Hottest links for Friday October 4th, 2013 the semi late edition again (see yesterday’s edition of hottest links). Check out our free daily newsletter and never miss a single edition here. Slightly shorter info paragraph today; make sure to check back on Sunday!
Top stories for today include; Robot hedge funds not having a great year; Speaking of hedge funds, SAC Capital is supposedly looking to sell its re-insurer; Great Bloomberg piece on how Brazil’s richest man lost his fortune (I remember hearing him speak at Sohn in 2011 and he sounded like he had ideas to change the world and was a bit ahead of himself; My colleague who is a PM at one of Brazil’s biggest asset managers agreed with the assessment); Puerto Rico officially can become a state now as they too have their share of muppets; Banks in US stuff cash in case there is a ‘run’ due to debt ceiling/Govt shutdown issues; That and much more below.
Hottest Links:Stories
Fund Controlled by Robots
These days, most investment funds employ some degree of automated trading. But the sub-category of funds that rely solely on computer software to analyze and bet on markets have had a terrible year. The average such fund is down 3.5%, according to data from Hedge Fund Research (HFR). Hedge funds overall were up 3.9% through August. The S&P 500 (INDEXSP:.INX), by contrast, is up 18.8%. [Simone Foxman, Quartz]
Currency Risk and ETFs, Trackers, and Other Funds
Where people get confused is when they buy a fund that is denominated in a currency other than that of the underlying investment. A typical example would be a UK-traded ETF that tracks the Japanese market[The Investor, Monevator]
SAC Capital Putting Reinsurer SAC Re Up For Sale
According to numerous reports in the press, SAC Capital, the embattled hedge fund owned by Steven A. Cohen, is looking for a buyer for its year old reinsurer SAC Re, as the hedge fund continues to fight insider trading charges. [Artemis]
Hedge Funds
Hedge funds step into the shadows. [Tracy Alloway and Arash Massoudi, FT]
Hedge Funds Shadow
Hedge funds are getting into the repo business. [Tracy Alloway and Arash Massoudi, FT]
Hedge Funds Used Obscure Bond Bet
General Motors Company (NYSE:GM)’s bankruptcy, which wiped out shareholders and left taxpayers on the hook for billions of dollars, is generating a new wave of profit for hedge funds that supersized their claim by betting on an obscure pool of GM debt issued in the Canadian province of Nova Scotia. A settlement reached last week proposes giving Fortress Investment Group LLC (NYSE:FIG), Elliott Management Corp. and other holders of GM Nova Scotia notes a $1.55 billion bankruptcy claim on $1.07 billion in debt. Holders of that same pool of debt had earlier received $367 million in cash. [Tiffany Kary, Bloomberg]
How Brazil’s Richest Man Lost $34.5 Billion
It’s a cloudy April afternoon in 2012, but Batista is full of blue skies and endless vistas. To date he’s founded five publicly traded companies and is soon to launch a sixth. His personal wealth is estimated at $34.5 billion; most of his enterprises are managed under the umbrella of a holding company bearing his initials, the EBX Group. At 55, he’s Brazil’s richest man—and the eighth-wealthiest man on earth. [Juan Pablo Spinetto, Peter Millard, and Ken Wells, BloombergBusinessweek]
Someone At SAC May Have Been Dabbling In Insider-Trading
After a barrage of similar requests, Chang sent out a new, as yet unpublished report, predicting a sharply lower number of Apple Inc. (NASDAQ:AAPL)’s iPhone sales. The report allegedly went to SAC, as well as to Baltimore-based T. Rowe Price Group, Inc. (NASDAQ:TROW) and the investment firms Citadel in Chicago and GLG Partners of New York. [Jon Shazar, DealBreaker]
Puerto Rico Has Muppets, Too
Puerto Rico, a commonwealth of the United States where residents typically pay no federal income tax, is regulated by the S.E.C. While other big banks do business in Puerto Rico, UBS AG (NYSE:UBS) is one of the few to have a large team of brokers on the island. The bank has five branches in Puerto Rico, with 132 brokers who manage money for the island’s elite, including local real estate magnates and wealthy foreigners. [Joshua M Brown, The Reformed Broker]
Important Thing Investors Should Remember During a Government Shutdown
The S&P 500 (INDEXSP:.INX) barely budged during the 1995 shutdown. More importantly, the shutdown didn’t have a measurable impact on long-term businesses. If you’re an investor, that’s really all you should care about. [Morgan Housel, Motley Fool]
Some lessons learned from some dead ETFs
A stroll through the ETF graveyard shows why some of the funds don’t last. Here’s a look at a few of the more famous defunct ETFs and the lessons we can take from their demise such as HealthShares Emerging Cancer (HHJ), PowerShares DB Crude Oil Double Short ETN (NYSEARCA:DTO), Dent Tactical ETF (NYSEARCA:DENT), FaithShares Christian Values Fund ETF (NYSE:FOC), Claymore/NYSE Arca Airline (ETF) (NYSEARCA:FAA), iShares Diversified Alternatives Trust (NYSEARCA:ALT), FocusShares Trust (NYSEARCA:FLG) and Global X Funds (NYSEMKT:FISN). [Eric Balchunas, Bloomberg]
Capital Flight Inside the Euro Area
Countries in the euro area periphery such as Greece, Italy, Portugal, and Spain saw large-scale capital flight in 2011 and the first half of 2012. While events unfolded much like a balance of payments crisis, the contraction in domestic credit was less severe than would ordinarily be caused by capital flight of this scale. [Ritholtz]
Mall Boom Continues Despite Bubble Fears
How many shopping malls does China need? If someone has come up with a sound answer for the retail needs of the world’s most populous nation it may well have been drowned out by the construction noise from projects sweeping the mainland. [Celine Sun, South China Morning Post]
Wall Street Banks, No Longer Invincible
Earlier today, we were shown some of the details in those instructions, as the two regulators unveiled the “living wills” of 11 big, systemically important banks, laying out how they’d prefer to be wound down in the event of their collapse. The plans outlined by this group, which includes Bank of America Corp (NYSE:BAC), JPMorgan Chase & Co (NYSE:JPM), Goldman Sachs Group Inc (NYSE:GS) and Barclays PLC (NYSE:BCS) (LON:BARC), follow earlier disclosures in July from another group that included Wells Fargo & Co (NYSE:WFC) and HSBC Holdings plc (ADR) (NYSE:HBC). [Michael J. Casey, MoneyBeat]
US Banks Stuffing ATMs
One senior executive said his bank was delivering 20-30 per cent more cash than usual in case panicked customers tried to withdraw funds en masse. Banks are also holding daily emergency meetings to discuss other steps, including possible free overdrafts for customers reliant on social security payments from the government.” [Tyler Durden, ZeroHedge]
How to Reduce Investment Mistakes
I went through annual letters of Warren Buffett and read countless literature on great investors such as Seth Klarman, Peter Lynch, Bruce Berkowitz, Michael Burry, and others. The final result is an extensive 90+ item checklist that one can use to reduce investment mistakes. The checklist attempts to stress test or “kill” the company’s business model. The checklist focuses on four pillars of our margin of safety analysis (SAVR). [Pope Brar, BeyondProxy]
Time to Ditch the Yale Endowment Model
Institutional investors are different from you and me — they have a lot more money. Pension plans in rich countries manage almost $30 trillion in assets, for example. This opens doors at the offices of hedge funds, private-equity firms and other expensive money managers and creates opportunities to directly invest in projects inaccessible to regular people, such as dams, natural-gas fields and real-estate developments. [Matthew C. Klein, Bloomberg]
Wall Street Headhunter
Say what you will about the quality of financial earnings in 2013 (and we have said quite a bit, making it very clear over the past three quarters that a substantial portion of financial “earnings” has been accounting gimmickry such as loan-loss reserve releases and other “one-time” addbacks which mysteriously end up becoming quite recurring), but one thing that is indisputable is that of the nearly $52 in non-GAAP, adjusted S&P 500 EPS so far in 2013, over 20% is attributable to financials. [Tyler Durden, Zero Hedge]
Ireland’s Pension Problems
The current rising birth rate in economically-challenged Ireland may help the nation’s burgeoning pension problem, a minister has said. [Elizabeth Pfeuti, aiCIO]
F. Scott Fitzgerald Offers A List Of Things
From F. Scott Fitzgerald—famous author of The Great Gatsby—comes this letter to his daughter Frances Scott Fitzgerald. Offering a hint of his parenting, the letter from August 1933 concludes with a list of things to worry about and things not to worry about. [Shane Parrish, Farnam Street]
Hottest Links: Not The Onion
GTA 5 Could Destroy Reputation of Scottish Border Town
Grand Theft Auto 5 features a character called Hawick, a so-called “druggie hipster”, and this also happens to be the name of a Scottish border town. The town councillor now fear that the reference could destroy the location’s reputation. No really, this isn’t a joke. [Dave Cook, VG24/7]
