Tuesday, 28 Oct 2014 | 9:20 AM ET

Why the market is losing its faith in the Fed

Posted By: Jeff Cox

As the Federal Reserve prepares to exit its monthly money-printing program, it faces a thorny dilemma with a market that is not buying what the central bank is selling.

Fed watchers increasingly are commenting on a dichotomy as it relates to monetary policy—namely, the disparity between what the so-called dot plot is showing regarding individual Open Market Committee members' expectations for its target short-term rate, and what the market believes the actual path will be.

Specifically, the FOMC grid is indicating a more aggressive path than what the market is pricing in.

The dot plot shows FOMC funds rate expectations for 2015-2017 at 1.38 percent, 2.88 percent and 3.75 percent respectively. Market expectations, as judged by futures action, are for 0.45 percent, 1.35 percent and 2 percent, according to economists at Deutsche Bank.

In short, investors simply don't believe the Fed and instead envision a scenario in which rates rise much more gradually.

»Read more
  Monday, 27 Oct 2014 | 11:10 AM ET

Ex-Chesapeake boss McClendon backs young hedgies

Posted By: Lawrence Delevingne
Aubrey McClendon
F. Carter Smith | Bloomberg | Getty Images
Aubrey McClendon

Aubrey McClendon is back in the hedge fund game, but this time he's taking a far more indirect approach.

McClendon, the ousted founder of Chesapeake Energy, has led a group of Oklahoma City-area investors in putting money with Caption Partners, a small fund run by two young managers, according to people familiar with the situation.

In 2012, Reuters reported that McClendon, now head of American Energy Partners, had from 2004 to 2008 run a $200 million hedge fund inside of Chesapeake, the second-largest natural-gas producer in the U.S. The outfit, Heritage Management, traded commodities, leading to criticisms of the potential for conflicts of interest between company operations and investments made by the fund.

McClendon was never accused of wrongdoing, but that and other corporate governance issues contributed to his removal as chairman and ultimate departure in April 2013. The Securities and Exchange Commission initially probed McClendon but ultimately took no action.

Read MoreSEC ends probe of Chesapeake, ex-CEO McClendon; no action planned

Caption, led by 2007 Duke University graduates Jason Strasser and William Cooper, does not bet on commodity markets and instead trades equity optionsmostly technology and consumer companiesin an attempt to profit from volatility, according to people with knowledge of the strategy. It's known as a "Vol Arb" fund in hedge fund industry lingo.

»Read more
  Monday, 27 Oct 2014 | 9:13 AM ET

Rob Citrone's funds taking a beating in October

Posted By: Kate Kelly
Getty Images

Discovery Capital Management, the multibillion dollar hedge-fund company run by seasoned trader Rob Citrone, has been battered by October's volatility, according to a recent hedge-fund report that disclosed year-to-date losses of more than 20 percent in one of its main funds.

Discovery's global macro fund had fallen more than 11 percent during the first few weeks of October, pushing its year-to-date losses to 20.6 percent as of Oct. 17, according to the HSBC Sports Pages report. The firm manages $15 billion for clients.

Discovery's Global Opportunity Fund, a separate investment vehicle managing nearly $5.4 billion as of mid-September, slid 10 percent through the same few weeks, rendering it down more than 16 percent for the year so far, the report said.

Citrone, an alumnus of the famous hedge fund Tiger Management who is known for his knowledge of global and emerging markets, did not respond to a request for comment.

»Read more
  Sunday, 26 Oct 2014 | 9:00 AM ET

Inside baseball: The 'Moneyball' stock method

Posted By: Jeff Cox
Kansas City Royals’ Billy Butler (16) hits an RBI single in the sixth inning against the San Francisco Giants during Game 2 of the 2014 World Series in Kansas City, Mo.
Getty Images
Kansas City Royals’ Billy Butler (16) hits an RBI single in the sixth inning against the San Francisco Giants during Game 2 of the 2014 World Series in Kansas City, Mo.

Here's where the stock market and baseball meet, just in time for the World Series as well as a likely volatile time ahead on Wall Street.

It's all about "sabermetrics," a term that became popular after it was used in Michael Lewis' best selling book "Moneyball," and the movie of the same name starring Brad Pitt.

In the movie, Bill James helps build the Oakland A's into a competitor by using metrics most other scouts had never heard of or given little regard—stats such as "defensive efficiency ratio," "value over replacement player," and "on-base plus slugging."

Goldman Sachs believes there might be a way to apply those measures to stock picking.

»Read more
  Friday, 24 Oct 2014 | 11:22 AM ET

10 'insane things' Wall Street really believes

Posted By: Jeff Cox
Scott Mlyn | CNBC

Wall Streeters believe the darndest things, like the Earth is flat, the moon is made of green cheese and central bankers are the most powerful force in the universe this side of gamma-ray bursts.

OK, so maybe they don't believe the first two things, but there seems pretty strong conviction about the third.

And that's not all—in fact, there's a slew of things pros on the Street hold as true that just don't seem to make a lot of sense, particularly to those on Main Street who get a close-up view of how the real world works.

Josh Brown—the "Reformed Broker" blogger, financial advisor with Ritholtz Wealth Management and regular on CNBC's "Fast Money" show—has a Top 10 list that he's been kind enough to share. It lists some of the more bizarre, but true, beliefs that constitute "Insane Things We Believe on Wall Street." Beware: It's only slightly tongue-in-cheek and actually cuts pretty close to some of the myths of the financial markets:

»Read more
  Friday, 24 Oct 2014 | 9:38 AM ET

Wall Street less confident than Main St. investors

Posted By: Jeff Cox

The stock market is acting as if the mid-October swoon never happened, despite a general—and fairly recent—sense of caution on Wall Street.

Strategists at JPMorgan and Bank of America Merrill Lynch released reports this week that, while overall bullish, told clients to prepare for more muted returns. Individual investors, though, don't seem to be listening, with sentiment indicators running strongly positive.

Caution hasn't been evident over the past week or so in the markets, which ripped higher after taking a hit from a variety of factors: Ebola worries, a significant euro zone economic slowdown and uncertainty about the rate of future Federal Reserve monetary policy.

Through Thursday trading, the S&P 500 picked up 4.73 percent, the Dow Jones Industrial Average 3.78 percent and the Nasdaq tech gauge 5.58 percent.

»Read more
  Friday, 24 Oct 2014 | 10:43 AM ET

Hedge-fund cool: Charity jam for 'Rocktoberfest'

Posted By: Lawrence Delevingne

Who said Wall Street can't be cool?

Hedge fund investors and others in the financial industry traded their market terminals and BlackBerrys for guitars and sunglasses Wednesday night in New York to rock out for a good cause.

Dubbed "Hedge Fund Rocktoberfest," the 11th annual version of the charity event raised about $400,000 for A Leg To Stand On, which provides prosthetic limbs and related mobility aid to children in developing countries.

Proudly amateur bands to play included "The Warriors from Mars" (Justin Lepone of Greenlight Capital and John Ivanac of BlackRock) and "JAM Partners" (CNBC contributor Tim Seymour of Triogem Asset Management, Mark Greenberg of Tigress Financial Partners, Michael Corasaniti of Tourmalet Advisors, Renzo Anfossi of Citi and Sy Jacobs of Jacobs Asset Management).

»Read more
  Thursday, 23 Oct 2014 | 2:23 PM ET

Loeb, Paulson, others cash in on Alibaba

Posted By: Lawrence Delevingne

After salivating at the Alibaba IPO, hedge fund managers lucky enough to buy in early are indeed getting a nice return kick from the Chinese e-commerce company.

Investment firms that have made money on Alibaba since it went public on Sept. 19 include Viking Global Investors, Third Point, Paulson & Co., Lone Pine Capital, Tiger Global Management and Glade Brook Capital Partners, according to people with knowledge of the portfolios.

Take hedge fund manager John Paulson, for example. Paulson & Co. bought private stock at $56 a share before the IPO, according to a discussion of the position on a call with investors Oct. 17. Paulson was then one of the lucky funds to get an additional allocation at the IPO price of $68 (bankers running the deal reportedly received far more order for stock than they could fill). The stock immediately popped when it hit the public market and now trades at more than $94.

The size of Paulson's position, spread between the firm's Advantage funds and others, is unclear. A spokesman declined to comment. While Alibaba was a winner, Paulson's Advantage fund has declined nearly 22 percent this year through Oct. 14, according to Lyxor data and as first reported by The Wall Street Journal.

»Read more
  Thursday, 23 Oct 2014 | 2:24 PM ET

Gender pay equality improving, but...

Posted By: Carleton English
Ian Jeffery | E+ | Getty Images

If women in the 1970s and 1980s had to contend with the glass ceiling, women now must contend with the glass cliff.

Progress is progress—even if it is slow.

"Although progress towards gender diversity on [corporate boards] is slow, it is indeed moving in the right direction to a global advantage that allows for increased transparency, performance and overall effectiveness," André Chanavat, product manager, Environmental, Social & Governance (ESG) at Thomson Reuters, said in a statement.

Thomson Reuters recently surveyed 4,255 public companies and found gender diversity on corporate boards is correlated to steady, positive performance. Meanwhile, boards that solely comprise men had more volatile portfolios and, on average, underperformed boards that included men and women.

Things become more difficult for women outside of the boardroom.

»Read more
  Thursday, 23 Oct 2014 | 1:05 PM ET

These senators get the most Wall St. campaign cash

Posted By: Jeff Cox

Financial firms are shelling out big cash for the mid-term Senate elections, but their favorite candidate is an unlikely one: left-leaning New Jersey Democrat Cory Booker.

An industry that has historically favored Republicans is spreading out campaign contributions this fall in an attempt to influence Washington lawmakers on the plethora of banking reforms already enacted or in the pipeline.

Securities and investment firms have given Booker about $1.88 million of his total $17.6 million in contributions this election cycle, according to records from SNL Financial and OpenSecrets.org. The industry has been the biggest group to give to the former Newark mayor, with lawyers and real estate firms the two next-highest.

Though Booker's policy stands are mostly favorable to the left, he's faced withering criticism from some of its loudest voices over his coziness with Wall Street.

»Read more

About NetNet

  • NetNet is where you'll find the low-down and the high jinks of Wall Street. It's the place for insider stories, trader gossip, and tales of the foibles of the moneyed crowd and the culture of finance.Wall Street news and commentary served fresh all day long.


  • Jeff Cox is finance editor for CNBC.com.

  • Lawrence Develingne

    Lawrence Delevingne is the ‘Big Money’ enterprise reporter for CNBC.com and NetNet.

  • Stephanie Landsman is one of the producers of "Fast Money."

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