30JUN08:
Oil to be USD200 by 30OCT08
USA Inflation to be 7.5% by 30OCT08 23APR08:
Next Rights Issue:
HBOS...yes
All & Lec ... 17APR08: Oil to be USD127 by 30SEP08
...16MAY08 losing my touch 27FEB08:
2 Banks go bust by 30JUN08
BS down, whose next? ... 20NOV07: Northern Crock to be sold for 15p
Nationalized 01NOV07: Oil to be USD103 EOM
...peaked too soon The Big Crash: 17OCT07
...well it's here 08OCT07:
SEC to fine Goldman for pricing issues
...still waiting 15JUN07: ML to buy-out BS
JPM got there first
Today I am in a part of the world that has been through what the rest of the Western world is now experiencing. Stagflation. Not that it is really helping their economy but Japanese banks are in relatively good shape and so is the hedge fund industry. There are hundreds more hedge funds than in the 1980's (were there any then?) and performance is about as poor as everyone else's.
The global hedge fund dream is over. Truly. Performance is all beta driven and the excuses communicated to investors are worthy of literary prizes. Struggling to buy some massage oils (see picture), I struggled to understand what the person in the shop was saying to me. Now I know what it feels like to be a perplexed investor. This is last month's newsletter regarding one of my fund's:
"The stressed value at market risk, the familiar and consistently run but rarely used number, contained jump and tail effects using fat-tail gaussian volatilities, stressed, de-stressed and chilled out correlations that modelled turbulent market collective irrational and ration behavior at a high confidence level of around 97.5% although 95% often produces better results. Combining the value at risk with liquidity penalties, operational and keyman dependency risks with idiosyncratic and holistic risks, coupled with time scales incorporating automatic dynamic trading effects the parameter estimation and component factor inputs that were bought at expensive cost and run though the Bloomberg var engine to benchmark our own non-Goldman Sachs approved risk management numbers we can conclude that our quant models were not up to the job. However, we are pleased to report that your investment out performed the Zimbabawe de-flation Index and the UK Sports Personality of the Year odds. Last month's negative net rate of return of 13.24% contributed to a 10 year net average return of libor less 225 basis points. Investing now is the right time, especially while stocks are low and before we lock you in for the next 2 years. Market sentiment indicators indicate that the indicators are below rationale indication and do not indicate anything except that the indicators are not indicating."
What I actually mean: "You lost 13% last month."
Today, as I do everyday, I am translating some top news stories and telling you what they really mean.
Philip Falcone is used to demanding change from underperforming company executives, but yesterday he took Harbinger Capital, his activist hedge fund, into new territory.
Complete with financial advisers and a big stake, Harbinger broke cover as a traditional prospective buyer of strategic assets, with a tentative approach to Inmarsat, the London-listed satellite operator.
Harbinger has a 29.9 per cent holding in Inmarsat, as well as stakes in several other satellite companies, including America's SkyTerra and Terrestar.
A raft of recent mandate wins has brought the total number of hedge and 130/30 fund managers using Citi's OpenPrime front-to-back office operating platform for alternative managers up to 20, the bank said today.
The recent mandate wins include deals with Hong Kong based hedge funds CMTF Asset Management Limited and Galaxy Asset Management and the Montana Board of Investments, which is using OpenPrime to manage its 130/30 funds.
Fintag says Nice to see Citi, a reseller of Beauchamp (a PMS used by many hedge funds), doing something right in alternatives.
EUROPEAN BIOFUEL TARGET LIKELY TO BE AMENDED; UK REPORT SAYS A THIRD OF THE FOOD BOUGHT FOR HOME CONSUMPTION IS WASTED
The European Parliament called Monday for the EU to lower its targets for developing biofuels, linked with raising harmful emissions and driving up food prices, in favour of cleaner power sources for transport. Also on Monday, the UK government signalled a retreat on its biofuels targets after the publication of a report showing the fuels contributed to rises in food prices. A UK report says that a third of the food bought for home consumption is wasted
Fintag says [Editor: What is this obsession about food?]
Imagine if that extra third that was wasted was eaten. We would all be one third bigger.
Troubled hedge fund group Absolute Capital Management keeps finding more of it.
A U.S. fund of hedge funds has sued AbCap and its co-founder, accusing the latter of defrauding investors and the former of letting it happen.
Evergreen, Colo.-based White Peaks Asset Management sued the firm and Florian Homm, whose abrupt departure last year sent AbCap into a downward spiral, in Denver federal court last week. According to the suit, Homm “secretly steered” investor funds into pink sheets through a brokerage firm he owned half of.
Fintag says It is that time of the business cycle. If you are fcked, then sue.
Totally unrelated news:
financial times says " Liffe to set a first in CDS clearance "
HEDGE FUNDS HIT TROUBLED BANKS WITH A HIRING BINGE
The biggest hedge funds are on a hiring binge, taking advantage of cutbacks at investment banks to recruit star traders, senior executives and whole teams to help them expand.
Yesterday Goldman Sachs lost Driss Ben-Brahim, one of its top traders, to GLG Partners, London's second-biggest hedge fund. This follows high-level recruitment from banks by Citadel, Tudor Investment, CQS and other well-known funds.
"The environment in investment banks is such that they don't feel as secure where they are," said Peter Clarke, chief executive of Man Group, the biggest listed hedge fund manager. "It is materially helpful to us."
Fintag says Tis sort of true. Hiring has always been an issue for small companies. Most investment bankers are good at politics, managing teams and lining their own pockets - so not very useful. However, the younger more dynamic associates who haven't been tarnished by years of incompetent banking are of a high quality and there are lots of them.
Hedge Funds: The new investment banks of the future. How awful ....
BANK LOSSES FROM CREDIT CRISIS MAY RUN TO $1,600BN, WARNS BRIDGEWATER
Bridgewater Associates has issued an apocalyptic warning to clients that bank losses from the worldwide credit crisis may reach $1,600bn (£800bn), four times official estimates and enough to pose a grave risk to the financial system.
The giant US hedge fund said that it doubted whether lenders would be able to shoulder the full losses, disguised until now by "mark-to-model" methods of valuing structured credit.
"We are facing an avalanche of bad assets. We have big doubts as to whether financial institutions will be able to obtain enough new capital to cover their losses. The credit crisis is going to get worse," said the group in a confidential report, leaked to the Swiss newspaper SonntagsZeitung.
Fintag says If this is the case, the pool of investment bankers to hire will be even greater. But nobody wants that. Without banks we are all doomed.
castlehall says " The latest term in the accountant's lexicon..."NAV Divergence" "
“I will hurt the shorts, and that is my goal,” Richard S. Fuld Jr. fumed.
Richard S. Fuld Jr., the chairman of Lehman Brothers, has vented about short sellers.
It was April, and Mr. Fuld was blaming short sellers, one of the most maligned tribes on Wall Street, for spreading rumors about Lehman Brothers, the troubled investment bank he runs. Shorts bet against stocks, and Lehman, they were whispering, looked like the next Bear Stearns.
Mr. Fuld must have been irate again last week, when Lehman's stock price plunged 11 percent in the space of three hours for no apparent reason. The shares opened that June 30 morning at $22.25, drifted higher — and then took an abrupt turn around 1:30 p.m. Lehman closed that day at $19.81, its lowest level since 2000.
Fintag says So Barclays are looking to buy Lehman? I would like to see that. Bobby Geezer and Dicky Bow Tie Fuld fighting over who is the best dressed. I know who will win:
In the bland, but less than convincing, disguise of Rev. Rul. 2008-39, the Internal Revenue Service has issued a fatwa targeting fund of hedge funds and their investors.
Sort-of translated from the original bureau-beancountingese, the ruling prohibits funds of hedge funds from claiming management and incentive fees on Schedule E, along with other partnership income or losses. Instead, the fees must be reported on Schedule A, where they are subject to two per cent and three per cent hurdles; some taxpayers will consequently lose all or some of the benefit of the deductions, depending on their income level and total deductions.
Bradford & Bingley shares hit a new all-time low and plunged further below the bank's rights issue price as fears increased about its prospects.
The stock dropped 16 per cent to close at 42p yesterday, far below the 55p price of B&B's third attempted cash call. The shares have lost almost one-third of their value in the last two trading days.
Fox-Pitt Kelton analysts predicted the fast-deteriorating housing market would drive B&B to a loss by 2010 as bad debts on its buy-to-let and self-certified mortgages surge. The bank's battered reputation will also push up the cost of retail funding and make it more difficult to secure finance in the wholesale markets, the analysts said.
Fintag says Thankfully nobody can blame me as I have been slating this bank since last summer. Not that they are alone. HBOS really scares me. It is the UK's largest property play and in deep deep trouble. But I am not here to make up rumors or spread them as I am not allowed to do that according to the UK's FSA so I will sit on the sidelines and pretend everything is all right.
I am smiling. Seriously, I am.
GOLDMAN DIDN'T MAKE ME A PARTNER & MY CAREER WAS OVER
I gave it my best shot at my new firm, but it just wasn't the same. Deep inside, I knew that I had reached for the top at Goldman and had fallen short. After six months, and giving up two decent bonus guarantees, I resigned and left the industry for good. I'm lucky enough to have made enough money never to have to work again (provided I'm not reckless). I've spent the last 18 months making some good personal investments and generally deciding on what's next. I do appreciate how fortunate I've been in my career, but I will never quite get over not having made it to the top at Goldman Sachs. That firm gets under your skin'.
Fintag says The smile is now gone and I am weeping like a baby. This is such a sad tale ...what a tosser ...
CHINA OILFIELD MAKES $2.5 BILLION NORWEGIAN ACQUISITION
CNOOC subsidiary China Oilfield Services buys fast-growing Awilco Offshore, valuing the firm at $3.8 billion and creating the world's eighth largest rig fleet.
China Oilfield Services (COSL) will acquire Norway's Awilco Offshore at an equity value of NKr12.7 billion ($2.5 billion). Including debt on Awilco's books, the acquisition is being transacted at a firm value of $3.8 billion.
Awilco's majority shareholders, Awilco AS and Aweco Holding, have agreed to sell their 40.11% holding in the company to COSL at a price of NKr85 ($16.72) a share and precipitated a tender offer to minority shareholders of Awilco. The offer price represents a premium of 18.7% over the closing price of Awilco shares on the Oslo Bors on July 4, the last trading day before the announcement, and a premium of 42.4% over the closing price on May 29, the day Awilco confirmed it was in discussions with a third party interested in acquiring the firm.
Fintag says The Chinese are slowly taking over the world. We fret about SWF's but they are just lumbering giants. Are you worried?
The title of this newsletter should not have been "lost in translation" - it should have been "troubled". AbCap, Lehmans, and 'banks' all labelled as such in the articles above. Only B&B escapes from the troubled frying pan into the "battered reputation" fire. Presumably battered is worse than troubled.
It would be interesting to compare a firm's share price movements after it starts to get labelled as 'troubled' in the press. A hugely over-used phrase in my opinion.
08 Jul 08 - 07:50 gmt
GalwayBoy said ...
Most of the prime brokers are punting around more CVs than a backstreet contingent recruiter in a desperate attempt to deepen their relationships with hedge funds. Anything to draw attention away from aggressive demands for collateral, haircuts and margin calls.............etc etc
08 Jul 08 - 09:27 gmt
anonymous said ...
Excellent
08 Jul 08 - 09:53 gmt
Ms R said ...
Anon: Ms R likes to think it was her intimate phone chat with with Fin last night which helped produce such a stonking newsletter...
Ms R read that piece in Here Is The City. Gosh he sounds like good company doesn't he? Ms R understands that not being promoted can upset people but when you have made enough money 'not to work again' then maybe, just maybe, you should shut the f**k up and be gracious. Just a thought really.
08 Jul 08 - 10:07 gmt
anonymous said ...
Beauchamp is probably one of the most clunky pieces of software ever written. We use an Excel spreadsheet instead, which has done wonders for our performance.
08 Jul 08 - 11:21 gmt
Finbar said ...
...dont get me onto Beauchump ...written using wizards ...it is truly awful ...but its british ...qed
08 Jul 08 - 11:40 gmt
dan said ...
truly awful and british - being redundant today?
08 Jul 08 - 14:54 gmt
GalwayBoy said ...
Leaving aside the product's failings surely being pitched to by the lovely Ms Flynn-Levy had its upsides?
08 Jul 08 - 15:27 gmt
anonymous said ...
>> We would all be one third bigger.
Hedgies and math - we'd be 50% bigger
08 Jul 08 - 22:24 gmt
Finbar said ...
...yes, you are right. However, given we burn off 80% of what we eat we would only be 12.5% bigger. Or not.
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Philip Falcone is used to demanding change from underperforming company executives, but yesterday he took Harbinger Capital, his activist hedge fund, into new territory.
Complete with financial advisers and a big stake, Harbinger broke cover as a traditional prospective buyer of strategic assets, with a tentative approach to Inmarsat, the London-listed satellite operator.
Harbinger has a 29.9 per cent holding in Inmarsat, as well as stakes in several other satellite companies, including America's SkyTerra and Terrestar.