$$$ Great idea for how to spend your bonus. [Telegraph]

$$$ Trying Times for Wall Street’s Top Women [DealBook]

$$$ TIM: $14,148 (up $84 on the day, up $1,733 or 14% on the month) [Tim Sykes]

$$$ Winners & Losers From the Week That Was [Deal Journal]

Pretty much everyone needs more credit analysts these days. New York Life Investment Management LLC, one of the largest managers of high yield and leveraged loans in the United States, wants to add a Credit Analyst to its Leveraged Loan team. Get on it!

We’ve now ventured into the dangerous territory of financial accounting three times in the past two days to raise the possibility that the deep discount on asset backed securities obtained by Citadel when it bought E*Trade’s portfolio may amount to a major mark to market event for Wall Street. We knew when we started discussing this that the banks and brokerages would not be eager to make further write-downs to their ABS books. But what we didn’t know was that so many of our readers would be eager to provide the rationalizations for avoiding the mark downs.

We’re told that the bulk of E*Trade’s credit portfolio consisted of prime residential first lien loans. According to one E*Trade document DealBreaker has obtained, E*Trade had assigned a book value of $1.4 billion to mortgages rated AA or higher, $590 million were rated A, and $285 million were Triple B. With the secondary market for mortgages largely opaque—to the extent it exists at all these days—we thought it was rather obvious that a large public transaction in these securities should at least cause accountants to take a second look at their supposedly marked-to-market portfolios.

The main objection to viewing this as a mark-to-market event seems to be that because Citadel bought more than just asset backed securities and because the securities they did buy were a heterogeneous lot, it’s difficult if not impossible to derive a market price for the individual securities. This strikes us as a daring dodge but we’re trying to keep an open mind about this. Please feel free to explain in the comments below why further discounts of ABS books are not called for.

I've used all the clips YouTube has to offer starring our favorite furry friend. Let's remember the good times, and use this as an opportunity to come up with random shit that I should start secretly sticking in carney's posts without his knowledge. And don't forget to watch.

Donald Trump's $2 billion proposal to build "the world's greatest golf course" in Scotland, the home of his ancestors, has been shot down. Councilor Martin Ford, who cast the deciding vote against the 15-mile construction of two 18-hole golf courses, 950 apartments, 500 homes and a 450-room luxury hotel, said the wildlife damage it would cost would be "too high a price to pay," though Trump claims that the area would "maintain its environmental integrity." In one of those rare moments that you couldn't say, "Wow, what an unjustifiably smug twat, he's clearly only gotten this far on his looks," Trump admitted that he was "surprised and disappointed." Thank god he had the good sense to add, "The appeal should go rather quickly and successfully...This is what I do all my life. In the end it works out because I do succeed." In other news, who knew Trump was Scottish? I certainly didn't. Seriously, some days I am too stupid to function. Other days, no joke, I'm a fucking genius.

Trump's In The Rough [NYP]

We noted our disappointment yesterday with the decision by the three British bankers—called The NatWest 3 by British tabloids—to plead guilty to one count each of wire fraud. The rubber hose and brass knuckles style of regulating business through the criminal justice system scored another undeserved victory, and unfortunately this will no doubt vindicate the zealous prosecution of Enron’s failure in the minds of many.

Houston attorneyTom Kirkendall, who writes the brilliant Houston’s Clear Thinkers blog, notes that the threat of long jail sentences and a jury pool that is virulently anti-Enron probably made the guilty plea inevitable. The defendants were facing years of jail in a foreign land—Texas!—and the convictions of Ken Lay and Jeff Skilling were not exactly re-assuring about the likely fairness of a trial.

“Given those choices, my sense is that the NatWest Three's choice was a rational and reasonable decision. It's simply not a choice that they should have been forced to make,” Kirkendall writes.

Somebody was guilty because they were guilty [Houston's Clear Thinkers]

Hi, it's Bess, Carney and I are tag teaming this post. Anyway, here's my comment: HAHAHA OMG OMG OMG OMG isn't the internet hilarious?!?!?! You are totally justified in clogging up your friends/colleagues/Dealbreaker's inboxes with this shit and the message "Scroll down, TOO FUNNY!!!" LOLZ LOLZ LOLZ.

We like laying blame and we like public humiliation. (Ed.'s Note: this is where I wanted to end the post but Carney said I had to go into greater detail.) If you can add in something about "pretentious know-it-all dicks," marry me? Hence, German finance minster Steinbrück's comment to the Financial Times that the "snooty" attitude of bankers and financiers who believed themselves to be "cleverer than the others" is to blame for the credit crisis is pretty much our own personal perfect storm. Steinbrück also said that while these incompetent managers were guiding us into the current global "disaster," they were also "mocking" and "deliberately misunderstanding" his proposal for increased transparency, which was genius and could've saved the planet. Pumping yourself up = cherry on top.

This is what we need more of. No more sidestepping the question of who's to blame when things go wrong (assuming in the first place that $8.1 billion writeoffs aren't right). No more blaming inanimate objects, or pretending to fall asleep when you should be flashing a picture on the screen of Jimmy Cayne meeting his dealer on Vanderbilt and the words "Is there a connection" with three or five questions marks and an exclamation point. Mack: Was the $3 billion writeoff Cruz's fault? Cruz, is Mack making you the fall girl in a desperate attempt to justify the free set of steak knives he gets every year from William Henry? Let it out, you two.

‘Snooty’ bankers blamed for crisis [Financial Times]

The completely predictable caterwauling over the proxy access decision by the SEC has already begun.
“The tensions over proxy access may tarnish Mr. Cox's image as a self-proclaimed investor advocate,” the Wall Street Journal’s Kara Scannell claims in an article the editors of the Journal headlined as “Cox Puts Legacy On The Line.”

We’ve said again and again that the so-called “proxy access” reforms were a bad idea. In the first place, this kind of corporate governance is best left to the states. What’s more, far from increasing the power of ordinary investors the move would have left them vulnerable to exploitation by special interests, especially union dominated pension funds.

I just saw a commercial for Wachovia. The financial institution's purported motto is, "We're absolutely obsessed with pleasing our customers." A. Someone's selling it too hard. B. Are you really "obsessed"? Or just showing a passing interest? I'm going to turn the TV off now. (Meaning I'm going switch over to my TiVo'd episodes of The Wonder Years that need tending to. Thank you, ION). Last thing, and then we're going to talk about Germany's finance minister-- am I the only one who's noticed that Rebecca Jarvis looks exactly like Erin Burnett, just slightly less Anglicanized, and with slightly more haunting eyes? Alright, I'll let myself out.

For a while there, it looked like CNBC was going to keep doing its thing as the "serious" business network, and not lower itself to Fox's, shall we say, looser format. "Skanks don't move markets," everyone* at Englewood Cliffs said during the first week of FB's debut. "Those hos won't last a month." How wrong was CNBC? Dead wrong. An informal poll of five traders shows that Fox Business is still in fact on the air, almost two months later. This unforeseen turn of events has everyone in NJ wetting themselves in fear (why do you think they're always behind a desk?) and scrabbling to tart it up in order to compete, with a more "ouch, what are you doing?" than pleasurable outcome. Take this morning, for example. A piece on Victoria's Secret, a Limited Brands company carried the headline "Vicky's Panty Raid," Erin Burnett half-heartedly making a joke about "Becky Quick's interesting Victoria's Secret story," and then a shot of Mark Haines eating a sandwich. It's just sad because they don't even know how to properly whore themselves out, and they're fumbling around and fucking it up and just looking awkward. It's like watching Dina Lohan trying to compete with Lindsay. Horribly depressing and giving me the worst case of secondhand embarrassment.

*Everyone, that is, but Kudlow, who insisted we give him credit for knowing that "Skanks *do* indeed move markets" from the beginning.

This is from the other day but, uh, perhaps there are one or two of you out there who don't regularly watch Fox Business's (fingers crossed) Emmy Award-winning "Happy Hour," produced at the Waldorf's Bull & Bear. I came across this segment while searching for a piece someone told me the show did yesterday on particle theory. But before I could find it, my eyes landed on this one, entitled, "Teenage NASCAR." Who among us would be able to resist? None, myself included. Cody and Rebecca interview 17-year-old Joey Logano about the financial component of racing and what it's like to be NASCAR jailbait (they also get him absolutely shitfaced and then request a spin in his 750 horsepower racing machine, which is just good TV). That's not what I want you to focus on though. I want you to focus on Cody's jacket. Watch it like you've never watched a jacket before. Watch it with the sound on, watch it with the sound off. Watch it on a boat, watch it with a goat. Watch it in the rain, watch it on a train. Watch it in a box, watch it with a fox. Watch it in a house, watch it with a mouse. Then start a letter writing campaign to Fox Business, petitioning that Cody Willard has to wear that jacket on every network appearance for the remainder of his contract. Then take a gander at this thing, which is equally mind-blowing and worthy of your time. You'll want to plug your headphones in.

Teenage NASCAR Sensation [Fox Business]

We greeted the news of announcement yesterday that Citadel had picked up an asset backed securities portfolio from E*Trade in our usual curmudgeonly style. While investors celebrated the news by pushing E*Trade’s share price up, we noted that this probably should have the accountants at many Wall Street firms scrambling to reassess their own ABS portfolios.

It turns our we weren’t alone on this. Paul Kedrosky filed a two-part analysis of the Citadel deal yesterday, and sounded many of the same notes.

“First things first, the price on E-Trade's ABS book. We just had a major mark-to-market event, in effect,” Kedrosky wrotes. “As more than a few people have argued to me via email, if most of the industry had to mark their ABS books to 27 cents on the dollar, the U.S. banking business would be in deep, deep trouble.”

So far the reaction from Wall Street has been mostly marked by silence, prompting one veteran Wall Streeter to remark over drinks last night, “How can you tell when a Wall Street bank is lying about the condition of its credit portfolio? It’s when they aren’t making any noise at all.”

E-Trade: Citadel Investment Analysis, Part 2 [Infectious Greed]

China Bends To U.S. On Trade Subsidies (Forbes)
We doubt this will have much effect on anything, but China has agreed to pare back certain export subsidies, per an agreement signed with the US on Thursday. Supposedly, the agreement helps put China more in line with WTO regs, but it's hard to imagine the country doing much that would lead to a big difference. And since when does the US have any credibility on subsidies?

Oil Falls Below $90 in New York for the First Time This Month (Bloomberg)
As we guessed yesterday, that pipeline explosion (and yes, we're sensitive about the fact that two people died) didn't prove to have much in the way of legs. Forget the century mark, now oil has to be gunning for the $90 mark. Next stop: $30. Wonder if that HuffPo blogger is going to admit that he was taken by the news hype and renounce his call for tapping of the SPR.

Verizon switches standards gears for next-generation network (CNET)
Verizon has announced the technology it will use for its "4G" wireless system, and the mobile cognoscenti seem to think this is a bigger deal than the company's earlier "open" announcement. While the first announcement basically stated that the company would adopt something similar to AT&T, its effect could be seen as muted, since the company's CDMA network isn't compatible with a lot of phones. But for its next gen, it will be using a non-CDMA standard -- LTE -- which will be compatible with a lot more, potentially making it that much more interoperable with other devices and networks.

The End of Hurricane Hugo? (The American)
It just clicked to us: we're going to be reading about the 'last days' of Hugo Chavez for the next 35 years. Seriously, if we could remember Castro's early days, we'd say it's eerily reminiscent, but alas that would be misleading. Then again, maybe not. Word is that the people may actually be catching on to him down there, though we'll believe it when we see it .

$$$ Restore Sears First [Jeff Matthews]

$$$ Thursday night pool? Act now! [Craigslist]

$$$ Touching You [WallStrip]

You really have to love bonuses paid in nearly worthless currency like, say, the Brazilian Real (not to be confused with other Brazilians, which we are all in favor of), or maybe UBS stock. So are UBS's investment bankers worthy of the 100 percent stock bonuses they have coming their way next month? Credit Suisse says "Yes." That is, Credit Suisse uses a cute report littered with 'Shroom burger stains to point out that UBS's investment banking unit might have a net worth of negative $20 billion dollars. Since this pegs each of the firm's 22,000 employees as worth negative $1 million, (before adjustments for ego good will--the Nazi sympathizers love themselves more than any other professionals on the Street, Goldman Sachs included, which is also your answer to why the stalls in the 3rd floor men's room are always occupied from 1-4 pm) a worthless stock grant seems like a well-priced treat. Some simple math shows that even if every employee pledges to switch from 2 to 1 ply and search for their own flights on Priceline, the bank will not be out of the red 'til 2015. Goldman Sachs, investment bank Schadenfreude of the highest order, has even more pessimistic ideas about "You and Us." But then, you knew that before we told you. Check out the bad news here.

Are UBS Bankers in a Sea of Red? [WSJ]

With the passing of Thanksgiving, the fall social season has officially come to a close. Now the holiday season is upon us. For some of you that means Christmas trees, for some of you that means dreidels, for some of you that means [insert something associated with Kwanza here]; and for others [fill in objects related to whatever other religion you practice here]. Yes, this is a divisive time of year.

But take heart, for we can obviously agree that “the holidays” mean one thing to us all—free drinks on our bosses’ dimes (and if you’re lucky, other “things,” too). And since you’re reading DealBreaker, you’re clearly the type of person who gets invited to tantalizingly salacious parties circa December/January, or at least ones with the potential to be so. And in less of a “we’re going to publish pictures that will ruin you, professionally and socially” and in more of a “this is the kind of party that no one will be able to remember in the morning unless there’s photographic evidence of its awesomeness,” we think you should totally send invites to any and all of these events to us at tips at dealbreaker dot com. (Use the subject line: “Holiday Party.”)

What’s in it for you? Two words: Bess Levin. We’ll be sending her to as many of these parties as her liver, brain and our insurance premiums can handle. And don’t worry about possible law-related problems, as her driver’s license informs us that she’s legal to drink. But just barely.

So send us the invites, or at least the time, place and manner. As always, the identities of all tipsters will be kept in strictest confidence.

Last night the doors of the meatpacking district's Lotus opened up for a party in honor of Jim Cramer's new book, "Stay Mad For Life."

The party was hosted by CNBC President Mark Hoffman. During a speech introducing Cramer, Hoffman noted CNBC was just completing their highest rated November since 2000.(Volatility is good for financial news networks.) He also mentioned that Cramer had signed a new, multi-year deal with the network. Media Bistro's TVNewser reveals that Hoffman also mentioned that he had heard a "big storm" was coming on October 15, the date Fox Business launched, but that CNBC hasn't "had to move the thermostat at all."

TV Newser continues:
The veiled shots at Fox Business continued when Cramer took the mic. After calling CNBC the "most exciting, gratifying and rewarding place to work," he acknowledged, although not by name, Fox Biz and his intention to "wipe the floor with them." And for those who jump ship to the competition? "Anyone who goes over there...we're not friends," Cramer said to cheers and laughter from the crowd.

Asked for a response, an FBN spokesperson said, "Doesn't Jim need ratings first before wiping the floor with us?"

A host of CNBC types attended the party, including Cramer's stop trading partner "Erin Burnett." (Related: anyone else notice how good she looks in that low-cut red number she's sporting today?) We kind of suspect Cramer is afraid of Bess--something about her love for our bobble-head version of him or calling his nephew Cliff Mason inept when it comes to ladies--so we weren't terribly surprised no-one invited us.

Incidentally: Lotus is still open? Who knew? We haven't even thought about that place for at least two years. Probably three.

Stay Mad Party [TV Newsers]

Earlier today we pointed out that the seventy-four percent discount on the asset backed securities Citadel has acquired from E*Trade will likely trigger a good deal of consternation on Wall Street. For the past few months banks and brokerages have been struggling to re-asses their credit portfolios. Even after a series of write-downs on those assets, many investors and market watchers remain unconvinced that the best and the brightest of the financial world understand the extent of their losses or are willing to be forthcoming about them.

The reason why Citadel's discount may have the bean-counters scrambling is that under new accounting standards—referred by those who enjoy talking in word and number jumbles as FAS 157 and FAS 159—companies are required to take into account easily available information about the market prices for their assets. With the Citadel trade blasted across Bloomberg screens and newspaper headlines, it's hard to argue that the information is not available.

What's more, one standard excuse for not writing-down assets should be unavailable. Under older standards, companies could claim that the assets had more value than could be achieved in a current market sale. No longer. These days companies are required to value even lightly traded assets in terms of the values they could achieve by selling or transferring the position. And that should mean they cannot blithely ignore the pricing of E*Trade's ABS portfolio.

It's still possible that other holders of asset backed securities on Wall Street will claim that E*Trades portfolio was especially weak or that they may continue to value the components of their own ABS portfolio as individual units rather than attempt to estimate the losses that would be incurred if a huge part of the portfolio was sold. This may provide some cover for the banks but it is not at all reassuring. We're told constantly that this latest round of write-downs has been the last, that the banks and brokerages are writing-down more than they need to because they have suddenly become conservative about such things. But if they put their heads in the sand—or, other dark places—and ignore E*Trade, we'll have to view these claims of a new conservatism on Wall Street with even more skepticism usual.

Among the more amusing items in our inbox this morning was an invitation to a party in Williamsburg, Brooklyn sporting the theme "Wall Street Circa 1987."

"Two dark events are upon us: the end of my 20s and the beginning of the recession," the woman throwing the party writes. "Let's fight both Brooklyn style with a giant dirty bomb of a party."

We're taking this as a hopeful sign. If Steve Schwarzman's lavish $5 million birthday party rang the bell at the top of the credit driven leverage buyout boom, a party thrown by Williamsburg hipsters build around downbeat market sentiment might be a sign of the bottom.

Hey guess what? Stephen Schwarzman and Henry Kravis might have the same personal net worth, even though Blackstone is worth significantly more than KKR. Who gives a shit? I'm going to go out on a limb and say this guy.

As has now been widely reported, Citadel has swooped down into E*Trade's coffers and delivered the internet bank and brokerage $2.5 billion in cash. Investors seem to like this deal, pushing up E*Trade's share price in early morning trading.

The lads and lasses at DealBook have a bit of a laugh this morning in a post titled "We're From Citadel, and We're Here To Help." They run through the now familiar litany of Citadel's quick asset purchases from distressed financial firms: Amaranth, Sowood, Sentinel. It would be tempting to describe these as bailouts by Citadel--indeed, DealBook reports that Citadel founder Ken Griffin pitches the deals as "helping" the troubled firms--except that each of the firms subject to Citadel's attention went on to sink even further. Citadel's help often seems to be a prelude to the ash-heap of financial history. E*Trade investors may want to take note: when Ken Griffin is on the phone, you are probably in more trouble than you think.

As part of the deal, Citadel is paying $800 million for asset backed securities that had a book value of $3 billion. That's close to a 74% haircut for E*Trade. It's worth paying attention to the possibly the secondary effects of this sale, which may be even more profound than most have acknowledged. The market for asset backed securities is one of those severely stricken in the credit crunch, and this trade is one of the few large, publicly announced sales of these assets in recent weeks. Surely those banks and brokerages which have been claiming to be adjusting their valuations to market realities will have to take a second look at their valuations in light of this 74% discount.

We're not exactly going to hold our collective breath waiting for the banks to mark their ABS portfolios down by two-thirds. If we listen close enough we can already hear them whispering in their conference rooms that E*trade's was a "firesale" and does not reflect underlying market fundamentals. Which makes us wonder whether they are truly confused about the difference between marking-to-model and marking-to-market.

We’re From Citadel, and We’re Here to Help [DealBook]

E*Trade to Get $2.55 Billion Cash Boost From Citadel [Bloomberg]

Our headline is more wishful thinking than an actual guess. But we're hoping our readers will provide some better informed speculation. Get your nominations in now and we'll run a poll later to decide this the democratic DealBreaker way.

WHICH senior Citigroup executive, who's still with the financial giant despite being involved in loss-making decisions this year, was able to promote his cute chief-of-staff and then replace her with an equally cute hire despite the bank's unofficial hiring freeze?

Just Asking [NYP]

We won't pretend we're a not at least a little disappointed by the guilty pleas offered in a federal court in Houston by three British bankers yesterday. The bankers—Giles Darby, David Bermingham and Gary Mulgrew—pled guilty to one charge of wire fraud each and are expected to be sentenced to 37-months in jail.

Those who have cheered on the criminalization of Enron's collapse will no doubt wear vindicated smiles when they talk about the guilty pleas. But their glee will be misplaced is they regard the guilty plea as a confirmation of wrong-doing. Plea bargains have become quite common in white-collar criminal cases not because prosecutors select only the guiltiest of defendants but because the threat of enormous jail sentences make fighting charges too risky.

Sears Holdings Reports Third Quarter Results
So earnings at Sears Holdings got slices to $2 million in the recent quarter, from $196 million last year. We we all set to snark it up, saying something sarcastic like "we're sure they did a great quarter, but we're just too stupid to really appreciate the subtlety of the results." But, maybe sometimes a bad quarter is just a bad quarter, even at Sears. To wit: "We are very disappointed in our performance for the third quarter. We cannot blame our results entirely on the retail and macro-economic environments. We have much on which to improve and are working hard to do so." We certainly applaud their forthrightness.

E*TRADE Financial Announces $2.5 Billion Investment Led by Citadel
Troubled online broker E-Trade is getting $2.55 billion in cash and it's not petrodollars. Actually, it very well could be petrodollars. It's coming from hedge fund Citadel, which for all we know, counts
several billion in petrodollars under management. In fact we wouldn't be surprise to see that at all. The fund had previously owned 3 percent of the company, but it stands at 20 percent. Also, the company is replacing its CEO Mitchell Caplan, though no full-time replacement has been named.

Talking Ourselves into Recession (Business & Media Institute) (via Talking Biz News)
Amy Menefee at the free-market oriented Business & Media Institute says everyone should shut up about the recession already, or it'll turn into a self-fulfilling prophecy (ah but aren't they all?). She notes that for all the talk, the majority of policy makers and economists don't see a recession actually happening. That's funny, because that doesn't fit with half of the conference calls we've heard this quarter. In many cases, management isn't predicting recession -- they're saying we're in one right now. This all seems very similar to things felt in late 2000, when "49 out of 50 economists" kept saying there was no recession in the offing. And then there it was.

Trappist Command: Thou Shalt Not Buy Too Much of Our Beer (WSJ)
Interesting article with some important points about economics. The Journal looks at the plight of Trappist, beer-brewing monks, whose brew is in incredibly high demand, especially compared to the meager supply. The monks, you see, aren't interested in being a beer powerhouse, so they've kept supply and price down, which has created all kinds of havoc. Best line: "This beer is addictive, like chocolate," said Luc Lannoo, an unemployed, 36-year-old Belgian from Ghent, about an hour away, as he loaded two cases of Westvleteren into his car at the St. Sixtus gate one morning. "I have to come every month." Oh, really? Didn't know beer could be addictive.

$$$ The Devaluation of UBS Bankers [Deal Journal]

$$$ Sell Everything; Hell is Here [LoSC]

$$$ Animals [WallStrip]

Lloyd Blankfein has been named the most powerful CEO on Wall Street. Bet you didn't see that one coming. OR THIS.

25 most powerful people in business [Fortune]
The Office Pessimists May Not Be Lovable, But Are Often Right [WSJ]

The confused idea of shareholder democracy suffered a set-back today when the SEC voted 3-1 to allow companies to block investors from placing board nominees on official corporate election ballots. There will no doubt be lots of hand-wringing about this vote but most of what you need to know about the proxy access proposals can be found by looking at its biggest proponents: labor unions and union dominated pension funds. The funds and unions favor proxy access rights not because they have an altruistic urge to help shareholders in general or out of a metaphysical attachment to democracy. They supported it because they believed it would give them a leg up in negotiations with management and corporate boards. Ordinary shareholders can breath a little easier that this attempted power grab has failed.

SEC denies shareholder bid for more power in board elections [LA Times]

We're totally sure that this two-day rally is perfectly healthy and that this description of the havoc wreaked on our economy by the Federal Reserve is not at all eerie.

All in all, financial instability has been far greater since the creation of the Federal Reserve. What did the Great Depression teach us? Essentially that even with the best of intentions, it is impossible for the authorities to manage the supply of money in accordance with the exact needs of the economy. A country's economy is the sum of millions of people making decisions that no single individual is in a position to anticipate. As economist Murray Rothbard showed in his book America's Great Depression, in the 1920s the Federal Reserve pumped up the money supply, expanding credit by more than 60 percent. Because the economy was very productive, this monetary expansion did not show up in the regular inflation figures. But, as is always the case with inflation, many resources went to the wrong kind of investments--until the crisis hit. The late Milton Friedman showed how the Fed made things worse by not providing the system with enough liquidity once the Depression was obvious.

Fed Up[The New Republic]

We at my apartment (so me and Marissa) have heard that the invasion of employee privacy by Wall Street firms has taken a bold step forward: hacking into employee Facebook accounts. According to a sometimes reliable, sometimes not source, the human relations department at a certain investment bank has been using creative technology to get into the profiles of current (and prospective) minions, to monitor their off (and on) the clock activities. This is bull shit and I'll tell you why: it would be one thing, if you and those with the power to get you fired willingly entered into a Facebook friendship, thereby granting them full-access to see what's a-poppin' in your personal life whenever they pleased. But this means that someone who doesn't even have the bedside manner to ask "You wanna do this" first, or worse, someone whose online friendship you've formally said no thanks to, can see that you've added "Boiler Room" to your favorite movies (sheep) and changed your status from "Billy is working at Bear Stearns" to "Billy is getting a public citation for having relieved himself on the sidewalk in front of Bear Stearns which he wouldn't have had to do in the first place if those FUCKS hadn't fired him." Anyway, try and guess which firm we're talking about via Facebook message (thereby granting me access to see your profile for one week even if we're not friends) and I will respond shortly.

Apparently there's some kind of protest on near Goldman Sachs on Broad Street today. Gawker dot com, a media and celebrity gossip site, reports that twenty or so protesters are chanting and waiving signs outside of Goldman. Security, of course, was summoned and the protesters apparently took off to march up Wall Street.

The best part of all this, of course, is the cause: the protesters are protesting predatory lending. Of course, since Goldman doesn't originate residential mortgages and made money last quarter shorting mortgages, it's a bit odd to protest them for predatory lending. If anything, they engaged in predatory anti-lending. Details!

I Predict A Riot [Gawker]

In an effort to "best position Bear Stearns for 2008 and beyond," which is the year it plans to "really start making this thing work," the securities firm will be laying off 650 employees. Ex-Bears will be given (probably uncompetitive) severance, benefits (that don't include dental) and outplacement services (with the majority of firees expected to land on their feet working as editors on the Think Equity blog).* In a remarkable show of compassion, James Cayne is said to have sent out a desperate e-mail to the members of the board early this morning, urging them to reconsider the drastic measure, on account of the fact that the staff reduction would translate to much fewer people for him to go in on 1/8ths with, and in Jimbo's words, "I don't have that kind of money right now." After being reminded that the layoffs had been an idea he had come up with on his own, after returning from a super frustrating smoking session in which he got a measly two hits before the spliff ran out because there were "like 30 people there" and "some first year fuck kept Bogarting the shit," Cayne, who had to read the reply six times before being able to process the information, responded, "Oh yeah. Ok, fuck it, get rid of them."

Bear Stearns Cuts 4 Percent of Staff [AP]

*actually, we don't know if any of these specs are true, we're just assuming. Got any info? Feel free to share.

We might give Citigroup a lot of shit for being the world's crappiest bank but that's just our way of showing affection. Because in truth, most days we really love Citi, today being no exception. Even though it has no CEO, no wiling candidates for CEO, no money, no women, no prospects, no action and no conceivable reasons at all for even getting up in the morning, Citigroup was reportedly downright offended to get a call from a prominent investment banker suggesting that perhaps it'd like to merge with Bank of America. Us? the world's crappiest bank, merge with Bank of America? Where the hell do you get off even thinking something like that? The board apparently called the approach (to say nothing of the actual proposition) "totally out of hand" and then looked around at its buddies as if to say, "You believe this guy?"

Financial Firms, Capital Depleted, Hunt for Cash [WSJ]

Remember that party we didn't go to? You know, the Financial Writers Association's "Financial Follies." Well, apparently this parody of "the Office" was part of the activities. It's vaguely funny, and relatively well produced. Oh, and it comes from the people who make that Bloomberg terminal on your desk.

PS: Last night we were sitting in the same bar we always sit in, Tom & Jerrys on Elizabeth Street, when we noticed the girls next to us were talking about "Clerks." At first we were excited because girls aren't usually huge fans of the movie. But we quickly realized the girls were talking about friends who were clerking for judges. In short, they were lawyers.

"Are you two lawyers?" we asked.

"No," the girl with the short hair and oddly attractive smile lied. Eventually she half-recanted and told us that her friend was a lawyer. In truth, both of them were.

"Do you always lie when asked about being a lawyer?" we asked.

"No. Just to you." She probably thought that was funny. We just thought it was sad that her life as a lawyer had left her so bitter.

So. Anyway. We totally had a point when we began telling this story. What was it? Oh, right. Here it is: the girl with the longer hair was a lawyer but she doesn't practice anymore. These days she works for Bloomberg. So there you go.

While many of the world's leading financial institutions struggle with a hangover from the credit market party that came crashing to a halt this summer, Andrew Lahde has some bad news for them: the credit crunch is going to get worse and it’s going to spread.

Lahde Capital’s flagship fund, US Residential Real Estate Hedge V, is up 1000% year-to-date. Another fund he manages, concentrated on commercial real estate, is up 80%. In a recent letter to investors he’s tells investors that he is taking the firm out of its short positions in BBB- and BBB rated paper over the next ninety days . He’s offering investors the opportunity to make early redemptions, telling them that it is time to take money off the table.

But this hardly means he’s suddenly become optimistic about mortgage backed paper. In a letter to investors obtained by the boys and girls at FinAlternatives, Ladhe tells investors that he expects further deterioration in the ABX index for paper rated AA through BBB-.

“We believe that all of these positions have further downside,” Ladhe writes. The AA rated paper will “melt away into the history books,” he says, adding that he expects this paper will eventually be worth “zero.”

If anything, he has become more pessimistic at time has passed. “The credit that America has been having an orgy with is going away,” Ladhe writes. “Our banks are saddled with endless bad debt and our collective leadership is clueless.”

Of course, being right once doesn’t mean that Lahde will always be right. It will certainly be hard to replicate his 1000% performance. But it’s a good reminder after a day like yesterday, when—consumer sentiment be damned—everything comes up roses, that there’s still a lot of weeds in the garden of good and bad credit.

Oh, and in case you are wondering, Lahde is launching a new fund. It's strategy? We'll let him tell it: "The focus will simply be shorting credit. There is plenty of bad credit left out there to short."

Hedge Fund Gains 1,000%, Preps Short Credit Fund [FinAlternatives]

Oil eases towards $94, U.S. economy and OPEC in focus (Reuters)
So what if oil never gets to $100. Could it be, is it possible? Who knows. If traders go way negative on the global economy and somehow the Dollar strengthens, then it's conceivable, but trying to guess this stuff would just make us look like fools. Meanwhile, it's important to remember that the "century mark" isn't a global phenomenon, but one that only has meaning if you're in the US. Check out the latest from Paul K, where he looks at a multi-year price chart in several different currencies. One thing's clear: no matter how strong your country's currency has been, oil has been getting more expensive. How do you say Peak Oil in Japanese?

Top Economic Adviser To Leave White House (WSJ)
George Bush's top economic advisor, Al Hubbard, is leaving at the end of the year. Notice in the headline, the Journal didn't use the guy's name, which is probably because all of 7 people know who Al Hubbard is. The good news: George Bush didn't create the precarious financial state we're in today, and he probably can't make it much worse in his final year in office, regardless of who fills Hubbard's shoes. Our vote for his replacement though: "world's greatest economist" Lyndon Larouche. Exactly what would be needed to turn Bush's lamest of lame duck years into something we could all get excited about.

Why Citi's 11% Coupon Doesn't Mean it's Paying Junk Rates (Felix Salmon)
Felix Salmon puts in plain language this post from Andrew Clavell about why the 11 percent rate on Citi's Abu Dhabi money isn't all its cracked up to be. No need for a summary of a summary of an explanation of the news, so just click on over.

Verizon’s Open Announcement Is A Big Deal, But Not For The Reasons You Might Think (Mobhappy)
Lots of enthusiasm over yesterday's announcement that Verizon would be "opening" up its network to outside phones and applications for the first time. Potentially a very big move for the company, though we'll see how it all goes down before getting into a full lather. Carlo Longino offers a more skeptical take. His core point: Verizon is now offering exactly what Cingular, er AT&T and T-Mobile have already been offering for a while, the ability to bring any device onto the network. Jeez, well when you put it that way, it doesn't sound like such a big deal.

$$$ Hath Joined Together [Going Private]

$$$ Is Abu Dhabi Getting a Good Deal? [Deal Journal]

$$$ Can you handle situations that might necessitate lying? Pretend to know stuff? Fingerbang old rich ladies? Delude compensation committees into thinking you deserve millions and millions of dollars?

If you answered yes to any of the above, you may be a hot commodity. [CNBC]

$$$ What can he say about Medallion's trading strategy?

``Not much,'' Simons says with a chortle, and then takes a drag on one of the Merit cigarettes he often smokes.

What kind of instruments does it trade?

``Everything.''

How many different strategies does it use?

``A lot.'' [Bloomberg]

$$$ "A few seconds later, as Zuckerberg—all 5’8”, 150 pounds, and 23 years of him—launches into his presentation, his voice cracks." [02138]

$$$ King of the Club [thestreet.com]

You will always be our number one.

Walid’s New Rival for Citi’s Affection [DealBook]

Some of you might call that favortism but A. Oh, it is? I wish I had a problem with that and B. You'll be singing a different tune when you behold the glory that awaits you after the jump. All I will say is that it was sent to us by the greatest reader of all time, who "ripped it out of a glossy mag that was in [his] South Beach hotel room" and that when I called Deutsche to make sure it wasn't a joke, there was a good ten seconds of stifled but totally professional giggling on the other end before the magical pronouncement: "I'm embarrassed to tell you this, but yes, it's real. Enjoy."

At a conference hosted by the Confederation of British Industry yesterday, a visibly shaking Stephen Schwarzman said that private equity is "a force for good" whose only goal is to help the children. Then he bemoaned the fact that his industry is seen as a "destructive force with a short-term perspective, levering companies and stripping their assets to enrich a few nasty people (like me), who then don't even pay taxes on all that they get in such an unsavory manner," just before yelling "good bye, cruel world" and throwing himself off a second-story balcony. (Schwarzman also offered this rave review of himself, courtesy of his own family, on the way down: “My wife and children were not ashamed to have me sit with them at the Thanksgiving table on Thursday.” You know what? Sold. I don't even know what he's selling, but sold.)

Stephen Schwarzman Speaks [DealBook]

Former Credit Suisse investment banker Hafiz Naseem pleaded not guilty yesterday to allegations that he was "the mastermind" behind a $7 million insider-trading ring in which he leaked details about nine deals that Credit Suisse was an adviser on, including the $45 billion leveraged buyout of TXU. The prosecution's foolproof rebuttal? Naseem had a gambling problem, and was up to his toes in $5,000 of debt, which is totally a plausible reason for committing a $7 million felony. Geniuses. (A lawyer for Naseem has denied these accusations as well, saying that while the $5,000 debt part of the story is true, the gambling part is not. It was a heroin thing, and was taken care of in a completely legal fashion.)

Credit Suisse Case Shocker [NYP]

So some banks are so poor now that they can't even afford to pay for your Blackberrys and there's a chance RIM might even go out of business as a result and I feel for you, I really do, but you know how it is...not so bad for DealBreaker, not so bad for Bess. What I'm getting at is that our publisher has decided I need to be able to check in with the tips line more frequently because you never know when Citigroup's going to announce a 350 billion dollar writedown or Jim'll want to get high and he (our publisher, but Jim, too) just really feels that I need to be accessible at all times in more ways than currently offered by my Razr. (This whole thing actually would've been a lot more satisfying if it had played out more like "Hey, Bessiecakes,* a busy and important person like you needs a wireless handheld device that allows you to check your e-mail and browse the Web for unique and interesting Craigslist postings (FOR THE PURPOSES WRITE-OFFS) whenever/wherever" than "Can I have a Blackberry?" "Yeah, sure," but whatever, I don't care. I really don't.)

Only thing is, I can't decide which one to get. (Obviously I've ruled out a Sidekick, because I'm neither a 14 year-old girl nor a 'mo of any age (not that there's anything wrong with that, I'm just not) and the Treo, because (in my mind only) I'm not a loser). You people know Blackberrys and you've made it this far (down the post) anyway, so I just thought, how about a poll? And here we are. I have a few notes, which aren't intended to inform your pick, just things to keep in mind: The Curve strikes me as very soccer mom, but I don't know, maybe I should run with that? I like the weight of the 8700, but prefer the look of the 8800 (in black). I've more or less rejected the Pearl out of hand because it's called the Pearl but I'm trying to step outside my comfort zone in all aspects of life and one might say that this would be a good place to start (though I'm asking as a friend: please don't). I'm not going to include the 7130 because I know some people won't be able to help themselves from voting for it simply because I think it's a hideous eyesore and wouldn't that be hilarious. But if there's anyone out there with strong feelings for the model, please share. Alright, so you pick one for me now, and later, we'll help Carney decide which finish he should use for his head shots (I say matte, he's holding out for high gloss).

*in this scenario Keith, who's the only one who calls me that, still works at DB.

Barclays said today that in spite of writedowns due to subprime, etc., it predicts that 2007 will exceed last year's profit, though just barely. Everyone (traders especially) thinks this is good news, and if we were talking about Citi it definitely would be, but making a pound more that least year means that Barclays earnings will have moved an insignificant 4 percent, compared to the gigantic growth seen in the last four years. Barclays's estimate is "broadly in line with" analysts' average estimate of about $14.7 billion (7.1 billion pounds), news which move the stock as much as 6.2 percent in London trading. Interesting. What I'm getting at is that Barclays is trying to cover up a record 75 percent increase in profit for 2007, so that whenever that actual numbers come out, they can say they "beat" analysts' expectations, and continue to recover from a 7-week losing streak. That or they're just trying to cushion the blow for the inevitable admission that those rumors about a $10 billion writedown were true. I can't decide which.

Barclays says on track for 4 pct 2007 profit rise [Reuters]

Barclays May Match 2006 Profit This Year [Bloomberg]

We all know CIBC analyst downgraded Citi to market underperform, predicted the bank would be forced to cut its dividend and sell its most valuable assets, and called for erstwhile chief executive Chuck Prince to be unceremoniously thrown out on his ass in an October report that earned Whitney her first death threats and had Mike Mayo muttering (through tears) to himself, "I wish I had balls like that," but apparently it wasn't the first time Mer chose to perform a bilateral orchiectomy with an audience watching. Whitney's husband, former football player and pro-wrestler John Layfield, AKA "Death Mask," recalls for BusinessWeek how he first fell for the girl, when they were guests on Fox's Bulls and Bears in August 2003, discussing the future of Citigroup. He was the bull, she was the bear:

"She asked me why you would want to own a financial stock during a time of rising interest rates, and she was right. She humiliated me on national TV...[we] were married in February, 2005."

What an awesome biatch! Carney thought to himself when he read the anecdote this morning in a little locked room. But we needed some assurance that these weren't two isolated incidents. Whitney's appearance (via phone) earlier today on Bloomberg TV provided that affirmation. How does she feel about Abu Dhabi's $7.5 billion, 4.9 percent investment in Citi? Not good! "$7.5 billion is not enough money by a longshot," Whitney told BTV. "Not enough, too late...[Citigroup] needs at least $30 billion dollars...[this injection] only partially mitigates the $11 billion charge in the 4th quarter. Citigroup needs to sell off better assets at a discount and cut their dividend [in order to deal with, among other things, the fact that C] has the single highest exposure to high LTV ratio mortgages, and the [imminent] default rates on those loans, which will be alarming."

No idea what she's talking about but loving that 'tude (JC's abbrev.).

Earlier: Some Analyst Love

The Analyst Who Rocked Citi [BusinessWeek]

Citigroup to sell $7.5 bln stake to Abu Dhabi (Reuters)
Everyone knew it was only a matter of time before Citigroup sold a big chunk of itself to some foreign fund, in hopes of getting some much-needed cash. The winner: Abu Dhabi, which is taking a 7.5 billion, 4.9 percent stake -- just below the threshold that would trigger SEC filings. Yes, Gulf investments are coming hot and fast right now, as the Emirate took a stake in AMD just a couple weeks ago, not to mention Dubai's purchase of a stake in Sony. Still, we have to wonder whether the growing Mideast influence at Citigroup will turn the company off to some retail investors in the US (just a thought). How long before the Dhimmigroup Meme starts up among conservative pundits.

Stocks Sink Into Correction As Credit Fears Take Toll (WSJ)
Last night, just for the hell of it, we watched about 20 minutes of Kudlow's show. Man, that stuff's hard to stomach. It's actually a little difficult to tell how serious he/his guests are being when the talk about some of this stuff. Everyone's goin' on about how it's all "profit taking" and that there's nothing to worry about and that if you're at all concerned about the economy, then you're just a negative ninny. Anyway, more good news today, the latest stock slide is now officially a "correction". In other words, stocks are more correctly priced now than they were when they were 10 percent higher and how can that be a bad thing. What we really need to be fearful of is an "incorrection", though, please let us know the last time you heard a rally described that way.

Study Warns of Decline In Value of Homes (WSJ)
Just in time for... a housing decline, a study is warning of a decline in home values. Specifically, a report put forth by US mayors says that homeowners will see a $1.2 trillion loss in value the next year, while 1.8 million will lose their properties. But, the good news according to the study: no recession. Just 1 point lopped off of GDP growth. Hey, as long as we're growing.

Ahead of the Bell: FCC Cable Regulation (BusinessWeek)
Big day if you're a Cable investor, as the FCC is set to chat on what, if any, new regulations will be imposed on the industry. FCC Commish Kevin Martin, alleged by many to be a friend to the Telcos, is looking to pass fresh regulations on the industry, over a host of things, like a la carte pricing and so forth. Grab the popcorn, should be a fun meeting.

$$$ Deals: An International Thanksgiving
In our M&A Roundup for the week ended Nov. 25, holiday deal values are cut by two-thirds, but cross-border dealmaking picks up sharply. [CFO.com]

$$$ Stephen Schwarzman doesn't like poor people? Stephen Schwarzma is MR. Poor People. [Deal Journal]

$$$ Hedge Fund Gains 1,000% [FINalternatives]

Apparently moved by the inspirational words in his latest read, Chicken Soup For The Divorcée's Soul, Greg Fleming sent out a heal thyself missive to all employees today entitled "A new chapter at Merrill Lynch," after being convinced that some people might be weirded out by "Starting Over, Yet Again."

In it, Fleming, who, according to CNBC's Charlie Gasparino, everyone at Merrill hates, said: "While the markets continue to be volatile, and challenges remain ahead, and I have cried myself to sleep every night for what feels like a lifetime and for what? That two-timing asshole?, I have tremendous confidence in our long-term prospects...Our core businesses continue to perform well...[and] our strategy is fundamentally sound." Ooo, but then he felt the need to go and back up the bull shit with evidence, and not having the decency to make something up, decided to work with the facts at hand. Big mistake. What'd the Flemster go with? A correction from the Wall Street Journal about an article that said Merrill was taking its accounting cues from Enron. A correction. That was the big pump-up part of his speech. A correction.

"The Wall Street Journal simply should never have written the story that it did, which is why it agreed to issue a rare correction of a page-one story," Fleming wrote. "The control groups worked just as they are supposed to work here, and the Journal got it wrong when it suggested that Merrill Lynch had engaged in any improper transactions." Apparently no one from Bloomberg had gotten back to Greg about whether or not they have plans to issue a correction to the story that reported Merrill would be writing down $8.1 billion (and counting), which he thinks (and said as much in the voicemails he left), "Bloomberg simply should never have written." God-willing, he'll have gotten some sort of a response in time for Chapter Two.

Merrill tells employees its strategy is sound [Reuters]

While most Americans were enjoying our “jingoistic” holiday on Thursday, the Dow apparently dropped “substantially…amidst more credit crunch fears.”

Or, at least, that’s what the BBC’s Newsnight reported. And it was only after viewers informed them that the US stock exchanges were closed for Thanksgiving that they realized their error.

They’ve gone and apologized for the mistake. You see, they don’t really get around to the market information until the last minute and they simply overlooked the fact that they were reporting the news from the day before. Apparently, this has happened to them a couple of times. Now they have found a way to ensure against future errors. They are going to insert a note on the page where they write down the market information that will read: “MAKE SURE YOU CHECK THE AMERICAN MARKETS ARE NOT ON A HOLIDAY”

Market sentiment [BBC News]

Speaking of, well, see below, Maximilia Cordero is now suing the New York Post for smearing 'her.' You’ll remember that Cordero came forward alleging she was raped by Jeffrey Epstein after word got around that the mysterious money manger would plead guilty to charges of soliciting prostitution down in Palm Beach. After she fired suit against Epstein for sexual misconduct when she was underaged, the Post printed stories alleging that Cordero was born a man.

And thus a new lawsuit was born. Now Cordero and her lawyer (and alleged sometime boyfriend) William Unroch have filed a lawsuit the Post, claiming it engaged in a smear campaign coordinated with Epstein’s flack Howard Rubenstein (who is also the publicist for the Post).

Radar has all the dirt, but here’s the dirtiest bit:

Conspicuously absent from the accusations is the Post's revelation that Cordero was born a man. A source tells Radar that the initial filing of the suit by Unroch includes as an exhibit a birth certificate, which showed Cordero being born Maximilia Cordero, a woman. Reached by phone this weekend, Unroch (with Cordero commenting loudly in the background but declining to come to the phone), called the Post's behavior "outrageous" but refused to address Cordero's birth gender or the authenticity of the birth certificate originally filed. "She's a woman," Unroch tells Radar. So, why not go after the Post's gender claims?

"It's a slam dunk case whether she was born a cat, a dog, or a space alien," Unroch says. He also claims to have phone records proving a series of calls between Epstein and the then-16-year-old Cordero. He names several Post reporters in the suit, including one from Australia, whose work status he says he plans to question along with the overall foreign labor use by the Post. "They came into my junkyard," Unroch says, "and I'm a pitbull. And I'm going to bite them so hard that they'll never do this to anyone else."

And now back to your regularly scheduled pictures of Saudi Prince Alwaleed bin Talal.

Epstein's Accuser Sics Law Dog On Page Six [Fresh Intelligence]

This is the closest we’ve ever come to a NSFW acquisition by a public company. Dick's Sporting Goods is picking up Chick's Sporting Goods, which is privately held. Dick's will pay $40 million in cash and assume around $31 million of indebtedness. There’s also a provision for an additional $5 million payout if Chick’s performs well. Which is probably another dirty joke in itself.

Dick's Sporting Goods Agrees to Acquire Chick's Sporting Goods [Press Release via Yahoo]

JPMorgan has named Barry Zubrow chief risk officer, the bank announced today. It's a job no one's done in almost a year, since Don Wilson retired, which would be hilarious if we were talking about Merrill or any of the other shit for brains banks on the street, but we're not. I guess the only funny thing to say is that the new guy's name reminds me of Barry Zuckercorn, who I am more or less dying to run a pic of with this post but won't, because I see things to their completion. Speaking of people whose faces I'm jumping out of my skin to put on the site, Bar was an adviser to Jon Corzine when the big guy worked at Goldman Sachs. That wasn't an attempt to inject more hilarity into this racket, just a bit of info that warms my heart of stone, and and the game-winning answer to tomorrow's trivia night. (You and your teammates can thank me later.)
JPMorgan Appoints Barry Zubrow as Chief Risk Officer [Bloomberg]

DealBook has a nice little post today that more or less confirms our longstanding suspicion that Andrew Ross Sorkin wants to die. In it, Sorkin-- or one of the many Mini Sorkins who represent him-- recalls the recommendation SAC Capital gave to TD Ameritrade a few months ago RE: combining with another online brokerage firm like E*Trade Financial, because it would “dramatically increase long-term shareholder value" and "assume only moderate credit risk."

The last few months have shown this particular piece of advice to not necessarily be the "best" SAC's offered in its illustrious history. But instead of gently, ever so gently saying that while making sure to kiss ass at the same time, like we did just now, Sorkin goes out of his way to point out that had Ameritrade heeded SAC's counsel, the results would've been "disastrous" and that, in his estimation, and I'm paraphrasing here because I don't want to even click back to the DealBook article for fear of being implicated in the whole thing, "Stevie Cohen is no more than a glorified day trader who couldn't execute a profitable trade if he were hopped up on female hormones and wearing a dress."

We're not saying he's wrong (unless Stevie or any of the Tonton Macoutes he has working out of his office are reading this, in which case, WHAT AN IDIOT), or that he shouldn't feel free to express his opinion (again: ARS is the reason I am against the First Amendment), but jesus christ, Sorkin, you don't mess with a guy who once killed a bunch of kids selling lemonade for fifty cents to rally his troops after a down month. (If you have to taunt, taunt guys who are afraid of their own shadows, like Global Alpha. They'll never hurt you.) Yes, you have your God-given ability, as a Jew, to win street fights, but he does too, so it's cancelled out. And then all you're left with is the fact that he operates under the belief that the taste of human flesh in his mouth is good for business, and that "legend" about him killing an analyst with his bare hands "on a lark." We've said it before but now, more than ever, it bears repeating-- Sorkin, sleep with one eye open.

Analysis: Beware Hedge Funds Bearing Advice [DealBook]

The Wall Street Journal's Carol Hymowitz reports this morning that today's CEOs are devoting far too much time to actually failing at their jobs and not enough to determining who will get to be CEO next when those failures are made public, and they get canned. According to Hymowitz, "Chief execs are too busy focussing on the shit of the present so that when new shit comes to light, their companies are shit out of luck." I think-- I think but I'm not sure-- she might be referring to Chuck Prince/Citigroup and Stan O'Neal/Merrill Lynch. She's obviously not talking about Jimmy Cayne/Bear Stearns, because Big C spent at least an hour last Tuesday afternoon coming up with a few options for what BSC should do in case of an emergency. Unfortunately, Cayne couldn't choose one ("I can't decide, I love them all. It would be like asking me to choose between White Widow and Northern Lights-- impossible.") and in a voicemail he probably regrets leaving, asked us to "put it to the DealBreaker audience." So:

If generals are always fighting the last war, politicians and pundits are constantly debating the last political crisis.

Earlier this year we had what passes for a national debate about immigration policy. As you may recall, that debated ended in a stalemate and preserved the mutually unsatisfactory status quo. (We regard the immense frustration of the political class at our current situation as a point in its favor.) A central talking point of those who advocate more open borders and legalization of illegal aliens was the concept of "jobs Americans won't do." This always struck us as largely economically ignorant nonsense—anyone who has watched the Discovery's Channel's "Dirty Jobs" know that Americans will do some pretty tough, disgusting and crazy work if the pay is good enough—but with a little fudging we could kind of understand the point: getting some things done would be far more expensive if we didn't import disenfranchised laborers from the third-world to do them. Construction was one of these things, and the flow of cheap labor is one of the things that kept the home construction boom going. Illegal immigration was the subprime loan of the labor side of the equation.

But now that the housing boom has deflated and the credit market is in the midst of a retrenchment, those "jobs Americans won't do for illegal alien wages" are vanishing. But the people who were imported to do those jobs are not. In yesterday's City Section of the New York Times, we learned that many of those immigrant workers are now virtually homeless, congregating most days hoping to land a $10 per hour day laborer gig. But those are few and far between, with the supply of men looking to do them far outstripping the demand. Most days, the best these guys can hope for is a warm meal from a charitable Colombian immigrant who spends his evening feeding them.

One difference between subprime loans and subprime labor is that unlike the loans, the financial institutions, home buyers and home builders who together helped create the demand for illegal immigrant labor don't find themselves now burdened by that legacy. These guys are out of work but no-one other than themselves and the general public pays the price. The profits from their labor were privatized but the costs of their unemployment will be shared by the broader public in the form of urban blight, higher crime and welfare.

In a sense, this is classic credit boom and bust economics. Loose credit terms urged by the Federal Reserve leads to malinvestment in low skilled laborers. But unlike buying the wrong equipment, importing too many of the wrong kind of workers doesn't create long term burdens for the companies that employed them. The initial investment was cheap to non-existent, and once the demand is gone the workers can just be fired. So the incentives to over-invest in imported labor during a credit driven boom are even more extreme than most other kinds of malinvestment that occur during booms, because the firms don't pay the downside costs. But, as this article makes clear, getting them off the books just puts them on the streets.

The Chicken And Rice Man [New York Times]

Charlie Gasparino reports that Citigroup will be laying off somewhere in the hilarious range of 17,000 to 45,000 employees in the next couple months. It is unclear whether the severe to very severe measure is just for fun or an effort on C's part to do something about the fact that its stock price has become a punch line (several sources have told Gasparino that the "I just found out I've got AIDS" line in the old "horse with AIDS joke" has recently been replaced with "I just got shafted with 1,000 shares of Citi.").

In other news, some congratulations are in order-- Doubledown Media has named Chuck Prince the 94th "Best C.E.O." out of 100. How did he do it? Mr. Prince says that his Recipe for Success was "a third of a pinch of hard work, a sprinkling of good luck, and a dash of a dossier full of damning information (pictures, e-mails, the works) about each and every one of Citigroup's shareholders, which was unfortunately, very unfortunately, lost when [his] laptop crashed last month." Chuck's pearl of wisdom for next year's hopefuls? "You've got to back that shit up. They invented external hard drives for a reason."

Also on the list was Stan O'Neal, ranked at 54, and Jimmy Cayne, at number one.

Citigroup Plans Second Round Of Layoffs [CNBC]
The List Is Stellar, but a Little Dated [NYT]

Early this month, it looked like we were getting into another media driven financial panic. The chiefs of banks and brokerages had been toppled. The front page of the Journal reported that Jimmy Cayne likes golf, cards and maybe even a little pot now and then. And, on November 2nd, the Journal reported that the bank had "engaged in deals with hedge funds that may have been designed to delay the day of reckoning on losses." And just in case that was too subtle, the article drew a connection to Enron and Japanese accounting scandals.

Merrill's stock dropped after the story and the brokerage fought back. It pointed out that the story seemed to be riddled with holes, with anonymous sources making vague allegations. And now it looks like Merrill has won. The Journal has printed a correction.

This article was based on incorrect information that the Merrill Lynch & Co. had engaged in off-balance-sheet deals with hedge funds in a possible bid to delay the recognition of losses connected to the firm's mortgage-securities exposure. In fact, Merrill proposed a deal with a hedge fund involving $1 billion in commercial paper issued by a Merrill-related entity containing mortgage securities. In exchange, the hedge fund would have had the right to sell the mortgage securities back to Merrill after one year for a guaranteed minimum return. However, Merrill didn't complete the deal after the firm's finance department determined it didn't meet proper accounting criteria. In addition, Merrill says it has accounted properly for all its transactions with hedge funds.

We didn't exactly tell you so, but our Opening Bell sounded a skeptical note when the article was printed, as did Felix Salmon.

Corrections & Amplifications [Wall Street Journal]
WSJ Admits its Merrill Story was False [Portfolio]

Everything about this is so wrong we almost feel guilty just linking to it. Almost.

BHP Bid for Rio Tinto Loses Confidence of Investors (Bloomberg)
It may not be totally DOA yet, but signs are pointing against BHP's play for Rio Tinto, which is too bad. BHP has already lost a cool $32 billion in market value since the plan was originally announced, and you have to figure it'd lose more if the deal were actually accepted, which they're a long way away from. Rio has made pretty clear that it has no interesting in a sale. Just a thought: if the deal did go through, would it be the AOL/TWX of the commodity boom? Not so much in terms of it being a bad idea, but in symbolism.

Holiday Sales Increase; U.S. Shoppers Spend Less on Average (Bloomberg)
Already we've seen a million conflicting reports about how shopping went the last three days. But then we saw several conflicting reports by Thursday afternoon. As you'll notice, none of them say much of anything -- just a bunch of hedging and statements that could be taken multiple ways. As you can see, holiday sales are up, but shoppers are spending less. Go figure.

Dubai Investment Fund Buys 'Substantial' Stake in Sony (WSJ)
(Abu) Dubai investment fund Dubai International Capital has taken a stake in consumer-electronics maker Sony according to the firm. It's not clear how big of a purchase was made, though it seems likely to have been under 5 percent, since no regulatory disclosure was made.

Online Holiday Shopping Season Kicks Off (AP)
Take an extra long lunch break today, it's Cyber Monday! You know the day everyone gets back to their computers at work and just browses the internet all day for Christmas gifts. Don't worry if you get caught, everyone's doing it! Except they're not. Every year, retailers put out spin about Cyber Monday and what a great day the Monday after Thanksgiving is for ecommerce... and every year the press eats it right up, basically publishing a press release as an article. But as folks who have looked into this know, there's nothing special e-commerce wise today. It's definitely not one of the biggest online shopping days of the season. So take that shopping break at your peril.

Bear Big's Good Deal (NYP) If we’ve said it once, we’ve said it one billion times—it’s better to be fired by Bear Stearns than employed by it. There are a number of factors that led us to having two hundred t-shirts made up with this proverb printed across the back, the most basic being Carney’s drunken delusion that “it’d be cool,” but there’s also your own sense of self-worth, plus the fact that you can’t read about proxy access on the job to take into consideration. Another important point to think about if you’re a BSC employee on the fence about purposely trying to get yourself escorted from the building for good is that contrary to the writing on the 14th floor men’s room, James Cayne has not (yet) spent all the money set aside for severance packages on weed, and Bear is still keeping up with the Street’s grand tradition of rewarding failure handsomely. Former president Warren Spector, who was fired in August after someone told the firm it should at least pretend to be embarrassed about two collapsed hedge funds, and for being just as much of a bridge enthusiast/proponent of taking personal days during a crisis as Cayne, is being allowed to keep his $23 million vested stock position, $250,000 salary through the year’s end, a $207,000 retirement plan, and an “executive secretary” through December. He’ll also be guaranteed a pro-rated bonus.

Greenspan Has No `Regrets' as Housing Slump Deepens (Bloomberg) Just in case you were wondering, Alan Greenspan has “no particular regrets” (about anything, ever) and said that the deepening slump in the U.S. housing market has nothing to do with his policies, or insistence on undermining every move Ben Bernanke makes (including this morning’s Jamba Juice. To wit: “Wow. Sure you want to do that? I’m sure you’re aware of how much sugar’s in that thing, right?”) He also stands by his previous statement about not giving a shit whether or not rich investors have seen their net worth go from $40 million to $5 million, and encourages everyone to go out and buy his book, on sale today. It makes a great stocking stuffer for those family members you hate but don’t yet have the moxie to kill (more on that later).

Norris Nuggets (Page Six)
FINALLY: “The Truth About Chuck Norris,” comes out next week. Author Ian Spector’s book has all the facts you already knew about CN (“The tears of Chuck Norris would supply enough liquidity to solve the credit crisis. Too bad he never cries.”), plus some new and exciting ones (“The day Citigroup became Shitigroup is the day Chuck Norris got fired from the firm for getting Maria Bartiromo pregnant on the corporate jet just by looking at her. It is not a coincidence.” “When Chuck Norris spends the day working out of Bear Stearns, he’s allowed to read Dealbreaker.com, and use James Cayne's private bathroom on the 14th floor.)

Goldman aims to raise $6bn for hedge fund (Financial Times) Like most perfectionists unable to accept that there might be something they suck at, Goldman Sachs, troubled by some difficulties mastering the money-making component of the hedge fund business of late, has responded to truthful allegations of Global Alpha being down sixty percent not by retreating from the hedges but by raising $4-$6 billion for a brand new fund. The unnamed entity will be run by Raanan Agus, former head of the proprietary trading desk and Kenneth Eberts, former head of the US prop desk. To Goldman’s credit, it has had the sense to realize that it’s not so good with the quantitative methods, and will be focusing on picking shares. Also smart? The two year lock-up.

City Homicides Still Dropping, to Under 500 (NYT) You’re much more likely to get killed by someone you know than a stranger. Like, for instance, a former employee.

Productivity Days Off (CNBC) CNBC Senior Economics Reporter Steve Liesman thinks the day after Thanksgiving should be a national holiday, because we would be more productive and make more money the rest of the year. He takes off his tie and throws it down on the desk just to show how serious he is about this. And yet, there he is, in Englewood Cliffs, NJ, still working. I tried a similar tactic of video taping myself untying my right sneaker and throwing it against the wall, uploading it to a video iPod and sending it to Carney. As you can see, it worked wonders. Next year will be the year Steve and I don't take no shit from anyone. Who's with us?

... everytime I hear your name, I almost Cry. -- Bill Monroe & His Bluegrass Boys.

The one real big mover today was E*Trade, whose shares shot up 25 percent on speculation that it might get bought out by Ameritrade or Schwab. The last two weeks for this company have been as volatile as any other we can remember. It currently trades at $5.33, though earlier this year it was as high as $26.00 and it was over $10 just a couple of days ago.

If the company does disappear, it'll bring with it some fond memories. Our all-time favorite BusinessWeek article was a February 7, 2000 (!) piece called "Tricks of E*Trade". This stuff is beyond classic:

KOOKY? To manage that tricky combo, (Christos) Cotsakos has become the Mikey of Silicon Valley--he'll try most anything. To make executives move faster, he organized a day of racing Formula One cars at upward of 150 miles an hour. To create a loose atmosphere, he has employees carry around rubber chickens or wear propeller beanies (emphasis added). And to bond his team, he had his managers attend cooking school, where they had to depend on one another to whip up a gourmet dinner. ''It's all about getting people excited about how they can make a difference as a person and as a team,'' says Cotsakos.

These techniques may sound kooky, but management experts say Cotsakos may be on to the company culture of the future.

Rubber chickens and cooking school aside, you might be surprised that we were/are really big Christos Cotsakos fans. Why? Because the easiest money we ever made (by far) was investing in E*Trade at its depths, knowing it would shoot up when he and his $100 million salary were finally pushed out.

So that old BW article was when the company was at is year 2000 peak. Now here's BW in Spring '02, when the company was at its depths:

Investors cried foul on Apr. 30 when E*Trade Group Inc. (ET) disclosed it had paid out a $77 million compensation package for Chief Executive Christos M. Cotsakos in 2001 -- a year in which the financial-services company lost $242 million. When Cotsakos pledged on May 10 to return $21 million to E*Trade, the din hardly subsided. After all, his remaining $56 million compensation still topped the combined pay of the CEOs of Charles Schwab, Goldman Sachs, J.P. Morgan Chase, and Merrill Lynch -- all vastly larger and more profitable firms. Perhaps Cotsakos' pay package shouldn't have been that shocking, for it could well be asymptom of greater corporate-governance issues at E*Trade now coming to the fore. Start with the question of director independence: It turns out director David C. Hayden, chairman of E*Trade's compensation committee and most responsible for Cotsakos' pay package, has close business ties to the CEO. Plus, Cotsakos is a general partner at a venture-capital firm bankrolled in part by E*Trade, positioning him to personally profit from E*Trade's investments and influence. These new questions may be having an impact on E*Trade stock value. Its shares have dropped 9% in the six days since the CEO compensation disclosure, closing at $6.88 on May 15. And one of E*Trade's larger shareholders says Cotsakos' decision to return a slice of his compensation package should be the beginning of several changes. "We would hope that the corporate governance would improve. If it doesn't, we will have to reevaluate our outlook," says Brian McMahon, president of Thornburg Investment Management, which owned a 2% stake in E*Trade as of December.

Tricks of E*Trade [BW]
E*Trade: CEO Pay Isn't the Only Problem [BW]

A commenter on the Opening Bell this morning linked to an FT article suggesting that private equity actually (surprise suprise) underperforms major public equity benchmarks, like the S&P 500. We're a bit skeptical of most data that tries to aggregate results for this kind of stuff, cause it's got to be riddled with bad data and other biases borne out of the data collection methods.

This part however was interesting and believable:

Mr Gottschlag admitted that some private equity firms were consistently outperforming the stock market. But he was sceptical about the number of buy-out funds that say they are “top-quartile” in performance rankings. “I have never met a general partner who was not top-quartile. So I wonder where three-quarters of the industry is hiding,” he said.

This same observation has been made many times, not just with PE, but with hedge and VC funds as well. Still, have to wonder whether the mistake is in thinking of private equity as an asset class that's comparable with the public markets. Reading this brought to mind an old post from Eric Falkenstein arguing against the old saw that risk and return are positively correlated:

Thus, I posit the theory that risk is compensated by return, but only in areas that are non-zero sum. When investors merely buy existing claims from each other, they are engaged in overconfidence (see Milgrom-Stokey's No Trade Theorem ). People self-select into non-zero sum situations based on their informational advantages and above-average ability, and on average prosper accordingly. Thus you need not only a high tolerance for risk, but moxie, because it takes energy and negotiating prowess to create and capture these non-standard options from one's investments. They are active investments even if the activity is merely in the negotiation of rights.

Private equity underperforms market [FT]
Are Almost All Investors Biased? [Overcoming Bias]

Ed note: Unfortunately, although we use the plural first person all the time, there's technically just one of us writing the Opening Bell... which means no coinflip about who had to write it today. That being said, we still like a good wager, so yesterday at Thanksgiving we amused ourselves by doing prop bets with our family members: $50 bet to whomever got the better end of the wishbone. After that, we just started snapping random bones we could find to see whose side ended up longer. We ended up +$250, though our high was +$900. Also, seeing as there may not be any news of substance today and there probably won't be too many of you reading, we make no guarantees as to the accuracy, validity, newsworthiness, or actionability of any of these items. It might just be links to stories about shopping -- we're not sure.

Stores Usher in Holiday Shopping Season (AP)
Blah blah blah, economy, blah blah blah, iPod, blah blah blah, subprime, blah blah blah, retail, blah blah blah, discount, blah blah blah, tainted Chines toys, blah blah blah, recession, blah blah blah, upbeat. Blah blah blah, l-tryptophaned.

The 2007 UT-A&M Game (Houston's Clear Thinkers)
We've been pretty down on our alma mater this year (well at least their football team), but the Longhorns have won a number of impressive come-from-behind wins against teams they never should have been behind against in the first place. Last year the 'Horns got spanked by the Aggies, which was humiliating, but this year it'll be different. We can feel it. Just curious: what bar do the UT alums among our readership watch the game at? Let us know in the comments.

Despite filters, tidal wave of spam bears down on e-mailers (USA Today)
Even on a slow news day, this is pretty low. Yes, there's still spam. And what's great is that the piece starts off with that old Bill Gates quote about the eradication of spam, which has probably been used in every other spam article for the past 3 years.

Yikes! (Information Processing)
More depressing stuff about subprime, CDOs, sivs, etc.

American Eagle flight gets stuck in Arkansas mud (Today in the Sky)
From what we can tell, the Thanksgiving travel nightmares never materialized this year... or not really so bad. An averted storm in Chicago helped matters. Anyway, at least one plane got stuck in the mud and was delayed.

$$$ The Thoroughbred of Investing [The Stalwart]

$$$ Office Decorations [Banker's Ball]

$$$ Stuck up? Snobby? If so, we should definitely chat. [craigslist]

Well, my bitches, it's about that time. I suggest you have yourselves a leisurely snack and just mosey on out whenever you want. Don't tell anyone, because it's Thanksgiving and you shouldn't have to. On Friday, posting will be super light. There'll be a couple of brief rounds-up of all the super important stuff that's sure to happen between now and then. Not sure if it'll be me or Carney doing it [JC Note: It'll be you, Bess. Get over it.] , that'll depend on the outcome of a coin-toss (of death), so stay tuned. We'll be back on Monday, unless of course one of my parents' friends offers me a job over the weekend (or someone on the subway does this afternoon, as I make my way to Penn Station) in which case, this is good-bye. Happy Thanksgiving!

We are closing in on 2 p.m. now. Our official plan was to close up shop and retire to lunch for the rest of the day an hour ago. But we can procrastinate about everything, even not working.

But what are you still doing at work? Why are you reading the internet instead of finishing up and getting out of there? Don't you know it's the day before Thanksgiving? The airports are already insane and the trains are packed. If you don't leave now, you'll never get back to Wisconsin tonight.

Actually, it's kind of comforting to know that so many of you are still out there, staring at your computers, hitting refresh and hoping Bess posts one more thing before she shakes her moneymaker over the Hudson for a holiday in the homeland. We'd like to know why you are still there.

After the jump, take our poll on why you can't leave work early today.

"What are your plans for Thanksgiving?"

"Don't your folks live in the city?"

Those are some of the worst questions a junior staffer at an investment bank can hear from his managing director. It means that there's work to be done and the bank is scrambling to find bodies who can run spreadsheets.

The only wise response is to lie. Never let them know you will be anywhere near the office on a holiday. Tell them your family always celebrates in Aspen or something. Or, better, on an island in Maine with no electricity, cell phone access or internet.

But if you've already screwed-up and revealed you will be in town, you may very well be expected to work on Thanksgiving. No one will actually say you can't attend Thanksgiving dinner. In fact, they'll assure you that it's just a couple of hours of work. It isn't. They are lying. They are just time optimists. If you point this out they will just think you work too slow.

But just because you'll be without friends, family or food on Thanksgiving doesn't mean we don't care about you. We've been there. We know what working tomorrow means. And after the jump we provide a schedule for those stuck churning Excel.

[More, a lot more, after the jump.]

We totally came up with a great turkey terminating holiday oriented piece to run today. The idea was that we would call all the big shots on Wall Street—or at least their flacks—and ask what they were grateful for this year. It could be funny. It could be touching. It could totally fill up space on a day where our thoughts are really about getting out of the office early.

And then the idea got even better. We'd also do some man on the street interviews to ask the common man—or at least the common investment banker—what he's grateful for this year. Maybe Bess could snap some pictures.

And what about their families? Maybe the wives of private equity honchos are grateful that their husbands are home much more now. Or maybe they worry about being able to buy more stuff at Christmas and what happens to New Year's in the Alps?

And you know what happened next? That's right. The whole project just seemed overwhelming. Wasn't the point of this thing to create some entertaining filler on the day before Thanksgiving? How did it go so wrong? Why did it suddenly seem to require so much work?

So we totally came up with a better idea. We want your answers. You people are funnier than at least half the team at DealBreaker anyway. So what are the inhabitants of the world of Wall Street grateful for this year? Leave you answer in the comments section.

Ben Bernanke has a special Thanksgiving message for DealBreaker and Ron Paul. It sounds like he's not happy about that video we posted yesterday.

"It’s clear from this video that Ron Paul does not understand all the advancements of economic science over the past few decades. If one of Dr. Paul’s patients was sick, would he ignore modern medicine and prescribe leeches? So why does he doubt my ability to prescribe the right interest rate medicine for the economy and favor returning to the gold standard?" Bernanke writes on Ben Bernanke's Blog.

But it's not all about leeches. There's also a suspicious Frenchness about Ron Paul's enthusiasm for laissez faire economics.

"Watch the video closely. I tell him that lowering interest rates (which has nothing to do with inflation, necessarily) won’t effect Americans’ ability to buy turkey or any other domestic products this Thanksgiving. In fact, it reinforces our culture. Ron Paul would have Americans running around with strong dollars (or worse, gold), buying up French fries, spaghetti and other fancy imports," Bernanke argues.

Ron Paul, the grinch who stole Thanksgiving [Newsgroper]

Only, spoiler alert, it's totally boring. Nothing like the Jermaine Dupri interview and not even in the same league as the 50 Cent spot. As someone who attended a Boyz II Men concert as recently as a few weeks ago, and until then, had a Post-It on my computer reading "Remember to buy Boyz II Men tickets," this was disappointing. And after all the points FB won with the Arabs! We're not going to write them off just yet, but Neil Cavuto needs to think about what he's done. (Dude didn't even act smug or self-satisfied, though we did appreciate it when he said, "You guys look like bankers!" and "I thought the line of fans outside was for me" before LOLing his own joke and ruining it. ) Thanksgiving starts tomorrow, not today, bub. Shape up.

I haven't worked at a bank for about fifteen years so I don't know if this is standard and I'm just out of the loop but someone told me recently about Morgan Stanley's felony prevention program and I sort of love it. Apparently, in light of the number of finance professionals who have openly admitted to being down with insider trading and the proliferation of groups to support this very cause (not like "let us help you with your insider trading problem" but more "so you want to insider trade? here's how"), Morgan Stanley has created a program where they bring in felons to talk to prospective felons (these being MS employees) about how they once committed felonies AND IT RUINED THEIR LIVES. It's all very "Oh, you thinking about smoking some crack? Maybe just a little in the men's room, take the edge off the morning? WELL DON'T BECAUSE I DID IT AND LOOK AT ME NOW! THAT ONE HIT FUCKED EVERYTHING UP. NOW I CAN'T EVEN GET A JOB AT CITIGROUP."

But the one thing we wonder is: yes, this whole thing seems like it would be hilarious to watch and we definitely wouldn't turn down an invite to observe the next one taking place, but does it work? Afterwards, are the MS boys and girls all, "Wow, that scared the shit out of me, I will never do anything illegal (again)"? or more, "Yeah, you went to jail but look at this awesome gig you've got now. This is the sort of speaking tour Tim Sykes would kill for, and, I have to say, so would I"? That's an actual question to those of you contemplating insider trading right now. (The other is, to the LEH readers out there, does Lehman have a similar program? Doesn't it seem like something that would be right up Dick Fuld's alley? Can't you see him leaving important meetings early to take part in the sessions just so he can violently get in his employees' faces and maybe throw one or two up against the wall under the guise of "getting into character"? And if the answer's no, would you consider suggesting it, and letting me watch?)

So is this why Larry Fink, the chief executive of BlackRock, either passed up or was passed over for John Thain? Everyone absolutely knew Fink was the number one pick to run Merrill Lynch after Stan O'Neal's ouster but some how the job went to New York Stock Exchange boss Thain. And know we know are entertaining ourselves with the thought that this might have happened because Fink had a task far more important at hand.

Since you already read the headline you know that the task he is taking on is saving Citigroup, but not by becoming it's chief executive. He's already said to have passed up that job too. As it turns out, he's taking a job that may even be more important—managing The Entity, the superfund being assembled in a secret laboratory by Citigroup, Bank of America and JP Morgan Chase.

Last night the Financial Times broke the news that BlackRock, the asset manager 49% owned by Merrill Lynch, is expected to be tapped by the banks to manage The Entity. Apparently Fink has become a strong advocate of the fund and has made BlackRock the leading candidate to manage the fund.

The super fund plans to bailout many of the world's biggest financial institutions by buying up assets from faltering structured investment vehicles. It has come under fire from critics who argue that the super fund is just a way to get the SIV assets even further removed from the balance sheets of banks, so that when they eventually do have to be written down the banks don't have to record the loss. Some have described the fund as a bailout of Citigroup, which is responsible for some of the world's largest SIVs.

"Look. B of A is the Stupid Bank. Citi is the Incompetent Bank. JP Morgan is Villainous," one fund manager affiliated with a large Wall Street firm told us. "The super SIV is Stupid, Incompetent and Villainous."

While the Treasury department, which has backed the fund, and the banks behind it claim that it will be able to hold the SIV assets for long enough for the market to recover from the current credit crunch, many do not expect an appetite for those investments to return to the market anytime soon. In fact, some think the super fund may be designed to collapse after it has safely isolated the balance sheets of the banks that are investing in it.

"These things are worth what they are worth. Putting it in a super fund doesn't change that," the fund manager said. "Eventually the assets will have to be sold off at steep discounts, and the rest written down to nearly nothing at best. The banks know this, which is why they are trying to get this stuff as far away from their balance sheets as possible."

Superfund lines up BlackRock [Financial Times]

Some guy whose money Bear Stearns lost sued the securities firm this week. Samuel Cohen (of the Baltimore Cohens) is accusing BS and its top execs of "recklessly" buying up billions in subprime loans and trying to hide its "tremendously risky subprime mortgage portfolio" from those who might have a vested interest in it by not so much lying but maybe "overstating" how it was doing. (Lying.) This all seems very three months ago to us, but we get that Cohen might feel differently.

In addition to seeking damages, Sam has said that he wants to see Bear Stearns implement better corporate governance practices, which could include, he suggests, splitting the chairman and CEO roles. We like this because what's a little lost money to Bear Stearns? Not such a big deal, it happens all the time. They pay this guy (really his company because it's a derivative lawsuit but that's not the point) and move on, relatively embarassment-free. The part about (*basically*) asking for James Cayne to be fired, or have his responsibilities significantly lightened adds a little bit of public shame we really appreciate.

Granted, Cayne would probably secretly love this, and is perhaps even in Cahoots with Cohen ("I don't think we should add that to the suit, can't I just ask for money?" "No, just do it!") but whatever. In other news, Fortune may soon be blocked at Bear because of the latest cover featuring Cayne and a bunch of CEOs who lost a ton of money, asking "What were they smoking?" (The special insert with commentary by L.Craig was apparently the breaking point, according to a BS spokesman.)

Bear, AIG Sued Over Subprime Exposure [NYP]

On Monday we noted a Financial Times article reporting that business school graduates who head for private-equity firms earn much more than those who land jobs in big, publicly traded investment banks. This stuck as absolutely correct but we wondered if the story had overstated the gap between PE and investment banking pay.

According to the Financial Times, recently minted MBA's "stand to earn more than $400,000 in salary and bonus in 2007-08, plus up to $5 million over several years depending on the fund's performance."
"By contrast, first-year associates with MBA degrees at big, publicly traded investment banks can expect to make $70,000 to $80,000 in base salary plus bonuses of $60,000 to $80,000, according to Eric Moskowitz of the Options Group," the article continued.

That would make for a total pay package of $160,000 at the upper levels, which seemed mighty low to us. In fact, as more than one of our commenters pointed out, that's what first year analysts, who are mostly freshly minted college grads without higher degrees, earn at investment banks. First year associates--largely business school grads--earn much more.

We contacted the Erik Moskowitz at the Options Group to find out why the numbers seemed so off. He tells us that our impression was correct. Those numbers were too low for associates. According to Moskowitz, first year associates earn a base salary for $100,000 to $120,000k this year and can expect a bonus of $125,000 to $175,000 in 2007. That leaves a total compensation package of nearly $300,000 for the top earners. That's not quite what their mates at PE shops are bringing home but it's much closer than the original piece indicated.

Oil Prices Rise Above $99 a Barrel (AP)
So you know what's going to happen, right? Yup, crude oil will break the century mark tomorrow on a day we're taking off in the spirit of thanksgiving, and we won't be around to commemorate it. Sure, we'll have our own private celebration among friends and family, but you know we'd rather be partying with you, or readers, on such a momentus occasion. Let's just hope we're wrong and that the inevitable is staved off until Friday, when at least a couple of you/us will be hanging around.

Target Profit Declines 4%; Warm Autumn Is Blamed (NYT)
Weak retail environment? Nah. Housing slump? Never heard of it. The real problem this quarter at Target: a warm autumn. Um, since when isn't it still warm when Q3 ends? Seriously... Q3 is just a warm quarter. If the company was really planning on something else, they need to bust open their copies of the Old Farmers' Almanac and get a better sense of what the weather is actually like during that time.

Big Buybacks Begin to Haunt Firms (WSJ)
Look: sometimes it makes sense to buy a certain company's stock and sometimes such a purchase will prove to have been a mistake. Everyone knows that. But for some inexplicable reason, that obvious logic is thrown at the window when a company is buying its own shares -- then it's always considered a good thing. The stock could be way overvalued and the company might have to borrow out the wazoo at a 15 percent interest rate, and you'll still hear analysts on the call chiding management for not buying back shares fast enough. So we're definitely not surprised that a reasonable number of these buybacks are proving to be a mistake... and yet we have no expectation that the demands of investors will diminish. Buy! Buy! Buy!

Bounty of the Bog Gets Pricier (WSJ)
In addition to everything else, the price of cranberries has been on the up-up-up. We're tempted to just blame the weak dollar, but apparently there are a number of unique factors, including bad weather (depressing supply) and increased interest in their health benefits (anti-oxidants, anti-UTI). Anyway, it's bad news for retailers since the more money spent on cranberry sauce the less money spent on GPS devices.

$$$ Stan and Chuck didn’t lie about their subprime losses, they just miscalculated. [NYT]

$$$ What’s happening to the adult-entertainment industry? [Portfolio]

$$$ "If This Could Happen To An Ivy League Grad, Someone With An IQ Like Mine, This Could Happen To Anybody." [Gawker]

We caught a lot of flak from the self-styled guardians of corporate governance for our repeated insistence that the Great Backdating Scandal of 2006 was overwrought. The financial press treated backdating as if it was a new form of embezzling even though it was, typically, nothing more than a quite common workaround of complex accounting and tax rules that made granting “in the money” options more costly, at least on paper, than “at the money” options. Our sober take on backdating was seen as an endorsement of corporate fraud by our critics.

So what ever happened to the Great Backdating Scandal? It looks like it has largely fizzled. The Securities and Exchange Commission has ended several investigations without filing formal charges, the Wall Street Journal reported yesterday. And despite the fact that scores of companies engaged in backdating, no one expects any more a handful of additional serious civil or criminal cases to emerge from this affair.

Which is not to say that the backdating scandal has been costless. More than 80 companies have had to restate their financials and dozens of executives were dismissed at the height of the affair. Companies and executives have spent millions of dollars and untold hours complying with investigations and fending off possible cases.

[More on the deflating backdating panic after the jump.]

Countrywide Financial Corp has said the rumors of a possible bankruptcy filing later today are "absolutely false," The Wall Street Journal is reporting.

Update: Reuters is reporting that the company won't return their phone calls.

Update II: We didn't even bother calling. What are they going to say? And would the spokesperson tell us the truth anyway? Would the spokesperson even know if they were filing?

Developing...
Treasurys Gain After Fed Minutes [Wall Street Journal]

Countrywide plummets as mortgage jitters grow [Reuters]

In the Financial Times today, James Altucher relates the tale of a rain-soaked ride in a convertible with a 31-year old former hedge fund manager who retired two years ago. So either the guy was incredibly lucky or he's a genius. We're going with genius for now because one of his picks shows that this one guy who knows what he's talking about.

Alucher calls his "Ralph" but that's a pseudonym. He's asked Altucher not to use his real name. (Anyone want to hazard a guess?) And his stock picks are rather surprising.

• Citigroup: It's a bet on a rate cut bailing out the banks.
• Ram Holdings: A re-insurer of financial services firms with a less risky portfolio than others in the industry.
• Radian: Another re-insurer getting beat down with the rest of the industry despite having a better business.
• E-Trade: Big upside if it avoids bankruptcy.

So what is it that won him the spot in the "genius" column? It's his final words to Altucher.

“Oh,” Ralph added as I was getting out of the car. “Please don’t mention my name or write about any of these picks.”

“No problem,” I said, “I won’t write about any of them.”

“One thing you can write about, though,” he told me, “is that I have a crush on Bess from Dealbreaker.com. Do you know her?”

Unfortunately for Ralph, Altucher has never been introduced to Bess. But we guarantee she'd look a lot better soaking wet in the convertible than a columnist for the Financial Times. Just make sure you've got a fifth of whiskey in the glove compartment, and ask if she'll bring her roommate along for the ride too.

A slow, wet convertible to the Street [Financial Times]

You know how we said the other day that we’re starting to love Fox Business because of the so-horrifically-bad-it’s-good thing it’s got going on? Yeah, that’s not what’s happening here.

Hey, remember Merle Hazard? The guy who sings the best ever country song about mortgage-backed securities, derivatives and leveraged buyouts? Well, the other day the New York Times profiled him, revealing his secret identity as a mild mannered money manager.

"Mr. Hazard, to be technical, has another identity, as Jon Shayne, a 46-year-old money manager who studied philosophy at Harvard and then got a law degree from Vanderbilt and whose company manages more than $120 million from Nashville," Peter Applebome writes.

And, for those of you keeping score at home, he thinks things are going to get worse before they get better. On the bright side, he is available for annual shareholder meetings.

Funny Songs Are Inspired by Sad Times for the Rich [New York Times]

I bet you think you know what it’s like to be a Master of the Universe. I bet you think it looks like a great time. What could be bad, you might be asking yourself. No Writedowns. No layoffs. No CEOs with substance abuse problems. No constant wondering, “Which Lloyd are we going to get today, Lloyd Lloyd, or Stoned Lloyd, who can only think about chips and dip?” You're probably even wondering aloud to no one in particular but perhaps some 2-bit recruiter, where and how can I get some of that? Take it from a few Goldman Sachs employees, you do not want. Speaking to Deal Journal on the promise of anonymity and the assurance that their names wouldn’t follow “whiney little bitches” in print, the Goldmanites said that $16.9 billion in bonuses and the opportunity to buy Bear Stearns as a group doesn’t mean shit because they are in a prison of their own making.

…some bankers at Goldman have told us they secretly wouldn’t mind seeing a little air taken out of the stock as the end of the fiscal year draws near.

How could the ultimate symbols of the capitalist system harbor such perverse desires? Look at the way bonuses are doled out at Goldman and other Wall Street firms. An employee is told, for instance, that he is getting $100,000 of stock. That means the higher the stock price at the time, the fewer shares he’ll receive. The fewer the shares, the less the payout will be worth down the road.

Think about that next time you pity yourself for working at Merrill Lynch or Citi or Bear Stearns. Some Goldman employees are apparently so upset about GS being priced at $220.31 this morning that they’ve put their resumes to C. No, just fucking with you, but seriously—that’s how bad it's gotten there.

The Goldman Bonus Paradox [Deal Journal]

One of the great things about having Ron Paul running for president is the attention he brings to economic issues other than the usual tax and spend debates between the Republicans and the Democrats. This video isn't all that fresh (it's weeks if not months old, actually) but it is refreshing.

What do ousted Wall Street chiefs Stan O'Neal and Chuck Prince have in common? Put aside the obvious. What we want to talk about today is that both men are married to blonde women. (That's Stan's wife Nancy on the left.) And that may have dumbed them down, at least if you believe the researchers mentioned in a story in the Times of London earlier this week.

[The blonde condition after the jump.]

Implementing the "internal controls" provisions of Sarbanes-Oxley has been immensely costly for publicly held businesses in the United States while the concrete evidence of it's benefits has been scant. By some estimates, the direct costs of implementation are as high as $35 billion each year. And the real costs might be even higher. Nonetheless, because non-compliance with Section 404 can be disastrous for a public company due to regulatory sanctions and massive stock declines, companies continue to spend and spend to implement Section 404.

It's clear the regulation is broken but we're unlikely to be rid of it any time soon. The regulation's defenders insist the regulation is helping us avoid the kind of accounting scandals we saw in the late nineties, and that government enforcement of the regulation is necessary because the market can't be trusted to regulate itself. There's some truth in this argument: the market won't necessarily price internal controls over financial accounting at the price regulators think is appropriate, much less at some level that optimizes efficiency over the long term.

But it's a half truth because it rests on a double standard. It insists we focus on the reality of imperfect markets but not notice the reality of imperfect government. There's no evidence that the government has arrived at the right level of internal controls, or that it can efficiently police this regulation.

Yesterday we got a reminder of the reality of imperfect government when the General Accounting Office declared that the Securities and Exchange Commission had a material weakness in the internal controls over its own financial reporting. This is a serious blow to the SEC's credibility, which avoided getting tagged with the "material weakness" finding last year only by promising to improve things. But things haven't improved. Indeed, they may now be worse.

Fortunately for the SEC, there is no market accountability for government agencies. You can't short the SEC, and lawmakers are unlikely to penalize the commission by denying it authority or funds. Indeed, we expect that this GAO finding will somehow become an argument for the SEC to get more funding. That's the way it works in our nation's capital: failure is only evidence of the need to get more of the people's treasure.

And for those of you who miss the irony of this we'll make it clear: the SEC is the agency charged with enforcing Section 404 on public companies. Of course, no government agency has ever let the glass facades of its own house prevent it from throwing stones.

SEC Flunks Internal Controls Audit [CFO.com]

There are very few rewards for being a financial journalist. You don’t get rich, unless you are a pretty girl and use your access to wisely marry well (or, at least, wealthy). It doesn’t impress girls much. And your relatives quickly lose their enthusiasm about your job when they realize you can’t pick stocks for them. Even worse, you might get invited to the Financial Follies.

Just as the city hall press crew gets to have it’s Inner Circle follies and the Washington press corps throws the famous Gridiron dinner, New York's financial media has an annual rubber chicken dinner of its own. Each year, on the Friday before Thanksgiving, the Financial Writer’s Association throws something called “the Follies.”

[More on this after the jump]

Posco Opposes BHP's Plan to Buy Rio, Executive Says (Bloomberg)
If Microsoft were buying Google, the news coverage would certainly blot out the moon. We'd have 50 straight days of above-the-fold front-page NYT headlines on the subject. That's not happening, but BHP Billiton is making a bid for Rio Tinto and Rio Tinto may turn around and do the same, and in this commodity climate, with so much at stake here, it's pretty damn big news. Anyway, we'd cover it some more, but it's not our main beat. For that you have to read Steelbreaker.com -- unfortunately it's in German and you need a password. But the latest is that Korean steelmaker Posco is freaking out about the merger, since they're not crazy about the monopoly potential in the base metal market.

SAP TomorrowNow Chief Resigns; Sale of Unit Possible (Bloomberg)
The parties in Larry Ellison's word must happen every night. Earlier this year, his company launched a major lawsuit against SAP, accusing it of improperly downloading internal Oracle documents. And now all of the management at the helm of that unit, TomorroNow, is gone -- resigned in shame. TomorrowNow is SAP's division that serves Oracle users with cut-rate service. It may even have some customers on The Street. Naturally, Oracle hates TomorrowNow's existence, since it takes food out their mouths. But now SAP may just jettison the unit to put the problem to bed, a major coup for Ellison and Oracle.

Holiday travelers unfazed by gas prices, airport delays (Sun Sentinel)
This article claims that travelers are unfazed this year, by things like high gas prices, long delays at the airport and lost luggage. Perhaps unlettered is the better word. Yes, people are still traveling the hell out of Thanksgiving. But that's because it's a holiday and they feel compelled. Nobody likes it. Nobody is unfazed. Travelers are the most fazed people in the world. Delay their flight for 15 minutes and they're ready to jump over the ticket counter and strangle the clerk. Seriously, we've seen it -- they had to bring cops in. It was the day after Valentine's Day at JFK. Eventually there's a breaking point. With gas at $200 next year and flights running 90 minutes behind schedules, people will just telecommute to Thanksgiving.

Pinot Contest (Felix Salmon)
On our 21st birthday, back in college, we had a friend get 20 bottles of wine and then had a big groups of friends over to do a wine tasting -- yeah, not exactly your typical bender, but whatever, that's now how we rolled. What made it fun was that we did the tasting in the style of an NBA slam dunk contest. Everyone got cards with numbers on them that they held up after each sip. Anyway, sounds like Felix Salmon did something similar, except naturally he totally one-upped us and brought in all kinds of econometrics. Instead of just determening which wine was the best, he created a scatterplot and did a study of price/quality correlation. Show off. Anyway, looking for a good wine? Check out the post.

$$$ Deals: Give Thanks for Strategy
In our M&A Roundup for the week ended Nov. 18, software, cereal, and drug acquisitions feast, while private equity all but takes a holiday. [CFO.com]

$$$ More awesome Harvard students. [02138]

$$$ "I was the finance dude in the vintage Benz rolling up Bedford Ave." [craigslist]

Eliot Spitzer is somehow the governor of the Empire State, and we’d be tempted to call him Emperor Eliot for his bullying ways. But he’s too weak now to be called Emperor. He’s got few allies in the state capital, and even the press—once his loyal lapdogs when he was Attorney General—seem to be turning against him. Only 25% of the public say they’d re-elect him, and his own party recently undermined his efforts to hand out drivers licenses to illegal aliens. So we’re sticking with the nickname we coined when we first started paying attention to his prosecutorial tactics—Loathsome Eliot.

All this comes to mind this morning because while we were catching up on our reading over the weekend, we noticed a Wall Street Journal editorial on “Spitzer’s Fall.” It runs through his political troubles before it gets to the heart of the matter—Spitzer’s ethical mess.

But Mr. Spitzer's biggest problem remains the ethics probe, which is getting more serious now that the state's ethics watchdog has found inconsistencies in a top aide's testimony and referred that matter to a prosecutor for possible criminal charges. Mr. Spitzer must have thought he'd put this scandal behind him when his successor as Attorney General, Andrew Cuomo, issued a tough report this summer but found no criminal wrongdoing. However, the inquiries have continued in the state Senate and at the Public Integrity Commission despite Spitzer Administration stonewalling.

Darren Dopp, a confidant and spinmeister from the Governor's days as AG, resigned under an ethical cloud last month. But now Mr. Dopp faces possible perjury and obstruction of justice charges for his role in what New Yorkers call "Troopergate." In that scandal, Mr. Dopp and other senior staffers were found to have ordered the state police to collect data on the travel patterns of the state Senate's GOP leader with an eye toward embroiling him in a scandal.

Mr. Spitzer defended Mr. Dopp and said he knew nothing of the scheme at the time. These days, the Governor is still doing the latter, but not much of the former. If Mr. Dopp is charged, he might shed some light on who knew what, and when.

You’ll recall that a couple of weeks ago we fingered the same Dopp as the guy who was spreading the worst smears against another target of Loathsome Eliot, Dick Grasso. On the bright side, at least Spitzer’s battling folks up in Albany rather than Wall Street these days.

Spitzer's Fall [Opinion Journal]

Stephen Schwarzman threw his son Teddy and new daughter Ellen a lavish Jamaican wedding last weekend blah blah blah $20,000 barbecue blah blah blah$8,500 4-hour fireworks display blah blah blah bought up the entire hotel for a $50,000 flat fee blah blah blah $150,000 open bar blah blah blah $1,000 wedding cake blah blah blah that’s a lot of money for flour, eggs and milk blah blah blah. No. This little gathering was a drop in the bucket compared to the $3 million birthday party Stephen threw himself last year. The subtext here is that Schwarzman is a bad father. The excuse that Blackstone just lost $113.2 million holds no water because we hear Schwarzman has plans to put stone crabs on the endangered species list by the end of the year. (Last complaint, because we’re really not trying to be negative about the whole thing, it’s just happening organically but 4 hours of fireworks? Seriously? That’s like half the workday. Wouldn’t your neck start to hurt? Wouldn’t your ears start to ring? What am I missing here? I’m really asking. Educate me.)

Earlier: Crab Hands Jr. Is Off The Market

Like Pa, Like Son [NYP]

Goldman Sachs analyst William Tanona is now saying that Citigroup will have to write off not 8, not 11 but $15 billion over the next two quarters on its collateralized debt obligations. Our question is, why stop at 15, which seems almost believable. You could probably go up to thirty, thirty five, before anybody would say, “Wait just a second.” It’s almost as though Bill didn’t get our memo on how he could better do his job. Anyway. Tanona’s note also included a downgrade of C to “sell” from “neutral,” and this pearl of wisdom: “The lack of leadership at this point in Citigroup's storied history could not have come at a worse time."

Unfortunately, at this juncture, it doesn't seem as though anyone's jumping for the job. As it happens, we've got someone in mind for the position, but don't want to name him just yet, as the bid will probably be taken more seriously in a couple months, when it's become clear beyond a shadow of a 50 billion dollar writedown that no one else will do it. The two hints we'll offer is that the candidate's going to be looking for work circa January 2010, and was the last vestige of class in that fleabag hotel known as 85 Broad. If you're able to hazard a guess, are you with me? Are you behind me? It could happen.

Citigroup Gets 'Sell' Rating, May Face $15 Billion Hit [CNBC]

Most women we know were quite upset by the widely circulated email responding to a Craig's List ad from a young women looking to marry. The response claimed that women's looks were a depreciating asset, while the financial value of wealthy men increased with age.

Well, ladies, we're sorry to say that the response got some evidential--or at least anecdotal--support today from Page Six. Apparently seventy-seven year old George Soros has traded in his 63 year old wife for a 22 year old Russian playgirl named Marina Zelle (pictured left}. Or, at least, that she is one of the many "young lovelies" he has entertained at his South Hampton Home.

"Sources say the financier and founder of moveon.org has 'a fondness for girls in their early 20s," Page Six reports.

Actually, we had reports this summer that Soros and Zelle were together at a party at real estate investor turned nouveau socialite Andrew Barrock's Water Mill mansion. But we couldn't confirm they were "together together" so we let the item die. So, you know, maybe?

(Picture credit: New York Social Diary.)

Thinking Young [Page Six]

It allegedly won’t be announcing any multi-billion writedowns this quarter but Goldman Sachs’s Global Alpha is probably going to lose about $6 billion in assets this year and that’s got to count for something. The 60 percent decline (from an ’07 start of $10 billion) is the result of a confluence of factors including some trades that were meant to come off as ironic (investors asking for their $2billion and counting back apparently didn’t get the joke) and the weather. The good news is that no matter how much money the fund loses, pride in the face of mounting failure--GA lost 9 percent last year--will prevent it from being shuttered. ``Goldman as a firm would like not to have the reputation of shutting things down,'' Geoffrey Bobroff, an independent investment consultant told Bloomberg. ``Smaller isn't necessarily bad.'' Anyone have the letter Mark Carhart and Raymond Iwanowski sent to investors using this "Global Alpha voluntarily lost money because we decided it was getting too big too manage" logic? Send it here.

Goldman's Global Alpha May End 2007 With Assets Down $6 Billion [Bloomberg]

This morning we noted that forty percent of the MBA class of 2007 from Harvard Business School headed to Wall Street to take "market sensitive" jobs. This is dire news for stocks, according to Ray Soifer. When that number climbs above 30%, the market is sending a long-term sell-signal, Soifer argues. We first hit 30% in 2005 (only 24% of the class of 2004 took such jobs), and last year's number was 37%.

Of course, skeptics of Soifer's metric might point out that the S&P 500 is up something like 25% since the sell indicator came out. But he cautions that his indicator has a lot of disadvantages: it only comes out once a year, and is intended as a long-term indicator and not a predictor of the immediate funture.

"Yet, for long-term investors who can think in terms of decades rather than months or quarters, it's worth keeping an eye on," Soifer notes. "Besides, it's fun!"

(Note: Our most loyal readers might wonder why we initially reported the number had jumped from 37% to 44% but we've now revised this year's number down to 40%. Our reason is rather simple. Soifer counts only "market sensitive" jobs in his metric, not the overall number of HBS MBAs headed to finance. Our initial report of 44% counted all finance jobs, while the 37% counted market-sensitive jobs (the over-all number in 2006 was 42%). This created the impression that the climb was even more extreme than it actually was. But, we should note, that the gap between the "market sensitive" jobs and the overall finance jobs is closing.)

The only excuse we have to offer re: just now mentioning what happened on Fox Business Friday morning is that we don’t watch Fox Business. Sure, we’ve checked out a few choice clips (50 Cent, Sammy Hagar, Lamb Chop and Jerry Springer all come to mind) but only because they were forwarded to us in convenient link form. The bottom line is that there are three TVs in the office and each one is spoken for (TV1: CNBC; TV2: Nintendo (and the answer to all your, “Why haven’t you guys posted anything?” comments); TV3: A Best of Carney clipshow that was spliced together in-house and plays on loop). We don’t TiVo FB because it’s the sort of thing that has to be experienced in real-time.

Which brings us to this: unless something really drastic happens, like Maria Bartiromo announces that Cutter Associates is buying half of Bear Stearns, or Kudlow and Company is replaced by Paulie Shore and My Biatches, or Charlie Gasparino finally cops to being a drug mule, or Joe Kernen discusses Aquaman, the fictional movie from Entourage as though it were real, CNBC is getting bumped. No longer can we afford to miss Fox Business Morning for Breakfast reporting that Apple is taking an 8 percent stake in chipmaker AMD, contributor Charles Payne analyzing the genius (/imaginary) deal, and Glick correcting the misinformation by noting that “It’s not Apple, it’s Apple Dubai? Apple Dubai? Oh, Abu Dubai.” Yes, yes, Abu Dubai, AKA Abu Dhabi. The best part is Peter Barnes’s magical recovery which, paraphrasing, went sort of like this: “Ohhh, okay, okay, Abu Dubai, which was discovered and named by the Germans in 1904, and of course in German means a whale's vagina.” Your move, CNBC. Transcript (via SAI) and video (via Valleywag) after the jump.

The post-graduate plans of business school graduates are sometimes taken to be contrary indicators. In fact, as we pointed out a little over a year ago, a system for measuring market sell signals based on the plans of Harvard Business School grads had been designed by Ray Soifer, a retired executive from Brown Brothers Harriman. By his metric, when 10% or less of a graduating class take Wall Street jobs, it's a long-term buy signal. When 30% or more take market sensitive Wall Street jobs, it's a big flashing sell signal.

When we noted first this story, 37% of the class of 2006 had gone to market sensitive Wall Street positions. This year's number was even higher--40%. Meanwhile, following the trend of recent years, the average number of months of work experience of HBS grads slipped from 52 to 50.

And the big money is still where it was last year: private equity and other buyout firms. According to a recent Financial Times article, graduates who go to private-equity firms "stand to earn more than $400,000 in salary and bonus in 2007-08, plus up to $5 million over several years depending on the fund's performance."

"By contrast, first-year associates with MBA degrees at big, publicly traded investment banks can expect to make $70,000 to $80,000 in base salary plus bonuses of $60,000 to $80,000, according to Eric Moskowitz of the Options Group," Francesco Guerrera and Ben White of the Financial Times write.

(Updated Note: Those numbers seem a bit low to us. In fact, they seem to jive with what we've heard Moskowitz say about first-year Wall Street analyst pay. We've contacted the Options Group to ask about that number. Certainly, the information from top tier graduates schools--prime recruiting ground for investment banks--indicates higher numbers.)

Those numbers struck us as low, even given the current damage to bonuses most expect from the credit crunch. Indeed, the information provided by Harvard Business School itself discloses much higher base salaries

Interestingly, however, we can report that the percentage of HBS grads headed to buyout land is down a tick from last year. Thirteen percent of the class of 2006 went to buyout firms. Only 12% of the class of 2007 followed that road. We have no idea whether that means that private equity is already over or headed for a comeback.

Private equity gains ground in talent war [Financial Times]

Merger winds blow 2 ways (AJC)
What did we tell you? We said last week that all of this talk about Delta and UAL merging was almost certainly rubbish. And when the smoke cleared, it turned out to be not much more than a hedge fund pushing the idea and hoping that that the idea would collect enough momentum to turn from vapor into reality. The funny thing is how it was reported, as if it was right around the corner. Maybe it's too early to say we were right on this one, but it looks like we were right.

China Freezes Lending to Curb Investing Frenzy (WSJ)
Finally, China is doing something about its overheating economy. What took 'em so long? Seriously, it was so obvious that they needed to cut down on runaway lending, so as to give the country a fighting shot at a soft landing. Word is, banks are being given 'til the end of the year to get their house in order. That being said, if they really get tight with the money, this could give rise to a criminal lending club (ie a mafia); basically loan sharks for large enterprises. Seriously, you'd probably pay 75 percent interest to build a gum factory if you figured it could grow as fast as the 500 other gum factories you've watched spring up in your back yard.

Swiss Re Has $876 Million Loss Due to Subprime Credit Write-Down (WSJ)
Not the biggest writedown by any means, but banking reinsurance giant Swiss Re has lost $876 million through the end of October. But, the company says its on track to earn a profit for the year and show a solid ROE. Again, not a huge loss by today's standards, but one to make sure you've got in your database.

Wall Street Plans $38 Billion of Bonuses as Shareholders Lose (Bloomberg)
A populist headline from Bloomberg about big Wall St. bonuses in light of investor losses. It's true though, no yachts for the shareholders this year. Still, shareholders have been getting paid in yachts for a long time now, so they can't be too picky. On average, the bonuses will work out to $201,000 per employee, though when you factor in what the Goldman guys are getting, in particular the top brass, it's really not that much for the average Streetworker.

$$$ Why I'm Ready to Be New Citigroup CEO [Bloomberg]

$$$ A date and day trading course [craigslist]

$$$ How I know I'll Never Be A Great Trader [Tim Sykes]

Every week we spend a few hours searching through the many, many positions advertised in our career center to find one special ‘help wanted’ ad that we think you deserve to know about. This week’s winner comes from a major US based credit hedge fund with 9 billion under management. The fund needs an analyst and an associate to cover high yield and high grade Investments. So if your fixed-income position at the bank seems a bit broken these days, this might be just the thing for you.

But you don’t have to take our word for it. There are scores of jobs in the career center. Make something happen.

Credit Hedge Fund 9 Billion [Career Center]

Dow Jones’s Evelyn Juan reports that Winthrop Smith Jr., son of the Merrill Lynch founding partner of the same name, is planning a little party next month for firm alums in New York. Mostly because he’s spent the last couple of years holed up in Vermont (running Sugarbush) and “really, really needs to get out” but also because it’s time to start reminiscing about the days when Merrill still gave out bonuses and wasn’t a stupendous failure. John Thain’s been invited, as has most of Citi (in order to make the MER guests look good), but guess who’s name is decidedly not on the list? Starts with an ‘S’, ends with a ‘tanley O’neal’ (also: starts with a ‘t,’ ends with an ‘ech sector,’ and a ‘J,’ ‘ohn Carney,’ though he plans on crashing and I may even come with, because I love the Time Square Doubletree). The burn isn’t really that surprising, considering that Stan got the job Smith wanted, but it nonetheless chafes, according to a receptionist from the office of O’Neal proctologist, who violated a host of ethics rules when she snuck a peak at his chart and called us with the results. Stan is said to be planning his own Merrill reunion for the same night, to be held in the office space the board’s letting him use for the next 3 years. Who will go where? We guess it really comes down to a matter of preference—Smith will have a piñata, Stan will be jumping out of a cake naked and serving Chex Mix^TM. Which one would you attend?

Forget about subprime write-downs and executive ousters for a moment. For a real glance at how the biggest names on Wall Street are doing, take a look inside the executive dining rooms. Or, if you can’t actually get into the executive dining room, check out the website of New York City’s department of hygiene.

It’s one of the grand egalitarian truths of our city that even powerful Wall Street firms are subject to inspection by government health bureaucrats. And their latest inspections reveal that Bear Stearns has one of the cleanest food facilities on the Street. Inspectors there found no violations. Citi, however, is not as fortunate. It scored 8 violation points for failing to keep cold food cold enough. Lehman Brothers did even worse, with 14 violation points.

But it looks like Wall Street is cleaning up its act. Earlier this year, inspectors found truly rank conditions at Citi, Lehman and Bear Stearns, where violations were two or three times as great as they are now.

Behind Closed Doors: Bear Maintaining, Citi Falling Apart [Hygenie.com]

Earlier: You Are A Dirty, Dirty Bank

Old man Buffett gets a lot of credit for arguing in favor of the estate tax. We’ve never been able to figure that one out, though. He’s already exempted most of his wealth from the tax by donating it to a charity run by his buddy, Bill Gates. And even if you taxed his estate at a rate of 90%, his progeny would still be wealthy. He’s got enough money that he basically doesn’t have to care about taxes.

Not everyone is so fortunate. Although few inheritances are actually subject to the estate tax, millions are spent to avoid it. And a good amount of that is spent in ways that help make Warren Buffett even richer. You see, old Buffett is not exactly a disinterested party in the estate tax debate, and his advocacy of the tax is not exactly a selfless sacrifice. Because he is invested heavily in the insurance industry, he stands to lose a lot of dough if the estate tax every got repealed.

Tim Carney (who is the brother of one of our editors) explains how the insurance industry is lobbying like crazy to preserve the estate tax. Buffett is the industry’s most prominent lobbyist.

Death tax is a lifeline for insurance industry [Washington Examiner]

A new study by Gerald Martin of American University and John Puthenpurackal of (wait for it) the University of Nevada, called “Imitation is the Sincerest Form of Flattery," has found that if you buy the same stocks as Warren Buffett, you will make a lot of money. It’s a companion piece to an equally groundbreaking paper by the same authors which found that Goldman Sachs employs many individuals from an ethnoreligious group originatating in the Israelites or Hebrews of the ancient Middle East. The study found that investors mimicking the Oracle’s stock picks, even up to four months later, would earn an annual return of 24.6 percent, easily beating the S&P 500, which rose 12.8 percent during the same period. Based on these numbers, Martin and Puthenpurackal came to almost the preposterous conclusion that “"Warren Buffett appears to possess investment skill.” (No joke, they actually came to and wrote that conclusion.) Investors partial to mammary glands of the gigantic variety will be pleased to note that Buffett told M&P that when he’s having difficulty making a decision about a stock, one of his tried and true tricks is to stare at a rack not unlike that of Liz Claman’s (and, in many cases, that exact one) for two, maybe three minutes, and the answer will “just come” to him. So keep doing what you’re doing.

Earlier: You Say Harem, I Say Whorehouse

Buying What Buffett Buys Based on Filings Doubles S&P 500 Gains [Bloomberg]

Don't count on a recovery of the mortgage-backed securities business any time soon. Sure, Blackstone says they're going long subprime but Goldman is still short and, more importantly, investment banks are slashing leverage provided to hedge funds for mortgage trades.

Roddy Boyd of the New York Post describes today how some of the biggest prime brokerage banks, including UBS and RBS Greenwich Capital, have cut back on their financing for hedge fund clients.

Brokers' Woes Trim Hedges [New York Post]

“I am getting tired, really getting tired, of these golfing cocksuckers.” [2:45]

Earlier: Merrill Lynch Has Made A Terrible Mistake

Mr O’Neal may not have been a backslapper. But at least he played golf, a great Merrill tradition, and spent a lot of time schmoozing with clients and executives on the golf course. Mr Thain, unfortunately, does not play golf.

“I can’t play at all,” he said on Wednesday. “I never learnt.”

Thain gets into swing of running Merrill [Financial Times]

Starbucks Shares Fall After Reduced Profit and Sales Forecasts (Bloomberg)
This is worrisome. The icon of bobo icons... the ultimate aspirational, not-quite quasi hip establishment has finally run aground. Sure, it's had hiccoughs before. Like last summer when it complained that long lines from the heat were hurting business, but the big problem there was just too much demand. No such excuses this time for the 'bux. In Frankfurter trading, shares slipped 7 percent, and it wouldn't be a surprise to us if the market were dragged down in sympathy today.

Inflation Was Tame in October (NYT)
Other than oil or anything that we'd have to import, inflation wasn't bad in july, so that's good news. Guess this makes it easier for Bernanke to do another cut without having to worry that he's going to hurt the dollar or cause inflation or anything painful like that.

Betting an Estate on Inhaled Insulin (NYT)
We talked about this a couple weeks ago, but so far, inhalable insulin has been nothing but a big flop. Pfizer took a $2.8 billion charge to abandon exubera after having sold only $12 million of the stuff, which is horrendous. Turns out that needles are okay for now, despite the fact that people don't seem to like them. But billionaire businessman Alfred Mann believes that inhalable insulin is the future and is ready to invest $1 billion to make it happen. That's like half of his personal fortune, which he has invested in the MannKind Corporation to make it happen. We hope for his (and for patients) sake that it's a real breakthrough. Certainly in the past, major personal risk has been a hallmark of major breakthroughs.

Barry Bonds indicted on 4 perjury counts, obstruction of justice (SF Chronicle)
Apparently the Steve Jobs rule doesn't apply to Barry Bonds, which is too bad, since he's pretty amazing. Seriously, we're big fans of the guy and think he should get a pass. Maybe perjury is a big deal, but consider the underlying investigation... steroids?

$$$ Digging for Dirt on Goldman Sachs [thestreet.com]

$$$ Hedge fund managers go to hell. [Bloomberg]

$$$ Cerberus, United Rentals letters re: failed deal. [Reuters]

$$$ An important message about the use of LOL in instant message. [youtube]

Goldman Sachs is really starting to frost my cookies and I don’t think it would be off base to say I’m not alone in this sentiment. Not content with merely getting through each quarter without taking multi-billion dollar writedowns and running the government, and keeping Lloyd Blankfein’s Oxy addiction out of the Journal, the bank (employees John Mallory and Gerry Cardinale, not representing the firm per se but nonetheless making everyone’s hands dirty) felt the need to broker a deal between mortal enemies Alex Rodriguez and Yankees management that would pay the disenfranchised third baseman at least $300 million if he breaks Barry Bond’s career home run record of 762 (and counting). No one is saying that the two parties shouldn’t have been reunited so that they might experience another pitiful season together, and Mr. Rod can wear stripes while he continues to never win a World Series ring, but why did Goldman Sachs (via employees who weren’t technically doing working at the time, but whose actions nevertheless reflected poorly on the firm) have to do it? We get it, you’re Goldman Sachs, you’re amazing, you’re wonderful, you can do no wrong and can’t help yourself but go out in the world and do right. Guy banks want to be you, girl banks (and gay banks) want to fuck you. You have nothing else to prove, and you’re only alienating people with this shit. Why don’t use do something really noteworthy, like hire a chief executive who has hair? Does Stan O'Neal fur? We hear he's available.

Also, I think you should look at this.

Yankees May Pay Rodriguez for Home Run Record [NYT]

John Thain is widely respected on Wall Street for his intelligence and experience. He scores top marks for his term at the head of the New York Stock Exchange. His knowledge of the bond market, gained running Goldman Sachs mortgage bond desk, is seen as exactly what Merrill Lynch needs right now. Investors in Merrill were pleased enough to push Merrill’s stock price up more than four percent after the news of his selection to replace ousted CEO Stan O’Neal broke yesterday.

Despite all this, Thain is far from an uncontroversial choice. In interviews this morning, current and former Merrill Lynch employees criticized the choice of Thain. The word used most often was “shocked.”

“I was shocked that the board went with someone with no connection with Merrill’s culture,” one former senior Merrill executive said. Others voiced similar concerns.

[More after the jump]

Tim Sykes's new "hedge fund," Transparent Investment Management, lost $28 dollars yesterday, and is up $1,635 (13.71 percent) to $14,050 since its inception, nine days ago. TIM's founder Tim would also like to you to note that he's devoting fifteen hours a day to the market, another 4 to answering e-mails, and the remaining five to "miscellaneous pursuits," which he would like you to identify below.

Furthermore: http://www.youtube.com/watch?v=TCprlfJ2Mzc

We’ve been digging deeper into how DealBreaker got blocked on the computers at Bear Stearns. We’ve finally learned the truth and it’s totally shocking.

DealBreaker didn’t get blocked because Bear Stearns wanted to censor our content, according to Bear Stearns. It wasn’t Bess Levin’s harping on golf, sex, drugs and cards. It wasn’t Opening Bell’s hatred of red apples. It wasn’t even our controversial stand on proxy access. And, even more shockingly, it wasn’t the dirty minds and mouths of some of our loyal commenters.

Bear Stearns has apparently blocked DealBreaker because they are afraid of their own employees. The company tries to block any website that allows its employees to speak out of turn. Facebook and Microsoft’s Hotmail are also said to be blocked in compliance with this policy. Bear Stearns has its baby bears on lockdown, unable to reach out to the outside world via the interweb. So DealBreaker’s commenting feature is what go us blocked, apparently.

When we learned this from Bear Stearns we had the distinct feeling that it was intended to make us feel better. “It’s not you. It’s me,” they were saying. But they underestimate the depth of our paranoia. After all, if they aren’t targeting us, why is DealBreaker blocked while some other prominent business websites that permit comments, including the New York Times’ DealBook, are not? Somehow we’re not convinced Bear’s desire to control their own employees is the entire story here.

But we have good news for our beleaguered Bear Stearns readers. You can still read DealBreaker by subscribing to our RSS feed. You can also subscribe to our daily newsletter by using that nifty little button on the left side of your screen.

UBS denied rumors that it will make a fourth-quarter writedown of $8 billion by saying today, "UBS does not expect writedown numbers like those implied in its outlook which means writedown numbers like $8 billion are not expected. [This also means that anything in the range of 7 billion and change, a number not like 8 billion because it's 7, is fair game]." Another possible scenario, according JP Morgan, is a $8 billion writedown broken into bite-sized pieces spread out over several quarters, which several students at Harvard have already told us they find "totally unacceptable" and maybe grounds for a Crimson editorial.

Incidentally: http://www.youtube.com/watch?v=TCprlfJ2Mzc
.
UBS CFO says not to expect massive Q4 writedown [Reuters]
Subprime Hits Seem Likely To Keep Coming [WSJ]
UBS May Write Down $1.8 Billion This Quarter, JPMorgan Says [Bloomberg]

Barclays was not lying last week when it categorically shot down scurrilous reports that it was about to take a $10 billion writedown, a denial the bank backed up this morning when it announced a writedown of only $2.7 billion on investments related to the subprime mortgage market. Of course, when they said there was “absolutely no substance to those rumors,” they meant to say “those rumors are only 27 percent correct,” but whatever: details. How do you like Barclays now? Probably not as much as Barclays likes itself. “Today’s extensive disclosure demonstrates the strength and resilience of our performance during the year and in particular during the turbulent month of October,” chief executive John Varley said in a statement.

Incidentally: You should watch this

Earlier: Barclays: $10 Billion Writedown Rumor Has As Much Merit As The One About James Cayne Smoking Dope

Barclays Writes Down $2.7 Billion on Mortgage Losses [Bloomberg]
A stitch in time [Breaking Views]
Barclays Ends Speculation Over Subprime Exposure [WSJ]

We’re back on the Amaranth beat this morning, and as long-time readers know, once we get our jaws around something, it takes awhile for us to let it go. After writing a bit about Amaranth’s lawsuit against JP Morgan this morning, we decided to take another look at an item published on the suit by BreakingViews, a subscription-only financial news site. It’s written as if it’s uncovering a new strategic mistake by Amaranth but we can squint our eyes a little bit and see it as a bold attack on JP Morgan.

The thrust of the BreakingView’s piece was that Amaranth had blundered by using JP Morgan as its principal broker.

“In the wake of the 1998 near-collapse of hedge fund Long-Term Capital Management, many funds that used only one prime broker found those banks pulled their credit lines, forcing the funds out of business,” Breaking Views explains. “It’s now standard practice to use several prime brokers in the hope of avoiding such a fate, and to ensure no one institution can see a fund’s entire trading strategy. Amaranth itself had a dozen prime broker relationships. But it put the bulk of its trades for its main energy strategy through only one.”

Relying too heavily on JP Morgan may well have been a mistake on Amaranth’s part. But we expect that’s not an argument that JP Morgan’s prime brokerage business would like to hear made too loudly. After all, they hardly market themselves to clients with the warning: don’t give us too much business or we’ll hold you hostage and capitalize on knowledge of your strategies. But that’s exactly the danger Breaking Views is saying Amaranth ought to have recognized.

Double whammy [BreakingViews; subscription required]

We noted in yesterday’s Opening Bell that Amaranth had filed a lawsuit against JP Morgan, claiming the bank undermined its efforts to stave off collapse. We’re late to the details of the lawsuit because we were overtaken by events yesterday but we’ve now had a chance to review the lawsuit.

Amaranth’s main claim is that JP Morgan interfered with Amaranth’s negotiations with Goldman Sachs and Citidel, forcing Amaranth to cut a more expensive deal with JP Morgan. According to Amaranth’s lawsuit, Goldman had agreed to take over its money-losing positions in the natural gas market for a $1.85 billion payment from Amaranth. But JP Morgan, which as acting as the hedge fund’s clearing broker, refused to execute the transaction and Goldman walked. The suit also claims that Citadel initially to assume the positions $1.85 billion but the JP Morgan executives talked Citadel out of it, according the lawsuit.

With nowhere else to turn, Amaranth ended up selling its positions to JP Morgan—which took them over in exchange for a $2.5 billion payment.

JP Morgan is denying any wrong doing, of course, and calls the lawsuit “baseless.” But there have long been questions about the many roles JP Morgan played in the collapse of Amaranth. At the very least, JP Morgan’s role as Amaranth’s broker gave it insider knowledge of Amaranth’s trading strategies—which may have allowed its traders better access to information than some of the outside bidders. In the months after Amaranth’s collapse, several top energy traders were left the bank under somewhat murky circumstances. And from what we know about lawsuits, this may well be just the start of things. Amaranth could use this lawsuit to start a discovery process that would include depositions of JP Morgan executives and review of internal documents in hopes of uncovering even broader wrong-doing.

Amaranth’s Dream-Team Law Firm: Beck, Webb & Boies [LawBlog]
Amaranth's lawsuit [Wall Street Journal]
Amaranth's letter to investors regarding the lawsuit [Wall Street Journal]
Amaranth Sues JPMorgan for Disrupting Transactions [Bloomberg]

Delta, United deny merger talks (SF Chronicle)
This again. Seems we go through this song & dance about once every six months or so, when some unattributed report promises that a big aviation merger is imminent. The talk goes on for a few days, while a few analysts talk up all the cost cutting that could be done, and then it goes away. Sure, there have been a couple of deals, usually smaller ones where integration issues wouldn't be so daunting. But it boggles the mind, the idea of merging Delta with United, so we're going to go out on a limb and predict 'no'. But, if it does happen, we promise to do something embarrassing... like dye our hair purple. Notice we said *like* dye our hair purple, which gives us a lot of wiggle room.

Oracle's Ellison says any new bid for BEA would be lower (SiliconValley.com)
If BEA ever comes crawling back to Larry Ellison, they'll have to accept a lower bid, at least according to a speech he gave to analysts on Wednesday. We saw this coming from day one, though to be honest, we think he could be posturing a little. If BEA were to call up Larry right now and say they'll take $17 per share, we bet he'd do it, though maybe not. During his talk, he also promised more deals of varying sizes. Good news for investment bankers... except that Oracle's been doin' it dolo lately.

German Train Strike Halts Passenger, Cargo Service (Bloomberg)
German train workers are striking and we can only assume it's in solidarity with the downtrodden screenwriters and Broadway grips in the US. Meanwhile, there have been talks about the Broadway strike have a negative effect on the economy which has yet to be said about the TV strike. Seriously, you've gotta figure that all of those apres-theatre restaurants are really starting to hurt. God save Ollie's.

Most at NYU say their vote has a price (The Politico)
When asked, several students at NYU said they'd sacrifice their right to vote for a free iPod touch and the majority said they'd give up their right to vote (in the next election) for free college tuition. We'll be the first to say it: these kids are absolutely mental! Their waaaaay overvaluing their vote. If they had an ounce of rationality, they'd give up their vote for a decent dinner, or maybe a book of fast food coupons. The ones who wouldn't give up their vote for a free ride to college have even more explaining to do. Are they high? Probably. It's one friggin' vote in... in New York, where the outcome (at least for the Presidency) is a foregone conclusion. The really silly thing is mostl of these "principled" kids, who wouldn't trade their precious vote for some crass material object, aren't going to vote anyway, because this is not a high voting demographic. Sheesh, time to get off your high horse there.

$$$ BSC Hates Freedom, By Jeff Skilling [NewsGroper]

$$$ John Thain Is Not a Broker. Does This Matter? [MarketBeat Blog]

$$$ John Fitzgerald Page Named "Least Influential" [Jezebel]

And we’re back to Thain already.

Not that there was any doubt but it’s now official. Here’s the Merrill Lynch press release announcing that Thain takes the helm on December 1st.

"Merrill Lynch & Co., Inc. (NYSE: MER) today announced that John A. Thain, chief executive officer, director and member of Management Committee of NYSE Euronext, Inc. and former president and chief operating officer of Goldman Sachs Group, has been appointed chairman and chief executive officer of Merrill Lynch, effective December 1," Merrill said in a statement.

Full Press Release after the jump.

Let’s take a bit of a breather from the news about John Thain and Merrill Lynch. (We’ll come back to that momentarily, no doubt.) In all the excitement, we almost overlooked an important column by the Wall Street Journal’s Holman Jenkins. In today’s Journal, Jenkins urges some sobriety in the face of losses at Wall Street firms, something that’s been sorely absent in recent weeks.

Indeed, at some point—after the executions of Stan O’Neal and Chuck Prince and while the mobs were turning their attention to Bear Stearns’ Jimmy Cayne—the urge to overthrow the heads of so many Wall Street firms began to take on tones that almost recalled the French Revolution. After losses at Bear Stearns were less than expected, Cayne now looks safe but it’s worth taking a step back and wondering if anger at chief executives over losses might have gone too far.

Certainly calls for jailing O’Neal or Prince—as we heard from Bill Lerach, a plaintiff’s laywer who is himself on the way to prison—went too far. Losing money is not a crime, at least not yet. But the more broadly felt outrage at the size of severance packages for O’Neal and Prince were only slightly more measured. As Holman points out,
“Misplaced moralizing over business losses also infects the discussion of exit packages. Notice how these discussions substitute the language of reward and punishment for what are really matters of contractual relations and strategic, before-the-fact incentives.”

To wit, Merrill Lynch CEO Stan O'Neal's severance is not a bonbon from a loving board, but what the board feels legally obligated to pay him, based on commitments made before the results of his tenure were known. Nor was he without proper incentives, then or now. His chief performance pay was Merrill stock, and his holdings are worth millions less than they were before the subprime losses emerged.

That won't satisfy Mr. Lerach, who thinks Mr. O'Neal should be imprisoned. But nobody in his right mind would take the job on such terms given the risks entailed in running a modern business, including the risk of civil or criminal litigation if things go sour. Indeed, what towering pay in the risk-taking professions really may be telling us is how utterly averse to risk-taking ordinary human nature is.

One fact that will surely drive the Lerach’s of the world up the wall is that the recent ousters on Wall Street are likely to result in even higher pay for management. The risks of running a bank or a brokerage are greater now than they have been at any time in the past—risks of prosecution, lawsuits, and ouster—and the top managers will demand to be compensated for those risks. Already the wires are carrying stories telling us that one of the surviving CEOs—Lloyd Blankfein of the House of Goldman—may receive as much at $75 million this year.

Losing Money Is a Crime [Wall Street Journal]

It looks like it's Merrill Lynch that is nabbing New York Stock Exchange chief executive John Thain.

The New York Post has just reported that Merrill is expected to announce that it has hired Thain to replace ousted CEO Stan O'Neal sometime this afternoon. Zach Kouwe, whose reporting has scooped the world on this story, attributes it to "people familiar with the matter."

An NYSE board meeting is scheduled for 2 p.m. today and an announcement could come after the market closes, sources said. The move is a huge coup for Merrill and board member Alberto Cribiore, who has led the search for a new CEO after O'Neal resigned on Oct. 30.

Kouwe also reports that Citi wanted Thain but he chose the smaller, more narrowly focussed Merrill instead. The Post describes this as a "snub" for Citi. NYSE Chief Operating Officer Duncan Niederauer is expected to land the top job at the exchange.

Citi Snub: Thain Going To Merrill [New York Post]

Update 12:32: The Wall Street Journal files its report also: "John Thain, CEO of NYSE Euronext, has agreed to take the top post at brokerage house Merrill Lynch & Co., according to a person familiar with the matter."

Update 12:39: Congratulations and thanks to all our readers who voted in this morning's reader poll, which correctly called that John Thain would leave the NYSE for Merrill. We're constantly gratified by the amazing accuracy of our polls, which have predicted everything from the level of Fed rate cuts to this news. We like to think we have the best informed, most intelligent readers but it's nice to see you guys prove it over and over again.

Update 12:50: So what happened to Blackrock chief Larry Fink, the man many thought would eventually be Stan O'Neal replacement? Did he turn the job down? Was the board's enthusiasm for him exaggerated? Some fear of subprime contagion? Loyalty to Blackrock?

Update 1:06: CNBC's Charlie Gasparino says that Fink was offered the job, but he spooked the Merrill board by demanding a full-accounting of Merrill's subprime exposure. This led the board to go in another direction, perhaps out of fear that Fink might turn down the job if the subprime exposure was too bad.

Update 2:01: The Journal confirms that the stock exchange will name
Duncan Niederaueras its new CEO.

Plus, a special treat. Don’t want to spoil the surprise, but we will tell you that it involves Alan Greenspan and rat poison. (Incidentally, we recently found out that chloroform doesn’t cause death, it just knocks you out. Who knew?)

Lifting the Veil on the Fed [Portfolio]

Let's assume for a moment that the rumors (and CNBC's Bob Pisani) are right and the board of the New York Stock Exchange is holding an unscheduled meeting right now. Views about what is happening are divided, so we figured we'd go to the experts: our readers. What do you think is going on at the NYSE board meeting today?

First, the securities firm announces it’s only going to writedown $1.2 billion in the fourth-quarter because of some bad luck in the mortgage market, beating Creditsights analyst David Hendler’s expectation of $3.2 billion. Strange, we thought, but okay, it’s not like they can’t come back tomorrow or next week and say, “JK, we actually meant $12 billion,” Merrill does it all the time. Then Chief Financial Officer Sam Molinaro says that the firm that loves subprime, that can’t get enough o’ subprime, that has, historically, had such a sick and twisted fetish for subprime that the pictures illustrating Bear’s perversion for subprime on Rich Marin’s blog were deemed NSFW (and ultimately contributed to http://whimofiron.blogspot.com being blocked by BSC), is now short subprime. Hedge fund balances are “coming back,” as are customers, and the second-worst performing stock is up. Health code inspections are being passed, due in no small part to the fact that not one piece of human waste can currently be found on the equity trading floor on 5th, where, apparently, you can barely detect the aroma of rotting fish anymore. JIMMY CAYNE IS AT THE OFFICE. Sure, he’s only there because he’s frantically trying to find the bag of White Widow he stashed “somewhere between the lobby and the 14th floor men’s room” before his flight to Tennessee departs at noon (two week of bridge camp, count it), but, still, he’s there!

Bear Stearns to Take $1.2 Billion Subprime Writedown [Bloomberg]
Bear Stearns Expects Write-Down Of $1.2 Billion in Fourth Quarter [WSJ]

Rumors are rampant that the New York Stock Exchange will begin an unscheduled board meeting in about ten minutes. The eleven o'clock meeting is widely believed to have been called so that NYSE chief executive John Thain can announce he is leaving the exchange.

CNBC has reported that speculation on the floor of the exchange has Thain leaving to go to either Merrill Lynch or Citigroup, both of which recently ousted their chief executives. Our sources are leaning heavily toward Merrill. And over at the Financial Times, they are just now reporting that Thain isn't even a contender for the top spot at Citi.

There's also a minority view that the board is meeting to discuss a new acquisition, perhaps of the NYMEX.

Thain absent from Citi’s shortlist [Financial Times]

The Northern Rock sales memorandum that FT Alphaville was forced by a British court to remove last night has re-emerged on Scribd, a website supporting document uploads. Our thanks to a loyal but anonymous reader who provided the link to us.

Northern Rock Summary [Sribd]

It's no surprise that this song was written by an American living in Paris, since the deterioration of the dollar often shows up first and most obviously in foreign exchanges. Well, the Dollar Got the Blues again so we thought we'd put this up as our third video this morning.

Hat tip: Mises.org.

Just because the markets rallied yesterday doesn't mean we're letting go of the sell-off of the previous week. Sure the Dow was up 319 points. But that's still less than half of what it lost in the previous four sessions. The skeptics of our theory of a quant sell-off last week persist in the view that the coordinated movements across many markets was simply the aggregate results of many independent decisions by investors, and not a cascading quant fund effect along the lines of what we saw this past summer. The quants have wised up, they insist. They have new strategies, and aren't all following the same path like so many ducks in a row.

We suppose there's some sense the theory that the humans running quant funds and the super-powered computers they work for are smart enough to have adjusted their portfolios--and to have done so in ways different enough to not leave them vulnerable to another cascade. But last week's sudden fall in tech stocks, mixed with a sell off in the broader US equities market and a dash of upside in widely shorted stocks certainly raised eyebrows.

And it wasn't just US stocks. Monday saw a saw sharp reversals for gold and oil, and emerging markets declined. The yen is still rallying. So what is going on? John Authers of the Financial Times thinks the quant cascade theory gets it right. It's far more likely that the similar move in so many unrelated markets were caused by shifts in the trading books of quant funds, he says.

But don't take our word for it. Watch his Financial Times video segment here. (Hmm. Second video link of the day. Seems to be a trend. Maybe we should go for three videos to start off the morning.)

Reversal In Market [Financial Times video]

It's the return of Merle Hazard. Last time we heard from this ersatz country music singer, he was lamenting the demise of his hedge fund. This time around he's meeting with Art Laffer, singing about the Federal Reserve and the plight of mortgage bond traders.

A British court has forced the Financial Times to remove details of a confidential sales memo circulated to would-be buyers of Northern Rock, the troubled UK lender. The memorandum had been obtained by the FT’s Alphaville blog and was available for several hours yesterday. The Blackstone group brought a lawsuit requesting an injunction against publication of material from the memo, which the court granted.

The memorandum, which had been prepared by Merrill Lynch, Citigroup and Blackstone, suggests that even if the company found a buyer, Northern Rock is expected to receive financial support from the Bank of England until at least 2010.

The FT has now summarized much of the memorandum, although the court order prevents them from publishing the memo itself. You should read the whole thing but here are some quick highlights:

• Northern Rock expects to have borrowed an estimated £24bn from the Bank of England by January 1 2008, which is about £4 billion more than it has already taken.
• In 2010 Northern Rock will need £6bn to refinance its Bank of England facility.
• Profits are expected to sink as low as £143m in 2008 and recover to reach £643m by 2010.

Northern Rock faces years of debt [Financial Times]

‘Seaweed’ Clothing Has None, Tests Show (NYT)
Now this... this is awesome. The Times take a break from reporting on what items have lead in them to report on what items have seaweed in them. Apparently a company called Lululemon, a maker of yoga clothes (duh), states that one of its lines is made from 24 percent seaweed fiber. Easy enough to test, right? So the Times did and found zilch. The best is the response from the CEO: “If you actually put it on and wear it, it is different from cotton,” said Dennis Wilson, Lululemon’s founder, chief product designer and board chairman. “That’s my only test of it,” said Mr. Wilson, known as Chip. Another interesting angle here is that the Times said it did the test after an investor who is short Lululemon's stock told the Times about the issue. Shades of Mark Cuban ShareSleuth, eh? We wonder what Gary Weiss will have to say. We'll see if it has any effect on the stock.

Chinese Prices Surge Again, Despite New Controls (NYT)
Imagine that. Price controls in China aren't working. Just pork prices are up 17 percent year-on-year. And just to get a sense of how price sensitive the Chinese population is, the article notes that a cooking oil sale at a Carrefour store recently caused a stampede that lead to three deaths. Crazy.

Oil Falls to $91 As Data Suggest Demand Shift (WSJ)
We came close, but didn't quite hit the magic $100 mark, and now the price of oil is taking a little bit of a breather. The IEA has lowered its global growth outlook (always good news) and the price of crude dropped towards $91. Apparently, a lot of traders had bets that prices would hit $100, only exacerbating recent selling. Really, the silly thing is that we and those traders are so fascinated by triple digits it affects our coverage and their trading. Still, it is pretty wild.

Holiday Sales, Sure -- But Don't Expect Steals (WSJ)
This same article gets reprinted every year. The retail industry always does a masterful job of PR, trying to claim that this will be the year prices will hold steady and that shoppers should expect to pay full price. Anyway, how do we know this is all PR. How about this quote from a retail industry trade group VP: "We don't anticipate a lot of unplanned markdowns." Well there you have it. In other words, don't go thinking you can give gifts on Dec. 27th and don't shop around. Just drive to the mall, buy what you're going to buy, and don't waste your time comparing prices.

$$$ Hideous ties you might be interested in. [FINalternatives]

$$$ Analyst Battleground Shifts to E*Trade [Deal Journal]

$$$ Tiffany & Co. (TIF) [WallStrip]

Hedge funds had a good month during October. After a summer of fear and losses, the aggregate average index of hedge fund returns measured by HedgeFund.net rose by 3.32% in October. But not all hedge funds fared so well.

AQR, a hedge fund company run by former Goldman quant Cliff Asness, was ground up in the Wall Street rumor mill last week, and eventually found itself blasted across the headlines of the New York Post. Although some of the details were disputed by the spokesman for the fund, AQR’s $4 billion flagship quant fund, called Absolute Return, was down 2.99% in October, according to AQR's letter to investors. (This was obtained by DealBreaker at great personal expense. You have no idea that sort of things Bess had to do to get our hands on it.) The more aggressive, highly leveraged strategy employed by the fund was down 6.58% for the year. These losses come after AQR’s Absolute Return was reported to have recovered from similarly dramatic set-backs this summer.

Of course, AQR manages 34 funds and we lack information on most of them. According to AQR, most of its hedge funds are doing well. "In our long-only funds, all funds are up, in the single digits or double," said AQR in a statement. "Among our hedge funds, some are up in the double digits, while are few are down but only in the single digits, though one hedge fund, which represents less than 1 percent of our AUM, is for the moment down in the double digits."

It should be noted, however, that long only strategies outperformed the S&P 500 in October by the largest margin in almost two years, according the the HFN index. So being up in your long funds for October is not exactly shocking news.

Hedge Funds See Best Average Performance In 5 Years [hedgeco.net]

A bunch of Harvard students who think UBS is pro-genocide because it underwrote PetroChina’s listing on the Shanghai stock exchange this past month are taking a stand. They’re going to show up at a recruiting event being held by the Swiss bank tomorrow night at the Faculty Club and “get as much information as possible regarding UBS’s complicity in PetroChina’s ties to Sudan” and “rigorously question representatives [on the firm’s] role in securing the Sudanese government’s greatest benefactor such a lucrative deal.” Whi