Today's Top Stories Editor's Corner: Which financial deal is the worst in history? Also Noted: Progress Software News From the Fierce Network:
Today's Top News1. Short seller offers to pay for Olam credit rating
Muddy Waters has struck again, this time against Singapore commodities trader Olam, which plunged in the wake of a negative report from the increasingly well-known research and trading outfit. This time, Muddy Waters, led by Carson Block, has come forward with a new tactic. It has publicly offered to pay for Olam to have its debt rated by a credit rating company, in this case Standard & Poor's. The offer highlighted the fact that the company's debt currently is not rated by such a firm. "Olam now has no good reason to avoid having its debt rated. Should it continue to refuse a rating, investors should wonder whether the company is worried that a rating would mortally wound it by making clear that the market has been underpricing its risk," wrote Muddy Waters in its report. Some advocates of credit rating reform have suggested that having investors pay for credit rating services would be superior to the issuer-pays-for-their-own-ratings system that we have now. Certainly, it takes out the main conflict of interest. In this arena, Muddy Waters is on high moral ground, as Olam runs the risk of appearing as if it has something to hide if it doesn't agree. Muddy Waters has issued a deadline of COB December 5 for Olam to agree to the offer. Olam is not likely to take the company up on its offer. Instead it has been playing up the fact that it was audited by Ernst & Young, which has said it stands by its audit. For more: Related articles: Read more about: Short seller
2. Cohen deposed by SEC earlier this year
The Financial Times notes that Steven Cohen was deposed by the Securities and Exchange Commission earlier this year, where he delivered his first (and only) explanation for SAC's controversial trading in shares of Elan and Wyeth before the companies announced negative clinical drug trial results. Cohen told investigators that he made the trades because he was simply no longer comfortable with the positions. "Cohen's memory was otherwise vague and that he could recall few details of the content of a 20-minute phone conversation, held in 2008, with Mathew Martoma, the portfolio manager who allegedly told Mr Cohen he was not comfortable with the position," FT reported. Martoma of course was recently arrested and charged with criminal insider trading. He was highly sought after as a witness against Cohen, but so far, he has refused. The FT notes that at least two other SAC employees were interviewed by the SEC. One was Phillipp Villhauer, Cohen's "head trader." The next milestone in this saga will likely involve the SEC filing civil charges against the hedge fund firm and possible Cohen himself. Jail time will not be an issue, but it's quite possible that investors will start to trickle away. As for criminal charges, as of now, Martoma seems to be standing firm, though the chances of a long prison term may change his mind. He is free after posting a $5 million bond. Cohen remains the Teflon Trader as of now. It's going to be hard to make criminal charges stick without Martoma or someone else. For more: Related articles: Read more about: SAC Capital, Criminal Charges 3. Technical analysis reborn as "The Math of God"
You can be forgiven if you assumed that technical analysis was dead. The sell-side has been cutting back in this area for years, some of the predictions fell flat, and much of the industry has trended toward rigorously quantitative approaches, driven by Ph.Ds in math and science, which seemed to make chart watchers look like tea leave readers. But the Washington Post reports that a renaissance is underway among technical analysts, led by Tom DeMark, who has grounded his analysis in Fibonacci numbers the Golden Ratio. He has attracted a crowd of devotees, including hedge fund managers such as Steven Cohen of SAC Capital, Paul Tudor Jones, Leon Cooperman and others. One of them was quoted as saying, "When I use DeMark's work, I feel like I'm wielding Thor's hammer." Another said that, "This mathematics is embedded in the structure of the universe. It is the language of God." That might be going a bit overboard, but it's clear that DeMark has hit some sort of nerve, as have other technical analysts. The fact that the markets are so much more correlated, in the wake of the financial crisis, may have a lot to do with it. It seems like a new generation of technical leaders are emerging, to replace the old guard, which some see as somewhat discredited. For more: Read more about: technical analysis 4. JPMorgan CIO unit "a secret hedge fund"
A few years ago, the notion came into vogue that Goldman Sachs was one giant hedge fund. Company executives hated the concept, and I would have to agree that the Goldman Sachs in its entirety was far from a hedge fund. Still, it would be hard to deny that proprietary trading and trading more generally has come to dominate the company. Given the reliance on trading, it's easy to see why the description seemed to stick. Perhaps the description is more apt when it comes to the JPMorgan Chase pre-London Whale implosion CIO unit. A new class action suit charges that the bank turned the ill-fated unit, which on paper was supposed to hedge against other risks held by the bank, into the equivalent of a hedge fund. Finextra notes a class-action complain filed last week in New York that alleges JPMorgan CEO Jamie Dimon "secretly transformed the CIO from a risk management unit into a proprietary trading desk whose principal purpose was to engage in speculative, high-risk bets designed to generate profits." The suit also claims that "JPMorgan senior management made a conscious, strategic decision to use the CIO for proprietary trading in pursuit of short-term profits." The plaintiffs include the Arkansas Teacher Retirement System, Ohio Public Employees Retirement System and the state of Oregon. So what to make of this? One of the more interesting questions that has yet to be resolved is just what the disastrous trades were hedging against. Some think they were legitimate economic hedges, but the view that that they were hedges in name only and meant to generate huge returns has proven persistent. The discovery process in this suit just might turn up some very interesting information. For more:
Read more about: London Whale, JPMorgan Chase 5. Citigroup's chairman on the hot seat
For years, shareholders have been asking boards to step up and aggressively confront management on key performance and other issues. In the case of Citigroup, critics of the management ostensibly got what they wanted when Chairman Michael O'Neill ousted then CEO Vikramn Pandit in a clumsy power play that earned lots of negative press for the board. O'Neill also hand-picked Pandit's successor, Michael Corbat. While the CEO is place, it would appear that the real puppet master at the bank remains the chairman. Reuters puts it bluntly: "O'Neill, 66, is effectively running Citigroup." That may be an overstatement, but you can bet that he has the upper hand in the always tricky chairman-CEO relationship. But is O'Neill qualified to run a global bank of the scale and complexity as Citigroup? Citigroup once considered O'Neill as a candidate to run the bank but ultimately decided that he didn't have right experience, as he had only managed small banks in the past. He was, however, deemed qualified to serve on the board, even as chairman. "It remains far from certain that O'Neill can use the methods he has previously used to turn Citi around. It not only dwarfs Bank of Hawaii but is also seven times as large as BankAmerica was in 1997, when O'Neill was that bank's chief financial officer. Citigroup is also vastly more complicated and has been exiting businesses for years." Can this work? The stock price over the next year or so will tell all. If the bank flounders, people will be second guessing a lot. For more: Related articles: Read more about: CEO, chairman Also Noted
SPOTLIGHT ON... Hedge fund assets still above $2T It's been a rocky year for the hedge fund industry, but as of now, assets under management remain historically high. Global hedge funds now oversee $2.2 trillion in assets, up from $2 trillion at the end of the 2011 and more than double what they invested for their wealthy clients in 2005, according to data from Hedge Fund Research. New commitments have been slow, just $31 billion this year, compared with $70.6 billion in 2011 and $194.5 billion in 2007. Article Company News:
©2012 FierceMarkets This email was sent to kumaresan.selva.blogger@gmail.com as part of the FierceFinance email list which is administered by FierceMarkets, 1900 L Street NW, Suite 400, Washington, DC 20036, (202) 628-8778. Contact Us Editor: Jim Kim Advertise Advertising: Jack Fordi or call 202.824.5040 Email Management Unsubscribe from FierceFinance Explore our network of publications: | ||||||||||||||||||||||||||||||||||||||||||||||
Monday, December 3, 2012
| 12.03.12 | JPMorgan CIO unit "a secret hedge fund"
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment