Tuesday, July 20, 2010

Man with a gun

Biggy

Man by pub © fintag

News comments:
Today I take a break for a few days. Sitting on cash, this time its EUR, means I can fish in peace. See you next week sometime.

Today's shorts:
Ireland Given Another Beating (blooomberg)
Bank Of Merrill Flogs Its Adminstration Business (wow, I didn't know it had one) (icfa)
Ocado - The World's Crappiest IPO To Launch (independent)
SkyBridge: Is This A Joke? (finalternatives)

Today's longs:
Hedgies: Extinct At Last (nymag)
Hedgies: Rent-a-friend (telegraph)
Hedgies: About As Useful As A Dart Board (yahoo)
FTAlphaville To Close Down (ftalphaville)

Gossip:



Monday, July 19, 2010

The winner takes it all

Connaught

Connaught Cocktails © fintag


Measurisk

Barely Measures Risk © fintag

So my bartender just won an award. He is the world class bartender of the year and beat 9000 people from 23 countries. The Connaught (see pic) is a favourite haunt and I am pleased Erik won. He is a winner (advfn).

Unlike those poor punters being force fed Ocado stock by Goldman who need the IPO to succeed. The founders shares are owned in tax havens, the company will never produce dividends, the business model is repeatable (fedex anyone?) and needs more funds to survive. Goldman are winners (dailymail).

MSCI. It bought riskmetrics and now its bought Bear Stearns barely measures risk (see pic). The winner is JP Morgan (marketwatch). But not the UK (telegraph).

But sometimes there are no winners. Take the Americans. Having bashed the Spanish and Greeks it turns out they are in a much worse position. Double Dip USA - Welcome to the the Great Depression 2.0 (telegraph).

Thought the internet was killing off journalism? 12 Hacks produced this simple powerpointesq chart. Financial Times. Via Google.

Prediction:
USA to give up the greenback for the Euro.



Friday, July 16, 2010

Goldman bend over

Mistresses for sale

Mistresses for sale © fintag

News comments:
Subprime. The cause of the world's ills. Or an effect of cheap lending? The upshot? Goldman are made a scape goat. Shocking. Peanuts. AIG, Bear Stearns, Bank of America, Lehman, all suffered fates worse than a few dollars but hey ho that is capitalism. RBS (that is the UK tax payer) gets USD100m.

Oil. Obama. > 10 dead. Dead pelicans. Stopped. Yahoo.

Apple. Liars. iPhone works with Duct tape. Recall. Worse than a Toyota Prius.

Dodd-Frank
So the lawyers delight has born fruit. The Dodd-Frank Act ("DFA") has come to pass, although most of it is unenforceable:

1. What is a derivative?
2. What is prop trading?
3. What is a hedge fund?
4. The SEC were useless during the crash. Why are they being give more powers?
5. The CRAs have been beaten up. So now we get state controlled rating agencies?
6. Will Goldman turn itself private? For sure.
7. Will JP Morgan get a another good quarter? Not if it has to sell off its prized derivatives business.
8. Market liquidity. The next few years it will dry up?
9. The DFA conflicts with EU law. So if Goldman sets its holding co in the UK and continues to prop trade, what will the DFA say to that?
10. There are OTCs and OTCs. Bi-lateral OTCs need never be put on an exchange. Surely?
11. How can DFA control banks too big to fail? Seems vague.
12. Hedgies managing >USD150m need SEC registration. Big deal. Come over the the UK and all managers have to be regulated by the FSA.
13. What is a venture fund? Is my hedge fund a venture fund because its illiquid?
14. The cost of this legislation being implemented will be horrendous. Interpretation, loop holes and ignorance will turn the banks into retail only shops. Nice for the consumer? Not really as the DFA costs will be passed to them.
15. Fannie and Freddie. Where so they feature? They were a main cause of the crash?
16. And much more ....

Of course the DFA will be repealed and in 10 years time we will be back to square one. Asia and Europe could win big time. Imagine that. Prop trading (like gambling) banned in the USA.

Today's shorts:
BP Saves Itself (bbc)
Fund Of Funds Are Dead. RIP (ft)

Today's longs:
Goldman Pay Some Pennies To Make The SEC Go Away (bloomberg)

Gossip:
Goldman to raise its fee when placing Obama's T-Bills.



Thursday, July 15, 2010

Fossil Fuels are good for the environment

Sk8ter Boy

Skateboarding Hedgie © fintag

News comments:
Green. It is everywhere. The EU wants to give all individuals a carbon footprint allowance and penalize people for consuming more. That is an exaggeration but that is the way it is going.

Oil is a brilliant energy. It is cheap to extract and is used to make cars go over 200mph. It has transformed our worlds so we can buy crappy iPhone 4s and make love using latex condoms. Oil has been used on great paintings and helps create electricity.

You see all these windfarms and bio fuels and hydrogen cells are expensive and more polluting than oil.

I know nothing about the green agenda but it seems to me it is becoming like IT. Lots of acronyms and complexities and lead by people who like skateboarding. Which means the green thing is the next black thing. Green 2.0. Bubble. Bust.

Today's shorts:
Spain Admit Defeat (wallstreetjournal)
Ocado: A Great Short Play (or How To Beat Goldman Sachs) (cityam)

Today's longs:
Hedgies To Cycle To Work (ft)

Gossip:
Goldman Sachs ready to lend out its Ocado stock for peanuts.



Tuesday, July 13, 2010

Bust. Another one bites the dust

Bling

Bling © fintag

News comments:
Bling. Another one of my mates has gone tits up. The banks caught up and sent the heavies in; and there are lots of other over leveraged people who are being forced to throw in the towel too.

There is only so much time an empty hedge fund can go on, or a burned out fund of funds can pretend to still be in the game. Even those huge and closed funds are suffering at the hands of pension funds and endowments who are needing transparency, low volatility and a AAA rating to keep them in jobs. It used to be so much fun and now its pain.

That's the problem with having stuff. You never have enough and there is always someone ready to rub your nose in it. So you get more, you get more stressed but it's not enough so you buy more. Every yard on a yacht is another middle finger to those wannabees until you find some junior who worked for you has parked next door with an extra deck and nuclear missiles.

Bankruptcy is humiliating. But then is driving a flash car, living 5 star and owning real estate when your bank account is empty and having to pretend all is well.

Thankfully I learned my lesson a couple of years ago and enjoy life as it should be enjoyed. Women. Restaurants. Opera. Gym. Extreme ironing on K2. And writing this newsletter.

Today's shorts:
Alan Howard Man Of The Century (finalternatives)

Today's longs:
Oil, Dollars and no fund (bloomberg)
Bandit Banker Blags Bong (hitc)
FSA To Kill Off Housing Market (cityam)
Mading Up The Numbers the ONS Way (cityam)

Gossip:
Hedge Funds to take a couple of gaps years (market watch).



Monday, July 12, 2010

Funds of No Fun

Fundy

Fundy © fintag

News comments:

As the FT wrote yesterday, the Fund of Hedge Funds industry is in a dire place thanks to woefully useless Due Diligence regarding Madoff, a disregard for transparency and the fees on fees business model being no longer valid in a world of low interest rates and negative real performance.

Hedge fund managers courted the FOFs for they were easy money. Alas, they are no more easy lays and we seek investor monies the hard way.

Today's shorts:
Hedge What? (ft)

Today's longs:
Liquid Real Estate: My Arse (hedgeweek)

Prediction:
Hedge funds to go the way of facebook.



Octopodes, Selling and having virtual sex

Tube sex

Tube sex © fintag

News comments:
I spend a lot of time trying to convince people their money is safe, the returns will be stellar in the future, the previous losses were out of my control and the volatility will continue to be lower than a Madoff fund or a faulty cVar calculation.

On the qualitative side I also have to convince my investors that our quants are Monkeys and Octopodes with amazing skills in stock picking.

Actually this is lie, for these days I hire third party marketers, in-house sales people and others who eat what they kill to sell my fintag funds. I am officially bored of flying and hotels and entertaining in foreign lands and have delegated it to others to catch STDs, age prematurely and die of liver cancer.

The dilemma I face in paying these people out of my management fees, is ensuring there is enough left to keep the other hungry mouths fed. Of course performance fees are so pre Lehman, I reckon I would earn more and be happier busking on the tube.

I applied to TFL for a busking bay. They didn't bother to reply. So I applied again with a 100 quid bung disguised as sponsorship but heard nothing. Boris Johnson is no Mike Bloomberg and the next time I see him, I shall run him over on his bicycle and cut off his hair. I mean why should I be deprived of entertaining the masses? I am a mean fiddler and have the voice of Fergie but it seems regulation and censorship are keeping me away from Green Park.

Kicks in style:
When I play "making virtual love on the tube", you know the game where your eyes meet with a complete stranger, the sweat drips down the face, you gasp for air as your body presses closer to that unbelievably gorgeous woman / man (the type you never seen in night clubs), as the onlookers jostle for position ("can you please move down, can you please move down") and that comfort space is eroded and bodies start to grind ....I like to leave a little card after the climax (this is when one of us gets off the train) with some witty comment, an email account and a skype number. These old fashioned ways of communicating are the new black given my iPhone is monitored daily by the CIA and every trade I make is sent to the FSA and SEC via every Investment Bank in the City.

Bye bye Facebook, hello edible paper.

Today's shorts:
Real Estate Bubble 2.0 (globalpensions)
Russian Spy Was A Hedgie (telegraph)
Pope Emulates The Average Hedge Fund (bbc)
Japanese Brutally Maul Innocent Man (reuters)
Paulson Hires Octopus To Be CIO (dealbreaker)

Today's longs:
Insider Trading Better Than Two Stops On The Central Line With Fintag (nymag)
Chocolate Better Than Two Stops On The Central Line With Fintag (independent)
Reading A Book Better Than Two Stops On The Central Line With Fintag (guardian)

Gossip:
Squid to be banned from trading in Europe.



Friday, July 9, 2010

Prostitution is a snob good

Jimmy Choo Handbag

Jimmy Choo Handbag © fintag

News comments:
Price reflects demand and supply. Demand goes up, price goes up. Supply goes down, price goes down. Inverse relationships and all that.

There are odd examples where this is not so. Take prostitution. Now, in London something is going on because before the Berlin Wall came down there were few prostitutes; and prices around Kings Cross were dirt cheap. Shepherds Market whores could be bought for Luncheon Vouchers.

This all changed when the cold war propaganda ended and head scarf mustache loving stumpy women turned into stunningly beautiful swans and swarmed the west looking for the easy euro.

Gone are the days when lusty men had to hunt down the prostitutes. Today they can be found are all over the bars,nightclubs and streets of Mayfair. Once you had to climb up some dark stairs for one's once a week whipping fun whereas now they sit in Starbucks waiting for punters. Prostitutes are everywhere. You may not notice them, for they often look like your average dancer on a Lady Gaga video, but they are everywhere.

In the USA, singles bars are just that. Here these single women carry credit card swipe machines.

And this is where the economics is strange because prices have quadrupled in the last 10 years. More supply, yes, but I doubt the demand has gone up at all. Sometimes the fundamentals don't make sense but we pay higher prices anyway. GBP500 for a look, GBP2000 for a grope, [Editor: Enough]

I don't get it.

Today's shorts:
Germany Get Cross Following World Cup Exit: Spain To Suffer (telegraph)
Butterfield CEO Gets A Job (icfa)
USA To Face Total Anarchy By Teatime (hitc/newyorktimes)
Hedgies Are All Useless (businessweek)

Quote of the decade:
Robert Prechter :'I'm saying: 'Winter is coming. Buy a coat. Other people are advising people to stay naked. If I'm wrong, you're not hurt. If they're wrong, you're dead'.

Today's longs:
Lawyers Rub Their Hands: Morningstar's Red Revolution (allaboutalpha)
Amazon To Take On Ocado (independent)
Lords And A Charles Set Up New Bank (ft)
Paulson Isn't As Good As He Once Was (ftalphaville)

Gossip:
BP to be nationalised by Obama.



Thursday, July 8, 2010

France: Just as bad as Germany

Sarkozy

Sarkozy © fintag

News comments:
As the Germans do a land grab (bbc) and fudge the legislation to ensure the EU super regulator is not in London or Paris but Franfurt, the gods look down and engulf Sarkozy in a nasty perfume bung scandal that could bring him down (guardian).

My prediction that German would win the World Cup were thwarted by Spain. Typical. It has been that type of year.

Today's shorts:
Solvency 11 to create lots of jobs (globalpensions)
Google To Be Banned In Europe (ft)

Today's longs:
Don't Mess With The Russians (telegraph)
Bonuses Outlawed (finfacts)

Gossip:
Europe to ban Europeans by 2014.



Wednesday, July 7, 2010

Double dipped fried chicken

Ocado's New Clothes © fintag

News comments:
I always thought a double dip was dipping twice into fees. Apparently not.

My favourite past time is trawling through PPMs and retail products, especially those from Investec.

Every couple of weeks, dozens of new retail based structured products hit my door mat and I get my quants to reverse engineer them to work out how the issuer is hedging the product. The other task I ask them to perform is to work out the fees.

Why anyone buys retail structured products is beyond me. Fees on net, fees on gross, minimum fees, admin fees, setup fees, subscription fees, exit penalties, fees on fees ...I am in the wrong game.

As I type this, my blood temperature is rising. Not because the fees are tickling my fancy but the central line tube I am on is stuck in a tunnel. I am betting the lady to my right will be fainting in next 5 minutes and my hand made Italian suit will resemble a hedgie in a wet t-shirt competition.

Austerity and cost cutting is the new black (guardian) so I thought I would join in too. After this episode it is back above ground. At least on a bus you can sit, even if the seat is made of concrete and has had the fabric sprayed on. Only once a week mind. My driver needs a job and unemployment doesn't sound fun at all.

So onto Ocado. This private equity play with some ex Goldman Sachers funded by Goldman Sachs have a van for hire business. Valued at GBP1.8 Billion it is touted to float some minority stock for GBP200 million. That is GBP200 million too much. It is a van for hire business. Think haulage. Think Avis. Think Zip car. Think dotcom. Think madness.

Today's shorts:
Hedge Funds: As Liquid As Mud (allabouteve)
Ocado: Worth More Than Apple (cityam)
K1 Suicide (newyorktimes)

Today's longs:
Fairfield Flumoxes FTSE (telegraph)
Pirates Pocket Pounds (financialtimes)

Prediction:
Ocado Stags in for a rough ride.



Tuesday, July 6, 2010

Foreigners to the rescue

Coffee

Best Coffee In The World © fintag

News comments:
Tony Blair. Remember him? He works for the Libya government and it is no surprise BP is going to be bailed out (financialtimes) by these terrorists-turned-thoroughgoods. Just like most things British, we have to rely on foreigners to sort out our problems. Take a lunchtime snack. I have to send my driver from Mayfair to Ottolenghi. It is miles away but alas the cheap pret-eat lunches around here are truly awful and nobody wants a flatulent Hedgie chundering over the pavements in Mayfair.

I noted that 200+ people died in the Congo (bbc) after an oil tanker blew up. I wonder if a $20 billion fund is going to be set up? Of course not because Africans are not real people.

Today's shorts:
Hedgie Found Shot To Pieces (hitc)
Double Dutch Dunk Doubters (hedgeweek)

Today's longs:
Hedgies to Try Harder In 2010 (reuters)
Liquidity Is For Wimps (moneymarketing)

Gossip:
Fenwicks (NBS) To Sell Paul Smith Jackets That Fit Normal People.



Monday, July 5, 2010

40% Volatility

Redundant men

Redundant men © fintag

News comments:
Men featured heavily in my weekend. The gay pride march (guardian) was fun as usual (don't worry ladies) as well as my prediction cast at the start of the world cup that Germany will win the world cup (fintag) was given a good bolster after thrashing Argentina, and Nadal showed us men what wimps most of us are. (guardian). Lots of American men were showing off their carving skills on July 4th [Editor: Uh? I think you mean Thanksgiving], a day that means nothing to us Brits.

Boy George, on the other hand, has decided to carve the Turkey in a different way and is to cut back up to 40% of the UK's public sector (ft) which will mean a lot of men, mostly Scottish, being without a job. With a 40% reduction in the police force, it is likely crime will go up 40% too.

A 40% cut in regulation (hedgefundsreview) is what this man is demanding but will no doubt get 40% more.

40% of unemployed graduates (bbc) will be men and 40% of all news stories are inaccurate.

Gossip:
Steven Gerrard is infertile (guardian).



Friday, July 2, 2010

Newcits fund to blow up

Gas Tank

Gas Tank © fintag

News comments:
Just like gas guzzling vehicles being replaced by solar powered alternatives, Hedge Funds will morph into something very different too. In Europe, Newcits are the de facto fund structure that is taking over the once cheap as chips Cayman co.

UCITS3 funds are being abused big time. They are supposed to be liquid, lowly concentrated, unlevered and not to contain nasty derivatives. They were designed to protect pension funds from investing in toxic waste. Well the reality is many of these UCITS funds are toxic. You may laugh but this is true. Hedgies have pulled the wool over the ...whats the phrase ...you know what I mean.

I wonder when we shall see the first Newcits fund to blow up because some hedge fund was swapping some returns on an underlying that was as illiquid as timber that suddenly burned down without being insured? It will happen and the EU will look stupid, Investors will get burned and Hedgies will get a bad name.

This afternoon I am seeing a foreigner play another foreigner at tennis. If the first foreigner wins, I will have to pretend I am Scottish at the weekend.

Today's shorts:
CT VS NYC (nymag)
Sempra Sold for a Song (cityam)
Hedgies pretend to be frightened (independent)

Today's longs:
Slow Boats (nyt)
Norway is the new Malta, Ireland, Gibraltar (businessweek)

Gossip:
Newcits to be renamed takingthepiss funds.