Sent from Bloomberg Professional for Android
Sent from Bloomberg Professional for Android
Sent from Bloomberg Professional for Android
Sent from Bloomberg Professional for Android
Sent from Bloomberg Professional for Android
SYRIAN WAR REPORT – OCTOBER 4, 2019: IRAN FOILS ATTEMPT TO ASSASINATE COMMANDER OF QODS FORCE
Turkey is fortifying its border with the Syrian province of Idlib with cement blocks, barbed wires, and other military-style structures. According to Ankara, Idlib is in the hands of the so-called moderate opposition. However, it is for some reason concerned over the presence of these moderate activists in the border area.
During the past months, the Turkish military deployed notable forces, including heavy military equipment, on the Turkish side of the border with the Syrian province. Most of these forces are located near the opposition-controlled border crossings.
Meanwhile, the situation once again escalated in the southern part of the Idlib de-escalation zone. On October 3, the Syrian Army shelled militant positions near the town of Kafr Nabudah and Baarbu in southern Idlib with heavy rockets. On the same day, helicopters of the Syrian Air Force delivered a fresh round of strikes in northern Lattakia targeting Hayat Tahrir al-Sham near Kabani.
Pro-militant sources also reported that the Syrian Army shelled area near a Turkish observation point in Maarat.
Despite efforts of Turkey, Iran and Russia in the framework of the Astana format, Idlib militant groups continue shelling positions of the Syrian Army along the contact line in southern Idlib and northern Lattakia on a regular basis. This forces the army to respond and fuels instability in the area.
The Intelligence Service of Iran’s Islamic Revolutionary Guard Corps announced that it had foiled an “Israeli-Arabic” plot to assassinate Gen. Qasem Soleimani, the commander of the Qods Force of the IRGC. According to Hojjatoleslam Hossein Taeb, the assassination squad bought a house next to the shrine of Gen. Soleimani’s father, prepared 350-500kg of explosives and planted them in a tunnel under the shrine. The squad planned to carry out the attack on September 8 or 9, which are the 9th and 10th days of the holy Islamic month of Muharram. Gen. Soleimani was supposed to visit his father shrine on one of these days. The IRGC arrested the entire squad consisting of 3 operatives. G_3
Iran is yet to name the side responsible for the supposed assassination attempt. However, most likely, Teheran will accuse Israel and Saudi Arabia.
Barneys Considers Buyout Proposal From Retail Investor Group
The effort is being led by Sam Ben-Avraham, known for his roles in starting New York retail store Atrium and streetwear brand Kith, said people familiar with the matter.
NEW YORK, United States — Luxury retailer Barneys New York Inc. is in advanced talks with a group of retail industry investors looking to buy the company out of bankruptcy for about $220 million, according to people with knowledge of the situation.
The effort is being led by Sam Ben-Avraham, known for his roles in starting New York retail store Atrium and streetwear brand Kith, the people said. They asked not to be identified discussing a private matter.
The bid is one of several that have emerged as the retailer seeks to find a suitor for its assets to avoid liquidation. Authentic Brands Group LLC has also been in discussions about acquiring the Barneys name, Bloomberg previously reported. The joint bid led by Ben-Avraham is the furthest along and it contemplates an asset-based loan and cash to keep Barneys operating, the people said.
The talks are continuing, and there’s no certainty that a deal will be reached, the people added. Any offer would need approval from the bankruptcy court.
Advanced Talks
“We are in advanced negotiations with a potential purchaser and intend to reach an agreement by next Friday,” Barneys said in an emailed statement.
Ben-Avraham couldn’t be reached for comment and Authentic Brands had no immediate comment. The Wall Street Journal previously reported the potential deal.
Barneys filed for Chapter 11 in August with plans to shutter most of its stores after getting squeezed by rising rents and fewer visitors. Its management has been seeking to sell a slimmed-down business and negotiate with its landlords through the court process.
The deal to rescue Barneys is expected to wipe out current equity owners including hedge fund veteran Richard Perry, who took control in 2012 in a debt-for-equity swap. At a bankruptcy hearing on Thursday, Judge Cecelia Morris extended the deadline for a definitive agreement until October 11, which could be pushed out further depending on how talks advance. An auction for the assets is set for the end of the month.
Barron’s Weekend Summary: Cover story on commission-free trading says SCHW will likely be the industry winner; TSM is a good way to play tech sector innovation
- Cover story: Customers of firms such as SCHW, ETFC, IBKR, and AMTD may be delighted about their move to cut equity trading commissions to zero, but analysts lowered estimates and tried to figure out who the winners and losers would be once the dust settles; If there is a winner, it is likely to be Schwab, which has a history of disrupting the industry, though it faces significant near-term challenges.
- Tech Trader: The technology industry is counting on 5G to be the next big growth driver for a range of new products, from phones and chips to software and sensors, but 5G remains an amorphous idea, and the short-term beneficiaries are no longer clear; “Even if the 5G opportunity takes more time to play out in the U.S., there is still a powerful near-term investment opportunity for the technology: Chinese infrastructure.”
- Trader: “As the data confirm, the U.S. economy is slowing but still growing, if at a much slower pace than a year ago. For investors sick and tired of the back-and-forth, perhaps it’s best to ignore it”; There’s little reason for PYPL, MA, and V to remain involved with FB’s Libra cryptocurrency—they have benefited tremendously from huge secular shifts in how people shop and have already navigated the regulatory issues that are slowing Libra down; This year, to keep stocks afloat, lower rates are needed, but so is action on the fiscal front, such as infrastructure spending, though a bipartisan package in that area is unlikely to materialize.
- Features: 1) China is growing at its slowest pace in decades—a slowdown that began before the trade war, and Beijing’s previous strategy of printing money to stimulate the economy has resulted in high government debt that prevents it from taking similar measures now, creating a challenge for stock investors who are reassessing their China stakes; 2) Positive on TSM: The company, which pioneered the foundry business model of making chips only for external customers such as AAPL, QCOM, Huawei, NVDA, and AMD, remains a good way for investors to play innovation in the tech sector “without the external noise”; 3) Positive on UTX, RTN: The companies’ planned merger hasn’t been easy to sell to investors, but there are still several good opportunities in the two stocks, though it might be best to act before shareholders of both companies vote on the merger on October 11; 4) Positive on VLO, MPC: Every year, some 60,000 oceangoing freight ships carry $7T in goods and commodities around the world, but big changes are coming to the industry that will reorder the oil and shipping markets—and perhaps make the planet a cleaner place, a shift that presents big opportunities for investors; beneficiaries are likely to include Valero and Marathon Petroleum; 5) Commission-free trades sound nice from a marketing standpoint and are likely to lure investors, but financial professionals say there are limits and some remaining fees, and that free trading could lead investors to make risky bets or disregard other costs of trading, such as taxes; 6) Scams that target the elderly, whether by phone, computer or in person, gain criminals billions of dollars a year, but fear and shame often keep victims from seeking the help that their grown children could provide, according to experts.
- ETF Quarterly: Stories on how emerging market funds are trying to sidestep China; How to bet on pre-IPO companies; What to expect when a fund merges with another fund; ETFs that can limit losses, though they cost more; Leaders and laggards in the industry.
- Follow-Up: Positive on SPOT: Shares of the global leader in streaming music have had a rough few months, but some analysts now say the bad news is already priced into the stock and that a rally is in the mix.
- European Investor: Positive on Technogym: The Milan-listed Italian fitness-equipment maker could become valued like a Silicon Valley technology start-up as it prepares to stream online fitness classes through digital platforms on its machines.
- Commodities: “Palladium has outdone itself with an extended run to record highs that began at the start of 2018 and is continuing, with prices up about 40% this year—the gains have come even as sister metal platinum’s recent rally to a more than one-year high failed to hold.”
- Streetwise: Company earnings won’t begin pouring in for another week, says columnist Jack Hough, and while on the whole the numbers won’t be good, they’ll be better than predicted.
MDMA 💊
October 4, 2019
The unicorn barn is on fire. Ablaze. A feckless FTC and DOJ, no longer countervailing forces to private power but co-conspirators, have enabled invasive species (Amazon, Apple, Facebook, and Google) to devastate the ecosystem. What to do? No worries, just double up on the MDMA of our economy — charismatic CEOs cut with cheap capital — and the illusion of prosperity party rocks on into the morning. Not that I’ve done a lot of drugs in my life, but they make for gangster metaphors, no?
Unfortunately, the later the lights go on, the uglier the reality. The markets have been dancing and partying with young firms with a seductive rap: “I think of myself as a tech, SaaS kind of guy.”
But as the lights come on, it’s clear he’s a rich kid exiting the bathroom with short-lived confidence from the cheap capital around his nostrils. He doesn’t have a real job (viable business model), and, worse, his parents are fed up and about to cut him off. (If I sound like someone who spent too much time at Pangea, Lotus, Rose Bar, Bungalow 8, and Butter in 2003 NYC, trust your instincts.)
The lights are on, and the market is now discerning between overvalued unicorns:
— Pinterest
— Snap
— Twitter
— Peloton
— Slack
— DoorDash
— Lime
— Palantir
— Uber
— Compass
And those that could lose more than 80 percent of their value or disappear:
— Tesla. Dear Twitter trolls: yes … I’m an idiot, I can’t do, so I teach, and I don’t understand genius. It’s a tech/energy play. I get it... Save your breath. Yes, he is a genius, Tesla has changed the world for the better (I believe this). And … Tesla doesn’t have the scale to compete in a well-run, low-margin business — auto.
— WeWork. Shared workplace concept that’s been in the news lately. Founder has great hair.
— Robinhood. Until yesterday, Robinhood was a disruptor. But Schwab announced they were eliminating commissions on trades, and Robinhood’s top of the funnel (customer acquisition) collapsed. Schwab has other products/revenue streams. Robinhood’s VCs must now fund a company whose $7.6 billion valuation (see above: white powder around nostrils) was cut in half yesterday. Similar to Walmart, Schwab’s leadership will result in multiple expansion. Look for Schwab stock to recover its 8 percent one-day loss within 30 days.
— Lyft. Imagine a shitty business, ride hailing, minus a global brand or Uber Eats. Lyft is all the calories of Uber, with none of the great taste.
— OYO. Just like WeWork, OYO is a REIT with too much SoftBank capital. Masa owns 45 percent, and as one of the lead investors in every round since 2015, he has pushed the valuation from $400 million to $12.5 billion. Smoking their own supply.
To be fair, it’s easy to see why we continue to do this. The stable (the US information economy) produced Secretariat, Seattle Slew, Zenyatta, and Spectacular Bid (awkward equestrian metaphors for Amazon, Apple, Facebook, and Google). We also feel a sense of hope/justification, as Airbnb is just hitting its stride and could be one of the greats.
The Betty White powder was cut with a variety of things: frothy markets, idolatry of innovators/founders, and weak oversight. But the central nervous system stimulant here is cheap capital. And the substance mixed into the fine Columbian has been SoftBank, whose $100 billion Vision Fund was disruptive, on several levels.
The case study we’ll be teaching for decades in b-schools around the world about the Vision 1 disaster (not fair, it’s a total f**king disaster), writes itself. The strategy was (wait for it) capital as a strategy. Specifically, more of it, so you could win deal flow and be the fuel that helps portfolio firms make the jump to light speed, leaving competitors behind and befuddled.
Easy to see how this makes sense. But it doesn’t. Capital is in fact a weapon in private equity, where only a few firms can bid for the truly great, proven assets with enormous cash flows. However, in venture, and growth, the secret sauce is dislocation, a market ripe for disruption, and crazy genius founders who are too stupid to know they will fail. When your ability to deploy heaps of billions into a concept becomes the priority, as it does when you have $100 billion to deploy, your returns go down. This is evident across SoftBank’s portfolio.
Venture Is Local
My NYU colleague Professor Pankaj Ghemawat published gangster research showing business and trade are, despite rumors of the death of distance, a function of geography. A retail store’s profitability is correlated with proximity to HQ. Sequoia Capital was the lead investor in my second firm, and the partner on our board told me a key tenet was they would not invest in a firm the partner could not drive to.
Masa and Adam would agree to meet in-between their 13 time zones (I think that’s Hawaii). Similar to when the Japanese acquired US movie studios and golf courses in the eighties, SoftBank will leave with less yen than they came with. If you found the previous sentence uncomfortable, racist even (as I initially did), you’ve fallen victim to the same monoculture PC virus infecting our universities. Japan did buy US golf courses, and their currency is in fact the yen.
Smoking Your Own Supply
Another tenet of venture, expressed by every investor I’ve raised money from (General Catalyst, Maveron, Sequoia, Weston Presidio, JPM, Goldman, and others) is they will not lead subsequent rounds. Good investors resist the temptation to smoke their own supply and require third-party, arms-distance validation of the firm’s value here and now. SoftBank was the only lead investor in WeWork, through multiple rounds, since 2016.
Ironically, the real damage on the capital side will be on SoftBank employees, as they own common stock in Vision 1. Saudi Arabia Public Investment Fund and Mubadala own preferred stock that captures a 7 percent (preferred) return each year, sequestering returns from the few winners in the portfolio. So, Vision 1 has pneumonia, but the common equity holders in Vision 1 are on a ventilator.
The spoon, baking soda, and heat that turns overvalued firms into crack is charisma — people who trade likability and their reputations for hundreds of millions (often billions) to wallpaper over ugly truths about a business and its impact on other people and the commonwealth. Think of it as information economy money laundering. Masayoshi Son is the Walter White of money launderers, washing dirty money and procuring his take.
A question: if the relationship between Saudi Arabia’s Public Investment Fund and SoftBank became strained — as it often does between criminals and money launderers — would Mohammad Bin Salman dispatch operatives to intercept him on foreign soil, strangle him, and then dismember him with a bone saw? And, another question, if they did … would Prime Minister Shinzo Abe do more than ask Mohammad Bin Salman to buy additional weaponry from Mitsubishi Heavy Industries?
Addiction
Addiction is the long-term inability to moderate or cease intake. Someone with an addiction will continue to misuse the substance in spite of the harmful effects. British-Venezuelan scholar Carlota Pérez has written powerfully about the link between technological innovation and extreme income inequality. We see evidence of a Hunger Games economy everywhere. Life has become harder for two of every five Americans.
However, the idolatry of winners, constantly promoted on CNBC and Instagram, creates a high we’re all chasing, the “innovator” badge. Its spoils, coupled with the false narrative that we live in a meritocracy, have dulled our sense of empathy.
We feel it in our gut. We witness immense prosperity, but little progress. A shrinking middle class, depressed teens, and fractured alliances. Still, we continue to look away. As a species, we’re easier to fool than convinced we’ve been fooled. We refuse to face the truth: The innovation industrial complex has ripped at the fabric of our democracy, fomented a caste system, and dulled our sense of empathy.
We’re lying to everyone. We’re lying to ourselves. We’ve lost sight of what’s important. We’ve lost ourselves. We’re addicted.
Life is so rich,
