We’re hearing rumors that Caxton Associates is blowing up. Caxton is one of the largest hedge funds in the world with around $16 billion under multi-strategy management so this would be huge and, as they say, unlikely. Some are saying it’s because of the move SEPR has made of over the past few weeks (Caxton’s largest equity position had been SEPR), others that it’s the very fashionable credit situation. Right now, all just hearsay. Maybe funds this large don't blow up. Maybe Caxton was already a red giant, and will contract into a white dwarf under a sea of redemption requests after some significant losses. Only then will it be ready for a supernova. Heard anything? You know where to find us.

Update: Caxton denies any such rumors. According a friend o' DealBreaker, there was a "larger than normal liquidation in order to reduce risk," the main fund is down 3-4% mtd and Caxton "made money today." Make of that what you will.

$$$ Of Taxes and ‘Deals That Don’t Get Done’ [DealBook]

$$$ The Complicated, Modern Renaissance Man [Banker's Ball]

$$$ How to Say All Their Money is Gone [LoSC]

Are you presently working for a hedge fund or major bank? May Jeremey Grantham, chairman of Grantham, Mayo, Van Otterloo & Co. (via us) suggest that you get the hell out of there, because most of you are going to die anyway? That’s right, Dealbreakettes, according to Grantham, credit-market declines are going to force “as many as half”-- half, 50%, 1 of every 2-- of all hedge funds to close in the next five years. Last year 717 hedge funds closed, leaving 9,800 in business. Ergo, FOUR THOUSAND NINE HUNDRED of you are soon to be history (we did the math). Oh, and at least one global bank (gut instinct: Goldman Sachs) and “one or two” of the largest private equity firms, because those assholes have it coming. Grantham can make such apocalyptic forecasts for 2012 because he is 68, and may very well be dead by then. Grantham, Mayo, Van Otterloo & Co will survive, presumably.

The troublesome US asset-backed insecurities market is mauvaises nouvelles for the French too, apparently. Oddo & Cie, a Paris-based money manager is closing three hedge funds worth 1bn Euros ($1.37bn) after losses on collateralized debt obligations, Bloomberg reports. The funds, which held 15% of investments in US CDOs, will be close in “the shortest possible time frame.”

“Like many actors, we have tried to revitalize the performance of our funds by investing in CDOs. Like others, we noticed recent problems with short-term liquidity and were caught out by the subprime dilemma,” said Arnaud Ploix, a spokesman for Oddo.

Oddo to Shut Three Funds `Caught Out' by Credit Rout [Bloomberg]

Did anyone catch today's New York Times lovefest fluff-piece about Chelsea Clinton? There's nothing she can't do, from working in finance to reading "Goodnight Moon" at a college level to dating Jews. And as any truly well-fluffed piece will tell you, merit carries the day throughout Ms. Clinton's orgy of success.

For instance, how did Chelsea deal with 9/11? In a bold, career-defining moment, Chelsea shuns the materialistic ambitions of her post-collegiate peers and decides to devote herself to good works. From the Times:

Ms. Clinton shared her answer in an earnest essay a few months later in Talk magazine: “For most young Americans I know, ‘serving’ in the broadest sense now seems like the only thing to do,” she wrote. “Is banking what’s important right now?” Her words are reminiscent of the young Hillary Clinton, who, as the campaign frequently reminds voters, chose children’s advocacy over corporate work after law school.

Chelsea's true desire to "serve" and shun banking led her straight into a career in finance when she got back from Oxford. Nothing fulfills that desire to serve more than firing a few people from a struggling company in a management consultant role. More from the Times:

after Oxford, Chelsea Clinton signed up with McKinsey, a consulting company known as an elite business training corps. She was the youngest in her class, hired at the same rank as those with M.B.A. degrees. Her interview was more like a conversation, said D. Ronald Daniel, a senior partner. “That’s why she was a good consultant, because we are professional question-askers and professional listeners,” Mr. Daniel said.

Let me get this straight fluff-piece, Chelsea Clinton's rare and unique business acumen resulted in her catapulting the entire McKinsey class?

Word on the Street (and from a couple tipsters) is that Chelsea was job shopping and resume padding like any other post-grad. McKinsey wanted a Clinton so badly that they were willing to give her a post-M.B.A. job. Other consulting firms laughed at the idea, even though word has it that Chelsea tried to play some hardball.

Chelsea was interviewing with BCG and a couple other places only prepared to throw her in with people of the same skill level who didn't live in the White House. Apparently consultants at other firms didn't have the right "conversations" with her, namely the ones deferred to her parents. The nerve.

Like her father, Chelsea is as drawn to integrity and character in her personal life as her professional life. This is why her boyfriend, Marc Mezvinsky is that rare combination of a Jew working at Goldman Sachs and the son of criminals. Mezvinsky’s father pleaded guilty in 2002 to swindling a bunch of investors out of $10 million, using his son’s bank account to transfer money undetected and often bragging about his Clinton connection. Papa M gets out of jail in November 2008.

Primed for a Second Stint as First Daughter [New York Times]

It’s finally pretty much almost over. Rupert Murdoch has secured enough Bancroft family shareholder votes to move forward with his $60-a-share, $5bn bid, one future News Corp holding reports.

One day after a Murdoch spokesperson said the deal was “highly unlikely,” the Denver branch of the Bancroft family, previously holding out for a higher offer, capitulated, giving News Corp at least 32% of the family vote. Nonetheless, one Bancroft family spokesperson said today, “Any suggestion that the process has been completed and/or that a particular level of support has been established is at this point premature.”

Both companies have board meetings this evening to formulate the take-over procedure. Dow Jones is trading up 7.04% to $57.50 today.

News Corp. Appears to Have Enough Votes to Clinch Deal [Wall Street Journal]
Murdoch Seen to Win Control of Dow Jones [NY Times]

Which New York short-seller, Simpsons fan and Yale graduate had this to say about the recent adversity faced by Sowood Capital?

"Let Harvard have its academic and athletic excellence...Yale will always be known for the finest in gentlemanly club life..."

Earlier: Sowood Is So Sowwy

Sowood Makes Citadel Look Good

ABN Amro’s board decided over the weekend to withdraw its formal recommendation for a bid by Barclays, but it was only half-serious, and they were winking at the time (though that may have just been an involuntary spasm resulting from getting grapefruit in their eyes, which stings quite badly). ABN’s chief executive Rijkman Groenink said today that he supports the offer by the British bank and may formally recommend it to shareholders later, just not now, even though he sort of just did.

Groenick commented that "We continue to support the Barclays offer because we believe overall it is to the benefit of shareholders and stakeholders,” and the ABN-A board “still believes in the strategic rationale of the Barclays bid,” but they’re still “neutral.” So “neutral,” in fact, that they “acknowledged”—yes “acknowledged” numbers—that the 38.40 euros/ABN Amro share being offered by rival bidder Royal Bank of Scotland-Fortis Group of Belgium-Banco Santander Central Hispano is “higher” than Barclay’s proposed 35.73 euros/share. Because they're "neutral."

ABN's Chief Expresses Support for Barclays's Bid [WSJ]
Board to Remain Neutral in Bids for Dutch Bank [NYT]

(If you missed our first installment of "Great Moments in Financial History," detailing Maria Bartiromo's appearance on Celebrity Jeopardy, you definitely want to check this out)

Traders, take a second from shifting vol and imagine this announcement:

"Traders, your work here is done. The market has done all it can do for you this year, so we're closing it. Come back in December, just in time for Christmas bonuses."

That was pretty much the case this day in 1914, although some believe the extended holiday was due to that particularly gory flick showing in the European theater at the time. From the Freakonomics Blog:

On July 31, 1914, officials shut down the New York Stock Exchange following news that Germany had declared Kriegsgefahrzustand (defined as an “imminent-danger-of-war situation“) while Austria and Turkey were already mobilizing.

From the NYSE's website, the exchange, "Reopened for trading in bonds with price restrictions on November 28, 1914; for trading in a limited number of stocks under price restrictions on December 12, 1914; and for trading in all stocks, under price restrictions, on December 15, 1914. All restrictions were removed April 1, 1915." The hiatus was the longest in the NYSE's history since 1885. There was no extended closing during World War II.

And Today Is… [Freakonomics Blog]

Ever wonder why, after a few minutes on the treadmill at the end of a grueling week, you're breathing harder than (eighteen pack a day smoker) James Simons trying to explain 5/44 to investors? Forget the crippling fatigue, lousy diet, self-loathing and emotional stress, it’s the PRINTERS.

Australian scientists from the Queensland University of Technology have found that office laser printers can damage lungs as much as smoke particles from cigarettes. Almost a third of the 60 printer models studied emit dangerous levels of toner into the air. A detailed explanation of your deteriorating health, from the BBC:

Almost one-third were found to emit ultra-tiny particles of toner-like material, so small that they can infiltrate the lungs and cause a range of health problems from respiratory irritation to more chronic illnesses. Conducted in an open-plan office, the test revealed that particle levels increased five-fold during working hours, a rise blamed on printer use. The problem was worse when new cartridges were used and when graphics and images required higher quantities of toner.

Since “working hours” for bankers include most of the 168 hours in a week, it turns out banking causes you to really suck, much more than originally thought.

Office printers 'are health risk' [BBC]

This is a list of people who we respectfully submit are liars: CNBC’s David Faber, Thestreet.com’s Nat Worden, and Reuters. We believe these entities to be capital 'L' small 'i' small 'a' small 'r's because among them they share the distinction of having reported or re-reported this morning that there will be an official announcement of News Corp.’s Dow Jones victory tonight. Nothing personal, it’s just that we no longer believe the words coming out of the mouths of people who say anything—outright, implying, leading, lip synching—that even hints that this whole thing will be conclusively finished before hell freezes over. We WANT to believe them, we just can't. Know anyone you’d like to add to our list? Send his/her name to tips at dealbreaker dot com.

In other news, MySpace co-founder Brad Greenspan sent an open letter to Dow Jones shareholders detailing a new proposal (he’s done this before, several times) in which he would invest $600 million in cash and stock in three joint ventures with DJ. Greenspan says he’s received “interest” from five “credible” investor groups, though he would not disclose their names, and their profiles are set to private. Brad informed shareholders that he and his investors “can meet this week” in order to “firm investment commitments,” but starting next week things are going to be really tight for him, so if Dow Jones could really get back to him A-sap to nail something down that would be solid, just name the time and place, but seriously, get back to him soon, otherwise, who knows, he could be busy.

Dow Jones to Agree To Takeover by News Corp. [CNBC]
Dow Jones Deal Gets Closer [WSJ]
Dow Jones Soars As Deal Appears Near [thestreet.com]
News Corp., Dow Jones deal expected Tues [Reuters]
MySpace Co-Founder Makes Another Dow Jones Proposal [Bloomberg]

Steve Schwarzman is selling state secrets to the Chinese. Is Schwarzman trying to pull a Jack Bauer's father in last season of 24 (Schwarzman is the only PE fund guru as "tall" as Keifer Sutherland, after all)?

For the low, low price of $540 million dollars, or a nice $23 million a day, the Chinese government has been studying the U.S. buyout market, courtesy of Blackstone's IPO. The first lesson is an awfully bitter fortune cookie - PE fund IPOs allow shrewd fund partners to cash out while passing impending turmoil onto investors.

China used its increasingly hard to employ $1 trillion "rainy day fund" of foreign exchange holdings to pump money into a 10% stake in Blackstone's IPO. China bought shares at a 4.5% discount and watched Blackstone's share price fall 18% in 24 trading days.

China is watching patiently, slowly developing the script for taking the PE reigns from the West, and the script for "Shaolin PE Investing," starring Stephen Chow.

(Pictured: Some Chinese investors have lost their shirts in the deal, others just have an axe to grind.)

Blackstone share slump costs China $540 million [MarketWatch via Deal Journal]

The letter a hedge fund manager sends to his/her investors in the event of bad news like, say, a meltdown, etc., is an exercise in trying to jam a huge ego and an “I’m sorry, but I’m not really sorry, but I’m saying I’m sorry” onto one page. We’ve been calling him out a lot lately for what he’s done wrong, but one thing James Cayne did right was his memo to investors. As you well know, Cayne informed them that, contrary to what he and his colleagues had been pretending in the weeks previous, Bear Stearns’ two hedge funds were worth jack. As this charade was getting exhausting, and not because it’s wrong to lie, the big guy took it upon himself to come clean with the sad sacks (his words) who were silly enough to give Bear their money only to watch it be lit on fire. This would have all been rather unfortunate, Cayne went on, if it were going to hurt employee compensation at year end, which it won’t, thank god, so that’s pretty much it. Shipshape.

Sadly, Sowood Capital Management founder Jeff Larson has apparently not mastered the art of this particular love letter, and comes off as actually rather regretful and apologetic in the one he sent to his investors yesterday, re: selling “substantially all the funds’ [Sowood Alpha Fund LP and Sowood Alpha Fund Ltd] portfolio to Citadel,” which was more than happy to take them on. Larson even says “We are very sorry this has happened.” It’s actually all rather off-putting. Full letter (which seems to imply Sowood will be shutting down) after the jump.

Funding a $37 billion buyout isn't what it used to be, especially since debt on recent buyouts is losing up to 10% in value, sticking lenders with hefty losses. The lenders led by Citi and including Lehman, JPMorgan, Goldman and Morgan Stanley are considering paying a $1 billion break-up fee so that everyone can quietly walk away.

The proposed KKR, TPG and Goldman PE buyout of TXU calls for $30 billion of term loans and $11 billion in an unsecured bridge loan. Sharing a $1 billion loss is better than sharing a potential $3.7 billion loss (several analysts worked a 120 hour week to compute that). The banks are clever like that, at least in hindsight after offering such huge financing packages for these PE deals.

Thomson Financial reports that there is $300 billion worth of unfunded buyout debt currently threatening numerous impending PE deals like First Data.

Lenders mull pulling out of TXU and pay 1 bln usd break-up fee [Thomson Financial via CNN Money]

ADM fiscal 4Q profit increases (Thomson Financial)
Food purveyor to the world, ADM, saw its profits rise in its most recent quarter, although that was mainly due to the disposal of certain assets. Surprisingly, the company's operating profits actually dipped, in part due to the rise in corn prices. Seems strange -- wasn't ADM supposed to benefit from higher grain prices. Isn't the spike in corn prices due to ethanol, a big area for ADM? Either way, the company says that prices are already coming down (which is good news for just about every other company in the world) and that earnings will normalize.

Murdoch Awaits Decision on His Dow Offer (NYT)
There was a moment yesterday when we honestly believed that we'd get some sort of definitive answer to the whole Dow Jones mess. How naive. This thing probably isn't going away anytime soon. At one point, it looked like the deal really might not happen, at least based on some murmurings coming out of the Murdoch camp, which, in retrospect, was probably just more posturing. Then, later into the evening there was talk about more negotiations and nailing down some fine points -- quite positive. Either way, we didn't get we wanted, which was resolution. Hopefully we'll have something more definitive today.

Russian Oil Magnate Forced to Sell to Putin Loyalist, He Says (NYT)
Vladimir Putin, the world's most important energy executive, continues to tighten his grip on the market. The owner of Russneft (Not to be confused with Rosneft), will be forced to sell out to Putin loyalists, AKA Putin. In a sense, we're not sad to see the Russian oligarchs' power dismantled... but oligopoly is probably preferable to monopoly, which is what the Russian energy market is turning into.

Europe, Asia Stocks Rise, U.S. Futures Advance; Aviva, UBS Gain (Bloomberg)
Remember all of those fears about subprime mortgages dragging down the markets? Yeah, neither do we. That was last week's news. This week it's all about how the subprime fears were overblown and not really a threat to the broader economy. Both Europe and Asia have shrugged it all off, gaining over night, while the US futures are pointing upward, at least for now.

$$$ Deals: Holding Their Own
In our M&A Roundup for the week ending July 29, reports of the death of the deal were exaggerated, as activity rose slightly from the prior week. [CFO.com]

$$$ "The Track is what separates man from beast. It’s what separates Banker from every other ungainfully employed idiot that exists out there. It’s magnificent in its simplicity and supreme in the rewards of its end-state." [Leveraged Sell-Out]

$$$ Dow Jones Reaches 14,000 [The Onion via CWS]

We’re almost as sick of the private equity tax debate as we are with Deal or No Deal: Dow Jones/News Corp. Edition (and, come to think of it, the same horrible game show featuring ABN Amro and Barclays, which has only kept our interest this long due to the Holocaust angle, because, as intuited by one of our more favored commenters earlier, I hate Germans). So we’re just going to point you in the direction of some people who are arguing in favor of the increase and some who are arguing against it and send you on your way.

- Pro-35 percent: Ben Stein comes up with a perfect storm that only a man who guest starred as Stanley Willard on “Charles in Charge” could pull off. First, he goes where no one else will: “Hedge funds have created a terribly wealthy new class. Although the data is overwhelming that the mass of hedge funds have not been outperforming the market after fees, money still pours into them. This has often made their proprietors terribly rich.” Then he tugs at the heart strings, noting that doctors, lawyers and actors are paying almost two times more than private equity guys on long-term capital gains on their compensation. He finishes up with a “support our troops” plea, says “let’s keep it real,” and suggests that we’re living in a climate not unlike that of the French Revolution.

- Anti-35 percent: It’s quite stunning to hear that a politician from New York would want to keep his constituents happy (by keeping them rich), but sometimes life just shocks you like that. Sen. Chuck Schumer, who is really giving Corzine a run for his money for our affection after JSC’s recent airstrike on e-mail, will resist all efforts by his party to more than double the taxes on his people.

- A little bit of both?: Noted private equity hater Andrew Ross Sorkin goes to bat for Crab Hands.

Sponsored by Financial Times

Coming off Wall Street’s worst week in five years, stocks traded up today in spite of lingering credit concerns. Purchases in the financial sector increased confidence and drove up prices across the board.

All ten S&P sectors traded higher today. The Dow closed up 92.84 or .7% to 13,358.31; the Nasdaq Composite Index increased 21.04 or .82% to 2583.28; and the S&P 500 jumped 14.96 or 1.03% to 1473.91. However, with the long-term consequences of the new credit crisis still unknown, it’s hard to see this rebound as the end of summer market woes (although a plurality of Dealbreaker readers predict a “small comeback” for the week).

Market intelligence everyday at FT Alphaville.

Sowood Capital, blistered by big losses in its bond portfolio resulting from the current state of affairs in subprime mortgages and karma for Harvard being one of its biggest investors, voluntarily left the credit business today, after being asked to leave. The erstwhile multi-strategy fund, founded by Jeffrey Larson, sold its credit positions to Citadel, which now controls the “majority” of Sowood’s positions. Citadel manager Ken Griffin said in a statement this morning that his people “appreciate the professional manner in which the Sowood team has handled this complex transaction from start to finish.” Because when you’ve just completed the “transaction” of organ-harvesting, it’s nice to be gracious about it.

Sowood Unloads Credit Portfolio On Citadel [FINalternatives]

Joseph Nacchio, former almost brother of Karate Kid idol and Qwest CEO, was sentenced to 6 years in prison for making $52 million by dumping Qwest stock when he knew his company was on a special tanking Qwest. Nacchio was convicted in April. The icing on the sentencing cake, from the New York Times:

Judge Edward Nottingham of United States District Court also ordered Mr. Nacchio to forfeit $52 million in assets he gained in illegal stock sales, imposed a maximum $19 million fine and ordered him to serve two years’ probation after serving his sentence.

Whether Nacchio's new home will be a federal "pound me in the ass" prison (or the TV edit, "pound me into ash prison"), remains to be seen. Whether Nacchio's lawyers will come up with something more clever in appeals than a tainted jury from pretrial publicity also remains to be seen.

Ex-Qwest Chief Gets 6-Year Sentence [New York Times]

(Note: The following is what happens when our graphics intern leaves and I am left to render artistic interpretations in Paint)

Rupert Murdoch’s bid for Dow Jones, once a sure thing, then “too close to call,” is now “highly unlikely” unless the Bancroft family increases its support of the deal by 5 p.m. today, the Wall Street Journal reports.

At the moment, 28% of Dow Jones’ voting power supports the deal, although it is unclear what percentage of Bancrofts voted affirmatively; 30% of the family needs to support Murdoch for his $5bn bid to go through. If this is not met, “News Corp likely wouldn’t take the deal to a full Dow Jones shareholder vote.”

After all the mud-slinging and Rupe’s cryptic commentary, this summer’s saga could come to a close tonight, in which case I will have no idea what to write about.

News Corp. Says It's 'Highly Unlikely' To Buy Dow Jones at Current Count [Wall Street Journal]

Anyone who’s ever interfaced with a jerk knows that the best of breed have an uncanny ability to turn situations around so that, all of a sudden, they’re accusing *you* of being the prick. Brian Hunter is no exception. In the middle of an interview earlier this year with Washington regulators, everyone’s favorite salmon lover went off for lunch and “never came back.” Just, you know, never came back. Made small talk about the turkey sandwiches from the deli across the street, acted as though he would be returning, like everyone else, and then never came back.

When FERC chairman Joseph Kelliher dared to go public with this information, a spokesman for Hunter said that he "voluntarily flew to the U.S.A. to meet with FERC officials and give an interview. Brian ended the interview when he and his attorney became aware that the FERC had misrepresented the agenda for the discussion." Got that? Not only will the Hunter not be apologizing for unilaterally ending the meeting, but *he,* Brian Hunter is accusing *other people* of pulling the wool over *his* eyes.

The trader who went to lunch and never came back [globe and mail]

After adding 10,000 employees in June, the U.S. Securities Industry is now 848,300 worker bees strong, higher than the March 2001 level of 840,900. This is a new all-time record, and June was the biggest single month gain in number of employees since June 2000.

Despite the record number of big winners trolling the Street, DealBook reports that with the credit crunch and arguable peak of PE/M&A deal bubble, many firms have frozen hiring. Is your firm one of them? Comment or send an email to tips at dealbreaker dot com. (There are even stirrings that...gasp...bonuses might not keep pace with last year if we've reached the peak of the current cycle.)

Banking jobs hit record high [Financial News via DealBook]

KB Deutsche Industriebank became the first German victim of the subprime situation today, saying that losses in the US sub-p mortgage market would translate to “significantly lower” earnings than the previously predicted €280m ($383m) for its 2007-2008 fiscal year. The profit warning caused shares of IKB to plummet 16.7% to €17.89, its lowest level since December 2003. Unlike others touched by the housing rough patch, IKB choose to hold those responsible accountable for their actions, and fired its chief executive. (Germans aren't exactly a "3-strikes" people).

Simon Adamson, an analyst at CreditSights, told Reuters, "This announcement from IKB will confirm the fears of a lot of investors that we don't really know what the scale of the problem is," which is comforting.

Subprime woes claim first German victim [FT via MSNBC]
U.S. mortgage woes claim first German victim [Reuters]

*We kid the Krauts.

Last, week, when Bear Stearns seized the assets of its own hedge funds, some people scoffed. It seemed a little unjust that while investors had been told there was a grand total of zero dollars (or zero-ish dollars, depending on whether or not they put their money in the gigantically failing fund or the essentially gigantically failing fund) available for them, B.S. managed to wring out some value for itself.

For those feeling bitter, today we offer some vindication: on the same day the bank was seeing just how long it could ride the Screw our Investors Express, CEO James Cayne—CHAMPIONSHIP BRIDGE PLAYER AND CIGAR SMOKER JAMES CAYNE, whose “ascent has been a result of a [bridge] player’s guile”—was getting his ass handed to him at the card table. Mr. Cayne, the No. 2 seed in the American Contract Bridge League’s Summer North American Bridge Championships in Nashville, Tennesse, lost to the No. 15 seed. The score was 119 imps to 93. Cayne was presumably not cheating at the time.

A First-Time Winner in Bridge Event [NYT]

Xerox has developed a new strain of low-cost environmentally friendly paper that compares in quality to standard 20-pound bond paper many businesses use. Xerox's "High-Yield Business Paper" is higher-yielding than most subprime issues and made in a much less intensive way than most paper on the market.

The new paper avoids some of the problems with "green" paper of the past, like its proclivity for curling in printers and spontaneously combusting in the hands of children. The new paper does have a slight aging problem, however, pictured here after two weeks out of the package. Here's a list of the pros and cons of the new paper:

Pros:
-Requires half as many trees, half as much energy, fewer chemicals and one-third as much heart to produce
-Weighs 10% less, looks better in swimwear
-Costs less
-Still beats rock
-Can now be folded 12 times
-Has a low fertility rate

Cons:
-Made from Giving Trees
-Not as white or smooth as what we conventionally call "paper," or "gravel"
-Yellows badly as it ages, confusing Egyptologists, politically correct Asians
-Goats won't eat it, not even for comedic effect
-Paper cuts now fatal

Xerox Develops a 'Green' Paper, But Will Firms Add It to Fold? [Wall Street Journal]

When Amaranth was blown to smithereens, we all had a good laugh about it. A fund lost $6 billion in one week because a brash young ichthyophile bet the wrong way on everything? That's hilarious. Plus: the genius trader and his boss really weren't affected, monetarily, as evidenced by the latter's chutzpah in threatening his investors not to sue him and the carefree attitude toward huge legal fees exhibited by the former. It's like Katrina, see-you can laugh about a disaster if no one got hurt. (I also challenge you to name one person who wouldn't pay to fulfill their childhood fantasy of having a sleepover in the Astrodome). LTCM? The tears are still streaming down our faces.

Today, however, our attitude toward the destruction of hedge funds took a hit. John Devaney, the United Capital Markets founder who recently suspended investor withdrawals on his $620 million hedge fund portfolios, has put his yacht up for sale. For John Devaney, "Positive Carry" wasn't just a boat. It was a big boat. And now, thanks to the markets, the god-damned markets, John Devaney is voluntarily stripping himself-at a starting price of $23.5 million-of his pride and joy. JD is also trying to get $16.5 million for his 16-bedroom house in Aspen, which he bought for $16.25 million in November.

Are you getting all this? A man is going to be without his yacht and ski lodge. All he's going to be left with are a Gulfstream jet, a waterfront mansion, and a helicopter.

There's an almost unbearable sadness about this permeating DBHQ. Carney's perma-glib has disappeared--he's been in the men's room, silent, for hours.

ANCHORS AWAY! FUND BOSS' YACHT ON BLOCK [NYP]
Disgusted With Hedge Funds? [thestreet.com]

Monster Worldwide posted lower than expected earnings and happily announced that it was cutting 15% of its full-time staff. Monster management put a happy spin on the layoffs, by first labeling them a "restructuring":

We are raising guidance for this quarter, knowing that our user base will grow by at least 800 people next quarter. We're talking high-end users who can take full advantage of the wide array of services they helped sell or put in place. Remember Monster is the leading global online careers property, that has changed the way people we lay off look for jobs and the way employers look for people we lay off.

Monster posted a 28% drop in net income from the same quarter last year on a 20% increase in revenue to $331 million, below analyst estimates of $337 million.

The market has such faith in Monster's unemployed legions that shares (Nasdaq: MNST) are up almost 3%, after hovering near 52-week lows last week.

Monster slashing 800 jobs [Reuters via CNN Money]

The Simpsons made $72 million in its opening weekend (our favorite comic book guy scene - facing impending doom, the comic book guy muses (paraphrasing here) "I've done nothing in my life buy collect comic books. Life well spent!"), picking up some Hollywood slack this summer by being one of the few films to exceed expectations.

Comic book guy, meet Steve Schwarzman, proud owner of the worst IPO ever, of 2007. In contrast to the ten largest U.S. IPOs this year, averaging a 14% return in their first month, Blackstone shares have dropped 21% in July, losing $7 billion in market value. Keep in mind that we're talking about IPOs that are larger than $500 million and that Schwarzman still made out like a bandit and got to cockblock Kravis by lowering the PE IPO bar to virtually un-limbo-able depths.

Another Superlative for Schwarzman: Worst IPO [Deal Journal]

It is now time that I bid you all adieu (albeit teary-eyed and heartbroken). I have enjoyed my internship here at DealBreaker more than any other internship I've had (slim pickings). I've had the privilege of exploring the deep, dark underbelly that is the DealBreaker dungeon and have had an exposure to the lovely, heartwarming comments that you, DealBreaker reader, have adorned me with.

From a meager start of mammaries to a grand finale of Rupert Murdoch, my just over eight weeks here have been a blast. From shocking secrets revealed at the Shake Shack to hoity-toity evenings at the NYPL to Dow Jones employees at the Corporate Challenge to iPhone launch coverage (by far the most fun), my photo essays have shocked millions dozens throughout the nation.

The people who work here are awesome. Bess, Keith, David, and John, thank you so much for everything including the opportunity to work with you for a short while. It has really been an excellent experience for me and I wish you all the best throughout the next months as DealBreaker undoubtedly grows to uncharted territories and new heights.

[Ed.'s note: we have released the hostage.]

Bank ratings intact despite LBO funding jam -S&P (Reuters)
Repeat after me: the problem is contained. That seems to be the message coming from S&P, which says that bank rating will be held steady... unless problems extend to investment grade credit. In the meantime, their models almost certainly don't foresee any problems, so no need to get worried.

Corporate Bond Risk Surges as IKB Reports Subprime-Loan Losses (Bloomberg)
Speaking of contagion, the subprime meltdown has claimed its first victim in Germany, as a bank there has reported significant losses stemming from losses in the US market. This is beginning to feel a bit like a made-for-TV disaster move, as some disease is rapidly breaking out, while biologists and epidemiologists sit in front of a big map of the world trying to predict where it will strike next. Meanwhile, the phone rings, and the person on the other end gives the somber news that they have to put a red pin over Dusseldorf.

Bancrofts' Jockeying Over Murdoch Deal Goes Down to the Wire (WSJ)
You already know what today is: the day we get some sort of 'yes' or 'no' from the Bancrofts. We have this nightmare that somehow the whole thing is going to get delayed and we'll be talking about this for the next six months. Word is that it's close. There may have been some late switchers to the 'nay' column, although it's hard to see how anyone has a good count right now. As far as we care, the family can do whatever the heck it wants at this point. Originally, we'd have said that it would be rubbish for it to reject the deal and screw over shareholders. However, the stock price has been high for quite awhile no, so any shareholders were free to sell out for almost the price the Murdoch is willing to pay. Thus, if the Bancrofts do refuse to sell, the only ones getting screwed will be the people that couldn't forgo one or two extra dollars. Seems they need a reminder about the old aphorism of picking up pennies in front of a steamroller.

Pearson lifts guidance for second half, posts first-half loss (MarketWatch)
If News Corp. is successful in acquiring Dow Jones, the big winner is likely going to be Pearson, particularly if Rupert Murdoch messes with the Wall Street Journal's style at all (which will happen, at least to some extent). Already there's been talk that the FT is the new WSJ, and you have to figure that the FT has a handicap, in that it's printed on pink paper. Pearson says things are looking bright, as it's raised its guidance for the second half of the year.

$$$ How Many Yachts Can John Devaney Waterski Behind? [thestreet.com]

$$$ Stocks Stocks Stocks: A Week in Review 07-27-07 [LoSC]

$$$ Grace Under Pressure [Going Private]

$$$ Amaranth Turns to Lobbying Powerhouse [DealBook]

$$$ A Thaw in Investment Prospects for Sex-Related Businesses? [NYT]

Sponsored by Financial Times

The Market slipped again today in spite of Treasury Secretary Henry Paulson’s positive comments on quickening growth in the US economy. Stocks closed at the at lowest point in today’s session, after a last minute sell-off.

Nine of the ten S&P 500 sectors traded down today. The Dow dropped 207.20, or 1.54% to 13266.37; the Nasdaq Composite Index fell 13.84, or .53% to 2585.50; and the S&P 500 fell 23.59 or 1.59% to 1459.07. JP Morgan Chase traded up. Volatility is their friend.

Market intelligence everyday at FT Alphaville.

Carney [16:01] So these Sowood guys are the ones who quit when the alumni started complaining that the dudes running their endowment fund were getting paid so much, right?
Levin [16:02] That’s the party line. But the rumors have it that Harvard dropped Meyer not because of alumni flap but because Robert Rubin knew the kind of trades Sowood/Meyer did were about to run into trouble.
Carney [16:02] I can’t get anywhere with these guys. They won’t return my phone calls. Let’s have Hahn call. He’s a Harvard man.
Levin [16:05] Don’t take it personally. They won’t call back Jenny Anderson at the New York Times either.

Two days after the contentious Bancroft family powwow in Boston, the Denver branch of the family announced it will vote against News Corp’s $5bn bid for Dow Jones, insisting that Rupert Murdoch raise his offer by $120-240mn. The Denver trust controls 9.1% of the Bancroft’s voting power, but has been watched closely by News Corp and Dow Jones management. “The outcome has been seen as too close to call, although the Denver trust's decision increases doubts about the deal's prospects,” The Wall Street Journal reports.

The Colorado Bancrofts want a 10-20% premium on compensation for super-voting B class shareholders (The Bancrofts) although News Corp spokespeople insist that the Murdoch will not raise the bid and that a two tiered compensation is not tenable.

Key Bancroft Family Trust to Vote Against News Corp. Bid for Dow Jones [Wall Street Journal]

Carney [15:21]: Lots of CNBC material on DealBreaker today. Aren’t we kind of hating a bit much on Maria? Feels like we’re piling on.
Hahn [15:22]: you are a weak man, carney. don’t go all bleeding heart on us now. didn’t you once ask whether warren buffett was going to hell?
Levin [15:22]: Yeah, Carney. Man up. There’s also lots of DealBreaker on CNBC today. Did you see that bit with Rebecca Jarvis?
Carney [15:23] That rocked. Remember to include her in our next poll of who moves your market.

Notice Maria’s score (and provide a caption in the comments section). Keep in mind that this wasn’t that early in the game.

For those who missed it several years ago, the Money Honey was featured in a May 2004 episode of Celebrity Jeopardy in Washington D.C. during POWER PLAYERS week. A POWER PLAYER is presumably a celebrity with a brain. Fortunately SNL stereotypes held, and Maria outshined the competition, which consisted of fellow TV personality Anderson Cooper and former NAACP President and Maryland Congressman Kweisi Mfume. Maria was playing for the National Italian American Foundation, ensuring that pizza remains an alternative to baby carrots in school lunches nationwide (especially good old fashioned school lunch “Mexican pizza”).

Maria got off to a slow start, not buzzing in on the first 10 or so questions. Taking a breather, she put her spontaneous intellectual bandwidth on display during the meet the players segment:

Alex: What’s the fascination for you and for Americans with finance?

Maria: I think that it’s an opportunity for all of us to know that we can have the American Dream. That we can invest in America, in business and have a feeling that we have an ownership of some business and hopefully watch that investment grow. It’s a (struggling with the next word) democratization of information and investing.

The key words are investment and business. After managing to sound like Ralph Wiggum when he said “Mrs. Krabappel and Principal Skinner were in the closet making babies and I saw one of the babies and then the baby looked at me,” Maria prepares to enter the fray and answer a question. Baby steps.

Maria’s first time:

Category: The Capital, for $100
A: In 1989 hundreds of pro-democracy demonstrators were killed by the military at Tiananmen Square in this capital.
Q: Maria buzzes in and makes a face for five seconds. A five second face, to her dismay, is incorrect. Armed with a functioning buzzer, Maria prepares to actually verbalize a question next time.

Maria does end up getting two questions right in a flurry at the end of the round, and manages to finish ahead of (and look slightly less retarded than) Kweisi, who ingeniously answered that “Montebello” was the name of Thomas Jefferson’s estate instead of “Monticello.”

Stay tuned for Maria's revenge in Double Jeopardy after the jump, along with the coveted YouTube clip of the entire episode (believe me, you want to know what went down in Final Jeopardy).

From a report that’s poised to win a cornucopia of awards for its breakthroughs in the field of human behavior, scientists—yes, scientists—have determined that “US executives have been able to secure more favorable research ratings for their companies from investment banks by bestowing professional favors on Wall Street analysts.” Time out. Did they just say what we think they just said? Let’s watch the tape again: “US executives have been able to secure more favorable research ratings for their companies from investment banks by bestowing professional favors on Wall Street analysts.” They did, indeed! Hang on. We need a second.

Okay, we’re going to try and muscle through this. “Unprecedented research” performed on 1,800 equity analysts found that an executive could greatly increase the odds of his company getting a happy face emoticon instead of the one with a foot where the mouth should be, by offering analysts favors ranging from recommending them for a job to agreeing to speak with their clients to blow job y backrub combos. Jesusmaryandjoseph! Keithrichardhahn! Johnfranciscarneythethird!

We’re not finished— analyst receiving two favors were 50% less likely than non-favor receiving colleagues to downgrade a company. We’re not finished—“favor-rending” to analysts in order to reduce the chances of a downgrade in the wake of poor results or a controversial deal is “widespread.” Meaning it happens a lot? In what kind of sick, fucked up, alternate universe was this study conducted?

Are you ready for this biggest kicker of them all? Kurt Schacht, director of the Center for Financial Market Integrity at the CFA Institute, which represents more than 80,000 analysts and fund managers, said that “Activities such as these are in clear breach of our code of conducts and standards…and are unethical.” Someone hand us a Molotov cocktail.

Executives find favours bring better ratings [FT]

Blackstone Group traded up yesterday despite the near-universal melt-down on Wall Street, surging from $23.80 to $25.70 in the final ten minutes. After dropping almost nine percent in the afternoon, BX rallied with a flood of buy-orders, including a block of 114,000 shares at 3:59:55pm.

Was this the work of Morgan Stanley or Citigroup, pulling their big IPO up by the bootstraps; Steven Schwazman, trying to save face with his new cash; or some Blackstone insider, trading on advanced news that Blackstone is taking itself private?

A dark horse (im)possible reason for the signs of life in Blackstone: maybe they’re a takeover target. Market Watch columnist David Weidner suggested yesterday that Kohlberg Kravis Roberts & Co should abandon its plans for an IPO and stick to what it knows best: the buyout business. More concretely, Weidner suggest they should buy Blackstone.

Blackstone is inefficient. It will pay nearly $400 million of Schwarzman and other managers' taxes during the next decade. Its IPO has generated a political backlash that could end up doubling its tax rate, and the firm expects "significant losses" during the next few years as it absorbs compensation costs and amortizes its goodwill, according the firm's prospectus.

KKR could eliminate most of those ills by sweeping management out the door and installing its own team.

It’s simply spoiling the fun to point out that the governance structure built into the Blackstone Group would make any hostile takeover impossible. The rights of Blackstone’s common shareholders approach zero. In fact, the only recent deal we can think with less rights was the sale of a stake in Blackstone to a Chinese government entity, where the Chinamen arguably have less than zero shareholder rights.

In any case, Blackstone, the worst $500mn+ IPO of the year is down close to 7% today and 23% since the IPO. It is currently trading in a territory we call "Early Vonage." China’s State Investment Company may be regretting its major stake in the private equity firm. Even after the 10% discount they received, the Chinese are down 13% in 5 weeks. As Reuters asked today, “Do friends lose friends that much money that quickly?”

The Case of the Mysterious Blackstone Jump [Dealbook]
Blackstone’s great leap forward [Reuters]
Barbarians face to face [Market Watch via Blogging Buyouts]

There may be no money left for investors in the two troubled Bear Stearns hedge funds but last night Bear Stearns itself managed to squeeze some value out of one of the funds by seizing its assets. Last month, Bear Stearns assumed the debt of the less levered of its two structured debt hedge funds—said to be around $1.6 billion—after creditors started seizing assets of the more highly levered fund. Last night it announced it was seizing securities from the fund to control their sale as the fund unwinds.

Bloomberg makes it clear that while Bear Stearns may have made a show of “standing behind its hedge fund” (as one trader put it to us), it certainly isn’t planning on losing on money on those funds.

Bear Stearns told investors in the two hedge funds last week that they'll get little if any money after “unprecedented declines” in the value of securities used to bet on subprime mortgages, or loans to homebuyers with the weakest credit.

The firm has said it expects to lose no money from the debt it assumed from the High-Grade Structured Credit Strategies Fund.

``We don't anticipate any material change in financial exposure to Bear Stearns as a result of this action,'' Sherman said. He said the debt Bear Stearns took over from the fund last month is now valued at $1.3 billion.

Early reactions to the news that Bear was taking this action haven’t been entirely favorable. “This presumably protects Mama Bear from more pain, which for the most part has been limited to their reputation,” a writer at the 1440 Wall Street blog writes. “But this wound is self-inflicted, and the sellers are finally getting to brokerage stocks, and Bear's stock is the poorest performer by far over the past year. Ralph Cioffi will be out of a job soon, but walks with the bulk of his net worth intact. Scuttlebutt pegs him as having only 10% of his net worth in the game, he can comfortably live off the rest of his stash. Sounds familiar, no?”

To turn around an old Wall Street saying, “Where are the managers losses?”

Bear Stearns Seizes Assets From Failed Hedge Fund [Bloomberg]
Bear seizes collateral from Bear Fund [1440 Wall Street]