Also Noted: Spotlight On... Fabrice Tourre dismisses emails to girlfriend News From the Fierce Network:
Today's Top News1. Fabrice Tourre takes the stand
It's always a dicey proposition to put the defendant on the stand in his or her own defense. For a defense team to do so suggests a certain confidence in the defendant, a bet that he or she will strike the right pose and make the perfect impression on the jury. In the trial of ex-Goldman Sachs executive Fabrice Tourre, the bet is that his French accent and general demeanor will comes across as likeable and more importantly believable. After his first day on the stand, it's all but impossible to know if that bet is paying off. Tourre duly apologized to a court reporter for his accent and he tried hard to explain the Latin in some of his emails, a jury-friendly move. But he also grew quite exasperated on the stand as he verbally sparred with SEC lawyers. One danger here is that he comes across as smug and pedantic. "You understand the tricky balance between picking a good portfolio and not too good a portfolio?" Tourre asked his questioner, according to the Financial Times. "If they were following your logic they would just pick US Treasury securities." That's a great point, but will the jury, comprised of non-financial folks, get it. The task at hand for the defense is to counter the SEC's star witness, a former executive at ACA who says she was never informed that Paulson & Co. was shorting the CDO that Goldman Sachs was assembling. The defense has to show that ACA should've have known that Paulson wasn't likely to be a long investor. ACA assumed as much, perhaps without aggressively inquiring. The ACA executive says that she formed her opinion based on emails from Goldman Sachs. Goldman Sachs apparently never corrected that view. The defense also noted that the SEC considered charging the ACA executive but declined to do so, implying that she had strong reason to serve as the SEC's star witness. For more:
Read more about: Goldman Sachs, Fabrice Tourre 2. SAC Capital employees wavering barely
SAC Capital has worked hard to convince employees to stand their ground, to stay on the ship, as it navigates some very tricky waters. The conventional wisdom hold that employees are staying put for the most part. But as the firm prepares to be criminally charged, the view from the gleaming offices may be changing. "It's not that Cohen's employees are running for the exits — net yet, anyhow — but hedge fund recruiters in the last week said they're starting to see signs that the rock-solid allegiance of these top-shelf traders, who help keep the 56-year-old billionaire art-lover up to his Picasso in fine art, is softening," according to the New York Post. "Traders who recently blew off recruiters looking to pitch them on leaving Cohen's $14 billion Stamford, Conn., firm are now at least hearing them out." One hedge fund executive recruiter was quoted: "During our dialogues with candidates, they are voicing concerns. We can say we're hearing from some of the people that there is a concern that . . . the scrutiny and the investigation may continue a long time." To be sure, even if SAC is found guilty criminally and even if he is eventually barred from managing other people's money, he would still be able to run a massive family office. But working to boost Cohen's personal wealth may not be what the most capable employees want in their careers. At some point, the firm may indeed become fertile recruiting ground. For more: Read more about: SAC Capital, employees 3. Macro hedge fund managers fare well
The Financial Times notes two hoary investment principles: "the trend is your friend" and "don't fight the Fed." They may be clichés. But these general principals have powered macro hedge funds this year. "The macro hedge fund manager, blueblood of the investing world, is back," according to the Financial Times. "The yen and the Nikkei have risen and fallen in an almost perfect arc for the savviest hedge fund managers to take advantage of. In the US, long-expected fears of a correction in the bond markets and the well-telegraphed "tapering" of the Fed's quantitative easing programme made for an equally profitable trade. And even in the eurozone – the bane of many traders' portfolios in recent years – opportunities have arisen by riding the recovery in fixed income." Some of the biggest winners include Caxton Associates, a 30-year-old macro hedge fund run by Andrew Law that "is enjoying one of its best ever first-half performances. According to an investor in the fund, Caxton is up 17 per cent so far this year." Tudor Investment, managed by Paul Tudor Jones, is up 12 percent this year, and Moore Capital, managed by Louis Bacon, was up 10.5 percent through mid-May. So is macro hedge fund investing back for good? There's no way to make a scientific prediction. But we're a long way from the heyday of the likes of George Soros and Julian Robertson. And the hedge fund industry in general has lot of work to do in terms of making up for recent performance. Still, macro hedge fund managers have long seen as a breed apart, and if they can reclaim some glory, that can help create a perception of strength for the whole industry. For more: Read more about: Macro Hedge Funds 4. Massive effort aims at taking down Cohen's advisory business
The extent to which the government is going after SAC Capital is nothing short of stunning. He's a modern day Capone, so it seems. So forget Arthur Andersen and its aftermath. Forget deferred prosecutions. The government wants him out of business like he was a prohibition era bootlegger and racketeer. Cohen personally has made himself untouchable. He will not be facing criminal charges and thus will not be heading to prison, unlike say Raj Rajaratnam. The most the prosecution could do is charge his company criminally and hope to force him out of business as a financial advisor. That's what's playing out now. The indictment is expected to "charge the fund with carrying out a broad conspiracy to commit securities fraud, citing several instances of insider trading. Underpinning the charge, the people say, is the theory of corporate criminal liability, which allows the government to attribute certain criminal acts of employees to a company itself," according to DealBook. "The case is the boldest yet from the top federal prosecutor in Manhattan, Preet Bharara, whose office has overseen the crackdown on insider trading. The government has brought charges against more than 80 people; of those, 73 have either been convicted or pleaded guilty, a success rate that stands in contrast to recent struggles with cases stemming from the financial crisis." But the Cohen prosecution stands apart. Bharara is said to be more involved personally as of now. In the end, Cohen may end up running a mere family office. That will not strike many as extreme punishment. But you could nevertheless spin it as a great victory against a modern-day untouchable. For more: Read more about: insider trading, SAC Capital 5. Dell committee wants founder to bid even higher
Ever since the Dell special committee came out in favor of the proposal put forward by founder Michael Dell and partner Silver Lake, it has seemed the two sides were teammates, jointly battling Carl Icahn and other dissidents. But the committee and the founder may be starting to slide farther apart. The committee has been openly suggesting for weeks that Michael Dell needs to hike its offer. Now, in the wake of the sweetened offer, it wants even more. According to Bloomberg, the committee wants Michael Dell to boost his offer to at least $14 a share from $13.75 now. It is dangling an interesting reward. The founder has conditioned his offer on the board change the rules, to allow the bid to win if a majority of the shares cast are in favor. As it is now, uncast votes are counted as no votes. The committee apparently is willing to take this step, if---and this is a big if---the offer price moves up to $14, which might be hard for Michael Dell to swing. In addition, the vote has been delayed again, to August 2. The move by the committee to let it be known that it is still not satisfied does not bode well for the proposed deal. It will certainly raise expectations among the arbs, who might interpret the move as a sign that the committee is convinced a better deal is likely. There are lots of fence stragglers still. They will hold on until the last minute. It's still a game of high stakes poker. For more: Read more about: Leveraged Buyout, Dell Also NotedSPOTLIGHT ON... Fabrice Tourre dismisses emails to girlfriend As expected, the email that made Fabrice Tourre famous came up while he was on the stand. He dispatched them as "silly" and "romantic," and on the surface anyway, it would be hard to disagree. Here's what he wrote: "More and more leverage in the system, the whole building is about to collapse anytime now ... Only potential survivor, the fabulous Fab ... standing in the middle of all these complex, highly levered, exotic trades he created without necessarily understanding all the implications of those monstruosities!!!" The prosecution is smart enough not base its chances on such emails. In the minds of the jurors, however, this may well help establish his frame of mind at the time. The far more damaging evidence came from an ACA executive, who testified for the prosecution. Article Company News:
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Friday, July 26, 2013
| 07.26.13 | Risky proposition: Fabrice Tourre takes the stand
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