John Paulson, of the eponymous hedge fund Paulson & Co., contends that the credit contraction has run only about 1/3 of its course as far as writedowns are concerned. He anticipates that the total credit losses will reach $1.3 trillion, which exceeds the IMF’s forecast of $845 billion. Paulson, who made a spectacularly successful bet […]
Read more...The Wall Street Journal reports that criminal charges against the managers of the failed Bear Stearns hedge funds, Ralph Cioffi and Matthew Tannin, are imminent. The Journal also indicates there are no charges pending against Bear Stearns or any other Bear executives. Pray tell, why not? The funds were clearly under the supervision of Bear […]
Read more...The New York Times describes how some big-money players are skipping the commodities market and going directly to being hard asset players by buying farmland and grain elevators. This is hardly new (I know of one global macro fund that was making ag related investments two years ago) but the Times piece gives the impression […]
Read more...The fulminating over what to do about our miscreant socialized unrepentant and as yet unreconstituted financial services sector continues. Since massive subsidies have been extended in the form of help to the mortgage business and an alphabet soup of Federal Reserve facilities, with nary a demand made of the beneficiaries of this largess, it seems […]
Read more...Even great investors have bad days and bad calls. John Authers has a clever piece in the Financial Times on the errors Buffett and Soros have made. According to a soon-to-be-released book by Vahan Jahigian, Buffett is astute about his picks, natch, but not so hot at selling. He argues that the Sage of Omaha […]
Read more...Bloomberg reports that stock hedge funds carried unprecedented levels of cash in the first quarter, which is usually considered to be a highly bullish sign. However, note that their cash levels fell by 28% from January to February due to deleveraging (which may not have been entirely voluntary given new tough-mindedness on behalf of prime […]
Read more...A colorful story in the Telegraph, “Hedge fund legends hit by financial crisis,” tells of the fall from grace of many former hedge fund stars. And the worst is yet to come. While the broad outlines of the story are well known – many formerly successful strategies are doing badly, with highly levered funds suffering […]
Read more...Martin Wolf comes perilously close to declaring hedge funds a scam in his article today, “Why today’s hedge fund industry may not survive.” However, in a departure for the normally clearthinking Wolf, the article conflates issues that would have benefitted from being discussed separately. First, he seems shocked, shocked that investment managers can make a […]
Read more...As I am sure you all know by now, Bear Stearns started coming spectacularly unglued last night, and called JP Morgan, who in turn tapped the Fed, who sent examiners who stayed at the firm all night. In the morning, a plan was announced by which the central bank would assume the risk of lending […]
Read more...Not only does leverage cut both ways, amplifying returns and losses, but bankers have a nasty habit of imposing tougher borrowing terms at the worst possible time. The hedge fund industry is learning this lesson the hard way, as cash strapped and newly risk averse prime brokers are raising margin requirements across the board, even […]
Read more...All About Alpha, which is a fine site for all things hedge fund related, has an excellent piece today by Dr. William Shadwick of Omega Analysis. Shadwick has the unusual distinction of being a serious mathematician (he established Fields Institute for Research in Mathematical Sciences) who writes well. He also entered the finance industry relatively […]
Read more...The deleveraging continues. MarketWatch reports that investment banks are reducing loans to customers, in particular their heretofore lucrative prime brokerage business, which is lending against hedge fund positions. Now Wall Street itself is less able than before to extend credit. With their equity bases under stress and exposed to further hits, securities firms are reducing […]
Read more...As this Financial Times article explains, taking the liquidation of the funds out of Bear’s chosen agent’s hands opens up the possibility of a suit against Bear to recover damages. From the Financial Times: Rebel investors have seized two failed Bear Stearns hedge funds in a move their lawyers hope will give them a platform […]
Read more...This post comes in significant degree from jck at Alea, who has access to the report, “Counterparty risk in credit markets,” from Barclays Capital and was kind enough to post the summary of key points. Despite the link, I seem unable to download it, but the summary is sufficiently detailed that I don’t think I […]
Read more...Pity the poor hedge fund manager. The markets have gotten so treacherous of late that most are not likely to see as much in years past from their 20% of the upside fees, but 2% on a big fund isn’t too shabby either. However, the bigger pressure comes from the fact that plain-vanilla, low cost […]
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