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
Thankfully most Hedge Fund quant models do not react to bad news. The arrogance of the markets that bad news is always incorporated into stock and bond prices always amuses me. But I have never seen anything like it. The news is so bad, equities so over priced, I wonder if there is anyone at home. Someone should rate news on how bad it is then correlate it to the S&P 500. There will be an inverse correlation I am sure.
However, that is very dull. So today we look at the death of London as a Financial Center, Merrill Lynchs efforts to save London from terminal decline and why August in London has been wet and unpleasant.
However, London welcomes all hedgies to its restaurants and drivers spend less on gas than their cars - unlike in New York.
Canada comes in on the inside to show off an out performing fund - careful there as they are the ones to avoid - and LTCM is 10 years old.
Insurance Policies are back on the table and Inflation is seen as all puff and no substance.
And UBS is in the news - again - for all the wrong reasons
The hottest restaurant in New York is getting a lot of attention for excluding one very well-heeled group: hedge fund managers.
The Waverly Inn & Garden in Greenwich Village “will seat just about anybody,” owner (and Vanity Fair editor) Graydon Carter tells The New York Times. But he adds that the restaurant does frown upon “any stars of reality TV and hedge fund managers.”
“For that reason, we screen calls from the 203 area code,” Carter adds. Area code 203 covers the hedge fund-laden country of southwestern Connecticut.
Perhaps the famed brusqueness of the stereotypical hedge fund manager is catching up with them. “I don't like people who are rude to our waiters,” Carter says, keeping track of how guests treat the staff.
Fintag says I have to hand it them for a great bit of spin. Given most "hedgies" would use a cell, this seems rather silly. As for us being rude, I can only say that in my many years as a hedgie I would say we were an extremely well educated and charming bunch of people who wouldn't be seen dead in Greenwich Village as its always full of back packers.
New Hampshire securities regulators accused a division of UBS of urging New Hampshire's main student lender to continue plunging into the auction-rate-securities market although the Swiss bank knew that market was failing.
The complaint represents a new aspect of the auction-rate meltdown: focusing on the damage done to issuers of these securities.
Fintag says You have to start feeling sorry for the Useless Bank of Switzerland. The reputation of Swiss management being a safe pair of hands has been destroyed. All the people I have known who have had a stint at UBS have ended up bitter and twisted. It is the ultimate european bank with politics that makes your average soap opera look tame and incompetence par excellence. However, when I was working at a top US bank in the late 1990's my bonuses were paid by the mispricing incompetence of UBS so I have a lot to thank them for.
With multi-billion dollar losses from their exposure to sub-prime mortgages and other effects of the credit crunch, you would expect to see the banks and other companies in the financial sector to start tightening their belts. This has certainly been seen in terms of recruitment freezes but what about in one of the other biggest areas of corporate spend? Business travel.
At the annual conference of the Institute of Travel Management earlier this year, the organisation's executive director Paul Tilstone said a number of firms, mainly US companies in the financial sector, had stopped all travel in a bid to cut their costs None will talk about it publicly, worried about the effect that talk of a travel ban might have on a bank's already deflated share price, but in private they admit to near-total travel bans or, at least, a clampdown on who can and cannot fly business class and on what types of journey.
Fintag says As shocking as this may seem, if I had to fly economy I would suddenly remember how to use Skype video.
MERRILL LYNCH'S SURVEY OF FUND MANAGERS AUGUST 2008: FUND MANAGERS' FEARS OF INFLATION PLUNGE; CORPORATES URGED TO REDUCE BORROWING AS RISK OF RECESSION RISES
Merrill Lynch's Survey of Fund Managers August 2008: Fund managers' fears of inflation have all but evaporated to reach their lowest level since the downturn of late 2001 while corporates are urged to reduce borrowing as the risk of recession rises.
The survey captures an extraordinary reversal in investors' attitude toward inflation according to Merrill Lynch. A net 18 percent of the 193 respondents expect global core inflation to fall in the coming 12 months. In June's survey, a net 33 percent thought inflation would rise. A falling oil price and growing evidence of recession have prompted this rethink. More investors believe that the global economy has already entered recession — 24 percent of the panel take that view this month compared with 20 percent in July and 16 percent in June. During the credit boom, investors urged companies to borrow more, but, with the credit crunch biting, they are now concerned about leverage. The net percentage of investors who believe corporates are under leveraged has tumbled to 9 percent, down from nearly 40 percent at the end of 2007.
Fintag says This has puzzled me. Inflation in my quant models is predicted to rise rapidly over the next 2 years as wage claims rise, chinese labor inputs rise, the west imports chinese inflation, unemployment rises, political incorrectness comes into vogue and the obese just carry on eating. Inflation time lags are very long - look at the 1980's - much of this inflation was a by product of the late 1970's.
The source of much of this lack of foresight reflects the break-neck speed with which these deals were completed, as well as the sheer volume of deals that had to be processed by, presumably, fairly junior lawyers.
"The level of complexity is unprecedented," says Jayant Tambe, securities litigation lawyer at Jones Day. "Some of the CDO and CDS documents leave a lot to be desired, and contain basic errors. The fear is that, as the courts get involved, we are going to have some unpleasant surprises."
The CDO disputes are unlikely to draw blood. But resolving them will involve an inordinate amount of sweat and, for some, even tears.
Fintag says Credit Derivatives are nothing but simple insurance policies wrapped in Investment Bank bollox. It is true as Finbar Taggit was selling these in the 1990's to UBS for silly money because they were desperate to copy the big boys. Talk to anyone at Lloyds and they will tell you horror stories about the reinsurance paper that is traded. CDOs and the many spin offs are just the same; overly complex and with underlying risks that are completely unknown.
According to Pensions and Investment, the Boston office of the US Department of Labor (the “DOL”) recently issued a letter to an (unidentified) US Pension Plan subject to ERISA (the Employee Retirement Income Security Act) stating that the plan was in violation of ERISA regulations. The letter noted that failure to correct such violations could result in legal action.
The problem?
Fintag says This is not such a problem. Pension Funds never know how to value the markets (they are lumbering giants who always invest at the top of the market - dot com, commodities, real estate) anyway and hedge fund assets are insignificant. So come on down ... we need your assets so badly.
Counterparty risk from credit default swaps (CDS) is seen as a serious threat to global financial markets, according to three quarters of institutions participating in new research by Greenwich Associates.
In the wake of the near collapse of Bear Stearns and its Fed-engineered buyout by rival JP Morgan, the study revealed almost 60% of respondents thought another large financial services firm would collapse within the next six months, and a further 15% within the next 12 months.
The survey relied on North American and European financial institutions, and found that more sophisticated investors were slightly more optimistic than other investors, but the overall picture was still pessimistic.
Fintag says ...back to our insurance policies again.
STUPID INVESTMENT OF THE WEEK COMMENTARY: TOUTED 130/30 FUNDS ARE 100% NEW AND UNPROVEN
There's a fine line between being "the next big thing" and being "the next great thing." The difference comes down to success. If a new idea can deliver performance, it will be both the next big thing and the next great thing.
But until some new concept proves itself, the "next big thing" is much more likely to be like Munder Small/Mid Cap 130/30 and RiverSource 130/30 US Equity, two issues from a new genre of ordinary mutual funds taking on hedge-fund-like strategies -- and the latest pick as Stupid Investment of the Week.
Fintag says Where have these people been? The 130/30 debacle is so 2007.
US hedge fund Long-Term Capital Management was all but destroyed by the impact of an announcement made by Russia's central bank early on Monday August 17, 1998, in a development that nearly sent the global financial system up in flames.
The bank chairman, Sergei Dubinin, said Russia was suspending payments of its ruble-denominated foreign debt due to a deteriorating economic situation.
Fintag says 10 years ago eh? Concentration trading and lack of transparency. Nothing much has changed then ...
Sextant Capital Management is enjoying a boffo year—possibly the best of any hedge fund firm in Canada.
The Toronto firm's Sextant Strategies Opportunities-A fund is the best-performing hedge fund in Canada this year, according to the Globe and Mail. The fund has returned 80.4% this year, thanks almost entirely to an incredible 73.5% return last month.
Fintag says Imagine naming your fund Sextant. That will get the spam filters excited. I should give you a list sometime of the most prudish hedge fund managers. The number 1 by far is Theorema who subscribe, like nearly every hedge fund in the world, to fintag but rarely get to read it. The word Essex always stops my letter getting through as do the words crap and "blue pill".
Maybe its employees are sensitive souls who would never be rude to waiters...
finalternatives says " NYSE Bars Ex-Bear Rep. Over Hedge Fund Trading "
MERRILL LYNCH BOOKS LOSSES THROUGH U.K. UNIT, CAN OFFSET TAXES
Merrill Lynch & Co. booked $29 billion of losses from U.S. subprime mortgages and collateralized debt obligations through its U.K. unit, making it unlikely it will pay U.K. taxes for years to come.
Most of the losses were recorded this year, including $5 billion from the sale of $30.6 billion in collateralized debt obligations, the New York-based firm said in an Aug. 5 filing with the U.S. Securities and Exchange Commission.
Fintag says So that means Merrill Lynch is going to move everything to London? No. It will be bust by then. This tax loss is worth more than the assets of Merrill Lynch and is worth taking over just because of this.
DRIVERS SPEND MORE ON FUEL THAN CARS FOR FIRST TIME SINCE 1982
Consumers spent more on gasoline than vehicles and parts for the first time in 26 years in May and June, as U.S. pump prices headed for a record.
Gasoline accounted for about 4.4 percent of spending in June, compared with 3.9 percent for autos and motor parts, according to the U.S. Bureau of Economic Analysis. Both were at about 4 percent in May. The last time gasoline exceeded cars and parts as a percentage of spending was in January 1982.
Fintag says Cars have turned into HP Printers. The printers cost peanuts and the ink costs a fortune.
Remember when London was the new New York, and the City the New Wall Street. Well you don't hear that much anymore.
"Now, however, the British capital is mired in as great a crisis as New York's--and things are about to get worse, making a mockery of the insecurity complex regarding Britain that hit U.S. business leaders just months ago," Jesse Eisinger writes in Portfolio.
Fintag says London is a shocker but with its currency turning into what the dollar was at the start of the year, we will end up with US backpackers touring our streets looking for Jude Law and that big fairground wheel. So its not all gloom and doom. Although NY is the best City in the world, with the fittest and sexiest people [Apologies to Theorema] it doesn't have the awful weather or the Queen or let us into its restaurants.
14 comments
anonymous said ...
Finbar Taggit, I doubt your claim about selling credit derivatives to UBS back in the 90s and your bragging about doing that for silly money. Back in the 90s and until early 2000, UBS was at the forefront of credit derivatives trading. I don't know where you were but I feel you are just using UBS' current situation to brag about something you didn't do. Yes, UBS is now a sorry mess but late 90s/early 2000 it wasn't. Please don't start a 1984-type website.
15 Aug 08 - 10:01 gmt
Finbar said ...
I assume you were on the other end at UBS? CD's were being traded from about 1998 and UBS were way behind the curve (in the US that is). I recall trying to hire mid office market data people from UBS because we couldn't understand why UBS were so bad at pricing ... I also recall some nifty structures that UBS gobbled up and had to close out of at loss ...leopards never change their spots
15 Aug 08 - 11:13 gmt
anonymous said ...
Remember that LTCM didn't actually own any Russian bonds. Their problem was that others who did own Russian bonds also owned the same stuff that was on LTCM's books.
15 Aug 08 - 11:31 gmt
Tradebot said ...
UBS at forefront of Credit Derivatives trading in 90s to 2000...buahha haha haha. I think you got the bank wrong... mind you back in those days the MTM price was what you told middle office it was, despite dealing at widely different levels. Hence, UBS got some gongs for doing business at levels nobody in right mind would do and the Gnomes of Zurich remained none the wiser.
Well known practice in UBS until... umm, 2007/2008.
15 Aug 08 - 11:50 gmt
Tradebot said ...
as we are strolling down the memory lane, I think LTCM was long EMG as well as any risky spread in the market. However what killed them was good old swap spreads, merger arb and equity vol. That is what you get when you open your book to Goldman spies before actually securing the capital from them first!
15 Aug 08 - 11:55 gmt
anonymous said ...
guys you're wrong, UBS from 95 to 2000 didn't trade CDs for its prop book. Everything was done on the back of structured deals perfectly hedged and sold to clients. You guys are rewriting the past.
15 Aug 08 - 13:12 gmt
TC said ...
Crumbs, anonymous internet gangsterism has spread from YouTube to Fintag.
You see what happens when you take a holiday! They get all surly.
Either that or it's the UBS marketing team trying to shut you up.
15 Aug 08 - 16:54 gmt
Totti said ...
On London becoming a sh!thole, that's true. After 13 years in the UK it's time to export my talent to more friendly shores. I've seen London rise, I will bail out before it crashes. Good luck to those left behind, good luck with the increased tax burden to come, good luck with the weather :)
15 Aug 08 - 17:13 gmt
anonymous said ...
Enron was a the forefront of credit derivatives in 1999-2000, before the inevitable colapse
15 Aug 08 - 21:06 gmt
anonymous said ...
Hey Fin where is the sexy Ms R...have you hooked up?
16 Aug 08 - 21:33 gmt
Finbar said ...
I believe Ms R is on vacation. She left the country as soon as I got back.
16 Aug 08 - 22:52 gmt
LittleMissMuffett said ...
Who is this bloke Finbar?
17 Aug 08 - 00:05 gmt
Dan said ...
Well educated and charming? Full of it today eh?
As for NY being the sexiest and fittest - my dear bloated old man, surely LA has that covered. Santa Monica, Venice...
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The hottest restaurant in New York is getting a lot of attention for excluding one very well-heeled group: hedge fund managers.
The Waverly Inn & Garden in Greenwich Village “will seat just about anybody,” owner (and Vanity Fair editor) Graydon Carter tells The New York Times. But he adds that the restaurant does frown upon “any stars of reality TV and hedge fund managers.”
“For that reason, we screen calls from the 203 area code,” Carter adds. Area code 203 covers the hedge fund-laden country of southwestern Connecticut.
Perhaps the famed brusqueness of the stereotypical hedge fund manager is catching up with them. “I don't like people who are rude to our waiters,” Carter says, keeping track of how guests treat the staff.