This morning the jury in the trial of former Enron chiefs Ken Lay and Jeffrey Skilling deliberated for a fifth day on Wednesday asked the judge for transcripts of trial testimony. No one really knows what this means in terms of acquittal or conviction, except that it means the jury is still deliberating. Shares of “Lay Guilty” at Tradesports.com (who provided the chart above) continued a moderate decline that began in the early morning hours before the news broke.
Enron jury asks for trial transcripts [Reuters]
Enron Trial Page [TradeSports.com]
Archive for May 2006
We suppose it was inevitable, but post-KKR-IPO, there’s a bit of bandwagoning, despite the fact that KKR performance has been less than stellar so far. From the WSJ:
Weeks after Kohlberg Kravis Roberts & Co. raised $5 billion in a European public stock offering, Apollo Management LP is following suit, with a planned $1.5 billion offering, and other private-equity firms are making similar plans.
The Journal notes that investors in the public entity aren’t likely to get the returns limited partners get because LPs only write checks on capital calls:
Investors in the publicly listed fund will be earning far lower returns than those that private-equity firms generally promise their investors, because traditional investors write checks only when the firms are ready to invest the money in actual deals, while the public investors provide their cash at the time of the offering.
Apollo’s solution: invest the money faster!
To entice investors, though, Apollo’s fund promises to invest its money on a tight timetable.
We get the logic, but in our experience faster deals are sloppier deals. (But then we assume, perhaps wrongly, that many of the people putting money into the KKR IPO couldn’t get into the original funds or comparable funds as LPs and are less sophisticated investors anyway.)
But re: LP advantages: our favorite private equity anonyblogger, GoingPrivate (who is fending off extortion threats at the moment), pointed us to KKR’s offering memorandum (downloadable here) a few days ago. One counterintuitive risk disclosure: KKR warns prospective investors that they’ll be receiving less information than LPs (p. 34/35.) All the downside of investing in public equities and none of the reporting benefits, apparently.
Apollo Will List Fund in Europe [WSJ]
William P. Kucewicz, editor of GeoInvestor.com and former Former Wall Street Journal editorial board member, argues for the immigration liberalization being pushed by President George Bush in NationalReviewOnline today. The problem is that Americans aren’t having enough babies to replace our aging population and prop up the governments burgeoning entitlement programs, according to Kucewicz. The solution? The government needs to import more people.
While it’s too late to change the boomers’ baby-making habits, policymakers can do the next best thing: that is, import as adults via liberalized immigration policies the children who were never born. Working-aged immigrants would do just as nicely as native-born Americans in terms of maintaining a viable ratio of workers to retirees.
This makes sense because, as everyone knows, governments are very good at second-guessing the independent decisions of millions of independent actors. And it’s totally not surprising that a “conservative” magazine thinks that government totally knows how many Americans there should be. No really.
If there’s money to be made somewhere, you can be pretty sure someone standing nearby is making money selling advice on how to make money there. Apparently the porn industry is no exception and now has its own investment research firm.
AdultVest.com, the first and only investment website serving the $57BN/yr adult industry, has set a blistering pace recruiting broker dealers, venture capital, private equity, hedge funds and accredited investors, announcing today that 1,000 investors have registered at AdultVest.com to research adult industry investments.
The money quote comes from a certain “J. Handy” who says “It is very exciting to be working with AdultVest.” We’re sure it is plenty, uhm, “exciting.”
AdultVest Heads to Exxxotica With 1,000 Registered Investors [via WallStFolly]
As it turns out, investment bankers have a lot of money but are chronically short on time. The Chicago Tribune’s review of former NY Post writer Wendy Straker’s (pictured to the left) new book In Men at Work: A Job-by-Job Search for Mr. Right breaks the news.
So a handsome investment banker asked you out, and you really clicked. You’re wowed by his brains, his confidence and, sure, his income. But if you’re dreaming of long, luxurious weekends spending his money with him, Wendy Straker is here to throw cold water on your fantasy…she says that while investment bankers fall in love just like anyone else, they are not for the emotionally needy; they have no time to spend their money and are constantly postponing plans.
It goes on to say that you should date a musician. But that, as a good friend of DealBreaker once said, is “poor people talk.”
New book says forget the banker and date a musician[Florida Sun-Sentinel]
It turns out that the authors of “Wages of Wins” have a blog! As we noted yesterday, “Wages of Wins” is the book reviewed for the New Yorker by Malcolm Gladwell. The authors claim to have derived a new algorithm for evaluating the quality of professional football and baseball players. The problem with the algorithm is that it overweights rebounding so much that it produces some weird results: claiming Dennis Rodman was a better player than Michael Jordan, for instance.
There’s plenty more on the Wages of Win blog, though, and Steve Sailer is already there trying to start a conversation with them in the comments section.
Meanwhile, Abnormal Returns is using the occassion to spell out some thoughts on investing.
Arbitrary algorithms is a good description of the way many investors go about identifying trades. Frankly, many are lucky if that have an alogorithm beyond the “seat of their pants.” While that may work for some from time to time that is not a durable, long term strategy.
Long term investment success is ultimately driven by embracing greater rigor in one’s investment process. Some investors were able to acquire this over time and through (costly) trial and error. In this day and age however the introduction of cheap data and even cheaper computing power frees us up to explore financial data in ways unimaginable only a decade ago.
Andy Kessler writes in, joining the Vonage-bashing fray, and explaining the full extent of the screwed-ness:
When you use retail to price a deal, you are always asking for trouble. The syndicate dude at Citigroup lost the poker game–he stupidly tried to signal that the deal was over-subscribed, but only raised the number of shares, not the price. then pricing it at the midpoint of $16-18 at $17 was another signal of weakness. Breaking price is bad form, but breaking that $16-18 range in the first hour is even worse, every Tom Dick and Scary retail investor is now unloading their 1300 shares. also looks like the specialist at the NYSE stepped away. U-G-L-Y
it may still trade up. there are always tricks, like Citigroup buying in, but no way to really know another case of Wall Street Buffoonery. Citigroup smelled the 7% IPO fees on $500 million, but may lose that much keeping this stock above $15.
(The above left graphic, in case you’re wondering, is “screwed on crack.”) Speaking of Scary Retail Investor, see below: the email that went out to the “Vonage Customer Directed Share Program” about the IPO. And from now on, we’re going to refer to questionable friends-and-family rounds as “customer directed share programs.”
On Seeking Alpha, Venture capitalist Kevin Chou compares Vonage to Pets.Com, writing:
Vonage (VG) is a horrible IPO to invest in. Avoid it like a rabid dog stumbling down your street. The company is nowhere near turning a profit, is spending crazy amounts of money on advertising (Super Bowl ads with sock puppets, anyone?), and is facing some of the most intense competition of any industry I track in the technology space.
Smith Barney has agreed to pay $98 million to settle claims made by class action lawyers, including one who is almost freakishly devoted to Star Wars, on behalf of thousands of current and former brokers that they are owed overtime pay and other reimbursements.
The proposed settlement is the latest and largest by securities firms that contend brokers are exempt from state and federal overtime laws because they are salaried, administrative employees. The brokers’ draw on commissions, a monthly loan most receive, qualifies as a salary, they [the class action lawyers] argued…
In February, the UBS Wealth Management unit of UBS AG agreed to pay $89 million in a nationwide settlement to financial advisers who sued for overtime pay and to recover charges assessed by the firm for sales assistants, computers, and trading errors.
Last year, Morgan Stanley agreed to pay $42.5 million, and Merrill Lynch & Co. Inc. acceded to pay $37 million, to settle claims involving only California brokers. Additional claims against the firms are pending in Connecticut, New York and New Jersey.
More settlements are expected. Too bad the story has no direct quotes from Mark “Obi Wan” Thierman. We’re sure that at some point Thierman must have greeted news of the settlement by saying “You were right, Master. The negotiations were short.”
Smith Barney to pay $98 million [Philadelphia Inquirer]
Eddy Elfenbein draws attention to the Expeditors International of Washington, Inc (EXPD) 8-K which is full of what our grandmother would have called “sass.” Right from the start the filing sets the tone.
1. Is there an inherent difference in the requirements for ocean freight volumes that allows better resource utilization than when handling airfreight volumes?
This is one of those questions that we puzzled and puzzled over and we are still not sure we understand the question.
But our favorite was about whether salary and other expenses were sustainable. Expeditors answers, “‘Sustainable?’ Given enough time, the sun is not sustainable, however, we think it is a good bet that there will be daylight tomorrow.”
The Bitchiest 8-K Report [CrossingWallStreet]
Expeditors 8-K [Edgar]
Fed Chief Swears Off Improvising (NYT)
Ben Bernanke regrets his bon mots with Maria Bartiromo and he intends to avoid loose lips from now on. But if history is any guide, this won’t be the last time he’s misunderstood. In fact, as long as the legacy of Greenspan remains intact, and the fed chief is expected to be cryptic, there will be plenty of misunderstandings. Of course, it can be debated whether there was ever any misunderstanding in the first place. Didn’t Maria’s original warning to the market prove prescient? Shouldn’t investors appreciate the whole situation for helping to tempter gains that eventually melted away? And really, what’s a Fed Chief without improvisation. Keep it cool man; play jazz.
The dollar is still a currency you run to … (RGE Monitor)
Well, some people do. Emerging markets seem to be getting schooled in the concept of the market for lemons. Among the hot emerging markets, investors know that X number of them are lemons, but in times like these they don’t know which ones. So selling becomes indiscriminate, without any concern for quality. Inflation-prone Turkey is getting whacked, as is surplus-running resource-rich Brazil. And a lot of investors still don’t seem to be able to answer a key question in the dollar debate. If not the USD, then what else? But then, why the US? Economist Brad Setser notes the irony of fleeing a country with a surplus, like Brazil for a country with a deficit, such as US. Also of note is that it’s not the whole world seeking safe haven, but mainly speculating Americans, who are closing positions and returning to their home currency.
H-P Lost Faith in Fiorina, But Not in Merger (WSJ)
So with HP’s resurgence, have Carly and the Compaq merger been vindicated? It’s an interesting question, and a testament to the company that anyone, today, is even having this discussion. The company’s CFO recently performed an internal study on merger, and by the broadest measures of profitability and market share gains it would appear that all of the goals from the merger have been satisfied. But does that really vindicate the merger? Or are backdating, or retrospectively writing history. In other words, does today’s success necessarily stem from the merger, or are they two separate things that can be nicely tied in a bow. Not an easy question, though it’s dazzling how often conventional business wisdom seems to be turned on its head.
GM offers $1.99 gas in Florida, Californian (Reuters)
Remember last summer when GM was offering steep discounts on cars and at least for a few months, their market share started to spike, causing Ford to do the same thing? It was great from a volume perspective, in terms of clearing out inventory, but it wasn’t so good for the bottom line. Everyone, including the company itself, agreed that it had to wean itself off of incentives and start selling cars for full price. So, they eventually ended the discount program (goodbye market share). But since then they’ve just replaced it with one cockamamie scheme after another, including this one to sell subsidized gas for SUV buyers. But as long as they’re going to keep up the incentives, why not just cut the price of the car, which actually worked really well? Any backdoor incentive will still lose money, while not being as affective at moving units. Seems like someone needs to work on their marketing strategy.