Each business day HedgeCo.Net keeps you informed with the top hedge fund industry news, opinion and insight from around the globe. From the latest hedge fund launches, to the impact of regulation, competition, and investor activism - we track the topics and people that make a difference to you.
Money Morning – President-elect Barack Obama has made no bones about wanting to jump-start the renewable energy markets – pledging $150 billion for the development of biofuels, solar and wind power, other alternative energy sources during his first term.
But what might the new administration mean for more traditional – and more reliable –energy sources?
Oil is always the first energy source to spring to mind. But it’s hardly a solo act – coal and nuclear make up the other two-thirds of the top fuel trio. Coal delivers 50% of U.S. electricity needs, and nuclear power brings another 20% to the table.
The cold truth is that demand for energy of all types – and especially electricity – is going to keep advancing, domestically and worldwide. And developing alternatives to coal and nuclear will take time. For instance, tying wind and solar into the existing power grid will be enormously expensive and is likely to pose massive technical and engineering problems.
Los Angeles Times – Financial giants and other large firms now being bailed out by the government spent millions underwriting the Democratic and Republican conventions last summer, just weeks before coming to Washington seeking multibillion-dollar handouts.
The big donors included AIG, Ford Motor Co., Citigroup, Goldman Sachs and Freddie Mac.
In all, major corporations, labor unions and individual millionaires poured $118 million into the nominating conventions for Barack Obama and John McCain, according to reports from the Campaign Finance Institute and the Center for Responsive Politics. The nonpartisan private groups compiled the numbers from filings required under federal law.
New York (HedgeCo.Net) – Saying that GM is in the “worst shape,” Senate Banking Committee Chairman Christopher Dodd told the struggling automaker that they’ve got to consider new leadership if they want to receive federal aid. The comments prompted many to believe he was referring in fact to GM CEO Richard Wagoner, whom Dodd said “has to move on,” on CBS’s “Face the Nation.”
President-elect Barack Obama didn’t exactly reaffirm Dodd’s position, but said at a Chicago press conference that if management “doesn’t understand the urgency of the situation and is not willing to make the tough choices and adapt to these new circumstances, then they should go.”
Congress will reconvene this week to discuss the proposed $15 billion rescue plan that would hopefully salvage both General Motors and Chrysler. Although they are closer to finalizing a plan of action for the troubled companies, they are still met with reluctance from certain individuals.
Alabama Senator Richard Shelby, who has been outspoken about his disdain for any auto rescue plan, is supporting a filibuster that would put a halt to the legislation and instead prompt a lengthy debate about the issue.
Dodd, however, realizes it is a time-sensitive issue and focused during the interview on the fact that the auto industry could completely sink in the next few weeks if nothing is done. “Even if people don’t like this idea, none of us want to wake up January 1st and discover we don’t have an industry to save.” According to the Connecticut Senator, 1 out of every 10 jobs in the U.S. is either directly or indirectly related to the American auto industry.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
West Palm Beach (HedgeCo.net) - Top financial industry leaders and more than 200 attendees gathered in New York late last week discuss the volatile hedge fund market and provide insights on distressed funds.
Sponsored by global offshore law firm Walkers, the "Fighting the Tape" seminar included a wide variety of speakers offered a comprehensive look at the changes in the market over the past year, as well as predictions for what the alternative investment funds industry can expect in the months ahead.
The experts anticipate a new era of hedge fund regulation, greater flexibility and versatility in hedge fund offering documents, broader discretion for fund managers, and continued growth in many of the world’s key economies such as China, India, Russia, Brazil, the Middle East, and South Korea.
Investment manager George Hall, founder and president of The Clinton Group gave his personal views on the financial crisis and what the market might see under President-elect Barack Obama. While he felt it was too early to say how the "Obama factor" might influence the hedge fund industry, Mr. Hall said that he hoped the new President would make good choices when selecting his Treasury Secretary and a leader for the SEC.
"The true impact of the US credit crisis will not be tangible for many months to come," Yolanda McCoy, head of the Investments and Securities Division at the Cayman Islands Monetary Authority (CIMA) said, although she was able to confirm that to date they were aware of a total of 340 Cayman funds that had been impacted by the problems with Lehman Brothers, Merrill Lynch, and AIG, with more than 200 of those affected by issues with Lehman.
Professor Jeffrey Rosensweig, director of the Global Perspectives Program at Goizueta Business School at Emory University, closed the seminar with insights into the investment opportunities presented by this current stage in the cycle, shifting the focus from New York and London to emerging markets such as Brazil, Russia, China, the Middle East and India.
"The world adds 100 people every 42 seconds," Professor Rosensweig said, "and 98% of that population growth is in the emerging markets." Pointing to the expectation of long-term continued economic expansion in these regions, Professor Rosensweig said this massive population growth, combined with a move out of poverty in these regions, presents real future opportunities for investors.
Politico – On the same day Lawrence Summers was announced as President-elect Barack Obama’s top White House economics adviser, the veteran economist said he would resign as the part-time managing director of one of the nation’s largest and most successful hedge funds, D.E. Shaw & Co.
But even as Summers takes the lead of economic policy thinking for the Obama White House, which has promised to be one of the most open and transparent in history, neither the Obama transition team nor D.E. Shaw would say exactly what Summers had done in his two years of work for the $36 billion hedge fund, or how much he has been paid.
In a press release issued Monday, D.E. Shaw said only that Summers had been working on “various strategic initiatives, high-level research and advising the executive committee on the overall business.”
Free Internet Press – George Soros, 78, has made billions as a hedge-fund manager and investor. Germany’s Spiegel magazine spoke with him about the current financial crisis, how he expect President-elect Barack Obama to respond to the economic disaster and the responsibilities borne by speculators.
SPIEGEL: Mr. Soros, in spite of massive interventions by governments and federal banks the financial crisis is getting worse. The stock markets are in free fall, millions of people could lose their jobs. More and more companies are in trouble, from General Motors in Detroit to BASF in Ludwigshafen. Have you ever seen anything like it?
Soros: Never. I find the present situation dramatic and overwhelming. In my latest book, “The New Paradigm for Financial Markets: The Credit Crisis of 2008”, I predicted the worst financial crisis since the 1930s. But to tell you the truth: I did not actually anticipate that it would get as bad as it did. It has gone beyond my wildest imagination.
Bloomberg – During the height of the financial crisis in late September, some of Barack Obama’s campaign advisers pushed him in a conference call to distance himself from Treasury Secretary Henry Paulson. The former Goldman Sachs Group Inc. chief executive officer, they warned, was too close to President George W. Bush and Wall Street.
Obama, 47, rejected the idea. At one point, he talked to Paulson everyday for two weeks.
As the president-elect faces a once-in-a-century opportunity to remake the regulatory apparatus governing Wall Street, some of Obama’s fellow Democrats and investor groups are urging him to bring sweeping changes to banks, hedge funds and executive pay. His closest economic advisers, men like Robert Rubin, Lawrence Summers and Paul Volcker, may recommend otherwise: go slow. If Obama takes their counsel, the 44th president, who succeeds Bush on Jan. 20, may not clamp down all that hard on a financial industry whose excesses have pushed the nation — and much of the world — into a recession.
The Washington Times – A transition adviser to President-elect Barack Obama earned millions of dollars overseeing an office that led a lobbying effort to prevent increased oversight of mortgage giant Fannie Mae, the company at the heart of the ongoing turmoil in the nation’s financial markets, public records show.
The unpaid adviser, Thomas E. Donilon, held several senior positions at Fannie Mae from 1999 to 2005, including vice president of law and policy, at a time when the company’s officers and lobbyists were insisting that now-troubled Fannie’s finances were sound.
In a 2006 report, the Office of Federal Housing Enterprise Oversight (OFHEO) said Fannie Mae lobbyists, whose office was overseen by Mr. Donilon, tried to use their ties to members of Congress to discredit federal regulators through a campaign aimed at securing the release of a U.S. Department of Housing and Urban Development report to discredit OFHEO.
Toledo Blade – President-elect Barack Obama is forming a White House leadership team that combines experienced Washington insiders who can help build a bridge with Congress and trusted associates who share his Chicago roots.
The West Wing appointments that Mr. Obama has announced in recent days stand in contrast to those of President Bush, who relied heavily on fellow Texans for top posts. They had virtually no experience dealing with Congress, nor did the former Texas governor who was their boss.
Mr. Obama comes to the Oval Office with an ambitious list of campaign promises that will require Capitol Hill’s cooperation and approval, and his team is heavy on the legislative experience that Mr. Obama is lacking. He resigned his Illinois Senate seat yesterday after just under four years of service, half of which he spent out on the presidential campaign trail.
New York (HedgeCo.Net) – Five billionaire hedge fund managers stood up before Congress yesterday and shared their differing views on the hedge fund industry.
George Soros, Philip Falcone, John Paulson, James Simons and Ken Griffin all took turns defending hedge funds at the House hearing yesterday, though they clearly weren’t on the same page regarding opinions on regulation.
The hearing was called by democratic committee Chairman Henry Waxman of California, as part of a much larger attempt by Congress to delve deeper into the cause of the credit crisis and to see whether or not hedge funds have had a hand in driving down the values of certain markets.
While Harbinger Capital head Falcone was all about greater regulations, saying that investors "have a right to know what assets companies have an interest in," Soros disagreed. The founder of Soros Fund Management warned against "ill-considered" rules and guidelines if they were merely a product of the recent turmoil in the economy.
Griffin of Citadel Investments agreed saying, "We do not need greater regulation of hedge funds. We’ve not seen hedge funds as a focal point of the carnage."
The issue of taxes was also raised, with a slew democratic representatives firing accusations that the fund managers enjoy special tax breaks.
Paulson & Co. head John Paulson came to the defense saying, "If your constituents, whether a plumber or a teacher, bought a stock and if they held that stock for more than a year they would pay a long-term capital gains rate."
Waxman suggested the hedge fund industry faces increased regulation and transparency when President-elect Barack Obama, who has also been vocal on wanting to raise the capital gains tax, takes office in Janary.
All five hedge fund managers who testified have enjoyed extreme success in the hedge fund industry. George Soros, who is best known for his infamous bet against the British Pound in which he pocketed $1 billion overnight, manages over $19 billion through his company.
Phil Falcone and John Paulson both predicted the subprime crisis before it happened. Paulson took home an estimated $3 billion in 2007, the largest single-year profit by a fund manager to date.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
Falcone, 46, has been dubbed the "Midas of misery" for taking lucrative short positions in the shares of struggling banks including HBOS and Wachovia. He lives in a 27-room townhouse on Manhattan’s Upper East Side bought for $49m. The youngest of nine children, he grew up in Minnesota and was a young ice hockey star dubbed "the phantom" for his ability to elude defenders.
Kenneth Griffin
The Boy Wonder As a Harvard University student Griffin installed a satellite dish on his dorm to help him trade options. His Citadel Investment Group, founded in 1990, has 1,200 staff and was tipped as the next Goldman Sachs, but its two main funds have lost 35% of their value in the market turmoil. Griffin, 40, was a high-profile donor to the presidential campaign of fellow Chicago resident Barack Obama.
James Simons
The Mathematician Born in 1938, Simons was a maths prodigy. He worked as a codebreaker for the US defence department in the 1970s and set up his Renaissance Technologies fund, which has some $20bn under management, in 1988. Known as a "black box" fund, it uses opaque quantitative techniques. Its core Medallion fund rose 49% in the year to September. Simons has a $600m charitable foundation.
John Paulson
The Sub-Prime King Low-profile Paulson made $3.7bn last year betting against sub-prime mortgages. A 52-year-old father of two, he was raised in the New York borough of Queens, gained an MBA from Harvard and has a $41m lakeside retreat in the Hamptons. His firm, Paulson & Co, manages $35bn and its advisers include Alan Greenspan. Reports suggest a bumper year, with the firm’s main funds rising by between 15% and 25%.
New York (HedgeCo.Net) – In his first press conference since winning the presidential election, Barack Obama discussed ways to tackle the economic crisis while describing the “enormity of the task that lies ahead.”
In the wake of what looks to be a pending recession, Obama talked about his focus on job production and the extension of unemployment benefits. He also talked about ways of helping the faltering auto industry and other small businesses, as well as possibly tweaking his tax plan to help more low and middle income families.
“I think the plan that we’ve put forward is the right one, but, obviously, over the next several weeks and months, we’re going to be continuing to take a look at the data and see what’s taking place in the economy as a whole,” Obama explained.
He did mention that a good majority of his first year may in fact be spent on reviving the troubled economy.
“Immediately after I become president I will confront this economic crisis head-on by taking all necessary steps to ease the credit crisis, help hardworking families and restore growth and prosperity,” Obama stated.
Before the news conference, Obama and Vice-Presidential elect Joe Biden met with the transition economic advisory board, where they discussed ways to stabilize the sinking economy. Although Obama did state that President Bush would be handling the situation for the days leading up to January 20, he did reinforce his belief that “a new president can have an enormous impact.”
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
