posted
just wondering your opinions on it... since alot of well publicized ones are crapping out so to speak... alot of investors $$ being lost and all... etc..
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posted
As far as i know Hedgies are not really transparent... they tend to be secretive about what they do... and this can lead to disaster ala Long Term Capital fiasco...
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posted
I feel they should be regulated. The playing field is no longer level. With hedgis manipulating stocks with phony bids and offers and various methods via trading programs.
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posted
Let me rephrase that. Hedge funds are manipulating markets via trading programs/software. This is exactly why you see them get destroyed during sinificant volatility.
They bully these things around. And every once in a while mass hysteria gets the best of their deep pockets and phony market making.
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posted
But alot of them go bust because they are not transparent about their trades & refuse to admit they are wrong on a trade and cut their losses ala Long Term Capital back in the day and the Barings Bank fiasco as well... You should read a book titled When Genius Failed .... it's about the LTC story...
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We'll if they went long on a position and they were wrong the short sellers got the dough and vice versa... with LTC they would not liquidate their positions because they considered themselves geniuses who were never wrong... well guess what.. they were wrong lol it's a zero sum game and they never learned that lesson before they went bust:
quote:Originally posted by Machiavelli: But alot of them go bust because they are not transparent about their trades & refuse to admit they are wrong on a trade and cut their losses ala Long Term Capital back in the day and the Barings Bank fiasco as well... You should read a book titled When Genius Failed .... it's about the LTC story...
Its not them admitting they are wrong...its the software/program that continues to support or lean. Thats why these things get wolloped during big news driven moves. For example: The programs cant interpret news breaking on Iranian uranium enrichment. The program will continue to support (in a long situation), and at times the further the market drops the more it will support looking to avg. and to play a bounce and to goose as well. This is when disaster happens. Its all about algorithms. To my understanding these programs have baby-sitters and sometimes you need H.I. as opposed to A.I.
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posted
Barings Bank wasnt about computers/AI/Algorithms though. Was a rogue trader who controlled the trading floor for them as well as the clearing department. He didn't know how to trade and was losing their money big time but refused to liquidate his positions to cut his losses because he believed the market would reverse and he had the bad luck of Japan having a earthquake or something and the market plunging further after that. I read a interesting book on it called Total Risk.
As for Long Term Capital Management. Perhaps they used computers but it was still human error. They refused to admit they were wrong on their trades and much like Barings didn't cut their losses causing the collapse of their Hedge Fund. But they were super secretive about what they were doing and were not transparent.
Other trend followers are transparent to their investors/account holders and profited from LTCM's downfall in losing trades because they took the opposite position to what LTCM did. Some of them are legends in the trading world such as John Henry, Ed Seykota, Jerry Parker (though I think he went bust recently), Richard Dennis, The Turtles, Bill Dunn, Keith Campbell etc. Some if not most are in interviews in the Market Wizard series by Jack D. Schwager or also profiled in Trend Following by Michael Covel. If you guys are interested in reading about them and trend following in particular: www.trendfollowing.com .
But nonetheless Hedge funds should be regulated by the government or if they self regulate themselves then they should be transparent so investors know what they are getting themselves into. There should be disclosure etc.
In the end as it stands right now computers or not it is the humans final decision on a trade.
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Interactive Brokers Cries Foul Liz Moyer, 07.06.07, 4:00 PM ET
For the second time since its public stock debut in May, derivatives trading giant Interactive Brokers Group says options market manipulation is weighing on its business.
The firm was hit with a $37 million loss in May because of manipulative trading activities on the German electronic stock market, it said in a regulatory filing late Thursday. News of the loss and its potential effect on second-quarter revenues sent shares of Interactive (nasdaq: IBKR - news - people ) down nearly 8% in heavy trading Friday.
Interactive Brokers says several other market makers were also affected by the trading, which is being investigated by German financial regulators, and that their losses are also believed to be "substantial."
The activity happened in shares of German company Altana (nyse: AAA - news - people ), which had declared a special dividend early in May to coincide with the sale of its pharmaceuticals division. On the ex-dividend date, 31 million shares, or about 44% of Altana's outstanding shares, crossed the electronic Xetra market. The price dropped 25%, pushing the price of the related options "into the money." Interactive Brokers, as a market maker for Altana, ended up on the wrong side of those trades, to the tune of $37 million.
Altana's shares recovered the next day, shooting up 64% after those who sold the previous day to avoid the taxes on the dividend payment bought up shares.
Interactive Brokers claims traders "unlawfully colluded" to manipulate the stock.
It's not the first time Interactive has claimed market manipulation is costing it money. In May, after its highly anticipated initial public offering, the firm announced a $25 million loss as a result of being on the wrong end of trades. The trading activity suggested some were taking advantage of non-public information in advance of major corporate announcements.
Several other options market making firms, including closely held Peak6 in Chicago and Goldman Sachs (nyse: GS - news - people ) in New York, have complained that possible manipulation is cutting into revenues. There are a limited group of such firms, but they control about 44% of trading, according to Options Clearing Corp.
The U.S. Securities and Exchange Commission is tracking dozens of cases of possible insider trading and market manipulation, according to Chairman Christopher Cox. The SEC, along with the Justice Department, has already gone after traders who bought a significant number of call options in shares of TXU (nyse: TXU - news - people ) days before the Houston energy company agreed to a $43 billion buyout by Kohlberg Kravis Roberts and Texas Pacific Group. Several other big merger announcements are also under scrutiny because of unusually heavy options trading volume in the days leading up to their deal announcements, including the $29 billion takeover of First Data (nyse: FDC - news - people ), again by KKR. http://www.forbes.com/wallstreet/2007/07/06/options-interactive-brokers-biz-wall st-cx_lm_0706options.html
this one looked suspicious to me to, since it was announced on Saturday:
There have even been questions raised about this week's $12 billion buyout of Hilton Hotels (nyse: HLT - news - people ) by Blackstone Group (nyse: BX - news - people ).
hedge funds have the $$, and manpower it takes to buy the intel to make this "stuff" work.....
since they have no transparency? one has to be more suspicious of them than other traders...
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it wasn't Saturday, it was Tuesday.... it was a holiday tho..
Hilton Pre-Deal Trading Was Brisk Posted by Dana Cimilluca
July 3, 2007, 8:00 pm
Trading wasn’t sluggish in every stock in the holiday-shortened session today.
Some traders were busy snapping up shares of Hilton Hotels Corp. today hours before the hotel chain announced that it is being bought by Blackstone Group for $18.5 billion or $47.50 a share. Volume was 7.5 million shares, more than twice the daily average in a session that ended at 1 p.m. New York time.
(It is unclear whether Hilton options were active today too, but if they were, it is likely that traders who bought them did better than those who piled into options of Manor Care on Friday. As this Wall Street Journal story today points out, even though a deal for the nursing-home company was announced yesterday, many of those options bets still didn’t pay off.)
The premium in the Hilton deal, at 32% over the $36.05 closing price today, is healthy for sure. But it would have been more like 40% if not for the 6.4% rise caused by all that buying today. (We wouldn’t be surprised if that’s why they announced the deal at such an awkward time.)
There has been a lull of late, in both deal making and in suspicious pre-deal trades. It had been several weeks since we saw anything like the $32 billion leveraged-buyout of TXU — or the trading frenzy that led up to disclosure of the deal. It now appears that both mega deals and pre-deal trading are back with a vengeance.
can't link this one cuz it has b lo gs in the url... it is a WSJ article tho...
who's NOT doing the "insider thing" might be the best question huh?
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Options Report: Unusual Hilton Options Activity Topics:Stock Options | Blackstone Group By Jim Kingsland | 05 Jul 2007 | 12:42 PM ET
While Wall Street coasted into a sleepy pre-holiday finish on Tuesday, options in Hilton Hotels were actively traded as shares of Hilton Hilton Hotels Corp (HLT) 45.71 0.32 +0.71% Quote | Chart | News | Profile | Add to Watchlist [HLT 45.71 0.32 (+0.71%) ] rose more than 6% in the abbreviated trading session.
Over the holiday break Blackstone announced a $20 billion buyout of the company which valued shares at $47.50. Shares traded higher by more than 26% in the Thursday session.
"The trading was hyperactive," said Andrew Wilkinson, senior market analyst at Interactive Brokers. "There have been rumors about Hilton going back to November, but it's definitely odd and extremely suspicious how options activity picked up to a pace of 9-times normal volume on Tuesday."
One of the most fortuitous of trades would have been a purchase of August 40 Hilton calls, a bet that Hilton would rise to $40 or higher by expiration in August. More than 5,000 Hilton August 40 calls traded Tuesday after only 70 traded during the previous 11 trading sessions.
The August 40 calls finished the trading day Tuesday with an offer of 85 cents. Today those same calls are trading in the $5.70 range, meaning that if a speculator bought 100 of the call options Friday for $8,500 before commissions and exchange fees, those same options would be worth approximately $57,000 today.
posted
More the reason Hedge Funds should be watched more closely by the SEC:
HEDGER BERGER NABBED $400M FRAUD FUGITIVE By JANET WHITMAN MICHAEL BERGER Austrian arrest.July 10, 2007 -- Police have picked up fugitive financial scammer Michael Berger, five years after he fled New York to avoid jail time for covering up $400 million in losses in his hedge fund.
Berger, who pleaded guilty to securities fraud in a Manhattan court in 2000 and skipped town in March 2002 before he could be sentenced, was arrested and jailed Friday in has native Austria as he was driving toward Salzburg in a red compact car, authorities said yesterday.
The FBI and Austrian police have been on an active manhunt for Berger, who at one point a few years ago was spotted on the tiny Caribbean island of Dominica, which has no extradition treaties with the U.S.
The search heated up in recent months and police are reportedly looking into whether he held fake passports.
Berger, now 35, was accused of hiding massive losses in his now infamous hedge fund, Manhattan Investment Fund.
In his guilty plea, he admitted to fudging the fund's performance figures after racking up big losses when he bet against tech stocks just as they were beginning to explode back during the late 1990s boom.
Berger tried to have his plea pulled in 2001 arguing he was mentally incompetent at the time he admitted guilt, but a judge rejected the motion.
Earlier this year, a bankruptcy judge ordered Bear Stearns, the fund's prime broker, to fork over about $160 million to the estate of the fund for failing to act on signs of fraudulent activity before its collapse in 2000.
At its peak, the fund controlled around $575 million.
U.S. authorities are seeking to have Berger shipped back to New York to face perhaps more than 10 years behind bars and over $1 million in fines for lying to investors and jumping bail on the eve of his sentencing. Austrian authorities have been looking to prosecute him as well because he cheated on at least three Austrian banks that invested in his fund.
Berger, a college dropout, arrived in New York in 1993 at the age of 22 and began his financial training in a teller program.
janet.whitman*nypost.com
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