Earlier today the owner of Murder Inc., a Manhattan based bookseller, announced that after 35 years in operation the store would be closing its doors at the end of the year. The owner, Jay Pearsall, when asked about his store's closure by an anchor on CNBC refused to blame anyone for his demise. Yes, he admitted that Amazon cut into his mail order business and yes, the Barnes & Noble that at one point opened in his neighborhood cut into his core store business. He was not bitter, though. While I'm sure he was not thrilled to be closing shop he did not get on the populist bandwagon and declare that small business was dead, corporate america is evil, and that the U.S. is destined to become a second class power. You could tell that the anchor was hoping for this type of answer. He refused. Pearsall's final words on the closing were, "if the market says it's time to go, then it's time to go." The invisible hand of capitalism can sometimes be cruel but ultimately it rules the day. Pearsall understands this and instead of bitching and moaning I trust he will use his abundant intelligence to do something else that he finds fulfilling.
Now if he understands so elegantly how capitalism works, why can't politicians and regulators?
Friday, December 29, 2006
Wednesday, December 27, 2006
They're Jacking up the Market
If there is another half decent day like today, so close to the finish of the year, then brace yourself for the idiots who love to say that the hedge funds are pushing the market higher. What they won't remind you about is that the last week of the year in 2005 was nothing like this. While hedge funds might be able to prop up a stock or two (usually of the microcap variety), they cannot prop up the S&P 500 and if they could then why don't they do it every year, every day or every week. The conspiracy theory holds very little water.
Tuesday, December 26, 2006
Sage Words from Herbert Stein
The following quote from Herbert Stein of the American Enterprise Institute is well worth reading. Though dense and wordy, it rings so true.
"Some people say that employers have a social responsibility to commit themselves to providing more assured employment. But would this social responsibility extend to paying workers as much as they would get without that commitment? And, if it did, would investors have a social responsibility to provide as much capital and on the same terms as they would without the employment commitment? And would consumers have a social responsibility to buy as much product if the commitment entailed higher prices? And who would have a social responsibility to the people who did not get employed in the first place because it would have entailed too large a commitment?"
The next time Mr./Mrs./Dr. "insert liberal politician here" talks about "economic policy" ask them this question. On second thought, don't, they just won't understand.
"Some people say that employers have a social responsibility to commit themselves to providing more assured employment. But would this social responsibility extend to paying workers as much as they would get without that commitment? And, if it did, would investors have a social responsibility to provide as much capital and on the same terms as they would without the employment commitment? And would consumers have a social responsibility to buy as much product if the commitment entailed higher prices? And who would have a social responsibility to the people who did not get employed in the first place because it would have entailed too large a commitment?"
The next time Mr./Mrs./Dr. "insert liberal politician here" talks about "economic policy" ask them this question. On second thought, don't, they just won't understand.
Friday, December 22, 2006
Australia "Gets It" - Buyer Beware
Australian hedge funds
Big hittersDec 13th 2006 SYDNEY From The Economist print edition
What happens when small investors play in the big leagues
AS A nation, Australians tend to get more excited at the prospect of slugging a ball around a cricket pitch than playing in the big leagues of international finance. But that does not mean they don't like to bat aggressively as investors, too. Unlike America and Europe, where regulators have shielded small investors from exotic investments, such as hedge funds, Australia allows its citizens to hold them as freely as it does mutual funds. So far this freedom has helped the local hedge-fund industry, without hurting the punters.According to the Reserve Bank of Australia (RBA), the central bank, one of the most powerful forces behind the growth of hedge funds is their popularity among individuals, including ordinary folk with as little as A$1,000 ($785) to invest. In much of the rest of the world, access to hedge funds is usually restricted to the rich and to institutional investors.But in Australia individual investors account for two-thirds of the A$60 billion invested in hedge funds, compared with just 44% globally. “In part, this high share reflects the regulatory regime, which does not limit retail access to hedge funds,” the RBA writes. Around 77 of the 200 hedge funds sold in Australia offer their products to the general public, sometimes over the internet, without officials batting an eyelid. “We sell loads of them,” says Ron Hodge, of InvestSMART, an online business that offers investments.Australian hedge funds are no different from those elsewhere; they can involve borrowing, short-selling, and illiquid securities. Generally, they claim to safeguard investments even if markets fall, and the most popular strategy is one that bets on falling as well as rising share prices, or so-called long/short funds. Mutual funds, by comparison, simply buy assets in the expectation that prices will rise. Registration is mandatory, but there is no difference between the processes for hedge funds and mutual funds. The legal principle is that disclosure of important information, such as risks and fees, in sales documents, is enough to protect the public.Financial advisers are often pushy in promoting hedge funds, which adds to the already high fees charged by the managers themselves. Typically, a financial adviser can collect up to an extra 1% of a client's assets each year. Yet more fees are paid to funds of hedge funds, which invest in a range of single-manager hedge funds rather than in the underlying securities.
In spite of the odd international blow-up, investment in Australian hedge funds has soared in recent years (see chart), and according to the RBA has even eclipsed the pace of growth in the global hedge-fund industry, where assets have reached around $1.5 trillion. Institutions are also stepping up their allocations to hedge funds; in 2005 almost one-third invested in hedge funds compared with less than 20% in 2003.But recent returns, in the aggregate, are barely more impressive in Australia than anywhere else—especially after deducting fees. The RBA said hedge funds returned the same as local shares over the past five years, or 12% a year after fees, albeit with lower volatility. At present there is little pressure to tighten up the industry. It is “fine as long as people go in with their eyes open,” says Frank Ashe, an associate professor of applied finance at Macquarie University. That attitude might change if something were to go horribly wrong with hedge funds. But Australia, unlike much of the rest of the world, is hoping for the best.
Big hittersDec 13th 2006 SYDNEY From The Economist print edition
What happens when small investors play in the big leagues
AS A nation, Australians tend to get more excited at the prospect of slugging a ball around a cricket pitch than playing in the big leagues of international finance. But that does not mean they don't like to bat aggressively as investors, too. Unlike America and Europe, where regulators have shielded small investors from exotic investments, such as hedge funds, Australia allows its citizens to hold them as freely as it does mutual funds. So far this freedom has helped the local hedge-fund industry, without hurting the punters.According to the Reserve Bank of Australia (RBA), the central bank, one of the most powerful forces behind the growth of hedge funds is their popularity among individuals, including ordinary folk with as little as A$1,000 ($785) to invest. In much of the rest of the world, access to hedge funds is usually restricted to the rich and to institutional investors.But in Australia individual investors account for two-thirds of the A$60 billion invested in hedge funds, compared with just 44% globally. “In part, this high share reflects the regulatory regime, which does not limit retail access to hedge funds,” the RBA writes. Around 77 of the 200 hedge funds sold in Australia offer their products to the general public, sometimes over the internet, without officials batting an eyelid. “We sell loads of them,” says Ron Hodge, of InvestSMART, an online business that offers investments.Australian hedge funds are no different from those elsewhere; they can involve borrowing, short-selling, and illiquid securities. Generally, they claim to safeguard investments even if markets fall, and the most popular strategy is one that bets on falling as well as rising share prices, or so-called long/short funds. Mutual funds, by comparison, simply buy assets in the expectation that prices will rise. Registration is mandatory, but there is no difference between the processes for hedge funds and mutual funds. The legal principle is that disclosure of important information, such as risks and fees, in sales documents, is enough to protect the public.Financial advisers are often pushy in promoting hedge funds, which adds to the already high fees charged by the managers themselves. Typically, a financial adviser can collect up to an extra 1% of a client's assets each year. Yet more fees are paid to funds of hedge funds, which invest in a range of single-manager hedge funds rather than in the underlying securities.
In spite of the odd international blow-up, investment in Australian hedge funds has soared in recent years (see chart), and according to the RBA has even eclipsed the pace of growth in the global hedge-fund industry, where assets have reached around $1.5 trillion. Institutions are also stepping up their allocations to hedge funds; in 2005 almost one-third invested in hedge funds compared with less than 20% in 2003.But recent returns, in the aggregate, are barely more impressive in Australia than anywhere else—especially after deducting fees. The RBA said hedge funds returned the same as local shares over the past five years, or 12% a year after fees, albeit with lower volatility. At present there is little pressure to tighten up the industry. It is “fine as long as people go in with their eyes open,” says Frank Ashe, an associate professor of applied finance at Macquarie University. That attitude might change if something were to go horribly wrong with hedge funds. But Australia, unlike much of the rest of the world, is hoping for the best.
Hank McKinnell - Executive Compensation
As I write this the media and other market observers are obsessing over Hank McKinnell's severance package from Pfizer. Yes, it's a large amount but does anyone really think he's going to say no to it. To villify Mckinnell, Dick Grasso and others for collecting or trying to collect large payouts from firms is insanity. If it was in their contracts then so be it - good for them for getting or trying to get what's theirs.
What CNBC and others should do is publish the names of and try to interview the people on the boards of these companies and point blank ask them what they were thinking. These people are responsible for the "excess". Don't blame someone for trying to get a large comp package. At the end of the day the board is responsible. No one really talks about this. It's easier to demonize the highly visible CEO. Leave the bastards alone!
What CNBC and others should do is publish the names of and try to interview the people on the boards of these companies and point blank ask them what they were thinking. These people are responsible for the "excess". Don't blame someone for trying to get a large comp package. At the end of the day the board is responsible. No one really talks about this. It's easier to demonize the highly visible CEO. Leave the bastards alone!
Thursday, December 21, 2006
Clinton Administration Hall of Fame Member - Sandy Berger
http://www.cnn.com/2006/US/12/21/berger.documents.ap/index.html?eref=rss_topstories
This article on Sandy Berger hiding classified documents under a trailer is a classic. A must read for those who wish to gain insight into what the Clinton administration was like. Enjoy!
This article on Sandy Berger hiding classified documents under a trailer is a classic. A must read for those who wish to gain insight into what the Clinton administration was like. Enjoy!
Wanted: The Next Bud Fox
A recent help wanted ad posted by Chapman Capital's founder Robert Chapman sheds some light on this gentleman's methods and tactics. Yes, he's rude, abrasive and obnoxious but he's also fairly brilliant.
-CrankyHedgeFundMan
Activist Hedge Fund Research, Writers/Editors, & Traders
--------------------------------------------------------------------------------Reply to: mako@chapcap.comDate: 2006-12-16, 9:17AM EST *** ======================== CAREER TRACK POSITIONS ======================== Hedge Fund Investment Advisor (http://www.takeovers.com/; Login: defcon1; PW: defcon1) seeks highly motivated, Type-A employees for both full time and internship positions in research/analysis, equity/option/debt trading, accounting, and programming/website design. Both entry level (recent college graduate) and experienced (with another hedge fund or investment banking firm) positions are available. Compensation level is competitive both in salary and incentive bonus. Hours can be exceptionally long and intense, with some requiring 5:00 a.m. PST (8:00 a.m. EST/Wall Street) starting times, though the work day can conclude at 2:00 - 3:00 p.m. PST, allowing for opportunity to enjoy S. California afternoons.
*** Activist 13D Letter Writer/Editor: write original and edit/proofread activist 13D correspondences from Chapman Capital to Fortune 1000 CEOs and Boards of Directors. Writers/editors must have articulate and witty approach to written communication. Compensation level is ultra-competitive.
Hedge Fund Private Investigator: conduct both clandestine and covert intelligence operations to track movements of public company executives (e.g., Enron types) to gain deep intel of how their behavior and actions may be affecting the company's Wall Street performance. Qualifications include any applicable state license(s) to conduct electronic/manned surveillance, resume of successful case records, and comfort with rigorous travel itineraries. Compensation level is ultra-competitive.
***
-CrankyHedgeFundMan
Activist Hedge Fund Research, Writers/Editors, & Traders
--------------------------------------------------------------------------------Reply to: mako@chapcap.comDate: 2006-12-16, 9:17AM EST *** ======================== CAREER TRACK POSITIONS ======================== Hedge Fund Investment Advisor (http://www.takeovers.com/; Login: defcon1; PW: defcon1) seeks highly motivated, Type-A employees for both full time and internship positions in research/analysis, equity/option/debt trading, accounting, and programming/website design. Both entry level (recent college graduate) and experienced (with another hedge fund or investment banking firm) positions are available. Compensation level is competitive both in salary and incentive bonus. Hours can be exceptionally long and intense, with some requiring 5:00 a.m. PST (8:00 a.m. EST/Wall Street) starting times, though the work day can conclude at 2:00 - 3:00 p.m. PST, allowing for opportunity to enjoy S. California afternoons.
*** Activist 13D Letter Writer/Editor: write original and edit/proofread activist 13D correspondences from Chapman Capital to Fortune 1000 CEOs and Boards of Directors. Writers/editors must have articulate and witty approach to written communication. Compensation level is ultra-competitive.
Hedge Fund Private Investigator: conduct both clandestine and covert intelligence operations to track movements of public company executives (e.g., Enron types) to gain deep intel of how their behavior and actions may be affecting the company's Wall Street performance. Qualifications include any applicable state license(s) to conduct electronic/manned surveillance, resume of successful case records, and comfort with rigorous travel itineraries. Compensation level is ultra-competitive.
***
Wednesday, December 20, 2006
Hedge Fund Minimums
So let me get this straight! Liberal politicians love to play the class warfare game yet are obsessed with making sure that only the ultra wealthy are allowed to invest in hedge funds. Proposed new minimum investment rules that the SEC is proposing would prevent the common man from participating in literally thousands of investment funds.
Don't get me wrong - most hedge funds are nothing more than a not so fancy legal structure. Still, shouldn't people be able to invest as they see fit without big brother getting in the way.
On a slightly different note, those that say hedge funds should not be regulated because "who cares if rich people get screwed" do not hold the moral high ground either. This is equally vapid.
Does anyone have a cogent thought regarding hedge fund registration?
Don't get me wrong - most hedge funds are nothing more than a not so fancy legal structure. Still, shouldn't people be able to invest as they see fit without big brother getting in the way.
On a slightly different note, those that say hedge funds should not be regulated because "who cares if rich people get screwed" do not hold the moral high ground either. This is equally vapid.
Does anyone have a cogent thought regarding hedge fund registration?
DELL - Give Credit Where It's Due
Don Carty former CEO of American Airline is named CFO of Dell. Good for Dell! Most companies would have shied away from someone like Carty who resigned from AMR under a bit of a cloud regarding executive comp. After running AMR, being CFO of Dell should be a breeze.
Even though Carty has been on the board of Dell for years it is still impressive that they went with this battle scarred highly experienced man. Most firms would not have thought outside of the box and just hired a CFO from a high performing tech company who would bring little to the table.
Now Dell needs to sell some computers, answer their phones promptly and take back some share.
Even though Carty has been on the board of Dell for years it is still impressive that they went with this battle scarred highly experienced man. Most firms would not have thought outside of the box and just hired a CFO from a high performing tech company who would bring little to the table.
Now Dell needs to sell some computers, answer their phones promptly and take back some share.
The Financial Wizards of Thailand
Well done gentlemen! You've (the government in Thailand) now lost all credibility when it comes to your fiscal, monetary and all other things related to your economic policies. Within 24 hours of announcing restrictions on capital flows from foreign investors (their market was down roughly 19% at one point) the government reversed direction almost completely. The Thai market rallied about 11%. It's obviously still well off its levels from last week but even worse no one will believe anything these guys say or do in the future.
Did they really think that their policy announcement would work? Have these policies ever worked? What were they drinking or smoking? It must have been good sh*t! At least float the idea first to gauge the potential impact.
Did they really think that their policy announcement would work? Have these policies ever worked? What were they drinking or smoking? It must have been good sh*t! At least float the idea first to gauge the potential impact.
Tuesday, December 19, 2006
Private Equity
For what it's worth, we're only in the "first inning" of large highly visible companies going private. Many would think that the recent rise in large cap stocks would have taken the vig out of the game, but from where I sit I see some big name mega cap stocks that would make perfect buyout candidates. Q1 of 2007 will see the largest LBO in history. This isn't even going out on a limb.
It will be great to hear how the levering of corporate america is amoral, greedy and going to lead to ruin. Be still my bleeding heart. Call it financial engineering (people think that's an oxymoron) but companies saddled with some debt become very focused on what works.
If you're looking for lazy management teams look no farther than companies with no debt and copious amounts of cash that also pay no dividend to boot. Run for the hills from these unless you feel you can affect change.
It will be great to hear how the levering of corporate america is amoral, greedy and going to lead to ruin. Be still my bleeding heart. Call it financial engineering (people think that's an oxymoron) but companies saddled with some debt become very focused on what works.
If you're looking for lazy management teams look no farther than companies with no debt and copious amounts of cash that also pay no dividend to boot. Run for the hills from these unless you feel you can affect change.
Market Predictions
New idea, feel free to make it your own: require that when a strategist (currency, stock, market) is on television he must provide a copy of his tax return or most recent bank / brokerage statement. If this guy is so smart then he is certainly stinking rich? We should assume that his bank account is overflowing with cash. The more money he's made via his insanely prescient insights the more we'll all listen to him. Alas, this will never happen but it's a killer idea. Full disclosure!
His First Post
This is HedgeFundMan's first post. I really don't care what you think about the blog. I had some extra time on my hands and here is the result. I manage a traditional hedge fund. Nothing sexy - just an old fashioned stock fund. The purpose of the blog is not to dish out advice or stock picks - only hacks tell the world what stocks to buy. The guys and some gals that go on CNBC with stock picks are not the cream of the crop. Trust me - the "smart money" which does exist does not appear on television or in magazines. They are too busy doing their jobs to hand out stock picks or investment advice to people who are not their clients.
The purpose of the blog is to provide commentary on an industy that is often misunderstood. The media, industy wonks, and politicians seem to have little clue when it comes to talking about hedge funds. Hopefully, this blog will shed some light on the industry and, of course, will give me the opportunity to share my thoughts on the market, CNBC, the media, politics and whatever else is pissing me off.
The purpose of the blog is to provide commentary on an industy that is often misunderstood. The media, industy wonks, and politicians seem to have little clue when it comes to talking about hedge funds. Hopefully, this blog will shed some light on the industry and, of course, will give me the opportunity to share my thoughts on the market, CNBC, the media, politics and whatever else is pissing me off.
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