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In Dramatic Twist, CEO Of "Gating" Third Avenue Is Fired, "Not Allowed Back In The Building"
And just like that last week's junk bond debt fund liquidation and redemption suspension, which first struck at the mutual fund giant Third Avenue and promptly spread to a hedge fund launched by the former heads of distressed and high yield trading from, get this, Bear Stearns, and was supposed to be quietly buried, went front page and nuclear following a WSJ report that the CEO of Third Avenue, David M. Barse, who had been with the company for 23 years, has been fired.
The less than amicable "parting of the ways" follows the decision to gate withdrawals from its junk-bond fund which as we reported on Friday, roiled all asset classes, and sent junk bond prices to the lowest level since 2009.
The WSJ adds that a security guard at the firm’s New York headquarters said Sunday that Mr. Barse had been let go and isn’t allowed back in the building.
Mr. Barse had led Third Avenue since 1991, according to the company’s website, and is a large shareholder. He was the public face of the firm’s announcement Thursday that it was closing its $789 million Third Avenue Focused Credit Fund and would bottle up investors’ money for months or more as it tries to liquidate its assets.
The move roiled credit markets Friday and sparked widespread concern about other mutual funds with large holdings of corporate junk bonds.
Mr. Barse didn’t reply to requests for comment. Third Avenue and its representatives didn’t respond to requests for comment.
This dramatic escalation now means that every single hedge and mutual funds will spend all Sunday night and Monday morning trying to ferret out any bonds that are especially illiquid or are mispriced (based on the traditional hedge fund mismarking methodology of marking an illiquid bond pretty much anywhere one wants because in the absence of an active market, that's precise where the price is: anywhere). It also means that what was already an illiquid market will, paradoxically, get even worse as BWIC after BWIC slam trading desks, and cause panic as stunned PMs ask themselves just what cockroaches are hiding in their own balance sheets.
As a result, instead of looking for bargains, everyone will be eager to dump as much illiquid exposure as they can since nobody wants to be the next David Barse.
* * *
Finally, here are some final thoughts from JPM on what one should be on the lookout for as fund liquidations and gates suddenly become the entire story, ironically enough, in the week in which Yellen is supposed to hike rates to demonstrate how solid the economy is and how stable financial conditions are.
This week’s experience also exposes the major disadvantage of mutual funds relative to ETFs in terms of “first mover advantage” in periods of stress: with bond ETFs trading continuously during the day like equities and with prices able to deviate significantly from their end-of-day NAV, the first move advantage disappears. In other words this deviation from NAV represents the market mechanism by which the first move advantage is cancelled.
In all, redemption gates appear to be a rather problematic tool relative to other options such as redemption fees in the debate on how to prevent runs in the mutual fund industry in the future.
Another issue that arises from this week’s decision by Third Avenue Management to suspend redemptions from its Third Avenue Focused Credit Fund is about the cash levels of bond mutual funds. How healthy are these cash balances overall to prevent a more widespread repeat of Third Avenue’s redemption suspension?
ICI data allow us to calculate the cash balances as % of assets for both HG and HY bond mutual funds in the US. These cash balances are shown in Figure 4. The cash balances of HY bond funds had risen in September and October but they remain rather low by historical standards. HG bond funds look less vulnerable than HY funds, but they have seen steady erosion of cash balances since mid 2014. In other words HG bond funds look a lot more vulnerable relative to a year a go.
We look forward as first bond, then stock, then all other mutual funds seeks to shore up cash balances in the aftermath of the Third Avenue fiasco. Or, in other words, as everyone tries to sell at the same time.
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He should be happy he didn't fall out of the window, as they have tended to do recently.
What's the bet that a couple months from now, they'll reveal a secret FED injection to these funds who are up to there eyeballs in shit?
I think he was supposed to ask Mr Yellin for permission first
ex-CEO of Third Avenue, David M. Barse:
"What the fuck is this? You can't do this! This is Amerika!
Bankers and swindlers are immune from this crap.
What do you think this is?... China?
Call Jon Corzine and tell him to have his lawyer (and the in-his-pocket politicians) call me."
Exactly.
We need to find him another job immediately.
How do you expect for him to pay his mortgage and grow our bogus economy? I mean, GDP.
They took down his twitter too! Bastards!
https://twitter.com/dbarsetam
Credit based high yield is in big trouble.
Ohh gosh! How is he gonna keep up with Rihanna now?
Big Trouble in Little High Yield Debt!
He wasn't arrested. Nor is he penniless. This is exactly America. Fuck up real bad and get to retire with hundreds of millions of dollars. He can even come back to work 3 years after the next crash. Wall Street monkeys have incredibly short memories and tiny dicks.
"Mr. Yellen? Permission to go down on you sir?"
-Last words of David M. Barse
It won't work, word of that secret will get out especially if all of these funds have crap on their books and sooner or later someone will talk when it's done.
"He should be happy he didn't fall out of the window, as they have tended to do recently."
Oh hell no. He is going to be Corzine's right hand man at myRA.
Maybe he will decide to nail the window sash back on with a nail gun. One can only hope.
Died trying to nail the window and the elevator shut with a nail gun. Dam the irony.
Monday is going to be nasty.
If Monday were going to be nasty it would have started already.
I don't wanna be David Barse either. I wanna be Spartacus
It's as if a thousand Junk Bond Funds cried out in terror and were silenced.
+bazillion for the reference ..... I hope this isn't serious....
http://www.breitbart.com/tech/2015/12/11/star-wars-is-garbage/
I'm a really gettin' tired of Propaganda in movies.
I wanna be Richard Corey.
Money checks in, but only the CEO checks out.
i like the nail gun firing much better.
ya, me too. just think, it kept tsfromhtf for 3-4 yr.
Wow, someone at the top actually got canned. I'm stunned.
Yes, but not for being a 0.01% pig at the trough. He was canned for refusing to play along with extend & pretend like everybody else.
Fired, unfortunately.
Unfortunately because he was NOT jailed -or hung on a hook like a deli sausage ring.
There might be legal violations by the two Bear Stearns alumni running the fund, but this guy was just the suit upstairs -- far away from the trading floor.
CEO deserved to get fired. On Wall Street you are only as good as last quarter, and this one was a disaster.
But direct your legal bullshit at the people who actually ran the fund.
homie should avoid nail guns too.
Really? He got fired? Whoop d' fuckin' doo. Can someone please put me in charge of hundreds of millions of dollars so I can syphon off the top for 20 or so years and then just send me home? Pretty please?
The man has devoted half his life to promoting high-yield corporate junk bonds, and now it's all over in one soul-crushing instant, and you make light of his situation? I'm sure he'd surrender all his material wealth if he could regain his professional reputation.
How the Hell is he going to tell the wife & kids? How's he going to face the guys at the club? His life is over, and you make jokes.
parasite's gotta eat, same as worms........
Parasites should be fed.
...LEAD.
You make him sound so majestic and altruistic. If he was that fucking good he should have not found himself on that ground to start with. He should have seen it coming and wound it down before it got out of hand, but greed has a funny way of blinding its victims to the fast approaching source of their impending doom.
Next, I am pretty sure there are still plenty of presents under that family's Christmas tree, and abundant and tasty food in their fridge. As for his reputation, these guys are like turds that never flush. They always find another gig and more money to manage.
Frankly, this whole shit show simply sickens me. Watching this slow motion train wreck (which never really seems to actually wreck) is mind-numbingly painful to endure and exhausting to plan for. Sooner or later this thing is going to get bigger than they can really control/contain, and when that moment finally comes you will start to see the jumpers, tail pipe suckers, and bullet-flossers come out in earnest, because you know there is another Madoff (or 3) buried somewhere in this steaming pile of shit we call a market.
So no, I am not playing the violin for this guy today (or any day). Hopefully he hedged accordingly in his personal finances is about as far as I will go on that front.
"The man has devoted half his life to promoting high-yield corporate junk bonds"
Therefore he had no professional reputation to be impugned. I doubt he would surrender a penny to save his mother.
Seriously, have you recently defrosted from 1920? He ran a firm, which if similar to other financial institutions, fired employees on the premise that you are only as good as your last quarter performance. Why should he be exempt? Reputation, honesty, honour, morality, conflict of interest and ideals are jokes to them, replace by greed, avarice and selfishness long since you and I were born.
The sad part of the whole deal is that he will sneak into the high life again with another scam. The probability of you tossing a quarter into his cup at a street corner near you is zero. Not with his CV.
How did he ever look himself in the mirror when he devoted his entire life to slinging junk bonds? The white man's crack rock! What a waste of a life if you ask me.
He spends his whole life peddling junk and expects sympathy?
On wall street, you are as good as your last trade homey... FACT
What are you are talking about, his life is not over , he will not be working in casino for a while, so what ? He already made a fortune, he doesn't need to work again and he has enough money for himself and his family. How about the innocent people who purchased these illiquid bonds and they will lose all their savings ?
itstippy - this is /sarc, right? Usually I can tell, but some of you guys are really good.
The force (of sarcasm) is strong with this one.
"In all, redemption gates appear to be a rather problematic tool..."
Speaking of problematic tools (e.g. Dimon, Blankfein, etc.)...
It was an easy choice for Barse to make. EIther leave quietly, through the door, or leave through an upper story window.
So 2010.
Open elevator shafts are the better way.
I'll take Gating leads to SpapeGoating for Billions Alex.
If all these fuckers were jailed back in 2008 like they should have been, we wouldn't be looking at the crack-up we're seeing now.
Was Barse running the HY fund that blew up on 3rd Avenue? Nope, it was two guys from Bear Stearns (seriously, look it up).
Bernanke and (Trsy Sec) Paulson gave the Bear crowd (and Lehman and...) a free pass. Paulson got to sell his Goldman stake tax free. Bernanke gets to sell speeches for $200K each. And Geithner, having looted the NY Fed to bail out AIG, got himself a defacto pardon for tax fraud. The new president went out (with the wicked bitch of San Fran) and committed massive insurance fraud.
With that track record, Washington DC couldn't very well prosecute bankers.
...and the zombie banks allowed to go bankrupt.
Mr. Barse had led Third Avenue since 1991, according to the company’s website, and is a large shareholder...
is? really? he didn't dump his stock before the collapse like all the other maggots?
what a maroon! [/bugs bunny]
No cockroaches in my junk!
maybe that's why he got fired. for dumping his own portfolio, and making the fund look even worse.
Anybody seen nodebt? Lately?
Hey! Wait a minute...
That's worth logging in for just to up vote!
Nail gun Nelly time
Well after a few.months he can write a book and explain how no one could have seen it coming and no one is to blame yadayadAyada.
This reminds me of China awhile back.Gating is fine but it is still a bank run which means
when you reopen the doors there's gonna a stampede.This whole problem comes down to
toxic derivatives.Because they are sold over the counter there is no worldwide exchange or
registry where people can look at a board and see how healthy a firm is.There will never be
complete and honest disclosure as long as companies like Enron can off-balance sheet their
problems.How old is the process of keeping two sets of books?
The reason why people are being taken behind the woodshed is image: Mutual funds are supposed
to be low risk. (Ergo,if these aren't safe then what are safe?)
BWIC?
HG keeps more cash the HY. that's some funny shit right there. not only are they not prepared for a run but they have no cash to take advantage of buying opportunities. egad, and here i thought stock traders were on the short bus.
I think there are still a few stinky turds out there.The next few weeks are going to be interesting.
Get out the bags of popcorn.You are gonna need them....
He did the right thing.
I was about to write the same thing. He probably did do the right thing for his company from a fiduciary perspective. Unfortunately, he found out the hard way that, as small as his company is relative to the bigs, it's still enough to create a potentially cascading panic that collapses the whole house of cards.
The lesson learned here is that no financial flea shall be allowed to fart out of line...ever.
Way,way back in time Barings blew up because of a trader at the Singapore exchange trying to trade his way
out of a hole.My point is there were late night screaming sessions in the Barings boardrooms about exec's
golden parachutes,until finally the Heavies from the City of London marched in and said it is over.Sold to the Dutch for
$2,lock,stock and barrel.There are really good books out there discussing "Cognitive Dissonance",but it was a pretty
good example. Never worried about shearing the muppets,but when it comes to THEIR salary packages,"Hang on there!".
This just in. Barse tragic end. After voluntarilly leaving the building it seems Mr. Barse visited his local watering hole. Bartender says he seemed fine, had two drinks and called a taxi. He was found dead after what the medical examiner says was a severe heart attack.
Kind of hard to beat an index that is by definition 100% invested with an active fund that is holding 10% cash . . . .
Wall Street: The New Roach Motel
I will bet that portofolio was chock full of commodities futures,and oil longs...
Next stop Puerto Rico....
More scum to add to the list:
http://thirdave.com/who-we-are/people/management/
Barse will be OK: From the above bio:
Prior to joining Third Avenue in 1991, Mr. Barse had a distinguished career in bankruptcy and corporate law.
There you go, demand will be up for bankruptcy lawyers...
"cockroaches are hiding in their own balance sheets"....well when you engage in dishonest accounting what do you really expect to find? NON-GAAP won't save your ass in this debacle.
Over valued assets. That is some funny shit. Why not just say totally false assets? Oh, right.
The problem with Casinos is one has to have sufficient resources to stay at the table until your luck changes if
ever.The people hurting now in the oil states could stand a few month downturn,BUT NOT LIKE THIS.
The Saudis are giving them a royal ass reaming while their Congress critters stand by and watch.
("Let the market decide!").The real joke here is that by gating redemptions they are implying there is still
some value left in the fund (not).Isn't this what happened to the depositors in Cyprus?
Wake up Monday morning and half your life saving evaporated (stolen) because you had it in an electronic account
instead of buried in a coffee can in the backyard?
People will start to understand why gold/silver will never be a relic...This world will always be run by crooks so gold/silver is the only real option at this point.
Wow, DOG, SDS, and PSQ might finally go up for the first time in forever. Whoopie!
Same Bear Stearns portfolio managers get recklessly over-leveraged (again). Same Americans buy over-levered dot-com subprime crap from the same BS portfolio managers, expecting to get rich overnight.
Too much debt causes massive collapse of artificial prices decreed by central economic planners at the Federal Reserve.
Angry dipshit mob blames someone else, then wonders why the same Bear Stearns guys get to run more portfolios into the ground. Same over-hyped talent-less central economic planners recommend Americans go even deeper into debt, even though no one can pay existing debt. "now is not the time to repay debt!" the central planners screech.
The solution to excessive debt and economic collapse is always (1) even more debt, (2) don't blame the politically connected, and most important (3) do not question the central economic planners who caused the mess. Jail the symptoms of the disease, not the cause.
That is the real "Amerika"
For a good time, call JPM's mutual fund wholesalers tomorrow and ask them what they think of JPM's IB analysis of mutual fund weakness vs. ETFs. What an interesting Monday morning market call that will be.
Do it and report back.
I dare you.
I see S&P futures are being bought again by FED agents to prop up the stock market again......
I guess they think that since that has been working for years now, that it will innoculate against bond market contagion....Good luck with that......
The man is right....interest rates are going up, with or without the FED.......
What time do the bankers start jumping out of windows?
Might need to hire some seasonal extra help down here...
Seasons greetings indeed.
Maybe for once a banker was trying to do the right thing for his clients and company but in the process risked tipping over the whole financial Ponzi?