You can't say Nassim Taleb didn't warn you: the outspoken academic-philosopher, best known for his prediction that six sigma "fat tail", or black swan, events happen much more frequently than they should statistically (perhaps a main reason why there is no longer a market but a centrally-planned cesspool of academic intervention) just had a black swan land smack in the middle of the Universa hedge fund founded by ardent Ron Paul supporter Mark Spitznagel, and affiliated with Nassim Taleb. The result: a $1 billion payday, translating into a 20% YTD return, in a week when the VIX exploded from the teens to over 50, and which most other hedge funds would love to forget.
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"... Shortly after returning from a trip in late 2009, Farmer erased electronic notes, in Microsoft Word format, that were stored on thumb drives, Zip drives and a shared drive at Citadel, agents wrote in a summary of one of the interviews with him. Farmer also threw away his handwritten notes because that was his normal practice and because they were incriminating, agents wrote. Farmer got rid of e-mails as well, according to their summary. “This,” they wrote, “wiped the slate clean."
Journalism and investment research have a lot in common, notes ConvergEx's Nick Colas; after all, both essentially ask the customer to freely part with three scarce resources: time, attention and money. It’s been a tough decade or two for both the newsroom and the research department in that effort, but at least one prominent venture capitalist, Marc Andreessen, thinks there is a future for the news business, however, due to a rising middle class in emerging markets and mobile Internet distribution. While this audience may not (yet/ever) be hankering to read Buy-Sell-Hold reports on their smartphones, Andreessen’s recently published 8-fold strategy for journalism has lessons for investment research as well. The big takeaway: sell-side research needs to change a lot – and quickly - to survive as anything more than an advertising vehicle for brokerage firms.
... And it is Point72. Of course, those who are aware of the physical address of the firm that single handedly made and destroyed "expert networks" (and assured a daily bug sweep at every hedge fund office in New York), or better yet, have visited the firm's sprawling trading floor located at 72 Cummings Point, will know that the name is merely a derivative of the actual address. Then again, perhaps when it comes to address-based appelations, Cohen picked the only feasible option: after all going with the zip code of his trading desk adress may have been a little too reminiscent of a convict's inmate number: 06902. And that would hardly inspire confidence in the New and Improved Stevie A. Cohen.
While January was a bad month for the market, it was certainly one which the majority of hedge funds would also rather forget as we showed yesterday. So with volatility, the lack of a clear daily ramp higher (with the exception of the last 4 days which are straight from the 2013 play book), and, worst of all, that Old Normal staple - risk - back in the picture. what is a collector of 2 and 20 to do (especially since in the post-Steve Cohen world, one must now make their money the old-fashioned way: without access to "expert networks")? For everyone asking this question, here is Deutsche Bank with its take on which will be the best and worst performing strategies of 2014. So without further ado, here is the Deutsche Bank Asset and Wealth Management's forecast of hedge fund performance matrix...
One look at the chart below from the NYT, and a pattern emerges...
Curious how much the various banks who stood to be impacted by or, otherwise, benefit from either a concentration or dilution of the Volcker rule? According to OpenSecrets, which crunched the numbers, here is how much being able to continue prop trading meant to some of the largest US banks and lobby groups:
- American Bankers Association: $6.495 million
- JPMorgan: $4 million
- Wells Fargo: $4.440 million
- Citigroup: $4.240 million
- Independent Community Bankers of America: $3.581 million
- Bank of America: $2 million
Not bad considering the loophole-ridden Volcker Rule will effectively permit "hedge" books (where an army of lawyers paid $1000/hour defines just what a hedge is) to continue piling on billions of dollars in wildly profitable, Fed reserve funded trades.
The Steve Cohen Era Is Over: S.A.C. To Plead Guilty To Securities Fraud, Stop Managing Outside MoneySubmitted by Tyler Durden on 10/29/2013 16:41 -0400
Nearly three years ago, before anyone had heard of expert networks, before the SEC had brought any major enforcement action against any hedge fund and long before anyone had to gall to accuse SAC of insider trading, Zero Hedge started a series of posts commencing with "Is The SEC's Insider Trading Case Implicating FrontPoint A Sting Operation Aimed At S.A.C. Capital?" exposing the fraudulent transactions of Steve Cohne's hedge fund despite fears of violent legal reprisals. We are delighted to inform our readers that this particular chapter is now over: the WSJ has just reported that SAC will plead guilty to securities fraud, pay a final $1.2 billion penalty (still a tiny sum compared to all the ill-gotten gains by Steve Cohen over the years), and most importantly, end the fund's management of outside money.
Wednesday's 10-7 vote in the Senate Foreign Relations Committee supporting an authorization of military attacks on Syria may have been affected by varying levels of financial support the senators got from political action committees representing the defense industry, and from the companies' employees. As The Daily Mail reports, on average, a 'yes'-voting senator received 83% more money from defense contractors than one who voted 'no.' Committee members who voted Wednesday to support the proposal collected an average of $72,850 in defense campaign financing between 2007 and 2012, Wired magazine reported, based on data collected by the Center for Responsive Politics. Those who dissented in the committee vote averaged $39,770, with the four senators who received the least amount of defense dollars, ranging from $14,000 to $19,250, all voted no. At a Pentagon-estimated cost of around $5 billion per month (for a 2-month deployment) - and in light of our previous discussion on lobbying ROIs - is it any wonder?
Behold what happens when Hedge Fund viagra "expert networks" and "information arbitrage" is taken away, and everyone trades on the same information.
Nearly three years ago, following the publishing of "Is The SEC's Insider Trading Case Implicating FrontPoint A Sting Operation Aimed At S.A.C. Capital?" which exposed the key aspects of SAC's insider trading strategy, and which linked SAC, and the hedge fund world in general, to expert networks three weeks before virtually anyone outside of the 2 and 20 (or 3 and 50 as the case may be) world had heard of them and before they became a household euphemism for insider trading, we expected the full rabid fury of the world's best paid legal team to fall upon us. It didn't, which meant only one thing: we were correct, or they had bigger fish (to avoid harpooning) on their mind. Turns out it was both.
The longest ongoing government "sting" operation against a hedge fund, possibly in all of history, that which absolutely everyone has known about for years now i.e., against Steve Cohen's SAC and its Bernie Madoff-esque series of profitable years (at least until recently that is, when "expert networks" no longer accept any calls originating out of Connecticut or New York), may be coming to an end, following what the WSJ reports may be an imminent filing of criminal charges against the hedge fund. "U.S. prosecutors are considering possible criminal charges against SAC Capital Advisors LP as a result of the government's insider-trading investigation of the hedge-fund firm, according to people familiar with the matter. It isn't clear what led prosecutors to warn the Stamford, Conn., hedge-fund operator that it could be charged criminally. But the move is the strongest sign yet that prosecutors and the Federal Bureau of Investigation are trying to ratchet up the pressure as a five-year deadline looms to file the most serious charges related to trading that allegedly involved Mr. Cohen."
The KMPG partner at the heart of today's Herbalife/KPMG fiasco was unknown for several hours, until finally his name resurfaced. Per Reuters: "Scott London, a partner at accounting firm KPMG, was the lead auditor for Skechers USA Inc who resigned after allegedly leaking insider information to traders, said Skechers Chief Financial Officer on Tuesday. In an interview, CFO David Weinberg said he was surprised to learn late on Monday from partners at KPMG that London had admitted to the allegations and was leaving the firm."