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28 Feb 2008

Offering sets new standard in hedge fund management

Hedge fund affiliate, Citadel Solutions, today announced a partnership with Bloomberg to provide hedge fund administrative services through the Bloomberg terminals used by traders.

With more than $30 billion in assets under administration, Citadel said the package will diversify their revenue. Citadel described the product as a "hedge fund in a box."

John Buckley, President of Citadel Solutions, said, "We've greatly simplified the set-up of managing a hedge fund, allowing our clients to focus on what they do best, trading, and not focus on administration."

Launched in 2007, Citadel Solutions is an affiliate of Chicago-based hedge fund Citadel Investment Group, they provide technology-driven fund administration and
reporting services to hedge funds.

Financialization of America

DUMMERSTON, Vt. -- It seems hard to believe, but the finance, insurance and real estate sector (FIRE, for short) now constitutes about 20 percent of our nation's gross domestic product, while manufacturing contributes less than 13 percent. By comparison, in 1950, manufacturing was 29.3 percent of GDP and financial services contributed 10.9 percent.

In other words, more money is made today by shifting money around than in making things. And the FIRE sector no longer represents a group of institutions designed to raise capital for investment in productive activities; it is wealth generated from activities that contribute little to the actual economy.

Conservative writer Kevin Phillips calls it "financialization," or the process by which the FIRE sector assumes the dominant economic, cultural and political role in a national economy.

For example, energy prices. Last summer, commodities traders bid up the price of oil to $78 per barrel last summer on fears of more unrest in the Middle East after the Israel/Hezbollah dustup and another season of severe hurricanes. Neither thing happened, and oil prices slid down to about $50 per barrel by the end of 2006. Fear-based speculation drove up oil prices, and reality drove them back down.

If you invested in oil futures and got out at the top of the market, you made money. But what did it contribute to the larger economy? The rest of us paid more than we needed to for most of 2006 for heating oil, propane and gasoline, based on a possibility that some disruption of petroleum supplies might happen. That's what you get when the financial sector is totally divorced from reality.

Now, oil prices have crept back up to that level this summer, without an suitable alibi such as a hurricane or a war to justify $78 a barrel oil. Who is profiting and does this profit provide an good for the economy at large?

An equally good question is the long-term viability of an economy based on shuffling around financial assets.

It's hard to say whether the sharp swings in the stock market over the past week has been just a minor correction in stock values or the start of what could be a bigger problem.

The Dow Jones Industrial Average went all the way up to 14,000 on July 19 based on the hope that the collapse of the subprime lending market would not have an effect on the larger economy and that higher energy prices would not have an effect on consumer spending.

The reality, however, is that as much as $2.5 trillion could be at risk in bad mortgages and the frenzy of mergers and leveraged buyouts of companies fueled by borrowed money.

According recent figures from Moody's, the bond rating firm, nearly 20 percent of all mortgage debt is at risk, or about $2.5 trillion of subprime mortgages. About $1.4 trillion is at high risk of default, as many as 2.5 million mortgages will default in the next two years and about 20 percent of subprime loans written in the last half of 2006 will default. Investor losses could run into hundreds of billions of dollars.

On July 26, a record 10.59 billion shares changed hands on the three major U.S, markets. Several big deals - from Chrysler to Tyco Electronics - have been postponed in the last couple of weeks because of rapidly tightening credit. There's an estimated backlog of more than $300 billion in unsold bonds and bank loans. That's almost as big as the backlog of unsold homes in the United States right now, as housing inventories in some part of the country are at levels not seen in decades.

The implosion of the subprime mortgage market, where people with little or no savings took huge mortgages with little or no money down, has been well documented. While it was inevitable that money lent to people without the means to pay it back would lead to a massive number of defaults and foreclosures, the investors who fueled this market never seemed to think that all those risky loans might go bad at all once.

It's truly amazing to see how deeply Wall Street has been involved in what's known as collateralized debt obligations (CDO), or the bundling of mortgages, home equity loans, car loans and credit card debt by hedge funds.

A major Wall Street investment house, Bear Stearns, saw about $10 billion of value disappear from two of its CDO hedge funds last month, and the market barely blinked an eye. But once other investment houses came to the realization that they are holding hundreds of billions of dollars of bad loans that they are now unable to sell to other investors, they started to realize that you can only ignore reality for so long before it comes back to bite you - hard.

Mortgage lenders stopped caring if borrowers were qualified. Bankers stopped caring if borrowers couldn't repay loans. And all these bad loans got repackaged and resold to other investors - all gussied up so that you'd never know that you were buying into funds based on assets that didn't exist.

This has been the state of our financial markets over the past few years. Greed has seemingly blinded people to fundamental economic principles, and the transfer of more of this nation's wealth into the hands of fewer and fewer people is celebrated as capitalism's highest achievement.

The total net worth of American households climbed to $54.1 trillion last year, or more than $3 trillion higher than it was in 2005, and tax revenues managed to increase despite lower rates on wealthy Americans. Meanwhile, over the past five years, inflation-adjusted weekly wages for workers have been up about 0.5 percent per year.

Unfortunately, the people who have profited from wrecking the American economy will walk away with bulging pockets and seemingly clear consciences. The rest of us will be stuck with cleaning up when every comes tumbling down.

Randolph T. Holhut has been a journalist in New England for more than 25 years. He edited "The George Seldes Reader" (Barricade Books). He can be reached at

On Native Ground
by Randolph T. Holhut
American Reporter Correspondent
Dummerston, Vt.

Individual Outperforms Hedge Funds at Competition

Haochen Hu, a seasoned investor from Hong Kong, won this year's World TopInvestor competition with gains of almost 785% over 12 months.

He outperformed the world's leading hedge funds with gains of almost 785% over the competition period. The competition is a live, real money, capital markets trading competition lasting for a full year. The prize for the top investor is the management of a fund with an investment value of $250,000 sponsored by Saxo Bank, a global leader in online trading and investment services.

The winner of the 2007-08 competition was Haochen Hu, who led a strong field including Guo Hanqui with a net gain of 630%, Julian Szkirpan from the United States with 555% as well as Hungarian investors György Doleschall with a 315% gain and Tamás Czajner with 135%.

"Losing money is bad, but it is much worse when you don't know why you lost. I have traded online for eight years and you must study and be familiar with the product you want to invest in. My strategy was simple. I focused on currency trading and used the higher leverage when I felt the chance was there," commented Hu.

Next year's World TopInvestor Competition is open to all entrants willing to open an account with any Broker sponsor. Among this year's sponsors of the World TopInvestor competition were several leading online investment banks and brokers from all over the world including: Saxo Bank, Commodity Broking Services, BenchMark Finance, Cambiste, Finexo, Buda-Cash Brókerház, TMS Brokers, Banco Best, Poteza BPD, Dif Broker and RCG FX Trader.

AdultVest Launches Alternative Investment Series Of Meetings

Alternative investment firm AdultVest has scheduled an ongoing series of monthly meetings to bring investors together with adult businesses that represent alternative investment opportunities.

On the last Wednesday of each month, AdultVest executives will listen to presentations from adult business owners, and the following day the most well-prepared companies with the best opportunities will be presented in person to investors at the investor meeting.

According to AdultVest CEO Francis Koenig, he and his team will meet tommorow, at the first of these monthly meetings, with about 20 adult companies to assess the viability of the investment opportunities presented to them. The following day, 10-15 vetted investors will attend.

"The meetings are geared to bring investors and companies together," he said. "During the meetings, deals will be passed around the table and we will all discuss the various levels of interest in the deals presented. In certain circumstances, if we feel they are ready, we will invite company CEOs to make their own presentations."

"We're specifically looking for Internet companies and gentlemen's clubs with minimum annual revenue exceeding $1 million. There really are no limitations as to deal size on the higher end of the spectrum."

AdultVest investor meeting attendees will include private equity, hedge fund, venture capital and angel investment fund managers, as well as individual investors, investment bankers, financial advisors, and the AdultVest investment committee in charge of managing the AdultVest Bacchus Investment Fund and Priapus Investment Fund.

According to Marketplace Statistics recently added to the AdultVest website, 647 adult companies have submitted investment proposals to the company, with 3380 vetted investors in the pool of interested parties. There have also been 1833 due diligence requests made by potential investors.