Archive for May 2006

Hedge Funds for Everyone!

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Tech Central Station’s Dominic Basulto suggests that the plebes are getting into hedge funds inadvertently by putting their money into mutual funds that employ hedging strategies. We guess he’s technically correct, since some mutual funds take small positions in hedge funds, but we think think there’s a difference between portfolio diversification and the sort of hedging strategies the funds that actually hedge (and increasingly, fewer do) employ. At any rate, you know it’s bad when Kiplinger’s is recommending Hedge Funds for the Little Guy:

According to David Landis of Kiplinger’s, “a growing number of mutual funds offer nearly all of the benefits of hedge funds with none of the drawbacks. And all you need to get through the door is a minimum investment of $1,000 to $2,500.” While all of these funds deploy their capital in different ways, they all share a common attribute: the desire to create relatively low-risk hedged positions for investors.

Basulto also points to Michael Steinhardt’s recent comments that average investors shouldn’t be putting their money in hedge funds because they don’t know what they’re doing. We’d go a little further than that and argue that a number of hedge fund managers we know shouldn’t be investing in hedge funds because they don’t know what they’re doing, either.
DIY Hedge Funds [TCS Daily]

Opening Bell: 5.18.06

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cartermedal.jpgStagflation (Econbrowser)
It’s simply too horrendous a word for the media to utter, so at the moment all you see are articles proclaiming that the markets are getting slammed on inflation worries. But let’s be honest; a lot of this inflation we’re seeing is nothing new. The real devilish specter is stagflation. If the 70′s are indeed back, it’s a logical component of the potential economic malaise. The housing story, which everyone had forgotten about, is getting play again, and of course the headlines aren’t as rosy on the backslope. The declines in starts and prices (in some markets) are real, as is the decline in consumer sentiment (which might be related). So start saying it baby, stagflation.
Mittal set to launch bid for Arcelor on Thursday (Reuters)
Game on. Mittal steel formally launched their bid for Arcelor after several months of pre-game interviews and activities. The company has received regulatory clearance from the relevant nations. The offer values Arcelor at $24.5 billion, and could have strong ramifications across the industry. Steel is one of the more fragmented of the industrial materials industries. There are just a couple of suppliers to their industry (BHP Billiton, Rio Tinto) and not a whole lot of buyers (car companies being some of the biggest); meanwhile there’s thousands of steel companies, hundreds in China alone. The deal could be more important than ever, if there’s an industry downturn and a possibility of overcapacity.
Hedge-Fund Manager Arrested (WSJ)
An Atlanta hedge-fund manager whose clients’ funds mysteriously disappeared has been arrested in Miami. This is gonna be an interesting story, and we can only hope it gets turned into a TV movie. The manager, Kirk S. Wright, had a lot of money that had belonged to football players. At one point, they tried to hunt the man down at his home, when they realized that their money was missing. Also, at some point, he was able to deliver 30,000 to a Brooklyn ex wife, for alimony payments. Any suggest of wrongdoing is, of course, alleged. But if he did do something wrong, and it appears from all the evidence that something weird was going on (you know, being on the lam in Miami and all), it could be like one of those movies, where someone makes a bad decision and gets themselves into a world of trouble. Or maybe someone kidnapped his wife and demanded $100 million, and the attackers surgically implanted a microphone into the Wright’s throat, so he couldn’t talk to the police, and so he had to embezzle the money — something like that. Hopefully, the story is more interesting than regular crime.
Stopping the Sprawl (BusinessWeek)
Check out the picture of HP CEO Mark Hurd at BusinessWeek. He must be quite the visionary with looks like that. Right now HP is doing everything that Wall St. likes; they’re increasing sales, gaining share, shutting down factories and moving to China. The company announced that it plans to slash $1 billion in costs, which is the kind of announcement one expects after bad earnings. When it comes after good earnings, that’s a major bonus. But right now, HP is simply playing it by the book, playing the outsourcing game, etc. which is fine. But Dell is still keenly focused on their strengths, manufacturing excellence, and they may rumble back to life yet.

Read more »

  • 17 May 2006 at 4:31 PM

Fly The Company Skies

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corporatejet.jpgFootnoted points out that Mylan Laboratories employment agreement with CEO Robert Coury gives the big guy access to the corporate jet for three years after he leaves the company. And just in case he doesn’t use it too much, they’ll pay him for unused time! Guess being a CEO means never having to fly commercial again.
Flying into the sunset… [Footnoted.org]

  • 17 May 2006 at 3:45 PM

NYSE Turns 214

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buttonwood.jpgAs WallStFolly notes, today the New York Stock Exchange turns 214-years-young. Dealbook provides a whole host of relevant links. Us? We’re going out and celebrating the birthday by raising a glass and toasting the original intentions of the founders of the NYSE–keeping the outsiders out and making lots of money for the insiders.
As the legendary Buttonwood Agreement put it:

We the Subscribers, Brokers for the Purchase and Sale of Public Stock, do hereby solemnly promise and pledge ourselves to each other, that we will not buy or sell from this day for any person whatsoever, any kind of Public Stock, at a less rate than one quarter per cent Commission on the Specie value and that we will give a preference to each other in our Negotiations.

Emphasis emphatically added.
Happy Birthday New York Stock Exchange! [WallStFolly]
214 Years of Bids and Asks [DealBook]

  • 17 May 2006 at 2:32 PM
  • CFOs

CFO Wanted: Must Be Right With Jesus

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Jesus.jpg
An Illinois-based company needs a CFO with 7 to 10 years of senior management experience in international finance. And, oh yeah, Jesus has to be your favorite management guru.

Qualifications include being a Christian, having a personal relationship with Jesus Christ and also agree with the Bible League’s Statement of Faith.

Turns out that under Title VII, religious institutions are exempt from certain federal laws covering religious discrimination. We’re not sure exactly what qualifies as an exempt religious institution but the folks hiring here—the “Bible League”—sure sound like good candidates.
CFO Careers [CFO.Com]

Which Bank Rats on Its Crooks The Most?

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snitching.jpgHere Is the City surveyed financial professionals in London on what they would do if they discovered that a close work colleague (and friend) was involved in unethical behavior. Citigroup topped list of snitching ethical firms.

1. Citigroup – 99.3% said that they would blow the whistle, 0.7% said they weren’t sure, 0% said that they would keep quiet
2. Morgan Stanley – 97.4%, 2.6%, 0%
3. Jefferies & Co – 96.8%, 3.2%, 0%
4. Deutsche Bank – 95.1%, 4.9%, 0%
5. Bank of America – 91.4%, 8.6%, 0%
6. UBS – 89.1%, 6.0%, 4.9%
7. JP Morgan – 85.1%, 9.8%, 5.1%
8. Goldman Sachs – 83.6%, 10.3%, 6.1%
9. Merrill Lynch – 73.6%, 18.4%, 8%
10. DrKW – 72.3%, 19%, 8.7%

We were shocked (shocked!) to learn that recruiters are the most dishonest people in the financial professions, according to the survey.
And The Most Ethical Staff In The Financial Markets…. [HereIsTheCity.Com]

Crash Course on Dating Bankers and Other NY Men

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HeartMath.gifGuides to dating and mating in New York City continue to proliferate. We’re pretty sure these things are popular because so many New Yorkers are convinced that they must be doing something wrong, and maybe a guide would help. It’s kind of reassuring to think that a well-written guide would rescue us from bad dates and worse relationships. The alternative is that we’re all destined to live long lonely lives in proximity to someone of our preferred sex who we really can’t stand and we suspect just wants us for our money, looks or club memberships.
Today the reigns of Bankersball have been given over to former finance professional “Ex-Working Girl” to describe for women the different types of dating candidates they might stumble across.

Finance/I-Banking Guys – Ah, what can I say about my counterparts. It’s definitely a love-hate relationship. These guys are driven and successful, which can be great because that also means that when they have time to play, funds are not an issue and they love the finer things in life (thus their love of beautiful women). However, that’s just it — “when they have time to play”. They often don’t. And because of their jobs they are often stressed out. Even after they get off work, it takes a while for them to decompress. But if you’re the kind of a girl who likes a challenge (like me) then I think you can appreciate these guys. If nothing else, they make a great fling.

Just in case her message isn’t clear, we offer this translation: “Investment Bankers=Good short term positions.”
Ex-Working Girl Presents: The Guys Guide [BankersBall]

Star Wars Aficionado vs. Wall Street

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obiwan.jpgRegistered Rep mag profiles Mark Theirman, a class action lawyer (it’s Class Action Day at DealBreaker) and ginormous Star Wars fan who is bringing suit against several large financial services firms for failing to compensate brokers for overtime work:

Thierman is now bringing his legal campaign east, with about 35 more class-action lawsuits, including some in New York, New Jersey and Pennsylvania. The list includes nearly every firm you’d expect, and then some: A.G. Edwards, Bear Stearns, Merrill Lynch, Morgan Stanley, Smith Barney, Edward Jones, Wachovia Securities and Raymond James & Associates. Thierman estimates that the suits represent about 100,000 brokers, past and present.

A few firms have settled with Thierman, while simultaneously arguing that they’re exempt from the Fair Labor Standards Act of 1938. In our totally inexpert opinion, they probably are, but we have trouble taking a guy with Obi-Wan vanity plates seriously in the first place.
Wall Street Wage Fight [RegisteredRep.com]

Jamie Dimon Up 47%; JPMorgan Up 1.7%

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DIMON.jpgWe’ve said before that Jamie Dimon has a bit of a “story” problem (as in, nothing’s happening and he doesn’t have one) but you could generally rest assured that he was off cutting costs somewhere because, well, that’s what he does. But now it appears that JPMorgan’s cost-cutting back (as in, Dimon’s pay):

Executive pay has been a sensitive topic at JP Morgan, which awarded Chairman William Harrison and Chief Executive Jamie Dimon $22.3 million in compensation in 2005, representing increases of 39 percent and 47 percent from the year before. By comparison, JP Morgan’s stock gained 1.7 percent in the period.

JPMorgan Investors Back Resolution It Opposed [Reuters]
Related: Jamie Dimon: Is There Any There There?

  • 17 May 2006 at 9:49 AM
  • Citicorp

Flashback, Sort Of: Remember Jack Grubman?

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grubman.jpgThe various deadlines for the class action suit against Salomon/Citi for Jack Grubman’s analysis of AWE circa 2000 are approaching. (If you traded AT&T during that period, you’re probably going to get the litigation flyer in the next few days.) As a reader points out, “sometimes scumbag class action lawyers do good things, like keep stories alive.”
The proposed settlement is for a little over $74 million, to be split between the millions of middle American grandmas who were allegedly victimized by bad sell-side analysis. We figure it works out to $2.67 per victimized grandma and roughly $2 million per class action lawyer.
Salomon AT&T Litigation [Berdon, LLP]

JPMorgan Interns Join Forces, Form Kill Blog

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A reader charts the devolution of the JPMorgan summer analyst blog, based on changes to its tagline and a recent post indicating that it has only days to live:

The path to disillusionment:

April 29: As everyone knows, corporate finance is the most important part of every bank, especially JP Morgan. This group is dedicated to the corporate finance summer analysts at all JPM offices for Summer 2006. This summer is going to be an orgy of Excel-induced I-Banking pleasure. Goldman Who? Shiti-Bank.Lame-man Brothers. Deutsche-Bag Bank. No bank can compare.

May 01: As everyone knows, corporate finance is the most important part of every bank, especially JP Morgan. This group is dedicated to the corporate finance summer analysts at all JPM offices for Summer 2006. This summer is going to be an orgy of Excel-induced I-Banking pleasure.

May 10: This group is dedicated to the corporate finance summer analysts at all JPM offices for Summer 2006. This summer is going to be an orgy of Excel-induced I-Banking pleasure.

May 12: This group is dedicated to the corporate finance summer analysts at all JPM offices for Summer 2006.

May 14: “As you can see, the blog has been down-sized a bit. Seeing as we are starting in a couple of weeks, this blog will only be up for a few more days.”

Ah, well. It was fun while it lasted.
JPMorgan Summer Analysts 2006