Meet The Man Who Lost $25 Billion In One Year

From Bloomberg: A year ago, Eike Batista was Brazil’s richest man, and his goal of climbing to No. 1 in the world seemed within reach. After founding five publicly traded natural-resource companies in six years, he’d just sold a stake in his EBX Group conglomerate that valued his holdings at $34.5 billion. His companies had yet to turn a profit, so the deal, struck with an Abu Dhabi sovereign wealth fund, was mainly a testament to Batista’s vision: an integrated empire of companies, shipping oil and iron ore to China from a port he was building near Rio de Janeiro. “I think Eike is a special kind of entrepreneur,” said Brazil’s President Dilma Rousseff during a visit to the port project in April. “He’s a person who comes up with extremely ambitious dreams and then seeks to fulfill them.”  Today, Batista’s empire is under siege….

Read all about it at http://www.businessweek.com/articles/2013-03-28/eike-batista-the-man-who-lost-25-billion-in-one-year#r=hpt-tout

Cyprus: Threat Contained, No Plan to Leave Euro

FYI The president of Cyprus said on Friday the risk of bankruptcy had been contained and the country had no intention of leaving the euro, in a speech laden with criticism of Europe's currency union for "experimenting" with the island's fate....

Read all about it at http://www.cnbc.com/id/100602909

SAC Capital Advisors Trader Charged With Fraud

From WSJ: Early Friday morning, Federal Bureau of Investigation agents arrested a longtime SAC Capital portfolio manager on insider-trading charges, making him the most senior employee of one of the nation’s most prominent hedge funds to be snared in the government’s sprawling probe. Michael Steinberg, 40 years old, was led out of his building on New York’s Park Avenue in handcuffs around 6 a.m. Mr. Steinberg has worked at Stamford, Conn.-based SAC since 1997 and at its Sigma Capital Management unit in New York since 2003, dealing closely with SAC’s billionaire founder Steven A. Cohen.

“Michael Steinberg did absolutely nothing wrong,” his lawyer, Barry H. Berke, said in a statement Friday. “His trading decisions were based on detailed analysis” and information “he understood had been properly obtained through the types of channels that institutional investors rely upon on a daily basis….”

Wait…wait…there’s more at http://online.wsj.com/article/SB10001424127887324685104578390023688221236.html?mod=WSJ_hpp_LEFTTopStories

Taking a break.  Posting will be light tomorrow for Good Friday. Enjoy the holiday; we’ll see you back here on Monday.

Judge balks at SAC's $602M settlement

Maybe hedge-fund titan Steve Cohen should have waited to buy that $155 million Picasso to celebrate his insider-trading settlement with the Securities and Exchange Commission.  Manhattan federal Judge Victor Marrero said he may not approve a record $602 million settlement between the SEC and an affiliate of Cohen’s SAC Capital because he has questions about controversial language allowing the hedge fund to “neither admit nor deny” wrongdoing….

More?  Check out http://www.nypost.com/p/news/business/judge_balks_at_sac_settlemetn_ZB9zO8qC7z7q89aTvfceGN

Bitcoin the Global Economy's Last Safe Haven?

Seriously folks.  From Bloomberg: One of the oddest bits of news to emerge from the economic collapse of Cyprus is a corresponding rise in the value of Bitcoin, the Internet’s favorite, media-friendly, anarchist crypto-currency. In Spain, Google searches for “Bitcoin” and downloads of Bitcoin apps soared. The value of a Bitcoin went up to $78. Someone put out a press release promising a Bitcoin ATM in Cyprus. Far away, in Canada, a man said he’d sell his house for BTC5,362.

Bitcoin was created in 2009 by a pseudonymous hacker who calls him or herself Satoshi Nakamoto (and who might be several people). It’s a form of virtual cash used to buy goods and services online. Even by Web standards, it’s a strange and supergeeky phenomenon….

Fnd out more at http://www.businessweek.com/articles/2013-03-28/bitcoin-may-be-the-global-economys-last-safe-haven#r=most popular

Hedge Fund Titan Buys Hamptons Property for $60 Million

Steven A. Cohen is known for his rapid-fire trading style, moving in and out of stocks with dizzying speed at his hedge fund SAC Capital Advisors.  He seems to be taking a similar approach to his real estate, Dealbook reports.

Mr. Cohen reached a deal last week to pay $60 million for an oceanfront property on Further Lane in East Hampton, on Long Island, according to a person with direct knowledge of the sale. The home, which was listed for sale late last week, is down the road from one he already owns. At the same time, he has put on the market his duplex apartment in the Bloomberg Tower on the East Side of Manhattan, this person said. His asking price: $115 million.

News of Mr. Cohen’s real estate activity surfaced a day after reports that he purchased Picasso’s “Le Rêve” for $155 million from the casino owner Stephen A. Wynn…..

More?  Turn to http://dealbook.nytimes.com/2013/03/27/hedge-fund-titan-buys-hamptons-property-for-60-million/

Cyprus’s Banks Open After Two Weeks as Controls Curb Panic

Cyprus’s banks opened for the first time in almost two weeks, with new rules curbing access to cash preventing an initial panic to withdraw deposits, according to Bloomberg.

 “We expected much more people,” said Argyros Eraclides, manager of a Bank of Cyprus Plc branch in the Stavrou area of Nicosia. “Fortunately there are only some people who needed cash for the day, but customers reacted fantastically. We expected some people to be more aggravated.”

Banks opened at midday local time today, with lines of about 15 to 20 people waiting to enter branches in the Cypriot capital. They close at 6 p.m. The Central Bank of Cyprus’s controls include a 300-euro ($383) daily limit on withdrawals and restrictions on transfers to accounts outside the country.

Read more at http://www.bloomberg.com/news/2013-03-27/cypriot-banks-to-open-for-first-time-in-2-weeks-with-cash-curbs.html

Introducing…Quant Trading for Little Guys

Ta-Da!  A new technology shop wants to bring quantitative investing to the masses.

From Hedge Fund Alert: QuantConnect is rolling out a cloud-based service that gives aspiring quant managers the tools to design and execute trading strategies and back-test their programs with historical market data. The offering promises to remove a big hurdle for many quant traders — namely, the high cost of accessing years of market data and the computing power needed to crunch the numbers. QuantConnect is offering the technology free of charge.

The New York firm has been beta-testing the service for the past year with 20-30 programmers, including computer engineers already employed at financial firms and graduate students pursuing careers in quantitative-investment management. In recent months, it has signed up nearly 600 prospective clients at conferences such as TechCrunch in San Francisco and Finovate in London — among them, dozens of Facebook and Google staffers. On March 14, QuantConnect alerted those individuals that they could begin using the service anytime. The firm also is working with the organizers of the Battle-Fin quant-trading tournament to support contestants…..

More?  Check out http://www.hfalert.com/headlines.php?hid=180111

Wall Street's Richest Man Is On The Attack

Forbes writes: Carl Icahn’s offices carry a distinct museum quality. Three decades of scalps, resulting from some of the most famous hostile takeovers, proxy fights and board assaults in American financial history, cover every cranny of his wood-lined corridors…. Icahn’s backward-looking perch, near the top of Manhattan’s old-school GM Building, has never been more relevant, as fortysomething billionaires like Michael Dell and Bill Ackman are learning to their chagrin. In the last 15 months the 77-year-old has taken positions in and then launched campaigns against 14 companies, a burst that has made him, at an age when he would have long been expected to fade away, the most disruptive individual in business, with a hand in almost every major corporate story in America…..

Read more at http://www.forbes.com/sites/stevenbertoni/2013/03/27/carl-icahn-unleashed-wall-streets-richest-man-is-on-the-attack-just-ask-michael-dell/

How Hedge Funds Will Have to Change …Or Else

Institutional investors have spoken – the time to change is now.  "Me-too" funds, products over solutions, and plain old performance - these are the areas in which institutional investors are demanding change or hedge funds will be left for dead, a survey has shown.

Almost three-quarters of investors responding to a survey by SEI Investment Management Services (IMS) complained that there were too many "me-too" funds in the sector - some seven out of ten of them said they were looking for new ideas.

Finding a fund or approach that covered a range of objectives in an investor's portfolio was an important factor, SEI IMS found. Rather than pitching products, fund managers would be well advised to use an interactive, problem-solving approach….

Read all about it at http://ai-cio.com/channel/ASSET_ALLOCATION/How_Hedge_Funds_Will_Have_to_Change_to_Survive.html

How to Make America a Global Tax Haven

From Bloomberg: The U.S. corporate-tax rate is higher than that of any other developed country. We have kept it at 35 percent even as other countries have reduced theirs. Republicans, unsurprisingly, want to cut the rate; most of them think 25 percent is the right target. President Barack Obama has suggested that eliminating loopholes would enable a reduction to 28 percent.

A lower rate would lead to more investment, and thus higher wages, in the U.S. But most businesses, especially small ones, don’t pay corporate taxes. They file under the individual income-tax code, partly because it treats investment better than the corporate code does. These businesses have no stake in seeing the corporate-tax rate fall -- especially since their own taxes just rose at the start of the year, when the Bush tax cuts on high earners expired….

http://www.bloomberg.com/news/2013-03-25/how-to-make-america-a-global-tax-haven.html?cmpid=hpbv

$27 million Silicon Valley insider-trading ring busted

AP’s Larry Neumeister repoer that the former chief information officer for a technology company and an analyst for a Bay Area hedge fund were arrested Tuesday in a $27 million insider trading case that prosecutors say involved several Silicon Valley companies.

Federal authorities arrested David Riley, 47, a former vice president at Santa Clara-based Foundry Networks, which made networking hardware before it was acquired by larger San Jose rival Brocade Communications Systems for about $3 billion in December 2008; and analyst Matthew Teeple, 41, of Artis Capital Management, a San Francisco-based hedge fund. Each was charged in federal court in Manhattan with conspiracy to commit securities fraud and three counts of securities fraud. If convicted, each could face up to 65 years in prison….

Read more at http://www.mercurynews.com/business/ci_22875739/27-million-silicon-valley-insider-trading-ring-busted

It Looks Like Jim Chanos Is Nailing Another Short — And People Are Starting To Notice

From BI: Last November Jim Chanos spoke about his "two favorite shorts" at London's Ira Sohn Value Investing Conference, both were Brazilian companies.

Today we'll just talk about one —Petrobras, Brazil's state oil company. This month it's getting negative attention from journalists and investors alike.

But first, Chanos' thesis (in case you don't remember). He said that state management was suffocating Petrobras' profitability. Basically, the company is drilling expensive oil fields with expensive machinery and hiring workers while the government suppresses oil prices…..

Read all about it at http://www.businessinsider.com/jim-chanos-petrobras-short-2013-3

23 Ways Your Wall Street Job Will Ruin Your Life

According to BI’s Linette Lopez and Julia La Roche: If you're considering going to Wall Street, you should really know what you're getting into.

Yes, you will get paid better than average people all over the world. Yes, you will get to learn new things constantly, and yes, you will be involved in important transactions (well, hopefully) and meet interesting clients. However, there is a downside, and it's generally all in your head.

A Wall Street veteran, who will remain anonymous, gave us a laundry list of ways working on the Street can actually ruin your life.

Wall Streeters have to deal with a distorted sense of money, questions about self-worth, arrested development and most importantly, the fact that they never ever have enough time. They can try and pay for it, but that only gets you so much.

The point is — you better love finance if you're getting into this business, because it's going to take over your life…

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Read more: http://www.businessinsider.com/drawbacks-of-working-on-wall-street-2013-3?op=1#ixzz2OfgLK4AD

Look Who Goldmans’ Biggest Shareholder Will Be?

According to Bloomberg Warren Buffett’s Berkshire Hathaway gave up an opportunity to become the biggest shareholder in Goldman Sachs Group Inc. (GS), choosing to take stock instead of cash profits he might make on a 2008 grant.

Berkshire held warrants that allowed it to purchase 43.5 million Goldman Sachs common shares for $115 apiece until Oct. 1. Under revised terms announced by the companies today, Berkshire will get stock equal to the difference between the average closing price during the 10 trading days preceding Oct. 1 and the exercise price, multiplied by 43.5 million.

The new deal eliminates some of the risk for Omaha, Nebraska-based Berkshire, which would have had to spend about $5 billion to exercise the warrants and then eventually sell the shares to cement a profit…

Read all about it at http://www.bloomberg.com/news/2013-03-26/berkshire-to-get-goldman-stock-tied-to-warrants-from-2008-deal.html

Hedge Fund Mogul Treats Himself to $155M Art Deal

Feeling sorry for Steven A. Cohen, whose SAC Capital just settled two insider-trading lawsuits with the government for $616 million?  Save it for the other 99%.  Cohen has bought himself a gift — Picasso’s “Le Rêve” for $155 million, the Ny Post has exclusively learned.

Billionaire Cohen secretly bought the masterpiece from Vegas mogul Steve Wynn, who famously put his elbow through the 1932 painting of Picasso’s mistress, creating a six-inch tear.  The price is estimated to be the highest ever paid for an artwork by a US collector — and it’s even more impressive because Wynn had previously agreed to sell the masterpiece to Cohen for $139 million in 2006, but accidentally tore the painting the following day….

http://www.nypost.com/p/pagesix/sac_cohen_in_art_deal_ZJQ39Tc7T1ih0ss3eLozjJ

BRICS Nations Plan New Bank to Bypass World Bank, IMF

The biggest emerging markets are uniting to tackle under-development and currency volatility with plans to set up institutions that encroach on the roles of the World Bank and International Monetary Fund.

The leaders of the so-called BRICS nations -- Brazil, Russia, India, China and South Africa -- are set to approve the establishment of a new development bank during an annual summit that began today in the eastern South African city of Durban, officials from all five nations say. They will also discuss pooling foreign-currency reserves to ward off balance of payments or currency crises…..

Read all about it at http://www.bloomberg.com/news/2013-03-25/brics-nations-plan-new-bank-to-bypass-world-bank-imf.html

'Funny money' has officially entered the real world

From Fortune: Last week, new U.S. government rules regulating online currencies affirmed the value of what was previously passed off as funny money. Now companies that issue or exchange online cash would have new bookkeeping requirements. For instance, transactions of more than $10,000 would have to be reported.

While one of the big draws of virtual currencies is that they're independent and generally sheltered from the government's watch, the new rules are unlikely to ruin their allure. If anything, they effectively pull the currencies offline and into the mainstream world of finance, making them infinitely more valuable…

More?  Check out http://finance.fortune.cnn.com/2013/03/25/online-currency-regulations/?iid=SF_F_River

A Gigantic Pension Fund Is Reportedly Considering A Change That Should Make Investment Managers Freak Out

Investment News reports that California CalPERS, the second biggest U.S. public pension fund, is weighing taking its massive $255 billion assets under management and moving it to an all-passive portfolio.

Why would this matter?   Well, it would matter a lot for active managers who receive management fees from CalPERS, Josh Brown, who runs the popular financial blog the Reformed Broker, points out on Twitter.   The California Public Employees' Retirement System already has more than half of its investible assets in passive strategies. CalPERS is expected to make the decision in about five months, the report said.

Read more at http://www.businessinsider.com/calpers-considering-passive-investing-2013-3

Nobody's Safe! Eurogroup President Spooks Markets By Saying Cyprus Deal Is A New Template

Cyprus finally got a deal done with the EU to bail out its troubled banking system last night.  Instead of levying a nationwide "tax" on bank deposits, the plan follows a more typical restructuring approach, seeing shareholders, bondholders, and uninsured depositors in the country's two biggest banks take heavy losses in restructurings.

This way, Cyprus will avoid increasing its own public debt stock as much as it would have done if it were to take loans from the troika to finance the full amount of the bailout.

 Read more: http://www.businessinsider.com/dijsselbloem-cyprus-deal-is-a-template-2013-3#ixzz2OZNNS2o9

Falcone Follows Michael Jackson Path Taking Fortress Loan

Hedge-fund manager Philip Falcone, beset by declining assets, federal securities regulators and the bankruptcy of his largest investment, is borrowing money against personal real estate he bought during better days, Bloomberg reports.

Falcone and his wife, Lisa, pledged their $39 million Caribbean villa to Fortress Credit Corp., the lender that provided Michael Jackson with a mortgage on his Neverland Ranch when the late pop idol was close to insolvency, according to a February regulatory filing. Within the past year, the couple also agreed to post both of their Manhattan townhouses as collateral for about $25 million of personal loans, real estate records show.

Assets under management at Falcone’s Harbinger Capital Partners LLC have plunged 89 percent since Falcone bought several of the properties in 2008, reducing the fees generated by the New York-based firm’s hedge funds. While it’s not unusual for wealthy individuals to use real estate as collateral, Fortress Credit specializes in higher-rate loans to borrowers who have difficulties getting bank financing, and it isn’t shy about seizing assets in a default, according to Steven Altman, an attorney who participated in litigation involving Michael Jackson’s debt….

Need to know more?  Go to http://www.bloomberg.com/news/2013-03-25/falcone-follows-michael-jackson-path-taking-fortress-loan.html

Fund Directors Feel the Heat

From WSJ: …Six former directors of Morgan Keegan Inc. mutual funds "abdicated" their responsibilities, says the Securities and Exchange Commission. A civil enforcement action filed in December against the directors and two former Morgan Keegan employees who were directors of the same funds is headed for an April 2 hearing by a judge.

People familiar with the case say both sides are in settlement talks, though terms of the potential deal aren't clear. The former directors deny any wrongdoing. Deal or no deal, legal experts say the case already is making waves across the mutual-fund industry. It is a "stark warning" that the SEC is revving up its scrutiny of mutual-fund directors and is likely to hold them more accountable than the agency has in the past...

Wait...wait...there's more at http://online.wsj.com/article/SB10001424127887323466204578380502371722698.html

GOLDMAN: What American Manufacturing Renaissance?

From BI: One of the big emerging economic stories in the world today is the American manufacturing renaissance.  This is the idea that low energy prices, increasing productivity, and rising costs overseas would invigorate the production of goods in the U.S.

Goldman Sachs' Jan Hatzius acknowledges that much of the recent economic data seems to support the idea that U.S. manufacturing is improving. However, Hatzius argues that all of the signs reflect a recovery that is "squarely cyclical," not structural. … 

Read more at http://www.businessinsider.com/goldman-no-american-manufacturing-renaissance-2013-3

DOJ Criminal Probe Into JPMorgan Whale Trade At 'Advanced Stages'

CNBC is reporting that the Department of Justice is in "advanced stages" of a criminal probe into the JPMorgan Chase "London Whale" trades, investigating whether former traders mismarked positions in an effort to disguise the size of losses that have reached more than $6 billion.

http://www.huffingtonpost.com/business/

The Zen of Index Liquidity: More Is Less

You would think that the whole point of a stock index is to be, well, an index of the stock market's performance.  But, the WSJ reports, thanks to the popularity of exchange-traded funds, or ETFs, stock indexes have in recent years been doing double duty as investment vehicles. At the same time, there have been subtle but important changes in the way indexes are constructed.

Bottom line: The indexes aren't measuring exactly what they used to.  It is a lot easier to manage an ETF if the stocks that underlie it are easily traded. If, instead, the stocks are illiquid, there is a risk their prices will get artificially inflated when money flows into the ETF. The opposite can happen when money flows out….

Wait...wait...there's more at http://online.wsj.com/article/SB10001424127887324373204578376510203909532.html

Why Can’t David Einhorn Get Apple to Budge on its Cash Award?

It was shaping up as an especially good episode of The David Einhorn Show. The founder of the $8.8 billion hedge fund Greenlight Capital was speaking in May 2012 at his favorite venue, the Ira W. Sohn Investment Research Conference, held that year at New York’s Lincoln Center, to a packed audience of money managers eager to hear which stocks were in his cross hairs.

Then he began to speak about Apple (AAPL). The day before, Greenlight had disclosed in a regulatory filing that its stake in Apple was valued at $877 million, almost 10 percent of the fund’s assets. Einhorn had been buying shares in the company since 2010, initially paying an average of $248. Now they cost $553, a 123 percent gain, and Einhorn told his audience that Apple still had plenty of room to grow, with a price-earnings multiple that was below average. “I have a hard time seeing how anyone ranks Apple as below average,” Einhorn said, arguing that the company could hit a market capitalization of $1 trillion.

Unlike the other stocks he had mentioned, shares of Apple barely budged—King Midas had touched a table, and it stubbornly remained wood. Partly this was a function of Apple ….

http://www.businessweek.com/articles/2013-03-21/when-david-einhorn-talks-markets-listen-usually

Krugman: Why You Should Really Worry About The Cyprus Crisis

A couple of years ago, the journalist Nicholas Shaxson published a fascinating, chilling book titled “Treasure Islands,” which explained how international tax havens — which are also, as the author pointed out, “secrecy jurisdictions” where many rules don’t apply — undermine economies around the world. Not only do they bleed revenues from cash-strapped governments and enable corruption; they distort the flow of capital, helping to feed ever-bigger financial crises.

One question Mr. Shaxson didn’t get into much, however, is what happens when a secrecy jurisdiction itself goes bust. That’s the story of Cyprus right now. And whatever the outcome for Cyprus itself (hint: it’s not likely to be happy), the Cyprus mess shows just how unreformed the world banking system remains, almost five years after the global financial crisis began….

Read all about it at http://www.nytimes.com/2013/03/22/opinion/krugman-treasure-island-trauma.html?ref=paulkrugman&_r=1&

Pressured, Investment Firm Skips Fees

Score one for private equity investors, says CNBC.  After suffering steep losses in one fund, the Yucaipa Companies, the money management firm run by the billionaire Ronald W. Burkle, has cut fees for investors in the portfolio. As part of the deal, Mr. Burkle agreed to forgo the firm's annual management fee until the fund's investors recoup their money, according to several people with knowledge of the matter. Such concessions reflect the broader pressure in the industry.

Faced with weaker returns, some big investors have been pushing private equity firms to lower their fees or make other concessions….

http://www.cnbc.com/id/100581817

Is JPMorgan Chase America's New Big Bad Bank?

From Forbes: The steady stream of negative news, congressional appearances and scathing Senate reports  is something more familiar to the likes of Bank of America, Citigroup and Goldman Sachs than JPM; but now Dimon & Co. are forced to play defense much more often.

 “….It’s the tone-deafness of comments like Dimon’s ‘tempest in a teapot’ remark that is staggering,” says Cornelius Hurley of Boston University’s Center for Finance, Law & Policy.

It’s not just its massive London Whale trading loss that has JPM in a funk. Consider yesterday’s $107.5 million settlement with MF Global trustee, James W. Giddens. JPM was MF Global’s clearing bank before it failed and lost $1.6 billion in client money in October 2011. Giddens threatened to sue JPM last year if it didn’t return funds that belonged to MF Global customers which he said the bank received in the final days before the bankruptcy.  The pact with MF Global customers clears up one of JPM’s bigger legal problems but as Steve Schaefer points out it’s just one of many headaches for Dimon’s behemoth bank these days…..

Wait…wait…there’s more at http://www.forbes.com/sites/halahtouryalai/2013/03/21/is-jpmorgan-chase-americas-new-bad-bank/

Deustche Bank Legal Tab Mounts Up

Deustche Bank revised fourth-quarter earnings downward, setting aside about €600 million ($773 million) in legal provisions for U.S. mortgage litigation in another sign that mounting legal liabilities are cutting into investment -bank profits, WSJ reports.. The bank updated its fourth-quarter net loss to 2.54 billion euros, wider than the originally reported loss of €2.17 billion. According to a WSJ report this compared with a profit of €147 million a year earlier.

The bank also reiterated that it would make first-quarter targets for a key measure of the bank’s health known as the capital ratio, indicating a strong first quarter, analysts said. Deutsche Bank has now set aside €2.4 billion for litigation, with additional identified non-provisioned legal risks of €1.5 billion. The bank’s legal provisions were nearly 10 times net profit of €237 million for 2012, compared with a profit of €4.1 billion in 2011. Total legal risk is likely much higher than what the bank has publicly identified, analysts told WSJ.

http://online.wsj.com/article/SB10001424127887324103504578372120674903556.html?mod=WSJ_hp_LEFTWhatsNewsCollection

ECB Threatens To Cut Off Cypriot Banks

From the WSJ: The European Central Bank ramped up pressure on Cyprus to seal a bailout agreement with the European Union and the International Monetary Fund by Monday, making further funding for the island’s ailing banks contingent on a deal. The ECB said it would extend emergency funding that has kept the island’s banks in operation while the bailout plan was being negotiated in recent months only until Monday. “Thereafter, Emergency Liquidity Assistance (ELA) could only be considered if an European Union/International Monetary Fund program is in place that would ensure the solvency of the concerned banks,” the ECB said in a statement….

More?  Check out http://online.wsj.com/article/SB10001424127887324103504578373791775965374.html?mod=WSJ_hps_LEFTTopStories

Fake Hedge Fund Manager Who Ripped Off Kim Kardashian’s Fake Husband Sentenced To A Few Years In Prison

Dealbreaker’s one and only  Bess Levin writes: Remember Andrey Hicks? For those who can’t keep their founders of fake hedge funds straight, he’s the guy who ripped off Kim Kardashian’s 72 day husband, Chris Humphries, along with a bunch of other investors in his Locust Offshore Management fund, and in 2011 was arrested and had his assets frozen by the Securities and Exchange Commission, which took issue with the “brazen web of lies” he’d fed people that included:

The claim he received a Ph.D in Applied Mathematics from Harvard in two years (he neither earned his doctorate from Harvard nor his undergraduate degree and in fact only lasted three semesters in Cambridge, taking a single math course, in which he got a D-)….

Wait…there’s even better stuff at http://dealbreaker.com/2013/03/fake-hedge-fund-manager-who-ripped-off-kim-kardashians-fake-husband-sentenced-to-a-few-years-in-prison/

Grim News: Mini flash crashes: A dozen a day

According to Maureen Farrell @CNNMoneyInvest there may not have been any major market malfunctions recently, but mini flash crashes still happen nearly every day.  Stock exchanges don't publicly release data about these mini crashes -- when a stock rapidly plunges then rebounds -- but most active traders say there are at least a dozen a day.  Dennis Dick, a proprietary trader at Bright Trading in Detroit, said he stopped tracking them because they happen so frequently.

While none have been as disruptive as the "flash crash" of 2010, or the ones that marred the IPOs of the BATS exchange and Facebook in 2012, they highlight the fragility of markets increasingly dominated by high frequency traders who count on fancy algorithms to make a quick profit. So far this year, these mini crashes have taken place in shares of Apple, Berkshire Hathaway, insurance broker Aon  and apparel maker Hanesbrands.....

Wait...wait...there's more at http://money.cnn.com/2013/03/20/investing/mini-flash-crash/index.html?iid=SF_BN_River

Judge orders bogus fund manager to prison for 40 months

From Reuters: Andrey Hicks, who invented an Ivy League resume and Wall Street credentials to steal $2.3 million from investors for a made-up hedge fund, will spend more than three years in prison, a judge ordered on Tuesday.

U.S. Federal Judge Patti Saris sentenced Hicks, 29, who most recently lived in Massachusetts, to serve 40 months in prison and ordered him to pay $2.3 million in restitution.

The sentencing ends one of the more brazen hedge fund frauds at a time wealthy investors are still reeling from the fallout of the Bernard Madoff and Allen Stanford investment swindles....

Find out more at http://www.reuters.com/article/2013/03/19/us-hedgefunds-hicks-sentencing-idUSBRE92I16U20130319

J.P. Morgan Bosses Slammed by Regulator

From WSJ: J.P. Morgan Chase was downgraded in a confidential government scorecard over concerns about the company's management and its board, a blow to a firm that has long been considered one of the best-run on Wall Street.

The New York company's management rating from the Office of the Comptroller of the Currency fell one notch last July to a level that signifies oversight "needs improvement," following the revelation of what are known as the "London whale" trading losses, said people familiar with the regulatory assessment.

Read all about it at http://online.wsj.com/article/SB10001424127887323639604578370781832140000.html

Hedge fund bets yen slide has further to run

The flagship hedge fund of Fortress Investment Group is betting on a further slide in the Japanese yen, predicting the new central bank governor in Tokyo will step-up the pace of monetary policy easing, Reuters reports.

The $3.2 billion fund has proved one of the most successful macro funds - funds which bet on big shifts in the global economy and which are among the best-known in the industry - returning almost 18 percent last year when many top names shied away from bold bets and struggled to make money.

Wagering against the yen has proved profitable for many hedge funds already this year, but Fortress believes the trade has further to run....

More?  Check out http://www.reuters.com/article/2013/03/20/fortress-fund-idUSL6N0CA98S20130320

Is SAC’s Michael Steinberg about to be criminally charged?

For months now, federal prosecutors have been weighing whether to bring criminal charges against Michael Steinberg, a former technology portfolio manager with SAC Capital's Sigma Capital division and confidante of Steve Cohen. He has long been thought to be the ultimate prize in the insider trading investigations.

Steinberg had been named previously by prosecutors as an unindicted co-conspirator in a criminal prosecution involving convicted hedge fund traders, Todd Newman and Anthony Chiasson. Any charges would likely involve trading in Dell, as evidence in trials made clear that Steinberg and his colleagues discussing Dell's earnings performance before they were publicly released. Trading in Nvidia may also be included….

Read all about it at http://www.fiercefinance.com/story/michael-steinberg-about-be-criminally-charged/2013-03-18

MEREDITH WHITNEY: I Have Not Been This Bullish On The US And Equities In My Career

From BI: Meredith Whitney was just on CNBC's Closing Bell with Maria Bartiromo and the normally skeptical bank analyst came out as a super-bull for the U.S. economy and equities.

"Would you put new money to work in this market right here?" Bartiromo asked her.

"Yes, absolutely," said Whitney. "I have not been this constructive and bullish on US equities in my career."

Whitney discussed two specific financial stocks that she really liked. First she mentioned Bank of America saying that it came out of last week's Fed stress tests looking better than any other bank on the Street.

This is partly because the bank started cutting costs back in 2010 before any other Wall Street bank, said Whitney. The stock has "value, catalyst, and momentum" and she expects it to shoot up another 15% in the coming months.

"This is not sexy stuff... it's all cost cutting it's all operational," she said.

http://www.businessinsider.com/meredith-whitney-bullish-on-us-equities-2013-3

Business CEOs Push To Limit Taxes On Record-Breaking Offshore Profits

At a time when major U.S. corporations have a record amount of cash stashed abroad, a group of influential CEOs want to make it even easier for companies to pay less in U.S. taxes on those profits, according to a report on HuffPo.

The Business Roundtable, a lobbying coalition of business leaders, plans to spend six figures on a campaign aimed at convincing lawmakers to lower the top corporate tax rate to 25 percent from 35 percent and shift to a territorial tax system, according to The Hill. The group argues that the changes would help U.S. companies compete against their foreign counterparts.

A territorial tax system allows businesses to put money overseas and only pay taxes to the foreign country where it’s parked. Currently companies pay U.S. taxes on any overseas profits they bring back home….

How can you not feel sorry for these poor guys?   Go to http://www.huffingtonpost.com/2013/03/19/business-rountable-offshore-profits_n_2906788.html?utm_hp_ref=business

Paulson hedge fund seeks dismissal of Abacus lawsuit

From Reuters: Paulson & Co asked a judge to dismiss a lawsuit accusing the firm of conspiring with Goldman Sachs Group Inc to get a bond insurer to guarantee payments on an investment allegedly designed to fail.

In a filing in New York on Monday, Paulson said it "made no misrepresentations" to ACA Financial Guaranty about the collateralized debt obligation known as Abacus.  ACA brought the $120 million complaint against Goldman in 2011 and amended its lawsuit in January, adding Paulson & Co and its hedge fund, Paulson Credit Opportunities Master II Ltd, as defendants.  The amended complaint claims Goldman and Paulson deceived ACA into believing Paulson was investing in the CDO. Paulson eventually took a short position on the CDO.

Paulson said it had nothing to do with how Goldman offset its risk or how Abacus was sold to investors.

More?  Go to http://www.reuters.com/article/2013/03/19/paulson-abacus-goldman-idUSL1N0CB0DA20130319

Man Group leads the way with 250 per cent cap on bonuses

The struggling hedge fund giant Man Group has capped all executive bonuses at 250 per cent of salary in a sweeping overhaul of its pay policy, according to the Independent.  The company, which paid no bonuses at all to its top staff after a poor 2012, said its previous salary structure had been "overly complex" and the new plan "will increase transparency and alignment with shareholders whilst reducing the complexity and likely quantum of awards".

The news came as fears mounted across the Square Mile that the cap on bankers' bonuses will spread across the entire financial services sector…

http://www.independent.co.uk/news/business/news/man-group-leads-the-way-with-250-per-cent-cap-on-bonuses-8539840.html

Apple Seen Raising Dividend More Than 50% to $16 Billion

Apple will probably lift its quarterly dividend 56 percent to $4.14 a share, for an annual payout of $15.7 billion, according to the average estimate from six analysts. The resulting yield of 3.6 percent would be higher than 84 percent of the companies in the Standard & Poor’s 500 Index paying dividends. Apple could fund a payout with existing cash flow without using profit from overseas, which can be subject to extra taxes, Gene Munster, an analyst at Piper Jaffray Cos told Bloomberg.

CEO Tim Cook, who a year ago this month reinstated a dividend and announced a $10 billion buyback, faces mounting pressure to take bolder steps to pay out more of Apple’s $137.1 billion in cash and investments. Investors including David Einhorn’s Greenlight Capital Inc. are pushing for more money as growth slows and competition from rivals such as Samsung intensifies...

Read all about ti at http://www.bloomberg.com/news/2013-03-18/apple-seen-raising-dividend-more-than-50-to-16-billion.html

Hedgie couple go Hollywood with Frederick’s

According to the Post hedge-fund honcho Phil Falcone just got his fashionista wife, Lisa Maria, a hot gift — lingerie chain Frederick’s of Hollywood.

A division of Falcone’s publicly traded Harbinger Group handed over $10 million to the troubled underwear retailer in exchange for the right to control the company, FOH announced.  If it exercises that right, Harbinger’s Five Island Asset Management will appoint a majority of the board.

FOH, founded 66 years ago by Frederick Mellinger, inventor of the push-up bra, was peddling sexy lingerie (left) 30 years before Victoria’s Secret emerged.  FOH operates 118 stores across the country and has been struggling amid sagging sales…

More? Check out http://www.nypost.com/p/news/business/labor_of_love_CDDen0DLdMfLrwf5dM6FhP

Hedgie holed up in hotel with hopes of not being cuffed at home

Staying in a hotel is boring, but it’s gotta beat a jail cell.  Michael Steinberg, a former SAC Capital portfolio manager and top lieutenant to hedge fund honcho Steve Cohen, has been holed up in a New York City hotel to avoid being paraded around in handcuffs, The Post has learned.

Prosecutors with the Manhattan US Attorney’s office are working toward an indictment of Steinberg related to an alleged insider-trading scheme. Steinberg, 40, has been named as an unindicted co-conspirator in recent court documents but has not been charged.  Steinberg’s lawyer, Barry Berke, has asked prosecutors that the married father of two be allowed to turn himself in to authorities in the event he is charged rather than risk being arrested in front of his family, according to people close to the case. The feds have so far declined to make the deal…..

More?  Turn to http://www.nypost.com/p/news/business/walls_close_in_pnssJ3TnMC05fBQrW0mOyK

'Wash Trades' Scrutinized

U.S. regulators are investigating whether high-frequency traders are routinely distorting stock and futures markets by illegally acting as buyer and seller in the same transactions, people familiar with the probes told the WSJ.

Such transactions, known as wash trades, are banned by U.S. law because they can feed false information into the market and be used to manipulate prices. Intentionally taking both sides of a trade can minimize financial risk for the trading firm while potentially creating a false impression of higher volume in the market…..

Read all about it at http://online.wsj.com/article/SB10001424127887323639604578366491497070204.html

Wait…Wait…There’s more: JPMorgan Faces Increased Legal Threat Following 'London Whale' Scandal

From HuffPo: Before Thursday, the fallout from JPMorgan Chase's $6.2 billion losses from the "London Whale" trade seemed limited to a scuffed reputation and some uncertain future legal liability. A scathing Senate report about the trade has changed this calculus, with the nation's largest bank and its chief executives now possibly to be cast as defendants in lawsuits and against enforcement actions by regulators, legal scholars said.

"There seems to be plausible reason to believe that investors were misled,…"

More?  Go to http://www.huffingtonpost.com/2013/03/16/jpmorgan-scandal-london-whale-legal_n_2885951.html

Firm Set to Slash Thousands More Jobs!

HSBC is gearing up for thousands more job cuts, with Europe's biggest bank by market value set to outline the next stage in its strategic overhaul at an investor day in two months' time.

Stuart Gulliver, HSBC's chief executive, said when he announced annual results last week that he would "fixate on costs" over the coming year and promised to find a further $1 billion of annual savings in 2013…

Read all about it at http://www.cnbc.com/id/100561038

A Trader You Never Heard of Blew Open “London Whale” Disaster

From HuffPo: Julien Grout was nowhere to be seen in the Senate hearing room on Friday. But behind the scenes, this largely unknown figure had much to do with why his former bosses at JPMorgan Chase were sitting there uncomfortably, answering often-hostile questions from lawmakers on how traders lost $6.2 billion on seemingly reckless derivatives trading.

A former bank trader, Grout is party to much of the correspondence and telephone conversations that Senate investigators presented as crucial evidence substantiating a key finding in their report released late Thursday: Top management was directly involved in concealing information that pointed to staggering losses within the London office of a JPMorgan unit known as the Chief Investment Office.

According to the Senate report, Grout frequently raised alarms internally about the size of the positions being staked out by his direct supervisor, Bruno Iskil, the trader whose gargantuan bets earned him the nickname the "London Whale."  Grout also engaged in a practice that many Wall Street denizens would regard as an act of brazen insubordination: He maintained a private spreadsheet tracking the difference between the daily losses the trading unit was reporting to headquarters in New York and what he calculated to be the real losses. …

More?  Go to http://www.huffingtonpost.com/2013/03/15/julien-grout-jpmorgan-london-whale_n_2884375.html?utm_hp_ref=business

SAC to Pay The Largest Fine Ever For Insider Trading

From Bloomberg: SAC Capital Advisors LP, the hedge fund run by billionaire Steven A. Cohen, will pay a record $616 million to settle U.S. regulatory claims that two of its units engaged in insider trading.

Settlement of the civil allegations against the units doesn’t preclude the Securities and Exchange Commission from pursuing Cohen himself in the future, George Canellos, the agency’s acting enforcement director, said on a conference call with reporters today. The investigation by the SEC continues, as does the criminal case against former SAC portfolio manager Mathew Martoma.

“There is no way of predicting what they intend to do,” said Jacob Frenkel, a former SEC enforcement lawyer who is now a partner at Shulman Rogers Gandal Pordy & Ecker PA in Potomac, Maryland. “When the agency is so obviously pursuing someone, and when we do not know what cooperators are saying, there are just too many unknowns.”

Read all about it at http://www.bloomberg.com/news/2013-03-15/cr-intrinsic-agrees-to-pay-600-million-over-insider-trading.html

Oops! Email Directly Ties Dimon To $6.2 Billion Fiasco

From HuffPo: Jamie Dimon’s email response was direct and to the point. “I approve,” he wrote to an oversight body within his enormous bank, JPMorgan Chase, thereby giving his blessing to an increase in the amount of risk the institution could shoulder. He also approved a change in the way a key trading unit was assessing threats of trouble in its then-burgeoning portfolio.

That email -- released late Thursday as part of a 300-page Senate report probing how and why Dimon’s bank managed to lose $6.2 billion on derivatives trading -- now appears to tie the chief executive directly to the disastrous decision-making at issue.

The trading occurred in the London offices of a bank unit known as the chief investment office, which was officially tasked with hedging against losses in JPMorgan's broader positions. The Senate report portrays the CIO as a locus of reckless speculation, asserting that executives with oversight ordered the manipulation of a key risk model to make its activities appear conservative….

Wait...wait.there's more good stuff at http://www.huffingtonpost.com/2013/03/15/jamie-dimon-email-jpmorgan-ceo-ties-loss_n_2883012.html

Paulson Has No Plans to Relocate to Puerto Rico

John Paulson, the New York hedge- fund manager said to have considered a move to Puerto Rico, said he won’t set up a permanent residence on the island.

“In light of the media attention surrounding a relocation to Puerto Rico, he has no plans to move to Puerto Rico,” Paulson & Co., John Paulson’s hedge fund, said today in a statement. “While Mr. Paulson has considered real estate investments and has vacationed on the island, he has no plans to establish a permanent residence there.”

Bloomberg News reported March 11 that Paulson, a lifelong New Yorker, had been exploring a move to Puerto Rico, where a new law would eliminate taxes on gains from the $9.5 billion he has invested in his own hedge funds, according to four people who have spoken to him about a possible relocation. The 57-year- old recently looked at real estate in the exclusive Condado neighborhood of San Juan, the people said….

http://www.bloomberg.com/news/2013-03-15/jpmorgan-pay-fueled-risk-amid-london-whale-loss-report.html

Kareemed! Banker being extradited to US

Former Credit Suisse banker Kareem Serageldin, the highest-ranking Wall Street executive to be charged for crimes tied to the mortgage meltdown, is coming home to face the music, The Post has learned.  The 39-tear old Yale graduate was indicted by a Manhattan federal grand jury in February 2012 — along with two Credit Suisse colleagues — for allegedly covering up losses in a $3.5 billion toxic mortgage portfolio as the real estate market was collapsing in 2007.

Serageldin could be brought to the Big Apple by the end of March to face wire fraud and conspiracy charges, this person said. He faces as much as 45 years in prison if convicted.   The cover-up scheme was carried out in a bid by the trio to boost their bonuses, prosecutors said. The alleged cover-up forced Credit Suisse, which has cooperated with the probe, to announce an unexpected $2.65 billion write-down in 2008….

More?  Check out http://www.nypost.com/p/news/business/kareemed_prtTIhAyTShBHWywhVab9L

US (and Booming Market) Adds 300,000 New Millionaires

The rising stock market has pushed America's millionaire population close to its all-time highs before the recession, the WSJ reports.

According to data from Spectrem Group, the Chicago-based wealth research firm, there are now 8.99 million U.S. households whose net worth totals $1 million or more (not including primary residence). That's up from 8.6 million in 2011 and just short of the all-time record set in 2006, when the United States had 9.2 million millionaire households….

More?  Go to http://www.cnbc.com/id/100552951

Mass. fines Deutsche $17.5 million over conflicts

Massachusetts on Wednesday fined Deutsche Bank AG (DBKGn.DE) $17.5 million, saying it deceived clients in creating and marketing $10 billion worth of collateralized debt obligations, Reuters reports.

Secretary of the Commonwealth William Galvin said Deutsche Bank Securities Inc, a unit of Germany's largest bank Deutsche Bank, failed to fully disclose what was in the financial products or that hedge fund Magnetar Capital was betting their value would fall.

Deutsche Bank Securities and Magnetar co-invested in at least six different CDOs with a value of $10 billion, Galvin's office said. Galvin's office specifically investigated Deutsche Bank Securities Inc's (DBSI's) role in a $1.56 billion CDO named Carina between December 2005 and November 2007...

More?  Check out http://www.reuters.com/article/2013/03/13/us-massachusetts-deutschebank-idUSBRE92C12420130313

Secrets of A Fugitive Fund Manager

By the time Florian Homm was arrested last Friday at an art gallery in Italy, the former hedge fund manager and chief investment officer of Absolute Capital Management Holdings had been a fugitive for six years, accused of defrauding investors of $200 million.  Six years? That’s just the beginning of our questions. Herewith, some answers from Businesssweek.

Can you really disappear with enough money?  Yes. To do so, it’s crucial to sock your money away in a safe place before you’re faced with criminal charges. Frank M. Ahearn, a privacy expert and author of How to Disappear, says the best white-collar criminals think like mobsters. “Florian Homm isn’t any different from Boston mobster Whitey Bulger,” he says. “You have to anticipate that the end is always around the corner….

Read all about it at http://www.businessweek.com/articles/2013-03-13/how-to-vanish-like-florian-homm#r=hpt-ls

US to Let Spy Agencies Scour Americans' Finances

The Obama administration is drawing up plans to give all U.S. spy agencies full access to a massive database that contains financial data on American citizens and others who bank in the country, according to a Treasury Department document seen by Reuters.

The proposed plan represents a major step by U.S. intelligence agencies to spot and track down terrorist networks and crime syndicates by bringing together financial databanks, criminal records and military intelligence. The plan, which legal experts say is permissible under U.S. law, is nonetheless likely to trigger intense criticism from privacy advocates….

Read more at http://www.cnbc.com/id/100551630