your money out of the fund.  Mutual Funds are perfectly safe and liquid...right?  I've heard of Hedge Funds, freezing redemptions by negotiation or as part of the investor agreement.  But I've never heard of a Mutual Fund taking these steps  (It certainly may have happened, I just can't recall hearing about it recently). The press release says they are in contact with the SEC and coming up with a plan.  Their marketing materials refer to "THE POWER OF ORIGINAL THINKING", and as far as I can tell, this is some of the most original thinking I've seen in a while.... and their originality seems to be what got them into this mess in the first place.

Here's a recent (hypothetical) phone conversation between Third Avenue and a sweet little old lady retiree I'll call Margaret:

Margaret: Good morning sir, I'd like to get my money back.
TAF: I'm sorry you can't have it.
Margaret:  But I need it.  I need to feed my cats & buy Christmas presents for the grandchildren.  My broker said you had $8 Billion dollars and I could get my money anytime.
TAF: I'm sorry, you just can't have it back...it wouldn't be fair to all of the other suckers.....uhhh.... I mean.....investors who want to stick it out.....
Margaret: But when I signed up you said I could have it back whenever I asked....It's in the ...what's it called....the "Prospector?"
TAF: I'm sorry Margaret, circumstances have changed, all of the risk disclosures are buried deep in the prospectus and the 6 month old form N-Q on file with the SEC.  It's just not our fault that you lost all of your money.  You really should be more careful.  You screwed up, you trusted us.  Luckily, nobody ever goes to jail for this stuff.
Margaret:  (In tears...sob...sniff) I don't trust you people anymore.

I had never heard of Third Avenue before last week, but the more I dug into it, the more I found this whole mess to be absolutely riveting.  Here's a quick summary of the Third Avenue Family of funds.  All numbers are from the 7/31/15 N-Q: (Link below)




Here are the bullet points that jump out at me.
  1. Most of the Cash/Equivalents (liquidity) is kept in the Real Estate fund.
  2. The Morningstar Rating for the Real Estate Fund is "Five Star".  The rest of the funds are "One Star" or "Two Star".
  3. All of the funds are filed on the same N-Q, presumably the same legal entity, so in the event of a liquidation or liquidity event in one of the funds, the assets of the entire family are "fair game".  I'm not a lawyer so I'll defer to my lawyer friends/readers to comment/advise on this topic.
  4. 15% of the Assets of the Focused Credit Fund are currently in default. The most notable assets total $198 million (Lehman Brothers Bonds, Altegrity Bonds - Ch 11 in Feb 2015, and.Energy Futures Bonds - Chapter 11, April, 2014). Authors Note: Really? Lehman Brother's Bonds with a 2008 Maturity still on the books valued at 10% of face? Ar you kidding me? I'm sure Dick Fuld will stop by to write you a check, along with a full apology, any day now. 
  5. 20% of the Real Estate Fund is invested in Chinese/Asian Real Estate Management Companies trading in Hong Kong (HK). 
  6. The Assets in the Focused Credit Fund have a Cost/basis of $2.5 Billion and a current reported value $2 Billion (Including assets in default and "Level 3" assets). 
  7. "Level 3" assets, as described in the N-Q amount to $545 million (6.7% of the family's NAV).
Valuation

Let's take a minute to discuss valuation and the mechanics of Mutual Funds & ETF's.  When I look at these funds I try to get a handle on management's philosophy and their perception of value.  As we all know, whether it be your home, your car, your business, your favorite old chair in your den that your wife has been begging you to get rid of,  you never know what something is truly worth until you put a "For Sale" sign on it. Sometimes you are pleasantly surprised as to what the market will bear.  Occasionally, like with my favorite old chair, nobody wants it and it ends up in the Goodwill dumpster.

So, you might ask, why is this such a big deal?  Third Avenue only has 4% of its assets in default and 7% classified as "Level 3".  They'll survive that?  Won't they?  Maybe.  Historically, Fund managers tend to overstate the value of il-liquid assets.  They rely on their "best judgement" as to what the asset is really worth and unfortunately, a write-down is usually the last resort. Obviously, the mere existence of  significant Level 3 assets as well as aggressive valuations of same are cause for concern. Once there's a liquidity event, credit hiccup, performance issue or perhaps, like Third Avenue, a freezing of assets, investors tend to want to  cash out quickly.  I know I do.  I determine I've made a mistake, things aren't as they seem, and I run for cover.  I can put my money anywhere I want. Why should I keep it a fund that might not be what it appears to be?  Thus the "run on the bank" begins.

Contrast this mechanism with a common stock, bad news simply triggers a price adjustment and the investor hits the "sell button" at a lower value.  Done deal.  The company isn't forced to buy back its' shares.  Bad press for a mutual fund or ETF can trigger a wave of selling of Level 1 & Level 2 Assets simply because there's no market for the Level 3 assets.  It's similar to a margin call.  The fund would prefer to wait until things settle down a bit, but they can't.  They have to raise cash to fund the redemptions.  Apparently, Third Avenue was either unable or unwilling to do so.  But, to Third Avenue's credit, they went to the SEC, presumably disclosed everything and are trying to work out a plan. At least I'll give them kudos for that.  It's much more conciliatory than the recent parade of Chinese executives who have simply "gone missing" with the cash box.    

Now let's take a look at what the FASB says about accounting for securities:

In accordance with FASB ASC 820-10, Fair Value Measurements and Disclosures, the Funds disclose the fair value of their investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. Fair value is defined as the price that a Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment under current market conditions. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). The three levels of the fair value hierarchy are as follows: 

Level 1 – Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Funds have the ability to access at the measurement date; 

Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not considered to be active;

Level 3 – Significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of investments)


In accountant-speak, Level 3 assets are "SAY-SO" valuations i.e.) Not LIFO or FIFO...they are what I Say-So.  I don't have data on this, but my suspicion is that Level 3 assets generally end up in the Goodwill dumpster, along with my favorite chair.  Obviously, management has a real incentive to maximize their "estimate" of the value of these assets since the NAV of the fund depends on it.  Somebody will buy this POS at that price someday? ...won't they?  After all, management wouldn't want to do anything which might cause a panic and have people try to cash out. Since they aren't planning on putting a "for sale"  sign on the assets soon, and nobody bothers to read the N-Q, nobody knows the fund is swimming naked and of course, they never plan on the tide going out. Technically, it's not a mis-rep...I guess.  As always, everything is kinda-sorta disclosed if you look hard enough and have a Masters Degree in Finance. Luckily, for the industry, nobody ever goes to jail for messing up an accounting estimate, or two, or three.....etc.

Moreover, let's say (hypothetically) that Margaret (who does not have a Masters Degree in Finance) is investing in the Third Avenue "Value Fund" because her son-in-law's nephew, who goes to the same church (and gets paid a nice commission) told her that the "Value Fund" is just like Warren Buffett.....It's Value Investing" and the Real Estate Fund is really safe since we all know that Real Estate doesn't lose value. Margaret thinks she's investing in a conservative, value oriented fund, when in reality, has no Idea that she actually has positions in Chinese Real Estate and il-liquid/defaulted Junk Bonds.  She is unaware that her life savings can potentially be used to pay redemptions on the higher risk asset classes because the high risk/il-liquid funds are housed in the same legal entity.

So, why do I have my shorts in a bunch about this?

Why?....because these are usually just the tip of the proverbial iceberg.  Third Avenue is a poster child for optimistic valuations and taking full advantage of the accounting rules which allow them to report trash as treasure to the SEC.  Unfortunately, in the world of finance, once you see something you've never seen before, you start seeing it often.  If one Fund, ETF or business is doing it, lots of them are doing it.  Why?  Because 1.) They have to find a way to compete for investor funds; 2.)  they can get rich; and 3.) They can get away with it.

Finally, I invite you to re-read my October post "Why Genius is about to fail.....again....." in the context of what you've just read about "Margaret" and her hypothetical experience with Third Avenue.  I hope you all go home tonight, pull your prospectuses and N-Q's and start doing your homework before it's too late.

Third Avenue is an easy one to analyze.  It's small, simple and unfortunately for their investors, soon to be out of business as currently  constituted.  The mis-steps and the accounting "methods" are obvious to anyone who wants to take the time to read and understand the filings.

Finally, again, referencing the content herein, I'll leave you with one, and only one, rhetorical question:

Does anyone really understand Blackrock?




Form NQ
http://www.sec.gov/Archives/edgar/data/1031661/000093041315003754/c82410_nq.htm

Prospectus p21 investment strategies - p40 redemptions
http://thirdave.com/wp-content/uploads/2015/12/Third-Avenue-Funds-2015-Prospectus-with-supplements.pdf

Bloomberg - Janet Yellen - Third Avenue
http://www.bloomberg.com/news/articles/2015-12-16/third-avenue-bled-managers-billions-of-assets-before-fund-shut

Third Avenue - Focus Credit Fund - Investor Class
https://www.google.com/finance?q=MUTF%3ATFCVX&sq=third%20avenue&sp=3&ei=puNyVqmBF4mPmAH7mLmwDg

Energy Future - Chapter 11 - April 2014
http://www.wsj.com/articles/SB10001424052702304163604579531283352498074

Altegrity - Chapter 11 - Feb 2015
http://www.wsj.com/articles/altegrity-files-for-chapter-11-bankruptcy-1423446150




Sunday, December 13, 2015

Breaking News: Yahoo! CEO, Marissa Mayer projected to resign.....

I notice an interesting phenomenon occasionally whenever I get a chance to play golf in Florida. I'm so focused on hitting my next shot that I fail to notice the big, old alligator in the weeds next to my ball. Fortunately, I'm usually playing with folks that know where the alligators like to hang out and they are kind enough to call the beast to my attention, lest they be obliged to refer to me as "lefty" or "peg-leg" on future outings.

Last month, Jeff Smith at Starboard Value LP wrote a wonderfully worded, laser-focused, well thought out, "time is of the essence" letter to Marissa Mayer noting all of the various options Yahoo! has at it's disposal to unlock shareholder value. (Letter Here)

No need to get into the details of Jeff's letter here, you can read it at your leisure. Of course, Jeff's strategies would be absolutely correct, and perfectly logical if this were a normal "unlocking of shareholder value" situation. Unfortunately, as you might guess where I'm going, Jeff is missing a big old Alibaba-gator sitting in the weeds. Here's a paste from my 11/20/2014 post on Laura Logan's CBS News page (and this blog).

When this scheme is discovered, the results will be devastating. BABA stock will be worthless. Yahoo will be out of business. The current Market Cap of Chinese ADR's including BABA is just north of $1.5T (US& Dual Lists included). They will all get an indiscrimanent, overnight 50% haircut, causing a liquidity crisis the likes of which we've never seen.

Let's say, hypothetically of course, that more than a year ago, my assessment was absolutely, spot-on correct.

A few months ago, I further described the consequences to shareholders of Yahoo!, Softbank (and now Rekesh Aurora) as well the long list of financiers supporting these businesses in my "Anatomy of a Financial Contagion and Kayaking the Chicago Wilderness" post.

Since everyone seems to be sending letters around and leaking them to the press, here's the letter I've drafted to Jeff Smith Re: the disposition of Yahoo!'s Alibaba shares and, of course, "leaked" on this blog.



Here's the problem:

It can be presumed, as "insiders" that Ms. Mayer, et al have a full grasp of what's going on at Alibaba. She is in the "either known or should have known" trap.  She probably asked more than a few questions re: Jackie Reses abrupt resignation distancing herself from "anything to do with the greatest IPO in history". I know I would have.

It's an odd, unprecedented situation. Ms. Mayer can't stop or control what Alibaba is doing, yet, she will be held accountable for how she handles the repercussions.  She might turn out to be the greatest CEO in history if she figures this out.....she's in uncharted waters. i.e.) How do I legally transfer this Alibaba mess to someone else, for the benefit of Yahoo! shareholders (or at least minimize the damage to same) without running afoul of the insider trading rules. (17 CFR 240.10b5-1) . Unfortunately, no matter what Yahoo!'s Board and Management believe, in the end, neither the initial Alibaba spin-off or the newly proposed Reverse Spin-off as currently proposed will be exempt from 10b5, nor considered non-taxable under IRC 355 i.e.) The Spin-off or Reverse-Spin-off can't possibly satisfy the active business purpose requirement due to the disproportionate value of the Alibaba shares.  Perhaps this is why they are indicating that the divestiture will take more than a year?  They are hoping that the rest of the market figures out what's going on and the valuation problem will take care of itself?  As always, hope is not a plan.

When Alibaba crashes and burns Ms. Mayer and Yahoo! management will most likely face legal action by whoever is left holding the bag of Alibaba-gators once the spin-off takes place, or if Alibaba implodes before the spin off, she/mgmt/board will likely be sued by Yahoo! shareholders for not acting fast enough to dump the stock. Inevitably, she will either look like she had no idea what was going on (incompetent) or complicit (a crook). Neither epithet leaves a palatable legacy. In any case, it's more likely than not that someone will eventually be presented with a large tax bill from the IRS at some point. The real twist would be that the taxes would attach at the time of the IRC 355 exchange. Theoretically, if Alibaba crashes after the spin-off, the tax bill would be maximized and the underlying asset generating the tax (Alibaba stock) would be worth significantly less, ironically leaving little/no assets with which to pay the tax? I suppose Marissa could just try to make the Ken Lay/Andy Fastow "Hey, I didn't know anything, I just ran the place" argument, but that strategy never ends very well.

The way I see it, Marissa, Yahoo! management and the board have only two options:

1.) Disclose everything they know about Alibaba's financial condition and begin selling/spinning-off or otherwise divesting the Alibaba stock immediately thereafter. That would be one hell of a press conference.; or:

2.) Resign immediately and set up a plan, in conformance with the 10b5 rules to divest their personal Yahoo! shares over the shortest period of time allowed by law and hope that this mess hangs together long enough to get out with at least some amount of cash and a bit of dignity.  Based on her current situation, she could probably negotiate $30 to $50 million in total "out-the-door-walk-away" compensation.   Of course, Marissa will have to bone up on her "Wowww....what luck, we got out in the nick of time!" Blankfein-like speech she's going to have to give at the "what did you know and when did you know it?" Congressional hearings.   But she'll be fine.  Nobody ever goes to jail for this stuff.

Bold Prediction:

So there you have it. I'm projecting that Marissa Mayer, and any other executives or board members with first hand knowledge of this mess will resign relatively soon. It's the only logical choice for them to make.

Don't get me wrong, I've never met her, but I'm sure that Ms. Mayer is a wonderful person. She's just in a horrible, impossible situation. As if Mother Theresa's frock were caught on railroad tracks.....there's nobody rooting for the train.

Finally, please note, I'm not an insider. I'm not talking to any insiders. I'm not breaching anyone's trust. I've come to these conclusions because I've seen this movie before and apparently, I'm one of the few analysts truly enamored with the SEC filings. Again, it's all in the filings. All you have to do is connect the dots.




Additional References:

Jeff Smth's Letter to the Yahoo! Board

http://starboardvalue.com/publications/Starboard_Value_LP_Letter_to_YHOO_08.10.15.pdf

Nikesh Arora - $483 million personal bet on Softbank....with borrowed money.
http://www.japantimes.co.jp/news/2015/11/29/business/corporate-business/no-sweat-risk-taker-arora-lets-%C2%A560-billion-ride-softbanks-future/#.Vmi3v3arS00

Jackie Reses Resignation letter to Alibaba Board - September 16th, 2014.
http://www.sec.gov/Archives/edgar/data/1577552/000000000014048770/filename1.pdf

Yahoo! Filings & 12/9/15 Press Release
http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001011006&owner=exclude&count=40&hidefilings=0 

LA Times - Estimates of Marissa Mayer's "walk away" money
http://touch.latimes.com/#section/-1/article/p2p-85294590/

Marissa Mayer Compensation History
http://people.equilar.com/bio/marissa-mayer-yahoo--inc./salary/668659#.Vm2Pemt5mSM

Marissa Mayer - CNBC - Change of Control payout discussion.

http://video.cnbc.com/gallery/?video=3000464853

Maynard Webb and Marissa Mayer CNBC Press Conference - 12/10/15

http://video.cnbc.com/gallery/?video=3000464428

Monday, December 7, 2015

So....how accurate was Deep Throat this year?......

As an investor, I believe it's important to review my decisions, thought process and results on a periodic basis.  Moreover, I've really enjoyed sharing my thoughts with you over the last year.  That said, in the interest of full disclosure, I'd like to review my posts over the next few paragraphs and let you decide how accurate my advice has been.

Questions received re: my last few posts.....

First, I'd like to post a few additional thoughts to address some general themes in the comments I've been receiving.  

Q: Re: "Why Genius is about to fail.....again"  Why do you hate technology?  High speed trading has benefited investors, reduced the cost of investing and made stock market access available to everyone.

A: I don't "hate technology".  Technology deployment has absolutely driven down trading costs and increased both the quantity and (sometimes) the quality of information.  In fact, this blog couldn't exist without technology.  Re: "Why Genius is about to fail.....again" The only thing I can refer to is the White Paper written by Eric Hunsader and referenced on pg. 280 of Flash Boys.  The paper chronicles the microsecond exchange activity that takes place when a large order is placed on a public exchange, in this case, a Buy order of 20,000 shares of Ford Motor Co. (F) at $17.38 a share.  The microsecond analysis shows how once a large order is submitted, there is a flurry of activity, primarily the cancellation of orders, the immediate withdrawal of liquidity and the inability of the order to be filled in its' entirety at the requested price.  The HFT's "jump the line" controlling shares that should have gone with the initial order, driving the price up.  It's estimated that the cost of this "slippage" (Flash Boys pg. 280) to a large money manager is a "tax" of roughly $240 million on $80 Billion in trades.  The money, of course, comes from Pension Funds, Mutual Funds and retirement accounts.  As a point of reference, today, the NYSE alone handles roughly $30 Billion a day in volume. The significant byproduct of this HFT phenomenon is the evaporation of "fake" liquidity when large orders are placed as described by Carl Icahn on his "Danger Ahead" website..  That said, there are also a number of studies, that HFT profits have fallen off dramatically, decreasing by more than 80% since 2009, yet the "fake" pseudo liquidity still exists.

Q: Why are you so doom and gloom?  You've been talking about this stuff for a year and nothing has happened?  The markets are humming along just fine.

A: I guess all I can say is, to paraphrase Warren Buffett, any good economist or investor can tell you what's going to happen, they/we just can't tell you when or how big it will be.  Next, if I've conveyed any sort of "doom and gloom" tone in my writing, I apologize.  That was never the intent.  I'm simply identifying and discussing odd, out-of-balance, global financial topics.  We've been on a great run over the last few years. We all hope that the ride goes on forever.  I'm just concerned, based on what I see, that it won't/can't....and I want to let my readers know.

Review of Deep Throat posts in date order:

Given the above, here are a few of the observations and projections made within this blog and where we're at today.

November 2014 -  Posted on Laura Logan's CBS News page and re-posted here on  12/26/2014 - Posted Alibaba's numbers are "suspect".  At the time the stock price was at $110.  Today it's at about $80 and has been as low as $57.  Mr. Market is just beginning to figure Alibaba out.

December 22, 2014 - Qihoo 360 was trading at $60.  I gave it a negative review.  Today it's at $70 and has been as low as $41.  Here was my review from last December:

"....the sole purpose of this enterprise is, apparently, to line the pockets of insiders.  Therefore the Intrinsic Value of this business, and the corresponding share value is US$0.00."

Even though the market seems to have, at least thus far, disagreed with my analysis, I'll stick with this valuation.  It's a dog with fleas.

December 23, 2014 - I referred to Lending Club (LC) as an "Impending Disaster" when it was trading at $28.  Today it's at $12 and on life support.

December 24, 2014 - The Valuation Problem.  I opined that the valuations of US Stocks were too high at the time.  At the time the S&P was at 2,060.  Today it's at 2,070, with a little wobble in August.  My opinion and the metrics supporting it, haven't changed.  Those of you who have been out of the equity markets haven't forfeited anything.

January 8, 2015 - Alibaba, the Ultimate Shadow Bank.  Like the Valuation Problem, the market hasn't figured this out yet.  As I had elaborated in the November 18th, 2015 post, I was talking with an analyst..,  there's significant undisclosed credit risk associated with the Alibaba/Alipay/Ant Financial relationship.  This will become apparent in 2016.

January 30th, 2015 - In Once Upon a Time... I discuss the Alibaba 12/31/14 6k and financial statements. Items of note were 1.) US$10 Billion Increase in "Questionable Assets" in just nine(9) months; 2.) Share-Based Comp being 16% of revenue; 3.) The blatant nondisclosure re: Alibaba/Ant and the integration of all of the absurd US$10 Billion in acquisitions accomplished in the prior nine (9) months.  Since then, as I've discussed in posts described below, the buffoonery has accelerated.

February 7th, 2015 - The Chinese Laundry, I provide details on how China's elite have been using Alibaba and other ADRs to move wealth out of mainland China.  Various sources estimate that hundreds of billions of US$ equivalents have been moved to dollar and Euro denominated investments and real estate in the third quarter of 2015.  The US Treasury estimates that capital flight was $200 billion in November 2015 alone. The flight is continuing.

February 17th, 2015 - What the Smart Money thinks about Alibaba.  Analysis of hedge fund holdings of Alibaba.  The conclusion was that Hedge Funds were generally not taking significant positions in Alibaba. The sentiment has continued.   As of the 9/30/15 13F's, only two (Viking & Blackrock) of the 22 hedge funds tracked s had a net-long position in Alibaba.  Ten of the 22 funds had held significant positions as of 9/30/14..

March 10th, 2015 - In The shape of things to come.... I discusses the parallel between NQ Mobile and Alibaba.  I described NQ as:

The answer to the question...."Is this business worth $4.00/share?"  I'm sorry, I don't even know how to answer the question.  I can't even classify this as a real business (It's certainly not run like one) and therefore I have no idea what it might be worth.  It's evolved into some sort of misguided start-up with weird baggage.  I don't know what to make of it and how it exists as a publicly traded security. It's a "money pit".  I can pretty much guarantee it's not worth anything near it's current $300 million market cap.  Like so many ADR's on life support, I expect this one to "go dark" at some point soon.

Today NQ Mobile is still bouncing along at $3.50 a share.  Not dead yet, but it's been given last rites.

March 28th, 2015 - The China Syndrome.  The post contained, among other projections: " The Shanghai, HK & Shenzhen markets would lose at least US$ 4 Trillion (40%) in value.  Again, as a point of reference, these exchanges lost roughly 2/3rds of their value during the 2009 US financial crisis."  Four months later, that's exactly what happened.

April 13th, 2015 -  "China's Dream....Defying Financial Gravity" where I described the inevitable devaluation of the Renminbi and capital flight from China.  Since that post there have been several RMB devaluations and the PBOC has spent nearly $300 billion in US$ Bonds and FOREX reserves to stabilize the floundering economy and protect the mainland equity markets from collapse. This, of course, will continue.

June 15th, 2015 - Alibaba, a year in review.  Review of the year end financial statements.  Elaboration on the "Questionable Assets" and accounting Shenanigans, as well as a detailed discussion on how Alibaba is faking GMV and Revenue.  

July 21st, 2015 - Tencent....10 cents is about what it's worth..... What can I say, the business was a fraud six months ago and it's still a fraud today.  Unfortunately, I don't see how you can short this "beloved" stock.  In the words of John Maynard Keynes "The market can stay irrational a lot longer than you can stay solvent"

August 21st, 2015 - Don't worry...be happy.  A detailed discussion on how the collapse of China's equity markets will impact US asset values.  The discussion focused on Hedge Fund leverage and the consequences of an abrupt liquidity event.  This "open item" remains one of my greater concerns in 2016.

September 14th, 2015 - Anatomy of a Financial Contagion and Kayaking the Chicago Wilderness. A detailed discussion of how Alibaba's inevitable collapse will destroy both Softbank and Yahoo!
  
October 14th, 2015 - Why Genius is about to fail....again.  An analysis of Carl Icahn's concerns about leverage and liquidity, specifically related to ETF's.  

November 2015The four November posts:  Bowenpress estimates 64% of Alibaba's "singles day GMV is fake......; I was talking with an analyst......The Silliness Continues....;  One of these things is not like the others......;  All of these posts discuss the ridiculous financial metrics being reported by Alibaba.  Especially in relation to the "stealth recession" currently underway in China.  I had assumed that investors would have discovered the level of mis-rep by now, but it seems to be taking longer than I had anticipated.  Again, my assessment of the intrinsic value of Alibaba hasn't changed.

Summary

After reviewing my work over the last year, much of the above has either, a.) Already happened; b.) Begun to happen; or, c.) Is too soon to tell.  So far, I've not seen anything I've said where I was "dead wrong". Honestly, based on the dire consequences if my forecasts are at all accurate, I actually wish I was "dead wrong" on much of it.

Again, I can only tell you what's going to happen, I have no way of knowing exactly when it will happen or how big the event(s) will be.

HAPPY HOLIDAYS!