Goldman Sachs hedge fund greatly under-performing

Financial News Online reports that Goldman Sachs' top hedge fund has continued to lose ground even after it has hired a team of 17 traders from Amaranth. The well-known Global Alpha hedge fund dropped 3.4 percent in January through April, though it rebounded a bit in April. On average, hedge funds gained in the period. What gives? Global Alpha reportedly made some big losing bets that some, like the Canadian dollar and Norwegian krone, would fall. It was also hit by market-neutral bond and equity plays. Is this going to prove to be a lingering problem for the fund? Hard to say. It lost nearly 10 percent last year. The year before it gained almost 40 percent. Goldman Sachs according to Alpha was overtaken by JPMorgan as the largest hedge fund operator this year.

Our take on this news: As all of us reported in our own personal blogs over the months on Goldmans Sachs poor performance in the hedge fund industry. We see more poor performances with other hedge funds in the months and years ahead. We believe their are cracks all over the hedge fund industry and believe there will be a shake up and/or a collapse of the industry.

More financial firms going public

We've been talking a lot of about more hedge funds going public in the wake of Fortress Investments' offering. It appears to be a reality. We're likely to see more hedge funds go public before more private equity funds make the move. According to an AP update, Souren Ouzounian, banker at Merrill Lynch, said at a conference that six of his hedge-fund clients are mulling IPOs. A Lehman Brothers banker said four clients are going to file in "the fairly near term." But you have to wonder if the thought processes have been complicated a bit by the lure of the private placements market, which is more active than the IPO market these days. Oaktree Capital Management last week placed securities privately in its management company.

Our take on the news: Once again, an idea brought to the public marketplace's attention a decade ago by smart money people, only now deciding to go public. What will happen to these funds when the bottom falls out of the market and the hedge fund industry goes in the tank? Everyone will lose their shirts because greed always comes first on Wall Street. Had a decade ago the equity and hedge funds entered the marketplace, the system would of worked better, now everyone is a genious on Wall Street and the idea of going public will collapse like all other great ideas.

LBO candidate search firms

Private equity funds and hedge funds are not always at odds. Bush Helzberg and Jonathan Angrist, who started their Private Value Arbitrage Fund in 2003, seek out shares of small- and medium-sized companies that they sense are likely to be bought out. According to MarketWatch, they analyze companies the same way private equity shops do and buy if the stock is trading at a perceived discount. Then they are likely to call the company's top executives and try to interest them in a going-private transaction. If the answer is yes, they play "matchmaker." Helzberg and Angrist call private equity firms that they have gotten to know and suggest a meeting. Sometimes, if a deal works out, they end up with a finder's fee. They say more companies are receptive to the idea.

Our take on this news: This is actually a process that numerous firms have done for many years now. Those firms just kept a low-profile and stayed out of the news, now the "cat is out-of-the-bag" and we're sure this industry will be abused and wrecked just like every other good thing about Wall Street. Too many so-called experts doing poor work. Sad to see in many respects, just hope that the great firms that we're acquainted with doing "search" work don't fall by the wayside because of pure greed by acquiring firms.

Ridiculous Hedge Fund fees with poor performance

We've discussed at length the fee structure of hedge funds, which is increasingly leading to massive payouts for big-fund managers even in so-so years. The New York Times notes that the flagship hedge fund at Goldman Sachs lost 6 percent last year, but it still brought in a lot of fee income. Bridgewater Associates has returned less than 4 percent the last two years; its founder made $350 million in 2006. Many are predicting that the awkward circumstance of good pay against poor performance will continue. There's just so much money flowing into funds still. The larger issue is whether hedge funds are still worth it. The answer according to the big institutions seems to be yes.

Our take on this news: How any investor tolerates these high fees is beyond any of our comprehension. This industry is ready to collapse on its face with total disregard to its investors. Greed always ruins any moneymaking situation.

TIBB takeover - Follow Up

FOLLOW UP: In recent weeks, there has been speculation of a possible takeover/buyout of TIBB. There has been no response from our calls and correspondence with the possible suitor Richard Christenson and associates, financiers from Minneapolis, their media spokesperson said that "Mr. Christenson is out-of-town and unavailable for comment."

Our take on this news: Our sources still hold to their original belief that Christenson is accumulating a position in TIBB through a multitude of companies and entities he owns or controls and has been for a period of time. Without question, a great buy at these share prices.

Hedge Funds stereotyped

The hedge fund industry has been stereotyped as swashbucklers and risk takers a bit by the media, which has really glorified how much money executives make. But Business Week Online notes some critics say the industry has become far too staid. If mutual funds can be criticized for aping indexes, hedge funds can be hit for becoming too much stock funds. People have noted the rising correlation among hedge fund returns--and the lower returns. Last year, hedge funds returned 13 percent on average, while the S&P 500 returned 13.5 percent. Big customers are not happy about this. They invested for big gains, which is not what they are getting. They could get the same return in index funds. The hedge funds will be quick to note that private equity funds are similarly muted.

Our take on this news: With all the money flowing into these funds, the end is near on decent returns. Too much flowing into deals that won't work out in the years ahead. Whenever there is too much money out there, bad deals will happen. They glory years are over in our opinion.

More women have status on Wall Street

For women, it's a tale of two Streets. Increasingly, they are making strides in areas once off limits. Female managing directors are now almost common. They have certainly made gains in research and management in areas like equity capital markets. All this counts as progress. We can only hope that the groundswell will lead to more women in high executive positions. At the moment, I can't think of one who is a candidate to soon head one of the top firms. Zoe Cruz may be an exception. Also, we aren't seeing a lot of women stake claims to high executive positions at hedge funds and private equity funds, where the real action is these days. Still, most firms are taking pains to create female-friendly workplaces. And that, as well, counts as progress.

Our take on this news: This is good news for everyone, because women tend to be more even-keeled and have a better balance on things. Most importantly, they might bring more integrity to Wall Street which has run amuck with corrupt self-serving souls.

KKR out on a clothing spending spree

Shares of footwear companies Skechers USA Inc. and Genesco Inc. rose yesterday, following a published report that they are being targeted by a buyout firm to take them private in two separate deals.
The plan is to combine the companies, after the deals are completed.
The buyout firm is possibly Kohlberg Kravis Roberts & Co., according to industry trade paper Women's Wear Daily, which cited anonymous sources. The acquisition price could not be determined.
Officials at Skechers did not immediately return phone calls. Both David Lilly, a spokesman for KKR, and Claire McCall, a spokeswoman at Genesco, declined to comment.
Shares of Skechers rose more than 9 percent, or $2.97, to $34.11, while shares of Genesco rose more than 3 percent, or $1.60, to $51.47.
Genesco, an accessories and footwear company, has retail brands such as Journeys and Hat World in its repertoire as well as Dockers Footwear.
Skechers markets a variety of men's, women's and children's casual footwear.
On April 23, Genesco formally rejected Foot Locker Inc.'s $1.2 billion takeover offer for all outstanding shares of the company.
But Foot Locker at the time said it isn't ruling out the possibility of raising its bid for its footwear and accessories rival.
Reprinted from New York Post

Our take on this news: KKR is undoubtably the best private equity firm in the business. With 30 years of sucessfully buying out companies and more often than not, making its investors a great deal of money. Sounds like another KKR winner.

Possible buyout of Trump Entertainment Resorts

Donald Trump outdid his usual $1 million-per-speech payday and picked up a tidy $25.6 million in just a few hours yesterday without even saying a word publicly.
Shares of the Trump casino group soared nearly 21 percent in an early buying frenzy on prospects that a private equity firm is preparing to acquire it.
Trump's own personal stock swelled in value, at least on paper, to $148.2 million in the busy trading - nearly 11 times the usual daily volume and the biggest embrace of the shares in years.
The company, Trump Entertainment Resorts, two days ago said its board is considering offers to buy the company. Shares shot up $2.73 to $15.80 and its bonds hit a record, with an 8.5 percent note due in 2015 climbing 3.3 cents to 102.4 cents on the dollar.
Three months ago Trump hired Merrill Lynch to determine options for its future, including finding a buyer for all three Trump casinos in Atlantic City, as a whole or individually, or finding partners to help in a costly makeover of the resort hotels.
Trump Entertainment, of which Trump is chairman and president, said yesterday it formed a committee to consider the offers it received. Analysts believe private equity buyers are more likely to make a play for the casinos than other gaming companies.
Trump casinos have struggled for profits since the group emerged from a bankruptcy makeover two years ago, which helped reduce interest rates on its nearly $1.4 billion in debt.
It its latest quarter, the company narrowed its losses to $8.13 million from $9.72 million a year earlier, while revenue dropped 1.4 percent to $234.3 million. Last year it posted revenue of $1.03 billion, up from the prior year.
Atlantic City's casinos are being clobbered by competition from Pennsylvania, Connecticut and upstate New York, and by local no-smoking laws that have cut into attendance, say industry sources.
Last month was one of the worst Aprils on record for Atlantic City's dozen casinos, down an average 10 percent, with Trump Marina off 13.2 percent, the Trump Plaza down 12.6 percent and the Trump Taj Mahal down 19.6 percent, said the New Jersey Casino Control Commission.
Reprinted from New York Post

Our take on the news: Great news for everyone. Trump gets himself out from underneath a real difficult industry. Shareholders benefit from the increased share price of a possible buyout. The acquiring equity firm will give its full attention to bringing this investment to its full potential. Win... win... situation.

Hearings in Congress a bust on equity firms

The New York Times notes that the House Financial Services Committee's hearings on private equity's effects on workers and firms were a bit underwhelming. Only about 10 of the 70 members even showed up. Apparently, the testimony and discussion were pretty uninspiring. So it seems that taking on the private equity industry doesn't have legs as a major political issue. One might think the Democrats would take a populist stand, but most of the top firms are based in blue states, so maybe not. I doubt we'll ever get around to taxing the carry, which wasn't even discussed.

Our take on this news: In typical Government fashion, since many politicians campaign funds are from these financial sources, nothing concerning the health and improvement of the public marketplace will be done. The small investor is forgotten. We have no confidence in this Congress.

IPO's off to a good start this year

There has been a lot of angst as of late about whether the U.S. was losing its financial dominance. A huge issue is whether the IPO market has been harmed by Sarbanes-Oxley. Turns out that the pace of deals this year is off to a good start. In the usually quiet first quarter, deals hit a seven-year high: 64 deals for $12 billion, led by financial services firms. The Nasdaq beat the New York Stock Exchange in volume for the first time in three years by one measure. The Nasdaq raised $6 billion from 39 deals. The NYSE raised $4.7 billion from 11 deals.

Our take on this news: This is good news for the health of our economy and confidence in the equity markets.

TIBB rumored to be takeover candidate

After weeks of speculation that a suitor may appear for TIBB, a financial institution based in Naples, FL because of shareholders disappointment with present management, under-performance of the company and share price. The street chatter is that Minneapolis-based businessman Richard Christenson and associates have been lurking in the background and possibly accumulating stock in TIBB. Christenson, a deep-pocketed financier and well-known shareholder advocate has a reputation to apply pressure on management to create value.

Our take on this news: Christenson might be management's best friend or their worst nightmare. Either way, we suspect the real winner's here will be shareholders.