The debacle in Florida, namely a $27 billion short-tern investment fund being frozen after the revelation it held $700 million of defaulted debt (today reported as $900 million) led to $12 billion in withdrawals, is producing a cash crisis at the government entities that hadn’t gotten their money back. Aside from the troubles this impairment […]
Read more...Yesterday, Bloomberg reported that a state-run investment fund in Florida witnessed $8 billion of redemptions out of a total fund size of $27 billion because its investors learned the fund held $700 million of defaulted paper. The fund froze the remaining fund assets today. Apparently withdrawals continued yesterday after the Bloomberg story was released, since […]
Read more...Public funds often make for great stuffees, as this story from Bloomberg (hat tip Ann Beaulieu) recounts. In brief: the Florida State Board of Administration runs roughly $42 billion of short-term investments on behalf of various government entities, including a “short term investment pool” of roughly $27 billion, as well as the state’s $137 billion […]
Read more...While the Financial Times has a wealth of journalistic talent, one of its standouts is capital markets editor Gillian Tett. She reported on the signs of trouble in the credit markets when the world at large thought everything was hunky-dory. One of her many prescient pieces was an article in January that used the fact […]
Read more...A reader chided me for being late to this story, but it appears not to have been widely covered yet. Moreover, I would hazard that it means less than the out-of-character reporting in the Financial Times suggests (this “leak” is a PR plant). First, the FT article: BlackRock, the asset manager 49 per cent owned […]
Read more...Federated Investors has joined Bank of America in investing its own funds in a short-term fund to prevent investors from suffering losses. While BofA’s salvage operation is estimated to have cost as much as $600 million, the damage to Federated has not yet been disclosed. Note that the fund in question is an enhanced cash […]
Read more...Goldman’s high profile and formerly highly successful quantitative hedge fund, Global Alpha, was one of the biggest casualties of turbulent markets in August, shedding 22.5% of its value. The firm orchestrated a shorting up of another one of its quant hedge funds (Global Equity Opportunities), putting in $2 billion of new Goldman money and raising […]
Read more...We had noted earlier that one of the motivations for launching the SIV rescue plan sponsored by Citigroup, JP Morgan, and Bank of America wasn’t only to help save the banks who sponsored SIVs from having to tie up their balance sheets by extending funding to them, but also to save money market funds from […]
Read more...A story highlighted on the first page of the Wall Street Journal and slotted to appear on page A3, “Fidelity Succession Plan Weighs Splitting Chairman, CEO Posts,” has the earmarks of being a PR plant by the Boston-based company. And the Journal appears to have featured it as served up in return for getting the […]
Read more...Hedge funds charge vastly higher fees than other money managers because they allegedly deliver better investment returns. Yet when you look at most hedge fund indices, they don’t look much better, and are sometimes worse than simple long-only strategies. And remember these indices almost certainly overstate performance, since they exhibit what is called “survivorship bias.” […]
Read more...I am beginning to feel like announcer at a prizefight where it’s obvious that one boxer is hopelessly outmatched, but the contest will still go a full twelve rounds due to the stubbornness of the underdog and the failure to land a knock-out punch. The SIV plan continues to take body blows, the supporters appear […]
Read more...Nassim Nicholas Taleb, seasoned trader and risk manager, and author of the provocative and well regarded book Black Swans, today in the Financial Times takes on the high priesthood of modern finance. He argues that modern portfolio theory and many of its offspring, such as the Black-Scholes option pricing model and the capital asset pricing […]
Read more...The Wall Street Journal and the New York Times report that Citigroup obtained funding through the end of the year for $80 billion of SIVs (for background, please see here and here). This development is newsworthy, since Citigroup had indicated it faced a crunch in November as commercial paper funding SIVs mature, yet the widely […]
Read more...A very good post by Menzie Chin at Ecnobrowser explores the meaning of an expression often used by regulators, traders, and the media, the strength (or weakness) of a currency. Chin tells us (and I hope I am not oversimplifying a lucid explanation) that it really signifies two things. The first meaning is the value […]
Read more...It’s revealing that Robert Kuttner’s hard hitting, cogent testimony before the House Committee on Financial Services (hat tip Culture of Life News) has gotten very little attention in the media and the blogsphere. Perhaps it’s because Kuttner, an economist and former investigator for the Senate Banking Committee, argues persuasively that the strong ideological bias against […]
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