By DAN FITZPATRICK, GREGORY ZUCKERMAN and SCOTT PATTERSON
The J.P. Morgan Chase JPM +0.79%& Co. trader known as the “London whale” tried to alert others at the bank to mounting risks months before his bets ballooned into more than $6 billion in losses, according to people familiar with emails reviewed by J.P. Morgan and a U.S. Senate panel.
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Recent Articles
‘London Whale’ Sounded an Alarm on Risky Bets
Paulson Holds on to Gold Bet as Others Dump Yellow Metal
By GREGORY ZUCKERMAN
John Paulson still believes in gold.
That has been a painful stance lately. But Monday finally brought some good news for the well-known hedge-fund manager and other gold bulls.
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The hottest trade on Wall Street–Betting against the Japanese Yen
By GREGORY ZUCKERMAN
Some of the biggest U.S. hedge-fund investors have made billions betting against the yen, exploiting Japan’s determination to weaken its currency and boost its economy.
Wagering against the yen has emerged as the hottest trade on Wall Street over the past three months. George Soros, who made a fortune shorting the British pound in the 1990s, has scored gains of almost $1 billion on the trade since November, according to people with knowledge of the firm’s positions. Others reaping big trading profits by riding the yen down include David Einhorn’s Greenlight Capital, Daniel Loeb’s Third Point LLC and Kyle Bass’s Hayman Capital Management LP, investors say.
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The $300 Million Blunder
Jabre Bought Japanese Shares After Quake, but Bailed Too Soon, Missing Rebound
By GREGORY ZUCKERMAN
Few investors have made as many mistakes navigating markets over the past two weeks as Philippe Jabre.
Mr. Jabre, one of Europe’s best-known hedge-fund managers, bought Japanese stocks on news of the earthquake, and then suffered when the Nikkei Stock Average quickly tumbled 13%. Making matters worse, Mr. Jabre got nervous and sold his shares last week, just before a rebound in Japanese stocks. The miscues cost his firm about $300 million, the worst few days of his career.
But as Mr. Jabre reflects on his decisions, he isn’t sure he made many mistakes.
“I keep thinking about it, what could I have done differently?” said Mr. Jabre, who manages $6 billion hedge fund Jabre Capital Partners SA. “I spent all last weekend asking questions” of friends, colleagues and clients, he said. “We couldn’t take the risk of the Tokyo Stock Exchange closing down, so we sold” Japanese shares.
‘Macro’ Traders Ride Yen’s Volatility
By GREGORY ZUCKERMAN
As financial markets struggle to digest the catastrophic effects of Japan’s earthquake, growing violence in the Middle East and resulting jolts to global economies, traders like John Brynjolfsson and Samer Nsouli are engaged in a furious fight to try to stay ahead of events.
Wednesday afternoon, Mr. Brynjolfsson was in the lobby of a Denver office building, waiting to meet a potential investor for his hedge fund, Armored Wolf LLC. Rather than review notes for the meeting, however, Mr. Brynjolfsson couldn’t take his eyes off a television screen flashing market prices.
Soon he was calling contacts at Wall Street banks, searching for information about what he describes as “a freefall panic” in currency markets that sent the yen soaring to its highest level in years, and the dollar tumbling, all between 5:10pm to 5:20 Eastern time on Wednesday.
Trader Racks Up a Second Epic Gain
$5 Billion Profit for John Paulson
By GREGORY ZUCKERMAN
Hedge-fund manager John Paulson personally netted more than $5 billion in profits in 2010—likely the largest one-year haul in investing history, trumping the nearly $4 billion he made with his “short” bets against subprime mortgages in 2007.
Mr. Paulson’s take, described by investors and people close to investment firm Paulson & Co., shows how profits continue to pile up for elite hedge-fund managers. Appaloosa Management founder David Tepper and Bridgewater Associates chief Ray Dalio each personally made between $2 billion and $3 billion last year, according to investors and people familiar with the situation. James Simons, founder of Renaissance Technologies LLC, also produced profits in that range, say investors in his firm.
Cocoa’s Drop Pressures a Big Wager
By GREGORY ZUCKERMAN And LIAM PLEVEN
Mr. Ward’s Armajaro Holdings Ltd. shook up the commodities market in July by buying a $1 billion cache of cocoa, enough to make 15 billion Hershey’s milk-chocolate bars. But since Mr. Ward made his audacious bet, cocoa prices have dropped 26%.
Two hedge funds run by Armajaro, including its CC+ Fund, which focuses on cocoa and coffee, lost about 6% of their value during the first two weeks of August, according to investors who have viewed the returns. And since then, prices have continued to decline, suggesting Mr. Ward could be coming under more pressure.
It isn’t certain the drop in cocoa is to blame for the recent losses. And some analysts say the recent decline in prices may be short-lived. An Armajaro spokesman declined to comment.
The funds remained up about 12% on the year through the middle of August, the investors say.
Firm Makes Bold Bet on Falling Prices
A Wager by Fairfax Financial Risks $174 Million. If Deflation Arrives, It Could Be Worth Billions.
By GREGORY ZUCKERMAN
A Canadian insurer is turning to a seldom-used strategy to make a big wager on falling prices over the next decade.
Greg Zuckerman discusses a Canadian insurer that has wagered on derivatives that profit from a decline in consumer prices.
As more investors worry about the possibility of deflation—or a sustained period of falling prices that could cripple stocks—Fairfax Financial Holdings Ltd. has spent nearly $200 million to buy derivative contracts wagering on a decline in the consumer-price index, an inflation indicator. The trade could lead to huge profits if deflation occurs.
Pellegrini’s Hedge Fund to Return Money to Investors
Paolo Pellegrini, the investor who helped hedge-fund manager John Paulson score more than $15 billion of profits betting against risky mortgages, is returning money to clients of his own hedge fund after suffering losses this year.
Mr. Pellegrini’s PSQR Capital has lost about 11% so far in 2010, according to a person close to the matter. The decline included a drop of about 8% in July, after bets against U.S. Treasurys and other moves went awry. The loss has made it more difficult for him to raise cash from investors.
Mr. Pellegrini’s fund gained more than 61% last year, and he had hopes of growing the firm, which he launched after leaving Paulson & Co. But investors have proved reluctant to place money with midsize hedge funds over the past year. The decision was reported by AR Magazine.
Gregory Zuckerman to appear at Wellesley Booksmith
Ever wonder how someone could earn four billion dollars in one year? Find out at Wellesley Booksmith on June 10 at 7 p.m. and hear what Wall Street Journal Senior Writer Gregory Zuckerman, author of “The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History,” has to say.
Zuckerman’s book depicts the evolution of hedge fund megastar John Paulson’s massive payday resulting from his timely bet against sub-prime mortgages when housing prices appeared to have a one-way ticket to the moon . Zuckerman’s portrait of the colorful gallery of individuals who won and lost as a result of the housing meltdown makes the book a compelling read even for financial novices.
“The Greatest Trade Ever” has recently received renewed attention amidst the SEC’s allegations regarding Goldman Sachs role in Paulson’s trades. Who thought a book about the hedge fund industry could be a page- turner?
Space is limited, so reservations requested. Call 781-431-1160; events@wellesleybooksmith.com. The event will be downstairs at Wellesley Booksmith, 82 Central St.
