Thursday, November 19, 2009

Bloomberg and Belly Laughs: Meredith Whitney Says Goldman Lost 'Tremendous' Talent

Janet Tavakoli emails:

I don’t normally turn to Bloomberg News for comedy, but it seems I underestimated its talents. Meredith Whitney was quoted in this Bloomberg article: ““Goldman’s lost a tremendous amount of talent going to set up their own hedge funds,” Whitney said today in an interview on Bloomberg Radio...

Goldman partners, Ron Beller and Geoff Grant started the Peloton Fund. I wrote about them in Chapter 9, “Dead Man’s Curve,” of Dear Mr. Buffett. The fund imploded within 6 weeks of being lauded as Eurohedges best fixed income fund. Here’s a short excerpt:

Ron Beller first made big headlines in 2004 when Joyti De-Laurey, personal assistant at Goldman Sachs to his wife, Jennifer Moses, went on trial and was convicted of forging the Bellers’ and Moses’ signatures to filch funds from their personal accounts. Beller and his wife asked De-Laurey to work for them personally when they both left Goldman Sachs, but De-Laurey stayed to become the personal assistant of another Goldman Sachs partner, Scott Mead. She was also convicted of filching funds from him. De-Laurey reportedly took £4.4 million (around $8.75 million in 2008 dollars) from the collective accounts of Scott Mead, Jennifer Moses (Beller’s wife) and Ron Beller. Neither of the Bellers noticed that De-Laurey had taken millions from their personal accounts for several months. Is it any wonder that during the trial De-Laurey referred to Mr. Beller as “an absolute diamond”? Yet, when Beller co-founded London-based Peloton in 2005, investors seemed eager to let him manage their money.

Ron Beller and Geoff Grant, another former Goldman Sachs partner, ran Peloton Partners, named after the vee-like bird formation adopted by endurance bicycle riders that lead the pack by taking advantage of drafting to reduce wind friction. In January 2008, Peloton Partners LLP was riding strong. It had two funds, the $1.6 billion Peloton Multi-strategy fund, and the $2 billion Peloton ABS fund. The latter fund won Eurohedge’s best new fixed-income fund of the year award, after reporting a stunning net return of 87.6 percent for 2007. When the fund’s returns were announced, some of the attendees at the awards ceremony “gasped.” Shock and awe. Beller and Grant were lauded as “hedgie heroes.” Within two months of receiving these accolades, Peloton’s $2 billion ABS fund collapsed, and Peloton put its offices up for sale.

I would be happy to give you several other examples, but as of 8:30 ET on November 19, 2009, the funds are [somehow] still in business.

Whitney’s pronouncement is on par with her Citi buy recommendation in the early part of 2007, while Jim Rogers was short Citi.

Tavakoli.s March 2009 article, Reporting v. PR: Meredith Whitney and AIG is here.

Here's a Partial Bibliography of Janet’s (Authored) Early Warnings

Tavakoli, Janet. Credit Derivatives & Synthetic Structures, 1st ed. New York: John Wiley & Sons, 1999.
———. Credit Derivatives & Synthetic Structures, 2nd ed. New York: John Wiley & Sons, 2001.
———. Collateralized Debt Obligations & Structured Finance. New York: John Wiley & Sons, 2003.
———. “Structured Finance: Uses (and Abuses) of Special Purpose Entities,” Corporate Governance: Implications for Financial Services Firms, Federal Reserve Bank of Chicago, May 2003.
———. “Buyer Beware,” International Financing Review, Issue 1507. October 25, 2003
———. “Landesbanken: Even Lower Ratings May be in Order,” Financial Times, December 1, 2003
———. “CDO Evolution Creates New World of Risk,” GARP Risk Review, Issue 15, November December 2003.
———. “Investors are the Gullible Ones if They Rely on Ratings as Indicators of Financial Robustness,” Financial Times, December 29, 2003.
———. “FASB in Error on Options Valuation,” Financial Times, April 5, 2004
———. “Ultimate Leverage: CFOs,” HedgeWorld, June 2004
———. “Invisible Hedge Funds,” GARP Risk Review, Issue 19 (July–August 2004).
———. “Rating the Rating Agencies,” GARP Risk Review, Issue 22 (January–February 2005).
———. “Structured Finance: Challenges for Supervision and Regulation (Presentation to the International Monetary Fund),” 19 April 2005.
———. “CDO Arrangers’ Correlation Books,” Securitization News Vol. II, No. 40, October 4, 2004
———. “Structured Credit: The Trials of Tranching” International Financing Review (IFR Magazine) Derivatives 2004, Issue 1556 – October 25, 2004
———. “How Will Bond Market React to Citigroup’s Trades?” Financial Times, February 2, 2005.
———. “CDOs Can Confuse Bank Managers,” Financial Times, April 26, 2005.
———. “My Favorite Hedge Fund,”, 26 May 2005.
———. “How Investors Can Lower Risk When Choosing a Hedge Fund” Financial Times, June 8, 2005.
———. “Consider Full Notional Amount of CDOs,” Financial Times, August 19, 2005.
———. “CDOs: Caveat Emptor,” GARP Risk Review, Issue 26 (September–October 2005).
———. “My Favorite Hedge Fund: Part II,”, October 24, 2005.
———. “Oil and Power: Iran Approach Must Avoid Past Mistakes,”, 14 June 2006.
———. “Dead Man’s Curve,” Client Note, 21 September 2006. A longer version of this client note was published in, September 22, 2006
———. “The Golden Fleece Award for Optional Integrity,”, 2 October 2006.
———. “Best Practices Among CDO Mangers,” Asset Securitization (Conference Daily), 7 November, 2006.
———. “Oil Pressure: Fallout from the Iraq Study Group Report,” Hedge World, December 14, 2006.
———. “The Elusive Income of Synthetic CDOs,” Journal of Structured Finance, Winter 2006.
———. “Crisis in Credit Derivatives is Averted,” HedgeWorld, May 22, 2006.

———. “Comments on SEC Proposed Rules and Oversight of NRSROs [Rating Agencies],” 13 February 2007.
———. “Subprime Mortgages: The Predators’ Fall,” Global Association of Risk Professionals, March–April 2007.
———. “Subprime Lending Excesses Have Damaged US’s Standing as Global Leader in Finance,” Financial Times, March 19, 2007.
———. “Do Not Accept Bolton’s Interpretation on Links with Iran,”Financial Times, April 11, 2007.
———. “Greater Global Risk Now Than At Time of LCTM,” Financial Times, May 7, 2007.
———. “Bear’s Bailout [of BSAM’s hedge funds] A Bad Idea,” LIPPER HedgeWorld, 27 June, 2007.
———. “Misfortune’s Formula: Structured Credit Ratings (Commentary),, 19 September 2007.
———. “Misfortune’s Formula: Structured Credit Ratings (Commentary),, 19 September 2007.
———. “Merrill’s Mal de MER,” TSF, October 8, 2007.
———. “Subprime’s Unreported Undertow,” TSF, October 22, 2007.
———. “Mal de MER, - Fourth Quarter, ” TSF, October 25, 2007.
———. “Too Big to Regulate?,” TSF, November 5, 2007.
———. “AIG Catches Up,” TSF, November 7, 2007.
———. “Derivatives Update,” TSF, November 17, 2007.
———. “Accounting Can Be Beautiful and is Merrill’s (Charge Against Earnings) Number Up?” TSF, November 17, 2007.
———. “CDO Cliffhanger,” TSF, November 27, 2007.
———. “Dicey Deals Done Dirt Cheap,” Tavakoli Structured Finance, Inc., 3 January 2008.
———. “Ambac and MBIA: Structured Finance Underwriting Standards,” TSF, February 18, 2008.
———. “Dead Calm: No One Trusts You,” TSF, July 30, 2008.
———. Structured Finance & Collateralized Debt Obligations, 2nd ed. Hoboken, N.J.: John Wiley & Sons, 2008.
———. “Madoff Deserves Lots of Company,” TSF, December 14, 2008.
———. Dear Mr. Buffett, What An Investor Learns 1,269 Miles from Wall Street, John Wiley & Sons, 2009.
———. “Premise of Fortune Cover Story is Incorrect [“Sending Wall Street to Jail,” Fortune, January 19, 2009],” TSF, January 11, 2009.
———. “BofA Says Merrill’s Huge Hit was in December (Not November)?,” TSF, January 25, 2009.
———. “The China Syndrome: It’s Our Fault They Don’t Trust Us,” Financial Times, February 5, 2009.
———. “Merrill’s Murder Suicide,” TSF, February 7, 2009.
———. “AIG Paying Out Millions in Bonuses,” TSF, March 14, 2009.


  1. You would think someone so prescient would be rolling in money and be lauded by her "clients" as the second coming of Warren Buffett. She does a lot of talking and writing but seems not to have any skin in the game or clients for that matter. She seems to go to earth's end to "prove" that she is right, and more so to "prove" others were wrong. She certainly behaves like a woman scorned by Wall Street. Remember she had a career on the Street--- but not now-- what is the back-story?

  2. Ms. Tavakoli is a fact-based rabid dog on this subject matter. How she makes her living or level of monetary success is not relevant. I have read her Buffett book, but not her text books, seen her on various financial shows; she is a dog with a bone and I find her quite colorful and generally spot-on!