Archive - May 2009

Troubled RenTec, which not only made WSJ last night, but also CNBC today, may not have to suffer much longer. Based on information Zero Hedge has received, the assets at Jim Simons' investor-open, RIEF fund, have plummetted over the past 3 years. The fund which was started as one with up to $100 billion in potential capital, is a mere shadow of its once fabled self.

Below are the AUM for RIEF at various points in time. Continuing the trendline implies some very troubling lack of capital in the not too distant future.

The charts below demonstrate unmistakably just how phenomenally bipolar the market has become, and just how aggressively asset managers are chasing after risky assets in order to make up for 2008 losses. Alas, nobody has learned any lessons from the credit bubble where fast, slow, dumb and smart money was all chasing the riskiest assets, all of which ended in tears for far too many people. The result so far for 2009: exactly the same pattern is repeating itself.

Charlie Munger, a man of many contrasts and vagaries, presents some of his trademark thoughts in the interview with Stanford Lawyer below.

pardon the horrendous spelling... but focus on the ideas. Bob is a smart man, even if he was a little overcaffeinated on this particular occasion.

Bob's World: Mini-May turn?
05/13 10:59:08

Turning to mrkts, some moans 1st:

After posting a deplorable relative performance in the first week of May, Simons' REIF is now matched with the S&P at 1.37% for both MTD. Did J.S. finally turn to the dark side and start buying SPY? If so, who is the marginal buyer left now that everyone is just a little pregnant.

No, seriously - this is actually good news. The basic problem was an overleveraging across all sectors of the economy and this is good news because the US consumer unequivocally needs to deleverage before a recovery can be viable. The choice has always been simple if you owe too much money: declare bankruptcy, inflate your way out of it or find a sucker to help you roll it until you can pay it off.

[youtube=http://www.youtube.com/watch?v=iRzr1QU6K1o&hl=en&fs=1]

Weekend humor

Spreads were broadly wider in the US as all the indices deteriorated this week. Indices generally outperformed intrinsics (single-name shorts versus index long hedges) with skews widening in general as IG's skew decompressed as the index beat intrinsics, HVOL outperformed but widened the skew, ExHVOL outperformed pushing the skew wider, XO's skew increased as the index outperformed, and HY's skew widened as it underperformed.

Somehow the Glenview man even avoided the Citi arb blow up.

January: 6.57%
February: -0.62%
March: 3.78%
April: 15.67%
May MTD: 9.59%

YTD: 39.31%

Net Equity Exposure: 39%

Net Credit Exposure: 32%

"During the first quarter of 2009, Third Point LLC (the “Investment Manager”) took significant defensive measures designed to protect the portfolio from the extraordinary dislocations occurring in the global economy and governments’ responses to these events. Through the first two months of the quarter, these positions proved profitable. They included stakes in European banks and in credit default swaps associated with the financial sector, as well as other bearish investments.

In an academic paper analyzing the value warrants that Old National Bancorp paid to the U.S. Treasury in order to become the first bank to buy back its Capital Purchase Program obligations, Assistant Professor of Finance Linus Wilson at the U of L in Lafayette, has come to the conclusion that the Geithner et al accepted a discount that may have been as much as 82% to the fair value.

ESL/lampert; mtd +17.50 ytd +8.61
D.E shaw; mtd +0.30 ytd +6.05
Qvt; mtd +0.01 ytd +1.60
Goldentree credit opp; mtd +13.52 ytd +26.71
Tpg credit; mtd -0.26 ytd +1.95
Amber(class r-3 series 1); mtd -9.00 ytd -3.17
Amber(class j); mtd +7.08 ytd +4.67
Satellite; mtd +2.50 ytd +6.52
Chilton small cap; mtd +5.94 ytd +17.94
Highbridge long/short eq; mtd -1.11 ytd +5.55
Bellman walter; mtd +1.34 ytd -1.21
Gandhara; mtd +1.74 ytd -3.88
Goldman sachs investment partners; mtd +1.55 ytd +6.49
Tci ; mtd -2.06 ytd -7.30

After decimating the Federal Reserve's Inspector General, and exposing her for the uninformed figurehead she is, Rep. Alan Grayson continues steamrolling through the swath of executive-level stupidity on both Wall Street and in D.C., and demonstrating just how clueless those who should be in control and anticipate the next potential black swan event, really are.

It appears that the Daily Telegraph has gotten major cold feet about the incendiary interview (incendiary, at least, to the administration) it had posted last night with Mark Patterson. One can only speculate why that may be the case, but if you try to connect to the article that had received the biggest number of hits yesterday, you just get a big gaping 404 hole now.

It appears that the Daily Telegraph has gotten major cold feet about the incendiary interview (incendiary, at least, to the administration) it had posted last night with Mark Patterson. One can only speculate why that may be the case, but if you try to connect to the article that had received the biggest number of hits yesterday, you just get a big gaping 404 hole now.