Venezuela, Bond Ethics & Argentina (Short Ethics)

We're big fans of Bloomberg's Matt Levine. He has written some great stuff on Venezuela and we like how he takes a piss out of Eaton Vance Corpin this piece. Putting aside high-yield issuances, though, folks in the distressed space know these ethical dilemmas all-too-well: in the claims trading space. To our knowledge, that space isn't as prolific or lucrative as it once was before the proliferation of expedited 363 sales and prepacks but there are still some exceptions and sometimes those exceptions can be dicey. We were thinking about this very subject while watching HBO's (fairly) new Bernie Madoff pic. When Madoff went down, claims traders started licking their chops looking for opportunities to arbitrage. So what happened? Moms and Pops accepted offers to sell their claims for pennies on the dollar to funds. Why? Because many just lost their life savings and needed liquidity, that's why. Why did the funds do this? You know, because of their fiduciary duty to generate alpha for LPs, of course. Those that didn't partake because of ethics? Well, quite frankly, they didn't make money like some of the big boys did. Which also means that those bros didn't get paid. "Honey, why wasn't your bonus bigger this year?" "Because management wouldn't let me make money off the backs of financial victims, baby." Ethics have costs, we suppose. Elsewhere in the realm of ridiculousness, Argentina, the Lucy to yield-starved investors' Charlie Brown, issued a 100-year bond. Choice quote: "The market has a short memory." You think? We wonder whether there's a PIK toggle feature: at this point nothing would surprise us. 

Sheesh...the Hedge Fund Business is Rough. $VRX

Maybe the SEC will approve a quadruple levered index fund that effectively shorts hedge funds. $111 billion has been withdrawn from hedge funds as they, collectively, fail to match the S&P Index. The linked article cites Pershing Square Capital ManagementPerry CapitalEton Park Capital Management and Paulson & Co. as examples of fallen stars; it also highlights the ridiculousness of paying these guys 2-and-20 to go long in a hedge fund hotel like Valeant ($VRX). You can just as easily lose your money in a pharma index. As Matt Levine from Bloomberg says, "The giants of the earlier, more romantic age of investing are on their way out -- retired, running family offices, reinventing themselves as quant managers, or just reeling off consecutive down years." Zing. On the flip side, Steve Cohen is whipping it out and flicking off the regulators starting in '18 (firewall). So, there ARE growth prospects in the industry so long as you're already rocking billions of your own seed funding, some celebrity, and a f*ck you attitude that translates, in the minds of the fickle, into "alpha." Yield is yield and ya gotta get it somewhere. Who cares how?