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
The signs are all is not well. I read a freebie newspaper last night and this is what I discovered.;
Iceland has become a must go to holiday destination.
Shoplifting for food is on the increase.
Nobody admits they work in the financial services industry anymore.
Black is certainly the new black (tried to buy a black shirt!? Nearly impossible).
Glossy black (blackberry, samsung etc) is too glossy and buyers are using sandpaper to make them look old.
New clothes are out. New clothes that haven't been washed or ironed in a week are in.
Obama declares war on tax havens (isn't one the worlds largest tax havens in the USA? I am talking about Delaware of course).
Nobody can afford to get their teeth fixed and so are keeping their mouths permanently closed.
Sales of condoms, dvds and candles are on the increase.
Gyms are out; home exercise is in.
Silk is out. Satin is in.
Pawnbrokers have so much uncollected collateral they are forced to sell it on ebay.
Old mobile phones are back in fashion.
Empty taxis are now more common than buses.
Nobody works in hedge funds anymore.
Pop stars are writing proper angst ridden lyrics once more.
"Older" people are staying in longer on reality tv progs (xfactor, strictly come dancing).
Politicians want to please us all by giving us tax rebates and then borrowing the money from our pension funds to do it.
Home ownership is for suckers. Squatting is the new renting.
Water is the new Starbucks.
So there you go. In other parts of the news the opaque TARP changes its remit and AIG pleads for more. Hedge Funds are still loved, even if there are less of them. GLG does a Joe Calzaghe and leverage ratios are the new black.
Profits at Starbucks collapsed 97 per cent in the fourth quarter of the year after the ubiquitous coffee chain was forced to absorb the effect of weakening demand and the cost of closing stores earlier this year.
As the group admitted to the earnings plunge, shares in the Seattle-based group sank 3 per cent in after hours trading to $9.91 each. Two years ago, the stock fetched $38.41.
The group, which this year admitted that it had too many stores in some areas and ousted its chief executive, said that profit for the last three months of the year fell to $5.4 million, compared with $158.5 million for the same period the year before.
Fintag says Music to my ears but for many of you its business as usual. As far as I can tell, Starbucks is busier than ever. It is filled with unemployed bankers being interviewed by headhunters (or in this market head-resume-storers) and students keeping warm. The difference this time is the coffee cups are taking longer to drink. Looks like they may have to adopt the old McDonalds model of uncomfortable seats and air conditioners failing to work. That, or removing the sofas and making proper coffee that costs half the price.
The US government is to buy a $40bn (£25.6bn) equity stake in troubled insurer American International Group - increasing its investment in the company to a total of $150bn as it reported $24.47bn of quarterly losses.
The Fed originally offered AIG an $85bn credit lifeline in mid-September, and handed over a further $37.8bn last month when it became apparent that the original facility was not enough.
Under the new structure, the Treasury will buy $40bn of preferred shares in AIG - which in return will pay an annual 10pc dividend - as part of the Troubled Assets Relief Programme.
Fintag says When the TARP was conceived, the fund size was based on bail outs of bad debts that were known at the time. These bad debts are increasing much faster and the fund's remit appears to have changed. No longer is it swapping bad debt for capital, it appears to have turned itself into a distressed fund.
As with most distressed funds, the investors have a vested interest. The TARP's investors are the US taxpayer who has no vested interest or say. This is going to end in tears.
No wonder the Fed is refusing to divulge what it is doing. The TARP is more opaque than a closed ended hedge fund.
bloomberg says " Fed Defies Transparency Aim in Refusal to Disclose "
bloomberg says " Fannie Says $100 Billion Pledge From Treasury May Not Be Enough "
Almost two-thirds of institutional investors surveyed, or 63%, said alternatives led by hedge funds will become as important as stocks, bonds or mutual funds—or more so—in the next five years despite a particularly bad 10 months for the hedge fund industry.
About 37% of institutions, including public and private pension funds, endowments and family offices said alternatives would become less important as an investment strategy in the next five years, according to a survey by Morningstar and Dow Jones industry publication, Barron's.
Fintag says That has warmed the cockles of my heart. Of course, there is little other choice out there and despite the volatility of performance, most hedge funds are still outperforming the standard indices. So come on down.
An administrative law judge at the Securities and Exchange Commission has concluded that S.E.C. officials did not mishandle an investigation into possible insider trading by a major hedge fund, Pequot Capital Management, and that no disciplinary action should be taken against two officials involved in that inquiry.
A report found no reason to penalize Linda Thomsen, S.E.C.'s enforcement chief, or an agency associate, Robert Hanson.
Those conclusions, released by the S.E.C. on Friday, are contained in a 15-page report by Brenda P. Murray, the S.E.C.'s chief administrative law judge.
Fintag says And how independent is this SEC law judge?
GLG Partners chairman and co-CEO Noam Gottesman is “cautiously optimistic” about long term prospects for the company despite falling assets under management and negative performance in the third quarter. Gottesman made his remarks during a conference call about the third quarter results.
GLG posted a $167.1 million loss for the third quarter as charges related to the reverse acquisition of Freedom Acquisition Holdings compounded a dip in performance and assets under management.
Fintag says Another story to warm my cockles. The worst is over and it can only get better. So has Lehmans unfrozen a large chunk of their assets and are the new academics who replaced Coffey up to the job? I hope so because GLG are the standard bearer for the UK hedge fund industry - even if they were aligned with those maverick Lehman cowboys.
Maybe I should celebrate with a new redesign of the website? Isn't that people do when they haven't anything better to do? With my funds all shut, it is a tad dull.
MORTGAGE MARKET WILL SHRINK BY 80 PER CENT THIS YEAR, SAYS NATIONWIDE
The UK mortgage market will contract by 80 per cent this year, house prices will fall for another 12 months and the property sector will not stabilise until 2010, Nationwide said yesterday.
Alongside financial results showing that pre-tax profits were up by 11 per cent to £374m, the UK's second biggest mortgage lender said it had handed out just £1bn worth of mortgages in the six months to September, less than a third of the £3.6bn in the same period of 2007.
Tony Prestedge, the group development director at Nationwide, said: "Our forecast is now for the total mortgage market to be valued at £18bn this year, compared with £90bn last year."
Fintag says For US readers this must seem like old news. Yes, the UK is always a year behind and it would be great to avoid the next year and jump straight onto the US curve as it slowly (5 years?) moves its way back upwards - fingers crossed.
The upshot of no mortagages is nobody can buy because the prices are still way to high.
For the second time in as many weeks, Citadel Investment Group has been forced to deny rumors that it is in serious trouble.
The hedge fund giant, whose flagship fund is down almost 40% this year, denied a Wall Street Journal report that banks were demanding increased collateral as its losses mounted. Gerald Beeson, the firm's chief operating officer, said Friday that it was meeting its daily collateral requirements with Goldman Sachs, Deutsche Bank, Merrill Lynch and others without being forced to sell its assets to cover the margin calls.
ftalphaville says " When to prune your hedges (and a chart showing aum / time) "
Fintag says This is the upshot of never saying a word. Citadel are fine. Just not as well as they were 12 months ago.
In the next few months, thousands of hedge funds will go out of business. What the world will look like for the survivors.
At first, hedge funds were truly innovative. Eventually, though, so many new funds poured into the industry that they eroded the competitive advantage of the original investors. Hedge funds, it turns out, were not “hedged” in any meaningful sense of the word. Too few shorted enough stock or managed risk prudently. Recent months have made it clear that hedge funds as an industry were, as the wisecrack had it, a pay scheme masquerading as an asset class. Sure, many funds have their “high-water marks,” meaning they don't receive their performance fees until they get back to the levels they had achieved at the peak. But many won't bother staying in business.
Perhaps ironically, many hedge fund managers are anticipating great times—if they survive. “This will be the best moneymaking environment of my career,” the hedge fund veteran tells me. “Tons of competition are out, and even the capital that will survive is underlevered. And we are starting with disparities and opportunities you've never seen.”
For the survivors, it's going to be a wonderful time. But there won't be many of them.
Fintag says Thankfully we closed our funds way before anyone else did. Our new line in funds include a money markets fund, a distressed coffee company fund, a fast foods long only fund, a land grab fund and a tax avoidance fund.
The bailout fund is quickly being depleted. Who would have thought it could be so easy to spend $700 billion? Federal commitments to AIG alone amount to more than one fifth of the entire bailout fund. The government should get at least some of that money back—assuming AIG stays in business and repays its loans and the feds eventually sell some of those pungent securities. But that won't happen for years, while other ailing giants like Fannie Mae and Freddie Mac may soon need a lot of help. Then there are the Detroit automakers, along with other insurers and perhaps dozens of regional banks that are lined up, asking for a bailout. Not long ago, companies turned to AIG to provide insurance against these kinds of catastrophes. Now the American taxpayer is the insurer of last resort.
Fintag says Why arent the AIG board in prison? Remember the press statements from earlier this year? AIG Financial Products was full of BCCI like cowboys who thought they were working for O'Connor of old.
Few measures of the scale of the financial crisis have been as overlooked as the humble leverage ratio. However, as other metrics chosen by financial regulators have proved inadequate measures of banks' soundness, the leverage ratio is making a comeback.
The change is happening because some market participants have questioned European regulators' reliance on Tier 1 capital ratios as the standard means of assessing financial strength. They believe the metric masked problems at some banks, which could have been uncovered by a closer look at leverage levels. Swiss and US regulators have been among the first to increase their focus on leverage.
Fintag says Thankfully, I weighted these in my models quite heavily 2 years ago. That is why Lehman et al were on my radar for some time. Sometimes the old fashioned factors are the best. That is why they are old. They are proven and work.
Finally, who will bail out China?
25 comments
anonymous said ...
I see Subway is the new McDonalds. What next? Oxfam is the new Harrods?
11 Nov 08 - 08:12 gmt
Top Cat said ...
Benjys is the new Eat
11 Nov 08 - 08:31 gmt
anonymous said ...
The number 159 is the new Dorchester hotel
11 Nov 08 - 08:38 gmt
anonymous said ...
the city used to be great, lots of independent family run establishments.. cafe's, sandwich bars etc... perhaps the fall of the Chain Coffee house - not that I have anything against big companies, or making a fat profit - can only be a good thing.. who here would like to be remembered and valued by the person you buy your morning coffee or bagel from..
11 Nov 08 - 08:40 gmt
anonymous said ...
@Anon: Well the problem with chains is they commoditise people and turn the whole thing sterile..so you have no personalities. People can vote with their feet but it seems that the Brits don't care for interaction so much
11 Nov 08 - 08:49 gmt
anonymous said ...
Nothing nicer than walking into your normal small independent breakfast joint, getting a smile and the server knowing what you are going to order. Big Co chains lose that. An analogy can be drawn with professional services firms to be honest - small consultancies and lawyers/accountants often focus more on what you want and need because they care more - losing your business has more meaning to them
11 Nov 08 - 09:04 gmt
MrQ said ...
the only way us brits change our buying habits is if you offer a buy one get one free...
How are funds going to differentiate them selves Fin?
With all the redemptions / profit taking, when confidence returns there will be less competition - but the likely hood is that the bigger, better performing houses will remain.. 2 and 20 is dead.. 1% is boring and you won't be rewarded for your amazing performance!!
What is the hedge fund equivalent of a BOGOF
11 Nov 08 - 09:11 gmt
anonymous said ...
GLG the UK standard bearer? After what they have done? what about Brevan Howard or BlueCrest? Both $20bn operations and up 13% and 20% respectively... You can tell Fin is a long short monkey - he thinks that is the only type of hedge fund that exists!!!
11 Nov 08 - 09:55 gmt
Tradebot said ...
agreed re : chains vs small independent coffee shops in the City. Food, service and coffee is MUCH better in the small shops, especially if they are manned by the owners.
11 Nov 08 - 09:58 gmt
anonymous said ...
I don't know anyone who likes GLG except people who work there (and a few of them don't either). Agree with Anon that there are other better firms who are more representative. Poor RAB Capital though - they were flying high just a year ago, now they look dead in the water. The market cap suggests you could buy the whole firm for chump change.
11 Nov 08 - 10:21 gmt
Shane Warne said ...
Can't agree, most independent coffee shops in London make dreadful coffee. Sadly the chains (Caffe Nero and Cafe Brera) tend to make the best coffee in London......not saying that is good by Italian or Portuguese standards.
The very best in London can be found in an out of the way local Italian place.....if you are lucky. Like those Apes (as in Bee in Italian) that have the espresso machine at the back. There was one outside ABN Amro, not sure if it is there anymore? The Ape not ABNA!
11 Nov 08 - 11:02 gmt
anonymous said ...
All wrong. You cannot beat a nice cup of Vietnamese cat crap coffee (Kupi Luwak). Available at Peter Jones for a mere £50 a cup. Unless that was quietly withdrawn during the recent crisis....
11 Nov 08 - 11:19 gmt
anonymous said ...
@MrQ - BOGOF equivalent is probably lowering management fees and upping performance fee and/or adding clawbacks. Aligns the manager more with the investor. But makes the business harder to operate due to potential failure to cover running costs.
11 Nov 08 - 11:20 gmt
MrQ said ...
Indeed @anon 11.19
So continuing with my comment about bigger competition, the only people who will be able to make any real management fees, are volume houses.. hence the move to long only / ucits vehicles...
Never been to Luxembourg.
11 Nov 08 - 11:42 gmt
Moron said ...
These markets seem to me to be on a downward trajectory :))))))
11 Nov 08 - 12:04 gmt
anonymous said ...
Citadel on taost. Nice. Something smells like it is burning.
11 Nov 08 - 13:50 gmt
fitzcaraldo said ...
@MrQ 11:20: Lux UCITS III is a great wrap for investment strategies -take advantage of the regulatory framework there and stay where you are - Luxembourg is dreadful...
11 Nov 08 - 15:18 gmt
Alpha60 said ...
Fin - Any prediction on where the price of crude will be by 31 dec08 ?
11 Nov 08 - 16:11 gmt
Watcher said ...
@ Shane - the Ape is still outside ABN most days (Mr. Coffee, for the record). And you're right, it's better than the local alternatives.
11 Nov 08 - 16:24 gmt
Moron said ...
Somebody else posting as moron while im on a private plane flying across europe tho i do agree markets r on a downward trajectory the christmas rally is over and its straight down for the rest of the year
11 Nov 08 - 17:10 gmt
Tradebot said ...
not touching equities, i rather be short sterling against EUR,GBP,JPY. 5 more years of Browntopia...apparently the thing to do now is borrow gazillion quids because it is prudent...
11 Nov 08 - 18:13 gmt
Tradebot said ...
..bit like what David Brent said : when times are tough does salesman start turning up on a bicycle? No, he turns up in a newer car - perception, yeah!
11 Nov 08 - 18:15 gmt
feral pigeon said ...
Bets on how long it will take the taxpayer to pay back the borrowed gazzillions? 100 years?
12 Nov 08 - 00:00 gmt
anonymous said ...
WSJ: The rescue efforts are "evolving in ways that I don't think anyone anticipated," said Camden Fine, president and CEO of the Independent Community Bankers of America, a trade group. "Things are just hitting them from every single direction, every day, and I don't think they know whether to spit or go blind."
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