Here a bit more from emma to people who keep saying Im dreaming, hedgies were all short, no they were all long the common and debt. http://www.thestreet.com/markets/emmatrincal/10246538_3.html Delphi's (DPH:NYSE - news - research - Cramer's Take) bankruptcy filing might make it Black Monday for the auto parts industry, but for hedge funds with big bets riding on the company's stock and bonds, the picture could be even bleaker. The No. 1 parts supplier to General Motors (GM:NYSE - news - research - Cramer's Take) ended months of frenetic speculation on Saturday by seeking Chapter 11 bankruptcy protection. The stock, which could well end up worthless in a reorganization, was recently trading for 48 cents after falling from $2.20 to $1.12 on Friday. For so-called "event-driven" hedge funds that tailor their bets to news flow, bankruptcy was not the preferred outcome. Faced with the choice of shorting the stock and owning Delphi's bonds, or doing the reverse, many funds did the former, according to sources who spoke to TheStreet.com. At this point, that trade has rendered the greater pain. "I don't know why they were long the bond. It's because they're crazy," said John Taylor, who runs FX Concepts, a macro and futures hedge fund. "It's exactly the same thing as a year ago with General Motors and Ford (F:NYSE - news - research - Cramer's Take), when everybody was betting they were not going to be junk." As if to remind traders of that botched tactic, Standard & Poor's on Monday downgraded General Motors further into junk status, cutting its long-term corporate credit rating to BB- from BB. "The downgrade follows Delphi Corp.'s bankruptcy filing, repercussions of which could impede GM's efforts to turn around its ailing North American automotive operations," S&P said. Up until early Friday, bonds of Delphi were trading around $60 to $65.50 per $100 of face value -- high levels for a company that could go bankrupt. But the assumption of many was precisely that Delphi would avoid bankruptcy. By Friday, amid leaks that the United Auto Workers union wasn't going along with Delphi's requested concessions, Delphi bond prices started to fall. "They wanted to take their compensation package, including benefits, down from $63 to $18 an hour. They would never have agreed to that," says Kevin Tynan, an auto analyst with Argus Research. With the Treasury market closed Monday for Columbus Day, the impact on bond prices remains uncertain. In over-the-counter trading, the 6.55% Delphi bond due 2006 fell 12%, as its price fell to $58 per $100 of face value from $65. To be fair, the Delphi story was an event-driven manager's dream. Hedge funds that exist to make bets on company news virtually had to jump on the Delphi story. And if someone had to take a stance on Delphi, buying the bond and shorting the stock seemed prudent, considering the superior positioning of bondholders to stockholders in a Chapter 11 proceeding. "They wanted to move up the food chain," says Tynan. Bobby Richardson, a hedge fund manager who runs Argent Financial Group, a convertible hedge fund, said the risk was well-considered: "I suppose that people who were trading the bond did some recovery analysis," he says, referring to a calculus that tries to foretell how much of a bond's value will be recoverable under bankruptcy. (Richardson noted that Delphi had no convertible paper outstanding.) Optimism, or an excess of it, is probably what drove many hedge funds or even traders to go long the bond. "Frankly, everybody was blindfolded because the result of a bankruptcy was so negative for everybody -- except maybe for Delphi -- that people were long the position," says Tynan. "Bonds got a lot cheaper, so hedge funds started to buy," says Taylor "They thought things were going to be OK. In the auto sector, panic is perhaps the best alternative. But that's not the way most hedge funds work," he says. From his macro-strategist perspective, the trade did not make sense because of the still-low rate environment. "Low interest rates mean that spreads are tight and that there is less room for error. Owning the Delphi bonds does not give you much room for profit," he says. So what's next? "GM is hurt immensely by this," says Tynan. "It affects the entire industry." Shares of General Motors fell almost 8% to $26.14, the decline exacerbated by S&P's downgrade. Tynan adds that other small auto part suppliers that depend on Delphi will suffer as well. "If Delphi owes you money as a supplier, if for instance you only get 10% out of a $10 million transaction: that hurts. You may have to file yourself," he says. However, Tynan notes, "there is a lot of bearishness regarding this industry and the market, to some extent has already priced in." In the meantime, Delphi will have to restructure its costs and it could take a year to a year and a half for this company to do so, this analyst says.
"It's because they're crazy,..." Delphi Punishes Hedge Funds http://www.thestreet.com/_googlen/m...538.html?cm_ven=GOOGLEN&cm_cat=FREE&cm_ite=NA fx
i like how the article states "but for the hedge funds riding big bets {long implied}"...... what all 10 of them {out of 8000 funds}. wow does the anti-hedge fund wall street media ever have everyone conned --- wonder who pulls their strings, wink, wink! yep Steveeee and the boys were heavy long Delphi! HAHAHAHAHAHA!!!
Yep, S.C. sold the 100 Million shares he bought at 2.50 for 50 cents today. He'll be holding a garage sale of all his systems to cover the loss.
lol macro, I wouldnt put so much stock on steve, when you get to his level, no matter how much he tries to minimize his risk, hes going to have to take huge risks to get results. Everybody is going into diffrent markets to get some kind of return. Whether its the credit markets, buying up payables of some company, insuring, commodities, or whatever, eventually your going to get hit. I was really surprise Steve bought northwest airline and delta common and debt. From his point of view he thought northwest wouldnt declare, and he could have broken the unions but he was wrong. Im just wondering if guys like him, who are suppovily geniuses, are making those kind of mistakes, and taking risks that are basically insane, eventually you are going to get a big hit that knocks down one of the big hedgefunds like citadal. It doesnt take much, look at the geniuses with GM debt hedge last spring. Or the geniuses with delphi, they are really lucky alot of the players are out for columbus day it could have been way nastier.
nope their buy-to-covers just put more gas in the Lambo's no-you will have to go back to the start of this year and see who had the SIZE to short all these {GM, Delphi, ect}.
bonds i know nothing about {who bought what from who}, but the stock picture is a whole different story and the hedge funds are not holding the "long" stock bag with Delphi --- now there are a lot of institutions that do. yes it is true that hedge funds are looking for new and more diversified ways to gain returns {some very strange stuff lately imo} --- but to understand what is really going on with the hedge funds/institutions and who is holding what HEAVY ---- you have to go back to the start of the year and up through spring to see where the volume played out with some of these companies. here is where you will see who really made the big bets. rumors from unnamed sources is not the way to trust the written media -- and i will predict here that over the next few months there will be more and more "anti-hedge fund" implied stories in the media. i am not saying here either that the hedge funds are "better" or "smarter" then the institutions --- no way, they all make stupid plays all the time {but some of the big hedge funds have made some really nice plays over the last several years --- and that is how they beat the average returns of the institutions for almost 4 years now}. what i am saying is don't fall for the "hedgies are holding all the bags" myth with these stories --- the institutions have some very lite bags they are holding now with these stocks.