A Palm Beach Enclave, Stunned by an Inside Job (NYT)
"He just didn't make mistakes," said Richard Spring, 73, from Boca Raton. "He was just a sound, smart, reasonable guy."Mr. Spring recounted meeting Mr. Madoff in the early 1970s when they shared a helicopter each day commuting from Long Island to Wall Street.
He said he vividly recalled one commute when Mr. Madoff "bawled out" one of his traders for sloppy work, not protecting against a downturn.
Impressed, he later invested with Mr. Madoff, over time putting more than $11 million into the firm, virtually every cent of his savings, he said.
BofA Holds On To Construction Bank, Keeps Plans To Shed People (Reuters)
Shares of Construction Bank fell 4% in trading as Bank of America announced it was going to hold on to it: a sure sign that the Chinese markets completely appreciate BoA's position. Had the move gone through, it would have raised approximately $3B in capital for the firm, whereas the shedding of 35,000 jobs over the next 7 years is going to effectively save the firm $7B. There's a further argument that by dumping the shares now, BoA would be opting out of any downside that the Chinese market will offer in the next couple of years - something that should be considered and then dismissed.
Hedge Fund Industry Downsizing (Bloomberg)
While we all saw it coming, Bloomberg is running a story calling for about a third (roughly 3300) fund failures/mergers in coming years. Generally speaking (and when it doesn't strike so close to home) we all know that consolidation can be healthy for an industry, I just wish it had been coupled with rock bottom bourbon prices and severance packages that lasted for a couple of years.
Work Slowing For China's Children (AP)
Human Rights mogul China is showing signs of a waning economy, as is evidenced by factory output falling to its lowest levels in the better part of a decade.
You Paid Too Much (Reuters)
"U.S. home values lost $1.9 trillion from the first of the year through the end of the third quarter, and will probably fall further in the fourth quarter. One in seven of all homeowners, or 14.3 percent, were "underwater" by the end of the third quarter, the reports showed."
Nationally, I would think it's fair to say people paid about 20% too much for their houses. I know there was talk of a mortgage bailout in days past - I think a better idea is just to let these people write it down on their taxes (much like a bank would write down an asset). Amortize it over 5 years, take the offset in taxes owed and allow the consumer to apply it towards the principal of the loan.
Oil Climbs On OPEC Meeting (FT)
Oil's pushing $50 a barrel in trading ahead of the OPEC meeting scheduled for this week. While the days of $150 barrels aren't likely to return for a while, there's a serious concern here that interests in the middle east (like survival) could push prices higher, effectively knee capping the manufacturing/shipping sectors - not to mention the cascading effect through everything else. What's more worrisome, however, is that I can see congress instituting price control measures in order to protect the American consumer. Don't worry consumer: your government will protect you.
Waking Up To Nothing (Reuters)
A compilation of banks and their exposure to the cluster fuck of losses presented by Mr. Madoff - what's truly sad about this is that the banks failed to do any in depth due diligence. It also makes you wonder how thoroughly they've examined the rest of their holdings (in re: funds), and whether we're set up to see this again?
--William Richards
Posted by guest , Dec 15, 2008 8:14AM
could somebody give me a credible explanation for how simons at renaissance makes money? 35% a year since 89, really?
Posted by VOL IS KING , Dec 15, 2008 8:15AM
oh come on, they didn't have helicopters in the 70's... maybe a plymouth helicopter or some shit.
Posted by VOL IS KING , Dec 15, 2008 8:19AM
@1:
He's a math PhD from MIT and most people are idiots? All he does is move liquidity from one market to another. The market isn't even close to efficient, the real question is why they don't make higher returns.
Posted by guest , Dec 15, 2008 8:21AM
can we have a separate discussion on citadel...in addition to the one started over the weekend...the gating decision is highly suspect
Posted by guest , Dec 15, 2008 8:43AM
http://www.bloomberg.com/apps/news?pid=20601087&sid=aKgINkd9m988&refer=home
"More than a dozen SEC inspectors have been working around the clock examining records at Bernard L. Madoff Investment Securities LLC in New York after his sons told authorities Dec. 10 he’d confessed to orchestrating a Ponzi scheme with more than $50 billion in losses, the biggest in history. People with knowledge of the probe who initially said they suspected the loss estimate was too high now say it may be roughly accurate."
Ouch babe.
Posted by guest , Dec 15, 2008 8:47AM
@5
Hi, my name is last week. Who are you?
Posted by guest , Dec 15, 2008 8:49AM
Schwab to lay off 100 jobs and take $20M pretax charge
Electrolux to cut 3000x
Northern trust cuts 450x , $25M charge
DSM to cut 1000x
Componenta to cut 1600x
Experian to cut 130x
L'Oreal to cut 500x
the fun don't stop!
Posted by guest , Dec 15, 2008 8:49AM
Schwab to lay off 100 jobs and take $20M pretax charge
Electrolux to cut 3000x
Northern trust cuts 450x , $25M charge
DSM to cut 1000x
Componenta to cut 1600x
Experian to cut 130x
L'Oreal to cut 500x
the fun don't stop!
Posted by cy , Dec 15, 2008 8:54AM
Will. i. am.-
Oil went to 147 without any mention of US price controls. What makes you think price controls would become popular even if oil doubled from where it is now?
Posted by guest , Dec 15, 2008 8:56AM
It never ceases to amaze in a financial publication how many times writers confuse principal with principle.
Posted by guest , Dec 15, 2008 9:02AM
"Survival" is why the OPEC cuts will not do any good - every member of the cartel has an incentive to cheat. I read somewhere that Russia needs $90/bbl oil to cover their 2009 budget (yes, I know they are not members of OPEC but Putin has paid lip service to working on concert with OPEC members). Venezuela gets 30% of the world market price on half its oil (petrocaribe countries) and 50% at the world price. Iran is propped up on subsidies and graft. Most of the OPEC countries subsidize fuel for the "man in the street."
It's classic Prisoners' Dilemma. There is no mechanism for sanctioning cheating members, because there is no way to "prove" cheating absent an intrusive inspection regime that no member would agree to.
Posted by guest , Dec 15, 2008 9:08AM
@6 - Read the last sentence of the Bloomberg quote, moron. The fact that investigators now suspect Bernie wasn't exaggerating is in fact new news. I hope your Mommy and Daddy had all their funds with Bernie. Have a nice day!
Posted by guest , Dec 15, 2008 9:14AM
#10 - most would not recognize either
Posted by guest , Dec 15, 2008 9:18AM
@ 10 the pricipal is your 'pal' :)
Posted by guest , Dec 15, 2008 9:18AM
TGFD is curious.
Does anyone here on DB personally know someone who has been impacted my Madoff's activities?
I'd like to hear a reality story.
The Guy from Delaware
Posted by guest , Dec 15, 2008 9:24AM
@10: Ask Bernie Madoff - reporters aren't the only ones who do it. ;)
Posted by guest , Dec 15, 2008 9:25AM
Watch CNBC TGFD......they have been running the names of many in the world whose losses are incredible.
Posted by William Richards , Dec 15, 2008 9:26AM
@9
That's a great question. When oil was at $147 we were looking Demand pull inflation (well, and greed) -- but it was a market driven move. There's too much going on right now, with too many people pissed off -- and if OPEC cuts production it's going to be seen as spite, and the politicos will be more likely to act.
I'm not saying they will, but I wouldn't rule it out in this climate.
Posted by cy , Dec 15, 2008 9:34AM
Will-
Thank you for recognizing the greatness of my question.
I think some of the older politicians probably still remember the needless trauma (shortages, queues, etc) price controls brought on in the 70's. I would hope they'd have more sense than to try again.
Posted by guest , Dec 15, 2008 9:38AM
Starting to see some Grannys advertising on CL Erotic now - love those gum jobs!!
Posted by guest , Dec 15, 2008 9:53AM
Can we please stop calling it a Ponzi scheme--from now on it should be a Madoff scheme.
Posted by guest , Dec 15, 2008 9:57AM
@#20...
TGFD looked up CL Erotic, and I didn't see any grannies on there.
The Guy from Delaware
Posted by guest , Dec 15, 2008 10:01AM
@3 - No. Just no.
Posted by guest , Dec 15, 2008 11:30AM
sorry but how could he have "bawled out" someone from a helicopter in the 1970s? There were no cell phones yet...
Posted by guest , Dec 15, 2008 2:05PM
Severance packages? Hedge funds don't give any severance packages. You get money for the vacation/sick days you have left in the year and shown the door.