Thanks for checking in with us. We're taking a breather - just a few days off

Mr. 1000% Says AA and A Paper Is Worthless

While many of the world's leading financial institutions struggle with a hangover from the credit market party that came crashing to a halt this summer, Andrew Lahde has some bad news for them: the credit crunch is going to get worse and it’s going to spread.

Lahde Capital’s flagship fund, US Residential Real Estate Hedge V, is up 1000% year-to-date. Another fund he manages, concentrated on commercial real estate, is up 80%. In a recent letter to investors he’s tells investors that he is taking the firm out of its short positions in BBB- and BBB rated paper over the next ninety days . He’s offering investors the opportunity to make early redemptions, telling them that it is time to take money off the table.

But this hardly means he’s suddenly become optimistic about mortgage backed paper. In a letter to investors obtained by the boys and girls at FinAlternatives, Ladhe tells investors that he expects further deterioration in the ABX index for paper rated AA through BBB-.

“We believe that all of these positions have further downside,” Ladhe writes. The AA rated paper will “melt away into the history books,” he says, adding that he expects this paper will eventually be worth “zero.” Ladhe writes. “Our banks are saddled with endless bad debt and our collective leadership is clueless.” Thems powerful words..

http://www.dealbreaker.com/index.php?page=2

Sell Everything; Hell is Here

According to Mr. Juggles, Google closed at $666. Must I remind you that Google is a member of Cramer’s Four Horsemen? He was more right with that allusion than he knew. If you remember your Biblical history, the Four Horsemen are the forces of man’s destruction in the Book of Revelation. 666 is the number of the beast. Add that up and you have The Apocalypse.

The market is, literally, about to go to hell. Recommendation: Sell through to the end times.

http://longorshortcapital.com/sell-everything-hell-in-a-handbasket.htm

Goldman Greedy? Give me a break!

Jefferies & Co. could be forgiven for feeling a little resentment toward Goldman Sachs.

Not only do Goldman bankers seemingly get as much M&A business in a week as Jefferies gets in a year, but the fees Goldman Sachs Group rakes in dwarfs those of just about all its rivals. (Take the $26 million Goldman is getting for its work advising wireless company SunCom, the subject of a relatively puny takeover.)

That isn’t stopping Goldman Sachs Credit Partners, which is financing Movie Gallery’s bankruptcy reorganization, from trying to put the kibosh on a measly $2.9 million transaction fee due Jefferies for advising Sopris Capital Advisors. That private-equity firm is buying the rental chain out of bankruptcy. Read more about it in this story from our colleagues at Daily Bankruptcy Review.

Goldman, speaking for a group of creditors, says any such payment is premature, given that Movie Gallery’s reorganization isn’t complete. Movie Gallery filed for Chapter 11 bankruptcy-law protection last month in part because it couldn’t handle debt taken on in its $1 billion acquisition of Hollywood Video in 2005. A hearing on the fee dispute in the Richmond, Va., court overseeing the Movie Gallery case is scheduled for today.

No word on how Jefferies feels about any fees Goldman will get on the $150 million bankruptcy loan it is providing Movie Gallery

http://blogs.wsj.com/deals/2007/11/28/goldman-the-fee-grinch/

The SuperRich: How they spend it

Blame it on hedge-fund hegemony. The quest for things exorbitantly exotic has reached a fever pitch of late. For one thing, more people than ever can afford to join in the pursuit. "This is the richest year ever in human history," said Steve Forbes, chief executive of Forbes, whose recent Forbes 400 list consisted entirely of billionaires for the second year since its inception.

Earth is a tiny travel agency in London whose 150 clients include business leaders, music and film honchos and other names you know. Its phone number is unlisted, and its website is a dead end, displaying only a dramatic image of the planet's surface and an enigmatic message: "Membership is currently restricted to recommendations from existing clients or by invitation." But the rarest thing about Earth is that it purveys stratospheric levels of luxury. So haute is the travel that even the poshest hot spots are deep-sixed.. On the docket instead are undiscovered, off-the-radar corners of the globe, most situated with private homes or hotels with few rooms. "It's not Monte Carlo and Dubai," Donovan explains. As for what it might be then? "It's a secret," Eath’s spokeperson says with another giggle. "That's the only mysterious bit."

With a member list that includes rock bands, Hollywood actresses and directors, British and Middle Eastern royals and other insiders' insiders, the service specializes in extreme service, everything from the élite to the impossible. For a yearly fee ($5,000 to $40,000), club members receive access to highly knowledgeable personal assistants in 35 cities around the world. A London member who was seeking a last-minute gift asked that a Picasso be found; it was. "There are a lot of people with a lot of needs or desires or whims," Rosenthal says. "We're able to facilitate that for them."

http://www.time.com/time/specials/2007/article/0,28804,1684022_1684717_1683565,00.html?xid=
feed-netzero-featured

Is Abu Dhabi Getting a Good Deal?

The last time a big Middle Eastern investor rode to Citigroup’s rescue, the move turned out to be nothing short of a financial home run. Even after the pummeling Citigroup shares have taken, the $590 million Prince Alwaleed bin Talal invested in the company’s predecessor, Citicorp, in 1991 is still worth something like 10 times what he paid for it. (Back in those days, Citi was reeling from Latin American loan losses and another real-estate crisis.)

Will Abu Dhabi, which is pumping $7.5 billion into Citigroup today, succeed in re-creating Alwaleed’s magic? Much more time than 12 hours will tell, though the market’s early reaction isn’t quite as enthusiastic as one might expect, as our colleagues at MarketBeat point out. The fact that Alwaleed himself didn’t put in more cash also raises the question of whether he sees more rough seas ahead for the banking giant. And there’s the 11% convertible bond yield it took for Citi to reel in Abu Dhabi.

But by two valuation measures, Citi looks like it might be a bargain compared with its peers. At 1.24 times and 8.53 times, respectively, in trailing 12 months price-to-book-value and price-to-earnings ratios, it is in the bottom half of a sampling of its peers, according to Capital IQ. The sample includes its two big bank rivals — J.P. Morgan and Bank of America, and two brokerage houses that also have encountered choppy waters, Bear Stearns and Merrill Lynch. It also has the firm that has been practically unscathed by the credit mess, Goldman Sachs, thrown in for good measure.

http://blogs.wsj.com/deals/2007/11/27/is-abu-dhabi-getting-a-good-deal/

Returns of more than 50% What’s Renaissance’s secret?

Face it. Renaissance is on fire: Its Medallion Fund -- which uses computers and trading algorithms to invest in world markets -- returned more than 50 percent in the first three quarters of 2007. It had about $6 billion in assets as of July 1.

Simons registered that performance as subprime and related markets were collapsing, sending two mortgage-related hedge funds run by Bear Stearns Cos. into bankruptcy. The turmoil pummeled the Goldman Sachs Global Alpha Fund, a rival to Renaissance's funds, which fell more than 25 percent during the same time. Morgan Stanley's computer jockeys lost $390 million in a single day in early August.

Medallion's returns are no anomaly. The fund, which trades everything from soybean futures to French government bonds in rapid fire, hasn't had a negative quarter since early 1999. From the end of 1989 through 2006, it returned 38.5 percent annualized, net of fees.

At an age when hedge fund pioneers such as Michael Steinhardt have long since stopped managing other people's money, Simons is building on Medallion's success. He's adding funds and strategies and accumulating assets, which totaled $35.4 billion as of Sept. 28.

In August 2005, Simons started Renaissance Institutional Equities Fund, or RIEF, which invests in U.S. stocks. Through Sept. 30, it has returned 12.8 percent annualized. Unlike Medallion, which turns over its holdings dozens of times each year, RIEF keeps its positions for months or longer. Simons said at the time of the fund's inception RIEF could theoretically manage as much as $100 billion.

http://www.bloomberg.com/apps/news?sid=ayjImYcoCiH8&pid=20601109

Citi to axe 45,000 Is Citi history?

Did we say axe? We meant a chainsaw massacre. New York City-based Citigroup may soon layoff as many as 45,000 jobs in an effort to cut costs, CNBC reported Monday.

The company with roughly 200 million customers worldwide currently employs about 320,000 people. Citigroup refused to confirm the size of potential layoffs.

"We are engaged in a planning process in anticipation of our new CEO and our business heads are planning ways in which we can be more efficient and cost effective to position our businesses in line with economic realities," Citigroup said. "Any reports on specific numbers are not factual."

The bank is still searching for a new CEO, after Charles Prince resigned as chairman and chief executive earlier this month. That same evening the bank announced that it will likely write down the value of its portfolio by another 8 billion U.S. dollars to 11 billion dollars in the fourth quarter.

http://news.xinhuanet.com/english/2007-11/27/content_7155403.htm

Hedge Fund Scandal Rocks Norway

Hedge funds sometimes get a bad rap in the U.S., but in Norway they are getting the stuffing beat out of them following reports that four public municipalities have suffered huge losses because of hedge fund investments. The scandal involves a credit-focused Citigroup hedge fund marketed by Terra Gruppen and sold to local townships in the Scandinavian country.

The hedge fund, Citigroup Municipal Investors, required municipalities to assume debt which was then secured by future energy revenues. However, the subprime credit crisis in the U.S. hit the fund hard, and the municipalities, four of which invested a total of $739 million, were forced to place more money into the funds or face losing their investments. According to reports, one small town couldn't even make payroll for December and was forced to cut child care and elder care programs.

"It’s not legal to market hedge funds in Norway," Eystein Kleven, a representative of Norway’s regulatory agency Kredittilsynet, told newspaper Aftenposten.

Politicians are taking the brunt of the blame from the public, though they are scrambling to place fault on Terra, claiming that they were tricked by the firm and that the investments Terra sold were illegal. The Norwegian government has launched an official probe into the scandal, and politicians are demanding that the municipalities withdraw all hedge fund allocations and that Terra compensate towns for any losses suffered. Now you know why the Citi never sleeps. Too busy screwing up.

http://www.finalternatives.com/node/2975

Stevie Schwarzman’s ‘Robin Hood’ Complex

Blackstone CEO Stephen Schwarzman a man of the people? What have they been smoking? At an industry conference in London today, Schwarzman defended the private-equity industry from charges that it takes from society more than it gives back. According to a Reuters account of the speech, Schwarzman says the industry has handed out to its limited partners more than $400 billion since the early 1990s. Since many of those limited partners are pensions funds entrusted with the savings of teachers, iron workers and the like, a big chunk of that cash has gone into the pockets of, in his words, the “little guy.”

The industry is “giving the little guy — via his or her pension fund — 80% of the upside in wealth creation that has historically been the exclusive preserve of the Rockefellers and Mellons of the world.”

Schwarzman hasn’t done too badly for himself. The IPO vaulted him to 40th on Forbes’ annual list of the richest Americans, with a net worth of $7.8 billion.

Of course, Blackstone has taken back from some little guys this year, too, namely those who bought stock in its June IPO. The stock — currently at $20.60 — had its lowest closing price ever today. It is down a third from the $31 IPO price.

http://blogs.wsj.com/deals/2007/11/26/steve-schwarzmans-robin-hood-complex/

The most spectacular low-risk trades in history!

Within the hedge fund biz there are some trades that are destined to live on in legend: Jessie Livermore’s claimed $100m profit from shorting the 1929 crash, Paul Tudor Jones’ prediction of the 1987 crash, from which he doubled his money in a month, or the $1bn profit George Soros reputedly made when sterling was forced out of the exchange rate mechanism.

But the forecast last year by a select group of hedge funds of a crisis in subprime mortgages has put even the most spectacular trades in history in the shade.

Leading the pack of hedge funds which benefited from the subprime fallout is John Paulson’s New York-based Paulson & Co. Last year, it raised $2bn for two funds betting on falls in subprime mortgage-linked securities and they are now worth more than $8bn. By the end of October, the first of these funds was up 550.8 per cent, even after fees which included a quarter of profits.

Three of these funds more than doubled investors’ money with their short positions, and investors say that in total, Paulson funds have made more than $12bn from the subprime bet.

http://www.ft.com/cms/s/0/c4487440-9b7e-11dc-8aad-0000779fd2ac.html

Citadel Up 27% for the Year

You can forget about market volatility, Citadel Investment Group LLC has gained 27 percent year to date in what's shaping up to be the Chicago-based hedge fund's second straight showing of double-digit returns.

In 2006, Citadel topped 30 percent, helped by energy bets after it took over some assets from Amaranth Advisors LLC, which imploded in September 2006.

That deal has continued to pay off in 2007, along with Citadel's opportunistic purchase of distressed hedge-fund assets during last summer's credit turmoil, according to a person familiar with Citadel's results.

Citadel's 27 percent return is "a very strong performance considering the volatility we've seen this year," said Joel Schwab, managing director of Hedgefund.net, a gatherer of industry news and information.

http://www.chicagotribune.com/business/chi-fri_citadel_1123nov23,0,4101298.story
?track=dlbk

Buffett Billionaire goes hunting for bargains

Billionaire investor Lee Shau Kee, sometimes nicknamed Hong Kong’s Warren Buffett, said he spent more than HK$1 billion ($129 million) in the stock market on Thursday as the first salvo in a HK$10 billion bargain hunt. “Now is the right time to get back to the stock market and start buying,” Lee told a news conference. The HK$10 billion that Lee is poised to pump into stocks will most likely target his favoured portfolio of 11 companies.

The initial HK$1 billion went into China Life Insurance Co, China Merchants Bank, oil firm CNOOC Ltd, coal producer Shenhua Energy and stockmarket operator Hong Kong Exchanges and Clearing Ltd. But Lee warned investors that although he was being open about his plans, he was not expecting anyone to follow him and he was not promising speculators would profit by doing so.

“Gamblers like to complain if they lose their money,” he said, according to Bonnie Ngan, spokeswoman for his firm Henderson Land. Lee said Hong Kong’s stock market had fully priced in negative news, such as the fallout from the U.S. subprime crisis, and it was time for investors to hunt for bargains. He forecast that the benchmark Hang Seng Index, which closed 2.3 percent down at 26,004.92 on Thursday, would hit 30,000 later this year before climbing to reach 33,000 by Chinese new year, during the first quarter of 2008. The index hit a high of 31,958.41 at the end of last month, but has fallen steadily reuters

http://www.dailytimes.com.pk/default.asp?page=2007\11\23\story_23-11-2007_pg5_33

Subprime writeoffs could top $300 billion

Ay Carumba! Losses from US subprime mortgage foreclosures, coupled with slowing economic growth and falling house prices, could reach as more than $300 billion , the Organisation for Economic Co-operation and Development (OECD) said in a report released on yesterday in Paris.

Global stock markets have lost $2.9 trillion since 31 October and the collapse of the subprime market in the US has triggered about $50 billion in write downs among the world’s largest banks. The dollar could also face further downward pressure as overseas investors, who previously bought structured products based on subprime loans, become more unwilling to buy higher-yielding debt, the OECD said.

“Recent economic news points towards a more protracted economic adjustment,” it said. “A recession in the US is now seen as more likely than before by some observers.”

The number of economists forecasting a US recession almost doubled in the past two months, according to a survey by the National Association for Business Economics.

“I don’t think the US will technically fall into recession, but we’ll certainly have a slowdown,” said Guy Sebban, secretary general of Paris-based International Chamber of Commerce. Golly, we can hardly wait.

http://www.livemint.com/2007/11/22235719/OECD-report-says-US-subprime-l.html

Guess who’s tops in redemptions?

Fidelity Investments, the world's largest mutual fund company, manages four of the 10 US funds with the biggest investor withdrawals this year.

Fido’s Growth & Income Portfolio had $10.2 billion in net redemptions in the first 10 months of the year, second most after the Vanguard 500 Index fund, according to data from Morningstar Inc. Fidelity Magellan had $7 billion in outflows, while investors pulled $8.8 billion total from Blue Chip Growth and Low-Priced Stock funds.

Boston-based Fido has been hampered by subpar returns at some funds while others are closed to new investors. Net inflows among long-term retail funds of $4.1 billion in the first nine months of 2007 trail Capital Group Cos. and Vanguard Group Inc., according to Financial Research Corp. in Boston.

http://www.boston.com/business/globe/articles/2007/11/22/4_fidelity_
funds_sustain_large_outflows/

Poor Little Rich Boys: Goldman Sachs Employees Need Your Pity

Are Goldman’s employees getting a little tired of all the firm’s success, too?

Some bankers at Goldman have told us they secretly wouldn’t mind seeing a little air taken out of the stock as the end of the fiscal year draws near..

How could the ultimate symbols of the capitalist system harbor such perverse desires? Look at the way bonuses are doled out at Goldman and other Wall Street firms. An employee is told, for instance, that he is getting $100,000 of stock. That means the higher the stock price at the time, the fewer shares he’ll receive. The fewer the shares, the less the payout will be worth down the road.

http://blogs.wsj.com/deals/2007/11/20/the-goldman-bonus-paradox/

A Canny (but mysterious) Ex-Hedgie’s Uncanny Picks

Citigroup. “Listen, the Fed is not going to let the US have an economic collapse. That’s their entire reason is to prevent this. Read all of Bernanke’s academic writings. His entire career has aimed him towards this one focal point. He knows what to do here. I’m making a big bet that he’s going to cut 100 basis points in the next two meetings. Citigroup can easily go up 30 per cent from here.”

“Ram Holdings. They are a reinsurer for financial services firms. Everyone thinks these firms are toast because they are reinsuring all the subprime stuff from the lending companies. But this one is different.

“Radian , is another reinsurer that is not only doing high quality but has sold off with the rest. I don’t know why it’s up so much in the past day [a day after the breakfast Third Point announced a 20 per cent stake in the company], but that could also be a triple once people realise what’s going on.

“Also, if E-Trade is not going bankrupt, then it’s a potential triple here. I might get a stake in that.”

http://www.ft.com/cms/s/0/8f097e4a-9715-11dc-b2da-0000779fd2ac.html

One hedge fund in 10 to go bust, says Man

More than one in 10 of all hedge funds will go out of business this year as the rate of failure doubles, the head of Man Group, the world’s biggest listed hedge fund manager, has predicted.

Peter Clarke, CEO, said the knock-on effect of the crisis in credit markets was also making it harder for hedge fund start-ups, with a drop of close to one-third in new fund launches.

There have been many high-profile hedge fund blow-ups this year as a result of the credit squeeze, and advisers to the industry predict more to come. However, Mr Clarke said in a video interview on FT.com that most of the closures involved “quiet withering” of funds that did not perform well enough to maintain investor interest, rather than sudden collapses.

“Historically the hedge fund world has seen somewhere between 5, 6, 7 per cent attrition rate in terms of funds closing or ceasing business, [and] I would expect to see that, and this is a pure guess of course, maybe reaching twice that,” he said.

. http://www.ft.com/cms/s/0/99e559ce-97b5-11dc-9e08-0000779fd2ac,dwp_uuid=
e8477cc4-c820-11db-b0dc-000b5df10621.html

Sad Times for the Rich

It’s true that the country singer Merle Hazard has never been to the Hamptons.

But he does bill himself as America’s first and only country music star to sing about mortgage-backed securities, derivatives and leveraged buyouts, and he slightly knows the economist Arthur Laffer, best known for the supply-side Laffer Curve beloved by anti-tax conservatives.

Mr. Hazard, to be technical, has another identity, as Jon Shayne, a 46-year-old money manager who studied philosophy at Harvard and then got a law degree from Vanderbilt and whose company manages more than $120 million from Nashville.

Over the summer, he gained a measure of fame on the Internet and beyond when he spun himself off as an independent issue in rented cowboy duds known as Merle Hazard. The name evokes both the country star Merle Haggard and the term “moral hazard,” which at the Grand Ole Opry and elsewhere refers to situations when a person’s behavior is altered because his risks are borne by others — say, by the Fed willing to bail out over-leveraged investors.

Mr. Hazard’s I.P.O., a song called “H-E-D-G-E,” a very loose takeoff on a song about a different variety of uninsured loss, Tammy Wynette’s “D-I-V-O-R-C-E,” became a niche favorite on YouTube. Dedicated to “the hardworking men and women on trading desks all across America,” it’s almost certainly the only country song about the subprime meltdown and its effects on the global credit markets.

http://www.nytimes.com/2007/11/18/nyregion/18towns.html?_r=3&ref=nyregion&oref=
slogin&oref=slogin&oref=slogin

Goldman's Global Alpha To End 2007 Minus $6 Billion

Yes folks, Goldman! Goldman Sachs Group Inc.'s Global Alpha hedge fund may lose about $6 billion in assets this year, a 60 percent decline, because of trades that went awry and client withdrawals, according to two investors.

Global Alpha, which entered 2007 with more than $10 billion, lost 37 percent on investments through Nov. 14, most of it in August, said the Goldman clients, who asked not to be identified because the fund's performance is private. The New York-based company has about $2 billion in fourth-quarter redemption notices, on top of withdrawals through the year.

Goldman, the world's most profitable securities firm, said last month it won't shut down Global Alpha, a quantitative fund whose managers, Mark Carhart and Raymond Iwanowski, use computer models to select trades. The fund generated $700 million in fees in 2006, after returning almost 40 percent the previous year.

``Goldman as a firm would like not to have the reputation of shutting things down,'' said Geoffrey Bobroff, an independent investment consultant in East Greenwich, Rhode Island. ``Smaller isn't necessarily bad.''

Christopher Williams, a Goldman spokesman, declined to comment.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aDPzxc7.LV.g&refer=home

Wall Street Plans $38 Billion in Bonuses

What shareholders? You mean the schlubs having their worst year since 2002, losing $74 billion of their equity? . Heck, why should a little thing like that prevent Wall Street from paying record bonuses, totaling almost $38 billion?.

That money, split among about 186,000 workers at Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co., Lehman Brothers Holdings Inc. and Bear Stearns Cos., equates to an average of $201,500 per person, according to data compiled by Bloomberg. The five biggest U.S. securities firms paid $36 billion to employees last year.

The bigger bonus pool derives from a record $9 billion of fees for arranging acquisitions and $5 billion for underwriting initial public offerings and sales of junk bonds, the most lucrative securities, Bloomberg data show. Bankers' record fees help explain why 2007 will prove to be the industry's second- most profitable after the subprime mortgage market collapse led to losses at Merrill and Bear Stearns. The last time bonuses declined was 2002 when the Standard & Poor's 500 Index fell 23 percent, and Enron Corp. and WorldCom Inc. went bankrupt.

Goldman's record earnings and gains at Morgan Stanley and Lehman mean all the New York-based firms will be forced to pay more in a year when all but Goldman lost more than 20 percent of their market value, said Charles Geisst, finance professor at Manhattan College in Riverdale, New York.

``They're all going to have to fall into line,'' said Geisst, author of ``100 Years of Wall Street.'' ``If Bear and Merrill plead poverty, they're going to lose all of their good people.''

http://www.bloomberg.com/apps/news?pid=20601087&sid=ahE8xVisWsbE&refer=home

Fight Club: Hedgies Knock Bankers Black and Blue

The psychological battle began last night as ten out of 12 contenders in Hong Kong’s only white-collar boxing event weighed in at new harbourside venue Watermark. Set to the thumping beat of “Eye of the Tiger”, the contenders from the world of hedge funds, investment banks and trading desks took to the stage with their opponents for a chance to strut their stuff.

Admittedly it was a polite, gentlemanly event, with no trash talking and only one battler coming out with both fists swinging – that would be England’s Will ‘Mad Dog’ Marsden of Mergermarket.

Most of the boxers looked a bit sheepish as they were paraded down by one of the black leather-clad ‘Never Say Never Again Girls’, who will serve as ring girls next week. They gamely climbed onto the stage, although Australia’s Adam ‘Kilgour’ Upton of JF Asset Management leapt up from the floor, to the audience’s approval. The atmosphere on stage was that of a team rather than of 10 men trying to intimidate one another's opponents. (Two of the boxers were travelling.

The Hedge Fund Fight Nite, which will raise money for charity Operation Smile, will be held Wednesday, 28 November at the Conrad Hotel. Real-estate investor Intellectual Property is the main sponsor for the event. There will be six fights, each consisting of three two-minute rounds. The organisers say they’ve already raised HK$200,000 and are aiming to raise $1 million by the end of next week’s black-tie action.

http://www.financeasia.com/article.aspx?CIaNID=65344

Fraudster Pleads Guilty, Guilty, Guilty

Michael Mendelson, co-founder of Portus Alternative Asset Management Inc., pleaded guilty to one count of fraud and was sentenced to two years in prison for his part in the collapse of the C$800 million ($812 million) firm.

Mendelson, 41, who entered the plea today during a hearing in the Ontario Court of Justice in Toronto, was accused with Portus co-founder Boaz Manor of misusing investor money. Mendelson admitted to taking part in the misappropriation of C$106 million ($108 million).

``To anybody who was negatively impacted by the creation of Portus, I deeply apologize,'' Mendelson said at today's hearing. ``I take responsibility for my actions.''

Mendelson, who was handcuffed in the courtroom and taken to a Toronto jail before his transfer to a federal facility, will be eligible for day parole in six months and full parole in eight months under Canadian rules. He struck a deal with prosecutors for the two-year sentence, agreeing to testify against Manor.

http://www.bloomberg.com/apps/news?sid=a3Z9yfHAWP5o&pid=20601082

Does the Hedge Industry Have a $$$ problem?

Every business should have such problems. But does the hedge fund industry have a problem with big bucks? That's the question posed by David Kochanek, president of Job Search Digest, the San Diego-based publisher of Hedge Fund Search Digest, a compensation survey of hedge fund professionals that found high employee turnover in the industry.

The survey, narrowed down to 232 qualified responses from industry professionals at 220 well-recognized institutions such as ABN AMRO, American Express, Credit Suisse, Deutsche Bank, Goldman Sachs and Morgan Stanley, found that more than 75% of respondents were dissatisfied with their current compensation packages.

The study noted that among respondents -- analysts, traders, portfolio managers and those in other positions -- dissatisfaction in light of relatively high average annual compensation of $250,000 might be a function of expectations. The largest number of respondents, or close to 20%, earned from $100,000 to $150,000 annually, and the second largest group garnered annual compensation ranging from $150,000 to $250,000. On the top end, some hedge fund dealmakers earn more than $1 million each year, while less than 5% made up to $50,000.

Additionally, most respondents, or more than 60%, had less than two years of experience with their current firms, suggesting that there's plenty of job-hopping among hedge-fund employees. "Respondents feel compensation needs to be improved, which might be what is sustaining the revolving door," the survey notes.

About 15% of survey respondents remained with the same firm for more than five years. Half of the survey respondents, meanwhile, reported 10 years of work experience, whereas 63% have more than five years of direct hedge fund experience and 31% recorded more than 10 years of hedge fund industry experience.

http://www.iddmagazine.com/idd/fierce_finance.cfm?id=14603&issueDate=current

It’s Payback Time for this Hedge fraudster

If only he had lived up to his name. Joseph T. Profit II of Atlanta, accused of defrauding clients of his New York-based hedge fund by lying about its investment returns, will have to pay restitution and civil penalties, a federal judge ruled this week.

The order comes nearly 10 months after the Commodity Futures Trading Commission, which regulates commodity futures and options markets, filed a complaint in the U.S. District Court for North Georgia against that fund, Cornerstone Capital Management LLC, and Profit, its chief executive.

The complaint alleged Profit and Cornerstone did not file required annual reports and lied to clients about the returns of the company's Icon Fund, claiming it recorded annual returns of 42.18 percent and 20.74 percent in 2005 and 2006, respectively.

In his order, Judge Richard Story found Profit and Cornerstone liable for defrauding clients and falsely claiming to have between $20 million and $60 million in assets, when in reality, Cornerstone has $3.2 million in client assets. Profit lost $1 million of that amount from trading losses and personal withdrawals that he spent on food, plane tickets and golf fees, the order said.

How much Profit has to pay will be set at a later date.

http://www.ajc.com/services/content/business/stories/2007/11/15/
cornerstone_1116.html?cxtype=rss&cxsvc=7&cxcat=6

Study Produces Useful Information For Investors Who Are Morons

A new study by Gerald Martin of American University and John Puthenpurackal of (wait for it) the University of Nevada, called “Imitation is the Sincerest Form of Flattery," has found that if you buy the same stocks as Warren Buffett, you will make a lot of money. It’s a companion piece to an equally groundbreaking paper by the same authors which found that Goldman Sachs employs many individuals from an ethnoreligious group originating in the Israelites or Hebrews of the ancient Middle East.

The study found that investors mimicking the Oracle’s stock picks, even up to four months later, would earn an annual return of 24.6 percent, easily beating the S&P 500, which rose 12.8 percent during the same period. Based on these numbers, Martin and Puthenpurackal came to almost the preposterous conclusion that “"Warren Buffett appears to possess investment skill.” (No joke, they actually came to and wrote that conclusion.) Investors partial to mammary glands of the gigantic variety will be pleased to note that Buffett told M&P that when he’s having difficulty making a decision about a stock, one of his tried and true tricks is to stare at a rack not unlike that of Liz Claman’s (and, in many cases, that exact one) for two, maybe three minutes, and the answer will “just come” to him. So keep doing what you’re doing.

Or even better, check out http://www.bloomberg.com/apps/news?pid=20601213&sid=an7palBI77Qg&refer=home

http://www.dealbreaker.com/

Fraud Patrol: First Bayou sentencing today

Oh happy day. The line is already forming outside the US District Court in downtown Manhattan where Judge Colleen McMahon will tomorrow sentence Bayou co-conspirator James G. Marquez for his role in one of history’s largest hedge fund frauds. Prosecutors want a 51-60 month jail sentence. The defense—citing Marquez’s mental illness, the fact that Bayou incurred most of its losses after he left, and “myriad contributions to society”—proposes a non-incarceratory sentence, “perhaps coupled with community service and/or home detention.”

The defense seems to have won at least a moral victory in the pre-sentencing hi-jinks over documents used by the government to support its case that Marquez played a prominent role at Bayou. Assistant US Attorney Margery Feinzig has conceded that several were signed by Dan Marino, Bayou’s chief financial officer, on Marquez’s behalf, either after “contacting Marquez and informing him,” or under authority “in connection with [Marino’s Bayou ] responsibilities.”

The defense, unsurprisingly, disputes that Marino, who was Marquez’s personal accountant in pre-Bayou days, was ever authorized to sign Bayou-related documents on Marquez’s behalf. But those documents are, in the end, little more than a sideshow. Marquez has admitted his role in the Bayou debacle, and the government has made a strong case that his alleged desire to recover the losses made on his watch ran a long second-place to his own self-enrichment. As well, has expressions of remorse and acceptance of responsibility are matched, at almost every turn, by his attempts to blame partners Marino and Scammy Israel III

http://nakedshorts.typepad.com/nakedshorts/2007/11/first-bayou-sen.html

.

Goldman puts its money where its mouth is

Goldman Sachs CEO Lloyd Blankfein said the Wall Street giant has raised one hedge fund and plans another to capitalize on the credit crunch.

Blankfein said Goldman has raised $2.7 billion for credit hedge fund Liberty Harbor and expects to launch a long/short hedge fund, both designed “to take advantage of distressed opportunities in the credit markets,” he told the Merrill Lynch Banking & Financial Services Conference.

“As you know, we’ve had issues with the performance of certain of our quantitative funds, as have others in the space,” Blankfein said, referring to the widely-publicized losses in its flagship Global Alpha fund, as well as its Global Equity Opportunities and North American Equity Opportunities funds. “While direct quantitative hedge funds represent only 5% of our assets under management, we realized it would be prudent to further expand our product portfolio in actively-managed strategies.”

The long/short fund, expected to launch in the next few months, is to be managed by traders who ran a similar fund at Goldman.

http://www.finalternatives.com/node/2899

Hedge rises from the dead, sues

Proof that there is life after death: Amaranth, the hedge fund that collapsed last year amid $6 billion in losses, has sued JPMorgan Chase for at least $1 billion, accusing the bank of fraudulently taking advantage of the firm during its crisis in September 2006.

Amaranth, which once had assets of $9.2 billion, charged in the suit, filed Tuesday in State Supreme Court in Manhattan, that bank executives spread lies about the value of its energy-trading assets in a successful effort to buy them cheaply.

“Absent JPMorgan’s actions, the fund’s losses, though significant, would have been survivable and far less dramatic,” a letter to investors signed by Amaranth’s founder, Nicholas Maounis, said.

The bank called the suit “an effort to rewrite history, and to blame JPMorgan for losses that were the result of Amaranth’s disastrous trading.”

http://www.nytimes.com/2007/11/15/business/15hedge.html?ex=1195794000&en=c42a311dab6c2909&ei=5099&partner=TOPIXNEWS

Fed Promises To Be Clearer About How It’s Going To Fuck You In The Future

Sometimes seen as a cryptic oracle of the economy, the Federal Reserve is overhauling the way it communicates with Congress and the public.

The Fed has in the past made its projections of economic growth, unemployment, and inflation twice a year, in February and July, when its chairman appears before the Joint Economic Committee of Congress.

The Fed will now increase those projections to four times a year. And it will look out to the next three years, instead of two. It will also publish projections for overall inflation, which includes food and energy costs, as well as core inflation, which excludes them.

Summaries and explanations of the projections will be released along with minutes of the Fed policy meetings at which they were discussed.

“These descriptions will provide a fuller discussion of the projections, covering not only the outcomes that most meeting participants see as most likely, but also the risks to the economic outlook and the dispersion of views among policymakers,” the Fed said.

The first publications will be issued on Tuesday, when the Fed releases the minutes of the interest-rate meeting of October 30-31.

http://www.portfolio.com/news-markets/top-5/2007/11/14/Bernanke-pledges-greater-openness/?TID=partnershipbadge

Goldman: Ducks Subprime Hit

Goldman Sachs Group Inc. does not expect to further write down the value of its portfolio, the investment bank's chief executive said Tuesday. Lloyd C. Blankfein, presenting at the Merrill Lynch Banking and Finance Conference in New York, said he expects no further significant costs tied to the drainage of demand from certain markets, including bonds backed by mortgages.

Wall Street's investment banks have written $43 billion off their balance sheets this year, according to a Deutsche Bank estimate.

These charges reflect lower values for the banks' portfolios because the crisis in the mortgage industry has scared buyers from a litany of investments backed by home loans.

Goldman Sachs recorded $1.48 billion in charges for the third quarter. By contrast, Merrill Lynch & Co. disclosed a $7.9 billion write-down just three weeks after the bank estimated a $4.5 billion charge. Citigroup Inc. has recorded nearly $6 billion in credit losses and warned it may have to record as much as $11 billion in further losses.

Goldman Sachs has won plaudits as the investment bank that best navigated this year's credit turmoil. The bank's stock is up more than 10 percent for the year, while its rivals are all down at least 15 percent. Shares of Goldman Sachs jumped $12.69, or 5.9 percent, to $227.40.

I hope for their sake Goldman's not cooking the books or pulling a fast one, but readers, our gut tells us there's more to this than meets the eye.

http://www.forbes.com/feeds/ap/2007/11/13/ap4333344.html

The Revenge of the Hedges: Overstock.com gets back a bit of its own

What goes around, comes around. It took more than two years, but the hedge fund sued by Overstock.com has finally countersued. Larkspur, Calif.-based Copper River Partners, accused by Overstock of being part of a wide-ranging conspiracy to drive down its stock price, returned fire, alleging that the online retailer used a campaign of misinformation and fudged accounting to jack up its share price.

In addition, Copper River—the former Rocker Partners—accuses Overstock of a “campaign of menace” using short squeezes to distract investors from its poor performance.

The hedge fund says Overstock altered its accounting system to allow it to claim a big jump in revenues, though there was allegedly no corresponding spike in business activity. It also accuses Overstock CEO Patrick Byrne of publicly downplaying the company’s need for capital.

Overstock said there is nothing to Copper River’s claims. What did you think they’d say?

http://www.finalternatives.com/node/2890

BoA Wants YOU To Guess How Much Money It's Going To Lose!

“Not so fast,” Bank of America said today to a bunch of analysts, who were hilariously projecting that the bank will earn $1.12/share in the fourth quarter, when it announced a $3 billion pretax loss stemming from standing in front of collateralized debt obligations for too long.

CFO Joe Price cautioned that while 3 is the number we’re hearing now, the sky’s really the limit in terms of how much more money the bank could lose before last call, which is why more money has been set aside for other potential fuckups. ``Where valuations will be at the end of the year is anyone's guess given these variables,'' Price said at a Merrill Lynch & Co. banking and financial services conference, still stifling laughter over the idea of BoA not being a huge embarrassment to itself. Giggles aside, he was being dead serious-- whoever estimates Bank of America's fourth-quarter losses closest without going over will win an unpaid apprentice position with Deutsche Bank's Mike Mayo, and another drinks at Cru with us, Holden R in the flesh! How can you resist?

http://www.dealbreaker.com/

Last but not least: A Holiday Gift For The Hedgie Who Has Everything

How do you shop for the man who has everything? More specifically, how do you shop for the hedge fund manager who has a multi-million-dollar mansion in Greenwich or East Hampton (or both!), a pied-à-terre in town, a boat, a Gulfstream, a dozen cars, a high thread count, a roomful of Manets, and a couple of billion hidden under the mattress?

Spoiled children and partners in extramarital affairs, Capital Ties has the answer for you. The New York-based “neckwear design and manufacturing company” has unveiled the perfect sartorial gift: the hedge fund manager necktie. Or, more accurately, “Hedgehogs.”

The bright-red silk tie features adorable little hedgehogs swimming is a sea of alphas, betas and deltas, “a tribute to those richly-paid experts in the use of quantitative analysis.”

This year’s fashion highlight is available just in time for the holiday season at Capital Ties’ Web site, at the deeply discounted price of $49.95 through Dec. 15 (procrastinators will have to cough up $65).

http://www.finalternatives.com/node/2888

A $45 Billion Writedown Won't Stop Wall Street Profit

Even after the record $8.4 billion writedown for bad debts at Merrill Lynch & Co., the unprecedented ouster of three chief executives within five months and the elimination of $84 billion of market value at the five largest securities firms, Wall Street still is poised to report its second-most profitable year.

And 2008 may be better.

``As the bombs are dropping and the mines are exploding, it's a bit of a surprise,'' said Kenneth Crawford, who helps oversee $950 million at St. Louis-based Argent Capital Management LLC, which holds Morgan Stanley and Merrill shares.

The collapse of the subprime mortgage market derailed the careers of Merrill Chief Executive Officer Stan O'Neal, Citigroup's Charles O. ``Chuck'' Prince III and UBS AG's Peter Wuffli. Together, those companies accounted for about 60 percent of the $45 billion of writedowns reported by the world's biggest banks and securities firms so far this year. The industry already has cut 10,000 jobs.

Amid the gloom, analysts estimate New York-based Goldman Sachs Group Inc., Merrill, Morgan Stanley, Lehman Brothers Holdings Inc. and Bear Stearns Cos. will earn a combined $28 billion this year, down 8.3 percent from the record $30.6 billion in 2006, according to a survey by Bloomberg. Analysts currently estimate the firms' net income will reach $32 billion in 2008.

Reason for Optimism

Goldman and Lehman will report their highest earnings ever this year, while profits will drop 42 percent at Merrill, 34 percent at Bear Stearns and 6 percent at Morgan Stanley. In 2008, analysts predict all the firms except Goldman will post higher profits. Goldman, led by CEO Lloyd Blankfein, will earn a Wall Street record $11 billion this year and then $10.5 billion in fiscal 2008, analysts estimate.

``When you look to next year, you're back to earning money once these writedowns are taken,'' said Benjamin Wallace, who helps manage $750 million at Westborough, Massachusetts-based Grimes & Co. and owns Merrill and Morgan Stanley shares.

Les Satlow, who oversees $450 million at Cabot Money Management in Salem, Massachusetts, said he's more bullish on prospects for investment banks than commercial banks.

``The securities firms have less exposure to the consumer and greater exposure to overseas capital markets, which have a reasonable chance of remaining solid,'' Satlow said.

http://www.bloomberg.com/apps/news?pid=20601109&sid=aDDoERW5M.NA&refer
=exclusive

Jim Rogers: the buck stops here

The U.S. dollar is sinking fast and investors wanting to stay afloat should clamber into a raft of commodities and benefit from the rising tide of China's economic boom, investment guru Jim Rogers said on Monday.

"I'm hoping to get all my assets out of U.S. dollars in the next few weeks or months," he told reporters in Hong Kong via a video link from Singapore. "But that will include going into commodities because that is a way out of U.S. dollars."

Rogers, who co-founded the Quantum Fund with billionaire investor George Soros in the 1970s, said the U.S. economy was already in recession, or soon would be, and the U.S. dollar would continue to have problems for years to come.

But that would not be enough to dent demand from Asia. Driving this bull market would be 3 billion people -- in China, India, Pakistan and Vietnam -- whose economies were at a subsistence level during the last commodities boom.

"Now, look around you. Everybody in Asia wants to live the way we live in America," said Rogers, who was launching Barclays' Global Commodities Delta Fund, which tracks his Rogers International Commodity Index , in Hong Kong.

http://today.reuters.com/news/articlebusiness.aspx?type=ousiv&storyid=2007-11-12T100035Z_
01_HKG96149_RTRUKOC_0_US-JIMROGERS-ASIA.xml&WTmodLoc=InvArt-R3-MostViewedBiz-1&from=business

COPS' FLOPS,: HEDGE MOGUL GETS OFF 'EASY'

A fight between high-school girls led to billionaire Jeffrey Epstein being busted on charges of having sex with underage teens - but infighting between police and prosecutors resulted in most of the raps going belly up, The Post has learned.

Despite an earlier claim that Epstein was backing out of a plea deal, he is resolute and will plead guilty in January to a single charge of soliciting an underage prostitute in Florida, sources close to the case said. The money manager's lawyer, Gerald Lefcourt, declined comment.

The single felony charge - and the 18-month prison term Epstein is expected to get in return for a plea - is a slap on the wrist compared to what Palm Beach police had recommended at the end of their 11-month investigation last year.

Cops had wanted prosecutors to slam Epstein with five felony counts stemming from "massages" he had received from as many as four underage girls - but the vast majority of those claims have disintegrated, thanks to questionable witnesses and misrepresentations from cops, a source close the case said.

The investigation started in 2005, after cops were called to a Palm Beach-area school because of a fistfight between two teenage girls, the source said. The teens told the cops the fight had started after one accused the other of being a prostitute.

One of the girls, 14, told cops she had indeed been paid $300 for going to the estate of an older man named "Jeff" and partially stripping while giving him a massage. She also said he used a "purple vibrator" on her, records show.

The girl told cops she had been taken to Jeff's by a friend of a friend named Haley Robson. Robson told cops the teen was one of six girls between 14 and 16 whom she had taken to Epstein's.

http://www.nypost.com/seven/11122007/news/nationalnews/cops_flops_letting_mogul_get_off_easy_303421.htm

GOLDMAN CEO IN LINE FOR $75M BONUS

Go figure. While most top dogs at big Wall Street firms could see their bonuses shrink by 20 percent or more this year, Goldman Sachs honcho Lloyd Blankfein stands to collect a jackpot of at least $75 million in cash and stock, according to sources inside the firm.

Blankfein's giant pay package, which would be about $20 million more than he got last year, comes as Goldman seems to have weathered the credit storm that rocked rivals Merrill Lynch and Bear Stearns.

Goldman's bonuses were calculated last month at the height of the subprime mortgage meltdown but traders and bankers won't get any word on their annual perks until mid-December, insiders said. Goldman's co-presidents Gary Cohn and Jon Winkelreid could also see their bonuses top $70 million each, sources said. They both got about $50 million last year.

Despite steep losses at several of Goldman's in-house hedge funds, the firm will likely still manage to post a 25 percent profit gain this year and has yet to take the giant write-downs that have plagued rival firms.

As of Friday, Goldman shares were up about 6 percent for the year, compared with other Wall Street firms, which are nearly all down over 30 percent.

http://www.nypost.com/seven/11112007/business/goldman_
ceo_in_line_for_75m_bonus_460668.htm

LITTLE EDDIE LAMPERT TAKES ONE ON THE CHIN

Top shelf hedge fund manager Eddie Lampert has had better years. Lampert, who ESL Investments fund has produced returns of 24 percent a year for nearly 20 years, has posted a paper loss from its top four holdings of about $4.47 billion since June 30, according to filings with the Securities and Exchange

Leading the decline is the fund's 65.6 million-share cache of Sears Holdings Corp., the parent of Sears and Kmart. Sears Holdings has fallen 28.7 percent since June 30, costing the fund some $3.2 billion. It closed Friday at $120.87.

Greenwich, Conn.-based ESL Investments also took it on the chin for its Citigroup stake, which got Lampert some unwanted publicity last week. The investor had been accumulating Citigroup shares through the first half of the year until he owned some 24.8 million shares valued at $1.3 billion on June 30.

The last 9.5 million shares, purchased during the second quarter, cost ESL Investments an average price of $52.42 a share. With Citigroup's close at $33.10 a share on Friday, that stake is now worth $821 million - a loss of about $500 million. Lampert also controls auto parts retailers AutoZone and AutoNation - which have seen their shares tumble. Together, the two chains' stock decline have cost Lampert $800 million. In addition to the portfolio loss, Lampert also rung up an investment loss of some $21 million in the three months ended April 30. Lampert invests some of the cash Sears Holdings spins off.

http://www.nypost.com/seven/11112007/business/tough_times_213480.htm

BILLIONAIRE TURNS TO GARBAGE

Billionaire investor Sam Zell has a new love - garbage. Or more precisely, the waste-to-energy industry, which he believes has a bright future because it is green and, much like commercial real estate, provides a steady revenue stream.

The billionaire mogul - who sold his massive residential and commercial real estate empire earlier this year for $39 billion - has placed his waste-to-energy bet on one New Jersey company, Covanta Holding, which is up more than 23 percent this year.

"The persistent high cost of oil coupled with a global consciousness of all things 'green,' positions waste-to-energy companies as a growing industry with great potential," Zell tells The Post.

The waste-to-energy industry is one of the most innovative of all the alternative energy sources around today. Instead of having household trash end up in landfills, WTE companies convert the garbage into energy, often burning it in the same way that traditional power companies burn oil or coal. And unlike oil or coal, WTE is a clean and renewable energy source.

The Environmental Protection Agency says that WTE has "less environmental impact than almost any other source of electricity."

Last week, Covanta brought online a plant that turns the trash collected in Lee County, Fla., into electricity.

"We were intrigued with the asset intensity and predictable revenue streams, which were strikingly similar to commercial real estate," the forward-thinking Zell said in an e-mail response to questions.

Zell, who is chairman of the Fairfield, N.J.-based concern, is scheduled to close on a much more publicized investment - the Tribune Company - in the next two weeks. His investment in Covanta is valued at about $600 million.

http://www.nypost.com/seven/11112007/business/billionaire_
investor_zell_has_new_love___941425.htm

O'Neal's Agony, or, in the Bunker With Stan

Michael Lewis writes: when a big Wall Street firm loses a huge pile of money, it's often hard to figure out exactly what happened.

Lots of shrewd people are scrambling to cover their rear ends. Every story has three versions. Who said what to whom, and when, is seldom clear. But in the strange case of Merrill Lynch's shocking $8.4 billion loss in its subprime-mortgage portfolio, there is perhaps less ambiguity. As Merrill's losses mounted, we know exactly where Chief Executive Officer Stan O'Neal was, what he was doing, and with whom:

On a golf course. Golfing. By himself.

O'Neal's golf scores, available on the U.S. Golf Association's Web site, http://www.ghin.com/lookups/index.html , but first brought to public attention by the Bespoke Investment Group's Web site, are interesting for several reasons.

In the six weeks between Aug. 12 and Sept. 30, as Merrill Lynch's losses mounted, its CEO didn't merely manage to play 20 rounds of golf, on four different courses. He played them beautifully, with a consistency that defied the pain he must have been feeling. Indeed, a glance at the scores explains why the Merrill Lynch board agreed to pay him $48 million in 2006: The man has ice water in his veins. From the end of July to early October, when the firm Stan O'Neal ran was losing money at a rate of more than $100 million a day, his handicap wavered only slightly -- in fact dropped, to 9.1 from 10.2.

Financial journalists assigned to explain how a Wall Street firm lost $8 billion on what was, in effect, a single trade, will no doubt attempt to recreate conversations and meetings inside Merrill Lynch's New York headquarters. They will be wasting their time.

To get to the bottom of the matter they must enter the calm, quiet zone that was the mind of its CEO, as he golfed, alone. As he motored along empty cart paths and strolled down empty fairways, pausing every few minutes to whack away at his dimpled white ball, what exactly was Stan O' Neal thinking? How did he manage to hold himself together so well, even as his firm fell to pieces?

As it happens, the answer to those questions can be found on the scorecards on file at the USGA. On these cards O'Neal wrote down not only his impressive scores but also revealing little personal notes to himself. Notes to which I alone have been given access.

Many of these, naturally, have nothing to do with business. For instance, on Aug. 31 on the back of the card that proves he shot an 83 on Martha's Vineyard's prestigious Vineyard Golf Club, O'Neal scribbled, ``Stan is certainly the man!'' On Sept. 22, after he'd shot an 80 at the verdant Waccabuc Country Club, he wrote, with his natural ear for the language, ``Eighty makes me greaty!''

But a handful of those notes hint at the inner workings of the 21st-century Wall Street CEO in crisis. Little black smudges made with stubby little pencils reveal a man sitting in the eye of a storm, almost perfectly at peace with himself:

Aug. 12: Purchase Country Club.
ALL ALONE ON THE COURSE. NO ONE TO TALK TO SO TALKED TO MYSELF. HAD A THOUGHT: NO ONE KNOWS WHERE I AM! REALLY! TURNED OFF CELL PHONE. FIVE HOURS LATER I WONDERED: WHERE DID THE TIME GO? A PERFECT DAY.

Aug. 18: Purchase Country Club.
BIRDIE ON 11 WAS A THING OF BEAUTY. IT WOULDN'T HAVE BEEN POSSIBLE IF I'D ALLOWED MYSELF TO BE DISTRACTED. DETAILS ARE THE ENEMY OF GOLFING EXCELLENCE. GAVE ME ANOTHER THOUGHT: GOLF IS LIKE RUNNING MERRILL LYNCH! THE TRICK IS TO KEEP IT SIMPLE. BE A BIG PICTURE PERSON. NOTE TO SELF: SMARTEST THING YOU EVER DID WAS TO TAKE FIRM AWAY FROM THE DAY-TO-DAY DRUDGERY AND MAKE JUST A FEW BIG BETS. FREES UP TIME.

Aug. 26: Vineyard Country Club.
FIVE BIRDIES AGAINST THREE BOGEYS. ALL THESE UPS AND DOWNS! MOODS SWINGS ARE TREMENDOUS AND EXHILARATING BUT CAN'T LET ANYONE AROUND ME KNOW WHAT I'M FEELING. NOT THAT THERE'S ANYONE AROUND ME -- BUT YOU NEVER KNOW WHO'S ON THE NEXT TEE. GOLF IS SO MUCH LIKE RUNNING MERRILL LYNCH! WHEN I PLAY I FEEL I MIGHT AS WELL BE AT MERRILL LYNCH. IN A WAY, I AM.

It must have been around this time that O'Neal received word that something unusual was afoot on Wall Street as he shot, in rapid succession, a pair of 90s. Painful as those scores must have been to him, he could hardly hold himself accountable. There was panic in the credit markets and Merrill Lynch was at risk.

The CEO showed up at the office, briefly, reassured the media that there was no risk of contagion in the subprime markets, and then returned to his single-minded pursuit of excellence. From his notes, we see how hard it can be for a golfer to concentrate, when he happens to also be a Wall Street CEO.

Aug. 26: Vineyard Country Club.
FREAKING MARKETS! CELL PHONE RANG WHILE CHIPPING OUT OF A BUNKER. PEOPLE SAYING SUBPRIME MEANS SUBPAR. NOTE TO PEOPLE: SUBPAR IS GOOD! TOOK A MULLIGAN, WHICH IS ONLY FAIR. (CHECK WITH COMPLIANCE?) WALL STREET A HARD PLACE TO ACHIEVE GOLFING EXCELLENCE. MEMO TO USGA: HANDICAPS SHOULD TAKE DAY JOB INTO ACCOUNT.

Aug. 31: Vineyard Country Club.
PUTTING ON THE 12TH WHEN A MERRILL CUSTOMER CAME OUT OF THE WOODS AND WHISTLED. MISSED THE PUTT! HE WASN'T EVEN A MEMBER. SAID HE SAW A BLACK GUY DRIVING IN AND FIGURED IT WAS EITHER ME OR VERNON JORDAN. HE WANTED TO DISCUSS HIS PORTFOLIO. SOME PEOPLE! TOLD HIM THAT INVESTING WAS LIKE GOLF. THAT CONFUSED HIM LONG ENOUGH FOR ME TO GET TO THE CART AND HIT THE GAS. HOW DID HE FIND ME? WILL OTHERS?

Sept. 2: Purchase Country Club:
PLAYING ALONE AGAIN. CAN'T FIND ANYONE WHO CAN GET AWAY FROM THE DESK -- EVEN JIMMY CAYNE NOW SAYS HE'S TOO BUSY. QUITTER. I TOLD HIM THAT THE BEAR WILL DO WHAT THE BEAR WILL DO. HIS HANDICAP WON'T. WALKING DOWN 16TH FAIRWAY I FELT VERY ALONE. THEN I REALIZED: I AM ALONE. HAD ANOTHER THOUGHT: ALONE IS HOW LEADERS ARE SUPPOSED TO FEEL IN MOMENTS OF CRISIS. CHURCHILL FELT ALONE, TOO. DID HE GOLF?

As summer turned to fall, Merrill Lynch's embattled CEO obviously took less and less delight in his many birdies. Tellingly, all but one of his diary entries occur beside the scores of holes that he bogeyed -- and the one exception was a hole that the CEO triple bogeyed, at Shinnecock Hills Golf Club in the Hamptons, on Sept. 22. It was at Shinnecock Hills that O'Neal shot what for him must have been a highly disappointing 89, evidently because he played in haste, in his rush to get to the first tee at Waccabuc, 50 miles north of New York, on the same day.

Sept. 22: FREAKING WATER HAZARD! FREAKING FREAKING WATER HAZARD!! FREAKING, FREAKING, FREAKING WATER HAZARD!!! REMEMBER: BIGGER BETS AT ML MEANS LESS TIME HAVING TO THINK ABOUT THE FIRM, AND LESS TIME IN OFFICE MEANS MORE TIME TO SWIM FOR BALLS. LOSING BALLS IS A SIGN OF WEAKNESS, EVEN WHEN NO ONE SEES YOU DO IT. BEST CASE SCENARIO: FIND BALL. WORST CASE SCENARIO: $160 MILLION PAYOUT.

To judge from this unusually emotive scorecard entry, the loss of a single golf ball in the pond just off the eighth fairway at Shinnecock Hills triggered in the CEO a surprising amount of resentment toward the firm that kept bothering him to run it. More generally, trouble on the links clearly unsettled the CEO's mind and dragged it, reluctantly, back to troubles at the office (wherever that was). I leave it to the reader to decide the meaning, and the importance, of Stan O'Neal's final two scorecards:

Sept. 29: OFFICE CALLED MIDSWING! ON A SATURDAY! WHY EVEN BOTHER TO PLAY ALONE????? 5.1 BILLION REASONS TO BLAME FOR THIS ONE. I THINK.

Sept. 30: MAKE THAT 8.4 BILLION REASONS TO BLAME

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ajTvXXdpb748

Coming soon to Wall Street cinemas: ``Honey, I Shrunk the Bonus'

For anyone who hasn't changed jobs recently enough to have secured a guarantee from his or her employer, the prospects of a decent payday in the next bonus round are about as secure as the AAA rating on a collateralized debt obligation.

It won't matter that your particular part of the business shot out the lights last year. There's just no way to generate enough profit to backfill the holes in the balance sheet at a time when the board is inclined to adopt a ``kitchen sink'' approach to its quarterly results.

As the year drags on, more and more regions of the global financial map are sinking into the quagmire of distrust, downgrade and destabilization. Even the stock market is finally noticing that we're not in Kansas any more and Dorothy might have to do more than click her heels three times to get home.

It's time to cancel your Audi R8 order and hang on to the old Porsche for another year. You might also want to consider spending more time hanging out on Facebook and MySpace; why risk making things worse for yourself by trading and doing deals if you're not likely to get paid for that additional risk?

http://www.bloomberg.com/apps/news?pid=20601010&sid=aP9vWNExG_xM&refer=news

When Good Traders Go Bad

Learn to deal. Good traders lose money. They also go through slumps. I've seen it with people who have made millions for multiple years running. What makes them good traders is, in part, how they lose. Here are three qualities I've seen in good traders who go through rocky periods:

1) They're quick to identify when their ideas aren't working - They don't fight the market, and they don't become threatened or defensive. Rather, they quickly enter a mode where they look at what's working, what isn't, and what they can do about it. They accept that there will be periods when they see things well and periods when they don't.

2) They're quick to de-lever - They get smaller when they realize their trading isn't working. They avoid digging large holes for themselves, but they also don't stop trading. By trading smallest when they're having the most trouble and largest when they're seeing things clearly, they leverage their strengths.

3) They're patient in regaining their feel - They keep trading small until they have a good understanding and feel for what's going on. They don't press to catch up and make money; they ride out the storm and take minimum damage. Because they've been through this before, they know that their time will come--and that helps them sustain patience.

The traders who are most at risk are those that fight markets, trade larger or more often to recapture lost money, and can't stay out of the water when conditions are unfavorable. All traders lose money; it's how you trade when you're down that makes all the difference.

http://traderfeed.blogspot.com/2007/11/when-good-traders-lose.html

Signs of the Coming Correction: The Van Gogh Nobody Wanted

Go effing figure. After a disastrous Impressionist and Modern art sale at Sotheby's on Wednesday evening, the art world is looking to next week's postwar and contemporary sales to answer a burning question: Was Wednesday an aberration, or are we headed for a serious correction?

Shares of Sotheby's stock fell 28% yesterday, presumably on investors' fears that Sotheby's had overextended itself in guarantees — prices the house promises to pay the sellers, whether or not their art sells. Sotheby's has offered an even higher total of guarantees for next week's sale.

"Next week is crucial to the auction houses and will be very telling as to the market," the art dealer Asher Edelman said. But he added: "I think the craze in the market probably capped itself last night. I think it's over."

"The one thing that's been propping up the art market has been the [weakness of the American] currency, and the thing that's been overlooked has been the deep, deep problems in the economy," Mr. Edelman continued. "We are heading into a 1970s economy: 10 years of recession and inflation and high interest rates."

The total hammer price at Sotheby's sale Wednesday was $238.8 million, or 67% of the pre-sale low estimate of $355 million. Several of the top lots failed to sell, including Vincent van Gogh's "The Fields (Wheat Fields)," which was estimated at between $28 million and $35 million.

http://www.nysun.com/article/66162

The Scariest Part of Citigroup's Mess

A truly sucky card player does not fold. A sucky card player calls and then stays in the game, praying that the one card in the deck that can help him falls and saves the hand.

For anyone that’s followed Citi’s latest, they are the sucker sitting at the table. Investors.com reports that the investment banking giant might just write down $1.1 billion in subprime mortgage losses this quarter alone and it does not end there. Hoping that their financial woes will not get any worse than they already are, Citigroup plans to write down $8 billion to $11 billion before taxes for its $55 billion worth of exposure to the never-ending US credit crunch.

As of last quarter, the bank’s lingering profits dropped their share price 3 cents a share. It also had to deal with $6.5 billion in subprime-related losses in the same quarter.

All of that was announced this Sunday, less than a month after the bank assured its investors that it had a “good, sustainable strategic plan” for getting itself out of the mess that they, like many banks are all currently experiencing.

http://www.riskcenter.com/story.php?id=15574

$500 Billion: The Mother of All Write-Downs

Write this down: five hundred billion dollars. That is how much one analyst thinks the tally of the carnage in the fixed-income markets ultimately could be. Royal Bank of Scotland Group chief credit strategist Bob Janjuah put out a report today estimating that the credit crunch will cause $250 billion to $500 billion of losses at banks and brokers around the world.

As Bloomberg points out in this story on the report, the estimate includes not just losses on subprime mortgage-related bonds but also the effect of a new accounting standard that goes into effect Nov. 15 known as Financial Accounting Standards Board’s rule 157. It will force companies to put values on opaque securities and could lead to write downs of as much as $100 billion at firms including Morgan Stanley and Goldman Sachs Group, according to Janjuah.

Should the estimate prove accurate, it would mean the credit-market storm that began this summer is just beginning. The total of write-downs already announced by Citigroup, Merrill Lynch and the other Wall Street firms is only about $30 billion to $40 billion.

Janjuah’s number is in a league by itself. Not only is the upper end of his range roughly what the U.S. has spent on the Iraq War, it is about equal to the market caps of the three largest U.S. banks, Citigroup, J.P. Morgan Chase and Bank of America, combined.

http://blogs.wsj.com/deals/2007/11/07/500-billion-the-mother-of-all-write
-down-estimates/

THE $6bn BIG MACK ATTACK

Morgan Stanley CEO John Mack (also known as Mack the Knife) could become the next Wall Street bigwig to find himself on the hot seat after two analysts predicted his firm is poised to book a massive write-down related to its exposure to troubled asset-backed securities and CDOs.

Fox-Pitt Kelton analyst David Trone estimated that Morgan is looking at a $6 billion charge for its exposure to the problem-plagued bonds, while analysts at CreditSights figure the collapse of the CDO market could lead Morgan to write down as much as $3.8 billion in assets.

CreditSights analysts also said they had concerns about Morgan's high percentage of so-called "Level III" assets. Level III assets are securities or investments that a firm values itself in the absence of published prices.

If the analysts' predictions are correct, then Morgan would become the latest Wall Street firm to fall victim to the CDO contagion spreading across the financial sector. Several big-name firms have reported substantial write-downs due to the CDO mess, which has claimed the careers of Merrill Lynch CEO Stan O'Neal and Citigroup CEO Chuck Prince.

A Morgan spokesman declined to comment.

. http://www.nypost.com/seven/11072007/business/big_mack_attack_23276.htm

The Housing Crisis’s latest victims? Wall Street Bonuses

Wall Street bonuses may be the latest victim of the subprime mortgage collapse and the tight credit market. Over all, bonuses are expected to be flat to down 15 percent, according to compensation experts and Wall Street executives.

More than most years, the disparities between investment banks and among different divisions within the banks will be unusually large, these experts say. The swings reflect differing losses at the banks and the fact that some areas, like investment banking and stock trading, did very well, while heavy mortgage-related losses were concentrated in a small area where there are fewer and fewer employees to compensate.

“It’s confusing,” said Alan Johnson, managing director at Johnson Associates, a compensation consulting firm based in New York. “We’re in that ugly transition year. The last couple of years have been spectacular, this year is sideways at best and next year will be down lots.”

Wall Street bonuses, in turn, affect everything from Manhattan real estate to the prices of art, luxury goods and vacation homes. In 2005 and 2006, bonuses soared. But this year, bonuses for some fixed-income professionals, who have been the kings of Wall Street for more than six years, will fall 5 to 20 percent, say analysts and Wall Street executives, while investment banking is expected to be up about 10 percent.

http://www.nytimes.com/2007/11/07/business/07bonus.html?_r=1&ref=business&oref=slogin

Redemptions bloody hedge fund losers

Ah, the good news just keeps on coming and coming. Investors removed $3.5bn (€2.4bn) from equity market neutral hedge funds in September after some of them made losses of more than 30% during the previous month, even though they are intended to move independently of the stock markets, but the overall flow of capital into the industry is set to continue.

The outflow, which is uncommon, took the capital invested in equity market neutral funds from $63.7bn to $60.2bn, according to data provider Barclayhedge.

Investors had expressed disappointment with August's performance of quantitative equity market neutral hedge funds, which rely on computers to construct their portfolios. These funds recorded heavy losses for the month to August 10, with US hedge fund manager Tykhe Capital saying one of its funds had dropped 31% in that period.

Goldman Sachs Asset Management subsequently told investors in its quantitative equity market neutral fund that, with the benefit of hindsight, it was clear managers were trying to invest too much capital using this strategy.

Investors also removed capital from fixed income hedge funds, taking their assets under management to $156.3bn, Barclayhedge said. It estimates the total assets in the hedge fund industry at $1.8 trillion and said the overall, net flow into hedge funds was almost $19bn.

http://www.financialnews-us.com/?page=ushome&contentid=244912649

Goldman's Bonus Pool is big enough for Bear to swim in

When Goldman Sachs Group Inc. employees cash their year-end checks, they'll have enough money to buy Bear Stearns Cos.

Goldman, the biggest and most profitable U.S. securities firm, set aside $16.9 billion to pay salaries, benefits and bonuses in the first nine months of 2007, according to the company's third-quarter earnings report. The stock market values Bear Stearns Cos., the fifth-biggest firm, at $14.7 billion. Bonuses, the majority of Wall Street compensation, are typically paid after the fiscal year ends this month.

The figures demonstrate how the fortunes of U.S. investment banks have diverged this year during the collapse of the subprime mortgage market and a credit-market contraction that has saddled the biggest lenders and brokerages with at least $40 billion of writedowns and losses. While analysts expect Goldman to top last year's profit record, they estimate that Bear Stearns's earnings will drop 27 percent. Goldman's shares have added 12 percent this year while Bear Stearns's are down 37 percent.

Wall Street bonuses may drop about 5 percent overall this year from 2006, Options Group estimated in August. That masks the gap between firms like Goldman, where money set aside through August already tops last year's $16.5 billion record, and Bear Stearns, where compensation fell 5.9 percent in the first nine months of 2007 to $3.1 billion.

http://bloomberg.com/apps/news?pid=20601109&sid=aD5AjC8ZyGUc&refer=exclusive

Where Have All the Hedge Funds Gone?

The hedge biz is grappling with its first shakeout in a decade as investors increasingly recoil from startups considered susceptible to the toxic shocks of this year's credit markets.

New hedge funds are opening at the slowest pace since 2003 with almost all of the $164 billion of new investments going to managers with proven records, data compiled by Chicago-based Hedge Fund Research Inc. show.

``People are spooked,'' said Bill Grayson, president of 21- year-old hedge-fund company Falcon Point Capital LLC in San Francisco. ``There is no doubt that a few years ago, if you popped out of brand-name firm,'' everyone wanted to give you money. ``That game is now over.''

Confidence in the $1.8 trillion industry has been shaken by the worst decline in non-government debt markets since Russia defaulted in 1998. Losses forced the liquidation of Boston-based Sowood Capital Management LP, which managed more than $3 billion, and two Bear Stearns Cos. hedge funds with a combined $1.6 billion. Cheyne Finance Plc and Rhinebridge Plc, debt funds based in Ireland that together held about $7 billion in assets, went bust when investors refused to finance them.

Meanwhile, Edward Lampert, 45, attracted almost $4 billion this year. His Greenwich, Connecticut-based ESL Investments Inc. has gained at an annual rate of almost 30 percent since it opened in 1988. Hedge funds like ESL are private pools of capital whose managers participate substantially in the profits from their speculation whether prices rise or fall.

http://bloomberg.com/apps/news?pid=20601109&sid=a_WHuKpgu2oE&refer=exclusive

As Oil Nears $100, Look Out Below

Sure, sure, oil prices are soaring. Having jumped 40% since August, crude prices hit another historic high on Nov. 6, rising to $96.70 a barrel. The factors sparking the $2.72 rally this time: bad weather in the North Sea that could force production cuts, the dollar's continued fall, more violence in the Middle East, and fears that U.S. crude supplies are low. The Energy Dept.'s Energy Information Administration will provide its weekly inventory report on Nov. 7.

But is there a sharp fall just ahead? Analysts say that the oil market looks overheated, and a number of factors could puncture the price bubble. Most important, speculators have played a key role in driving up crude prices this year, and if the trend reverses they'll get out fast. Certainly, global demand remains strong for now. But a number of factors—technical indicators, an economic slowdown, lower demand—could prompt investors to exit en masse.

"Oil prices are in uncharted territory," says Peter Fusaro, co-founder of the Energy Hedge Fund Center, which tracks commodities hedge funds. "My worry is that if the market tanks, everyone will want out at the same time. The market would collapse, and who knows what the bottom is."

Beutel says that regardless of the exit signal for investors, the oil market is due for a correction. "Historically speaking we see that every time there is a sustained vertical [price] rise, we see a 20% correction," says Beutel, adding that the serious threat of a recession could take 40% off oil prices

http://www.businessweek.com/bwdaily/dnflash/content/nov2007/
db2007116_060737.htm?chan=top+news_top+news+index_top+story

The dead can dance! Revival predicted for bond markets

Thanks to the credit crunch, investors can again find good returns in bond markets after years of flagging returns, according to John Pattullo, director of fixed income at Henderson Global Investors Pattullo gained a reputation for strong opinion this year when he advised investors to hold money in a savings account rather than investing in bonds.

This summer the manager said bonds would return less to investors than cash. He said: “Bonds have been awful for about two years. This year, returns have been negative to zero. In June, I said investment-grade bonds were a waste of time.”

However, the liquidity squeeze in financial markets has led to an improvement in bonds, he said. “We thought cash was better than anything else, but credit spreads are cheap, interest rates are coming down and we do not think risk is commensurate with such wide spreads.”

At the end of July, Pattullo’s £200m Strategic Bond fund held 22.4% in cash. At the end of September, the cash holding had fallen to 6.6% and allocations to investment-grade and non-high yield corporate bonds – mainly financials – had more than doubled.

Pattullo started buying subordinated bonds of the best banks on the first day the Bank of England provided emergency support to beleaguered bank Northern Rock. He said: “We spent a lot of cash on investment-grade banking paper in September.” Given his prediction that corporate bond spreads will tighten, his belief that returns from cash will fall leads to the shift in relative returns on cash

http://www.financialnews-us.com/?page=ushome&contentid=2449113375

The Dish at Bear

“Is it possible.that the higher-ups at Bear Stearns are smarter (and the employees dumber) than we thought, and the James “I’m high from life” Cayne all-employee memo re: smoking funny cigarettes was just an elaborate plan to get people to break IT rules so Bear could fire them without coughing up the money for severance? From the text line:

“Bear Stearns fired several people last week for forwarding Jimmy Cayne's memo outside the firm. The email system normally blocks messages that say internal use only in the text. These 2 dozen or so idiots thought they could just erase those words and it would go through without getting caught. This lets Bear cut more people but this time without paying severance.”

http://www.dealbreaker.com/

Soros forecasts serious economic correction

Billionaire investor George Soros forecast on Monday that the US economy is "on the verge of a very serious economic correction" after decades of overspending.

"We have borrowed an awful lot of money and now the bill is coming to us," he said during a lecture at the New York University, also adding that the war on terror "has thrown America out of the rails."

Asked whether a recession was inevitable, Soros said: "I think we are definitely in for a slowdown that I think will be a bigger slowdown than (Fed Chairman Ben) Bernanke is seeing."

Famous for his speculative attack on the Bank of England that made him more than $US1 billion, Soros declined to nominate which currencies are more vulnerable currently. He also declined to comment specifically on the dollar.

"I know exactly where the currencies are going to but I'm not going to tell that to you," he told the audience.

http://www.theage.com.au/articles/2007/11/06/1194321849068.html

Supermodel 'rejects dollar pay' (Can you honestly blame the dude?)

The world's richest model has reportedly reacted in her own way to the sliding value of the US dollar - by refusing to be paid in the currency.

Gisele Bündchen is said to be keen to avoid the US currency because of uncertainty over its strength. The Brazilian, thought to have earned about $30m in the year to June, prefers to be paid in euros, her sister and manager told the Bloomberg news agency.

However, Ms Bündchen, 27, declined to comment on her pay arrangements.

Last week the dollar hit long-term lows against the euro, the British pound and the Canadian dollar.

According to Brazil's weekly magazine Veja, when Ms Bündchen signed a deal to represent Pantene hair products, she demanded that the brand owner, Procter & Gamble (P&G), paid her in euros.

P&G was reported as saying that it could not comment on details of the contract.

There are also reports that she will be paid in euros for a deal with Dolce & Gabanna to promote its The One fragrance.

"Contracts starting now are more attractive in euros because we don't know what will happen to the dollar," Patricia Bündchen told Bloomberg.

http://news.bbc.co.uk/2/hi/business/7078612.stm

Afterhour investors maul GLG

The world's grubbiest major hedge fund manager oozed under the door of the New York Stock Exchange yesterday, and, despite the financial sector thumpage and dippage, didn't have a bad day: it traded 2.3 million shares, and closed up 6.6 percent at $14.60, after a first print at $13.70. An achievement somewhat tarnished when, for reasons not entirely obvious at the moment, it spat up most of that after-hours, with the last trade—according to the not always entirely reliable Yahoo! Finance—at $13.84.

London-based GLG, which now runs $23 billion and is a long-standing member of the global hedge fund super-league, has the unique charm of having been the first hedge fund to cop to a regulatory trifecta in the UK, France and the US, where it whined that it wasn't aware of the rule it broke at the time of its infraction.

So it's entirely appropriate that it chose to enter the US capital markets by the back-door, getting a leg-up through the unlocked SPAC window from Freedom Acquisition Holdings Corp. That company's stock, then listed on the The World's Most Unnecessary Stock Exchange, magically ran up eight percent, on 10 times its average daily volume, late on the Friday afternoon before the GLG listing plan was announced on a Sunday in late June. No word yet from the alleged cops on the insider trading beat but, there again, that sort of informed trading almost certainly falls under the Amex business-as-usual exemption.

http://nakedshorts.typepad.com/nakedshorts/2007/11/after-hours-ban.html

Credit Bubble will take 6+ years to fix: Rogers

U.S. credit markets are enduring their worst bubble ever and it may take more than six years for them to return to normal, investor Jim Rogers said.

``Never in American history have people been able to buy a house with no money down,'' Rogers said in an interview in New York. ``We have the worst credit bubble, and it's going to take a long time to work its way out. You don't cure a bubble in five or six months. It takes five or six years minimum.''

Rogers, the 65-year-old chairman of Beeland Interests Inc., also said he's pessimistic on the U.S. dollar. The dollar fell to $1.4528 per euro on Nov. 2, the weakest since the European currency's debut in January 1999. The U.S. currency traded at $2.0893 per pound last week, the lowest since May 1981.

``The dollar is in serious, serious trouble,'' he said. Rogers said he hoped the Federal Reserve raises interest rates to stem inflation, but if it does ``the dollar is going to collapse.''

Rogers, who predicted the start of the global commodities rally in 1999, is betting that prices for oil and agricultural commodities will continue to rise. He advised avoiding financial stocks, which fell the most in five years on Nov. 1.

``There are plenty of things to buy in the world, you just have to be careful and not buy things that are in a bubble, like investment banks on Wall Street,'' Rogers said. ``That has still got a lot of cleaning out to do. I have a lot of friends on Wall Street, but they better start catching on to what's going on with their assets.''

http://www.bloomberg.com/apps/news?sid=aGCtO0cv4EAY&pid=20601103

Long Term Capital is B-a-a-a-c-k!

Well, not exactly. Citi named Richard Stuckey to manage most of its $43 billion of subprime mortgage assets, choosing the same executive who nine years ago helped unwind Long-Term Capital Management LP's bad bets.

Stuckey, 51, will run the Sub-Prime Portfolio Group, created after the largest U.S. bank by assets said Nov. 4 that it will write down as much as $11 billion of subprime debt and Chief Executive Officer Charles Prince resigned. Stuckey will oversee most of the bank's securities linked to homeowners with poor credit, according to a memo sent to employees and confirmed by Citigroup spokesman Dan Noonan.
Rescuing the bank's subprime holdings may be a harder challenge than Long-Term Capital, said Lawrence White, professor of economics at New York University's Stern School of Business. Citigroup owns subprime mortgage securities that are rarely traded and hard to value. Long-Term Capital was holding derivatives tied to interest-rate and equities that are readily traded.

``The opaqueness as well as the stinkiness are greater,'' White said.

Stuckey, called Rick by his colleagues, is former head of risk management at New York-based Citigroup and currently oversees finance, G-10 risk treasury and relative value.

Mark Tsesarsky, the 45-year-old head of special situations, securitization at Citigroup, will assist in the group's risk management strategy, according to the memo. The team will also draw on ``other expertise'' from the company's structured credit, securitized markets and independent risk management teams.

Citi's Noonan declined to comment further or make Stuckey available for an interview.

http://www.bloomberg.com/apps/news?pid=20601103&sid=aOxEVhVdK1r0&refer=us

Sorry....

Due to a schedule glitch, we're gonna be posting much, much later than usual. Bare or should we say bear with us....

CHINA IS NOT TO BE TRUSTED, a very interesting memo

Does this memo hit the bullseye or what?

To: "info@fintag.com"
From: RH somewhere in Asia
Sent: Wednesday, 31 October, 2007 10:32:36 PM
Subject: back door imperialism

> Having a Chinese wife, business associates in China who all without

> exception inform me how PRC operates, and watching economic trends unfold,

> it is a wonder the western powers cannot see the writing on the wall

> themselves for I am only a simple technical investment fund analyst. Trend

> identification is my skill.

>

> First rule: Chinese do not change their stripes overnight.

>

> So lets tell it like it is: - The western powers want China to open for

> trade, but PRC are doing it their way!

>

> PRC is not stupid. It has brilliant tacticians and PRC plans on a medium

> to long term basis, whereas western business is mostly short sighted.

> China works on massive scales that western countries have never

> experienced before.

>

> China's low wages and lower cost manufacturing push takes advantage of the

> imbalance with western minimum wage rules and higher costs. Eventually

> western manufacturers cannot compete, and have to move to China or close.

> Instead of correct the imbalance, western powers continue to demand local

> business pay for all costs and must engage employees at rates that cannot

> compete - and then the powers that be enter into WTO agreements to promote

> China trade.

>

> Stage one - China uses to advantage it's mass labour force and low wages -

> while the rest of the world insists on trade with China but western

> economies refuse to compete on costs and wage levels. Eventually

> employment levels suffer.

>

> Stage two - China limits its exchange rate (against western requests for a

> floating Yuan) to increase export driven manufacturing margins. The world

> gets caught up in the China manufacturing strategy (under Stage one) and

> western countries buy Chinese cheaper goods, which in turn promotes

> further China manufacturing strategy.

>

> Stage three - The balance of power shifts over time. Western cash markets

> become debt orientated purchasing Chinese imports as internal revenue

> diminishes.

>

> Stage four - PRC accrues massive surpluses (regulatory-manufacturing

> arbitrage)

>

> Stage five - PRC tells Chinese banks to lend to China businesses on

> "relationship terms and conditions" to beef up the market expansion and

> underwrites the exposure with the accruing surpluses. No transparency in

> the market ensures what appears to be seemingly massive Chinese economic

> growth that is bone fide.

>

> Stage six - PRC opens up the market and allows Chinese enterprises to list

> using the "beefed up" format so as to allow replacement of the under-table

> debt. Problems such as commodity and energy continuity arise to keep up

> with growth and production.

>

> Stage seven - PRC use the accruing surplus to go out and start acquiring

> commodities and resources in other countries - eventually owning the major

> industry resources in western countries that those western countries

> indirectly funded China into. The balance of resources and commodities

> world wide shifts to PRC.

>

> Stage eight - PRC focus on changing China from an export orientated

> economy to a self-sufficient economy having acquired western skills,

> assets and resources.

>

> Planned result - China dominates, owns global resources (in a fight with

> Russia which is presently also buying up resources and selling them back

> to China at a margin) and, as occured in its own country over decades,

> leaves western economies stripped and bare. Western economies fail and

> assets and resources become cheaper for China to acquire.

>

> Thats the plan in a nut-shell. The most obvious hinderance in present

> times to this eventuality is whether the western world will ever wake up

> and appreciate that the present PRC economic boom via listed companies is

> underpinned with massive opaque PRC debt arrangements.

>

> Take three examples in China that show the form of PRC ways:

>

> 1) Western investment is controlled ultimately by PRC under rules of

> trade. PRC can still at anytime close the doors and prevent repatriation

> of funds. Business requires chinese ownership and control of companies.

> Western enterprises must operate in defined zones if they want tax relief

> (e.g. Coke a Cola). The zones have been ID'd by the PRC military.

>

> 2) Manufacture a fake placebo medicine and sell it across China via

> hospitals, paying doctors under the table to send out purchase orders. As

> sales sky rocket, float the company and recoup massive margins. Activate a

> government dept facade that closes down the business once the company has

> been sold to the western investors based on strange arguments about

> Chinese cultural obligations to its people.

>

> 3) When western countries are complaining that the Yuan is not floating

> fast enough - use rhetoric to insist the process must be slow and that it

> is being undertaken in consideration of the global market place which is

> increasingly becoming reliant on China becoming a safe economy.

>

> In summary - anyone in their right mind should never allow a western

> economy to become reliant on Chinese cultural ways of doing business, let

> alone let an economy. Anyone who has ever worked in China knows this for a

> fact. Chinese love to, as their saying goes, "Steer their own boat, and

> not be a passenger in anothers boat".

> The usual phrase stands well in these times "watch what they do; not what

> they say". Much of Chinese culture is based on saving face and presenting

> a facade that has little to do with reality - its part of the PRC culture

> over thousands of decades, and seen as a way of doing business, not as a

> misrepresentation as western countries would see it.

> Hope this gets to the right centres of influence.

>Best

> RH

Fintag says

Many hedgies employ chinese brains and boy are they good. Their work ethic is unbelievable, they are loyal and are the guts behind many a company such as Goldman.

Chinese people are the west's new slaves. We enjoy a dollar a day labor and having shifted all our manufacturing to China it has kept inflation down and we have all enjoyed really cheap goods at the expense of pollution and exploitation. Well the Chinese are hitting back with their new found wealth and we will all suffer as Chinese inflation hits us all and they start calling all the shots.

The current wage demands in China are around 20%+ - and these are passed straight onto the West. Why the West treats this communist country with such kindness is crazy. Nobody wanted to challenge Hitler and look what happened there. China is a skinny panda that is growing large and powerful. We fret about Bernanke's put option but the real threat is being totally ignored.

Become chinese or die.

fintag.com

Let Them Eat Cake: While Bear’s hedges fell, Cayne was playing bridge!

Rubber anyone? A crisis at Bear Stearns Cos. this summer came to a head in July. Two Bear hedge funds were hemorrhaging value. Investors were clamoring to get their money back. Lenders to the funds were demanding more collateral. Eventually, both funds collapsed.

During 10 critical days of this crisis -- one of the worst in the securities firm's 84-year history -- Bear's chief executive wasn't near his Wall Street office. James Cayne was playing in a bridge tournament in Nashville, Tenn., without a cellphone or an email device. In one closely watched competition, his team placed in the top third.

http://online.wsj.com/article/SB119387369474078336.html?mod=hpp_us_whats_news

Fat, Fatter, Fattest: A Billion Dollar Payout.

Just a few weeks ago, DealBook noted the giant payouts in store for Mr. Och, the Goldman Sachs alumnus whose hedge fund firm, Och-Ziff Capital Management, is gearing up to go public. At the time, we reported that he was on track to receive $598 million, or nearly half of the expected $1.2 billion in proceeds from Och-Ziff’s initial public offering. That put him on a par with the chief of Blackstone Group, Stephen Schwarzman, who got $684 million when that firm went public in June.

But with this week’s agreement to sell a stake in Och-Ziff to Dubai International Capital, Mr. Och’s windfall just got a lot fatter.

Dubai International plans to invest about $1.26 billion in Och-Ziff in return for a stake of nearly 10 percent. That investment has increased the expected proceeds from the offering-plus-stake-sale to about $2.2 billion. Of that, Mr. Och is slated to receive a whopping $1.1 billion, according to the latest version of Och-Ziff’s prospectus.

That money won’t be immediately available to help furnish Mr. Och’s new apartment at 15 Central Park West. Mr. Och and other Och-Ziff executives have agreed to reinvest their I.P.O. proceeds in Och-Ziff funds for five years.

http://dealbook.blogs.nytimes.com/2007/10/31/ochs-ipo-payout-tops-billion-dollar-mark/

Has Warren Buffett Lost His Mind?

The United States' second-richest man has delivered a blunt message to the Bush administration: he wants to pay more tax. Warren Buffett, otherwise known as the "Sage of Omaha", has complained that he pays a lower rate of tax than any of his staff - including his receptionist. Mr Buffett, who is worth an estimated $52bn (£25bn), said: "The taxation system has tilted towards the rich and away from the middle class in the last 10 years. It's dramatic; I don't think it's appreciated and I think it should be addressed."

During an interview with NBC television, Mr Buffett brandished an informal survey of 15 of his 18 office staff at his Berkshire Hathaway empire. The billionaire said he was paying 17.7% payroll and income tax, compared with an average in the office of 32.9%.

"There wasn't anyone in the office, from the receptionist up, who paid as low a tax rate and I have no tax planning; I don't have an accountant or use tax shelters. I just follow what the US Congress tells me to do," he said.

Buffett also took a pot shot at hedge fund managers. He said: "Hedge fund operators have spent a record amount lobbying in the last few months - they give money to the political campaigns. Who represents the cleaning lady?"

http://business.guardian.co.uk/story/0,,2202020,00.html

Don't Knock the Quants (Hint: Summer is so over)

Despite the horror stories in recent months about "quant" hedge funds, mutual-fund investors need not necessarily run for cover when they see words such as "quantitative" and "proprietary model" in a fund's descriptive material.

There are a number of open-end mutual funds run largely with the help of quantitative models that produce steady, positive results and are appropriate for consideration by the typical mutual-fund investor.

Quant funds earned their bad rap in July and August as turbulence from the subprime mortgage imbroglio spread to the broader credit markets and then to equities. Goldman Sachs' (GS - Cramer's Take - Stockpickr) quantitatively-driven Global Alpha flagship hedge fund reportedly lost 22.7% in August.

Another Goldman Sachs quant offering, Global Equity Opportunities, was reported to have sunk around 30% in a single week, while the Morgan Stanley PDT -- for Process Driven Trading -- quant group was said to have lost half a billion dollars in late July and early August.

Troubling reports of steep losses at quant funds Renaissance Institutional Equities, AQR Capital Management and Tykhe Capital LLC also appeared with alarming frequency.

All that might be enough to prompt an investor to run in the other direction. But the big losers of summer were, for the most part, hugely-leveraged hedge funds. Most open-end mutual funds using quantitative models are far less menacing creatures. A number of them, in fact, were racking up impressive gains at the same time some of their less fortunate hedgie cousins were crumbling.

http://www.thestreet.com/s/dont-write-off-quant-funds/funds/mutualfundinvesting/
10387534.html?puc=_googlen?cm_ven=GOOGLEN&cm_cat=FREE&cm_ite=NA