Amaranth

  • 10 Oct 2006 at 5:09 PM
  • Amaranth

Amaranth’s Stock Portfolio: Now 97% Smaller

By

One of the best places to find out what really went down at Amaranth at the end of this summer was the Platts news service, which is pretty much the go-to for energy news. Well, the go-to place if you have plenty of cash to fork over for the subscription only service. Today they picked up on Amaranth’s latest SEC filing. The damage is severe. The funds stock holdings are down to $175.2 million.
Here’s an excerpt.

The value of hedge fund Amaranth Advisors’ stock portfolio dropped 97% in
the third quarter, according to filings with the US Securities and Exchange
Commission, as the fund was forced to liquidate the bulk of its holdings to
meet margin calls on more than $6 billion worth of bad gas trades.
Amaranth controlled $175.2 million worth of stocks and puts and calls on
those stocks at the end of the third quarter, the Tuesday filings showed.
By comparison, Amaranth’s stock portfolio was worth $5.7 billion at the
end of the second quarter, according to SEC filings.
Stocks and puts and calls on those stocks made up an undetermined portion
of Amaranth’s investments.

You didn’t actually think we were going to make through an entire day without mentioning Amaranth, did you?

    • 09 Oct 2006 at 11:33 AM
    • Amaranth

    Has Brian Hunter Hired Bodyguards?

    By

    London’s Sunday Times Prufrock column says it’s hearing that Amaranth trader Brian Hunter has hired bodyguards. Even more striking, the Times report says the guards were hired after “several attempted attacks” from colleagues.
    Are Amaranthers really trying to attack Hunter? We’re putting this at about a 30% chance of being true, because we find it hard to imagine energy traders in Calgary as thugs or assassins. And we find it hard to imagine Amaranth’s Greenwich, Connecticut staffers actually making the trip all the way out to Calgary just to deliver a beat down on the guy.
    So has Hunter hired bodyguards? We’d give this about a 60% chance of being true. If we’d lost more than $6 billion of other people’s money, we’d probably think about a little extra security ourselves. Just because Amaranth employees aren’t attacking Brian Hunter doesn’t mean he’s not paranoid.
    The trader they hate [Sunday Times; fourth item]

      • 09 Oct 2006 at 9:59 AM
      • Amaranth

      In Re: Silver Linings: Amaranthers Finding Jobs

      By

      amaranthHQ.jpgHey, look! Some good news coming out of Amaranth.
      We’re told that employees at the hedge fund manager Amaranth, which suffered massive losses at the end of this summer and is now in the process of winding down its funds, are indeed landing financial industy jobs, thanks in part to Amaranth’s reaching out to many of the banks and other Wall Street outfits with which it has relationships.
      According to a source familiar with the situation who spoke with DealBreaker over the weekend, Amaranth’s employees won’t be hitting the dole anytime soon. The fund has so far been successful in placing many employees at clients, vendors and competitors, we’re told. Since the problems at Amaranth arose from its tiny Calgary office, employees in the Greenwich, Connecticut offices do not seem to be suffering from any “scarlet letter” shunning when looking for new positions.
      Amaranth has announced plans to lay off 250 workers, about 60% of its workforce.

        • 06 Oct 2006 at 10:01 AM
        • Amaranth

        Amaranth Turns Into Job Placement Agency

        By

        amaranthHQ.jpgTAs we reported last week, people are still working at Amaranth. You haven’t forgotten them already, have you? They were the hedge fund whose Calgary based energy trading desk bet big on natural gas futures and lost big. So big, in fact, that Bloomberg says its losses were the costliest ever for hedge fund investors.
        Well, people are still working there. But not for long. About 250 of Amaranth’s 420 employees will be dismissed, the firm announced. It’s offering to help employees find new jobs. It’s even stressing that unlike a traditional recruiting firm, there won’t be head-hunting fees associated with job placements it makes for its people.
        The mystery here is what the remaining 180 employees not being dismissed by Amaranth are going to do. Some will no doubt have to be kept on to oversee the transfer of Amaranth assets to buyers and the redemption of funds to investors—but that sounds like a job for about twelve people. What’s everyone else there doing?
        Or maybe the real mystery is why anyone would stay on at Amaranth? Again, maybe it’s appealing for some wind-down specialists, but what’s in it for everyone else? After a couple of months, won’t remaining Amaranth employees start to look like people who couldn’t get a job anywhere else?
        Amaranth to Cut About 60% of Workers as It Liquidates [Bloomberg]

          • 05 Oct 2006 at 12:49 PM
          • Amaranth

          The Definition of A Genius Trader

          By

          yieldsign.gifGary North, in the middle of a long column warning that the inverted yield curve is telling us a recession is on the way, touches on the Amaranth meltdown and the illusions of trading geniuses.

          There is a temptation that faces investors who happen to buy into a market just before a major rise. They think, “I’m a genius. I can beat the market.”
          The most recent example of this mentality is the 32-year-old hot-shot who made two billion dollars for hedge fund clients in the highly leveraged natural gas futures market. Then, in just two weeks, he lost six and a half billion dollars with his technique. Amaranth Partners, a hedge fund, suffered the consequences.
          On October 1, Amaranth suspended redemptions by its clients. They are now locked in. Their capital is no longer accessible to them. Redemption is by grace – the grace of the directors. The directors giveth, and the directors taketh away.
          The clients thought, “I’m a genius. I got into Amaranth Partners.” They are all ex-geniuses this month.
          Genius is a rising market.

          But go read the whole thing.
          When the Yield Curve Flips. . . . [LewRockwell.com]

            • 05 Oct 2006 at 11:33 AM
            • Amaranth

            Flipping Amaranth

            By

            amaranthHQ.jpgThe Wall Street Journal’s big story this morning on how Citadel and J.P. Morgan bought out Amaranth’s energy positions and then flipped them back onto the market is a great uncovering hidden value tale. It’s also a good illustration about how risk tolerance differs for different market actors—Citadel and JP Morgan could tolerate holding the troubled Amaranth positions in part because their size allowed them to make additional investments to hedge against the risk. The best ‘graphs are toward the end of the story.

            Citadel and J.P. Morgan employed their risk-management systems to estimate the investments’ value. Their conclusion: Once transferred from Amaranth, the trades would be more valuable than the market assumed. The new owners would be able to hold them until they proved to be winners, in part because each was bigger than Amaranth and so could afford to wait. J.P. Morgan and Citadel also felt they could hedge, or reduce the risk of the trades, through other investments.
            Working with Amaranth’s traders, they concluded that enough collateral remained to back the investments, so they could be assumed. The collateral totaled $2 billion, people familiar with the situation said. Along with the investments, that money was transferred to J.P. Morgan and Citadel.
            To reduce some of their risk, the partners immediately moved to sell some of the investments after concluding that the energy market wasn’t buckling, despite worries about ripple effects from Amaranth’s woes. Willing buyers quickly emerged. Some were J.P. Morgan’s investor clients. Others were traders on the other side of Amaranth’s bets eager to cash out and pocket their winnings.
            Within days, the firms had sold enough of the portfolio to shift more than 50% of its risk to others, according to someone close to the matter.

            Both Citadel and JP Morgan are generally being treated as knights in shining armor who rescued Amaranth investors (and perhaps the broader commodities markets) from even worse losses. But we’re sure somewhere in the back of his brain Amaranth energy trader Brian Hunter must have watched those traders flipping his investments and thought “sharks in the water.”
            How the Wreck From Amaranth Was Contained [Wall Street Journal]

              • 04 Oct 2006 at 12:39 PM
              • Amaranth

              Did Al Gore Ruin Amaranth?

              By

              algorehurricanes.jpgOne of the explanations for Amaranth’s outsized position in natural gas futures is that energy trader Brian Hunter may have been predicting that hurricanes this summer would hurt energy production. So where did Hunter get the idea that hurricanes would be worse this year than last?
              Maybe from Al Gore. Last night we had occasion to flip through the book version of An Inconvenient Truth and came across this paragraph in the introduction.

              The voluminous evidence now strongly suggests that unless we act boldly and quickly to deal with the underlying causes of global warming, our world will undergo a string of terrible catastrophes, including more and stronger storms like Hurricane Katrina, in both the Atlantic and the Pacific.

              Maybe we should have added Al to our poll on who to blame for Amaranth.