$$$ Deals: The Fords in India’s Future
In our M&A Roundup for the week ended March 30, there’s still a pulse if one looks at certain markets — not just Indian firm Tata Motors buying Jaguar and Land Rover, but also in a credit-card deal and a blank-check acquisition. [CFO.com]
$$$ DON’T FORGET: For the Love of White Horse and Tiger, tonight, 9 PM! [CNBC]
$$$ CLARCOR Inc. (CLC) [WallStrip]
Archive for March 2008
$$$ Deals: The Fords in India’s Future
This May, the University of Texas Press will publish a book by Robert Auerbach, called “Deception and Abuse at the Fed: Henry B. Gonzalez Battles Alan Greenspan’s Bank.” In it, Auerbach questions the legitimacy of Greenspan’s Ph.D. thesis from NYU, implying that the paper was “obtained in a few months with little more rigor than a matchbook-cover art degree,” and that were you or I ever privy to reading the thing, it would be plainly evident that Greenspan was blowing the half the degree-granting faculty. Luckily for Greenspan, that’ll probably never happen, because, according to Auerbach, New York University is in cahoots with the former fed chairman to keep Auerbach/other interested parties from every laying eyes on that puppy (Auerbach says NYU’s provost, David McLaughlin, claims that dissertations from the 1970s were not placed in the library, and therefore unavailable, which Auerbach doesn’t buy FOR A SECOND).
Obviously this whole thing is making Bernanke tweak his nipples in delight, and our sources in Washington tell us he’s taken to walking around town with his paper tucked under his arm, replying with feigned innocence when people ask what it is, “Oh just the musty old thesis. Needed to check something; still holds up pretty well. See: Benjy Bernanke, MIT Class of 79.” We’ll do an extended review of the book when it officially comes out, but from the unedited copy we were able to get our hands on today, here’s the other shit Greenspan doesn’t want you to know about that you can likely expect to read, barring any major rewrites.
Auerbach alleges that :
1. Greenspan hasn’t read any of Ayn Rand’s books.
2. All of his addresses to Congress involved typing a speech at a third-grade level then using Microsoft’s thesaurus to replace every single word with the most fancy-sounding substitute — even if he didn’t know what it meant.
3. It is a lie of the highest order that Greenspan conducts 80% of his business out of the tub; the author claims “evidentiary proof” that “all the magic happens on the can.”
4. His basement wall is littered with photos of, articles by and home addresses of “infidels I must exterminate,” including Robert Auerbach, Jim Grant, Bill Fleckenstein, and Alan Abelson.
5. BG has 20/20 vision and wears the glasses to “look smart.”
6. He never dated Barbara Walters. Actually briefly dated Geraldo Rivera (then Jerry Rivers) during his late-70s “experimental phase,” and Phyllis Diller for the better half of the 1980s.
7. He lies about his age. He is really only 42.
8. Greenspan inflated his resume credentials; actually spent most of the 1960s and early 1970s running “Easy Al’s Used Cars” in Dubuque, Iowa.
9. During undergrad his source of income was from peddling phony tips on penny stocks, then cleaning up shorting them, and working as a phone sex operator. The book goes into graphic detail, noting that Greenspan was known for his unique style, telling callers things like, “At this juncture you should feel your labia minora becoming engorged. (Since retiring, Greenspan has apparently fired the phone line back up, to much success. $3.99/minute, call 203-890-2000)
Dr. Greenspan’s Amazing Invisible Thesis [Barron's]
Susan Krakower sits, stands, perches, then paces the length of her windowless office. A crease deepens down the center of her forehead. In two hours “Fast Money” airs, and something’s not right. The show she created isn’t moving fast enough in its second segment, and that’s a problem. “I want the trades – get right to it!” she explains. Tonight she’s trying something new. It’s a quick interlude she dreamed up the previous morning after watching her 7-year-old son’s favorite TV programs, Nickelodeon’s “iCarly” and “Drake and Josh,” which rely on graphics to move the narrative. When the show airs, she’ll head downstairs to the control room to swap a new, 15-second sound and visual effect in place of a riff by host Dylan Ratigan.
CNBC feels your pain… [Fortune]
I love every aspect of this quaint tale about Canadian hedge fund manager Matthew MacIsaac (MM Asset Management) facing cocaine charges (he was arrested at the end of a six-week investigation known as Project White Rabbit, at a club called the Comfort Zone; the damning bit of a evidence from a “rival” manager that MacIsaac is building a new house with his and her sinks in the master bath) but here’s what I love most: the fact that MacIsaac apparently attempted to “explain” the $600 in his pocket to the police officers on the raid by saying, “I’m a hedge fund manager.” A little bit because (and I could be wrong) I’m pretty sure it’s not illegal to have cash in your pocket, so it sounds like MM folded like a cheap suit even Thain* wouldn’t be caught dead wearing, and a lot a bit because in my mind, it’s the new default excuse everyone can use, for any situation with even the hint of consequence. Just imagine yourself to be one of your favorite hedge fund managers, and respond as they would — as in the examples below.
Officer: Did you just litter, pal?
Leon Cooperman: Yes, but officer, I can explain: I’m a hedge fund manager.
Officer: Sir, this is a peaceful demonstration. We don’t allow people to immolate themselves to protest eating meat.
Dan Loeb: First off, fuck you and your animal-clogged arteries. And b., I answer to a higher authority—I’m a hedge fund manager. [Douses himself in lamp oil and lights a match.]
Angry Shareholders: Did you just lose our company $100 billion in shareholder capital?
Jim Cayne: It’s OK, I’m Big Daddy Cayn–I mean, I’m a hedge fund manager.
Barnes and Nobles employee: Did you just take that book in the bathroom with you?
Larry Robbins: Yeah, and I was in there for a while, too but don’t worry about it: I’m a hedge fund manager.
Guard: There’s no smoking in the museum, pal.
Jim Simons: Oh, it’s all right, buddy. I’m a hedge fund manager.
David Spade: Melted chocolate inside the dash, that really ups the resale value.
Steve Cohen: I think you’re going to be okay here because I deep fried the chocolate then coated it with caramelized sugar, thereby creating a hard candy shell. Plus, I’m a hedge fund manager.
Hedge fund manager faces cocaine charge [Globe And Mail]
*He looks like a cheap Midwesterner.
We’re going to have a lot to say about the costs of Treasury Secretary Hank Paulson’s Blueprint for a Modernized Financial Regulatory Structure. Before that, however, it’s worth noting that there is little to admire about our current financial regulatory structure. Largely a product of the financial crises of the past, the structure was unwieldy, arguably created a bureaucratic structure at odds with the constitutional framework of our Republic and tended to serve the interest of the very financial institutions it sought to regulate at the expense of individual investors and the broader public. The array of regulatory bodies we live with were largely “captured” by the securities and banking industry, although “capture” is probably the wrong term because it implies that they were independent at some point. Many were built to serve the interests of Wall Street, so no capture was necessary.
The best that can be said about the current system is that we have years of experience with it. We understand how it operates, how it fails and what its strengths are. This is a conservative point but one that needs to be made: regulatory innovation inevitably leads to “unintended consequences” and unanticipated costs. At the very minimum, the costs of adjusting to a new regulatory structure need to be taken into account. We may not be risking our lives and sacred honor by declaring the need to dissolve the longstanding financial regulatory bonds, but we may be risking our fortunes.
That said, we’re headed deep into the details of this bold new world Paulson has proposed. The Treasury has released a cheat sheet here. But if you are really ambitious, follow us into the 212 page blueprint. We welcome your insight, of course, in the comments below or via email to email@example.com.
Female bankers in London are taking pole-dancing exercise classes. This would be “scandalous” if suburban housewives across the country, who’ve been taking these classes as well as “cardio strip tease” et al. at their local gyms for at least the past five years, hadn’t beaten them to the punch. At this point, everyone knows how to swing ’round one of these things and it’s no longer going to give you a leg up at work. Now, what would be interesting, and probably a more marketable skill? If some of these ladies (and/or gentlemen) would have the brass to attend the pole-smoking classes from the same instructor later that evening. Who knows? These services could come in handy at some I-banks unable to meet margin calls.
Pole-Dancing Classes Lure Eager Women Bankers in City of London [Bloomberg]
There’s an outrageous article in Crain’s today about executive perks. Apparently senior management at some banks get to fly on the corporate jet. Others have their country club tabs picked up by the company. A few—VERNON JORDAN, LAZARD LTD, SHAME HIM IN THE STREETS—even get their apartments paid for, at up to $24,000 a month. Crazy, isn’t it? No, it’s not crazy. What’s crazy is that everyone—author, shareholder activists, Tim Robbins and Susan Sarandon– still fails to get it. If I agree to run one of these things, I want to plied with gifts at every turn. This job is really hard and I’m very sensitive and the suggestion that I’m not worth tons of freebies plays on the deep insecurity I attempt to mask with a self-righteous attitude and shameless bravado. That makes me unhappy and you know what happens when I’m not happy—I destroy billions in shareholder capital (I might do that anyway, but without the gifts the threat is more imminent).
Plus, the notion that shouldering my basic costs of living is a “gift” is absolutely absurd. That’s a basic requirement of your job in keeping me comfortable enough to work. I never, EVER, would’ve taken this gig if I thought I would be asked to pay for wherever I happen to rest my head. It’s extremely demeaning. Know what I would consider a “gift” and something I’d even think about standing before shareholders and fighting for? Free access to the Olsen twins, which I hear Goldman has no problem subsidizing for LB, though, as this video shows, he made be getting duped.
A key question in the liability of brokerages in the failure of the auctions for auction rate securities is what customers were told about the risks of the products they bought. The brokerages now claim they properly warned customers about the products, and that they never considered them cash or cash equivalent. Most individual brokers we’ve spoken to off the record say that this is very inaccurate, and every retail customer we’ve spoken to (including some who are friends and family of DealBreaker editors) say they bought these securities with the understanding that they were “highly liquid” or “cash equivalents.”
So what did the brokerages tell retail customers? There were lots of disclosure documents that say a variety of confusing things but almost none of them reveal the risk of systemic and perhaps permanent auction failures for the auction rate preferred securities that pay low interest rates even after auction failure. And, as the screen shot of a ARPS customer online account above reveals, the brokerages did, in fact, take actions that encouraged customers to regard the ARPS as cash. This account comes from a Merrill Lynch customer account. (Click on image for a bigger version.)
It’s often been said that we’re in the worst financial crisis since the 1930s. So perhaps its no surprise that we seem on the verge of the biggest financial regulatory overhaul since the Great Depression. But we certainly didn’t expect anything this sweeping to come out of the Bush administration. We clearly underestimated these guys. Talk about shock and awe.
But we’re getting ahead of ourselves. Over the weekend Treasury Secretary Hank Paulson released the outline of his controversial and sweeping a plan to overhaul financial regulation. He would eliminate thed SEC, FDIC, CFTC, OTS and OCC. And after dumping out this bowl of alphabet soup, he would fill it right back up again with the Prudential Financial Regulatory Agency , the Conduct of Business Regulatory Agency, the Federal Insurance Guarantee Corporation and the Corporate Finance Regulator. It’s going to take some time to digest these changes.
Later this morning, Paulson will give a speech about this plan. In the meantime, the plan is already coming under criticism. Barney Frank worries that the plan may take too much power away from states, particularly (from what we’ve been lead to understand) in the area of regulating insurance. Larry Ribstein worries that the new, more concentrated structure of regulation could result in losing significant flexibility in financial innovation.
“On this latter point, consider that the CFTC’s replacement, CBRA is likely to be less accommodating,” Ribstein writes. He adds that “with one regulatory agency we’re likely to get fewer new financial products.”
We’re going to hold back for now, as we attempt to work through what’s known about the plan. Let’s see what Paulson has to say. More later today.
Paulson Plan Begins Battle Over How To Police Market
Paulson’s big bang [Ideoblog]
Lehman Sues Japan Firm, Claiming $350 Million Fraud (WSJ)
There’s a million ways to lose money. Here’s one of the more interesting ones we’ve been paying attention to. Lehman claims that employees of a Japanese firm fraudulently bilked Lehman out of $350 million. Their method of action: using official company documentation to suggest that it was behind a hospital refurbishment funding project. Turns out the Japanese company Marubeni Corp had no idea about it. So now Lehman is suing for its cash back. Whether they get it back or not, you have to figure that Lehman’s counterparty (so to speak) in this fraud, must’ve had a damn good idea about how this whole process works to pull something like this off.
Citizen Huff (NYT)
The redhot Huffington Post continues to make the media rounds, jumping form the New Yorker to the New York Times for its latest glowing profile. Actually, it started even earlier when some (possibly dubious) numbers came out that the site was bigger than Drudge. It helps that it’s election season and there’s an added hook to write about a politically-oriented site. But really. Financially, the site expects revenues between $6-$10 million this year, on what sounds like breakeven profits. Oh, and they found some guy to say it was worth $200 million.
Aloha Airlines Halting Passenger Service (AP)
We’ve long been in the “more bankruptcies” camp when it comes to airlines, hoping that they’ll lead to more gates/opportunities for interesting upstarts. That being said, seeing as we’re not too big on the intra-Hawaii island-hopping scene, it’s hard to get real excited about the end of Aloha Airlines. After 60 years, the company recently declared bankruptcy, and now it’s shutting down operations for good.
HUD Secretary Expected to Quit (WSJ)
There’s something about HUD secretaries. Always seemingly getting up to no good. Yesterday we couldn’t have named our current one, but today we know his name is Alphonso Jackson and he’s expected to quit amidst some vague allegations of wrongdoing. The Journal describes this as a blow to Bush’s attempt to fix the housing mess. Eh, somehow we doubt that this position isn’t so crucial to the situation.
UBS Falls After Reports It May Have to Raise Capital (Bloomberg)
Having already raised about $13 billion earlier this year, UBS may have to double dip in the guacamole. As it gets set to report another wave of writedowns, analysts say it will have to go back and raise more money, possibly as much as another $15 billion. Overnight, shares fell around 4 percent on the report.