citadel and the fed

Sorry for my language, but that's exactly what that one fucker at Bear Stearns maintained until one day before it went bankrupt!

 

There's a rumor that ET is going to implode any day now, what with all the anii infesting it.

 

The New York Times made Griffin sound like an idiot earlier this week. Discussing his losses, he said something like My Traders Have To Make Money In Any Market Or They're Gone (not even close to what his words were - but the idea is). Then the article pointed out SAC had gone into cash. I'd imagine his clients and credit facilitators weren't comforted by that article.

NYT fired another shot at him today:

October 25, 2008
Citadel Chief Denies Rumors of Trouble
By LOUISE STORY
The hedge fund manager Kenneth C. Griffin christened his company Citadel — a name that conjures images of ancient strongholds.

But now his fortress is coming under siege from some of the most dangerous weapons on Wall Street: rumors.

As the stock market tumbled again Friday morning, the Citadel Investment Group, which rarely discusses its business affairs publicly, took the unusual step of issuing a statement to deflect rumors that it might be in trouble. The talk, Citadel said, was “categorically false.”

Hours later, Mr. Griffin held an emergency conference call that transfixed Wall Street, where some fear that troubled hedge funds might dump investments into the already-shaky markets.

But Citadel, Mr. Griffin said in the call, is sound. The firm, which is based in Chicago, has ample cash and financing facilities on hand, and its investors have withdrawn only a small amount of their money, he said.

Still, Mr. Griffin, who started trading out of his dorm room at Harvard in the 1980s, acknowledged that these were tough times in the financial world.

“I’ve never seen a market as full of panic as I’ve seen in the last seven to eight weeks,” Mr. Griffin said. “To call it a dislocation doesn’t go anywhere near what we’ve seen. We’ve seen a near collapse of the world’s banking system.”

Citadel runs some of the largest and best-known hedge funds, and its pain is a sort of bellwether for the broader industry, which is having its worst year on record. Hedge funds lost an estimated $180 billion during the last three months and some are near collapse. Investors are demanding their money back, and Wall Street is bracing for a shake-out in the $1.7 trillion industry.

“The reason we worry about something like Citadel is that it’s so large that you’d worry about systemic risk,” said William Goetzmann, a finance professor at the Yale School of Management, who has studied hedge funds.

The industry has grown fivefold in size since 1998, when many funds hit trouble, most notably Long Term Capital Management. A group of banks bought Long Term Capital Management’s assets to prevent its losses from cascading through the industry.

This time around, however, it is less likely that banks have the strength to stabilize the financial system if a big hedge fund hits trouble. It is unclear what role, if any, the government might play.

There is no evidence that Citadel will collapse, and Mr. Griffin’s remarks in the conference call may ease some of the doubts in the market. But Citadel has been in the position of fighting daily rumors, much like some investment banks. Investors are still debating what role rumors played in the deaths of Bear Stearns and Lehman Brothers.

“This is a game as old as organized stock markets,” said David Salem, the president of the Investment Fund for Foundations, which invests money in hedge funds for nonprofit organizations. “Traders know if they spread rumors and cause Citadel to unwind, that they can put wind in their own sails.”

For Citadel, the trouble began in September, when its largest funds lost 16 percent because of a divergence between prices on derivatives and related cash assets. Problems have continued this month, and Citadel’s flagship fund is now down 35 percent for the year. The rumors on Friday included word that Citadel was down 60 percent and claims that the Federal Reserve officials had arrived at the fund’s headquarters in Chicago.

Mr. Griffin did not refer to the rumors in the call Friday, but the fear in the markets generated frenzied interest in his remarks. Though the call was directed to Citadel’s small set of bondholders, about a thousand people dialed in. Scores of others tried to listen in, but the lines were busy.

“I’m less concerned about where the rumors are coming from, but certainly concerned about what is being said,” said Gerald Beeson, the company’s chief operating officer, in an interview. “And we took steps today to set the record straight.”

Mr. Beeson tried to dispel fears that Citadel could have trouble financing itself. He said the firm worked with a variety of prime brokers and had credit lines with commercial banks. Citadel has not tapped $8 billion of that credit, and the company has 30 percent of its capital in cash.

Citadel is leveraged just under 3 to 1 in its equity and credit-related businesses, which means it borrows $3 for every $1 it has in capital. That is a decrease from past levels.

Citadel also repurchased some 10 to 20 percent of its own debt in the last few days when approached by bondholders, according to a person with knowledge of the matter. Its bonds were put on negative watch by the ratings agencies in recent weeks. Mr. Beeson said that most of the funds’ losses were mark-to-market losses, which he thought were caused by a lack of liquidity and not by weakened assets. Earlier this year, investment banks said their losses were being caused by similar liquidity problems. Asked how Citadel’s paper losses differed, Mr. Beeson said, “This is not a portfolio of illiquid real estate assets. It is a portfolio principally consisting of bonds, equities and related assets.”

Citadel in the past has been strong when others were weak. Mr. Griffin has often called his competitors at their weakest moments and offered pennies on the dollar for their portfolios. Some of his recent winnings came from trouble at E*Trade, and the collapse of the hedge funds Sowood Capital and Amaranth Advisors.

When quantitative hedge funds tumbled in the summer of 2007, Mr. Griffin reportedly called Clifford S. Asness, managing principal of AQR Capital, looking for a deal. Mr. Asness, who survived the squeeze, described his reaction to the call to a reporter by saying, “I looked up and saw the Valkyries coming and heard the grim reaper’s scythe knocking on my door.”

Mr. Griffin is not only famous for buying assets cheaply, he is also known for picking off talented workers. JPMorgan Chase stopped trading with Citadel for one day in September to protest Mr. Griffin’s hiring from its ranks.

In 2005, the hedge fund manager Daniel S. Loeb of Third Point Capital wrote a widely circulated e-mail message to Mr. Griffin about Citadel’s poaching. Any attempts to hire his or his friends’ workers, Mr. Loeb wrote, would be considered “an act of war.”

The two hedge fund managers reportedly made up in recent years, when Mr. Loeb mailed Mr. Griffin a book on diet and exercise. Mr. Loeb said in an e-mail message Friday that he had “come to respect Ken for his intellect, competitive spirit, relentless drive and energy.”

“I’m sure he views this chaotic environment as a chance to demonstrate his impressive skills,” Mr. Loeb said.

 

CHICAGO, Oct 25 (Reuters) - Examiners with the Federal Reserve have questioned Wall Street counterparties in recent days about their exposure to debt and other holdings of Citadel Investment Group, the Wall Street Journal reported on Saturday.

The report came a day after Citadel, one of the world's largest hedge funds, said it has more than $10 billion in available credit. The Chicago-based fund was seeking to stop rumors it was liquidating some portfolios after its two main funds had lost 35 percent since January.

Citing people familiar with the matter, the Journal said the Fed had questioned the counterparties in at least two instances.

Talk has swirled in the market that Citadel had asked the U.S. government for a cash injection and that financial regulators were coming to inspect its accounts.

Citadel manages roughly $18 billion. The firm's main Kensington and Wellington funds have lost 35 percent this year. (Reporting by Kyle Peterson; editing by Mohammad Zargham)

http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSN2525825820081025

 

So the rumor was well substantiated

 

I wonder how many hedge funds will be left when all is said and done.

50% wipe out would be my guess.

 

any person, fund, bank, country or planet that was trading so close to the brink of collapse that a date with the fed/treasury is make-or-break for their business, deserves to go to shit

cmon assholes... is this a free market or not?

somewhere buried under a zillion manipulative, reality-distorting business models is a real market for real assets where you can be right regardless of the size of your participation and power. somewhere.

 

Hedge Fund Withdrawals Stress Market; Citadel Reassures Clients

By Saijel Kishan and Katherine Burton

Oct. 25 (Bloomberg) -- Hedge funds are aggravating the worst market selloff in 50 years as they dump assets to meet investor redemptions and keep lenders at bay.

U.S. hedge-fund managers may lose 15 percent of assets to withdrawals by year-end while their European rivals shed as much as 25 percent, Huw van Steenis, a Morgan Stanley analyst in London, wrote yesterday in a report to clients. Combined with investment losses, industry assets may shrink to $1.3 trillion, a 32 percent drop from the peak in June.

With the average hedge fund down 18 percent this year, as measured by the HFRX Global Index, managers are selling assets to repay departing investors and meet demands from lenders for more collateral. Others including Paulson & Co. and Winton Capital Management LLC are hoarding cash to soothe nervous clients and wait for signs the worst is over. When stocks rally, hedge funds take advantage to unload what they can.

``I have never seen a market as full of panic as I've seen in the last seven or eight weeks,'' Kenneth Griffin, founder of Citadel Investment Group LLC, a Chicago-based hedge-fund firm, said yesterday.

Citadel, addressing investor concerns that its funds may be forced to liquidate, said yesterday it has $8 billion in untapped bank credit, 30 percent of its assets in cash and ``modest'' client redemptions.

The firm had no material losses from trading partners as its main Wellington and Kensington funds fell about 35 percent this year through Oct. 17, Chief Operating Officer Gerald Beeson said on a conference call with bondholders. Year-end redemptions will be a ``few percent'' of assets.

Worst Year

Griffin, 40, who started Citadel in 1990, has posted the biggest losses of his career in 2008 after increasing wagers on loans and bonds before the markets plunged.

Most of the funds' declines occurred in the four weeks after Lehman Brothers Holdings Inc. went bankrupt, Beeson, 36, said. Kensington and Wellington lost money holding convertible bonds, high-yield bonds and bank loans, and investment-grade bonds, which were hedged with credit default swaps that protect the buyer in the event of a default.

Citadel was betting that the gap between the default swaps and the bonds would narrow. Instead, they widened as lenders left the market and investors bet that more companies would default.

``Even the healthy hedge funds are being forced to sell,'' Mohamed El-Erian, co-chief executive officer of Pacific Investment Management Co. of Newport Beach, California, said in an interview yesterday with cable-television network CNBC.

Shake-Out

John Paulson, whose New York-based Paulson Advantage Plus Fund climbed about 25 percent this year through September, was about 70 percent in cash at the end of last month, according to investors. David Harding, founder of London-based Winton Capital, said he is holding about 95 percent of assets in U.S. Treasury bills and cash or cash equivalents.

``What we're seeing now is an acceleration of the shake- out that should have happened a long time ago,'' said Peter Rup, chief investment officer at New York-based Orion Capital Management LLC, which invests in hedge funds.

The HFRX Global Index fell 7.76 percent this month through Oct. 22, according to Hedge Fund Research Inc. in Chicago. Hedge funds lost 5.4 percent last month, the most since the implosion of hedge fund Long-Term Capital Management LP a decade ago.

Passport Management LLC's Global Strategy fund fell 27 percent this month through Oct. 15, and 34 percent for the year, as investments in commodity stocks slumped, according to an investor letter. The $4.5 billion hedge-fund firm is run by John Burbank III in San Francisco.

Calming Investors

Platinum Asset Management LP, a Rye Brook, New York-based firm, lost as much as 29 percent this month through Oct. 15, bringing its year-to-date decline to 38 percent, according to investors.

Investors withdrew a record $43 billion from hedge funds last month, according to TrimTabs Investment Research in Sausalito, California.

``There's a bigger push by hedge funds to mitigate risk,'' said Matt Simon, analyst at New York-based Tabb Group, a financial-services consulting company. ``Funds are trying to keep jittery investors calm.''

To contact the reporter on this story: Saijel Kishan in New York at skishan@bloomberg.net; Katherine Burton in New York at kburton@bloomberg.net

Last Updated: October 24, 2008 19:02 EDT
***************************************************

``I have never seen a market as full of panic as I've seen in the last seven or eight weeks,'' Kenneth Griffin, founder of Citadel Investment Group LLC, a Chicago-based hedge-fund firm, said yesterday. "

This is not what old rich guys want to hear from a 40 yo. He needs help from PR and legal people skilled in corporate crisis management.

 

if the feds are on it there finished.

 

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