The Daily Alpha: Real Talk on Marine Le Pen, Ted Seides, David Einhorn and Infrastructure Inequality

May 4 2017 | 11:11am ET

Today, we tackle real inequality in America: TSA lines for the rich and TSA lines for everyone else. We also discuss Marine Le Pen’s debate burn, Ted Seides’ terrible Warren Buffett bet and David Einhorn’s Tesla rage.

·      Shot: It’s Time to Get Worried About the Auto Industry

·      Chaser: Banks Pull Back on Car Loans as Used-Auto Prices Plummet

Quotes of the Day

“France will be led by a woman, me or Mrs. Merkel.”

Marine Le Pen delivered one of the best debate lines of the year yesterday.

The French election is set for Sunday, and Emmanuel Macron is holding steady with a three-to-two lead in polling. That said, Le Pen is firing away with heated rhetoric at Macron, a former banker who is pretty much ready to shower Greece and Italy in so much bailout money that everyone from Rome to Athens gets a Fiat and a lifetime supply of Ouzo, a combination that offers a fair mental picture of the European Union’s economic future.

“No. 3. A passive investment in the S&P 500 is an active bet.”

Ted Seides took to Bloomberg to explain his no-good, terrible bet with Warren Buffett.

For those who need a refresher, the hedge fund manager made a 10-year bet pitting the returns of five activist funds against the Standard & Poor’s 500 index fund. With eight months left, he has conceded.

Naturally, Buffett has been telling his shareholders that high management fees carve into the returns. But as Seides explains, this isn’t the entire story.

It would be interesting to try this experiment when we are not in a bull market… and we’re not coming off the worst economic downturn in 80 years… and the Fed is not pumping money into the system like a crank-addled member of the “Black Gang” shoveling coal into the Titanic’s boilers as it charges at an iceberg.

In an interview with Modern Trader in our June issue, one hedge fund manager adeptly explains that hedge funds are not designed to outperform bull markets. However, this has been lost in the shuffle of conversations about fees and performance, and broader narratives about Wall Street greed simple conversation about the stability of centralized planning around the globe by central banks operating in uncharted territory.

"While we don't know exactly when the bubble pop, it eventually will." 

That’s hedge fund manager David Einhorn.

The manager of Greenlight Capital remains convinced that Tesla Motors stock is in bubble territory and that a horrible collapse is coming sooner or later. He might have to keep waiting…

"It’s a borderline third-world country," he said. "It’s a disgrace. It’s simply wrong."

That’s Ken Griffin.

Griffin said at the Milken Institute Global Conference that he is vastly disappointed by U.S. infrastructure. The Citadel chief called for the U.S. to fix its airports, improve its electrical grid and address other high-priority needs.

Wasn’t there supposed to have been a massive stimulus eight years ago to address this very problem? Where is the money going?

“Members don’t walk down long crowded concourses, or line up at ticket counters and boarding gates. They don’t deal with baggage. And they don’t deal with paparazzi.”

Well, it looks like we found some of the infrastructure money.

While the middle class infrastructure stinks, at least the Hollywood mega-rich are getting their own airline terminal in Los Angeles.

At LAX, the ultra-rich won’t have to experience the horrors of air travel.

For a $7,500 a year membership fee and an additional $2,700 per domestist flight ($3,000 for international), you can avoid the hoi polloi in the airport once and for all.

The Private Suite Terminal at LAX provides the very simple image of “Airport Inequality.”

“It typically takes 2,200 footsteps from car seat to plane seat. For members of The Private Suite, it’s 70 footsteps. And they are all peaceful footsteps.”

While the four-figure annual fee is expected to eventually pay for the maintenance of this terminal, many people are already wondering how this impacts TSA. As it turns out, TSA isn’t hiring more officers. They will just pull on-duty officers over to this terminal for a temporary period so that they can pat down Nicolas Cage and his dog while the actor takes off for Vegas.

It’s just a matter of time before Chicago and New York build something similar for wealthier citizens.

Exit questions?

·      In the book shops, what gossip magazines are sold in the private terminal?

·      When does the Occupy LAX movement start over this?

·      Can we track the carbon footprint of all those celebrities lecturing everyone about climate change out of this terminal alone?

Thursday Reading List

·      Financial News: What activist Bill Ackman thinks about Brexit

Bill Ackman, the US hedge fund manager, has said the UK's exit from the European Union will be negative for London as a financial centre -- even though he listed his £3.6 billion Pershing Square Holdings fund here yesterday.”

·      ValueWalk: Passive Funds Are No Match For Skilled Active Managers

“However, index funds have yet to prove themselves where information is constrained and informed institutional investors are the minority. Small capitalization equities in Australia are an obvious example; if you buy the index you will almost certainly underperform a randomly picked manager.”

·      Financial News: Sydney hedge fund calls for BHP board renewal

“Tribeca outlined its concerns in an eight-page letter titled "Making BHP Great Again" that was sent to its investors late on Thursday. Its push coincides with a visit to Australia by $30 billion New York-based activist fund Elliott Associates, which has been meeting with shareholders of the miner in Sydney and Melbourne in recent days.”

·      The Real Deal: Activist investor buys $30M duplex at 30 Park Place

“The penthouse — which was initially listed as a larger combo unit for $65 million — spans 6,000 square feet across the 78th and 79th floors of the condominium tower, dubbed the Four Seasons Private Residences.”

·      Recode: Etsy has ousted its CEO and is laying off 8% of its staff

“The moves come as Etsy is being attacked by the activist investor Black-and-White Capital, which is pushing the company to cut costs, improve its user experience and consider a sale, according to Bloomberg.”

Tracking Calls

Jeff Gundlach (5/2): Market Correction by Summer 2017

Patrick Armstrong (5/3): Technology stocks could see 15% correction by Summer 2017.

Grab the Newsletter

The Daily Alpha is published on Finalternatives.

Signup here for the daily FINalternatives Newsletter, which includes the Daily Alpha.

Follow @FINalternatives

Be sure to check out the award-winning Modern Trader and a very special offer for first-time readers and follow @moderntradermag  

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. 

In Depth

PAAMCO: Will Inflation Deflate the Asset Bubble?

Jan 30 2018 | 9:49pm ET

As the U.S. shifts from monetary stimulus to fiscal stimulus, market pricing should...


CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Boost Hedge Fund Marketing ROI By Raising Your ROO

Feb 14 2018 | 9:57pm ET

Tasked with delivering returns on client capital, a common dilemma for many alternative...