consultants are sandburs

Friday, August 12, 2016

A pair of thought experiments.

First, with all the alleged hacking hither and yon, might it be that somebody has gotten hold of the Clinton - Goldman transcripts, and is planning an October surprise?

Second, with Hillary emailing around about likelihoods of a Greek sovereign debt bailout, and of a Greek bank bailout, in advance of any decision; and with the son-in-law having spun himself off from Goldman to run a Goldman-helped hedge fund for "sophisticated" investors wanting a gamble at possibly gaining higher than index-fund returns, that Goldman, and/or some foundation somewhere unloaded non-liquid over the counter traded stuff (recognized-in-advance as waste because of insider knowledge of German resolve against bailouts); and that such unloading might or might not have been from savvy holders with insider knowledge to unprepared or ill-prepared investors in some hedge fund somewhere? It could be done to look less suspicious if the savvy players put token skin in the game at the chump outlet level. Not that anything like that has been shown to have happened, but as a hypothetical it is a concern having intrigue in the unraveling, were it to have happened.

Well, that first thought experiment surely was a simpler one to state, but could the two be interrelated rather than separate hypotheticals?

While of course unlikely to be related to anything above, the one linked item concludes:

click to read

__________FURTHER UPDATE___________
RT posts about Goldman and the sophistication of counterparties, as a defense against allegations of untoward predatory practices. The "they're all adults at the table" defense which arguably fails if a marked deck is not known by all to be in use. CalPERS would have to be regarded as a sophisticated investor.

__________FURTHER UPDATE_____________
Another interesting thought experiment might be why each of these items (here, here, here, here and here) get a positive hit for "Blankfein" and why "Blankfein" as a start-up investor, and mention of that, might matter in the marketing of a hedge fund described in one of the items -

In 2013, Institutional Investor proclaimed Mezvinsky "a hedge fund rising star"...

In late 2011, Marc Mezvinsky co-founded New York-based, macro-focused hedge fund firm Eaglevale Partners with Bennett Grau and Mark Mallon, two Goldman Sachs Group proprietary traders whom he'd gotten to know when they all worked at the bank. Best known as the husband of Chelsea Clinton, Mezvinsky, 35, who has a BA in religious studies and philosophy from Stanford University and an MA in politics, philosophy and economics from the University of Oxford, has been quietly building his finance career. Before launching his own firm, the longtime Clinton family friend was a partner and global macro portfolio manager at New York- and Rio de Janeiro-based investment house 3G Capital. Eaglevale manages more than $400 million.

But, as The Wall Street Journal reports, things are not working out so well...

The hedge fund co-founded by Bill and Hillary Clinton ’s son-in-law suffered losses tied to an ill-timed bet on Greece’s economic recovery, according to documents reviewed by The Wall Street Journal.

Eaglevale Partners LP, founded by Marc Mezvinsky and two former colleagues from Goldman Sachs Group Inc., told investors in a letter sent last week they had been “incorrect” on Greece, helping produce losses for the firm’s main fund during two of the past three years, according to the letter.

The main fund dropped 3.6% last year, far trailing the 5.7% rise for similar hedge funds tracked by HFR Inc. That followed an Eaglevale gain of 2.06% in 2013 and a loss of 1.96% in 2012, the documents show.

A smaller Eaglevale fund focused only on Greece plunged 48% last year, said the person familiar with the situation, hurt by the belief Greece’s economy will see a quick rebound.

“Our recent predictions regarding Greek politics have proved incorrect,” Mr. Mezvinsky and the other Eaglevale founders wrote to investors last week, after a radical leftist party won national elections in an upset of Europe’s political order.

Eaglevale is a relatively small player in the hedge-fund world... But its moves have been closely followed, investors said, partly because of Mr. Mezvinsky’s family connection. Ahead of the firm’s launch, Goldman Sachs hosted group sessions for prospective investors that drew standing-room-only crowds. The investment bank is one of the firm’s prime brokers, which help hedge funds execute trades and introduce them to potential backers.

Goldman Chief Executive Lloyd Blankfein is an investor in Eaglevale’s main fund, people familiar with the matter said.

Since its founding, Eaglevale has spent 27 of its 34 months in operation below its “high-water mark,” a term that describes whether a Day One investor is in the black.

* * *

And in conclusion, why the fund will likely see massive redemptions now... the ten words no one wants to hear from their hedge fund manager - no matter who his in-laws are:

“We are reticent to render decisive predictions at this time.”

(links and ellipsis formatting from original; bolding, underlining and italics omitted)

"Ill-timed" is an interesting usage in the above quoting. What was "ill-timed" for the fund investors taking the haircut after betting on the celebrity of the fund, or perhaps on its fundamentals, might have been very well-timed for the counterparties to transactions of the Hellenic fund extravaganza. Whoever they might prove to be.

How about the lifestyle of the rich and connected? Swank, the one item says.

It is swank. One might call it "Trumpian" in grandeur.

___________FURTHER UPDATE____________
It was either in one of the cited items, or in other reporting online that an interested reader can track down, but in starting the son-in-law's spinoff from Goldman, the reporting was Blankfein put skin in the game, (actual level of exposure unstated), and that Goldman would handle brokerage. So son-in-law gets management fees whether the fund prospers or tanks as it did, and Goldman gets brokerage fees for any trades. The question then is did Goldman sell from its own portfolio and set a price with little/none of son-in-law negotiating but rather accepting Goldman's ask price; or was there a real and reliable over-the-counter, bid/ask market equilibrium pricing mechanism at play for something as ill-liquid and prone to risk discounting as questionable debt and Greek banking stock where the Greek banks held a lot of the questionable debt? Also, what of Goldman brokering a private over the counter transaction, trash from Clinton Foundation portfolio, priced and bought at the ask price, and then seeing it sink to where a disinterested market analyst might have priced it when traded? Goldman trading; Foundation trading with son-in-law's hedge fund? Who knows? Goldman, the son-in-law, and the Foundation, and wasn't Chelsea managing the foundation then, or was it still Bill? Yes, there would have been staff, but who was giving orders at the Foundation if the son-in-law actually took out the garbage?

If CalPERS was a substantial player in the fund, was it at a level high enough to justify suing to get to discovery? As a bet, any such suit would be settled as with most Trump litigation, by a secret agreement with gag orders all around. Again, say CalPERS did sue; the fiduciary duty would be to the pensioners, so settling on fine terms would be a duty owed to them and settling w/o gag orders would seem unlikely. Last question, in the deleted 30,000 or so emails, was there a smoking gun, and might hacking before the lawyers stepped in and deleted be a possibility? In terms of possible October surprises?

Wikileaks is a very good thing for the public to have. Their integrity, the integrity of what they post, almost always goes unchallenged as to content accuracy; the complaints being, "My dirty laundry, how dare they." The whistleblowers such as Chelsea Manning may suffer extreme wrath and retribution of the powerful, and Assange has to remain holed-up in the Ecuadorean embassy in London, so there is suffering for those disclosing. The problem, with the press and public, is that there's been too little suffering by the exposed perps. Business simply going on as usual. Bothersome speed bumps, here or there a minor jolt, but speed on, there are no consequences.

So can the public somehow gain knowledge of possible trading shenanigans? Guessing at what was possible is short of having evidence something may actually have happened. Yet in voting, circumstantial evidence would include actual evidence being solely in the hands of those holding it while being steadfast in nondisclosure. There is a circumstantial inference the evidence, if disclosed, would be unfavorable; and voters can vote accordingly. Whether it be wise of folly to do so is up to each voter.

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