Archive for April 2006

My Shark Tank Is Bigger Than Your Shark Tank

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Fortune says the new status symbol for hedge funds is a massive aquarium**:

City Aquarium, which he founded in 1999, now has a client roster that includes sultans, supermodels, Russian heiresses, Broadway producers, and an increasing number of hedge funds like SAC Capital Advisors and Sandell Asset Management (both declined to comment on their expensive toys). “Aquariums are status symbols,” says [City Aquarium owner] Muir, who has also designed aquariums for hedge fund managers’ homes. “These guys say, ‘Okay, if we are going to do [an aquarium], it has to be hot.’ ” So what’s the hottest thing right now in hedgie tanks? Sharks, natch. The price: around $2,000 each.

When we hear “shark tank” and “SAC” in the same sentence, we either think, “metaphor,” or this, which Stevie Cohen bought for $12 million:
hirst.jpg
Does that count as an aquarium?
**One vendor in New York = trend.
Latest Status Symbol: $600,000 Aquarium [CNNMoney/Fortune]

  • 28 Apr 2006 at 11:02 AM
  • Overstock

LiveBlogging Overstock’s Conference Call…

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dvader.jpgRECAP: The OSTK call was less eventful than what we’ve come to expect from Byrne, but there was the usual hint of conspiracy and gratuitous media bashing (see Roddy Boyd, swipes at; Wall Street Journal, accusations of fabricated quotes). Byrne also says that one of the “big three” bulge bracket banks has been calling up some of OSTK’s partners and telling them to drop OSTK. And guidance: next quarter will look exactly like this quarter.
11:59 – final comments. Jason: we stumbled and we know we stumbled and don’t let anything we say make you think we’re making excuses.. but in the long run it might be a good thing for the business… when we had the debacle we had, replacing all of our systems this year, and we shrunk a lot… it’s given us time to take a deep breath and harden our systems. [our core business] is getting a lot of attention. As bad as the systems got, i think the core shopping business, as far as somebody orders a product and they get it on time, i’m not sure our business has ever been better… i think investors should be pleased and in the next 6 months to a year, you’ll see a big difference in our financial performance. Byrne – to me this is all a function of bad decisions i made in the first half of ’05, both in that they were belated, and that… we stumbled… To jason’s point… we couldn’t have gotten better or more refined looks at inventory or more refined looks at marketing… travel beat budget for the quarter, auctions was just a little behind budget…we don’t really have any great new businesses planned. we’re just refining what we have… i’m sure you welcome having Jason back to provide adult supervision… Expect that same thing for one more quarter..

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  • 28 Apr 2006 at 9:30 AM
  • NYSE

No More Salisbury Steak for the NYSE; Dark Paneling Down 24%

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lunch.jpgThe NYSE is closing its dining club, citing rising costs, lower membership and, of course, 9-11. (When we hit the decade, we assume blaming 9-11 will seem sufficiently ridiculous that people will stop doing it. But we usually give people too much credit.) At any rate, the club was at its peak… guess when. Guess. Just guess:

The Luncheon Club hit its heyday in the early 1980s, when it served up to 500 meals a day, according to one report. The club occasionally served as a backdrop for inter-member skullduggery, with four separate NYSE disciplinary actions over the years arising from misuse of members club charge accounts.

We predict that this is just harbinger for the decline of dark-paneled private clubs in general. (Except the Racquet Club. And the University Club. And the Century Club. And the Union League Club…)
NYSE Ditches Dining Club [NYPost via WSF]

Write-Offs: 04.27.06

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$$$ “A sexy line of credit and a big revolver” Columbia B-school kids re-define sucking up to the teacher. [WARNING: This file contains a Vanilla Ice parody. Probably Safe for Work, But Not Recommended for the Weak.] [via LongOrShortCapital]
$$$ AOL launches bloggingstocks.com, a blog about individual stock performance. From the press release: “These blogs will focus obsessively on what average investors care about most, giving readers an interactive platform to get behind the headlines and exchange insights on some of the most widely held and talked about companies.” (Average investors or the average investor? Eh, probably both.)
$$$ McKinsey predicts that investors will eventually tire of mediocre hedge fund performance and writes a report about it. It’s just that sort of sophisticated observation that makes the seven-figure consulting fees entirely worth it. [Daily Dose of Optimism]
$$$ David Wittig, insider trading and now a surge in blind-pool offerings. The ’80s are back. Again. [Forbes.com]

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  • 27 Apr 2006 at 3:13 PM
  • Labor

Aliens of Extraordinary Ability

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gisele.jpgH-1B visa limits have been long stretched to the max for engineers, programmers and other people with specialty technical expertise. (Just ask the people in your newly-created Bangalore office.) But now another profession is hitting the H-1B ceiling: we’re told by an agency owner that it’s nearly impossible to get foreign-born supermodels into the country these days. See that on the left there? There will be no more of those. We’ve got enough, apparently.
(Now we better understand why Bill Gates wants to abolish H-1B caps.)

  • 27 Apr 2006 at 1:04 PM
  • drugs

And Speaking of Belgium-Based Ecstasy Dealing…

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HollyMacDonald-Korth.jpgA few months ago, Overstock CEO Patrick Byrne got into an exchange with Jeff Matthews about the supposed existence of an Israeli mafia. (This discussion pre-dates his defense against more recent allegations of anti-Semitism.) In a post about the exchange, Matthews points out that Byrne is on record pointing to the “Israeli mob” (presumably among others–Sith Lords, etc.) as one of the conspirators in the alleged naked shorting movement against him. Byrne responds:

Jeff omits precisely the part of the quote that makes the connection, and that is, after I mentioned the Italian, Russian, and Israeli mobs, and the discussed the Russian mob, the interviewer said/asked, “I didn’t know Israel had a mob?” To which I replied that, yes it does: for example, it is widely thought to control the US ecstasy trade.

The relevant quote from the transcript of an interview Byrne did with the Christian Financial News Network:

The Israeli mob–in fact I was just reading Ha’aretz, which is an Israeli newspaper, ah, and a very good one, and you can Google this–If you Google “ectasy Israeli mafia” you’ll find articles that basically the Israeli mob…is thought to control 75% of the ecstasy trade in the U.S.”

Which begs the question: why would Byrne be Googling “ecstasy Israeli mafia” in the first place? Possibly because of this: [From the Salt Lake Tribune, May 26, 2002]

In another Utah case, Holly McDonald-Korth was allegedly receiving shipments of Ecstasy from Antwerp Belgium, according to a search warrant filed by Salt Lake City police investigators… On paper, McDonald-Korth appears nothing like a drug dealer. She was enrolled in private school as a teen and then attended the University of Michigan before graduating with honors from the university of Miami with a degree in finance, according to court documents. After graduation, McDonald-Korth went to work for the Federal Reserve in Washington. The 25-year-old came to Utah 18 months later after obtaining a job as an analyst for Overstock.com

The ecstasy dealer who presents the biggest threat to Overstock isn’t, as it turns out an Israeli mobster. It’s their current SVP in charge of Overstock Auctions.

  • 27 Apr 2006 at 11:05 AM
  • analysis

DealBreaker Financial Tools™

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In keeping with our continuing coverage of the “New, New Economy” we have begun collecting a series of mergers and acquisitions analysis and valuation tools. Cumulatively, we expect these will give the modern investment banker a goodly number of financial arrows in her quiver. On Tuesday, we formalized the Idov Multiple. Today we bring you the Kanige Chaos Theory of M&A due diligence.
(You’re welcome.)
Eventually, we expect that bankers who do not have these tools will be left behind in the fast-paced financial world, shortfalling $200 million dollar valuations of commerciablog firms and executing poorly vetted $500 million acquisitions of bricks and mortar publishing firms silly enough to sign a teenaged author.

Multi Capital Group, Donald Trump and Ecstacy Dealing

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dtrump.jpgAccording to this story in Philadelphia magazine, Donald Trump’s new business partner in the area is Raoul Goldberg (nee Raoul Goldberger), a principal real estate bank/developer Multi-Capital Group. Goldberg has a colorful history that includes a 1999 conviction for ecstacy dealing. Upon learning of the conviction, Multi Capital and Trump have been distancing themselves from Goldberg:

“We were unaware of his past,” Multi-Capital said, through the powerhouse Rubenstein PR firm, “and he is no longer associated with the marketing of the project and he is not a principal in the development.”

But we’re sure Goldberg will survive. After all, he’s faced tough business problems before:

From a 1999 NY Post article: [Michel] Hemli, a resident of Belgium, sent shipments to Goldberger and Freund in a hollowed-out night table, the feds said. The trio began to panic earlier this month when a New York-bound shipment of 200,000 pills was “misdirected” to Spain, according to wiretapped talks. “I’ve been in this business for years,” Goldberger told [partner Marc] Freund during an April 24 phone call. “There is nothing you can do when the s–t hits the fan.”

  • 27 Apr 2006 at 8:20 AM
  • FOREX

Opening Bell: 4.27.06

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chinacurrency.jpg
China Central Bank Raises Benchmark Interest Rate (Bloomberg)
The Chinese interest rate/exchange rate puzzle always perplexes, and trying to figure out which direction things will go is a thankless task. Presumably, a higher interest rate for lending Yuan will crimp Yuan borrowers. The stock market is punishing shares of mining companies, who need to borrow a lot. At the same time, a higher interest rate on the Yuan should also boost demand for the currency — whose exchange rate is fixed. Won’t this simply require the company to print more Yuan, in order to sop up the demand, and won’t this counteract the desire to make borrowing more expensive. Perhaps (surely) there’s something we’re leaving out in our analysis, but the more we think these things trough, the more we align with the central banks have no effect thesis. Put it this way, if central bankers really did have the power that everyone thinks they have, wouldn’t we see a lot more crashes and depressions?
No sign of an end to mergers boom, says Goldman chief (Times of London)
Good news! Analysts expect that companies have no plans to stop merging, and even more importantly, companies will keep going private. Going private is truly the new IPO. Everybody wants in on it, and investors just wait around for word that private money is gonna come take them out. Also driving M&A is greater international integration (EU), and new wealth in different parts of the world (Middle East).
CBS CEO says considering sale of some radio stations (Marketwatch)
Whatever you think about the future of big media gloms, it’s harder to be optimistic about their local TV & radio affiliates. New modes of distribution (satellite, internet) threaten to, eh, disintermediate them, to use a buzzword. So it’s no surprise that companies continually will look for opportunities to dump the local guys. This isn’t to say that they might not be good values, or offer some compelling cash flow opportunities — but they’re certainly not growing.
A Stunning Display of Pricing Power by Guess Who? (Bloomberg)
While many mergers turn out to be a colossal waste of shareholder money, some actually seem to pay off. The railroads, which have seen a good amount of consolidation over the years, are exhibiting great pricing pressure in the face of sky-high energy costs. Not only have their numbers been reduced, but it’s really hard to start a railroad. It’s comparatively easy to lease a few planes, hire an out-of-work pilot, rent a gate, and start an airline. That doesn’t explain why there hasn’t been more consolidation in the industry. One of the big culprits is pilot pay structure. It’s all based on seniority, and when you merge two lists of pilots, the whole thing gets messed up. It’s more evidence that labor inflexibility is a serious impediment to the economy.

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  • 26 Apr 2006 at 3:03 PM

Yahoo! Finance: Infinity +1; Google Finance: 0

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We give up.
Previously:
Yahoo! Finance: 3; Google Finance: 0
Yahoo! Finance: 2; Google Finance: 0
Yahoo! Finance: 1; Google Finance: 0

What Would Jamie Buy?

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images-1.jpgWe were just perusing the Vault.com IB message boards and buried under the pile of questions about internships, SAT scores and whether one can get a job at Carlyle as a managing director straight out of high school if one “knows someone” is a fairly extensive back-and-forth about what JPMorgan’s next acquisition will be. The guesses revolve mostly around retail expansion, though someone throws in the Morgan Stanley canard for good measure.
Some of the names floated:
SunTrust (the usual name floated)
Wachovia (ditto)
USB (west coast expansion is attractive, but Grundhofers probably wouldn’t sell)
PNC (nice east coast footprint but not a big enough deal for Dimon’s ego),
Wells Fargo (deposit limit problems)
Washington Mutual (possible deposit limit problems, S&L component that complicates things)
Someone points out that Dimon’s ostensible financial superstore strategy is exactly what Citi seems to be moving away from (see Legg Mason), which is ironic, unless Dimon’s logic is that he can do Citi better than Citi does Citi. All we know is that Dimon doesn’t have much of a story right now and he needs one. (And we need more material, so we’re secretly hoping for that dark horse MS merger.)