This Hedge Fund Honcho Really Delivers the Alpha

It's becoming an annual tradition. Every year it seems—multiple times, in some cases—Leon Cooperman takes the stage to discuss his best investment ideas. And much like the plot in the Bill Murray movie "Groundhog Day," the themes of the Omega Advisors founder's presentations seem to repeat themselves time and again. 

The former Goldman Sachs Asset Management CEO started Omega in 1991. When this year began it had $7.3 billion in assets under management, good enough for No. 73 in the Hedge Fund 100 ranking of the world's biggest hedge fund firms compiled by Institutional Investor's Alpha.  The firm's flagship fund returned between 27 and 28 percent last year and posted first-quarter gains of 9 percent to start 2013—putting it among the best-performing hedge funds…..

Read all about it at http://www.cnbc.com/id/100848963

Slice ‘em, Dice ‘em: Wall Street's newest flav: Risk-parity funds

Risk-parity funds debuted in 2009 & have attracted $30 billion in assets, $16 billion in 2013

Funds are designed to mitigate risk & earn modest gains as opposed to high-risk, high-yield funds

Assets are deployed to equalize risk between stocks, bonds, and commodities.

Index funds were once a novelty, but pioneers like Vanguard 500 brought about a new standard for low costs, tax efficiency and solid performance. Target-date funds, too, were once the next big thing, but losses as high as 45% during the 2008 crash gave the category a black eye.

The latest contender to be a better mousetrap is known as the risk-parity fund. Just four years after their debut, the new breed of funds has already attracted nearly $30 billion in assets—$16 billion of that in the past year alone, according to Lipper….

http://www.usatoday.com/story/money/business/2013/06/02/risk-parity-funds-better-mousetrap/2376517/

How One Hedge Fund Strategy Is Like The Steve Carell Character In Every Movie

Certain hedge funds have been employing an investment strategy known as risk parity, which is safe, measured, cautious. Not unlike most of the movie characters played by Steve Carell.  Hedge funds such as AQR, Invesco, and Bridgewater Associates, which ranks as the world’s largest hedge fund, have been struggling lately. The problem, according to experts, is that these funds all employ an investment strategy known as risk parity, which can best be explained through Steve Carell’s most memorable movie roles.

“The Forty-Year-Old Virgin”  The Role: Carell plays Andy Stitzer, an involuntarily celibate 40-year-old virgin who has always lived a simple, straightedge lifestyle. He has trouble meeting women, despite the best efforts of his friends and encouragement of those around him. Carell’s character is so cautious he has trouble with women even in situations where opportunities are seemingly handed to him.

The Connection: Risk parity involves spreading risk around a portfolio evenly and proportionately based on the riskiness of an asset class. In other words, it’s always making sure to operate with a measured approach and extreme caution. Perhaps too much caution — the kind that can make you miss out on life experiences…

http://www.buzzfeed.com/mariahsummers/how-one-hedge-fund-strategy-is-like-the-steve-carell-charact

Fun and Games: Goldman Sends Employees on $270,000 Scavenger Hunt

NYMagazine’s Kevin Roose reports: It's always been presumed (by me) that when Goldman Sachs employees are in the running to be named partners at the firm, they're sent on a brutal, globe-spanning Amazing Race–style test of physical abilities, where they face challenges like scaling Kilimanjaro wearing only a fur-lined Zegna suit and traversing the Gobi Desert with a summer intern strapped to their backs.

So it's a bit of a relief that the actual test Goldman employees took on last fall — an epic fifteen-hour scavenger hunt that involved 180 of the firm's employees — was more cerebral than physically grueling.

Quartz's Euny Hong embedded with a team from the Goldman commodities desk during "Midnight Madness," a massive all-night hunt that took twenty teams around New York City for a series of complex brain-teaser challenges. (The name is an homage to a bad 1980 Disney movie.) The hunt cost $270,000 in total and was financed by Goldman Sachs Gives, the firm's partner-led charity….

Read all about it at http://nymag.com/daily/intelligencer/2013/06/goldman-sachss-270000-scavenger-hunt.html

Commodity 'Super-Cycle' Suspended, Not Ending

From Kitco News: Another tough day at the office for metals continues to fuel questions about whether or not the “commodity super-cycle” over the last decade is coming to an end.  Driven largely by Chinese appetite for commodities, the 2000s saw a commodities boom with both precious and base metals prices rising to record highs.  With sharp drops across the metals board in the last three months, some analysts have begun to believe this commodities boom, dubbed the “commodities super-cycle,” is at an end….

Wait….wait.there’s more at http://www.forbes.com/sites/kitconews/2013/06/26/interview-commodity-super-cycle-suspended-not-ending-head-of-global-mining-group-fasken-martineau/

Regulators To Go After Corzine’s Hedge Fund and Brokerage Fraud

According to HedgeCo.Net US regulators are planning a lawsuit later this week against Jon Corzine over the collapse global financial derivatives broker and hedge fund trader MF Global, formerly known as Man Financial, Reuters reports. The company allegedly dipped into customer funds, spending as much as $1 billion in misappropriated funds to cover it’s losses from scrutiny….

http://www.hedgeco.net/news/06/2013/regulators-to-go-after-corzines-hedge-fund-fraud.html

Who Dunnit? SEC Gets Set to Test Policy for Guilt Admissions

Securities and Exchange Commission enforcement chiefs have drawn up a hit list of impending cases where officials intend to test their new policy of requiring admissions of wrongdoing when settling civil charges, people close to the agency told WSJ

The handful of likely target cases include a planned enforcement action against a company alleged to have made illicit profits by charging investors undisclosed markups on top of commissions, one of the people said….

http://online.wsj.com/article/SB10001424127887323998604578565782523815430.html?mod=WSJ_hp_LEFTWhatsNewsCollection

Stop! Top Firm Gains by Putting the Brakes on Traders

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If you can believe Dealbook (we do) the spoils on Wall Street generally go to the firm that is the fastest and most opaque. But one upstart contender is trying a distinctly counterintuitive approach.

In the financial equivalent of the Tortoise and the Hare, Royal Bank of Canada has risen up the ranks of the biggest stock trading firms in the United States by embracing a rather Canadian restraint and prudence.  At the center of the efforts by the bank’s New York trading desk is a technology that actually slows its customers’ orders so as to evade high frequency traders. And unlike nearly every other large bank in New York, it has elected not to open its own dark pool, where banks privately carry out customer trades away from the public exchanges…...

Find out more at http://dealbook.nytimes.com/2013/06/25/royal-bank-of-canada-gains-by-putting-the-brakes-on-traders/?src=me

What The Rich Really Want: Financial Advisers Turn to Hedged Mutual Funds

From WSJ:  Wealth managers are putting more client money into mutual funds that use hedge-fund strategies. The funds work well for clients who can't meet hedge funds' large minimum investment requirements or who want the transparency and liquidity that come with a mutual fund.

Wealth managers are putting more client money into mutual funds that use hedge-fund strategies, seeing a potential shelter in a storm.

Often called hedged mutual funds, these instruments use some of the complex investment styles and tactics found in hedge funds, such as short-selling, employing leverage and trading in derivatives such as options. But unlike hedge funds, they offer greater transparency and can be traded daily…..

Want to know more?  Turn to http://online.wsj.com/article/SB10001424127887323419604578569520215935186.html

Pimco Flagship Fund Loses Bigtime

Pimco's flagship Total Return Bond Fund took a hefty hit in June, due to the sharp rise in bond yields that was sparked by fears the U.S. Federal Reserve will scale back its asset-purchasing program.

The Pimco fund, which is the world's largest bond fund, with over $285 billion asset under management, has shed 3.79 percent from its net asset value since the start of June. This makes it the 12th-worst performer out of 177 similar funds tracked by data firm Lipper, according to the Wall Street Journal….

Read all about it at http://www.cnbc.com/id/100844891

Even The Best Performing Hedge Fund Of 2012 Is Getting Hammered In This Market

From BI:  One of last year's top-performing hedge fund managers, Deepak Narula, is suffering a reversal of fortune as the mortgage bonds that steered him to the top of the industry in 2012 are now delivering losses.  His Metacapital Management's roughly $1.5 billion flagship fund was down 5.66 percent for the year through June 14, according to an investor with knowledge of the numbers….

 Read more: http://www.businessinsider.com/deepak-narula-metacapital-underperforms-2013-6

More big time hedge funds lick wounds from bond sell-off

One of last year's top-performing hedge fund managers, Deepak Narula, is suffering a reversal of fortune as the mortgage bonds that steered him to the top of the industry in 2012 are now delivering losses.  His Metacapital Management's roughly $1.5 billion flagship fund was down 5.66 percent for the year through June 14, according to an investor with knowledge of the numbers.  The loss is particularly given the fund's 41 percent gain last year.

Read all about it at http://www.reuters.com/article/2013/06/25/us-hedgefunds-performance-metacapital-idUSBRE95O1FD20130625

Dr. Doom? Marc Faber Sees Stock Buying Opportunity

The dean of doom, Marc Faber, told CNBC on Tuesday that a variety of asset classes—including equities—may be worth buying for short-term gains.  In the midst of market volatility on concerns over Federal Reserve tapering, he said, "Treasury bonds, gold and equity markets are oversold in the near-term and they can rebound for the next 10 days or even the next month."

"The best course of action is to actually not buy anything, but rather to reduce positions on a rebound," Faber said.  The S&P 500 could "rebound to around 1,630-1,640" in the short-term, Faber added, but warned the index could drop 20 to 30 percent from its all-time intraday high on May 22 of 1,687….

More? Turn to http://www.cnbc.com/id/100841125

Sad, sad: A big Bridgewater fund is under the weather

From Reuters: A $70 billion portfolio managed by hedge fund titan Ray Dalio's Bridgewater Associates and widely held by many pension funds to survive stormy markets is emerging as a big loser in the recent selloff in global markets.  The Bridgewater All Weather Fund is down roughly 6 percent through this month and down 8 percent for the year, said two people familiar with the fund's performance.

The All Weather Fund is one of two big portfolios managed by Bridgewater and uses a so-called "risk parity" strategy that is supposed to make money for investors if bonds or stocks sell off, though not simultaneously…..

Grab a fresh hankie and check out http://www.reuters.com/article/2013/06/24/hedgefund-performance-bridgewater-excl-idUSL2N0F00Y220130624

Hedge Funds: The Poor Misunderstood Asset Class

But seriously folks.....finalternatives writes:  As hedge funds have matured as an alternative asset class they have been increasingly embraced by institutional investors of all sizes, as well as high net worth investors. Their very success or perceived non success may also be creating confusion for some investors.

Over many years and now decades, we believe that hedge funds have been a misunderstood asset class due to investors and advisors alike grouping hedge funds into a single melting pot and believing any hedge fund should be able to accomplish what the client needs. We will attempt to clear up some of these misconceptions about hedge funds, by first identifying what are some of the primary factors affecting hedging risks and returns, and by providing guidance as to the hedge fund strategies that would best match the particular investment objectives for different investors…..

http://www.finalternatives.com/node/24005

It's Getting Harder And Harder To Deny The Power Of The Index Fund

From BI:  A new white paper by Portfolio Solutions and Betterment, "The Case For Index Fund Portfolios,"pretty much solidifies all we've ever known or guessed about low-cost, passively managed index funds  –– they can rarely be beaten.

Looking at advanced portfolios holding 10 asset classes between 1997 and 2012, researchers found index fund portfolios outperformed comparable actively managed portfolios a staggering 82% to 90% of the time. And the longer investors held those investments, the better shot they had at outperforming active funds over time. ….

Still not convinced? Even lowering the cost of actively managed fund portfolios couldn't offer a boost significant enough to outperform index funds, the researchers found.

Read more: http://www.businessinsider.com/index-funds-beat-actively-managed-funds-2013-6#ixzz2XEsec7kL

5 tips from Hedge Fund Hall of Fame

From MarketWatch: Entrepreneur Mark Cuban once noted that “The number-one job of the hedge-fund manager is not to make sure that you can retire with a smile on your face, it’s for him to retire with a smile on his face.” So you can imagine that everyone who made the Hedge Fund Hall of Fame when it opened in 2008 was all smiles — these were fabulously wealthy money managers who, in some cases, had become household names.

But the funny thing about the Hedge Fun Hall of Fame — which was not an actual place but an online collection put together by Institutional Investor’s Alpha — is that once the smiles faded, so did the idea. After the original 14 members of the Hall, no one else was inducted. That changes this year, as Institutional Investor’s Alpha is picking up the ball with a new list of successful hedgies to fete and celebrate….

http://www.marketwatch.com/story/5-tips-from-hedge-fund-hall-of-fame-2013-06-24?reflink=MW_news_stmp

Raj’s Insider Conviction Appeal Nixed

From Bloomberg: Raj Rajaratnam’s conviction for insider trading was upheld by a federal appeals court in New York, which rejected a challenge to the use of government wiretaps in his trial. The U.S. Court of Appeals in Manhattan, in a decision filed today, affirmed the 2011 conviction of the co-founder of Galleon Group LLC for conspiracy and securities fraud.

This comes as former Goldman Sachs Group Inc. director Rajat Gupta waits to hear from the same appeals court in his bid to overturn his insider-trading conviction. Gupta argued that prosecutors shouldn’t have been allowed at his trial to use secretly wiretapped calls in which he wasn’t a participant….

http://www.bloomberg.com/news/2013-06-24/raj-rajaratnam-insider-conviction-upheld-by-appeals-court.html

Why are US hedge funds sexier? A tale of two markets

From Hedgeweek:  Summer in London brings with it a whole new wave of would be hedge fund managers, who have either left their employers as part of a pre-bonus cost-cutting exercise, or are planning to do so once they have been paid the sums they will then use as the required investments to start up their new ventures.

Those currently involved in drawing up business plans, as well as incumbents taking a look at where they are within the industry in order to monitor levels of profitability, all have an interest in reviewing the competitive landscape. While the former need to know what they are up against before making the “big jump”, the latter also have to keep an eye on how the forces that shape the industry1 are evolving, to be able to forecast revenue and make the necessary adjustments to their business strategies, be it their product offerings, approaches to marketing, or the structuring of their operations.

….As it turns out, defining the market with a view to analysing competition provides those from the European side of the pond eager to make their mark in the hedge fund industry with a striking starting point: this is a global industry in which the top performers worldwide are managed from the US.

More? Check out http://www.hedgeweek.com/2013/06/23/186344/are-us-hedge-funds-more-attractive-tale-two-markets

Hedge fund exits rise in June as investors reposition at mid-year

From Reuters - Requests to pull money out of hedge funds rose in June as investors used the mid-year point to review their portfolios and release cash to spend elsewhere.  Hedge fund administrator SS&C GlobeOp's forward redemption indicator, a monthly snapshot of clients giving notice to withdraw their cash which shows the percentage of assets under administration, stood at 3.88 percent in June, a moderate rise from May's measurement of 3.77 percent.

Bill Stone, chairman and SS&C Technologies CEO described the June increase as "typical semi-annual redemption activity", such as investors freeing up cash to spend on summer holidays…

Throw another shrimp on the Barbie or find out more at http://uk.reuters.com/article/2013/06/21/uk-hedge-fund-exits-idUKLNE95K00G20130621

Inside look at trading (Investors beware!)

According to the NY Post: Dirty dealings on Wall Street may be as old as the Street itself, but the stakes are higher now, given the trillions swirling around hedge funds….Trades on confidential tips have become easier to trace thanks to technological improvements and legal precedents that give the authorities greater reach to go after anyone who trades on confidential tips, the Charles Gasparino’s book, “Circle of Friends” said.

Yet insider trading has become the crime du jour with the rapid growth of opaque hedge funds, which now manage $2.2 trillion in assets.

“…Indeed, the rise of hedge funds means that the phenomenon is “no longer confined to a few dumb-ass players like Sam Waksal,” the former CEO of ImClone Systems, and Martha Stewart, the domestic diva who sold her ImClone shares with impeccable timing, Gasparino  explains.  Instead, insider trading has become sophisticated, and it has lured the feds to their current, high-profile cat-and-mouse game with hedge fund titan Steve Cohen.

http://www.nypost.com/p/news/business/inside_look_at_trading_mP5SOTnWiYYzvHyY1d4sYK

Gold Wagers Slump as $55 Billion Erased From Funds

Bloomberg reports: Hedge funds cut bets on a gold rally by the most since February after the Federal Reserve laid out plans for reducing stimulus and this year’s drop in the value of exchange-traded products extended to $55 billion.

Speculators reduced their net-long position by 29 percent to 38,951 futures and options by June 18, U.S. Commodity Futures Trading Commission data show. Holdings of short contracts jumped 14 percent, the most in eight weeks. Net-bullish wagers across 18 commodities slid 2.2 percent as investors became more bearish on copper and wheat.

http://www.bloomberg.com/news/2013-06-23/gold-wagers-slump-as-54-billion-erased-from-funds-commodities.html

Goldman Sachs Goes Social: You've A Come A Long Way Lloyd Baby!

From HuffPo:  There was a time when reading through a public company's annual report was mostly for those with problems sleeping. While arguably the most critical opportunity for companies to "strut their stuff" before the public and their investors, most annual reports were "yawn-worthy" glossy books with pages of boring text and pictures of lighthouses, compasses and yachts, in addition to piles of numbers and charts.

Until now...Thankfully, and at long last, 2013 has rung the death knell for the static, boring, sleep-inducing, hard-cover bug-swatting paperweight annual report. For all the annual report hoarders out there who still love getting hefty packages in the mail, not to worry: the movement is only just beginning. But like the move from radio to television, what is starting to emerge are more colorful, digital, interactive, engaging and entertaining packages that resonate - especially with the younger generation which has next to zero interest in reading anything on paper, and wants to be told what's going on - not dig for it.

Interactive charts and graphics; video snippets from the CEO and other senior execs; links to research, materials, blogs and other information….

Read more at http://www.huffingtonpost.com/april-rudin/youve-a-come-a-long-way-b_b_3416249.html

Man vs. machine: Wall St. is culling high price talent

Wall Street firms are cleaning out their desks — institutional-equity desks, that is.  Large and midsize firms are giving the boot to hundreds of high-priced trading staff in widespread layoffs and deep cost-cutting, replacing flesh-and-blood staff with cold steel computers and high-frequency trading algorithms.

The wholesale bloodbath is not painful to Wall Street’s profits, which are reaching historic highs. (New York Stock Exchange member firms’ profits tripled last year, to $24 billion, up from $7.7 billion in 2011. And this year opened with an outsize financial flourish. )

But with equity and other trading in the doldrums, Dodd-Frank regulations casting a dark shadow, and, notably, advanced trading technology eliminating manual intervention, the Street is swinging the ax.  Many traders are now seen as “expenses” as the Street faces an uncertain and volatile future…..

Read all about it at http://www.nypost.com/p/news/business/man_vs_machine_kcKBB0HkdpQr4jtAUprbIK

A Virtually Unknown Hedge Funder Who Crushed It During The Crisis Is Preparing To Make His Comeback

Dr. Michael Burry is apparently plotting a comeback to the hedge fund world.  Burry, the former hedge fund manager who accurately predicted the housing market crisis and is featured in Michael Lewis' book "The Big Short," is looking to raise money to start a new fund, the Wall Street Journal's Juliet Chung reports.  According to the Journal, he's looking to raise between $100 and $200 million.

The medical doctor-turned-hedge fund manager had incredible annualized returns during his eight years of running Bay Area-based Scion Capital Group.  Burry—who has a glass eye, Asperger's Syndrome and likes to play the guitar—racked up returns of 472% since the fund's inception in 2000.  He crushed it on his bet against the subprime housing market. In 2007, he returned 166% for investors. …

Read more: http://www.businessinsider.com/michael-burry-raising-capital-for-fund-2013-6

Fasten Your Seatbelts: After The Fed Shock, Markets Are Set For More Turmoil

From Reuters UK:  If that was the message Ben Bernanke was trying to deliver when he said the Federal Reserve could soon start scaling back its massive stimulus program for the U.S. economy, it's safe to say investors received it loud and clear.  In fact, the sell-off in stocks, bonds and commodities that rippled around the globe after Bernanke's remarks looks to some like the dawn of a new period of volatile, disorderly trade - a stark change from the calm that prevailed since the Fed began its most recent bond-buying program last autumn.

"When market regimes shift, they rarely do so in an orderly fashion - look at equity prices collapsing at the end of the dot-com bubble or the height of the financial crisis," said Stephen Sachs, head of capital markets at exchange-traded fund issuer ProShares in Bethesda, Maryland. "It usually gets violent. We're going to face that in interest rates now….."

http://uk.reuters.com/article/2013/06/22/uk-usa-fed-volatility-analysis-idUKBRE95L06E20130622

Buckle Up: Hedge Funds Shift to Stocks, Just in Time for Pullback

 

According to CNBC’s Jeff Cocks: Hedge fund investors have begun to like stocks again—just in time for what appears to be a rough summer ahead for the equity markets.  Reversing a trend that began in March 2010, hedge funds in May saw inflows to equity-based products and outflows from fixed income.

The move replicates investor behavior in mutual funds, which have seen powerful streams of cash moving to stocks and away from bonds, to the extent that fixed income is poised to have one of its worst months ever….

Read all about it at http://www.cnbc.com/id/100834715

Hedge fund exits rise in June (investors reposition at mid-year)

Reuters reports: Requests to pull money out of hedge funds rose in June as investors used the mid-year point to review their portfolios and release cash to spend elsewhere.  Hedge fund administrator SS&C GlobeOp's forward redemption indicator, a monthly snapshot of clients giving notice to withdraw their cash which shows the percentage of assets under administration, stood at 3.88 percent in June, a moderate rise from May's measurement of 3.77 percent.

Bill Stone, chairman and chief executive officer at SS&C Technologies described the June increase as "typical semi-annual redemption activity", such as investors freeing up cash to spend on summer holidays.

So far this year, hedge funds have returned 3.95 percent according to Hedge Fund Research, compared with a gain of almost 13 percent from the S&P 500 .SPX….

Wait….wait…there’s more at http://www.reuters.com/article/2013/06/21/uk-hedge-fund-exits-idUSLNE95K00G20130621

The Last Mystery of the Financial Crisis

 Rolling Stone’s Matt Taibbi writes: What about the ratings agencies?  That's what "they" always say about the financial crisis and the teeming rat's nest of corruption it left behind. Everybody else got plenty of blame: the greed-fattened banks, the sleeping regulators, the unscrupulous mortgage hucksters like spray-tanned Countrywide ex-CEO Angelo Mozilo.

But what about the ratings agencies? Isn't it true that almost none of the fraud that's swallowed Wall Street in the past decade could have taken place without companies like Moody's and Standard & Poor's rubber-stamping it? Aren't they guilty, too?   Man, are they ever. And a lot more than even the least generous of us suspected.  Thanks to a mountain of evidence gathered for a pair of major lawsuits by the San Diego-based law firm Robbins Geller Rudman & Dowd, documents that for the most part have never been seen by the general public, we now know that the nation's two top ratings companies, Moody's and S&P, have for many years been shameless tools for the banks, willing to give just about anything a high rating in exchange for cash……

Wait…wait…there’s more at http://finance.yahoo.com/news/the-last-mystery-of-the-financial-crisis-154447818.html

Is the Drop in Financial Markets an Overreaction or an Early Innings of a Sell-off?

From CNBC:  Stunned investors are now wondering whether the markets' big selloff was an overreaction or a sign of more volatility to come.  Global financial markets plunged Thursday after the Federal Reserve roiled Wall Street by saying it could reduce its aggressive economic stimulus program later this year. Concerns about China's economy heightened worries.

The global selling spree began in Asia and quickly spread to Europe and then the U.S., where the Dow Jones Industrial Average fell 353 points, wiping out six weeks of gains.  But the damage wasn't just in stocks. Bond prices fell, and the yield on the benchmark 10-year Treasury note rose to 2.42 percent, its highest level since August 2011, although still low by historical standards. Oil and gold also slid….

You lived through it, now read all about it at  http://www.cnbc.com/id/100833913

The ETF Market Kind Of Broke Yesterday

Yesterday's big selloff exposed a weakness in one of Wall Street's darling products, Exchange Traded Funds (ETFs), the FT reports, and no one really saw it coming.

ETFs are a baskets of goods that can be traded like a single asset. They've become really popular on the Street over the last decade to the point where you can buy an ETF of almost anything — gold, kinds of companies, groups of countries (like emerging markets)... the list goes on.  And just like everything else, they got killed yesterday.

The problem wasn't just that ETFs got swept up in the general panic of the moment. It was that as traders sold off and ETFs got cheaper, the discount between the price of the ETF and the assets that made it up widened.  Suddenly, everyone wanted to redeem those underlying assets from banks like Citi and State Street.

Now you can imagine what happened next……..

Read all about it at http://www.businessinsider.com/etfs-hurt-in-bond-selloff-2013-6

Blackstone, Carlyle, Goldman face conspiracy trial after bid fails

One piece of the explosive bid-rigging case against the largest private equity firms appears headed to trial.

A judge yesterday denied a second bid by the firms — Blackstone Group, Carlyle Group, Goldman Sachs and TPG Capital — to dismiss a claim by shareholders that they conspired in 2006 to keep down the price of the $33 billion buyout of HCA.

While the defendants are considering an appeal, sources on both sides of the case said chances of success are low.  The PE firms are facing up to $4.5 billion in damages on the HCA count, a source close to the situation told the Post….

. More?  Check out http://www.nypost.com/p/news/business/pe_firms_face_conspiracy_trial_after_gLL2pj2FROarq2WArzlUnJ

Dr. Doom and Gloom Sees Further Downside

China's factory output weakened to a 9-month low today, and financials saw a huge sell-off today, with the FM traders; and The Gloom, Boom and Doom Report's Marc Faber, shares his economic outlook.

There's plenty of room for the stock market to decline, noted bear Marc Faber said Thursday on CNBC.

"Yes, I see further downside," said the editor of "The Gloom Boom & Doom Report."

However, Faber said that there were plenty of reasons for stocks to head lower other than what the Federal Reserve was doing in terms of quantitative easing.  Faber noted that interest rates have been rising for a year, pointing to the 30-year U.S. Treasury bond and the 10-year U.S. Treasury note bottoming out in July.

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But that wasn't the whole bear case.  "The Chinese economy is much weaker than the official statistics suggest," Faber said. "My view would be that at the present time, the Chinese economy is growing at something like 4 percent per annum, and without huge credit expansion there would probably be no growth at all….”

Grab a fresh hankie and read more at http://www.cnbc.com/id/100833048

Whack Market Indicator: Using Hershey Chocolate to Predict the Market

According to CNBC life may be like a box of chocolates, but how about the stock market? Brian Stutland of the Stutland Volatility Group believes that chocolate sales can tell us a great deal about where the market will go next.

"Your basic thing that everybody loves is chocolate," Stutland said. "If chocolate sales are falling—if you hate chocolate—you definitely hate real estate or whatever big-ticket purchases you want to make."

So to get a jump on the market's next move, Stutland zeros in on one particular company: Hershey.  In addition to capturing chocolate sales, "Hershey usually trades at a pretty low multiple," said Stutland, who is an "Options Action" contributor. "If the multiple starts to get overextended, and investors start to take the multiple down, that is probably going to happen across the marketplace. So the market will follow the mean trend" that is first set by Hershey…..

Seriously folks.  Find out more at http://www.cnbc.com/id/100828643

Downward Dog: Hedge Funds Slide In Early June

From finalternatives: Hedge funds took a hit in the first half of June, according to figures from Hedge Fund Research. The HFRX Global Hedge Fund Index fell 0.95% through mid-June, cutting the benchmark's year-to-date gains to 3.55%.  The losers were led by systematic diversified commodity trading advisors, which fell 1.22% (down 2.88% year-to-date). Multi-region funds dropped 0.85% (up 3.92% YTD), distressed restructuring funds 0.84% (up 3% YTD), macro funds and CTAs 0.78% (down 1.19% YTD) and equity-market neutral funds 0.74% (up 0.28% YTD).

Multi-strategy funds shed 0.69% on the month (up 1.4% YTD), event-driven 0.67% (up 7.88% YTD), relative-value arbitrage 0.65% (up 2.25% YTD), emerging markets 0.63% (up 2.58% YTD), credit 0.51% (up 4.81% YTD), convertible arbitrage 0.11% (up 8.8% YTD) and special situations 0.11% (up 10.45% YTD)…..

Read all about it at https://www.finalternatives.com/node/23965

Hedge fund Grandmaster sees stock market crash in China

Former chess grandmaster-turned hedge fund manager Patrick Wolff is betting on a stock market crash in China, where he says corruption and bad debts have spiraled to dangerous levels.

Speaking to Reuters on the sidelines of the GAIM conference in Monaco this week, Wolff said investors were too focused on trying to work out when easy money policies will taper off in the United States and ignoring a looming correction in China.

"People are talking way too much about the Federal Reserve and not enough about China," he said. "We've been saying that the U.S. is the safest place to invest, while China is a crash waiting to happen."

"China's centrally-planned economy inevitably means massive corruption and a massive misallocation of capital," he added, pointing to increasing funding problems for Chinese companies.

More?  Turn to http://www.reuters.com/article/2013/06/20/uk-hedgefunds-gaim-grandmaster-idUSLNE95J00H20130620

Let’s make a Dell: Icahn revises plan, pushes $14-a-share offer

Icahn doesn’t know how to quit according to the NY Post..  The billionaire activist yesterday suddenly switched tactics in his high-stakes bid to upend an effort by Michael Dell and partner Silver Lake Management to take PC maker Dell Inc. private for $24.4 billion.

The 77-year-old investor demanded that Dell Inc. launch a $14-a-share tender offer for about 60 percent of the PC maker’s outstanding shares.   The Dell-Silver Lake offer is valued at $13.65 a share…

Read more at http://www.nypost.com/p/news/business/let_make_dell_OJ3I7CRoLBz3awGH25gbrM

Hedge funds brace for renewed debt crisis

Fasten those seat belts people.  According to Reuters the euro zone's debt crisis may be far from over, while Japan's money-printing gamble to revive its economy could destabilise global markets if it doesn't work, some hedge fund managers say.

They are taking the view that the rally in financial markets over much of the past year, fuelled by central bank money printing, could mask a failure to tackle some European countries' and banks' debt problems, and the sell-off of recent weeks may be the start of a longer downward move….

Wait…wait…there’s more at  http://www.reuters.com/article/2013/06/19/uk-hedgefunds-gaim-eurozone-idUSLNE95I00920130619

Loeb Belief in Abenomics Drives Pursuit of a Sony Shakeup

From Bloomberg: Daniel Loeb took his team to Japan in April 2012 to determine if the world’s third-largest economy was ready for investment. The central bank had set a new 1 percent inflation goal, an encouraging step in a country where growth had stagnated for two decades.

Yet Loeb wasn’t convinced until October when polls signaled that the next prime minister would be Shinzo Abe, a pro-business leader who agitated for reforms including a weaker currency and unprecedented monetary easing to end deflation…..

Find out more at http://www.bloomberg.com/news/2013-06-19/loeb-belief-in-abenomics-drives-pursuit-of-a-sony-shakeup.html

Déjà vu all over again: Bill blasts Herbalife

From the New York Post: The hedge-fund manager — who took a $1-billion short against Herbalife’s shares last year — reiterated his call for an investigation of the company while attacking a recent survey that Herbalife says refutes his allegations that it is a pyramid scheme.

Ackman’s Pershing Square said that the Nielsen survey funded by Herbalife relied on responses from only 349 individuals to conclude that 7.9 million Americans have bought Herbalife’s products in the past three months.  While Herbalife has “incurred substantial expense in commissioning surveys,” the company “refuses to release actual sales data,” Pershing said in a statement.  “If Herbalife is a legitimate consumer products company, it should be tracking sales data as closely as possible,” the statement continued.

More?  Check out http://www.nypost.com/p/news/business/deja_vu_all_over_again_bill_blasts_K9uiTVU9Fy91nQP80HR34M

Enquiring Minds Want To Know: Is High-Frequency Trading Bad For Profits, Including Those Of High-Speed Traders?

From HuffPo:  High-frequency trading is bad for everybody, including high-frequency traders, according to new research from a university that produces economic reports that are sold early to high-frequency traders.

The study, by the University of Michigan's engineering department, focuses on one particular tactic of high-speed trading, known as "latency arbitrage."  This is the practice of gaming the split-second lags between the time trades are made and the time those trades are crunched by a central clearing house called the Security Information Processor into a price quote called the National Best Bid And Offer. Traders with super-fast computers can calculate the NBBO faster than the Security Information Processor can do it, and they take advantage of the tiny gaps between the old NBBO and the new NBBO.

The researchers say this trade somehow reduces the total amount of profits in the system -- in other words, it not only hurts regular, slowpoke investors, but also other high-speed traders. Whatever profit each individual robot makes on a latency arbitrage trade is less than the amount of profit that is destroyed by the practice, according to the report. This is just more evidence that zapping thousands of trades per second does nothing for society….

http://www.huffingtonpost.com/2013/06/18/high-frequency-trading-profits_n_3459497.html?utm_hp_ref=business

Roubini: Fed Exit Strategy Will Be 'Treacherous'

From Yahoo Finance: As the Federal Reserve's Open Market Committee begins a two-day meeting , economist Nouriel Roubini, known as Dr. Doom, and political scientist Ian Bremmer warned that the Fed's monetary easing exit strategy would be "treacherous" and would lead to financial instability.

"We know how the movie ended, and we may be poised for a sequel. The weak real economy and job market , together with high debt ratios, suggest the need to exit monetary stimulus slowly. But a slow exit risks creating a credit and asset bubble as large as the previous one, if not larger," they wrote in a report published in Institutional Investor magazine.

In the report, they warned that market complacency among politicians, investors and central banks was leading us into a "New Abnormal" era - a "period in which every market assumption must be questioned and the wise investor is prepared to be surprised…."

http://finance.yahoo.com/news/roubini-fed-exit-strategy-treacherous-073247994.html

Tim Hortons stock soars: in crosshairs of second U.S. hedge fund

Pressure is likely to mount on Tim Hortons Inc. now that it’s in the crosshairs of a second American hedge fund.

Scout Capital Management says in a regulatory filing that it has boosted its Tim Hortons stake to 5.5 per cent, from 1.5 per cent earlier, and that it plans to raise certain issues with the Canadian coffee-and-doughnut chain.  Yesterday, in documents filed with the Securities and Exchange Commission, Scout said it now holds 8.4 million shares of Tim Hortons and has been talking with the company’s senior executive.

Read all about it at http://www.theglobeandmail.com/report-on-business/top-business-stories/tim-hortons-in-crosshairs-of-second-us-hedge-fund/article12630210/

Martoma, U.S. Reach Deal With University Over Laptop

From Bloomberg: Ex-SAC Capital Advisors LP portfolio manager Mathew Martoma and U.S. prosecutors reached an agreement with the University of Michigan giving them access to documents encrypted on a laptop belonging to the government’s star witness in Martoma’s insider trading case.

Martoma was charged by the U.S. in November with the largest insider trading case in history, accused of helping the hedge fund founded by Steven A. Cohen make $276 million using illegal tips about a drug to treat Alzheimer’s disease.

The U.S. Securities and Exchange Commission alleged that Martoma’s source was Sid Gilman, a University of Michigan neurologist who was head of the safety monitoring committee for the drug trial. Gilman has entered into a non-prosecution agreement and is cooperating with the government.

http://www.bloomberg.com/news/2013-06-17/martoma-u-s-reach-deal-with-university-over-laptop.html

Third Point Lifts Sony Stake, Urges Spin Off

From CNBC:  U.S.-based hedge fund Third Point on Tuesday said it has lifted its stake in Sony and urged the Japanese electronics giant to spin-off its entertainment business.

Sony appears to be regaining its competitive edge and as a sign of its increased confidence in the company, Third Point has raised its stake to 70 million shares valued at 136.5 billion yen ($1.4 billion), the hedge fund's CEO Daniel Loeb said in a letter that was seen by CNBC.The billionaire investor reiterated his call to spin-off Sony's entertainment division and offer to sit on Sony's Board of Directors….

Read all about it at http://www.cnbc.com/id/100822623

ShockerFund manager used postal box to hide $6 million fraud

From Reuters:  A North Carolina hedge fund manager used a personal post-office box and forged bank statements to hide his theft of about $6 million over a seven-year period, U.S. regulators and prosecutors said on Monday.

James Shepherd, who ran a commodity fund that traded contracts at CME Group and IntercontinentalExchange Inc, was charged with the fraud in federal court in Charlotte on Monday. In a related action, the Commodity Futures Trading Commission sued Shepherd for fraud and misuse of customer funds…. Shepherd's alleged swindle lays bare the ongoing challenges of policing the vast hedge fund and commodity pool industry, much of which has come under additional regulation since January through the National Futures Association (NFA) trade group….

More?  Check out http://www.reuters.com/article/2013/06/17/us-financial-fraud-shepherd-idUSBRE95G17S20130617

Warren Buffett's Mentor Was A Crappy Hedge Fund Manager

According to Jack Bogle, the outspoken godfather of index funds and passive investing strategies, didn't approve of a recent Wall Street Journal article defending hedge funds.  In particular, he took issue with the author's reference to Benjamin Graham, the legendary Columbia finance professor who literally wrote the book on Security Analysis and mentored Warren Buffett. Here's an excerpt: from his letter to the editor

Citing Benjamin Graham as the first "hedged fund" operator is an especially unfortunate example. "The trick," Mr. Rice writes, was Graham's "clever way to make money . . . whether it [the market] continued to rise, or started to fall."   How did the hedged strategy work out in the bull market of the Roaring Twenties and thereafter? Thanks to Joe Carlen's recent book, "The Einstein of Money," we know the answer…. From 1929 through 1932 inclusive, the Graham account turned in a loss of 70%, compared to a loss of 64% for the S&P 500 Index.  "The strategy unraveled quickly," Mr. Carlen writes. "There was no longer any reliable advantage to be gained from that kind of hedging."

Some hedge fund manager. At least he didn't do much worse

Read all about it at http://www.businessinsider.com/benjamin-graham-underperforming-hedge-fund-manager-2013-6

The Rise (And Repression) Of The 'Bond Vigilantes'

According to Ed Yardeni of Yardeni Research   In the past, before the era of financial repression imposed by central banks, the 10-year Treasury bond yield tended to trade around the y/y growth rate of nominal GDP. From the 1950s through the 1970s, the yield tended to trade below the GDP growth rate because bond investors failed to anticipate rising inflation.

They learned their lesson and bond yields generally exceeded GDP growth during the 1980s and early 1990s. That was the era of the "Bond Vigilantes," a term I coined in 1983. They contributed to breaking the back of inflation. As a result, by the late 1990s, they became less vigilant. While they’ve been repressed in the US by the Fed since late 2008, they were back in the saddle again during 2010 and 2011 in the peripheral countries of Europe. But then, ECB President Mario Draghi repressed them over there when he said on July 26, 2012 that he’ll do whatever it takes to defend the euro.

If the Fed stops repressing the Bond Vigilantes over here by phasing out QE, then the 10-year Treasury yield should rise to the growth rate of GDP, which was 3.4% y/y during Q1. That would probably be a big shock to the economy….

http://www.businessinsider.com/yardeni-on-bond-yields-and-gdp-2013-6

Goldman Here's How The Fed Will Try To Calm The Markets This Week

From BI: ... While we do not expect the committee to deviate much from the existing message, we anticipate that Fed officials will, on the margin, try to calm markets at the June 18-19 FOMC meeting.

We therefore expect the FOMC statement to show only modest changes, mostly focused on acknowledging the lower inflation numbers. Moreover, the committee is likely to downgrade its 2013 growth and inflation numbers moderately. While Chairman Bernanke is likely to reiterate in the post-statement press conference that the QE tapering decision is data dependent, we expect him to dissuade markets from frontloading too much of the entire monetary tightening process—not just the end of QE but also the normalization of the funds rate—as soon as the committee takes the first step in that direction….

Read all about it at http://www.businessinsider.com/goldman-sachs-fomc-preview-2013-6

Hedge Funds Cut Gold Bets as Paulson’s Loss Widens

Hedge funds cut wagers on a gold rally for the first time in three weeks on mounting speculation central banks will curb record stimulus and as this year’s slump in bullion spurred losses for billionaire John Paulson.

The funds and other large speculators lowered their net-long position by 4.1 percent to 54,779 futures and options by June 11, U.S. Commodity Futures Trading Commission data show. Net-bullish wagers across 18 U.S.-traded commodities rose 0.1 percent. Bearish copper bets more than doubled as the metal had its longest slump since November….

http://www.bloomberg.com/news/2013-06-16/hedge-funds-cut-gold-bets-as-paulson-s-loss-widens-commodities.html

Lampert Yanks $393 Million from AutoNation for Redemptions

From Bloomberg: Eddie Lampert used $393 million of shares in AutoNation Inc. (AN) to meet client redemptions from his main hedge fund, whose investment in Sears Holdings has led to volatile returns. Lampert’s ESL Partners LP on June 10 distributed 9.09 million AutoNation shares, or about 41 percent of its stake in the auto retailer, to investors who were redeeming their interests in the fund, according to a regulatory filing June 12. The fund also used part of its stake in Orchard Supply Hardware Stores Corp. (OSH) to meet redemptions, filings show.

With Sears struggling, clients have been pulling money out of ESL Partners. Gross assets declined 24 percent to $5.1 billion at end of 2012 from a year earlier, and the number of investors in the fund dropped to 164 from 250, filings show.….

Read all about it at http://www.bloomberg.com/news/2013-06-13/lampert-clients-exit-fund-with-393-million-of-autonation.html

Hedge Fund Manager: If I Get Assassinated…

According to CNBC: Bill Browder, chief executive and founder of Hermitage Capital Markets, told CNBC the Russian government is "apoplectic" over sanctions imposed on Russian officials that he has campaigned for, and if he gets assassinated, "everyone would know who did it."

The well-known critic of the Kremlin has been living in London since he was kicked out of Russia for accusing Russian tax officials of embezzlement, in 2007.   Since then, he has repeatedly accused Russia of corruption and has been involved in a high-profile battle with the Russian state over the death of his lawyer Sergei Magnitsky, who was investigating fraud among Russian officials.  In April, Russia issued an arrest warrant against Browder on charges that he stole shares in gas giant Gazprom fifteen years ago and requested Interpol, the global police agency, to launch a manhunt for the investment banker.   Interpol refused the request but Browder said he feels under constant threat….

Wait...wait...there's more at http://www.cnbc.com/id/100815768

Goldman Sachs, Do-Gooder: Firm to Finance Early Education Program

Attention must be paid.  Goldman Sachs is making its second foray into an experimental method of financing social services, lending up to $4.6 million for a childhood education program in Salt Lake City.

This “social impact bond,” in which Goldman stands to make money if the program is successful but will lose its investment if it fails, will support a preschool program intended to reduce the need for special education and remedial services. The upshot, in theory, is that taxpayers will not have to bear the upfront cost of the program.

Goldman is being joined in this effort by the Chicago investor J.B. Pritzker, who is providing a subordinate loan of up to $2.4 million, bringing the total financing to $7 million. The loans were announced at an event in Chicago on Thursday….

Read all about it at http://dealbook.nytimes.com/2013/06/12/goldman-to-invest-in-utah-preschool-program/

Hedge fund gains may not be what they seem

Financial News’ Harriet Agnew reports:  Hedge fund performance data published this week by JP Morgan prime brokerage appears to show that the sector outperformed domestic and international equities, commodities and fixed income during the 16 years from 1997 through 2012.

But there are several reasons why this chart may exaggerate the actual performance of hedge funds.

For example, at the end of 2007, the hedge fund industry ran almost $1.9 trillion in assets. So its 19% performance loss the following year would have wiped roughly $360bn off the industry’s asset base. A time-weighted series ignores this….

More?  check out http://www.efinancialnews.com/story/2013-06-14/hedge-fund-performance-methodology?mod=blogheadlines-home

What’s A Fund Mogul to Do? Towns With Mansion Shortages

From CNBC: Wealthy home buyers are quickly running out of mansions to buy. While housing inventory is falling throughout the country, it's falling especially fast in some of the country's richest ZIP codes. A study from Altos Research, the Mountain View, Ca., real-estate research firm, found that inventory in the nation's 90 wealthiest ZIP codes fell 15 percent over the past year, slightly faster than the broader market.

But in the richest ZIP codes, inventory is down more than 50 percent. In a ZIP code in Carmel, Calif., inventory fell 76 percent over the past year. There were only four homes left on the market priced at $1 million or more as of the end of May, according to Altos…..

Read all about it at http://www.cnbc.com/id/100811031

Only in NY: Hamptons Hedge Fund Manager And Police Face Off

Forget everything you know about the glamorous lives of the rich and famous.  Thanks to to the tireless tweeting of Hamptons Handyman Joe Schwenk (aka HamptonsBorn), we know about a fairly serious confrontation that happened this morning between a hedge fund manager and his generators, a neighbor with a hatred for noise, lawyers, private security, and the cops.

We imagine that the hedge fund manager, identified only as "Mr. C",  probably needs those "movie set" generators — Bloomberg machines suck up a lot of power…..It all started out early this morning….:

http://www.businessinsider.com/police-called-on-hedge-funds-generators-2013-6#ixzz2W4tZ9zBL

SEC, Fund Execs Strike Deal Over $68M Insider Trading Plot

 From Law360: The U.S. Securities and Exchange Commission has reached a tentative settlement in New York federal court with convicted hedge fund executives Anthony Chiasson and Todd Newman over an alleged $68 million insider trading scheme involving shares of Dell Inc. and Nvidia Corp., the agency said Monday.

Chiasson, a founder of Level Global Investors LP, and Newman, a former portfolio manager at Diamondback Capital Management LLC, were convicted in December and sentenced in May to 78 months and 54 months in prison, respectively…...

Read all about it at http://www.law360.com/whitecollar/articles/448983/sec-fund-execs-strike-deal-over-68m-insider-trading-plot

Saving The Zombies And Shorting The Yen: Hedge Funds And Japan

From buzzfeed: The hedge fund industry is increasing its bets on the Japanese market, where the stellar first-quarter results for some funds show few signs of slowing. Some estimates call for hedge funds to increase assets focused on the Japanese market by as much as 20% in an effort to capitalize on the intense policy changes being instituted by Prime Minister Shinzo Abe, known among investors as “Abenomics.”

Managers that got into Japan last year have generated tidy profits for their funds. George Soros reportedly made $1 billion since late last year on his yen plays. And as far as many in the hedge fund industry are concerned, the end isn’t anywhere in sight….

More?  Check out http://www.buzzfeed.com/mariahsummers/saving-the-zombies-and-shorting-the-yen-hedge-funds-and-japa

Traders Pay for an Early Peek at Key Data

From WSJ:  “….This is a "blind spot" in U.S. law, said Richard Painter, a former Republican White House ethics lawyer. Groups, he said, should "not be allowed to selectively disclose market-moving data to people who pay more money—that is not right."

But it is legal, and so is trading on the advance peeks. Even as securities rules bar companies from selective data disclosure, and as authorities vigorously pursue insider trading in all its forms, no law prevents investors from trading on nonpublic information they have legally purchased from other private entities. Trading would be illegal only if the information was passed through a breach of trust, said securities lawyers….

Read all about it at http://online.wsj.com/article/SB10001424127887324682204578515963191421602.html

Rival hedge funds hope to feast on SAC Capital redemptions

According to Reuters a long list of rival hedge funds is eager to tap the billions in outside money that Steven A. Cohen's SAC Capital Advisors is expected to return to investors by year-end.

Israel Englander's $18 billion Millennium Management, which has long had a rivalry with SAC, is the name that comes up most often as a possible alternative investment, the industry sources said. The firm also relies on a group approach where dozens of smaller portfolio teams, rather than one or two main managers, buy and sell securities quickly, often thousands of them…. Balyasny Asset Management, Visium Asset Management and Kenneth Griffin's Citadel, which all feature multi-manager trading teams, have also been named frequently as candidates for some of the estimated $3 billion to $4 billion expected to leave SAC, said industry sources….

Wait...wait...there's more at http://www.reuters.com/article/2013/06/12/us-saccapital-money-idUSBRE95B16320130612