The Finance 202: Hedge fund execs risk their bottom lines in fight with Elizabeth Warren

And former Goldman Sachs CEO Lloyd Blankfein just jumped into the fray, suggesting "tribalism is just in her DNA": 

But there are warning flags in recent headlines for financiers who make their living managing billion-dollar investments for public employee retirement funds. They demonstrate how wading into dicey political fights or otherwise veering off script can offend institutional investors enough to pull their money and go home. Consider: 

• Ken Fisher, the billionaire founder of Fisher Investments, saw more than $2 billion in investments flee his fund after sexist comments he made at recent conferences surfaced. 
• The California Public Employees’ Retirement System — or Calpers, the country’s largest public pension fund — divested last month from two leading for-profit prison companies over their role running Immigration and Customs Enforcement detention facilities. 
• The state’s retirement fund for teachers pulled its stakes in those companies a year ago, and New York City’s pension funds blazed the trail in 2017. 
• New York City’s fund in 2015 also rejected a recommendation it invest in Gotham Asset Management LLC, because that hedge fund’s chief, Joel Greenblatt, is a major backer of charter schools.

Cooperman himself faces no danger of an exodus of outside money: He returned all of his at the end of last year and converted his hedge fund, Omega Advisors, into a family office. And Blankfein, per his Twitter bio, is “on a gap year." 

So far, other Warren critics in the industry with more exposure — including billionaire hedge fund managers Paul Tudor Jones and Steven Cohen — have been more circumspect, limiting their public comments to predictions that the stock market will tank if she is elected. 

But those who are speaking out are “elevating their opponents,” Jeffrey Sonnenfeld, the senior associate dean for leadership studies at the Yale School of Management, tells me, suggesting the complaints are compulsive. “They’re feeling guilty, and they know their vulnerability, but they’re increasing their vulnerability.” 

Some hedge fund titans, Sonnenfeld says, are overpaid for work that's "bad for employment and bad for communities. The more they bring the spotlight on themselves this way, the easier they make it for institutional fund managers to recognize they’ve been going down the wrong path. What these guys do for a living didn’t exist 25 years ago, and we were better off because of it.”

A spokesman for the Managed Funds Association, the lobbying group for hedge funds, declined to comment. 

The irony is that the private equity industry has far more to fear from a Warren presidency than their hedge fund brethren. The Massachusetts Democrat has all but declared war on private equity’s business model, likening those firms to “vampires.” Her bill, “The Stop Wall Street Looting Act” would shake the sector to its studs, including by making firms responsible for the employee pensions and debt obligations of companies they buy. 

But the private equity industry — through it’s lobbying arm, the American Investment Council — is mounting an organized counterpunch. The group is circulating a report from Ernst and Young arguing the industry supports 26 million American jobs and running ads, timed to the reintroduction of Popeye’s wildly popular chicken sandwich, that claims credit for the fast-food chain’s turnaround. The campaign demonstrates a sophistication in Washington the sector only developed relatively recently: It began massively beefing up its lobbying muscle in 2007 after lawmakers targeted the so-called carried interest loophole that provides its executives a steep discount on their income tax burden. 

Cooperman, now a de facto spokesman for the hedge fund crew, is hewing to his shoot-from-the-hip approach. Joining CNBC’s “Fast Money Halftime Report" to react to Warren’s new ad running on the network, he said, “I don’t know if I should respond, because I’m just giving her more credibility by speaking out. But anyway, that’s my nature.”

MARKET MOVERS

— Walmart sales point to consumer strength: “American consumers showed no signs of belt-tightening in sales results from Walmart Inc., offering comfort to retailers worried about fallout from the trade war and the health of the global economy as the holiday shopping season nears,” the Wall Street Journal’s Sarah Nassauer reports.

“Walmart said its U.S. comparable sales, those from stores and websites operating for at least 12 months, rose 3.2% in the period ended Oct. 25, marking a five-year streak of quarterly sales gains. Its e-commerce sales in the U.S. rose 41% from a year earlier, bolstered by grocery orders … Trump weighed in on Walmart’s results, saying they were proof that his administration’s imposition of tariffs on Chinese imports wasn’t driving up prices or slowing consumer spending. ‘Walmart announces great numbers. No impact from Tariffs,’ he tweeted.”

— Rising Treasury yields reassure investors. WSJ's Daniel Kruger and Sam Goldfarb: "Yields on U.S. government bonds have rebounded from near-historic lows hit just two months ago, sending one of the clearest signals yet that investors’ recent recession fears have waned. A series of developments have combined to boost the economic outlook, spurring selling in bonds and powering a steep climb in the 10-year Treasury yield—a key benchmark that helps set borrowing costs on everything from corporate debt to mortgages. Those include the Federal Reserve’s cuts to short-term interest rates, steps toward a trade agreement by the U.S. and China and a series of economic reports that turned out better than some investors had feared."

— Powell signals qualified optimism. WSJ's Nick Timiraos: "Federal Reserve Chairman Jerome Powell said the central bank was optimistic its interest-rate cuts this year would buoy the U.S. economy against lingering headwinds, including trade uncertainty and a slowdown in global growth. The U.S.-China trade conflict that escalated this summer has contributed to declines in domestic manufacturing activity, Mr. Powell told the House Budget Committee on Thursday. 'There are a number of factors that are contributing' to the slowdown, he said. 'Trade is one of them. It’s certainly not the whole story.'"

S&P 500 index edges up to new record close but euphoria about U.S - China trade deal fades (MarketWatch)

TRUMP TRACKER

TRADE FLY-AROUND:

— Pelosi says USMCA deal “imminent”: “House Speaker Nancy Pelosi (D-Calif.) said that agreement on a new North American trade deal is ‘imminent’ and she would like to pass it by year’s end,” my colleague Erica Werner reports.

“Pelosi’s comments at a news conference represented her most optimistic assessment to date on negotiations to replace the 25-year-old North American Free Trade Agreement with a new deal that would improve environmental and labor standards. House Democrats have been negotiating for months with the Trump administration to reach agreement, but it’s proven elusive so far.”

• Not everyone is so optimistic: “Others involved in the talks, however, cautioned that significant work remained before a deal could be announced between U.S. Trade Representative Robert Lighthizer and the House Democratic working group led by Ways and Means Chairman Richard Neal (D-Mass.).”
• Including labor unions: “In a letter to lawmakers last week, the AFL-CIO Industrial Union Council, representing more than 4.5 million workers, cautioned against a rush to pass the new trade deal, writing that ‘NAFTA 2.0 as currently written does not meet the needs of working people for a new trade model that ends the race to the bottom.’”

— Kudlow: Trump not ready to sign U.S.-China phase-one deal. WSJ's Harriett Torry: "The U.S. and China are nearing a trade deal, but [Trump] isn’t ready to sign off, White House economic adviser Lawrence Kudlow said Thursday. They are getting close to an agreement, Mr. Kudlow said in an event held at the Council on Foreign Relations. 'The mood music is pretty good,' he said, adding that Mr. Trump 'likes what he sees, he’s not ready to make a commitment, he hasn’t signed off on a commitment for phase one, we have no agreement just yet for phase one.'"

CNBC's Carl Quintanilla notes that per Kudlow, the two sides are always on the verge of a deal: 

— Apple hires pro-Trump lobbyist in bid to avoid tariffs: “Apple has hired one of [Trump’s] closest allies in Washington, D.C., to lobby on its behalf as it looks to avoid getting hit with another round of tariffs,” CNBC’s Brian Schwartz reports.

“Apple, the computer and phone making juggernaut, has tapped longtime Trump ally Jeffrey Miller to lobby on its behalf, a lobbying registration form shows. The document says Apple is hiring him and his team, which includes others with ties to the Trump administration, for what’s described as ‘trade issues as they relate to technological goods and services.’ It did not disclose the specific nature of Miller’s role as it pertains to various trade hurdles.

• Miller’s background: “He was vice finance chairman of Trump’s inaugural committee before he became a top fundraiser for the president’s reelection campaign. In the third quarter he bundled $255,000 for the Trump Victory Committee, a joint fundraising operation between the campaign and the Republican National Committee, a Federal Election Commission record shows.”

— Barr says Huawei and ZTE “cannot be trusted”: Attorney General William Barr said “that Huawei Technologies Co and ZTE Corp ‘cannot be trusted’ and labeled them a security threat as he backed a proposal to bar U.S. rural wireless carriers from tapping an $8.5 billion government fund to purchase equipment or services from them,” Reuters’s David Shepardson reports.

“The Federal Communications Commission will vote on Nov. 22 on the plan and is proposing requiring those carriers to remove and replace equipment from the companies. Barr said in a letter to the FCC that ‘their own track record, as well as the practices of the Chinese government, demonstrate that Huawei and ZTE cannot be trusted.’ ”

Bridgewater’s Ray Dalio Warns of Capital War Between U.S., China (Bloomberg)

TRUMP WATCH:

— Trump asks SCOTUS to keep his tax returns private: “[Trump] asked the Supreme Court to stop a prosecutor’s investigation of his personal finances, a bold assertion of presidential power that seeks a landmark decision from the nation’s highest court,” my colleagues Robert Barnes and Ann E. Marimow report.

“The filing by the president’s private lawyers represents a historical moment that tests the court’s independence and highlights the Constitution’s separation-of-powers design. It also marks a new phase in the investigations that have dogged Trump throughout his presidency and have culminated in an impeachment inquiry.”

IMPEACHMENT MINUTE: A speed read on the latest from the congressional impeachment inquiry.

"How the impeachment inquiry has revealed a long and murky campaign to oust a veteran U.S. ambassador." By The Post's Rosalind S. Helderman and Tom Hamburger 

"Besieged on all sides, Gordon Sondland clings to power." By The Post's John Hudson and Michael Birnbaum 

"For Trump, Yovanovitch’s testimony brings moment of reckoning on gender." By The Post's Elise Viebeck 

"Career White House budget official expected to break ranks, testify in impeachment inquiry." By The Post's Erica Werner

POCKET CHANGE

— Amazon will challenge Pentagon’s award of $10 billion contract to Microsoft: “Amazon said it will protest a Pentagon decision to award Microsoft a massive cloud computing contract worth up to $10 billion, citing ‘unmistakable bias’ and ‘political influence,’ ” my colleagues Jay Greene and Aaron Gregg report.

“The controversial and long-delayed Joint Enterprise Defense Infrastructure contract had been widely expected to go to Amazon Web Services but was instead awarded to rival Microsoft last month. Amazon spokesman Drew Herdener said in an emailed statement that contract awards should be ‘free from political influence.’ In July, [Trump] directed Defense Secretary Mark T. Esper to reexamine the contract, citing concerns it would go to Amazon.” (Amazon CEO Jeff Bezos owns The Washington Post.)

— Google antitrust probe by states is expanding: “The 50 attorneys general investigating Google are preparing to expand their antitrust probe beyond the company’s advertising business to dive more deeply into its search and Android businesses, people familiar with the matter tell CNBC,” CNBC’s Lauren Hirsch and Lauren Feiner report.

“The attorneys general — who represent 48 states, Puerto Rico and Washington, D.C. — will write up subpoenas known as civil investigative demands, or CIDs, to support the inquiries, the people said. One of the people cautioned that the subpoenas may not be served imminently.”

— The latest on Goldman’s rebuild: “Goldman Sachs Group Inc. promoted 465 employees to the role of managing director, a smaller class than previous ones as the bank looks to cut costs and restore the luster of its upper ranks,” the WSJ’s Liz Hoffman reports.

“Managing directors are the last role before a slot in Goldman’s partnership, which David Solomon, in the chief executive role for a year, has been working to shrink and re-energize. Two years ago the bank named 509 managing directors. (New classes of managing directors and partners are chosen in alternating years.) A record 29% of the 2019 class are women, slightly higher than the roughly one-quarter in each of the past two cycles.”

— Gannett, GateHouse create largest newspaper publisher: “Shareholders of Gannett and GateHouse Media approved a deal to combine the companies, after management promised to find $300 million in annual savings that some critics warned would further squeeze already shrunken newsrooms but that some investors warned may not go far enough,” my colleague Jonathan O'Connell reports.

“In the deal, GateHouse parent New Media Investment Group will purchase Gannett for a combination of cash and stock, creating a conglomerate that will own more than 250 daily newspapers including publications such as USA Today, the Milwaukee Journal Sentinel and the Indianapolis Star, plus hundreds of weekly and community papers.”

This state requires company boards to include women. A new lawsuit says that’s unconstitutional. (Kayla Epstein)

MONEY ON THE HILL

— McConnell nukes Democratic Ex-Im Bank bill: “Senate Majority Leader Mitch McConnell is refusing to take up House legislation that would extend the operations of the beleaguered Export-Import Bank for the next decade and is instead inclined to keep the agency running as part of an upcoming government funding bill, he told Politico,” Politico’s Zachary Warmbrodt reports.

“The agency, which guarantees loans for U.S. goods sold abroad, is set to see its charter expire after Nov. 21 if Congress doesn't act. The House on Friday is planning to pass legislation by Financial Services Chairwoman Maxine Waters (D-Calif.) that would reauthorize the agency for 10 years … McConnell is now eyeing stopgap government funding legislation, which must also be passed next week, as the vehicle to maintain the Ex-Im Bank's operations.”

— Deval Patrick is officially running: “Former Massachusetts governor Deval L. Patrick jumped into the Democratic presidential contest, saying he wants to build ‘a better, more sustainable, more inclusive American Dream’ and acknowledging the difficulty his late start creates in achieving that goal,” my colleague Matt Viser reports.

“In a morning interview with CBS, Patrick, 63, appeared to knock former vice president Joe Biden as out of touch and Sen. Elizabeth Warren, his home-state senator, as too dug in on her ideas. The campaign has been caught between ‘nostalgia’ and the desire to return to what existed before [Trump], he said, and ‘our big idea or no way.’ ‘Neither of those seizes the moment, he said.”

• Patrick is also defending his ties to Bain Capital: 

— Yang proposes tax on digital ads: “Democratic presidential candidate Andrew Yang proposed a tax on digital ads that takes aim at the revenue models of companies such as Facebook Inc. and Alphabet Inc.’s Google,” Bloomberg News’s Ben Brody reports.

“Along with a proposal for a cabinet-level secretary of technology, the value-added tax was among a series of ideas for regulating privacy, antitrust issues and digital platforms’ impact on democracy released … by the former tech entrepreneur. The proposal would use revenue from the tax to grant ‘a slice of every digital ad’ to those whose data is used to deliver the advertisements, while also ensuring customers can opt out of data collection, have their existing information deleted and move their data between rival services.”

Bloomberg Will Spend $100 Million on Anti-Trump Online Ad Blitz (NYT)

DAYBOOK

Today:

• The New York Fed releases its latest Empire State Manufacturing Survey
• JCPenney is among the notable companies reporting its earnings, per Kiplinger.
• The Brookings Institute holds an event on taxing capital income

THE FUNNIES

BULL SESSION