Two weeks ago I decided to sell my shares of E*Trade (ETFC) after concluding it did not fit my investment criteria. It was one of my successful picks for 2010 and I made money having sold puts establishing a base price of $13.50. It closed Friday February 25 at $15.89.

I might not have chosen to post about this except for news that Ken Griffin's hedge fund Citadel Investment Group plans to sell much of its stake in E*Trade Financial. The largest shareholder selling out is news. Citadel will still hold valuable warrants, giving it the option of taking a very large position again, but for now there seems to be a change of heart for them as well.

Continue reading Chasing Value: Time to Sell E*Trade?

Chasing Value: Time to Sell E*Trade? originally appeared on BloggingStocks on Sun, 27 Feb 2011 13:40:00 EST. Please see our terms for use of feeds.

Actually, before you compose a bunch of angry missives, please consider the state of terrestrial radio. Quite frankly, CBS doesn't have a choice. Between the lousy growth prospects for the medium, and the challenged status quo of the advertising market given the terrible global recession that continues to rip through the markets like a hideous beast, changes have to be made. Changes that you thought would never come.

Continue reading CBS takes WBCN to web -- a wise move?

CBS takes WBCN to web -- a wise move? originally appeared on BloggingStocks on Wed, 15 Jul 2009 15:20:00 EST. Please see our terms for use of feeds.

Continue reading Closing Bell: When 2009 highs are under-covered (BAC, ETFC, MYL, PFE, QCOM, STAA)

Closing Bell: When 2009 highs are under-covered (BAC, ETFC, MYL, PFE, QCOM, STAA) originally appeared on BloggingStocks on Thu, 11 Jun 2009 16:10:00 EST. Please see our terms for use of feeds.

Now at last we will have some transparency in the CDS (credit default swaps) markets. Regulators approved a joint venture between the CME (Chicago Mercantile Exchange) and Citadel, a hedge fund to clear swaps trades that will begin operations within 30 days. The size of this market is mind boggling at 54,000 billion dollars.

One of the underlying factors in our current credit crisis has been the lack of supervision in the CDS markets. Very often it was difficult and nearly impossible to figure out who the players were. You had the original parties to the CDS and then you had speculators who gambled on the credit worthiness of the underlying bond.

While this move to clear CDS trades is a good thing, it does not eliminate the speculation and risk taking by traders in the swaps market. That may never go away but at least it will be easier for trading managers to monitor their trader's actions more closely.

Do we have full transparency in the CDS markets? originally appeared on BloggingStocks on Thu, 01 Jan 2009 12:00:00 EST. Please see our terms for use of feeds.

The typical structure of a hedge fund can be precarious. For example, there are usually huge amounts of leverage. At the same time, investors can redeem their shares, which often happens in tough times. The upshot: a fund may have to shut down.

Just look at Citadel Investment Group. As of the end of November, the firm's two main funds have lost close to 50%. What's more, investors are requesting redemptions of $1.2 billion, which comes to 12% of overall assets.

What to do? Well, Citadel isn't going to honor the redemptions -- at least for now.

No doubt, this will anger investors. But, hey, in the hedge fund world, the investors are sophisticated, right? Shouldn't they anticipate such things? Besides, other hedge funds have done the same thing (such as Tudor Investment Corp.)

To allay things, Citadel is making a concession. That is, the firm is going to pay its own operating expenses for 2008 (keep in mind that this usually comes out of investor dollars). And this is no small amount, which could be $200 million to $300 million.

The problem is that -- in light of the huge investment losses -- it will be extremely difficult for Citadel to generate incentive fees. So, in light of this, why will top employees stick around? If anything, they may start their own funds.

In other words, Citadel is in a tough spot right now. And, it could easily take many years for the firm to regain its former stature - if it ever happens.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Streetsmart Guide to Short Selling: Techniques the Pros Use to Profit in Any Market. He is also the founder of BizEquity, a valuation website.

Citadel crumbles and says "no" to investors originally appeared on BloggingStocks on Sun, 14 Dec 2008 13:40:00 EST. Please see our terms for use of feeds.

The Dow lost 385 points this week with a 315 point election day rally on Tuesday, two consecutive days which totaled 929 points down, and a Friday rally of 248 points. Did the market rise on hopes of a McCain upset only to fall due to disappointment that Obama won? Did the market rally Friday because the 6.5% unemployment rate was not as bad as expected? It could be, but I doubt it.

More likely, the markets are moving because of the trading behavior of endowments, pension funds, and hedge funds. They make decisions for very different reasons. But some reporting on daily market movements looks like a joke -- nobody knows why the market goes up or down, but commenters use price movements as a daily barometer of the national mood. So how do endowments, pension funds, and hedge funds move the markets? Here's how:

• Endowments. Big university endowments, such as Harvard's, are desperately trying to unload billions of dollars worth of illiquid interests in venture capital and private equity firms. Harvard is reportedly trying to dump $1.5 billion worth of such interests into a market where there is likely to be very little interest. Not only that, these private equity firms are demanding that endowments fork over the money they committed to them so they can make new investments. And with the S&P 500 down 36.6% so far this year, many endowments are selling anything liquid to meet these commitments and to pay shorter-term obligations -- such as paying professors and keeping the lights on.

Continue reading Why did the Dow fall 385 points this week?

Why did the Dow fall 385 points this week? originally appeared on BloggingStocks on Sun, 09 Nov 2008 08:16:00 EST. Please see our terms for use of feeds.

Kenneth Griffin, who manages the massive Citadel Investment Group Inc. hedge fund, has produced a sterling record over the past 20 years. Actually, he's one of the world's top money managers.

But, in "Black September," Griffin's tracked record got trashed. Apparently, his flagship fund is down as much as 22% for 2008.

Interestingly enough, Wall Street has been abuzz with rumors that Citadel is dumping lots of shares - putting further pressure on the markets (and may have accounted for some of yesterday's losses on the Dow and S&P).

But Citadel is not alone. Other hedge fund operators have also suffered major losses.

One key issue has been the erratic regulatory response to short selling (essentially, the ban made it illegal for hedge funds to make profits). Of course, investors have also been requesting redemptions.

In fact, it looks like some key hedge fund managers are staying on the sidelines (can you really make money when the markets look irrational?)

As for Citadel, the fund had some other problems. For example, Griffin loaded up on convertible securities. While such things are okay in normal times, they can become illiquid during periods of crisis. Besides, the short-selling ban made it excruciatingly difficult to employ arbitrage strategies.

Something else: with the significant losses, hedge funds will have a hard to getting incentive fees. The reason is that they need to recoup the losses (this is known as the high-water mark). As a result, many hedge funds may decide to close shop.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Streetsmart Guide to Short Selling: Techniques the Pros Use to Profit in Any Market. He is also the founder of BizEquity, a valuation website.

Hot-shot hedge fund manager, Kenneth Griffin, gets crushed originally appeared on BloggingStocks on Thu, 16 Oct 2008 10:00:00 EST. Please see our terms for use of feeds.

Continue reading A takeover at E*Trade? Don't bet on it.

A takeover at E*Trade? Don't bet on it. originally appeared on BloggingStocks on Mon, 03 Mar 2008 13:50:00 EST. Please see our terms for use of feeds.

As we read of writedowns, impending bankruptcies, and the faltering U.S. consumer, it's interesting to get a glimpse at the players behind this whole snafu.

The Wall Street Journal published an article today about Magnetar Capital, a fund started by a star trader from Citadel Investment Group. Magnetar was a key player in the structuring of CDOs, or collateralized debt obligations. Magnetar acted as a "lynch-pin investor" in over $30 billion of these syndicated bundles of subprime mortgages and derivatives, according to the article.

In spite of the losses being racked up on Wall Street, the fund, with about $9 billion in assets, made about 25% returns last year.

According to the article, "Magnetar swooped in on securities that it believed could become troubled but were paying big returns. CDOs are sliced based on risk, with the riskiest pieces having the highest yield but the greatest chance of losing value." Magnetar concentrated its trading on these riskiest pieces.

Continue reading Hedge funds profit from subprime mess

Hedge funds profit from subprime mess originally appeared on BloggingStocks on Mon, 14 Jan 2008 14:06:00 EST. Please see our terms for use of feeds.

MAJOR PAPERS:

• The Wall Street Journal reported that in a list released last night by the FCC, Google Inc (NASDAQ: GOOG), Cablevision Systems Corporation (NYSE: CVC) and other "nontraditional" players are set to compete against more traditional wireless companies like Qualcomm Incorporated (NASDAQ: QCOM) and MetroPCS Communications Inc (NYSE: PCS) in the federal government's spectrum auction next month.

• Banks that include Merrill Lynch & Co Inc (NYSE: MER) and The Bear Stearns Companies Inc (NYSE: BSC) are reportedly in talks to help bail out struggling bond insurer ACA Capital Holdings, which lost $1B in the most recent quarter, according to two people briefed on the situation and reported by the New York Times; ACA Capital has guaranteed $26B in mortgage securities.
• Executives at Tribune Company (NYSE: TRB) were faced with last-minute questioning from bankers that were reluctant to fund the final portion of the $8.2B deal to take the company private, according to sources close to the company, the Chicago Tribune reported.

• Barron's Online's "Inside Scoop" reported that analysts are not convinced that the deal with Citadel is enough to save E*Trade Financial Corporation (NASDAQ: ETFC), as it does not eliminate E*Trade's $12.4B second-lien mortgage exposure, and the company could potentially face further customer attrition, which many think will continue to pressure the shares.

Newspaper wrap-up: Google, Cablevision to bid for FCC spectrum originally appeared on BloggingStocks on Wed, 19 Dec 2007 08:15:00 EST. Please see our terms for use of feeds.

E*Trade's not-quite-full disclosure of its deal with Citadel originally appeared on BloggingStocks on Thu, 06 Dec 2007 16:35:00 EST. Please see our terms for use of feeds.

Right -- but what about the shareholders who will see the higher rates paid right out of what's left of E*Trade's equity?

Continue reading E*Trade raises its rates for customers -- desperation?

E*Trade raises its rates for customers -- desperation? originally appeared on BloggingStocks on Mon, 03 Dec 2007 15:51:00 EST. Please see our terms for use of feeds.

Today's news of E*Trade(NASDAQ:ETFC) receiving a $2.5 billion cash infusion as part of selling off its $3 billion asset-backed securities (ABS) portfolio, including its ABS collateralized debt obligations (CDOs) and second lien securities to Citadel Investment Group, is bound to the talk of Wall Street. As usual there are two big winners and one big loser.

The winners:

Citadel scores big-time getting the $3 billion ABS business for about $0.30 on the dollar. I can only imagine how much money it is going to make on that deal. Once the dust clears from the whole subprime mess, and credit markets calm, this portfolio will skyrocket in value and Citadel will laugh all the way to the bank.

Mitch Caplan, the CEO who gets to go home with a huge package. Glad to see the man who oversaw this whole mess is going to walk away with millions.

Continue reading E*Trade: Hey Mitch, how about paying investors back

E*Trade: Hey Mitch, how about paying investors back originally appeared on BloggingStocks on Thu, 29 Nov 2007 08:50:00 EST. Please see our terms for use of feeds.

Citadel will "purchase E*Trade's entire $3 billion portfolio of asset-backed securities for a value of around $800 million." The balance of the money will go in as 10-year notes with a 12.5% interest rate. Citadel will end up owning 20% of the company and have a seat on the board.

Douglas A. McIntyre is an editor at 247wallst.com.

Flash: E*Trade gets huge investment from Citadel Investment Group originally appeared on BloggingStocks on Thu, 29 Nov 2007 06:44:00 EST. Please see our terms for use of feeds.

MOST NOTEWORTHY:

• JP Morgan upgraded Expedia (NASDAQ: EXPE) to Overweight from Neutral on expectations for U.S. bookings growth and margin stabilization.

• YRC Worldwide (NASDAQ: YRCW) was raised to Neutral from Underperform based on valuation.

• Fiserv (NASDAQ: FISV) was upgraded to Sector Outperformer from Sector Performer at CIBC following the CheckFree (CKFR) acquisition.

• Banc of America upgraded Citadel Broadcasting (NYSE: CDL), Cox Radio (NYSE: CXR) and Entercom Comm (NYSE: ETM) to Neutral from Sell as they believe it is time to cover short positions with the expected Q3 weakness likely priced into shares. They caution that this upgrade is not a buy signal as downside risk remains...

• Wachovia upgraded Cabela's (NYSE: CAB) and KBR Inc (NYSE: KBR) to Outperform from Market Perform.

• Baird raised Lear (NYSE: LEA) To Outperform from Neutral.

• Nokia (NYSE: NOK) was upgraded to Outperform from Neutral at Credit Suisse.

• Pacific Crest upgraded shares of eBay (NASDAQ: EBAY) to Outperform from Sector Perform.

Analyst upgrades: EBAY, EXPE, NOK and YRCW originally appeared on BloggingStocks on Fri, 03 Aug 2007 10:45:00 EST. Please see our terms for use of feeds.

MOST NOTEWORTHY:

• UBS upgraded US Airways (NYSE: LCC) to Neutral from Reduce based on valuation.

• Cigna Corp (NYSE: CI) was upgraded to Neutral from Sell at Banc of America to reflect the company's market share gains and share buybacks.

• Banc of America also raised Gentex Corp (NASDAQ: GNTX) to Buy from Neutral to reflect increased penetration of the company's new rear-camera display product.

• Deutsche Bank upgraded shares of China Life Insurance (NYSE: LFC) to Hold from Sell on valuation and the continued strong equity markets...

• Morgan Stanley raised DirecTV Group (NYSE: DTV) to Overweight from Equal Weight.

• Citigroup upgraded Sempra Energy (NYSE: SRE) to Buy from Hold.

• Acorda Therapeutics (NASDAQ: ACOR) was upgraded to Buy from Neutral at Banc of America.

• Merrill Lynch raised Citadel Broadcasting Corp's (NYSE: CDL) rating to Buy from Neutral.

• CyberSource Corp (NASDAQ: CYBS) was upgraded to Buy from Accumulate at ThinkEquity.

Analyst upgrades 6-19-07: CDL, CI, DTV, LCC and LFC originally appeared on BloggingStocks on Tue, 19 Jun 2007 10:56:00 EST. Please see our terms for use of feeds.

Continue reading FCC settles payola probe for a song

FCC settles payola probe for a song originally appeared on BloggingStocks on Sun, 15 Apr 2007 13:10:00 EST. Please see our terms for use of feeds.

Citadel raises $500 million -- a hedge fund bubble? originally appeared on BloggingStocks on Mon, 11 Dec 2006 11:46:00 EST. Please see our terms for use of feeds.