TheChek News Flow

{ http://www.zerohedge.com/news/2015-01-21/hedge-fund-manager-loses-998-9-months-tells-investors-he-sorry-overzealousness}

Hedge Fund Manager Loses 99.8% In 9 Months, Tells Investors He Is "Sorry" For "Overzealousness"

Day after day, mainstream media proclaimed December the month to be in stocks: seasonals, Santa Claus rally, and performance-chasing funds would 'guarantee' upside. For Owen Li, former Raj Rajaratnam's Galleon Group trader, and the clients of his Canarsie Capital hedge fund, December 2014 will never be forgotten. According to CNBC, from around $100 million in AUM in March 2014, Li told investors in a letter, the fund had lost all but $200,000 and he was "truly sorry," for "acting overzealously" in the last 3 weeks.

Lawrence Delevingne reports:

A hedge fund manager told clients he is "truly sorry" for losing virtually all their money.

Owen Li, the founder of Canarsie Capital in New York, said Tuesday that he had lost all but $200,000 of the firm's capital—down from the roughly $100 million it ran as of late March 2014.

"I take responsibility for this terrible outcome," Li wrote in a letter to investors obtained by CNBC.com

"My only hope is that you understand that I acted in an attempt—however misguided—to generate higher returns for the fund and its investors. But even so, I acted overzealously, causing you devastating losses for which there is no excuse," he added.

...

Li said in the letter that he made a series of "aggressive transactions" over the last three weeks to make up for poor returns in December. He said he bet on stock price options, predicated on the broader market rising. But stock indexes instead fell, causing the huge losses along with several undisclosed direct investments, according to the note.

Li is a former trader at Raj Rajaratnam's Galleon Group, which collapsed amid insider trading charges.

Li's lieutenant at Canarsie is Ken deRegt, who joined in 2013 after having retiring as the global head of fixed income sales and trading at Morgan Stanley.

To Mr. Li's less than sophisticated investors we have a short clip summarizing what just happened:

As for Mr. Li, we look forward to his next "hedge" fund reincarnation so that we too can give him some of our money to manage because it really is not easy to find someone who can blow through $100 million in less than a year. And who knows: if someone is willing to fund a guy that dumb and that clueless, next time he actually is due to hit it out of the ballpark.

- Sources say that Google looking to strike deals with Sprint and TMUS to buy wholesale access to their networks, which would make Google a mobile virtual network operator (MVNO)

- Sources say that Google looking to strike deals with Sprint and TMUS to buy wholesale access to their networks, which would make Google a mobile virtual network operator (MVNO)

He’s the oracle of oil.

Wall Street is buzzing about hedge-fund hotshot Zach Schreiber, whose New York firm reaped $1 billion last year betting on the oil bust, Bloomberg News reported.

Schreiber — a relative unknown even in hedge-fund circles — sounded the alarm in May when he warned a gathering of bigwig moneymen that the price of oil would plunge.

“If you are long, I’m sorry for you,” he told the audience, according to Bloomberg, then underscored his point by flashing a slide of a clown-stuffed car on the screen.

Since then, the 42-year-old Schreiber has watched his star soar while the price of crude oil has taken a dive.

Oil has fallen by more than 50 percent amid a global glut, making Schreiber’s PointState Capital one of the biggest hedge-fund winners. The fund generated a return of 27 percent for 2014 after fees, Bloomberg reported.

The US has ramped up oil production, fueling competition with crude-rich countries in the Middle East. To protect their market share, the OPEC nations have resisted slashing production despite the plunge in prices.

Schreiber worked at Stan Druckenmiller’s Duquesne Capital Management until 2010. He started PointState, along with several Duquesne alums, in January 2011. The firm started last year with $5.8 billion in assets.

The famed fund pro generally avoids commodity sectors. But he sees value in some beaten-down names.

The fourth quarter was a strong one for stocks in general. Small-cap companies were particularly strong and made up some (but not all) of the ground by which they trailed large caps this year. During the quarter, though, there were two notable points of weakness.

The first was a very brief period in October. The market had drifted off its September highs and then dropped over 5% in five market days. This was not a major drop, but amid the panic selling some individual stocks fell much further. We were able to add to existing holdings and to initiate positions in several stocks--- MasterCard (ticker: MA ), Allison Transmission ( ALSN ), Motorola Solutions ( MOT ), and Twenty-First Century Fox ( FOX ) -- that had been waiting patiently on our “on deck” list. We were hopeful that the correction would continue so we could buy more shares but the market bounced almost immediately.

A narrower but much deeper and longer decline occurred in the energy sector. Oil prices had drifted down from a mid-year peak over $100 per barrel to about $90 at the beginning of October. The slide continued to the mid-$70’s in late November and then accelerated, reaching $55 in late December. It is impossible to predict how low oil prices will fall or when they will recover. The domestic shale oil boom, OPEC behavior, slowing growth in China, and many other factors will affect the short-term supply and demand balance. In the meantime, drilling budgets and other capital spending plans are being slashed. Stock prices of strong energy-related companies have fallen sharply (and prices of companies with weak balance sheets have been crushed).

We have rarely held large positions in energy stocks. The companies tend to be capital intensive and have little control over their own destinies because they have to accept the going prices for the commodities they produce. Occasionally, though, when oil and gas prices fall below their long-term marginal cost of production and there is distress in the industry, we get the opportunity to buy strong energy businesses with sensible, disciplined managements and conservative balance sheets at attractive prices. Pioneer Natural Resources ( PXD ), an oil stock, Range Resources ( RRC ), a natural-gas play, and Core Labs ( CLB ), an oilfield services stock, have each fallen nearly 50% from their recent highs and we have added, or initiated positions.

Conditions can change rapidly in the “oil patch,” and the stocks might recover in short order, but if the recovery is measured in years, we believe we have the right companies at the right prices to earn good returns over an extended holding period.

Outlook

Going forward into 2015, we are excited about the possibilities. There are signs that the economic recovery in the U.S. is gathering strength. The Federal Reserve has finally completed its multi-year program of creating money and pumping it into the securities markets. This may cause some “withdrawal pains” among investors who used the Fed’s largesse for speculation, but the end of “quantitative easing” should prove to be a healthy development.

The “rest of the world” is a mixed picture (as it always is). The collapse in oil prices will be very hard on some countries, beginning with Russia. On the other hand, Japan, China, India and other oil importers will receive a boost. Growth rates in China and other “emerging markets” have slowed recently but at 5-7% are the envy of most Western countries. There are geopolitical hotspots all over the world and some are bound to generate worrisome headlines at times. The very strong dollar may cause some disappointing earnings reports (earnings in foreign subsidiaries’ home currencies will translate into fewer dollars), but foreign assets will be cheaper for our U.S. companies.

The October “wobble” and the more serious carnage in the energy sector were good reminders that opportunities arise unexpectedly. We have been actively researching new investment ideas and patiently waiting for the chance to deploy some of our cash reserves. We are not cheering for a bear market but some stock price volatility would be very helpful in positioning our portfolios for future gains.

The outlook for our portfolio companies is very good. We expect them to grow and to find ways to “make their own breaks” over the coming years. After six “up” years in a row, it would be surprising to see another smooth, upward move in stock prices but that will depend on investor psychology. In the long run, it is valuation that matters and we are keeping our eyes firmly focused on business values.