Interestingly, two big "Quant" shops are long this name, and given that the short interest is a whopping 41% of the float, that liquidity factor could very well be part of the reason why.
AQR Capital and LSV Asset Management are the 2 reputable quant firms on the top 10 holders list.
Quantitative Strategies do pose serious stock specific and market related risks when they correlate. The % moves in YRCW in the past few weeks highlights an example of as much.
(chart courtesy of stockcharts.com)
Weather is ravaging the corn crop in the United States, the largest corn producer in the world. In Argentina, the second largest producer of corn in the world, man is threatening to reduce the output of corn. Both weather and conflict are not good for corn supplies, and have pushed corn prices now to new highs.
The Central Government of Argentina is again fighting with its farm based producers on how exports should be taxed. This taxation issue has been around for a century as the government in Buenos Aires has tried to control the export of farm crops through export taxes. Historically, when the fight came to a climax, the result was a reduction of farm output over the following decade.
The populist government of the Kirchners is claiming that their taxation efforts are justified as they claim that agribusiness is now becoming more controlled by large moneyed groups. The farmers claim that the government is interfering with the free market and that higher profits are needed to meet the rising cost of farming.
The conflict is now threatening to cripple the Argentina as road closures are bringing fuel and food shortages in parts of the country. Neither side appears to be ready to concede its position. The sad fact is that Argentina is again on the midst of destroying its agribusiness, which is the only business segment where it is competitive in world markets.
It is said that God fixes at night what the Argentines break during the day. For the consumers sake worldwide, lets hope the Argentines help God this time.
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- The casual dining industry saw its margins stabilize in the first quarter of 2008 after a severe decline in the second half of 2007. While it will be another month before we get a glimpse into the second quarters for most of the companies, the recent data flow on food prices, discounting and the increase in the minimum wage suggest it could be a long summer for many casual dining companies. Several companies are starting to report EBIT margins anywhere from 0-6%.
Since 5/30, after the stock was conveniently marked at its 52 week high on month end for May 2008, CSX has fallen -7.1% from $69.06. Deutsche Asset Management and 3G Capital were the 2 other recipients in the top 3 holders of this wonderfully ironic month end performance result.
In between then and now, we've had the ruling Judge in the CSX case (Judge Kapplan) look a lot like a toreador furiously waving a red flag in the face of an SEC bull:
Some people deliberately go close to the line dividing legal from illegal if they see a sufficient opportunity for profit in doing so. A few cross that line and, if caught, seek to justify their actions on the basis of formalistic arguments even when it is apparent that they have defeated the purpose of the law.
It's likely that the entire nature of the Total Return Swap business will change dramatically with this ruling as regulators and banks realign their perceptions of the product. I recommend reading the ruling - it's a fascinating document that comes complete with charts detailing the transactions in question.
Wall Street's fascination with "activism" will be looked back upon as simply another silly function of the cheap money leverage cycle.
Based on what we are seeing in the chart below, Mr. Bond might need to update his comments!
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