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
There are a lot of unconfident people around. Existing frameworks, values and modus operandi are under attack. Take counterparty risk. Analysts were hired to rip apart financial statements, ratios calculated and compared to other company statistics. Credit Rating Agencies did the same and rubber stamped with letters that gave one comfort as to the financial standing of the entity.
Strong ratings equalled strong financial footing. Weak ratings deemed them junk. But with demise of CRA's who appeared to be nothing but ratings-for-hire, analysts, bankers, creditors and traders have turned to Credit Derivative Swaps. [Editor: Default not Derivative, you idiot.]
The CDS market is worth tens of trillions, possibly more. Counterparties underwrite the default of non connected parties. Anyone can write a CDS. Insurance companies like AIG loved them. Hank Paulson makes bail out decisions on CDS spreads and yet the market is completely unregulated. Clearing houses have been set up but these bits of paper are potentially what will bring the financial services sector down even further. But this is not what you want to hear; CDS indices are the new CRA's. It makes us feel confident that we can all monitor counterparty risk. The market is made up, but it is better than the equivalent CRA model.
I follow the CDS market closely. I know its bad but I know everyone else loves it. Trading isn't about rationality, it is about catching irrational people out. The problem is there are too many irrational people around.
So in these times of irrationality, one needs perspective. To get this, one needs to laugh. And here is another plug for the present you don't want to receive but are willing to inflict on others. My order of books has arrived and they will shortly be scattered around various books stores for you to find. They are signed and numbered and may well be available in the three hedge fund centers of the world - London, Greenwich and Switzerland. I would do Japan but it is a long way to fly to play this silly game.
The White House and Democratic Congressional leaders said Monday that they were close to agreeing on the terms of a $15 billion government rescue of the American automobile industry that would be directed by one or more appointees of President Bush and would impose expansive federal oversight of the auto companies.
The president's designee would disburse the short-term emergency loans to General Motors and Chrysler, which are at risk of financial collapse, and would directly supervise the reorganization plans that the auto manufacturers have agreed to carry out in exchange for government aid. The government also could receive warrants that would give it equity stakes in the companies.
Fintag says Remember the people of America that this bail out is just a tax rebate and around half of what they paid in tax last year. Of course this is a bad move. The UK did this in the 1970's to appease the unions and the cars produced got worse. Today the UK has no main stream car industry although we lead in the world in fast cars thanks to the private sector.
GM Ford will soon be making the new Trabant 2.0. Of course such a bail out puts other non bailed out car manufacturer at a short term disadvantage. What is it about cars? They pollute and are don't last long enough. I see sales of 1960's and 1970's cars are rising because they are cheap to run and easy to fix. Ever tried to change the oil in Series 7 BMW? Don't bother. Take it to your local garage and get charged GBP100 for the pleasure.
A couple of weeks back, we had 'Sachs In The Citi' (talk of a possible Goldman / Citigroup merger), now there's speculation about a Goldman / Morgan Stanley deal. CNBC reported last week that either Lloyd Blankfein (Goldman CEO) and John Mack (Morgan Stanley CEO) have become close muckers all of a sudden, or they are cooking up a deal of some kind (on the basis that there's just not enough room for two former pure investment banks anymore). The news agency has learned that the two executives have been having dinner 'regularly' since Lehman Brothers went belly-up in September, prompting speculation that they talking merger. Here is The City thinks it's more likely, however, that they have simply been talking about the 'good old days', when they both managed profitable businesses with large market caps, and got paid huge bonuses just for showing up for work.
Fintag says As you know I am good at predicting things. I even predicted this merger 2 years ago. But I was only joking. Does this mean all my crap cartoons that refer to Goldmorgan Stanley will be breaking future copyrights?
Bad year is balanced by good prospects but investors will need to be patient
With the credit crisis ravaging the investment banking industry there have been grim predictions for the future of the hedge fund business.
Returns were down by 23% in the 10 months to October, according to statistics published by US hedge fund database Hedge Fund Research. Also, for the first time in more than a decade, the industry has seen its assets shrink, with $72.5bn (€57.4bn) of outflows since June.
Fintag says ..and the weak will fail. Sorry, but what is the point of this article?
Capitalism is changing in fundamental ways. What's happening will affect the relationship between business and government, between taxpayers and the private sector, between employers and employees, between investors and companies for many years to come. Arguably the crisis will turn out to be more significant for us and other developed economies than the collapse of communism.
A New Capitalism is likely to emerge from the rubble, one which may well seem fairer and less alienating than the model of the past 30 years. The system's salvation may require it to be kinder, gentler, less divisive, less of a casino in which the winner takes all ...
Fintag says A new new black? I wish people would read history books. The human population survives. It does this by acting in a cooperative fashion and through competition. Communism has never worked and never will. Still, for many of us we will experience it for a short period of time before trashing our Trabants for Democratic Chinese Cars and then turning against our spend spend spend (our money) leaders.
MCCREEVY SAYS CURRENT LEVELS OF IRISH PUBLIC SPENDING "WILL HAVE TO BE PRUNED AND PRUNED HARD"
European Commissioner for Internal Market and Services Charlie McCreevy was in Dublin on Monday and at an Association of European Journalists lunch, he warned that current levels of Irish public spending "will have to be pruned and pruned hard."
As Minister Finance, McCreevy, the author of the back-of-an-envelope decentralisation plan, whose dictum was: "when you have it, you spend it and the mistake is trying to spend it when you haven't got it," said on Monday in relation to Irish public spending: "People shouldn't kid themselves into thinking that past spending levels are sustainable. Diminishing tax inflows cannot be replaced with ever rising levels of public sector borrowing in order to sustain spending levels that are simply not sustainable indefinitely : Investor appetite for government debt is not limitless and the more we borrow the more the premium for new debt we will have to pay. We need to guard against this - otherwise we will be propelled into a downward spiral where rising borrowing costs have to be met by even deeper spending cuts: The reality is that over coming years the current levels of public spending will have to be pruned and pruned hard."
Fintag says I watch Ireland closely because it is a country that has been hit hard. It is also moving faster than anyone else. Given it is constrained by the ECB re interest rates, all it can do is cost cut. No printing of cash allowed in Europe
NEARLY 30% OF FUND ADMINISTRATORS IN EUROPE WILL EXPERIENCE A REDUCTION IN REVENUE IN 2008
Nearly 30% of fund administrators in Europe will experience a reduction in revenue in 2008, according to the Deloitte Fund Administration in Europe Survey 2008*. The outlook for 2009 is slightly better, with 24% of respondents predicting a further reduction in revenue next year. The funds administration industry (presentation) in Ireland alone employs over 9,000 people and has traditionally been a major recruiter of both graduates and experienced hires.
Fintag says Well this makes sense. If Hedge Funds are to lose 30% of their assets then Administrators will lose 30% of their income since it is usually basis points driven. This model is dead and it will soon be fixed costs and transaction complexity based.
Hedge funds were - at least in theory - supposed to be absolute return vehicles which would produce gains even in difficult and volatile markets. The whole marketing language of the sector has always been to compare annual returns from hedge funds using the language of 'cash plus 2 to 3 per cent per year'.
For some of the time, that language has been justified - from 1999 to the beginning of October 2008 the FTSE All-Share delivered a total return of minus 16.5 per cent, while the HFRI index of Fund of hedge Funds Composite delivered a total return of 57.9 per cent.
Fintag says We are different. It is just there are a lot of people pretending to be hedge fund managers who should have stayed in Investment Banking. Luckily, Darwinism kicks in and the best survive and the weak fail.
No bail outs here.
HEDGE FUNDS PUT GATE GOURMET IN THE DEPARTURE LOUNGE
The company, which supplies inflight meals to customers such as British Airways, has appointed Credit Suisse to handle the sale on behalf of its one hundred or so shareholders with the first deadline for offers three weeks ago.
GG was once owned by Texas Pacific Group which bought it from Swissair for £618m in 2002. At the time the US buy-out giant was accused by unions of being an example of private equity's slash-and- burn strategy, after it sacked about a third of its workforce - some 700 people. The industrial action led to a walk-out by staff, grounding 700 flights and causing travel chaos for passengers in the summer of 2005.
Fintag says At last. Its food is truly shocking. I only ever drink tea when I fly and I bring my own tea leaves.
TRIBUNE'S $13BN DEBT SENDS IT SPIRALLING INTO BANKRUPTCY
Tribune Company, the owner of the Chicago Tribune and the Los Angeles Times, two of the most powerful newspapers in the US, has filed for bankruptcy protection, after buckling under the weight of huge debts.
Its collapse is a miserable sign of the pressures on the newspaper industry, in the midst of an advertising recession, and a humiliation for Sam Zell, the billionaire property magnate who bought the company last year.
Fintag says I expect we will see a few more newspapers going down. Have you noticed how many more web based newspapers are going down the subscription model again e.g. Financial News?
John Thain's original bonus request was four times as large as the $10 million request reported by the Wall Street Journal's Susanne Craig, a reliable source tells us. Later, when it became clear that the board would never accept the astronomically high $40 million request, he revised it down.
Fintag says Yes, he has revised it down to nil. Traders, don't you just love them.
Many traders I speak to argue that what makes this recession particularly nasty is that it didn't happen earlier. The longer the credit bubble went on, the bigger the pain would be when it burst. Cheap credit was just an illusion...
The focus at the moment is on insurance sales to generate commission. There is no humour in the place and hardly any talking amongst colleagues. At this time of year usually parties are being discussed or organised but not this year...
Fintag says I wouldn't read this rubbish. Read this rubbish instead.
Just six months after a major expansion in the region, Citadel Investment Group is roughly halving its headcount in Asia and closing its office in Tokyo.
The Chicago-based hedge fund giant, which has been buffeted by poor performance and investor redemptions, is just the latest Western hedge fund to scale back its Asian operations. The firm will cut a total of 37 positions in Asia: In addition to the dozen jobs to be lost at the Tokyo office, Citadel will also cut almost half of its Hong Kong-based staffed, leaving between 25 and 30 employees in that office.
Fintag says Oops.
HEDGE FUNDS AIM TO MAKE A VIRTUE OF EASING REDEMPTIONS
As hundreds of hedge funds put up defences to stop investors pulling out their money, some are betting that they will be better off in the long term if they let clients leave.
Well-known hedge funds including New York's Cantillon Capital and London's Marshall Wace and Winton Capital are making a virtue out of losing customers and their fat fees in the hope that allowing withdrawals will make them more attractive in future.
Fintag says And why not give the customer what they want? Perhaps this time they will read the small print instead of greedily subscribing.
In one of the most baffling fraud cases in years, a prominent New York securities lawyer has been accused of engaging in an elaborate scam against hedge funds.
The lawyer, Marc Dreier, the founder and sole owner of the 250-lawyer Park Avenue firm Dreier, was arrested in Toronto last week on charges that he impersonated a lawyer for the Ontario Teachers' Pension Plan. Dreier was released on bail on Friday and was arrested upon returning to New York on Sunday.
The lawyer is accused of selling $113 million in fake promissory notes to hedge funds and other private investment funds. According to the S.E.C. complaint, Dreier "created an elaborate charade designed to convince purchasers that the notes were genuine." The charade included phony financial statements, fake audit opinion letters and even dummy email addresses and telephone numbers.
Fintag says Amazing. Who said lawyers were dullards?
HEDGE FUND ADVISER TOZAI TO CLOSE AFTER REDEMPTIONS
Tozai Investment Advisory Ltd., a Tokyo-based hedge fund adviser, is closing its business after market losses and investor redemptions cut its funds' assets to zero from a peak of $70 million, a senior partner said.
The Cayman Island-based Trident Pacific Japan Absolute Return Fund, which Tozai advises, was closed last month, Angus McKinnon, senior partner at Tozai said in an interview in Tokyo yesterday. The fund, launched in December 2004, invested in Japanese equities using a so-called long-short strategy that bets on rising and falling stock prices, McKinnon said.
Fintag says What is it with Japan? People try so hard to relive the glory days of the 1980's and fail every time.
finance asia says " Asia set to recover quicker than other regions "
bloomberg says " Japan's Economy Shrinks 1.8%, More Than Expected "
TREASURY SELLS THREE-MONTH BILLS AT THE LOWEST RATE SINCE 1929
The Treasury sold $27 billion in three-month bills at the lowest rate since it starting auctioning the securities in 1929 amid record demand for the safety of U.S. debt during the worst financial crisis since the Great Depression.
The bills were sold at a high discount rate of 0.005 percent, the Treasury said today in Washington. At last week's auction, the bills drew a rate of 0.05 percent. The government received bids for the bills totaling more than triple the amount sold.
Fintag says Deflation worries? Demand for safe but dull stuff? It is madness but when rates are this low and CDS spreads so high, what do you expect?
JP Morgan has swept the board in the Financial News investment banking awards, winning the top award for European investment bank of the year while its co- chief executive Bill Winters won the individual award for banker of the year.
The U.S. bank was also voted the top investment bank in the debt and equity capital market categories, and came second to Goldman Sachs for mergers and acquisitions.
Fintag says I thought Goldman was excluded because it was just a lowly Commercial Bank?
It might be fun to share in a little Goldman-bashing with Chanos, until you realize that you and he are in very different circumstances. Your 401(k) has been plunging at the rate his fund is rising. Chanos is arguably the most successful hedge-fund manager on Wall Street right now. As hedge-fund all-stars bleed red—SAC Capital's Steve Cohen is said to be off 18 percent this year, Citadel's Ken Griffin as much as 44 percent, and even David Einhorn, who presciently called Lehman's implosion, has seen his fund, Greenlight Capital, slide a reported 26 percent—Chanos's short positions have earned him a return of a reported 50 percent. He now manages some $7 billion. Trader Monthly estimated his paycheck in 2007 at over $300 million, and he's on track to earn a similar payout this December. While many Wall Street refugees are liquidating their art collections and listing their trophy houses on the market, Chanos is buying. This summer, he closed on a new $20 million triplex on 75th Street, off Fifth Avenue.
Fintag says I like the NY Mag.. Why doesn't the UK have something similar?
32 comments
FTW said ...
In Geneva? where ? where? I got nothing else to do these days than read newsletters and go book hunting...
09 Dec 08 - 08:39 gmt
Shane Warne said ...
Fin, it is Credit DEFAULT Swaps.............
09 Dec 08 - 09:00 gmt
Onice said ...
Hope you hide one in Greenwich. Was on the US Figure Skating Team and my partner lived there.
09 Dec 08 - 09:32 gmt
anonymous said ...
A liquidity trap arises when nominal interest rates are low enough to remove the opportunity cost of holding cash instead of bonds. (Krugman reviewing Keynes) Dec 8 Bloomberg: The Treasury sold $27 billion in three-month bills at 0.005%, the lowest rate since it starting auctioning the securities in 1929
09 Dec 08 - 10:26 gmt
anonymous said ...
do any of you agree that banks like times of economic hardship?
09 Dec 08 - 10:29 gmt
Davros said ...
Ireland's really not going to have a good year. No hedge funds, no sausages, PE trying to hoover up their banks, exports to UK crippled by EUR (and their own shops too, witness shoppers heading up to NI to enjoy Discount Darling's Chrimbo VAT megasale).
09 Dec 08 - 11:26 gmt
Sweet & Sour said ...
"Credit Derivative Swaps" DOH!
09 Dec 08 - 11:52 gmt
anonymous said ...
I for one like the semantic idosyncrasies of this blog.. derivatives or defaults.. who cares... we get the intention
09 Dec 08 - 12:39 gmt
anonymous said ...
too much greedy crooks in this business - hope they exit now that the financial rewards in this industry are diminishing...
09 Dec 08 - 12:48 gmt
anonymous said ...
whos ready for a massive fade? 5 4 3 2 1... down down into 2009?
09 Dec 08 - 13:45 gmt
Prophet said ...
very disappointing that I had to go to some pony US site to order your magnum opus. you could have brought them round in person from Curzon Street
09 Dec 08 - 13:45 gmt
Tradebot said ...
Uh huh. UK v Ireland economic basket case race. Who would win? Difficult call. Maybe Ireland in short term, but the UK is totally Donald Ducked for a generation if lucky. Keep selling the GBPeso!
09 Dec 08 - 13:49 gmt
Tradebot said ...
re : future of the money biz, well, future is not orange but Brown. Gordon Brown. Which is not good. In the fact bad, very bad. IBs will become commercial banks and shrink balance sheets in best case. Worst case they will become zombies controlled by Governments for political purposes. Hedgies + boutique IBs (partnerships) will be the future. But not before the survival of the fittest cull will take place.
09 Dec 08 - 13:54 gmt
Moron said ...
anon 13:45...i culdnt agree more.....lets make some of that nice green stuff they call money:)))
09 Dec 08 - 14:00 gmt
anonymous said ...
ascent of money last night - I hope brown or darling watched. they could have taken a few pointers from Niall Ferguson
09 Dec 08 - 14:07 gmt
Jaa said ...
i want to fade this mkt but not yet.. dax above 5100 and spx circa 980...stupid bottom pickers..
09 Dec 08 - 14:15 gmt
anonymous said ...
I don't understand how any one could possibly call the bottom of the market now. just don't understand the rational. The economic data just gets worse and worse. Who in there right mind would do such a thing?
09 Dec 08 - 14:32 gmt
MsR said ...
@14.07. You think so. I found the programme lame really. Too many locations for no reason and not enough substance. - far too much an outsider looking in. But maybe I just don't get why Niall isn't spelled Neil.
09 Dec 08 - 14:34 gmt
anonymous said ...
@MsR, yes to be honest i agree it wasn't great but you have to remember that he is trying ever so hard to appeal to joe the plumber, somewhat impossible as joe isn't interested and its not in enough depth for anyone who is actually interested in this subject. But I was referring to his points about Jap sate risk/ownership which I think GB & AD should really give some thought to. Answer to the other question – he is really Irish.
09 Dec 08 - 14:44 gmt
MsR said ...
@ anon 14.44. Oh that was interesting but I was annoyed with his 2 minutes on derivative and his breathless hedgie visit. ("Wow look") A few years ago I read Devil Take the Hindmost by Ed Chancellor and explains the various paradigms etc that NYALL skimmed over. Maybe I find him smug. Maybe I'm annoyed he supported Iraq. Who knows?
09 Dec 08 - 14:52 gmt
Bart Simpson said ...
- Ring Ring - Moron's Tavern here. - ... - Uh, call for Butz. Seymore Butz ! Hey everybody, I wanna Seymore Butz !!! - Wait a minute ...
09 Dec 08 - 15:14 gmt
Sweet & Sour said ...
"Communism has never worked and never will" thoughts of Chairman Fin (aka Tory boy).......Chinese balance of payments and reserves anyone?
09 Dec 08 - 16:31 gmt
anonymous said ...
@MsR just so you know i certainly wasn't backing him up and yes he is very very annoying. Still i'm absolutely fascinated by economic history so i enjoy, i'm very very easy to please.
09 Dec 08 - 16:41 gmt
anonymous said ...
This Bart Simpson character is hilarious
09 Dec 08 - 17:08 gmt
Moron said ...
yes....must admit...he is fuuny..probably another version of bitter anon though:)))
09 Dec 08 - 17:17 gmt
MsR said ...
@16.41: Goodness I would never presume to judge you or anyone on a few sentences (unlike some). I like eco/pol history too. Still there was worse last night: Why on earth was Nancy dell'Olio invited on Newsnight to comment on economics and morality...very odd. She doesn't seem to be speaking English or Italian.
09 Dec 08 - 17:22 gmt
Super Mario said ...
agree with Moron, this mkt is going down. Needs to cross a few important technicals though
09 Dec 08 - 17:29 gmt
David said ...
Fin, great idea on the book. Had no idea about the Blurb site before now. Is there time to include your latest auto bailout cartoon in a second pressing? I like that one.
09 Dec 08 - 18:00 gmt
Free Willy said ...
Dec. 9 (Bloomberg) -- Treasuries rose, pushing yields on the three-month bill to minus 0.01 percent, as U.S. stocks declined amid concern that the recession will deepen.
09 Dec 08 - 18:52 gmt
anon 13:45 said ...
moron i think we called this fade pretty accurately, don't you think!?
09 Dec 08 - 19:18 gmt
Moron said ...
yes...we did...must say though....i did enjoy the bart simpson comment...what an idi*t:)))
09 Dec 08 - 19:27 gmt
13:45 said ...
especially if you imagine it to be someone like, oh i don't know ron beller from Peloton!!!!
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