Tag Archives: John Paulson

Business, Finance, Occupation & Industry

SEC Heads to Court Against Ex-Goldman Sachs Bond Trader

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By Reuters

Fabrice Tourre goldman sachs trader testimony congress

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Chip Somodevilla/Getty ImagesFomer Goldman Sachs bond-trader Fabrice Tourre, shown here in a 2010 photo, faces civil charges that he misled investors in a trial that starts Monday.

By Nate Raymond

NEW YORK — The U.S. Securities and Exchange Commission heads to trial Monday against a former Goldman Sachs bond trader in a case it says highlights what went wrong on Wall Street in the financial crisis.

Jury selection begins in federal court in New York in the civil fraud case against Fabrice Tourre, 34, who the SEC says misled investors in an ill-fated mortgage-securities investment called Abacus 2007-AC1.

It is the highest-profile trial to date stemming from the SEC’s investigation of the events leading up to the 2008 crisis and, legal experts say, presents a chance for the SEC to hold an individual responsible at trial.

The SEC’s case, as summed up by U.S. District Judge Katherine Forrest last month, is that Tourre “handed Little Red Riding Hood an invitation to grandmother’s house while concealing the fact that it was written by the Big Bad Wolf.”

According to the SEC, the wolf in question is John Paulson, a hedge fund billionaire whose bet against the subprime mortgage market was chronicled in “The Greatest Trade Ever” by Gregory Zuckerman.

In 2006, Paulson’s hedge fund, Paulson & Co., turned to Goldman Sachs Group (GS) for help betting against subprime mortgages, the SEC said.

They began discussing Abacus, which would give Paulson a role in picking the underlying portfolio of mortgage securities, the SEC said. Paulson could then short, or bet against, it through an insurance product called a credit default swap.

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At the time, Tourre, a French national, was 28 years old and working at Goldman Sachs in New York. He became the bank’s principal employee working on what became Abacus, known in the financial industry as a synthetic collateralized debt obligation.

The SEC said Abacus’s marketing materials failed to disclose Paulson’s role in picking the underlying assets, instead saying that a subsidiary of ACA Capital Holdings selected them.

Tourre’s goal, the SEC contends, was to deceive investors into buying the liabilities of Abacus.

In a much-cited email sent on Jan. 23, 2007, to his girlfriend at the time, Tourre said of the financial markets: the “whole building is about to collapse anytime now.”

“Only potential survivor, the fabulous Fab … standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!”

When the underlying mortgage securities turned sour, investors including IKB Deutsche Industriebank AG and ABN AMRO Bank NV, now owned by Royal Bank of Scotland Group (RBS), lost over $1 billion, the SEC said.

Paulson, meanwhile, netted …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Media Digest (4/17/2013) Reuters, WSJ, FT, Bloomberg

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By 24/7 Wall St.

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The role of central banks in stimulus will be considered at International Monetary Fund (IMF) and G-20 gatherings. (Reuters)

Display ad revenue at Yahoo! (NASDAQ: YHOO) drops sharply. (Reuters)

News Corp. (NASDAQ: NWSA) will call its entertainment company 21st Century Fox. (Reuters)

Carl Icahn agrees to limit his stake in Dell Inc. (NASDAQ: DELL) but can join other bidders to make an offer for the company. (Reuters)

Procter & Gamble Co. (NYSE: PG) will lengthen the number of days after which it pays suppliers, which will allow it access to $2 billion in cash. (WSJ)

A new IMF report attacks the results of austerity taken on by financially troubled nations. (WSJ)

A reservations system glitch limits American Airlines bookings and causes a number of flights to be halted. (WSJ)

Boeing Co. (NYSE: BA) completes tests of batteries on its Dreamliner 787, but the FAA has not approved them. (WSJ)

Intel Corp.’s (NASDAQ: INTC) profits drop by 25% as PC sales tumble. (WSJ)

Investment manager John Paulson loses $1.5 billion in his bet on gold prices. (FT)

The drop in gold prices hits central bank asset values by $560 billion. (Bloomberg)

Filed under: 24/7 Wall St. Wire, Press Digest Tagged: BA, DELL, INTC, NWSA, PG, YHOO

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From: http://www.dailyfinance.com/2013/04/17/media-digest-4172013-reuters-wsj-ft-bloomberg/

Business, Finance, Occupation & Industry

Hedge Fund Billionaires John Paulson And David Einhorn Lost $640M In Gold Bloodbath

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By Agustino Fontevecchia

The gold bloodbath that hit the market over the past two trading sessions has definitely caused a dent in the portfolio of billionaire hedge fund managers. John Paulson and David Einhorn suffered combined losses of more than $640 million since Friday, according to their latest SEC filings, with the bulk concentrated in the former?s massive position in the SPDR Gold ETF. Einhorn’s Greenlight took a big hit on its holdings of the gold miners ETF.

From: http://www.forbes.com/sites/afontevecchia/2013/04/15/hedge-fund-billionaires-john-paulson-and-david-einhorn-lost-640m-in-gold-bloodbath/

Business, Finance, Occupation & Industry

T-Mobile Throws MetroPCS Shareholders a Bone

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By Rich Duprey, The Motley Fool

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With a vote on its acquisition of MetroPCS imminent, T-Mobile parent Deutsche Telekom  is trying to mollify angry shareholders by throwing them a bone. It’s offered to reduce the debt the new company will carry, reduce the interest rate on the debt, and triple the amount of time it must hold onto the new stock before it can sell it. 

Despite having passed all the necessary regulatory hurdles, the merger is in danger of falling apart as major shareholders and institutional services alike say the deal is not favorable to MetroPCS stockholders.

While there’s been a war of words going on between the major participants, T-Mobile’s CEO certainly won himself no fans after calling hedge fund operator John Paulson “greedy.” Particularly after Institutional Shareholder Services came out blasting the deal as well, backing the contention of Paulson and P. Schoenfeld Asset Management that because T-Mobile has so underwhelmed the markets, MetroPCS shareholders need to be better compensated for the risk of turning control over to Deutsche Telekom.

Under the original proposal, MetroPCS shareholders would be paid about $4.09 a share and receive a 26% stake in the new company.

With the merger unraveling, DT decided it needed to salve the wounds it created. It offered to reduce the debt burden of the combined company by $3.8 billion and said it would cut the interest rate it charged by half a percentage point. Additionally, it would increase from six months to 18 months the amount of time it would have to hang onto the new company’s stock, but the rest of the terms apparently will remain unchanged.

While the original deal was scheduled to be voted on by MetroPCS shareholders tomorrow, that has now been pushed back to April 24 to give more time to review the deal. And while not giving any indication of which way it would fall on the new offer, at least the asset management firm has said it appreciated the olive branch.

Yet Deutsche Telekom needs this deal to go through if it ever wants to get out of the U.S. market. It previously tried by selling T-Mobile to AT&T for $39 billion, but regulators quashed it over anti-competitive concerns. Now with the proposed combined company being publicly traded, DT will finally get its exit strategy, even if it takes a year and a half to leave instead of the six months it previously envisioned.

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The article T-Mobile Throws MetroPCS Shareholders a Bone originally appeared on Fool.com.

Fool contributor Rich Duprey has no position in any stocks mentioned. The Motley Fool has no position in any

From: http://www.dailyfinance.com/2013/04/11/t-mobile-to-sweeten-the-pot-for-metropcs/

Business, Finance, Occupation & Industry

Who's Left to Buy Bank of America?

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By Matt Koppenheffer, The Motley Fool

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Owners of Bank of America  stock (like myself) may be starting to worry that B of A optimism has gone too far. A couple of years ago, it was tough to find anyone willing to say a good word about the bank. Today, it seems hard to find anyone who’s saying anything negative.

The about-face may seem at first blush like good news, but it could also spark the concern that — as my fellow Fool David Hanson put it — “dumb money” has rushed into the stock. At the same time, it compels the question: If everyone is already bullish on the stock, who’s left to buy?

The data suggests that there are at least three major groups that could push Bank of America’s stock higher.

1. Giant mutual fund companies
Fidelity, Wellington, and Capital Research and Management — three of the largest fund companies in the world — all currently have a significant stake in Bank of America. However, each had an even larger stake prior to the financial crisis. 

According to the numbers, combined, these investors owned an additional 5% of Bank of America in early 2006 vs. today. Put another way, if the three were to increase their stakes to what they were in 2006, it would require a total investment of $7 billion. 

2. Big hedge fund managers
One of the biggest downward changes in Bank of America ownership over the past few years came from hedge fund giant John Paulson. At one point, his fund owned north of 2% of B of A’s outstanding stock. That’d be equivalent to a position of around $2.7 billion at today’s prices.

I assume that Paulson feels sufficiently burned by his B of A investing experience, so I don’t expect that he’s going to be diving back in with both feet anytime soon. However, it’s a reminder of just how much big money is sloshing around in hedge funds out there that could end up sloshing in Bank of America’s direction.

3. The public
By my calculations, “the public” — that is, the B of A stock not held by institutions or insiders — owned around 29% of the company in 2006. At the end of 2012, that percentage was at 27%. That may not seem like a huge difference, but that 2-percentage-point difference could represent billions of dollars in buying pressure if retail investors get excited about the bank again.

There’s a flip side
Obviously, there are plenty of potential sellers that could have the opposite effect on the stock. Interestingly, the asset management arms of a lot of B of A competitors — notably Citigroup, JPMorgan Chase, and Goldman Sachs — have jumped on the Bank of America bandwagon and have been building sizable positions. They could very easily reverse that trend. And avid cheerleaders like Bruce Berkowitz could change their tune.

But investors concerned about who’s left to buy can stop worrying: If the bank continues to execute, there’s still plenty of money that could be …read more

Source: FULL ARTICLE at DailyFinance

News, Politics, Government

My Gold Guru Got It Right– and Then Wrong, as the Gold Craze Went Cold

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By Robert Lenzner, Forbes Staff My gold guru, Frank Giustra of Vancouver, Canada pushed me hard on gold from the summer of 2008 when it was selling at $900 an ounce– all the way up to $1900 an ounce in the summer of 2011– a hell of a run of accumulated gain of more than a double– while stocks floundered pretty badly. The gold story went like this; Ben Bernanke‘s policy of one QE after another– dramatically increasing the supply of greenbacks– was bound, sooner or later, to cause the dollar to face its own severe crisis of devaluation. Faith in the dollar was going to swoon badly– and then the late to the game investors would recognize that the only true protection against the denouement of paper currency was that precious metal gold. Giustra even believed that the panicky selling of dollars to escape its tarring and feathering would trigger a parabolic rise in the value of gold to some astronomically fantastic level– and then you were supposed to make your exit, selling to the crowd. Such noted hedge fund barons as George Soros and John Paulson signed onto this playbook to one degree or another. Family offices, public pension funds, fixed income advisors looking for an extra kick to their bond portfolios– and the many camp followers no matter how amateur trailed along, thinking to make a killing when gold shot through $200 an ounce to $5000 an ounce and tghen God knows where. Chinese banks, encouraged by the Communist government, allowed their banks to establish monthly gold accumulation plans as the way to stay ahead of whatever inflation hit the fastest growing economy in the world. Indian gold jewelry was hoarded while retail lenders offered credit to accumulators of silver, which was expected to move jointly with gold. Central banks in Asia and in Russia regularly purchased gold whenever the IMF scheduled auctions of its inventory. The tv networks were filled wit come-one advertisements to join the smart money. Then came the denouement in Europe, and pressure on the euro, while the Japanese economy languished and China appeared to be tightening up credit to avoid some kind of bubble. Gold retreated, advanced again, then retreated again– and seems stuck in a trading range between $1525 and $1650 an ounce. The dollar has not collapsed; rather it has gotten stronger as US treasuries are the safe haven of choice and are at record price levels as well as record low yields. Simultaneously, the shares of gold mining stocks have retreated due to the high cost of producing gold, political turmoil and strikes at major mines, and the need of governments like australia or Peru to seek high tax revenues from their mining giants. Desperately, the dreamers, the fantasists and the conspiracy end of civilization fanatics are looking for the new gold- Bitcoins, with staggering face values, or some new currency that will somehow have legs. It has been a great run. Even at $1550, the return since July, 2008 has been 67% over …read more

Source: FULL ARTICLE at Forbes Latest

Business, Finance, Occupation & Industry

NovaGold Earnings: An Early Look

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By Dan Caplinger, The Motley Fool

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Spring is finally here, and a new earnings season is right around the corner. On Wednesday, NovaGold Resources will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they’ll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you’ll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Gold mining stocks have gotten crushed over the past year, as a combination of weak bullion prices and cost-related struggles have led to intense pressure throughout the industry. Yet NovaGold has gotten the attention of hedge-fund investors John Paulson and Seth Klarman, who have taken sizable stakes in the company. Let’s take an early look at what’s been happening with NovaGold over the past quarter and what we’re likely to see in its quarterly report.

Stats on NovaGold Resources

Analyst EPS Estimate

($0.03)

Year-Ago EPS

$0.07

Revenue Estimate

$0

Year-Ago Revenue

$0

Earnings Beats in Past 4 Quarters

2

Source: S&P Capital IQ.

Will NovaGold Resources shine brighter this quarter?
It’s hard for analysts to get too excited about NovaGold because it hasn’t reported even minimal revenue since 2010. The single price target on the stock of $17.10 is wildly out of line with its current price, and shareholders have taken a substantial hit lately, with the stock having lost a quarter of its value since the beginning of the year.

NovaGold has several promising development-stage mining properties in its portfolio, although none of them has gotten to the production stage at this point. The company claims its Donlin Gold joint venture with Barrick Gold in Alaska is the world’s largest known undeveloped gold deposit, with project permitting having begun last August. Moreover, its Galore Creek venture with Teck Resources in British Columbia has promising prospects for copper, silver, and gold.

But the big problem that NovaGold has faced is that high production costs have made those projects less economically viable. Last summer, Barrick said that Donlin no longer met its goals for suitable investments because of substantial needs for capital, and although the permitting process has continued, it’s far from certain whether Barrick would be willing to go forward even if the project is approved. Meanwhile, NovaGold has said it would try to sell its 50% interest in Galore Creek, but the company has only been willing to enhance the project’s value on a reduced budget.

Meanwhile, NovaGold’s capital structure is becoming more precarious. Earlier this month, the company sent notice to its convertible bond holders that they could exercise their rights to sell the bonds back to NovaGold at par. NovaGold has enough cash to cover its repurchase of any bonds that investors offer, but with no revenue, it definitely …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Gold: Golden for the Wrong Reason

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By Matthew Zeitlin, The Motley Fool

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One of gold’s most prominent bulls, John Paulson, the asset manager who made more than $1 billion betting on the housing downturn, is tarnished.

Bloomberg reported that Paulson’s $900 million gold fund is down 26% through the beginning of March, after falling 25% last year. The fund has been hurt by the price of gold falling to around $1,600 off its all-time high of more than $1,900, which it hit in Sept. 2011. Paulson told clients that “his Gold Fund would beat his other strategies over five years because the metal was the best hedge against inflation and currency debasement as countries pump money into their economies.”

Paulson echoes comments from Ray Dalio, the man behind the $140 billion hedge fund Bridgewater Associates. Dalio told Barron’s in March 2011, “Currency devaluations are good for stocks, good for commodities, and good for gold.”

The price of gold has fallen off those highs and, so best we can tell, another economic crisis isn’t happening soon, meaning investors are less likely to flock toward the most prominent bearish investment. But gold’s effectiveness as just that — protection against the worst economic and financial distress — is also under attack.

History
One of the most common arguments to invest in gold is inflation. Credit Suisse Senior Advisor Robert Parker told CNBC last month, “To get back into a bull market on gold we need inflation.” Although there are different ways to interpret gold as an “inflation hedge,” the simplest version is that changes in the consumer price index should drive changes in the price of gold: if prices (in dollars) rise 10%, then the price of gold should rise 10% as well, giving gold a constant purchasing power.

The historical record, however, suggests little relationship between the gold price and inflation. In a recent paper titled “The Golden Dilemma,” Claude Erb and Campbell Harvey found that “over 1, 5, 10, 15 and 20 year investment horizons the variation in the nominal and real returns of gold has not been driven by realized inflation.”

Looking at the price of gold and the consumer price index since 1975, when private ownership and trade of gold was reallowed in the U.S., they find that in March 2012 (when they last did the calculations), the price of gold “should” have been $780 an ounce, but the actual price was closer to $1,600. (It was right around $1,600 this morning.)

When it comes to whether gold can hedge unexpected inflation, the authors find “effectively no correlation” between the real price of gold and future inflation; any relationship is driven by 1980, when the real price of gold more than doubled and hit its all-time peak of around $2,440 (2013 dollars) and inflation was up above 12%.

After 1980, gold sharply declines and then starts moving sideways until 2003, while average annual inflation was around 4%. Even for 10-year periods, gold did little to nothing to hedge inflation, expected or …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

From Peak to Peak: What I've Learned About Investing in the Last 5 Years

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By Travis Hoium, The Motley Fool

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I started investing in the ga-ga days of the late ’90s. You could throw a dart at the market page of the newspaper and hit a winner — and a lot of investors did. 

Then the Internet bubble burst, and I learned a little bit about the difference between speculating and investing. But the past five years have been unlike anything we’ve seen in my lifetime. The financial world almost collapsed, housing dropped, and the stock market went on a rollercoaster ride that made many investors sick of the market altogether. 

Through it all, I’ve stayed invested, and I’ve emerged better off than I was five years ago in many ways. Here are a few of the lessons I learned from the 2007 peak to the most recent highs of the Dow Jones Industrial Average . 

Being a bear isn’t a bad thing
A lot of people made a lot of money betting against the housing market and banking sector when the Great Recession hit. John Paulson and David Einhorn became household names by being bearish at exactly the right time. 

I won’t advocate trying to time the market, and we don’t have the ability to make the same bets hedge funds did during the crisis, but we can learn something from their bearishness. It isn’t bad to have a few short positions thrown into your portfolio at any given time. You don’t need to be a market bear to short a stock. Do the same research you would normally do and find companies that are overvalued and that you think will go down in value. A market panic usually hits fundamentally weak companies first, so a recession can be your friend when it comes to these short bets. 

I was recently short Sony because I thought it was a dying consumer-electronics company with a terrible business model. Sony has made bets on the PC, console gaming, and TVs at exactly the wrong time and no longer makes compelling products that brought it consumer electronics fame (remember the Walkman?). This had the company posting massive losses as sales dropped. It so happened that the market went up while I was short the stock, but the stock went down — a profitable trade for me.

I’m currently short Amazon , an opinion contrary to that of many Fools. But if we go into another recession, Amazon will be hurt more than most companies, so it’s a bit of a hedge for me. It’s already unprofitable, and if sales growth slows or, heaven forbid, falls, the stock will tumble. In a good economy, I think it’s overvalued. But in a bad economy, I think it would fall hard and offset other potential losses in my portfolio. 

In 2008 and 2009 I didn’t have any short positions, but I wish I had. Next time a crash rolls around, I’ll be more prepared. 

Trust your instincts
There are a lot of pundits and money managers trying …read more
Source: FULL ARTICLE at DailyFinance

News, Politics, Government

Shorts Battle The Longs Over Rural Fairpoint Communications

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By Daniel Fisher, Forbes Staff

Fairpoint Communications is a tiny telephone company operating in out-of-the-way markets like rural Maine and New Hampshire (it just sold its Idaho business for $30 million). But the Charlotte, N.C.-based carrier has inspired a long-running war on Wall Street between short-sellers who think Fairpoint is ripe for failure and longs including Angelo, Gordon & Co. and John Paulson, who think the company is on the verge of reaping the benefits of a big investment in fiber optics. …read more
Source: FULL ARTICLE at Forbes Latest

News, Politics, Government

DOJ v. Standard and Poors: The Feds Take On the Rightfielders Of Finance

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By John Tamny, Forbes Staff

His trade is legendary now, so much so that the Wall Street Journal’s Gregory Zuckerman penned a book about it titled The Greatest Trade Ever, but at one time John Paulson was something of a joke. Bulge bracket banks like Goldman Sachs took his calls and filled his orders in which he bought he bought insurance on mortgage backed bonds, but in the eyes of his GS coverage (as recounted by Michael Lewis in The Big Short) Paulson was a “was a third-rate hedge fund guy who didn’t know what he was talking about.” …read more
Source: FULL ARTICLE at Forbes Latest

News, Politics, Government

Caterpillar's $580M-Headache And The Perils Of Chinese Accounting

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By Agustino Fontevecchia, Forbes Staff China’s impressive economic growth has attracted investors from all industries and every corner of the globe.  Yet, investing in the world’s second largest economy is far from an easy task, as Caterpillar can attest for.  A few days ago, the worldwide leader in construction equipment announced it will take a $580 million charge in the fourth quarter after finding ERA Mining Machinery, a company they recently acquired, had overstated profits and improperly recognized revenues and inventories.  The situation is reminiscent of John Paulson’s recent China-gaffe, when the billionaire investor had to take a $750 million loss on a big position in Sino-Forest, which ultimately filed for bankruptcy.
Source: FULL ARTICLE at Forbes Latest