Excellent story about Harbinger Capital from Portfolio, which is turning out to be a must-read for business news:
For evidence of just how ruthless this summer has been in the global markets, look no further than Harbinger Capital Partners.
This year, the hedge fund run by Philip Falcone has had nothing but stellar news to report to shareholders. Thanks to bets against subprime mortgages, returns for 2007 were 116 percent. Returns through the end of June were 40 percent after Harbinger cashed in on its short position in Bear Stearns.
But now Harbinger shareholders are being sorely reminded that what goes up must inevitably come down.
Nearly two-thirds of the hedge fund’s gains in the first half of the year were erased in July and the first two weeks in August, reports James Mackintosh on the Financial Times’ Alphaville blog. The fund was stung by the sudden reversal of the long-energy-short-financials trade that has hurt so many hedge funds this summer.
… Harbinger has had some high-profile hits and misses so far this year. It waged war with the New York Times Co. and successfully pushed Arthur Sulzberger to give it two seats on its expanded board. So far, though, any change Harbinger hoped to inspire has had little effect on shareholders. Shares in the New York Times Co. have steadily declined since the proxy war ended in March, and it’s now being pressured to cut its dividend.
The sub-prime mortgage mess was reported as a crisis of capitalism, but it isn’t: Some investors just make better bets than others. Likewise, the common hedge-fund strategy of betting on higher oil prices and lower prices for shares of banking and financial-services stocks is turning out to be less than optimal at the moment. But when oil prices fell for days and days, nobody in Congress was squeaking about the evil foreign “speculators” pushing prices down.
Why is that?
On the other hand, investors who smack around the management of the New York Times are okay in my book.