Tag: hedge fund

Tuesday’s financial links

Just numbers

Ugly Friday Market Review

I’m not grave dancing – I’m outlining alternative tactics in my own head (and begging for ideas)

  • A jobs report came out today, and it was the opposite of expectation. The Dow promptly tanked. I think there are still liquidity problems that need working out, and this just exacerbated the situation. Frankly, a few lost jobs would keep inflation in check – goddamit…I was just forced to spend sixty-five bucks on flies!
  • Speaking of jobs, Countrywide is now laying off up to 12,000 workers. That’s a lot of brokers and backoffice folks out looking for work, and I can’t help but think it WILL affect online advertising.
  • Another hedge fund comes clean – they were on the winning side of the subprime mess. The problem as I see it – it’s tough to gain a real edge unless you have tons of capital – there aren’t enough products available for the little guy to take advantage of.

I’ll ponder what to do while searching for trophy trout this weekend…not!

UPDATE: It seems the fixed income markets are looking for someone to blame…and finding it.

Two people smiling: Sowood/Citadel edition

This post “graduated” from the category Web Links. I’m doing this short post bit to Web Links for personal reasons…follow-up without having to traipse to some bookmarking site.

Somewhere, Nassim Taleb is sitting back, smiling, and saying “I told you so…”

And in Chicago, Ken Griffin is smiling because he went out for funding for these kinds of deals ahead of time.

UPDATE: Paul Kedrosky takes a shot at housing pessimism while noting Citadel made a potentially bullish move on the sub-prime market with the Sowood purchase. I won’t speculate as to whether that’s true, other than to say Kedrosky is a smarter cookie than I. But…

Citadel was born in arbitrage – specifically convertible bond/equity arbitrage. There are a lot of people in that market, and while Griffin’s group may well be top notch, I can’t imagine the spreads are as wide as they were in the late 80’s/early 90’s. You have to look elsewhere, and they certainly have. And there is still such a thing as hedging – a big sub-prime prime portfolio purchase could be used as either an arbitrage or hedging play against:

  • A short position in mortgage insurers;
  • A short position in other mortgage lenders;
  • A short position against broker/dealers; or
  • A short position in other housing-related investments, such as real estate brokers and/or suppliers such as Home Depot or Lowe’s.
  • Again, just ideas – and I’ll credit some folks I discussed this with as well. You can’t deny Jim Rodgers his peace either – this chart is hard to argue with. Also note that the fact the Sowood portfolio was purchased at a deep discount means less leverage (or opportunistically priced leverage) for Citadel – leverage is something that got Sowood and other funds into so much trouble in the first place.

    UPDATE: Why broker/dealers? Maybe this will help.

    There are NO “guarantees”

    It is a total no-no for a registered investment advisor to “guarantee” an investment return. It is even worse to run sans licensing within your state’s guidelines while promoting a fund that has already lost everything. Unfortunately (and I hate saying this), those actions are what a Colorado-based hedge has been accused of doing.

    Investors need to keep an eye out for early warning signs of trouble. “Guarantees” are one reason you should walk away from a particular investment, and suspect dealing in a sector is a big reason to be wary of it all.