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
The ECB opens the floodgates and the yield curve hardly moves. Bonus envelopes and excuses arrive at many US banks and apparently houses are for living in, not for making an investment turn.
A Bear is on the run and for some a Bonus means not having to work in Investment Banking for a few months. Distressed funds are the new black for 2008 and a super dooper SIV bucket is being launched to save the banks from further red faces.
Tonight the FiNTAG Christmas party (#2) is in full swing at some fancy restaurant (we weren't allowed to book more than 4 heads a table so my PA booked a number of tables for 4 under different names about 3 months ago and gave them a GBP1000 tip) so I may not be very coherent tomorrow morning. [Editor: You never are and where is my invite?]
STOP PRESS Morgan Stanley is now Junk. Official.
bloomberg says " Morgan Stanley Reports Worse-Than-Estimated Loss "
Morgan Stanley have been bailed out by the Chinese Government (keen to get rid of their worthless dollars for 10% yield - we are in Junk bond territory); Mack says no to a bonus; first loss in its history; beats analysts loss forecast 10 fold - how many more lies do we have to endure?
And now General Motors announces its to add $1500 to its 2008 models to cover rising steel prices.
Few people knew at the start of 2007 the meaning of "subprime" real estate loans or how they might affect the US and global economies.
Today, worries are growing that the crisis that began with mortgage failures and spread to banks and brokerages may push the US economy into a downturn and put the entire global economy at risk.
Subprime loans flourished at the end of the US housing boom as lenders offered mortgages to people with shaky credit in an effort to cash in on surging prices.
These loans were packaged into securities that were sold to investors around the world, with little regard to what would happen when low "teaser" rates were reset to increase payments from homeowners.
When a wave of defaults began to hit, US and global banks began to see billions of dollars in losses on their balance sheets. The lenders had to tighten credit, crimping consumer and business spending and threatening the overall economy.
Goldman Sachs economist Jan Hatzius says his "back-of-the-envelope calculation" now suggests "losses of around 400 billion dollars" for global banks and investors.
Fintag says Of course in the UK, this is not new.
We suffered in the late 1980's/early 1990's after a period of reckless lending to no questions asked borrowers who bought property like stocks and shares. When negative equity kicked in, the housing market collapsed and today it is doing the same. Why people think investing in houses is a good thing is still beyond me but hey some have become very rich off the back of the banks handing out leverage like candy.
BEAR STEARNS HEDGE FUND MANAGER DEPARTS AMID PROBES
Ralph Cioffi, the manager of Bear Stearns Cos. hedge funds that invested in subprime mortgages, left the firm as U.S. prosecutors investigate whether he withdrew his money from two funds before they collapsed in July.
Cioffi, 51, ceased to be an employee last week, Bear Stearns spokeswoman Elizabeth Ventura said in an interview yesterday. She declined to say why he left or to comment on the federal probe. He had stayed on as an adviser to the New York-based securities firm after being relieved of his duties as a fund manager in June, when his subprime mortgage investments began to unravel.
Cioffi declined to comment on his departure. He left Bear Stearns, the second-biggest underwriter of bonds backed by mortgages, because his role in unwinding the funds was completed, a person close to the firm said.
The U.S. Attorney in Brooklyn and the U.S. Securities and Exchange Commission are investigating Cioffi's withdrawal of some of his own money from the funds, three people with knowledge of the matter said. The probe is part of a broader regulatory review of the implosion, according to the people, who declined to be identified because the examination isn't public. Investors in the two funds, which filed for bankruptcy in July, lost $1.6 billion.
Fintag says Jimmy "Teflon" Cayne escapes with another fat bonus and his senior management take the blame. However, if this is the case that the mild mannered Cioffi front ran his own fund, or even worse acted fraudulently then I am disgusted.
Cowboy hedgies are a thing of the past. They don't work for big US banks. It makes me want to curl up like a hedgehog.
finalternatives says " SEC Files Action Against Fla. Hedge Fund Manager "
financial news says " Sub-prime king Paulson turns profit from UK operation "
finalternatives says " Failed Australian Hedge Fund Solvent, Will Repay Creditors "
The European Central Bank has allocated 348.7bn euros ($502bn; £249bn) to banks at a below-market rate in a refinancing move to ease tightened credit markets.
It is one of five central banks that have injected billions in emergency cash into money markets.
The aim is to cut the cost of lending between retail and commercial banks, which has jumped in the past few weeks.
All banks with enough collateral, and which submitted bids of at least 4.21%, received funds from the ECB.
The ECB said 390 banks across the eurozone had sought the funding.
The move - making the extra cash available over the next two weeks -will ease fears of a credit meltdown over the Christmas period, when banks need extra cash.
Cutting interbank rates
The hope is that lower interbank rates will mean that banks will also be able to make more funds available at cheaper rates to companies and individuals.
The ECB's action succeeded in cutting short-term lending rates, with the two week euro Libor rate falling sharply to 4.4%.
However, the rate still remains above the 4% ECB refinancing rate.
The two-week ECB refinancing operation is the first time it has said it would offer banks unlimited funds, above a certain interest rate, since 9 August when the credit crisis started.
The size of the offer surprised some analysts.
"The sheer magnitude of the operation caught the market off guard," said Win Thin, a senior currency strategist at Brown Brothers Harriman.
Fintag says ...and the result is lots of banks dipping into the chocolate fondue and not sharing it out. Sometimes trying to manipulate markets doesn't work when the participants are not cooperating.
Investment Banks hate each other. They make their money from ripping off retail investors or more likely each other. Every year, the fools on Wall Street change. This year it has been UBS, DB, Citi and Bear Stearns and a handful of German post offices. Next year it could be Goldman, JP Morgan and Credit Suisse? Why would they believe each other's balance sheet collateral when they don't believe in their own?
It is going to be a fun time working at PWC, E&Y et al this year end. I wonder what they will be focusing on in their annual Investment Banking audits?
financial times says " Goldman encounters hard-to-please investors "
telegraph says " ECB's mind-numbing cash injection is no cure "
SUPERSIV' FUND TO START BUYING IN WEEKS, BANKS SAY
The ``SuperSIV'' fund, set up to provide cash to structured investment vehicles hurt by the collapse of the subprime-mortgage market, plans to start buying assets ``within weeks,'' its sponsors said today.
The fund's size, originally envisioned at about $80 billion, will be based on ``SIVs' needs and evolving market circumstances,'' Citigroup Inc., Bank of America Corp., JPMorgan Chase & Co. and BlackRock Inc. said in an e-mailed statement. The banks are raising money for the fund to buy assets from SIVs. BlackRock will be the manager.
The urgency that led to the SuperSIV's creation eased after separate SIV bailouts by banks including Citigroup and London- based HSBC Holdings Plc. New York-based Citigroup said last week it would take over seven SIVs with $58 billion of debt. Banks want to avoid forced assets sales to repay SIV borrowings because that would further roil credit markets and reduce the value of their own debt holdings.
The fund, also known as the Master Liquidity Enhancement Conduit, or M-LEC, can still provide ``an optional source of liquidity for eligible high-quality assets,'' the banks said in the statement.
Fintag says Go for it. Thanks to BASEL 2 and extra eyes on off balance sheet vehicles, we watch with interest. Blackrock will emerge with some fat fees and the banks less embarrassment at the year end.
A predicted golden age for distressed debt hedge funds has so far failed to materialise in spite of the global credit crisis, but 2008 should be their year.
"You ain't seen nothing yet ... It's going to be huge," said one funds of hedge funds executive who declined to be named. "The tea leaves are not difficult to read."
After the start of the credit crisis this summer caused by the U.S. subprime meltdown, and after subsequent turbulence in equity and bond markets, a number of funds of hedge funds have again turned to distressed investing, a cyclical strategy that tends to do well when times are tough for everyone else.
Distressed funds look to buy the discounted bonds, loans or other debt of firms that have defaulted on debt payments or are set to enter bankruptcy or financial restructuring and bet they can weather the storm and earn strong returns from a turnaround.
Matt Grossman, one of the star traders at SAC Capital, is leaving the fund after the end of the year, according to an internal SAC memo. Mr. Grossman helps Steven A. Cohen, who founded the firm that bears his initials, run CR Intrinsic, a fund at SAC that has more than $2 billion in assets under management. Their team included roughly 50 people.
As with all senior, brand-name traders who leave their brand names, Mr. Grossman is expected to start his own investment business.
For those with the right pedigree, the market for raising money is clearly good.
Consider Goldman Sachs, which has been marketing its new Goldman Sachs Investment Partners. That fund has $6 billion, which includes money from investors and money the traders used to run one of Goldman's proprietary desks, according to one person briefed on the plans.
A Goldman spokesman declined to comment.
Fintag says And how many hedge fund start ups will we see next year? Quite a few I am sure. Expect to see Hedge Funds for Dummies going to number 1 in the charts.
Maybe someone should launch a fund for distressed hedge fund managers ...
A federal judge has granted Bear Stearns a trial before the prime broker can be ordered to pay nearly $160m (€111m), as the bank's board reportedly considers a succession plan for chief executive James Cayne.
US District Judge Naomi Reice Buchwald in Manhattan said yesterday a "trial will be necessary" to determine whether Bear Stearns acted in "good faith" when it accepted money for a defunct hedge fund.
Buchwald ruled on an appeal of a February order by US Bankruptcy Judge Burton Lifland that Bear Stearns pay nearly $160m to investors in the Manhattan Investment Fund. Lifland had found that Bear Stearns failed to properly monitor the activities of the fund before it collapsed in early 2000.
The fund, run by Austrian-born manager Michael Berger, lost nearly $400m of investors' money by making wrong bets on Internet stocks during the technology boom of the late 1990s.
The Securities Industry, Financial Markets Association, the Financial Markets Lawyers Group and the International Swaps and Derivatives Association, all supported Bear's appeal.
Fintag says Who would have thought at the start of 2007 that Bear Stearns would have imploded? And so who did get a cash bonus, if any, yesterday?
The Northern Rock crisis is threatening to cost every taxpayer up to £1,800, as it emerged Gordon Brown was warned a year ago that "urgent action" was needed to prevent a banking meltdown.
Ministers yesterday announced that public guarantees to the beleaguered bank could rise to £57 billion - almost as much as the annual Whitehall education budget - with a full-scale nationalisation now thought to be imminent.
In a further development, the governor of the Bank of England, Mervyn King, revealed that the Prime Minister had been informed that Britain was uniquely vulnerable to a run on a bank.
Mr King told MPs that Ed Balls, one of Mr Brown's closest colleagues, was part of a top-level Whitehall group warned last year that "urgent action" was needed to deal with the potential future collapse of a retail bank.
Fintag says 3p in income tax? Happy Christmas...
Still, anything that kicks out these incompetent losers from Government has to be a good thing.
So-called "short-sellers" saw average gains of almost 7pc in November, according to figures compiled by the EDHEC business school's asset management research centre. The FTSE 100 lost about 4.3pc over the same period.
Bets on Britain's major banks suffering a share price collapse were among the most profitable trades for short-sellers, according to market sources.
Funds including Lansdowne Partners made huge sums of money by "shorting" shares in Northern Rock, the troubled mortgage bank. Buy-to-let mortgage lender Paragon saw its shares dive 40pc in November, while Royal Bank of Scotland tumbled more than 11pc and Alliance & Leicester dropped 7pc.
One partner at a London-based fund of hedge funds said: "Short-selling has indeed done very well in November, there's no question of that. But I don't believe these figures tell the whole story. We have seen success in a number of strategies - distressed debt funds have done very well, as have market volatility funds."
Emerging markets' investment strategies were the poorest performers in November, losing about 2.5pc of their value. Merger arbitrage funds, which make money by trading around takeover situations, lost about 1.5pc over the month.
The poor performance of most of the hedge fund investment strategies raises new questions about the effectiveness of the hedge fund industry in times of crisis. Many critics of the industry argue that hedge funds were originally designed to "hedge" risks and protect returns - which was why they could merit charging higher fees.
Fintag says Lansdowne have the largest short book in Europe so their Christmas must be coming very early. Having made a killing shorting Northern Crock, they are onto an absolute winner. Mind you, it has been slow coming and many of its funds have performed badly as the equity markets continued to defy gravity when all around the earth was crumbling. The time has arrived and Morgan Stanley who own them (20% that we know of) must be laughing all the way to their stock lending desks.
3 comments
anonymous said ...
And if the ECB's $500bn fails to oil the markets what next? The next few days will be very telling. January should be a great month.
19 Dec 07 - 10:29 gmt
You're a mean one, Mr. Grinch! said ...
No mini-dialogues, but your commentary was on point today.
19 Dec 07 - 17:16 gmt
ozgerbobble said ...
Strange timing for State Street Global Advisors to be closing their entire Hedge Fund Strategies Group. I wonder what their credit losses were like?
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Few people knew at the start of 2007 the meaning of "subprime" real estate loans or how they might affect the US and global economies.
Today, worries are growing that the crisis that began with mortgage failures and spread to banks and brokerages may push the US economy into a downturn and put the entire global economy at risk.
Subprime loans flourished at the end of the US housing boom as lenders offered mortgages to people with shaky credit in an effort to cash in on surging prices.
These loans were packaged into securities that were sold to investors around the world, with little regard to what would happen when low "teaser" rates were reset to increase payments from homeowners.
When a wave of defaults began to hit, US and global banks began to see billions of dollars in losses on their balance sheets. The lenders had to tighten credit, crimping consumer and business spending and threatening the overall economy.
Goldman Sachs economist Jan Hatzius says his "back-of-the-envelope calculation" now suggests "losses of around 400 billion dollars" for global banks and investors.