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Exclusive: Einhorn

BOSTON (Reuters) – Superstar investor David Einhorn is raising cash for the first time since 2012 following three straight years of lagging performance – and some customer redemptions from his $10 billion hedge fund, Greenlight Capital.

Einhorn has delivered an average 19 percent annual return over 18 years. But slower annual growth in the last years, plus the fund’s restrictive redemption policies, have raised questions among some of his clients about Greenlight’s prospects.

Einhorn’s fund has returned 4.9 percent this year through October, compared with a 13 percent gain by the benchmark Standard Poor’s 500 Index. Similarly, he trailed the SP 500 by 13 percentage points in 2013 and by 8 percentage points in 2012.

“We haven’t had a quarter this thin in about three years,” Einhorn wrote to investors regarding the recent third-quarter period. “We just got ground down gradually.”

Some of Einhorn’s short positions have weighed on performance this year, investors said. He recently closed out his short bet against Keurig Green Mountain Inc. with a loss. “We had many opportunities to trade this position to a successful result, but failed to do so,” he wrote in the quarterly letter, which was seen by Reuters.

Also hurting performance: bets against U.S. Steel and Mallinckrodt and a bet on Marvel Technology Group Ltd, which lost 9 percent in the last six months.

While the average hedge fund returned only 3 percent this year, some of Einhorn’s more direct competitors are doing better. William Ackman has posted a 35 percent return at his $18 billion Pershing Square Capital Management through the end of October, Ackman said in a letter to his investors.

Einhorn, Ackman, and Third Point’s Daniel Loeb, who also has about $18 billion in assets, have long been seen as equally skilled by investors – and for a time the trio had a lot of overlap among clients.

One disadvantage for Einhorn going forward: he has more restrictive conditions than most other top-tier funds. No withdrawals are permitted for at least 25 months, and a 5 percent penalty is imposed on redemptions requested within three years, according to investors and documents reviewed by Reuters. After the lockup period expires, investors get only one chance a year to request an exit.

A spokesman for Greenlight declined to comment.


Greenlight last raised money in April 2012, when Einhorn accepted about $1.2 billion in new money, roughly half of what investors wanted to give him. That was designed to replace some redemptions that had occurred then – and also to boost the fund’s capital by 10 percent, people familiar with the move said.

This year, all of Greenlight’s capital was freed from lock up – with roughly half available for redemption by June 30, and the remainder by December 31, according to the sources and documents. The deadline to exit by year’s end passed earlier in November.


Despite some withdrawals detailed by investors contacted by Reuters, Greenlight remains an industry favorite with consultants. Investors have in the past lined up to give Einhorn money because of his track record – meaning the new fund raising effort could be oversubscribed as well.

Brian Shapiro, whose firm Simplify performs due diligence on hedge funds for wealthy clients, said Einhorn’s reputation is still solid, calling his returns “reasonably consistent.”

Einhorn made a name for himself in 2008 during the height of the financial crisis when his short bet against Lehman Brothers Holdings Inc added 7.3 percent to his returns that year. Even though Greenlight lost 23 percent in 2008, Einhorn fared better than other hedge funds which lost roughly 27 percent.


The call against Lehman was considered bold and paid off when the bank filed for bankruptcy. But fast forward to 2014 and some investors said some recent picks look a little less interesting.

Greenlight’s biggest position at the end of the third quarter was iPhone maker Apple, the company Goldman Sachs researchers say is the single most widely owned company among hedge funds.

In its October 16 letter soliciting fresh money, Greenlight said the fund had identified new investment ideas.

“While we have been fully invested for some time, it has been hard to find new opportunities. Given the current turmoil in the markets, this is changing quickly,” the firm wrote.

Some of the new money is likely to come from people who already know and like Greenlight, industry analysts and investors said. They also said the money raising could follow the same pattern as two years ago where some replaces money that was redeemed and more is raised to deploy on new bets.

“Who will put money with Einhorn now?” Shapiro said. “People who buy brand name funds.”

Greenlight’s current investor line up includes pension funds, foundations and endowments which make up about one quarter of the assets, according to the documents. Funds of funds and high net worth investors also each make up about one quarter. The firm’s partners and employees are also invested.

The last deadline to fund new investments was November 24 but the firm has not yet said how much new money it will accept. It couldn’t be determined how much investors asked to get back at the two deadlines.

But this much is clear. Einhorn wants more money to cover some redemptions and make new investments to increase his hedge fund’s returns. Said Simplify’s Shapiro: “Einhorn has a lot of tail risk with some of his bigger bets and he needs to broaden his diversification which means he needs more cash.”

(Reporting by Svea Herbst-Bayliss; Editing by Richard Valdmanis)

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U.S. crude down 10 percent post-OPEC, Brent breaks below $70

NEW YORK (Reuters) – U.S. crude tumbled 10 percent in its biggest one-day drop in more than five years on Friday, and benchmark Brent broke below $70 a barrel, as OPEC’s decision not to cut output sent oil traders and analysts scurrying to find a new trading floor.

“I see little reason to buy oil now. I think people are either going to drive it down further or just let the market collapse,” said Tariq Zahir, managing member at Tyche Capital Advisors in Hollow Way, New York.

U.S. West Texas Intermediate (WTI) light crude (WTI) settled down $7.54 at $66.15 a barrel, and fell further post-settlement, reaching a four-year low of $65.69. The last time the market lost 10 percent in a day was in March 2009.

North Sea Brent LCOc1 finished down $2.43, or 3.3 percent, at $70.15. It fell to as low as $69.78 on the day, a bottom since May 2010. Brent also finished down 18 percent for November for a fifth straight month of declines, or the longest losing streak since the 2008-2009 financial crisis.

Since June, Brent has given up about 40 percent of its value, falling from above $115, as increasing U.S. shale oil output helped create a glut amid sluggish global growth.

Friday’s selloff culminated a stunning 24 hours on global crude markets, in near free fall after Saudi Arabia blocked calls from poorer members of the Organization of the Petroleum Exporting Countries to reduce production.

With U.S. markets officially closed for Thursday’s Thanksgiving holiday, WTI went down about 8 percent in electronic trading overnight. Losses resumed when the New York Mercantile Exchange reopened, with U.S. crude capitulating just before Friday’s close.

The risk flight in oil extended to the stock market, with energy shares on Wall Street taking a hammering despite the broader market closing up for a sixth straight week.

Shares of shale energy firms saw outsized declines, as $70 oil was considered a level at which shale drilling became unprofitable. Denbury Resources (DNR.N), QEP Resources (QEP.N) and Newfield Exploration (NFX.N) all lost more than 15 percent.

“The message from OPEC was fairly clear – we are not hurting yet because we are the lowest cost producers,” said Iain Armstrong, oil and gas analyst at wealth management firm Brewin Dolphin in London.

“It is a question of who blinks first – OPEC or the U.S. shale producers. The longer the oil price stays at these levels the greater chance a U.S. shale producer will go under. But it will take time.”

Saudi Arabia’s oil minister told fellow OPEC members on Thursday they must combat the U.S. shale oil boom, arguing against cutting crude output in order to depress prices and undermine the profitability of North American producers.

Traders said if U.S. crude took out the May 2010 low of $64.24, it could technically be headed for a test below $60, toward the low of $58.32 set on July 2009.

“WTI could certainly be down a couple of dollars more next week, and test newer lows from there,” said John Kilduff, partner at energy hedge fund Again Capital in New York.

Shale companies aside, shares of oil major Exxon Mobil Corp (XOM.N) fell more than 4 percent to below $91, while Chevron Corp (CVX.N) lost about 5 percent to under $109.

Activity in the options on the Energy Select Sector SPDR Exchange-Traded Fund XLE.P exploded as traders who had bet on a drop in the ETF scrambled to book hefty profits after the OPEC decision.

Russia’s most powerful oil official Igor Sechin said oil prices could hit $60 or below by the end of the first half of next year. Options market data show speculators betting on $65 Brent by early next year.

Goldman Sachs said $60 Brent oil was possible but not sustainable and that WTI in a $70-$75 range could prompt U.S. producers to reduce capital expenditure, or drilling. For next year, BNP Paribas cuts its Brent forecast by $20 to $77, and WTI by $18 to $70.

“The market is looking for a new paradigm, a new range to settle into. Where that is, is anybody’s guess,” said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt.

(Additional reporting by Ahmed Aboulenein in London and Keith Wallis in Singapore; Editing by Christopher Johnson, Chizu Nomiyama and Tom Brown)

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Vodafone examining UK options, including a move for Liberty: sources

LONDON (Reuters) – Vodafone (VOD.L) is reviewing potential acquisitions, including of Europe’s leading cable operator Liberty Global (LBTYA.O), to counter the pending consolidation among rivals in Britain, five people close to the matter said.

The internal deliberations at the world’s second-biggest mobile operator, have picked up pace in recent days after broadband leader BT Group (BT.L) revealed it was in parallel talks to buy either EE or Telefonica’s 02 (TEF.MC).

If concluded, BT’s foray into mobile is expected to tilt the market toward selling more all-included bundles of fixed and mobile services. That makes it more important for historically mobile-only companies such as Vodafone, EE, 02 and Hutchison’s 3 to have their own fixed networks or be condemned to being simple resellers of BT’s fiber.

The attraction of Liberty, which is backed by U.S. billionaire John Malone, is its ownership of cable networks capable of carrying very high-speed broadband traffic to homes and business in nearly a dozen European countries.

In Britain, Vodafone would get its hands on the broadband network of Liberty’s Virgin Media, which covers around half of the country. That would bolster the broadband network Vodafone got in 2012 when it bought Cable Wireless.

One person familiar with the situation said Vodafone had approached Liberty Global about a combination earlier this year but found a gulf on price expectations.

A deal would come after Vodafone undertook similar moves by buying the Ono cable company in Spain and Kabel Deutschland in Germany as it seeks to either buy or build fixed-line infrastructure across Europe.

In addition to Liberty, Vodafone is also considering all its options in Britain to bolster its broadband operation including a deal for low-cost player TalkTalk (TALK.L), although this is seen as a weaker option since the company does not have many fiber lines going into consumers homes.

“Liberty is the obvious one that makes sense,” said a third person close to the situation. “Vodafone need fiber and that is what Liberty has.”

A fourth person said Vodafone’s strategy team had been meeting for over a week to consider the different options.

The combination would create a communications powerhouse with annual sales of more than $80 billion, but is likely to face regulatory scrutiny in countries where the two overlap, such as Germany, Britain, and the Netherlands.

In Germany where Vodafone and Liberty compete in cable, competition regulators have taken a tough stance on combinations among cable companies.

It remains to be seen whether Vodafone will move ahead with making a bid for Liberty, or if it will seek an another way to bolster its UK fixed operation, such as renting lines or building more itself.

“Absolutely, they are watching developments but that doesn’t mean they are going to pounce,” said a fifth person.

Both Vodafone and Liberty Global declined to comment on Friday.

(Additional reporting by Leila Abboud and Sophie Sassard; Writing by Leila Abboud, editing by David Evans)

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Exclusive: P&G exploring sale of $7 billion Wella hair care unit

LONDON (Reuters) – Procter Gamble Co (PG.N) is working with Goldman Sachs (GS.N) to explore the sale of its Wella hair care business that could be worth around $7 billion, sources familiar with the matter told Reuters, as the world’s largest consumer products company streamlines its business.

PG is exploring all options for the unit, which includes a professional and a trade business. That may result in selling the whole or parts, the sources said on Friday, cautioning that no final decision had been taken.

A PG spokesman said the company did not comment on rumor or speculation. Goldman Sachs was not immediately available to comment.

Cincinnati-based PG said in August it would shed 80 to 100 slow-growing product lines in order to focus on about 80 brands such as Tide laundry detergents and Pampers diapers which generate most of its profit and revenue.

In November, it announced the sale of its Duracell battery unit to Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) and it has already sold the bulk of its pet food business to Mars Inc and Spectrum Brand Holdings Inc.

In the hair care segment, PG also owns Clairol, which it bought from Bristol-Myers Squibb for $4.95 billion in 2001, and Vidal Sassoon. Prospective buyers could include Anglo-Dutch consumer goods group Unilever (ULVR.L) and Germany’s Henkel, which made an informal approach for Wella in 2002 before it was subsequently sold to PG in 2003 for 6.5 billion euros ($8.1 billion).

PG has undertaken a multi-year restructuring program, cutting thousands of jobs and taking steps to streamline operations, launch new products and expand into fast-growing emerging markets, under pressure from shareholders including activist investor William A. Ackman, who took a stake in PG in 2012.

It is also thought to be exploring options for Braun, which makes electric razors and toothbrushes and which it acquired as part of its $57 billion purchase of Gillette in 2005, sources familiar with the matter told Reuters. It could also look to sell some of its fragrance business.

(Additional reporting by Pamela Barbaglia; Editing by Mark Potter)

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Wall St. up for sixth straight week despite oil rout

NEW YORK (Reuters) – U.S. energy shares saw heavy pressure on Friday as crude oil tumbled to a multi-year low, though consumer stocks lifted broader indexes in a quiet, holiday-shortened session.

The market’s recent upward bias continued despite the energy weakness, and major indexes are on track for their sixth straight weekly advance. However, there was heavy volatility in areas connected to the price of oil CLc1. Crude plunged 6.5 percent to $69.38 per barrel a day after OPEC decided not to cut output, which could leave markets oversupplied.

The decline was the biggest one-day drop since May 2011, with prices lowest since 2010.

“Crude seems to have no floor right now, and we could easily see the price drop into the low $60s,” said Tony Roth, chief investment officer at Wilmington Trust in Wilmington, Delaware.

The Energy Select Sector SPDR exchange-traded fund (XLE.P) fell 5.5 percent to $80.59. Exxon Mobil Corp (XOM.N) lost 3 percent to $91.69 while Chevron Corp (CVX.N) fell 4.9 percent to $109.47; both are Dow components.

Weakness in oil boosted other sectors, including airlines, which are inversely correlated to oil prices given fuel costs. Southwest Airlines (LUV.N) rose 7 percent to $42.05 as the SP 500’s biggest percentage gainer, followed by Delta Air Lines (DAL.N), up 6 percent to $46.90.

Retailers also rallied, as lower gas prices could increase consumer spending as the holiday shopping season ramps up. Wal-Mart Stores Inc (WMT.N) rose 3.1 percent to $87.63, keeping the Dow in positive territory, while the SP 500 Retailing index .SPXRT was up 1.6 percent.

“[Oil] this low should be very additive to economic activity, not just with gas prices but across the economy,” said Roth, who oversees $80 billion in assets. “Early holiday shopping numbers should come in pretty strong.”

At 11:29 a.m. the Dow Jones industrial average .DJI rose 59.02 points, or 0.33 percent, to 17,886.77, the SP 500 .SPX gained 0.81 points, or 0.04 percent, to 2,073.64 and the Nasdaq Composite .IXIC added 19.34 points, or 0.4 percent, to 4,806.66.

Major indexes are on track for their sixth straight weekly advance, the SP’s longest streak since November 2013. For the week, the Dow and SP are up 0.4 percent and the Nasdaq, which counts few energy names among its major components, is up 2 percent.

Declining issues outnumbered advancing ones on the NYSE by 1,490 to 1,404, for a 1.06-to-1 ratio on the downside; on the Nasdaq, 1,296 issues fell and 1,232 advanced for a 1.05-to-1 ratio favoring decliners.

The benchmark SP 500 index was posting 149 new 52-week highs and 20 new lows; the Nasdaq Composite was recording 152 new highs and 58 new lows.

(Editing by Nick Zieminski)

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U.S. crude down seven percent to May 2010 low on OPEC, new low likely

NEW YORK (Reuters) – U.S. crude fell 7 percent on OPEC’s decision to not cut output, but light trading on Friday after the U.S. Thanksgiving Day holiday meant there could be more losses when markets return to full strength next week, traders said.

West Texas Intermediate (WTI) light U.S. crude hit a four-and-half-year low of $67.75 a barrel overnight after Saudi Arabia blocked calls on Thursday from poorer members of the Organization of the Petroleum Exporting Countries to reduce production. U.S. markets were officially closed on Thursday for Thanksgiving, with only electronic trading.

Traders said if WTI takes out the May 2010 low of $64.24, it could technically be headed for a test below $60, toward the low of $58.32 set on July 2009.

“There’s a notion that yesterday’s selling was overdone, but not everyone is fully back to work yet after Thanksgiving,” said John Kilduff, partner at energy hedge fund Again Capital in New York. “WTI could certainly be down a couple of dollars more next week, and test newer lows from there.”

U.S. crude’s front-month contract CLc1 was down $5.42 at $68.27 a barrel at 11:56 a.m. EST (1656 GMT). The drop of more than 7 percent was the biggest daily fall since 2011.

The front month for benchmark North Sea Brent crude LCOc1 was 40 cents lower at $72.18, after falling earlier to $71.12, a low since July 2010.

“We are seeing continued oversupply. I think $70 a barrel will be the new norm,” said Bill Hubard, chief economist at, referring to Brent.

With November trading in its final session, Brent was headed for a 15 percent loss on the month, or the steepest monthly decline since 2008. It has lost over 30 percent since June, falling from above $115, as increasing North American shale oil output helped create a glut amid sluggish global growth.

Russia’s most powerful oil official Igor Sechin said oil prices could hit $60 or below by the end of the first half of next year. Options market data show speculators betting on $65 Brent by early 2016.

“The market is looking for a new paradigm, a new range to settle into. Where that is, is anybody’s guess,” said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt.

(Additional reporting by Ahmed Aboulenein in London and Keith Wallis in Singapore; Editing by Christopher Johnson and Chizu Nomiyama)

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U.S. lodges new appeal at WTO in meat labelling dispute

GENEVA (Reuters) – The United States lodged an appeal on Friday to challenge a World Trade Organization ruling it said had failed to bring its meat labelling laws into line with global trade rules.

Canada and Mexico won a WTO ruling three years ago that said the U.S. rules illegally discriminated against imported meat.

The United States lost a subsequent appeal and was told to bring its laws into line, but in October this year the WTO said it had not done so, paving the way for Canada and Mexico to demand the right to impose trade sanctions.

Canadian Agriculture Minister Gerry Ritz said Ottawa was deeply disappointed by the appeal and called on the United States to drop its “blatantly protectionist” labelling rules.

“We will take whatever steps may be necessary including retaliation to achieve a fair resolution,” he said in a statement.

Canada estimates the U.S. rules, which require retailers to list the country of origin on meat, cost its farmers and processors $1 billion a year in lost sales and lower prices.

Ottawa already has published a hit list of potential U.S. targets including wine, chocolate, ketchup and cereal.

Even if the latest U.S. appeal fails to overturn October’s ruling, it will delay the threat of sanctions, which would only be imposed if the United States failed to bring its laws into line with the WTO rules within a reasonable period.

After that, Mexico and Canada could ask the trade body to let them impose a certain degree of trade sanctions on the United States, which in turn can challenge such a ruling.

Mexico has said it would seek “hundreds of millions” of dollars if the United States does not change its rules.

(Reporting by Tom Miles in Geneva and David Ljunggren in Ottawa; Editing by Paul Simao; Editing by Ralph Boulton)

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Black Friday shopping crowds thin after Thanksgiving rush

WEST HARTFORD, Conn. (Reuters) – Mall crowds were relatively thin early on Black Friday in a sign of what has become the new normal in U.S. holiday shopping: the mad rush is happening the night of Thanksgiving and more consumers are picking up deals online.

Most major retailers now open their doors Thursday evening and offer extended holiday deals rather than limiting them to one day. The result is a quieter experience on what has traditionally been the busiest, and sometimes most chaotic, shopping day of the year.

“It just looks like any other weekend,” said Angela Olivera, a 32-year old housewife shopping for children’s clothing at the Westfarms Mall near Hartford, Connecticut. “The kind of crowds we usually see are missing and this is one of the biggest malls here. I think people are just not spending a lot.”

The crowds normally reserved for Black Friday morning appeared Thursday night. Over 15,000 people lined up for the opening of the flagship store of Macy’s Inc (M.N) in New York on Thursday, Chief Executive Officer Terry Lundgren told CNN. Police responded to a handful of incidents at Wal-Mart Stores (WMT.N) on Thursday, including to break up a fight over a Barbie doll in Los Angeles, CNN said.

Target Corp (TGT.N) CEO Brian Cornell told Reuters he was encouraged by early indicators for a holiday season that “has moved from an event on Black Friday morning to a multi-day event.”

“The consumer clearly enjoys shopping on Thanksgiving,” Cornell said, noting the retailer was selling 1,800 televisions per minute nationwide between 6 p.m. and 8 p.m. last night.

Wal-Mart said Thursday was its second-highest online sales day ever after last year’s Cyber Monday, which is the Monday following Thanksgiving when online retailers promote bargains. Cornell said Target rang up a record day of online sales on Thursday.

Overall Thanksgiving Day online sales rose 14.3 percent from a year earlier, according to IBM Digital Analytics Benchmark.

The National Retail Federation is projecting that sales for November and December will rise 4.1 percent to $616.9 billion, which would mark the most bountiful holiday season in three years. Holiday sales grew 3.1 percent in 2013.

It was unclear what impact a movement to boycott Black Friday in protest of a grand jury’s decision not to indict the police officer who shot and killed an unarmed black teenager in Missouri might have on the holiday season. The movement has gained some momentum on Twitter and Facebook.

OUR Walmart, a group of Wal-Mart employees pushing for higher wages and benefits, is also hoping to use Black Friday to spread its message with protests planned at 1,600 stores across the country.

(reporting by Nandita Bose and Nathan Layne; Editing by Jilian Mincer and Paul Simao)

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Billions wiped off energy shares as investors rush for exit

LONDON (Reuters) – A fresh slide in the price of crude wiped tens of billions of dollars off oil companies’ market value on Friday and signalled an end to the sector’s safe-haven status, as fears mounted over future profits and dividend payouts.

Fund managers described the last 24 hours of trading as “capitulation” – the point at which a sell-off becomes widespread and panic-driven – as investors reassessed whether the sector could keep gushing cash after OPEC’s decision not to cut oil production to fight a supply glut.

“Oil stocks are currently in the final phase of capitulation,” said UniCredit strategist Christian Stocker.

Oil prices have been sliding for months, but the pain has mostly been felt by oil-services suppliers rather than majors like Royal Dutch Shell (RDSa.L) or Total (TOTF.PA). Investors maintained some faith in them based on their record of paying reliable dividends.

That faith appeared to erode on Friday, when $33 billion in market capitalisation was wiped off the sector in Europe. Norway’s Statoil (STL.OL) fell 8.2 percent, BP (BP.L) 3.7 percent and Shell 3.3 percent. The STOXX 600 Europe oil and gas sector .SXEP fell to its lowest since mid-October.

Overall, the sell-off since Thursday amounts to around $67 billion in lost market value, Reuters estimates. That compares with a total dividend payout from the sector of $41.6 billion in the second quarter of 2014, according to data from Henderson Global Investors.

“Many investors in the oil-and-gas exploration industry were there for the promise of dividends,” said Yannick Naud, portfolio manager at Sturgeon Capital. “Today, with the oil price so low, many oil companies will have difficulty protecting their dividends.”

To be sure, share prices have already cratered in parts of the sector, and some are buying in the belief the declines are overdone. “We don’t expect oil prices to fall much further from these levels,” said Luca Paolini, chief strategist at Pictet.

But others warned they had been fooled before by false dawns and this time the pessimism would take longer to end.

“The whole sector … could be at risk of having to make a choice between keeping a high dividend payout ratio or (spending on) investing,” said Antoine Porcheret, a derivatives strategist at BNP Paribas. “These stocks can go lower.”

(Additional reporting by Atul Prakash, Tricia Wright and Francesco Canepa in London and Blaise Robinson in Paris; Editing by Larry King)

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