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REAL TALK ON
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BUSINESS & FINANCE

The Daily Alpha - 09.28.15

The Daily Alpha - 09.28.15

Garrett Baldwin



Here's Today's Alternative Thinking on Capital Flight, Agricultural Technology, Janet Yellen’s Impact on Hedge Fund Returns, a Busy Q4 IPO Schedule, and How Jimmy Clausen Should Retire from the NFL.

 “You’re talking about the smartest people in business who know how to manipulate money. If you tell them you’re closing loopholes, they’ll take the money someplace else, offshore.”

On Monday, hedge fund managers reacted to Donald Trump’s plan to close the “carried interest” loophole and raise taxes on America’s top earners.

As expected, the wealthiest of the wealthy offered a simple reaction.

When/if taxes are raised, they’re either going to find new loopholes in the tax code, or they’ll move money to places where tax rates are lower than here in the United States.

Capital flight is always a fallback argument (one that aligns with human behavior), particularly in an age of globalization and digitization.

No longer does someone need to make a month-long journey by boat and horse under the threat of a cholera pandemic just to see their gold bars sitting in a Swiss vault. A few mouse clicks and signature can now have your money waiting for you on a beach in the Bahamas before you board the flight from JFK.

But while the front-runner says he plans to hike taxes on the “hedge fund guys” (by just 1.2%, according to the Washington Examiner) he also plans to eliminate the “inheritance tax” completely. Should Trump continue to hold a lead, his “inheritance tax” or “death tax” position will likely be very popular among the Republican base. It will also spur a much needed debate about the nature of this double-tax on income that reduces the amount of money that a person can leave to their children and grandchildren when they shed their mortal coils.

Democratic candidate Bernie Sanders wants to hike up the “inheritance tax” to a maximum rate of 65% and lower the threshold for a single person to $3.5 million and $7 million for a couple. That’s quite a sharp difference in policy.

But even if Sanders were to pull this off, again, he’s also missing what the hedge fund manager said above in reaction to Trump’s “carried interest plan.” That money will find itself offshore or in a state-based trust that the ultra-wealthy had enough to pay top advisers to shield wealth from the tax man.

The only reason one should support raising the “inheritance tax” – and not eliminating it – is that the vast amount of wealth passed on in recent years in America has produced a wealth of crappy reality television shows about rich kids who have never worked a day in their lives. America shouldn’t be subjected to another season of Southern Charm, Keeping Up with the Kardashians, the Real Housewives, or Chrisley Knows Best.

Unfortunately, Trump is a big fan of reality television.

In the end, hedge fund managers think a lot less of Trump than he thinks of “hedge fund guys.”

Lloyd Blankfein is apparently being kept up at night by the thought of the Donald having access to the nuclear codes.

But despite their insults – one calling him a buffoon in Vanity Fair– they’ve admitted that each time they underestimate him, they’ve been wrong.

Thirteen more months of this, America.

“Farmers and agribusinesses need to understand, embrace, and adopt a variety of technologies to compete in the marketplace.”                                                                                                                                                                   

The world is going to need to feed nine billion people by the year 2050, and that figure might be underestimate the challenge. But every time a challenge of massive proportions comes along, engineers (human beings) find a way to create a machine, a device, a disruption that confronts these challenges.

Investment in agricultural technology is hot among Silicon Valley titans and private equity, venture and angel investors. University of California-Davis’ Sustainable AgTech Innovation Center (SATIC) has brought together investors and innovators to address global food challenges and make a lot of money in the process.

Here’s a breakdown of some of the hottest areas of AgTech from BMO Harris Bank.

One thing is sure, this gold rush isn’t going to slowdown any time soon.

 “The latest weekly briefing from Lyxor Asset Management shows hedge funds remained resilient in the aftermath of the September 17 FOMC meeting.”

Finalternatives reports that hedge funds outperformed the broader market following the Federal Reserve’s decision to hold off on raising interest rates due to concerns about slowing global growth. Hedge funds were still down for the week, but nowhere near the 1.8% decline in the S&P or 4.1% slump in the Eurostoxx 50.

“Now with high market valuations behind them, the investment firms are looking to finally book some profits.”

Business Insider reports that private equity firms could be gearing up for a busy IPO season in the fourth quarter. From payment processor First Data to food chain giant Albertsons, private equity firms are looking to profit. (Here’s a breakdown of other possible IPOs).

How will increasing volatity and concerns regarding global economic growth affect their plans?

That’s a story we’ll be exploring later this week.

“[Alshon] Jeffery is ruled out for the second consecutive game with a hamstring injury in the final year of his contract.”

Finally, the Chicago Bears are 0-3.

Their starting quarterback Jay Cutler is out with a serious hamstring injury. Their first round pick hasn’t played in a game and could be out for the season with a shin fracture. And their star wide receiver Alshon Jeffrey has missed two games due to a hamstring injury.

Jeffrey has been in focus at the Alpha Pages not just for his NFL skill set, but also for his participation in sports investment exchange Fantex. The bid-ask spread on Jeffrey remains extremely wide, and it appears that some investors are looking to grab shares at a low price if shareholders throw their hands up and abandon their position as Jeffrey can’t get on the field during his contract year.

Before the season, Fantex projected that Jeffery would sign a 5-year contract extension (new 6-year contract) with the Bears worth $89.0 million. Now, Brad Biggs at the Chicago Tribune hints that soft-tissue injuries are a top reason why Jeffrey might not make it to the next level as an NFL superstar -- or obtain that top tier contract.

Will the Bears be willing to part with $14 million a year for Jeffrey, the same amount that Dez Bryant and Demaryius Thomas have earned in recent contracts? It’s uncertain. But it’s clear that some Fantex traders are hoping for some panic, especially as the offense is led by Jimmy Clausen, who threw for 63 yards on Sunday.

The Seattle Seahawks shut out the Bears in a 26 to 0 victory.

Clausen looked overwhelmed all game, and Jeffrey might not have been able to do much to help.

The only way that Clausen could have reversed the damage from Sunday’s spectacle – would have been to take a snap at the 50-yard line in the shotgun formation, turn around, and throw the ball through his own uprights. Then, run off the field, trot through the tunnel with a finger in the air, jump on a horse outside the stadium, ride it to SeaTac airport, board any international flight at random, and disappear from society. That would be a proper NFL retirement.

If the ship is sinking, make sure that the fireworks can be seen from miles away.

There could have been a book, a documentary, an Unsolved Mysteries episode about his final 30 seconds in football.

That's all for today...

Be sure to check back tomorrow as we read into Carl Icahn’s endorsement for Donald Trump, news about the rise of institutional investment in climate financing, and dig deeper into how hedge fund Starboard Value Partners has turned around Olive Garden and turned breadsticks into some serious dough. 
















































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