By 10am it emerged that Mr Perkins had single-handedly moved the global price of oil to an eight-month high during a 'drunken blackout'. Prices leapt by more than $1.50 a barrel in under half an hour at around 2am....Ten times the usual volume of futures contracts changed hands in just one hour.
By the time PVM realised the trades were not authorised and swiftly began to unwind the positions, losses of exactly $9,763,252 had stacked up.
The amount was almost equal to PVM Oil Futures' entire annual revenue of $12m"
Ok, yes I know this was pre-Lehman, and even pre-Bear! That said, it is an excellent starting point to understand banking. (If I were currently teaching a Money and Banking class I guarantee it would be required and tested).
Richard Davis (the CEO) speaks on the banking industry as well as his own firm.
In this hour long video, Davis -one of the few banking CEO’s to remain largely unscathed in the recent financial mess- gives a great overview of the banking system. Davis is the CEO at US Bancorp."
While many might question the term unscathed (stock price fell by over 70% at trough), it is true they seemingly came through it alive. And yes, it should be noted that US Bancorp did get TARP money and is currently in plans to issue new equity.
A great class project would be to look at the firm and see what happened to it over the past 18 months realizing its exposure to the California housing market. (Hint: use Google lab's TimeLine (which wont allow me to link to it, but is very good and could easily be used to make a fascinating class discussion)
"In the most widely anticipated public offering of the young year, Fortress Investment Group (FIG), the first U.S.-based hedge fund to go public, stormed the ramparts. Shares in the alternative investment outfit were trading around $32 in the early going Feb. 9 -- 73% above the offering price set the previous day but down from the intra-day high of $37. The shares opened trading at $35."
The IPO:
From the NY Times: "The first hedge fund and private equity company to go public in the United States will make its market debut today at $18.50 a share — at the high end of its expected price range."
and later:
"Fortress is trading some of that privacy and cachet for capital. The company raised $634 million from the sale of 34.3 million shares yesterday. Demand for the offering was strong, analysts said. People who attended a presentation by Fortress on the offering on Wednesday said that it was standing room only. Last week, Fortress said in a filing that it expected to sell the shares in a range of $16.50 to $18.50 each."
Some interesting things to note:
The VAST majority of the price appreciation went to the first buyers (IPO was at 18.50, first trade in secondary market was $35).
Can a hedge fund company (most of whom love secrecy) maintain competitive advantages as a public firm? (In fact other hedge funds that have gone public have shied away from issuing in the US due to regulations that would lessen their secrecy.)
Does the IPO signal the cooling of the hedge fund industry? (from MarketWatch:"Under pressure, managers like those at Fortress may be looking to a reliable source to keep the new money rolling in, said Roy Smith, a former partner at Goldman, now a finance professor at New York University. Hedge funds remain a fashionable place to be for small-time investors who recognize it as a symbol of sophistication...."When the smart money is pulling out," Smith said. "It's time to start selling to the dumb money." ")
