Archive - Jul 22, 2009

Cliff Asness V2

HedgeBay reports that after a four-fold increase in hedge fund LP volume, prices of LP interests are starting to fall: the June average price was 90.13, a 2% decline from May. Yet, liquidity is likely negligible and bid ask spreads on HedgeBay are notoriously wide. Yet, HB's summary assesment of the HF LP market is surprisingly astute and could be applied to the broader, much more busted market: "As a result, clients who are not necessarily “in need” of cash are making a present value calculation based on the inherent risks – including market, manager and business – as well as the probability of recovery for any particular asset. Armed with this information they are able to make rational rather than emotional decisions about trading out."

Ole Andreas Halvorsen is one of the best hedge fund managers bar none. And yet his Viking Global Equities massively underperformed the S&P in Q2: VGE generated a barely profitable 0.5% in Q2, a 15.4% underperformance of the S&P over the same time period. The problem - sticking with a rational and sensible fundamentally-driven strategy.

Recently Charlie Gasparino has been seen meandering within the halls of 85 Broad, trying to get scoops in exchange for reports on the phenomenal liquidity services Goldman Sachs provides to the markets (for the opposing view please read some of Themis Trading's recent reports or any other post on Zero Hedge). But aside from the fact that even Goldman's liquidity provisioning could be perceived as anything but an altruistic act, Charlie leaves a lot of questions about Goldman's recent record earnings not only unanswered but untouched. Janet Tavakoli retorts to Charlie's recent 180-degree on being one of the few last reporters who actually would dig in Lucas Van Praag's garbage can instead of sharing a Johnnie Walker Blue poolside with him.

Must Watch

• Gallup Poll: More disapprove than approve of Obama's healthcare policy (Gallup)
• PIMCO and Centerbridge charging 13% for the privilege of bleeding CIT dry, before handing off charred remains to GE Capital (Bloomberg)
• The GE - CIT Connection becomes obvious (Bloomberg)
• CIT troubles raise Fed supervision questions (Reuters)
• CNBC parent GE to exit TLGP taxpayer backstop program (AP)
• Goldman Sachs lack of love puts profits at risk (Bloomberg)

• Asian stocks rise for seventh day on speculation profits will increase.
• Bank of England voted 9-0 on asset plan as GDP risks diminished.
• Bernanke says policies are sowing recovery.
• Nikkei hits 2-wk high but firm Yen limits gains.
• Oil lingers near $65 as US crude supplies rise.
• U.K.’s house-price slump will persist until 2012.

Spew of news highlights from the UK and Europe. Lots of things to catch-up on today. GDP forecasts coming out of Eastern Europe, minutes from the Bank of England. I will be covering currencies, German and UK debt market news in the future...

Rare? Medium Rare? Medium? Well Done? S&P? Indeed, as the last peg in the gradation of burnt to a crisp, S&P smells completely done. As in there isn't even left a shadow of a doubt that all S&P does is pander to the solicitations of whatever few remaining clients it may have, or, as the case may be, the U.S. government. Any credibility S&P, which one would be excused for confusing with Sycophantic & Pathetic, may have tried to salvage over the past 6 months has been gutted and left to dry after this most recent fiasco, which is the final straw on theMcGraw-Hill subsidiary's expedited route to the NRSRO utterly discredited trash heap.