A Wipeout That Didn't Have to Happen
(Feb 2012)
This weekend the New York Times' Gretchen Morgenson wrote an article about the recent FINRA award against Banc of America Securities for their LCM VII CLO. We have blogged about this case before, and have put together a research paper describing the underlying issue of warehousing assets in structured credit derivatives. We are very grateful to the New York Times and Gretchen Morgenson for giving this story the attention it deserves.
The fundamental problem with structured credit and many...
President and CIO of Direxion admits that leveraged ETFs are not appropriate for most investors
(Jan 2012)
Today Seeking Alpha posted an interview with Dan O'Neill, President and CIO of Direxion, one of the first and best known issuers of leveraged ETFs. Readers familiar with our work on leveraged ETFs know that we feel these products are almost always unsuitable for retail investors.
Surprisingly enough, Mr. O'Neill agrees completely:
The leveraged indexed ETFs are used by very tactical investors, and so there we have bull and bear funds. They have daily betas, which means that essentially...
NY Times on the Hosier decision
(Jan 2012)
The New York times has an article about the MAT and ASTA products sold by Citigroup that were the subject of a $54.1 million award in Denver last April. SLCG provided expert testimony and analysis for the claimants in this case, including assessing the MAT/ASTA products at issue, and we are excited that the Times has drawn attention to these highly risky investments.
The MAT and ASTA products were hedge funds that implemented a leveraged municipal bond arbitrage strategy. Essentially,...
In the News: Auction Rate Securities
(Dec 2010)
Forbes' blogger Bill Singer narrates the story of Grand Circle LLC.
Grand Circle had brokerage accounts at the Royal Bank of Canada (RBC) and Wachovia. Through the recommendation of representatives at RBC and Wachovia, Grand Circle purchased auction rate securities (ARS). For business-related reasons, Grand Circle opened another brokerage account at CCO Investments Services Corp (CCO). Grand Circle's Investment Policy stated that it wanted safe, liquid and AAA rated securities and that...
