Apple issued a stern warning yesterday to cult members that they may “permanently damage” their cell phone/iPod combos by using “unlocking programs” in an effort to get the Cadillac of mobiles to work on unauthorized, non-AT&T networks. Speaking in hushed tones the company was vague in describing the actual technical problems, only saying that fraternization with the evil programs (that might jeopardize their licensing agreement with AT&T) would render the phone “permanently inoperable” when users install future software updates. Any issues that arise from the installation of forbidden software are not covered in the warranty.
In a recent interview, Mock Turtleneck cackled at the idea of being threatened by such programs. “It’s a cat-and-mouse game,” the High Priest of A said. “We have a lot of really good cats.”
Apple Sounds Warning on iPhones [WSJ]
Archive for September 2007
First Data was supposed to be one of the big leveraged buyout deals teetering on the edge of extinction thanks to the credit crunch this summer. The debt load of the company was said to be at the outer limits, leaving it with razor thin margins for slip-ups. But last week investors snapped up its $5 billion buyout loan. In fact, the loan was over-subscribed by about $2 billion.
Last night First Data said the deal had closed. First Data has gone private, and its stock has been removed from the New York Stock Exchange.
Earlier this month, the buyout firm behind the deal, Kohlberg Kravis Roberts & Co, was said to be in a nasty negotiation with the seven banks involved in arranging the First Data transaction. The banks had become nervous about massive loans on their books, and were pressing KKR to renegotiate its deal. KKR eventually did offer one concession—a leverage ratio financial test in its bank loans that has been described as “toothless” and “mere optics.”
While there are still questions about the financing—banks continue to look for ways to syndicate the nearly $24 billion in debt financing they committed to the deal—but fears that the credit crunch might derail the biggest deals, or leave a the financing banks with large losses, seem to be abating.
KKR completes $26 billion First Data takeover [Reuters]
Increasingly, it seems that the way up on Wall Street is reached via an exit ramp. There was a time when leaving Wall Street’s big firms to launch a small investment fund was viewed as a way of getting off the fast track. It may have been bold or it may have been a semi-retirement but it was seldom seen as a way of climbing upwards. Last year, however, things began to shift as Wall Street firm began buying hedge funds and hiring their managers to take over their own alternative management division. Suddenly the path to the top of the firm—or at least, the path to serious riches—led through places with names like Old Lane.
The latest version of this story comes from in the form of news that Morgan Stanley is in talks to buy a minority stake in Traxis Partners LLC, a $1.5 billion hedge fund run by the investment bank’s former chief strategist, Barton Biggs. The outspoken Biggs is a frequent guest on CNBC and the author of tell-all Hedgehogging. During his thirty years at Morgan Stanley, he became a well-known figure to many on Wall Street.
He comes from Wall Street blood. His father was chief investment officer of Bank of New York. After Yale, where he studied under the poet and novelist Robert Penn Warren, Biggs taught English at a prep school and wrote some short fiction. In 1961, he joined EF Hutton. He joined Morgan Stanley in 1973. He left the firm in 2003 to start Traxis.
He was well-liked by brokers and traders at Morgan Stanley.
“Barton Biggs was a joy to listen to every morning,” one former broker tells us. “I felt like I got smarter just listening to him. He was one of those guys who seemed to have it all together. He had an amazing grasp of everything that was happening in the markets. He was an optimist, even in the dark, cold winter of 2001.”
Traxis reportedly faired decently in August, losing just 2.5 percent for the month. It’s up about 9 percent this year, according to the Financial Times.
Morgan in talks over Traxis stake [Financial Times]
$$$ Soccer mom and investment banker dad for same [craigslist]
$$$ Suit Up: Loro Piana [Banker's Ball]
$$$ Official UAW strike Car Pundit Drinking Game [Jalopnik]
$$$ Swedish game show host vomits live on air (it’s better without the volume), gets back on the horse. [Breitbart]
A pair of academics at MIT have published a paper that seems to confirm the Rothman Theory of this summer’s Quant Bloodbath. The Rothman Theory—named for Lehman Brothers analyst Matthew Rothman who laid it out in a note published in the midst of the blood bath—held that the initial quant fund losses were triggered a large hedge fund unwinding one or more market-neutral portfolios.
Now Amir E. Khandani and Andrew W. Lo have used financial models to simulate this summer’s bloodbath, and what they found largely confirms the Rothman Theory.
The findings are likely to be welcomed by the quants, who are still smarting from what they think was biased reporting about their troubles this summer. Their findings suggest that the quantitative nature of the losing hedge funds was incidental, and the main driver of the losses in August 2007 was the firesale liquidation of similar portfolios that happened to be quantitatively constructed. That firesale was likely set-off by a hedge fund facing margin calls or seeking to pre-emptively reduce risk after its credit portfolio was hit by this summer’s collateral and credit crunch.
You can see why this is appealing to the quants. The math magic still works! It’s was just those 25-standard deviation moves triggered by subprime. How were the funds supposed to know they were all following the same strategy? This is why the Rothman Theory was so popular with quants to begin with.
But the quants might not like the conclusions the egg-heads draw. Their findings also suggest that hedge funds may have grown more dangerous since the demise of Long-Term Capital Management in 1998, according to Portfolio magazine’s Odd Numbers blog. Part of the problem is that long-short equity hedge fund returns are increasingly correlated. What’s more, the finding that the source of this summer’s long-short bloodbath seems to lie in a completely unrelated set of markets and instruments—the credit market—suggests that systemic risk in the hedge-fund industry may have increased in recent years.
Hedge funds are becoming more like banks, and the reason that the banking industry is so highly regulated is precisely because of the enormous social externalities banks generate when they succeed, and when they fail. Unlike banks, hedge funds can decide to withdraw liquidity at a moment’s notice, and while this may be acceptable if it occurs rarely and randomly, a coordinated withdrawal of liquidity among an entire sector of hedge funds could have disastrous consequences for the viability of the financial system if it occurs at the wrong time and in the wrong sector.
What Happened to the Quants in August 2007? [SSRN; link downloads pdf file]
Doomsday Clock for Hedge Funds Is Ticking [Portfolio.com]
You’d think that Jeffrey Epstein would want to go out with a bang, before he is (most likely) sentenced to 15 months in prison to be followed by 15 months of home confinement, for asking underage girls to work out the kinks in his back and then chill for a sec while he got physical with a towel. For the Epstein fans in the crowd (these are generally the same people who count John Carney and Jeffrey Jones as heroes), we are sad to report that for his finale shebang, the man has gone soft (hahaha, get it? Like a penis going soft? You liked that).
Johanna Sjoberg was a “church-going” brunette studying psychology at Atlantic College when she was approached by Ghislaine Maxwell, Epstein’s consigliere of jailbait. She was hired to answer phones and serve drinks at Epstein’s home for $20/hour, a job which she described as a “great opportunity,” of which all of her friends were “jealous.” She soon got a raise. Instead of fielding calls from noted pal Bill Clinton (“Just tell him I said ‘Well done, Sugar Tits’”), Johanna was making $100 for “rubbing feet.” The coed found it “fun” and “really liked [Epstein” and “didn’t get any sexual vibes from him” and “viewed him as a great uncle who wanted me to be happy.”
During the next several years, Epstein showed Sjoberg “the basics of massage,” introduced her to Prince Andrew (who shook her breast, which is a standard greeting in the UK), asked her “to do the nipple thing,” paid for her schooling and flew her to the Virgin Islands, where they watched movies.
Even though Sjoberg says the whole thing was “like a fairy tale,” she still decided to keep it a “secret” that Epstein “was a dirty old man,” preferring tell friends and family that he was “like [an uncle].” And that’s all there is.
Disappointed that the best anyone could do by a man who kept the makers of terry cloth in business for the last twenty years and whose police report required a cigarette and a shower after being read was this half-assed Made-for-TV-Movie, he-was-like-my-uncle-who-molested-me-in-the-poolhouse slop? Us, too. Really disappointed. So much so that we almost considered sending Carney in to work his magic, but then remembered you can’t get much done with a eunuch. So we’ll just say this– were YOU made to “do the nipple thing” to Jeffrey Epstein? Call 212-334-1871. We’ll wring something sick and twisted out of this yet.
Prince Andrew’s friend, Ghislaine Maxwell, some underage girls and a very disturbing story [Daily Mail]
The Truth About Jeffrey Epstein and ‘Vanity Fair’ [Gawker]
Brought to you by Financial Times
Off to an optimistic start, stocks took a downturn after late morning trading. Even less optimistic, the euro $1.4086 against the dollar. Notice the influx of tourists brimming the streets of Times Square? The dollar will also get you 114.85 yen.
In major indexes, the DJIA fell down 31.95 to 13788.24. The S&P 500 declined 5.99 to 1519.76, and the Nasdaq declined 3.80 to 2667.42. The Russell 2000 index down 9.05 to 804.06. Finally, The 10-year note rose 2/32 to yield 4.624%. Today’s Index Spinner: S&P EURO INDEX 1,780.76-3.37-0.19%
The tech sector saw a bit more action than others today with AAPL up 2.6%, MSFT up 2.6%, and EMC up 6.8% in anticipation of the Halo 3 launch.
Tomorrow sees Consumer Confidence announcements as well as Existing Home Sales. Both report at 10amET.
For more market hotness visit FT Alphaville
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