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
Having analysed and compared the Investment Bank business model versus Hedge Fund managers, it is clear that Hedge Funds are the future and Incompetent Banks are soon to be relegated to the dot com trash can.
It has taken over 50 years for the Investment Banks to be found out. Like the free masons, the people on the inside had no reason to critique their masters because the gains were too good. So let's look at what IB's are good at? Apart from being a place for ultra smart people to get a job there are no other positive attributes. So here is a list of the negatives:
1. Shareholders are treated as scum. 2. The key objective of being an Investment Banker is to asset strip your employer and take nothing but cash. 3. Only the little people in Banks get stock options (always expire worthless) while the senior staff get cash. 4. IB's like to arbitrage governments, regulators and anything that isn't in the IB club. 5. Its a zero sum game: and the zeroes are rarely IB's. 6. Balance Sheet Assets are valued depending on how the IB industry wants to value them. 7. Most profits are unrealised but bonuses are paid out on them. 8. IB'ers have no other skills except Investment Banking so will always protect their own.
Let us look at Hedge Funds and their managers. Unfortunately I couldn't find any negatives so here are the positives:
1. The people are even smarter than the average IB'er. 2. Hedgies provide liquidity to all parts of the market. 3. The employees are allowed to asset strip their own company. 4. Hedgies like to catch out the regulators, governments and corporates for incompetence. 5. Hedgies are the new trading desks of the IB's. 6. Hedge Funds provide value to fund investors because the investors own the business (no investors, no fund, no manager). 7. Hedgies are better looking, more philanthropic and more entertaining at dinner parties.
So hereth endeth the lesson.
That was a bit crass, but that is the mood I am in. For those of you at Citi I thought you might appreciate the picture of the sunflower. Look at its vibrancy, the diffusion of succulent colors, the tiny little bee sucking on the tender nectar, the crispness of the yellow leaves and the dreamy blue sky. Make the most of it because we are told Citi are replacing all their PC and Laptop screens with black and orange bloomberg-dos affairs?
Today's news is invigorating. Are we on the verge of a GSE crash? I haven't really analysed those large quasi-nationalised mortgage debt companies in any detail before. My conclusion is that any time a Government pretends to guarantee something (in fact only the Bonds are, not the entire company - bad luck stockholders) and Banks use it as collateral you are going to get trouble. The Credit Rating Agencies were stamping AAA on toxic crap last year and Freddie and Fannie are toxic crap stamped AAA by the US Government except they never have done. Implicit support is not the same as actual support.
Obama and McCain seem to want to prop up these trillion dollar debt traps and rightly so. But with whose money? The tax payer of course. So all those frugal and thrifty middle classers will be bailing out the profligate and reckless debt owners who have given their keys back to the brokers. Nice. And the winners? All those CDO Investment Bankers who stripped out large cash bonuses in 2007 off falsely marked books. Will the regulators be chasing these people for fraud? Unlikely.
CITIGROUP LIMITS MEETINGS, PARES COLOR PHOTOCOPIES
Citigroup Inc., the biggest U.S. bank by assets, banned off-site meetings among investment- banking employees and cut back on color photocopying to reduce expenses as revenue declines.
Executives in the New York-based bank's trading and investment-banking unit will need to ensure spending is ``highly efficient,'' according to an internal memorandum confirmed by a Citigroup spokesman in London today.
Fintag says The jokes are limitless. Glad to see Citi has been taking FiNTAG's advice (as usual we are one step ahead of the main stream media)
...and so on.
UP TO 300 US BANKS COULD GO UNDER, SAY INSOLVENCY EXPERTS
Insolvency experts are predicting that as many as 300 smaller US banks will fail over the next three years as the economy edges towards recession.
The warning from Begbies Traynor's international network came as spread-betting firm Capital Spreads quadrupled the minimum margin requirement for positions on US banks in anticipation of heavy short-selling due to similar concerns.
The moves came after the former head of the International Monetary Fund, Kenneth Rogoff, warned that the worst of the credit crisis is yet to come, and a rule protecting 19 selected US financial stocks from "naked short-selling" expired.
Fintag says Of course this is very serious. After the great crash in 1929, many banks collapsed. This was because there was no internet. Punters just took their money out because they had no information. We have so much information and Bernanke's and Kings and ECB's who implicitly say they are propping up banks we keep are money on deposit. The conclusion is the crash, bang, whallop will either happen very quickly or very slowly.
It appears a slow and painful death is the way forward. Not nice.
Anxiety over a possible US government bailout of Fannie Mae and Freddie Mac is unwarranted, according to Goldman Sachs economists, who say rescuing the struggling mortgage finance giants would be an "entirely manageable event."
Taxpayers will face "some cost" if the Treasury Department were to act on its new powers to bail out the government-sponsored mortgage firms, wrote the economists from Goldman, the firm formerly headed by Treasury Secretary Henry Paulson.
Fintag says Of course Goldman would say this. They want the business. Especially when they get to spend tax payers money shoring up the best bits. Freddie and Fannie are the US equivalent of the UK's Northern Rock and I predict that they will be nationalised. There is no other option.
A new open architecture platform being launched this week will enable third parties - including financial advisors and family offices, as well as fund managers - to establish their own Luxembourg-regulated Specialised Investment Funds (SIFs).
The platform, described as being the "first of its kind", is being launched by KMG SICAV SIF. The company said the platform will make it easier for promoters to launch a SIF, a new class of SICAV fund created by the Luxembourg authorities last year.
Fintag says Imagine being able to access your own personal SIV.
financial times says " Abu Dhabi Commercial Bank files suit over losses of London-based SIV "
MOST HEDGE FUNDS DON'T PLAN AHEAD ON MANAGEMENT: STUDY
Hedge fund firms often pride themselves on being ahead of the curve on financial trends but roughly 70 percent lag behind on planning for their own futures, according to a study to be released on Tuesday.
"Regardless of firm size, most participants have not taken all of the necessary steps to ensure a smooth transition in the event of a change in the senior management team," said Rick Flynn and Alan Kufeld, who provide tax, accounting and consulting services to hedge funds as principals at Rothstein Kass.
Fintag says And Investment Banks plan ahead? Of course we are fly by night specialists. That is why we are so good ...usually. Perhaps they are right. If investors got to read this, they wouldn't be too happy. Now where is that old dusty business plan ...just need to change the dates. There you go. A five year plan.
APPLE MISLED IPHONE USERS OVER INTERNET CAPABILITY
The iPhone, the latest must-have gadget from Apple, fails to give users complete access to the internet, the Advertising Standards Authority (ASA) rules today.
It said the combined phone, music player and computer is flawed because of the absence of two common website programmes, Flash and Java. As a result, the authority said Apple's claim that the iPhone gave access to "all parts of the internet" misled customers about its power as a web browser.
Fintag says ...and that its battery lasts about 4 hours? For those of you at Citi, an iPhone is device used to make phone calls away from your desk and to look at color photos as well as listen to music. Allegedly.
LEHMAN ASKS PRIVATE EQUITY FIRMS TO REMAIN IN BID: REPORT
(Reuters) - Lehman Brothers has asked three private equity firms to remain in bidding for its asset management arm even though the investment bank has yet decide on whether to sell the unit, the Financial Times reported.
Kohlberg Kravis Roberts, Hellman & Friedman and Bain Capital have been told by Lehman that their bids are high enough to go forward, the paper said citing people familiar to the matter.
Fintag says A news report written by FT, reported by Reuters and then reported by Portfolio. That is a lot of broking.
FINANCIAL CRISIS IS ABSENT FROM AGENDAS OF PARTIES, CANDIDATES
The U.S. is facing the worst financial crisis since the Depression. You would never know that from the Democrats' platform in Denver or its Republican counterpart, or from listening to Barack Obama or John McCain.
While both candidates have bemoaned the ravages of the subprime crisis, they have yet to spell out steps for tackling it, such as using taxpayer money to shore up banks and housing.
Eighteen months ago, the City was riding high. Companies flocked from across the world to take advantage of London's principles-based regulation and wide investor base. The mood on Wall Street was more embattled. The subprime mortgage market was showing signs of strain and three separate commissions were bemoaning a loss of US competitiveness in financial services.
What a change the credit crunch has wrought.
“The brand of London has taken a hammering because of Northern Rock,” says Tim Linacre, chief executive of Panmure Gordon, a London stockbroker that also has a large US presence. “I don't think it is terminal, but London needs to be absolutely on its toes.”
Meanwhile, New Yorkers are trying not to say “I told you so” now that financial woes have spread worldwide. They also are touting the benefits of tight regulation, saying that, with volatile markets, many investors value watchful regulators, tight listing standards and the right to sue.
Fintag says A reader believes the term Credit Crunch can be traced back to the late 1960's. Thanks for that.
Anyway, poor ol' London Town is looking very sorry for itself. The empty buildings will all be coming down soon because of the empty buildings tax rates they have to pay. Is this London's 21st Century Blitz?
Now why hasn't anyone sent me a Green card yet? I donated USD100 to Obama and McCain and have heard nothing.
Of course we can blame these characters for ruining the party:
Germany's biggest bank, has been trying to collect $107 million loaned to bankrupt units of the SageCrest LLC hedge fund, according to court documents.
SageCrest Holdings Ltd., a Bermuda-based unit that filed for bankruptcy protection Aug. 20, said it had about $100 million outstanding under a credit facility with Deutsche Bank. SageCrest II LLC, a Greenwich, Connecticut-based fund, sought bankruptcy protection Aug. 17 after the bank told it to sell assets at a discount to pay a $7 million loan, said the fund's lawyer, Bill Brewer of Bickel & Brewer.
Fintag says Thought I had better get a hedge fund story in here. PB's eh? They always have the last laugh.
And finally, for those at Citi this is what things look like in Black and White. Get used to it ...
14 comments
anonymous said ...
But what about SRM?
27 Aug 08 - 11:16 gmt
anonymous said ...
stock8
27 Aug 08 - 11:40 gmt
the credit crunch issue! said ...
Pace of Spending Confounds Officials 25 March 1984 The Washington Post That is the credit-crunch theory of recessions postulated by economist Albert M. Wojnilower of First Boston Corp. after the 1980 recession. It is being revived to explain why the economy is booming despite high interest rates. It suggests that, so long as credit is available, despite the price, borrowing and the economy's expansion will continue.
27 Aug 08 - 11:41 gmt
cont. said ...
… The credit-crunch scenario had been abandoned after the most recent recession that began in 1981, when it again was believed that high interest rates had been the culprit, Schultze said. But he added that some economists now feel they may have overreacted in throwing out the Wojnilower hypothesis.
27 Aug 08 - 11:41 gmt
the answere said ...
The term "credit crunch" has its roots in the unusually tight credit conditions that existed in the United States in the late summer of 1966, when reports of borrow ers unable to obtain credit at any price were common.
27 Aug 08 - 11:51 gmt
the answere 2 said ...
Before 1966, the postwar United States experienced three periods of tight credit: the spring of 1953, the fall of 1957, and the last third of 1959. These periods were called "credit squeezes" or "credit pinches." Sidney Homer and Henry Kaufman, economists at Salomon Brothers in the 1960s, coined the term "crunch" to describe how the 1966 episode differed from those in the 1950s (Kaufman,1994).
27 Aug 08 - 11:52 gmt
Finbar said ...
...why does the media have to regurgitate old phrases? It should be called the debt for all party is over (DAPO) or something like that ...
27 Aug 08 - 12:16 gmt
anonymous said ...
is that Ms. R in the picture?
27 Aug 08 - 13:00 gmt
ReturnFreeRisk said ...
Fin- you have noted the symbiotic relationships between IBs and Hedgies. So I pose the question...How many Hedgie positives were born, either directly or indirectly, from the existence of IB negatives. One could make the argument that hedge funds would eventually become more inefficient if IBs were not part of the system.
27 Aug 08 - 14:34 gmt
TC said ...
Good point.
And while we're on investment darwinianism... what is the next step?
IBs < HFs < ?
What will the evolved HFs of the future be called and what will they look like?
Make a prediction.
27 Aug 08 - 15:27 gmt
Moron said ...
long only:))
27 Aug 08 - 19:07 gmt
anonymous said ...
IB > Dot Com > Hedge Fund > Kaballah
27 Aug 08 - 19:50 gmt
Finbar said ...
No its not Ms R by any stretch of the imagination ...
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Citigroup Inc., the biggest U.S. bank by assets, banned off-site meetings among investment- banking employees and cut back on color photocopying to reduce expenses as revenue declines.
Executives in the New York-based bank's trading and investment-banking unit will need to ensure spending is ``highly efficient,'' according to an internal memorandum confirmed by a Citigroup spokesman in London today.