In a sign of how dramatic the reversals of fortune have been on Wall Street, hedge funds, until recently considered the riskiest players in the financial services industry, are now questioning how safe it is to leave cash and securities with their prime brokers, the securities firms that provide credit, brokerage, clearing, and sometimes fund […]
Read more...January was a bad month for hedge funds. Depending what average you looked at (different services define strategies somewhat differently and have distinct comparison groups), a loss of 2% was a pretty typical figure, and I have heard rumors of quite a few funds, particularly quants, taking double-digit hits. The wounded are coming to light. […]
Read more...In today’s post, “The Rising Risk of a Systemic Financial Meltdown: The Twelve Steps to Financial Disaster,” the bearish and prescient professor Nouriel Roubini sets forth how a systemic financial crisis could play out. The most troubling thing about this piece is that it is quite plausible. Of Roubini’s twelve steps, the first eight are […]
Read more...Standard & Poor’s issued a research report today that stresses that bond insurer downgrades would hurt banks and in some cases could lead to reductions of their debt ratings. This report is in contrast to the comparatively cheery view of Morgan Stanley yesterday, that bond guarantor downgrades (presumably to AA; note further downgrades are possible) […]
Read more...A Bloomberg story today points out that the snowballing credit market crisis is an indictment of the use of quantitative measures of risk, particularly one of the longer established and still widely used approaches, value at risk. VAR uses historical trading patterns to determine the probability of loss to a certain percentage of certainty. Firms […]
Read more...Here we go again. We have another Ben Stein column, “Can Their Wish Be the Market’s Command?” which says, I kid you not, that we have a bear because a whole bunch of traders got together and made it so. Since undue contemplation of Ben Stein logic is bad for anyone’s mental health, I will […]
Read more...Roger Ehrenberg’s latest post, “Alternative Asset Managers and Down Market Cycles: What to Expect,” isn’t quite as blunt as my headline above, but it comes pretty close. He at least says that suffering, while common, will not be universal. Cheap funding was important to the success of hedge and LBO funds and its evaporation will […]
Read more...Ooh, I am ill. The Financial Times seems to have scooped this story (I don’t see it on Bloomberg). In keeping with Greenspan’s tutelage at the knee of Ayn Rand, he has exercised his right not to be constrained by propriety or other rules that govern little men and has gone and sold himself to […]
Read more...The Wall Street Journal broke the story that Bear Stearns’ 74 year old chairman James Cayne has told board members he will give up his CEO role but stay on as chairman. 57-year old president and investment banker Alan Schwartz is expected to assume the CEO post. I complained back in November that the Wall […]
Read more...The Financial Times’ Tony Jackson admits to having come to a bearish propensity from having trained under the dour Scots, but nevertheless thinks that pessimists, at least as far as the near-term economic outlook is concerned, may have a point. Jackson goes through a quick and dirty list of Things That Could Cause Trouble. While […]
Read more...Drake Management’s founders, Anthony Faillace and Steve Luttrell, have the pedigrees that go over well with investors. Both hail from BlackRock, and before that, Pimco. After a stellar 2006 for their largest fund, Global Opportunties, a global macro player, 2007 a large increase in assets under management was followed by a dramatic reversal, The fund […]
Read more...The theme du jour, at least in the world of Dow Jones, is the sorry condition of the financial services industry. While the basic thrust is nothing new, some of the data point are revealing. The Journal’s Heard on the Street column tells us that banks like Citigroup and HSBC are likely to sell business […]
Read more...On top of Bear’s subprime losses, hedge fund woes, and pending lawsuits and investigations, what else could go wrong? Answer: one of its big earnings engines seizes up. The Financial Times reports that Bear Stearns will announce that it has lost market share in prime brokerage. Prime brokerage is something of a misnomer; hedge funds […]
Read more...A Bloomberg story reveals that municipal bonds have lagged other fixed income investments, mainly because important investors, namely hedge funds and banks, are directing capital to other uses (as in saving their hides). Due to their tax-deductible status, munis trade at a lower yield than Treasuries, but that differential has narrowed markedly. Are munis a […]
Read more...The odd thing about former hedge fund manager Ralph’s Cioffi’s departure from Bear Stearns isn’t that it has happened, but that it is taking place now. The decision to keep him on as an advisor was inexplicable, unless there was some convoluted legal reasoning, for example, that keeping him in the Bear tent would lead […]
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