MetaFilter posts tagged with hedgefunds

Kraft durch (Schaden)freude

Skeptic — Wed, 29 Oct 2008 12:53:01 -0800

Short selling is basically the practice of selling borrowed shares, with the intention of purchasing them back later at a lower price. It amounts to a placing a bet on the share value dropping, is a favoured move of hedge funds, and has been recently blamed for much of the current economic mayhem. However, when last Sunday Porsche tersely announced that, in addition to its 44% of Volkswagen's shares, it had secured 31% through cash-settled call options, the invisible hand of the market gave those short-sellers an atomic wedgie: Since the German state of Lower Saxony holds just over 20% of VW, Porsche's disclosure meant that, in fact, there were only 5% of VW's shares left on the market, whereas traders were shorting for about 13% of those shares. This set off the "Mother of All Short Squeezes". Traders scrambled to buy those few shares to cover their short positions, sending the share price of VW upwards to ridiculous heights, and completely distorting the German blue-chip index DAX. Today, Porsche eased the pressure on the short-sellers by releasing 5% of VW's shares. Coincidentally, this also probably bagged them enough billions (never mind street cred) to finance their whole takeover operation. Suddenly, even hedge fund managers are clamouring for more disclosure and regulation in the markets. They aren't meeting much sympathy.

The uptick rule

anotherpanacea — Sun, 26 Oct 2008 12:04:45 -0800

Rule 10a-1, otherwise known as the uptick rule, provided that, subject to certain exceptions, a listed security could only be sold short at or above the last sale price. The uptick rule was introduced in 1934 when the public blamed bear traders for the 1929 crash, and was eliminated in July of 2007 after a temporary pilot program. The SEC is now considering reinstating the rule, an effort buoyed by rumours that downtick short-selling may have facilitated an alleged 'bear raid' on Bear Stearns.

Crap - I only made $15B last year

blahblah — Fri, 26 Sep 2008 10:16:53 -0800

There are still some smart people left on Wall St. Hedge fund manager, John Paulson, made a cool $15B for his fund as the housing market imploded. His cut? $3-4B. Not too shabby for a year's worth of work. Interestingly, Greenspan was an advisor to the hedge fund. How much did he make out in the housing decline?

Saturday night poker night is about to get a lot more interesting ...

Mutant — Mon, 22 Sep 2008 02:40:56 -0800

Hedge Funds employ many different strategies to make money. There are long/short funds, event driven funds, emerging markets funds [.pdf], funds looking to profit from global macroeconomic trends and a large number of funds employing a wide range of arbitrage techniques to make money.

But these techniques are the tried and the true. As both assets under management and market turmoil have grown significantly, hedge funds are rapidly branching out into domains far, far detached from finance: art, litigation funding and now even poker.

Minsky Meltdown ahead?

umop-apisdn — Wed, 29 Aug 2007 08:56:28 -0800

Minsky Meltdown ahead? Named after Hyman Minsky, an economist who was known for his research concerning financial crises, specifically asset bubbles based on credit cycles. [much more inside]

A world of Casey Serins

Asparagirl — Wed, 11 Jul 2007 17:13:46 -0800

What's the link between:
1) the quickly-growing number of American homeowners becoming unable to pay their mortgages after their ARM's reset (a trend nicknamed "ARMageddon" -- applicable in the UK too), which is translating into soaring foreclosure rates, and in turn forcing at least 60 US semi-shady mortgage brokers to go belly-up in the past year (i.e. the "subprime meltdown"), and...
2) the recent implosion and impending financial bailout -- which may become the biggest since the Long Term Capital Management fiasco of 1998 -- of two Bear Stearns hedge funds which dealt in mortgage securities? [more inside]

Traders will do anything for money. Film at 11.

quite unimportant — Wed, 21 Mar 2007 11:39:56 -0800

"The great thing about the market is that it has nothing to do with the actual stocks." Jim Cramer--probably most famous for his CNBC show "Mad Money"--comes clean in a TheStreet.com interview about the tactics he used while managing his hedge fund and how he, you know, might influence Apple's stock if he were in the game today. Feathers get ruffled.

Cash & Hemlock Partners LLC

nj_subgenius — Wed, 27 Dec 2006 13:58:40 -0800

EarthShell, a small Maryland company that makes environment-friendly packaging (among others) may wink out of existence thanks to PIPEs, or private investments in public equities. Who likes PIPEs? Hedge Funds, mostly. Companies that take the pipe, as it were, may be sealing their doom. 10 percent of PIPE deals done this year are 'death spirals', where the company's stock price plummets from short selling by the financiers who structured the deal in the first place. And of course it's legal if you don't get caught shorting the stock naked and covering with the shares from the PIPE. (BTW, http://www.earthshell.com appears to be on the margins now or I'd have linked it).

Shareholder activism

mullacc — Wed, 30 Nov 2005 10:17:55 -0800

Carl Icahn's Time Warner efforts find a powerful ally in "white-shoe" investment bank Lazard. Wall Street M&A advisors have been hesitant to support efforts by Icahn and his hedge fund brethren in their share-holder activist efforts for fear of alienating fee-paying corporate clients (investment banking, legal and registration fees on the Time Warner/AOL deal were approximately $300 million). By hiring Lazard, which is led by banking legend Bruce Wasserstein (1,2,3), Icahn is surely raising the intensity of his campaign against Time Warner management. Icahn has been successful in previous shareholder activist campaigns, most notably against Blockbuster (1,2), and talks a pretty mean game. Wall Street will be watching this closely - hedge fund activism is becoming a very real fear for company management/directors: Circuit City/Highfields Capital, Wendy's/Pershing, Bally's Fitness/Pardus Capital & Liberation Investment Group, Axciom/ValueAct Capital, MSC Software/ValueAct Capital (reg. required), Beazer Homes/Tontine Capital (second story on page) and more.