Having previously explained the 175,846,629,768 reasons why former Fed Chair Ben Bernanke would join Citadel - the most-levered hedge fund in the world and alleged conduit of fed put protection; we thought it intriguing to note what billionaire Citadel Ken Griffin had to say about Bernanke and his policies just 2 years ago...
It is almost too coincidental to be a coincidence: on the day Ben Bernanke, who until a year ago was the biggest fixed income portfolio manager in the world courtesy of the Fed's $4.5 trillion in assets, joins Citadel as an advisor, the massively levered "market-neutral" hedge fund which as we showed earlier has $176 billion in regulatory assets, "loses" its global head of fixed income, senior managing director Derek Kaufman. Well not exactly loses. The reason for his "voluntary" departure: according to Bloomberg Kaufman is leaving Citadel not because he is about to be replaced by the former Fed chairman but because last year he lost $1 billion "in a variety of trades."
"The Markets Group at the Federal Reserve Bank of New York manages the size and composition of the Federal Reserve System’s balance sheet consistent with the directives and the authorization of the Federal Open Market Committee (FOMC), supports debt issuance and debt management on behalf of the U.S. Treasury, provides foreign exchange services to the U.S. Treasury and provides account services to foreign central banks, international agencies and U.S. government agencies. Markets Group is establishing a presence at the Federal Reserve Bank of Chicago and has openings for both experienced professionals and recent graduates.
Now that the World Cup is over, and following last week's global macro reporting slumber (aside for the Portuguese risk flaring episode of course), things pick up quite a bit in the coming week. Here are the key events.
Now that both the FBI and the DOJ have woken up from a half-decade slumber realizing there was riggedness, RIGGEDNESS going on in these here stock markets courtesy of Michael Lewis' book, it wasn't long before those most impacted by the frontrunning startegies of HFTs spoke up - anyone who has lost money in the stock market since Reg NMS was conceived. Sure enough, in a lawsuit that was just filed by lead plaintiff William Charles Braman, seeking class-action status, and filed on behalf of all users of real-time futures market data and futures contracts listed on the CBOT and CME from 2007 to now, the CME is allegd to have sold order information to high-frequency traders ahead of other market participants.
The Fed Engaging In Quantitative Easing Until Unemployment Falls Is Like a Medieval Doctor Bleeding a Patient with Leeches ...Submitted by George Washington on 05/01/2013 19:19 -0400
While 88% of hedge funds underperformed in 2012, no doubt relying on tried and true analysis of fundamental valuation, macro-economic trends, and flows (as opposed to a 12-inch ruler), it would appear one young chap by the name of Ken Griffin is doing rather well. As Bloomberg reports, the Citadel LLC fund founder (now gated since 2009) just purchased his second luxury oceanfront property in Palm Beach Florida in less than two months. In fact, Griffin bought the two lots for a total of $79.6mm. The compact-and-bijou house of a mere 6,055 square feet was built in 1988 and previously sold for $29mm in May 2011, was Zestimated at $33.75mm (by Zillow), meaning Mr. Griffin only 'overpaid' by a mere $8mm as he snipped it up a smidge under $42mm. The grander house, of a perfectly reasonable 9,111 square feet previously sold for $20mm in May 2000, was Zestimated at $21mm, and was bid at $38mm by the deal-making Citadel founder. It seems, given Citadel's 21% return through November, that being the Fed's alleged willing HFT-router-of-last-resort in times of 'market' need, has its handsome rewards - though all that sand would just get annoying.
On the surface, the fact that NYSE short interest was just reported today to have risen to 13.1 billion shares as of April 30 could be troubling for the bears, as this just happens to be the highest short interest number of 2012. Indeed, an increase in short interest into a centrally-planned market is always disturbing, as it opens up stocks to the kinds of baseless short covering melt ups that simply have some HFT algo going on a stop hunt as their source, that we have seen in the past several weeks. Naturally, it would be far easier to be short a market in which Ben Bernanke managed to eradicate all other bears, especially when considering that a year ago the Short Interest as of April 30 was virtually identical.
No, it is not that redemption gates are coming up again, or that the firm has lost half (or all) of any given team to some other firm that actually doesn't think it is an investment bank-HFT-options-distressed debt conglomerate (ironically Citadel is one of the last investment banks that is not a bank holding company.... when everyone else is a bank holding company...that's ok - Kenny has the balance sheet... until he doesn't), or that it may actually be above its high water mark for the first time in over 2 years... Instead, Ken Griffin recounts the wise words of his first investor and Citadel founding inspiration - grandma Gratz: "While Citadel is remarkably different from what it was 20 years ago, my core vision remains the same, defined by the attributes that my grandmother exemplified - strong character, courageous action, and honor in all her business dealings. These enduring values have underpinned our success and will carry us into the decades to come." Well, when you can't boast with P&L, which is what you actually are paid for, you can at least regale them with stories of your great grandfather's mustache.
GATA must be gulping hard as Goldman, GETCO, Citadel, MS, UBS & DRW announce the purchase of minority stakes in NYSE Liffe U.S., which administers 100 oz. gold futures, 5,000 oz. silver futures, options on gold and silver futures, and mini-sized 33.2 oz. gold and 1,000 oz. silver futures. The long-suspected ringleader of silver futures short-sided shenanigans, JPM, was conspicuously absent from today's NYSE press release. David Simon himself (The Wire) couldn't write a seedier script of flagrant fraud and regulatory remiss.
Black River Asset Management, which according to Hedge Fund Alert "runs many funds and at one time had $10 billion under management, [and] was hit with a slew of redemptions requests last year," has employed a spin on the reverse auction process utilized by other formerly reputable funds such as Golden Tree. The Cargill affiliate, trying to appease a wave of March 31 redemptions, has told investors to submit the largest discount they are willing to accept for their shares.
The stampede of Citadel clients who have been eagerly waiting to pull their money (which, despite a 4.95% up January, is still worth roughly 50 cents on the dollar after last year's performance) will be let loose any day now. Bloomberg reports that in a letter to investors, Kenny Griffin has realized that it is beneath any self-styled master of the universe to keep cash locked up despite loud protests to the contrary.