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New York (HedgeCo.Net) – President Obama met with Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner on Friday, after which he told reporters there are “glimmers of hope across the economy.”

The meeting, which was also attended by Sheila Bair from the Federal Deposit Insurance Corp. and Mary Schapiro, head of the Securities and Exchange Commission, focused on topics like home-owner refinancing, stabilizing the banks, increasing jobs, and the new “stress tests” being administered to companies by the government.   

The test are being conducted on the 19 largest U.S. banks to see whether they would hold up or crumble amidst worsening economic conditions.  The results are expected to be released the end of this month.  Banks that do not fare so well may get additional taxpayer funded assistance.

“We have always been very cautious about prognosticating, and that’s not going to change,” the President told reporters after the meeting.

Obama pointed to several reasons why he felt the economy is showing signs of hope, mainly the nearly $800 billion stimulus package plus an increase in loans to small business owners and more options of homeowner refinancing.  He added that the administration will be unveiling additional programs over the next several weeks, though he didn’t get into details.

“We’re starting to see progress, and if we stick with it, if we don’t flinch in the face of difficulties, then I feel absolutely convinced that we’re going to get this economy back on track.”

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

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Tags: accredited-investors, economic conditions, federal deposit insurance, federal reserve chairman ben bernanke, federal-deposit-insurance-corp, federal-reserve-chairman, glimmers, hedgeco, mary schapiro, securities-and-exchange-commission, sheila bair, signs of hope, small business owners, stimulus package, stress tests, timothy geithner, treasury-secretary

Bloomberg – Signet Capital Management Ltd., a hedge fund investor that overseas about $2 billion, wrote down to zero an investment in Weavering Capital, the London-based hedge fund that filed for administration last week.

PricewaterhouseCoopers LLP is liquidating the $506 million Weavering Macro Fixed Income Fund after discovering the fund had $637 million in swap agreements with a company controlled by Magnus Peterson, the firm’s founder. That company “lacked the value to support the swaps,” PwC said.

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Tags: bloomberg, capital-management-ltd, category indexes, February Hedge Fund Performance, fund-investor, london, stimulus package, swaps

West Palm Beach (HedgeCo.net) – Morningstar reported a sharp decline in credit and equity markets as the U.S. government announced its stimulus package and financial stability plan. February saw a huge sell-off in U.S. and European bank stocks caused by concerns of financial health and nationalization.

U.S. bank stocks hit a 17-year low and spreads on corporate bonds widened, according to the report.

"Hedge fund managers, like other investors, are nervous about the efficacy and unpredictability of government involvement in the economy. They just don’t know what the U.S. government will do next, and this uncertainty is wreaking havoc in the markets," said Nadia Papagiannis, Morningstar hedge fund analyst.

Widening spreads hurt hedge funds that invest in distressed debt, as lower-quality credits became cheaper. The Morningstar Distressed Securities Hedge Fund Index was one of the worst-performing category indexes, falling 4.1%. The Morningstar MSCI Specialist Credit and Relative Value Hedge Fund Indexes fell only 0.5% and 0.1%, respectively, as some areas of the credit market, such as leveraged loans, performed better than others.

Global non trend funds, those that make macro-economic bets, and global trend funds, those that bet on price trends in commodity and financial futures, showed mixed results in February. These funds took advantage of the rise in gold and the depreciation of the Japanese yen against the U.S. dollar, but volatility in other commodities such as oil caused declines.

Alex Akesson

Tags: accredited-investors, bank-stocks, category indexes, corporate bonds, distressed-debt, distressed-securities, financial futures, global trend, government involvement, hedge-fund-index, hedgeco, japanese yen, leveraged-loans, nationalization, price trends, relative-value, stimulus package, u s bank, wreaking havoc