After the recent bubble in the housing market, seems like Wall St. is about to create another bubble. This time the bubble is in the commodities markets caused by the falling Dollar relative to the other global currencies.
How far will this bubble run until the bottom is pulled out and there is another crash?
We are designing trading strategies to take advantage of the beginning of this economic opportunity before the herd senses the end.
Friday, September 28, 2007
GOIH Quantative Finance Group---Gold 20 year high.
Gold is at a 20 year as a hedge against inflation after the Fed cut interest rates. Inflation is peaking in the imports to the US.
The Dollar is at a new low against the Euro (142.21).
Expect to see gold continue to increase especially if the Fed lowers interest rates again.
The Dollar will continue to decrease against the Euro.
The Dollar is at a new low against the Euro (142.21).
Expect to see gold continue to increase especially if the Fed lowers interest rates again.
The Dollar will continue to decrease against the Euro.
GOIH Quantitative Financial Group--Statistical Robustness of the Normal Distribution.
Quantitative Finance Group:
Our QFG has developed an algorithm to determine the statistical robustness of the Normal Distribution in dynamic asset pricing under extreme economic conditions. Extreme economic conditions such as the crisis in the credit markets and other economic disasters.
What this means is for the pricing process of exotic financial instruments, i.e., subprime mortgage derivatives, credit card receivable derivatives, etc., what is the equivalent distribution function for exotic financial instruments as to what the Hurricane Roof would be for residential construction in South Florida?
Our QFG believes that the Normal Distribution, N(µ, σ) is flawed for the pricing of exotic derivatives under disaster conditions. We believe the distribution should include a behavioral finance component to compensate for the “fat tail” risk probability.
Practically this means how can GOIH and its investment banking arm take advantage of a fundamental flaw in the pricing of financial instruments and create an arbitrage condition for profit.
We will publish more on this topic.
GOIH Capital Markets: Global 1 Financial News Network
The Global 1 Financial News Network distributed by Global 1 Distribution via broadband and IPTV covering the global in financial news and investment strategies available via internet broadband, Apple TV in HD and mobile handheld wifi, and wimax via cell phones.
Content created via the Global 1 blog and daily market coverage.
Content contributors are strategically located around the world and submit their stories via internet and live via IPTV in print and video.
We have developed the above distribution system for our financial content and will offer a subscription service for accredited investors throughout the world as well as an advertisement based platform for unaccredited investors.
We will make an announcement on next week regarding the network and the financial opportunities available.
GOIH
Content created via the Global 1 blog and daily market coverage.
Content contributors are strategically located around the world and submit their stories via internet and live via IPTV in print and video.
We have developed the above distribution system for our financial content and will offer a subscription service for accredited investors throughout the world as well as an advertisement based platform for unaccredited investors.
We will make an announcement on next week regarding the network and the financial opportunities available.
GOIH
Thursday, September 27, 2007
GOIH Capital Markets: Model Recalibrations
We have spent the last several days reprogramming and recalibrating our quantitative models after the Fed's rate cut. We have completed the recalibration and will post several new scenarios and trading strategies the models have produced.
We are investigating the effects of a falling Dollar v. Euro, Dollar v. Yen, Dollar v. Pound on oil, gas, and consumer discretionary items.
Moreover, our behavioral finance model is being constructed to quantify fear and greed and the factors that influence both of these variables.
We also have in design a model to predict political decisions and legislative implementation given a certain choice of executive leadership as a stochastic variable.
We will be publishing as a book our strategies and the results of simulations for various strategies we have developed and designed.
GOIH Capital Markets
We are investigating the effects of a falling Dollar v. Euro, Dollar v. Yen, Dollar v. Pound on oil, gas, and consumer discretionary items.
Moreover, our behavioral finance model is being constructed to quantify fear and greed and the factors that influence both of these variables.
We also have in design a model to predict political decisions and legislative implementation given a certain choice of executive leadership as a stochastic variable.
We will be publishing as a book our strategies and the results of simulations for various strategies we have developed and designed.
GOIH Capital Markets
Wednesday, September 26, 2007
GOIH Capital Markets: General Motors (GM)--@ $37.79
Earlier today we predicted that GM would rise on the news of the settlement of the labor strike with the UAW. GM is trading up $37.79.....we are in at $36.40 for 200,000 shares.
GOIH Quantitative Finance Group: Is the Sun Setting on the Dollar as the Reserve Currency?
Will the U.S. Dollar continue to be the reserve currency of the world? That is will most of the major commodities be priced in US Dollars forcing a purchasers to sell their currency and purchase Dollars to pay for imports? The Dollar is at an all time low against most of the major currencies especially the Euro currently trading at € 141.11 to the Dollar. Because of the subprime crisis and the credit market freeze up the Fed had to step in and prematurely cut its primary policy tool, the Fed Funds rate by 50 bps. This cut caused downward pressure on the dollar due to interest rate differentials between the Dollar and the other major economies of the world.
Dollar denominated assets immediately declined in value with the interest rate cut, and commodity prices increased thereby causing a forward looking increase in inflation due to the increase in import price primarily in energy and basic metal raw materials.
If the Dollar is no longer the reserve currency of the world, and the Euro ascends to the top, then the US is in real economic trouble. What this will mean is that the US will now have to sell the Dollar and buy the Euro to pay for imports, especially oil. Causing further decrease in the value of the Dollar and increase in the price of imports, causing increase in inflation, causing corporate profits to decrease, causing the equity markets to decrease, causing a recession, causing the Fed to continue to lower interest rated, causing the spiral cycle to run its course.
What is the Defining Act to Cause the World to Refuse the Dollar in International Commerce?
Lack of confidence in the economic fundamentals of the US will be the deciding factor of whether the Dollar loses its influence in the world. The economic fundamentals of the financial sectors relative to the general economy primarily decide the policy initiatives taken by the economic establishment to drive the economy. The last Fed rate cut will have no effect on the average consumer who cannot meet their mortgage payment or to the builder who over built with the expectation that the subprime mortgage would continue.
The largest sector of the economy, home building cannot be exported into a low cost labor market, nor can the supply of homes be exported and profit from the falling Dollar. The domestic demand is insufficient to consume the excess supply existing in the market causing a further price drop to clear the market of the excess inventory, estimated at a 48 month supply.
Dollar denominated assets immediately declined in value with the interest rate cut, and commodity prices increased thereby causing a forward looking increase in inflation due to the increase in import price primarily in energy and basic metal raw materials.
If the Dollar is no longer the reserve currency of the world, and the Euro ascends to the top, then the US is in real economic trouble. What this will mean is that the US will now have to sell the Dollar and buy the Euro to pay for imports, especially oil. Causing further decrease in the value of the Dollar and increase in the price of imports, causing increase in inflation, causing corporate profits to decrease, causing the equity markets to decrease, causing a recession, causing the Fed to continue to lower interest rated, causing the spiral cycle to run its course.
What is the Defining Act to Cause the World to Refuse the Dollar in International Commerce?
Lack of confidence in the economic fundamentals of the US will be the deciding factor of whether the Dollar loses its influence in the world. The economic fundamentals of the financial sectors relative to the general economy primarily decide the policy initiatives taken by the economic establishment to drive the economy. The last Fed rate cut will have no effect on the average consumer who cannot meet their mortgage payment or to the builder who over built with the expectation that the subprime mortgage would continue.
The largest sector of the economy, home building cannot be exported into a low cost labor market, nor can the supply of homes be exported and profit from the falling Dollar. The domestic demand is insufficient to consume the excess supply existing in the market causing a further price drop to clear the market of the excess inventory, estimated at a 48 month supply.
GOIH Capital Markets: Apple up in premarket @ $154.92
Apple is trading up in the premarket @$154.92.....Apple is on a tear and has been upgraded to a buy by Wall St. The target price is now increased to $181.00.
GOIH Capital Markets: Market Overview---GM Settlement with UAW.
Our indicators indicate the market to open higher today due to the labor settlement with GM and the UAW. GM should trade up strong today on lower future cost. We are reentering GM in the premarket at $36.45 for 200,000 shares. We see the markt selling off after the GM news is absorbed into the trading models.
The durable goods orders were lowered than expected as we predicted. Durable goods included stove, refrigs, large appliances and other purchases typically associated with home purchases. With new home sales down and both Home Depot (HD) and Lowes (LOW) reporting lower sales, the durable goods order was destined to be lower.
Apple remains strong on a new price target of $181 by Wall St.
The durable goods orders were lowered than expected as we predicted. Durable goods included stove, refrigs, large appliances and other purchases typically associated with home purchases. With new home sales down and both Home Depot (HD) and Lowes (LOW) reporting lower sales, the durable goods order was destined to be lower.
Apple remains strong on a new price target of $181 by Wall St.
Tuesday, September 25, 2007
GOIH: Quantitative Financial Group---Behavioral Finance Model
Quantitative Finance Group:
Our QFG is developing a quantitative economic model based on behavioral finance because the consumer is 60% of the US economy and makes its consumption decisions based on psychology as well as economic sentiment.
The model will attempt to replicate the consumption behavior of a typical consumer in the current economic climate and the decisions the consumer would make given the current stochastic data set of: interest rates, inflation rates, housing prices, oil prices, unemployment data, dollar exchange rate, car prices, credit card balances, presidential candidates, budget deficits, tax rates, environmental crisis, foreclosure rates, commodity prices, price of gold, and other variables.
We believe that the model once properly designed and calibrated will give us an insight on the general economic climate and provide our team with the general trend and the investment decisions that would be generated based on the consumer sentiment.
The model’s general predictive value will give our company an investment product that has the ability to generate above average market returns and will assist our share price.
GOIH (OTCBB:GOIH)
Our QFG is developing a quantitative economic model based on behavioral finance because the consumer is 60% of the US economy and makes its consumption decisions based on psychology as well as economic sentiment.
The model will attempt to replicate the consumption behavior of a typical consumer in the current economic climate and the decisions the consumer would make given the current stochastic data set of: interest rates, inflation rates, housing prices, oil prices, unemployment data, dollar exchange rate, car prices, credit card balances, presidential candidates, budget deficits, tax rates, environmental crisis, foreclosure rates, commodity prices, price of gold, and other variables.
We believe that the model once properly designed and calibrated will give us an insight on the general economic climate and provide our team with the general trend and the investment decisions that would be generated based on the consumer sentiment.
The model’s general predictive value will give our company an investment product that has the ability to generate above average market returns and will assist our share price.
GOIH (OTCBB:GOIH)
GOIH Capital Markets: Lowes (LOW) down on lower sales.
NEW YORK (MarketWatch) -- Shares of Lowe's slumped in Tuesday trading after the home-improvement retailer said that sales are trending below plan and warned that its fiscal 2007 earnings would come in at the low end of its previous expectations.
Mooresville, N.C.-based Lowe's attributed the slowing sales to drought conditions in the mid-Atlantic, Southeastern and Western regions, which hurt sales of outdoor products. The company said late Monday that it now expects fiscal full-year earnings at the low end of its earlier forecast of $1.97 to $2.01 a share.
In a conference call before the start of trading Tuesday, Chief Executive Robert Niblock underlined the problems facing the company, saying that the sales environment remains challenging as consumers hesitate to take on some projects, and adding that pressures on the housing market are mostly regional in nature.
Mooresville, N.C.-based Lowe's attributed the slowing sales to drought conditions in the mid-Atlantic, Southeastern and Western regions, which hurt sales of outdoor products. The company said late Monday that it now expects fiscal full-year earnings at the low end of its earlier forecast of $1.97 to $2.01 a share.
In a conference call before the start of trading Tuesday, Chief Executive Robert Niblock underlined the problems facing the company, saying that the sales environment remains challenging as consumers hesitate to take on some projects, and adding that pressures on the housing market are mostly regional in nature.
GOIH Capital Markets: The Falling Dollar---A New Economic Paradigm.
Our economic models predict a coming economic crisis in the US. The Fed is helpless to make an meaningful effect on the economy now that the worlds capital markets are integrated and linked to each other. We are building a new Monte Carlo simulation that will model global economic and political events and make recommendations for investment.
Our economic indicators foresee a crisis in the value of the Dollar against other major currencies. Currently the Dollar is at an all-time low reflected in the dollar index which is trading below 80.
The Fed's rate cuts add pressure on the Dollar relative to countries that have a higher interest rate. Dollar denominated assets are now less attractive due to the lower rate of return offers by the lower US interest rates.
The lower US interest rates will cause imports into the US to rise in price, especially oil which made a new high on last week. Although the official estimate of inflation is 2%, our models indicate the real rate of inflation is closer to 6%. Home prices were up more than 20% over the last 3 years; gasoline prices averaged $2.65 up $0.40 cents per gallon, auto prices up about 9% in three years.
Because the US imports a large portion of its energy, which trades in the international market in dollars, which is at an all-time low, means that the consumers' price has to increase to compensate the exporters for the loss on the currency.
If the Fed continues to cut interest rates expect to see continued weakness in the dollar. The US exporters will benefit from the falling Dollar, MCD, KO, BO and other multinational exports who generate a majority of their sales outside the US.
Inflation will heat up and US importers will continue to be weak. Long term interest rates, i.e., the 10 year bond, which mortgages are priced against will rise due to the inflation threat.
If the 10 year bond increases in yield mortgage rates will increase offering no benefit to the Feds cut in the discount rate or Fed’s Fund rate. Housing will continue to be weak now that we are in this spiral downwards.
We have positions in MCD, KO, BO.
Our economic indicators foresee a crisis in the value of the Dollar against other major currencies. Currently the Dollar is at an all-time low reflected in the dollar index which is trading below 80.
The Fed's rate cuts add pressure on the Dollar relative to countries that have a higher interest rate. Dollar denominated assets are now less attractive due to the lower rate of return offers by the lower US interest rates.
The lower US interest rates will cause imports into the US to rise in price, especially oil which made a new high on last week. Although the official estimate of inflation is 2%, our models indicate the real rate of inflation is closer to 6%. Home prices were up more than 20% over the last 3 years; gasoline prices averaged $2.65 up $0.40 cents per gallon, auto prices up about 9% in three years.
Because the US imports a large portion of its energy, which trades in the international market in dollars, which is at an all-time low, means that the consumers' price has to increase to compensate the exporters for the loss on the currency.
If the Fed continues to cut interest rates expect to see continued weakness in the dollar. The US exporters will benefit from the falling Dollar, MCD, KO, BO and other multinational exports who generate a majority of their sales outside the US.
Inflation will heat up and US importers will continue to be weak. Long term interest rates, i.e., the 10 year bond, which mortgages are priced against will rise due to the inflation threat.
If the 10 year bond increases in yield mortgage rates will increase offering no benefit to the Feds cut in the discount rate or Fed’s Fund rate. Housing will continue to be weak now that we are in this spiral downwards.
We have positions in MCD, KO, BO.
GOIH Capital Markets: Market Overview
Our indicators see the market opening lower today due to weakness in Home Depot (HD) and Lowes (LOW), Target (TGT) and the other consumer retailers. As we have reported here in earlier posts the consumer is tapped out and especially in the home products retailers HD and LO the outlook is not positive.
We see GM trading lower due to the strike of the UAW. It's estimated that the strike will costs GM $5.0 billion if it lasts for very long. GM will lose about $100 million per day during the strike.
See a little weakness in Apple (AAPL) due to making a new high on Monday.
The Feds rate cuts were largely symbolic and of little effect to the consumer's confidence.
The homebuilders are continuing to see weakness in their stocks with Lennar reporting today and is down in the premarket indicating lower earnings.
We will update during the day as our models generate trading ideas and information.
We see GM trading lower due to the strike of the UAW. It's estimated that the strike will costs GM $5.0 billion if it lasts for very long. GM will lose about $100 million per day during the strike.
See a little weakness in Apple (AAPL) due to making a new high on Monday.
The Feds rate cuts were largely symbolic and of little effect to the consumer's confidence.
The homebuilders are continuing to see weakness in their stocks with Lennar reporting today and is down in the premarket indicating lower earnings.
We will update during the day as our models generate trading ideas and information.
Monday, September 24, 2007
GOIH Capital Markets: General Motors (GM) Position exited At $35.00
GOIH Capital Markets: General Motors (GM) Position exited At $35.00
Entry Point: $31.00
Entry Point: $31.00
GOIH: Economic Analysis----Fear of a Dollar Collapse, Part II
Fear of a Dollar Collapse, Part II
by Barry Ritholtz
Thursday, we discussed the potential impact of the ongoing weakening of the U.S. dollar. Today, we look at a few printing press Money Supply issues. Our focus: The spread between the Fed liquidity action (a/k/a Repos) and the M2 money supply measures. This is simply a measure of how much cash the Fed is injecting into the system.
The following Bloomberg chart shows the spread between these two monetary measures. It is quite instructive:
click to enlarge:
by Barry Ritholtz
Thursday, we discussed the potential impact of the ongoing weakening of the U.S. dollar. Today, we look at a few printing press Money Supply issues. Our focus: The spread between the Fed liquidity action (a/k/a Repos) and the M2 money supply measures. This is simply a measure of how much cash the Fed is injecting into the system.
The following Bloomberg chart shows the spread between these two monetary measures. It is quite instructive:
click to enlarge:
Speaking of surges: As you can clearly see above (bottom left chart), the amount of MZM (repos) versus M2 during 2007 is enormous. This means that the Fed is "inflating" at a rate faster today than it did right after 9/11, or during the deflationary scare of 2003.
As we asked Wednesday night, "What did the Fed Chair and the FOMC see that spooked them into a half point (over) reaction?" I am not sure what is was (and we've discussed many of the potential issues over the past 2 years), but the Fed is obviously scared witless.
The manifestations of this free printing press are many: Any commodity priced in plentiful dollars will cost more. Crude is now $82; and Inflation Fears Send Gold to 27-Year High.
Why? One way to think about it is supply and demand. Print A LOT more dollars and each one is worth a little less. Or, consider it this way: Extracting Oil or Gold from the earth ain't easy: We have to explore for Oil, determine where it is, how deep, what quality, etc. Then we have to use lots of heavy machinery to extract it, ship it to where it gets processed, refined, used in chemical manufacturing. Some of it gets refined into gasoline, and it is then transported to a network of gasoline stations, and it gets pumped into your car -- all for less per gallon than diet Coke or peach Snapple!
For gold, the process is not all that dissimilar.
Just crank up the printing press: It's cheap and easy. But why should us gold and oil producers exchange our hard won commodities (it's hard work) for pieces of paper you people are simply cranking out for free? Either give us something of real value -- or instead, we will insist on more of your crappy little pieces of green paper.
Thus, the inflationary repercussions of a "free money" policy. In fact, every commodity that is priced in dollars can potentially see much higher prices: Gold, Oil, Wheat, Soybeans, Copper, Timber, Corn, etc.
It's easy to understand why inflation has been called The Cruelest Tax.
~~~
GOIH QCF: Monte Carlo Recalibration
Our QCF has reprogrammed our Monte Carlo simulation after last week's Fed interest rate cut. We have adjusted the parameters to account for the interest rate decrease and the possibility of further decreases in the short term.
We are also designing a quantitative assessment model to predict sporting events outcomes. Our QCF has developed a model that combines various stochastic variables into a procedural model with predictive qualities of the outcomes of sporting events for personal use.
We are also designing a quantitative assessment model to predict sporting events outcomes. Our QCF has developed a model that combines various stochastic variables into a procedural model with predictive qualities of the outcomes of sporting events for personal use.
GOIH Capital Markets: Market Overview
Our indicators see the market opening slightly higher trading sideways on low volatility.
We car preparing a new quantitative analysis of the Dow components and what components tend to increase or decrease the Dow depending on the Dow futures trading.
The market is still uncertain of the Fed's interest rate cut. The cut of 50bps in both the Fed Funds Rate and the Discount Rate is causing the market to reflect on what is actually happening in the global economy.
The Dollar is at an all-time low against the Euro as oil made a new high last week on inflation fears. Gold is at a 24 year high on the weakness of the dollar causing inflation fears in long term interest rates.
It is our opinion that the Fed's actions will have little if any immediate effect on the market and the continued weakness in the housing sector will continue into 2008 due to the excess supply in housing units.
Even if Feddie and Fannie Mae increase the jumbo limits, beyond $417,000, the avaialble supply of new buyers is insufficient to increase demand for hte excess housing units.
The Dollar is trading at 141 to the Euro causing the exporters to MCD, KO, GE, BO and others to have a positive outlook as long as the Dollar is weak. As the Dollar weakens against the major currencies, European exporters’ sales will decrease relative to US exporters causing global markets to weaken.
Friday, September 21, 2007
GOIH Capital Markets: Quantitative Financial Group
We still have positions in GS, AAPL, LEH, MER, GM, MCD and we will post a mark to market at the closing today before we rebalance our positions.
GOIH Capital Markets: Market Overview
Our indicators see the market opening higher on low vol. After the Fed cut both the Fed Funds Rate and the Discount Rate by 50 bps the market is unsure what this actually means economically.
Our Quantitative Finance Group has reprogrammed our Market Monte Carlo simulation and we will post on next week the results of the new simulation.
Because of the cut in US interest rates we will see continued weakness in the Dollar relative to other currencies, as well as continued strength in gold due to the inflation risks cause by the lower interest rates.
Stocks that are attractive with a weak dollar will be profiled.
Oil has reached a new high after the interest rate cut, how does this play into the inflation calculation, and if inflation increases, can the Fed lower the rates again with inflation risk increasing?
Our QFG is researching these issues and will report back here with strategies to implement for above average profits.
Our Quantitative Finance Group has reprogrammed our Market Monte Carlo simulation and we will post on next week the results of the new simulation.
Because of the cut in US interest rates we will see continued weakness in the Dollar relative to other currencies, as well as continued strength in gold due to the inflation risks cause by the lower interest rates.
Stocks that are attractive with a weak dollar will be profiled.
Oil has reached a new high after the interest rate cut, how does this play into the inflation calculation, and if inflation increases, can the Fed lower the rates again with inflation risk increasing?
Our QFG is researching these issues and will report back here with strategies to implement for above average profits.
Tuesday, September 18, 2007
GOIH Capital Markets: Market Overview
GOIH Capital Markets sees the market opening higher on news of the pending Fed FOMC meeting.
Our models indicate that the Fed will lower the Fed Funds rate between 25-50 bps.
Market Sectors Affected:
Financial Services----up trend
Consumer Discretionaries---up trend
Housing Sectors----flat trend
Our Monte Carlo simulation has identified several stocks that will be affected positively by the Fed's rate cut:
Our models indicate that the Fed will lower the Fed Funds rate between 25-50 bps.
Market Sectors Affected:
Financial Services----up trend
Consumer Discretionaries---up trend
Housing Sectors----flat trend
Our Monte Carlo simulation has identified several stocks that will be affected positively by the Fed's rate cut:
- Goldman Sachs (GS)
- JP Morgan (JPM)
- Bank of America (BAC)
- Countrywide (CFC)
- Lehman Bros. (LEH)
- Morgan Stanley (MS)
Monday, September 17, 2007
GOIH Capital Markets: Arbitrage Strategies Group
Quantitative Finance Group: FICC Model.
We have developed a multivariate input simulation using stochastic volatility, crude oil prices, and the dollar index as the input variables for a model that sources the major markets of the world for opportunities for above average profits. The model reflects the sentiment of the global financial markets.
The models outputs: equities, currencies, fixed income instrument as well as commodities. The outputs will be stressed tested against several benchmarks for correlations and covariance determination.
We have developed a multivariate input simulation using stochastic volatility, crude oil prices, and the dollar index as the input variables for a model that sources the major markets of the world for opportunities for above average profits. The model reflects the sentiment of the global financial markets.
The models outputs: equities, currencies, fixed income instrument as well as commodities. The outputs will be stressed tested against several benchmarks for correlations and covariance determination.
GOIH Capital Markets: Market Overview
The market is shaky today after the subprime crisis now in England. North Rock a British financial institution had a "run” on the bank as depositors lined up to withdrawal their deposits from the bank.
On Tues, the FOMC meets in an anticipated meeting where the consensus is that the Fed will lower the Fed Funds rate by 25 bps. As we have in an earlier post stated we do no believe a 25-50 bp decrease will have nay effect on the economy.
The brokers report this week led by Lehman Bros. on Tues and the others later in the week. There is much dissention regarding the book value of the brokers. The assets on the balance according to the rumors will have to be reduced
FedEx (FDX), Best Buy (BBY) also report this week. Our models indicate that FDX will report forward guidance lower due to the decrease in consumer spending. Our models indicate that BBY will report flat to slightly lower expectations in earnings.
We see the market trading sideways pending the Fed's announcement on interest rates.
We will publish the results of the Monte Carlo simulation and the securities selected by the model.
Saturday, September 15, 2007
Fast Track in Finance
By LOUISE STORY
Published: September 16, 2007
MOST people who knew Gabriel Hammond at Johns Hopkins in the late 1990s could have predicted he would rise quickly on Wall Street. As a freshman, he traded stocks from his dorm room, making a $1,000 bet on Caterpillar. Soon after, he abandoned his childhood dream of becoming a lawyer and, upon graduation, joined Goldman Sachs as a stock analyst.
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Damon Winter/The New York Times
Gabriel Hammond, 28, is a founding partner of Alerian Capital Management, a hedge fund. He has no interest in going to business school.
Age of RichesFast Money
Articles in this series are examining the effects of the growing concentration of wealth. Previous Articles in the Series »
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Damon Winter/The New York Times
Katie Shaw, 28, took a hiatus from a private-equity job to get her business degree at Harvard Business School, where she is in her second year. She said the decision was a tough one. “It’s not only, ‘Where do I go to business school?’ It’s also, ‘Do I go?’”
The New York Times
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Damon Winter/The New York Times
Samir Ahmad, 25, was promoted to an M.B.A.-level position in the fixed-income, currencies and commodities division at Citi. He does not have an M.B.A. and has no plans to go to business school. He says on-the-job experience will serve him better.
Three years into his new job, Mr. Hammond noticed something. Very few of his young co-workers were taking a hiatus from Wall Street to go to business school, long considered an essential rung on the way to the top of the corporate ladder.
So he, too, decided to forgo an M.B.A.. Instead, he raised $5 million and started his own hedge fund, Alerian Capital Management, in 2004. The fund now manages $300 million out of offices in New York and Dallas, and Mr. Hammond, 28, enjoys seven-figure payouts.
Like other young people on the fast track, Mr. Hammond has run the numbers and figures that an M.B.A. is a waste of money and time — time that could be spent making money. “There’s no way that I would consider it,” he says.
As more Americans have become abundantly wealthy, young people are recalculating old assumptions about success. The flood of money into private equity and hedge funds over the last decade has made billionaires out of people like Kenneth Griffin, 38, chief executive of the Citadel Investment Group, and Eddie Lampert, 45, the hedge fund king who bought Sears and Kmart. These men are icons for the fast buck set — particularly the mathematically gifted cohort of rising stars known as “quants.” Many college graduates who are bright enough to be top computer scientists or medical researchers are becoming traders instead, and they measure their status in dollars instead of titles.
Many of the brightest don’t covet a corner office at Goldman Sachs or Morgan Stanley. Instead, they’re happy to work at a little-known hedge fund run out of a two-room office in Greenwich, Conn., as long as they get a fat payday. The competition from alternative investment firms — private equity and hedge funds in particular — is driving up salaries of entry-level analysts at much larger banks. And top performers at the banks make so much money today that they don’t want to take two years off for business school, even if it’s a prestigious institution like the Wharton School or Harvard.
The new ranks of traders and high-octane number crunchers on Wall Street are also a breed apart from celebrated long-term investors like Warren E. Buffett and investment banking gurus like Felix G. Rohatyn. What sets the new crowd apart is the need for speed and a thirst for instant riches.
“With the growth of hedge funds, you’re getting a lot of really smart people who are getting paid a lot very young,” says Arjuna Rajasingham, 29, an analyst and a trader at a hedge fund in London. “I know it’s a bit of a short-term view, but it’s hard to walk away from something that’s going really well.”
The shift has not gone unnoticed by administrators at some business schools. Richard Schmalensee, who was dean of the M.I.T. Sloan School of Management until June, chalked it up to the changing nature of money-making. In many banks and investment boutiques, traders with math and science backgrounds now contribute more to the bottom line than the white-shoed investment bankers who long presided over Wall Street. And traders tend to be less likely to go to business school.
“I don’t think you will see M.B.A.’s less represented in executive suites, but you may see M.B.A.’s less represented in the lists of the world’s richest people,” Professor Schmalensee says.
BUSINESS school has not fallen out of favor among the student population at large. The number of students who earned M.B.A.’s in 2005 was about 142,600, nearly twice the level in 1991. But as M.B.A.’s become more common, the degree seems to carry less prestige with people who land top-paying jobs in finance soon after college.
And recent upheavals in the financial markets don’t seem to be changing the thinking of these younger high-fliers and their employers.
Hedge fund managers are unlikely to punish their younger workers for any dip in returns this year, says Adam Zoia, managing partner at Glocap, a headhunter in New York. Management fees charged by funds — typically 2 percent — come in regardless of return levels and can more than cover large salaries for young employees at many funds.
“Most managers say, ‘If I don’t pony up a decent bonus, then I’m going to lose people,’ ” Mr. Zoia says. “It’d be short-sighted of them not to retain their good people.”
At funds that manage $1 billion to $3 billion, people with just a few years of finance experience will make $337,000 this year, Mr. Zoia says, and those with five to nine years of experience will average $830,000, up 6 percent from last year. These estimates include analysts and researchers but not portfolio traders, who can make much more because they sometimes share in profits.
Dozens of young people (mostly male) who want to be, or already are, successful traders said in interviews that they relished the challenge of their jobs, in addition to the lofty paychecks.
But they also spoke as if a money-clock were ticking: many said they wanted to make as much money as fast as they could so that they could live in style later in life while doing less lucrative things like running a charity, working for the government, spending time with their families, or inventing new technologies. Some, of course, plan to stay in finance their entire careers, and they, too, are very focused on earning fat bonuses fast.
“The sales pitch of these private equity funds or these hedge funds is, ‘Come here, and you’ll make a million bucks in two years,’ ” says Gregg R. Lemkau, 38, managing director and chief operating officer of investment banking at Goldman Sachs, who passed up business school to stay at Goldman in the early 1990s when that choice was more rare.
And because today there are more self-made millionaires — and billionaires — than ever before, 20-something traders seem bolder in their monetary ambitions. Business school often does not fit into these plans.
“If you want to make the most money in the shortest period of time, you can’t be away from work for two years,” says Vitaly Dukhon, 30, who recently left the Fortress Investment Group in New York to join another hedge fund.
While in college at Harvard, Mr. Dukhon thought he would go to business school in his mid-20s, but in his first job on the Treasury desk at Deutsche Bank, he realized that the smartest people just a few years his senior were staying put. “I saw that people that had been working for 20 years did have M.B.A.’s, but people five to six years older than me were not going,” he says. “Going to business school is a way for people to try to open the door, to try to get into a company or hedge fund. But if you’re already there, it doesn’t make sense to go.”
Mr. Hammond of Alerian noticed the same trend while he was an analyst at Goldman Sachs. His co-workers who went to business school either wanted to change careers, or they were not doing well in their current jobs, he says.
Part of the shift comes as investment banks like Goldman Sachs and Credit Suisse have changed their tune on business school. Instead of pushing all their young employees into M.B.A. programs, banks are telling the best ones to stay put.
“We are the perfect training ground for people who want to have careers in finance,” says Caitlin McLaughlin, director of campus recruiting for Citi, the former Citigroup. Just 15 years ago, Ms. McLaughlin estimates, 85 to 90 percent of Citi’s analyst classes ended up attending business school. Now, she thinks that figure is closer to 50 percent.
Samir Ahmad, 25, has worked at Citi since college. This summer, he was promoted to associate, an M.B.A.-level position, in the fixed-income, currencies and commodities division. Despite advice from his older brother that he should attend business school, Mr. Ahmad says he cannot see what he would gain to justify the time. “If I were to spend two years at business school, I’d get an M.B.A. degree, but I think learning a different product or a different group here at Citi would be more valuable,” he says.
To be sure, business school can still be a valuable investment, especially for those who want to change careers. Most schools teach a well-rounded curriculum that exposes students to the full picture of the way the business world works. They are great places to make friends and connections that can help throughout a career. And the top business schools serve as a useful filtering system, placing a seal of approval on graduates that can help them find jobs.
“Most banking — and that includes private equity — is about deals and about relationships,” says Timothy Butler, director of M.B.A. career development programs at Harvard Business School. “That will always be M.B.A. territory.”
YET even some students at top schools like Harvard say the decision to go is tougher now than it likely was two decades ago. “We all struggled with it,” says Katie Shaw, 28, who is in her second year of business school there. “It’s not only, ‘Where do I go to business school?’ It’s also, ‘Do I go?’ ”
Ms. Shaw worked in private equity before business school and plans to return to a position in finance. In private equity, she says, an M.B.A. is valued because buying and selling companies involves relationships and company analysis skills. Still, most private equity firms used to require their young hires to leave to go to business school, and some are now letting talented ones keep working instead.
Headhunters for hedge funds and private equity firms say hedge funds, in particular, do not value an M.B.A. “I have some clients that will legitimately say, ‘An M.B.A. means absolutely nothing to us,’ ” says Tim Zack, principal of In-Site Search, a headhunting firm in Westport, Conn., that is a division of Chaves and Associates.
Mr. Hammond of the Alerian hedge fund recently hired someone from Carnegie Mellon’s business school because of that person’s engineering talent, not the skills he learned in business school. While Mr. Hammond says he understands why his new employee went to business school to move into finance, he would look less favorably on someone in an M.B.A. program who had left finance to go to business school.
If he were looking at someone who went to Harvard Business School after the two-year analyst program at Goldman, “I’d be suspicious,” he says. “I’d be saying, ‘What was it you were doing wrong that you couldn’t get a promotion at Goldman or did not pursue an opportunity with a private equity or hedge fund?’ ”
When young people on Wall Street consider the benefits of business school, Mr. Hammond says, the upside no longer outweighs lost salaries and bonuses they would have earned. He calculates the cost of going to a two-year business school to be at least half a million dollars for the average bank employee — $250,000 or more each year in lost salary, plus $50,000 a year in tuition and living expenses. For hedge fund employees, Mr. Hammond says, the number would be considerably higher.
The result, headhunters say, is that many of the best people in finance are no longer entering the M.B.A. pipeline. “If someone is doing well at a hedge fund, they absolutely do not encourage their employees to go off to business school,” says Mr. Zoia of Glocap.
Some young people are pursuing alternatives that can be completed without leaving their jobs. Some take the certified financial adviser tests or study part-time at night at schools like N.Y.U. that offer master’s degrees in subjects like financial engineering.
“There’s a real shift in assumptions as to what is going to make you a better applicant or a prospect for a job,” says Art Hogan, chief market analyst for Jefferies & Company, noting that he had seen an increased interest in young people pursuing a degree as a certified financial adviser at night rather than leaving their jobs for an M.B.A.
At the banks, there has been a push in recent years to keep top performers around after their time as analysts, the most junior position, ends. “Strong performers we want to keep at the firm for as long as possible,” says Julie Kalish, 28, head of United States recruiting for Credit Suisse. “The amount of analysts that we try to keep for the associate promotion process has grown over recent years.”
Admissions officers at top business schools say finance firms always try to hold onto their best employees when the economy is good. They say interest from applicants working in finance is not declining and their graduates still land a large number of top finance jobs. What administrators at business schools do not know — largely because their admissions and career placement offices are separate — is whether their students with a finance background are staying in that industry.
Recruiters at banks say a large number of the students that they are hiring from business schools are from an international background or are changing careers. These students are valuable, they say, but they come in with a different background from someone who has been in finance since age 22.
Jeffrey Talpins, chief investment officer at Element Capital Management, a small fixed-income hedge fund in New York, says he likes to hire people fresh out of school so he can teach them himself. Mr. Talpins attended Yale as an undergraduate but did not go to business school. If a young employee asked his advice on business school, he says, he would tell them not to go if they wanted to stay in finance. “I’d say, ‘You already have a great platform for a job in finance,’ ” he says. “If you’re a superstar, and you’re very good, you’ll grow very rapidly in this field.”
Eventually, these young people may want to raise money and start their own fund, suggests Thomas Caleel, director of admissions at Wharton, and that’s where an M.B.A. and the connections that come with it could help. “If you are trying to raise money for a hedge fund, you will need that network,” he says.
Mr. Talpins of Element said he had no trouble raising money for his hedge fund without an M.B.A. After all, he had a track record from Citi and Goldman Sachs to show to potential investors. In his corner of the world, where math equations are likely to be scrawled on white boards around the office and young people hold the purse strings to millions of dollars in investor money, it seems there is no point in going to business school just to punch a ticket.
In 2005, Trader Monthly named Mr. Talpins one of the top 30 traders under 30. “Youth is not wasted on this crop, any of whom could be a billionaire by 40,” the magazine said. “Or, then again, they could be belly up and bust.”
Mr. Hammond of Alerian, who was featured on the magazine’s list last year, said he has seen people go to hedge funds and get fired in six months “because they couldn’t hack it.”
But he says the risk is worth it.
“If you look at the really successful hedge fund managers — the Eddie Lamperts,” he says, “they’re all in their 40s now. They were probably making only low single-digit millions in their 20s.
“That’s why you do this,” he continues. “That’s why it’s so attractive, because the payoff of being the winner, the next Eddie Lampert, is so high.”
Published: September 16, 2007
MOST people who knew Gabriel Hammond at Johns Hopkins in the late 1990s could have predicted he would rise quickly on Wall Street. As a freshman, he traded stocks from his dorm room, making a $1,000 bet on Caterpillar. Soon after, he abandoned his childhood dream of becoming a lawyer and, upon graduation, joined Goldman Sachs as a stock analyst.
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Gabriel Hammond, 28, is a founding partner of Alerian Capital Management, a hedge fund. He has no interest in going to business school.
Age of RichesFast Money
Articles in this series are examining the effects of the growing concentration of wealth. Previous Articles in the Series »
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Damon Winter/The New York Times
Katie Shaw, 28, took a hiatus from a private-equity job to get her business degree at Harvard Business School, where she is in her second year. She said the decision was a tough one. “It’s not only, ‘Where do I go to business school?’ It’s also, ‘Do I go?’”
The New York Times
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Damon Winter/The New York Times
Samir Ahmad, 25, was promoted to an M.B.A.-level position in the fixed-income, currencies and commodities division at Citi. He does not have an M.B.A. and has no plans to go to business school. He says on-the-job experience will serve him better.
Three years into his new job, Mr. Hammond noticed something. Very few of his young co-workers were taking a hiatus from Wall Street to go to business school, long considered an essential rung on the way to the top of the corporate ladder.
So he, too, decided to forgo an M.B.A.. Instead, he raised $5 million and started his own hedge fund, Alerian Capital Management, in 2004. The fund now manages $300 million out of offices in New York and Dallas, and Mr. Hammond, 28, enjoys seven-figure payouts.
Like other young people on the fast track, Mr. Hammond has run the numbers and figures that an M.B.A. is a waste of money and time — time that could be spent making money. “There’s no way that I would consider it,” he says.
As more Americans have become abundantly wealthy, young people are recalculating old assumptions about success. The flood of money into private equity and hedge funds over the last decade has made billionaires out of people like Kenneth Griffin, 38, chief executive of the Citadel Investment Group, and Eddie Lampert, 45, the hedge fund king who bought Sears and Kmart. These men are icons for the fast buck set — particularly the mathematically gifted cohort of rising stars known as “quants.” Many college graduates who are bright enough to be top computer scientists or medical researchers are becoming traders instead, and they measure their status in dollars instead of titles.
Many of the brightest don’t covet a corner office at Goldman Sachs or Morgan Stanley. Instead, they’re happy to work at a little-known hedge fund run out of a two-room office in Greenwich, Conn., as long as they get a fat payday. The competition from alternative investment firms — private equity and hedge funds in particular — is driving up salaries of entry-level analysts at much larger banks. And top performers at the banks make so much money today that they don’t want to take two years off for business school, even if it’s a prestigious institution like the Wharton School or Harvard.
The new ranks of traders and high-octane number crunchers on Wall Street are also a breed apart from celebrated long-term investors like Warren E. Buffett and investment banking gurus like Felix G. Rohatyn. What sets the new crowd apart is the need for speed and a thirst for instant riches.
“With the growth of hedge funds, you’re getting a lot of really smart people who are getting paid a lot very young,” says Arjuna Rajasingham, 29, an analyst and a trader at a hedge fund in London. “I know it’s a bit of a short-term view, but it’s hard to walk away from something that’s going really well.”
The shift has not gone unnoticed by administrators at some business schools. Richard Schmalensee, who was dean of the M.I.T. Sloan School of Management until June, chalked it up to the changing nature of money-making. In many banks and investment boutiques, traders with math and science backgrounds now contribute more to the bottom line than the white-shoed investment bankers who long presided over Wall Street. And traders tend to be less likely to go to business school.
“I don’t think you will see M.B.A.’s less represented in executive suites, but you may see M.B.A.’s less represented in the lists of the world’s richest people,” Professor Schmalensee says.
BUSINESS school has not fallen out of favor among the student population at large. The number of students who earned M.B.A.’s in 2005 was about 142,600, nearly twice the level in 1991. But as M.B.A.’s become more common, the degree seems to carry less prestige with people who land top-paying jobs in finance soon after college.
And recent upheavals in the financial markets don’t seem to be changing the thinking of these younger high-fliers and their employers.
Hedge fund managers are unlikely to punish their younger workers for any dip in returns this year, says Adam Zoia, managing partner at Glocap, a headhunter in New York. Management fees charged by funds — typically 2 percent — come in regardless of return levels and can more than cover large salaries for young employees at many funds.
“Most managers say, ‘If I don’t pony up a decent bonus, then I’m going to lose people,’ ” Mr. Zoia says. “It’d be short-sighted of them not to retain their good people.”
At funds that manage $1 billion to $3 billion, people with just a few years of finance experience will make $337,000 this year, Mr. Zoia says, and those with five to nine years of experience will average $830,000, up 6 percent from last year. These estimates include analysts and researchers but not portfolio traders, who can make much more because they sometimes share in profits.
Dozens of young people (mostly male) who want to be, or already are, successful traders said in interviews that they relished the challenge of their jobs, in addition to the lofty paychecks.
But they also spoke as if a money-clock were ticking: many said they wanted to make as much money as fast as they could so that they could live in style later in life while doing less lucrative things like running a charity, working for the government, spending time with their families, or inventing new technologies. Some, of course, plan to stay in finance their entire careers, and they, too, are very focused on earning fat bonuses fast.
“The sales pitch of these private equity funds or these hedge funds is, ‘Come here, and you’ll make a million bucks in two years,’ ” says Gregg R. Lemkau, 38, managing director and chief operating officer of investment banking at Goldman Sachs, who passed up business school to stay at Goldman in the early 1990s when that choice was more rare.
And because today there are more self-made millionaires — and billionaires — than ever before, 20-something traders seem bolder in their monetary ambitions. Business school often does not fit into these plans.
“If you want to make the most money in the shortest period of time, you can’t be away from work for two years,” says Vitaly Dukhon, 30, who recently left the Fortress Investment Group in New York to join another hedge fund.
While in college at Harvard, Mr. Dukhon thought he would go to business school in his mid-20s, but in his first job on the Treasury desk at Deutsche Bank, he realized that the smartest people just a few years his senior were staying put. “I saw that people that had been working for 20 years did have M.B.A.’s, but people five to six years older than me were not going,” he says. “Going to business school is a way for people to try to open the door, to try to get into a company or hedge fund. But if you’re already there, it doesn’t make sense to go.”
Mr. Hammond of Alerian noticed the same trend while he was an analyst at Goldman Sachs. His co-workers who went to business school either wanted to change careers, or they were not doing well in their current jobs, he says.
Part of the shift comes as investment banks like Goldman Sachs and Credit Suisse have changed their tune on business school. Instead of pushing all their young employees into M.B.A. programs, banks are telling the best ones to stay put.
“We are the perfect training ground for people who want to have careers in finance,” says Caitlin McLaughlin, director of campus recruiting for Citi, the former Citigroup. Just 15 years ago, Ms. McLaughlin estimates, 85 to 90 percent of Citi’s analyst classes ended up attending business school. Now, she thinks that figure is closer to 50 percent.
Samir Ahmad, 25, has worked at Citi since college. This summer, he was promoted to associate, an M.B.A.-level position, in the fixed-income, currencies and commodities division. Despite advice from his older brother that he should attend business school, Mr. Ahmad says he cannot see what he would gain to justify the time. “If I were to spend two years at business school, I’d get an M.B.A. degree, but I think learning a different product or a different group here at Citi would be more valuable,” he says.
To be sure, business school can still be a valuable investment, especially for those who want to change careers. Most schools teach a well-rounded curriculum that exposes students to the full picture of the way the business world works. They are great places to make friends and connections that can help throughout a career. And the top business schools serve as a useful filtering system, placing a seal of approval on graduates that can help them find jobs.
“Most banking — and that includes private equity — is about deals and about relationships,” says Timothy Butler, director of M.B.A. career development programs at Harvard Business School. “That will always be M.B.A. territory.”
YET even some students at top schools like Harvard say the decision to go is tougher now than it likely was two decades ago. “We all struggled with it,” says Katie Shaw, 28, who is in her second year of business school there. “It’s not only, ‘Where do I go to business school?’ It’s also, ‘Do I go?’ ”
Ms. Shaw worked in private equity before business school and plans to return to a position in finance. In private equity, she says, an M.B.A. is valued because buying and selling companies involves relationships and company analysis skills. Still, most private equity firms used to require their young hires to leave to go to business school, and some are now letting talented ones keep working instead.
Headhunters for hedge funds and private equity firms say hedge funds, in particular, do not value an M.B.A. “I have some clients that will legitimately say, ‘An M.B.A. means absolutely nothing to us,’ ” says Tim Zack, principal of In-Site Search, a headhunting firm in Westport, Conn., that is a division of Chaves and Associates.
Mr. Hammond of the Alerian hedge fund recently hired someone from Carnegie Mellon’s business school because of that person’s engineering talent, not the skills he learned in business school. While Mr. Hammond says he understands why his new employee went to business school to move into finance, he would look less favorably on someone in an M.B.A. program who had left finance to go to business school.
If he were looking at someone who went to Harvard Business School after the two-year analyst program at Goldman, “I’d be suspicious,” he says. “I’d be saying, ‘What was it you were doing wrong that you couldn’t get a promotion at Goldman or did not pursue an opportunity with a private equity or hedge fund?’ ”
When young people on Wall Street consider the benefits of business school, Mr. Hammond says, the upside no longer outweighs lost salaries and bonuses they would have earned. He calculates the cost of going to a two-year business school to be at least half a million dollars for the average bank employee — $250,000 or more each year in lost salary, plus $50,000 a year in tuition and living expenses. For hedge fund employees, Mr. Hammond says, the number would be considerably higher.
The result, headhunters say, is that many of the best people in finance are no longer entering the M.B.A. pipeline. “If someone is doing well at a hedge fund, they absolutely do not encourage their employees to go off to business school,” says Mr. Zoia of Glocap.
Some young people are pursuing alternatives that can be completed without leaving their jobs. Some take the certified financial adviser tests or study part-time at night at schools like N.Y.U. that offer master’s degrees in subjects like financial engineering.
“There’s a real shift in assumptions as to what is going to make you a better applicant or a prospect for a job,” says Art Hogan, chief market analyst for Jefferies & Company, noting that he had seen an increased interest in young people pursuing a degree as a certified financial adviser at night rather than leaving their jobs for an M.B.A.
At the banks, there has been a push in recent years to keep top performers around after their time as analysts, the most junior position, ends. “Strong performers we want to keep at the firm for as long as possible,” says Julie Kalish, 28, head of United States recruiting for Credit Suisse. “The amount of analysts that we try to keep for the associate promotion process has grown over recent years.”
Admissions officers at top business schools say finance firms always try to hold onto their best employees when the economy is good. They say interest from applicants working in finance is not declining and their graduates still land a large number of top finance jobs. What administrators at business schools do not know — largely because their admissions and career placement offices are separate — is whether their students with a finance background are staying in that industry.
Recruiters at banks say a large number of the students that they are hiring from business schools are from an international background or are changing careers. These students are valuable, they say, but they come in with a different background from someone who has been in finance since age 22.
Jeffrey Talpins, chief investment officer at Element Capital Management, a small fixed-income hedge fund in New York, says he likes to hire people fresh out of school so he can teach them himself. Mr. Talpins attended Yale as an undergraduate but did not go to business school. If a young employee asked his advice on business school, he says, he would tell them not to go if they wanted to stay in finance. “I’d say, ‘You already have a great platform for a job in finance,’ ” he says. “If you’re a superstar, and you’re very good, you’ll grow very rapidly in this field.”
Eventually, these young people may want to raise money and start their own fund, suggests Thomas Caleel, director of admissions at Wharton, and that’s where an M.B.A. and the connections that come with it could help. “If you are trying to raise money for a hedge fund, you will need that network,” he says.
Mr. Talpins of Element said he had no trouble raising money for his hedge fund without an M.B.A. After all, he had a track record from Citi and Goldman Sachs to show to potential investors. In his corner of the world, where math equations are likely to be scrawled on white boards around the office and young people hold the purse strings to millions of dollars in investor money, it seems there is no point in going to business school just to punch a ticket.
In 2005, Trader Monthly named Mr. Talpins one of the top 30 traders under 30. “Youth is not wasted on this crop, any of whom could be a billionaire by 40,” the magazine said. “Or, then again, they could be belly up and bust.”
Mr. Hammond of Alerian, who was featured on the magazine’s list last year, said he has seen people go to hedge funds and get fired in six months “because they couldn’t hack it.”
But he says the risk is worth it.
“If you look at the really successful hedge fund managers — the Eddie Lamperts,” he says, “they’re all in their 40s now. They were probably making only low single-digit millions in their 20s.
“That’s why you do this,” he continues. “That’s why it’s so attractive, because the payoff of being the winner, the next Eddie Lampert, is so high.”
Friday, September 14, 2007
GOIH Capital Markets: Market Overview
Our indicators see the market opening lower and trading lower today ahead of the Fed's meeting on Tues. Overnight the subprime mortgage market claimed another victim, this time in London. A lender had to seek an emergency loan from the Bank of England to maintain solvency.
Thursday, September 13, 2007
GOIH QFC: Goldman Sachs Group Inc.'s Global Alpha hedge fund fell 22.5 percent in August.
Sept. 13 (Bloomberg) -- Goldman Sachs Group Inc.'s Global Alpha hedge fund fell 22.5 percent in August, its biggest monthly decline, on losses from currency and stock trades.
The fund, managed by Mark Carhart and Raymond Iwanowski, lost a third of its value in 2007, according to an update sent to investors. Investors last month notified New York-based Goldman, the most profitable securities firm, that they plan to withdraw $1.6 billion, or almost a fifth of the fund's assets as of July 31.
Carhart and Iwanowski, who use mathematical formulas to select trades, may get more redemption notices as Global Alpha falls further behind quantitative managers such as James Simons's Renaissance Technologies Corp. Global Alpha generated $700 million in fees after an almost 40 percent gain in 2005. The fund has fallen 44 percent since its March 2006 peak.
``With losses this large, typically you have to look at the return potential going forward,'' said Gregory Dowling, vice president for alternative investments at Cincinnati-based Fund Evaluation Group LLC, which doesn't have money in the Goldman fund. ``If there isn't a possibility of a snap-back, you have to examine where else you can put that capital.''
Goldman injected $2 billion into Global Equity Opportunities, another quant fund run by Carhart and Iwanowski, both 41, after it lost 28 percent in the first eight trading days of August. The fund, which also received $1 billion from outside investors, rose 12 percent in the following week.
Global Alpha's biggest loss in the month stemmed from the managers' decision to sell Japanese yen and buy Australian dollars. The so-called carry trade unraveled when the Australian dollar fell 6 percent against the yen in August. Equities holdings, including stocks in the U.S., Norway and Finland, declined 4.7 percent.
Fundamental Beliefs
``We still hold our fundamental investment beliefs that sound economic investment principles coupled with a disciplined quantitative approach can provide strong uncorrelated returns over time,'' Goldman said in the unsigned report.
Goldman spokeswoman Andrea Raphael declined to comment.
Hedge funds are largely unregulated investment pools that can bet on falling as well as rising asset prices. Their managers gain substantially from profits on money invested.
Global Alpha's decline compares with the 20 percent drop in Red Kite Metals, the world's largest hedge fund dedicated to metals. Old Lane LP, the hedge-fund firm acquired two months ago by Citigroup Inc., lost 5.9 percent in August, quadruple the industry's average decline, as bond and emerging markets fell.
Deep Hole
Global Alpha will have to return 80 percent before the managers can resume collecting 20 percent of investment profits from clients who were in the fund at the beginning of last year.
The fund lost about 9 percent in 2006. At the same time, hedge funds globally gained an average of 13 percent, according to Chicago-based Hedge Fund Research Inc.
Goldman markets the fund, which started in 1995 with $10 million, as making high-risk bets that can lead to swings in performance. It targets a 20 percent annual return, according to fund documents.
Other quant managers fared better in August after a rocky start. Simons's $29 billion Renaissance Institutional Equities Fund made up the entire 8.7 percent loss it suffered in the first eight trading days of August.
Goldman blamed its losses on too many quantitative funds making the same trades, and said in mid-August it would have to develop new strategies.
``Longer term, successful quant managers will have to rely more on unique factors,'' Goldman's fund-management division said in a report to clients. ``While we have developed a number of these factors over the last several years, in hindsight we did not put sufficient weight on these relative to more popular quant factors.''
To contact the reporters on this story: Katherine Burton in New York at kburton@bloomberg.net ; Jenny Strasburg in New York at jstrasburg@bloomberg.net
The fund, managed by Mark Carhart and Raymond Iwanowski, lost a third of its value in 2007, according to an update sent to investors. Investors last month notified New York-based Goldman, the most profitable securities firm, that they plan to withdraw $1.6 billion, or almost a fifth of the fund's assets as of July 31.
Carhart and Iwanowski, who use mathematical formulas to select trades, may get more redemption notices as Global Alpha falls further behind quantitative managers such as James Simons's Renaissance Technologies Corp. Global Alpha generated $700 million in fees after an almost 40 percent gain in 2005. The fund has fallen 44 percent since its March 2006 peak.
``With losses this large, typically you have to look at the return potential going forward,'' said Gregory Dowling, vice president for alternative investments at Cincinnati-based Fund Evaluation Group LLC, which doesn't have money in the Goldman fund. ``If there isn't a possibility of a snap-back, you have to examine where else you can put that capital.''
Goldman injected $2 billion into Global Equity Opportunities, another quant fund run by Carhart and Iwanowski, both 41, after it lost 28 percent in the first eight trading days of August. The fund, which also received $1 billion from outside investors, rose 12 percent in the following week.
Global Alpha's biggest loss in the month stemmed from the managers' decision to sell Japanese yen and buy Australian dollars. The so-called carry trade unraveled when the Australian dollar fell 6 percent against the yen in August. Equities holdings, including stocks in the U.S., Norway and Finland, declined 4.7 percent.
Fundamental Beliefs
``We still hold our fundamental investment beliefs that sound economic investment principles coupled with a disciplined quantitative approach can provide strong uncorrelated returns over time,'' Goldman said in the unsigned report.
Goldman spokeswoman Andrea Raphael declined to comment.
Hedge funds are largely unregulated investment pools that can bet on falling as well as rising asset prices. Their managers gain substantially from profits on money invested.
Global Alpha's decline compares with the 20 percent drop in Red Kite Metals, the world's largest hedge fund dedicated to metals. Old Lane LP, the hedge-fund firm acquired two months ago by Citigroup Inc., lost 5.9 percent in August, quadruple the industry's average decline, as bond and emerging markets fell.
Deep Hole
Global Alpha will have to return 80 percent before the managers can resume collecting 20 percent of investment profits from clients who were in the fund at the beginning of last year.
The fund lost about 9 percent in 2006. At the same time, hedge funds globally gained an average of 13 percent, according to Chicago-based Hedge Fund Research Inc.
Goldman markets the fund, which started in 1995 with $10 million, as making high-risk bets that can lead to swings in performance. It targets a 20 percent annual return, according to fund documents.
Other quant managers fared better in August after a rocky start. Simons's $29 billion Renaissance Institutional Equities Fund made up the entire 8.7 percent loss it suffered in the first eight trading days of August.
Goldman blamed its losses on too many quantitative funds making the same trades, and said in mid-August it would have to develop new strategies.
``Longer term, successful quant managers will have to rely more on unique factors,'' Goldman's fund-management division said in a report to clients. ``While we have developed a number of these factors over the last several years, in hindsight we did not put sufficient weight on these relative to more popular quant factors.''
To contact the reporters on this story: Katherine Burton in New York at kburton@bloomberg.net ; Jenny Strasburg in New York at jstrasburg@bloomberg.net
GOIH Capital Markets: Gen'l Motors (GM) Position: 100,000 @ $31.75 sell stop entered at $31.00.
We have entered a position in GM for 100,000 @$31.75.....the position was entered due to our Wall St. contact. It's rumored UAW contract negotiations are positive. Sell stop entered at $31.00.
GOIH Capital Markets: Coke Cola (KO)---Analysis
Earlier we posted we had entered a position in MCD (McDonald's). We believe that KO is a good entry point since if MCD's sales are up, then it follows that those sales include sales of KO products.
The weak dollar helps both KO and MCD since a majority of their earnings are earned outside the US. The dollar index against seven major currencies is at a 15 year low helping US exporter
KO is up about 7% in the last 10 trading days. MCD raised its dividend 50% today indicating strong growth.
GOIH Quantitative Finance Group: Monte Carlo Simulation
GOIH's Quantitative Finance Group (QFG) has programmed a Monte Carlo simulation of the U.S. financial markets with the input variable a stochastic process of the Fed Funds rate. Our QFG has modeled the Feds Funds stochastic process with a range of (0-100) basis points in the Fed Funds rate.
We will announce the results of the Monte Carlo simulation before the Fed meets on Tues.
The model is designed to predict the effects on the market of the Fed's action regarding the interest rate and other policy decisions concerning the economy.
We will publish a list of stocks we feel will be affected by the interest rate decision and the predicted market action: the Dow, Nasdaq, Dollar, Yen, Euro, housing sector, financial sector.
We will announce the results of the Monte Carlo simulation before the Fed meets on Tues.
The model is designed to predict the effects on the market of the Fed's action regarding the interest rate and other policy decisions concerning the economy.
We will publish a list of stocks we feel will be affected by the interest rate decision and the predicted market action: the Dow, Nasdaq, Dollar, Yen, Euro, housing sector, financial sector.
GOIH Capital Markets: Goldman Sachs---Long 200,000 @ $184.00
We will hold this position for a short term trade pending the Fed's FOMC meeting on Tues.
GOIH Capital Markets: Goldman Sachs (NYSE:GS), Merrill Lynch (MER), Morgan Stanley (MS), Lehman Bros. (LEH).
We are entering a long position in Goldman Sachs (GS) and Morgan Stanley (MS), Merrill Lynch (MER), and Lehman Bros. (LEH). We are bullish on the brokers going into earnings on next week. We believe the Fed will lower interest rates which will help the investment banks lower their operating and funding costs.
GOIH Capital Markets: CFC: short position 300,000 share covered at $16.45.
GOIH Capital Markets: CFC: short position 300,000 share covered at $16.45.
Profit $465,000
Profit $465,000
GOIH Capital Markets: Market Overview
GOIH Capital Markets sees a strong opening in the market today. Our models indicating the Dow opening higher as well as the NASDAQ on slow volume pending the Fed's meeting on Tues.
Next week the investment banks report earnings for the second quarter. Trading has been volatile in the banks pending the announcement of earnings. Most of the large brokers have exposure to the credit market and earnings will depend on the management of the risk involved in the assets of that market.
McDonald's
In an earlier post here our models predicted that MCD, (McDonald's) was attractive. MCD raised its dividend by 50% after the close. A gap up in the opening.
We picked up a position in the after market long for 100,000 @ $51.20 on MCD.
We see the market trading sideways until the FOMC meeting on Tues.
Apple Inc.
Apple is up strong in the premarket with bid of $138.61 after closing at $136.85.
GM is up strong on news of the UAW contract negotiations......we see GM going higher if the contracts are positive. However, the gap up is based on costs saving rather than increased sales.
Crude oil traded over $80.00 per barrel in intra day trading.....strong oil should lower GM's sales relative to any gains made in the UAW contract.
Countrywide (CFC)
We exited our short CFC position at $16.45 for 300,000 shares for a profit of $465,000.
Wednesday, September 12, 2007
GOIH Capital Markets: Global 1 Investment Holding Corp. (OTCBB:GOIH) New Mortgage Product.
WASHINGTON (MarketWatch) -- More mortgage products are needed to help homeowners keep their houses, Treasury Secretary Henry Paulson said Wednesday. Speaking before a meeting with mortgage-servicing companies, Paulson said the Bush administration is working to keep as many homeowners in their homes as possible. "It's going to take awhile" for problems in the subprime-mortgage market to correct, Paulson said, because many loan resets will take place over the next 18 months to two years. He said the administration is identifying borrowers who may face expensive resets and that "we need an expansion of mortgage-financing products."
GOIH Commentary:
Our Financial Engineering Group has developed a new mortgage product to remedy the problem cited by Sec. Paulson in the above news article. We are fine tuning the product and will launch the product as soon a we have the financial models worked out.
GOIH Commentary:
Our Financial Engineering Group has developed a new mortgage product to remedy the problem cited by Sec. Paulson in the above news article. We are fine tuning the product and will launch the product as soon a we have the financial models worked out.
Tuesday, September 11, 2007
GOIH Capital Markets: Countrywide seeking more funding
September 11, 2007 --
Countrywide Financial Corp. is putting together another multi-billion dollar bailout plan as the nation's largest home lender continues to struggle amid the global credit crunch and declines in the housing market, The Post has learned.
Sources familiar with Countrywide's plans said the lender continues to work with Goldman Sachs and law firm Wachtell Lipton Rosen & Katz to structure another strategic investment similar to the deal Bank of America struck last month.
It's unclear at this point who exactly is involved in the investment, but sources said a group that could include J.P. Morgan and Citigroup as well as several hedge funds has expressed interest in Countrywide.
A final deal could be announced by the end of the month, sources said.
Last month, Bank of America paid $2 billion for a new series of non-voting preferred stock in Countrywide, which provides an annual dividend of 7.25 percent and can be converted into common stock at $18 per share. As part of the deal, Countrywide left the door open to issue additional preferred stock or convertible preferred stock.
"Countrywide is in desperate need of cash right now to continue funding mortgages and the credit markets are still largely closed to them," said one source familiar with the company.
Countrywide's chief executive Angelo Mozilo, who announced plans last week to eliminate as many as 12,000 jobs, said recently that interest rate cuts by the U.S. Federal Reserve won't be enough to revive home sales and warned that the U.S. economy is headed for a recession.
"The issues the economy is facing are worse than most people believe," Mozilo said in an interview last Friday with Bloomberg News. Mozilo has been pushing for the government to allow Fannie Mae and Freddie Mac to finance bigger home loans.
Countrywide, which handles one of every five new U.S. mortgages, has been hurt by falling home prices and record foreclosures. The company has billions in medium-term debt coming due in about 90 days and needs to cash to continue operating.
Countrywide's stock plunged by over 5 percent yesterday after analysts at Merrill Lynch and UBS cut their profit estimates on worries over the company's ability to make new loans. The stock, which has fallen over 59 percent this year, closed at a four-year low of $17.21 yesterday.
Making matters worse, Alliance Capital Management, which is owned by giant French insurance company Axa SA, disclosed that it has sold about 31 million shares of Countrywide in the last month. Barclays Global Investors has also sold nearly 25 million shares.
"We think the stock will continue to drift down, as investors lose hope of a near-term recovery," said Merrill analyst Kenneth Bruce. He estimates that the job cuts could save Countrywide roughly $1 billion a year, but that will only offset lower revenues.
zachery.kouwe@nypost.com
GOIH Commentary:
We have previously posted here the apparent link between CFC and GS. Now there appears to be a second bailout in the works for CFC, lead by who: GS. We believe based on the trading patterns of GS and CFC, GS hedge funds hold a large position in CFC and by buying the company they can close out their losing positions or replace those positions with new positions and avoid any loses associated with the investment.
Countrywide Financial Corp. is putting together another multi-billion dollar bailout plan as the nation's largest home lender continues to struggle amid the global credit crunch and declines in the housing market, The Post has learned.
Sources familiar with Countrywide's plans said the lender continues to work with Goldman Sachs and law firm Wachtell Lipton Rosen & Katz to structure another strategic investment similar to the deal Bank of America struck last month.
It's unclear at this point who exactly is involved in the investment, but sources said a group that could include J.P. Morgan and Citigroup as well as several hedge funds has expressed interest in Countrywide.
A final deal could be announced by the end of the month, sources said.
Last month, Bank of America paid $2 billion for a new series of non-voting preferred stock in Countrywide, which provides an annual dividend of 7.25 percent and can be converted into common stock at $18 per share. As part of the deal, Countrywide left the door open to issue additional preferred stock or convertible preferred stock.
"Countrywide is in desperate need of cash right now to continue funding mortgages and the credit markets are still largely closed to them," said one source familiar with the company.
Countrywide's chief executive Angelo Mozilo, who announced plans last week to eliminate as many as 12,000 jobs, said recently that interest rate cuts by the U.S. Federal Reserve won't be enough to revive home sales and warned that the U.S. economy is headed for a recession.
"The issues the economy is facing are worse than most people believe," Mozilo said in an interview last Friday with Bloomberg News. Mozilo has been pushing for the government to allow Fannie Mae and Freddie Mac to finance bigger home loans.
Countrywide, which handles one of every five new U.S. mortgages, has been hurt by falling home prices and record foreclosures. The company has billions in medium-term debt coming due in about 90 days and needs to cash to continue operating.
Countrywide's stock plunged by over 5 percent yesterday after analysts at Merrill Lynch and UBS cut their profit estimates on worries over the company's ability to make new loans. The stock, which has fallen over 59 percent this year, closed at a four-year low of $17.21 yesterday.
Making matters worse, Alliance Capital Management, which is owned by giant French insurance company Axa SA, disclosed that it has sold about 31 million shares of Countrywide in the last month. Barclays Global Investors has also sold nearly 25 million shares.
"We think the stock will continue to drift down, as investors lose hope of a near-term recovery," said Merrill analyst Kenneth Bruce. He estimates that the job cuts could save Countrywide roughly $1 billion a year, but that will only offset lower revenues.
zachery.kouwe@nypost.com
GOIH Commentary:
We have previously posted here the apparent link between CFC and GS. Now there appears to be a second bailout in the works for CFC, lead by who: GS. We believe based on the trading patterns of GS and CFC, GS hedge funds hold a large position in CFC and by buying the company they can close out their losing positions or replace those positions with new positions and avoid any loses associated with the investment.
GOIH Capital Markets: Target (NYSE:TGT) down 10% in last 7 trading days.
In an earlier post we anticipated weakness in the consumer discretionary retailers. TGT has traded down 1 standard deviation according to our statistical arbitrage models and the actual market data.
Consumer retailers will remain weak until the consumers' ability to spend is restored which we do not foresee for the next 18 months.
Consumer retailers will remain weak until the consumers' ability to spend is restored which we do not foresee for the next 18 months.
GOIH Capital Markets: Countrywide Financial (NYSE:CFC) trading below $17.00.
CFC is trading below $17.00 per share....we have a short position entered at $18.00 for 300,000 shares....we see continued weakness in CFC now that we believe BAC has recouped its investment and CFC is free to trade according to market forces.
GOIH Mark to Market--09-10-07 Positions
Positions:
CFC-----Short @ $18.00 for 300,000----closing price $17.25----Profit: $225,000
Apple----Long @$132.00 for 250,000----closing price $136.71---Profit: $ 1,117,500
CFC-----Short @ $18.00 for 300,000----closing price $17.25----Profit: $225,000
Apple----Long @$132.00 for 250,000----closing price $136.71---Profit: $ 1,117,500
Monday, September 10, 2007
GOIH Capital Markets: Countrywide Financial (NYSE:CFC)
CFC is trading at $17.05 below $18.00 the conversion price of the BAC investment....we are short CFC at $18.00 for 300,000 shares with a buy stop of $17.50...we see CFC continuing lower as we predicted here in an earlier post.
Target (TGT) has broken below one standard deviation on its price according to our statistical arbitrage model.....as we have stated here in earlier posts the consumer discretionaries are weak and will continue to be weak now that the consumer is tapped out and the calvary is not coming to the rescue.
Target (TGT) has broken below one standard deviation on its price according to our statistical arbitrage model.....as we have stated here in earlier posts the consumer discretionaries are weak and will continue to be weak now that the consumer is tapped out and the calvary is not coming to the rescue.
GOIH Capital Markets: Apple 250,000 @ $132.00 on the open.
GOIH Capital Markets: Apple 250,000 @ $132.00 on the open. Apple was raised as a buy with a target price of $211.00 we will hold for a short term trade.
Sell stop entered @134.00 for 250,000 shares
Sell stop entered @134.00 for 250,000 shares
GOIH Capital Markets: Market Overview--Market Turmoil
Today trading resumes after the sell off on Friday after the job numbers disappointed. It is being discussed on Wall St of a sure Fed Funds rate cut of at least 25 basis points, with a high range of 50 basis points.
As we have discussed in several earlier posts we do not believe the rate cuts will have an immediate effect on the “economy”. We think if there is any immediate effect it will be on the financial sector of the economy, i.e., Wall St. and the large financial services providers.
Systemically, the economy is crippled wounded by the crisis in the subprime mortgage market. Essentially, aggregate demand (consumer purchasing power) has declined relative to aggregate supply (industrial production) in the housing sector which due to the multiplier effect, has a disproportional impact on the economy.
A Fed Funds interest rate cut even of 100 basis points will not increase aggregate demand where the excess capacity currently exists, the housing sector. The housing sector is so saturated with over priced current inventory; there will be no demand for loans even at the lower interest rate.
Because there will be no increase in demand for the lower interest rate loans, industrial production will not increase, no new workers will be hired and consumer consumption will remain flat due to the lack of any “new wealth” effect created by the increase in house equity.
Corporate profits will decrease due to the decrease in consumer spending causing earnings to decrease, causing stock equity prices to decrease, causing the stock market to decrease.
Global Equity Market Decrease:
Because the US is 30% of the global import market, any decrease in US consumer spending will decrease imports causing global markets to decrease for the major exporting nations.
Stocks we are watching for short term trades:
We are watching stocks that have exposure to international consumer staple or discretionary markets and technology that is not sensitive to interest rate gyrations.
We see MCD, KO, PEP, INTC, CSCO as good opportunities for short term trading profits. We will take positions in some of these on the opening.
We see Sony, Honda and the major Japanese exporters for short plays.
As we have discussed in several earlier posts we do not believe the rate cuts will have an immediate effect on the “economy”. We think if there is any immediate effect it will be on the financial sector of the economy, i.e., Wall St. and the large financial services providers.
Systemically, the economy is crippled wounded by the crisis in the subprime mortgage market. Essentially, aggregate demand (consumer purchasing power) has declined relative to aggregate supply (industrial production) in the housing sector which due to the multiplier effect, has a disproportional impact on the economy.
A Fed Funds interest rate cut even of 100 basis points will not increase aggregate demand where the excess capacity currently exists, the housing sector. The housing sector is so saturated with over priced current inventory; there will be no demand for loans even at the lower interest rate.
Because there will be no increase in demand for the lower interest rate loans, industrial production will not increase, no new workers will be hired and consumer consumption will remain flat due to the lack of any “new wealth” effect created by the increase in house equity.
Corporate profits will decrease due to the decrease in consumer spending causing earnings to decrease, causing stock equity prices to decrease, causing the stock market to decrease.
Global Equity Market Decrease:
Because the US is 30% of the global import market, any decrease in US consumer spending will decrease imports causing global markets to decrease for the major exporting nations.
Stocks we are watching for short term trades:
We are watching stocks that have exposure to international consumer staple or discretionary markets and technology that is not sensitive to interest rate gyrations.
We see MCD, KO, PEP, INTC, CSCO as good opportunities for short term trading profits. We will take positions in some of these on the opening.
We see Sony, Honda and the major Japanese exporters for short plays.
Friday, September 7, 2007
GOIH Capital Markets: Countrywide cutting 12,000 jobs.
The WSJ is reporting that Countrywide will slash 12,000 jobs in its operations. As the details are released we will update.
GOIH
GOIH
GOIH Capital Markets: Yahoo-Microsoft Spread Trade Exited
GOIH Capital Markets exits Yahoo-Microsoft spread trade.....
We had shorted MSFT at $29.15 for 200,000 shares and long Yahoo for 400,000 @ $24.20.
MSFT covered at $28.56
YHOO exited @ $23.88
Net: $0.59 MSFT per share x 200,000= 118,000 profit
Net YHOO $0.32 per share x 400,000 = 128,000 loss
Net Position: $10,000 loss
We had shorted MSFT at $29.15 for 200,000 shares and long Yahoo for 400,000 @ $24.20.
MSFT covered at $28.56
YHOO exited @ $23.88
Net: $0.59 MSFT per share x 200,000= 118,000 profit
Net YHOO $0.32 per share x 400,000 = 128,000 loss
Net Position: $10,000 loss
GOIH Capital Markets: We see the Fed cuttting Feds Funds rate in an emergency meeting.
GOIH Capital Markets: We see the Fed cutting the Feds Funds rate in an emergency meeting. We think today's jobs number reinforced our position that we are in a sectorized recession, i.e., housing and the financial sectors. We earlier explained the multiplier effect created by the housing sectors and how it affects the entire economy.
Today's job numbers confirms that the consumer is losing jobs, and without a job there will be no spending, implying businesses will not manufacture goods, and the spiral effect snowballs.
Today's job numbers confirms that the consumer is losing jobs, and without a job there will be no spending, implying businesses will not manufacture goods, and the spiral effect snowballs.
GOIH Capital Markets: Greenspan Says Turmoil Fits Pattern---This is not good
Greenspan Says Turmoil Fits Pattern
By GREG IP September 7, 2007; Page C2
Former Federal Reserve Chairman Alan Greenspan said the current market turmoil is in many ways "identical" to that which occurred in 1987 and 1998, when the giant hedge fund Long-Term Capital Management nearly collapsed.
"The behavior in what we are observing in the last seven weeks is identical in many respects to what we saw in 1998, what we saw in the stock-market crash of 1987, I suspect what we saw in the land-boom collapse of 1837 and certainly [the bank panic of] 1907," Mr. Greenspan told a group of academic economists in Washington, D.C., last night at an event organized by the Brookings Papers on Economic Activity, an academic journal.
Mr. Greenspan, Fed chairman from 1987 to 2005 and now a private consultant, said business expansions are driven by euphoria and contractions by fear. While economists tend to think the same factors drive expansions and contractions, "the expansion phase of the economy is quite different, and fear as a driver, which is going on today, is far more potent than euphoria."
The euphoria in human nature takes over when the economy is expanding for several years, and leads to bubbles, "and these bubbles cannot be defused until the fever breaks," he said.
Bubbles can't be defused through incremental adjustments in interest rates, Mr. Greenspan suggested.
The Fed doubled interest rates in 1994-95 and "stopped the nascent stock-market boom," but when stopped, stocks took off again. "We tried to do it again in 1997," when the Fed raised rates a quarter of a percentage point, and "the same phenomenon occurred."
"The human race has never found a way to confront bubbles," he said.
GOIH Commentary:
This is not good....for Mr. Greenspan to make such a statement when he has insider information tells us that there is something big brewing and we expect to see a major market move to the downside in the near term.
By GREG IP September 7, 2007; Page C2
Former Federal Reserve Chairman Alan Greenspan said the current market turmoil is in many ways "identical" to that which occurred in 1987 and 1998, when the giant hedge fund Long-Term Capital Management nearly collapsed.
"The behavior in what we are observing in the last seven weeks is identical in many respects to what we saw in 1998, what we saw in the stock-market crash of 1987, I suspect what we saw in the land-boom collapse of 1837 and certainly [the bank panic of] 1907," Mr. Greenspan told a group of academic economists in Washington, D.C., last night at an event organized by the Brookings Papers on Economic Activity, an academic journal.
Mr. Greenspan, Fed chairman from 1987 to 2005 and now a private consultant, said business expansions are driven by euphoria and contractions by fear. While economists tend to think the same factors drive expansions and contractions, "the expansion phase of the economy is quite different, and fear as a driver, which is going on today, is far more potent than euphoria."
The euphoria in human nature takes over when the economy is expanding for several years, and leads to bubbles, "and these bubbles cannot be defused until the fever breaks," he said.
Bubbles can't be defused through incremental adjustments in interest rates, Mr. Greenspan suggested.
The Fed doubled interest rates in 1994-95 and "stopped the nascent stock-market boom," but when stopped, stocks took off again. "We tried to do it again in 1997," when the Fed raised rates a quarter of a percentage point, and "the same phenomenon occurred."
"The human race has never found a way to confront bubbles," he said.
GOIH Commentary:
This is not good....for Mr. Greenspan to make such a statement when he has insider information tells us that there is something big brewing and we expect to see a major market move to the downside in the near term.
GOIH Capital Markets: GS $300 million "paper" gain
It's being reported in the media that GS made a paper profit of $300 million on its hedge fund. However in none of the new articles does it tell how GS made the $300 million.
GOIH Commentary:
We think that GS and CFC were knee deep invested together. As we reported here CFC and GS were trading lockstep during the meltdown. See our previous posts regarding CFC and GS. We believe the $2.0 investment by BAC which momentarily increased the share price of CFC via short covering, was the source of any profit to GS.
We believe GS was on the opposite of the calls that were written against CFC, and benefited once the transaction with BAC was announced after hours. We believed BAC shorted into the rally in CFC and profited as well as the investors who injected the capital into the GS Fund.
That is our take on how the $300 million was made since there is no reported verification on how it was made in the media.
The bank's Global Equity Opportunities fund, into which it injected $2bn of its own money as part of a $3bn bail-out in the middle of last month, recovered strongly after the rescue but still underperformed badly for August as a whole. The paper profit positions Goldman as one of the big beneficiaries of last month's credit squeeze, though the bank is likely to suffer from widening credit spreads and a drop in the value of debt not yet syndicated.
Hank Greenberg, former chairman of AIG, hedge fund Perry Capital, and Eli Broad, the US billionaire, participated along with other investors in the rescue, which involved injecting $3bn into the fund after it lost a third of its value in a week.
Those who took part in the rescue made a return of 15 per cent by the end of the month, while external investors before the bail-out lost 23 per cent in August.
"It is typical of Goldman to find a way to profit from this disaster," said one investor in the fund.
GOIH Commentary:
We think that GS and CFC were knee deep invested together. As we reported here CFC and GS were trading lockstep during the meltdown. See our previous posts regarding CFC and GS. We believe the $2.0 investment by BAC which momentarily increased the share price of CFC via short covering, was the source of any profit to GS.
We believe GS was on the opposite of the calls that were written against CFC, and benefited once the transaction with BAC was announced after hours. We believed BAC shorted into the rally in CFC and profited as well as the investors who injected the capital into the GS Fund.
That is our take on how the $300 million was made since there is no reported verification on how it was made in the media.
The bank's Global Equity Opportunities fund, into which it injected $2bn of its own money as part of a $3bn bail-out in the middle of last month, recovered strongly after the rescue but still underperformed badly for August as a whole. The paper profit positions Goldman as one of the big beneficiaries of last month's credit squeeze, though the bank is likely to suffer from widening credit spreads and a drop in the value of debt not yet syndicated.
Hank Greenberg, former chairman of AIG, hedge fund Perry Capital, and Eli Broad, the US billionaire, participated along with other investors in the rescue, which involved injecting $3bn into the fund after it lost a third of its value in a week.
Those who took part in the rescue made a return of 15 per cent by the end of the month, while external investors before the bail-out lost 23 per cent in August.
"It is typical of Goldman to find a way to profit from this disaster," said one investor in the fund.
GOIH Capital Markets: Countrywide (CFC) trading below $18 BAC conversion price.
GOIH Capital Markets: Countrywide (CFC) tradingat $17.84 below $18 BAC conversion price.
CFC has broken below the $18 conversion price of the BAC covertible preferred stock investment.
We anticipated this move several weeks ago and the prediction has come to fruition. BAC can now convert their investment of $2.0 billion into common stock of CFC and take a 17-18% ownership stake.
We think that the conversion will take place as a means to cover their short position created synthetically via calls and option rather than an equity short position. In any event expect to see BAC drive the price down even lower and then acquire CFC....we are going short on CFC in the near term.
CFC has broken below the $18 conversion price of the BAC covertible preferred stock investment.
We anticipated this move several weeks ago and the prediction has come to fruition. BAC can now convert their investment of $2.0 billion into common stock of CFC and take a 17-18% ownership stake.
We think that the conversion will take place as a means to cover their short position created synthetically via calls and option rather than an equity short position. In any event expect to see BAC drive the price down even lower and then acquire CFC....we are going short on CFC in the near term.
GOIH: Biogen (BIIB) position exited on open @ $66.00
GOIH: Biogen (BIIB) position exited on open @ $66.00
Goldman makes $300m from fund rescue
Goldman makes $300m from fund rescue
By James Mackintosh in London
Published: September 6 2007 20:52 Last updated: September 6 2007 20:52
Goldman Sachs made $300m last month from the rescue of one of the investment bank’s troubled hedge funds, even as external investors lost more than a fifth of their money.
The bank’s Global Equity Opportunities fund, into which it injected $2bn of its own money as part of a $3bn bail-out in the middle of last month, recovered strongly after the rescue but still underperformed badly for August as a whole.
The paper profit positions Goldman as one of the big beneficiaries of last month’s credit squeeze, although the bank is also likely to suffer from widening credit spreads and a drop in the value of debt it has not yet syndicated.
It will also boost quarterly profits for the bank when it reports results for the three months to the end of August in a fortnight.
Hank Greenberg, former chairman of AIG, hedge fund Perry Capital, and Eli Broad, the US billionaire, participated along with other investors in the rescue, which involved injecting $3bn into the fund after it lost a third of its value in a week.
GOIH Commentary:
Notice they didn't say "HOW" GS made the "$300 million"...ummmm
By James Mackintosh in London
Published: September 6 2007 20:52 Last updated: September 6 2007 20:52
Goldman Sachs made $300m last month from the rescue of one of the investment bank’s troubled hedge funds, even as external investors lost more than a fifth of their money.
The bank’s Global Equity Opportunities fund, into which it injected $2bn of its own money as part of a $3bn bail-out in the middle of last month, recovered strongly after the rescue but still underperformed badly for August as a whole.
The paper profit positions Goldman as one of the big beneficiaries of last month’s credit squeeze, although the bank is also likely to suffer from widening credit spreads and a drop in the value of debt it has not yet syndicated.
It will also boost quarterly profits for the bank when it reports results for the three months to the end of August in a fortnight.
Hank Greenberg, former chairman of AIG, hedge fund Perry Capital, and Eli Broad, the US billionaire, participated along with other investors in the rescue, which involved injecting $3bn into the fund after it lost a third of its value in a week.
GOIH Commentary:
Notice they didn't say "HOW" GS made the "$300 million"...ummmm
GOIH Global Economics Report:Dollar tumbles after jobs report
Dollar tumbles after jobs report
By Peter Garnham
Published: September 7 2007 11:02 Last updated: September 7 2007 13:48
The dollar fell to a one-month low against the euro on Friday after data showed the US economy shed jobs for the first time since August 2003.
US non-farm payrolls data showed 4,000 jobs were lost in August, well below expectations for an increase of 112,000.
Analysts said the number increased expectations that the Federal Reserve would move to cut its main lending rate.
“This is unequivocally bad news for the dollar, raising the probability that the Fed will cut interest rates on or before its next meeting on September 18 to almost one hundred per cent,” said Michael Woolfolk at Bank of New York Mellon.
“This is the first piece of solid data that shows the problems in the US mortgage markets are hitting the real economy.”
The dollar dropped 0.5 per cent to $1.3750 against the euro, fell 0.8 per cent to Y114.44 against the yen and eased 0.3 per cent to $2.0280 against sterling and eased 0.2 per cent against the yen.
Meanwhile, the yen advanced as weakness on global stock markets saw investors shun riskier, high-yielding currencies in favour of the low-yielding Japanese currency.
The yen rose 0.2 per cent to per cent to Y157.60 against the euro, gained 0.4 per cent against sterling to Y232.50 and climbed 0.7 per cent to Y79.35 against the higher-yielding New Zealand dollar.
Elsewhere, the pound dropped 0.2 per cent to £0.6780 against the euro.
Tom Vosa at National Australia said there were downside risks to sterling.
He said although ongoing liquidity problems in the UK banking sector were keeping three-month interest rates above the Bank of England’s standing facility lending rate for now, there had been more success in encouraging the overnight rate back towards the Bank rate.
“Sterling could suffer from a lack of interest rate support amid reports that rate increases are beginning to weigh on UK consumers,” said Mr Vosa.
By Peter Garnham
Published: September 7 2007 11:02 Last updated: September 7 2007 13:48
The dollar fell to a one-month low against the euro on Friday after data showed the US economy shed jobs for the first time since August 2003.
US non-farm payrolls data showed 4,000 jobs were lost in August, well below expectations for an increase of 112,000.
Analysts said the number increased expectations that the Federal Reserve would move to cut its main lending rate.
“This is unequivocally bad news for the dollar, raising the probability that the Fed will cut interest rates on or before its next meeting on September 18 to almost one hundred per cent,” said Michael Woolfolk at Bank of New York Mellon.
“This is the first piece of solid data that shows the problems in the US mortgage markets are hitting the real economy.”
The dollar dropped 0.5 per cent to $1.3750 against the euro, fell 0.8 per cent to Y114.44 against the yen and eased 0.3 per cent to $2.0280 against sterling and eased 0.2 per cent against the yen.
Meanwhile, the yen advanced as weakness on global stock markets saw investors shun riskier, high-yielding currencies in favour of the low-yielding Japanese currency.
The yen rose 0.2 per cent to per cent to Y157.60 against the euro, gained 0.4 per cent against sterling to Y232.50 and climbed 0.7 per cent to Y79.35 against the higher-yielding New Zealand dollar.
Elsewhere, the pound dropped 0.2 per cent to £0.6780 against the euro.
Tom Vosa at National Australia said there were downside risks to sterling.
He said although ongoing liquidity problems in the UK banking sector were keeping three-month interest rates above the Bank of England’s standing facility lending rate for now, there had been more success in encouraging the overnight rate back towards the Bank rate.
“Sterling could suffer from a lack of interest rate support amid reports that rate increases are beginning to weigh on UK consumers,” said Mr Vosa.
GOIH Capital Markets: Equities and Indices Positions.
We are looking at taking short positions in the consumer retailers on the open.
We are also reviewing taking short positions in GS, MS, BSC, LEH, CFC, WMT, BBY.
We think today's jobs report guarantees a Fed Funds rate cut maybe before Sept. 18, 2007 FOMC meeting.
We see technology and energy strong.
We see the Dollar weakening against most of the major currencies with the anticipated Fed Funds rate cut. Shorting the Dollar against most major currencies should be a profitable trade in the short term.
We see Gold rising against the Dollar index.
We are also reviewing taking short positions in GS, MS, BSC, LEH, CFC, WMT, BBY.
We think today's jobs report guarantees a Fed Funds rate cut maybe before Sept. 18, 2007 FOMC meeting.
We see technology and energy strong.
We see the Dollar weakening against most of the major currencies with the anticipated Fed Funds rate cut. Shorting the Dollar against most major currencies should be a profitable trade in the short term.
We see Gold rising against the Dollar index.
GOIH Capital Markets: Market Overview---Worst Jobs Report in 4 years
GOIH sees the market opening sharply lower on the jobs report. We see the major market indices trading lower with an increase in volatility.
A Report of the Job Market:
Fed officials said as recently as yesterday that they were not convinced the market turmoil had spread into the overall economy.
Some economists have speculated that the Fed might even cut rates before the next scheduled meeting.
The weakness in last month's nonfarm payroll growth was concentrated in the manufacturing and construction sectors.
Manufacturing jobs declined by 46,000, the biggest drop since July 2003.
Construction jobs fell by 22,000.
Jobs in the services increased 60,000, as retail jobs rose 13,000.
Government lost 28, 000 jobs in August. Economists had been expecting an increase.
The average hourly wage increased 5 cents or 0.3% in August to $17.50, in line with expectations. Hourly wages are up 3.9% in the past year.
The average workweek held steady at 33.8 hours. Total hours worked in the economy held steady. Average hours worked in manufacturing also held steady, while factory overtime fell six minutes to 4.1 hours.
GOIH Commentary:
With more people unemployed, i.e., consumers, spending will decrease easing the economy into a recession in the fourth quarter. Our market strategies will be to short consumer retailers and the financial services sector and any sector that has a positive statistical correlation to to each of these sectors.
We see weakness in the holiday shopping season in the consumer retailers. We see weakness in WMT, BBY, and other equities we will publish in a report this weekend with our forecast of our opinion of the market condition.
A Report of the Job Market:
Fed officials said as recently as yesterday that they were not convinced the market turmoil had spread into the overall economy.
Some economists have speculated that the Fed might even cut rates before the next scheduled meeting.
The weakness in last month's nonfarm payroll growth was concentrated in the manufacturing and construction sectors.
Manufacturing jobs declined by 46,000, the biggest drop since July 2003.
Construction jobs fell by 22,000.
Jobs in the services increased 60,000, as retail jobs rose 13,000.
Government lost 28, 000 jobs in August. Economists had been expecting an increase.
The average hourly wage increased 5 cents or 0.3% in August to $17.50, in line with expectations. Hourly wages are up 3.9% in the past year.
The average workweek held steady at 33.8 hours. Total hours worked in the economy held steady. Average hours worked in manufacturing also held steady, while factory overtime fell six minutes to 4.1 hours.
GOIH Commentary:
With more people unemployed, i.e., consumers, spending will decrease easing the economy into a recession in the fourth quarter. Our market strategies will be to short consumer retailers and the financial services sector and any sector that has a positive statistical correlation to to each of these sectors.
We see weakness in the holiday shopping season in the consumer retailers. We see weakness in WMT, BBY, and other equities we will publish in a report this weekend with our forecast of our opinion of the market condition.
Thursday, September 6, 2007
Fed Sees Limited Housing Fallout
Fed Sees Limited Housing Fallout
Risks to Broader EconomyFrom Market's DownturnRemain a Top Concern
By SUDEEP REDDY
September 7, 2007
Several Federal Reserve officials said the housing market's downturn and recent market volatility have created risks to the broader economy, but that so far the fallout has remained relatively contained.
The Fed policy makers, speaking at unrelated events yesterday, endorsed views they have received from businesses across the country indicating limited impact from the recent credit crunch.
TALKING POINTS
• The Good News: Fed officials said fallout from housing- and credit-market problems so far appears to have had limited impact on the broader economy.
• The Bad News: That could change if mortgage woes continue and hurt the housing market further, they noted.
• The Bottom Line: The latest comments suggest central bankers remain cautious about making aggressive rate cuts.
Tightening credit conditions and growing trouble for the housing sector have added to worries about the overall economy. Some analysts expect the rising number of mortgage-payment delinquencies and falling home prices to eat into household wealth and constrain consumer spending, which accounts for more than two-thirds of the nation's economic activity.
Fed officials yesterday acknowledged that concern. "If current conditions persist in mortgage markets, the demand for homes could weaken further, with possible implications for the broader economy," Fed governor Randall Kroszner told a San Francisco audience.
The Federal Open Market Committee is set to meet Sept. 18 to discuss interest rates. Markets expect the central bank to lower the benchmark rate from the current 5.25%, but the extent of the expected cut isn't clear. The latest comments suggest officials remain cautious about making aggressive rate cuts.
Risks to Broader EconomyFrom Market's DownturnRemain a Top Concern
By SUDEEP REDDY
September 7, 2007
Several Federal Reserve officials said the housing market's downturn and recent market volatility have created risks to the broader economy, but that so far the fallout has remained relatively contained.
The Fed policy makers, speaking at unrelated events yesterday, endorsed views they have received from businesses across the country indicating limited impact from the recent credit crunch.
TALKING POINTS
• The Good News: Fed officials said fallout from housing- and credit-market problems so far appears to have had limited impact on the broader economy.
• The Bad News: That could change if mortgage woes continue and hurt the housing market further, they noted.
• The Bottom Line: The latest comments suggest central bankers remain cautious about making aggressive rate cuts.
Tightening credit conditions and growing trouble for the housing sector have added to worries about the overall economy. Some analysts expect the rising number of mortgage-payment delinquencies and falling home prices to eat into household wealth and constrain consumer spending, which accounts for more than two-thirds of the nation's economic activity.
Fed officials yesterday acknowledged that concern. "If current conditions persist in mortgage markets, the demand for homes could weaken further, with possible implications for the broader economy," Fed governor Randall Kroszner told a San Francisco audience.
The Federal Open Market Committee is set to meet Sept. 18 to discuss interest rates. Markets expect the central bank to lower the benchmark rate from the current 5.25%, but the extent of the expected cut isn't clear. The latest comments suggest officials remain cautious about making aggressive rate cuts.
GOIH Capital Markets: Countrywide (CFC) Traded below $18
CFC today traded below the conversion price of $18 on the preferred stock investment of BAC. In an earlier post we predicted that CFC would trade down to the conversion price as a short against the box by BAC.
Look for BAC to acquire CFC now that the premium is equal to the market price and BAC does not want to realize a loss on the transaction.
Look for BAC to acquire CFC now that the premium is equal to the market price and BAC does not want to realize a loss on the transaction.
GIOH Capital Markets: Biogen (BIIB) Takeover Play---250,000 @ $63.79
We picked up Biogen on the open for 250,000 shares @ $63.79 holding for a short term profit....rumored a takeover play......we posted here on last week of the activity in BIIB and took a position and sold for a profit.
GOIH Capital Markets: Market Overview
Our indicators predict the market to be flat to slightly lower over the next several trading sessions pending the Fed's next FOMC meeting on Sept. 18, 2007. We are hearing rumors that the Fed might not cut the Fed Funds rate.
Wall St. is clamoring for the rate cut as if that will be the panacea for all that is wrong in this market.
Our view of the situation is that if a rate cut is announced, it will have a meaningless effect on the fundamentals, but only have a psychological fix for the financial sector rather than the economy as a whole.
Consumer retailers are taking it on the chin the last several trading days with decreased equity prices resulting from a diminished outlook on consumer spending.
We see volatility increasing as we near Sept.18 with wild swings in the market.
Wall St. is clamoring for the rate cut as if that will be the panacea for all that is wrong in this market.
Our view of the situation is that if a rate cut is announced, it will have a meaningless effect on the fundamentals, but only have a psychological fix for the financial sector rather than the economy as a whole.
Consumer retailers are taking it on the chin the last several trading days with decreased equity prices resulting from a diminished outlook on consumer spending.
We see volatility increasing as we near Sept.18 with wild swings in the market.
Wednesday, September 5, 2007
GOIH Capital Markets: Consumer Retails sharply lower.
The consumer retailer suffered to day in trading, WMT was at a 52 week low trading @ $42.48. Among retail stocks, Walgreens Co. (WAG:
Walgreen Co. News, chart, profile, more
Last: 45.22-0.21-0.46%3:52pm 09/05/2007Delayed quote data
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WAG45.22, -0.21, -0.5%) lost 0.4% after the drug store chain reported a 6.5% rise in same-store sales in August.
Costco Wholesale Corp. (COST:
costco whsl corp new com
News, chart, profile, more Last: 59.04-2.57-4.17%3:57pm 09/05/2007Delayed quote data
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COST59.04, -2.57, -4.2%) fell 4% after the warehouse retailer missed estimates for August same-store sales.
Shares of Mattel Inc. (MAT:
Mattel, Inc
News, chart, profile, more
Last: 22.00+0.03+0.14%3:52pm 09/05/2007Delayed quote data
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MAT22.00, +0.03, +0.1%) were down 0.9% after its third recall of toys made in China, and Guess Inc. (GES: Guess?, Inc News, chart, profile, more
Last: 51.70-1.70-3.18%3:52pm 09/05/2007Delayed quote data
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GES51.70, -1.70, -3.2%) was off 4.9% after it forecast fiscal-year end earnings at the low-end of forecasts
Walgreen Co. News, chart, profile, more
Last: 45.22-0.21-0.46%3:52pm 09/05/2007Delayed quote data
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Sponsored by:
WAG45.22, -0.21, -0.5%) lost 0.4% after the drug store chain reported a 6.5% rise in same-store sales in August.
Costco Wholesale Corp. (COST:
costco whsl corp new com
News, chart, profile, more Last: 59.04-2.57-4.17%3:57pm 09/05/2007Delayed quote data
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InsiderDiscussFinancials
Sponsored by:
COST59.04, -2.57, -4.2%) fell 4% after the warehouse retailer missed estimates for August same-store sales.
Shares of Mattel Inc. (MAT:
Mattel, Inc
News, chart, profile, more
Last: 22.00+0.03+0.14%3:52pm 09/05/2007Delayed quote data
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InsiderDiscussFinancials
Sponsored by:
MAT22.00, +0.03, +0.1%) were down 0.9% after its third recall of toys made in China, and Guess Inc. (GES: Guess?, Inc News, chart, profile, more
Last: 51.70-1.70-3.18%3:52pm 09/05/2007Delayed quote data
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Sponsored by:
GES51.70, -1.70, -3.2%) was off 4.9% after it forecast fiscal-year end earnings at the low-end of forecasts
GOIH Mark to Market Positions
Apple exited @ 144.00 entry @ $139.94
Profit= $306,000
Yahoo entry @$ 24.20 for 400,000 shares closed @ $24.10= (loss) $40,000
Profit= $306,000
Yahoo entry @$ 24.20 for 400,000 shares closed @ $24.10= (loss) $40,000
Apple position exited @$144.00---New Ipod revealed...Buy on rumor sell on news.
Apple position exited @$144.00---New Ipod revealed...Buy on rumor sell on news.
GOIH Capital Markets: Market Overview
Our indicators see a market opening lower to flat with the financials being downgraded today. We see strength in Apple and Yahoo, rumored to be eyed by Microsoft for a possible takeout.
We see opportunities in regional banks if the Fed lowers interest rates which the market is pricing in for a 25 basis point lowering.
We see Sun Trust as moving higher on a rate cut.
Tech should remain strong with activity in Cisco (CSCO) and Hewlette Packard (HPQ).
We are eyeing taking positions in a G1 tech created index against the actual equities.
We are working on a statistical pattern recognition algorithm to sift thorough market and news data and identify opportunities for investment.
We see opportunities in regional banks if the Fed lowers interest rates which the market is pricing in for a 25 basis point lowering.
We see Sun Trust as moving higher on a rate cut.
Tech should remain strong with activity in Cisco (CSCO) and Hewlette Packard (HPQ).
We are eyeing taking positions in a G1 tech created index against the actual equities.
We are working on a statistical pattern recognition algorithm to sift thorough market and news data and identify opportunities for investment.
Tuesday, September 4, 2007
GOIH Capital Markets: Yahoo position for 400,000 @$24.20
GOIH Capital Markets: Yahoo position for 400,000 @$24.20
GOIH Capital Markets: Apple (AAPL) soring on Ipod announcement.
Apple will announce a new Ipod, one with a touch screen later this week it's rumored.
AAPL-----100,000 shares on the open @ $139.94 executed. Will hold for short term profits.
Yahoo (YHOO) rumored to be in play for takeover by Microsoft.
Looking at a risk arbitrage position.....short MSFT long YHOO in ratio spread trade.
AAPL-----100,000 shares on the open @ $139.94 executed. Will hold for short term profits.
Yahoo (YHOO) rumored to be in play for takeover by Microsoft.
Looking at a risk arbitrage position.....short MSFT long YHOO in ratio spread trade.
GOIH Capital Markets: Market Indicators
We have been asked how we make market analysis and forecasts. We use a combination of statistical and probability analysis along with numerical analysis of market data in real time. We have calibrated our models based on our view of what we think is the actual, rather than the reported major news events.
Calibration of Financial Models:
We test the calibration of our financial models using advanced stochastic econometrics. We have developed a proprietary model with variables derived from fundamental relationships and the extraction of information content from news events.
Our financial engineering group has developed models of most of the major market indices and currencies where we identify arbitrage strategies based on the analysis of the indices relative to our model.
We have constructed our own model of the major indices using the put-call parity equation and replicated the indices for real time forecasting and arbitrage opportunities.
An arbitrage opportunity is created when there is an imbalance in pricing or volume or news events between our model and the trading of the actual index.
We use Asymmetrical Information Possession (AIP) to gain an advantage in the execution of our arbitrage ideas. AIP allows our group to be competitive with other major market participants.
Calibration of Financial Models:
We test the calibration of our financial models using advanced stochastic econometrics. We have developed a proprietary model with variables derived from fundamental relationships and the extraction of information content from news events.
Our financial engineering group has developed models of most of the major market indices and currencies where we identify arbitrage strategies based on the analysis of the indices relative to our model.
We have constructed our own model of the major indices using the put-call parity equation and replicated the indices for real time forecasting and arbitrage opportunities.
An arbitrage opportunity is created when there is an imbalance in pricing or volume or news events between our model and the trading of the actual index.
We use Asymmetrical Information Possession (AIP) to gain an advantage in the execution of our arbitrage ideas. AIP allows our group to be competitive with other major market participants.
GOIH Capital Markets: Market Overview---09-04-07
Our indicators see the market opening flat to lower.
The market is recovering after the Fed's speech on Friday basically leaving the market with no new information pending the next scheduled FOMC meeting on Sept 18, 2007. Wall St. is howling for a rate cut in the Fed Funds rate. However, a cut in the Fed Funds rate will have a negligible effect on the current market intangibles. If a rate cut is announced, it will be primarily symbolic and psychological.
The consumer is facing major risks to its standing in the market. With wages flat and no new increase in home equity prices, the consumer is tapped out just before the major Christmas buying season.
We expect to see weakness in Best Buy, Target, Wal-mart, Sears, GM, F
We expect to see continued weakness in the consumer discretionaries as well as weakness in consumer financials.
We expect to see tech and energy leading the way until the end of the year.
We see Apple trading up to to a new high in anticipation of the release of the new Ipod. We are taking a speculative position for short term trading profits.
The market is recovering after the Fed's speech on Friday basically leaving the market with no new information pending the next scheduled FOMC meeting on Sept 18, 2007. Wall St. is howling for a rate cut in the Fed Funds rate. However, a cut in the Fed Funds rate will have a negligible effect on the current market intangibles. If a rate cut is announced, it will be primarily symbolic and psychological.
The consumer is facing major risks to its standing in the market. With wages flat and no new increase in home equity prices, the consumer is tapped out just before the major Christmas buying season.
We expect to see weakness in Best Buy, Target, Wal-mart, Sears, GM, F
We expect to see continued weakness in the consumer discretionaries as well as weakness in consumer financials.
We expect to see tech and energy leading the way until the end of the year.
We see Apple trading up to to a new high in anticipation of the release of the new Ipod. We are taking a speculative position for short term trading profits.
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