Toomre Capital Markets LLC

Real-Time Capital Markets -- Analytics, Visualization, Event Processing, and Intelligence

Hank Paulson Appointed as U.S. Treasury Secretary Designate

Today’s big market news was that Hank Paulson, the current chairman of Goldman Sachs, has been named as the designate to replace current U.S. Treasury Secretary John Snow, subject to Senate confirmation. Selected news articles on Paulson’s appointment can be found here, here and here.

According to this article in The Financial Times of London entitled Dollar Plunges on Paulson Appointment, the currency markets did not react at all well to President Bush’s comments that “one of Mr. Paulson’s objectives would be to ensure the currency flexibility of the US’s trading partners,” such as “to allow a faster appreciation of the [Chinese] renminbi in order to help reduce global economic imbalances.” The article continues that “By mid-session New York trade, the dollar was down 1 per cent at $1.2866 to the euro, 1.3 per cent to $1.8818 against sterling, 1 per cent to SFr1.2119 against the Swiss franc, 0.2 per cent at Y112.23 against the yen, and 0.6 per cent to C$1.0995 against its Canadian counterpart, brushing 28-year lows.”

Similarly, the United States equities markets did not react at all well. The Dow Jones Industrial Average declined 184.18 points with all 30 Dow stock components declining for the first time in 2006. This daily summary from the Associated Press has more details on the day’s price declines.

Coupled with the sharp declines in commodity prices earlier this month as well as the sell-off in most spread sectors like emerging market debt, the hedge fund community is likely to report many “poor” results for the month of May 2006. The key question is whether the negative performance will sharply alter the behavior of either investors or the hedge fund managers. It also will be extremely interesting to review just how much Alpha performance truly has been generated by the high hedge fund fees. Toomre Capital Markets LLC looks forward to the shortly forthcoming performance reports and associated management discussion papers. Comments are welcome.