Hugh Hendry’s Slams Economist Jeffrey Sachs: I Would Recommend You Stop Going Skiing And Panic
by ilene - May 27th, 2010 1:20 pm
Hugh Hendry’s Slams Economist Jeffrey Sachs: I Would Recommend You Stop Going Skiing And Panic
Courtesy of Courtney Comstock of Clusterstock/Business Insider
The European banking system is in crisis, says Hendry.
"I would recommend you panic."
The hedge fund manager of Eclectica Management went on BBC Newsnight last night to play pessimist against Jeffrey Sachs, an economist from Columbia University.
Of course the two get into a fight. It’s awesome.
At first Hendry is talking quietly and his manner is worryingly subdued but wait just a minute. He starts going after Sachs at 2:38.
"When you bring on a professor and when you bring on a politician, they are unaccountable. Jeffrey’s wrong, you know what? He’ll survive and tenure. I’m wrong, I go bankrupt."
Then Jeffrey defends himself a little bit, says no one should jump to the conclusion that all is lost, and Hendry literally jumps on him. (4:50)
"I don’t know," says Hendry, "because, was Jeffrey skiing two months ago? I was working, Gillian (Tett, who was also on the show) was working. So we can tell you about the real world."
It’s so offensive that the host has to jump in and say, "Now that’s just a low blow."
(Meanwhile, Gillian Tett is loving this, grinning from ear to ear.)
Then Jeffrey, who doesn’t want to let some other guy fight his fight for him, warns Hendry:
"Please watch your language, it’s just ridiculous. Watch your rhetoric a little bit."
Seriously, says Hendry. It’s time to worry. Panic.
"Banks today are refusing to lend to each other. Bank share prices are collapsing. We have no ability to gauge the credit-worthiness of the banking system."
"I say, let’s purge this system of its rottenness," recommends Hendry. "Let’s take on a recession. It’s going to be tough. People are going to lose their jobs."
"The banking sector is responsible for gross folly," he says. The solution is just, "Don’t pay them. Don’t reward folly."
"We can spread this over 20 years or we can get rid of it over 3 years… You make a mistake, you pay for it."
Of course remember that Hendry is shorting the crap out of Greece and the European banking crisis. He’s a big proponent of speculation and shorting, so he hates bailouts and would love massive failure.
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DiggTies Surface in Pension Chief’s Exit?
by ilene - May 26th, 2010 9:27 pm
Ties Surface in Pension Chief’s Exit
Courtesy of Leo Kolivakis
Michael Syre of the Boston Globe reports, Pension chief says he’ll quit over pay:
Michael Travaglini, who as head of the state’s pension fund is among the highest-paid government employees in Massachusetts, plans to quit next month, citing as a reason efforts by legislators to limit what he and his staff can earn.In his six-year tenure as executive director, Massachusetts Pension Reserves Investment Management ran one of the top-rated public pension funds in the nation — until last year, when losses from the financial crisis made it one of the worst.
Prior to that downturn, the pension fund’s high performance earned Travaglini a $64,000 bonus in 2008, on top of his $322,000 salary. But now he cites the legislative backlash to that bonus system as a factor in his decision to leave June 11 and go to work for a Chicago investment firm.
“The issue of incentive compensation here is back on the front burner,’’ said Travaglini, who will formally announce his resignation June 1. “If you need the context for my decision, it’s an entirely personal one. I have a wife and three children, and I’m going to provide for them.’’
Under the bonus system, which Travaglini helped to create three years ago, he can make as much as 40 percent more if the pension fund exceeds certain investment benchmarks on a three-year basis. Bonuses for other pension fund employees range from 30 percent to 40 percent.
Travaglini said two legislative proposals would limit such bonuses, and thus make it harder to attract and retain talent to run the state’s $44 billion pension fund. One would limit the ability of state workers to earn more than the governor, whose annual salary is $143,000. Another would block bonuses for the years in which the fund lost money, regardless of how it performed against its benchmarks.
“Someone else can hang around for that, but it’s not going to be Mike Travaglini,’’ said Travaglini.
“Most people will say, ‘Good riddance. If you want to make more money, go do it in the private sector,’ and that’s what I’m going to do. But there’s a real threat to not being able to recruit and retain competent people here.’’
He added: “People can vote with their feet, and that’s
…
Insider Trading Busts are the Corporate World’s Darwin Awards
by ilene - May 26th, 2010 3:15 pm
Insider Trading Busts are the Corporate World’s Darwin Awards
Courtesy of Joshua M. Brown, The Reformed Broker
Insider trading busts are the Darwin Awards of the corporate world.
The Darwin Awards are based on people doing such stupid things to end up dead that the entire human race’s gene pool is better off for their demise. When you hear about corporate insiders emailing undercover FBI agents with insider information in this day and age, you can only shake your head and ponder the utterly pathetic intellects of the people involved.
From the Wall Street Journal:
A former Walt Disney Co. employee and a friend have been arrested for allegedly trying to sell early access to the company’s earnings, the Federal Bureau of Investigation said Wednesday.
Bonnie Hoxie, a former Disney employee, and her friend Yonni Sebbag were arrested by FBI agents in Los Angeles on Wednesday, the FBI said. They are expected to appear in federal court in Los Angeles later Wednesday.
Ms. Hoxie and her friend were allegedly trying to sell early access to the company’s second-quarter earnings report to hedge funds and investment companies, the FBI said. They have been charged with wire fraud, the FBI said.
As we hear more details about the investigation, I suspect there will be even more head-scratching over how it could be possible that these people haven’t learned better by now.
No shortcuts, Ms Hoxie. Enjoy your imprisonment.
Props to the FBI for taking this one down.
Source:
Former Disney Employee is Arrested (WSJ)
The Challenge of Closing Tax Loopholes For Billionaires
by ilene - May 23rd, 2010 9:02 pm
"Call me old fashioned but I just think it’s wrong that a single hedge fund manager earns a billion dollars, when a billion dollars would pay the salaries of about 20,000 teachers." Guess I’m old fashioned too. I find the bonuses and tax evading practices of the ultra-weathy financiers even more outrageous than Mish’s Union examples. If free markets are a contradiction of terms – while we’re headed in the opposite direction at lightening speed – maybe we could at least strive for fairer markets? And good luck with that given we need the participation of our corrupted, banker and lobbyist-owned politicians. – Ilene
The Challenge of Closing Tax Loopholes For Billionaires
Courtesy of Robert Reich
Who could be opposed to closing a tax loophole that allows hedge-fund and private equity managers to treat their earnings as capital gains – and pay a rate of only 15 percent rather than the 35 percent applied to ordinary income?
Answer: Some of the nation’s most prominent and wealthiest private asset managers, such as Paul Allen and Henry Kravis, who, along with hordes of lobbyists, are determined to keep the loophole wide open.
The House has already tried three times to close it only to have the Senate cave in because of campaign donations from these and other financiers who benefit from it.
But the measure will be brought up again in the next few weeks, and this time the result could be different. Few senators want to be overtly seen as favoring Wall Street. And tax revenues are needed to help pay for extensions of popular tax cuts, such as the college tax credit that reduces college costs for tens of thousands of poor and middle class families. Closing this particular loophole would net some $20 billion.
It’s not as if these investment fund managers are worth a $20 billion subsidy. Nonetheless they argue that if they have to pay at the normal rate they’ll be discouraged from investing in innovative companies and startups. But if such investments are worthwhile they shouldn’t need to be subsidized. Besides, in the years leading up to the crash of 2008, hedge-fund and private equity fund managers weren’t exactly models of public service. Many speculated in ways that destabilized the whole financial system.
Nor…
The German Government Has Had Enough
by ilene - May 19th, 2010 3:59 am
The German Government Has Had Enough
Courtesy of Karl Denninger at The Market Ticker
If you thought the German government was going to be a lapdog for Sarcozy, or worse, was going to fellate Brussels and the ECB, you got a rude shock today.
It appears that the German Government has just plain had enough of the crap that the banksters have tried to pull, and has decided to do what Barack Obama should have done in early 2009.
That is:
- No more naked credit crap, especially against sovereigns but not only against sovereigns. No insurable interest, no CDS – period.
- Naked shorting will now be actually stopped in 10 leading financial institutions.
- Germany has had it with naked shorting of Gold, and specifically noted bank manipulation of gold prices via naked shorts beyond intent or ability to deliver.
- Germany has also said that they’re not going to permit Euro derivatives that are not a "bonafide" FX hedge. That is, no more naked bets on Euro movements either.
- Hedge funds are going to be regulated, position size limits mandated and enforced, reporting enhanced and a transaction tax is coming.
- It’s about damn time.
Oh, and it appears that instead of telling all the banksters what they were going to do and "getting permission" first, or even discussing it with other governments, the German Government did what all governments should do - make up your mind and then do it without giving a good damn whether the banksters or other governments like it – and without giving them input into the decision or notice that it’s coming.
The bid rigging, the game-playing and the rest are all a bunch of crap. I’ve been hollering about this now for more than three years and yet our government spends it’s time fellating the bankers and their dogs instead of enforcing the law.
It is illegal to defraud people.
It is illegal to rig markets, including the massive bid-rigging that I wrote about this morning, the Jefferson County Alabama scam and dozens if not hundreds more – all committed, it is alleged (and in some cases proved) by the major banks.
It is illegal to short stocks with no intention or ability to deliver.
And it is illegal to bribe government officials, no matter how you accomplish it.
These are not "isolated incidents" or even a pattern of conduct – as the bid-rigging report this morning makes clear ripping people off has become an institutionalized…
S&P VOLUME IS RISING – WHAT IS THIS TELLING US?
by Chart School - April 30th, 2010 3:29 pm
S&P VOLUME IS RISING – WHAT IS THIS TELLING US?
Courtesy of The Pragmatic Capitalist
By Data Diary:
It’s been notable that volume has been stepping higher on the S&P500:
Volume peaks tend to be associated with short to medium bottoms in the index. Similarly, troughs in volume often signal some kind of top. Or course this relationship doesn’t always hold – a wicked example being that 2008 price avalanche where volume peaked around 8bn shares per day and then thrashed around below that level until the March 2009 floor was eventually reached.
Still is there some significance to the recent rise in activity? Some thoughts for your consideration…
1) It’s a ‘reversion to mean’ volume – While it’s incredible (and clearly unsustainable) that volume increased over 20% per annum since the beginning of 2004, the question remains what is the underlying trend in daily volume. On a trend basis we may still be south of that level.
2) Buy the dip – the risk compression trade is alive and well and about to enter it’s next phase. This would have more credibility in my book if risk appetite had also blown out already. It hasn’t.
Credit spreads in Europe may have dissolved in a gelatinous mess, but the US credit markets remain blase about this state of affairs. Similarly, the VIX has sprung to life but not nearly enough to signal that we are in a renewed bout of risk aversion. The relative calm can be seen a little more clearly via our risk appetite index:
As an indicator, we would normally expect the index to have dipped towards -2% before the ‘panic’ volume spike was upon us.
3) Risk aversion is on the rise - My best guess is that the rising volume is part of a change in trend – that’s it’s more likely to represent distribution than accumulation. Witness the Merrill Lynch hedge fund position report (via Market Folly) suggesting that funds have been reducing their equity exposure. If this is the case, then it’s likely that there are a few even higher volume days in the wings.
Investigation Begins Into E&Y's Role In Connection With Lehman's Repo 105 Scam
by ilene - April 13th, 2010 3:43 pm
Investigation Begins Into E&Y’s Role In Connection With Lehman’s Repo 105 Scam
Courtesy of Tyler Durden
Fox Business reports that the investigation around Lehman is intensifying. Surely the SEC, now generically equated with objects that float around in sewers in formal conversation, has realized it has to do something, anything, to find at least one scapegoat for the financial collapse. Which is why we read with little surprise Gasparino’s report that "thee SEC has ramped up its inquiry into Lehman’s fall, particularly after court-appointed bankruptcy examiner Anton Valukas issued a lengthy report stating that Lehman’s top executives were “grossly negligent” in possibly hiding the risky nature of the firm’s finances during its final day." What we find much more interesting is that "yet another investigative agency, the Public Accounting Oversight Board — created under the 1992 Sarbanes-Oxley law to investigate and discipline public accounting firms — has launched an inquiry into the role of Lehman’s auditor, Ernst & Young, following the examiner’s report, which accused the big accounting firm of “professional malpractice,” for its work in approving accounting techniques Lehman used during its dying days in the summer of 2008." In the absence of any Wall Street villains, which it is now all too clear have endless diplomatic immunity from prosecution by the corrupt regulators, will the auditor, together with Dick Fuld, be made into the sacrificial lambs? Or will we continue the farce that anything even remotely related to capital markets integrity and reporting is real and valid? Judging by the nearly 60 days of no S&P downticks, the market has answered that question for us.
More from Gasparino:
It was the use of one of those accounting techniques, known as Repo 105, which appears to be at the top of the list of investigators, people with knowledge of the inquiry say. The use of the accounting technique, which is designed to temporarily lower the amount of “leverage,” or borrowing a firm uses to stay afloat thus lowering its risk levels, isn’t necessarily illegal. In fact, Lehman sought and received a favorable opinion from Ernst & Young to use the technique in 2008.
But what might fall afoul of the securities laws, according to people close to the inquiry, is if Lehman turned to the gimmick in a concerted effort to hide its risk level. One person with knowledge of the inquiry say investigators
…
Quad Witching Expiration and a Pullback from the Long Term Trend
by ilene - March 19th, 2010 12:02 pm
Quad Witching Expiration and a Pullback from the Long Term Trend
Courtesy of JESSE’S CAFÉ AMÉRICAIN
The front month on the SP futures has now switched from March to June as a part of the Quad Witching Expiration. (Technically it switched last week, but for charting purposes I made the switch last night.) The June Futures have essentially the same formations as did March, it’s just that the earlier months have few trades to mark them.
This is the first serious test for US equities since mid-February, as it has been on a spectacular rally streak, no doubt fueled by excess liquidity applied to a selling exhaustion in the funds. Curiously not among corporate insiders who were selling at a rate of 57 to 1 in this latest rally, no doubt for diversification purposes.
The extent of this correction will be determined on the amount of actual selling that starts to occur. For now what we are seeing is more of a trading correction in response to an outsized rise in price, or as the Street likes to say, the market was getting ahead of itself.
Key levels to watch are 1135 and 1120. If we break those I would look for a consolidation around the 1080-1100 level.
Hugh Hendry: “We Hedge Fund Managers Are On Your Side”
by Zero Hedge - March 11th, 2010 11:47 am
Hugh Hendry: "We Hedge Fund Managers Are On Your Side"
Courtesy of Tyler Durden
Originally authored by Hugh Hendry and appearing in the Daily Telegraph
You don’t know me; we’ve never met. But I fear you are being encouraged to dislike me. Let me explain: I’m a speculator. I manage a hedge fund. Apparently I profit from your misery. Accordingly, our political leaders are keen to see the back of me.
Only yesterday, Germany and France were calling for the "fastest possible" adoption of new rules to put an end to financial speculation. But before you write me off I ask that you listen to my side of the story.
First, and much like the bogeyman of folklore, the size and significance of the hedge-fund industry is vastly over-stated. The best estimate is that people like me control just 2.5 per cent of total global financial assets under management. The ability to move prices and markets resides more with the managers of pension funds, unit trusts and our banking contemporaries; fortunately, for them, they are on much better terms with our political masters.
Second, and much to my regret, I have to correct another misconception. I am not guaranteed success; far from it. I have no certainty or monopoly on making money; that’s the nature of risk taking, there is no free lunch. And believe me, I am subject to the harshest possible critic: the market.
Unlike my political adversaries I can’t spin this out. If I am wrong in my deliberations, I have to record a loss immediately. So it should come as no surprise that I give great consideration to what I do.
But what about this short-selling business and the allegation that hedge funds seek to profit from the misery of others; are we simply a scourge on society?
I believe not. Let me explain. In short selling, investors borrow shares and sell them, hoping that the price will fall and they can buy the shares later at a lower price, replace them and thereby turn a profit.
Hedge funds are not seeking to dictate economic affairs. Rather we are preoccupied by price. A market-based economy like ours requires a pricing mechanism to allocate resources and ensure that we all prosper. Get it wrong and we endure the calamity of the technology bubble and the sleazy debacle of the American mortgage crisis.
It’s not that hedge fund…
Hugh Hendry: “We Hedge Fund Managers Are On Your Side”
by ilene - March 11th, 2010 9:13 am
Hugh Hendry: "We Hedge Fund Managers Are On Your Side"
Courtesy of Tyler Durden
Originally authored by Hugh Hendry and appearing in the Daily Telegraph
You don’t know me; we’ve never met. But I fear you are being encouraged to dislike me. Let me explain: I’m a speculator. I manage a hedge fund. Apparently I profit from your misery. Accordingly, our political leaders are keen to see the back of me.
Only yesterday, Germany and France were calling for the "fastest possible" adoption of new rules to put an end to financial speculation. But before you write me off I ask that you listen to my side of the story.
First, and much like the bogeyman of folklore, the size and significance of the hedge-fund industry is vastly over-stated. The best estimate is that people like me control just 2.5 per cent of total global financial assets under management. The ability to move prices and markets resides more with the managers of pension funds, unit trusts and our banking contemporaries; fortunately, for them, they are on much better terms with our political masters.
Second, and much to my regret, I have to correct another misconception. I am not guaranteed success; far from it. I have no certainty or monopoly on making money; that’s the nature of risk taking, there is no free lunch. And believe me, I am subject to the harshest possible critic: the market.
Unlike my political adversaries I can’t spin this out. If I am wrong in my deliberations, I have to record a loss immediately. So it should come as no surprise that I give great consideration to what I do.
But what about this short-selling business and the allegation that hedge funds seek to profit from the misery of others; are we simply a scourge on society?
I believe not. Let me explain. In short selling, investors borrow shares and sell them, hoping that the price will fall and they can buy the shares later at a lower price, replace them and thereby turn a profit.
Hedge funds are not seeking to dictate economic affairs. Rather we are preoccupied by price. A market-based economy like ours requires a pricing mechanism to allocate resources and ensure that we all prosper. Get it wrong and we endure the calamity of the technology bubble and the sleazy debacle of the American mortgage crisis.
It’s not that…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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