28JAN09:
Q1-09 DOW: 8900
Q2-09 DOW: 7250
Q3-09 DOW: 5810
Q4-09 DOW: 3960
CITI NATIONALIZED
OBAMA GETS SICK 27AUG09:
Mini Crash 21SEP09 Predicted correctly:
Bailout=Bonuses
Demise of Bear Stearns
Demise of Lehman Bros.
Demise of AIG
Subprime would cause problems
Date of 2007 crash
CRAs were to blame
G20 riots were a party
Northern Rock run
Northern Rock Nationalization
HBOS and RBS demise
UBS really was Useless
In today's short issue we look at short news, short analysis and short comments. The best short summary I have read to date is from a freebie rag that is handed out at the tube stations. Take a look at the flickr picture. The blame on this mess is Clinton and Greenspan. So there you go.
Lehman is sued by the slowly dying RAB Capital (fingers crossed the Special Sits fund can stay closed and the shareholders realise that letting toxic assets out of the bag will destroy the fund and its management company too - and its new CEO has only been in the job a few days).
Non Financial companies try to get on the short sell banned lists so Directors can protect their options. Of course market makers are not stupid and look at how betting exchanges are seeing a massive increase in bets against companies. However much these socialists want to dry up the markets and susequently push countries into recession, there are ways round the rules. Apparently off market shorting is rife and we have traded with a couple of counterparties where we go synthetically short. It is a very easy trade; it is just very difficult to hedge it. But it can be done.
Of course in backward America, you cannot bet but that isn't stopping Cayman Island funds from doing so. You thought hedge funds were a bunch of gamblers? Well we are now.
Paulson and Bernanke have yet to explain how they will buy and value crap debt for their super fund. Remember when the banks were going to create a super SIV and chuck everything into it? It failed precisely because they couldn't price the crap.
Yesterday an aggrieved Goldman Sachs Investment Banker, sorry, ATM Teller, berated my banter and my lack of bonuses. Of course, hedgie partners take drawings but he / she is right. I have been attacking them lately. That is because they are so good. Like a macbook, I have to find faults in it. It is human nature. And as I was an employee, alas they kicked me out before I became a partner for being too questioning, I think I have a right to have a go. Sounds good that. Have a go Finbar.
Back to shorting.
BAN ON SHORTING FINANCIALSTOCKS SENDS BETTING SOARING
Fixed-odds betting on financial markets has surged in recent days as traders find ways to get around the ban on short-selling financial stocks.
BetsForTraders.com, a financial bookmaker, has reported volumes up by more than 400 per cent since last Thursday's ban, with almost all the increase in activity in bets against banking stocks.
Lloyds TSB is the most heavily bet-against bank share, with 84 per cent of open bets on the bank predicting its shares will fall following its agreement to buy HBOS. Other favourites for short betting include Royal Bank of Scotland, Barclays, Goldman Sachs and Morgan Stanley.
Fintag says Where there is a will, there is a way.
GORDON BROWN WARNS SHORT-SELLING BAN MAY BECOME PERMANENT
The investment bank, which raised $5bn from Mr Buffett's Berkshire Hathaway plus a further $5bn from institutional investors, will use the money to buy assets either from the US government's planned $700bn bail-out fund or from banks directly.
The Daily Telegraph understands that the bank sees a great deal of potential upside from some of the prices that assets are currently trading at, and believes that if legislation allowing the bail-out fund is passed, other banks will become more willing sellers.
If the bill is not passed, it gives Goldman a substantial buffer if the market continues to worsen, providing the bank with a Tier One capital ratio of 14.3pc.
News of Goldman's plan for its fresh funds highlights the opportunistic nature with which the bank views the coming months - in spite of the relatively expensive way in which it raised its money from Mr Buffett's Berkshire Hathaway investment vehicle, which is earning a 10pc dividend from Goldman and also has warrants to buy a further $5bn of shares at a discounted price. These reaped Mr Buffett an instant profit of more than $400m.
The fundraising was put together in less than 24 hours, with Goldman Sachs investment banker Byron Trott brokering the deal with Mr Buffett on Tuesday morning. The pair have worked together for years, and the bank is Berkshire's exclusive relationship bank for debt issues.
The bank managed to double the minimum $2.5bn it first said it hoped to raise from institutional investors, selling 40.7m shares at $123 each, with an option to sell a further 6.1m shares, raising an extra $750m, to handle excessive demand.
Fintag says With Buffet demanding a 10% yield, Goldman are going to have to pull out all the stops. Now we all know Goldman are after distressed, sellers will be putting up prices.
SOME HEDGE FUNDS FROZEN BY SEC'S BAN ON SHORT SELLING
The short-selling ban is taking the "hedge" out of hedge funds.
The Securities and Exchange Commission has banned short sales of roughly 950 financial-related stocks until Oct. 2, a list that ranges from Goldman Sachs Group Inc. to International Business Machines Corp.
With their hands tied on those stocks and the algorithms that do much of their trading running into technical hitches, many quantitative and other "market neutral" hedge funds are drastically reducing trading activity, according to Wall Street sources.
Fintag says So does that mean the term hedgie will die? Good. It is an awful word. I shall call myself a Fundie from now on.
America's SEC ordered more than two dozen hedge funds to turn over trading information as it ramps up its investigation into whether traders were spreading rumours to manipulate shares, reports the WSJ. The SEC order, dated Sept 22, identifies six financial institutions the SEC believes may have been subject to such manipulation. The order is akin to a subpoena and requires information to be handed over with a sworn statement attesting to its accuracy. It seeks a wide range of trading data and emails over a period of three weeks involving AIG, Goldman Sachs, Lehman Brothers, Morgan Stanley, Washington Mutual and Merrill Lynch.
Fintag says Well I guess the SEC would look a bit silly if it wasn't seen to be doing anything about the current crisis. As a regulator it did almost no regulating during the last 5 years.
PLAN'S BASIC MYSTERY: WHAT'S ALL THIS STUFF WORTH?
What would you pay, sight unseen, for a house that nobody wants, on a hard-luck street where no houses are selling?
That question is easy compared to the one confronting the Treasury Department as Washington works toward a vast bailout of financial institutions. Treasury Secretary Henry M. Paulson Jr. is proposing to spend up to $700 billion to buy troubled investments that even Wall Street is struggling to put a price on.
Fintag says If the markets and banks with smart people like Lehman, Bear and Merrills failed to price the stuff, are we confident that the bearded man can do it on our behalf?
Remember the super SIV? That failed because they couldn't work out the prices.
cnn says " Banks to abandon 'Super-SIV' fund (Dec 2007) "
FINANCIAL SERVICES AUTHORITY THREATENS HEAVY FINES FOR SHORT-SELLERS
The City's regulator has threatened to impose unlimited fines on investors that breach its new rules on betting against UK bank shares amid a flurry of late disclosures by hedge funds.
The warning came yesterday as Gordon Brown promised new permanent rules to curb short-selling once the Financial Services Authority (FSA) ban expires in January. The Prime Minister said: “We'll be reviewing over the next four months and I think you will find new rules for the future.”
Such a move could further threaten the hedge funds industry, which has grown explosively in London. The FSA last week introduced measures to tackle short selling of UK bank shares, fearing falling prices would undermine the financial system.
It ruled that any short position greater than 0.25 per cent of a market value of any 34 named financial stocks must be disclosed by 3.30pm on Tuesday this week. A number of other companies have since approached the regulator asking to be included on the list.
Fintag says So the FSA is turning into the SEC. After its Hutton moment (Northern Rock) the FSA is going the wrong way.
I am off to Switzerland soon. End of this week actually.
times says " Withered hedge funds set for severe autumn pruning "
US Federal Reserve chief Ben Bernanke has urged politicians to "act quickly" to support the proposed $700bn (£378bn) bail-out of the financial markets.
He added the US economy risked "serious consequences" if action was not taken.
Treasury Secretary Henry Paulson told Congress that the proposal was about "benefiting the American people".
Meanwhile, presidential candidate John McCain said he felt the bail-out would not be approved, and was suspending his campaign to help find a solution.
Fintag says This could get nasty.
finalternatives says " Topless Hedge Fund Manager Suit Dismissed "
reuters says " Pimco's Gross says would manage bailout fund for free "
Man Group, the world's biggest listed hedge fund, has come under renewed pressure following the ban on shorting financial shares announced by the FSA. Traders said the clampdown could hit Man's business, with analysts at Investec cutting their 2009 earnings forecasts by about 14% and their price target from 650p to 460p. But another reason for yesterday's fall was that Man is not on the FSA's list of 32 companies where shorting is prohibited, and is therefore a target for the bears. Man ended 35.5p lower at 398p.
Fintag says Thank goodness Fink is not a Mack.
RAB CAPITAL SUES OVER $50 MILLION FUND LEHMAN MANAGED
RAB Capital Plc sued to recover about $50 million in assets tied to a fund that used Lehman Brothers Holdings Inc. as its prime broker.
RAB filed the suit in London this week, Marc Popiolek, a spokesman for RAB in London, said in a telephone interview today. The court rejected a request for a speedy ruling on a request to take back control of the assets, he said.
RAB ``has sought to secure the orderly operations of our fund,'' Popiolek said. The fund, RAB Market Cycles, accounts for about 1 percent of RAB Capital's total assets.
Fintag says Ooops. If only RAB had been reading FiNTAG.
American financier and philanthropist Michael Milken spoke to a standing room audience at lunch yesterday at the 15th annual CLSA Investors' Forum. The test to any such speech is that there is still a standing room audience at the end. And there was.
His talk covered too many topics to encapsulate in one article: from the value of education and healthcare and how that carries through to human capital in business, to the importance of long-term strategies, and on to a look at how heterogenerous our regions and institutions have become. Milken backed up his statements with historical points and catchy figures. And he spanned the globe from Pakistan's growing population (and thus education challenge) to Mexico's bourse and the comparative differences between New Jersey and Mississippi.
Fintag says A man who knows and in fact started this whole securitization business off.
President Bush appealed to the nation Wednesday night to support a $700 billion plan to avert a widespread financial meltdown, and signaled that he is willing to accept tougher controls over how the money is spent.
Fintag says What a sad man.
GRIEVING FAMILIES ARE STRUGGLING TO SELL HOMES THEY INHERIT TO PAY IHT BILLS
Families who inherit a home which is difficult to sell because of the credit crisis are being faced with "impossible" demands by tax inspectors, surveyors and accountants claim. They say a tough new stance by probate valuers at HM Revenue & Customs (HMRC) means grieving families face big inheritance tax (IHT) bills based on properties which they have no immediate prospect of selling.
Simon Aldous, a probate expert at estate agents and mortgage brokers Savills said: "In the current climate of failing property values and tax revenues, we are finding district valuers are not easy people to deal with. Families are in danger of paying significantly too much tax.
"In some cases they are proving impossible to deal with. We have executors and family members coming to us, who have filed IHT returns, only to be told by the valuer 'I will not talk to you and will only talk to your professional advisers'.
Andrew Jupp of accountants Tenon, added: "Things are difficult at the moment, and everything comes down to negotiation. It can be almost impossible to have an argument with HMRC without professional help."
Bank of New York Mellon has been forced to inject money into cash funds and money market mutual funds exposed to Lehman Brothers, as the fallout from the financial crisis continues to be felt by funds previously regarded as low risk.
The bank will take a $425m (€290m) after-tax charge in its third quarter results, according to a statement from the investment manager. It said it is taking the action to prevent fund shares from "breaking the buck," when a fund's value falls beneath $1 share and impacts investor confidence
Fintag says Oh dear.
PAULSON PLAN MAY PUSH U.S. DEBT TO POST-WWII LEVELS
Treasury Secretary Henry Paulson's $700 billion proposal to stabilize the banking system may push the national debt to the highest level since 1954, threatening an erosion of foreign appetite for U.S. bonds.
The plan, which asks Congress for funds to buy devalued securities from financial institutions, would drive the debt above 70 percent of gross domestic product and the annual budget gap to an all-time high, possibly exceeding $1 trillion next year, economists estimated.
``This is sobering, absolutely sobering, even to someone who doesn't drink,'' said Stan Collender, a former analyst for the House and Senate budget committees, now at Qorvis Communications in Washington.
Fintag says Isn't it funny when Congress spends months debating about bills with spends of a few million. And then comes the bird fancier and breaks the country with his demands. As usual, if you ask for something, ask for it big.
A longer lock-up period could in theory solve that mismatch. But investors (a lot of them, at least 75 per cent) need to agree or the fund will likely be wound down - with possibly massive implications for the rest of the market. They're due to vote by Sept 29.
Will they look kindly on Richards' fund or will they head for the relative safety of cold, hard cash?
Fintag says Now why didn't they use better lawyers? Why did they list on an exchange? Trying to be a Brevan Howard eh?
Fingers crossed.
26 comments
jaa said ...
Merrill may bail on BoA deal.. article in Forbes..
25 Sep 08 - 07:18 gmt
Finbar said ...
..as I predicted last week. Ooo I am good (hat tip to the Merrills insider)
25 Sep 08 - 07:54 gmt
anonymous said ...
..Too easy for Mer...and Lehman wouldn have been bankrupcy as well!
25 Sep 08 - 08:50 gmt
Dan said ...
Wait, how perverse is this? So Goldman would use the money it's getting from Berkshire, after bailout, to buy assets that the gov't has taken in bailout?
25 Sep 08 - 09:08 gmt
Dan said ...
Oh and this whole anti-shorting nonsense is getting to be silly. Even Bill Maher ranted about it. Hmm, well folks, there's gotta be a counter party for every short out there. Mark Yusko put it very simply on today's call: for every short seller, in order fo rthe contract to happen there's gotta be a buyer at that price. Otherwise there's no transaction.
25 Sep 08 - 09:08 gmt
Dan said ...
Finbar or commenters: what's the general take on the prime brokerage consolidations? Who's going to be around and who isn't? Looks to me like DB is nicely suited. ANyone else faring well?
25 Sep 08 - 09:10 gmt
KONG said ...
There's an irony in two priests questioning anyone's use to society. Particulaly the great bearded one and his token side kick
25 Sep 08 - 09:28 gmt
KONG said ...
Brown can ban what he likes- next election it is just going to get reversed. Of course, by then the whole of the City will have moved to Switzerland. See you in Zurich Fin.
25 Sep 08 - 09:39 gmt
Tradebot said ...
Those who buy and sell debt solely for their own profit. Truly evil act of Beelzebub himself. What next? Are we going to ban commerece?
My theory is that that everyone with beard is bad. Marx, Osama, Ahmadinenajad, Bernanke and Dr Williams. This is no coincidence.
25 Sep 08 - 09:53 gmt
Tradebot said ...
Kong, you clearly haven't seen the latest polls.... Brown is back! Brown bounce! 5 more years!
Never underestimate the stupidity of the British public. Taxi to Heathrow please!
25 Sep 08 - 10:00 gmt
anonymous said ...
credit suisse is the only other PB that is raking in the business. jp/bear still isn't properly set up. So yes Deutsche (which is apparently executing 1m transactions daily at the moment ) and credit Suisse is the only people to put your money with.
25 Sep 08 - 11:32 gmt
anonymous said ...
Problem with these guys is that they don't have the depth of knowledge that someone like MS has - I think the herd exiting the quality PBs will live to regret it personally, especially when their portfolios are complex.
25 Sep 08 - 11:42 gmt
anonymous said ...
Love the Beard theory. Once it goes mainstream and people realise they need to be clean shaven, should we go long Gillette?
25 Sep 08 - 11:43 gmt
anonymous said ...
Also, most of those people are bald. As is Paulson. Perhaps baldies are evil (due to hair envy) and are out to exact revenge on the world
25 Sep 08 - 11:53 gmt
anonymous said ...
Technical question: can the Archbishop of Canterbury excommunicate shorts? What about burning at the stake? Is that still an option in C of E bylaws?
25 Sep 08 - 12:05 gmt
anonymous said ...
Short selling ban doesn't appear to be working as Bradford & Bingley is off a further 7% and now has a market cap worth less than the value of the money raised in this summer's rights issue. When future commentators reflect on recent events they'll identify the shorting ban as one of the key mistakes.
25 Sep 08 - 12:39 gmt
Hammer said ...
The Church of England has a massive investment book (the body responsible is called the Church Commissioners). Over £5bn, heavily into the FTSE and property. No wonder the CofE's CEO is getting upset. Don't think they'll be making their RPI+4% target this year!
25 Sep 08 - 12:52 gmt
Kong said ...
I've always been short bald people with beards. Pure evil
25 Sep 08 - 13:41 gmt
MsR said ...
Ms R has a no exception rule on men with beards. There is simply no excuse for them. She will however make an exception for the odd continental type with a two day growth as long as he is not wearing loafers with tassels(ugh) and does not have a lemon jumper slung around his shoulders.
25 Sep 08 - 14:28 gmt
MacDice said ...
"Irrelevant mediaeval bearded twit questions relevance of modern world"
25 Sep 08 - 15:28 gmt
randommoron said ...
womanofexperience is also bearded
25 Sep 08 - 16:50 gmt
IG convert. said ...
actually managed to make some money today - using IG Index. what a brilliant invention.
25 Sep 08 - 17:20 gmt
Tradebot said ...
Hmm, after running my beard/evil correlation model the results are out : Longer the beard, more bad they are.
God should look again into the appointment of Dr Williams. First the Sharia law and now this praise of that heathen Marx. Three strikes and you are out - with a lightning bolt.
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