Paul Singer Doesn’t Understand Why We’re So Obsessed With His Little Argentina Investment

paul singer

It’s just a little money.

In his Q2 2014 investor letter, Elliott Management founder Paul Singer expressed his annoyance at the media’s obsession with his decade-long public slug fest with Argentina over $1.3 billion of sovereign debt.

“Elliott does not seek such publicity,” Singer wrote. “Obviously, our lives would be easier if the press cared less about this particular position and/or similar positions that attract attention. The Economist ran a piece rebutting the silly and hyperbolic claim that our case will encourage lots of other investors to follow our lead, dryly noting that “There are easier ways to make money.” We think most other investors would certainly agree. As we have noted, one of the reasons that we continue to see attractive opportunities, even in the current yield-hungry environment, is that complex, labor- intensive situations are not everyone’s cup of tea.”

Singer’s hedge fund bought Argentine sovereign debt after the country defaulted in 2001. However, unlike over 90% of the bondholders, he refused to restructure his investment and take a haircut in 2005 and 2010.

For that, Argentina called him — and other hedge funds that followed his lead, known collectively as NML — “vulture” capitalists, and vowed never to pay.

An ugly lawsuit ensued that went all the way to The Supreme Court with Singer arguing that Argentine could not legally favor “exchange bondholders” who restructured their debt over he and other investors that did not. Argentina lost.

And unless some negotiation is reached, The Republic must pay Singer today or default.

Now, to Singer’s point. Of course it would’ve been easier for both parties if Singer had not chased Argentina’s money around the world — from Belgium, to France — for the last ten years.

A slew of messes that would’ve been avoided. Like the time Singer sued Elon Musk’s Space X for a ride Argentina had purchased as collateral for the country’s debt.

Or the time Singer got a Ghanaian Court to impound an Argentine naval vessel sitting in its waters. The crew on board was stuck in Ghana for about 2 months in 2012 over that one. Eventually they got to leave when the International Maritime Court of the Sea stepped in.

Yes, that’s a real thing.

And no, Singer didn’t like that The Court had to step in. In fact he wrote that he doesn’t like lawsuits at all, as they are “uncertain, expensive, difficult and time-consuming.”

Can’t argue with that.

“While many journalists and commentators often badly misunderstand what Elliott is all about, we understand that this publicity is occasionally the cost of adhering to our philosophy, which is to seek truly uncorrelated positions in which the key determinants of unlocking value are our own creativity and hard work,” Singer continued.

Uncorrelated? Creative? Can’t argue with that either.

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OK Tea Partiers, Let’s Burn Down The Obscure Export-Import Bank

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The fight over the reauthorization of the obscure Export-Import Bank is the perfect opportunity for Democrats to take advantage of the growing rift in the Republican Party. This is a chance for liberals to let the two wings of the GOP cannibalize each other.

First, the facts about the Ex-Im Bank. It is arguably the most “Republican” of government agencies. Basically, it supports businesses who want to export goods.

The Ex-Im bank works in a way that nearly all other countries do, with lending and insurance services that fill the relatively small gaps left by the private financial services firms. The bank turns a profit and represents the broad consensus in this country that, one, exports help create jobs, and, two, helping companies compete in the global marketplace is better than fighting protectionist trade wars. The companies that turn to the Ex-Im bank for help are frequently either from Red States or run by the same conservative executives and boards of directors that decry high taxes, overbearing government, and uncertain regulations. Because of this, the biggest cheerleaders for the Ex-Im bank are the classic old school Republican types.

Considering the Ex-Im Bank’s relatively simple functions and natural GOP appeal, one might think it would be uncontroversial. However, the bank is in danger of not having its charter reauthorized before its present enabling legislation expires on September 30th.

This is a big deal if you are one of the companies and workers who have benefitted from the bank or are counting on its services to sell your crops or your airplane. And there are a lot of them. Since 2009, the Ex-Im bank has supported over 1.2 million private sector jobs and financed more than $188 billion worth of exports.

Keeping the Ex-Im Bank running seems like an obvious no-brainer, but the fight over reauthorization has become another bloody battle in Washington. Even though the bank may seem like an odd target for your father’s Republican party, It is low hanging fruit for the nihilist wing of today’s GOP. It’s small enough to actually eliminate the whole thing and it’s obscure enough you can really make up any story you like about the imagined “corporate welfare” it represents. Perhaps best of all for conservatives in Congress, you can kill this agency by NOT passing a law, the specialty of the Tea Party. If nothing happens, Ex-Im won’t be reauthorize, and the bank will die. Voila! The government is smaller!

So, as Tea Partiers try to bring the bank down, Democrats find themselves aligned in trying to save it with that quaint wing of the Republican Party that actually believes getting things done to improve our country is OK.

But more and more Democrats are torn. Maybe losing the Ex-Im bank will actually accelerate the fissure between the Tea Party and the money that sustains the national Republicans. Perhaps we have to let the village burn to the ground to save it.

The GOP money machine seemed to be genuinely scared when the Tea Partiers nearly caused economic crises over debt limit increases, hurricane relief and transportation contracts. Losing Eric Cantor and the inability to deal with immigration reform also seemed to shake up the Republican establishment’s financial arm. But maybe they need to see real casualties that they care about to get them convinced that they need to turn off the fundraising spigot and bring congressional Republicans back in line. Perhaps the Ex-Im bank needs to die.

Democrats have always burdened ourselves with a sense of responsibility for keeping the government running. This refusal to let things grind to a halt has left us ill-equipped to fight as dirty as this new version of the Republican Party. We negotiate, cajole, and ultimately, compromise. President Obama long ago decided he wanted his political epitaph to be “He Got The Best Deal He Could.”

So as we near the witching hour in another showdown maybe it’s time we stopped trying to keep things afloat and gave up on helping the “good” Republicans who are trying to get the Tea Party gun away from their heads. Maybe the bloodletting hasn’t been full enough yet.

Come on Tea Party. Go ahead and shoot.

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Nintendo Is Stuck In The Mud Because Of The Wii U, And ‘Mario Kart 8′ Hasn’t Helped

mario kart 8

Nintendo posted its third loss in four quarters on Wednesday. 

Even though Mario Kart 8, its big first-party game released in May, shipped more than 2.82 million copies by the end of June, the Mario-themed racing game was not enough to help Nintendo’s struggling Wii U console perform in this particular quarter. The company said it lost $97 million between March and June.

Nintendo shipped 510,000 units of the Wii U in the June quarter, bringing the total to 6.68 million consoles sold, according to Bloomberg. It’s a big jump from the 160,000 units it sold in the same quarter a year ago and a small improvement over the 310,000 units it sold in the March quarter, but the Wii U is still lagging behind the PlayStation 4 and Xbox One consoles. Nintendo must also contend with mobile games available on Apple and Google’s app stores, which cost but a fraction of a Nintendo game. 

Reggie Fils-Aime, the president of Nintendo for America, said the company is working on multiple ways to improve the “software droughts” between Nintendo’s first-party game releases, namely by squeezing more games out of second- and third-party developers. But for now, Nintendo can only point to its back catalogue as it looks to achieve its “pace of product launch that we need to really drive momentum for Wii U,” as Fils-Aime put it to IGN’s Jose Otero.

Games like Mario Kart 8 will clearly help the Wii U achieve its goals. Consumers showed a 50% increase in “purchasing intent” for the console after the release of Mario Kart 8 and Nintendo’s successful showing at the E3 gaming conference in June, but it simply needs more games like Mario Kart 8. 

Super_Smash_Bros._U_ _new_charactersAs The Guardian’s Keith Stuart points out, Nintendo has a number of big games coming, including Mario Maker, Yoshi’s Woolly World, Captain Toad’s Treasure Tracker, and Super Smash Bros. for Wii U. But until those games release later this year and next year, the mainstream schedule is “a wasteland,” as Stuart described it.

As the Nintendo looks to bolster the Wii U with more titles, the company is already beginning to pivot towards a new health-related platform “that improves people’s quality of life in enjoyable ways,” according to Nintendo president Satoru Iwata. 

Amiibo_Group

Until that console comes around, however, Nintendo will keep pushing the Wii U, as well as the 3DS, its bestselling handheld console, and its new collectible figurines called “Amiibo,” which let gamers enter their purchased characters into Nintendo games with the Wii U’s GamePad controller. Nintendo hopes Amiibo can help drive revenue in the same way a similar, uber-successful platform called Infinity helped Disney

Mario Kart 8 will carry Nintendo for the next few months until the fall rolls around, which will see the release of two new Pokemon games for the 3DS and Super Smash Bros for Wii U and 3DS in October. But if Nintendo wants to reverse its fortunes, it may want to embrace its immense back catalogue of games — even the simplest of 8-bit and 32-bit classics from the NES and SNES consoles — and make them available for mobile gamers. 

SEE ALSO: 10 Reasons To Buy A Wii U Right Now

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Goldman Sachs Predicts The Slow Decline Of Wal-Mart And Target

walmart wal-mart

The heyday of big box discount retailers is over. 

Consumers are becoming less interested in retailers like Wal-Mart and Target, according to a recent note by Goldman Sachs. 

Instead, “consumers appear more focused on some combination of value and convenience,” the analysts write. 

The advent of online retailers like Amazon has also contributed to the problems at Wal-Mart and Target, according to the note. Consumers are less likely to make a trip to the stores when they could get free delivery online. 

Wal-Mart’s sales have declined for five straight quarters, leading to shakeups at the executive level.

Target’s CEO left earlier this year amid disappointing sales results and a data breach that affected millions of customers. 

Several sectors are benefiting from widespread lack of interest in Wal-Mart and Target, according to Goldman. 

Dollar stores, drug stores, and warehouse clubs “are taking share from broad-assortment retailers,” the analysts write. 

While dollar stores have struggled recently, they have been a threat to Wal-Mart since the recession. Dollar Tree’s acquisition of Family Dollar puts the retailers in a position to negotiate with suppliers for even lower prices. 

Meanwhile, drugstores like CVS and Walgreens have spent years expanding their assortments to include groceries, high-end cosmetics, clothing, and accessories. 

Costco’s strategy of very low mark-ups and quality over quantity also appeals to consumers today. 

Huge Wal-Mart and Target stores lack the convenience of smaller dollar chains and drugstores. They also can’t offer the deep discounting of warehouse clubs like Costco. 

To improve business, Goldman says, these retail behemoths need to adapt to accommodate changing consumer habits. 

SEE ALSO: American Retail Is Losing Its Mind Over Chinese Consumers

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The Economic Takeaways From Earnings Season Are Pretty Good (NSC, KSU, UNP, CAT, HOT, V, DIA, SPX, SPY, QQQ, IWM)

csx trains

John Stoltzfus, chief market strategist at Oppenheimer, is out with a new research note giving a quick update on some of the major macroeconomic takeaways from second quarter earnings announcements.

Overall, the reports show that things are going pretty well. And today’s better than expected GDP print corroborates these observations.

Stoltzfus highlights the transportation sector as having performed particular well in the second quarter, noting that the Dow Jones Transportation Average reported year-over-year earnings growth of about 22% on a more than 7% increase in sales. 

“Within the transportation industry group, railroads have stood out. Norfolk Southern Corp (NSC) recorded record revenues in the quarter, citing an 8% increase in shipments. Kansas City Southern (KSU), which operates between the US and Mexico, increased volumes by 7%. Union Pacific Corp reported earnings in line with expectations, up 20.7% from a year ago on sales growth of 10%,” Stoltzfus writes.

“We believe increased business activity in the railroads provides evidence of healthy economic growth, increased business production as well as the sustainability of economic expansion.”

Stoltzfus also viewed Caterpillar’s results positively, as they showed organic North American sales growth of 6%.

An improvement in consumer spending was seen by management at Starwood Hotels, which beat by 2% on earnings per share, while Visa was more cautious saying that they hadn’t seen, “any signs of acceleration in the pace of the economic recovery.”

With more than half the S&P 500 having reported earnings, Stoltzfus and his team find that among components of the benchmark index, positive surprises for sales growth are outnumbering negative surprises by about 2:1, while earnings growth surprises are favoring positive results by more than 3:1.

S&P 500 earnings surprises

This table is broken down the S&P 500′s sectors, which include Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Healthcare, Financials, Information Technology, Telecommunications, and Utilities. 

SEE ALSO: The Recovery Doesn’t Look As Good After A Revision Buried In Today’s GDP Report

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The ‘Highway Cliff’ Is Back, And It’s Rearing Its Ugly Head Just Days Before A Potential ‘Shutdown’

Highway traffic gridlock

With just two days left before lawmakers leave Washington, D.C. for a five-week-long recess, the House and Senate still have not agreed on how to keep funding federal highway and construction spending.

As of now, the Senate and House have dueling legislative proposals to keep the Highway Trust Fund, which provides federal money for transportation infrastructure projects, afloat. The Senate offered their proposal Tuesday by passing a bill to extend highway and construction funding through December. House members passed their own Highway Trust Fund bill last week that would keep the money flowing until May of next year. However, in addition to the different timetables, the two bills propose different methods for financing the fund and House leaders vowed to reject the Senate bill hours before it even officially passed. 

The Obama administration has warned that federal transportation funding to states would slow by as much as 28% beginning Aug. 1, because the federal Highway Trust Fund is expecting a shortfall sometime next month absent congressional action. The fund finances tens of thousands of construction projects around the nation, and the administration has warned as many as 700,000 jobs are at risk.

 

Despite the disagreements in Congress, a highway bill is still expected to get to President Barack Obama’s desk by the time Congress skips town — but the competing legislation in the two bodies has increased the uncertainty ahead of what some lawmakers have dubbed a potential “construction shutdown.”

The sponors of one of the Senate amendments that altered the House’s bill — Sens. Tom Carper (D-Delaware), Barbara Boxer (D-California), and Bob Corker (R-Tennessee) — said they wanted to force Congress to agree on a long-term solution to shore up the Highway Trust Fund sooner rather than later.

“With a December deadline, Congress has more than enough time to consider the variety of solutions available to us. I am confident this Congress can get it done and I will continue to fight to make sure we do,” Carper said in a statement Wednesday night.

The Senate also adopted an amendment from Sens. Ron Wyden (D-Oregon) and Orrin Hatch (R-Utah) that changes the way the highway-funding extension is paid for. The senators said they would instead raise revenue by tightening compliance language in the tax code, making it more difficult for individuals and corporations to claim undeserved tax deductions.

Some Democratic lawmakers and groups have derided the House’s method for funding the bill, an offset which is known as “pension smoothing.” It permits employers to delay contributions to employee pension plans, thereby increasing taxable corporate income and generating revenue for the Treasury. However, Democrats and conservative groups have called it a “gimmick.”

From here, the House has a few options. Most likely, judging from House Speaker John Boehner’s comments to reporters on Tuesday, they will simply strip out the Senate’s amendments and send the bill back to the Senate.

As Boehner said at stakeout this morning, I expect we’ll put our pay-fors back in and send it back,” a House GOP leadership aide told Business Insider.

At that point, with their tickets out of town already punched, analysts believe the Senate would likely blink.

“This spells a game of chicken with the potential for a summer construction shutdown affecting approximately 100,000 road construction projects around the country and the approximately 700,000 jobs associated with them,” Guggenheim Securities analyst Chris Krueger said in a note to clients Wednesday.

But he added, “We do not believe that the Congress will leave for their 5-week August vacation (with 97 days before the midterm elections) without resolving this issue. … The odds for a partial construction shutdown are below 20%.”

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FOMC Preview: Here’s What To Expect From Today’s Meeting (DIA, SPX, SPY, QQQ)

janet yellen richard shelby

The Federal Reserve’s Federal Open Market Committee is set to announce the results of its latest two-day monetary policy meeting Wednesday afternoon at 2 pm ET.

Economists expect the FOMC to take another $10 billion off its monthly asset purchases, or quantitative easing program. 

At its June meeting, the Fed signaled that if the economic recovery proceeds as the central bank expects, it would conclude QE with its October meeting. 

Wednesday’s meeting is largely expected to come and go without incident, with the Fed expected to keep interest rates between 0%-0.25% and continue with its taper, as Fed Chair Janet Yellen is not scheduled to hold a press conference after this meeting.

And this morning’s better than expected GDP report won’t cause the Fed to make any significant moves with Wednesday’s announcement.

Following the GDP report, Chris Rupkey, chief financial economist at Bank of Tokyo Mitsubishi wrote that, “Growth is back, and [the Fed] expected it to bounce back, so that means another $10 billion cut in their QE purchases. The steady as she goes economy means a steady as she goes Fed policy. Nothing here for the Fed to speed up its exist, at least in today’s policy statement… Maybe Yellen will have more for us at Jackson Hole.”

Without a press conference offer more insight into the Fed’s thinking, Bill McBride at Calculated Risk said there will likely be a heightened focus on the language in the Fed’s statement on Wednesday. 

McBride cited Goldman Sachs economist David Mericle who wrote that:

“We expect that next week’s FOMC statement will show very little change. The FOMC might choose to upgrade the language on growth in economic activity somewhat, and it might also strengthen the language on labor market indicators a touch in recognition of the strong June employment report.”

And as the Fed approaches the end of its QE program, Fed watchers are looking for a signal on when the central bank will raise interest rates, and if more members of the FOMC will begin agitating for change.

Michael Hanson and Ethan Harris at Bank of America Merrill Lynch, however, write that more dissent from FOMC members at this meeting would not be a useful signal for determining the Fed’s next move. 

Hanson and Harris expect that the Fed’s statement will acknowledge some of the better economic data since the last meeting, but they expect, “no meaningful change in the policy language.”

Despite expecting language that is no more hawkish in the Fed’s July statement, Hanson and Harris say that, generally, “The risk is that markets seize on any language that could be (mis)interpreted as hawkish at any of the next several FOMC meeting, given market sentiment and positioning.”

In September, Chair Yellen will hold a press conference following the FOMC’s statement and the Fed will also release its latest summary of economic projections.

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11 Facts About China’s Economy That Will Blow Your Mind

China is the most populous country in the world, and its 1.35 billion nationals consume copious amounts of food and resources.

Produced by Matthew Stuart. Research by Mamta Badkar

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ALAN GREENSPAN: ‘We Are Running Out Of Buffer In The Economy’

alan greenspan

The U.S. lacks the resources to adequately respond to external shocks like a foreign relations crisis or climate change, former Federal Reserve Chair Alan Greenspan said Wednesday.

In an appearance on “In The Loop With Betty Liu,” Greenspan warned that the economy has almost no room to maneuver if faced with a security threat:

We are running out of buffer in the economy. We don’t have the capability should, for example, we run into a major conflict in the Middle East or elsewhere where it requires a major increase in our defense budget. Our defense budget is heading in a direction where in a couple, two or three years it will be at the lowest level relative to GDP since before World War II. We don’t have the physical resources to respond. 

Meanwhile, the government is going to have difficulty raising revenues to adequately confront longer-term threats like global warming: 

We’re seeing innumerable things going on in our climate which is going to require funding in order to get to, I wouldn’t say cure, but to offset. And we have no – we don’t have those monies. We’re already fully committed in the budget. We have no way of finding new revenues. And one thing that what concerns me is that if in the context we’re going to be getting and inflating a, I should say, pressure in the fiscal system at the same time we’re doing major things in the monetary system.

For context, here’s the chart of year-on-year percent growth in current tax receipts. They’ve been declining since mid-2010. 

fred receipts

Finally, Greenspan believes a correction is likely given current valuations, but it’s impossible to say when it will hit.

…the stock market has recovered so sharply for so long you have to assume somewhere along the line we’re going to get a significant correction. Where that is I do not know, but I would not say that we are grossly overpriced at this point in a historical context.  

Greenspan also discussed the resilience of the U.S. dollar and how there’s no way of telling what the outcome of the Fed’s unprecedented easing will be. 

SEE ALSO: The One Hiccup In Todays GDP Report

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Argentina Finally Makes An Offer Worth Listening To

cristina fernandez de kirchner and axel kicillof

With hours until the country could default, Argentine leaders negotiating in New York City are finally putting together something of an attractive deal.

Here’s how it all started going down: On Tuesday night, Argentine Economy Minister Axel Kicillof flew in from Caracas for last-ditch negotiations with the Special Master of the Court. At about 11:20 EST he left the meeting saying negotiations were ongoing.

What he wants is a stay on a payment to bondholders due by the end of the day Wednesday, marking the end of a decades-long dispute with a group of hedge fund managers, known collectively as NML Capital.

For years it refused to pay these investors over $1.3 billion in sovereign debt.

The country’s leaders reasoned that because they would not take a haircut on the debt they purchased after Argentina’s default in 2001, like 90% of holders of the same debt, they were “vultures.”

So the “vultures” sued the country all the way to the Supreme Court and won. Now they must be paid like all the other bondholders. By the end of the day.

Unless there’s a stay on payment until 2015 (like Argentina wants), of course.

On Wednesday morning, a group of Argentine bankers announced that they would try to sweeten the pot. After years of arguing and appealing, the Court has little confidence in Argentina and has so far rejected its requests for a stay on payment. 

The bankers said that they would put up $250 million as collateral — a show of good faith — to satisfy the Court and NML as negotiations went on. Argentina’s leaders have said that if NML is paid 100 cents on the dollar for their investment before 2015, it will trigger a clause in their contract — the RUFO, or Rights Upon Future Offers, clause.

It basically says that if Argentina gives some bondholders — in this case NML — a better deal, other bondholders of the same debt can claim the same terms. Argentina says that could cost the country $15 billion.

But default could cost the country even more. If no payment is made by the deadline, bondholders can sue for an acceleration of payment. That means Argentina would have to shell out everything it owes at once — about $29 billion (about everything Argentina has in its Central Bank).

Another option on the table, according to Bloomberg, is for Argentine banks to buy the country’s debt from NML and then ask the Court to suspend payment until 2015.

Here’s Kicillof entering negotiations around 10 a.m. EST. Let the games begin.

SEE ALSO: The Most Dangerous Politician In Latin America

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