Facebook Investors Know Exactly Whom to Blame

Illustration by Martin Cole

By Jonathan Weil 2012-09-06T22:30:32Z

 

Who is to blame for Facebook Inc. (FB)’s initial public offering? Is it Mark Zuckerberg, Facebook’s founder and chief executive officer? Someone else at the social- networking website? Morgan Stanley (MS), the bank that led the deal? Nasdaq, which botched the stock’s early trading?
If you lost money on Facebook shares, which have given up about half their value since the company’s IPO, the answer is: none of these.

Ever since Facebook debuted in May, only to begin plunging in value within a few days, I hoped somebody of note would speak out publicly to take personal responsibility for losing money on this stock, rather than pointing fingers at others. A few days ago, it happened.
Mark Cuban, owner of the Dallas Mavericks basketball team, wrote a post on his blog in response to a column in which Andrew Ross Sorkin of the New York Times pinned the blame on David Ebersman, Facebook’s chief financial officer. Cuban said:
“I bought and sold FB shares as a TRADE, not an investment. I lost money. When the stock didn’t bounce as I thought/hoped it would, I realized I was wrong and got out. It wasn’t the fault of the FB CFO that I lost money. It was my fault. I know that no one sells me shares of stock because they expect the price of the stock to go up. So someone saw me coming and they sold me the stock. That is the way the stock market works. When you sit at the trading terminal you look for the sucker. When you don’t see one, it’s you. In this case it was me.”

Ringing True

Bless that man. Cuban may be a sophisticated fellow, in the sense that he’s very wealthy and knows the Wall Street game, having once run and sold a public company. But his comments ring even more true for individuals of much lesser means.
As the financial journalist John Brooks wrote in his epic 1973 book, “The Go-Go Years,” about Wall Street during the 1960s: “In the nature of things, the amateur investor remains and probably will remain at a certain disadvantage in relation to the professional. Perhaps his best protection lies in knowledge of that fact itself.”
In spite of the shareholder lawsuits filed against Facebook, I have seen no indication that the company’s executives lied to the public about its performance or prospects. Facebook’s prospectus warned about the risks. The decline in Facebook’s rate of revenue growth shouldn’t have surprised anyone. In 2010, sales grew 154 percent. In 2011, they rose 88 percent. By the first quarter of this year, the year- over-year rate was 45 percent. Last quarter, Facebook’s first as a public company, it was down to 32 percent.
So where might be the bottom for Facebook’s shares? The stock recently was selling for about $19, giving the company a $46 billion market value. Facebook isn’t going broke, or at least not anytime soon. Thanks to the money it raised through its IPO, the company had $10.2 billion, or about $4 a share, of cash and marketable securities as of June 30. Even in a worst- case scenario, the stock shouldn’t drop that low, assuming Facebook doesn’t blow all the money. The company’s $13.3 billion of shareholder equity, or assets minus liabilities, works out to a little more than $5 a share.
Last year, Facebook reported $1 billion of net income. Let’s say, for argument’s sake, that Facebook deserves to trade for 14 times that much, or $14 billion, using the earnings multiple for a typical stock in the Standard & Poor’s 500 Index as a guide. That’s less than one-third of the market capitalization now. And that may be generous, considering Facebook reported a net loss last quarter.

Long Way

While these are simplistic gauges, they do illustrate that the stock could still have a long way to fall. My guess is a price in the single digits might be worth a flier, and that there is still a huge amount of risk in the shares now. But what do I know? Trying to predict Facebook’s stock price is like trying to guess from a distance what a helium balloon might do next after it’s already way up in the air.
In an e-mail, Cuban said he wrote his blog post because “I just get annoyed by talking heads in media throwing punches without any real substance.” Asked why he bought the stock, he said: “I thought that there would be traders who would trade the psychology and hype of the stock. Turns out I was the only one trading that way.” Pointing fingers at others, he said, is “the easy way out.”
As for investing advice for the masses, particularly on newly minted stocks, Cuban said: “You don’t know enough to invest in individual stocks. You are gambling. If that suits you, great. Go for it. You might win. But realize that no one sells stocks expecting you to make money on the deal.”
So who is to blame if you lost money on Facebook? The fault is entirely your own. This isn’t a game for crybabies.

(Jonathan Weil is a Bloomberg View columnist. The opinions expressed are his own.)

To contact the writer of this article: Jonathan Weil in New York at jweil6@bloomberg.net
To contact the editor responsible for this article: James Greiff at jgreiff@bloomberg.net

U.S. lays out examples of "gross negligence" by BP

By David Ingram

WASHINGTON | Wed Sep 5, 2012 12:09am EDT

(Reuters) - The U.S. Justice Department is ramping up its rhetoric against BP PLC for the massive 2010 oil spill in the Gulf of Mexico, describing in new court papers examples of what it calls "gross negligence and willful misconduct."

The court filing is the sharpest position yet taken by the U.S. government as it seeks to hold the British oil giant largely responsible for the largest oil spill in U.S. history.
Gross negligence is a central issue to the case, slated to go to trial in New Orleans in January 2013. A gross negligence finding could nearly quadruple the civil damages owed by BP under the Clean Water Act to $21 billion.
The U.S. government and BP are engaged in talks to settle civil and potential criminal liability, though neither side will comment on the status of negotiations.
"The behavior, words, and actions of these BP executives would not be tolerated in a middling size company manufacturing dry goods for sale in a suburban mall," government lawyers wrote in the filing on August 31 in federal court in New Orleans.
The filing comes more than two years after the disaster that struck on April 20, 2010 when a surge of methane gas known to rig hands as a "kick" sparked an explosion aboard the Deepwater Horizon rig as it was drilling the mile-deep Macondo 252 well off Louisiana's coast. The rig sank two days later.
The well spewed 4.9 million barrels of oil into the Gulf of Mexico for 87 straight days, unleashing a torrent of oil that fouled the shorelines of four Gulf Coast states and eclipsed the 1989 Exxon Valdez spill in Alaska in severity.
Specifically, errors made by BP and Swiss-based Transocean Ltd, owner of the Deepwater Horizon platform, in deciphering a key pressure test of the Macondo well are a clear indication of gross negligence, the Justice Department said.
"That such a simple, yet fundamental and safety-critical test could have been so stunningly, blindingly botched in so many ways, by so many people, demonstrates gross negligence," the government said in its 39-page filing.
BP rejects the charge. "BP believes it was not grossly negligent and looks forward to presenting evidence on this issue at trial in January," the company said in a statement. A Transocean spokesman had no immediate comment.
On August 13, BP urged U.S. District Judge Carl Barbier to approve an estimated $7.8 billion settlement reached with 125,000 individuals and businesses, asserting its actions "did not constitute gross negligence or willful misconduct."
The government said Barbier should avoid making any finding about BP's potential gross negligence when he rules on the settlement. Barbier will hold a fairness hearing on that settlement on November 8.
Barbier should also disregard claims made by BP that minimize the environmental and economic impacts of the spill, the government said, citing environmental harms like severe ill health of dolphins in Louisiana's Barataria Bay, which saw some of the heaviest oiling from the spill.

'INDIGNANT TONE'
The new comments do not represent a change in U.S. officials' legal stance, said David Uhlmann, a University of Michigan professor and former environmental crimes prosecutor.
"The Justice Department has consistently maintained that BP and Transocean were grossly negligent and engaged in willful misconduct in the events leading up to the Gulf oil spill," Uhlmann said in an email to Reuters.
The department's latest filing "contains sharper rhetoric and a more indignant tone than the government has used in the past," he said.
But the filing does exhibit exasperation on the part of government lawyers. They wrote that they decided to elaborate on BP's alleged gross negligence because they believed BP was trying to escape full responsibility.
The Justice Department said they feared that, "if the United States were to remain silent, BP later may urge that its arguments had assumed the status of agreed facts."
BP in its statement on Tuesday reiterated that it believes the private-party settlement "is fair, reasonable and adequate and meets all the legal requirements for final approval by the court."

(Reporting by David Ingram, Roberta Rampton, Chris Baltimore and Jonathan Stempel; Editing by Michael Perry)

Oil major BP to make Australian-dollar bond debut in rare kangaroo offer

 Wed Aug 29, 2012 12:33am EDT
* Deal expected to raise $519 million
* Joins exclusive club of offshore borrowers
* Cross-currency swap rate encourages debt deal
SYDNEY, Aug 29 (Reuters) - British oil company BP Plc is looking to sell an inaugural Australian dollar bond issue in a rare "kangaroo" offer, bringing a fresh industrial face to a market crowded with financial and sovereign borrowers.
Kangaroo bonds refer to Australian dollar bonds sold by international issuers in Australia. Offshore borrowers have been historically reluctant to raise Australian-dollar funds because of the limited scale of the nation's bond market.
The five-year kangaroo issue, due to price later on Wednesday, is expected to fetch around A$500 million ($519 million), according to a source who has seen the deal's terms. It will likely pay a margin of around 115 basis points over the Australian bank bill rate.
Greg Stock, a portfolio manager at Perpetual Investments which manages A$4.5 billion in fixed income assets, welcomed the offer.
"It's a global household name and it is very good to see diversification in Australia," he said, adding the issue margin was around fair.
The offer, to be issued by BP Capital Markets, joins a selective club of non-bank/non-government kangaroo borrowers. British telecom company Vodafone is the only other international corporate issuer that has tapped the A$367 billion Australian bond market, ADCM and ThomsonReuters data show.
"Historically, international borrowers, excluding banks, had limited interest in Australia mainly because of the relative smaller size of our market and pricing," said Gus Medeiros, credit strategist at Deutsche Bank.
"But domestic demand appears to be improving for selected names, with the basis swap helping on pricing, enhancing the position of Australia as an alternative."
Encouraging BP is a favourable move in the Aussie-U.S. dollar cross-currency basis swap rate, a key instrument used by international borrowers because it reflects the cost of converting funds from Australian dollars to U.S. dollars.
Still, bond deals from non-financial and non-government borrowers in Australia account for only 11 percent of the amount outstanding, according to ADCM data.
The BP offer is said to have drawn interest from Australian funds as well as interest from offshore, high net-worth investors, the person who has seen the issue said.
Perpetual's Stock particularly appreciated a one-year gap that BP allowed between its roadshow visit and the actual bond offer, as it allowed him to better assess the company's ongoing litigation issues.
In April 2010, BP's Deep Horizon oil platform exploded in the Gulf of Mexico, killing 11 workers and sparking the biggest U.S. oil spill in history.
"The passage of time was beneficial," he said.
BP is rated A by S&P and A2 by Moody's and its offer is jointly led by ANZ and UBS.

Shell ups stake in Australia's Browse LNG, Chevron exits

Tue Aug 21, 2012 12:39am EDT

 

(Reuters) - Royal Dutch Shell Plc (RDSa.L) will increase its stake in Australia's Browse LNG project by picking up Chevron's equity in the $30-billion venture in an asset-swap deal, opening up the possibility of new development options such as floating LNG.

Browse LNG has been plagued by controversy over its proposed location at James Price Point on the northwestern coast of Australia, which has been opposed by some project partners, environmentalists and Aboriginal landowners.

"Shell's increased participation may promote alternative development options such as floating LNG, should a land-based project prove to be too expensive or too impractical," Morgan Stanley analyst Stuart Baker said in a note to clients.
Shell is regarded as the industry leader in developing floating LNG and expects to bring the world's first floating LNG, Prelude LNG, online by 2017.

Shell will pay $450 million and swap interests in two fields off the Australian coast for Chevron Corp's (CVX.N) holdings in the Browse LNG project, Shell said in a statement on Monday.

The deal will increase Shell's share in the development to around 27 percent, according to analysts, and make it the second largest shareholder after operator Woodside Petroleum (WPL.AX).

But the exit of Chevron, which is a partner in Woodside's North West Shelf LNG, may also decrease the likelihood of Browse LNG piping its gas to that facility as an alternative to the development of a plant at the James Price Point location, analysts said.

Woodside is scheduled to make a decision on whether to go forward with the James Price Point location by mid-2013.
BP (BP.L), Japan's Mitsui & Co (8031.T) and Mitsubishi Corp (8058.T) (MIMI) and BHP Billiton (BHP.AX) (BLT.L) also hold equity interests in the development.

Australia, which is expected to surpass Qatar as the top LNG exporter by the end of the decade, has more than $170 billion worth of LNG export projects under construction.

DEAL DETAILS
As part of the deal, Shell will exchange a one-third interest in the Clio and Acme fields in the Carnarvon Basin off northwest Australia for a 16.7 percent interest held by Chevron in the East Browse block and a 20 percent interest it holds in the West Browse block.

The swap would help Chevron expand its Wheatstone area resource base in Western Australia.

Chevron plans to increase production at the $29 billion Wheatstone plant to 25 million tonnes per year (mtpa) from the 8.9 mtpa of LNG currently under construction. Wheatstone LNG is expected to start exporting gas in 2016.

Buying Chevron's interests in the Browse LNG project in Western Australia means Shell will hold a 35 percent interest in the West Browse block and 25 percent interest in the East Browse block. The asset exchange is subject to governmental approval.

(Reporting by Swetha Gopinath in Bangalore and Rebekah Kebede in Perth; Editing by Sriraj Kalluvila and Himani Sarkar)

Barclays, Absa in talks to join forces in Africa

 Tue Aug 21, 2012 1:55pm GMT

 

 

LONDON/JOHANNESBURG (Reuters) -
British bank Barclays is in talks about combining its African operations with those of majority-owned subsidiary Absa Group in a move aimed at accelerating expansion on the continent to catch up with rivals.

Barclays acquired a majority stake in South Africa's third-largest bank in 2005 but the two have remained separate entities outside South Africa - in one case, Tanzania, running parallel operations in the same country.

The bank said on Tuesday that combining the businesses would help increase growth opportunities in Africa.

"The Africa business is an important long-term growth driver," said Oriel Securities analyst Mike Trippitt who estimates Barclays' African loan book will grow by an average 9 percent per annum between 2011 and 2015 compared with 5 percent for the group.

Analysts have said Absa, which is 56 percent owned by Barclays, has been slow to take advantage of its parent's wide presence on the continent, trailing fast-moving rival Standard Bank.

Absa's shares have been hammered on concerns that rising bad debts were derailing its recovery. The bank posted a surprise drop in first-half earnings last month.

The shares are down nearly 7 percent over the last six months, making it the worst-performing stock among South Africa's four biggest banks. By contrast, rival FirstRand is up nearly 20 percent over the same period.

Absa shelved plans to buy Barclays' African assets in 2008 citing price differences. The planned purchase had been part of the original deal when Barclays acquired its Absa stake.

The latest proposal would see Barclays combining its interests in Botswana, Ghana, Kenya, Tanzania, Uganda, Zambia and the Indian Ocean with Absa, and remaining as the majority shareholder of the combined African operations.

Barclays and Absa had already agreed to work more closely together in their "One Africa" strategy and had set up a joint team of executives.
The proposed combination of the businesses will mirror the operational structure already in place, said Maria Ramos, chief executive of Absa and Barclays Africa.

"It will provide a platform for further growth," she said.
The two lenders are hoping to grow their retail and corporate franchise across the continent, while growing the investment bank. They have launched financial services in Botswana, Mozambique and Zambia, and are planning to roll out similar products in Kenya.
"It will result in cost savings," said Faizal Moolla, an analyst at Avior Research. "It could mean that Absa will be focused on South Africa and the new combined entity will spearhead the drive into Africa."
Barclays said combining the businesses would not result in job cuts.
Shares in Barclays were up 1.8 percent to 194.3 pence at 1323 GMT, compared with a 0.7 percent rise in Europe's bank index. Absa was down 0.1 percent compared with a 1 percent increase in the Top-40 index.

(SOURCE- Thomson Reuters, 2012)

Obama’s Health-Care Overhaul Upheld by U.S. Supreme Court

 By Greg Stohr - Jun 28, 2012 5:19 PM GMT+0300

The U.S. Supreme Court upheld the core of President Barack Obama’s health-care overhaul, giving him an election-year triumph and preserving most of a law that would expand insurance to millions of people and transform an industry that makes up 18 percent of the nation’s economy.
The justices, voting 5-4, said Congress has the power to make Americans carry insurance or pay a penalty. That requirement is at the core of the law, which also forces insurers to cover people with pre-existing health conditions. The court limited the law’s extension of the Medicaid program for the poor by saying the federal government can’t threaten to withhold money from states that don’t fully comply.

The ruling frames the health-care issue for this year’s elections and is a victory of symbolism as well as substance for Obama. Chief Justice John Roberts, a Republican appointee, joined four Democratic-selected justices to give the president a majority on a law that has divided the country along ideological and partisan lines throughout his presidency.
Roberts, writing for the court, said Congress had the authority to impose the insurance requirement under its power to levy taxes.
“It is reasonable to construe what Congress has done as increasing taxes on those who have a certain amount of income but choose to go without health insurance,” Roberts wrote.

Longest Arguments

The decision on the Patient Protection and Affordable Care Act is the climax to an epic legal fight that featured the longest courtroom arguments in 44 years, a record number of briefs and extraordinary public interest in a Supreme Court case. The case tested both the constitutional powers of Congress and the willingness of the Roberts court to overrule the other two branches of the federal government.
The dispute marked the first time the Supreme Court had considered a president’s defining legislative accomplishment in the middle of his re-election campaign. The Supreme Court hadn’t considered a law of comparable scope since the justices overturned part of the National Industrial Recovery Act in 1935 during President Franklin Roosevelt’s New Deal.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net
To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net

Moody's tilts playing field towards safe haven banks

By Matt Scuffham and Sarah White

LONDON | Fri Jun 22, 2012 8:29am EDT

Credit: Reuters/Mike Segar/Files

 (Reuters) - Downgrades by ratings agency Moody's will make funding more expensive for banks that rely the most on capital markets, while reinforcing the competitive advantage of "safe haven" banks that can fund themselves from stable customer deposits.

Stock markets took Moody's announcement that it had downgraded 15 of the world's biggest banks in their stride, as the rating agency's lowering by up to three notches had been widely anticipated.
European bank shares rose just under 1 percent. But longer-term, the downgrades could have a lasting impact.
But over the medium term, the downgrades will reinforce a trend that has seen weaker banks punished for their risk taking, while stronger banks are rewarded for conservative funding models, ensuring lower costs and higher margins.
 
Not only will funding costs rise for the worst-rated banks, but trading partners are bound to ask for more collateral - and steer business to those perceived to be financially stronger.
"The new ratings landscape could provide a competitive edge for higher-rated firms," said analysts at Citigroup.
Moody's gave the highest ratings to HSBC, Royal Bank of Canada and JP Morgan, which it said had stronger buffers than peers.
All three are regarded as safe haven banks, funded by deposits from millions of retail customers and relying less than riskier banks on capital markets for short term financing.
Moody's gave the lowest credit ratings to banks that have been affected by problems with their risk management or whose capital buffers are not as strong as rivals.
Those include banks like Morgan Stanley with few retail deposits, as well as banks like Bank of America, Citigroup and Royal Bank of Scotland, which despite having big deposit bases have gotten into trouble by combining their retail business with riskier investment banking.
Moody's placed Barclays, BNP Paribas, Credit Agricole, Credit Suisse, Deutsche Bank, Goldman Sachs, Societe Generale and UBS in a middle group of banks, which it said include firms that rely on unpredictable capital markets revenues to meet shareholder expectations.
For banks which rely heavily on markets for funding, the lower ratings make difficult conditions even worse, at a time when they are suffering because of the euro zone crisis and a global slowdown in growth.
"Markets tend to discriminate more between issuers at lower ratings - in terms of funding costs - particularly during times of stress," said Citigroup analysts.
The downgrades reflected a view on capital markets that was "something more structural and fundamental rather than what is just cyclical noise", Johannes Wassenberg, Moody's managing director of European banks, told Reuters.

"We tried to assess risk from capital markets... and the shock absorbers banks have," Wassenberg said.
Regulators have told investment banks to keep far higher capital buffers, making their business less profitable, while also taking a knife to some of their most lucrative businesses, such as trading for their own account.
The sector has been left with significant overcapacity, reports from consultancy firms have said, meaning the battle for the favors of clients can only intensify.


RISK MANAGEMENT
The ratings agency looked at the banks where exposures to capital markets were the most pronounced, picking firms by the share of revenue generated by fees from debt and equity advisory, trading revenues and trading inventories.
Analysts say banks that will be most affected by funding costs rising as a result of the downgrades are those that were most likely to have to put more collateral on the table.
"Most directly, there are contractual provisions in agreements that would require a firm to post additional collateral, or to replace itself as the counterparty to transactions," said analysts at Execution Noble.
Moody's said some of the lowest rated banks had undertaken considerable changes to their risk management models and were implementing business strategy changes intended to increase earnings from more stable activities such as retail banking. However, it said these transformations are ongoing and their success has yet to be tested.
Moody's said it had taken into account management action at firms like UBS, where it listed the bank's reduced ambition in investment banking as a positive factor.
The downgrades had been widely anticipated having been flagged by Moody's in February and the initial market reaction across Europe was muted.
Daiwa Capital Markets analyst Michael Symonds said the cuts could have been worse and the conclusion of the review removed an uncertainty from the market. However, he warned there could be more downgrades to come.

"The next round of downgrades may be just around the corner given the myriad challenges still weighing on the sector, including the far-from-resolved euro area crisis and imminent legislation on bail ins and resolution regimes," he said.

(Editing by Peter Graff)

California Hedge Fund Is Latest Europe Crisis Casualty

By Saijel Kishan - Jun 14, 2012 7:10 PM GMT+0300

Hedge-fund manager Paul Sinclair is the latest casualty of Europe’s sovereign-debt turmoil, almost six thousand miles away from the epicenter of the crisis.

Sinclair, who is based in Los Angeles, is liquidating his $458 million health-care equities fund, Expo Capital Management LLC, after more than five years, as political decisions made on the other side of the globe have undermined his stock picks and spurred losses for a second year.

People wait in line for bread outside the charity organization "Pane Quotidiano" ("Everyday Bread"), in Milan on June 14, 2012. Photographer: Luca Bruno/AP Photo 

 “I don’t have an edge on Greek elections, the Spanish banking system, what the European Central Bank, the International Monetary Fund, the Chinese government, Angela Merkel, or the U.S. Federal Reserve will do,” he said in a telephone interview yesterday.
Sinclair, 41, said that over the past year he’s found it increasingly difficult to make money because of the macroeconomic environment, and that investing in health care since 2004 has left him “physically and mentally exhausted.” He said he chose to return money to investors, which he plans to do by the end of the month, rather than hold cash and charge them fees.
Billionaire energy trader John Arnold, former Morgan Stanley co-president Zoe Cruz, and Duke Buchan III are among managers who have shuttered hedge funds in the past year as Europe’s sovereign-debt crisis has roiled global markets. The industry last month posted its biggest loss since September as stocks slumped on concern Greece may exit the euro and the global economy is weakening.

Supporters of the Greek socialist party Pasok with the party's flag and fireworks during the a pre-election rally in Athens on June 13, 2012. Photographer: Andreas Solaro/AFP/Getty Images

‘Tricky Markets’

“It’s a confluence of tricky markets, super-cautious investors and a tough fundraising environment that’s making it a difficult time for hedge-fund managers,” said Steven Nadel, a partner at New York-based law firm Seward & Kissel LLP, which advises hedge funds.
Sinclair said he has most of his liquid net worth invested in his fund and was no longer comfortable putting it at risk when markets are subject to the actions of policy makers globally.
He said he plans to spend the rest of the summer sleeping and relaxing and may take up a new hobby, according to a June 9 e-mail he sent to clients. Sinclair said he would continue to follow the health-care industry and is keen to see how it is shaped by a U.S. Supreme Court decision on President Barack Obama’s health law overhauls and the November presidential elections.
Returning client money “is an unusual move but fair and would be welcomed by investors,” said Graziano Lusenti, founder of Nyon, Switzerland-based Lusenti Partners, which advises clients on investing. “Most hedge funds would try to hold onto the money for as long as they can.”

Liquidations Rise

Liquidations in the hedge-fund industry rose to 775 last year, the most since 2009, according to Hedge Fund Research Inc., a Chicago-based research firm.
Fortress Investment Group LLC, based in New York, last month said it will liquidate its $500 million commodities fund run by William Callanan after losing almost 13 percent in the first four months of the year.
Arnold also said the same month that he plans to close Centaurus Energy Master Fund in Houston. Cruz, the former Morgan Stanley executive, is liquidating her $200 million hedge fund after losing 8 percent last year.
Buchan, a New York-based hedge-fund manager, cited the European debt crisis as one of the reasons behind the closing of his equity hedge fund Hunter Global Investors LP.
“Markets seem to be driven more by the latest news out of Europe than by a company’s earnings prospects,” he said in a Dec. 8 investor letter. “We have not weathered the ensuing volatility well.”

Moore Traders

At least three hedge funds run by former Moore Capital Management LLC traders have shuttered in the past seven months after losing client money. They are Salute Capital Management, run by Lev Mikheev, Avesta Capital Advisors LLC, founded by William Tung and Tim Leslie’s JCAM Global fund.
Sinclair’s Expo Health Sciences Fund lost about 6 percent this year through May, after falling 8.7 percent in 2011, the hedge fund’s first year of negative returns, he said in an e- mail. The fund has returned about 50 percent since its 2007 inception, net of fees.
Hedge funds slumped 2.9 percent in May and 1.3 percent this year, according to data compiled by Bloomberg. They lost 5.8 percent last year and a record 19 percent in 2008, the data show.

Market Correlation

The turmoil in the global markets has spurred stocks across industries to rise and fall in tandem. The relationship between price fluctuations for health-care stocks and the rest of the market has tightened. The 30-day correlation coefficient between the MSCI World Index and its members in that industry is 0.92, compared with the average since 1995 of 0.73, according to data compiled by Bloomberg. Readings of 1 mean prices are moving in lockstep.
Sinclair employed a seven-person team with offices in San Francisco. Before he started his hedge fund, Sinclair worked at Vantis Capital Management LLC, a hedge fund in Pasadena, California, where he managed a health sciences fund from about two years until the end of 2006, when the firm shut down. He was previously at Merrill Lynch & Co., within the bank’s health-care investment banking group, and before that at investment bank Donaldson Lufkin & Jenrette.
Sinclair received a masters of business administration from Stanford Graduate School of Business in 1999 and graduated with a bachelors degree in business economics from the University of California in 1994.


To contact the reporter on this story: Saijel Kishan in New York at skishan@bloomberg.net
To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net