Hedge Funds Skirt Paulson’s Flak
Hank Paulson's efforts to prop up financial stocks has not worked; today's price action was delayed, but probably inevitable.
It has been a hell of a (bad) run for Paulson, who was on top of the world 2 1/2 yeara ago, and turned down the job as Treasury Secretary twice before President Bush talked him into it by granting him unusual powers that, essentially, clinched the deal:
Paulson finally agreed but insisted on some terms. He would answer only to President Bush and not be subject to meddling by the president's economic policy advisers. And, Paulson recalled, he wanted it in writing.
Paulson used his influence within the administration to win even broader powers from Congress, allowing him to nationalize major financial institutions, either in part or entirely. The bills were sweeping in scope and gave him the latitude to spend hundreds of billions of dollars as he saw fit.
And Paulson unilaterally pushed his authority to craft initiatives even when, according a senior government official, he was not sure he had an airtight legal basis. Washington Post
The market continues to vote daily on Paulson's stewardship; what more can you say (besides bait and switch on the TARP). This is beyond ugly.
How Chanos Made the Big Bucks
Jim Chanos will post among the best numbers in Hedgistan this year; no surprise there given his short bias.
The more argumentative amongst us might even argue that his 50% gains are merely in line with the declines we have seen this year, that theory sells Chanos’ talents short. He had a good year, and the New York Post has the story.
If you were wondering how he did it, read up. It was not exactly as I had thought....
Chanos, readers of The Post learned last week, has posted a 53.2 percent increase through Oct. 31 for his $5 billion short-only Ursus fund.
The 50-year-old Chanos said last week that he posted the gains by shorting “all of the satellite and most of the cable companies” but would say no more.
So On the Money did a little digging and came up with the exact stocks Chanos has ridden to great success this year.
Time Warner Cable, Viacom, Cablevision, Carmike Cinemas and Dish Network - stocks that have lost at least half their value since he set up the trade - have been money in the bank for Chanos, according to investors in the fund.
Ironically, recent market volatility, a friend of a short seller, wasn’t the key to Chanos taking profit in this year’s trades - instead it was strategic planning set up years ago. He first touted his visionary investment strategy, which he calls “The Twilight of the Gatekeepers,” at an investor presentation he gave in New York in late 2005. He said cable and satellite companies would lose their lock on revenue from programmers as the Internet would open a gateway for networks to send their shows straight to peoples’ computers and bypass the fees paid to the cable guys.
Chanos’ bearish trade on large chain movie theaters proved profitable because he predicted we would see demand fall as people moved to fancy home theaters and faster distribution of films through alternative means, like On-Demand movies. One such bet against Carmike Cinemas earned him a whopping 90 per cent return when the stock slid below $3 in October. New York Post
This is the second time in a decade Carmike Cinemas has imploded-if it goes into bankruptcy and eventually emerges again as a public company again, well you will know what to do.
CHANOS’ RIDE TO BIG GAIN
New York Post
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Regulatory Filings Reveal Massive Selling in Hedgistan
The rumors of major selling by hedge funds earlier this fall seem to be accurate; 13-F filings from September 30th indicate the selling was fast and furious as September came to a close:
Regulatory filings last week by 38 hedge funds with more than $1 billion in assets each show that selling and market declines cut the value of their reported holdings by about 30 percent to $273 billion. Bloomberg
He who panics first, panics best, and the hedgies stampeded out of stocks, trampling everything in their paths:
- At Tudor Investment Corp., the Greenwich, Connecticut, hedge-fund group founded by Paul Tudor Jones, 13F holdings fell to $453 million from $5.7 billion. Jones said markets face more selling from managers.
- Atticus Capital LP, based in New York, disclosed that its holdings declined to $510 million from $8.1 billion. The firm, run by Timothy Barakett, 43, sold out of 39 stocks while adding no new holdings. ConocoPhillips, MasterCard Inc. and Burlington Northern Santa Fe Corp. were the three largest positions he exited, with a combined market value of $2.68 billion as of Sept. 30.
- SAC Capital Advisors LLC of Stamford, Connecticut, said its holdings were $7.7 billion as of Sept. 30, down from $14.4 billion at June 30. Founder Steven Cohen, 52, had about half the firm's assets in cash in mid-October, after his main fund fell 5 percent through September.
- Jeffrey Vinik, who once ran the Fidelity Magellan Fund, disclosed that his Boston-based Vinik Asset Management LP held $1.8 billion at Sept. 30, down from $11.8 billion at June 30.
Selling by the big guns no doubt accelerated after regulators changed the rules of the game and tried to protect the nation's largest banks and brokers from the predators. Too, they were quick to pick up on the post-Olympic hangover and jettisoned resource equities they had ridden to big gains over the past few years.
Is Dan Zwirn Long Term Greedy?
Is Dan Zwirn Long Term Greedy?
The phrase has positive connotations; it was a hallmark of the old Goldman Sachs, whereby they sacrificed short term profits in the name of building long-term relationships.
Wall Street was a better place when we were all long-term greedy, and now it appears to be making a comeback.
Daniel Zwirn, a once-highflying hedge-fund manager whose fund imploded back in February, has been dipping into his own pocket over the past several months to keep the lights on at his firm D.B. Zwirn & Co.
According to sources, Zwirn has been writing checks totaling as much as $50 million to cover the costs of staying in the Midtown office he leases at 745 Fifth Avenue, as well as to pay vendors and employees as he unwinds his $5 billion hedge fund...... The manager has recently tapped into deferred compensation, including $12.6 million of his own money, to fund the firm’s operations, according to Hedge Fund Alert. By doing so, it ensures his investors get their money back.
Despite the situation, Zwirn has generated goodwill with some of his investors, leading him to consider launching a new fund. However, it’s unclear whether that plan will get off the ground given the carnage in the hedge-fund world. New York Post
It is unfortunate more people do not take this route; I have heard too many stories of hedge fund managers screwing their analysts who produced outsized returns, in some cases firing them before bonuses were paid in years gone by.
Zwirn actions should curry favor with his clients longer term, and set the stage for a comeback at some point, providing he can put accounting issues in the rear view mirror.
His actions sure beat a stick in the eye.
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D.B. ZWIRN HEAD PAYS $50M OUT OF POCKET
New York Post
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The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.
Heebner’s Footprints Leave Trail of Tears
In 2004/'05 I had a series of spirited discussions with Maggie Whelan, the former UBS homebuilding analyst that was a frequent guest on CNBC just as her coverage list crested into 2006.
There were no homebuilders on my sheets, yet she was insistent I jump in the pool. Everyone but Marco Polo and I were long the stocks. Ken Heebner was loaded to the gills with homebuilders, and I feared he would blow out of the stocks and leave a huge crater, living up to this nickname "the Mad Bomber".
Ken eventually sold the stocks very well, into the peak of the euphoria, solidifying his place as a genius on the buyside.
But Ken's reputation printed a 52-week high in May of 2008, and his CGM Focus Fund (CGMFX) and its piggybackers, have been absolutely murdered over the past three months down over 40% and 97th percentile against its Large Cap Core peers.
