by Paul Springer

Performance numbers for August and recent legal developments show that some hedge funds were extremely busy this summer – in court and in the markets.

August was a mixed bag for hedge funds according to data just obtained by CNBC. Funds lost ground, but still faired better than the S&P 500:

Hedge funds declined by more than 2 percent in August, according to new data from Hedge Fund Research. While that performance significantly outpaced the S&P 500 (which lost roughly 5.7 percent over that same period), it has thrown the industry into negative territory for the first time in 2011.

Funds that made a habit of shorting the market were up 7% on average, CNBC says.

Those who fared particularly badly were some of Maverick Capital’s funds and vehicles managed by Paulson & Co., Reuters says.

While August’s volatility after the debt-ceiling deal kept traders busy, the wheels of justice were grinding along at their usual lackadaisical pace. The wheels have ground to a halt right on top of former Galleon head Raj Rajaratnam, who is awaiting sentencing on Sept. 27. Rajaratnam has not show the contrition evinced by some others tried in the matter, and The Guardian says his attitude may not impress the judge favorably:

The hedge fund manager convicted of conducting America’s biggest insider trading scheme has told court officials he isn’t “clear” that what he did was wrong. The admission may lead to an ever harsher sentence, say legal experts.

Former SAC Capital Advisors portfolio manager Donald Longueuil will have plenty of material to work with if asked to prepare a “what I did last summer” essay. After receiving a two-and-a-half year jail sentence in July for criminal charges of securities fraud and conspiracy, Longueuil has now agreed to pay the Securities and Exchange Commission about $250,000 in disgorgement. The  Wall Street Journal says Longeuil will receive credit for $1.25 million in the criminal case.

It was a good-news and bad-news scenario for Louis Bacon’s Moore Capital Management. The good news was the dismissal of a lawsuit that Reuters says disgruntled investors filed, alleging they had lost money because of illegal activities at the fund:

The settlement resolved claims over [trader Christopher] Pia’s alleged efforts in the last 10 seconds of trading days to enter large trades in “illiquid” platinum and palladium markets that pushed prices higher, a strategy known as “banging the close.”

The bad news: The fund already paid $25 million last year to settle charges of manipulating markets in the two metals. This year Pia agreed to pay $1 million to settle with the Commodity Futures Trading Commission.

An allegedly phony hedge fund is at issue in a civil lawsuit that the SEC filed to stop a deaf  Texas man who purportedly drew on connections with other deaf people to solicit capital for investing in traded endowment polices (TEP), the U.K. equivalent of viatical settlements. The SEC’s complaint alleges that over 7,000 deaf investors sent money to Jody Dunn, who neglected to mention that he was allegedly using some of the money to make car and mortgage payments.

Victims were told that an initial $50 investment would allow clients to receive an $80,000 loan to purchase a TEP that yielded 1.2% per day.  The ultimate destination of customer funds is not entirely clear at this point, but the commission says the money was not invested in anything – nor was it returned to investors.

by Todd Shriber

With another Republican candidate debate and President Barack Obama’s long-anticipated jobs speech this week, it’s fair to say that we’re already in the throes of election season. Sure, Election Day 2012 is still 14 months away, but in the world of politics, it’s never too early to start pandering for votes.

Along those lines, Trader Daily decided to take a look at the 10 most important states in the 2012 election, either to Obama’s re-election hopes or the designs any Republican challenger has on defeating the incumbent. California, Illinois, New York and Texas were not included on this list because, based on recent trends, it is highly unlikely that any of these states flip sides.

States appear in order of electoral votes from least to most (electoral votes in parentheses).

10) New Hampshire (4)

The only state in New England that can be viewed as a toss-up, New Hampshire has been identified as critical to the hopes of both parties in 2012, according to The Wall Street Journal.

9) Nevada (6)

Nevada is an interesting case not only because it is the epitome of a tossup state, but also because it was worth five votes in the electoral college in 2008, but in 2012 it will be worth six. President Obama won Nevada in 2008, but Nevada is not loyal. In the three elections from 1980 to 1988, Nevada went Republican. Then Bill Clinton won it in 1992 and 1996. George W. Bush won it twice before Obama cleared it in 2008.

8) Colorado (9)

Once reliably red, demographic changes have altered Colorado’s political hue. And while nine electoral votes won’t have anyone confusing Colorado with California or Texas, in a close race, Colorado will matter, as The Wall Street Journal noted.

7) Wisconsin (10)

Wisconsin has been a blue state in presidential races for a while now. But in 2010, the state elected a Republican governor and senator, so the Democrats could face a dog fight here.

6) Indiana (11)

Obama pulled a big surprise here in 2008. Red Mass Group says the Republicans must win Indiana back in 2012 “in order to remain competitive and relevant.”

5) Virginia (13)

See above. That comment from Red Mass was made in reference to several states, including Virginia. Virginia was once an easy win for Republicans, but Obama dispelled that notion. A potentially competitive Senate race shines the spotlight even brighter on Virginia in 2012.

4) North Carolina (15)

Virginia’s neighbor to the south was also another former easy win for the GOP that went Democrat in 2008. Fifteen electoral votes is enough to get both parties spending plenty of money in the Tar Heel state.

3) Ohio (20)

Ohio elected a Republican governor and senator in 2010, but that hasn’t changed a very weak jobs picture. The big question is which party does Ohio blame its economic woes on, because the party that escapes Ohio’s wrath probably carries this critical state.

2) Pennsylvania (21)

Pennsylvania hasn’t gone Republican in a presidential race since 1998, but it usually appears competitive enough to get both parties spending money there. Losing Pennsylvania would arguably cripple Obama’s re-election hopes.

1) Florida (29)

It’s no surprise that at least one Florida politician acknowledges the fact that Florida is the most important state in presidential politics, according to Politico. President Obama won here in 2008, but Florida has had a tendency to bounce back and forth. The last time a candidate lost Florida and won the election? Bill Clinton in 1992.

by Todd Shriber

Add daily deals purveyor Groupon to the list of hot Internet start-ups that have delayed plans for an initial public offering.

Just a week after Zynga, the company behind the Facebook games FarmVille, CityVille and Mafia Wars, said it would delay its IPO, Groupon appears to have gotten a case of IPO cold feet as well.

No surprise here, at least in terms of the reason Chicago-based Groupon is giving. Market volatility appears to be the culprit, The Wall Street Journal reported, citing a source familiar with the matter. The delayed Groupon IPO is sure to sting a bit for bankers, Groupon insiders and early investors alike.

In early June, the Journal reported that a $1 billion IPO by Groupon could value the company at $20 billion. Around the same time, Bloomberg reported the company was potentially chasing a whopping $25 billion valuation.

Groupon’s publicly traded valuation will have to wait as a roadshow that was planned for next week has been canceled. While Groupon’s IPO plans have not been scrapped outright, the delay arguably underscores some thorny issues the company has had to deal with. Not only is Groupon not yet profitable like Zynga is, but the company found its way into hot water with the Securities and Exchange Commission for using a controversial accounting metric, The Wall Street Journal said.

Groupon has reportedly stopped using that accounting method, but the Journal said the SEC contacted Groupon last week about another matter. Insiders say the SEC’s concerns aren’t the reason for Groupon delaying its IPO, the article said. But even with that, there is no word yet on when the company plans to go public.

by Todd Shriber

Exxon Mobil, take note. A day after the largest U.S. oil company signed a multi-billion dollar exploration pact with Rosneft, Russia’s largest oil company, masked police officers armed with assault rifles raided the Moscow office of competitor BP.

Call it coincidence, call it rubbing salt in BP’s wounds, but whatever your pleasure, the timing of the raid is odd considering that it was BP, Europe’s second-largest oil company, that was originally supposed to partner with Rosneft.

Only the folks at Exxon can say for sure whether they are smart enough to realize what they’re getting into. But raids in Russia on the offices of western companies doing business there aren’t uncommon. BP has had its share, and Germany’s Deutsche Bank was on the receiving end of a raid in February, The New York Times reported.

Wednesday’s raid on BP’s Moscow office was authorized by a Siberian court that is scheduled to hear a case involving the British oil company and private investors in TNK-BP, BP’s Russian joint venture according to the Times. The case stems from the TNK-BP investors being irked by BP pursuing a relationship with Rosneft. The Siberian lawsuit was based on the allegation that BP executives serving on the board of directors of TNK-BP violated their fiduciary obligation,

BP Russia President Jeremy Huck told the newspaper that the company believes “these legal actions are without merit and appear to be part of a pressure campaign against BP’s business in Russia.”

Potentially worse for Exxon is that its accord with Rosneft, which will see the two companies tap the oil-rich Kara Sea, is that the American company will now be firmly ensconced in the politics of Russia’s oil business, and those can be choppy waters. Eurasia Group said the “politics of the Russian energy sector remain treacherous,” the Times reported. The raid on BP’s Moscow’s office underscores that point.

To be sure, doing business anywhere in Russia is no picnic. Moscow has been condemned by some of its own media outlets for not doing enough to fight corruption. And Russia’s reputation as one of the most corrupt countries in the world is well-documented.

In 2010, NGO Transparency International ranked Russia 146th out of 180 countries in the world, with 180 being the worst, when it comes to corruption. The organization said that bribe-taking was a $300 billion annual enterprise in the “R” in BRIC, according to Reuters.

Russia’s corruption score is so bad that it ranks behind most of Africa and a fair amount of the former Soviet republics, according to the Guardian.

Exxon, you’ve been warned.

by Todd Shriber

A sign of the times? Mere overreaction? Either way, news that Zynga, the company behind popular online games such as FarmVille and CityVille, might delay its initial public offering had Silicon Valley and the press abuzz on Monday.

The New York Post reported that the company said in a Securities and Exchange Commission filing that the offering, originally scheduled for as soon as possible or early September, could be delayed.

One reason Wall Street might be in a tizzy over the delayed Zynga IPO is because this is one of the more widely anticipated tech public offerings. No, Zynga won’t be par with Facebook, but it is probably in the realm of Groupon in terms of offering size and demand. A $2 billion IPO from Zynga could value the company at $15 billion to $20 billion, plus Zynga said it is already profitable, as Trader Daily noted last month.

But is the delay of Zynga’s IPO really any big deal? The late August/early September time frame isn’t traditionally active in terms of IPOs. After all, bankers need to get in one last weekend at the Hamptons. Plus, an October offering makes a lot of sense, as CNN Money points out.

On the other hand, it’s important to note why Zynga’s Morgan Stanley-led IPO might be shelved for a little while. Citing unidentified sources, CNBC reported that the fine folks at the SEC are asking Zynga for more clarity on the company’s accounting metrics. At issue are “bookings,” which Zynga describes in a recent document as the total revenue from the sale of virtual goods in games or advertising that Zynga would have reaped if it could have recorded all the proceeds immediately, according to CNBC. Problem is, bookings aren’t part of generally accepted accounting principles.

Groupon previously garnered headlines for irking the SEC with its own use of a questionable accounting metric. The coupon company said earlier this month that it would ditch that methodology, which didn’t include marketing costs.

There might be a lesson here: Don’t run afoul of the SEC before or during a launch as a public company.

by Todd Shriber

Gold’s recent performance has been lethargic by the yellow metal’s standards. But the reality is that the yellow metal is still one of the most popular kids at the financial markets party. Here’s a look at 10 fun and illuminating facts about gold:

10) Warren Buffett Really Doesn’t Like Gold

Gold isn’t the Oracle of Omaha’s favorite investment option, as Forbes notes. While Buffett has been wrong about gold, at least he has been consistent with the message. His dislike of the yellow metal dates back to at least the late 1990s.

9) A History Lesson

Yes, it was ages ago, but if all the gold mined during the California gold rush was tallied up in today’s U.S. dollars, the sum would be more than $50 billion.

8) Costs Rise, but Prices Rise Even More

The average production cost for replacing and producing an ounce of gold jumped from $281 an ounce in 2001 to $655 an ounce in 2008, according to the World Gold Council. The price varies in different parts of the world, but the average is currently estimated to be around $700 an ounce. So production costs haven’t even tripled in the past decade while gold prices have climbed roughly 500%.

7) India’s Reserves

With 614.6 tons of gold reserves, India boasts the 11th-largest total in the world, according to CNBC. The country is the world’s largest consumer of the yellow metal, Reuters reports.

6) Russian Replenishing

Earlier this year, the Central Bank of Russia announced plans to purchase 100 tons of gold per year to replenish its reserves, The Wall Street Journal reported.

5) History Lesson Part II

The first gold coins were produced in 700 BC and the history of gold being converted to money spans 2,600 years, according to Talewins.com.

4) ETFs

The first exchange traded fund (ETF) backed by physical gold to trade in the U.S. was the SPDR Gold Shares (GLD), which made its debut in November 2004. Today, GLD faces competition in the U.S. from the iShares COMEX Gold Trust (IAU), the ETFS Physical Swiss Gold Shares (SGOL), and the ETFS Physical Asian Gold Shares (AGOL), just to name a few.

3) History Lesson Part III

Gold futures began trading in the U.S. in 1974 after a 41-year ban on gold ownership by private citizens was lifted, according to Inside Futures.

2) Production

Barrick Gold (ABX) was the world’s top gold miner as ranked by production by a wide margin in 2009 and 2010, Bloomberg reported.

1) Production Part II

Contrary to popular belief, South Africa is not the world’s top gold producer. In fact, South Africa is the fourth-largest behind China, the U.S., and Australia, according to Index Mundi.

by Todd Shriber

One would think that with all the money some bankers on Wall Street haul in that they would be willing to take some risks with their personal investment accounts. After all, they work for banks that are out touting riskier asset classes such as stocks to their clients. However, that’s just not the case as many investment bankers are quite conservative with their personal investment strategies.

In fact, a recent examination of the personal investing practices of a dozen senior investment bankers by The Wall Street Journal reveals this group is downright boring in its approach to seeking alpha. One banker quoted by the newspaper confesses to being 80% in cash and Treasuries, while another admits to a portfolio heavy on Treasuries and other investment-grade debt.

To some degree, the “boring is beautiful” philosophy employed by some members of the Wall Street crowd makes sense. As Dealbreaker notes, the future earnings of investment bankers are levered to the performance of their employers. And as everyone not living in a cave now knows, this is a less-than-appealing environment to be long bank stocks.

What’s interesting about the conservative investment proclivities of Wall Streeters is that, by comparison, members of Congress and their staffers are far less risk-adverse. That anecdote comes despite the fact that no one in Congress receives compensation worth seven or eight figures, as many bankers do.

That doesn’t mean it would be best to follow the investment advice of Congress. As Cabot Wealth Advisory points out, the most widely held stocks on Capitol Hill have a distinct “dogs of the Dow” feel to them.

by Todd Shriber

The past week on Wall Street has provided plenty of memorable mathematical moments. Without further ado, Trader Daily takes a look at 10 of the craziest numbers of one of Wall Street’s most volatile weeks:

1) Two: Including last year’s rejection, the number of times Peabody Energy (BTU) has tried to get its hands on Australia’s Macarthur Coal and thus far failed.

2) Five: We mean $5, the price nearly a third of the respondents in a poll on The Street think shares of Bank of America (BAC) will bottom at.

3) 63: As in percent. That’s the premium to the closing price Motorola Mobility (MMI) Google (GOOG) is paying to acquire the maker of mobile phone handsets that run on Google’s Android operating system. That’s nearly double the average premium paid in over 360 wireless sector deals in the past five years, according to Bloomberg.

4) 77: That’s the percentage of turnover in high-frequency trading accounts for some U.K. markets, The Wall Street Journal reported.

5) 2.4 Million: As in dollars per day. That’s what BP (BP) is spending on rigs in the Gulf of Mexico that are not currently looking for oil, according to OilSlick.com.

6) 37.1 Million: The White House payroll for 2011, InvestorPlace said.

7) 63.2 Million: The number of Bank of America shares sold by John Paulson’s Paulson & Co. during the second quarter. Paulson now holds 60.4 million shares of BofA, according to Bloomberg.

8) 627.7 Million: That’s the value of call options on the SPDR Gold Shares (GLD) purchased by Steven Cohen’s SAC Capital, according to Benzinga.

9) 1.63 Billion: The amount in dollars that the Swiss government may forgo in francs to help the country’s export and tourism industries following the franc’s recent surge as a safe-haven currency, Bloomberg reported.

10) 1.8 Billion: The lead in dollars the SPDR S&P 500 Trust (SPY) held over GLD at the end of last week for the title of world’s largest ETF by assets.

by Todd Shriber

Apparently not content to let his loaded “elephant gun” sit idle in the second quarter, legendary value investor Warren Buffett did some shopping on behalf of Berkshire Hathaway (BRK.A, BRK.B), the financial services conglomerate he has run for over four decades.

While global equity markets have been whipsawing even some of the most noted names in the hedge fund business, Buffett is once again proving value investing never goes out of style. The Oracle of Omaha added to two new positions among Berkshire’s $52.4 billion portfolio in the second quarter – discount retailer Dollar General (DG) and insurance data provider Verisk Analytics (VRSK), according to The Associated Press. At the end of June, Berkshire held 1.5 million Dollar General shares and 2.1 million Verisk shares, the AP reported.

Those weren’t the only targets of Buffett’s affections in the second quarter. Berkshire also added to its stake in MasterCard (MA), which was the firm’s only new position in the first quarter, Forbes reported. Berkshire also boosted its interest in long time holding Wells Fargo (WFC), but its stake in Kraft (KFT), the Dow component and largest U.S. food company, was trimmed Forbes noted.

From the outside, Buffett’s buy in Dollar General looks like a curious move as Berkshire is already a massive shareholder in another discount retailer – Dow component Wal-Mart (WMT), according to tickerspy.com data. Then again, Berkshire holds equity investments in eight different financial services companies, so intra-sector, double-dipping isn’t new for him.

Beyond the new buys and sells, Buffett remains steadfast in his belief that the U.S. needs to reform its tax policy. He says he wants to pay more in taxes. Seriously.

by Paul Springer

A short selling ban lifted European markets at the end of the week, but the regulatory move – which has yet to prove successful for any market in which it has been tried – may just be providing short-term comfort at the expense of fair and liquid trading.

The temporary U.S. short selling ban on some 799 banks during the global financial crisis gave preferential treatment to one industry and rewarded poor management. It also did not prevent their stock prices from falling.

While it’s not surprising to hear poorly managed microcaps blaming their woes on short sellers, it’s pretty pathetic when a big, badly run bank makes the same pitch to politicians — and gets away with it.

Even the regulators had their regrets, as CNBC notes:

At the end of his tenure as chairman of the Securities and Exchange Commission, Christopher Cox said the biggest mistake of his term was to implement a three-week ban on short-selling bank stocks at the height of the financial crisis in 2008.

With the U.S. ban in the rear view mirror, to some it looks like it was part of a “too rich to fail” policy that spared banks from price discovery that should have been allowed to take place.

Some banks effectively used the bailout and shorting ban to stabilize, but now we’re seeing the gradual implosion of some perhaps should have been put out of their misery.

But European markets loved the ban today. Dow Jones correspondents did not find monolithic support of the idea, about which traders and bankers expressed doubts. “While the ban on short selling equities may support share prices for a day or two, unfortunately it is highly unlikely to prevent a further selloff,” ETX Capital senior trader Manoj Ladwa told Dow Jones.

The European ban covers much ground but seems better organized than the U.S. efforts, The Financial Times says:

The ban affects equities, convertibles and equity derivatives of more than 60 bank, insurance and financial companies in Belgium, France, Italy and Spain. Credit default swaps, a form of insurance against default that are linked to debt, are not included.

At the same time, The Times and others found a variety of critics. “Everything says that the short-sale bans don’t have very much effect other than creating turmoil and uncertainty in the market. . . It takes liquidity out of the market and has pernicious effects without really accomplishing much,” a hedge fund manager told The Times.

The Guardian surveys commentary on the ban. One respondent, Atif Latif of Guardian Stockbrokers actually felt the move could have unexpected consequences:

After 15 days then what happens? This can have the opposite intended effect by volumes being decreased and pricing being more volatile. Not shorting banks is clear but last time there was confusion regarding “financial companies” classification, same again.

BGC Partners’ David Buik had stronger views:

Until the EU’s politicians wake up to the fact that there is a stench of fear and uncertainty in the air, much of it down to their ineptness, markets will continue to behave irrationally with seismic levels of volatility . . . [the ban]  may also make investors even more nervous about the debilitating state of European banks‘ balance sheets.

In contrast to the recent four nation ban, Reuters notes, Germany took its own steps. This nation banned naked short selling only, allowing covered shorting to continue. This leads to the real problem: naked shorting is allowed in the EEU.

Maybe what needs to happen is for all parties to follow the U.S. trend towards making naked shorting illegal. If it’s legal to sell unlimited quantities of stock without controls, any company can be pounded into the ground regardless of market conditions.

In the meantime, Europe’s ban will make it difficult to know what some of these banks are worth. If they aren’t worth nearly what they appear, it might be better to find out sooner rather than later.