For Citigroup (NYSE: C) to regain the confidence of Wall Street it will have to start doing a few things right. Firing 53,000 people probably does not qualify. After that news, Citi hit another 52-week low at $7.80, down from a 52-week high of $35.29.

More losses won't help. Some bank analysts believe that Citi's consumer credit portfolio and derivative assets will cause negative earnings right through 2009.

Now, the big bank gave investors another reason to turn their backs as it closed one more of its hedge funds, which lost 53% of its value in a month. Taking the value of assets down that much in such a short period probably requires as much skill as showing an increase of a similar size. In other words, it is extraordinary.

According to the FT, "Citigroup is liquidating its Corporate Special Opportunities hedge fund after it lost 53 per cent of its value last month, marking the ninth time in recent months that the bank has had to close or rescue a fund." At its peak, the fund had over $4 billion in assets.

The point in this is not only that Citi keeps making mistakes. In addition, the bank might as well fire its entire public relations and corporate communications staff. They are of no use to the firm as long as it keeps cutting its own throat in front of the press and shareholders. Dispensing with the PR group could be part of the big, planned layoff. No one would miss them

Douglas A. McIntyre is an editor at 24/7 Wall St.

The people at Goldman Sachs (NYSE: GS) are supposed to be genetically different from the rest of Wall Streeet. They are supposed to be smarter and more astute at taking risks. That may be why the firm's losses have not been as great as those at most other financial companies.

The folks at Goldman looked downright human as news came out that one of its large hedge funds is $1 billion lighter than it was at the beginning of the year. According to the FT, "Goldman Sachs Investment Partners, which was hailed in January as one of the biggest hedge fund launches, raising more than $6bn, has told investors that it had lost $989m by September."

Goldman did have an excuse. The firm said that the hedge fund business was bad everywhere. Cold comfort to investors who lost money.

Unstated by most ,but nonetheless true, missteps by Goldman have hurt its image and brought it down to the level of most other investment banks. Its image as "elite" probably changed with its transformation to being a commercial bank to qualify for one of the federal programs that provides financial aid to U.S. banks. Wall Street wondered why the premier company in the industry would have to do that.

The news about its big hedge fund loss is just one more piece of data. Goldman is no longer special. The credit crisis has made it "ordinary" and there is not much evidence that it can recover from that fall.

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

MAJOR PAPERS:

• Investors are taking their money out of hedge funds more now that at any time over the past 10 years, according to the Wall Street Journal. Firms are bracing for the end of June when the next big wave will hit.
• First it was a demand for management changes, and now shareholders, including one time director Eli Broad and fund managers Shelby Davis of Davis Selected Advisors and Bill Miller of Legg Mason Inc (NYSE: LM), are again upset with American International Group Inc (NYSE: AIG) and want changes in the boardroom as well, the Wall Street Journal reported.
• The Wall Street Journal reported that Citigroup Incorporated (NYSE: C) will close Old Lane Partners, a hedge fund co-founded by CEO Vikram Pandit.

OTHER PAPERS:

• Spotlight Capital is increasing pressure on Chico's FAS Inc (NYSE: CHS) and said it has been in touch with 25 major shareholders in order to oust CEO Scott Edmonds and unseat board member John Burden, who are accused of having a conflict of interest, the New York Post reported.

WEB SITES:

• Advanced Micro Devices Inc (NYSE: AMD) denied reports certain of its new dual-core chip, code-named Kuma, have been canceled, according to CNet. A spokesman for the company said that the launch of Kuma, scheduled for the second half of 2008, remains on track.

Ever wonder how hedge fund managers get to become hedge fund managers? It'd be pretty interesting to have $1 billion at your fingertips to try and make some loot.

Portfolio.com has an interesting article today entitled, "Digging Up Dirt on Fund Managers", which explores the people behind the computers in the hedge fund industry. Based upon a recent survey published by the Greenwich Roundtable and Quinnipiac University, researchers claim that almost 82% of investors in hedge funds have decided not to invest with a manager because of allegations of unethical behavior. (See my recent post about a leading hedge fund manager facing time.)

In an industry that is supposedly driven by hard, cold numbers and return on investment, it's interesting to see how when you get down to it, managing money is still built on trust. The same article quotes Steve McMenamin, executive director of the Greenwich Roundtable, a non-profit research group for investors in alternative assets, as saying, "These fund structures are based on trust. If there's even a hint of impropriety, investors tend to shy away."

Interesting findings indeed.

Zack Miller is the Managing Editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.

MAJOR PAPERS:

• According to sources, the Wall Street Journal reported that Countrywide Financial Corporation (NYSE: CFC) is under investigation for possible securities fraud. People close to the situation say the inquiry is in its early stages but it involves an inquiry into alleged misrepresentations of the company's financial position and the quality of its mortgage loans.
• The Financial Times reported that Credit Suisse Group (NYSE: CS) has teamed up with three leading academics to create products that will deal with the potentially lucrative hedge fund replication industry. The upcoming suite of products will attempt to mechanically replicate the returns of the major hedge fund strategies.

OTHER PAPERS:

• Rio Tinto Plc (NYSE: RTP) is expected to announce this week that its aluminum business is worth up to $20B more than current estimates, after a rise in aluminum prices; the UK Times reported that the statement could raise pressure on BHP Billiton Limited (NYSE: BHP) to increase its takeover bid for Rio.
• Asset manager Ameriprise Financial Inc (NYSE: AMP) is pairing up with MasterCard Incorporated (NYSE: MA), the Associated Press reported, to become a credit card lender for the first time, the two companies reportedly plan to announce today.

MAJOR PAPERS:

• The Wall Street Journal's "Heard on the Street" reported that VCG Special Opportunities Master Fund, a $58M asset hedge fund which is owned by an investment firm that also owns a Puerto Rican investment bank, is separately suing Citigroup Incorporated (NYSE: C) and Wachovia Corporation (NYSE: WB) for requiring it to pay money from "credit default swaps" as the value of mortgage backed bonds fell.

OTHER PAPERS:

• In an attempt to cut back its growth plans due to higher fuel costs, AirTran Holdings Inc (NYSE: AAI) CEO Bob Fornaro said the Orlando-based airline will sell two jets next month. The Orlando Sentinel reported that record fuel costs could also impact AirTran's negotiations with its pilots union.
• Fnac is in talks with Apple Inc (NASDAQ: AAPL) to sell the iPhone in France, Le Figaro reported. The head of PPR SA's Fnac Chain, Denis Olivennes, said France Telecom's (NYSE: FTE) exclusivity rights for the iPhone in France are "inadmissible."

WEB SITES:

• Bloomberg reported that the head of Dubai International Capital, Sameer al-Ansari, said that as losses increase from the subprime mortgage market turmoil, Citigroup may need additional capital from outside investors.

MAJOR PAPERS:

• The Wall Street Journal reported that the focus of reports of four deaths and 350 allergic reactions to Baxter International Inc's (NYSE: BAX) generic version of the blood thinner drug Heparin, and the ingredients supplied by a Chinese manufacturer, also includes Wisconsin-based Scientific Protein Laboratories, a co-owner of the Chinese manufacturing plant, and majority owned by American Capital Strategies Ltd (NASDAQ: ACAS), a Maryland buyout firm.
• Citigroup Incorporated (NYSE: C) has suspended investors at its CSO Partners hedge fund from withdrawing their money after they attempted to pull more than 30% of the fund's nearly $500M in assets, the Wall Street Journal reported.
• AT&T Inc (NYSE: T) is seeking more revenue from India as it tries to expand its consumer mobile phone operations outside the U.S, the Financial Times reported.

OTHER PAPERS:

• According to the New York Times, the FDA broke its own rules by approving for sale Baxter International's Heparin without first inspecting a Chinese plant where the drug's key ingredient is made.

Experienced fishermen know that sometimes the fishing is good -- and sometimes, it ain't.

Bloomberg reports on Mark Fishman, a famed bond trader previously with SAC Capital. His main fund, Sailfish Capital Partners LLC, has lost about half its assets since July because of soured investments and clients pulling money, according to two investors, cited in the article.

Fishman, 47, Sailfish's investment chief, left SAC in March 2005. After losing more than 12% in August, clients pulled about $400 million from Fishman's Multi-Strat fund this month alone, cutting assets to $980 million. Bloomberg cites increased mortgage defaults and credit markets seizing up as two reasons hampering performance at Sailfish.

I wrote recently about former Fed Chairman, Alan Greenspan, joining up with a leading hedge fund. Maybe Alan's looking to catch a few bond-trading fish to join him.

Zack Miller is the Managing Editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.

MAJOR PAPERS:

• Looking to enter the Japanese market, sources familiar with the matter said that Apple Inc (NASDAQ: AAPL) CEO Steve Jobs recently met with NTT DoCoMo Inc (NYSE: DCM) to discuss a deal to offer its iPhone, the Wall Street Journal reported.
• Nike Inc (NYSE: NKE) is in talks with Mike Ashley to try and persuade the entrepreneur to not block its £285M takeover offer for Umbro, the Financial Times reported.

OTHER PAPERS:

• The Detroit News reported that in an effort to cut costs, General Motors Corporation (NYSE: GM) is looking to form a deal with the United Auto Workers on a buyout program for veterans.

WEB SITES:

• According to two people familiar with the fund, The Goldman Sachs Group Inc (NYSE: GS) is looking to start Goldman Sachs Investment Partners, its newest stock hedge fund, with as much as $10B, Bloomberg reported.

Historically, when the Fed has started cutting rates, investing in financial stocks has proven profitable for investors. Will the same hold true in today's easing cycle? Probably not.

The Bear Stearns (NYSE: BSC) model for its mortgage business might point to problems ahead for the financial industry in general. The financial services industry has done an outstanding job during the past twenty years developing new products and marketing them to institutions who specialize in buying these new instruments -- primarily hedge funds. With mortgage hedge funds, publicly traded vehicles such as mortgage REITs and other investors now shutting their doors to these products, who gets stuck with them? You guessed it! The investment firms and large commercial banks.

Now let's go to $300 billion of private equity debt that needs to be placed. Who is buying that up? While some institutions are, much of it is staying on the books of the investment firms and banks. Will funds be formed to invest in this debt? Yes, but it will take time.

Sears Holdings Corp. (NASDAQ: SHLD) the hedge fund ... err, retail chain headed by hedge fund star Eddie Lampert, may see renewed pressure to sell off some it its valuable real estate soon. Notable activist investor William Ackman will see to it, as his fund, Pershing Square Capital Management, has acquired five million shares of the retailer. Mr. Ackman, who battled Lampert last year for control over Sears Canada, is set to have another celebrity deathmatch with him again soon, I'd suspect.

It's no surprise to anyone that Lampert's real mission with Sears Holdings is not the operational efficiency (or even profit) of the retail side of things; that's just a side mission probably talked about a few minutes at each board meeting. What Lampert did with Sears was to make it a holding company -- but the truth is, he owns so much of it that Ackman's potential advances may be akin to ascending a steep hill with slippery shoes on his feet. The New York Post even says that Ackman's buy-in was for "a long term investment" more than any moves to get Sears on the property-unloading trail.

Still, Ackman's purchase makes him the fourth-largest SHLD shareholder, and it's hard to imagine him wanting those shares for some kind of "long term investment" -- it just doesn't suit Ackman's profile at all. He's said before that the combined value of Sears' real estate is valued more than Lampert's $22 billion figure, and that difference provides a nice "cushion" should the retail end of things continue to falter. Sears' retail operations are going nowhere these days since there appears to be little direction to that end of the business. I submit that Ackman wants to break it all up and sell some real estate, Gekko-style. That, or he does not deserve the title 'activist investor.'

Goldman Sachs (NYSE: GS) volatility Elevated into EPS, Risk Exposure & Outlook. GS is expected to report EPS on 9/20. Wachovia Corp.(NYSE:WB) say's "Lack of mortgage and Chinese exposure distinguish GS." GS September option implied volatility is at 50; October is at 45; above its 26-week average of 35 according to Track Data, suggesting larger risk.

Morgan Stanley (NYSE: MS) MS is expected to report EPS on 9/19. MS September option implied volatility is at 48; October is at 41; above its 26-week average of 33 according to Track Data, suggesting larger risk.

Bear Stearns (NYSE: BSC) is expected to report EPS on 9/20. Aquarian Investments holds a 6.97% stake in BSC for investment purposes. BSC Chairman & CEO James Cayne is 72. BSC Chairman of Executive committee Alan Greenberg is 79. WB say's BSC "shares are currently 1.2x book value compared to its historical average of 1.6x." BSC September option implied volatility is at 71; October is at 63; is above its 26-week average of 43 according to Track Data, suggesting large price movement.

Lehman Brothers (NYSE: LEH) is expected to report 3rd quarter EPS on 9/18. WCHV say's LEH's "Q3 started strong but ended real weak." LEH September option implied volatility is at 76; October is at 62; above its 26-week average of 40 according to Track Data, suggesting larger price risk.

Hedge fund managers are all afraid of one day each month -- the 15th. For the normal American this day doesn't signify much. But for fund managers this is the last day when hedge fund investors can redeem (withdraw) their money from hedge funds.

According to a New York Times article, credit funds and quantitative funds are expected to be the ones hardest hit by redemptions. The reason for this is simple to understand: many credit funds had subprime exposure and were hit hard due to drastic repricing in the subprime market and quantitative funds, notorious for group thinking, were hit hard when volatility spiked and funds were forced to begin closing their positions creating a death spiral in their positions.

Experts expect "hot money" such as funds of hedge funds based in Switzerland to be the first to withdraw money and move into less-leveraged funds according to the Financial Times.

In response to these fears, some managers are even prohibiting redemptions from their funds because it would force the funds to sell their positions at a steep discount. One such fund is Sentinel Management Group as the Associated Press reported here.

Today could be a make or break day for many hedge fund managers, especially those with a concentrated investor base.

The Wall Street Journal is reporting [subscription required] that poorly-performing 'quant fund' managers will be forced to explain their recent poor performance to investors in their funds beginning this week. Despite normally remaining quite secretive and under-the-radar, many of these fund managers are being forced to hold conference calls in order to save the reputation of the firms they work for.

All of the negative news from investment bank-owned hedge funds such as that from Bear Stearns (NYSE: BSC), Barclays (NYSE: BCS) , and Goldman Sachs (NYSE: GS) points to significant risks in the asset management business. When times are good, profits and positive news from the hedge fund businesses inside these investment banks is plentiful. But when times begin turning bad, as they seem to be now, the risk of destroying a firm's reputation is quietly intertwined with any signs of poor performance.

Investors need to now be extra careful before investing in the financials. Derivatives exposure, topping private equity activity, hedge fund risks, and subprime vulnerability are all uncertainties and potential sources of destruction that need to be remembered before purchasing these stocks.

Barron's [subscription required] revealed some scary statistics about this week's carnage. The smartest of the smart are finding that their computer models are telling them to do the wrong things at the moment of maximum peril. As a result, The Goldman Sachs Group's (NYSE: GS) $8 billion Global Alpha hedge fund is down 26% so far this year and the $26 billion Renaissance Institutional Equities Fund -- run by the $1.7 billion (2006 compensation) man, James Simons -- has fallen 8.7% so far this month.

What is going on? The computer models that run these funds don't model what is happening now -- a simultaneous dash to liquidate by all their peers. Statistical factor-based quantitative models -- which weight dozens of valuation, growth, and momentum variables to create long/short portfolios -- have attracted many competitors.

Their models broke in recent weeks as volatility surged, leverage was cut back, heavily shorted stocks went up and statistically cheaper shares cracked. One anonymous manager said "There is this unknown risk, when there are enough people doing what you do, that when some of them have to unwind and they start unwinding -- you are just going to get crushed. And that's not in the model anywhere."