Saturday, 20 December 2008

Hedge Funds and the Financial Market

George Soros (from Flickr)

The Committee on Oversight and Government reform held a hearing titled, “Hedge Funds and the Financial Market” on Thursday, November 13, 2008.
Here you can read some interesting excerpts:

Testimony of Professor David Ruder (Professor of Law Emeritus, Northwestern University School of Law, Former Chairman, U.S. Securities and Exchange Commission 1987-1989)

The definition of hedge fund is unclear. The SEC has acknowledged that the term has no "precise legal or universally accepted definition". The President's Working Group on the Financial Markets has called a hedge fund "any pooled investment vehicle that is privately organized, administered by professional managers, and not widely available to the public".
Hedge fund managers do not want their investment strategies to become known.
Although hedge funds have been active participants in the financial markets during the past years, they do not seem to have played a major role in the events precipitating the crisis. [...], the market participants central to the credit crisis were loan originators, investment banks, rating agencies, and sellers of credit default swaps.

Testimony of Professor Andrew Lo (Director, MIT Laboratory for Financial Engineering, Massachusetts Institute of Technology, Sloan School of Management)

If hedge funds are forced to reveal their strategies, the most intellectually innovative ones will simply cease to exist or move to other less intrusive regulatory jurisdictions.

Testimony of Houman Shadab (Senior Research Fellow, Mercatus Center, George Mason University)

First, hedge funds did not cause the financial crisis and are in fact helping to mitigate its damage and save taxpayers money. [...]
Second, hedge funds' short-selling activities have helped draw attention to the poor management and investment decisions of financial companies in recent years. [...]
Finally, existing laws and regulations should be strictly enforced against hedge funds and their managers, but changing how hedge funds are regulated could actually undermine the interests of investors and increase economic instability.

Testimony of Philip Falcone (senior managing director and co-founder of Harbinger
Capital Partners Funds)

Our investment philosophy is very simple; we study, often for months, the fundamentals of companies to identify those that are undervalued or overvalued, and we act decisively when opportunities present themselves. We are not momentum traders, nor are we day traders; we are investors. It is not magic. My analists perform thorough due diligence, rather than relying on ratings agencies or other research reports -- like many of the reports that improperly valued securitized mortgage products over the past few years.

Testimony of Kenneth Griffin (founder and CEO of Citadel Investment Group)

I am proud that in the 18 years since I founded Citadel, it has grown into a financial institution of great strenght and capability, with a team of over 1,400 talented individuals. Citadel manages approximately $ 15 billion of investment capital for a broad array of institutional investors, endowments, high-net-worth individuals and Citadel's employees.

Testimony of James Simons (chairman and CEO of Renaissance Technologies LLC)

Renaissance's investment approach is driven by my background in mathematics. Before I ever entered the business world, I was a mathematician. I have a PhD from Berkeley, won the 1975 Veblen Prize of the American Mathematics Society (given every four years for work in geometry and topology), and taught mathematics at the MIT and Harvard before becoming the chairman of the Mathematics Department at the State University of New York at Stony Brook. Along the way, I spent four years as a code cracker for the National Security Agency. Renaissance, an SEC-registered Investment Adviser since 1998, manages what are termed quantitative funds - funds whose trading is determined by mathematical formulas designed to predict market behavior. Individual trades are generated by computers, based on work continually developed by our researchers. Naturally, human beings carefully monitor the trade execution process, making sure that all parts of the system are behaving properly. We operate in only highly liquid, publicly listed securities, such as stocks, bonds, currencies, and commodities, and do this on exchanges throughout the world. This means, for example, that we do not trade in credit default swaps or collateralized debt obligations, neither of which satisfies the above criteria. In the stock trading of our Medallion Fund, we hold balanced portfolios in each country, i.e., portfolios very close to being equally long and short. Our trading models tend to buy stocks that are recently out of favor and sell those recently in favor.

Testimony of John Paulson (president and founder of Paulson & Co. Inc)

Paulson & Co. Inc is an investment advisory firm that was founded in 1994 and has been registered with the SEC since 2004. We currently manage assets of approximately $ 36 billion using event-driven strategies. We are based in New York and also have offices in London and Hong Kong. We have approximately seventy employees. Prior to founding the firm, I was a Managing Director in Mergers & Acquisitions at Bear Stearns. I am a summa cum laude graduate from New York University and graduated with high distinction, as a Baker Scholar, from Harvard Business School in 1980. Our investors include pension funds, endowments, banks, insurance companies, family offices and high-net-worth individuals in the U.S. and around the world. All of the investment funds we manage are open only to "qualified purchasers", which are highly sophisticated investors with $5 million in investable assets if they are individuals, and $25 million in investable assets if they are institutions. Our investors look to us to protect their capital, and to show positive returns in both good and bad markets. We do this by going long securities that we think will rise in value and going short securities that we think will decline in value. By constructing a diverse portfolio of both long and short positions, we have been able to operate profitably in 14 out of the last 15 years, including this year and the 2000-2002 periods when the NASDAQ index lost 78% of its value. [...] We share profits with our investors on an 80/20 basis where 80% of the profits go to the investors and 20% remains with us. We only earn performance allocations if our investors are profitable. All of our funds have a "high water mark", which means that if we lose money for our investors, we have to earn it back before we share in future profits. Some of our funds also have a "claw back" provision, requiring us to return profits earned in prior periods if we lose money in subsequent periods. In addition, we invest our own money alongside that of our clients, so we share investment losses along with gains.
We are a private company and have no public shareholders. We receive no taxpayer subsidies. All of our investors invest with us on a voluntary basis. We also use very little leverage. Over the past five years, for over half the time our base portfolios were not funded with any borrowed money, and our maximum borrowing as a percentage of equity capital over this period was 33%.
In February 2004, we voluntarily registered with the SEC as an investment advisor.

Testimony of George Soros

The crisis was generated by the financial system itself. This fact - that the defect was inherent in the system - contradicts the prevailing theory, which holds that financial markets tend toward equilibrium and that deviations from the equilibrium either occur in a random manner or are caused by some sudden external event to which markets have difficulty adjusting. The severity and amplitude of the crisis provides convincing evidence that there is something fundamentally wrong with this prevailing theory and with the approach to market regulation that has gone with it.

Friday, 12 December 2008

Zeitgeist of the year 2008

Sarah Heath Palin: she lost election but she won the Google Zeigeist

One year ago, i wrote about Google Zeitgeist of 2007. Now it's time to write about the Zeitgeist of they year 2008.

Zeitgeist is a german word and it could be translated as "spirit of the age" or "spirit of the times", it is best known in relation to Hegel's view of philosophy of history.

From Google Zeitgeist site:
As the year comes to a close, it's time to look at the big events, memorable moments and emerging trends that captivated us in 2008. As it happens, studying the aggregation of the billions of search queries that people type into the Google search box gives us a glimpse into the zeitgeist — the spirit of the times. We've compiled some of the highlights from Google searches around the globe and hope you enjoy looking back as much as we do.

Actually, in US Zeitgeist they are more specific:
"Fastest rising" means we looked at the most popular searches conducted for 11 months of 2008 (we compile this list by early December) and ranked them based on how much their frequency increased compared to 2007.

Fastest Rising (Global)
  1. sarah palin
  2. beijing 2008
  3. facebook login
  4. tuenti
  5. heath ledger
  6. obama
  7. nasza klasa
  8. wer kennt wen
  9. euro 2008
  10. jonas brothers

1 Tuenti is a Madrid-based, invite only private social networking website (launched on May 2006) that has been referred to as the "Spanish Facebook". The name Tuenti, pronounced in Spanish, sounds like Twenty in English. Tuenti is targeted at the Spanish audience. The site is currently accessible only to those who have been invited
2 (Our Class) is a large social networking platform for people in Poland, a social networking site bringing together a school's students and alumni; launched on november 2006, today has 11 million registered people
3 wer kennt wen is a german social networking website created on 2006, today has 4.9 million of users
4 Jonas Brothers are an american boy band active since 2005

--- - Fastest Rising (U.S.)
  1. obama
  2. facebook
  3. att
  4. iphone
  5. youtube
  6. fox news
  7. palin
  8. beijing 2008
  9. david cook
  10. surf the channel

5 att should be AT&T: the largest provider of both local and long distance telephone services, DSL Internet access and wireless service in the United States with 71.4 million wireless customers and more than 150 million total customers
6 David Cook (1982) is an American singer-songwriter. On May 21, 2008, he won the seventh season of the reality television show American Idol
7 SurfTheChannel is website for TV fans


Fastest Rising UK

  1. iplayer
  2. facebook
  3. iphone
  4. youtube
  5. yahoo mail
  6. large hadron collider
  7. obama
  8. friv
  9. jogos
  10. wiki

Most Popular UK
  1. facebook
  2. bbc
  3. youtube
  4. ebay
  5. games
  6. news
  7. hotmail
  8. bebo
  9. yahoo
  10. jobs
8 friv is a site with 200 flash games online
9 large hadron collider (LHC) is the world's largest particle accelerator


You can't miss the Techcrunch article about the Google Zeitgeist and you can read the TOP 10 searches for 2008 by Yahoo (but it's so similar to the 2007 list!):

1 Britney Spears
2 WWE (World Wrestling Entertainment)
3 Barack Obama
4 Miley Cyrus
5 RuneScape
6 Jessica Alba
7 Naruto
8 Lindsay Lohan
9 Angelina Jolie
10 American Idol

Where are the techno-enthusiasts who were telling us "Mankind will enter a new era with Internet!" ??

Monday, 1 December 2008

The battle of (mobile)phones goes on

pic from Flickr - iPhone

Last year i was writing about phone business: iPhone and Android, let's see what happened in the last 12 months.
On 14th November 2007, i wrote about Android Developer Challenge: a contest for the most innovative application for Android, 10 million US dollars distributed between two phases of the competition.

First phase - 12th May 2008 - The top 50 applications are announced, click here to know 46 of them (4 teams decided "to continue their efforts in secret"); each team received a $25,000 award to fund further development
Second phase - 25th September 2008 - 10 teams received a $275,000 award each and 10 teams received a $100,000 award each. Click here to know all the projects

The winner of $275,000 award are:
cab4me enables you to easily call a cab to any location worldwide
Compare prices, read reviews, and connect with local stores
Ecorio automatically tracks your mobile carbon footprint, suggests transit and carpooling alternatives and lets you stay carbon neutral by offsetting your trips easily
Scan a product's barcode with your phone's camera and view all the best prices online and at nearby, local stores
Life360 uses a multi-channel messaging system and neighborhood-centric social network to keep you up-to-date and in contact with your family and local community
Locale is an advanced settings manager that automatically changes your phone's settings based on conditions, such as location
Easy to use image editor that enables you to quickly personalize your pictures and share them with friends or photo sites
With Softrace people around the world meet online to compete against each other in different physical activities
TuneWiki Social Media Player, is an advanced player, featuring synchronized lyrics for audio or video, translation, music maps and a social network
Find the hottest parties in town and connect with friends and others all night long

Since 21 Oct 2008, Android is available as open source, the source is approximentely 2.1GB in size

The first phone in the market running Android is the T-Mobile G1, released on 22nd October 2008, it came preinstalled with Android 1.0

pic from Wikipedia - T-Mobile G1 (made by HTC)

And what happened to the iPhone?
iPhone has been a big success but iPhone 3G has been a HUGE success:

picture from Wikipedia
Q1 Oct-Dec; Q2 Jan-Mar; Q3 Apr-Jun; Q4 Jul-Sep

iPhone was realeased on 29th June 2007, iPhone3G was released on 11th July 2008. Apple sold more iPhones in 92 days (July-Sep 2008) than in the previous 12 months!! 6.89 million of iPhones in July-Sep 2008 and 6.124 million from 29th June 2007 to 30th June 2008.
Apple might win the battle of business but isn't winning the battle for climate leadership.

From the site of Greenpeace:

The Guide to Greener Electronics is our way of getting the electronics industry to take responsibility for the entire lifecycle of its products. We want it to face up to the problem of e-waste and take on the challenge of tackling climate change.

First launched in August 2006, the Guide ranks the leaders of the mobile phone, computer, TV and games console markets according to their policies and practices on toxic chemicals, recycling and energy. Since June 2008, the Guide has ranked companies on five climate and energy criteria. In this current edition we're focussing on climate leadership - not only because the global climate needs it but because electronics firms have a big role to play in the low-carbon economy of the future.

Nokia is the best one: ranking 6.9/10
Apple ranking 4.3/10

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