30SEP08:
31DEC08 INDICES:
FTSE100:3550
DOW30:7550
# HEDGE FUNDS:4425 30JUN08: Oil to be USD200 by 30OCT08 USA Inflation to be 7.5% by 30OCT08
...oops 23APR08:
Next Rights Issue:
HBOS...yes
All & Lec ...
...1 Nil. 17APR08: Oil to be USD127 by 30SEP08
...16MAY08 losing my touch 27FEB08:
2 Banks go bust by 30JUN08
BS down, Lehman (a bit late I know) 20NOV07: Northern Crock to be sold for 15p
Nationalized 01NOV07: Oil to be USD103 EOM
...peaked too soon 08OCT07:
SEC to fine Goldman for pricing issues
...still waiting 15JUN07: ML to buy-out BS
JPM got there first 06JUN07: The Big Crash: 17OCT07
...well it's here
Barnet FC versus Accrington Stanley. The whole event cost less than the weekly wage of your average Chelsea player. It was a family affair and reminded me of the early days of Hedge Funds when it was a bit amateur but good fun.
Today we live in a world of MiFID and super leagues.
The markets continue to defy logic which is so normal now that maybe we have been wrong all along. Equities is a flight to quality.
Lots of analysis on Merrill, M-LEC fees and more fortelling of the death of hedge funds by a German Head of Structured Products at ... wait for it ... Merrill Lynch.
Hedge funds have historically shown the ability to recover more quickly than global debt and equity markets in the 12-month period following financial turmoil, according to Credit Suisse/Tremont, which examined the effects of five crises on hedge funds and world financial markets.
"Although there are certain sectors that fared better than others during such periods, it is unclear whether one hedge fund strategy is more resistant to market shocks than others," concludes the report. "However, as an asset class, hedge funds have remained less volatile and have retained positive performance throughout most crises."
Fintag says Isn't this what I tell you day in and day out? Hedge Funds are low vol, low risk and as the industry matures and the cowboys are forced out (pre Bear Stearns) then they will become the new mutual funds industry of choice.
Famed hedge fund manager Julian Robertson and the organizers of an exclusive "wealth group" for multimillionaires are heading into court-ordered mediation in a bid to settle a dispute over who gets to mark their territory with the Tiger name.
Robertson, whose value-oriented Tiger Management once managed over $22 billion prior to a series of missteps and investor defections several years ago, is suing Michael Sonnenfeldt, alleging that Sonnenfeldt's Tiger 21 investment seminars infringe on Robertson's long-standing Tiger trademarks. Sonnenfeldt has since countersued, contending Robertson abandoned the name when he shut down the New York-based Tiger Fund and five other similarly named funds in early 2000, which is just about the same time Sonnenfeldt and equity partner Richard Lavin began organizing day-long roundtables on investment strategies for individuals with at least $10 million in assets...
Fintag says That is the thing about news and blogs. All the stories look the same. Unlike a newspaper where you know what the main story is, you can never really tell with a news site like the BBC or the New York Times - or finalternatives.
I misread the title, and pasted in the first few paragraphs. I have read the story and wish I hadn't.
The banks participating in the Master Liquidity Enhancement Conduit, the super-fund planned by four US banks to ease liquidity concerns in the market, could make more than $1.3bn (€900m) in management fees and even more in other charges, according to people who have seen an early prospectus.
Bank of America, Citigroup, JP Morgan and Wachovia are backing M-LEC, which is expected to raise assets of $75bn to $100bn and which is supported by the US Treasury. Three people who have seen a prospectus dated October 8 - a week before the fund became public - said the banks will earn 1% on structured investment vehicles of less than $5bn, and 1.5% for SIVs over $15bn.
The banks will also earn fees for the provision of backstop liquidity facilities. Structured investment vehicles are off-balance sheet funds that seek to profit from the difference in the cost of short-term borrowings and higher returns on structured credit.
Christian Stracke, an analyst at CreditSights, said: “Even at 1% it's still very high. These are vehicles that have little wriggle room in what they can afford to give up, especially SIVs that have taken a beating in their asset values.”
The prospectus also details what SIVs will receive for selling their assets to M-LEC. Qualifying SIV holders will be eligible for up to 94% of the value of the assets they sell in cash, or 89% cash and 5% in senior capital notes, in the form of medium- term notes, that will participate in part of the upside when the assets mature.
Fintag says You didn't think the banks would be doing this for free? This is ripe for corruption - much of these fees will be rebated, the fund completely opaque and probably offshore and unaudited. Shocking stuff.
A "superleague" of hedge fund managers is seizing an ever greater proportion of inflows into the sector, according to research by Morgan Stanley.
Huw van Steenis, who leads the asset management and diversified financial groups at the US bank, found that a handful of large groups were emerging as the prime beneficiaries of the ongoing institutionalisation of the industry.
"We see the 'superleague' taking share as larger platforms offer greater capacity, a broadening fund offering and fiduciary reassurance," he said.
The gulf appears to be widest in the fund of hedge funds universe where the six largest managers; UBS, Man Group, Union Bancaire Privée, Permal/Legg Mason, HSBC and GAM/Julius Baer, have each seen assets under management rise by a compound annual growth rate of at least 39 per cent in 2007, according to Morgan Stanley - a rate achieved by just two of the 20 next largest managers; Blackstone and Gottex.
Mr van Steenis also found that the 100 largest hedge fund houses had increased their share of total industry assets from 49 per cent in 2003 to 67 per cent last year.
Fintag says Tis true. The big boys are pulling away, just like the big studios did in the early days of Hollywood. Performance is no longer the important factor - it is being with other like minded investors.
Investment Banks beware for we are the new Investment Banks (but without the politics and HR handbooks)
GOLD RISES TO 27-YEAR HIGH ON CRUDE OIL RALLY, DOLLAR WEAKNESS
Gold climbed to the highest since January 1980 as crude oil rallied to a record and the dollar slumped to an all-time low against the euro, boosting the appeal of the precious metal as an investment. Silver also gained.
``Gold prices were markedly stronger, being bolstered by the low U.S. dollar, high oil prices, and expectations of a cut to U.S. interest rates,'' said David Moore, commodity strategist at Commonwealth Bank of Australia.
The dollar fell as low as $1.4422 per euro today, the weakest since the introduction of the 13-nation common currency in 1999, before trading at $1.4411 as of 11:54 a.m. in Singapore.
Crude oil rose to a record $93.19 a barrel in New York after Turkey's Foreign Minister Ali Babacan said his government is considering ``all options'' including military action to deal with Kurdish rebels operating from Iraq, heightening concerns about potential supply disruptions.
The December-delivery gold contract on the Comex division of the New York Mercantile Exchange gained $8.9, or 1.1 percent, to $796.40 an ounce at 11:52 a.m. Singapore time.
In Japan, gold for delivery in August gained 51 yen, or 1.7 percent, to 2,930 yen a gram ($798 an ounce) on the Tokyo Commodity Exchange at 10:49 a.m. local time. It reached as high as 2,931 yen a gram, the highest for the most-actively-traded contract since July, 1984.
Fintag says And the Fed want to cut rates. Please read the following blog because the UK went through this years ago and ended up crucified - and so did Japan.
One thing that has surprised me since I wrote Financial Armageddon and began publishing this blog is the extent to which concerns about where we are as a nation, and where we are headed in future, seem to transcend class, political persuasion, education, age, and other differences that often color our perceptions.
Rich or poor, young or old, conservative or liberal, citizen or foreigner, it seems that growing numbers of individuals who may have little else in common believe there is much that is wrong with our world nowadays. Yesterday, in "From Somewhere in Middle America," I published the contents of an email from a Midwestern housewife (with her permission) who eloquently expressed her thoughts on the subject.
Today, I have taken the liberty of reprinting a comment posted in response to what she said from someone with similar worries, but with a decidedly different background.
Your lady from Middle America is spot on. Her sixth sense is well grounded. The system is rotten and it is almost as bad in Britain. I am a retired U.K. fund manager and if I had gone to sleep when starting in finance in 1960 and woken up today I would not have believed what I now saw about me.
In those days it was illegal for a company to buy its own shares, strong company balance sheets with lots of cash were seen as a good thing, debts were incurred when necessary, not voluntarily, and accounts were honest. Stability was prized. Banks did not set about to circumvent the rules. Even politicians only lied about 15% of the time.
It is all gone and much of what is talked about on Financial Armageddon will surely come to pass. It may develop in Britain too. Indeed it has already started with the recent run on our Northern Rock mortgage company. The much despised continental countries may not suffer the same financial (as distinct from economic) troubles as the U.S./G.B. because they have been better regulated and are not so gorged on debt.
Americans may soon discover something with which older Brits are all too familiar. A weak currency reaches a certain point when something snaps and it can spiral down, almost out of control. Then interest rates have to be raised, dramatically, to save the currency. Domestic considerations go out of the window.
America has been so almighty for so long, until recently, that it's leaders have little idea what might be coming, although the public, as evidenced by the lady poster from Middle America, has a sixth sense.
If the dollar collapses the effects will be horrendous. We Brits have learned the hard way, starting with the Suez Crisis in 1956, yet we may have to learn it again because our recent politicians and bankers have been so negligent. For America, it would be the financial equivalent of September 11th.
Fintag says That last sentence is pretty tough; but it is probably true. The US has always led the world - now it is going alone and everyone is pouring into the Euro, Gold and Oil instead.
Will someone please call 911 and take Bernanke to the nearest Hospital and remove the parts of his brain that are obsessed with 1929?
PLEDGING ALLEGIANCE TO THE UNITED STATES OF HEDGE FUNDS
...now, I am a little troubled by where this leaves the other hedge fund managers who are also making 40 percent a year for their hedge funds, both here and abroad. At some point, the top players will start bumping up against limits, and against one another. Then it will be like King Kong versus Godzilla versus Mothra — a giant creature in early horror movies that resembled an immense moth. Only the toughest hedge fund manager will be left standing. And I am not sure where this leaves China, which is growing, and will surely keep growing, at 10 percent a year.
Mr. Cohen has the sechel (a Yiddish word meaning wisdom), but China has the bomb and the Thought of Mao Zedong. It's all too complicated for me. And I think that by solving the problems of the national debt and taxation, I have done enough for today.
Hedge fund power. Unlimited, clean and silent. In the meantime, enjoy Lake Pend Oreille and the splendid empty waterways and mountain forests of North Idaho before it all becomes the United States of Cohen.
Fintag says gods.
MERRILL LYNCH CEO POISED TO STEP DOWN AMID SPIRALLING LOSSES
The credit market crisis was on the verge of claiming its biggest casualty last night, as Stan O'Neal, the embattled chief executive of Merrill Lynch, prepared to resign his position after losing the support of boardroom colleagues.
In five years at the helm of one of Wall Street's largest firms, Mr O'Neal had worked to replace Merrill's paternalistic reputation with a strategy of risk taking and a push into exotic new trading areas. But he was brought down by spiralling losses on risky mortgage-backed assets, and the revelation of illicit talks to sell the company to a rival.
An emergency board meeting on Friday decided that he had to go, and it was reported yesterday that directors had spent the weekend discussing the terms of his departure, and the timetable for appointing a successor.
The company declined to comment on the rumours, which had pushed Merrill Lynch shares more than 8 per cent higheron Friday and kept them rising in after-hours trading.
The terms of a likely pay-off remained unclear, since many of the details are at the board's discretion. Members could withhold yet-to-vest share options worth about $76m (£37m), for example. Mr O'Neal was paid $48m last year, a 30 per cent pay rise thanks to a mortgage market that was then soaring and which had propelled Merrill to a record annual profit of $7.5bn.
Last week, the bank admitted it plunged into the red in the third quarter of 2007, having lost $7.9bn on mortgage-backed securities and structured credit products that rely for their value on the home loans of low-income Americans. These have collapsed in value as Americans began defaulting on their mortgages in record numbers.
A further write-down of loans for private equity deals pushed Merrill's total write-down to $8.4bn, several billion dollars more than it had warned Wall Street to expect. The confusion over its internal valuation procedures added to the perception that Mr O'Neal had taken the company into territory for which it was ill-equipped. That view was underlined by one of his predecessors yesterday. Daniel Tully, who was Merrill Lynch chairman for four years before stepping down a decade ago, told a Bloomberg reporter that third-quarter losses were "sickening".
Fintag says The story that has gripped Wall Street. Why? It is because they lied and then told the truth. Journalists and analysts don't like that. At least we now know really is bad. And I mean really bad. I have seen it since July and despite commentators like myself telling the world, it is only when a big player lifts up their skirt do we find out that it is true. So what happens next?
Banks are out of love and looking for new partners.
JP Morgan wants a prime brokerage business so quite fancies Bear Stearns. Citi wants an alternatives business and fancies HSBC or Barclays, who have both struggled in the US. Wachovia needs comforting and Merrills is a nice fit. So is Credit Suisse. Goldman always build and if they cleanly escape the SEC's current investigation, it will grow organically but may asset strip Bear Stearns. DB are a bit like Microsoft - always late to the table but willing to pay over the odds. They have no real US franchise and Morgan Stanley could be a nice marriage. Or maybe JP Morgan? Bank of America have thrown in the towel but could work well with Lehman. SocGen and BNP are hated by everyone and Nomura may take out both if Sarkozy let's them talk. The Chinese don't really care who they buy out as long as its American.
At the start of 2007, the banking CEOs club was as tight as a scratch handicap. Today the club is breaking up and golf and bridge partnerships mean nothing when shareholders are in revolt. Consequently we can expect mergers after years of profligate and careless risk management.
If I don't get at least one prediction right by the end of 2008 I will eat my scrotum.
As reported earlier today, Moody's (MCO) downgraded CDO's backed by $33 bln of subprime mortgages and suggested that further downgrades may be forthcoming.
One of the challenges that Moody's (and the market overall) faces is identifying who holds each downgraded CDO and whether or not those downgraded CDO's serve as the backing for other rated debt - such the commercial paper or MTN's for SIV's or other structured vehicles - which may in turn need to be downgraded. And with the downgrading of structure debt accelerating, I expect that structured vehicle entities, whose ratings may have previously been stable, may soon be under review.
But beyond the obvious Merrill Lynch (MER)-like portfolio write downs, there are other implications to all of these structured asset write downs. For asset-backed commercial paper issuing vehicles holding downgraded debt, it may mean even greater and greater dependence on their short term liquidity lines provided by banks. (Which in turn puts the banks in the position of further on-balance sheet loans (all requiring loan loss reserves), which in turn requires the banks to issue more debt, which puts further pressure on bank leverage ratios - which ultimately reduces the availability of new credit.)
Also, and I think missed by many, Moody's put the market on notice today that future structured note downgrades may be immediate, rather than occurring following an announced review period. For holders of structured debt this further raises the risk of a forced sale, rather than orderly liquidation. In addition, given the ratings interdependence of billions of dollars of structured debt, the downgrading of one structured debt security could result in immediate ripples across a far larger universe of financial institutions.
How the banking system responds to the accelerating downgrading of structured debt remains to be seen. As I have written already, financial institution balance sheets are already getting stretched. And, from what I read today, Moody's is not making it any easier for holders of structured debt. If anything, at least to these eyes, the pressure tightened.
Fintag says Crashes are always slow to start off with. Look at the dot com bubble? We have been struggling all year for the trigger to the fall and maybe this will be it?
Nearly three quarters of women working in private equity and hedge funds believe their sxe is a barrier to success, according to a survey by Financial News.
The poll, which surveyed almost 850 women working in the financial services industry, showed that a higher proportion of women working in private equity considered being female made it harder for them to succeed than in any other sector.
In total, 75.5% of women working in private equity said their gender was a barrier in their career, against 24.5% who said their sxe (spam filter) was irrelevant to their progress. None of them said it was an advantage.
Hedge funds was the next most difficult sector for women, with 69% of respondents working in the sector saying their gender was a significant barrier to success, although more than 4% said it was an advantage.
Across the full survey, 64% of women said their sex made it harder for them to succeed, and 66% said it was possible but difficult to juggle the demands of raising a family with a career in the securities industry.
Only one in eight women said it was “entirely possible” to juggle the demands of career and family.
Overall, only 2% of respondents thought their sxe helped them succeed.
The survey was commissioned to raise awareness of the issues facing women in the securities industry in association with the launch of the inaugural Financial News list of the 100 most influential women in European finance, published today.
Fintag says Maybe it is because finance is a really dull subject to most women?
The European financial services industry is braced for months of uncertainty and confusion as sweeping rule changes, years in the making, come into force.
Mifid, the Markets in Financial Instruments Directive, is to become law throughout Europe on Thursday. But in spite of lengthy planning, many countries and companies are far from fully implementing it.
Business and regulators are unsure about the scale of problems that could be thrown up by the directive, designed to create a single market for financial services and level investment opportunities by opening the industry to cross-border competition.
Of the 27 European Union member countries, three met the January 31 2007 deadline to adopt Mifid into national legislation: Britain, Romania and Ireland.
Others have since passed the required laws but some, including Spain, Finland and the Czech Republic, have not. Poland said in a September submission to the European Commission that it was “impossible to estimate” when it would do so.
In the UK, many mid-sized and smaller firms are still working on becoming fully compliant.
Banks, brokers and other financial services companies have spent billions of euros complying, even though some regard Mifid as EU red tape. Many questions remain about how regulators in each member state will monitor and enforce changes.
Organisations that are ready could lure business from rivals. Mifid requires brokers to offer clients “best execution” prices for share trades. Many larger businesses have invested in technology to find the cheapest and quickest trading platforms.
In a Thomson IFR survey, more than two-thirds of companies thought customers would challenge on best execution and all expected fines to be levied in the first quarter next year.
Fintag says Nobody including my lawyers really see the point of MiFID. We have written hundreds of letters to our outsourced partners, written another best execution policy (that is overridden by our fund's offering memorandum), written a conflict of interest policy and then received lots of letters from other banks who want us to sign and return them back to satisfy their compliance officers demands. This maybe an EU issue (red tape and a complete waste of time) but it has impacted our funds in the Cayman and our PB in the USA.
Best Execution was important when trading was done over the telephone. With electronic trading this is no longer an issue. As for conflicts of interest, let's face it but Investment Banks are a conflict of interest. Period.
Red tape with strangle us all. The EU is turning into India.
August was not a propitious month for hedge funds, with the reverberations from the US subprime mortgage crisis, the subsequent credit squeeze and the travails of many quantitative funds grabbing the headlines.
But MPC Investors, a London-based hedge fund outfit, proved an oasis of calm in the middle of a storm, successfully raising $900m for its latest fund launch, MPC Samsara, a pan-European directional long/short equity vehicle.
The launch took MPC's assets under management to $3bn (£1.4bn, €2bn), up from $1.1bn at the start of January, and it is still not finished for the year; it has opened the MPC Strategic Opportunities fund, a discretionary macro hedge fund it soft-launched in July with $25m to outside investors with the aim of raising a further $500m.
Business is going so well that MPC is about to move into its own offices, no longer having to share premises with a Greek yoghurt manufacturer.
Yet this burst of success has come after years of toil. Formed in 2000, MPC initially struggled to make headway, with only its Pilgrim fund, an Anglo-European long/short equity vehicle, capturing any significant assets.
Matters came to a head in early 2006 when Peter Harrison, previously chief investment officer at Deutsche Asset Management and JPMorgan Asset Management, was drafted in as chief executive to recharge the business. "The Pilgrim fund was very successful under John Innes but the firm had failed to diversify. It had started a number of strategies that just hadn't worked," he says.
Fintag says Mmmm.
GLG FUND TO BE SOLD TO PUBLIC THROUGH BRANSON'S VIRGIN MONEY
GLG Partners LP, the London-based hedge-fund manager with $21 billion in assets, will make some of its investments available to retail investors after agreeing to manage a fund for Richard Branson's Virgin Money unit.
Starting in January, Virgin Money will sell its Climate Change Leaders Fund to invest in companies that benefit from concern about the environment, spokesman Jason Wyer-Smith said today. The new fund, managed by Ben Funnell and Pierre LaGrange, will mostly mirror their Environment fund, Wyer-Smith said.
Fintag says lastminute.com?
MERRILL LYNCH'S HELMUT FISCHER SAYS MORE HEDGE FUNDS TO END
As an analyst, one is often called on to travel with senior managers on investor roadshows. It's a lot like babysitting, but with better pay. These senior managers often need cajoling, persuading and bribing to get them to be pleasant to the owners of the companies they are paid to manage.
The current market volatility has made us all more aware of the need to ensure our clients are kept happy - the last thing we want to see is some major blue chip walking off to the bank down the road. "The bank needs to ensure income streams keep coming in from all areas", is how one senior manager put it recently.
Last week's trip - to the US to visit investors in a long-standing retail client - seemed to have been arranged for just such a purpose. The only problem was the senior manager - who did exactly what he normally does on these sorts of trips.
On the morning of the roadshow, he arrived at 10am, an hour late. To be fair, tearing yourself from a sumptuous five-star hotel suite can be tough at the best of times. It wasn't so hard for me to get out of bed - it's traditional for the analyst to slum it in a cheaper hotel nearby.
The three of us, myself, the company's head of investor relations and the director arrive at meeting number one - and our director falls at the first hurdle. His "brief review" of the recent quarter lasts 45 minutes, leaving five minutes for the detailed question and answer session the investor requested. Question one takes a rambling eight minutes to avoid answering. Question two is too detailed for a man of our director's seniority to answer, and is met with a blush, a stern stare and terse mutterings that sounds like "competitive info".
Meeting two is with the evil forces of the dark side. Despite assurances that the investor is one of the company's top three shareholders, and among the savviest of investors on the street, our director is furious that a hedge fund has got through the net. All powers of persuasion are required to ensure we make it to their front door. We are met by a charming gentleman - I will call him Randy - wearing an outfit that must have cost $5,000. Unfortunately, the director feels jeans, designer or otherwise, are inappropriate for a professional, so the meeting starts on a bit of a sour note.
Our director insists that a brief review of the most recent quarter would be useful, but this is brushed aside by the tanned hand of Randy, who would rather go straight into the Q&A session. The investor relations director quivers as he sees the director's face flush (at this stage it is unclear if this is fear or anger), and so Randy commences. Sixty minutes later with our ears still ringing with questions about cash conversion, invested capital strategy, the pluses and minuses of EVA and why it might be that the group has substantially higher capex and working capital requirements than its key Korean, Taiwanese and Brazilian competitors, we leave Randy behind.
"Do you think he's OK with me saying, 'we'll have to get back to you on that one...' to every question?" worries the director. "I'm sure he understands", soothes the head of investor relations.
The biggest challenge for the next four meetings is to keep our eyes open, look interested, laugh simultaneously at the same gags (told at the same places in each presentation) and not to mimic the director as he gives the same performance over and over again.
It is also tough not to smile as the director is asked the same question by different investors. It's almost as if a helpful analyst has sent a pre-prepared set of "Questions for management" to them. Not that I have ever done anything like that, of course.
As we reach the airport, tired, drawn but happy, we debate why the stock has closed down 7 per cent today given the excellent meetings that we have had. After several glasses of fine wine in the lounge, we agree that there were probably more sellers than buyers, but somehow the name Randy keeps on coming to mind. Perhaps our sales pitch wasn't quite so good after all.
The author is an analyst at a major investment bank in London
Fintag says Carbon foot print comes to mind.
MICROSOFT MAKES FACEBOOK A CLUB YOU DON'T WANT TO JOIN
Pssst ... have I got a deal for you! Send me a cheque for £10 and I will sell you a 0.000001 per cent interest in NetworkerColumns Ltd, a privately held company which produces copious quantities of mildly irritating prose. I will then release a press statement announcing that we are both partners in a £1bn company!
Daft, isn't it? Well, it's exactly the same logic that has led the mainstream media to hail Facebook as a $15bn company - that is to say, the fifth-most valuable internet company after Google, eBay, Yahoo and Amazon. What happened is that Microsoft, after months of secret negotiations, announced it was paying $240m for a 1.6 per cent stake in Facebook. Multiply 240 million by 100, divide by 1.6 and out pops the 'valuation'.
House prices fell for the first time in two years this month, sending a shudder through millions of homeowners already hit by rising mortgage repayments and more expensive borrowing.
The outlook for homeowners is likely to worsen with news that the wealthy are losing confidence in bricks and mortar as an investment. There has been a big drop in City bonuses being used to buy prime property in Central London and in the popular second-homes areas, triggering fears of price falls in the South West, East Anglia and the Cotswolds.
Today's figures will increase the anxiety of millions who have banked on ever-rising prices to fund their old age and pay off mortgages. To add to their misery came a new warning from America, that Britain would not escape the fallout from the US as the property market there went through its worst recession in 16 years. Robert Shiller, Professor of Economics at Yale University, who forecast the end of the dot.com bubble in March 2000, told The Times that the slowdown would start in London.
The amount of City bonus cash flowing into prime London property and into second and third homes will fall by 60 per cent to £2 billion in the coming year, according to one of the country's largest property agents. This will lead to at least six months of falling prices in Central London, predicted Savills, the estate agency, which specialises in selling houses worth £1 million and more. Also at risk are the Cotswolds, the South Westand parts of Norfolk, Suffolk and Kent.
Recent market turbulence has tested banks' technology and is putting a question mark over whether increasingly popular computer-generated algorithmic trading is suited to volatile conditions.
Algorithmic trading -- where computers make multiple trades in fractions of a second -- has soared to make up 30 percent of equity trading volume according to industry analysts AITE group.
It is also increasing popular in the $3.2 trillion a day in foreign exchange market.
EBS, the biggest interbank venue for foreign exchange trading, says algorithmic trading has doubled from around 15 percent of its volumes at the start of 2006 to 30 percent now.
But traders say current volatility is showing the limitations of this form of trading, in equities and forex.
"Algorithmic trading works by taking historical moves to predict what will happen in the future," said Lee Ferridge, senior proprietary trader at Rabobank.
"When market moves bear little resemblance to what has happened in the past all types of model will struggle."
This certainly appears to be the case for Morgan Stanley (MS.N: Quote, Profile, Research) who reported a $480 million loss in the third quarter from the bank's in-house equities trading desk that employed computer generated models to drive returns.
Fintag says Who writes this drivel? Despite Goldman's hiccups it seems to have done extremely well as have most stat arb / quant funds. My two flagship funds are up over 20%.
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Hedge funds have historically shown the ability to recover more quickly than global debt and equity markets in the 12-month period following financial turmoil, according to Credit Suisse/Tremont, which examined the effects of five crises on hedge funds and world financial markets.
"Although there are certain sectors that fared better than others during such periods, it is unclear whether one hedge fund strategy is more resistant to market shocks than others," concludes the report. "However, as an asset class, hedge funds have remained less volatile and have retained positive performance throughout most crises."