Friday, December 12, 2008

Today's Headlines

- The Bush administration dropped its opposition to using the $700 billion bank bailout fund to provide financing for U.S. automakers after the Senate yesterday failed to approve emergency loans.

- Speaker Nancy Pelosi said the U.S. House is likely to act next month on a $500 billion to $600 billion economic-stimulus measure aimed at making long-term investments in renewable energy as well as providing a short- term boost for the economy.

- Hedge funds, already heading for their worst year on record, may lose at least $10 billion from investing with a New York firm that founder Bernard L. Madoff called “a giant Ponzi scheme.” The biggest loser may be Walter Noel’s Fairfield Greenwich Group, whose $7.3 billion Fairfield Sentry Ltd. invested with Madoff’s eponymous firm, three people familiar with the matter said. Another was Kingate Management Ltd., whose $2.8 billion Kingate Global Fund Ltd. invested with Madoff, they said.

- Pequot Capital Management Inc., the hedge fund run by Arthur Samberg, was asked by two U.S. lawmakers to spell out why the firm agreed to pay $2.1 million to an ex- employee who figured in a federal insider-trading probe. Senators Charles Grassley and Arlen Specter, both Republicans, sent a letter to Samberg dated Dec. 10 asking for “all records” related to the payments to David Zilkha, who worked at Pequot for less than a year in 2001, as well as “a narrative explaining their purpose.” The payments were disclosed in Connecticut court documents filed by Zilkha’s ex-wife, who’s seeking details of his deal with Pequot as part a dispute stemming from their divorce.

- SAC Capital Advisors LLC, the $16 billion hedge-fund firm run by Steven Cohen, told investors they can remove money early from its multi-strategy fund, in contrast to firms that are restricting withdrawals. Investors in SAC’s Multi-Strategy Fund Ltd. who want their money returned in the first half of 2009 must notify the firm this month, the Stamford, Connecticut-based company said in a letter yesterday. “In times when confidence in hedge funds is getting broken, it’s definitely a move in the right direction,” said Cem Habib, a portfolio manager at London-based Altedge Capital Ltd., which invests in hedge funds. “They don’t have to do this. It’s a goodwill gesture.”

- Russia’s ruble had its biggest weekly decline against the euro in eight years after the central bank eased its defense of the currency for the fifth time in a month as foreign-exchange reserves shrink. The ruble dropped 3.2 percent against the euro this week, the biggest weekly loss since December 2000, and fell to 37.0841 per euro as of 5:01 p.m. in Moscow, from 36.9689 yesterday.

- Crude oil pared losses after the Bush administration said it may tap the $700 billion bank-rescue fund to prevent an auto-industry collapse, easing concern about a prolonged recession that will cut fuel demand. Goldman Sachs Group Inc. lowered its average oil price forecast for next year and said crude may drop to $30 a barrel in the first quarter. Goldman Sachs lowered its average oil price forecast for 2009 to $45 a barrel from $80 after the first simultaneous recession in the U.S., Europe and Japan since World War II caused oil to fall 54 percent this year, snapping six years of gains. Regular gasoline at the pump, averaged nationwide, fell 0.8 cent to $1.656 a gallon, AAA, the largest U.S. motorist organization, said on its Web site today. The fuel has fallen 60 percent from the record $4.114 a gallon reached on July 17.

- In the close-knit hedge fund community, where confessions of a mistake are rare, billionaires Louis Bacon, Kenneth Griffin and Paul Tudor Jones are retreating from borrowed-money bets, private equity and emerging market debt and championing more transparent stocks, bonds and currencies. The three trading prodigies, who have earned annualized returns of more than 20 percent in careers of two decades or more, say they aren’t about to lose the cachet that prevented them from ever being compared to ordinary investors. “We had become disheartened by the complexity of our portfolio given our results and took decisive steps to change our format,” Bacon wrote in a Dec. 3 letter to investors in his New York-based Moore Capital Management LLC.

Washington Post:

- President-elect Barack Obama and Democrats in Congress are planning to expand health provisions in an economic stimulus plan to be considered by Congress early next year. Obama has already pledged to expand Medicaid spending and invest in health information technology and is now in talks about adding money to retrain health workers, extend children’s health insurance and help the unemployed buy health insurance.

Chicago Sun-Times:

- Even though U.S. Rep. Jesse Jackson Jr. says he has gotten a clean bill of health from federal prosecutors, sources tell the Chicago Sun-Times he's not yet in the clear. Investigators want to know what Jackson knew about allegations that a Jackson "emissary" offered to raise at least $1 million in campaign contributions for Gov. Blagojevich in exchange for appointing the Democratic congressman to a U.S. Senate seat, sources say.

- The falling investment markets have brought more business to at least one Philadelphia-area firm. InvestorForce Inc., Wayne, tracks complex investment portfolios for pension funds, endowments and other institutions through its proprietary online portal and software. I asked whether his clients think hedge funds (which Pennsylvania's pension fund and Harvard's endowment bought in hopes of avoiding a stock market plunge) will survive the current collapse. "There’s going to be a big fundamental challenge: They earn no performance-based fees unless you achieve performance return. If you’re down 25 percent, you have to work your way back up to that" before you get paid. "Given the expense to run a solid organization, a lot of these guys eare going to fold. There's a lot of redemptions are going on. There’s fear of the unknown. Especially in this area, where transparency is more difficult. You could see a lot of fiduciaries are moving out of that area. Morrissey added, "The (college and charitable) endowments can maybe stand the loss. But the pension funds have to hit their targets," and many are liquidating their hedge investments.

- A Vatican bioethics document Friday condemned artificial fertilization and other techniques used by many couples and also said human cloning, "designer babies" and embryonic stem-cell research were immoral. The long awaited document from the Vatican's doctrinal body marked a big step by the Vatican into the brave new world of biotechnology, an area in which governments around the world are struggling to formulate legislation.

- Russia may not join a new global deal to fight climate change if it is against Moscow's interests and will set a national mid-term target for reducing greenhouse gas emissions next year, an official said on Friday. "If the conditions for the international agreement are not favorable for us we may not join such an agreement," Alexander Pankin, deputy head of the Russian delegation at U.N.-led December 1-12 climate negotiations in Poland, told Reuters.

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