Sayth Bill via the PIMCO Twitter feed (yes): “Not to rain on your parade but be leery of today’s exuberance.” [PIMCO via Heidi Moore ]
Archive for August 2011
Just a quick programming note for those of you who failed to mark it down on your calendars: please be advised that tomorrow is George Soros’ birthday (his 81st to be exact). Continue reading »
Frank “F.I.A.S.C.O.” Partnoy has a column in today’s FT pointing out that you’ll probably be replaced by an iPhone app pretty soon:
In the future, improved technology will reduce the number of human beings needed to allocate capital, as it has done in other service industries. People will also play a smaller role in dealmaking and trading, just as they do when we board a plane or shop for clothes. HSBC is downsizing so dramatically because its leaders look at technology companies and see their bank as a dinosaur that must shed weight or become extinct. …
Facebook and its peers also play an allocative function, just as banks do, except they help people move content instead of capital. Social network firms and banks both allocate information; in one case it is personal data and in the other it is money. As with Google, though, the employment numbers differ starkly. Facebook’s equity is worth more than that of most banks, yet it has just 2,000 employees.
Imagine the following thought experiment. If all of the world’s major banks had failed during 2007-08, and regulators had permitted Apple, Facebook, Google and Microsoft to take over the economy’s capital allocation function, how would employment numbers have changed? Surely any neo-bank would hire smart lenders, traders, analysts and advisers, the people who have the strongest relationships with, and knowledge of, the institutions that demand or supply capital. But would they have hired all of them? Half? How many people would a new bank really need? Hedge funds take on traditional bank functions with a fraction of the employees.
And sometimes that doesn’t work out!
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So Europe’s going to ban short selling. Or not, whatever. Or, sure, yes. Since last time this happened it did such a great job of propping up equity prices.
But maybe propping up equity prices isn’t the point? It’s not hard to find European (or American) politicians who just think that short selling is immoral and should be punished by public flogging, whatever it does to equity prices. And given the likely explanation for the recent European financials selloff – worries that banks’ balance sheets are stuffed with Italian government debt – maybe there’s something else going on here. Here’s a comment that’s sure to get some regulators’ blood boiling:
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George Soros and his “on-again, off-again non-exclusive girlfriend” Adriana Ferreyr in happier times. [Earlier]
George Soros’ “On-Again, Off-Again” Ex-Girlfriend Wants $50 Million For Broken Promises
By Bess Levin
In 2006, George Soros was eating lunch in the Hamptons when he feasted his eyes on something he thought looked even tastier than his soft-shell crab sandwich: 23 year-old Brazilian soap star Adriana Ferreyr. A “smitten” Soros asked for her phone number and the two dated for the next five years, with Soros promising to buy her her “dream home” at 30 East 85th Street, a convenient two blocks from his own pad. A few days after a contract was signed Soros “heartlessly dumped.” Ferreyr was pretty pissed about the situation but, as these things go, the duo “briefly reconciled for a romantic night together” during which Jorge supposedly had the Soroses to “whisper in her ear” that he’d given the keys to her dream house to another one of his gal-pals. That’s when this allegedly happened: Continue reading »
Update: According to Citadel “we’re laying off some employees but not shutting down the entity. This continues to be an ongoing business.”
From the front lines: Continue reading »
Hedge Funds Win With Gold, Bonds; Paulson Struggles (WSJ)
Ray Dalio’s Bridgewater Associates LP has scored gains of more than $3.5 billion, or about 5%, in its flagship hedge fund just in the past week, according to investors. The $71 billion fund now is up more than 20% this year, investors said, making it among the best performers in the hedge-fund business. The gains are partly due to a spike in safe-haven investments, such as gold, Treasury bonds and the Swiss franc, in which Bridgewater has sizable positions. Other large hedge funds that try to anticipate global markets and economic trends, such as Bruce Kovner’s Caxton Associates LLC and Alan Howard’s Brevan Howard Asset Management LLP, also are making money, even as the Dow Jones Industrial Average has shed nearly 12% so far in August. But John Paulson, the investor who made billions during the mortgage meltdown of 2007 and 2008, has been on the wrong side of the market.
For Street Veterans, Past 3 Days Rank With ’87 Crash, ’08 Crisis (WSJ)
“I’ve been lucky enough to be in this business over 50 years and have seen lots of things, from the Cuban Missile Crisis and the Kennedy assassination to the Crash of ’87 and the 2008 meltdown,” Art Cashin, director of floor operations at UBS Financial Services, wrote in his morning note Wednesday. “Still, [Tuesday] was rather special. … One of the most frenetic and bizarre trading sessions that I can recall.”
Sarkozy Gives Ministers One Week Debt Deadline (FT)
On Wednesday Mr Sarkozy summoned members of his government back from holiday for an emergency meeting on the current financial turmoil. In a statement after the two hour meeting in the Elysee Palace in Paris, Mr Sarkozy said France’s pledge to reduce the budget deficit from last year’s 7.1 percent to 3 percent by 2013 “will be kept whatever the evolution of the economic situation”.
Penny Pinching Hurting Recovery (WSJ)
The past week’s market meltdown is confirming what many business leaders and consumers were already thinking—that the economy is close to tilting back into recession and therefore they need to cling to every penny. For an economy already on the brink, such precaution may well be the difference between growth and recession. Gross domestic product—the sum total of goods and services produced in the U.S. and the broadest measure of economic growth—grew at an annual rate of less than 1% in the first six months of 2011. Just a few delayed decisions could push the rate back into negative territory. “Consumers will decide whether we have a better second half or not,” said Dean Maki, chief U.S. economist at Barclays Capital in New York. Continue reading »
Three weeks ago, Egan-Jones Ratings Co. downgraded America. Almost no one paid attention. “S&P’s downgrade was on the front page of every newspaper,” said Sean Egan, president of the Haverford, Pa., ratings firm, which has been issuing ratings since 1995. Mr. Egan’s disappointment that Standard & Poor’s rattled the world with its Friday-night rating cut on long-term U.S. government debt to double-A-plus, from triple-A, while his identical move was essentially ignored, is a sign of the grip on the debt-ratings industry held by its three giants. [WSJ, earlier]
Scottwood Capital Decides To Become Family Office After Majority Of Non-Related Investors Redeem
By Bess LevinThey’ll show you. They’ll show all of you! Continue reading »
Got that?
1. Brian Moynihan told Bruce Berkowitz this afternoon, “I’m comfortable we can get to 1% return on assets based on a 1.25%-1.5% Fed funds rate and a normal business cycle.” Moving to 1.5%-area short term rates would apparently add about $3 billion to BofA’s net revenue.
2. Jamie Dimon chatted with Melissa Francis this morning and told her:
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