Paolo Pellegrini

These SEC Insider Emails Reveal Why No Bankers Have Gone To Jail

Now that we are gearing up to bring a handful of cases in this area, I suggest that we keep in mind that the vast majority of the losses suffered had nothing to do with fraud and the like and are more fairly attributable to lesser human failings of greed, arrogance and stupidity of which we are all guilty from time to time.”

Here We Go Again: Step Aside RMBS, Rent-Backed Securities Are Here, And With Them The Beginning Of The End

Earlier today, when we reported that median asking rents in the US had just hit an all time high, we had a thought: how long until the hedge funds that also double down as landlords decide to bypass the simple collection the rental cash flows, and instead collateralize the actual underlying "securities"? One look at the chart below - which compares the median asking "for sale" price in black and the median rent in red - shows why. The last time there was a great divergence (to the benefit of housing), Wall Street spawned an entire Residential Mortgage-Backed Securities industry where Paulson, Goldman willing sellers would package mortgages, often-times synthetically, slice them up in tranches of assorted riskiness, and sell them to willing idiots yield-starved buyers. As everyone knows, that particular securitization bubble ended with the bankruptcy of Lehman, the bailout of AIG and the near collapse of the financial system. As it turns out, the answer to our original question was "a few hours" because securitizations are back, baby, and this time they are scarier and riskier than ever.

Frontrunning: July 17

  • Bernanke Seeks to Divorce QE Tapering From Interest Rates (BBG)
  • China launches crackdown on pharmaceutical sector (Reuters)
  • Barclays, Traders Fined $487.9 Million by U.S. Regulator (BBG) - or a few days profit
  • Barclays to fight $453 million power fine in U.S. court (Reuters)
  • When an IPO fails, raise money privately: Ally Said to Weigh Raising $1 Billion to Pass Fed Stress Tests (BBG)
  • Bank of England signals retreat from quantitative easing (FT) ... Let's refresh on this headline in 6 months, shall we.
  • Russia's Putin puts U.S. ties above Snowden (Reuters)
  • Smartphone Upgrades Slow as 'Wow' Factor Fades (WSJ)
  • Snowden could leave Moscow airport in next few days (FT)
  • New Egypt government may promote welfare, not economic reform (Reuters)

Paulson Parting For Puerto Rico To Prevent Tax Payments?

Departing a socialist regime to avoid paying taxes is not just a French thing anymore: Bloomberg reports that one of the most famous hedge fund managers of the late 2000s, if not so much recently, John "Boricua" Paulson "is exploring a move to Puerto Rico, where a new law would eliminate taxes on gains from the $9.5 billion he has invested in his own hedge funds, according to four people who have spoken to him about a possible relocation." In moving to Puerto Rico, Paulson would merely be the latest person to avoid paying any taxes associated with Paulson & Company: virtually every other investor in Paulson's hedge funds also has no taxes to worry about, for a far simpler reason: taxes are generally incurred on profits, not three years in a row of relentless losses.

Paolo Pellegrini Is Coming Back As A Quant, Laments Loss Of Traditional Investment Thought In A Fed-Dominated World

It appears Paolo Pellegrini, the brains behind Paulson & Co. most profitable trade, is coming back... as a quant. As we reported in August, the billionaire manager's former fund - PSQR - had decided to return all capital to investors citing "challenging market conditions." It only took Paolo 3 months to realize that money is no longer to be made in a macro world dominated by central bank infighting, in which a schizophrenic market goes up or down by several percentage points on a daily basis depending on what word feels out of place in any given central banker's speech, and instead will focus on "quantitative disciplines" along the lines of DE Shaw and RenTec. And why not: the only ones left making money in this market are momentum chasing strategies which have millisecond frontrunning arbitrage over the rest of what is left of the heard. As to the visionary's current market views, his mantra is "don't fight the Fed" even as he sees bond trading at ridiculously high levels, although with a caveat: "of course you don’t want to fight the Fed, until the Fed loses control which is what happened obviously in the sub-prime and financial crisis.  That is very difficult, though, to predict." As we predicted earlier in the year not only are macro funds soon going to be extinct but the same fate lies in store for the traditional long/short 130/30 group. Very soon every fund will need to have their own quant/HFT group (SAC has already quietly amassed almost 20 HFT pods) just to be able to attract outside investors. After all why else is the woefully underpaid SEC admitting it has no idea how to fix the market now entirely dominated by HFT, and will merely extend its completely worthless "circuit breaker" model for another three months, then another three months, and so on.

Paolo Pellegrini Follows Druckenmiller Into The Sunset: Paulson Protege To Return All Capital To Investors

When we reported that Stanley Druckenmiller had decided to call it a day after a 30 year career, we joked that his action was a stark confirmation that alpha was dead, as more and more hedge funds are increasingly unable to eek out incremental returns over risk free, thereby rendering the whole 2 and 20 business model meaningless. Today, we get more confirmation that ever more of the "smartest money" on the street is packing it in (at least temporariliy) after Absolute Return+Alpha reports that the man behind the Paulson CDO trade, Paulo Pellegrini has decided to return investor capital and is stepping back from managing investor capital "given challenging market conditions." "Paolo Pellegrini announced today that he will be returning all outside investors' capital in his global macro firm PSQR Capital by the end of September, citing the additional work necessary to profit from his bearish views." As a reminder, as of his first letter (posted below), the fund was up 175.5% through September 2009 from inception in April 15, 2008. One wonders how much pain Pellegrini may have suffered, considering his main bets, at least as of a year ago, were short Treasuries and short equities.