Charging full speed ahead into a world of “up-only” equities, the SEC is back on the evils of short-selling band wagon. And you can believe we are going to get some results this time. Deliberate and thoughtful results. The kind of results that get results.
The head of the Securities and Exchange Commission said Tuesday she is making the issue of new rules restricting short-selling a priority as the agency hears from an array of interests about ways to limit trades that bet against a stock.
Investors and lawmakers have been clamoring for the SEC to put new brakes on trading moves they say worsened the market’s downturn.
“I have made it a priority to evaluate the issue of short-selling regulation, and ensure that any future policies in this area are the result of a deliberate and thoughtful process,” SEC Chairman Mary Schapiro said at the start of a public “round-table” meeting organized by the agency.
SEC chief says new short-selling rules a priority [The Associated Press]
Given that we are fully supportive of the Taking It Easy lifestyle, we relay the following without judgment, and perhaps even with a bit of “break me off a piece of that.”
One of AQR’s founding partners, Robert Krail, has been completely absent from the firm for almost three years now. He moved out to Hollywood and bought a $20mm house. Arguably, this is in violation of the key personnel provision in most of the firm’s investors’ offering memorandum. If anyone is trying to get out of the lockup they could use that.
To recap: last month Jim Cramer said that Nouriel Roubini was “intoxicated” with his own “prescience and vision.” Roubini responded with “Cramer is a buffoon,” and the alleged court jester, who loves it when you tell him he sucks, invited Dr. Doom onto his show to say it to his face. Perhaps ticked that he’s yet to be taken up on the offer, JC came back with a PS this morning:
Today Roubini, my favorite perma-panda, takes on Warren Buffett in a piece entitled “We Can’t Subsidize the Banks Forever,” in the Op-Ed section of the Wall Street Journal. This debate reminds me of the Pope v. Stalin when Stalin responded to the query about the pope being an opponent with “How many divisions does he have.” The simple truth is that the professor can’t stand up to the nation’s bank arbiter and this veiled attack seems like sour grapes as the answer isn’t that we subsidize banks forever, it is that we subsidize them for as long as we have to. Does Roubini favor nationalization because he has people short through this RGE Monitor outfit? Is that what this is all about?
Cramer Calls Out Roubini [TRB]
Apparently, this is the first insider trading case involving credit default swaps. We think it is high time that these points along the access of financial evil be eliminated permanently. Why fat cats should be permitted to continue victimizing innocent media holding companies with these crude, dangerous and unregulated instruments is beyond us. Enough is enough.
The Securities and Exchange Commission today charged Renato Negrin, a former portfolio manager at hedge fund investment adviser Millennium Partners L.P., and Jon-Paul Rorech, a salesman at Deutsche Bank Securities Inc., with insider trading in credit default swaps of VNU N.V., an international holding company that owns Nielsen Media and other media businesses.
[SEC Press Release]
Almost unnoticed (almost) China has been quietly making provisions to avoid the three-way-conversion from local currency to dollars to yuan when dealing with Central and South American trading partners. This should lift eyebrows in the United States, but so far it hasn’t. This might help:
China replaced the United States to become Brazil’s biggest trading partner, said Brazil’s Ministry of Development, Industry and Exterior Trade on Monday.
According to the trade balance released by the ministry, the sum of Brazil’s exports and imports with China reached 3.2 billion U.S. dollars in April, over the 2.8 billion dollars in its trade with the U.S.
Trade Minister Welber Barral said the change was “historic,” as the U.S. has been Brazil’s biggest trading partner since the 1930s.
Though the trade pacts are being sold as a way to unfreeze trade during the global economic slump, but the arrangements could well be the beginning of a larger effort by China engage in a little trade partner swapping. China already has put in place a $10 billion currency swap with Argentina, as well as deals with Malaysia, South Korea, Hong Kong, Belarus, Indonesia just in the last five months.
Is anyone paying attention over at Treasury?
China surpasses U.S. to become Brazil’s biggest trading partner [China View]
Last night we were thinking it’d been a while since we talked AQR Capital (and forever since any of the principals left a heated message for us). So we decided to see what was a poppin’ up in Greenwich. Turns out a lot! A little bird brings us up to speed:
AQR’s head of fixed income left yesterday. He was a star trader poached from Deutsche Bank three years ago. This is the second head of fixed income to depart the firm in a year.
They royally screwed people on bonuses last year and anybody who could has been walking out and even those without a back up are doing so. There have been at least five people who quit that place thus far this year without another job lined up. Probably because AQR enforces upon everyone (even junior analysts) a six month non-compete (so it’s in your advantage to walk ASAP if you recognize that there will be no payout).
They only have $20B total under management (this time last year it was $33B). About $19B of that is in managed account which only yields about 40bps in fees. And we all know the returns aren’t what they used to be.
Calpers completely withdrew its money. The marketing guys used to love to boast how they had Calpers (although it was in long-only managed account and not in hedge funds) to potential investors. They’ve probably gone quiet on the bragging lately.
Oh yes, one more thing. AMG, 25% owner of AQR, ordered Cliffy to get anger management counseling after his warm posting on your site. Since then he has been seen in his office walking around with no shoes on, incense burning, and occasionally engaging in meditation sessions behind closed doors.
Given the dominating coverage focus on Chrysler’s pre-bankruptcy, and the trials of some senior creditors, as well as a great deal of obfuscation or outright willful ignorance, it is easy to forget that “Chrysler sails out of bankruptcy” isn’t a slam dunk- even if we could expect Fiat’s total, drooling subservience, which we cannot. Chrysler still has to actually, you know, sell automobiles. And they are going to have to totally rebuild a dealer network that the bankruptcy filing was designed to crush. As you might imagine, rosy projections about sales have not come to pass.
Chrysler’s car dealership network is on the verge of collapse, a U.S. bankruptcy court heard on Monday, as hundreds of dealerships have closed their doors this year and uncertainty about the company’s future is driving consumers away.
“A lot of these guys right now are just trying to survive,” James Arrigo, the co-chairman of Chrysler’s National Dealer Counsel said of the company’s dealers at a hearing on Monday in U.S. bankruptcy court in Manhattan.
Arrigo, who is one of the company’s top-ten selling dealers, according to court papers, says that even he has seen a drop off of about 50 percent in car sales this year.
Of course, the deterioration of the dealership network is also one of the prime reasons, the argument goes, that Chrysler’s sale must be flashed through the courts as quickly as possible, so it is not surprising that we would start to hear a lot about the dire situation Chrysler is in. (Of course, not a few days ago everything was going to be just fine, but now that a speedy sale is all the rage, things are exploding and spilling toxic gas into a nearby wildlife preserve causing unmarried cats and dogs to room together and otherwise filling the world with unneeded chaos).
Chrysler bankruptcy has dealers on “razor’s edge” [Reuters]
Performance for Pershing Square International:
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So remember that totally crazy rumor everyone thought was insane to the effect that pretty much all of the banks (16 of 19) failed the stress tests? Or were “technically insolvent,” whatever that means? That rumor seems to have originated with a April 19th weblog entry from Turner Radio Network listing 7 facts about the stress tests and summarizing with “Put bluntly, the entire US Banking System is in complete and total collapse.” Well, that eventually looked like a total hoax- intended to be outlandish for the shockingly poor results turned in by the banks tested. But apparently the real results aren’t particularly fantastic either. Specifically:
About 10 of the 19 largest U.S. banks being stress tested will be instructed by regulators to raise more capital, according to a source familiar with official talks.
The banks have been negotiating with their regulators about the depth of their capital needs, should the recession prove to be deeper and longer than anticipated. Markets have been anxiously anticipating the results, which will differentiate the strongest banks from those still expected to sustain considerable credit losses.
What could be a more perfect opportunity for the DecaSplit 10 unit splitscreen segment on CNBC? Reuters managed only eight (and since the exact list of the failuresbanks needing further assistance from various agencies and the gracious demeanor of the American public hasn’t been released yet, these might not even vaguely resemble the real list. Well except for Ken Lewis. And Count Vikula) so CNBC has a huge opening here.
About 10 U.S. stress test banks to need more capital [Reuters]
Citigroup Eyes New Ways to Pay Employees (Reuters)
“Three people familiar with the matter said the bank has examined a series of possible moves, including special stock-based bonuses, or offering employees a percentage of their group’s revenue.”
UBS Reports $1.76B Loss (NYT)
The Swiss bank chalked the loss up to “yet more writedowns, as client withdrawals continued.” I don’t see client withdrawals stemming, any time soon.
“UBS said its core wealth management and Swiss bank business saw net new money outflows of 23.4 billion francs in the quarter, while its wealth management Americas business saw net new money inflows of 16.2 billion.”
RBS Finance Chief To Step Down (WSJ)
“The CFO, Guy Whittaker, is staying on to allow time to undertake an orderly search for a successor, RBS said. In the meantime, his role and responsibilities are unchanged. A spokesman for RBS said that Mr. Whittaker wasn’t available for comment.
He was preceded in his departure by, among others, former CEO Fred Goodwin, who has been sharply criticized for a taking generous pension package that the bank is now attempting to claw back.”
Program To Unfreeze Credit Receives $10B Boost (WSJ)
People are starting to push credit card loans/student loans into bonds again under TALF; there’s been about $10B in movement in the past two months. The most deal was put together by JP Morgan recently was the largest to date, $5B, and sold at LIBOR + 1.55.
“The $5 billion deal put together by J.P. Morgan is one of six deals, including General Electric Co.’s $1 billion credit-card-backed deal, due to be sold Tuesday, the deadline for the Fed’s nonrecourse loans under TALF. J.P. Morgan, which is underwriting the deal, didn’t return calls seeking comment.”
Much The Same After Credit Crunch (Bloomberg)
Cohen (of Sullivan & Cromwell LLP) is of the opinion that Wall Street will be much the same after the recent credit crunch; that is, that firms won’t be remarkably different in their structuring or operating practices. Between he and Lazard’s Par, and Carlyle’s Rubenstein they seem to think we’ll end up with 5 to 7 larger institutions, 3 to 4 of which are going to be top notch.
Fed Sees Loosening Of Bank Standards For Loan Origination (WSJ)
Ongoing surveys by the Federal Reserve are showing that banks are starting to loosen credit requirements for loan origination, most notably in the commercial sector.
“When banks tighten standards, they make it harder to get a loan by toughening certain criteria, such as for income, cash flow or indebtedness. Banks were also a little less aggressive about demanding more for the loans they actually made. Some 80% said they toughened terms on loans — for instance, increasing the interest rate — when compared with some benchmark. That was down from the 95% that said in January they demanded a higher rate.”
Georgia Accuses Russia Of Mutinous Plot (BBC)
“Tanks and armoured personnel carriers are being sent to quell the rebellion at the Mukhrovani base, reports say.
The authorities say the mutiny is part of an attempted coup – linked to Russia and aimed at assassinating President Mikhail Saakashvili.
Russia’s envoy to Nato described the charges as “mad”. The trouble comes a day before Nato exercises in Georgia.”
$$$ “American International Group Inc., the insurer rescued four times by the U.S., may post first-quarter results this week that don’t trigger a new capital injection from the government, said three people familiar with the matter. ” [Bloomberg]
$$$ Adviser Sees Profitable Chrysler By 2012 [Dbook]
$$$ The SEC has strong words for Sir Allen Stanford [FT Alphaville]
