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.
Reuters – Nick Bullman, who told Reuters he has this week placed bets on falling share prices, is concerned that government stimulus packages have not revived bank lending as much as hoped and that conditions remain as tough for companies as they did last year.
"The rally has been a ‘dash for trash’ based on speculation … On Wednesday (I) went short on the Standard and Poor (500) and financials via ETFs (exchange-traded funds)," he said in an interview on Friday.
The Business Insider – We’re eagerly awaiting the testimony of energy fund billionaire John Arnold before the Commodity Futures Trading Commission today, and not just for the obvious reasons.
Former Enron trader Arnold presumably became the second-youngest self-made billionaire in the country in part by exploiting the same speculation spree that two years ago caused gas prices to triple while world oil demand was actually falling.
Bloomberg – K+S AG, Europe’s largest maker of potash for fertilizers, and competitor Israel Chemicals Ltd. fell in local trading after a Russian rival’s contract in India prompted speculation that prices will come under pressure.
The drop mirrors declines at North American producers Potash Corp. of Saskatchewan Inc. and Mosaic Co. on July 10 after RBC Capital Markets reported that Russian producer OAO Silvinit may have sold the crop nutrient for less than analysts expected. K+S lost as much as 5.4 percent and the Israeli company dropped 3 percent.
Soros Fund Management LLC, billionaire investor George Soros’s hedge fund firm, owns about 1.9 percent of Potash Corp after reducing the stake to 5.6 million shares at the end of the first quarter from 5.9 million at the beginning of the year.
Bloomberg – Crude oil was little changed near $60 a barrel in New York amid concerns the global recovery has yet to take root, postponing a rebound in demand for fuel.
Hedge-fund managers and other large speculators reduced their net-long position in New York in the week ended July 7, according to the latest data from regulators. Stocks dropped from Dubai to Taipei and Treasuries rose on speculation that government rescue measures have not taken effect.
“Bearish sentiment in the market is persisting,” said Andrey Kryuchenkov, an analyst at VTB Capital in London. “It’s weak, so a move to $58.30 is possible, but we should consolidate around there.”
Belfast Telegraph – Mike Ashley’s Sports Direct International has offloaded its 4.8% directly-owned stake in struggling rival JJB Sports, it was revealed today.
Speculation was mounting over the identity of the buyer after the Sports World parent sold 11.9 million ordinary shares.
But it is thought that Mr Ashley – also the owner of recently relegated Newcastle Football Club – still holds further JJB shares through contracts for difference, which are a type of derivative.
PerthNow – Mr Geffen tried to acquire a 19 per cent stake in the New York Times Company that was held by Harbinger Capital Partners, the activist hedge fund, but was rebuffed, it emerged overnight.
Since 1896, the newspaper has been controlled by the Ochs-Sulzberger family, whose members maintain their grip with a separate class of super-voting shares.
However, the dominance of the family, headed by Arthur Sulzberger, has come under pressure as advertising has collapsed and losses have mounted, which have led to speculation that The New York Times may be sold.
Reuters – General Growth Properties Inc GGP.N, the second largest U.S. mall owner, on Thursday filed for bankruptcy protection on Thursday, making it one of the biggest real estate bankruptcies in U.S. history.
Ending months of speculation, the Chicago-based mall owner which listed total assets of $29.557 billion and total debts of $27.294 billion, sought Chapter 11 bankruptcy protection from creditors along with 158 of its more than 200 U.S. malls, while it seeks to restructure some of its debt.
New York (HedgeCo.Net) – Hedge funds can expect to be kept on a tighter leash in the near future, as leaders from all over the world met at the G20 summit in London to discuss the next steps towards remedying the worst financial crisis in six decades.
Agreeing that lax regulation on all levels helped to fuel the credit crunch, the 20 leaders agreed to vamp up national regulators and to keep a watchful eye on any practices that may threaten international markets.
To some, this includes hedge funds, who have taken much of the blame for market meltdowns thanks to domino effects that stem from imploding funds and the practice of short selling which some say can create enough speculation and fear to cause plummeting stock prices.
The Financial Stability Forum, which has been around for over a decade, will be renamed the Financial Stability Board, and will have the task of overseeing international markets, banks, and to some extent, hedge funds.
The FSF has already stated that hedge funds must disclose how much leverage they are using, so that investors can better gauge the risks involved.
In an effort to quell outrageous bonuses and pay, the FSF has said that an executive’s pay must directly reflect the risks they are taking, halting any million dollar pay days for a risky wager. They also vowed to closely monitor the credit ratings agencies, whose actions contributed greatly to the economic meltdown.
The leaders also pledged to boost the war chest of the International Monetary Fund by adding $500 billion, promised to crack down on offshore tax havens and those individuals who failed to disclose information, and threw in $250 billion to help kick start trade over the next two years. An agreement was made not to introduce any new policies that would restrict trade through 2010.
Although the FSF has not drafted any rules as of yet on hedge funds or tax havens, they did agree that “systemically important hedge funds” will be regulated.
"Today the largest countries of the world have agreed on a global plan for economic recovery and reform," said British Prime Minister Gordon Brown.
President Obama agreed, saying that “the London summit was historic.”
French President Nicolas Sarkozy, who is an advocate on stricter regulations for hedge funds added, “The G20 countries have decided on a profound reform of the international financial architecture, which has not been done to such an extent since the Bretton Woods accords in 1945.”
U.S. stocks surged following the summit and the promise of a renewed economy that came with it. The Dow Jones Industrial Average shot past 8,000 for the first time since February 10. It ended the day up 2.8 percent.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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TPMCafé – Last November, Ken Griffin told investors in his Citadel Hedge Funds that they couldn’t withdraw their money, but he was still going to charge a 2% management fee on their trapped funds. Oren Kramer a rival hedge fund manager said, "It’s like telling someone at a hotel that they can’t check out and then charging them for the privilege of staying."
Things were bad for Citadel, but this evening we learned that Ken Griffin isn’t really the hyper-capitalist he’s always portrayed as–he’s just another corporate socialist, passing his losses off on the public. It turns out that $200 million of taxpayer dollars have been turned over to Ken Griffin by AIG for his speculation in Credit Default Swaps. As I said last week, there is no good reason for this to happen.
CNN.com – The girlfriend of a convicted hedge fund manager who disappeared last year, leading to speculation that he had committed suicide rather than report to prison, pleaded guilty on Tuesday to helping him, according to federal prosecutors.
Debra Ryan pleaded guilty to "aiding and abetting Samuel Israel III’s failure to surrender to serve his sentence on June 8, 2008," according to the U.S. Attorney’s Office for the Southern District of New York.
With the guilty plea, she avoids a trial but still faces up to 10 years in prison. But the judge indicated Tuesday that she will most likely face about four to 10 months in prison, federal prosecutors said.
Bloomberg – OPEC wants U.S. regulators to curtail oil trading by hedge funds and speculators who helped make last year the most volatile in crude oil trading.
Abdalla el-Badri, secretary-general of the Organization of Petroleum Exporting Countries, is seeking rules to “limit the level of speculation” by investors who buy oil without planning to use it. Oil surged 46 percent in the first half of 2008 to a record $147.27 only to plunge by the end of the year, prompting OPEC to make its biggest ever supply cuts.
“OPEC has repeatedly called for the need to reduce the role of excessive speculative activity in the market,” el-Badri, who will attend this week’s World Economic Forum in Davos, Switzerland, said in an e-mailed response to questions. “Today, it is impossible to know who is actually buying and selling oil futures.”
Financial Times – The London market’s new year bounce continued into a fifth session, but Tate & Lyle missed the trend.
Tate lost 8.5 per cent to 386¼p amid speculation that Harbinger, its second-biggest shareholder, might have to sell to meet redemptions.
The US hedge fund run by Philip Falcone cut its holding from 19 per cent to 13.9 per cent through December.
Tate shares were also hit by concerns that the sweetener industry had failed to push through price rises. Supply contracts for 2009 have been fixed at 1-2 cents above last year’s levels, but below the 3½-cent increase requested, according to a trade press report.
Tate shares rallied 5.5 per cent last week, helped by talk of a Russian investor looking to buy a 10 per cent stake but had struggled to find a broker willing to take the trade.
The FTSE 100 closed up 0.4 per cent, rising 17.85 points to a two-month high of 4579.64. Activity remained at holiday levels, however, with just over 840m blue-chip shares changing hands.
