FiNTAG - Hedge Fund News, Views, Opinions and Gossip

THE FINTAG NEWSLETTER @ 22 October 2009

Finbar Taggit

FINTAG COMMENT

Black armband day.

So Goldman, JPM et al who were saved from bankruptcy have lobbied Obama to avoid comp caps and instead thrown BoA, ML and AIG into a cesspit where country club membership will be banned and a few top earners will not get paid. Savings? I reckon less than 100m. Pathetic.

I am therefore on strike.

For those of you keen to read about me, fintag the sequel can be consumed here:

rich, bored and pathetic

THE FINTAG NEWSLETTER @ 21 October 2009

Finbar Taggit

FINTAG COMMENT

Begging bowl.

So the UK's debt is a few billion off the budgeted forecast. Like the USA, the UK has its largest ever debt since the Second World War when there was a good reason for a large amount of debt - War. This time around, the reason for the debt is ...Investment Banking. So we defeated Hitler and a potential world of horror, spent decades paying off the loans for these loans to reappear because a few bankers needed to continue their lifestyles.

Seems rather bizarre, doesn't it?

But not as bizarre as the Galleon sheep who are ripping out its hedge fund with panic like zeal. It looks like the fund will be forced into liquidation and this always results in less for those who stand last and I am surprised Galleon hasn't just gated the fund. Even so, when panic sets in, panic sets in. Has anyone checked out who these investors are? I got a sneak preview from a disgruntled to be out of work Galleoner and hey presto, a few of these also had Madoff exposure. Bad luck seems to follow those who are useless.

Benality
A few days ago I tried to tweet the 5 billionth tweet. I was close but not close enough. I must try harder:

http://twitter.com/fintag/status/4999882493

U.S. STOCK FUTURES POINT TO SECOND STRAIGHT DIP

market watch

Ian Shepherdson, chief U.S. economist at High Frequency Economics, said the U.S. equity rally from the lows of March can continue. He sees nominal GDP rising and unit labor costs declining next year.

"If we're right, the spread between sales and cost growth next year should be nearly six percentage points, which is consistent with S&P earnings rising by around 25%," he said. That would put the S&P 500 on a forward earnings multiple of about 14.2%.

"On that basis, it is hard to argue that U.S. equities are overvalued."

Fintag says
Hey Presto. The world is over valued.

GALLEON STAFF EYE EXITS

deal book

Dozens of employees at Galleon Group are hunting for new jobs as investors debate how to react after the hedge fund's founder was arrested and charged with running one of the biggest insider trading schemes, Reuters reported.

For years, Galleon prided itself on hiring only the best in the technology and healthcare industry — top-notch analysts and portfolio managers boasting Ivy League degrees and stints at Goldman Sachs and Needham & Company.

Fintag says
Ship. Rats. Jumping.

wall street journal says "Rakoff Gets Galleon Case And Will Bharara Become the Great Preetinder? "

Mind you seems ironic that Australia, the world's only booming economy has a Sri Lankan boat problem. Given Galleon owned a lot of the SL stock market, we may see a few more immigrants looking for new homes.

KING CALLS FOR BREAK-UP OF BANKS

financial times

Mervyn King, governor of the Bank of England, called on Tuesday night for banks to be split into separate utility companies and risky ventures, saying it was “a delusion” to think tougher regulation would prevent future financial crises.

The economic crisis has prompted governments across the world to re-evaluate their financial regulatory frameworks

Mr King's call for a break-up of banks to prevent them becoming “too important to fail” puts him sharply at odds with the direction of domestic and international banking reform.

The Treasury and the Financial Services Authority have specifically rejected the idea of spliting up the banks, while the Conservatives think action in Britain alone along these lines would not be feasible.

Fintag says
Looks like King is prepping himself for the job of top regulator once the FSA is binned. His statements are so obvious and a sentiment we have been espousing for years. Glass Steagall 2.0. Alternatively GS 2.0. Spooky.

THE FINTAG NEWSLETTER @ 20 October 2009

Finbar Taggit

FINTAG COMMENT

Pop.

Funny how the people I talk to are waiting for the big pop. And yet they are piling into the markets because they believe it has some way to go before the big bang 2.0.

Many commentators have gotten bored about debt, protectionism, Bernanke china bashing, export crazy Asians and living off bread and water and aren't discussing it anymore. Most markets are fundamentally overvalued because the huge wall of cash that is rushing around like a tsunami on speed is looking for returns that are safe and known. When demand exceeds supply prices go up but that doesn't mean that the underlying asset bought is worth the price paid. But hey, who cares. Rising markets give us optimism and keeps people employed and only a deluded bear sucking moron would dare predict a crash.

Thankfully this one has already tried and had to readjust but given I am no longer actively trading, I am pouring everything into commodities. Why? Why not? When the pop pops, those with real stuff will win out. Be warned.

In the meantime, 3 cheers to Apple! We all love your products even if they fall to pieces after 1 year less 1 day. My Macbook of the same age has a bust cd drive, two stuck keys and a screen that has vertical lines going down it.

U.S. SAID TO TARGET WAVE OF INSIDER-TRADING NETWORKS

bloomberg

Federal investigators are gearing up to file charges against a wider array of insider-trading networks, some linked to the criminal case against billionaire hedge-fund manager Raj Rajaratnam that shook Wall Street last week, people familiar with the matter said.

The pending crackdown, based on at least two years of investigation, targets securities professionals including hedge- fund managers, lawyers and other Wall Street players, the people said, declining to be identified because the cases aren't public. Some probes, like the one focused on Rajaratnam, rely on wiretaps. Others stem from a secret Securities and Exchange Commission data-mining project set up to pinpoint clusters of people who make similar well-timed stock investments.

Fintag says
If only the UK's FSA could take a leaf out of the SEC book given regulation doesn't work anymore. Britain's own Jabre the Crook was long gone before the sleepy FSA prosecuted him and the small spate of low life insider trading has been pathetic. Of course I used to keep a "Rumors" policy document (as required by the FSA) and this stopped my traders from carrying 3 mobile phones and visiting websites using vtunnel.com and using PGP encryption for their emails.

HEDGE FUND LEGEND ROBERTSON LIKES PLASTIC NOT GOLD

reuters

Hedge fund pioneer Julian Robertson, whose Tiger Management once oversaw $22 billion in assets, told a conference of money managers on Monday he is bullish on credit card companies, but would steer clear of gold as an inflation hedge.

Speaking at the New York Value Investing Congress, a private event where hedge fund managers share trading ideas, Robertson reaffirmed his positive view on the shares of Visa Inc (V.N) and MasterCard Inc (MA.N), citing their growth potential.

Fintag says
For a moment I thought I was going to have start wearing those plastic wrist bands. I am sorry but I don't have the same view on plastic. While interest rates are low then this is fine but the CCC are hiking up rates. Default rates are going to rocket.

BRAZILIAN HEDGE FUNDS LURE $19.7 BILLION THIS YEAR

bloomberg

Brazilian hedge funds are luring more money than any type of investment pool in the country after record withdrawals last year, offering returns four times the yield from certificates of deposit.

Local hedge funds attracted a net 33.7 billion reais ($19.7 billion) this year through Oct. 15 after posting 54.6 billion reais in redemptions in 2008, preliminary data from the National Association of Investment Banks' Web site show. Third-quarter inflows surged to 36.3 billion reais, according to the data. The figures will be revised and re-published this week, said a spokesman for the association known as Anbid.

Fintag says
I am going to have to divert towards Brazil meez thinks asap. We all love an emerging market play when the west has run out of Alpha.

GOLDMAN SACHS MUST FAIL

here is the city

That's the message. In just one short year, Goldman Sachs has morphed from an organisation that was 'too big to fail' into one which is now 'too successful to exist'.

At a time when we should be celebrating that the world's largest financial institutions, vital to our own economic wellbeing, have come back from the brink, we are pointing the finger of blame at the likes of Goldman, and complaining about how successful they have become. And Goldman, of course, is being beat about the head for government interference it never wanted, and a bailout it never sought.

Fintag says
Word on the legal street is that by this time next year, GS will be a private partnership hedge fund manager.

SCHRODERS LAUNCHES UCITS PLATFORM WITH EGERTON FUND

hedge funds review

he platform, Schroder GAIA (Global Alternative Investor Access), will be run jointly by Schroders and its fund of hedge fund (FoHF) subsidiary NewFinance Capital.

NewFinance's business development manager Eric Bertrand said the platform had been in development since 2007.

Bertrand said GAIA would build on Schroders' existing expertise in Ucits funds but would open up hedge fund expertise to more investors.

Fintag says
I didn't know Schroders had any Hedge Fund business left. If you are a fund of funds in doubt, launch a UCITS platform (with a few cta managers only). That will revive your business.

BERNANKE WARNS ON IMBALANCE RISKS

financial times

Ben Bernanke said on Monday that it was “extraordinarily urgent” that the US and Asia adopt policies that prevent a revival of global economic imbalances as the financial crisis ebbs.

The Federal Reserve chairman warned that global imbalances - the big gaps between national saving, consumption and investment rates reflected in large trade deficits and surpluses - had helped cause the crisis and needed to be corrected.

Fintag says
Go on Benny. Nuke those Chinks ... [Editor: Is this your Jan Moir moment?]

This is truly an offensive speech. The man is deluded.

THE FINTAG NEWSLETTER @ 19 October 2009

Finbar Taggit

FINTAG COMMENT

Marriage.

Trading is like being married. It is a contract between an ego and a lifestyle that starts out on the right tracks but can often lead to a hatred of that Bloomberg or Reuters screen and turns into a nasty love hate scenario what-if denial depression. My divorce started at the beginning of this month and my first and only love has been sold on. I sold out and now my soul is selling out too.

My brain is struggling to cope. It is used to constant stimulation. News, market data, lunches and email avalanches. Today it is going to sleep and it is not pleasant. I have never slept more than 6 hours and I am losing an extra 2 hours a day to the sandman. This is not right. I am turning into a welfare addict, a human being who has no responsibility.

Roll on next year when I can get back into the game. Leisure is not what it is cracked up to be.

HEDGE FUNDS GAIN CLOUT ON CAPITOL HILL

deal book

Hedge fund managers appear to have a new degree of clout on Capitol Hill in shaping legislation that will determine how they will be regulated, according to The Boston Globe.

To gain that clout, industry leaders are using a congressman-turned-lobbyist, a major increase in campaign donations and a strategy that relies heavily on advancing their own reform ideas, making them active players in the legislative process and perhaps staving off more rigorous regulation measures.

Fintag says
Just like Investment Bankers, we have learned to lobby and lobby hard. If it involves lunches, then I am in.

DUE DILIGENCE KEY TO HEDGE FUND INVESTING

investment news

The losses of 2007 and 2008 in the [hedge]-fund-of-funds industry showed us that some funds of funds turned out not to be as diversified or non-correlated as they claimed and that some funds of funds were not performing the level of due diligence required to avoid the problems experienced by others. The events of 2007 and 2008 demonstrated that strategies that were supposed to be non-correlated were in fact correlated, and managers were exposed when the financial markets ceased to function. Trades were taking place, but not at rational levels. We believe that many funds of funds were not doing enough research into portfolio management, and as a result, their performance did not deliver the steady results they once provided. Remember, however, that one bad apple does not spoil a bunch, nor does it mean that the whole industry is spoiled. Quite the contrary; the funds-of-funds industry is alive and well, and thriving in the post-meltdown world. That's the beauty of what the hedge funds industry is all about.

Fintag says
Hasn't it always been? Well I guess Optimal, UBP, et al thought they knew what they were doing but as usual checking an AIMA DDQ is not really DD is it? DD is having a decent lunch and touching and feeling your hedgie.

A LOOK AT THE HEDGE FUND CHIEF ACCUSED OF FRAUD

dealbook

In 2004, Raj Rajaratnam started a charity for victims of the devastating tsunami that hit his native Sri Lanka. On Friday, Mr. Rajaratnam, a 52-year-old hedge fund manager, was caught in a storm of his own as one of six people charged by federal investigators in a $20 million insider trading scheme.

While he was born in Sri Lanka, Mr. Rajaratnam, founder of the hedge fund Galleon Group, studied engineering at the University of Sussex in England and earned a business degree from the Wharton School, University of Pennsylvania in 1983. He started his career as a lending officer in the technology group at Chase Manhattan Bank before becoming an electronic analyst at Needham & Company, the boutique investment bank.

Fintag says
I wonder how many others didn't carry out a proper DD on Galleon? Unfortunately Inside Trading is a tricky one to catch. My theory is to be wary of those with the letter "J" in their names. You know, Jabre, The Junk Bond King, Rajaratnam ....

CALIF. BANK BECOMES 99TH IN US TO BE SHUT IN 2009

yahoo

The Federal Deposit Insurance Corp. was appointed receiver of San Joaquin Bank, based in Bakersfield, Calif. It had $775 million in assets and $631 million in deposits as of Sept. 29.

The FDIC said Friday the bank's deposits will be assumed by Citizens Business Bank, based in Ontario, Calif. Its five branches will reopen Monday as branches of Citizens Business Bank.

Fintag says
Some banks are just too small to survive. Big is best. We all want monopolies and banks with large middle fingers.

EU HEDGIE BILL TO COST £2.9BN

city am

EUROPEAN UNION plans to crack down on hedge funds and private equity houses could cost the industries as much as €3.2bn (£2.9bn), according to the first official report into the directive.

The study, conducted by Charles River Associates for City watchdog the FSA, also said the affected firms would be hit with annual costs of around €311m.

The EU is planning to force fund managers to sign up to a costly registration and disclosure regime, and to adhere to caps on leverage.

Fintag says
We are not worried. Its your Private Equity and Real Estate girls and boys who are worried. What is the point? Yes, to create jobs in Ireland and Malta at the expense of London and hit Investors with more costs. Not that the FSA are bothered - its more regulation work for them.

THE FINTAG NEWSLETTER @ 15 October 2009

Finbar Taggit

FINTAG COMMENT

Back to ordering the last wine on the list.

Why the media is so surprised at the latest stellar profits from the Investment Banks is rather bizarre. Any company that can offload its bad debts and get a decent fair value as well as pushing its hard to price illiquid assets into off balance hedge funds (I mean Goldman have been doing this for years) despite socialist regulators capping their remuneration policies and restricting their business practices by demanding a strong balance sheet, could not do anything but make profit is madness.

Risk is about mitigation. When the mitigation is a government, taking large risk becomes a no brainer. We have all been duped because socialists are on the whole simple people and fighting against some of the smartest people on the planet is rather dumb.

Never in history has socialism benefited the rich at the expense of the poor. Actually, that is a complete lie. Socialism is a dictatorship and the selected few always benefit at the expense at the poor and stupid. Obama should get the Nobel Prize for Being a Pratt.

Of course this is all good news for luxury product providers and despite down sizing my demands on my current soft marketing trip, it is clear that from hotels to night clubs, the Incompetent Bankers are back.

Except they are no longer Incompetent but Incredible. The Incredible Bankers are back. Except Bruce W who never got to retire. I never met the guy but he seemed to be a smooth operator. Maybe he passed away because he too couldn't believe what was happening to Investment Banking?

GOLDMAN NET BEATS ESTIMATES ON TRADING, INVESTMENTS

bloomberg

Goldman Sachs Group Inc., the most profitable securities firm in Wall Street history, reported third-quarter earnings that exceeded analysts' estimates on trading gains and investments with the company's own money.

Net income more than doubled to $3.19 billion, or $5.25 per share, in the three months ended Sept. 25, from $845 million, or $1.81 a share, in last year's third quarter, the New York-based company said today in a statement. The average estimate of 22 analysts surveyed by Bloomberg was for $4.18 a share, with forecasts ranging from $3.48 to $4.75.

Fintag says
Of course this is wonderful news for all of us involved in Financial Services. A bit like the Airline Industry being propped up by Governments of old, where all the side industries were indirectly subsized by the tax payer, Hedge Funds and the like have to embrace this new socialism because it benefits us as much as the banks. The fact all these short term wins are at the benefit of the next generation, who gives a hoot?

There was a time when protectionism was frowned upon but in todays collaborative market place, the banks are the first industry in the world to be protected by all countries.

Socialists protecting Capitalists.

If you look carfeully, it is the same old same. Fixed Income bond issuances based on crap underlyings. Subprime 2.0 lives on.

LIGHTS DIM FOR AMERICAN BANKS IN LONDON, BUT RIVALS RUSH TO FILL THE GAP

telegraph

An American downgrade of London leaves a gap, which others are rushing to fill. Compared to their US rivals, Barclays, Credit Suisse and Deutsche Bank have more international management teams but each has to struggle to gain market share from US firms. Japanese Nomura did it in one big move, by taking over the European operations of Lehman Brothers.

By the time US banks are ready to rediscover their Anglophile tendencies, it will be much harder to rush back in.

Fintag says
Tax.

EU: BRITAIN IS AT HIGH RISK OF GOING BUST

this is money

Britain's economy was consigned to an EU list of those at 'high risk' yesterday because of the spiralling national debt.

The European Commission issued a humiliating warning that the worsening budget deficit poses 'serious concerns' that the country will be unable to meet future spending commitments, such as pensions.

Fintag says
The UK set the agenda and it ends going bust while the US rides high. Don't you get the feeling you have been conned?

DAMIEN HIRST PLUMMETS DOWN ART WORLD POWER LIST

times

The day after suffering the most brutal critical pasting of his career, Damien Hirst woke up today to discover that he is no longer considered one of the real movers and shakers in contemporary art.

Last year, after capping a long line of pickled sharks and sheep with a £50 million diamon-encrusted skull, Hirst was ranked No 1 by the influential ArtReview magazine in its annual Power 100 list, which is released to coincide with the Frieze Art Fair in London.

Fintag says
So where is his bailout?