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175,846,629,768 Reasons Why Ben Bernanke Joined Citadel

Tyler Durden's picture




 

No, that is not the number of hits his blog posts got, neither is that what Ben Bernanke will make as the most recent employee of Citadel (at least not for a few years until the the eponymously named helicopter makes a landing and hyperinflation runs wild).

It is also not the assets under management held by HFT titan, and Bernanke's new employer, Citadel. As Citadel reminds us in its regulatory filing with the SEC, "as of December 31, 2014, in Funds managed on a discretionary basis, we had approximately $23,804,000,000 in net assets under management."

Only.

So what does the number above represent? Well, as Item 5 of Citadel's Form ARV also filed with the SEC every year just before the end of the first quarter, $175,846,629,768 is the total amount of regulatory assets held by Citadel.

 

At this point one can also add +1 to Citadel's 979 employees.

But what are regulatory assets? For the answer we go back to not only our post from April of last year in which we showed the world's "Most Levered Hedge Funds" but better yet, to a Bloomberg article from April 2012, in which we read:

In seeking to adopt a uniform method for determining who met the threshold, regulators instructed firms to count assets that most were excluding from tallies on size, including holdings obtained through loans, short sales and hedging. Traditionally, hedge-fund advisers have quoted a net number, comprising investor capital plus investment gains and losses, when disclosing their assets under management.

In other words, the only difference between net assets and regulatory assets is one simple word: leverage.

Bloomberg continued:

While some fund managers only gave information on their gross assets, 31 of the 50 largest also disclosed their net assets in a separate section known as the client brochure. For these advisers, gross assets of $949 billion were more than double their net assets of $422 billion.

 

That indicates hedge funds may be using as much leverage as they did prior to the 2008 financial crisis. On average, hedge funds held total assets that were double their net capital as recently as 2007, said Daniel Celeghin, a partner at Casey Quirk & Associates LLC, a Darien, Connecticut, adviser to asset managers.

Three years later hedge funds are using more leverage than they did prior to the financial crisis. Much more, as we also showed a year ago. This year it's even worse.

But nowhere is this greater than at, drumroll, Citadel. Again, Bloomberg from three years ago:

The amount of leverage that an adviser uses, and thus its ratio of regulatory to net assets, is often tied to the firm’s primary trading strategies. Prime brokers are often willing to lend more money to firms that make bets that aren’t tied to market swings, said Leonard Zacks, a Chicago-based money manager who oversees about $2 billion.

 

Citadel, for instance, generally seeks to follow strategies that have a low correlation to stock and credit markets. An example would be an index arbitrage trade in which a fund manager bets that futures on the Standard & Poor’s 500 Index are cheap relative to the price of the individual stocks that comprise the benchmark.

 

“From the prime broker’s point of view, they have an almost zero risk portfolio,” said Zacks, who has been running a market-neutral strategy for 15 years. He said most market-neutral strategies use leverage of three to four times capital.

 

Citadel’s gross assets were also nine times its net figure back in May 2008, when the company was bulking up on convertible bonds as part of a relative-value strategy designed to profit from small price differences in related securities. The firm had gross assets of $145 billion at the time before the bets went awry, leaving clients with a 55 percent loss for the year.

And, as the latest leverage update shows, Citadel's leverage is absolutely mindblowing and approaches that of some banks.

 

 

And that, in a nutshell, is Bernanke's job: to make sure that Citadel's 7.4x leverage only keeps rising, and that its "true" regulatory assets of $175.8 billion follow. Because if there is one thing Bernanke has experience with, it's lots and lots of leverage.


 

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Thu, 04/16/2015 - 10:42 | 5998677 Seasmoke
Seasmoke's picture

Hang Bernanke for Treason. Laundering. RICO. 

Thu, 04/16/2015 - 10:47 | 5998694 CL Spec
CL Spec's picture

But he had the courage to do the right thing!

Thu, 04/16/2015 - 11:07 | 5998762 SoilMyselfRotten
SoilMyselfRotten's picture

Resign and get rich in the private sector?

Thu, 04/16/2015 - 11:14 | 5998781 bania
bania's picture

And a G5 airplane.

Thu, 04/16/2015 - 11:22 | 5998825 Thirst Mutilator
Thirst Mutilator's picture

His 'fraternity' name at Citadel is rumored to be 'PEDRO'...

Thu, 04/16/2015 - 11:44 | 5998915 old naughty
old naughty's picture

G5 plane? He dumped the helicopter?

And change name to "Peter"?

Wow. Rinse...

and repeat (later)?

 

Thu, 04/16/2015 - 13:38 | 5999455 clooney_art
clooney_art's picture

Why just Bernanke ? What happened to the other Fed Chairs and Timothy Geithner and Paulson, Kashkari et al.

They all have a lucrative wall street consulting careers.

Thu, 04/16/2015 - 11:08 | 5998767 booboo
booboo's picture

The problem with a kleptocracy is that sooner the real ptb will have to explain to the fake ptb why they didn't make the cut. Considering that it will take all of 1.3 seconds to drain the swamp my guess is they won't get a call.

Thu, 04/16/2015 - 11:16 | 5998797 Kirk2NCC1701
Kirk2NCC1701's picture

Wasn't he also doing some deity's work?

Thu, 04/16/2015 - 11:59 | 5998966 iofera
iofera's picture

Bob, you won't be hanging anything up, except that cheap coat you've got.

But for Bernanke and everything he did during America's darkest hour, you wouldn't even have a job.

Thu, 04/16/2015 - 14:09 | 5999596 Clowns on Acid
Clowns on Acid's picture

you would probably have been chopped in the neck... so STFU you fuckstick.

Thu, 04/16/2015 - 15:35 | 5999994 Blankenstein
Blankenstein's picture

 

"America's darkest hours."  Really?  Do you work as a propagandist for the Fed?  Instead of taking our licks in 2008, Bernanke reblew the housing market bubble and created a new stock market bubble.  We are in for a world of hurt because of his misguided policies.  And take a look around,  towns and cities are crumbling across America, yet the .01% are living like kings as recipients of the Fed's printing press dollars.  

Thu, 04/16/2015 - 15:01 | 5999081 KnuckleDragger-X
KnuckleDragger-X's picture

You know, he'd look really good with a couple of 16 penny nails sticking out of his forehead.....

Thu, 04/16/2015 - 10:46 | 5998693 buzzsaw99
buzzsaw99's picture

he's there to help them dump their losing bets off onto the fed aka taxpayer

Thu, 04/16/2015 - 10:47 | 5998697 nopat
nopat's picture

What's with all the shit slinging at Citadel this morning?  This feels like 'bag envy' for third-tier asset managers.

Don't worry, buddy, you can still print your AUM in dick inches..

Thu, 04/16/2015 - 11:02 | 5998751 NotApplicable
NotApplicable's picture

Envy? Seriously? Do you really think that's what's at play here?

Yeah, we're all jealous of Citadel's aiding and abetting the destruction of the world's financial system.

I can only imagine where you must work to have that POV.

Thu, 04/16/2015 - 11:13 | 5998768 nopat
nopat's picture

Aiding and abetting?  Jesus Christ, you must be real fun to hang out with at cocktail parties...

Thu, 04/16/2015 - 13:12 | 5999293 nope-1004
nope-1004's picture

If the bankrupt aren't allowed to go bankrupt, then new ideas and entrepreneurship is dead.

- Jim Grant

 

 

And it's absolutely ridiculous to say someone has envy of another when 'another' creates the rules, changes the rules, bends the rules, corrupts the rules, and then won't reveal the rules to the public.

 

Thu, 04/16/2015 - 13:33 | 5999425 nopat
nopat's picture

Want me to call you a whaaambulence?  

Seriously, what rules are you bemoaning now?

Thu, 04/16/2015 - 12:02 | 5998986 iofera
iofera's picture

Green with envy you are.

Thu, 04/16/2015 - 15:48 | 6000030 Blankenstein
Blankenstein's picture

Where would Citadel be without HFT to front-run trades?

 

"Also, according to Harvard Political Review writer Austin Tymins, HFT private equity fund Citadel LLC made billions of dollars front-running the trades of large institutional investors, many of which are investing on behalf of middle-class clients.[7] These estimates show that Citadel LLC makes several times of all of the HFT private equity funds profits singlehandedly, using such strategies"

http://en.wikipedia.org/wiki/Front_running

Envy of those who can succeed only by cheating?  Nope. Disgust at those who are willing to engage in unethical business practices and don't care if they hurt others. 

Thu, 04/16/2015 - 10:47 | 5998698 jcaz
jcaz's picture

Que bailout of Citadel in 3...2....1.....

Thu, 04/16/2015 - 10:48 | 5998703 buzzsaw99
buzzsaw99's picture

citadel = future tbtf

Thu, 04/16/2015 - 10:58 | 5998734 NotApplicable
NotApplicable's picture

My guess is that Benron's gonna advise them on how to increase that leverage into double digits.

Thu, 04/16/2015 - 10:50 | 5998712 BeaverCream
BeaverCream's picture

 Dude looks like a muppet, is a muppet and will hopefully spend eternity in a vat of boiling fesces....oh wait no that's what happened to that guy in that sacred book.

Thu, 04/16/2015 - 11:00 | 5998741 e_goldstein
e_goldstein's picture

Nope, the Bernank, Lloyd, Jamie, Blythe, Hank Paulson, et al deserve the fate of Crassus.

http://www.smithsonianmag.com/smart-news/heres-what-happened-people-who-...

 

Thu, 04/16/2015 - 10:50 | 5998713 WTFUD
WTFUD's picture

Citadel- the fortified area of a city or town- The Vatican, for example. Makes Sense for Benny to have shored up it's defenses prior to taking up his seat for favours granted.

Hang these bastards now!

Thu, 04/16/2015 - 10:59 | 5998738 NotApplicable
NotApplicable's picture

"The Courage to Act"

Thu, 04/16/2015 - 10:52 | 5998717 Calculus99
Calculus99's picture

Wall street must love how easy it is to buy these fuckers.

Armand Hammer knew the game. One of his top lieutenants said he couldn't be at a very important meeting because he had to watch his little boy play ball and he'd cancelled the previous 5 times because of important meetings.

Hammer hit the roof saying the executive had to be there but the exec played hard ball. Hammer asked if the kid was at home, he was, so he called and said 'hey kid, this is your dad's boss speaking and I've heard you want daddy to come watch you play ball. Well, I've got a idea, how about I send you $100 and your dad stays here at the office today'.

DONE, the kid said.

Hammer then smiled and said, see, bribing kids is as easy as bribing adults, you've just  got to set the money right.

 

 

Thu, 04/16/2015 - 17:36 | 6000425 unicorn
unicorn's picture

imagine this guy surrounds himself with bought people, how safe can he feel?

.....

politicians, all bought, ..., oh no, i wont write this depressing stuff.

.

Thu, 04/16/2015 - 11:01 | 5998745 Rainman
Rainman's picture

' The more corrupt the State, the more laws '

            ~ another Tacitus favorite

Thu, 04/16/2015 - 11:02 | 5998748 new game
new game's picture

nothing is beyond the pale. if i didn't even know who the benank was would my life be 1 iota different? ha. apathy setting in...

Thu, 04/16/2015 - 11:06 | 5998757 venturen
venturen's picture

isn't there one freaking populous in this country. I mean Ted Cruz's wife works for Goldman, Christie wife works at a bond trading house....SOMEONE? Hillary is bought and paid for bitch of Wall Street. 

Thu, 04/16/2015 - 11:11 | 5998770 curbyourrisk
curbyourrisk's picture

Bernanke....meet Jon Corzine

Thu, 04/16/2015 - 11:13 | 5998779 Dr. Engali
Dr. Engali's picture

Good for him. A great man like Ben deserves to be rewarded for his heroism when he single handily saved our economy and society with the help of his magic printing press. If it weren't for him throwing years of malinvestment on the backs of those useless proles called the poor the banks would have collapsed and we wouldn't have people like the Goldman employees making $400,000 a year for doing nothing but extracting the nation's wealth to trickle down on us. I am grateful for Ben and those he enabled to piss on us and tell us it's raining.

Thu, 04/16/2015 - 11:20 | 5998813 Gypsy Ramono
Gypsy Ramono's picture

In 1943 Hitler launched "Operation Citadel" to capture one million Russian soldiers in the Kursk sailant. It went badly for the Germans, as the Russians were waiting for them to attack and they outnumbered the Germans 2.8 to 1 in men, 4 to 1 in artillary and 2 to 1 in tanks. 

Citadel might want to take a lesson from the Germans and revise their leverage of 7.4 before the inevetible bloob bath, but what the fuck do I know about finance! I am sure Bernanke will be able to convince his fuck buddy Janet to start up the printing presses and bail out Citadel.

Thu, 04/16/2015 - 11:27 | 5998859 Atlantis Consigliore
Atlantis Consigliore's picture

Everything is Awesome! Cue music..Paging Jenna...

$250,000 a mouthful rental rate...

Thu, 04/16/2015 - 11:32 | 5998874 Herdee
Herdee's picture

Bernanke and Obama along with their former officials did a really good job f desyroyong Detroit and various other major U.S. Cities and giving away everything to Communist China.Pretty funny when you see how good they're doing over there and then you look at their policies in the U.S. where you can't even get a pot hole filled and the majority of kids going to school go hungry.BASTURDS

Thu, 04/16/2015 - 11:38 | 5998892 JohnGaltsChild
JohnGaltsChild's picture

I think he may have joined 10 years ago.

Thu, 04/16/2015 - 11:50 | 5998937 Blopper
Blopper's picture

What?

7.4x leverage is considered high?

What about those leverage used in forex, like up to 500x?

Thu, 04/16/2015 - 12:44 | 5999192 Bastiat
Bastiat's picture

Awesome with the Tacitus quote, William.  There's a reason classics aren't taught anymore.

Thu, 04/16/2015 - 13:30 | 5999408 Monty Burns
Monty Burns's picture

+100

Thu, 04/16/2015 - 14:28 | 5999367 tahoebumsmith
tahoebumsmith's picture

Meanwhile Bernie Madoff grunts one out on the stainless steel wondering "Where did I go Wrong"?

 

Thu, 04/16/2015 - 13:42 | 5999473 Banker Buster
Banker Buster's picture

Interesting to say the least.  

 

Have you guys heard of "Los Pepes" the CIA operation that took place in Colombia.  To make a long story short, the Colombian government was so corrupt that they couldn't get Pablo Escobar (Colombian Drug Lord).  Because of this corruption, they created this vigilante group called Los Pepes who went around and assasinated the lawyers and others that did business with Escobar, they not only murdered these people but took out these peoples entire family: kids, parents, friends...  They did this because they wanted to send a message and make it so terrifying to do business with Escobar that no one would, thereby weakening his defenses which then ultimately allowed them to get Escobar.  

Thu, 04/16/2015 - 18:55 | 6000721 The Econ Ideal
The Econ Ideal's picture

Citadel, like the Fed/Treasury/US gov't, is just using the revolving door for the central planner-banker in the event of the very financial instability the lot create. Look for Bernanke to "manage" the next bailout to Citadel orchestrated with the help of the NY Fed, Treasury, and ultimately, every US taxpayer, asset holder, saver.

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