No respite for gold producers in the southern hemisphere on Tuesday morning…
And no dead cat bounce splat for the gold price.
And to spell out why this is such an issue for the gold miners, we present the following thoughts from Citigroup. Read more
The 17th annual Sohn conference took place last May in New York and drew a star-studded panel of fund managers to offer (a few of) their best trade ideas.
Everyone was there, from David Einhorn to John Paulson and Bill Ackman. Topics as diverse as palladium, French CDS and Argentina’s sovereign debt were discussed.
But were the trade ideas any good? Read more
The letter.
From an old New Yorker story on Daniel Loeb: Read more
John Paulson, the billionaire investor, has taken public his efforts to get The Hartford Financial Services Group to split into two companies, says the FT. The Hartford, like other insurers, has been under pressure in its life insurance business as interest rates hover near zero, making it difficult to generate the income to cover pay-outs on products like annuities. At the same time, it has participated in an industry-wide increase in pricing in its separate property and casualty business to make up for disaster-related losses last year. Mr Paulson, the largest shareholder in The Hartford with an 8.4 per cent stake, published a letter to the company on Tuesdayblaming its underperformance on the combination of its two businesses. He said it is too complex for analysts to properly value and that most other insurers have chosen to focus on one or the other business. Meanwhile Bloomberg reports Mr Paulson sold his entire stakes in Citigroup and Bank of America in the fourth quarter before the shares rallied. Paulson & Co, which owned $643m worth of Citigroup at the end of the third quarter, had sold its entire 25.1m shares as of December 31, the firm said on Tuesday in a filing with the SEC. He also sold $394m worth of Bank of America, or 64.3m shares. It also sold its 998,900 shares of BlackRock valued at $146m. Read more
You’ll have to imagine how it sounded.
But here’s an interesting demonstration of John Paulson at work… stepping onto Hartford Financial’s earnings conference call to lambast the insurer’s performance. Shares in Hartford dropped 39 per cent last year. Paulson’s the biggest holder. Read more
John Paulson’s flagship fund lost 3.6 per cent in November, taking losses for the leveraged Advantage Plus fund to 46 per cent in 2011, Bloomberg says. Gold-denominated shares in the fund have fallen 29 per cent in 2011, dropping 2.7 per cent last month, while dollar shares in the Advantage fund fell 3.3 per cent in November. Paulson & Co’s Gold fund is up 11 per cent for the year, the FT reports, adding that the the Dow Jones Credit Suisse hedge fund index is down 7 per cent for the year so far. Paulson has already apologised to investors, and promised to reduce risks arising from his bets in financial stocks, Reuters says. Read more
John Paulson’s hedge fund has lost 46 percent in 2011 through November in one of his largest hedge funds, says Bloomberg. Paulson’s Advantage Plus Fund, which seeks to profit from corporate events such as takeovers and bankruptcies and uses leverage to amplify returns, declined 3.6 per cent last month. The fund’s gold share class dropped 2.7 per cent in November and 29 per cent this year. The losses came in a highly volatile month for stock markets, says the FT, with Paulson’s troubles reflecting broader challenges for hedge funds. Read more
John Paulson’s investors have signalled confidence in his ability to recover from severe losses in his flagship hedge funds, with the great majority choosing to keep their money with a manager who personally oversees $30bn in investments, the FT reports. “Gross redemptions before giving effect to additions of capital will be less than 8 per cent of firm assets under management, well less than our typical year-end redemption cycle,” Mr Paulson said in a letter sent to investors on Tuesday. Investors had until an October 31 deadline to submit requests to get their money back at the end of the year. The weight of redemption requests has been one of the most eagerly awaited numbers in the hedge fund industry, as traders speculated whether Mr Paulson would be forced to sell assets in order to meet requests for funds. The letter suggests that Mr Paulson will need to raise less than $2.5bn to meet client redemptions. “All of our funds have ample liquidity. As stated previously, we will pay redemptions according to regular practice during January 2012,” it said. Read more
John Paulson’s investors have signalled confidence in his ability to recover from severe losses in his flagship hedge funds, with the great majority choosing to keep their money with a manager who personally oversees $30bn in investments, the FT reports. “Gross redemptions before giving effect to additions of capital will be less than 8 per cent of firm assets under management, well less than our typical year-end redemption cycle,” Mr Paulson said in a letter sent to investors on Tuesday. The weight of redemption requests has been one of the most eagerly awaited numbers in the hedge fund industry, as traders speculated whether Mr Paulson would be forced to sell assets in order to meet requests for funds. The letter suggests that Mr Paulson will need to raise less than $2.5bn to meet client redemptions. “All of our funds have ample liquidity. As stated previously, we will pay redemptions according to regular practice during January 2012,” it said. Reuters says Mr Paulson has not yet given a figure for net redemptions and industry analysts said it might take a few days to calculate these statistics, but believed it possible his fund had attracted new money despite the heavy losses. Read more
Paulson & Co, the giant US hedge fund run by billionaire investor John Paulson, has warned that in a “worst case” scenario, it could suffer redemptions equivalent to between a fifth and a quarter of its assets by the end of the year, the FT reports. In a third-quarter call with investors held on Tuesday, Mr Paulson sought to play down concerns about the future of his $30bn hedge fund amid steep losses in recent months and growing fears over the health of the US economy. Several people on the call told the FT that Mr Paulson – best known for his spectacular bets against the US housing market in 2007 – spoke strongly of his “100 per cent” commitment to continue to run his funds, none of which will be wound down.
Tough news for both the prophet and the profiteer of doom.
John Paulson, who made his name and fortune shorting the sub-prime bubble, on Tuesday said he was reducing the leverage of his Advantage Plus fund to 1.1 from 1.5 times. That fund is down 47 per cent on the year (the vanilla Advantage fund is down a mere 32 per cent on the year), according to the WSJ. Read more
The lawsuits filed on Friday by the Federal Housing Finance Agency against 17 global banks involved nearly $200bn of mortgage-backed securities but the regulator refused to put a figure on the total losses it was seeking to recover.
To arrive at a very rough estimate, FT Alphaville used the 21 per cent loss ratio claimed by FHFA in its July lawsuit against UBS. We scrawled $40bn (a figure twice as high as Reuters suggested) on the back of our envelopes and headed out for the long weekend. Read more
John Paulson, one of the world’s most successful hedge fund managers, has extended losses throughout August to leave his flagship fund down almost two-fifths for the year, the FT says, citing a person familiar with the fund’s performance. His Advantage Plus fund was down 38.7 per cent for the year as of Friday, having lost 22 per cent in the first 19 days of the month. The fund, which follows a strategy of trading around corporate events, was hit by the plunge in the price of Hewlett-Packard after the company announced it would pay $11bn for UK software maker Autonomy and consider a spin out of its PC business. At the end of June, Paulson & Co, which manages about $35bn, held 23.5m shares in HP, according to regulatory filings, a stake then worth $855m. Meanwhile Brevan Howard, the world’s largest macro hedge fund, has made close to $1.5bn over the past three weeks on the back of turmoil in the global markets, also in the FT.
Bank of America has sold its Canadian cards business for about $8.5bn to TD Bank, and pledged to sell its bigger UK and Irish cards portfolios in a move to shore up capital, the FT says. The sale also marks another milestone in a spree of Canadian banks buying up their US peers’ assets, Bloomberg reports. TD bank bought Chrysler Financial for $6.3bn only five months ago. But at the same time, Paulson & Co has sold around half of its high-profile stake in BofA, according to its latest 13-F filing, notes FT Alphaville. Paulson & Co had been one of BofA’s ten biggest shareholders in the first quarter. Read more
John Paulson’s quarterly 13F filing was released late on Monday and the headlines make for interesting reading. We may go through it in more detail later but we thought this portfolio change-up was worth noting right away:
Monday, August 15, 2011 5:25:30 PM RTRS – PAULSON & CO INC RAISES SHARES STAKE IN WELLS FARGO & CO WFC.N BY 64 PCT TO 33.6 MLN SHARES Read more
Paulson & Co, the hedge fund that made billions from betting on a collapse in mortgage-backed securities during the financial crisis, has made more than $550m from a recovery in the value of bonds it bought in failed investment bank Lehman Brothers. The world’s third-largest hedge fund has made a profit of $554m before legal fees, on more than 2,000 trades in Lehman bonds that started the day the investment bank filed for bankruptcy in 2008, according to an analysis of court documents by the FT. The profit will be realised by a settlement between warring creditors to the largest corporate failure in history, a deal partly driven by hard bargaining by Paulson & Co and allies. Read more
John Paulson, one of Bank of America’s largest shareholders, pushed the lender not to make the $8.5bn investor claims settlement it announced this week, reports the WSJ. BofA had faced a lengthy legal fight over with a group of bondholders including Blackrock, until the settlement was included in a $20.6bn set of provisions to deal with losses from its acquisition of Countrywide. Paulson argued that the bank had enough ammunition to fight a case against private investors, but ultimately lost out to a group led by BofA chief executive Brian Moynihan, following legal decisions against the bank that made it easier for investors to bring claims. Read more
FT Alphaville caught up on its Sino-Forest reading over the weekend and enjoyed the latest post by John Hempton of Bronte Capital. It looks at Paulson & Co.’s loss from the perspective of a fellow portfolio manager, offering sympathy and rivalry in equal measure. Hempton recognises that small teams of investors will use “shortcuts” based on received wisdom such as timber being a safe asset.
However, that does not excuse Paulson & Co for not doing their research thoroughly, writes Hempton: Read more
Here are extensive extracts from the memorandum sent by John Paulson, Michael Waldorf, and James Wong of Paulson & Co. Inc. to investors on Thursday:
It begins: Read more
Only one of these exhibits is real:
Exhibit A: Read more
Paulson & Co has lost more than $500m after selling its entire holding in Sino Forest, then FT reports. The sale adds to the pressure on Sino Forest as it attempts to fight a series of accusations by short seller Carson Block, and represents a high-profile setback for John Paulson, Paulson & Co’s founder, as his hedge fund struggles with recent poor performance. Paulson & Co was the largest shareholder in Sino Forest when Muddy Waters, Mr Block’s research firm, published a report on June 2 accusing the group of overstating its ownership of forestry assets in China. The company has denied the allegations and appointed an independent committee to examine the report. Since the report was published, shares in Sino Forest have fallen by more than 80 per cent. Read more
FT AlphaTilt, the swashbuckling blogging portmanteau, noticed on June 2 that Paulson & Co was listed as owning by proxy 14.13 per cent of the outstanding shares in Sino-Forest Corporation.
The timber firm’s troubles were more bad news for the world’s third-largest hedge fund, whose main fund lost 6 per cent of its value in May. Read more
Paulson & Co, the world’s third-largest hedge fund, saw the value of its flagship fund drop close to 6 per cent in May, echoing losses across the industry, the FT reports. The loss tops negative returns in the first quarter at the $37bn New York-based money manager, famed for the spectacular returns gained by shorting the US mortgage market in 2007, and will again raise questions over its portfolio’s volatility. Meanwhile, the Wall Street Journal said on Saturday that Paulson’s fund owned nearly 35m of shares in Sino-Forest, the Chinese forestry company accused of fraud. Paulson’s paper loss on the stock is an estimated $323m. Read more
A series of scandals at Chinese companies listed in New York, Hong Kong and Toronto has unsettled investors and raised questions about all Chinese companies seeking to raise capital abroad, reports the FT. In recent months, short-sellers have attacked an unprecedented number of foreign-listed Chinese companies listed, accusing them of fraud or other actions. This has driven down their share prices and inflicted losses on some top investors. Sino Forest, a Chinese forestry group listed in Toronto, lost more than two-thirds of its market value from Thursday after Muddy Waters, a research firm founded by short-seller Carson Block, accused it of overstating sales and asset values. Sino Forest’s denial on Friday failed to stop the slide, which inflicted paper losses of nearly $500m on Sino Forest’s top shareholder, the $37bn Paulson & Co hedge fund. Read more
Paulson & Co, the world’s third-largest hedge fund, saw the value of its flagship fund drop to nearly 6% in May, echoing losses across the industry, reports the FT. The loss tops negative returns in the first quarter at the $37bn money manager, and raises more questions about its portfolio’s volatility. John Paulson, group founder, has maintained a bullish view on the US economy and equity markets, even as many peers have cut their exposure. May’s loss means the $9bn Paulson & Co Advantage Plus fund is down 7.6% so far this year. The average hedge fund lost 1.39% over the month, according to Hedge Fund Research, with “event-driven” strategies such as that operated by Paulson & Co’s main fund down on average 0.62%. Also, Paulson’s gold fund dropped 6.39% in May, erasing much of its 8.5% April gain. The fund – the world’s largest non-sovereign gold investor – is up 0.9% in the year. Separately, reports the FT, the group was also hit by last week’s share price slide of Chinese group Sino Forest.
Read more
Paulson & Co could end up making profits of between $350m and $726m on its purchases of distressed Lehman Brothers debt, if a bankruptcy plan going through courts is approved, says the WSJ. Paulson has bought $7bn of Lehman debt since 2008 at an average price of 13 cents on the dollar; one bankruptcy plan supported by Paulson would return 25 cents on the dollar to investors. While the higher recovery values will also help public pension funds who bought Lehman bonds, funds that traded with its subsidiaries will see their recoveries on claims reduced accordingly. Elsewhere, a federal court has approved Barclays to receive $1.1bn from Lehman’s trustee, but some $2bn in assets are still in dispute, the FT says. Read more
Credit strategies are leading the way for hedge fund managers as funds adjust to volatile trading conditions, the FT says. Credit is the best performer so far this year, without the benefit of leverage, among funds managed by John Paulson & Co. The group’s $9bn Credit Opportunities fund returned 1.4 per cent in April and is up 7.8 per cent for the year, according to investors. Paulson’s credit funds were up between 5.92 per cent and 6.34 per cent in the first quarter. The robust performance in credit comes as it emerged leading hedge fund managers were caught out by a pause in the swift rise in gold, volatile prices and a resilient stock market in the first quarter. The San Francisco Chronicle adds that Paulson’s biggest fund, Advantage Plus, is said to be down 1.7 percent in 2011 after gaining 0.1 percent last month. Read more
A three-way battle over the remnants of Lehman Brothers Holdings is coming to a head, as the defunct investment bank’s estate fights with top hedge funds and Lehman’s former rival Goldman Sachs over how to divide $61bn in assets, reports the WSJ. In one corner is hedge fund manager John Paulson, who has been snapping up bargain-priced debt of Lehman and is now one of its biggest creditors. His firm, Paulson & Co, is leading a group of hedge funds pushing one proposal for unwinding the failed firm. In another is Goldman, which on Monday led a group of banks in presenting a plan that would pay a larger share of proceeds to them. Both oppose a previous proposal filed to the bankruptcy court by Lehman’s estate manager. The battle’s outcome could set a precedent on dealing with creditors of global companies after they fall into bankruptcy protection. Read more
The top 10 hedge funds made $28bn for clients in the second half of last year, $2bn more than the net profits of Goldman Sachs, JPMorgan, Citigroup, Morgan Stanley, Barclays and HSBC combined, according to new data, reports the FT. Even the biggest of the hedge funds have only a few hundred employees, while the six banks employ 1m between them. According to the data, calculated by LCH Investments, which invests in hedge funds run by Edmond de Rothschild Group, the top 10 funds have earned a total of $182bn for investors since they were founded, with George Soros making $35bn for clients – after fees – since he set up his Quantum Fund in 1973. But John Paulson’s Paulson & Co is closing in on Soros’s fund as the hedge fund to have made most money for investors, after scoring net gains of $5.8bn in the second half of 2010. Read more
Older entries
1Bernanke weighs in on robot wars; brings Keynes for backup
2Secret liquidity and Scottish independence
3Spain's awful unemployment
4S&P 2,100, by Goldman Sachs
5Pump up, debase
Show more6Buyback to enrich
7Collateral crunch-counting gets sophisticated
8Everlasting credit, the long view
9Apple Operations International, facts (?) du jour
10In which the FTSE puts the crisis behind it
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