Main News

 

Once Again, the Risk Protection Fails
Wall Street Journal - USA
Since the initial rumblings of what would turn in to a $7.8 billion fourth-quarter write-down tied to bad CDO bets first surfaced in October, Morgan Stanley ...

 

Hedge Fund Working Group unveils valuation and risk management standards
The Hedge Fund Working Group, established by 14 leading hedge fund managers based mainly in the UK, has published best practice standards for hedge fund managers following consultation with the industry and other interested parties.

 

Crisis grips European hedge funds
Times Online - UK
A RAFT of European hedge funds have been forced to introduce emergency measures to protect their businesses from collapsing in the wake of the turmoil in ...

 

Read It Here First: Fed Responding to Stocks? <http://seekingalpha.com/article/61691-read-it-here-first-fed-responding-to-stocks?source=i_email>
by Barry Ritholtz <http://seekingalpha.com/author/barry-ritholtz?source=i_email>

 

NYTimes, Société Générale, & Me <http://seekingalpha.com/article/61702-nytimes-socit-gnrale-me?source=i_email>
by Barry Ritholtz <http://seekingalpha.com/author/barry-ritholtz?source=i_email>

 

SocGen and the Perception of Risk <http://seekingalpha.com/article/61734-socgen-and-the-perception-of-risk?source=i_email>
by Richard Kang <http://seekingalpha.com/author/richard-kang?source=i_email>

 

In Depth: Rogue Trader Who Cost SG €5bn
Financial Times - Friday January 25, 08:21 GMT

 

Le rogue trader
An astounding €4.9 billion fraud
Full article

 

But it remains unclear exactly how the rogue trader managed to evade SG’s internal controls for months at a time before he was finally discovered last weekend.
Questions remain over SG rogue trader

 

Loss at French Bank Raises Doubts
PARIS, Jan. 25 -- French political figures, shareholders and bank customers on Friday voiced growing criticism and skepticism of banking giant Societe Generale's explanations of one of the largest financial scams in history.
(By Molly Moore and Corinne Gavard, The Washington Post)

 

SOCGEN&#39;S $70B PROBLEM
 By RICHARD WILNER
Société Générale, France&#39;s No. 2 bank, got off easy.  Although rocked by the largest white-collar fraud in history - a $7.1 billion loss tied to phony transactions posted by rogue futures trader Jerome Kerviel - the 144-year-old bank could...
full story: http://www.nypost.com/seven/01272008/business/socgens_70b_problem_136198.htm

 

Who Is Jerome Kerviel? <http://seekingalpha.com/article/61661-who-is-jerome-kerviel?source=i_email>
by Eben Esterhuizen <http://seekingalpha.com/author/eben-esterhuizen?source=i_email>

 

Some employers worry about their employees being a bit too careless with their petty cash receipts. Some worry about their employees losing €7bn.

Full Story...

 

BARRON'S FEATURE
What Now?Felix Zulauf, Abby Cohen, Marc Faber, Archie MacAllaster and Scott Black share their investment picks - and their views of the market's prospects from here.
http://online.barrons.com/article/SB120132064710419211.html?mod=djemWR

 

BARRON'S FEATURE
Forecasting Contest 2007Why winner Chad Sturgill is bullish on stocks.
http://online.barrons.com/article/SB120131698658019061.html?mod=djemWR

 

BlackRock to buy 40% in DSP Merrill Lynch fund
Business Standard India Sat, 26 Jan 2008 9:48 AM PST
New York-headquartered hedge fund BlackRock Inc has acquired the 40 per cent stake held by Merrill Lynch in mutual fund DSP Merrill Lynch Fund Managers, in a move that signals the world’s fifth largest asset manager’s entry into the booming Indian market.

Bonds Rise; Hedge Fund Rumor Circulates
The Associated Press -
NEW YORK (AP) — Treasury prices threw off early weakness and advanced Friday after a rumor that another hedge fund is in financial trouble circulated ...

 

FACTBOX-What is a monoline bond insurer?
Reuters - USA
CDOs insured by monolines typically have a cushion whereby the monoline is not required to pay claims until a certain percent of defaults in the CDO ...

 

Japan's Pension Fund Assn eyes hedge funds
Source: Reuters
Japan's largest private-sector pension fund manager, the Pension Fund Association, is starting to invest in hedge funds, another sign that the country's conservative institutional investors are dipping into riskier assets. More... <http://www.hedgefund-index.com/newstoday.asp>

 

Empirical Examination of Operational Loss Distributions Authors Rachev, Svetlozar; Chernobai, Anna; Menn, Christian; Date July 2005 Category Operational Risk
Click above to see all GloriaMundi resources from these categories Abstract Until very recently, it has been believed that banks are exposed to two main types of risks: credit risk (the counterparty failure risk) and market risk (the risk of loss due to changes in market indicators, such as interest rates and exchange rates), in the order of importance. The remaining financial risks have been put in the category of other risks, operational risk being one of them. Recent developments in the financial industry have shown that the importance of operational risk has been largely under-estimated. Newly defined capital requirements set by the Basel Committee for Banking Supervision in 2004, require financial institutions to estimate the capital charge to cover their operational losses [6]. This paper is organized as follows. In Section 2 we give the definition of operational risk and describe the effect of the recent developments in the global financial industry on banks’ exposures to operational risk. The following section, Section 3, will briefly outline the recent requirements set by the Basel Committee regarding the capital charge for operational risk. After that we proceed to Section 4 that presents several alternative models that can be used for operational risk modeling. In Section 5 the class of heavy-tailed Stable distributions and their extensions are defined and reviewed. Section 6 consists of the empirical analysis with real operational risk data. Finally, Section 7 summarizes the findings and discusses directions for future work. Links view complete description on GloriaMundi

 Modeling Operational Risks in Business Processes Authors Cheng, Feng; Gamarnik, David; Jengte, Nitin; Min, Wanli ; Ramachandran, Bala ; Date July 2005 Category Operational Risk
Click above to see all GloriaMundi resources from these categories Abstract We propose and approach for modeling and analysis of operational risks in financial institutions. The importance of understanding and mitigating operational risk had been gaining a growing attention recently and let to the necessity for providing systematic foundations for modeling such risks. In this paper, we propose a methodology for modeling operational risk based on business process models. Links view complete description on GloriaMundi
download this resource from GloriaMundi

 

The Bulls, The Bears, & the Media <http://seekingalpha.com/article/61698-the-bulls-the-bears-the-media?source=i_email>
by Barry Ritholtz <http://seekingalpha.com/author/barry-ritholtz?source=i_email>

 

T-Bills vs. Fed Funds: A Recessionary Tale <http://seekingalpha.com/article/61658-t-bills-vs-fed-funds-a-recessionary-tale?source=i_email>


by Michael B. Krause <http://seekingalpha.com/author/michael-b-krause?source=i_email>

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Yield Curve Corner

 

FRENCH TWIST
 By PAUL THARP
Ben Bernanke is defending his emergency rate cut to help tame a stock market rout - and dismissing critics who think a rogue French trader&#39;s scandal ultimately tricked him into the move.  Although the Federal Reserve chief surprised global...
full story: http://www.nypost.com/seven/01252008/business/french_twist_556340.htm

 

Bernanke's Schools in `Corridor of Shame' Roil Obama (Update2)
Bloomberg - USA
24 (Bloomberg) -- Ben Bernanke's public school education in Dillon, South Carolina, was his steppingstone to Harvard University. ...

 

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Natural Disaster Corner

 

Climate Prediction  http://www.nws.noaa.gov/predictions.php

World Meterological Organization http://severe.worldweather.org/

Tornadoes: http://www.disastercenter.com/tornado.htm

Great Sat Pictures of events:

 

6 Powers Agree on Draft Iran Sanctions
Washington Post Sat, 26 Jan 2008 9:02 AM PST
BERLIN -- The U.N. Security Council's permanent members and Germany agreed Tuesday on the contents of a new draft resolution on sanctions against Iran after talks on its nuclear program, the German foreign minister said.

 

AP: Iran Gets Army Gear in Pentagon Sale
Washington Post Sat, 26 Jan 2008 11:33 AM PST
WASHINGTON -- Fighter jet parts and other sensitive U.S. military gear seized from front companies for Iran and brokers for China have been traced in criminal cases to a surprising source: the Pentagon.

 

Judge Awards $466 Million In Lawsuit Against Iran
Washington Post Sat, 26 Jan 2008 7:11 AM PST
LOS ANGELES, Jan. 3 -- Iran must pay $466 million to the family of a Los Angeles man who was tortured and executed there a decade ago for spying, a federal court ruled.

 

Israel urges Davos business chiefs to boycott Iran
AFP via Yahoo! News Thu, 24 Jan 2008 4:13 PM PST
Israel Foreign Minister Tzipi Livni appealed to the global political and business elite gathered in Davos on Thursday to make the personal decision to pull out of Iran and isolate the Islamic republic.

 

The U.S. Department of the Treasury, the Financial Services Sector Coordinating Council for Critical Infrastructure protection and Homeland Security (FSSCC), and the Financial and Banking Information Infrastructure Committee (FBIIC) yesterday released the in-depth results of the FBIIC/FSSCC Pandemic Flu Exercise of 2007.

Full Story...

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Iranian Situation and Other Man Made Disasters

 

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Opalesque’s Corner

 

- Editor's Note
- Opalesque Exclusive: First 2008 hedge fund deal: Largest dedicated hedge fund seeder and PE firm in management buy-out
- Société Générale: SocGen reels from record $7 billion rogue trader fraud, SocGen`s CEO: All of our business activities remain fully operational, the Group will post a positive net income for 2007, Bank of France head reassures after SocGen fraud, Société Générale in danger of takeover as it is now vulnerable, Markets ask if the Fed was panicked into rate cut by the bank`s unwinding of the trader`s positions, French Bank rocked by ordinary trader
- The best rogue traders,  Likeness to Barings is striking, `Let`s all try to be like Goldman` syndrome in international banking, Wikipedia`s updated list of trading losses
- Other Voices: SocGen fraud exemplifies how badly hedge funds need independent administrators
- Fund launches: 3A launches two new hedge funds, Cowen AM launches climate fund
- Performance: Horlick`s Bramdean Alternatives up 1.3% in December thanks to exposure to Paulson Advantage Plus Ltd, Cayuga fund managed by MBA students up 6% in volatile year
- Views: Eton Park chief says market `mispricing` creates opportunity, Man Investments says sell U.S. banks and long-term bonds
- Debt Investing: HF traders believe debt markets will get worse,  Analysts warn that distressed debt strategy will take time to reap rewards
- Institutions: Sweden`s AP7 outlines $500m clean tech mandate ahead of tender, Report: Wealthy college endowments beat the stock market, up 21.3% last fiscal year, secret weapon is in alternatives, NJ pension fund in talks with other funds to form consortium that will invest in faltering companies, Blackstone CEO: Sovereign, pension funds same
- HFWG Update: Comment: Valuation recommendations do not go far enough to protect investors` interest; standards are principle based, with no consequences for managers who do not comply
- People: RAB names chief of compliance, joining a trend, Man Investments opens a new office in Singapore to be headed by Tim Peach, Guy Dawson joins Egerton`s board, President of Fidelity institutional arm to retire
- Legal: Enron creditors seek $18bln from Citi
- IMA calls fro abolition of stamp duty tax, huge damage through funds moving offshore
- Environment / Energy: Deutsche sets up carbon securities service, EU: 60% of emissions credits to be auctioned in 2013, The world will be getting greener if investors have their way, New report provides in-depth analysis of the energy hedge funds market
- Commodities: Citi`s tips for 2008: Stick with equities and look to funds that invest in agricultural commodities, emerging markets and distressed assets, Will the stock market meltdown hit commodities? Emerging markets might keep prices up, Global metals prices to decline by 20%-30% in 2008, Investing in commodities funds
- Comment: `The hedge funds have completely disoriented the long-only fund managers`
- Comment: UK prime minister on ways to fix the financial system
- Update: Chinese banks to invest in Singapore under QDII, third approved market after HK and UK
- Activist News: Ramius cuts Luby`s stake, SEC decision may allow `genocide-free` vote at Fidelity, Old Lane Hedge Fund liquidates stake in LandAmerica
- News Briefs: GLG Partners unit registers with SEC as investment advisor, ETrade reports $1.71bln loss on mortgage sales, Investors consider launching new bond insurers, Morgan Stanley to cut 1,000 jobs, Cohen gives $50m to hospital, Brazil stocks tumble, Central Bank holds interest rates steady, 39% of candidates worldwide passed December 2007 Level 1 CFA exam, Fink sells 2.4m shares in Man Group
- ...And finally: The best 2007 newspaper headlines
- Logon: http://www.opalesque.com/main.php?act=archive

 

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Misc. Items of Interest

 

RiskMetrics' shares jump 21% in trading debut
By Greg Morcroft MarketWatch
1/25/2008 10:08:00 AM

NEW YORK (MarketWatch) -- In markets, like comedy, timing is all-important. 

 

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Funnies, Facts, Quotes, etc….

 

indelible in-DEL-uh-buhl, adjective:

1. That cannot be removed, erased, or washed away.
2. Making marks that cannot easily be removed or erased.
3. Incapable of being forgotten; memorable.

 

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Conference, Courses, Books, Papers

 

Great Research Sites:

 

Merrill Lynch research Link to full report including important disclosures see example

 

John Mauldin’s Weekly Analysis

 

James Altucher’s Website:

 

Other useful sites:

 

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Index Corner

 

The CSFB/Tremont Hedge Fund Index www.hedgeindex.com.

The Cogent Dynamic Averages http://www.cogenthedge.com/home/inv_strategy.asphttp://www.cogenthedge.com/home/inv_strategy.asp

The Dow Jones Indices: http://www.djhedgefundindexes.com/index.cfm?event=viewPremiumContent (free registration)

HFRX Indices https://www.hedgefundresearch.com/hfrx_reg/index.php?fuse=login&1170880431

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Regulatory Info

 

 

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Disclaimer

 

The information contained in this document does not constitute an offer or solicitation to sell any security or other type of vehicles to or by anyone in any jurisdictions, nor should it be regarded as a contractual document. Under no circumstances should the information provided on this document be considered as financial advice, or as a sufficient basis on which to make investment decisions. The information contained herein has been gathered by Investor DNA, LLC from sources deemed reliable as of the date of publication, but no warranty of accuracy or completeness is given. Investor DNA, LLC is not responsible for and provides no guarantee with respect to any of the information provided herein or through the use of any hypertext link. Past results are no indication of future performance. All information in this newsletter is for educational and informational purposes and does not constitute investment, legal, tax or accounting advice. All materials are the property of the respective publishers, as referenced by header and appropriate hypertext links.