Hedge Fund’s Suit on Fannie and Freddie May Spell Trouble for U.S. (NYTimes)
The lawsuit brought by the hedge fund Perry Capital against the federal government over the Fannie Mae and Freddie Mac bailout may be the case that finally subjects the government’s bailout practices to closer outside scrutiny. The Fannie Mae and Freddie Mac bailouts were two of the biggest and earliest of the financial crisis. In September 2008, a government team led by the Treasury secretary at the time, Henry M. Paulson Jr., placed the companies into a conservatorship and provided them with hundreds of billions of dollars in backstop financing.
Marc Faber on How the Economic Chess Game Might End (TradeTheNewsRoom)
Marc Faber was his normal cheery self when he sat down for an interview with the Prospect Group. Filmed in Chiang Mai, Thailand, the author of the Gloom Boom and Doom Report went into detail on how he sees the current global financial situation shaking out. Obviously when given a bit more airtime, Faber can expand on his thoughts on where he thinks this is all heading. Spoiler alert. Nowhere pleasant. His thought is that eventually we will have to adjust to the downside. Marc Faber’s issue is that growth in global financialization has far exceeded that of real economies. This has cause the inflating of multiple asset bubbles, be they housing, financial, student loans etc.
Hey Gold Bugs, Did You Hear Dr. Doom? (YCharts)
Economist Nouriel Roubini, who in 2005 warned of the US housing collapse, said Monday gold prices could fall toward $1,000 an ounce by 2015. The cofounder and chairman of Roubini Global Economics, also known as Dr. Doom, told Index Universe the recent rebound in gold is only transitory. He estimates that from current levels, bullion prices may see another 25% to 30% correction. Among the reasons Roubini quotes for saying the gold bubble has burst is the way they tend to spike when there are serious economic, financial and geopolitical risks in the global economy. He also believes gold performs best when there is a risk of high inflation, as its popularity as a store of value increases.
Paulson will not testify in Tourre trial (Reuters)
Hedge fund billionaire John Paulson will not testify in the high-profile civil case against former Goldman Sachs Group, Inc. (NYSE:GS) bond trader Fabrice Tourre, who is on trial in federal court in New York. The U.S. Securities and Exchange Commission accuses Tourre of failing to tell investors that 57-year-old Paulson’s hedge fund firm intended to bet against Goldman Sachs Group, Inc. (NYSE:GS)’ Abacus 2007-AC1. The $2 billion offering was tied to subprime mortgage bonds and known as a synthetic collateralized debt obligation.
Keeping SAC Alive Is in Banks’ Interest (WSJ)
As SAC Capital Advisors LP battles the fallout from criminal charges, it is receiving help from two unlikely quarters: Wall Street banks and the U.S. government. When Manhattan U.S. Attorney Preet Bharara leveled criminal insider-trading charges against SAC last week, the received wisdom was that the firm likely was on its way out. SAC pleaded not guilty and denied the allegations and its founder, Steven A. Cohen, hasn’t been charged criminally with any wrongdoing. But no major financial firm has survived a federal criminal indictment. And SAC’s legal troubles already had prompted several investors to ask for their money back. The severity of the charges—and the language used by Mr. Bharara to describe them—only added to the sense of gloom.
Unhedged Commentary: Marketing and Branding in the Post-JOBS Act Era (InstitutionalInvestorsAlpha)
Even though the Securities and Exchange Commission recently lifted the 80-year-old ban on general solicitation for hedge funds, don’t expect to see late-night infomercials or billboards at sporting events advertising the industry’s latest investment opportunity anytime soon. The impact of the new rules is likely to manifest itself in a less sensational, yet more meaningful way for investors. By lifting the ban on general solicitation, Congress and the SEC have opened the door to greater transparency and information sharing between funds and those qualified to invest with them.
Convexity Closes to New Money Amid Disappointing Performance (InstitutionalInvestorsAlpha)
Convexity Capital Management, the secretive Boston-based hedge fund firm co-founded by Jack Meyer, expressed frustration to clients over what it describes as subpar performance and said it is closing to new investments until its performance improves. The firm’s main fund lagged its benchmarks by 132 basis points, or 1.32 percentage points, in the second quarter as well as for the first half. The fund also is behind its self-imposed benchmarks by 167 basis points for the 12 months ended June 30, according to Convexity’s second-quarter letter to clients.