Friday, November 25, 2011

Is the end of the Euro near?

Good article from the Economist:

EVEN as the euro zone hurtles towards a crash, most people are assuming that, in the end, European leaders will do whatever it takes to save the single currency. That is because the consequences of the euro’s destruction are so catastrophic that no sensible policymaker could stand by and let it happen.
A euro break-up would cause a global bust worse even than the one in 2008-09. The world’s most financially integrated region would be ripped apart by defaults, bank failures and the imposition of capital controls (see article). 
Past financial crises show that this downward spiral can be arrested only by bold policies to regain market confidence. But Europe’s policymakers seem unable or unwilling to be bold enough. The much-ballyhooed leveraging of the euro-zone rescue fund agreed on in October is going nowhere. Euro-zone leaders have become adept at talking up grand long-term plans to safeguard their currency—more intrusive fiscal supervision, new treaties to advance political integration. But they offer almost no ideas for containing today’s conflagration.

Read more here:

Wednesday, November 23, 2011

Battle of the Stock Market Indicators 11/23/11

We haven't posted about our stock market indicators since October 13, 2011, because our indicators have stayed relatively constant.  On October 13th, the S&P stood at 1195 (when both our long-term and intermediate-term models were slightly bearish).  Currently, the S&P stands at 1167.  Here is an update on our stock market indicators:

  • Our long-term model is currently bearish (more bearish than the slightly bearish stance on 10/13).  
  • Our intermediate-term indicators are moderately bullish (from the slightly bearish stance on 10/13).  
Our key models have offsetting signals, so that stock positions will be dictated by the short-term movements in the stock market.  Long-term investors should be watching key levels of stock market technical support -- and/or adding to positions on market weakness.  Traders should be wary of the short-term trends in the markets.  

Happy Thanksgiving!

Tuesday, November 22, 2011

Largest Hedge Funds

Here are the largest hedge funds as of April 2011 (with assets under management, in $ billions):

Rank  FIRM/LOCATION                                 AUM
1     Man Group / London                            69.0
2     Bridgewater Associates / Westport, CT         62.0
3     JPMorgan Asset Management / New York          45.5
4     Paulson & Co. / New York                    36.0
5     Brevan Howard Asset Management / London       32.3
6     Och-Ziff Capital Management / New York        28.7
7     Soros Fund Management / New York              27.0
8     BlackRock / New York                          26.6
9     Highbridge Capital Management / New York      25.0
10    BlueCrest Capital Management / London         24.5
11    Baupost Group / Boston                        24.0
11    Cerberus Capital Management / New York        24.0
13    Angelo Gordon & Co. / New York              23.5
14    Farallon Capital Management / San Francisco   21.5
15    Winton Capital Management / London            20.0
16    King Street Capital Management / New York     19.9
17    Goldman Sachs Asset Management / New York     19.8
18    Canyon Partners / Los Angeles                 19.0
19    Renaissance Technologies / East Setauket, NY  17.1
19    Elliott Management / New York                 17.1
Read more here:

Monday, November 21, 2011

Large Institutional Investors & Gold

Gold has been in the news a lot lately.  In particular, several large institutions have relatively large positions in gold.  Here are some headlines on their positions.

Paulson & Co., the U.S. hedge fund run by John Paulson, cut a stake in the SPDR Gold Trust, an exchange-traded fund backed by the precious metal, during the third quarter, according to a government filing.
Paulson held 20.3 million shares in the SPDR Gold Trust as of Sept. 30, compared with 31.5 million a quarter earlier, a filing today with the U.S. Securities and Exchange Commission showed. SPDR is the biggest exchange-traded product backed by gold.

Read more here:

... University of Texas Investment Management Corporation’s (UTIMCO) recent announcement that they are holding $1 billion in gold bullion. This is significant investment for America’s second largest college endowment and it’s important for investors understand why UTIMCO chose to invest in so much gold, and also why they chose to invest in bullion.
Read more here:

Another article:

The April purchase of nearly $1 billion in physical gold bullion by the University of Texas Investment Management Company (UTIMCO) is raising questions among endowments, think tanks, and asset managers: Was this a prescient investment, or a political statement?

“Gold has had a huge run-up—which suggests a bubble,” says Dean Baker, Co-Director at the left-leaning Center for Economic and Policy Research in Washington, who has previously warned about institutional investors overallocating to gold. “I would not consider investing in gold. I assume they expect higher inflation, but I don't understand it. I think it's silly. In this case, I don't see why UTIMCO would do this.”
Read more here:,_or_Political_.html

Friday, November 18, 2011

MF Global: Customer Asset News thread

We'll update this blog post with recent news about the missing customer assets. We hope that the Trustee transfers substantial assets soon.

$200 Million in MF Global Assets potentially found

CME Group Raises Guarantee -- and Expected Customer Assets up to 75% (hopefully more),0,7413232.story

Missing Customer Assets may double to $1.2 billion (Nov 21, 2011)

Customer Assets were shifted to BNY Mellon (Nov 18, 2011)

Just "Words" but Trustee says Goal is to return 100% of Assets (Nov 18, 2011)

Tuesday, November 15, 2011

MF Global: The Search for Missing Assets... AND when will Assets be Transferred?

It is now the middle of November, and it has been several weeks since the MF Global bankruptcy on October 31, 2011.  There have been numerous articles detailing the news and sometimes sensationalizing speculation about the MF Global debacle.  In this article, we give some background, update relevant news, and summarize thoughts we have heard from alternative investment industry participants – on how the industry can move forward.

Website Links to the Major Parties
Here are several important links (Trustee, CFTC, CME) involved with the MF Global bankruptcy and asset transfer.  These sources typically post factual and relevant information: – this link forwards to:
CFTC – The Commodity Futures Trading Commission page on MF Global:
CME – The Chicago Mercantile Exchange page on MF Global:
Recent MF Global News

The links above, along with several informative articles on the MF Global situation have been archived at this blog:  Below are several recent news articles related to the MF Global bankruptcy and customer asset transfers.  More specifically, many are interested in the search for missing customer assets – and when the bulk of assets will be transferred.
Here are some excerpts from a recent article on the continuing search for missing MF Global Assets.
“(the) CME Group pledged $300 million to help accelerate the release of customer cash and other collateral from MF’s bankruptcy…”
“In addition to helping make customers whole, some additional assistance may be appreciated by the 1,000-plus MF employees fired on Friday…”
“The case of the firm’s missing $600 million also continued this week.”
Read more here:
Here are excerpts from a detailed Forbes article on what may have transpired.
“When did MF Global exploit the customer segregated accounts and why?  How were the proceeds used to stem the firm’s deepening insolvency?”
“Based on the sequence of events described… I believe that MF Global transferred assets, not cash, from customer segregated accounts to a “house” account sometime late Wednesday or early Thursday.”
“I’ve given those who executed the ‘nuclear option’ to save MF Global the benefit of the doubt.  I believe those executives used all available legitimate means to raise cash first, including trying to sell proprietary assets, as CNBC reported, and exhausting existing credit lines.”
Read more here:
Below are excerpts from an interesting article that discusses JP Morgan tactics, as one of MF Global’s main creditors. 
“Similar in nature to one’s bank account or stock market account, JP Morgan is trying to sweep titled segregated accounts into the assets of MF Global into the bankruptcy courts.”
“The analogy is very simple.  Let’s say you have a bank account in your name.  The bank makes bad business decisions.  Then a company like JP Morgan makes a claim on your personal assets that happen to be at the bank.  How would you feel?  How safe do you think your money is?”
Read more here:

What Now?
At this point, many investors and interested parties want some action – and many investors and industry participants hope the process of transferring the bulk of the assets starts very soon.  With the whirlwind of media information swirling around, here are several key questions and thoughts:
  • SIPC protection:  There has been speculation about SIPC protection.  The general consensus is that this protection exists for securities accounts, but not necessarily for futures accounts.  But what about T-Bills?
  • It appears that MF Global used a loophole to invest customer assets in "sovereign debt" – and then used the "segregated accounts" to cover margin calls.   
  • The Trustee has stated that they need to understand everything before they start transferring assets.  Others are clamoring for the quick release and transfer of MF Global customer assets. 
  • In the name of the integrity of the business, and practicality, industry participants hope asset transfers for the bulk of client assets start very soon.  Assets cannot be held hostage for this long.
  • Some industry insiders feel that JP Morgan Chase, as a major player in the financial industry, will feel the pressure to help make customers whole.
  • Many hope that the industry and regulators will work to maximize the “integrity” of the business and financial marketplace.  It is always best to maximize client trust and regain customer confidence. 
  • It has been several weeks, and many are surprised that the large majority of assets have not yet been transferred.  If 11% of assets in segregated assets are in question, why have 85% of assets not yet been transferred?  
Lessons – and Moving Forward
  • Many investors typically prefer less government regulation, but some sort of checks and balances would be a good thing.
  • Where applicable, it is best not to have all of your "eggs in one basket."  That is, if possible and practical, it is good to diversify your brokers.  It is especially good to have more than one broker and more "outs" for your trading positions.
  • Although some point to CFTC rule (1.29) that allows the use of customer assets for “sovereign debt” – most people would recognize that the intent of the law would not allow the use of highly leveraged positions.  
  • There are many offsetting responsibilities and wants.  The Trustee is trying to do the right thing.  All interested parties want to access their assets as soon as possible.  The industry wants to maintain the integrity of the marketplace.
  • With the increased pressure on JP Morgan and regulators to move forward, many expect progress and asset transfers in the near future.  
  • In times like these, it reminds us that it is important to know who we are doing business with – including financial advisors, hedge funds, and even our financial institutions.
In the end, many in the investment industry hope that the Trustee, industry, and exchanges will start the transfer of the bulk of the assets very soon, and make the customers "whole" soon after the dust settles.  This will do a lot to sooth customers and regain a measure of faith and confidence in the financial industry.

This is a summary of relevant information surrounding the MF Global bankruptcy and does not necessarily represent the views of the authors nor the z-trader blog.  

For additional articles by z-trader contributors, please visit:

Carlton Chin, CFA, is chief investment officer at Adamah Capital, a specialist in managed futures and quantitative & alternative investment strategies.  Alternative assets offer diversification to traditional portfolios of stocks and bonds.  

Monday, November 14, 2011

S&P Earnings - Q3 record!

Here is an excerpt on S&P earnings.  Earnings and fundamentals are looking up...

Recession fears or not, based on Corporate America’s latest financial results, happy days are here again.
With nearly 90% of S&P 500 companies having reported, the third-quarter earnings season is on pace for a record, according to Bespoke Investment Group.
S&P 500 SPX companies are on pace for overall earnings of $25.42. The four quarter trailing earnings total $94.77, topping the old record of $91.47, which was set in the second quarter of 2007.

Read more here:

Thursday, November 3, 2011

MF Global: thread of information

We'll update this blog post with relevant information as we read it...  At the top are links to the Trustee and other relevant parties.

Links to Trustee and Relevant Parties (which forwards to):


White Paper by MF Global customer group on: Background, Impacts & Solutions to MF Global's Demise (Nov 14)

Assets still missing; Trustee discusses pro-rata distribution (Nov 9, 1am)

MF Global Client Assets & CFTC Rule 1.29 (Nov 8, 2011, 4pm)

On MF Global Transfers & Missing Funds (Nov 7, 2011, 11pm)
Separately, Giddens asked U.S. Bankruptcy Judge Martin Glenn to approve the return of money “misdirected” to MF Global bank accounts, including sums intended for the benefit of customers whose accounts are being moved. He needs permission also to stake claim to any misdirected amounts owed to a party who has a debt to the brokerage estate, he said.

More on the JP Morgan - MF Global Account (Sun, Nov 6)

Good Summary by the Financial Times (Sat, Nov 5)

Search for MF Global Client Funds continues (Fri, Nov 4, 2011, 9pm)

MF Global Client Funds said to be located at JP Morgan; this rumor seems false now -- see above (Fri, Nov 4, 2011 - 6pm)

Corzine Resigns (Friday, Nov 4, 2011 - 9am)

Good article by industry professional, John Lothian (Nov 2, 2011)

Source: Money Not Missing  (Thu, Nov 3, 2011)

MF Global Trustee Aims to Transfer Accounts Before Weekend (Thu, 11/3/11)