Archive for April 2007

Write-Offs: 04.30.07

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$$$23 year old female hedgie seeks hot, promiscuous male roommate. “Dana Vachon, Tim Sykes need not apply.”
$$$Polonius is (Posthumously) Avenged [Going Private]
$$$Toyota [WallStrip]

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The Krugman Economy?

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krugmanthecontraryindicator.jpgShould the New York Stock Exchange put Paul Krugman on retainer? That’s the conclusion of Paul Greenberg writing in today’s Washington Times.

Surely another dip in the market is bound to come — so long as there’s a business cycle — but Paul Krugman’s magic touch keeps delaying it, turning every down into still another unstoppable up. It’s positively unnatural. The man is a kind of walking, talking, and, best of all, writing version of Al Capp’s poor little jinx of a character, Joe Btfsplk — only in reverse, leaving not disaster but good fortune wherever he goes. The New York Stock Exchange ought to put him on retainer. If only Paul Krugman would just keep writing about the coming End of It All, prosperity might be assured.

But it isn’t just Krugman as a contrary indicator of the direction of the financial markets that has caught Greenberg’s attention.

Then there’s the language in which Mr. Krugman sends out his jeremiads. It is, in a word, hilarious — if unintentionally so. He has to be the country’s leading practitioner of purple-as-a-bad-bruise prose. Mrs. Malaprop might have spoken like that if only she’d had a Ph.D. in the dismal science.
I’ve saved my favorite Krugmanism of all time for those occasions when I may need a bit of cheering up: “And when the chickens that didn’t hatch come home to roost, we will rue the days when, misled by sloppy accounting and rosy scenarios, we gave away the national nest egg.”
As prose, that’s a lot of poultry. Try to visualize those chickens that didn’t hatch coming home to roost, if you can stop laughing. Why, that’s almost Zen, like the sound of one hand clapping. His reference to the national nest egg is just lagniappe.

One note to Greenberg: if you are going to criticize the writings of others, avoid the word “lagniappe.” We have no idea what that word means and no intention of looking it up. In fact, we couldn’t read any further after we saw that word because it made us feel nauseated. It sounds like something we drank at Mardi Gras once and we’re afraid to find out what they put in it.
Sound of one man weeping [Washington Times]

  • 30 Apr 2007 at 4:25 PM
  • Microsoft

Who let the dogs out at Microsoft?

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Take the fairly simple premise that you aren’t allowed to put pictures of canines in your workplace because Bill Gates had nights terrors after watching Cujo, add Valleywag, and you get CONTROVERSY. Valleywag heard from a friend who heard from another friend that you aren’t allowed to put pictures of dogs in your workstation at Microsoft. The justification from Microsoft, according to the source, was that “some people just hate dogs, yo” without any explicit allusion to the Muslim belief that dogs are inherently unclean. Does anyone have any more dirt on this (tips at dealbreaker dot com)? Is this a first in the American workplace – in terms of banning something so innocuous and fundamental to the general aesthetic of your assistant’s cubicle? Is Microsoft instead controlled by ancient Egyptians (i.e. – aliens) and is anti-dog out of reverence to cats, or an aversion to the death cult of Anubis? Is this just Valleywag pulling a “Calcanis wants Imus to start a new media network” on us?
Dogs at work – [Valleywag]

  • 30 Apr 2007 at 3:39 PM
  • KKR

TXU TV: We’re Not Going To Burn As Much Coal As We Planned

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The video above comes from Texas Energy Future Holdings, the joint-venture partnership set up by Kohlberg Kravis Roberts and the Texas Pacific Group to fund their acquisition of the Texas energy company TXU. They also have a snappy, graphics laden website called TexasEnergyFuture.com.
We’ve run a lot of stories about the online public relations campaigns of Pirate Capital but until now haven’t touch on the phenomenon of political campaign style advertisements in the TXU deal.
We were wondering who was behind the turn to the public airwaves in order to win sympathy for the buyout. Unfortunately, we didn’t get very far in our inquiries with Texas Energy Future Holdings.
“The investors felt the need to let the public know about the transaction,” Jeff Eller told us twice when we asked about who planned the advertising campaign and how the idea was first hatched.
This morning’s Financial Times reports that Bonderman didn’t fare too well when confronted by Dallas mayor Laura Miller during a panel discussion at Milken Institute’s annual conference in Los Angeles.

In matters of substance, I would say that Mr Bonderman won on points. But Ms Miller and a member of the audience managed to rile him enough to concede a hostage to fortune. I concluded that the senior partners of private equity firms, who are under the spotlight around the world, still have much to learn about how to behave adroitly in public.

The turning moment of the discussion came, the FT reports, when Bonderman faced a question from an environmentally concerned audience member.

So why did he lose his cool when a self-righteous man from the audience demanded to know whether he felt an ethical responsibility to cease contributing to global warming? “You and others who are absolutists tend to be wrong almost always, in every event, at any time,” Mr Bonderman snapped back, promptly losing the audience’s sympathy.
It was an ingenue’s error. A smile lit up Ms Miller’s face and she said: “That was a really interesting answer.” No smart politician would have been caught losing his temper with a critic in that way, especially not on camera. As they have learned, in the age of YouTube, one reckless moment can doom them.
Like the male leads who clash with sparky women in Hollywood films, Mr Bonderman is charming but arrogant. I suspect that is true of the heads of other private equity firms. Who might not be with their stellar financial records? But it is no longer tactically wise to show it and the sooner they learn that the better it will be for them and their investors.

We hadn’t seen the video of the debate. So we asked Jeff Eller about it. Was it televised somewhere?
“It wasn’t a debate, it was a panel discussion, and to the best of our knowledge it wasn’t broadcast anywhere,” he said.
So was the “panel discussion” broadcast or not? Does anyone have the video? We haven’t been able to track it down anywhere. Send what you know to tips@dealbreaker.com.
Private equity needs more charm

Job Application: Berkshire Hathaway

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Dear Mr. Buffett… [WSJ]

  • 30 Apr 2007 at 2:28 PM
  • admin

Help Wanted: DealBreaker Summer Interns Gone Wild!

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summerinternships.jpgThe resumes are already starting to pour in but it’s not too late. DealBreaker is still looking for summer interns and we might just be looking for you!
Our internships fall into two categories, editorial and graphics. For editorial interns we’d like someone interested in spending their summer writing, reporting, research and performing mild administrative tasks—things like making frozen margaritas for Bess. Ideal candidates will have an interest in finance, some writing experience, a mischievous sense of humor and a history of causing trouble.
We’re also looking to improve our graphics this summer through the use of slave labor with the help of a graphics intern. The ideal candidate will have a well-developed aesthetic sense, a desire to make pretty pictures on the internet and some experience using photoshop. We’re going to be providing original video and podcatsing content in the near future, so experience in podcasting, film-making or online video is a major plus. It will probably make your summer much more pleasant if you have some interest in finance as well.
DealBreaker internships are great resume building opportunities. This is a nice way of saying they are unpaid—although you can expect to receive cocktails and food on occasion. If you are a student, we will work with you to get credit for the position. Also you should keep in mind that DealBreaker internships are not dead-end jobs. Bess Levin started as an intern, and is now a full-time contributing editor.*
And now she’s also our internship coordinator, too! Send your resumes to bess (at) dealbreaker (dot) com. Include “Editorial Intern” or “Graphics Intern” in the subject line as appropriate.
*Past performance is not necessarily indicative of future results. This “help wanted” item contains forward looking statements that rely on certain assumptions, projections and flat-out baloney that the management of DealBreaker believes to be reasonable or at least knows how to spell.

  • 30 Apr 2007 at 2:15 PM
  • Pharma

Just when you stopped believing in God

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Monkey.jpg Put down that Dawkins book and stop reading that Hitchens interview, there may be hope for divine intervention yet. In other big (HUGE) pharma news today, a pill that causes women to lose weight AND their inhibitions could be on the market in the next 10 years (right at the point when age will render us in dire need of administering such a pill to our dates, sans hedge fund). Researchers from the Medical Research Council’s Human Reproduction Unit in Edinburgh found the hormone-releasing pill causes female monkeys and shrews to develop the dual effects (which I guess somehow aren’t correlated with each other).
Hope for sex-boost slimming pill – [BBC]

  • 30 Apr 2007 at 12:30 PM
  • Fed

Goldman, Merrill, UBS – Fed should not take a hike

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Goldman, Merrill and UBS are claiming that the Fed’s recent inflation warnings, suggesting interest rate hikes, get the housing market and the general direction of the economy all wrong. Chief economists at the three banks feel that the decline in the housing market has spread to the overall economy, which would indicate a bullish view on bonds and even suggest the need for rate cuts. The Fed disagrees and sees a stabilization of the housing market and no major correlation between the recent housing slump and the overall economy.
The three banks contend that a strong labor market has prevented any cuts on the Fed’s part thus far, and believe the Fed is coming around to the more bearish view that the economy is still slowing. The Fed has readjusted its time table for a housing recovery and scaled back the forecast on capital expenditures. Despite this, the latest Fed meeting gave no hint of a rate cut, and the 2.3% rise in the Commerce Dept’s price index from a year earlier send off inflation warning signals. Also, the banks are often wrong when it comes to predicting the direction of rate changes. Some highlights of Goldman, UBS and Merrill’s glorious track record, from Bloomberg:

Goldman projected an increase in June 2002 and the central bank ended up cutting rates the next quarter. UBS expected the Fed to double its target by the end of 2003 to 2.5 percent from 1.25 percent. Instead, the Fed reduced borrowing costs to 1 percent in June 2003.
Merrill had forecast in early 2006 that the Fed would end a series of increases when its benchmark reached 4.5 percent. Instead, the Fed boosted rates to 5.25 percent in June.

Bernanke Is Wrong on Inflation, Goldman, Merrill Say – [Bloomberg]

Jim Cramer Wants You To Lay Off Lloyd Blankfein, John Mack and Stanley O’Neal (But Keep Mocking Chuck Prince Because That Guy’s Had It Coming And, Also, He Just Doesn’t Like The Look Of Chuck’s Face)

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jimmyc.jpgJim Cramer doesn’t want you to hate the game, or the playa. And in his column in the latest issue of New York, the “game” refers to making money; the “playas,” I-bankers (and I-bank CEOs, and, more generally, I-banks). Sure, you might be saying, why shouldn’t I hate the $54 million/year Lloyd Blankfeins and the Goldman Saches of the world? Not only are they terribly unhygienic, but they make more in an hour than I do in a month (or is that just us at DB? Don’t answer that) and I’m a jealous, small and petty person (to say nothing of my unresolved issues from childhood, which probably feed into the pettiness in a vicious, never-ending circle).
You’re saying that, right? Well Big J has the answer. If you invest said “playas,” you’ll get to be part of their “game” and your resentment will disappear because when you’re rich, you can buy the antidote to resentment. Another reason you shouldn’t hate these “playas” is because Cramer used to work for Goldman Sachs and never fails to mention this (or his relationship with Spitzer, which, let’s be honest, you really can’t blame him for, because Goldman Sachs is an incredible institution and Spitzer is essentially God’s special gift to the world and politics at large). Here are some other arguments for why you should cross Lloyd, Dick and Stanley off of your To Kill lists (hint: they all have to do with their outifts making you money, and Chuck Prince having less financial acumen than Cramer’s garbage disposal):
1. These guys are basically stay-at-home moms: underpaid and, more importantly, unappreciated.

Stop envying Goldman Sachs’ Lloyd Blankfein already. Don’t begrudge Bear Stearns’ Jimmy Cayne and Lehman’s Dick Fuld their millions. Let Merrill’s Stan O’Neal and Morgan Stanley’s John Mack get paid more than Croesus. You heard it here first: They deserve it. In fact, they deserve more than they earn now.
Those five men are underpaid because they are about to make you very rich if you buy their stocks.

2. They will make you Kings of Great Neck, Dukes of Roslyn with Asset Management alone. And, not to brag or anything, but if you must know, Cramer predicted Asset Management would be a major money-maker YEARS AGO, before assets were even invented. Of course, no one at 85 Broad listened to him, just like they didn’t about gravity or 9/11.

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  • 30 Apr 2007 at 11:44 AM
  • Citi

Fear of A Hedge Fund Planet: Will Activists Force A Break-Up of Citi?

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citigroupbuilding.jpgCitigroup executives are worried that managers of activist hedge funds will try to force a break-up of the company, David Wighton of the Financial Times reports this morning.

Senior Citigroup executives fear the world’s biggest financial services company could become the target of activist hedge funds that would press for it to be broken up.
The executives believe Citigroup needs to step up its investor relations and explain better to shareholders the value of keeping its businesses together.
Many have dismissed the possibility that Citigroup, valued at $260bn, could become an activist target. But one Citigroup executive said: “Even Citigroup is not too big. It’s not impossible.”

None of executive are named in the story, and at least one person inside Citigroup (who also asked to remain anonymous) tells us that he suspects the story is a plant from executives trying to get management’s attention following the campaign by The Children’s Investment Fund which appears to have convinced ABN AMRO, the dutch bank at the center of a bidding contest between Barclays, the Royal Bank of Scotland and Bank of America. The fact that the executives feel the need to make their argument for better investor relations through the press, and to raise the threat of activist hedge funds, is a sign of the disfunctional culture at Citi, our source says.
Citigroup chiefs fear push for break-up [Financial Times]

How do you talk to an angel (Besides kicking the crap out of Donna)?

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how do you talk to an angel.jpg If you didn’t know “How to Dance with Angels,” CFO.com is here to tell you. Even though VC investing is back at 2001 levels, the level of angel investing is ramping up at nearly the same rate. Angel investing, or foregoing VC money in lieu of wealthy individual investors, is seen as a way to prevent the pressures of 20%+ above market returns and allow for more corporate flexibility. More traditional angel return expectations hover around 10%-15% above the S&P. A sense of the overall market, from the article:

Last year angels — wealthy individuals who hope to take advantage of ground-floor investment opportunities in new companies — provided $25.6 billion to burgeoning businesses, an increase of nearly 11 percent over 2005, according to the 2006 Angel Market Analysis released by the Center for Venture Research at the University of New Hampshire. Furthermore, the number of ventures to receive angel funding rose 3 percent, to 51,000, last year, and average deal size grew by 7.5 percent. “This continued rise in total investments points to a healthy angel market,” concluded the report.

More after the jump…

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