Tag Archive for DB

Distressed Debt Investing Now a Favorite Move for Hedge Funds – Money Morning

Regulators have demanded that banks stop engaging in so much risky behavior – chiefly, distressed debt investing. And the banks have begun to curtail this type of investing.

But this has led to an unprecedented – though not unpredictable – situation: It seems the hedge funds are picking up the slack.

The distressed debt that banks are leaving behind is getting bought up, in a big way, by credit hedge funds. Fully $108 billion worth of distressed debt investments is being picked up by these groups.

Hedge funds are not as big as the large banks, with assets running “only” into the mid-hundreds of billions. But the more moves they make, the bigger they become.

Hedge funds, money-market funds and REITs – engines of shadow-banking – have exploded recently, in terms of capital and headcount. And top talent – for top dollar – has been leaving companies like Deutsche Bank AG (NYSE: DB) and Barclays Plc (NYSE: BCS) for the greener, riskier pastures of BlueCrest Capital Management and Pine River Capital Management.

Hedge funds are less regulated than banks, because they cater to a savvier investor with different goals than someone who has a run-of-the-mill checking, savings or retirement account. Grandma is not opening up a Christmas Club account for you with the likes of Carl Icahn – yet.

This freer atmosphere makes hedge funds the natural place to turn once you begin to rule out banks. They’ve become “shadow banks,” and they’ve been getting into some pretty interesting areas.

Their investment in bankruptcy claims and distressed debt is of particular note.

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Goldman Sachs is Manipulating Gold Prices Right Before Your Eyes – Money Morning

If you want a lesson on how to manipulate gold prices, you need only look at what Goldman Sachs Group Inc. (NYSE: GS) has been doing over the past few months.

Goldman set the table by predicting a turn in gold prices back in December 2012, which no doubt contributed to the precious metal’s 5% decline in the first two months of the year.

At the end of February, Goldman issued a research report that said the big Wall Street bank had soured on the yellow metal, and dropped its three-month target for gold prices from $1,825 an ounce to $1,615, its six-month forecast from $1,805 to $1,600, and its one-year outlook from $1,800 to $1,550.

Then, just yesterday (Wednesday), Goldman doubled down on its negative outlook for gold prices.

The bank’s new targets for gold prices are $1,530 in three months, $1,490 in six months and $1,390 in one year.

The double whammy – two downgrades in two months – had its intended effect, as gold prices fell 2%, to $1,558.80, after Goldman released its report. It was the biggest single-day percentage drop for gold in nearly six months.

“If you’ve ever suspected gold prices are being manipulated, you’re not alone – and you’re right, they are,” said Money Morning Chief Investment Strategist Keith Fitz-Gerald.

The proof is right in front of us.

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