The Daily Alpha: Alternative Thinking on Venezuela’s Collapse and Moving East…Far East

May 18 2016 | 11:06pm ET

The Daily Alpha: May 18. 2016
By Garrett Baldwin

“When Maduro came in, the markets said, ‘Chávez has borrowed so much money that you’re no longer eligible for loans.’ So that caused him to lose international finance, so he started printing money.”

RIP Venezuela: 1811 – 2016.

Right now, political analysts are saying that the South American nation is on the brink of collapse. It has no more foreign reserves. It hasn’t learned that printing money destroys any economic agency. It’s energy sector is beyond shambles. They have changed their time zones in an effort to somehow save electricity… all while saying that they have “30 minutes more of future.”

Because Nicolas Maduro actually talks like a pig from Animal Farm.

No longer can President Maduro borrow more money from the international market as there is virtually no expectation the nation would ever pay it back.

When he claims capitalist forces are working against the “people” to keep them from achieving their socialist utopia – he is talking about the fact that no one wants to just give them money and never receive any return. He just wants the world to pay. Typical.

But here in the United States, not even our journalists seem to understand what it is that Hugo Chavez and Nicolas Maduro have done to one of the most wealth nations of the 20th century and how we got here.

In a write up about the nation’s economic collapse, The New York Times comments on the dismal conditions in the nation’s beleaguered hospital system. The newspaper refers to one hospital as a “battlefield clinic in a country where there is no war.”

Kudos to Ed Morrissey for explaining that there actually is a war going on.

“Oh, there’s a war, all right — a war on natural rights to property, on investors, and on economic sanity,” Morrissey writes. “In less than a generation, the Marxists of Venezuela have fundamentally transformed their country into impoverishment for all but the Marxists. Anyone who doubted that there would be casualties in that war simply didn’t pay attention to the entire 20th century.”

That’s now three countries in Western Hemisphere that have tried to go this route – and the end has been absolute economic ruin and political disaster. Argentina, Venezuela, and Cuba.

But let’s give socialism a try, folks. What could go wrong?

“Being in the hedge-fund industry has been a tough gig lately. Fund closures in Europe and the U.S. have accelerated and are running near their 2014 high, according to industry tracker Eurekahedge.”

Christopher Langner at Bloomberg highlights how Singapore and Hong Kong has created a great opportunity for hedge fund employees looking for a job.

There, wealth is on the rise, taxes are low, and talent is being paid well.

Perhaps that’s why there’s a lack of talent – according to Steve Cohen. Hedge fund employees are heading east where they aren’t demonized by the public, and they are incentivized to work.

“In a blistering letter to Pandora’s board of directors, activist investor and Carl Icahn protege Keith Meister is calling for the company to put itself up for sale.”

Forbes recounts news that Corvex Management announced a 9.9% stake in the music streaming firm and is pushing for the board of directors to explore a sale of the firm.

Does anyone actually pay money for the ad-free Pandora service?

"There's a bigger problem here for Wall Street ... the move to index funds.”

That’s Jim Chanos calling out the hedge fund industry.  

Chanos argues that the industry has gotten away with high fees for way too long.

This is an interesting podcast interview with the head of Kynikos Associates.

"It's more of global fear than anything. There's still this fear of 'everything is going to fall apart."

Ihab Salib, head of international fixed income at Federated Investors, discusses how China, Russia and Brazil have been selling off Treasuries.

Had to keep it short today due to our deadlines around the next issue of Modern Trader. Be sure to check out the June issue's feature story "The Issue(s) with Hedge Funds".


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