Tops & Bottoms of 2013

Tops

Equity markets: Regardless of what motivated equities in 2013 — the Fed or organic growth — the move counts for those invested: The Dow Jones Industrial Average returned 29.65%, the S&P 500 returned 32.39%, the Nasdaq composite 38.32% and the Russell 2000 returned 38.82% (see chart, right).

ICE closes NYSE deal: Perhaps to “Wall Street” this is a sign of the end times, but an entrepreneurial derivatives exchange engulfing the granddaddy of them all is a top in our book. 

CFTC Charges Jon Corzine: The CFTC charged former MF Global Chairman and CEO Jon Corzine with “unlawful misuse of nearly $1 billion of customer funds and related violations.” Many former customers are still holding out for jail time.

Wasendorf sentenced to 50-year term: Victims of Russell Wasendorf Sr.’s decades-long fraud at PFGBest at least saw some justice. Maybe if he had stolen a few billion more he would have gotten away with it.

Bottoms

Media attack: If the recent poor performance for managed futures wasn’t bad enough, Bloomberg took a pretty cheap shot at the industry in a a piece this fall titled “Fleeced by Fees,” which compared the entire asset class to retail funds that add an extra layer of fees and used dubious math to make a point.

NFA President Dan Roth wrote in a letter to Bloomberg: “[The story]deliberately presents an inaccurate view of the managed futures industry. The article’s author, David Evans, ignored all of the rules that ensure customers are given correct and current information about the fees they pay and the impact of those fees on their investments.”

Managed Futures continues to struggle: It has been a tough time for managed futures as the risk-on/risk-off trades of recent years have made for choppy markets. A year ago the Barclays CTA Index experienced its first back-to-back negative years. Make it three-in-a-row as the index dropped 1.44% in 2013. 

Washington vacation: For some this may be a top, but not for the government workers who did not get paid, and the near-win debacle of a debt ceiling fight certainly didn’t provide confidence to foreign jurisdictions looking to buy more of our debt or the Fed looking to buy less of it.

Signs of the times

A whale of a fine(s): It has been an expensive year for JPMorgan as it agreed to pay $20 billion in legal settlements for various misdeeds ranging from dodgy marketing of mortgage-backed securities of affiliates to the London Whale to Bernie Madoff to Libor manipulation.  







Bitcoin bubble/fever: After starting the year around $20, Bitcoin exploded onto the world scene after the Silk Road website was busted and governments around the world considered the legitimacy of the crypto-currency. At one point, one Bitcoin was fetching more than $1,000. Hope you don’t lose your digital wallet.

Dooley gets five years: Evan Brent Dooley, who was caught making unauthorized trades in wheat at MF Global in 2008, is going to prison. His trades lost the firm more than $141 million; if he had lost $150 billion he may have gotten away with a fine!

MF Global customers made whole: Media reports presenting this as a victory for the victims of the MF Global debacle but if it took two years for the victims of MF Global to pay their bills, those bills may have doubled with interest and fines, or they would have been foreclosed on. 

Off the charts 

Viagra anyone?: Media company Bloomberg launched an attack on alternatives in 2013, first with this edgy cover that seemed to question the virility of hedge fund managers and later with an unbalanced attack on managed futures.  

Don’t read the brown tweets!: In the same year that Twitter had a successful IPO, a single tweet nearly crashed the markets after AP News had its Twitter account hacked and someone posted a fake tweet about an explosion at the White House.

 

 

Justice delayed: The U.S. Department of Justice sued Standard and Poor’s over alleged misrepresentations to inflate ratings for certain structured debt securities. You know, the products that crashed the economy in 2008. What have they been doing for six years? Later Reuters reported that the liquidators of two Bear Stearns hedge funds filed suit against the three major U.S. rating agencies (Fitch, Moody’s & Standard & Poor’s), accusing them of fraudulently assigning inflated ratings to securities in the run-up to the financial crisis.

Stealing made easy: The sovereign debt crisis in Europe came to a head in Cyprus after bank deposits were raided to pay for the next bail-out.

In Memoriam:  

The industry said good-bye to two much-loved innovators. Barry Lind, one of the co-founders of Lind-Waldock, died in a car crash in January, and Elizabeth Cheval, founder of EMC Capital and one of the original Turtles, died of a brain aneurism in March.

About the Author

Michael McFarlin joined Futures in 2010 after graduating summa cum laude from Trinity International University, where he majored in English/Communication.

Editor-at-large Daniel P. Collins, who writes a blog, DanCollinsReport, has covered the derivatives industry since 2001. He was an editor at Futures from 2001 through 2012.