I really hope that Facebook is just faking us all out with this whole “we’re IPO’ing on Wednesday” thing that they haven’t said, in part because I have yet to park $100k of the Dealbreaker slush fund/Bloomberg budget in Facebook shares on SharesPost. But just in case they actually do something next week let’s analyze the hell out of everything so we can be proven wrong by the filings. Okay? Okay.
One thing to over-analyze is that presumptive lead-left bookrunner Morgan Stanley’s shares did or did not go up on the news that Facebook will or will not file next week and MS will or will not be the lead bookrunner. One reason for the market to shrug off this quasi-news is that Morgan Stanley won’t actually make any money on the deal since Faceook is planning to punch everyone in the face on fees: Continue reading »
Finally someone’s listening to us, I guess:
While prominent hedge-fund manager David Einhorn was the focus of the latest alleged insider-trading case this week, a supporting actor in the drama belongs to a fraternity of London bankers that also is under increased scrutiny.
Andrew Osborne, until last month a so-called corporate broker in the sprawling London outpost of Bank of America Corp.’s Merrill Lynch investment-banking unit, is alleged to have passed sensitive information to Mr. Einhorn, according to people familiar with the matter.
The U.K.’s Financial Services Authority is planning to fine Mr. Osborne £350,000 pounds ($549,674) for his role in the matter, said these people on Thursday.
This is not to be confused with the other other fines in the Greenlight case, which include Greenlight’s poor London trader being fined because he should have known that his boss should have known that he was breaking the law, or something. This is the guy who told Einhorn, on a non-wall-crossed call with him and Punch Taverns management, that Punch was going to raise £350mm, which Einhorn may or may not have laughed off as fee-seeking banker bluster. It comes from this Wall Street Journal article about “corporate brokers” – basically, as far as I can tell, ECM banker types who, um, do a lot of calling of investors and saying “how would you feel about a £350mm capital raise at Punch, hypothetically of course?” – and about how the UK is cracking down on insider trading. Just like the US is. Sort of: Continue reading »
Earlier this week, in an interview with Bloomberg TV, Morgan Stanley CEO James Gorman was asked how he would respond to employees expressing disappointment with this year’s bonuses. Perhaps at his wits end with compensation complaining, perhaps to indicate there is a new James Gorman in town and he is not to be fucked with, perhaps to get it through his staff’s thick skulls that they ought to WAKE UP, perhaps because he thinks the building is getting overcrowded, Gorman said he’d tell them three things: “You’re naive, read the newspaper, No. 1. No. 2, if you put your compensation in a one-year context to define your overall level of happiness, you have a problem which is much bigger than the job. And No. 3, if you’re really unhappy, just leave. I mean, life’s too short.” When asked the same question by the same organization today, Brian Moynihan was slightly less aggressive in his answer. I mean, he’d like you to stay but he’s not going to force anyone to do anything they’re not comfortable with. Don’t get him wrong he wants you to be there but please can we not have any intense discussions about it? Stay/go just please keep him out of it. The idea of you yelling at him makes his stomach turn. He can’t do it. He won’t. Continue reading »
One reason that you’re in for seven lean years in the investment banking business is that bank capital requirements are going up due to Basel III, and “capital is expensive” in some loose sense, so banks will have less money to use to make loans and/or pay you. Some people think that this is mostly bull, because capital is not actually any more “expensive” than any other form of funding, though those people often actually don’t care that much about paying you so it may not be worth listening to them. In any case here is the abstract to an amusing new paper by Karlo Kauko of the Finnish central bank, because yes I make a point of being up to date on everything published by the Finnish central bank:
Bank managers often claim that equity is expensive relative to debt, which contradicts the Modigliani-Miller irrelevance theorem. … An opaque bank must signal its solvency by paying high and stable dividends in order to keep depositors tranquil. This signalling may require costly liquidations if the return on assets has been poor, but not paying the dividend might cause panic and trigger a run on the bank. The more equity has been issued, the more liquidations are needed during bad times to pay the expected dividend to each share.
Don’t worry if you don’t get that name dropping, it doesn’t matter. Also don’t worry too much about the paper itself, which is amusing but also sort of nuts.* The basic idea to come away with is that bank equity is where the bank puts all its hopes and dreams, and that, if banks are more or less reflections of hopes and dreams, the people who provide the real funding for the banks – repo counterparties and clearing banks and suchlike – are going to be inordinately influenced by reading equity tea leaves. Because what else are they going to read? Continue reading »
Cuts are said to have gone down at the House of Diamond. Continue reading »
“People are furious.” Continue reading »
Larry Summers: ‘A Lot of Work’ Needed to Fix Economy (CNBC)
“We have all got a lot of work to do,” Summers, who played a key role in the early years of President Barack Obama’s administration, said. He believes that European governments should be “redoubling” their efforts to solve the crisis. The euro zone debt crisis has been top of the agenda in Davos this week. German Chancellor Angela Merkel opened the conference with a downbeat speech emphasizing the need to solve the problems in the euro zone. The European Central Bank injected more liquidity into the European markets through a long term refinancing operation (LTRO) in December, which Summers described as “a very important step.” “That’s lubricating credit and economic activity. The sense that we are near the edge of a precipice has been clawed back,” Summers said.
Greek Debt Wrangle May Pull Default Trigger (Bloomberg)
Any agreement between the Greek government and the Washington-based Institute of International Finance on debt writedowns will only bind 50 percent of investors in the 206 billion euros ($270 billion) of notes being negotiated, Barclays Capital estimates. Hedge funds may resist a deal, seeking to get paid in full or compensated from insurance contracts.
U.S. Economy Grows 2.8%, Less Than Forecast (Bloomberg)
The U.S. economy expanded less than forecast in the fourth quarter as consumers curbed spending and government agencies cut back, validating the Federal Reserve’s decision to keep interest rates low for a longer period. Gross domestic product, the value of all goods and services produced, climbed at a 2.8 percent annual pace following a 1.8 percent gain in the prior quarter, Commerce Department figures showed today in Washington. The median forecast of 79 economists surveyed by Bloomberg News called for a 3 percent increase.
In Punishing Year for Hedge Funds, Biggest One Thrived (Dealbook)
Bridgewater Associates posted returns of 23 percent in 2011 — a year when the average hedge fund portfolio lost 5 percent. Against the backdrop of fear over European debt and stagnant global growth, the hedge fund, led by one of Wall Street’s more enigmatic titans, Ray Dalio, sidestepped the mess. The fund did it with bets on United States Treasuries, German bonds and the Japanese yen, according to people familiar with the firm’s investment strategy, who spoke on condition of anonymity because the information is private. Continue reading »
The Queen did want to acknowledge all the work he’s done, though, so she threw the government worker a bone he can collect a few years from now. Continue reading »
On further inspection Greenlight Capital’s unfortunate relations with Punch Taverns went down more or less as I had thought: they had an un-wall-crossed conversation with management that David Einhorn took to be a sign to sell, and sold without ever agreeing to keep any information confidential. One key and sort of amusing difference – if you believe Greenlight’s explanation – is that, contrary to what I and the FSA thought, the sell signal in Einhorn’s mind wasn’t “Punch is going to raise equity.” It was “the CEO of this company thinks it’s a piece of crap.” Which I guess is also material nonpublic information.
Anyway here is something Einhorn said on his call yesterday:
The Decision Notice … doesn’t seem object to my having sold the stock. The problem is that I didn’t get permission first. “It was a serious error of judgement on Mr Einhorn’s part to make the decision after the Punch Call to sell Greenlight’s shares in Punch without first seeking any compliance or legal advice despite the ready availability of such resources within Greenlight.” It was already obvious to me that I was clear to trade. I have no idea why a compliance officer would have reached a different conclusion. It is highly unlikely that asking would have led to a decision to restrict ourselves.
Here is an alternative view: Continue reading »
“We’re entering the year-end process of compensation reviews. I think it’s an open discussion during the year of how businesses and how individuals perform and now we’re just trying to execute on the balance that we all try and strike between being responsible and being competitive. I think people get it. I think industry compensation is down this year because the performance in the industry is down. So I think they get it…I think if we weren’t treating [top producers] fairly we would look at it objectively and try and get to the underlying causes, but I think everyone has a decision to make about what industry they want to work in or what firm they want to work for… Not everyone wants to be in this industry. But I’ll give you a statistic that is important. Last year, we had applications from 107,000 kids at university, of which we had positions for 1,500. So there’s still a lot of people who want to come into the financial services industry.” [Bloomberg TV]
