Monday, December 22, 2008

Today's Headlines

- Magnetar Capital LLC, the $8 billion hedge-fund firm co-run by former Citadel Investment Group LLC trader Alec Litowitz, limited withdrawals from its biggest fund after it lost 30 percent this year through November, according to two people familiar with the fund. The restrictions, known as gates, were triggered after clients sought to pull more than 15 percent of their money from the firm’s $4.8 billion multistrategy fund, said the people, who asked not to be identified because the information is private.

- The TED spread, a gauge of banks’ reluctance to lend, slipped below 150 basis points for the first time since before the collapse of Lehman Brothers Holdings Inc. amid speculation U.S. borrowing costs near zero and promises of further government cash will help unfreeze credit.

- Banks have increased cash balances by $700 billion in three months, creating a $7 trillion stockpile that may be used for new loans, according to Miller Tabak’s Tony Crescenzi. Lenders have “enough money to propel lending by $7 trillion if banks were willing and able,” Crescenzi said. Bankers in the US put a “disproportionate” amount of assets into buying securities and now are selling some of their investments, “which optimists would hope is a precursor to lending,” Crescenzi said.

- UBS AG, Switzerland’s biggest bank, agreed to sell its agricultural and Canadian energy-commodities units to JPMorgan Chase & Co, and said it may dispose of other commodities operations.

- Crude oil fell on speculation OPEC will be unable to bolster prices as the global recession curbs demand faster than the group can make production cuts. South Korea consumed 12.4 percent fewer oil products in November from a year earlier. The country used 60.3 million barrels of refined products, data from state-run Korea National Oil Corp. showed today. “OPEC may be determined to stabilize oil prices, but with such poor demand it’s hard to see how any supply-driven initiatives can have a positive impact on prices,” said Addison Armstrong, director of market research for Tradition Energy in Stamford, Connecticut.

Wall Street Journal:

- Bankers are seeing a wave of mortgage-loan applications triggered by falling interest rates, and are reassigning scores of workers to handle the crush of would-be borrowers. A large percentage of the applications are for refinancings rather than purchases, and the phenomenon is so new it isn't yet clear how many of the borrowers will actually receive loans. But some bankers say it could be the beginnings of a possible turning point in a battered lending sector and a still-weak housing market.

- General Motors Corp., while holding preliminary discussions now with key constituents, is expected to wait until early January to begin deep talks with the United Auto Workers union, bondholders and the coming Obama administration, in an effort to work out agreements to comply with the terms of the bailout President George W. Bush announced last week.

NY Times:
- Since Bernard L. Madoff was arrested 11 days ago in connection with a $50 billion Ponzi scheme, the Fairfield Greenwich Group has portrayed itself as an unwitting victim of the fraud, the biggest of Mr. Madoff’s many losers. Clients of Fairfield, a secretive hedge fund advisory company based in Connecticut, lost $7.3 billion to Mr. Madoff’s fund. But for Fairfield, working with Mr. Madoff was hugely profitable.

- Clinton Foundation Got Big Lift From Hedge Funds.

LA Times:

- When money manager Bernard L. Madoff was arrested in New York recently for allegedly engineering a massive Ponzi scheme, Wall Street financiers were left slack-jawed at the unmasking of an establishment figure who seemed to be an unlikely fraud. The reaction was similar among many politicians in Washington. For years, Madoff was a generous donor to mostly Democratic causes and maintained a steady lobbying presence through the government relations firm of a former New York congressman. Few of Madoff's political beneficiaries want to talk about the New York money manager for fear of being tied to his legal problems. But one former Democratic fundraiser who asked not to be identified said the political community that knew him was shocked by his arrest because Madoff, a former chairman of Nasdaq, was known for his expertise as well as his deep pockets. Since 1999, Madoff spent at least $540,000 for lobbying by the Lent Scrivner firm. Madoff, his wife and individuals at his company gave $392,900 to federal candidates, parties and committees since 1998, with 89% going to Democrats, according to a Times analysis. Fully $238,200 of that total came from Madoff and his wife alone.
Most of the 13 members of Congress who received funds are New York-area lawmakers or members of committees overseeing financial services. "His profile as a large giver certainly gave him more access," said the former Democratic fundraiser who dealt with Madoff but did not want to be identified because he wants to stay out of the scandal.

Boston Herald:

- State and city or town crews around New England are attacking ice and snow with high-tech engineering and a low-salt diet — changing during the last decade or so from plowing, salting and sanding to spraying liquids that prevent snow and ice from bonding with the road.

USA Today:

- Utah is the nation's fastest growing state, knocking Nevada from its usual top spot.


- It is no secret that quant funds (and a number of what we will call "quasi-quant" funds) as a whole have taken it on the chin the last several months. Funds with heavy quant components of neutral equity market strategies, for instance, have been handed their mud-stomped hats in 2008- many with 40%+ losses in November alone. Some subsets of neutral equity market strategies, fundamental long-short strategies for instance, have performed slightly better, but overall, you would have done better investing in the S&P 500 index for 1 month, 3 month, 6 month, 1 year, 2 year, 3 year and 5 year periods than touching most neutral equity market funds.


- Russia’s economy shrank .7% in November compared to the previous month, citing a government official.

- Russia may resort to external borrowing after 2010 if oil prices stay below $30 a barrel, citing Deputy Finance Minister Dmitry Pankin.

Arab News:

- A majority of Saudi Arabian women suffer financial and economic abuse by their husbands or male siblings, citing a study by Khaled Al-Radihan, an assistant professor at King Saud University. Of 267 women involved in the university study, 67% had their money taken or had loans taken in their names without their consent.

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