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$$$ Another way to cheat at pricing II [Naked Shorts]
$$$ Blackstone Filing — Details on Comp, Part II [Banker's Ball]
$$$ An Uncommon Combination of Beauty & Brains seeks Rare Renaissance Man-- CEO, hedge fund manager or creative genius [Craigslist]
$$$ The iPhone on the Daily Show.
Call options of Marvell Technology have been trading at four times their usual volume today. Apple’s iPhone is widely rumored to use a wi-fi processor manufactured by a company Marvell bought last year. Shares of Marvell traded up 5.81% for the day, with nearly twice the average number of shares changing hands.
One analyst we spoke to said he did not believe that the surge trading volume in the options and shares indicated anything suspicious.
“Some people are definitely trading on hopes that the stock will get a bump once the teardown analysts release their reports on the iPhone,” the trader told us. (He asked to remain anonymous because he wasn’t authorized by his employer to speak on the iPhone.) “But I don’t think this pick-up is due to someone having inside information about what’s insider the iPhone.”
Marvell is still priced well-below the highs it hit in early 2006. Since then the company has faced an stock options scandal that lead to the resignation of its chief financial officer. Its most recent quarterly results came in below estimates.
But it hasn’t all been bad news for Marvell. Nasdaq announced this week that it was holding off suspending trading in Marvell’s while Nasdaq’s board reviewed allegations against the company. Marvell was recently added to the Russell 2000 index.
"There's other news on this company besides the iPhone," the trader told us. "But today's interest is definitely trying to get in pre-teardown."
Of course, it's not just speculating traders who are excited about the iPhone. Nerds are excited too! Our reporter on the scene, Scott Bressler, says that there are approximately 362 people on line at the Apple store in Soho. At noon there were about 280, up from 68 at midnight.
(Photo: Waiting for tonight's iPhone launch outside the Apple store by Scott Bressler).
Our more fashionable little sister site, Fashionista.com, noticed today that Esprit is on the hunt for a small, high-end brand to buy. Despite its powerful earnings and impressive performance of its stock—Bloomberg notes that it is the best performing stock on the Hang Seng index in ten-years—the company’s executives feel the brand lacks a little luxury appeal.
“Even though they sell loads of sportswear to Germany and the rest of Europe, they know they've got nothing on TopShop, H&M, or even The Gap in terms of style cred,” Fashionista writes. “Their hope is to find a company that makes Esprit look better to designers and fashion folk who might, eventually, pair with the line.”
The Fashionista readers have been chiming in with the names of potential targets. Luella and Diane von Furstenberg both seem to be favorites.
What Should Esprit Buy? [Fashionista]
Apple will release the iPhone tonight, but consumers and the media are unanimously apathetic. We just googled “iphone” and received five results, four of which referred to the International Paper Historians eg. “IPH, one group of paper historians…”
What little buzz there is for the phone seems confined to NYC, maybe just downtown. This picture of the Apple Store in Soho was taken by Scott Bressler.
CNBC reports that the SEC has asked Bear Stearns to turn over its documents about the investments made by its two hedge funds that nearly collapsed. Bear representatives, Masters o’ PR, have pointed out that inquiry is “informal” rather than full-fledged. But the only reason the investigation is being called “informal” is because Bear Stearns is cooperating, says the SEC. If they were to put up a fight regarding turning over the documents, a subpoena would be requested and the investigation would become “formal.”
Related: Jeff Lane, the guy Bear recruited from Lehman Brothers to replace Richard Marin as asset management chief, is “not known as a fixer of failed things.”
Last night we sent DealBreaker intern Scott Bressler to scout the scene at the Apple stores in NYC. In Soho he met the folks at the front of the line, who are broadcasting their standstill adventure at iPhone Launch TV. They plan to be the first to buy the iPhone, which they will auction on eBay for charity. (Scott made an appearance on their webcast last night, and we'll be posting his pictures later today.)
So the bleeding hearts are selling the iPhone for charity. We're sure that's sweet of them. But what we want to do is get our hands on one of these babies and smash it.
That's the only way we're going to get real answers to the question that has Wall Street traders speculating, whispering and rumor-mongering today: Who makes the components of the iPhone? Some rumored parts makers are Marvell Technology, Broadcom, Samsung, Infineon Technologies, FoxConn Technology and Cambridge Silicon Radio. Apple won’t say who is manufacturing the guts of the new phone, and none of various players are commenting to the press.
But that hasn’t kept the stocks from moving. Marvell technology seems to be a favorite. The stock is up nearly 3.5% today, and just halfway through its trading day it has almost reached the three-month average for trading volume. Broadcom is down a bit, after rising earlier in the week. Infineon has been up and down all week, and is currently trading about where it started on Monday.
Clearly we need to learn who makes what inside the iPhone as soon as possible. And the only way to do it is to break the phone open.
The market expects Apple to sell as many as 1 to 2 million iPhones today.
Update: It looks like we're not the only ones who want to break the iPhone.
Barbarians at the Gate was a great read but who’s up for a new book by the voice of our generation? By a day trader so great he turned $12,415 in Bar Mitzvah money into a fully audited pre-tax sum of $1.65 million, a writer so wonderful he just might trump Mergers and Acquisitions in book sales? Anyone not vigorously shaking his/her yes is a liar and a fool. Yes, friends, hedge fund guru Tim Sykes has a book. Unfortunately, he doesn’t have a publisher other than himself. And master of his own publicity as he is, he needs a little help. So we’ll be excerpting his memoir, “An American Hedge Fund: How I Made $2 Million As A Stock Operator & Created A Hedge Fund” whenever the mood strikes us, and if you like it, you can buy it (in October), and if you don’t (and/or have some edits), you can email Tim at Tim at timothysykes dot com.
“My high school teammates loved my wins but were put off by my intensity. As a result I didn’t get captain; probably because they knew I’d work them as hard as I worked myself.”
“I hated Tufts University from the start. The weather seemed colder than Connecticut. The girls were overwhelmingly unattractive.”
“I was used to having my own space. Lots of it. I’d drawn a forced triple, which meant that I shared a room with two roommates instead of just one. The room was barely meant for two people, let alone three, so it was extremely tight and crowded. Early on, I banded together with one of my roommates whom I liked and we planned to irritate the third roommate into leaving. We toyed with him on a daily basis using such petty tricks as subscribing his email address to pornographic websites and spraying his sheets and pillows with Windex. After a few weeks, our operation succeeded and he moved out. My roommate and I celebrated our newfound space by throwing a party for the dorm.”
Movie critic and head of the Bear Stearns the asset-management division that ran the two nearly-collapsed hedge funds, Richard Marin, has been replaced by Jeffrey Lane of Lehman Brothers Holdings. Though Marin will remain an "adviser" to Bear Stearns, he will now have considerably more time to blog.
Rich, Rich, Rich. What can we say? We warned you about comparing yourself to the Spartans. Sounds like you basically just met the Wall Street equivalent of the fate of King Leonidas.
Lane To Head Bear Stearns Asset Management [CNBC]
Bear Stearns Hires Lehman's Lane as Head of Fund Unit [Bloomberg]
One of the great secrets of our success here at DealBreaker is our readership. We have the brightest, wittiest and best informed commenters on the web who help keep our recent comments page always fresh. And our tipsters—often people we have never met who reach out to us through email and phone calls—have helped us break stories and get the insider angle on stories where everyone else is simply re-writing the press release.
So this morning we’re happy to bring you new ways to send us tips. Starting today, you can now contact via instant messaging. Our AIM screenname is TheDealBreakers. But sometimes you need that extra-measure of security—or rather, to avoid those extra measures of security from the folks who might be monitoring your computer usage. So we also have a DealBreaker tips text message account. Send your text tips to 973-495-0177.
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Carl Icahn and Hank Greenberg don’t play golf. And they don’t like executives who do. On Wednesday we went to the Wall Street Journal’s Deals and Dealmakers conference, and while everyone else was frantically scribbling down what Treasury Secretary Hank Paulson said about globalization—hint: he’s for it—we found ourselves more interested in the slightly less, well, earth moving details.
Golf—arguably the most popular pastime in America—didn’t score well with two headliners.
“I hate golf,” former AIG chairman Greenberg told the assembled crowd of investment bankers. “I play tennis. It doesn’t take long. Then I get back to work.”
After his talk we asked Greenberg about the popularity of golf among corporate executive.
“A lot of people like to get away from their work,” he said. “You have to wonder about whether they like what they’re doing.”
Icahn, the legendary corporate raider turned shareholder activist, was even more dismissive of golf. For him golf players symbolized the kind of clubby, chummy corporate executive he thinks is dragging down American business.
“These guys would rather play golf, slap each other on the back,” he said. “I want a guy running a company who sits in his tub at night thinking about the challenges he faces. The guy who can’t let it go. The focused guy.”
Yesterday we noted that Carl Icahn is not just short golf. He also tried to short Blackstone just after it's IPO.
Here's the latest BonusBumper chart. Thanks UBS, for driving down the median. Bonus numbers are starting to roll in, and while there isn't any speculation on whether bonuses are higher than the amounts listed, there is speculation that they may be a tad lower. It's also possible that the majority of bonuses have diverged so far from the top that no one knows what the real top is anymore. It doesn't help that that top analyst is usually a complete pain in the arse and the one person in your group who's mum about the extent of that obscene lump sum.
Comment or send any bonus info to: tips at dealbreaker dot com
What do you do when you’re trying to take the heat off your firm for the near-collapse of two hedge funds, and your last attempt to do so, leaking the fact that the guy in charge of the unit that ran the funds has a blog (hey, look, a blog!) backfired after a few people wondered aloud, “Why is this guy writing movie reviews?”? Let’s see, how about we get a guy to produce some pictures of John Mack dressed in drag? No? Okay, say someone could arrange for a hedge fund to lose $6 billion in two weeks? Is that something anybody would be interested in? No…okay…what about a profile of James Cayne that has all of the clichés about James Cayne that every article ever written about him includes, plus some new stuff about how he’s cutting back on red meat? Yes, this is the way to go.
Make sure the lede has the word ‘bellyache’ in it. Q. Who wants to read the article in the Journal that actually names the funds when we’ve got an exposé on Jimmy Cayne’s gastrointestinal problems? A. NO ONE. It is of the utmost importance that you mention JC’s affinity for cigars. Write something like “[Yadda, yadda, yadda], he said as he took a deep puff on a freshly lit Montecristo cigar.” This serves two purposes—it a) reinforces something everyone already knows about Cayne and b) is a nod to Charlie Gasparino’s assertion that “James Cayne has smoked more cigars than any CEO on Wall Street.”
Next up is cards. Forget about the Bear Stearns High Grade Structured Credit Strategies Enhanced Leveraged Fund, forget about the SEC, forget about Bear Stearns being a sty. James Cayne is a “world class bridge player who did not finish college.” Losses? What losses? James Cayne’s ascent “has been a result of a card player’s guile.” What is this subprime mess you speak of? James Cayne “didn’t go to Harvard Business School—he was a bridge bum.”
Now talk about Cayne cutting out “red wine, bacon and salmon for breakfast.” His "tan" thanks to weekends down the Shore. His “youthful demeanor.” The fact that he likes the musical stylings of a Norwegian pop star named Sissel and “any movie that stars Halle Berry.” Basically, anything you can get off his MySpace page is fair game.
Finally, ctrl-V “bridge-cigar” several times. How many is something of a personal choice but thirty is too few, sixty is probably too many. But no fewer than thirty, because Richard Marin felt the need to tell us not to see “Evan Almighty.”
Salvaging a Prudent Name [New York Times]
Soaring RIM shrugs off iPhone threat (Globe and Mail)
Well today is the day: iDay. That's not a pathetic witticism. That's literally what Apple is calling today, which is, to be perfectly honest, sort of silly. iDay? Whatever. We walked through the city for awhile yesterday evening, and although we passed a few AT&T Wireless corporate stores, we were disappointed to see nobody camped out. Guess you have to go to the Cube or the Soho shop for that. Meanwhile, one of the big expected losers from iPhone mania, Research-in-Motion, reported blowout earnings yesterday evening, sending shares soaring in after hours trading. That's great, now you can sell your RIMM to buy your iPhone.
Bancroft Heir Pursues Alternative to Murdoch (WSJ)
So you know that the Murdoch-meter is really pushing the mercury, as the deal seems closer than ever to going through. But it's not at 100%. A few folks inside the Bancroft clan are still actively pursuing alternatives. The Journal (hmm, you know, they seem really fixated on this topic), points to Leslie Hill (Hill?), a key Bancroft that's been traveling up and down the east coast looking for an alternative suitor. It doesn't really sound like she's found much out there, although she actually wants to hear out MySpace co-founder Brad Greenspan, who holds a grudge ever since his company was sold for a song to News Corp. He made some dopey announcement last week about wanting to buy Dow Jones (just to stick a needle in Murdoch's eye), though it didn't seem particularly serious.
Western Digital to Buy Komag for $1 Billion in Cash (Bloomberg)
Hard drive maker Western Digital has agreed to buy out Komag for $1 billion in cash. There may be no other merger in history where the word 'synergy' is more apt. Western Digital makes the technology that writes data to the storage. Komag makes the part where the data is stores. Sounds like a match made in heaven.
FDA bans seafood from China (Chicago Tribune)
The hits just keep on coming for products from China. We've seen concerns about everything fro toy trains to toothpaste and pet food, and now the FDA has slapped a ban on certain seafood products from China. Of particular concern are farm-raised shrimp, catfish, eel, which appear to be grown using some drug that's banned in us fish farms. Just as long as there's still plenty of eel at the local sushi joint, the FDA can do whatever it wants.
$$$ The iPhone is too expensive? GET OUT. [Parks Associates via Paul Kedrosky]
$$$ The Crime of Losses [Going Private]
$$$ MBA finishing school [Banker's Ball]
$$$Tomorrow is D-Day for the phone that does everything.
McClatchy still won't comment on its mysterious share price jump since the market opened on Wednesday. That's right, McClatchy won't comment on the dearth of company news, the kind of dearth that drives a share price up more than 4% at day's end. After retracting a bit this morning, McClatchy (NYSE: MNI) shares are up almost 1.5% today, nearing the midday peak of yesterday's surge. Granted, McClatchy reached a new 52 week low at market close on Tuesday, and has to double (almost) to reach its 52 week high, but publishing stocks have been hammered for a variety of legitimate reasons. McClatchy's sales are down 6% this year and ad revenue is down over 7%, like other publishers struggling to go digital.
The lead rumor is that McClatchy is planning to dump the rest of its stake in CareerBuilder. Still no word on who's pumping, and who's dumping?
Extra! Extra! McClatchy for sale? [Media Biz via CNN Money]
You know that ‘private’ blog written by Rich Marin, the head of the Bear Stearns group that ran the two hedge funds that have been causing all the trouble lately? Well, thanks to Google’s cache function, it’s a little less private.
The cached blog post gives us a peak inside the mindset at the embattled bank. Marin describes it as a “dog fight” but seems to revel in the combat. He uses a picture from the recent film 300—in which a small band of Spartans fights against the army of the Persian empire—to illustrate the post.
“This pretty much sums up my last two weeks trying to defend Sparta against the Persians hordes of Wall Street,” Marin writes. “Nothing like a good dog fight 24X7 for a few weeks to remind you why you chose the life you chose. The good news is that after two embattled weeks both I and my loyal staff are still standing to fight another day. If youwant details....pick up any WSJ for the past week and we were in the top three stories every day. It's nice to know you can have an impact on the world....next time I'll try to make it a slightly more positive impact.”
Marin might want to rethink his analogy. Thebattle of Thermopylae depicted in the film ended with the deaths of all of the Spartan warriors. We're sure he hopes that the current crisis passes with fewer casualties.
Whim of Iron [Google Cache]
When it came out that Rupert Murdoch and Dow Jones had agreed on a way to preserve the Wall Street Journal’s editorial independence, we naively assumed that a compromise had been reached. In fact, the “agreement” consists of exactly what Murdoch wanted and more, the New York Times is reporting.
The details have not been finalized, but as it stands, News Corp will have the exclusive power to hire and fire top editors at the Journal. In addition, and this is the shocking part, the board of editors the Bancrofts want established as shield against Murdoch’s influence will not have veto power over any News Corp editorial appointees. Even the similar board at the Times of London, which the Bancrofts have cited as an example of too much News Corp influence, has this veto.
The Bancrofts still haven’t seen the agreement. Based on their past behavior, they probably won't be happy about it.
In related news, some Wall Street Journal staffers are apparently taking half the day off work today to protest Murdoch’s bid. According to a Newspaper Guild statement from this morning,
“The Wall Street Journal's long tradition of independence, which has been the hallmark of our news coverage for decades, is threatened today. We, along with hundreds of other Dow Jones employees represented by the Independent Association of Publishers' Employees, want to demonstrate our conviction that the Journal’s editorial integrity depends on an owner committed to journalistic independence.”
Also, MySpace founder Brad Greenspan’s weird effort to block Murdoch by buying 25% of Dow Jones is apparently still happening. "We have put out a proposal to the family and the board, and I think they’re looking at it with great interest. We plan to meet with the board later this week – that’s a new development," he told CNBC yesterday.
Dow Jones stock dropped slightly with the news, most likely out of fear that the Bancrofts won’t like the agreement the board reached with Murdoch. The meter has slipped 5%.
Tentative Dow Jones Sale Pact Said to Give Murdoch Power to Hire and Fire at The Journal [NYT]
A statement from Wall Street Journal reporters [Romenesko]
Dow Jones Bidder to Meet Board; News Corp. Deal Reached [CNBC]
The New York Stock Exchange has banned Michael Moore, saying he is not welcome in the exchange building on Wall Street, CNBC is reporting. The controversial film-maker was scheduled to be interviewed by CNBC’s Maria Bartiromo at 3 PM today.
Moore’s latest film “Sicko” is critical of the health care system in the United States, and he has been calling on investors, pension funds other institutional investors to divest from health insurance companies. Some publicly traded health insurance companies are listed on the New York Stock Exchange.
Last week a Lehman Brothers analyst wrote a client note describing the film as an attack on the U.S. health care system. "Michael Moore's latest documentary, 'Sicko,' to be released June 29, might trigger resentment against insurers," the note said. "The film directly aims at the U.S. health care system and the insurance industry and suggests a government-run system is the best alternative."
Update: We’re told that Moore may now be unbanned. Still no word on what powerful force inside the exchange is issuing and possibly retracting these orders.
The Fed has kept the bank lending rate at 5.25% for the eighth straight meeting, in an announcement made at 2:15pm today. Economic growth appeared to moderate opposed to slow, which is better news than expected. The market today has been cautiously higher in anticipation of no surprises.
Stocks Inch Higher Ahead of Fed [Wall Street Journal]
We like our men in blue shirts and black pants, as opposed to ensembles reminiscent of “high-end gigolos populating the piazzetta in Capri.” So the news that the new uniform of (mostly) hedgies and (some) investment bankers alike is comprised of $700 cotton poplin trousers (Bottega Veneta), $250 flip-flops (Hermès) and $20,000 satchels in matte tobacco crocodile (Tod’s) was a bit disturbing to us, as we imagine it was to anyone else with eyes. But apparently, according to those designers, plus Ferragamo, Gucci, Versace, Valentino and more, you people enjoy looking like the male-moneyed equivalent of a Puerto Rican whore. They’re just complying.
A “diaphanous raincoat of parachute silk and side-belted blouson shirts” here, “boxing shorts and judo trousers, remade in matte satin and jewel colors” there. This is the new sartorial face of Third Point, RenTech, and ESL. The Bear Stearns bullpen.
Investment banker Euan Rellie was recently photographed wearing a “cropped jacket piped at the collar, lapel, hem and pocket; shirttails left hanging; bow tie” all by Thom Browne. Guy Trebay found the resulting ensemble in line with that of “the man hired by the caterers to make balloon animals.” Are these the people you want handling your money?
Looking Like a Billion Bucks [New York Times]
Marc Spilker has been named COO of the investment management division of Goldman Sachs (he will not be replacing Eric Schwartz, who recently announced he would be stepping down as co-head of asset management, as rumored earlier this week). Spilker will retain his role overseeing alternative-investments.
The latest email making the rounds through investment banking circles is a bridge burning farewell from a young banker.
"I have been fortunate enough to work with some absolutely interchangeable supervisors on a wide variety of seemingly identical projects - an invaluable lesson in overcoming daily tedium in overcoming daily tedium in overcoming daily tedium," the email says.
It sounds like exactly the kind of bold declaration of independence that many young bankers dream of writing but almost never do. So many were applauding the JP Morgan banker whose name appears on the email as the author.
The only problem is that the banker on the email says he didn't write it. What's more, he still works at JP Morgan. It appears that the banker (whose name we're redacting to protect the innocent) is the victim of a hoax, although it's not clear who is responsible or why he has been singled out.
The email bears more than a family resemblance to a faux-farewell email message written by Upright Citizens Brigade regular and comedy writer Chris Kula. Kula’s original purely comedic farewell is here, although we have to dock him a few points for not having any fun banking scars or chiropractor bills to show for his faux angst.
Read the email that a JP Morgan banker didn't send after the jump.
Separated at birth? Lloyd Blankfein, Goldman Sachs CEO; Pancho Villa, Leader of the Mexican Revolution; Snarf, Thundercats (Ho!)
“Um…why is my Grande Mocha (with extra whip) asking me to spell ‘sardoodledom’?” pretty much sums up Starbucks’ first film promotion venture.
Last year, Starbucks Entertainment (and here I thought Starbucks Entertainment is the laughter that ensues when the cashier asks for $5 in exchange for a cup of coffee) promoted the film “Akeelah and the Bee” for a cut of the film's box-office proceeds. Akeelah, surprisingly void of sardoodledom (mechanically contrived plot structure or stereotyped, unrealistic characterization in drama (another word for melodrama)), was a flop, even for a documentary. The promotion campaign consisted of spelling bee words on cup sleeves and general barista harassment to go see the film (although baristas are surprisingly mum when it comes to giving a language of origin).
Undeterred by its first film promotion effort, Starbucks is promoting another film, “Arctic Tale,” an eco-fable about a walrus and polar bear that become special, special friends, and then drown after the ice caps melt (like Milo & Otis, if they were in Korea). The Paramount Classics and National Geographic Films release will be condescendingly explained to Starbucks patrons as a cautionary tale about global warming. The film is set to open in select theaters on July 25 and nationally on August 17.
(Here is the video of the poor soul who got stuck with “sardoodledom” in the National Spelling Bee, and nailed it)
Starbucks Sticks With Film-Promotion Plan [Wall Street Journal]
With regard to a House bill that would swap the much-loved 15% tax rate loophole for a staggering 35%, White House flak Tony Snow said Wednesday that Bushie will veto any and all attempts to increases taxes on hedge funds y buyout firms. Snow, never afraid to go where no one else will, noted that “This is not an administration that’s predisposed toward tax increases.” This bill is separate from the one aimed at Blackstone, Fortress, et. al., though similar in nature, and one that Treasury chief Hank Paulson believes would have “unintended consequences on capitalism,” namely that the mind-blowingly rich would have to let some of its hired help go.
Bush Attacks Tax [New York Post]
But the rich really are different. As they say, they have sex less often. (The jury is still out on whether they do it with fewer clothes on.) Here's the New York Post's Liz Smith writing about Holly and her husband's intimacy issues.
Holly's handsome husband, Rick Kimball, thanked his wife for keeping her maiden name and not putting his on her novel. He has been trying to keep people where he works from finding out who he is married to.He noted that Holly told him when slaving over the book: "From here on in, it's either dinner or sex, but not both!" Rick quipped that it was lonely to eat dinner by himself every night. Holly grabbed and kissed him in the middle of his remarks.
Last time we checked, Rick Kimball worked at Morgan StanleyGoldman Sachs.
New Party Starts For Paris [New York Post]
The London-listed $908mm Caliber Global Investment fund managed by Cambridge Place Investment Management LLP is liquidating its remaining assets and shutting down within the year. The culprit - a majority of the fund is invested in US mortgage backed securities.
Former Goldman bankers Martin Feingold and Robert Kramer founded Cambridge Place in 2002. The Caliber fund reported a $9mm Q2 loss and retained Lazard to review strategic initiatives. The strategy going forward is that there is no forward. It's that kind of out of the box thinking that makes I-banks useful (thank you, that’ll be $3mm).
The Caliber shutdown follows another UK fund shakedown from subprime issues. Earlier this week, Queen's Walk Investment reported a $91mm annual loss. The fund is managed by Cheyne Capital Management.
Cambridge Place's Caliber Fund Shuts on Subprime Loss [Bloomberg]
Carl Icahn tried to short the stock of the Blackstone group immediately after its IPO, the billionaire "corporate raider" told an audience at a conference sponsored by the Wall Street Journal.
"I tried to borrow the stock but I couldn't do it in time," Icahn said.
After he spoke to the conference, Icahn asked reporters not to print the story of his attempt to short Blackstone. Although he had bashed executives and told the audience that private equity had peaked, Blackstone was one of the few companies Icahn discussed specifically.
UBS charged with running 'hedge fund hotel' (Reuters)
Regulators in Massachusetts have accused UBS of engaging in unethical practices to win business from hedge funds. Such activities included offers of free Red Sox tickets and cheap office space. We're not really sure what the problem is. Presumably, UBS shareholders got the better end of the deals, or else UBS probably wouldn't have entered into them. As for the hedge funds, it's also hard to see how anyone got hurt. Maybe some shareholder could be upset that management is making decisions based on anything but alpha, but why should Massachusetts taxpayers be ponying up the legal bill to look out for the millionaires invested in the funds?
A New Genre on Wall St.: Bailout Blog (NYT)
Apparently, the head of the Bear Stearns unit that managed its troubled hedge funds, Richard Marin, has launched a blog. Part of it is details his experiences at the unit, while other entries are about movies that he's seen. But here's the thing. The blog appears to be password protected, which is lame-o. We can't abide by that. So, Mr. Marin, we'd love it if you could see fit to shoot us a password. Or if anyone else knows its contents, we'd love to hear about it.
Hanesbrands plans to send more work overseas (Chicago Tribune)
Underwear maker Hanesbrands (Hanes) said that it will close a number of plants in the US, Mexico and the Dominican Republic, moving that production into even cheaper locales across Asia and Central America. When critics of globalization decry the "race to the bottom", this is exactly what they're talking about. When even Mexican workers aren't immune from cost competition, it would seem that the country is running furiously on a treadmill. But it's also worth asking whether Hanes is getting anywhere. Does it really make good business sense to set up factories and then move on anytime you think you can get a labor edge somewhere else? While it might sound good on conference calls, it comes off as grossly inefficient.
Alitalia Seeks Another Suitor After Aeroflot Withdraws (Dealbook)
The European state airlines have always been troubled in some sense or another, but by all accounts, Italy's Alitalia has been the worst of the worst. Not surprisingly, given what we know about government in Italy, the airline has been, simply put, exceptionally poorly run. It's been trying to unload the damn thing for a while, but it doesn't seem to be doing well. Russian firm Aeroflot had been interested in purchasing, but it pulled out after claiming that it hadn't been given access to critical operating data. Our bet: the papers were probably just lost. So, it's looking for new suitors. Good luck on that.
$$$ Money - Get it while it’s Hot [Long or Short Capital]
$$$ Bear Stearns appoints somebody to do something about it's minor HF problem [Reuters via NYT]
$$$ Classy, Cerebral Beauty seeks Cultured, Magnate Dom CEO or hedgie. Please write "Genuine Alpha Male" in the subject heading of your email. [Craigslist]
John and Timothy Rigas, the father and son who used Adelphia funds for such opulent treasures as 100 pairs of bedroom slippers and two $3000 Christmas trees were ordered to prison after a four-year appeal process. Adelphia Communications collapsed in 2002 when the firm disclosed $2.3bn in off-balance-sheet debt.
Both Rigases must report to the slammer on August 13, Timothy for twenty years and John, who is 82, for fifteen.
Adelphia founder Rigas and son told to report to prison in August for fraud convictions [Boston Herald]
Were you affected by the five-minute blackout on the Upper East Side? Share your experiences here.
With construction of its new JPMorganChase tower at WTC Site 5, Jamie Dimon can resume his rightful place at the top of the Greek Orthodox Church. Never one to be called anything but a strict constructionist, the belly of the DimonDome plans to rest over St. Nicholas Greek Orthodox Church and 165 feet over Liberty Park.
The building concept (pictured left), from Kohn Pederson Fox and The Real Estate, is being criticized as not only a good picnic spoiler but a bit of an eyesore, and may be pared back, according to architect Gene Kohn. The cantilever is a "beer belly" according to the New York Post and a "tower of darkness" according to Curbed.
Despite public opinion (the JPMorgan way!), the cantilever will exist at all costs, and contain JPMorgan's trading floors. JPMorgan plans on doling out a few million to the Greeks to keep them quietly in the shadow of the 42 story tower and amidst the whooshing lament of the vortex of lost souls.
One upping JPMorgan is the new Goldman Sachs World Headquarters (pictured right) at 43 stories down the street at West Street between Vesey and Murray (Battery Park Site 26). The tower, which has several more lateral bumps than a measly lone cantilever, is already 8 stories high under construction and expected to open in 2009. If the JPMorgan tower is the "tower of darkness" then Goldman HQ is the tower of light, or at least greenery, as the building is being prided as a marvel in green-tech and earning all sorts of eco-friendly certifications.
WTC Chase Tower Will Block Church's Heavens [Curbed via DealBook]
Goldman Sachs New World Headquarters (West and Vesey Streets) [Lower Manhattan.info]
Were you worried there wasn’t going to be an update to the pettiest story of all time? Worry no longer. Here’s a quick recap for those of you who haven’t been keeping score, which seems ridiculous to us since this story is about shrubs, but whatever, that’s your journey. Anyway, Goldman Sachs MD Marc Spilker wanted to widen his path to the beach at his house in the Hamptons. Unfortunately, his neighbor, Kynikos founder Jim Chanos had a problem with this, since his row of hedges would have to be taken out in order for Spilker’s family to be able to “maximize their beach enjoyment.” Spilker cited a deed that said he could have 15 feet, Chanos produced one that said otherwise. Then this week they went to court to negotiate; Spilker claimed to only want a few feet (i.e. 6-7), Chanos gave it to him and asked for it to be put in writing.
The (soon-to-be-promoted?) Goldman Sachs employee apparently then had a change of heart, re: abiding by the terms of the agreement, and yesterday afternoon decided he’d rip down the remaining hedges on Chanos’s property. Oh, and new neighbor Stevie Cohen, who shares the path to the beach, has thrown his support to Spilker.
After yesterday’s announcement that an “agreement” had been reached to secure the editorial independence of the Wall Street Journal, Rupert Murdoch said that he would not raise his current, $5bn bid for Dow Jones. “Everything is done. We are just waiting for a final approval of the Bancroft family. The final approval is in the next two, three week’s time or not at all,” Murdoch said today from Poland.
This, of course, doesn’t mean a modest bid increase is out of the question. One can hardly expect a perspicacious dealmaker like Rupe to tell Reuters, “I probably will up the offer, I just want to see if the Bancrofts will take the five billion first.”
It also seems that yesterday’s agreement on the Journal may have been prematurely announced. Parts of the deal remain, “sketchy or not yet written,” the New York Times is reporting. “The nuts and bolts are there, but not all the details,” a source involved in the negotiations said. Only a few of the Bancrofts, who have ultimate veto power over the deal, have been briefed on the still-unreleased Dow-NewsCorp. agreement.
Dow Jones Accord In Place, But Incomplete [Dealbook]
Murdoch: No plans to raise Dow Jones bid [Reuters]
For the first time ever, the words "former VP Dan Quayle and former Notre Dame football coach Lou Holtz," are not the setup to a joke (punchline - because I just gave the lineman a potatoe). Instead Dan & Lou, and CEO of K2 Richard Heckmann, are planning to raise up to $500mm for a SPAC (Special Purpose Acquisition Company). Heckmann is planning on leaving K2 by August 1.
SPACs are publicly raised entities that provide a virtual blank check for a management company to make an acquisition. The acquisition doesn't have to specified beforehand, although there are strict limits on when a target must be designated, and when a SPAC needs to spring into action (or else it would be the greatest scam ever). Why investors would want to give Quayle and Holtz a blank check is anyone's guess. I guess a few companies could use more heart and less brains (Quayle plans to make "Rudy" a managing director).
The largest SPAC is Freedom Acquisition Holdings, which raised $528mm last Decemember. SPACs have raised $4.1bn in 33 IPOs this year, taking advantage of the blank check fervor created by the planned and executed IPOs of hedge and PE funds.
Quayle has been busy as chairman of the global investment unit at Cerberus since 1999 and Holtz has been saying nonsensical things on ESPN since retirement.
Quayle joins 'blank check' firm's IPO [Los Angeles Times]
Smart people would rather work at Google than Goldman Sachs, Bloomberg reports today. One reason is that “Goldman's current package is not enough to compete with West Coast IT companies.” But then again, if you work at Goldman, you get to play with Excel all day. It's so hard to decide, we know. Having difficulty picking one G over the other? We’ve broken it down for you, after the jump.
Goldman Meets Match in Googleplex When Recruiting Graduates [Bloomberg]
JPMorgan has reversed the curse, and pulled into the top spot of the European I-Banking League Tables for the first half of 2007. JPMorgan was boosted by its strong performance in ECM, which commanded the second highest combined market share in ECM, trailing Deutsche Bank. The League Tables measure the combined market share of M&A, ECM and DCM. Citi was the only bank to finish in the top four in all three categories, and is 2nd in the League Table to JPMorgan.
Goldman, the Yankees of the financial world, remain much like the Yankees this year, sitting in a distant fifth place behind JPMorgan, Citi, UBS and Deutsche Bank (or 11 games out of first place). Goldman is quick to mention its top spot in European M&A, and high team OBP. Goldman has advised on $401bn worth of European transactions so far this year.
Spurred by megadeals like UniCredit/Capitalia, Enel & Acciona/Endesa, KKR/Alliance Boots, Reuters/Thomson and the ABN Amro bidding war between Barclays and RBS, deal volume in Europe has reached $1.3 trillion, and is expected to exceed last year's record of $1.5 trillion.
JP Morgan leads in investment banking [Financial News via Dow Jones]
Citi is set to buy human replacement toy Automated Trading Desk for $700mm. Automated Trading Desk was born in 1988, fathered by two computer programmers and David Whitcomb, a finance prof at Rutgers. The firm makes money by being quick on the draw, apparently, using these crazy things called computers and algorithms. Even though the firm employs 100 people, it handled 6% of the trading volume in major US stock markets last year, processing over 200 million shares traded per day.
Citigroup In Talks To Buy Automated Trading Desk [Dow Jones via CNN Money]
Dutch Economist Henry Kat, profiled in a recent New Yorker feature, was skeptical that hedge funds produce alpha after 2 and 20 (or much higher for the average fund of funds (3 and 30) or funds run by a secret cabal of international quants and a chain smoker), which doesn’t make us feel that bad for thinking the same.
Kat was former head of the equity-derivatives desk at Bank of America but wasn’t down with ‘waking up at 5am, getting on the train and spending all day in the office for 25 years.’ This means that he’s not a complete nutjob, which is reassuring. Kat now settles for less than a hundred thousand pounds a year as a professor.
Kat followed through on his hedge fund skepticism by conducting two hedge fund related studies. The first, published in the June 2003 Journal of Financial and Quantitative Analysis, looked at the fee-adjusted returns of 77 funds from 1990-2000 in relation to returns generated by market benchmarks with similar risk profiles. The result – 72 of 77 funds failed to outperform the benchmark.
The second, posted online as a working paper in 2006, looked at more than 1,900 funds and generated a similar result. Only 18% of funds beat the designated benchmark, and the most successful funds had declining returns over time. The after-fee alpha was negative in the vast majority of cases.
How do hedge funds convince rich investors otherwise? For starters, they exaggerate, demonstrated in a 2005 paper by Malkiel and Saha (a Princeton Prof and a NY investment analyst). The study showed that funds are usually telling fish tales when talking about past performance and that hedge fund returns in aggregate are skewed by the mysterious disappearance of imploded funds from databases. Factoring dead or missing funds into the picture, Malkiel and Saha found that hedge funds made an average return of 9.32% from 1996-2003, instead of the 13.74% average return of funds in published databases. Another study (Brown, Goetzman and Liang) suggested that fund of fund fees negate what is generated in above market returns.
More after the jump...
Paris Hilton analogy count with regard to subprime/Bear Stearns/CDOs: 83
Who Made The Big Bets In Subprime Lending? [CNN Money]
When CDOs Trump Paris Hilton, There's a Problem [Bloomberg]
Looking for Contagion in All the Wrong Places [PIMCO]
Blackstone closed at $30.75 yesterday, down 5.2% for the day and below its $31 initial offering on Friday; shares fell to $30.48 during pre-market trading. This is embarrassing. Nobody (here) knows for certain why life is being so god damn unfair to Stephen Schwarzman, 5’6”, but perhaps it could have to do with the Schwarz’s outrageous pay package, the nebulous amount of disclosure about the actual content of the Blackstone funds, or the fact that equity investors haven’t been duped into thinking they are LPs.
This also might have something to do with it:
One particularly risqué segment posed a personnel problem more pressing than a potential shunning at Shinnecock. “The kid, Dylan, was either going to hump a chair or hump the nanny’s leg,” Holly [Peterson, Peter’s daughter] said
