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Money managers under the microscope

Einhorn: Moody’s broadside lacks usual punch

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einhorn

David Einhorn again sent markets scurrying last week when he told investors he was shorting Moody’s Corp, but the Greenlight Capital manager’s latest thumbs down packed a weaker punch than his past, celebrated broadsides.

To be fair, Einhorn had a tough act to follow. A year ago, he boldly said Lehman Brothers was in much worse shape than its management would admit. Four months later — the bank went bankrupt and the shares were wiped out. It took more than six years, but his warnings about business lender Allied Capital also proved accurate and ultimately very profitable.

Last week, the soft-spoken Einhorn turned his sights on the parent of credit rating agency Moody’s Investors Service. Investors dutifully followed Einhorn’s lead and sent Moody’s shares down as much as 8 percent before they closed at $26.89.

Yet in the three trading days since, Moody’s stock has recovered its Einhorn losses and more. The shares traded at $28.66 a share Tuesday.

Batten down the hatches

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It’s fashionable now for leading economists and financial wizards to claim that they saw the credit crunch coming and the kind of dislocation it would create. But how many have predicted where the next implosion will occur?

bad-building1Dr Andrew Lo, founder of hedge fund firm AlphaSimplex, and director of the MIT laboratory for financial engineering, has spent his career studying market behaviour, publishing papers examining why quant funds imploded in August 2007, and trying to reconcile behavioural economics with efficient market theory.

from Global Investing:

Hobson’s choice

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Imagine you're an institutional investor holding a great deal more illiquid, price-impaired assets than you're comfortable with. Do you a) hold on to them and pray that the price rebounds, or b) sell now and take a loss, before things get even worse?

This is the dilemma facing institutional investors who went just that little bit too far out along the risk curve in search of extra yield. According to Tom Graf, who heads BNY Mellon's global workout solutions business, clients have to-date largely preferred to wait for markets to rebound, and in some cases this could well make sense.

Chicken Little was Quite the Optimist

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By Martin de Sa’Pinto

 

If the sky falls, at least you know how far it can go – the worst case scenario is that it will hit the ground.

 

That’s not the case for the hedge funds, asset managers and banks exposed to toxic assets.

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