Repost: "'The Time PIMCO's Bill Gross Acted Like A Cheap Prick To A Waitress'"

First posted February 25, 2014:
Although not today's story that's one of my favorite PIMCO headlines. It's by Bess Levin at DealBreaker, naturally, on one of Gross' 2011 letters, link below.

I used it again last year to top an FT Alphaville post by Joseph Cotterill that I intro'd with:

Mr. Gross has a letter out today that's a bit tacky and I realized the guy has some character flaws that may have an impact on his investing.
Today's stupidity is adequately covered at Alphaville:

No, Bill, losing money on bonds is not like dying at the Somme

I didn't know the half of it.
From the front page of today's Wall Street Journal:

Inside the Showdown Atop Pimco, the World's Biggest Bond Firm
After clashing with Pimco co-founder Bill Gross, CEO Mohamed El-Erian decided to leave the fund giant.

Pimco co-founder Bill Gross Bloomberg News

NEWPORT BEACH, Calif.—Tension increased at Pacific Investment Management Co.'s headquarters here last summer. The bond market was under pressure, losses grew and clients pulled billions of dollars from the firm.

Bill Gross, who co-founded Pimco in 1971 and is largely responsible for building it into a behemoth overseeing almost $2 trillion in assets, struck some of his colleagues as testier than usual. He argued openly with Mohamed El-Erian, Pimco's chief executive—something employees say they rarely had seen.

Mr. Gross—by his own admission, a demanding boss—had long showed respect for Mr. El-Erian and indicated that the younger man eventually would take over the world's biggest bond firm. But one day last June, the two men squared off in front of more than a dozen colleagues amid disagreements about Mr. Gross's conduct, according to two people who were there.

"I have a 41-year track record of investing excellence," Mr. Gross told Mr. El-Erian, according to the two witnesses. "What do you have?"

"I'm tired of cleaning up your s—," Mr. El-Erian responded, referring to conduct by Mr. Gross that he felt was hurting Pimco, these two people recall.

Later, after Mr. El-Erian told Mr. Gross he needed to change the way he interacted with employees, Mr. Gross, 69 years old, agreed to make adjustments, several Pimco employees say. But last month, Pimco announced that Mr. El-Erian, 55, would leave the firm—a surprise to both employees and investors.

In a note to clients, Pimco said Mr. El-Erian will leave in March but will remain on the management committee of Pimco's parent company, German insurer Allianz SE. Mr. Gross later said Mr. El-Erian wanted to write a second book and spend more time with his family.

Interviews with nearly two dozen individuals close to both men and to the firm suggest more-important factors in the departure: a high-pressure work environment that turned less collegial over the past year, a deteriorating relationship between the two senior executives and certain decisions by Mr. Gross that confused some employees....MORE

Dual Hat Tips:
HT: FT Alphaville's Further Reading post.
HT Felix Salmon at Reuters who writes:

It’s time for Bill Gross to retire

A word of entirely unnecessary advice for anybody on the Pimco trading floor Wednesday morning: do not look Bill Gross in the eye. Or talk. Or do anything at all to make yourself stand out or be noticed. Because Gross, who for most of his career has been the subject of some of the most glowing press imaginable, has just been brought down by a downright brutal article on the front page of the WSJ. Neither Gross nor Pimco will ever be seen the same way again, and indeed, if Gross cares at all about the long-term fortunes of the company he built, the best thing he can do right now is simply retire.

The story is illustrated, online at least, with a gruesome photograph of the 69-year-old money manager, looking sideways through yellowing eyes as he reaches out like something from a zombie movie. And it just gets worse from there, confirming all the worst fears of anybody with investments at the monster-sized firm.

Late last year, in front of a number of traders, Mr. Gross said, “if only Mohamed would let me, I could run all the $2 trillion myself…I’m Secretariat,” referring to the famed thoroughbred. “Why would you bet on anyone other than Secretariat?”

That’s just about the worst possible thing for Gross to be quoted saying, given who Pimco’s clients are, and what they want, and what former CEO Mohamed El-Erian has been telling them, consistently, since he re-joined the company in 2007....MORE

Here's the DealBreaker story complete with a a couple special bonus gifts for our readers:

PIMCO's Bill Gross Tells Investors About The Time He Acted Like A Cheap Prick To A Waitress

included are the oft requested favorite "Bill Gross on Turning Down Loan Requests from Warren Buffett and Sam Walton (BRK.B; WMT)" and a put-him-in-his-place by Then-Dow-Joneser Matt Phillips:

Bill Gross: His Most Obnoxious Note Ever!

Where should we start? Bond king — or former bond king? – Bill Gross is out with his monthly investment outlook note. Mr. Gross is not merely satisfied managing the world’s largest bond fund. (Pimco Total Return Fund: $240.7 billion in assets in December.) Nay, he fancies himself something of a scribe, and his monthly investment outlook is where he talks his book for a few hundred words spicing it up with some belabored metaphors and a self-serving analogy, or several. But there are a few things that stick in our craw about this month’s note....MORE

So there! A lousy human being and he doesn't write well either! 

Weather Pics

From My Modern Met:
Magnificent Landscapes Dominated by Powerful Storms

Since a very young age, Arizona-based Mike Olbinski has been obsessed with weather. As a professional photographer, he has since translated that passion into mind-blowing images filled with the life and energy of nature. Olbinski creates dynamic photographs, from stark desert landscapes to bustling cityscapes, where storms consume the earth.

The artist is surrounded by all kinds of extraordinary wonders and he shows no fear as he ventures towards the bad weather rather than away from it! Through his lens, he documents powerful lightning striking to the ground and ominous skies as billowing storm clouds roll in. "The summers in Arizona bring the monsoon thunderstorms, and they are a blast to chase. We get amazing clouds, awesome dust storms, and serious amounts of lightning," explains Olbinski.

...MORE

Climateer Line of the Day: William The Gross Edition

Today's winner of the prestigious CLoD are the nameless pixel-stained wretches who labor under the simple nom de blog FT Alphaville and who repurpose an old Oscar Wilde line to mark the occasion:

"They say that to lose one figurehead may be regarded as a misfortune; to lose both looks like carelessness."

...MORE

Bill Gross departs Pimco for Janus

From Wealth Manager:

Renowned bond investor Bill Gross is leaving the firm he co-founded to join Janus Capital Management

Gross will be based in a new Janus office to be established in Newport Beach in California and will be responsible for building out the firm’s efforts in global macro fixed income strategies, according to a statement put out by Janus.

He will manage the recently launched Janus Global Unconstrained Bond fund and related strategies and will join Myron Scholes and other members of the Janus team, who focus on global asset allocation. Gross joins at the end of September and he will begin managing the Janus Global Unconstrained Bond Fund and related strategies in early October....MORE

Quantum Computing: "Three Questions with the CEO of D-Wave"

I'm still not sure if D-Wave has a quantum computer or not, some links to previous posts below.
Also, the interviewer does not ask what the advantages of this approach are for fanciers of cat videos.

Regarding the quantum, this is not Schrödinger's Cat

From MIT's Technology Review:

The CEO of quantum computing startup D-Wave says its machines are helping companies analyze Wall Street data and search for new cancer drugs.

Ever since D-Wave Systems unveiled what it called the world’s first quantum computer in 2007, the small Canadian company has attracted controversy.

Computers capable of exploiting quantum physics for computation on a large scale promise to solve in mere seconds problems that would take conventional machines millions of years. But whether D-Wave’s machine uses quantum tricks to process data more efficiently is still an open question. Nonetheless, the company has attracted significant investment funding, and it has struck deals to supply its hardware to companies including Google and Lockheed Martin for research (see “The CIA and Jeff Bezos Bet on Quantum Computing”).

D-Wave’s CEO, Vern Brownell, met recently with Tom Simonite, MIT Technology Review’s San Francisco bureau chief, and said the company now has customers using its computers to tackle real problems.

By now you have built a few generations of your quantum processors. Are they ready to be used to solve problems yet?

We have 12 machines running now. A few of them are online; we have customers who can access a machine over the Internet. It’s not a product or something that’s available to everyone, but we have customers doing real things with the computer today that have huge business impact. We have seen results that are better than classical systems. Customers have their application and integrate quantum computing into it and it performs better.

Over the next few years we will be offering more and more of that capability to the world. We see us eventually making quantum cloud services available to the world. But we don’t have a tool set yet that allows us to do that. It requires a lot of hand-holding with even the most sophisticated customers.

Can you give some examples of what those customers are using D-Wave’s machines for?

[A company called] 1Qbit was started to use our quantum computer for financial services. They have 20 PhDs developing algorithms in portfolio optimization and things like that. We provide them with some training and expertise, but they are by and large doing this work themselves. If they find the amazing algorithm that is going to make tons of money for Wall Street traders, it’s their intellectual property, not ours....MORE

HT: FT Alphaville's Further Reading post.

Sept. 2014
"The Man Who Will Build Google’s Elusive Quantum Computer" (GOOG)
April 2014
"Why Nobody Can Tell Whether the World’s Biggest Quantum Computer is a Quantum Computer"
May 2013
Google Launches the Quantum Artificial Intelligence Lab (GOOG)
March 2013
Does Lockheed Have a Quantum Computer or Doesn't It? (LK)
Nov. 2012
Quantum Computing: CIA and Bezos Invest in D-Wave Systems In.

"The CIA and Jeff Bezos Bet on Quantum Computing" (AMZN)
"Does probability come from quantum physics?"
 "Hacking the Quantum: A New Book Explains How Anyone Can Become an Amateur Quantum Physicist"
  Quantum Physicists Disagree on the Nature of Reality
 Multiple Steps Toward the 'Quantum Singularity'

"The Secret Goldman Sachs Tapes" (GS)

From Bloomberg:

Probably most people would agree that the people paid by the U.S. government to regulate Wall Street have had their difficulties. Most people would probably also agree on two reasons those difficulties seem only to be growing: an ever-more complex financial system that regulators must have explained to them by the financiers who create it, and the ever-more common practice among regulators of leaving their government jobs for much higher paying jobs at the very banks they were once meant to regulate. Wall Street's regulators are people who are paid by Wall Street to accept Wall Street's explanations of itself, and who have little ability to defend themselves from those explanations.

Our financial regulatory system is obviously dysfunctional. But because the subject is so tedious, and the details so complicated, the public doesn't pay it much attention.

That may very well change today, for today -- Friday, Sept. 26 --- the radio program "This American Life" will air a jaw-dropping story about Wall Street regulation, and the public will have no trouble at all understanding it.

The reporter, Jake Bernstein, has obtained 47½ hours of tape recordings, made secretly by a Federal Reserve employee, of conversations within the Fed, and between the Fed and Goldman Sachs. The Ray Rice video for the financial sector has arrived.

First, a bit of background -- which you might get equally well from today's broadcast. After the 2008 financial crisis, the New York Fed, now the chief U.S. bank regulator, commissioned a study of itself. This study, which the Fed also intended to keep to itself, set out to understand why the Fed hadn't spotted the insane and destructive behavior inside the big banks, and stopped it before it got out of control. The "discussion draft" of the Fed's internal study, led by a Columbia Business School professor and former banker named David Beim, was sent to the Fed on Aug. 18, 2009.

It's an extraordinary document. There is not space here to do it justice, but the gist is this: The Fed failed to regulate the banks because it did not encourage its employees to ask questions, to speak their minds or to point out problems....MUCH MORE

In Search of the Universal Algorithm: Jeff Hawkins on Why His Approach to Artificial Intelligence will Become THE Approach to AI

From GigaOm:

Jeff Hawkins invented the Palm Pilot and the Treo smartphone, and now he’s trying to invent the future of artificial intelligence. In this interview, he explains why he’s so adamant about his company’s approach and how the company is settling in after some early hiccups.

Jeff Hawkins is best known for bringing us the Palm Pilot, but he’s working on something that could be much, much bigger.

For the past several years, Hawkins has been studying how the human brain functions with the hope of replicating it in software. In 2004, he published a book about his findings. In 2012, Numenta, the company he founded to commercialize his work, finally showed itself to the world after roughly seven years operating in stealth mode.

I recently spoke with Hawkins to get his take on why his approach to artificial intelligence will ultimately overtake other approaches, including the white-hot field of deep learning. We also discussed how Numenta has survived some early business hiccups and how he plans to keep the lights on and the money flowing in.

An edited version of the interview follows. Hawkins kicks if off with a description of Numenta’s technology — which it calls hierarchical temporal memory — and how it came to be.

Derrick Harris: Please explain Numenta’s approach to brain-inspired artificial intelligence technology.

Jeff Hawkins: We’re going through a transition right now in the world of machine intelligence that’s similar to the transition from analog to digital computing back in the 1940s. Today, if you look in the world of machine learning and machine intelligence, you see varied types of things going on. There are different types of algorithms that people are using — specific and universal — and people debate which approach is better.

We’re very confident that by the end of the 2020s, we’re going to be settled on a dominant paradigm. It’s going to be quite different than the one we’re currently in today, where specific algorithms that excel at one task dominate. We believe it’s going to be based instead on the universal algorithms that work on many problems. They’re going to be memory-based, not mathematically based. They’re going to be based primarily on time-based patterns, and they’re going to be online learning paradigms.

Our belief in this comes really from studying the brain. This is what the neocortex does. The neocortex uses one framework for vision, audition, language, motor, planning, robotics, everything. Everything you do, writing, thoughts, planning conferences, it’s all the same thing. It’s one memory framework.

We’ve invented a term called hierarchical temporal memory, which describes the basic theory about what’s going on here. Very importantly, nothing in HTM is task-specific, just like in your brain. The way you see and the way you hear and the way you feel, the neural tissue that does that is exactly the same. You can actually swap them around, and you’ll still work.

That’s the key part of the whole bet here, that there are going to be, as we know in the brain, universal learning algorithms that may not be the best at everything, but they’re really good at everything....MUCH MORE

"3pm update - a day for the bears"

Still looking for that thousand points of downside, Just under 300 of them so far.
17,279.74-16981.51 = 298.23
Switching back to the "S&P ~ 1900" call from a month ago, it's at 1969.65 down 28.65. The Aug. 7 low was 1904, a reasonable target.

From Permabear Doomster:

Regardless of the closing hour price action, today has been a day for the equity bears. There have been so many technical breaks... more notably on the bigger weekly and monthly cycles. Interesting days are ahead....MORE

sp'15min

(click to enlarge)

Previously:

Mon Sept. 22
Equities: How's About a Thousand Dow Points (to the downside)? 

The INDU closed at  17,279.74 on Friday and, since we're already looking for a 5% drop in the S&P 500, to ~1900 we might as well go whole hog on the round numbers (plus, the futures are indicating a down 36 point open).

Tues. Sept. 23
Should the Worst Happen: Surviving Waterfall Declines 

That post was followed on August 15 by "The Peak-to-Trough Magnitude of the Recent Decline Was 4.3%":

I'd expect the next one to be deeper but also reward "Buy-the-dips" setting up a nasty little experience on the next-next one for folks coming in at down 10% who watch in horror as the drop doubles to 20%....

We are now in what looks to be "the next one" which we are calling to be in the ~5% range followed by a "whew, that wasn't so bad."

Tues. Sept. 23
Equities: Where to Now?

Wed. Sept. 24
Equities: We Bounced Off Support

As was mentioned in yesterday's "Equities: Where to Now?":

...This morning, with 107 of those points in the can the question is what comes next. On a very short term basis the 1978 bottom of the last decline is support....

This morning the range on the S&P 500 has been  1,978.63 - 1,986.23
1,984.18, last........So now what? 
We should hit that 1978 at least once more, slice through and continue the down-move.
We'll be back with more this afternoon

Wed. Sept. 24
Equities: "Sell Rosh Hashanah, Buy Yom Kippur?"
S&P 500 1996.29 up 13.52; DJIA 17,202.88 up 147.01.

"Somali Pirates Fight Over Ransom After Release of Journalist"

From Reuters via gCaptain:

Six people were killed in central Somalia in a gunfight over a supposed ransom payment tied to the release this week of a German-U.S. journalist held hostage in Somalia for more than two years, police said on Thursday.

The journalist, Michael Scott Moore, 45, was kidnapped by armed militia in the city of Galkayo in January 2012 while researching a book on piracy. After his release this week, local Somali officials said they were not unaware of any ransom paid.

A local militiaman, Zakaria Farah, told Reuters the ransom had totalled $2 million although he did not say who had made the payment. He played down the shooting, calling it “accidental,” and said any issues surrounding the payment had been resolved....MORE

Tangentially related:
"Somali sea gangs lure investors at pirate lair" and "A comparison of Piracy and Private Equity"
"Dealing with Pirates (and terrorists) Russian Style"
UPDATED: Time to Go Pirate Hunting: "Somali pirates kill 4 American boaters"
The secret Somalia anti-piracy force
Oil: Somali Pirates Seize Supertanker, Smoke the Khat, Head for Home
Invest in Beautiful Somalia
Somali Jihadi's Put a Price on Obama's, Hillary's Heads
Indian navy destroys 'pirate ship'

"Major Sell Program Trips 50-DMA, Sends Stocks Sliding"

DJIA down 214.57 at 16,995.49. S&P 500 down 25.01 at 1973.29. More to come.
From ZeroHedge:

A "huge" institutional sell order, covering almost 200 individual stocks, is rumored to have been responsible for getting this morning's weakness across stocks going as equity indices catch down to bonds and credit. The S&P 500 broke key support at its 50-day moving-average (for first time in 2 months) and is back at 6 week lows. The Russell 2000 is now down 4.25% from the FOMC meeting last week...
S&P 500 cash breaks key technical

And from FOMC, it's all red again...

Chartology: "The Dollar Rally May Have a Long Way to Run"

From Barron's Getting Technical column:
The U.S. dollar index took out a major hurdle on its long-term chart, suggesting it can keep rising.

The U.S. dollar has been on a tear higher since July. Whatever the fundamental issues driving the move – the economy, global trade, or a flight to safety – the technicals look bullish for the long term.

Many dollar forecasts start with the U.S. dollar index, which is a trade-weighted basket of currencies, each paired against the greenback. The euro still makes up more than half the weight of that basket but it is not the only currency against which the dollar is rising. 

A long-term chart of the index shows the convergence of two major resistance features in the 84.75 area (see Chart 1). After rising from roughly 80.00, in round numbers, in less than three months, the index paused just under that ceiling this month. And Wednesday, it finally punched through, trading above 85.00 for the first time since 2010.

Chart 1

U.S. Dollar Index

Trends in currencies, once they get going, tend to persist for a long time and are often measured in years. Clearly, there was no major trend for the dollar for the past two years as the chart shows choppy sideways movement. Even the cyclical bull and bear markets that took place in the aftermath of the financial crisis of 2008 lasted no more than nine to 12 months.

But looking back in time, we can see trends that lasted on the order of a decade. I am not suggesting the dollar is in the dawn of a 10-year run, but rather that this may be the start of a long period of dollar strength, and all the consequences that brings to economists and gold bugs. 

Of course, we should not confuse the long term with the short term. The dollar index is technically overbought, meaning that it has risen too far, too fast, to sustain its current pace. That does not mean it will immediately back down, but it is a dangerous condition for new dollar buyers. Even with the technical breakout in place, overbought markets can stall just enough for weak bulls to question their choices. The ensuing shake-out sets the stage for the next leg up....MORE 

"Falling commodity prices flash warning on widening global divergences"

The thing I don't get about some commodity "specialists" is why they can't make money in down markets.
I mean you can trade from either side but for some reason the mean-reverting nature of commodity prices seems to challenge some folks who really should know better.
From the Financial Times:

Price slide reveals mounting concern about China.

Global gloom-mongers have something new to worry about – falling commodity prices. The closely watched Bloomberg Commodity index, which tracks 20 commodity prices, has dropped this week to a fresh four-year low.

Tumbling prices for metals, oil and agricultural products fit with a narrative of a slowing China and of growth spluttering in advanced economies, despite exceptional levels of central bank support. It is hard, however, to find anyone in equity, bond or currency markets getting seriously concerned – yet. If anything, the opposite is the case.

Of course, falling commodity prices should feed through into higher real incomes and thus boost economic growth prospects. What matters as much, however, is the effect on inflation gauges watched by central banks. Falling commodity prices have this week helped push lower expectations about inflation rates to be priced into bond and swap markets.

That increases the chances of central bank interest rates remaining at historic lows for even longer – in turn, supporting elevated bond and equity prices. As one analyst puts it: “Asset reflation is here to stay.” (Readers are forgiven for feeling confused at this point: it was not so long ago that central banks were criticised for driving commodity prices higher.)

Another reason suggested for ignoring the most recent falls in commodity prices is that they result from an exceptional confluence of unrelated factors that is unlikely to last. Grain prices have fallen on bumper harvests – which are entirely unrelated to worries about credit bubbles in China which have hit metals. Oil prices fell as tensions in the Middle East and over Ukraine failed to hit production, as well as on demand concerns. 

But the general price falls are flashing warning signs. They highlight widening faultlines between the world’s biggest economic regions. Such divergences are already driving currency and bond markets – and could become a bigger feature as quantitative easing by the US Federal Reserve ends next month. ...MORE

Secular Stagnation: "Study: Older societies have less entrepreneurially dynamic economies"

Pethokoukis at AEIdeas:

Something to consider when thinking about a pro-innovation economic agenda. From “Demographics and Entrepreneurship” by James Liang, Hui Wang, and Edward Lazear

Entrepreneurship requires creativity and business acumen. Creativity may decline with age, but business skills increase with experience in high level positions. Having too many older workers in society slows entrepreneurship. Not only are older workers less innovative, but more significant is that when older workers occupy key positions they block younger workers from acquiring business skills. A formal theoretical structure is presented and tested using the Global Entrepreneurship Monitor data. The results imply that a one-standard deviation decrease in the median age of a country increases the rate of new business formation by 2.5 percentage points, which is about forty percent of the mean rate. Furthermore, older societies have lower rates of entrepreneurship at every age.

"The Hazelnut News Frenzy Continues"

'Hazelnut news frenzy' reminds me of a story from the WSJ's Matt Phillips a few years ago:

The clamor for more historical context on the current record low for U.S. interest rates has hit a fever pitch!

-from "U.S. Borrowing Costs: 1941-Present"

We've been keeping our distance from Nutella news, fearing it would cut into the pixels available for almond articles.
From Modern Farmer:

Turkey's bad weather in March led to a spate of news stories last month warning of a possible big shortage of Nutella, the chocolate spread with an unusually fervent fan base.

Now we know the effects: Wholesale hazelnut prices are up 30 percent, according to the Hazelnut Growers of Oregon. That is very good news for American growers, who are working to expand the tiny-but-burgeoning U.S. crop, but the high prices are not expected to last.

And, predictably, there is no actual “shortage” of Nutella, though prices for it have risen as well — by as much as 60 percent, and may rise yet more.

The whole thing started on August 20, when the Huffington Post ran a scary-sounding article about a looming “major shortage.” The HuffPo’s Jonathan Feldman declared that “if you see long lines at your grocery store, it might be people trying to get their hands on the last jars of Nutella before prices surge.”

The story was certainly attention-getting (and more to the point, click-generating), but even if production of Nutella were halted entirely, it seems unlikely it would have resulted in “long lines” of people hoping to snap up the remaining jars. Feldman did not respond to a request for comment.

As we’ve seen recently with limes, avocados, chicken wings, and other foodstuffs, “shortages” of certain popular commodities can make for highly viral news stories, whether the underlying problem is serious (limes) or hyped (chicken wings)....MORE

"Yale beats Harvard in endowment returns, 20.2% to 15.4%"

From ValueWalk:

The Ivy League universities have released their endowment returns for the 2014 fiscal year, with Yale besting rivals Harvard and Dartmouth.

Harvard remains the world’s wealthiest university, possessing the largest school endowment at over $34 billion. Yale’s endowment grew to $23.9 billion as of June 30, from $20.8 billion the previous year. A press release detailed double-digit returns in private equity, domestic and foreign stocks, and real estate, as well as 9 percent returns on hedge fund investments.

Endowment diversity
Yale stated that it would hold 20 percent of its portfolio in hedge funds and 31 percent in private equity during 2015, with the rest consisting of real estate and equities.

Meanwhile Harvard increased its commitment to alternative investments in hedge funds, private equity and real estate. A letter written by Harvard endowment chief Jane Mendillo gave the green light to increase allocations to private equity and hedge funds from 31% to 34% of assets in the fiscal year 2015.

A different strategy
Harvard’s commitment to hedge funds comes at a time when other investors are moving away from them. Just last week the biggest pension fund in the U.S., the California Public Employees’ Retirement System, announced that it was fully retreating from hedge funds to cut costs and simplify holdings.

Since the financial crisis Harvard’s performance has been less impressive than that of its peers, and its endowment is still short of its pre-crisis peak of $36.9 billion, set in June 2008....MORE

Saks Deal Is A Sign of New Luxury Era in Downtown Manhattan

From the WSJ's Developments blog:

Rendering of new Brookfield Place retail complex

Luxury retail is beginning to boom in Downtown Manhattan.

The announcement Wednesday that a Saks Fifth Avenue department store will open in Brookfield Place is the latest sign that shopping in the city’s financial district is going upscale. Other tenants that Brookfield Property Partners LP has signed at the retail complex that it’s overhauling include Burberry, Emenegildo Zegna and Salvatore Ferragamo.

The new Saks Fifth Avenue “will cater to what we believe is an underserved and rapidly growing downtown luxury markets,” said Richard Baker, chief executive, of Hudson's Bay Co., the Canadian department store owner that acquired Saks last year.

In the deal announced Wednesday, Hudson’s Bay said it would open an 85,000 square foot Saks Fifth Avenue in Brookfield Place and a 55,000 square foot Saks Off Fifth outlet at One Liberty Plaza, which also is owned by Brookfield. In addition, Hudson will lease 400,000 square feet of office space in Brookfield Place, which will become the company’s New York home office.

Until recently, stores in Downtown Manhattan primarily served commuters and office workers. Many of the biggest retailers in the area, like Century 21, were known partly as discounters. Only a few luxury stores, like Tiffany and Hermes have opened in the Wall Street area....MORE

"Are You A Tech Company?"

From The Awl:

In 2014, there are but a few questions to ask yourself in order to determine if you are a technology company or "startup."
• Do you have a website which is primarily used to sell your product(s)?
• Do you sincerely believe that your company, which mostly aspires to sell a commodity product to middle-class and upper-middle-class consumers using mildly novel marketing techniques, is going to change the world?
• Has a mysterious man offered you tens or even hundreds of millions of dollars?
Well then! I have good news for you.

The shaving industry, long dominated by giants like Gillette and Schick, now includes a wave of well-financed start-ups. Dollar Shave Club, which just raised a $50 million round of venture capital, offers inexpensive replacement razor blades....

...MORE

Equities: "All Death Crosses Are Not the Same"

Please note: we did not bother gentle reader with Death Cross posts last week.

No, we went with "You Can Read about the Fed or You Can Read 'Randy Eurasians Surprise Scientists With Ancient Sex Romp'", "Oh Dear God: The IMF's Christine Lagarde Will Belly-dance to Achieve Her Goals" and "Things I Cannot Do, Part ∞, Sound like a distorted electric guitar playing Led Zeppelin's Whole Lotta Love".

Now it's time for Death Crosses.
From Dragonfly Capital:

The Death Cross in the Russell 2000 seems to be all that anyone talking about. Mostly because it sounds cool, I guess. So are you sick of it yet? Death Crosses as a trading signal are not very interesting. They lag the price action and often you will have already seen the bottom before the Death Cross occurs. But as a long term indicator they can carry some value, if you know what to look for. You see all Death Crosses are not created equal.

The Death Cross is defined as when the 50 day Simple Moving Average crosses down through the 200 day moving average. It seems simple enough to interpret. If the shorter moving average is falling through the longer moving average the price is falling and the the short term momentum is to the downside. Plenty have discussed the statistics of how the market does 3, 6 or 12 months after one so I wont repeat that here (spoiler: it is higher). But what happens in 3, 6 or 12 months without looking at what happens in between is ludicrous for a swing or position trader. Even a position trader may not be able to stomach the short term pullback, and I am sure those talking statistics are not holding stop losses that allow for a 25% decline along the way. So what can you do? Lets look at the last 4 Death Crosses in the Russell 2000 ETF, IWM, a bit more closely to see if there are some clues.

The chart above has the last 4 Death Crosses marked, as well as the one happening now. You can see that in all 4 cases the market had fallen by at least 7% and as much as 20% BEFORE the Death Cross. this reinforces the point that a Death cross is a lagging signal. But also in in 3 of the 4 the IWM headed lower lower by over 10%, following the Death Cross, before a Golden Cross changed the signal. The 4th time, in 2010, the move following the Death Cross was muted. What is the difference?...MORE

The market looks to be trading down over the next few weeks but truth be told, unless you are manipulating the result, no one knows.

Death Crosses over the years:
2012
Societe Generale's Albert Edwards on Analysts as Leading Indicators (and something about us approaching the Ultimate Death Cross)

Ummm... Regarding Albert Edwards and the "Ultimate Death Cross", Never mind

2013
Praise Be! The U.S. Market Has Narrowly Avoided Albert Edwards' "Ultimate Death Cross"

Everything You've Ever Wanted To Know about Moving Average Crossovers

2011
Look Past the Current Crises and See.... An S&P Death Cross

2010
"Qaddafi declares jihad against Switzerland"

Equities: "Sell Rosh Hashanah, Buy Yom Kippur?"

The Jewish New Year begins at sundown the evening of Sept. 24.
From Barron's Stocks to Watch:

This year has been terrible for seasonal strategies. Sell in May and Go Away? You would have missed out on a 6.5% return in the S&P 500. Avoid the stock market during a mid-term election year? You would have missed out on a 9.2% return. So much for seasonality.

But with markets weakening ahead of Rosh Hashanah, the Jewish New Year, maybe it’s time to think about selling before the High Holiday. In a post from Sept. 7, the blog Humble Student of the Market explains why it’s taking that maxim seriously this year:

…the strategy of adopting the Wall Street adage of sell Rosh Hashanah, buy Yom Kippur may not be a bad idea. Bespoke showed the profitability of such a strategy in 2011. Though the sample size is relatively small, the strategy did show a negative bias in equity returns during such a period....MORE

S&P 500 1996.29 up 13.52; DJIA 17,202.88 up 147.01.
Now about the Blowing the Shofar joke...
See also:

April 30
Debating "Sell In May, Go Away..." 
I've mentioned we don't have much time for calendar effects. 

May 28
Equities: 2014 as Analog to 2007 
We are still in a bull market and markets being perverse we'll probably have a summer rally that drives the Sell in May folks insane. Their prayers for a correction to scale back in on go unanswered and in their madness to participate they put in the top.
Or something.

July 2
The S&P 500 May Never Pull Back

Art, Real Estate, Whatevs: The Wealthy Are Buying Pre-packaged Luxury

From Art Market Monitor:
Lessons from the Ultra Luxury Real Estate Market

Bloomberg ran a story earlier this week on Bruce Makowsky, luxury bag maker turned ultra-real estate developer, who is building $100m houses in Beverly Hills. What’s important here for the art market isn’t the real estate, the taste or the money. It’s the fact that the wealthiest are willing to buy pre-packaged luxury. Something similar was seen in the aftermath of the bidding for the Francis Bacon triptych featuring Lucien Freud where underbidders and auction house personnel alike remarked upon the appeal of a work that ticked obvious boxes.

Also, there’s the simple appetite for homes and the need to furnish them with status objects:

“There was a void of homes for super-wealthy people, and that’s why I did it,” Makowsky said while sitting near a curved 54-foot (16-meter) glass wall that slides open to an infinity pool with iPad-controlled fountains. “I don’t think there’s anybody who’s served up $85 million-to-$100 million homes at this level for somebody to step into and buy.”

...MORE