3:29: Hold music. Hopefully I won’t get mysteriously kicked off.
3:34: Now operator is saying we’ll be starting in “approximately ten minutes.”
3:41: The hold music is some techno-y, New Age stuff.
3:43: The conference will begin “shortly.” Now the music kind of sounds like what you’d hear in a Sharper Image.
3:46: Radio silence
3:48: Gerald Beeson, Chief Operating Officer, starts call.
3:50: Kenny in the house
-Grateful to be surrounded by incredible team
-gives the mic back to Beeson
3:51: we have seen the near collapse of the world’s banking system. we wont go into the details. we’re going to talk about how Citadel has weathered the storm.Wellington Kensington down 35% ytd as of last Friday.
3:54: Dollars losses sustained in 4 weeks following LEH’s bankruptcy
3:55 We’ve seen the importance of diverse counterparties
3:57: The firm’s liquidity remains strong with more than 30 percent of investment capital held in cash.
3:58: Significant capacity in lines that have NOT been utilized. As of today, 8 bn of undrawn capacity in tri-party lines.
3:59: “some of the principles we’ve had around what has commercially acceptable, as we move forward, will not be acceptable
clearing houses will be much more important in the trading of over the counter derivatives.
counterparty credit exposure has not been apart of our losses; losses were due to dislocation.”
4:00 Ken takes mic
-Dislocations will create tremendous opportunity
-”incredibly excited about the portfolio we own”
-as TARP and other programs come to bear, stresses will correct themselves
-Never seen a market as full of panic as the last several weeks
-the banking system will be forever different
-redemptions at yearend are modest
-couldn’t ask for a better team to weather the storm
- #1 trader of listed options it the US
- very proud of team for providing liquidity
- with respect to W and K, everyone knows what we need to do: make good investment decisions and deploy thought capital
- Looks forward to 2009 being a good year.
Questions from Note Holders
-No questions
And scene.
Pity, none of the Dow Close guesses will have the benefit of this call to work with.
Is Kenny G going to blame the short sellers?
thanks for the live-blog, bess.
what is the hold music?
Anyone else able to get in? I’ve been trying for 20 minutes w/ no luck.
Apparently nobody here can get in. I hear fast busies on just about every desk (speakerphones)
-mrp
All the hold music sounds like the interludes from Ferris Bueller.
@ 4 –
a little known Kraftwerk cover of “Me and Mrs. Jones” It’s awesome!
Thought you all should know,
Bess is doing this live blog topless.
can’t get on the call either (tried both lines relentlessly)
you’d think they would until after the close if it were bad news. maybe the ten minutes gets strung out.
I was hoping Ken would have some style and go with Biggie “Mo Money, Mo Problems” or the Method Man “C.R.E.A.M.”
“However, new approach is required
You’ve *got* to do the work”
Because, dear investors, previously we allocated capital depending on how we were woken up on the day.
been trying since 3:20, even tried the international line- no luck
We lost all your money. Sorry.
WTF. Are they trying to fucking buy time here?
Get the money. Dolla dolla bill yall!
Let’s go back to our ABC’s.
Ass
Balls
Cock
Can we get a confirmation on the artist performing the new age type music?
“only 17 more minutes guys til the market closes, you think they’ll stay on hold?”
Citadel:
Noteholders will have to watch the Fed stick into us a hot preferred equity injection into our funds. You will be able to do this from the sidelines or the rear. Regardless, you will leave feeling cheated and shortchanged since the Fed didn’t give you one either.
Okay…now it’s time for questions from the audience.
Their conference call company would host unless they put down a deposit. Couldn’t come up w/ money.
Ken: If everyone on this call wires us $10,000, we’ll be fine for another week. Okay, maybe three days. And who let all this fuckers from the fed in here?
A lot of people would apparently *LOVE* to see Kenny G get a hot beef injection from the Fed.
If this is the end, there’s no way KG breaks down in tears a la Larry Hilibrand…
wuss.
Hm…silence
Hm…silence
and that concludes our call!
If the Fed injects capital into Citadel there will be mass rioting in the streets, and I will be among them, sans-cullotes.
Or…..maybe they just cashed AIG and Fed check and their funds are up like a zillion percent and they want to laugh at all the Ivy League jerkoffs who they traded with.
maybe…….
A reverse crank call?
why would anyone go into a Sharper Image?
“fool me once shame on me, err,” GWB
COO is currently servicing his lawyers (verbatim)
Didn’t Sharper Image go BK? ominous
Great Thomas Dolby reference.
(I’ll stop now)
Citadel: We’re down a bit, sure, but it’s just a flesh wound really.
Interesting…so you’re hedging stuff that’s tanking with stuff that’s REALLY f*ckin tanking
Well done
“Federal agents mad cause I’m flagrant”
why as of LAST Friday? Don’t they know where they stand THIS Friday?
Only conclusion I can draw is that it must be worse by another 500bps or so.
Tapped myself, and the phone in the basement.
Citadel is a privately traded company… So they have a vastly reduced duty to report the truth here, right?
lawyers?
8 sticks in undrawn capacity
drop in the bucket
Who is buying stocks?
SO WHAT? I’M STILL A ROCK STAR.
“Beating Citadel” is the new “up”.
C.R.E.A.M. is technically a Wu-Tang clan song.
“Tap my cell, telephone in the basement”
Losing 180 points in six minutes to the close. Way to go, Dow.
The correct biggie quote is “tapped my cell and the phone in the basement”…..not myself.
When you have to convince people you are strong, you really aren’t.
But honestly…could you really tell everyone: We’re f*cked and so this is goodbye?
Citidel: Everything’s OK. We found the Holy Grail.
Investors: Can we see it?
Citdael: No you may not.
Are citadel’s notes publicly traded or not?
If not, who would the bondholder turn them back into to unload them?
What’s going on here?
Did Citadel sell CDS protection on its own debt?
Mahnahmahnah!
no grave dancing tonight. bummer.
“Please don’t cash out all your money! I promise, we’ll make it all back next year!”
What does Ken think of the lunar cycle?
well that was useless…..
this is why we are in trouble. When note holders have no questions when the smoke is so thick everyone’s coughnig.
“These are not the bad PMs you seek.”
That was ridiculous. THe note holders should be ashamed that they couldn’t rally for a question.
@59
Circle gets the square
i just got it – is it done?
all i hear is another type of newage music…
Wait, no questions? How bout this:
“hey ken, how’s it feel to get f’d in the a. suckaaaaaaaa”
Bona fide noteholders probably couldn’t get through … OR … wanted to identify themselves. It was obvious that this was a public forum – what FOF or other institution wants to express concern about a holding that way?
44: I’z a lawyer, but this isn’t legal advice.
“Vastly reduced” is true but relative and mostly deals with affirmative duty to disclose. Basically if you can see an exchange from your office, metaphorically speaking, actual lies or materially misleading statements, etc, can come back and bite your ass clean off, publicly traded or no. They can get boiler-room pump-and-dump chumps, they can get this guy if he pushes it too hard. They’ll find a way.
Didn’t listen to the call, have no opinion on the legal status of any comments made.
what happened to: good qtr guys; how should we be thinking about guidance next qtr; and my pers fav, just a few housekeeping questions
@53
stealing from other blogs are we?
@64: then WE are the suckers. That was just a dog-and-pony “we’re OK! please go back to your regularly-scheduled trading – no need to worry about us!”
Did anyone read the New Yorker article on Jerome Kerviel? When SocGen called up the head of their version of the SEC, and said “we have material information” (i.e. huge unhedged position that we have to unwind) “that we have to act on”.
That is what this is – pay no attention to the man behind the Griffin.
Another tool with a bowtie.
53 here: those words are my own
I was also the guy who came up with the “nobody want to buy your drugs here…louie!” quote which EP stole from me two days later. It’s a dog eat dog world out there.
Only AIG sells protection on itself
@70 what other blog was it on?
wow- 72 of the most intelligent “comments” i’ve ever heard.. well done- now go take your naps.. you’re all ridiculous.
“53 here: those words are my own
I was also the guy who came up with the “nobody want to buy your drugs here…louie!” quote which EP stole from me two days later. It’s a dog eat dog world out there.”
Uh, I think it was Timothy Harris who came up with that line. (I have no idea who you are or what your blog is).
wow- 72 of the most intelligent “comments” i’ve ever heard.. well done- now go take your naps.. you’re all ridiculous.
can carney stop ripping off db? it’s embarrassing…he obviously wasn’t on the call and yet:
http://www.clusterstock.com/2008/10/ken-griffin-i-ve-never-seen-a-market-like-this-before
2nd time today, shall we go for the hattrick?
hearing there is a $933 million leveraged loan BWIC out there right now. CSFB. Reducing risk? Raising capital?
@73/75
You’re goddamn right we are. That’s what happens when you’re a f*ckin baller
@76- saw that. what a spinless rat.
What is Citadel? 99% convertible arb? How’s that historical data analysis working out for them?
These guys are different. They are basically dealers in options, etc. financed by their LP’s. Every once in awhile they swoop in and buy panics.
They’re simply not like the other guys that buy (or sell) and hope.
Also, they have broad-based talent and don’t rely on one or two “smart guys”.
They also raise their own borrowings directly-not through the big dealers.
I don’t have any money in any of Ken’s outfits. I just know them somewhat and they are fairly unique.
I worked at Citadel in converts until today. Six of us let go.
Too long, didn’t read.
Ken Griffin… more like Peter Griffin.
The gerbil (who stole his Convertible Arb Model from Rush Simonson) finally gets his due.
-VOL IS KING
#82: sorry to hear it. how many were in your group total – is 6 a big number?
@81, so they “sell the skew” which is pretty much the backbone of every options dealer. How’s that leptokurtosis working out for them?
“Things that make you say hmmm?” – C&C Music Factory
anybody else hearing they’re 70% down including their CDS book?
I worked at Citadel in converts until today. Six of us let go.
“My team supreme, stay clean
Triple beam lyrical dream, I be that”
“…. in holsters, girls on shoulders”
@85 — it was approx 1/3 of the group. We have some ppl in London as well, and I don’t have their headcount. I’m starting my own shop to trade vol.
Good weekend everyone.
@85 — it was approx 1/3 of the group. We have some ppl in London as well, and I don’t have their headcount. I’m starting my own shop to trade vol.
We’re down 45%
Good weekend everyone.
@85 — it was approx 1/3 of the group. We have some ppl in London as well, and I don’t have their headcount. I’m starting my own shop to trade vol.
We’re down 45%
Good weekend everyone.
WTF! Miley’s dating a 20yo?
@94
Go back to perez hilton prgy!
@94 Grass grows play ball.
Baby Jesus
any other rumors of Citadel laying off people?
#s 1-97 who gives a shit about citadel?
“Deploy thought capital….”?
Now I want my money back!
LABia’s Decric strikes again!
The word on the floor is that Ken and the boys up at the fort are fucked. Period.
What a dumbass, conf. call 30 min before the close, nice try though, still the NY Fed will see your call and raise you all in Kenny…., hmmm more silence….hmmm thinking now, did he check raise me or did I semi bluff with a small suited pair to the flop, hmmmm, he has me covered, not sure what to do here….. hmmm maybe I talk him up before I act, get a read on him….
Pitiful, the floor sees through it, thus the market see through it.
Pack up the fort, the days of selling imlied vol just went KABOOM. Nothing like the smell of 70 i.v in the morning, cue the Wagner.
Cut.
i trade butterflies, and you?
does anybody have a transcript or know where one is posted?
Did they ever mention one thing about their capital position?
LEH had alot of cash/liquidity right up to the end.
Once counterparties realize you’re insolvent, they aren’t going to trade with you. regardless of how liquid you are.
I can attest that Griffy is not a big seller of vola in flies. 101 wouldn’t know his dgamma any better than Kenny G. than Kenny G. Nice try, however.
I can attest that Griffy is not a big seller of vola in flies. 101 wouldn’t know his dgamma any better than Kenny G. Nice try, however.
So….did they crash or not?
@98.
The only reason to care about Citadel is that they might be forced into forced redemptions (if they haven’t been forced already).
Just read a piece by someone who said that all the hedge funds are fine and will survive and he doesn’t understand why people on CNBC keep saying that they are selling, cause this guy says they aren’t.
@105,
this, your reply, in a word is what is/was wrong with “the street”.
Derivative’s for Dummies:
Lesson 1.
If you are trade convertible bonds in the manner of delta neutrality vs. the underlying stock i.e long the convert short the stock or vice versa you ARE either long the implied volatility of the embedded option or short it, respectively.
Lesson 2.
If you don’t understand this BASIC concept do not try to pretend as if you do on a public format/blog that is read and used by PRACTITIONERS of said financial concepts.
Lesson 3.
My name is ‘i trade butterflies, do you’.
End of Lesson.
itbdy
Glossary.
dgamma: a term used by idiots (see past members of Bear Stearns Derivatives desk) who attempt to sound sophisticated when referencing the higher moments of optionality. Please keep in mind gamma, expressly the d. of gamma has NOTHING to do with i.v per say as gamma has only to do with the second derivative of delta.
Warning this handout only to be used in case of supreme assclown antics by the pseudo intelligent- you know, Merrill stockbrokers pretending to be traders.
End
@105:
There’s no such thing as implied volatility, just delta and gamma. Implied volatility is a myth told by floor traders in order to fleece idiots.
Invest only in 100% Genuine Real(ized) future volatility. Except not synthetic substitutes.
-(maximum instantaneous realized future) VOL IS KING
yeah, that was @ 109
Public denial of any liquidity problems, trading losses, counterparty issues, blah blah blah. We haven’t heard anything like this over the past year. Wait for the Sunday night/Monday morning government intervention /unexpected merger announcement.
@110
You believe in delta and gamma? What about the tooth bunny? It’s all interpolation, don’t kid yourself.
Didn’t these dingbats read Fuld’s email and then hunker down. Yeesh. The Fed is seeking cash from the shadows to fund the board. The dinner bell is a margin call. What’s on the menu?
We call them “monkey sheets” and we give them to the floor traders in the options pit. You can find your “dgamma” there
@113:
Gamma is the only thing in this world that I do believe in my friend. It is real and predictable and calculable, with certainty. AND not only is it real it is systemically under priced. People sell dollars for pennies and buy pennies for dollars every day.
@115
Sheets?!! What happened to handhelds?
@ Idiot Vol Trader aka Vol Is King:
“There’s no such thing as implied volatility, just delta and gamma. Implied volatility is a myth told by floor traders in order to fleece idiots.”
Implied vol is “mark to market”. Markets can/ will remain irrational longer than you can remain solvent.
Wanna bet? Done. Any time; Any Size.
Markit to Market
Think of this one — “skew” has been really bid as of late. A smart hedge fund (read Citadel ((a la LTCM but with timespreads))) might say “hmm, this is ridiculous! These puts in the same month should not be priced on an implied volatility this much higher than that which the equivalent calls are priced on! Sell the spread!”
Then hmm… that mispriced spread continues to expand (remind you of implied vol spreads across time with LTCM?)
Hey.. these spreads are continuing to expand.. and hey… we’re falling into our shorts? What gives! Not only is our position getting marked against us, but we’re getting hosed on gamma!
Uh oh.. our clearing firm wants us to put up cash — No pro-, wait, what about all these redemptions? Hey can you give us a break clearing firm?
Big bad Goldman Sachs – “You better pony up on this haircut or protect your downside!”
KG with tail between legs – “But we can’t raise adequate funds with the redemption, and we can’t borrow!”
Goldman Sachs – [[brainstorming with KG on how to protect downside whilst mitigating cash outflows]] – “You’d better sell some futures KG, or we’re liquidating your portfolio on the open — all of it.”
KG – “Can you give me a few days?”
Goldman Sachs – “Open Friday, or else.”
KG – “But there’s no overnight or premarket liquidity! ((crying on TT as he sells the market limit down and is still forced to work thousands of future sales 8pct down on the open)) — This is criminal!”
Goldman Sachs – “Cry to the Feds… Oh wait, THEY WORK FOR US.”
—End Scene—
@101 – what’s a small suited pair? holding two five-of-diamonds?
@119 – I like the post – sums it up nicely.
@120
Nice catch, that should have read “small suited connectors”.
Late night posting has its drawbacks.
Thanks for pointing that out.
@119
Nicely done. Not sure if you picked up on my moniker, but this was my backhanded way of describing The Fort’s basic position. These nimwits saw the skew jack across the board in the indices and the lsited single names on the floor- and then like every “smart” trade decided 50,55,60 vol was just too rich not to sell and so they sold the skew with abandon- all under the idiotic belief that the massive ‘flow’ they see across their entire book would allow them to hedge out any vol dips on the vol surface of the i.v they sold. BUT guess what? Yup, no vol dips occurred in the otm they sold- instead the market raced down and their otm quickly became itm and no amount of dynamic hedging could save them.
Here is where a good risk manager COULD have saved Kenny and the fort, by saying, ‘look we took a shot at selling the top in i.v and we got nailed- let;’s just buy the damn puts and synthetic puts in and live to fight another day- but NOOOOO not those boys up at the fort, this braintrust decided to do the dick on the table trade- and instead of buying the damn atm straddle in the indices, they sold them. OOPS!!!!
Hmmmmmmmmm,
So you mean now we are short otm, and the atm vol??? Well why yes Dr. Kevorkian, we did- but who would have thought that i.v would go to 70!!! Why that’s a 9 sigma event- it just doesn’t happen. Well, except for last week- but, but, but….hey what are you doing with that needle doc? Doc….?? Do…..
The fort SHOULD have legged into the butterfly, but hubris and their models told them not to, ergo they sold straddles and sold futures as their ‘hedge’ but when vol expands delta can NOT hedge vol.
Not in the convert market (ooohhh thanks Chris Cox).
Not in the CDS market (wait just a friggen minute TCW , what do you mean you have no bid on my high yield bonds, you sold them to me just last week 8 points higher!).
And certainly not in the OTC and listed options market- “hmmm futures rallied but why in the name of god is vol still 70 bid, wait we are trading down again, shit its 75 bid, fuck 80 bid!!!”
“Mr. Griffin, I have Mr. Geithner on hold on line 1 and a Mr. Singh, wait no a Mr. Lieberman from Goldman Sachs on line 2. Mr. Griffin?, Mr. Griffin are
you there??”
Cut
itbdy
@119 – perfect scene.
http://www.weeklyta.blogspot.com
@118:
Are you aware options can be exercised if the market price is irrational?
Here’s a little trick boys, never assume the IV in the ATM options is too high. Just assume that if its correct that then there are some serious violations of parity in the chain and just keep trading them until they go away. If future realized volatility really is that high then the ITM calls are way too expensive and the OTM puts are way too cheap. same thing on the upside.
@119:
GOLD!
P.S.
When all these companies cut their dividends cramer is really going to regret recommending all those “high yielding stocks”
oh oh…. new trade idea….