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31-Year-Old Hedge Fund Trader Made More Than The CEOs Of The Six Biggest Banks Combined

Tyler Durden's picture




 

Over the weekend, there has been some consternation over the report that the CEOs of the 6 largest US banks: JPM, BAC, GS, MS, C and WFC, collectively made $96.1 million in 2013, more than $86.3 million the year before and the most since the financial crisis.

However, we are confident those same people would have an aneurism if they were to learn that James "Jimmy" Levin, a 31-year-old hedge fund trader - head of global credit and an executive managing director at Och-Ziff - last year made a whopping $119 million, or more than all of the CEOs of the six largest firms combined. 

rom Och-Ziff's Proxy filing.

Just who is this trading wunderkind? WSJ's Greg Zuckerman explains:

In 2012, James Levin, a then 30-year old trader at Och-Ziff Capital Management LLC, turned heads with a bet of more than $7.5 billion on “structured credit” debt investments, or about a quarter of the money the firm managed when the investments were made.

 

The wager was an enormous winner. Mr. Levin’s group scored gains of nearly $2 billion, according to people close to the matter. The trade was detailed in an earlier Wall Street Journal story.

 

* * *

 

James Levin, of Och-Ziff Capital Management made a wager in 2012 of more than $7.5 billion on "structured credit" debt investments. That amount represented about a quarter of the money the firm managed when the investments were made.

 

The bet paid off. Mr. Levin's group scored 2012 gains of nearly $2 billion, or about 25%, before fees—likely making it one of the top trades on Wall Street last year. The credit team, with 14 members, accounted for more than half of the 468-person firm's $3.4 billion trading gains last year, according to people close to the situation.

 

Mr. Levin and Och-Ziff aren't the only boldfaced investors who scored large gains last year buying investments such as residential mortgage-backed securities and collateralized loan obligations, among others, many of which were crunched in the financial crisis.

 

The prices of these instruments rallied in 2012 amid the U.S. housing rebound and the hunger by investors for debt with sizable yields, and have risen further in 2013.

 

Seth Klarman's Baupost Capital, Jeffrey Gundlach's DoubleLine Capital LP and Greg Lippmann's LibreMax Capital LLC are among those who saw hefty returns in 2012. Dozens of smaller hedge funds also racked up sizable gains, as did SkyBridge Capital, which invests in various funds.

 

* * *

 

In some ways, Mr. Levin's strategy was riskier than some rivals' because he did less hedging, or protecting against the downside, than some others, according to people close to the matter. Mr. Levin's team was an especially big buyer of investments tied to residential and commercial mortgage-backed securities, traders say.

 

* * *

Mr. Levin, 31, who goes by Jimmy and is described as outgoing and thoughtful, works closely with David Windreich, Och-Ziff's head of U.S. investing, and Daniel Och, the firm's founder, according to people close to the matter. Mr. Levin first got to know Mr. Och when he taught Mr. Och's son to water ski at summer camp several years ago, before Mr. Levin completed a degree in computer science at Harvard University.

Mr. Och helped him find his first job at Sagamore Hill Capital Management, according to someone familiar with the matter. After a stint as an analyst in the distressed debt and statistical-arbitrage group at Dune Capital, Mr. Levin joined New York-based Och-Ziff in 2006.

And something stunning: "Mr. Levin’s credit team, with just 14 members, accounted for more than half of the 468-person firm’s $3.4 billion trading gains in 2012, according to people close to the situation, as prices of the debt rallied amid a U.S. housing rebound."

What housing rebound?

That said, $120 million on over $1.7 billion in firm profits sounds a little cheap to us. Still, we are confident young Jimmy will be more than happy to collect what amounts to over 2,300 median annual salaries. And all he had to do to facilitate yet another great example of the great US wealth divide in which the rich get super rich while everyone else, well, doesn't, was to correctly forecast that the US economy would continue to deteriorate and that the Fed would continue injecting trillions of  liquidity into the stock market.

What better example of the "value added" activities that are most highly rewarded in US society.

 

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Sun, 04/13/2014 - 13:20 | 4654257 fonzannoon
fonzannoon's picture

at least he is outgoing and thoughtful

Sun, 04/13/2014 - 13:34 | 4654295 SafelyGraze
SafelyGraze's picture

wow. that's a lot.

only 6% of our return on trillions in loans gets disbursed to our un-named shareholders. 

the surplus is shared with the treasury, against which it can borrow more.

hugs,
misteryellens

a percent of trillions is actually a very small amount and you shouldn't fret about it.

pay your taxes! 

Sun, 04/13/2014 - 13:58 | 4654361 Caviar Emptor
Caviar Emptor's picture

He, like many others, makes money collecting the crumbs that fall off the big-big cake that the Fed has placed on the table for the grown ups to feast on!

You, like many others, at least can get to see the cake an be graced by the presence of grown ups

Sun, 04/13/2014 - 14:45 | 4654481 Ray1968
Ray1968's picture

I'm sure his personal tax accountant is picking up a few of his crumbs.

Sun, 04/13/2014 - 15:14 | 4654543 ml8ml8
ml8ml8's picture

"Mr. Levin's group scored 2012 gains of nearly $2 billion, or about 25%, before fees—likely making it one of the top trades on Wall Street last year."

Uh, say what?  How could a trade returning 25% possibly be one of the "top trades on Wall St." in a year when the S&P 500 was up 29%?  My S&P Indexed mutual fund outperformed one of the top trades on Wall St. by 4%!! Wahoo!!!   /s

Incredibly poor reporting.

Sun, 04/13/2014 - 15:23 | 4654554 Say What Again
Say What Again's picture

You know what Taleb would say about traders that place large bets and win on Wall St.  If not, you should read "Fooled by Randomness" and "The Black Swan."  The thing is, you rarely hear about the many traders that place large bets and lose.  They drift into jobs as bar-tenders, or central bankers.  There will always be stories about some guy that got LUCKY.  NEVER confuse LUCK with TALENT.  I really want to see an annual report on this guy that places over-sized bets.  Lets see what his track record will be over the next 10 to 20 years.

Sun, 04/13/2014 - 16:32 | 4654789 Manthong
Manthong's picture

Ok.. factor in options, deferred and other obfuscated compensation.

..see what you get now.

 

..ain't no way a punk is making more than Jamie.

 

Sun, 04/13/2014 - 16:49 | 4654839 cifo
cifo's picture

Isn't this the reason everybody loves America, where everything is possible and one's dreams can come true?

How much did Justin Bieber make last year, btw?

 

Sun, 04/13/2014 - 17:32 | 4654944 zaphod
zaphod's picture

The only reason this guy has enough capital to pay with to make these returns is because his creditors know that the FED will bail them out if this hedge fund blows up. That was the bailout of LTCM created. 

This guys captial and returns are backed by us tax payers, but we only participate on the downside and get nothing of the upside.

 

Mon, 04/14/2014 - 00:09 | 4655815 CheapBastard
CheapBastard's picture

The Hedge Fund manager and his team split $2 billion?

Ok, I now see where that recovery is Barry and Bernanke talked about.

Mon, 04/14/2014 - 00:10 | 4655817 willwork4food
willwork4food's picture

Au contraire mon ami. We get great leaders in DC!

'oh wait

Sun, 04/13/2014 - 17:12 | 4654911 PT
PT's picture

The six bankers are just better at hiding what they really make ...

Sun, 04/13/2014 - 18:40 | 4655078 Marco
Marco's picture

Heads they win, tails we lose.

Sun, 04/13/2014 - 15:21 | 4654557 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

No, they're 100% accurate. Wall St massively underperformed the index

Sun, 04/13/2014 - 15:45 | 4654640 ml8ml8
ml8ml8's picture

Oops, some bad reporting of my own. The year of the trade returns was 2012 (not 2013).  The S&P only returned 13.4% in 2012.  Notwithstanding, still hard to see how it could have been one of the best trades on Wall St. even in 2012.  Was it the largest amount of money returned?  Possibly, but that's more a function of access to massive capital and leverage than it is of picking the right investment.

Sun, 04/13/2014 - 16:53 | 4654842 Excursionist
Excursionist's picture

Regardless of your math, you're forgeting to risk-adjust the returns for apples-to-apples comparisons.

If presented a choice between a potential 25% return from structured credit and a potential 35% return from equities, I'd opt for the former a 100 times out of a 100.

A 25% return in the credit world is typically considered a home run.

Sun, 04/13/2014 - 16:44 | 4654830 holmes
holmes's picture

I'd be very happy with the crumbs of his crumbs.

Sun, 04/13/2014 - 14:03 | 4654370 Gaius Frakkin' ...
Gaius Frakkin' Baltar's picture

From their Wikipedia article:
"The firm is reported to have avoided large losses during the financial crisis of 2008..."

Yeah most were, thanks to taxpayer bailouts from poor people. Your welcome.

Sun, 04/13/2014 - 14:02 | 4654371 Groundhog Day
Groundhog Day's picture

So they made a wager with 25% of their book that they can buy up all the RMBS they can find at a discount and sell it to the fed at par using leverage....gosh had i only gone to HHHAAAAARRVVAARRD

Sun, 04/13/2014 - 14:22 | 4654409 Never One Roach
Never One Roach's picture

He sounds like fun. I like him already. I think I saw him at Caesar's Palace ... he's the "outgoing and thougthful" guy at the table.

Sun, 04/13/2014 - 15:22 | 4654558 noless
noless's picture

What is "outgoing and thoughtful" in reference to?

Sun, 04/13/2014 - 15:09 | 4654532 Wahooo
Wahooo's picture

That'll buy a lot of nailguns.

Sun, 04/13/2014 - 14:20 | 4654406 Bangin7GramRocks
Bangin7GramRocks's picture

A wager. Remember the difference. He is a gambler and he got really lucky once or he has inside information. So check back in 5 years. If he continues to strike it big, he is just another filthy criminal. If he is legit, the returns will return to historical norm. It's that easy.

Sun, 04/13/2014 - 17:33 | 4654947 SteveNYC
SteveNYC's picture

He made bank on these "investments" selling them to Bernanke's Fed at a premium? Yeah, really impressive. Money out of thin air to buy the sludge these guys kicked onto the Fed's books via QE"X", a portion of which is then transferred to the individual for facilitating the trade. One day, this will be looked back at as complete insanity.

Sun, 04/13/2014 - 13:21 | 4654258 FuzzyDunlop21
FuzzyDunlop21's picture

"When asked for his trading strategy, he replied 'BTFD'"

Sun, 04/13/2014 - 13:30 | 4654282 Rubbish
Rubbish's picture

And tell everyone you know.

 

Let's get ready to rumble this week. More RED....

 

Gold Bitchez

Sun, 04/13/2014 - 13:34 | 4654291 Skateboarder
Skateboarder's picture

Today's FD is tomorrow's FATH, so you might expect a foward-thinking individual to say 'BTFATH,' non?

Yeah, I'll bet on seven billion clownbux too. Will they throw a party for me?

Sun, 04/13/2014 - 14:14 | 4654394 Oh regional Indian
Oh regional Indian's picture

Hey SB, know any node.js geniuses?

Much needed....

thanks, ori

Sun, 04/13/2014 - 16:10 | 4654585 Skateboarder
Skateboarder's picture

Hi ORI, I'm not friends with many web developers. I know a great web developer - he's a JS expert. Don't know if he is a 'node.js genius' though. I'm not particularly the best resource for JS inquiries, as I am one of those [real] engineers who look down on JavaScript for being the hacked-together toy language it is (with many security issues). Any webpage I design has been and always will be pure-HTML [+ CSS]. Holding such contempt for this hack of a front-end language that many a career and company (fb, googs, all yer favorite bubble 2.0 companies) have been built on, I can at best talk smack, and at worst talk shit.

Fuck JavaScript.

p.s. will inquire and let you know. He's not cheap - quality stuff.

Sun, 04/13/2014 - 16:38 | 4654812 nufio
nufio's picture

+1 on fuck javascript

Mon, 04/14/2014 - 14:53 | 4657704 StandardDeviant
StandardDeviant's picture

Yeah, I mostly agree -- and love the few remaining pure-HTML [+ CSS] sites out there.  Most sites which depend on JS are rubbish.

If you're willing to hear the case for the defense, though, Douglas Crockford's "JavaScript: The Good Parts" is a good read.

Sun, 04/13/2014 - 13:23 | 4654264 Arius
Arius's picture

Takeway: if someone knows water skiing, trust him with everything, including billions

Sun, 04/13/2014 - 13:23 | 4654265 goldhedge
goldhedge's picture

He doesn`t need to commit suicide then.

Sun, 04/13/2014 - 13:26 | 4654270 Snoopy the Economist
Snoopy the Economist's picture

"He doesn`t need to commit suicide...yet

Sun, 04/13/2014 - 13:56 | 4654354 Spitzer
Spitzer's picture

And the saddest thought of all is that these dimwits that are riding this tech bubble 2.0 are making off with way more.

 

He deserves some credit though. His monkey and dart board rules.

Sun, 04/13/2014 - 14:01 | 4654368 Caviar Emptor
Caviar Emptor's picture

Tech bubble 2.0 is so much kewler! Only the kewl kidz need apply!

Sun, 04/13/2014 - 13:24 | 4654267 A_Nejad
A_Nejad's picture

Chosen people at their best.....

Sun, 04/13/2014 - 20:00 | 4655252 Colonel Klink
Colonel Klink's picture

Skimming off the top.

Sun, 04/13/2014 - 13:27 | 4654271 yogibear
yogibear's picture

The Federal Reserve the last 5 years has been transferring wealth from savers to Wall Street.

Best thing to do is borrow all you can, buy a asset without a title and then default now. 

You have the asset and they have nothing except the non-performing loan.

 

Sun, 04/13/2014 - 13:27 | 4654274 nelsonmandella
nelsonmandella's picture

and guess what he did with his bonus - Bitcoin !

Sun, 04/13/2014 - 13:28 | 4654277 FoodStampPrez
FoodStampPrez's picture

Good thing he is only taxed at 20%, unlike small business owners who produce actual value and pay more than twice that rate. Otherwise we wouldn't have any brilliant computer scientists pushing paper around.

Sun, 04/13/2014 - 13:29 | 4654278 RafterManFMJ
RafterManFMJ's picture

I salute him and appreciate the tools, toys, and medical advances he and his ilk provide.

Truly, these are the best - the best of times.

Sun, 04/13/2014 - 14:03 | 4654375 Caviar Emptor
Caviar Emptor's picture

We're living in a fucking utopia! Back in the day only rock stars could get money for nuthin and chicks for free

Sun, 04/13/2014 - 14:27 | 4654423 zerozulu
zerozulu's picture

when Ctrl-P is the source of the wealth, everything is possible.

Mon, 04/14/2014 - 00:18 | 4655840 willwork4food
willwork4food's picture

Free beer?

Sun, 04/13/2014 - 13:34 | 4654293 I Write Code
I Write Code's picture

But the thing is, Jimmy earned it, after a fashion, he and his little team.

I am much more outraged at the combined CEOs who did NOT earn it, they each head companies of tens of thousands or hundreds of thousands of employees who ALL worked towards any positive results.

Now, there is something structurally wrong when an individual *can* earn nine figures in a year, moving money from place to place.  Really what he did was find a way to dip his bucket into the river of money flowing out of the fed.  He really is stealing public money.  So are the CEOs.

Sun, 04/13/2014 - 14:00 | 4654366 Spitzer
Spitzer's picture

 

CEO pay in the US is a cultural thing. It is not based on reality. Look at CEO's in Japan. S Korea or China. They simply get paid way less yet they are resposable for more output then these seppo's.

 

But yeah, I respect this guy more then these tech bubble 2.0 geeks who make him look like a shrimp.

Sun, 04/13/2014 - 13:35 | 4654299 kchrisc
kchrisc's picture

He's a goy, right?!

Sun, 04/13/2014 - 13:40 | 4654308 giggler321
giggler321's picture

This is great news.  I still have a couple more years to prove social mobility still exists and become an equal to Mr. Levin, give or take a few million of course

Sun, 04/13/2014 - 19:23 | 4655157 kchrisc
kchrisc's picture

Wrong answer. Expropriate their script, socialism, and demand your "share" from Mr. Levin.

I am assuming that he "didn't build that."

Sun, 04/13/2014 - 13:40 | 4654309 Xibalba
Sun, 04/13/2014 - 13:41 | 4654314 NeedleDickTheBu...
NeedleDickTheBugFucker's picture

So Jimmy receives a 6% "commission" ($119 million) out of the $2 billion profit (25% return) from his $7.5 billion (highly leveraged) investment?

Sun, 04/13/2014 - 13:45 | 4654322 Skateboarder
Skateboarder's picture

Wouldn't you want a nice tall $119M glass of iced tea after a hard day of work in the [virtual] fields?

Sun, 04/13/2014 - 13:46 | 4654327 Dadburnitpa
Dadburnitpa's picture

Bet billions of other people's money.  Win, you're set for life.  Lose, you're forced to go get a real job doing something that might be productive.  Not a bad gig if you're just 30.  Doesn't take brains, doesn't really even take guts since the money isn't yours anyway.

Sun, 04/13/2014 - 13:46 | 4654328 derek_vineyard
derek_vineyard's picture

how do i open a hedge fund?

Sun, 04/13/2014 - 13:50 | 4654339 Danno Anderson
Danno Anderson's picture

<<<<   last year made a whopping $119 million, or more than all of the CEOs of the six largest firms combined.   >>>>

Either do your math or writing again, cause it don't add up. 


Sun, 04/13/2014 - 14:33 | 4654442 nevadan
nevadan's picture

The graph is for 5 years.  Last year was 96 million.  There is nothing to add.

Sun, 04/13/2014 - 13:53 | 4654347 Inthemix96
Inthemix96's picture

Amazing, truly amazing.

Produce nothing, nothing at all, bar what amounts to betting on horses and earn nine figure salaries.

I'm not shocked as I would bet most here arent, but fuck me sideways, nine figure salaries for betting?

What in fucks name is happening to us?

Over two million a week for betting?

And betting on the very homes we lot have to live in rigged to fuck by the LIBOR scandal?  This is backwardisation on a criminal scale.

Ob-fucking-scene.

Sun, 04/13/2014 - 14:01 | 4654363 Skateboarder
Skateboarder's picture

There is no agreement among men, that these unconscionable acts of 100% willful thievery, must be punished.

Drag one of these fuckers on to the street, tar and feather him, brand his chest with "IMMORAL THIEF," and hang him in the middle of the busiest public space for all to see, what happens when you fucking steal the lives of everyone else's children.

One should not be afraid of delivering justice, but one alone does not accomplish this in this day and age when the average male fears the blade of a knife. It will take a million pissed off, angry rednecks to get this job done.

In rednecks we trust. (cuz fuck me, all of these middle class assholes in Silicon Valley aint gonna do shit to fix any of this)

Sun, 04/13/2014 - 14:53 | 4654501 Inthemix96
Inthemix96's picture

Beautifully put Skateboader.

I honestly believe we as close to collapse as is possible without actually going over the edge.  Shit like this, nine figure salaries are seriously angering the plebs, this fucker better have a smashing place to fuck off to because believe you me, not everyone sits here typing words onto computer screens.

This is beyong the fucking pale my friend.

120 million for betting on the equivalent of horses, but the sticker is we live in them?  This is so immoral, I am stuck for words.

Un-fucking-possible.

Sun, 04/13/2014 - 14:35 | 4654446 hot sauce technician
hot sauce technician's picture

This nonsense only exists because fractional reserve banking is allowed to exist. And that is because the Fed (and central banks worldwide) have a monopoly on banking i.e. issuing currency.

Were there an actual free market these chumps would have to sweat a lot harder to make much less. Read a great analysis by Frank Shostak on the topic: https://mises.org/daily/4100

Sun, 04/13/2014 - 14:03 | 4654372 Judge Crater
Judge Crater's picture

Quantitative easing at work, since zero interest rates encourage property speculation.  

Sun, 04/13/2014 - 14:08 | 4654385 hotrod
hotrod's picture

Gosh and I lost my financial ass and basically discretionary life in 2013 in Precious metals.  Guesss he was short.

Sun, 04/13/2014 - 14:10 | 4654388 bankonzhongguo
bankonzhongguo's picture

It pretty funny that stories like this require the words "wager," "bet" and "odds," yet "gambling" is considered illegal in most jurisdictions for the common person.

Furthermore, now consumers are forced a la Obamacare to join the actuarial probability contained in all risk measurements.  Sorry. "Bets."

Gambling via the internet, book making over the phone, or some backroom card game are criminal, yet investments and insurance are mandated and supported (bailed out/in) by the government because there is "skill" involved.

Come on hard eight!

It's not a market or even a country any more.  The concept of Laws and Justice are dead.

Didn't you get the memo?  It's all just a free-for-all before the music stops.

The ship won't right itself until some of these characters are cut down like the pigs that they are.

Sun, 04/13/2014 - 14:44 | 4654475 Ban KKiller
Ban KKiller's picture

Guessing you are not a fan of Mr. Holder. 

Mon, 04/14/2014 - 00:26 | 4655855 willwork4food
willwork4food's picture

He did a disservice to pigs when he mentioned Holder.

Sun, 04/13/2014 - 14:10 | 4654389 Seasmoke
Seasmoke's picture

That must buy some really awesome water front property in Israel.

Sun, 04/13/2014 - 14:44 | 4654480 hot sauce technician
hot sauce technician's picture

Or in Munich. Near the Bürgerbräukeller.

Sun, 04/13/2014 - 14:19 | 4654403 bobcromwell
bobcromwell's picture

The Economic Rape of America

Sun, 04/13/2014 - 14:21 | 4654408 Stuck on Zero
Stuck on Zero's picture

These money managers have a deal going that I will promote myself for.  Hand over your money to me to manage and I will invest it wisely.  If it fails to earn money I will take no compensation whatsoever.  If it earns money I will take 10% of the earnings. What an incredible deal.  Don't pass it up. 

 

Sun, 04/13/2014 - 17:00 | 4654873 holmes
holmes's picture

I've got a better deal for you: become a "sports handicapper"in Vegas. Steve Stevens tells clients what games to bet. If the bet wins, Stevens gets about 1/2 of the winnings. If the bet loses, Stevens isn't out a dime. Heads, Stevens and client win, tails, client loses. I think I would follow Gartman in the market before I would bet with Stevens.

 

CNBC's “Money Talks” takes viewers inside the world of Steve Stevens, a sports handicapper who runs VIP Sports out of Las Vegas. Each one-hour episode follows Stevens and his agents who sell their picks to gamblers looking for any kind of edge. From small-time bettors to big-time whales who put six figures on the line, this is a world built on high risk, high reward and high emotions.

Sun, 04/13/2014 - 19:52 | 4655094 yellowsub
yellowsub's picture

But they have MBAs from fancy schools that means they know how to steal, I mean invest your money!

 

Sun, 04/13/2014 - 14:21 | 4654410 RaceToTheBottom
RaceToTheBottom's picture

The lesson here is give out water skiing lessons.....

Sun, 04/13/2014 - 14:25 | 4654418 Seize Mars
Seize Mars's picture

Well you can't print pussy.
Oh, wait...

Sun, 04/13/2014 - 14:31 | 4654436 Stinko da Munk
Stinko da Munk's picture

When the time comes, I wonder what the little fucker will taste like?

Sun, 04/13/2014 - 14:41 | 4654466 hot sauce technician
hot sauce technician's picture

When that time comes bitchez will be thinking the same about you. Don't look forward too much to any type of violent apocalypse. Chaos has compassion for no one.

Sun, 04/13/2014 - 14:43 | 4654472 Ban KKiller
Ban KKiller's picture

Long pig. Will need to be fed organic corn for a few weeks along with clean water. All to flush the system, right?

Sun, 04/13/2014 - 14:47 | 4654487 Ban KKiller
Ban KKiller's picture

Is Greenwich fireproof? Still applies...

Sun, 04/13/2014 - 14:56 | 4654502 Brokenarrow
Brokenarrow's picture

here's another point of view:

Och Z is one of the MOST leveraged hedge funds in the world. Some say 100-1.

Where does that kind of leverage come from? It comes from prime brokerage accounts at BANKS. Some tbtf bank loans them the money at huge risk to the bank. Of course, if the fund blows up, the bank is on the hook.

But, not really. The taxpayer is once again on the hook. The fucking bank never loses. It only wins.

As for this nice young man. He is no saint or genius. He gambled with your money and won. It's like taking your money to Las Vegas and putting it all on a hand of black Jack. He has nothing to lose and everything to gain by being reckless.

50 mil people cant afford heath insurance and this little bastard is making gigantic bank with the peoples money. Where is Hitler when he is really needed? More now than ever.

Sun, 04/13/2014 - 15:49 | 4654655 hooligan2009
hooligan2009's picture

you might also say that the profits made were a small part (roughly 1%) of the total profits made from that QE trade for the market as a whole... as well as that those profits are payments made by the tax-payer to the hedge fund industry via the regulatory (central bank) arbitrage known to occur to prevent the discovery of market clearing prices in the underlying investments.

in other words, the underlying was crap, with no economic value and the Fed created value via QE and this "corruption" is endemic each and every time a central bank intervenes with QE to support a bankrupt asset class.

that a "quiet and thoughtful" hedge fund trader could get paid, say, 8-10% of the traded gains is symptomatic of the "pinball wizard" mentality that creates no value but benefits from an advanced form of (morally though not legally) criminal money laundering within financial markets.

what could have gone wrong? well here is the double jeapardy.. even if it had gone wrong, the theory you have out forth is that the taxpayer would have bailed the bet out. that may be true, but what is also true is that it wouldn't matter if the tax payer didn't, because the financial system the regulatory arbitrageurs/money launderers know and love would be over anyway. of course, it should be, but the bet was, not just that these investments would be laundered by the Fed, but that there was nothng to lose even if there was no tax-payer bail-out.

regulatory arbitrageurs have no downside and potentially enormous upside. they would be stupid not to "game" the system and would not be doing the job they are employed to do.. immoral, unethical and corrupt as it the method is.

 

Sun, 04/13/2014 - 17:12 | 4654910 Seize Mars
Seize Mars's picture

Brokenarrow

Yes you are correct, it is prime brokerage that is the catalyst here. Most people don't understand this. This is a mechanism that is used to "help" a hedge fund with various financing and collateral-easing arrangements.

So in the end, the net effect to the "economy" is inflationary. There is only one way this works. If a paper-pusher made a bundle, it was inflationary. Having two, three, four or four hundred scumbags who "compete" in the fiat-casino does not mean that the money was won by "honest risk-taking." It comes on the back of a reduced buying power for the average person on the street.

So they are all "competing" for the money in our pockets, whether or not we signed up to play.

End the FED and the cronyism stops. Immediately.

Sun, 04/13/2014 - 15:00 | 4654507 robertocarlos
robertocarlos's picture

All that money and he still kept his front teeth.

Sun, 04/13/2014 - 15:02 | 4654516 Seasmoke
Seasmoke's picture

We all agree Jones and Smith are most used last names of all. Yet I never seem to those names pop up in any of these financial stories. However, Most always the Tribe does pop up. If we are supposed to be good with numbers here at ZeroHedge. How do you explain those numbers ???

Sun, 04/13/2014 - 17:12 | 4654912 Seize Mars
Seize Mars's picture

Seasmoke

Is that a trick question?

Sun, 04/13/2014 - 15:29 | 4654582 highwaytoserfdom
highwaytoserfdom's picture

The trade shows exactly the corruption of  FED not failing the markets in 08. Paulson  down and this guy up.  The Blackstone  funding for largest rental assets is turning out to be a disaster...    Private profit public risk..   Greece here we go.      

Sun, 04/13/2014 - 17:05 | 4654891 holmes
holmes's picture

Snowden

Paulson

Sun, 04/13/2014 - 15:38 | 4654619 Downtoolong
Downtoolong's picture

But wait, just think how happy you will be when your share of these spoils trickles down to you via the wealth effect.

(Que the soundtrack of everyone at the Fed laughing out loud).

Sun, 04/13/2014 - 17:17 | 4654920 mumbo_jumbo
mumbo_jumbo's picture

James "Jimmy" Levin

 

member of the tribe?  how does one small group seem to win all the time?

Sun, 04/13/2014 - 17:31 | 4654940 mumbo_jumbo
mumbo_jumbo's picture
'James Levin, of Och-Ziff Capital Management made a wager in 2012 of more than $7.5 billion on "structured credit" debt investments' ------------------------------------------------------ and the big question is did he hedge that "bet"??????? and if not, then why not? cause he knew it would win? that sure sounds a bit shady if you ask me, no?
Mon, 04/14/2014 - 00:53 | 4655895 hooligan2009
hooligan2009's picture

the bigger question is "if you gave twenty idjuts $7.5 billion to gamble on a leveraged trade with the Fed telling them what they would be buying, how much would the twenty idjuts have made, more or less? or would 200 million have been considereda success and 40 billion considered a roaring success with a few billion just middle of the road creamed off profits, cos none of the twenty idjuts would need to risk a dime of their own money... just tha taxpayer funded banks risk capital?"

Sun, 04/13/2014 - 18:09 | 4655031 IMA5U
IMA5U's picture

jimmy is The Man

 

h8ters

Sun, 04/13/2014 - 18:24 | 4655050 Mercury
Mercury's picture

However, we are confident those same people would have an aneurism if they were to learn that James "Jimmy" Levin, a 31-year-old hedge fund trader - head of global credit and an executive managing director at Och-Ziff - last year made a whopping $119 million, or more than all of the CEOs of the six largest firms combined.

 

Not me.

 

if it was all legit (I know, I know...) well, Hooray!  

Banks should more or less be (and be regulated like)  public utilities. So, the highest paid hedge fund trader should be getting an even bigger payday vs. the CEOs of the top six banks combined.

Which is a long way of saying that a big bank CEO should be getting paid a lot less than is the case now.

Sun, 04/13/2014 - 20:19 | 4655279 Walt D.
Walt D.'s picture

$119 million? Wouldn't even pay for Obama's vacations. 

Pretty small, when you consider Michael Milken made $550 million in 1986, or there abouts.

Sun, 04/13/2014 - 20:23 | 4655296 AndrewJackson
AndrewJackson's picture

The real chumps in this trade are the investors in the fund. The investors in this fund have sold a call for 0. It is no better than that new boiler room gambling show on cnbc, money talks. I am pretty sure I could make hundreds of millions if I could keep half the profits on heads and lose nothing on tails.

Sun, 04/13/2014 - 21:48 | 4655522 walküre
walküre's picture

James "Jimmy" Levin. Just another Arab Afro American Hispanic White Male who got lucky at the Riviera crabs table? At 31 he has barely finished playing with his Bar Mitzvah toys which I'm sure were plenty given that the kid is allowed to play with several billions in investors cash a few years later.

Sun, 04/13/2014 - 22:18 | 4655593 Dalmatian
Dalmatian's picture

Damn.  I'm "thoughtful and outgoing" and I'm making loser money (only 35,000 per year with 19 years of experience) with no pension as a school teacher busting my ass with harder to please youngsters.  Barely making ends meet and trying to save enough so I'm not an old toothless bag lady that smells of urine in the near future.  Jammie Levin, can I please just have 1 million of yours?  You wont miss it, and it would mean the world to me, and I'm not wasteful, I would not piss away a dime! Heck, I miss meals in order to save money and pull out uneaten sandwiches thta spoiled kids throw out from the school's garbage to save a buck!

Sun, 04/13/2014 - 22:53 | 4655640 jonjon831983
jonjon831983's picture

Isn't it funny... if this 1/4 of managed money trade went the other way, this guy probably would have been called a "rogue trader".  Somehow purposely letting someone play with that amount of a firm's $ doesn't seem kosher in the first place.

Sun, 04/13/2014 - 23:54 | 4655784 nostromo17
nostromo17's picture

That said, $120 million on over $1.7 billion in firm profits sounds a little cheap to us. Still, we are confident young Jimmy will be more than happy to collect what amounts to over 2,300 median annual salaries. And all he had to do to facilitate yet another great example of the great US wealth divide in which the rich get super rich while everyone else, well, doesn't, was to correctly forecast that the US economy would continue to deteriorate and that the Fed would continue injecting trillions of  liquidity into the stock market.

What better example of the "value added" activities that are most highly rewarded in US society. 

Not sure what the latter has to do with the rest of the article. Sounds like the guy bet the residential and commercial securities were over discounted - too cheap.


Mon, 04/14/2014 - 00:12 | 4655824 InanimateCarbonRod
InanimateCarbonRod's picture

2015, Jimmy, his head inflated to the size of Texas, strikes out on his own with a bunch of lickspittle traders and opens up his new fund, investing in EU credits...with Brian Hunter, who will arb the natgas trade between the Ukes and the Stalins.

 

 

Mon, 04/14/2014 - 05:17 | 4656112 GFORCE
GFORCE's picture

Good luck betting 25% of aum on one opportunity!

Mon, 04/14/2014 - 06:23 | 4656140 kurt
kurt's picture

Now I feel a whole lot better about Bank Executive compensation. 

I like Hormel Canned Meat

My neighbor's teeth are black and falling out.

People live in the trees by the freeway.

Mon, 04/14/2014 - 08:17 | 4656266 messymerry
messymerry's picture

This is just sick.  Makes me want to gag.  Good hard working people are losing sleep at night worrying about how they are going to feed the kidlings and keep the beer in the regrigerator cold...and these pricks are sucking up vast amounts of money playing their shitty little games with CDOs and  “structured credit” debt investments, and residential mortgage-backed securities and whatever the fuck all you want to call these bullshit moneychanger schemes. (jealous sarcasm ;-)  These people are no better than the Statist assholes that are making eveybody miserable.  We are in a fully developed Corporate Police State.  Kristalnacht is coming.

 

Consumer is a derogatory term.  Please don't use it.

 

OBTW:  Kurt, my neighbor's teeth are black and falling out too.  Do you live in N. Texas????

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