Jim Chaos And Dan Loeb’s Lawuit, SEC After Hedge Funds, Jim Roger And Seth Klarman’s Interview

Kynikos, Third Point Are Dismissed From $8 Billion Fairfax Suit (Bloomberg)

James Chanos’ Kynikos Associates LP and Daniel Loeb’s Third Point LLC won dismissal from an $8 billion lawsuit accusing the two hedge funds of spreading negative information to drive down Fairfax Financial Holdings Ltd. (FFH)’s stock price. New Jersey Superior Court Judge Stephan C. Hansbury in Morristown granted their requests yesterday, saying they couldn’t be sued in New Jersey. Hansbury also dismissed Institutional Credit Partners LLC. All three firms are based in New York. In addition to Chanos and Loeb, also dropped from the suit were Jeffrey Perry, an analyst at Third Point, and William Gahan, who was an analyst at ICP. In September, Hansbury dismissed billionaire Steven A. Cohen and his Stamford, Connecticut-based SAC Capital Advisors LP from the case. “One must establish that the defendants purposely availed themselves of the State of New Jersey and that the alleged improper conduct was expected or intended to be felt within the State of New Jersey,” Hansbury wrote. He said Fairfax didn’t do that. Fairfax, a Toronto-based insurer, sued the hedge funds in 2006, alleging they acted to harm the company because they were betting its stock price would decline. The hedge funds named in the suit have denied Fairfax’s accusations.

Jim Chanos puppeteer

SEC Ups Its Game to Identify Rogue Firms (WSJ)

It is the Securities and Exchange Commission’s new “most-wanted” list: a chart covered with handwritten notes, yellow highlighter and the names of about 100 hedge funds. The hedge funds have one thing in common: Their performance seems too good to be true, with some trouncing the overall market and others churning out modest results without ever suffering a down month. Some funds on the list stumble but still always outperform rival hedge funds. “There is serious fraud in this space, and we have been attacking it,” said Bruce Karpati, co-chief of the SEC’s asset-management enforcement unit. The hedge-fund chart dominates a corner of his lower Manhattan office. The list is the low-tech product of a high-tech effort by the SEC to crack down on fraud at hedge funds and other investment firms. After the agency failed to detect the $17.3 billion Ponzi scheme by Bernard L. Madoff, who wowed investors with steady returns over several decades, SEC officials decided they needed a way to trawl through performance data and look for red flags that might signal a possible fraud.

Sears To Close More Stores As Holiday Sales Slump (Reuters)

Sales at Sears Holdings, whose chairman and top shareholder is hedge fund manager Edward Lampert, have fallen every year since it was formed through the merger of Sears and Kmart in 2005. And so far this holiday season, the drop has continued. Same-store sales at Kmart were down 4.4 percent in the current quarter through Christmas Day, and down 6 percent at Sears’ U.S. stores. Companywide, they were down 5.2 percent, the company said on Tuesday.

Jim Rogers 2012 Outlook: Pessimism With Scattered Crises (Zerohedge)

Typically limited to 90 second soundbite-gathering exercises on mainstream financial media, Australia’s Finance News Network gives Jim Rogers the chance to discuss much more broadly his outlook not just for 2012 but beyond. Surprised by the false optimism he sees globally, he is not concerned that consensus is too bearish, and worries that the political pressure and central banker un-independence will inevitably lead to more and more money printing.

Seth Klarman And Charlie Rose (Frankly Speaking)

Interviews with Seth Klarman are relatively rare, and so it was with great excitement that I came across an interview I had missed last month with Charlie Rose and Seth Klarman at a Facing History and Ourselves event. In this interview, Klarman spends the first ~1/3 discussing his work with the charity and his other philanthropic activities through his family foundation. The remainder is devoted to investment philosophy, discussing value investing and what it means to him. He even hints at republishing his exceedingly rare book Margin of Safety to raise money for charity.

SEC Backs Lehman Brokerage In Barclays Dispute After Shortfall (Bloomberg)

The U.S. Securities and Exchange Commission sided with the bankrupt Lehman Brothers Inc. (LEHMQ) brokerage in a $3 billion dispute with Barclays Plc (BARC) over assets, saying the defunct brokerage didn’t have enough money to pay customers. In October, Barclays and brokerage trustee, James Giddens, both appealed U.S. Bankruptcy Judge James Peck’s ruling that gave Barclays “only a conditional right” to $769 million in the reserve account, unless Giddens had enough to pay customers. In addition to the $769 million, reserves include $507 million in margin for customer transactions at the Options Clearing Corp., the SEC said. Giddens is liquidating the remnants of the Lehman brokerage to pay hedge funds and institutional investors after Barclays took over most of the brokerage clients, with some $43 billion in assets, and some of the trading businesses.

BofA Mulls More Asset Sales To Boost Capital (Reuters)

Bank of America Corp (BAC) is lagging behind its major U.S. competitors in complying with new capital rules, leading the bank to consider even more asset sales, sources said. The bank’s management is focused on not being an outlier compared to its peers and believes it has “viable alternatives” to increase its capital levels, a person familiar with the situation told Reuters. “A question a serious board should ask is, ‘Do we want to one of the top four banks?'” said Tom Brown, chief executive of hedge fund Second Curve Capital, citing additional capital requirements and limits on acquisitions.

Paul Orwicz To Rejoin SAC As Sursum Shuts (AR)

Paul Orwicz, the hotshot SAC Capital Advisors portfolio manager who left to launch his own fund last year, plans to rejoin Steve Cohen’s multibillion-dollar firm following the rapid decline of his long/short equity shop Sursum Capital Management, according to former employees and people familiar with the situation. In going back to SAC and shutting Sursum, Orwicz ends a short-lived foray into running his own firm.

The Sweet Charity of Hedge Funds (FINalternatives)

“[Hedge fund employees] are the most generous group of people in the industry,” said Dee Dee Ricks, a hedge fund consultant. Ricks, founder and partner at Ricks Consulting Firm, was diagnosed with breast cancer in 2007 and has since raised an undisclosed eight-figure sum for the illness, mostly thanks to the hedge fund community.