30SEP08:
31DEC08 INDICES:
FTSE100:3550
DOW30:7550
# HEDGE FUNDS:4425 30JUN08: Oil to be USD200 by 30OCT08 USA Inflation to be 7.5% by 30OCT08
...oops 23APR08:
Next Rights Issue:
HBOS...yes
All & Lec ...
...1 Nil. 17APR08: Oil to be USD127 by 30SEP08
...16MAY08 losing my touch 27FEB08:
2 Banks go bust by 30JUN08
BS down, Lehman (a bit late I know) 20NOV07: Northern Crock to be sold for 15p
Nationalized 01NOV07: Oil to be USD103 EOM
...peaked too soon 08OCT07:
SEC to fine Goldman for pricing issues
...still waiting 15JUN07: ML to buy-out BS
JPM got there first 06JUN07: The Big Crash: 17OCT07
...well it's here
What do China, Egypt, Britain, the USA and the Romans have in common? They all built their empires using cheap labor. Over the last 50 years, the West has abused, exploited and damn right enjoyed the dollar a day labor that the East has been providing. Of course, just like the rise and the fall of the Roman Empire, the rulers soon lose the plot and the slaves are eventually liberated from their chains.
Picture what is happening in India, Turkey, China, Brazil? The poor are wanting more and more and the greedy Westerners are starting to realize that bloated democracy's with pen pushers and no producers is a recipe for falling quality of life. Without the gun, or other means to keep the poorest down, the West will fall into decline. The debauchery of decadence makes us immune from the reality of the moral fall in standards of lifestyle.
Not only has cheap labor reduced dramatically the price for white goods, clothes and food, but by allowing people to buy assets on credit to escape poverty has turned us into druggies. Fashion, advertising and dissatisfaction are the symptoms of a sick and dying culture. [Editor: Kabbalah and Socialism - are they related by any chance?] In the 1950's credit was hard to come by and wealth grew slowly. In the last 10 years, wealth has grown through credit. Governments are borrowing more than ever and populations are following suit. Savings ratios are back to 1950's levels and a return to austerity is in order. All except in Asia, where prudence still enjoys a strong following.
There are entities with billions of cash piles but they cannot spend it. As the slaves become more powerful and live longer, the more they consume and our finite resources become more expensive. This leads to inflation. Rates go up to combat inflation, companies default on debt payments and they fail. Unemployment goes up, and the value of these cash piles diminishes in a desperate attempt to buy up distressed assets. The Chrysler Building maybe iconic but it is just a building.
Opportunities to find ways to make will always exist. Question is what are those opportunities? Will hedge funds be at the opportunity frontier? Let's hope so. [Editor:Wrong blog and a lame link].
If you are a smart graduate wanting to earn a bowl of rice a day, send me an email.
"We are talking ourselves into a recession" I heard this quote again yesterday and again am bemused. How can people talk up inflation or talk down the demand for oil? The UK has lots of interesting statistical reports published today that will "suggest" the UK is heading for recession. Whatever its definition, the UK is a sorry place to be. Anything Bush can do, Brown can do better. George Bush took on a massive surplus and turned into a whopping deficit; Brown has turned the UK into the G8's worst creditor. It is so easy spending other people's money. Making a return on it is of course very difficult and that is where hedge funds are supposed to excel. Well, despite a cheap work force of slaves out there desperate for work to pay off their 125% mortgages, we are all losing our edge, if we ever had one and our quant models don't work any more. Not that we are alone.
Take JP Morgan. They were pioneers, some would say they were inventors, of credit derivatives and it has bewildered me that during the last few months their books and records were fine and dandy. Well it looks like the middle office (independent pricing? Not when the front office determine the bonus pool) have woken up and refreshed their spreadsheets. It is not looking too healthy.
As I stated yesterday, UBS would be going back to Core Competency and concentrate on Wealth Management. Imagine my surprise when a Bloomberg news story came up saying the same thing. Am I psychic or have super natural powers? As Greg Newton at Naked Shorts told me yesterday, the fintag rss feed date came up as being published in October 2008. My excursion to the spiritual world of Kabbalah has, it appears, turned me into a proper fortune teller. So here are the lotto numbers for this Saturday - 8 15 16 22 37 40. [Editor: No financial advise, please]
Shame I didn't go on a Kabbalah course earlier as I wouldn't have this ludicrous prediction on fintag that oil will hit USD200 by the end of October. Mind you, if the Georgia / Russia war continues and the gas pipe line is closed, it may move back up again. Or it may not. Sometimes predicting the markets is like trying to guess how many non-drug enhanced Gold Medals the Chinese will get at the Olympics.
Back to a round up of the vacation lite news.
KILL THE COMPETITION: INFLATION HEADS TO 5%...OIL RETREATS ON CEASEFIRE HOPES...BANKS FACE PROBE
The Times: Inflation is set to hit 5 per cent over summer, leaving the Bank of England no scope to cut interest rates.
New York Times: New York will pursue three more banks over the same auction-rate securities that Citigroup and UBS have spent $25 billion (£13 billion) buying back.
Daily Telegraph: Oil and gold prices fell amid hopes that Russia and Georgia would negotiate a ceasefire over South Ossetia.
Comment
Gerard Baker in The Times: Russia's blitzkrieg into Georgia is an old-fashioned opportunistic power grab rather than a move to manipulate global energy markets.
Tracy Corrigan in the Daily Telegraph: Selling British Energy to the French is not ideal, but it is preferable to relying on Russia or Algeria.
Fintag says Now this is lazy. Journalists who provide links and summaries. That it is my job.
JAPAN'S ECONOMY CONTRACTED IN THE SECOND QUARTER OF 2008; CONSUMER CONFIDENCE TUMBLES TO 26-YEAR LOW
Japan's economy contracted in the second quarter of 2008, signalling that the economy is on the brink of its first recession in six years.
Gross domestic product (GDP) fell an annualised 2.4% in the three months ended June 30 after rising 3.2 percent in the first quarter, the Cabinet Office said today in Tokyo.
In related news, Japanese consumer confidence fell to a new record low in July as concerns about price rises and jobs rose, the government said on Tuesday.
The consumer confidence index fell to 31.4 in July, hitting its lowest level since June 1982, and down from 32.6 in June.
Correct me if I am wrong, but I do believe Robert Steel of Wachovia owes a royalty payment to John Thain of Merrill Lynch.
Why? For for this manuevuer:
"Wachovia Corp increased its previously reported second-quarter loss to $9.11 billion to cover costs to settle a probe of auction-rate securities sales, and said it will cut more jobs as the housing market deteriorates.
The fourth-largest U.S. bank is now reporting a loss of $4.31 per share, up from the $8.86 billion, or $4.20 a share, it reported on July 22, according to its quarterly report filed on Monday with the U.S. Securities and Exchange Commission.
Wachovia also now plans to cut 6,950 jobs, 600 more than it had disclosed, with the additional cuts coming from mortgage operations, spokeswoman Christy Phillips-Brown said. The cuts affect about 5.8 percent of Wachovia's 120,000-person workforce. Wachovia also is also eliminating 4,400 open positions...
The quarter marks the second in a row when Charlotte, North Carolina-based Wachovia revised results to increase the size of its reported loss. Wachovia increased its first-quarter loss to $708 million from an original $393 million because of a write-down tied to life insurance policies."
Fintag says Hedge Funds struggle to come up with excuses in their newsletters. Now the banks are struggling too. It is so much easier when times are good. Seems such a long time ago.
A rule that made it harder to short some financial stocks — and that may have helped raise prices and reduce the volume of shorting in those stocks — expired Tuesday, as the Securities and Exchange Commission considers whether to tighten the rules on all short selling.
It may be a coincidence, but the announcement of the rule on July 15 coincided with the bottom of the bear market for financial stocks, which leaped that day and are now well above where they were. And the final day proved to be a very bad day for those shares.
Fintag says Market abuse is something traders do. Now it is a routine employed by central governments and regulators. One wonders if the end of capitalism is here. Of course if Barrack "higher taxes and more oppression" Obama gets in, capitalism will be halted. Imagine that. The USA becomes a communist state and Russia a laissez faire free for all.
Karl Marx must be turning in his grave.
CDS COUNTERPARTY RISKS SERIOUS THREAT TO GLOBAL FINANCIAL MARKETS
Over 75% of institutions said counterparty risk in credit default swaps (CDSs) represents a serious threat to global financial markets, according to a study by Greenwich Associated.
Greenwich Associates conducted a study of 146 institutions in North America and Europe to determine how fears of counterparty risk were affecting institutional investment and trading strategies.
The study revealed that 37% of participating institutions have over $50 billion in assets under management. A further 18% have more than $100 billion.
Fintag says ..and CDS's were designed to promote stability in the financial markets. JP Morgan must take the blame for this (correct me if I am wrong, but they started it all in mid 1990's).
The Bank of England will today dramatically downgrade its forecast for growth in the British economy and warn that inflation is set to continue to rise.
The Bank will forecast a collapse in economic growth to about 1 per cent next year, heightening fears that the British economy may soon slide into recession. It will also signal still higher inflation over the next few months, probably peaking at more than 5 per cent by September.
The Bank's quarterly Inflation Report comes just a day after food inflation hit a 28-year high of 13.7 per cent. Overall inflation rose to 4.4 per cent in July, as measured by the consumer price index (CPI), a jump of 0.6 per cent on June's annual rate of 3.8 per cent. Such a downgrade in the Bank's forecasts will be deeply unwelcome to ministers, as they prepare the Government's economic recovery programme in time for the Labour Party conference next month and the pre-Budget report in October.
Fintag says And after years of pleading, my Green Card has yet to arrive. Maybe I should go on that 3 year intensive Kabbalah course starting in September? At least they provide you with food and there is a nice gym with a well used Power Plate (the lady who hogs the machine seems never to be off it, although occasionally a wizen old man shouts at her and drags her to see her children and that's when I get a chance to shake, rattle and roll before she comes back and removes me with one finger).
finalternatives says " Joke's On Hedge Fund Manager-Turned-Comedian "
Brian Hunter, the trader who was blamed for the collapse of $9bn hedge fund Amaranth Advisors two years ago, has taken advantage of last month's plunge in commodity prices to help propel the year-to-date return at the fund he now advises to 230%. The Peak Ridge Capital Commodities Volatility fund, which Hunter advises, returned 24% in July as commodities prices fell 10% for the month.
Fintag says All very nice for his new investors. I am sure the San Diego Pension Fund must be very excited. They lost USD150m in Amaranth. I wonder if they are investors in his new fund?
telegraph says " Stage two of the gold bull market is just beginning "
Random News Link Fest Generator"
finalternatives says " Sorin Snags Former Bear Stearns Exec. "
finalternatives says " Morningstar Plans Fund Of Funds Ratings "
Finbar on political rants. Amusing but we know the end of the empire has long been underway. All of you are a bit rusty. That being said, what are you shorting in the process?
13 Aug 08 - 08:04 gmt
Finbar said ...
Wrong question: ask me what I am going long in?
13 Aug 08 - 10:28 gmt
Marx said ...
Marx turned into his grave when Lenin&co did the Russia revolution; then again when China turned red. Marx tought communism was a consequence of overly matured capitalist society. And if we think that success comes with the ability to use compliant cheap labor, China comes in mind; compliant to the govt of China naturally. Another issue is their willingness to share the pie - or just use the cheap Western expertize in various areas.
13 Aug 08 - 10:43 gmt
The Scream said ...
{limo careens round the corner, drives past with machine guns flaring, disappears round far corner again, terrible screams in aftermath"
13 Aug 08 - 11:35 gmt
Confused said ...
While you get Sagegauge up and running I will use this plattform: March 2009 - "Brian Hunter's fund loses 85% in one month...tries to stem redemptions...lawsuits" What part of "high leverage = volatility" don't his investors understand?
13 Aug 08 - 12:25 gmt
Don Quixote said ...
so finbar , what are you LONGING THEN ?
Welcome back by the way 8-)
13 Aug 08 - 12:40 gmt
TC said ...
We need to work on the banter at Fintag.
13 Aug 08 - 13:42 gmt
Finbar said ...
@TC: still jet lagged but my creative juices are starting to boil ...
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The Times: Inflation is set to hit 5 per cent over summer, leaving the Bank of England no scope to cut interest rates.
New York Times: New York will pursue three more banks over the same auction-rate securities that Citigroup and UBS have spent $25 billion (£13 billion) buying back.
Daily Telegraph: Oil and gold prices fell amid hopes that Russia and Georgia would negotiate a ceasefire over South Ossetia.
Comment
Gerard Baker in The Times: Russia's blitzkrieg into Georgia is an old-fashioned opportunistic power grab rather than a move to manipulate global energy markets.
Tracy Corrigan in the Daily Telegraph: Selling British Energy to the French is not ideal, but it is preferable to relying on Russia or Algeria.