trades

Does Soros still rule?

Fri, 11 Apr 2008 06:59:55 -0400

There was a day when George Soros ruled the hedge fund universe. He practically defined it. The story of his famous bet against the pound--taking on the British government--is the stuff of legend. The New York Times also recounts his later bet against the Thai baht, which generated so much anger he was forced to cancel a trip to the country. At 77, he's still influential. The financial crisis pushed him back into trading, where some timely trades last year proved big winners for his fund. He also found time to write a book, which he now is promoting. Of course, he's known for his bearish economic views. We can only hope he is wrong.

For more:
- here's the New York Times profile

Lehman Brothers raises $3 billion

Tue, 01 Apr 2008 07:59:58 -0400

So who invested in Lehman Brothers? That's the big question. All we know is that Lehman intends to raise $3 billion from American institutions, not sovereign wealth funds. The move is necessary, given the recent anxiety that the company was another Bear Stearns waiting to happen. That does not appear to be the case, but we all know how rumors can take on a life of their own. And there were great fears related to its Tier III capital. People would feel better if they knew who snapped up the convertible shares, which pay a hefty 7 to 7.5 percent rate and convert to common at $50. The bank trades at about $36 now.

For more:
- here's the New York Times article

Related Articles:
Big scam could hit Lehman earnings. Article
Is Lehman undervalued? Article
Lehman takes distressed debt plunge. Spotlight

Trend: More roll-ups of advisory firms?

Thu, 13 Mar 2008 07:59:57 -0400

Registered investment advisers have a pretty compelling pitch when it comes to graying clients. They aren't commission-based guys. They're thinking less about trades and more about your portfolio in its entirety. Of course, some of them take something like 200 basis points, which some would find even worse than cadging a few commissions here and there. In any case, there is demand for RIA service and several in the private equity industry are bent on creating nationwide firms by rolling up boutique advisory firms, notes Investment Dealers' Digest. While this is nothing new--recall the success of National Financial Partners--the trend seems to be gathering steam.

For more:
- here's the Investment Dealers' Digest article

One measure of firms' trading prowess

Wed, 05 Mar 2008 06:59:55 -0500

Do you recall Bank of America CEO Ken Lewis' statement that he's had about all the fun he can stand in investment banking? This after the bank decided to scale back dramatically? Well, new filings indicate that the bank lost money by trading on nearly one in three days last year, a sixfold increase from the previous year, according to Financial News Online. Goldman Sachs was the only top bank to lose money on fewer trading days in 2007 than in 2006; days with losses dropped to 52 from 56 in 2006. Losing days at Lehman Brothers rose from just five in 2006 to 33 last year, still the fewest loss days of the premiere banks. It's getting tougher out there. We'll see if banks can collectively navigate 2008 any better.

For more:
- here's the Financial News Online article

Read more on: losses | trades | investment banking

CDS market creaking?

Tue, 19 Feb 2008 06:59:55 -0500

The New York Times puts the market for credit default swaps in perspective: "Since 2000, it has ballooned from $900 billion to more than $45.5 trillion--roughly twice the size of the entire United States stock market." The fact is that this regulated market is one of the worst run in the world. Back-office problems have been its bane since the beginning. Despite major industry wide efforts, the recent volume has rendered the paper trail of many trades obscure, to say the least. If big waves of trading hit, settlements will become a nightmare. That will only add to the confusion, and likely push more banks to give up and take losses. The Times noted that in August, 14 percent of trades were unconfirmed. Look out folks.

For more:
- here's the article

High-stakes trading as an addiction

Thu, 07 Feb 2008 06:59:54 -0500

Now this is interesting. The New York Times reports on the emergence of neurofinance as an academic pursuit that "combines psychology, neuroscience and economics, to examine how the brain makes decisions." One conclusion is that some people tend to crave the risk that high-stakes trading creates. The brain activity between trades is apparently the same as a drug addict between hits. So perhaps in the future, job interviews at Goldman Sachs or Morgan Stanley will include a brain image. What if some scientist is able to isolate the type of brain activity that results in the best decisions, the most money made. Sounds like a thriller.

For more:
- here's the article

ALSO NOTED: Merrill COO: liquidity position strong; MBIA to sell stock to strengthen capital position; and much more...

Thu, 07 Feb 2008 06:59:50 -0500

Company News:
> MBIA to sell stock to strengthen capital position. Article
> Merrill COO: liquidity position strong. Article
> Merrill aims to grow wealth management outside U.S. Article
> Wachovia to raise $3.5 billion in preferred stock sale. Article
> More on Meredith Whitney's Goldman Sachs downgrade. Article
> Nikko Citigroup to cut staff. Article

Industry News:
> Banks unable to benefit from lower rates and carry trades. Article
> Long-short ETFs fare well. Article

And Finally... How to get hired by the best. Article

What to make of BATS?

Tue, 29 Jan 2008 06:59:55 -0500

There are so many players in the exchange game these days that it's hard to handicap the field. BATS has made a huge move as of late, and has become the third largest trading venue, behind the NYSE and Nasdaq. It has certainly shaken up the two big boys with its aggressive pricing as of late. BATS has filed for exchange status, which might give it another boost. This week, BATS executed 1.2 billion shares in trades, a new record for the upstart, according to Financial News Online. More than anything, the service indicates that top Wall Street banks, most of whom have invested in the firm, are bent on breaking their dependence on the top exchanges. For buyside traders, the complexity in order execution is an issue still searching for a solution.

For more:
- here's the article

How Kervial did it

Mon, 28 Jan 2008 06:59:55 -0500

The question on everyone's mind is: how did he do it? Societe Generale believes that, Jerome Kervial placed large long bets in one portfolio and then created fake hedges in another portfolio. So instead of hedging, as he was supposed to do, Kervial was effectively speculating that various stocks and indexes were poised to rally. The New York Times notes that risk managers saw several red flags but were apparently satisfied with Kervial's explanations--that some trades were mistakes that he would then cancel. He apparently used access codes pilfered from others to help game the system. Kervial is in custody, and his lawyers are saying that the bank is using the incident to divert attention from its subprime-related woes.

For more:
- here's the New York Times article
- rogue trader in custody Article
- background on the rogue of SocGen Article

Is the CDS market the next black hole?

Mon, 14 Jan 2008 06:59:56 -0500

Thanks to Bill Gross, Pimco's famed bond fund manager, the idea that the credit default swaps market could blow up is floating around. He noted this week that new systemic risks from CDS might crop up. Until now, the market has been a home run for Wall Street--the market took off so powerfully, the back offices couldn't keep up. CDSs are now a staple of the derivative world. Fortunately, we've experienced few outright corporate defaults, but the Financial Times notes that could change, and if it does a lot of holders will be wondering if they are going to get paid by counterparties. This raises the question of who, exactly, the counterparties are. They could be people on the other side of trades or they could be the market makers. But if defaults run high, someone will have to pay.

For more:
- here's the Financial Times article