The Greek Fallout Shatters US 'Get-Rich-Quick' Hedge Fund Dreams

Tyler Durden's picture

It's not all Aston Martins and Brioni suits for hedge fund managers this year. As Bloomberg reports, "It’s a confluence of tricky markets, super-cautious investors and a tough fundraising environment that’s making it a difficult time for hedge-fund managers." The latest addition to the 775 funds that were shuttered last year (the most since 2009) sees California-dreamer Paul Sinclair liquidating his $458mm health-care equity fund as "political decisions made on the other side of the globe have undermined his stock picks and spurred losses for a second year." Physically and mentally exhausted from his travails (planning to spend the summer sleeping and relaxing), Sinclair joins the wannabe likes of Zoe Cruz and three ex-Moore Capital managers, as he honestly notes "I don’t have an edge on Greek elections, the Spanish banking system, what the European Central Bank, the International Monetary Fund, the Chinese government, Angela Merkel, or the U.S. Federal Reserve will do." It seems an increasing number of masters-of-the-universe are awakening to what retail seemed to figure out over the past few years - that everyone's a hero in a central-bank-liquidity-driven rally - and as one other hedge fund manager noted in his investor letter "Markets seem to be driven more by the latest news out of Europe than by a company’s earnings prospects, we have not weathered the ensuing volatility well." Once again correlations are rising - 30-day correlation coefficient between the MSCI World Index and its members is 0.92, compared with the average since 1995 of 0.73 - as all that over-priced alpha is shown up as 'central-bank' beta.

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Colombian Gringo's picture

Message to the hedge fund community: No Alpha, no pussy <g>

Unprepared's picture

But can a beta male still get some love?

sunaJ's picture

Maybe in his circles, everyone is concerned about Europe (as they should be), but on Main Street it is DWTS.

 

CommunityStandard's picture

Climate change is so last decade.  Top trending now is #RihannasBox.  Get with the times.  /sarc

Colombian Gringo's picture

As it should be, since climate change is a fraud but Rihannas box is real.

CommunityStandard's picture

Haha!  Though I might need an Al Gore movie to be fully convinced of its existence.

YuropeanImbecille's picture

I can't believe that people on ZH still believe in the fucking man made climate change scam?

 

Of course the weather is changing, as it has done for millions of years (and quite dramaticly if I may add). 

Fucking hippies ruining the lives of decent people with their "carbon taxes" and other idiot ideas.

I know I will get 400+ red little arrows, BUT FUCK YOU, YOU TREEHUGGING FUCKING HIPPIES!

hedgeless_horseman's picture

 

 

"political decisions made on the other side of the globe have undermined his stock picks and spurred losses for a second year."

Message to long-only equity funds from Tim Geithner, "Fuck you, I am a genius!  Just look at my borrowing costs."

America is paying its bills with the tears of Europe.

knukles's picture

 

Said decisions cratered a.....

Health Care Fund

My ass

 

What horseshit

AlaricBalth's picture

Todd, Lighten up and go find Lisa.  :-)

http://www.hulu.com/watch/4104

Classic Bill Murray-SNL

williambanzai7's picture

Funny, I thought earnings prospects were no longer relevant either because robots don't give a rats ass.

SemperFord's picture

Why don't these Hedge Fund managers get together and buy precious metals???

junkyardjack's picture

Hard to get paid a performance fee on negative returns...

zilverreiger's picture

then the cftc will suddenly complete their investigation, and put limits on positiion size

knukles's picture

Yeah, limit size of longs, unlimited shorts netting to the benefit of Blythe.

And I don't mean Eastman Dillon.

Zola's picture

HFs (non insider trading ones) are the last non crony capitalists in finance. No wonder they suffer when the banks get bailed out constantly and the central banks kill and manipulate the free markets.

junkyardjack's picture

Exactly, I'm not sure why hedge funds are now getting bashed on here.  Its like most of the commenters just don't want to see anyone else be successful.  Hedge Funds aren't getting bailed out, they are placing bets and if they win they make money.  You can tell there area  bunch of poor people in here as they despise anyone that can earn a living

CommunityStandard's picture

Agreed - at least they are allowed to fail.  However, investors serve a purpose in an efficient economy - to invest in businesses and help them grow.  HF don't invest - they place bets.  If all investors took their money exclusively to the casinos every day, we'd certainly be trashing that behavior.

On the other hand, this behavior is a symptom of the central bank inference and poor policies from the government.  Solve this problem, and real investors will return.

CvlDobd's picture

All your investments are bets.

All mom and pop investments in GEVare just bets that it is a good company that will be there for the long haul. Gambling, investing, placing bets, scratching lotto cards, buying powerball tickets are all synonymous.

gjp's picture

It's the leverage and high turnover that make the betting culture a problem (and the fee structure that incentivizes this behavior).  Make a long-term bet on a new factory, software development, etc and manage that to deliver long-term returns, then you have productive capital management.  Taking highly-levered risks on complex (fictitious?) financial products and whipping in and out of them with the whims of the market is quite the opposite.

CommunityStandard's picture

Not true.  If you have an idea, and I give you money to turn it into a business, that is an investment.  Yes, it is also a bet on your success, but you are producing something of value with it, you can employ people, and your idea has the potential of improving society.

If I buy an option on an ETF, I am simply betting on its movement.  The money sits around and produces nothing.  It is a pure bet, and not an investment.

Ghordius's picture

+100% correct.

The correct terms are:

 

Investment: buying an asset because it will generate a revenue stream

Speculation: buying an asset because it will be more worth in the future

 

The reason for this popular confusion is the stock market full of "growth" shares that won't pay out dividends.

Further, speculation is often the major cause of bubbles, particularly because you can't judge the performance based on the revenue stream.

I am a Man I am Forty's picture

I think what people are annoyed at is that some of these guys are getting billions and billions of dollars from pension funds because the pension funds are corrupt, making 50M a year, and can't even beat an index.  And the fact that they have somehow convinced anyone that they are worth a 2% fee and 20% of the winnings.  Sure, a few out there are, but 95% are not.  Good luck finding that 5%.  I like Bridgewater, Kyle Bass, and Seth Klarman and that's about it.

tocointhephrase's picture

The heart bleeds, Tyler!

Skateboarder's picture

If your job was to moving around money in ways that made you richer and someone else poorer, and that made you richer than someone moving around something real (say tomatoes... or garbage), then you probably didn't do anything real and therefore didn't earn anything real (nor did you deserve it). Hope all the hedge funds die, and along with them the corrupt markets they hedge on. Fuck people who don't do anything and get rich by being in the right place at the right time, doing wrong things...

Unprepared's picture

There was a time when hedge funds had some real role to play in capital allocation and closure of market gaps, however marginal that role may have been.

Today, the majority are just Dinosaurs before the commets shower.

Apply Force's picture

Agreed & hope Paulie boy is "sleeping and relaxing" in a box under a bridge somewhere this summer.  Would be a great summer should reality re-assert itself & nature revert to the mean...

pashley1411's picture

Just a basic reading of Hayek will tell you that when markets come under the thumbs of the political class, valuations will soon be made on a political basis, not a profit-loss basis.

Hedge funds aren't wrong.  But in an age when the politicals have slipped their leashes, instead of reading Barron's, HF's need to read HuffPo, the Nation, the NYT, and other such effulent, for the latest fad.   Or start showing up at Obama fundraisers.

GeneMarchbanks's picture

eventually valuations are made on a political basis, not a profit-loss basis.

Uhm, hate to burst your bubble but those two are one in the same. The only question being how that political basis operates. Presently, they're not fairing too well anywhere you look.

Spitzer's picture

Ummm, wrong.

Stock prices are not reflecting real value. Mining stocks for example

GMadScientist's picture

How's your "one Zooro to rule them all", Spitz?

LOL

junkyardjack's picture

How many hedge funds go out of business on average every year? Aren't there like 8,000 of them? Wouldn't they all have some excuse why they failed

Big Corked Boots's picture

Well, it's all F250's and Carhartt suits for me, bitchez.

KarlGDenninger's picture

not me. Im getting out. Just sold all 80 million shares of bank of america. You know what the boys in the pit below me like to say, prune in june. Buy in july!

KarlGDenninger's picture

not me. Im getting out. Just sold all 80 million shares of bank of america. You know what the boys in the pit below me like to say, prune in june. Buy in july!

Bam_Man's picture

Trying to front-run the front-runners with the inside information is a losing game. Retail had this figured out two+ years ago.

KarlGDenninger's picture

Your right. The boys did 7 million in the pit yesterday. I said if we hit 5 million we would all go out for pizza and beer. The boys were pumpin there fists in the air and hootin and hollering after we hit our goal. Our supercomputer on the 3rd floor accurately forecasted the market perfectly.

epwpixieq-1's picture

and my distributed/super app ( pardon virus ) running on your smart ( pardon dummy ) phone is getting me some fee CPU cycles for my personal super computer forecasting and of course not only that ...

walküre's picture

Paul Sinclair liquidating his $458mm health-care equity fund

How is he liquidating? Who is buying his positions?

The scheisse muffin started when the Fed didn't announce QE3 last year after QE2 expired.

Some are still hoping, praying, salivating over QE3 coming soon.... Keep dreamin'

the 300000000th percent's picture

no free lunches bitchez!

El Viejo's picture

"- that everyone's a hero in a central-bank-liquidity-driven rally"

So why do the sheeple bad mouth Bernanke???

 

I am a Man I am Forty's picture

those high water marks are a bitch, aren't they?  better off to just shut the fund down and start from scratch, better chance in getting that 20 and not just the 2.

mendigo's picture

"super-cautious investors" - more like the few left with means and have not swallowed the date-rape pill.

slewie the pi-rat's picture

you had me at zoe and sinclair

that fungicide is gonna run in the beta breakers again this quarter

screwed down tight is the forecast

the alpha pig-men are gonna love peanut butter and baked potatoes and hard-boiled eggs with sun tea, too;  they will be in solidarity with slewie

the only oscillators left for the flagellators are over-risk0n  and over-risk0ff and they are painted for the moronic, too

and the builld-up of cesium in the food chain, of course...  the ecosytems i visit on a daily basis seem to be loving the bequerels;  so far, so good;  the half-life of cesium137 is 30 years and fuk_u is about 15 months old

i don't believe they have yet figured out how to safely dispose of the first thimble-full of toxic nukuler waste ever produced, have they?  but we can be assured that best minds in "science" are working on the problem and sparing no expense which can be socialized while they are fuking at it, too

GMadScientist's picture

The best minds in science would tell you that nukes are an expensive jobs program with sideline benefits to the healthcare industry.

Of course, they'd also tell you that conservation+renewables would allow us to tell the ME to summarily fuck itself and save hundreds o'billions per year on dropping Johnny where he's not wanted.

"Starving hysterical", as the fat gay poet said.

c-rev with a twist's picture

This is because these are not hedge fund managers.  These are mutual fund managers masquerading as hedge fund managers.  Were they actual hedge traders, they would be hedging one market against the other, or volatility against another equity index.  All of these lemmings deserve to go under.

W10321303's picture

Obama's NEW WORLD ORDER/The FIANAL SOLUTION

http://citizenstrade.org/ctc/wp-content/uploads/2012/06/cppinvestment.pdf

The newly leaked document is one of the most controversial of the Trans-Pacific Partnership trade pact. It addresses a broad sweep of regulations governing international investment and reveals the Obama administration's advocacy for policies that environmental activists, financial reform advocates and labor unions have long rejected for eroding key protections currently in domestic laws.

Under the agreement currently being advocated by the Obama administration, American corporations would continue to be subject to domestic laws and regulations on the environment, banking and other issues. But foreign corporations operating within the U.S. would be permitted to appeal key American legal or regulatory rulings to an international tribunal. That international tribunal would be granted the power to overrule American law and impose trade sanctions on the United States for failing to abide by its rulings.

 

falak pema's picture

 

...US 'Get-Rich-Quick' Hedge Fund Dreams...

Ah, I thought these guys were the salt of the earth, the beacons of new capitalism, the guys who drew their guns faster than their shadows and hit bulls-eye every time, alighting the torch of triumphant capitalism. Even they have fears of biting the dust, their quest ephemeral self interest, not to save home of the brave and land of the free. What a let down, and...they do have tickets on the Titanic! 

 

 

W10321303's picture

    All HAIL the EMPEROR JAMIE!

ore than $4 trillion in near zero-interest Federal Reserve loans and other financial assistance went to the banks and businesses of at least 18 current and former Federal Reserve regional bank directors in the aftermath of the 2008 financial collapse, according to Government Accountability Office records made public for the first time today by Sen. Bernie Sanders.

On the eve of Senate testimony by JPMorgan Chase CEO Jamie Dimon, Sanders (I-Vt.) released the detailed findings on Dimon and other Fed board members whose banks and businesses benefited from Fed actions.

A Sanders provision in the Dodd-Frank Wall Street Reform Act required the Government Accountability Office to investigate potential conflicts of interest. The Oct. 19, 2011 report by the non-partisan investigative arm of Congress laid out the findings, but did not name names. Sanders today released the names

“This report reveals the inherent conflicts of interest that exist at the Federal Reserve.  At a time when small businesses could not get affordable loans to create jobs, the Fed was providing trillions in secret loans to some of the largest banks and corporations in America that were well represented on the boards of the Federal Reserve Banks.  These conflicts must end,” Sanders said.

The GAO study found that allowing members of the banking industry to both elect and serve on the Federal Reserve’s board of directors creates “an appearance of a conflict of interest” and poses “reputational risks” to the Federal Reserve System.

In Dimon’s case, JPMorgan received some $391 billion of the $4 trillion in emergency Fed funds at the same time his bank was used by the Fed as a clearinghouse for emergency lending programs. In March of 2008, the Fed provided JPMorgan with $29 billion in financing to acquire Bear Stearns. Dimon also got the Fed to provide JPMorgan Chase with an 18-month exemption from risk-based leverage and capital requirements. And he convinced the Fed to take risky mortgage-related assets off of Bear Stearns balance sheet before JP Morgan Chase acquired the troubled investment bank.

Another high-profile conflict involved Stephen Friedman, the former chairman of the New York Fed’s board of directors. Late in 2008, the New York Fed approved an application from Goldman Sachs to become a bank holding company giving it access to cheap loans from the Federal Reserve. During that period, Friedman sat on the Goldman Sachs board.  He also owned Goldman stock, something that was prohibited by Federal Reserve conflict of interest regulations. Although it was not publicly disclosed at the time, Friedman received a waiver from the Fed’s conflict of interest rules in late 2008. Unbeknownst to the Fed, Friedman continued to purchase shares in Goldman from November 2008 through January of 2009, according to the GAO.

In another case, General Electric CEO Jeffrey Immelt was a New York Fed board member at the same time GE helped create a Commercial Paper Funding Facility during the financial crisis. The Fed later provided $16 billion in financing to GE under this emergency lending program.