hedgefundmetdownrumors.gifRumors have been swirling around about two separate hedge fund meltdowns. According to one set of rumors a multi-strategy hedge fund facing impending doom due to leveraged bets in credit derivatives. Entirely different sources have mentioned a major meltdown from natural gas bets. DealBreaker calls to some of the usual suspects could not confirm the identities of the allegedly troubled funds.
And we’re not naming the names being whispered because life is hard enough without getting called out on DealBreaker as a meltdown candidate when things might be going just fine.
Both rumored meltdowns are plausible given recent market movements. The credit markets have been rocked by a level of volatility unseen in recent times. Earlier today Bloomberg reported that many large financial institutions believe that hedge funds are using too much leverage to finance credit derivative investments, according to a Fitch
Ratings survey of 65 banks, insurers and money managers.
Natural gas futures prices are flat to down, and the spread between summer-winter season is narrowing. The spreads in future contracts fell from $2.50 to pennies in two weeks. Similar movements in the markets for natural gas futures helped bring down Amaranth last year.
If you’ve got a likely candidate for either rumor—natural gas or credit derivative blow-up—feel free to leave a comment below or email us at
Derivatives Banks Concerned by Hedge Fund Leverage Bloomberg]

johnivers.jpg[The following is an imagined conversation based on a real event. After the Times ran its exposé on men in their 40s who don’t let their 20-something girlfriends come out to the Hamptons for the weekend, John Ivers, 42, got himself and the 19 people with whom he went in on a sweet 4-bedroom summer share in the Hamptons kicked out of their house*].
Ivers: Brosef, it’s Ivers.
Guy Ivers went to college with 85 years ago, ATO brother: Who is this?
Ivers: Ivers, man, Ivers! 2 minutes, 30 seconds ATO record setting keg stander-Ivers!
Guy: …Jeff…?
Ivers: John, brah, John!
Guy: Right. Hey man. Been a while. How are you?
Ivers: Not good, brah, not good at all.
Guy: What’s the trouble?
Ivers: The Times did a story on me being, more or less, AWESOME, you know, ‘cause I told that girl I’m dating she can’t come to the Hamptons because it cramps my style vis-à-vis nailing other chicks, etc, and Summer Share Ivers doesn’t do girlfriends, whatever, and the owners of the house I guess saw the article and were PO’d cause it’s not supposed to be a shared house and to make a long story short I have no place to stay for the rest of the summer and to, more importantly, hang my paddle…you know what I’m talking about.
Guy: Yeah, can you actually hang on a sec?
Ivers: Okay.
Guy: Sorry, kids.
Ivers: Kids? You gotta watch that shit, man, if they’re under 18 it gets risk-ay.
Guy: Actually I meant my children. I have 2 of them, 5 and 7.
Ivers: You dog!
Guy: Right.
Ivers: So brohamster, what I need is for your to tell me where you beach house is and when I can make a copy of the keys.
Guy: Yeah, actually I can’t do that, I just go there with my family, and my wife would probably have a problem.
Ivers: Brohamster, we’re bros! We’re brothers! This is not cool man, NOT COOL!
Guy: Yeah, I gotta go, but good luck with the house Jeff.
Ivers: You’ve changed, broheim.
Earlier: DealBreaker PSA: You Could Learn A Lot From This Guy
*Which we were told by quasi-reputable sources over the holiday. Any of the homeless 20 want to comment? John? You know where to find us.

  • 23 May 2007 at 10:13 AM
  • rumors

Palm shareholders hoping CFO continues to have back trouble

subzero_mk_fatality.jpg Canceling conference appearances may be the latest pump and dump scheme, or just blowing off JPMorgan. Shares of Palm, maker of wireless handheld devices like the Treo, shot up more than 4% on merger speculation created by CFO Andrew Brown’s “back troubles.” Always a euphemism for an impending takeover or unveiling a new wireless megadevice, Brown used his “back trouble” to get out of speaking at a JPMorgan tech conference in Boston. Palm quickly issued its “No, Seriously” press statement, insisting that Brown was not only experiencing back trouble but was “at the physical therapist right now.”
Palm (Nasdaq: PALM) shares have recoiled slightly, trading down over three quarters of a percent in morning trading.
Skyrocketing Health Costs at Palm, Sort of [WSJ Deal Journal]

Rumor Mill: Hedge Fund Collapsing?

NickelsAndSteamrollers.pngWe’re starting to hear chatter about a hedge fund meltdown. The outlines are still vague. Multi-strategy fund. Something like $3 billion under management. But nothing more.
There are way to many hedge funds that fit that description to get anywhere with just that information. So we’re opening up the comments for random guesses, rumor mongers and, who knows, maybe some actual intelligence.
Keep in mind that these stories come and go, sometimes never amounting to anything.

  • 16 May 2007 at 9:58 AM
  • rumors

George Taylor (And Others?) Resign From JP Morgan

George “Beau” Taylor, head of JP Morgan’s energy-trading business has resigned from the bank. The WSJ reports that Taylor will move to Credit Suisse to trade commodities in its proprietary-trading group. Sources tell DealBreaker that a VP and ED will be joining him. Taylor joined JP Morgan in May 2005 and made $725 million off of Amaranth by taking over its positions with Citadel.
No word on the inducements, but as one source told DealBreaker, “Must have been a pretty lucrative offer if Taylor left for another firm, considering his compensation the last two years.”
Taylor’s position will reportedly be filled by energy-sales and trading co-heads Catherine Flax and Ray Eyles.
J.P. Morgan Energy Trader To Join Credit Suisse Group [WSJ]

NEWSCORPDOWJONESRUPERTMURDOCHWALLSTREETJOURNALSMALL.JPGThe story at the end of week two of News Corp’s bid for Dow Jones is clearly the loss of confidence that this will end in an acquisition. No other bidders have emerged. News Corp hasn’t made any gestures that it might increase it’s bid. Quite the opposite—word is spreading that News Corp won’t increase it’s bid and that News Corp CEO Rupert Murdoch has told a close associate that he is not certain he will prevail.
Murdoch seems to be trying to use charm rather than money to win over the Bancroft family, which controls the company through its super-voting shares and has announced—through a representative on the Dow Jones board—that it isn’t going to take News Corp’s offer. He’s telling jokes. Keeping it light. On the News Corp earnings call he spoke of his admiration for the Bancroft family and Dow Jones management. And he’s more or less apologized for the fact that his offer became public, claiming he hoped to negotiate the deal in private—contrary to rumors that the leak came from News Corp. The point of this is to make nice with the Bancrofts, to take away the impression that Murdoch went public with his offer in an attempt to get the public shareholders to pressure the family into selling the company. No one likes to be strong-armed.
(After the jump: A completely paranoid deal judo conspiracy theory.)

Read more »

  • 04 May 2007 at 4:39 PM
  • Banks

Rumor Mill: Prime Brokerage Bust Up At Bear Stearns?

BearStearnsEmptyLobby.jpgA top Bear Stearns prime brokerage executive has left the firm, according to a source who spoke with DealBreaker on the condition of anonymity. The source identified the departing executive as one of the heads of prime brokerage at Bear Stearns. DealBreaker has not been able to independently confirm or corroborate this story, however, so we regard it as unsubstantiated rumor at this point. Bear Stearns did not return calls seeking confirmation or clarification.
Since March, the prime brokerage business at Bear Stearns has been led by Leonard Feder and Louis Lebedin. Feder was brought over from the structured trading desk to replace Jeff Dorman who had left for Deutche bank. DealBreaker placed several calls to Bear Stearns seeking confirmation. At one point a Bear Stearns employee said “Everyone here knows what DealBreaker is. No one is going to answer your questions or call you back.”
A woman identifying herself as “Breeda” answered the phone at Feder’s desk. Breeda said he was traveling in England and would not return for more than a week. She would not comment when asked about the rumored resignations.
Lebedin’s phone was answered by a woman calling herself Gladys. She said that Lebedin was in a meeting but declined to comment about the rumored resignations.
Bear Stearns prime brokerage unit has been a center of controversy for some time. Earlier this year a federal bankruptcy judge ordered Bear Stearns to pay almost $160 million to investors in a hedge fund that was a prime brokerage client. The judge said Bear Stearns bore responsibility for inadequately monitoring its client and failing to detect that the hedge fund was a fraud.
Last year Ron Suber, who was responsible for overseeing Bear Stearns’ prime brokerage hedge fund business, left the firm. He had been implicated by federal authorities in a scandal involving mutual funds and abusive hedge fund traders. In 2006, Bear Stearns paid $250 million in penalties to settle allegations that it had facilitated abusive trading practices by hedge fund clients.
Try to keep in mind that this is only unsubstantiated rumor at this time.

Rumor Mill: Breaking Off A Piece Of The Rock

prudentialbreakingup.jpgWhispers around Wall Street today claim that Prudential, the insurance and financial services company, may spin-off its equity research, sales and trading unit.
“It’s definitely possible that they are selling the group,” a former Prudential Financial employee told DealBreaker. “But compared to the over all size of Mother Pru, the group is tiny. The stock move is surprising.”
On Monday, Mark DeCambre reported on that Prudential Financial was “fielding offers” for the Prudential Equity Group, which handles equity research, sales and trading.
“The equity unit, which is small relative to other shops such as Goldman Sachs and Merrill Lynch, consists of some 35 senior analysts but also has around 80 traders,” DeCambre wrote. “Prudential has been trying to offload the unit as the market for research and trading has become more competitive and less lucrative.”
Today the rumor was everywhere on Wall Street. Several finance professionals told DealBreaker they had heard of the upcoming sale but none could confirm it or name the buyer. At least a one cited a rumor that Prudential might simply shut down the group.
“They wouldn’t make sense as a stand along shop,” DealBreaker’s source said. “But as part of a larger operation, filling-in gaps, they would make sense. They have lots of big league guys. Sales and trading. Good analysts.”
One challenge faced by Prudential’s equity group in recent years has been the focus on large cap stocks in a period when many clients demand analysis on small cap, mid cap and growth stocks, the source said.
“Pru had a great year and a half when they were able to sell themselves as a clean, pure research shop. A Sanford Bernstein look alike,” he said. “But the scandals of Citi and CSFB have faded from memory. That model isn’t driving things. They’ve lost some big analysts.”
Prudential Shopping Equity Unit []
Prudential jumps after report revives break-up talk[Reuters]
Completely Unrelated: The other Pru may break-up also. [Daily Telegraph]