The FemBot vs. The Company Man

[wndysrf]

Attention Riverboaters:

 

This will be my last M2M opening this year. I will be leaving tomorrow to head back to Kentucky to be with my family over the holidays. I?ll post in IDS if I can, after the 27th, if I?m watching the markets, but most likely I?ll be too busy or traveling. So happy holidays to all the Stool Pigeons?.

 

??????????????.

 

Last night, I watched the final episode of The Apprentice II on CNBS, which was airing on full rotation all evening.

 

Jennifer Massey ?The FemBot?, otherwise known as a ?cold-blooded man-eating shark?

 

vs. Kelly Perdew ?The Company Man?, otherwise known as a ?G.I. Joe?

 

The Donald seated in the middle.

 

To his right, there was the always balding and always sweating ?George?, always cowering in The Donald?s shadow.

 

To his left, the always aneorexic and always smirking ?Carolyn?, observing with a slightly tilted head.

 

In the final tally, Kelly was the overwhelming winner. A virtual landslide.

 

Kelly is a Kentucky-bred West Point grad, now President of his own company based in Carlsbad, CA. A company which is a ?software outsourcing? gig of some sorts.

 

Now that he has been hired by The Donald, he can join the lackey brown-nosers ( ?George? and ?Carolyn?) of the now bankrupt Trump Organization, now trading on the OTC Pink Sheets.

 

Who would want to leave Carlsbad, the Epicenter of Excess where millions are getting rich on QCOM stock and exploding housing prices? Running your own company and answering to no-one?

 

Why move to New York and suffer under the BlowHaired Donald and his myriad shell corporations supervising the construction of another Obelisk? And have half your paycheck confiscated with ?required? contributions to the U.S. Treasury, State of New York, and New York City income taxes?

 

Anybody see Trump?s CEO and CFO?? I mean, these guys looked like gangsters.

 

Kelly?s career is doomed.

 

Jennifer M., on the other hand, is about to experience a Career Explosion. She is still a practicing securities attorney in San Francisco. Living with her no-name husband named Aron or something.

 

That?s about to change.

 

Jennifer has ?the look?. The collagen lips. The permanent lip gloss. The toothpick arms. The flattest stomach. The flowing blonde hair. And curves which can be described as none other than, ?extraordinary?.

 

With Princeton and Harvard degrees.

 

And of course, she has the required coolness and aloofness. The Ann Taylor suits. The assorted blouses which have the buttons on the front, which allow you to see just enough, and not enough.

 

Soon, the boring seamless T-back bras she wears will be discarded. So will the button down shirts.

 

No doubt, thousands of HedgeFund Managers have been watching ?The Apprentice II?.

 

And hundreds of SVP?s in charge of the various Prime Brokerage units at the I-Banks.

 

Jennifer is about to leave the San Francisco lawyering and her lazy husband behind.

 

And she will be fast-tracked into the hottest, the fastest growing industry in the world.

 

The world of HedgeFunds.

 

My bet is that she is hired as the Marketing Director of a HedgeFund with a minimum of ?$25 billion under management?, to solicit more pension money into the Hotel California Funds.

 

Or, she will be hired by the myriad number of ?financial institutions? like GE Capital, Countrywide, H&R Block, and other third rate financiers attempting to break into the lucrative Prime Brokerage business, peddling zero interest-rate margin loans and unlimited financing schemes to the HedgeFunds.

 

The consumer now has an unlimited source of credit. Zero percent mortgages, zero percent car loans, free credit card checks, 100% financing of Botox, no payments until 2008 on Plasma TVs.

 

Its no different for the HedgeFunds. Unlimited margin loans. Financing for any asset class, including derivatives, strips, options, converts, futures, anything. Cross collateral agreements, where risks are sliced and diced, offloaded, and/or cancelled out, enabling the use of even greater leverage and even more generous terms.

 

Now there is a Mad Panic for asset gathering, every HedgeFund is trying to recruit more ?sponsors? so they can take a $1 million of ?new money? and parlay it into a $100 million position trade.

 

And a Mad Panic among the lenders and I-Banks, each scrambling to offer easier terms, lower interest rates, higher margin capacities, myriad collateral-sharing arrangements, and instantaneous settlements.

 

Clearly, the highest and best use of Jennifer?s talents is in the solicitation and marketing these products.

 

Nowhere else can money be made faster. Trump?s luxury condo buildings take years to construct and occupy. HedgeFunds and their financiers can make it in 30 trading days or less.

 

First stop will be at the beauty shop, where that boring ?Corporate Veil? hairdo will be spiffed up with a few highlights and curls.

 

Next, the T-Back, all cotton Maidenform underwear will be dumped in favor of exotic silk French lingerie with the spaghetti straps, highlighted by sheer silk blouses with the flimsy buttons which look like they are about to snap off any second.

 

Then, the Ann Taylor look will be chopped in favor of more trendy outfits from BEBE stores.

 

Now, imagine yourself being the EVP of CalPers or one of the nerdy looking fumble manager executives featured in Barron?s with their faces constantly buried in the computer screen all day.

 

And in comes this commission-based ?sales rep? pitching the latest and greatest leveraged trading strategy or financing scheme. Dressed up as if she were out of Vogue Magazine??

 

Of course, this career will only last a minimum of two years, enough for her to make enough ?drop dead? money. Once her nest egg is secured, then she can advance to the next level.

 

The next level is the solicitation of the Next Husband, most likely to be one of her HedgeFund clients, or any of the other traders, merchantmen, sports celebrities, physicians, or other Carmel-by-the Sea locals featured a couple of days ago in ?Wealth Parabola?.

 

Aron will be backslapped into obscurity, while his ex-wife enjoys a life of leisure sunbathing in Mykonos aboard her new husband?s 450-ft. yacht.

 

Of course, she will be smart enough to have parked her nest egg in gold, Swiss Francs, or other safe investment in case her new husband?s world blows up along with The Donald?s when the next Derivative Accident shows up.

 

In the meantime, the HedgeFunds continue to run wild, and the banks are concocting even more absurd financings, collateral arrangements, anything and everything to increase leverage and ?trading capital?.

 

From yesterday?s Wall Struck Journal:

 

Wall Street's Wooing Of Hedge-Funds

 

By HENNY SENDER

 

Wall Street's love affair with hedge funds knows few bounds, as the brokers and the banks fall over each other courting these investors.

 

Concern is especially focused on big banks that have come up with innovative products to lure business from securities firms like Morgan Stanley and Goldman Sachs Group, which own a big part of the business that hedge funds generate.

 

For much of the six years since Long-Term Capital Management's massive trading positions went wrong, U.S. regulators have voiced few concerns about the burgeoning hedge-fund industry. And today the amount of borrowing, or leverage, hedge funds use to amplify trading strategies is seemingly very low.

 

But credit monitors at some brokerage firms, along with regulators, now wonder if the lack of leverage is an illusion. Indeed, both believe the leverage they are utilizing in their trading is rising but that hedge funds are using new derivatives products which effectively disguise that leverage.

 

In a speech last month, New York Federal Reserve Bank President Timothy Geithner noted "hedge funds -- and financial leverage more generally -- still present a source of potential risk to the financial system." Mr. Geithner went on to cite "the increased complexity of their interactions with major dealers...and signs of some erosion in standards in response to competitive pressures, reflected in some lowering of initial margin requirements and a relaxation in other credit terms."

 

Hedge funds generate between 40% and 70% of all institutional equity commissions, according to estimates from prime brokerage firms. These funds dominate convertible-bond trading, as well as parts of the lending market, particularly the so-called second-lien loan market, in which lenders don't have first claim on the assets of the borrower.

 

And hedge funds are increasingly important as trading partners for the banks in new derivatives products. For example, one-third of all deals involving credit-insurance derivatives involve hedge funds as either buyers or sellers, according to data from Deutsche Bank AG.

 

"Everyone wants to cater to the hedge funds, and the hedge funds are aggressively renegotiating the terms on which they deal with Wall Street," says the head of credit risk at one major Wall Street investment bank. "There has been a major erosion of the protections we have in place."

 

The often invisible leverage being used by hedge funds takes many forms, but all come against a backdrop of still-low interest rates and what Mr. Geithner refers to as "a time when the markets appear to be pricing in a relatively benign view of risk in the financial system and in the economy overall." Such a placid environment encourages hedge funds to take greater risk in order to magnify performance, whether for better or worse. At the same time, the present low market volatility makes those that cater to hedge funds more comfortable taking risks, because they see massive market moves as a remote possibility.

 

In the past, brokerage firms have given hedge-fund clients overnight financing on their trades, and allocated capital against the money they extended. They take collateral they believe adequate to cover any market movements -- anything from 20% to 50% of the value of the trade.

 

But now some of the banking powerhouses are trying to break into the so-called prime brokerage business, which has been dominated by brokerage firms including Goldman Sachs, Morgan Stanley and Bear Stearns, by offering innovative financing products that effectively involve greater leverage and less transparency. J.P. Morgan Chase, for example, markets its MastersSwap on its Web site and boasts that it "provides many of the functions normally associated with prime brokerage...leveraging its market leading capabilities in derivatives products." J.P. Morgan Chase didn't respond to requests for comment.

 

But these derivatives also enable banks such as Deutsche Bank, UBS and J.P. Morgan Chase to be more aggressive on margin requirements and prices, prime brokers at the investment banks say.

 

For example, banks offer financing through the use of derivatives, particularly so-called total-return swaps that replicate the performance of a security. Rather than actually buying the shares of a company from a broker, a hedge fund will pay a certain rate to the broker and compensate the broker for any loss in value. At the same time, the broker will pay the fund any dividends and any gain in value.

 

The arrangement works for the banks because there is no capital hit. And it works for the hedge funds because they need to put up far less collateral, often a token amount of 5% of the value of the trade. The extent to which this is being done is impossible to ascertain, however, because it doesn't appear as a separate item in the accounts of the banks. This approach is even more effective in London, where the hedge funds avoid certain taxes if they do derivatives while similar trades in the cash market would entail a tax.

 

Because hedge funds are often the most opportunistic of all investors, diving into anything that can be traded from bonds to buildings to bullion, they expect their brokers to execute the most-convoluted trades and give them credit for positions that offset other positions. That's why "global cross-product margining has become the holy grail for all of us," says Alex Ehrlich, who heads the prime-brokerage effort at UBS, referring to the hedge funds' desire to put up less margin on any single transaction by taking into account the offsetting aspects of an entire portfolio, rather than examining a single trade in isolation.

 

The banks that engage in the practice deny that their approach involves greater risk. "Greater leverage does not mean greater risk," says James Rowan, head of prime brokerage for Deutsche Bank in New York. "In our case, we look at total exposures, and if there are hedges, we require less margin, so it actually results in less risk."

????????????.

 

So there you have it. Jennifer?s new career, participating in the fastest money-making business on the planet.

 

Now picture yourself as Kevin Jamdis, a thin, scrawny, bony fund manager. Or a corporate plutocrat, working at some pension fund like TIAA/CREF, stuck bug-eyed behind a monitor all day.

 

You are sitting at your office, scanning the CanSlim Breakout list, and in walks this??

[wndysrf]

"Hi!!! My name is Jennifer. I am here to introduce you to our HedgeFund, with over $25 billion under management. Our performance speaks for itself, so you will not need to worry about the 5-year lock-up period."

[wndysrf]

"Yes, I think we can provide you with a risk-free Curve Flattening Trade. We have a myriad network of counterparties to offload risk, and of course, the entire transaction is financed 100%, with 5:1 margin."

[Bearman]

QUOTE(wndysrf @ Dec 22 2004, 03:48 PM)

3:40 Merrill launches its first registered hedge fund

 

 

 

 

 

 

 

 

GREAT!!!!!!!!!!

 

They got out of commodity funds @ the bottom

 

SIGN OF A TOP for SM imvho

[machinehead]

This has gone entirely too far.

 

Bubble II, I mean.

 

Today I did something I've never done -- put some cash accounts into a 200% inverse NazTrash fund.

 

Usually such funds are not attractive. In an inflationary world, stock markets spend twice as much time going up as down, so most years are bad years for inverse funds.

 

Moreover, these funds are very subject to being damaged by procyclical hot money inflows, forcing them to 'short low and cover high' to everyone's detriment.

 

Nevertheless, insane measures are now required to counter radical Dadaist and Deconstructivist monetary excesses.

 

Take Fannie Mae ... please! Don't you suspect we're victims of a lagging news feed? Potato Head and Shemp just got canned. But in all probability, Fannie went insolvent in June 2003 when the hedges went haywire and the zombie T-note yield got pounded down to 3.07%. That's a major reason that Mad Al extended his "one percent forever rate blowout" for another full year afterward.

 

Now, behind the cover of rising rates, Mad Al Leeson and his straight-man sidekick, Benwa 'Balls' Bernanke, ostentatiously stride onto the floor of the Bond Exchange in top hat and tails, bidding for 10,000-lots of Fannie paper. The rakish exploits of these prominent Pimpmasters excite the envy and admiration of the borker jackal pack, obliging them to do likewise.

 

It's an historical first, in other words: an 'invisible crisis,' papered over by a pre-emptive 'silent rescue.' 'Hey, did you see that?' 'Me neither!'

 

Not that I'm under any naive illusion that they'll stop pumping. But the 'sweet spot' of reliquifaction is the first couple of years. Ergo, time's up. From here on out, accelerating the Paper Blizzard only pressures goods prices higher, and stock P/Es lower.

 

The stench of rot and decadence hangs heavy in the fetid air. Little wisps of smoke are curling out from behind the ceiling tiles. It's been a lovely party here at the Statisticians Convention ... but I believe I'll check out early from the 'Fat Tails Casino' before the guest of honor, Mr. Six Sigma, makes his grand entrance.

 

Truth to tell, I'd rather be planting cotton and soybeans.

 

Best wishes,

 

Tractorhead

[Bearman]

Attention Riverboaters:

 

This will be my last M2M opening this year. I will be leaving tomorrow to head back to Kentucky to be with my family over the holidays. I?ll post in IDS if I can, after the 27th, if I?m watching the markets, but most likely I?ll be too busy or traveling. So happy holidays to all the Stool Pigeons?.

 

 

Happy Holidays to you Mark!

 

L@@k out for Kentucky Women

 

Up on Overton Mt !

 

They do hold shotgun weddings

[Bearman]

nice sp runoff! rundown

 

PEI 8.6yr cycle turn can come early ,no need to wait for 2005

[DrStool]

Hmmm. I wonder if that drop kick in the ruboff means anything? Stay tuned to Stooltrading to find out.

[Charmin]

If RIV is akin to riverboaters

I missed the boat

 

Tuesday momo list a mixed bag

[DrStool]

Doubts About A Rally

 

Uncle Buck and the Long Bong Hit, including short and long term updated charts and price targets, is now loaded. Take a subscribatory and get the latest whiff of Uncle Buck and the Long Bong Hit.

[soup]

Tractorhead: Great post. I thank you, and many otehrs for helping me stay sane thorugh the most insane time in al of financial history. ( Well not quite sane, but believe me I would be hanging from the raptors if I did get my dose of such fine wisdom)

[K Wave Rider]

Doubts About A Rally

 

Uncle Buck and the Long Bong Hit, including short and long term updated charts and price targets, is now loaded.  Take a subscribatory and get the latest whiff of Uncle Buck and the Long Bong Hit.

<{POST_SNAPBACK}>

 

Doc, the up phase of the 13 day cycle that just bottomed is key here, methinks..

 

We have convergence of a 13 week, 6 month and 12 month bottom here..

 

Da buck is wedged to the max here at 82..if it is goin' to explode upward with all those cycles converging, this is the place right here, right now...if it fails to do so, over the next few dayz, that would have to be viewed a sign of weakness..

[GregFokker]

Tractorhead:  Great post.  I thank you, and many otehrs for helping me stay sane thorugh the most insane time in al of financial history.  ( Well not quite sane,  but believe me I would be hanging from the raptors if I did get my dose of such fine wisdom)

<{POST_SNAPBACK}>

Second that, Soup!

[intertrader888]

China accelerated its buying of Crude Oil during the current correction,

using its surplus. Does this mean that those petrodollars would be

reinvested in the T Bone? Lower yields ahead? That's why we see unreal

performance of $HGX?

[tradermark]

nice sp runoff!  rundown

 

PEI 8.6yr cycle turn can come early ,no need to wait for 2005

<{POST_SNAPBACK}>

 

Pardon my ignorance here, but what is the 'PEI 8.6 yr cycle turn'