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."
Oil? Financials? Aerospace? When someone asks who the biggest sources of lobby dollars for DC's politicians-for-purchase are, these are the three usual suspects that come to mind. Some may, therefore, be surprised to learn according to the database kept by OpenSecrets between Pharmaceutical and health product industry, hospital and nursing homes, health professionals and health services, HMOs, or more broadly Pharma/Healthcare/HMO, the total lobby dollars spent between 1998 and 2012 was a staggering $5.3 billion, or nearly three times greater than the second most generous industry: insurance, and well above Oil and Gas at $1.4 billion, and Securities and Investment at $1.0 billion. Is it becoming clearer why the US government has few qualms about unsustainable taxpayer funded healthcare spending, especially when there are so many current benefits accruing to the politicians who see so many billions in benefits from passing lobby-friendly laws now (by which we mean generous taxpayer funding, the bulk of which benefits the healthcare industry's bottom line)? As for the costs: who cares - just dump them on future generations. It's not like anyone expects the $16.7 trillion in US debt to be ever repaid.
You know how we feel about special order-types and expert networks. I'll save you the long-winded paragraph so you can keep selling AMZN. Here is an HFT infographic
"They say this is not massive money printing, but first they are wrong; and second, monetary authorities in the United States did not see the crash coming and the unsoundness of the financial system. In fact, right up until the crash they were saying that nothing like what happened could ever happen... This monetary policy, $3 trillion of bond buying in the United States, $3 trillion in Europe and another $2.5 trillion to $3 trillion in Japan, is unprecedented. ... If and when people lose confidence in paper money because of repeated bouts of quantitative easing and zero-percent interest rates—it could happen suddenly and in a ferocious manner in the commodity markets, in gold, possibly in real estate—interest rates could go up at the long end by hundreds of basis points in a very short time. I’m quite concerned as a money manager that we have to manage money, not just for the boundaries of what’s in front of our faces—maybe we’ll have a little tax increase or not, the fiscal cliff, or the stock market might go up or down 10% or 15%—but for a basic shift. The thing that scares me most is significant inflation, which could destroy our society."
Curious why stocks suddenly took on extra water in the past few minutes? This:
- SAC CAPITAL SAID TO PLAN INVESTOR CONFERENCE CALL TOMORROW - BBG
As a reminder, SAC is and has been for the past 10 years arguably the largest buyside market maker, and the firm which now that it has no more Expert Networks to lead to "excess alpha" is forced to slam stops in the market, primarily to the upside, and crush all shorts during times of peak shorting. Should SAC be forced to scale its operations lower, one thing is certain: the farce formerly known as the market will look very different than it does now.