Posts Tagged ‘hedge fund’

Fat Finger Friday – Business as Usual, Really

Wow, we are sinking to new levels of idiocy now.

The MSM would have you believe that the tremendous sell-off in the markets was just a trading error.  If it was a trading error, then these markets SUCK!  Are you telling me we put TRILLIONS of dollars, including our retirement savings into a system that can be completely thrown into chaos because a single guy hits the wrong button on a single transaction?  It's a good thing Faisal Shahzad isn't still working on Wall Street anymore, or he could have just pushed a button and caused a lot more damage that way than he did with a faulty car bomb

This is financial terrorism folks, retail traders were stopped out and margined out while the pros made Billions picking up the pieces.  Don't worry though, if you are rich enough and connected enough, the Nasdaq will reverse your losses but if they really wanted to make ammend, they would cancel the day's trading for ALL traders.  My Members don't care, we were, of course, in cash and generally short on our fun plays so we made out like bandits or, should I say, like banksters!  Heck we even used our cash to do some bottom fishing in that ridiculous sell-off.   

This market didn't just sell off because of a trading mistake.  Whatever really happened, it happened because there were no real buyers when the selling came – something I have been warning would happen during the last 3 months of low-volume run-ups.  I keep using the house of cards/Jenga metaphore and that's exactly what we have so be very careful when the same idiots who have been telling you BUYBUYBUY are now telling you to "come back in – the water's fine."   We all know how that advice worked out in Jaws

I'm certainly NOT saying not to buy now.  We dumped our short yesterday as I told member Members during Chat to take the ridiculous money we were getting for the day and run:

  • 2:17: Well you can assume today is a very nice move down and get out now.  Tomorrow, even if jobs are bad and we head lower, then you can still flip to a June spread.  Don’t foget that VIX keeps climbing as we head lower.   Also, don’t forget how nice it is to be in cash and


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Rant of the Day: No Ethics, No Fiduciary Responsibility, No Separation of Duty; Complete Ethics Overhaul Needed

I’ve posted a lot on the Goldman Sachs fraud charges and hope it marks the beginning of change. Many of my favorite bloggers believe this is a mere distraction, and GS, the corporation, will get a slap on the wrist and a fine – which means essentially nothing happens to the people responsible for an ongoing parade of front-running, misrepresentations and frauds, even if the SEC is only permitted to file civil charges.  That said, here’s Mish on the subject. (My highlights) – Ilene 

Rant of the Day: No Ethics, No Fiduciary Responsibility, No Separation of Duty; Complete Ethics Overhaul Needed

AFIS BILLBOARD POSTERS ETHICAL BEHAVIOR DEFENSE BILLBOARD #21

Courtesy of Mish  

Goldman Sachs Shares Drop After Goldman Sachs Accused of Fraud in Mortgage Deals

Goldman Sachs, which emerged relatively unscathed from the financial crisis, was accused of securities fraud in a civil suit filed Friday by the Securities and Exchange Commission, which claims the bank created and sold a mortgage investment that was secretly devised to fail.

The move marks the first time that regulators have taken action against a Wall Street deal that helped investors capitalize on the collapse of the housing market. Goldman itself profited by betting against the very mortgage investments that it sold to its customers.

The suit also named Fabrice Tourre, a vice president at Goldman who helped create and sell the investment.

The instrument in the S.E.C. case, called Abacus 2007-AC1, was one of 25 deals that Goldman created so the bank and select clients could bet against the housing market. As the Abacus deals plunged in value, Goldman and certain hedge funds made money on their negative bets, while the Goldman clients who bought the $10.9 billion in investments lost billions of dollars.

“The product was new and complex, but the deception and conflicts are old and simple,” Robert Khuzami, the director of the S.E.C.’s division of enforcement, said in a statement. “Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party.”

In recent months, Goldman has repeatedly defended its actions in the mortgage market, including its own bets against it. “We certainly did not know the future of the residential housing market in the first half of 2007 anymore than we can


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Goldman Sachs (GS) VP Email Jan 2007: “The whole building is about to collapse anytime now.”

Goldman Sachs (GS) VP Email Jan 2007: "The whole building is about to collapse anytime now."

Courtesy of Trader Mark at Fund My Mutual Fund

I have no idea the implication but for those of you around a decade ago you know what this parallels… Eliot Spitzer made his career on almost the same exact thing a decade ago.  Investment banks bringing product (IPOs) public, their analysts cheerleading the stocks to the public while writing internal emails about how the companies were complete trash.

Well this London based VP looks like the sacrificial lamb.

  • The suit also named Fabrice Tourre, a vice president at Goldman who helped create and sell the investment

As usual the snake oil never really changes… but in the past the snake oil salesmen would be run out of town.  Now they are protected by government, backstopepd by our Federal reserve, and glorified.  We’ve really evolved as a society :)

  • According to the complaint, Goldman created Abacus 2007-AC1 in February 2007, at the request of John Paulson, a prominent hedge fund manager who earned an estimated $3.7 billion in 2007 by correctly wagering that the housing bubble would burst.
  • Goldman let Mr. Paulson select mortgage bonds that he wanted to bet against — the ones he believed were most likely to lose value — and packaged those bonds into Abacus 2007-AC1, according to the S.E.C. complaint. Goldman then sold the Abacus deal to investors like foreign banks, pension funds, insurance companies and other hedge funds.
  • But the deck was stacked against the Abacus investors, the complaint contends, because the investment was filled with bonds chosen by Mr. Paulson as likely to defaultGoldman told investors in Abacus marketing materials reviewed by The Times that the bonds would be chosen by an independent manager.

———————————

Fascinating to see John Paulson’s firm involved as well – I don’t see any wrong doing on his part but apparently one of his former lieutenants, Paolo Pellegrini was the ‘snitch’. [Oct 2, 2009: Paolo Pellegrini, Formely of John Paulson's Hedge Fund, on Bloomberg]

Full pdf file of SEC complaint here.

p.s. bought some SPY puts to get some hedging going on.


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To The SEC: Prove It

Here’s a handy list of coincidences to file under insider trading in plain site. – Ilene

To The SEC: Prove It

Police tape

Courtesy of Karl Denninger at The Market Ticker


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Julian Robertson’s Interview With The Financial Times

Julian Robertson’s Interview With The Financial Times

Courtesy of Market Folly

On his recent media escapade, Tiger Management founder and hedge fund legend Julian Robertson stopped off to chat with the Financial Times about many topics. He has been out talking a lot about his curve caps play lately where he essentially is buying puts on long-term treasuries as he expects prices to fall and yields to rise. Julian again touched on this position in this interview but we want to turn the focus to other topics that he hasn’t previously discussed in his other recent media appearances. Here are some notable excerpts from the Tiger Management founder and hedge fund legend’s interview with the FT:

"Julian Robertson on market cycles and hedge funds

FT: You were famously bearish about technology stocks ahead of, during the tech bubble; did that experience influence you in predicting 2007, 2008?

JR: No, I don’t think so. What really caused me to predict the problems we had in 2007 and 2008 was the fact that we were spending so much more and no one was balancing the budget; no family can keep doing that forever, no corporation can keep doing that forever, and no nation can continue doing that forever. I think that’s, we did it on all three fronts; as individuals we did it, as corporations we did it, and as a nation we did it – and it blew up in our face.

FT: Why do you think corporations and in particular financial institutions were so bad at seeing that; why did they keep on dancing too long?

JR: Well, I think it goes back to greed and bad judgement, I mean that’s the thing I see. A lot of people were trying to get more risk in their balance sheets, they really were during that period, and once the risks caused their problems they then rushed out and blamed hedge funds – and that was ridiculous. These people were responsible for their own problems because they had levered up too much and made some very bad investments.

FT: One of the fascinating things about your own performance as a fund manager, particularly around the tech bubble is, you were right, but being right wasn’t such a great thing to be. How can people use that


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Money Markets are the New Suspenders

Money Markets are the New Suspenders

By EB, courtesy of Zero Hedge

The Financial Times recently reported on the Fed’s latest exit strategy to eventually contain the inflation zombie:

 During the crisis, the Fed created roughly $800bn of additional bank reserves to finance asset purchases and loans. This total is likely to rise in the coming months as the central bank completes its asset purchases and the Treasury unwinds financing it provided to the Fed. Fed officials think they could raise interest rates even with this excess supply of reserves by offering to pay banks to deposit their surplus funds with it rather than lend them out. However, they also want to use reverse repos in tandem to soak up some of the excess reserves. Policymakers call this a “belt and braces approach”. [The latter, clearly a nod to the great Gekko.]

nice suspenders, zero hedgeTD touched on this last Thursday, and we will expand upon it here as it is particularly relevant to our ongoing theory that it is the proceeds from permanent open market operations (POMOs) and their close cousins that are driving equities.  Though this may be received wisdom to ZH readers, the Fed has done us the favor of providing additional evidence through the FT story.  A bit of background, as we are new contributors to this forum:

Money Supply:  Based on our previous research on the effects of swings in M2 non-seasonally adjusted money supply (M2) on the stock market, we were a bit surprised in July 09 by the resiliency of the rally, which continued in the face of such a dramatic contraction in M2.  The dismal Durable Goods report from last Friday confirms that the capital goods sector is still under significant pressure as a result of a lack of money in the general economy.  With banks not lending to normal businesses and consumer credit contracting equally as violently, what is the basis for this rally and from where does the never-ending flow of equities juice flow? 

Bank Non-Borrowed Excess Reserves:  The Fed statistic that most closely correlates with the 2009 equities run-up appears to be bank non-borrowed excess reserves (bank NBER), which


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Market Insights From Hedge Fund D.E. Shaw & Co: Common Trading Mistakes

Market Insights From Hedge Fund D.E. Shaw & Co: Common Trading Mistakes

Courtesy of Market Folly

This is a first for Market Folly in that we’ve been able to track down some market insight from none other than hedge fund firm D.E. Shaw & Co. While the commentary is from July of this year, it is theoretical and applicational in nature so it’s still very relevant. Not to mention, it’s probably worth your time regardless, considering it is coming from a firm who has their hand in all different types of markets. After all, they are a hedge fund, a private equity firm, and technology development shop all rolled up into one.

This particular research report focuses on intuition versus reason. Additionally, it deals with analyzing trades and what they call the "time-portal" fallacy. It makes for interesting reading so definitely check it out as they delve into the topic of common trading mistakes and the consequences that follow. You can download the .pdf here. For more on DE Shaw, check out our recent portfolio coverage on them.

Market Folly

 


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Michael Milken, 60,000 Deaths, and the Story of Dendreon

It’s very been very exciting to bring terrific new authors together at Phil’s Favorites and today I’m pleased to welcome Mark Mitchell of Deep Capture to our site. Mark’s written a fascinating account of the real story behind Dendreon’s (DNDN) most unusual trading activity in recent years. Here’s the first chapter of Mark’s 15 part series. – Ilene

Michael Milken, 60,000 Deaths, and the Story of Dendreon (Chapter 1 of 15)

drugs, pharmaceuticals, studiesCourtesy of Mark Mitchell at Deep Capture

What follows is part 1 of a 15-part series. The remaining installments will appear on Deep Capture over the next several weeks, after which point the story will be published in its entirety. It is a story about the travails of just one small company, but it describes market machinations that have affected hundreds of other companies, and it contains a larger message for anyone concerned about the “deep capture” of our nation’s media and regulatory bodies.

This story, like too many others, begins with Jim Cramer, the CNBC personality, making “a mistake.”

On September 26, 2005, Cramer  announced to his television audience the sad news (punctuated by funny sound effects – a clown horn, a crashing airplane) that Provenge, an experimental treatment for prostate cancer, had flopped. Thousands of end-stage patients had been pinning their hopes on Provenge, but according to Cramer the treatment had just been rejected by the Food & Drug Administration. It would never go to market.

This seemed odd, because Dendreon (NASDAQ: DNDN), the company developing Provenge, had not yet submitted an application for FDA approval. As everybody in the biotech investment community knew, Dendreon had, in fact, only recently completed Phase 3 clinical trials and probably would not face scrutiny from an FDA advisory panel for at least another year.

As for the likelihood that the advisory panel would eventually vote in favor of Provenge, the odds looked quite good. The Phase 3 trials had demonstrated that Provenge significantly increased patient survival with only minimal side-effects, such as a few days of mild fever. Moreover, Provenge was an altogether different sort of treatment – one that fought tumors by boosting patients’ immune systems rather than subjecting them to the ravages of chemotherapy.

Provenge was not a magical elixir of life, but Dendreon was doing more than just developing a new technology. It…
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Boone Pickens Seeks Investors For Hedge Funds

Boone Pickens Seeks Investors For Hedge Funds

Boone PickensCourtesy of Market Folly

Well, here we go again. After his energy fund lost 98% and his equities fund lost 64% in 2008, Boone Pickens is back for more. Yep, he is raising money for new iterations of essentially the same hedge funds that his hedge fund BP Capital previously ran. Well, we don’t even really need to say "essentially" because they literally are the same funds just with a "II" at the end of the name, signaling their second incarnation.

His Energy fund will trade futures and his Equities fund will trade energy related equities and some futures as well. His "II" Energy Fund started trading back in February and is already up a whopping 79%. It’s funny how they are undoubtedly using that as marketing material and you can’t blame them. However, investors should be aware that the exact same types of funds were obliterated last year. So, a 79% gain this year is not much when you consider how much they were down the year prior. According to fund documents, Pickens will aim to hold investments between 3 months and two years. If you’re curious as to what his firm owns, we’ve covered Pickens’ hedge fund portfolio recently here.

As our friend TraderMark over at FundMyMutualFund.com so poignantly asked, is Boone turning into the next John Meriwether? For those unaware, Pickens had an absolutely brutal last year as his funds lost money, he personally lost money, and every bet he made seemed to go against him. John Meriwether, on the other hand, blew up Long Term Capital Management back in the day and we just recently got word that he is closing yet another hedge fund down. We like to call it the hedge fund boom-bust cycle. Manager starts hedge fund, goes boom to the top of the charts, then goes bust. They then re-group, raise more money, and then start over again. Rinse and repeat. And, repeat again. You get the picture.

So, we like to poke fun at both the fund managers themselves for their propensity to ‘blow up’ and come right back from the dead with a new fund offering. At the same time, we like to poke even more fun at the investors who continually come back for more. Such is life in hedge fund land. Speaking of ‘pokes, we…
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Zero Hedge

$100 Oil Is A Distinct Possibility

Courtesy of ZeroHedge. View original post here.

Authored by Nick Cunningham via Oilprice.com,

An oil price spike is starting to look increasingly possible, with a rerun of 2008 not entirely out of the question, according to a new report.

The outages from...



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ValueWalk

Kase Learning Shorting Conference: Limited-Time Offer

By Jacob Wolinsky. Originally published at ValueWalk.

Shorting Conference: Limited-time offer for my newsletter subscribers!

We had an incredibly positive response to our inaugural Kase Learning Shorting Conference back in May. Many attendees capitalized on some of the fantastic actionable short ideas presented that day.

On Monday, December 3, we’ll be hosting our second Shorting Conference at the NY Athletic Club. We’re also going to be livestreaming the entire day if you cannot attend in person.

...



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Phil's Favorites

10 Years and 10 Lessons from the Financial Crisis

 

10 Years and 10 Lessons from the Financial Crisis

Courtesy of Cullen Roche, Pragmatic Capitalism 

10 years. It feels like yesterday. Then again, sometimes when I look at the economic data it feels like it never even happened. Whether you feel like the crisis is a distant memory or still lingering I think we can all agree that these kinds of big events serve as important lessons for understanding how we will navigate the future. So, 10 years later, here are 10 big lessons I take away from the financial crisis:

  1. Fear wins in the short-term and loses in the long-term. This is probably the number one lesson from the crisis. Human beings have been making tremendous progress for thousands of years. The fina...


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Kimble Charting Solutions

Canadian Dollar Attempting Bullish Breakout

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

Since 2011, the Canadian Dollar has been hit hard, losing nearly a third of its value, while creating a series of lower highs and lower lows.

After declining nearly 30% into the lows of 2016, the Canadian Dollar has been attempting to change its long-term trend as it has created a series of higher lows inside of rising channel (2).

Over the past few months, rising support has been tested several times. Currently, it is attempting to break above falling resistance at (3), inside of the rising cha...



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Insider Scoop

10 Biggest Price Target Changes For Tuesday

Courtesy of Benzinga.

  • Morgan Stanley raised NuVasive, Inc. (NASDAQ: NUVA) price target from $55 to $77. NuVasive shares closed at $68.40 on Monday.
  • Citigroup cut the price target for Lam Research Corporation (NASDAQ: LRCX) from $216 to $177. Lam Research shares closed at $154.74 on Monday.
  • Stifel Nicolaus boosted the price target on Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN) from $130 to $136. Alexion Pharmaceuticals shares closed at $128.51 on Monday Monday.
  • ...


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Chart School

Weekly Market Recap Sep 23, 2018

Courtesy of Blain.

More saber rattling between China and the U.S. did little to distract the market.

On Tuesday, President Donald Trump reiterated his hard-line stance on China during a news conference with Polish President Andrzej Duda and said the U.S. had “no choice” but to levy another $267 billion in duties on China. That would come on top of announced tariffs on about $200 billion in Chinese goods announced late Monday.  China responded with tariffs of 5% to 10% on $60 billion worth of U.S. products that will take effect Sept. 24, and said it may introduce more measures if the U.S. goes ahead with higher tariffs.

This seems to be the prevailing thought process, ...



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Members' Corner

Why obvious lies still make good propaganda

 

This is very good; it's about "firehosing", a type of propaganda, and how it works.

Why obvious lies still make good propaganda

A 2016 report described Russian propaganda as:
• high in volume
• rapid, continuous and repetitive
• having no commitment to objective reality
• lacking consistency

...

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Digital Currencies

Mania to Mania

 

Mania to Mania

Courtesy of 

“Russell rarely played the stock market and had little investing experience when he put around $120,000 into bitcoin in November 2017.”

This comes from a CNN money article, Bitcoin crash: This man lost his savings when cryptocurrencies plunged. From January 2017 through the peak in early 2018, Ethereum gained 16,915%.

Any time you have something go vertical, you just know that some peopl...



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Biotech

Gene-editing technique CRISPR identifies dangerous breast cancer mutations

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

 

Gene-editing technique CRISPR identifies dangerous breast cancer mutations

Breast cancer type 1 (BRCA1) is a human tumor suppressor gene, found in all humans. Its protein, also called by the synonym BRCA1, is responsible for repairing DNA. ibreakstock/Shutterstock.com

By Jay Shendure, University of Washington; Greg Findlay, ...



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Mapping The Market

Mistakes were Made. (And, Yes, by Me.)

Via Jean-Luc:

Famed investor reflecting on his mistakes:

Mistakes were Made. (And, Yes, by Me.)

One that stands out for me:

Instead of focusing on how value factors in general did in identifying attractive stocks, I rushed to proclaim price-to-sales the winner. That was, until it wasn’t. I guess there’s a reason for the proclamation “The king is dead, long live the king” when a monarchy changes hands. As we continued to update the book, price-to-sales was no longer the “best” single value factor, replaced by others, depending upon the time frames examined. I had also become a lot more sophisticated in my analysis—thanks to criticism of my earlier work—and realized that everything, including factors, moves in and out of favor, depending upon the market environment. I also realized...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

...

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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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About Phil:

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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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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