Bank bailout a `sweet deal': Hedge fund managers

TheStar.com - Business -

Bank bailout a `sweet deal': Hedge fund managers
November 14, 2008

WASHINGTON–Hedge fund managers, who rank among some of the world's shrewdest deal makers, told Congress the U.S. government's bank capital injection program did not have enough strings attached.

"The current terms are overly generous to recipients," said John Paulson, president of hedge fund Paulson & Co.

He was among five hedge fund managers questioned yesterday by the U.S. House oversight and government reform committee about Treasury Secretary Henry Paulson's management of a $700 billion (U.S.) bailout program to unfreeze credit markets through taxpayer investments in financial firms.

Treasury's Henry Paulson said Wednesday that the government had largely abandoned its plan to buy toxic mortgage assets in favour of making direct investments in financial institutions and shoring up consumer credit markets.

John Paulson said any bank receiving federal funds should halt cash dividends on common stock and restrict cash compensation to executives.

He also said the government should demand a higher dividend payment from participating banks, possibly around 10 per cent instead of the 5 per cent rate now in place.

James Simons, a mathematics professor-turned-investor who now heads Renaissance Technologies, called the bank injections "quite a sweet deal" for firms requesting the funds.

John Paulson, Philip Falcone, Kenneth Griffin, George Soros and Simons were called to testify at the hearing about the role of hedge funds, their tax status and regulation. Each executive earned, on average, more than $1 billion last year.

Soros, the billionaire chair of Soros Fund Management, said the Treasury department's execution of the program "is not adequate or acceptable." Soros said the government should have made the cost of capital more expensive, giving participating banks an incentive "to put it to good use to get a good return by actually lending," he said.

The U.S. has so far dedicated $250 billion for bank capital injections under the Troubled Asset Relief Program.

Reuters News Agency

The Death of Buy and Hold

Monday, 10 Nov 2008

The Death of Buy and Hold

Posted By:Lee Brodie
Topics:Stock Market Stock Picks
Companies:Potash Corporation of Saskatchewan Inc. Cisco Systems Inc

The five stages of death are denial, anger, bargaining, depression and finally, acceptance. We bring it up, because right now, Wall Street is really struggling with that last one, acceptance.
We’re talking about the death of that time honored investment strategy, buy-and-hold. Investors just can't let go, and they need to.

Thanks to black October, the S&P 500 has now lost a fifth of its value over the last 10 years. According to Jeff Macke, "2008 is the year that will go down in history as the year that long term investment died as a thesis."

And that means it’s time to move on.

But just because buy-and-hold is pretty much dead and buried, that doesn't mean you can't make money anymore.

Just like the widow who gets a second chance at happiness, financial planners are rediscovering an old love. It’s called diversification. And it could make investors very happy for a long time to come.

All the traders think that you shouldn't go into a stock before knowing when you'll get out of it. Maybe you sell if it goes up 10% or maybe you wait for it to double, but you should always know when to take some off the table."It’s very important to take profits in trades," adds Tim Seymour. "You can’t be in a market like this and asleep at the switch."


"It’s very important to take profits in trades," adds Tim Seymour. "You can’t be in a market like this and asleep at the switch."

"Buying and holding isn’t going to make you money anytime soon," says Jeff Macke. "Whether you’re looking at Cisco

[CSCO 17.26 0.71 (+4.29%) ]

or Potash [POT 74.19 4.54 (+6.52%) ] don’t just hold on hoping to see new highs."

If you do Macke thinks you'll be holding on for quite a long time.


" although he does it with put options.What the bottom line? Don't go into a stock without knowing when to take profits.