The Daily Alpha: Real Talk on Retail Bankruptcies, the Tesla Cult, Performance Fees and United’s PR Problems

Apr 12 2017 | 3:08pm ET

Today, we discuss Tesla’s new search for board members, retail bankruptcies, hedge fund taxes and United’s PR problems.

Hair of the Dog

Shot: MBA: Despite flat mortgage apps, purchase loan size reaches a new high…again.

Chaser: Freddie Mac: Renters say they expect to stay where they are.

Quotes of the Day

“Welcome to the party, pal.”

This is our reaction to the following quote from Corali Lopez-Castro, a bankruptcy lawyer, who just attended a recent distressed-investing conference in Palm Beach, Fla.

In an interview with Business Insider, Lopez-Castro said that "2017 will be the year of retail bankruptcies.” 

When Castro-Lopez isn’t projecting the obvious, she probably cold reads for very distressed people grieving over a personal or financial loss…

If you didn’t know that brick-and-mortar retail companies have been dying a cold, lonely death because they don’t understand the importance of e-commerce… then you should be forced to run a Blockbuster franchise…

Between Peak 2006 and Peak 2016, Best Buy lost 49% of its market cap. JCPenney lost 83%. Kohl’s Corp. lost 59%. Macy’s lost 46%. Nordstrom lost 21%. Sears lost 95% and Target lost 15%.

Amazon meanwhile saw its market capitalization increase by 1910%.

Water is wet…the sky is blue…and technology and convenience are preferred to loading the kids in the car and driving to buy crap that can be on your doorstep by the time you got home.

"I could not believe it when I saw the proposal.''

Bruce McGuire, president of the Connecticut Hedge Fund Association, doesn’t like the idea of a 19% surcharge on hedge funds.

But Connecticut Democrats are saying that they need to close a $1.7 billion deficit, so they’re going to stick it to the evil hedge fund managers… because “fairness.”

McGuire predicts that some firms "will leave Connecticut for other states.”

It’s as though McGuire has seen this happen somewhere else…

“I’m sorry. We will fix this.”

United CEO Oscar Munoz’s internal memo over the firm’s decision to basically defenestrate one of their passengers so that their crew could take his seat has not going over well. Munoz is now furiously apologizing for his company’s actions while the stock takes a hit.

The first thing they might want to do… change the language on their United App software updates because THIS IS NOT SOLVING YOUR PROBLEM.

“Fees are increasingly a focus for hedge funds, consistent with the broader industry, yet performance is still the key metric for investors. It’s the most oft-cited reason for redemptions.”

Bloomberg conducted a study to better understand the wants and needs of hedge fund customers… and they found – to the surprise of millionaires everywhere – that performance is the most important metric by which hedge funds are judged.

Wait… are there customers who don’t care about performance?

I’m sure Peter Zuck would have liked to have met them… before the sentencing.

“Directors should be held to a higher standard of independence given the conflicts of interest that permeate this board. A thoroughly independent board would provide a critical check on possible dysfunctional group dynamics, such as groupthink.”

Are you interested in joining a cult?

If so, do we have the job opportunity of a lifetime

Tesla is looking for independent board members, and you could be the lucky person to help Elon Musk somehow obtain more capital…

Do you like speculating about the feasibility of living on Mars? Ever pined to join an organization with a valuation that makes no numerical sense? Are you not concerned that your company has a higher market capitalization than any auto in America but doesn’t come close to delivering anywhere close to the same amount of vehicles annually?

Or do you just really really like submitting all power to the great Elon Musk?

Ignore all the stuff about groupthink, because it’s a requirement to work here…

Tesla remains the great cult stock of this decade... a topic we covered extensively at Modern Trader.

Congratulations to everyone making money on its meteoric rise.

Just make sure your trailing stops are in order.

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Garrett Baldwin is the voice of the The Daily Alpha, the features editor for Modern Trader magazine, and the author of The Man with The Big Red Balloon.

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