$$$ Bear bankers “becoming spa swans and gym rats.” [NYMag]
$$$ Atkins departure from SEC mixed blessing for hedge funds [TheDeal]
$$$ Michael Jackson’s Neverland Ranch Loan Sold by Fortress to Colony [Bloomberg]
Archive for May 12th, 2008
The real problem with holidays is that they are illiquid. You can’t trade them very well, which is why roses cost so much on Valentines Day and the price of a swiftly-dying severed evergreen increases prior to Christmas Day and drops immediately afterwards. Here in New York City people do manage to trade holidays in some ways—choosing to give up Memorial Day in the summer share house for a random summer weekend while seeking excess profit on the trade by also scoring hard to get restaurant reservations in the under-populated city—but Steve Sailer thinks we’re not going far enough. Smart people, he says, should internally trade comparable holidays.
On Mother’s Day, it’s hard to get a brunch reservation; and on Father’s Day, it’s hard to get a tee time. So, just switch days and celebrate Father’s Day in May and Mother’s Day in June.
Interestingly, doing that violates Kant’s Categorical Imperative, which is a sort of Teutonic philosopher’s version of the Golden Rule (“Act only according to that maxim whereby you can at the same time will that it should become a universal law”). Yet, if everybody switched months, then we’d be right back where we started. But if you switch, then you’re a lot better off and everybody else is a tiny bit better off.
One question would be how to charge others for the positive externality created by switching holidays. After all, we can’t have them free-riding on our holiday trading, can we?
Remember this for next year [Steve Sailer]
You know what’s something that used to be considered gauche but is now de rigueur with the Hamptons set so you know it’s cool? Not paying your mortgage. Apparently a bunch of Hamptons residents have been neglecting to send their checks to Angelo Mozilo’s PO Box these last couple months, former UBS executives included, which sounds about right. Erstwhile UBS employee Marc Warren is among the 120 homeowners who’ve had preliminary foreclosure actions (lis pendens proceedings) taken against them for loans exceeding $1 million. And they may soon be in even better company, if no one’s in a buying mood—Concoran broker Susan Breitenbach says she’s been called by dozens of Bear Stearns employees “desperate to unload their East End homes.” Hopefully they’ll be able to do so, and not join the growing number of EE homes (ten to date) that’ve been foreclosed outright since January. Which brings us to today’s reader poll– who’s the (former) deadbeat owner of this $15 million Westhampton home, pictured above? The Post doesn’t say, but we have faith the DealBreaker brain trust can figure it out.
Related: Trader Made Billions on Subprime
Trouble In LI Paradise [NYP]
We’re not suggesting in the slightest that Citi’s new-old slogan, “Citi Never Sleeps,” doesn’t strike us a tagline that would get Meredith Whitney going, “You know, I’m starting to think that those guys know what they’re doing over there,” but we have been wondering why the firm felt the need to rebrand itself as the posterchild for insomnia. The real reason is apparently that they simply couldn’t afford a new one, but as the C puts it, when you’ve got GOLD like “Citi Never Sleeps” just lying around, you go with it.
Shortly after Vikram S. Pandit took over in December, he scratched the “Let’s Get It Done” slogan and ordered up the “Citi Never Sleeps” tagline. Though the phrase was introduced around the invention of the A.T.M. and 24-hour banking, Mr. Pandit thought it better promoted the bank’s global presence.
“This is an extraordinary asset, and guess what, we own it,” said Ms. Caputo, who is also leading the new campaign. “It made all kinds of sense to bring it forth and advertise it.”
Sooo. Moments after we announced our latest market moving experiment, inspired by the stomach rumblings of Charlie Gasparino, C to the G called us to “set the record straight.” Gasparino, who seemed a bit perturbed at Barron’s writer Jonathan Laing’s suggestion that he’d been fed the “Ambac or MBIA will be downgraded” story by Bill Ackman, told us: “A lot of journalists take shots at people without calling them first. This guy lacks the integrity to call me first and at least find out if something is right or wrong. He failed Journalism 101.” Prepared, network-approved comments aside, however, we’ve heard that Gasparino put it slightly less lightly to friends, saying: “This guy didn’t have the balls or the brains to call me. If he had half a brain or half a testicle, he would have at least dialed me up before I fly out to Chicago and dial him up. I hope he sleeps well tonight.” When asked to confirm that the harsher, mildly more litigious words had exited his mouth, CG only offered “no comment.” You do the math. (And: start doing something with that Bear news I mentioned. Time’s running out!)
Management buyouts have been a favorite target of corporate governance types for years but the critics may have a new line of attack—criticizing managers for scuttling deals.
The traditional criticism of management buyouts—where a company’s senior executives cooperate with financiers to buy a company from public shareholders and take it private—has been that management could exploit shareholders by buying the company on the cheap and discouraging other bidders. When the buyout market was firing on all cylinders, objecting to management buyouts on these grounds was a favorite past-time of self-styled shareholder advocates. (One particular lunatic who happens to have a column in the New York Times even proposed outlawing them.)
But now that the buyout market has ground to a crawl—if not a complete halt—the conflicted role of buying and selling a company at the same time could be working the other way. This morning our own Joe Weisenthal, who also writes over at PaidContent.org, points out that the collapse of the deal to take radio operator Cumulus Media private has collapsed, and unlike some recently failed deals, Cumulus seems to have no plans to sue the buyers to force them to close the deal.
“A question that shareholders might be wondering about: Was the agreement to amicably drop the deal made easier by the fact that CEO Lew Dickey was on both sides of the transaction?” Weisenthal writes.
Cumulus shareholders will get a break-up fee of $15 million but it hardly seems likely that the company could sue its chief executive to force the sale. Think of it as an agency cost of a bear market.
Cumulus Take-Private Deal Falls Through; Stock Off Over 20 Percent [PaidContent.org]
Barron’s has an article today about how even though no one knows anything about credit-default swaps, few people can resist speculating, the analysts in Charlie Gasparino’s lower abdomen included. Around 3 pm on January 30th the CNBC on-air editor said he “felt in his gut” that Ambac or MBIA or both would be downgraded. Nothing happened, but shares of both companies plummeted on the news. That’s right people—the gastrointestinal discomforts of Charlie Gasparino, who we’re told was seen wolfing down an Italian sub with rapidity that would distress even the steeliest of bellies, are now causing turmoil in the markets. So ridiculous we wish we could take credit for making it up. Damn you, Charlie Gasparino, for subconsciously ginning things up in response to our obsessive chronicling of your every Dago-esque utterance. It’s almost as though you want to make it impossible for us to parody you. Attributing insider information to the sources in your stomach is something WE do, not you.
Anyway. We can’t be too hard on Gasparino’s prognostication skills because, truth be told, who cares about being right or wrong when you’ve got that kind of power? Though we could never hope to match his market moving ability, we have decided to perform a small experiment of our own, just to see how we match up. Here’s the rub: we had some bad Chinese last night and are starting to feel violently ill. That’s got to mean something, no? At random points throughout the day, we’re going to pin the feelings of nausea waving over us to a little piece of news that we know isn’t true, and see what happens. Starting now: We feel in the pit in our stomach that Bear Stearns is going to pre-announce record earnings on the strength of its subprime mortgage funds. Make of that what you will.
Credit-Default Swaps: Weapons of Mass Speculation [Barron's]
JP Morgan has taken a hatchet to Bear Stearns’ foreign exchange business, with 62 of 73 positions set to be “put on notice,” according to a Forex Factory story citing “a senior Bear Stearns official.”
Both the New York and London offices of Bear Stearns have been slashed. In New York, 28 out of 34 people working in foreign exchange are expected to receive this week what Forex Factory describes as “consultation letters.” In London, 33 of the 39 team members received notification last week that they had entered a consultation period. It’s unclear how many of these “consultations” will result in job cuts or offers for positions. Apparently some have been offered positions at JP Morgan but turned them down because they were a lower levels—and presumably paid less—than their positions at Bear Stearns.
“Bear Stearns’ New York trading operations have almost ground to a halt, with the FX team handling only 1% of its pre-takeover commerce,” Forex Factory reports.
Bear Stearns gets the axe [Forex Factory]
Listen, we talk a lot of shit about Citi here, and I highly doubt that’s going to stop any time soon. But let’s just all agree that the C’s got a new contrarian indicator and she’s telling us to buy. Big time. And that contrarian indicator is: Meredith Whitney. Crazy? Yes. Implausible? No. Here’s why.
As she’s wont to do, Whitney recently offered what can be interpreted as largely negative statements about Citi, following the bank’s announcement that it promises to begin realizing its “enormous potential.” She even upped the ante a bit, moving from “you will suck until you do exactly what I tell you to do” to “you will suck no matter what you do so just give up and die.”
Specifically, Whitney said today that CEO Vikram Pandit faces “an impossible feat” in trying to turn the diversified whorehouse into a profitable company. Not surprisingly, Mistress Meredith recommended that investors sell their shares, noting that “they don’t have the revenue power [and] they don’t have the earnings power in so many of their businesses.” She also took issue with the lack of details in Vikram’s Friday morning presentation, entitled, “Locating The User Manual To This Bitch.” All valid, if not predictable, points. Whitney lost us, however, when she started in with the jokes.
“Even Stephen Hawking could not pull this off,” she said. And that’s true—Stephen Hawking, who to our knowledge has never attempted to underwrite any subprime debt, probably couldn’t singlehandedly turn that dump into something resembling a solvent company. It’s just slightly disconcerting when your most vociferous critic, who’s supposed to be offering reasoned, sober analysis is playing to the Borscht belt. She might as well have said, “Even Chuck Norris could not pull this off.” (In fact, if yuks are her new schtick, she should have gone with Chuck Norris.) Anyway my point is that while we will continue to be unrelenting in our mockery of Shittygroup, you should take this as a sign to back up the truck and buy this bitch. And reserve your seats from Meredith’s debut at the Laugh Factory’s monthly open mic night pronto.
Citi’s Pandit Faces `Impossible Feat,’ Whitney Says [Bloomberg]
A lot of people are wondering this morning how HSBC was able to see a rise in first quarter profits, despite rising bad-debt charges in the U.S. and a sizable writedown in its investment banking arm. The most popular theory pins the gains to higher returns in Asia, the Middle East and Latin America. DealBreaker readers who have been paying attention know that the key to HSBC’s success is far more subtle: the elimination of acronyms. Who’s laughing at asinine corporate directives now?
Earlier: We Need To Make This Thing Work. What’s The Key To Making This Thing Work? NO. MORE. ACRONYMS. If I See Or Hear One Person Not Spelling/Saying The Whole Word Out, I Will Go Carnival-Freak Crazy On Your Ass. I Mean It, I’ll Scratch Your Eyes Out.
3rd UPDATE: HSBC 1Q Profit Ahead Of 1Q07 Despite US Impairments [CNN Money]
