Everyone talks to everyone about Herbalife.
And mostly that's totally fine: Hedge funds are allowed to talk to their buddies about their investment ideas, even if their investments might be market-moving. On the other hand, there is a line, and this sure sounds like it crosses it:
Before the announcement, the people briefed on the matter said, one of Mr. Ackman’s junior employees mentioned the planned trade to his roommate. ... [T]he roommate may have crossed a legal line when he helped a friend place a bet against Herbalife. After Mr. Ackman’s presentation pummeled the company’s stock, the people said, the friend reaped at least $20,000.
The article goes on to say that "the bond between roommates does not inherently require a duty of confidentiality," but surely rooming with a hedge fund analyst implies a duty to not go trading on what he talks about. That's just common sense. Meanwhile, on the other side of the trade:
Those supporting Herbalife, including the funds created by Mr. Soros and Mr. Icahn, have also drawn attention from the S.E.C.
It is possible the scrutiny stems from Mr. Ackman’s private plea to the S.E.C. last year to examine whether rival traders improperly collaborated to buy Herbalife shares and drive up the price of the stock. If Mr. Ackman’s rivals acted together to collectively buy 5 percent or more of Herbalife stock, they would have to disclose it within 10 days.
I don't really get why Ackman, whose own Schedule 13D disclosure practices are coming under scrutiny these days, would go around asking the SEC to interpret the rules more strictly, but okay. In other news, Pershing Square is up 20 percent for the year, with Allergan being helpful. And Bill Ackman's Herbalife movie premieres today.
RBS made money.
The Royal Bank of Scotland beat estimates by a billion pounds on lower than expected impairments. The stock was up 10 percent, leaving the UK government's 80-percent stake still underwater, but somewhat less underwater.
People keep leaving Pimco.
Bill Gross's flagship Total Return Fund had its 12th straight month of outflows and "has now seen a total of $55.26 billion in net outflows since last May, according to Morningstar data on Thursday." It's easy to blame Bill Gross's recent public tribulations for some of those outflows. And in fact some of the money has gone to, for instance, Jeff Gundlach's DoubleLine Capital, because what you want as a bond investor is the stability and certainty of investing with the celebrity bond manager who has not recently been in the news for weird semi-scandals. Meanwhile, if you're looking for Ukrainian bond exposure, try Franklin Templeton.
Libya, Goldman, and secret memos.
I missed this yesterday, but if you're interested in the Goldman Sachs vs. Libya fight, and who wouldn't be, Euromoney has the story. There's a 2010 memo to unwind earlier losing trades, in which Goldman would pay Libya a little bit of money and some other stuff would happen:
It also involves a special-purpose vehicle called Tiber Bond Investment Ltd, a Cayman Islands entity. And another party is a group referred to as the ‘investment adviser’ in the memo – Palladyne International Asset Management. Under the terms outlined in the memo, the LIA would instruct Goldman to pay the amount directly to Tiber. Tiber would then issue a limited recourse note to LIA as its sole investor. Libya would then buy a $5 billion unlisted 6% note due 2030 at a price of 74%, meaning it would put $3.7 billion (74% of $5 billion) into Tiber, which would invest it in a portfolio of dollar-denominated investment-grade and high-yield bonds under Palladyne’s management.
Palladyne is where things get tricky; one lawsuit describes it as "a kickback and money-laundering operation for the former dictatorial Gaddafi regime in Libya, operating under the public pretence of a hedge fund."
Wynn Resorts had an earnings call.
Always mesmerizing. Steve Wynn:
Well, it's axiomatic that when the customers get lucky, the drop goes down, and the markers go down because most understand what happens in Las Vegas. The customers walk up to the Baccarat table in the private rooms, and we have a very, very strong grip on that kind of business in this town. They walk in to the table, and they say to the boss, "Let me have $1 million" and they have established credit. We put up a table marker, a lammer, a little round circle that's visible on television on our continuous taping. And we slide the money across. Now the guy plays. He goes up. He goes down. He wants to go to dinner. He leaves the money in front of him. There's no -- there is no drop yet. There is no handle. Until remember -- handle in a Las Vegas casino is made up of cash in the box and credit slips associated with markers as opposed to credit slips associated with chip returns when the rack is too full. Markers and cash make up drop. We don't have any drop unless the guy loses, which, in many cases, they don't sign the marker until they're ready to leave in 2 days. They leave the money on the table overnight. We lock it up with a case, but they're very superstitious about that. So there's only a table lammer up. So when a customer, let's say, plays for 6 hours and at the end of the thing, he's up, down, up, down a couple million dollars, but he's up $1 million. At the end of his play he slides the chips back and says, "Take down the mark -- the table marker," and there is no drop. So there is no credit. So when the win is down, credit is also down.
I'm not saying I know what that means, or that it's interesting, just that it's sort of mesmerizing.
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