Archive for January 2008

  • 29 Jan 2008 at 9:41 AM
  • Ben Stein

The Thing About ‘Financial Realism’

…is that it demonstrates so little contact with reality and finance.
And here’s good round-up of the most recent critiques of Mr. B.S.

Could Cramer Be Right?

These United States long ago cried Uncle but the President went right-on twisting our elbow behind our back yesterday, insisting that the not-even-great boondoggle plotted in our nation’s capitol could be described with terms like “economic” and “stimulus.” As is usually the case, this is a clear sign that there is nothing economic about the plan and little that is stimulating, unless triggering our gag reflex counted.
As our eyes threatened to glaze over we turned our eyes away from the idiot box and toward the mounting mountain of periodicals that demand our attention each week. For no particular reason we can determine, we received three copies of New York magazine last night. This had the surprising effect of convincing us to turn our attention to the magazine. Note to advertisers on dead trees: you may want to insist that magazines mail multiple copies to subscribers. At least it ensures the mass circulation magazine will be picked up and perhaps an eyeball or two will settle on the pricey ads you somehow still believe should be placed there instead of on, ahem, little websites.
Leafing through the magazine we found ourselves experience a bit of intellectual surprise. We were reading a column by a man named James J. Cramer—as he calls himself in print—and we were agreeing with it! We read on, mouths agape. Had this final act of the Bush administration accomplished reconciliation between Cramer and DealBreaker?
More on the potential reconciliation after the jump.

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Opening Bell: 1.29.08

moneypress.jpgBaucus Stimulus Plan May Spur Conflict (WSJ)
One of those things they teach you in undergrad poli sci is that the Senate doesn’t like to take its cues from the House. The House could pass a resolution calling the Senate the most important of the two bodies, and the Senate would still find something in the language to change. So it’s no surprise that Senators are not quite ready to rubber stamp the eocnomic stimulus first passed in the House. Sen. Max Baucus has proposed an alternative econ stimulus plan, whose main divergence from the House bill seems to be that wealthy folks get a rebate too. There’s also an unemployment insurance extension not in the House. Just proves that the Senate/House divide actually runs deeper than the Democrat/Republican divide, which is actually sort of depressing.
Liberty Media Moves to Take IAC From Diller (WSJ)
The mind-boggling trapezoid known as the John Malone-Barry Diller-Liberty Media-IAC relationship has only continued to get more bizarre in the last week. Ever since IAC decided to split itself into five companies, the various parties have been growing tense and now Libierty wants Diller ousted. Great drama.
Operator of Walk-In Clinics Shuts 23 Located in Wal-Mart Stores (NYT)
This is too bad: we’ve always been optimistic about the role that retail, walk-in clinics could play in the healthcare system. You know, for your garden variety malady, you just walk in, pay $30 to a nurse and get your prescription. But what sounds good on an intellectual level doesn’t always work in business, it would seem. CheckUps, which was operating clinics inside Wal-Marts has decided to shutter 23 of its stores and it’s behind on payments to its nurses. Not sure what’s going on exactly, but obviously not a great sign.
Further revelations dent SocGen’s reputation (FT)
The Kerviel story has legs — which is as you’d expect when you’re talking $7.1 billion. Increasingly, it’s one of those what/when did they know kind of deals. And then when maybe earlier than previously admitted, even if the what isn’t obvious. But apparently warnings were given as early as a year ago about a trader named Jerome Kerviel and how he was trading Eurex derivatives. What exactly those warnings were, however, is not known.

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Write-Offs: 01.28.08

$$$ Our M&A roundup reveals that the merger-and-acquisition bust has hit full-force. Last week saw only 33 new transactions worth a total of $3.4 billion.
$$$ The Midtown Journal?[The Observer]
$$$ ______Sperm_Donor___$75-150___per_donation___ (Financial District) [craigslist]
$$$Jerome Kerviel is free on bail. He did it for the bonus. [Times]
$$$ Syms goes to the pink sheets. Blames Sarbox. [Business Wire]
$$$ Hoku [WallStrip]

–Bess Levin is on assignment. She will return tomorrow.

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Legg Fetting?

“Legg Mason is expected to announce that Mark Fetting will become its new chief executive, succeeding co-founder Raymond Mason,” the Wall Street Journal is reporting.

  • 28 Jan 2008 at 4:32 PM
  • Fed

Strange Timing On The TAF Auction

The last of the initial round of Term Auction Facility offerings is today, with the results expected to be announced tomorrow. Does this strike anyone else as strange timing?
The FMOC is set to meet for the next two days, and everyone seems to expect that the Federal Reserve will announce a rate cut on Wednesday. (In our poll this morning, a cut of 25 basis points trails close behind a cut of 50 basis points). Should this rate cut make it hard to know where to bid in the auction? If the Fed cuts more than expected, it may wind up penalizing the banks with bid for the TAF. If it cuts less, it could wind up giving them an especially generous deal. This no doubt puts added pressure on the Fed to cut exactly where the market expects, at the fifty basis point level.

  • 28 Jan 2008 at 3:47 PM
  • Ben Stein

Ben Stein’s Intensely Silly Market Manipulation Theory

Ben Stein was up to his usual silliness in Sunday’s New York Times, this week writing about a conspiracy theory involving traders manipulating the market in search of profit. He gives his theory a name—Financial Realism—because he bases it on something he learned about in law school called Legal Realism. According to his theory, traders have been using fear churned up by the subprime storm to push markets down in search of profits.
It’s a really radically theory of how easily markets can be manipulated. If traders could really move markets like Stein thinks, we wouldn’t already be hearing about January was a terrible month for hedge funds, and quantitative managers went through another 28 sigma event last week. And, as Gary Weiss points out, if Stein were right about this all being a result of manipulation, that would be good news. Because soon the efficiency of the markets would step in, set things right, the Fed wouldn’t have to inflate away are already meager savings and we could live forever on the big rock candy mountain.
“If the current market action is the manifestation of some sort of evil trader genius, they have executed it pretty poorly,” Naked Capitalism writes. “Every major firm should have been net short, not just Goldman. The investment banks, with their sales forces and research arms, are in a much more powerful position to push rumors. If the market fall was by design, pray tell me how it benefited the Street? They have taken over $100 billion in writeoffs, and the fourth quarter results are still coming in.”
After the jump, we get into it with a bit more detail with Stein again.

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  • 28 Jan 2008 at 12:51 PM

News From Davos: The Seat of Power Spins

As long time readers of the site know, we’ve got an unhealthy obsession with the trivial. We write about things like bathroom conditions at Merrill, seating arrangements at SAC Capital, cafeteria sanitation at Bear Stearns. Which is why we’re so bored by most of the stories coming from Davos, where all the masters of the universe have been meeting. It’s all who said what at the panel on global warming, cooling or seizing? Boring! What do these people eat? Drink? Smoke? Where are the small, telling details about what it’s actually like to be at Davos?
Finally, however, Jeff Jarvis has produced the kind of story we can use. After the jump, check out Jarvis’ short video of the real seat of power at Davos.

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