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Lehman To Sue One Or More Big Banks Over Derivatives "Fraudulent Transfer"

  
Analysis, Economy, Education
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Lehman Holdings will be filing a lawsuit against one or more major banks in regards to the valuation of derivatives. This will occur today or Monday. It is the first such lawsuit (valuation dispute) of its kind by Lehman. Some of the counterparts to Lehman’s existing trades weren’t willing to play nice, so the “estate” felt it necessary to rack up another few thousand billable hours and take this battle to court.

Which banks you may ask? The Valukas report indicated the beneficiaries of the alleged fraudulent transfer were as follows: Goldman Sachs, Barclays, Morgan Stanley, JPMorgan, Citadel L.P. and DRW Trading. Surely, another lawsuit for shady business practices against Goldman is all the firm needs right now.

 

Human decisions blamed for market rout

  
Analysis, Education
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Human decisions to sell stocks may have been behind the August rout for equity markets after all, with hedge fund and mutual fund managers selling in response to turbulence and fears for the Chinese economy.

The conclusion, based on work by strategists at JPMorgan, is a riposte to those who have attempted to blame esoteric trading strategies such as “risk parity” for the size and speed of the summer correction.

“Discretionary managers were likely the ones responsible for the recent equity market sell-off,” said Nikolaos Panigirtzoglou, global asset allocation strategist for the bank, in a note to clients.

Macro hedge funds and balanced mutual funds, both of which can invest in a variety of asset classes, took abrupt steps to reduce the risk of stock market losses during the month. The aggregate equity beta of portfolios, a measure of the relationship between equity index movements and those for individual investment funds, declined sharply in August.

The bank also found betas for so-called long-short hedge funds, stock market specialists, declined sharply in August as managers reacted to volatility by paring bets. JPMorgan’s work is based on a regression analysis of index movements, such as the HFRX, a hedge fund benchmark, as a proxy for fund holdings. (more…)

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