Larry Kudlow, as you may have noticed, is for some reason obsessed with Larry Summers taking over for Ben Bernanke. Is this because LK just loves the idea of having a “Chairman Larry”? Did Summers make Kuds a promise back in their Studio 54 days that if he ever got the job, he’d commission the printing of a stack of special edition hundos with Kudlow’s face on them* through which the two would do seemingly endless lines off the president’s desk? It’s unclear. But does buddy boy have a point? And if not, why not?
*Early in Bernanke’s tenure L-Kud approached him about this but was brutally rebuffed. Kuds knew better than to ask Greenspan, who had a hard and fast policy of only printing special edition bills bearing the mugs of his favorite Hill bitches.
Archive for June 2009
Before another New Jersey health care worker gets thrown for a loop and tries to cover their losses from yet another structured product by suing everyone involved, Finra sent out a little reminder to brokers and investment advisers that leveraged ETFs are not for everyone. They cautioned that these “highly complex financial instruments” are typically unsuitable for retail investors. For those who might selectively confuse the safety of products labeled ultra short/ultra long for the cash stuffed under their mattress, the Finra communication is bad news. Now they might have to freely admit that they were simply greedy and didn’t know what they were doing.
Finra Urges Caution on Leveraged Funds [WSJ]
The following post is by a hedge fund manager friend of DB who shall remain nameless. He runs the emerging markets desk at his firm.
Emerging Markets and derivatives are like alcohol and barbiturates: each on its own has attractions but create a recipe for choking on one’s own vomit when combined. And despite all warnings, rock stars (or in the case of finance “rock stars”), real and aspiring, continue to do just that. The latest set of investors to get the Jimi Hendrix experience: writers of CDS on the Kazakh financial institution BTA Bank. The bank, by some measures Kazakhstan’s largest, declared its intent to restructure its debt back in late April, after the authorities alleged its loan book to be riddled with undisclosed related-party deals and its controlling shareholder, Mr. Mukhtar Ablyazov, fled the country. On a loan book of KZT 2.4 trillion, it has now provisioned nearly KZT 1.5 trillion, the sort of write-down that makes Merrill Lynch look like a bunch of pikers. Sadly for creditors, it didn’t occur to Mr. Ablyazov to try to pitch the bank to Ken Lewis.
The chicanery at BTA Bank itself is another story, though. ISDA’s Determinations Committee declared a credit event on April 29th. The baleful interaction of EM and derivatives relates to the CDS credit event auction. BTA Bank had issued a fairly full curve of eurobonds, most of which traded in the wake of the default in the mid-20s. The spirit of creativity was strong with the Kazakhs, though, and the bank was understood to have done a fair number of private deals. Less well-understood was the magnitude of off-balance sheet borrowing. A few “shell” borrowers – reputedly related to BTAS’s controlling shareholder — had taken out loans from western banks, which in turn got guarantees on these loans from BTA. The “shell” borrowers in turn onlent to Ablyazov-related entities (as Borat would say, “Naughty, naughty!”). Credit Suisse was the most active lender; at the time of making the loans – which yielded a premium to other BTAS obligations – it had gone and hedged itself by buying CDS from the market.
The Acting Assistant Secretary for Financial Markets, Karthik Ramanathan, gave a bit of a pep talk yesterday regarding US debt issuance for 2009 and 2010. People should take comfort knowing that the US has funded nearly 80% of its total “expected borrowing needs” of $2 trillion to fund the fiscal deficit for this year and is “well situated” on its funding needs for next year. However, left out of this feel good speech was any guidance on the administration’s demand forecast for US debt that falls into the “unexpected borrowing needs category” on the off chance the government’s macroeconomic assumptions are a tad too optimistic.
US Treasury: Funding Needs Large But “Manageable” [Dow Jones via Nasdaq]
Ira Sorkin has put it out there that he’d like his client to get less than life when he’s sentenced on June 29. Also, apparently Ponzi Boy is planning on speaking about “the shame he feels and the pain he’s caused,” and attempt to paint himself as a victim with regard to “the death threats and anti-Semitic e-mails he’s received.”
Update: This is good– Sorkin is asking that Bernie get twelve years.
As previously mentioned, the Central Intelligence Agency wants you, yes you, up in its business. The Company will be conducting interviews in the city this summer, and though its website claims you had to submit a resume by yesterday to be considered, there’s probably some wiggle room there. While starting salaries aren’t as high as you’d probably like ($48,682 – $95,026), spokeswoman Marie Harf, thinks the “deeper sense of patriotism” than you’d get working for, say, Citi, is a decent trade. She also adds that many of you have no other options (unless you count choosing between what they’re offering and zero dollars), which we find a tad bitchy but not necessarily untrue. Plus, there’s the badass factor of telling people you work for The Agency, even if you’re not staffed in the field and, let’s be honest, none of you fairies are cut out for something that dangerous.
According to “Jim,” who previously worked at an unnamed bulge bracket bank, and took a gig with the CIA after 9/11, working in finance is cool but if you’re not actively shutting down the next attack on the country, you’re not doing much at all. “Even though we were doing important work in investment banking, you don’t get the feeling every day that you are making a contribution or doing something that matters. You might help a company go to the bond market and get some money, but is that really using all of your talents and abilities … [to] avoid another 9-11? I wanted to find a responsibility here that would leverage my educational background but also my finance background.” Interested? Here’s what they’re looking for:
Ideally, applicants are “specialists in international banking systems, financial markets, financial transactions, financial instruments, and energy. Economic analysts will also assess illicit financial activities, including networks used by terrorist and criminal groups, financing and procurement of weapons of mass destruction, money laundering, and corruption among foreign governments and companies.”
“The skills sets are similar, trying to understand trends,” says a senior banker with a Wall Street boutique firm, adding that the CIA’s attempts at recruiting from Wall Street come at a time when many professionals who have lived through the financial crisis have to be “rethinking their priorities.”
Oh, and there’s this:
Dick Fuld, pictured with former LEH executive vice-president Scott Freidheim, enjoying himself at a wedding in Paris.
Goldman Denies It Will Pay Out Huge Bonuses (NYDN)
I mean, it will, but the issue here is that we don’t know if they’ll be record-breakingly big just yet. We can certainly make guesses, though, which you should feel free to do at this time.
U.S. credit rating a “solid triple-A,” Says Moody’s (Reuters)
But it could be at risk for the d-word. “Either our assumptions in terms of debt reversibility prove to be wrong. That is, in fact the U.S. government is unable to bring public debt back to a downward trajectory,” Pierre Cailleteau, team managing director of Moody’s Sovereign Risk Group said.
Three Banks Suspend TARP Dividends (WSJ)
At least three cash-strapped banks have stopped paying the government the dividends they owe: JPM, GS, MS. No, just messing. Jamie Dimon would sell his liver if need be. The banks are pacific Capital Bancorp, Seacoast Banking Corp, and Midwest Banc Holdings.
Buffett Boy Raises $2 billion (FT)
Byron Trott, AKA “Buffett’s banker,” has raises a nice chunk of change for his new firm, BDT Capital Partners. For those interested in getting in on that, BDT will “maintain a close relationship with Goldman,” Trott’s former employer.
A Transplant That Is Raising Many Questions. You Know The One. (NYT)
Doctors say there is “little opportunity” to cheat the system when you need an organ, but the Times apparently remains unconvinced that Mock Turtleneck didn’t do just that.
What Has the World Bank or IMF Ever Gotten Right? (Infectious Greed)
Paul Kedrosky would like to know.
No Jobs On Wall Street Mean Graduates Can Have A Social Conscience Now (Bloomberg)
Nationally, 27 percent of about 1.6 million graduating seniors plan to work for nonprofit groups or governments, an increase from 23 percent in 2008.
Settlement Anticipated In UBS Case (NYT)
“The Justice Department may drop a closely watched legal case aimed at forcing the Swiss bank UBS to divulge the names of 52,000 wealthy American clients suspected of offshore tax evasion, a United States official briefed on the matter said Monday. The move, which would halt an unusually aggressive effort to force Switzerland to lift its veil of banking secrecy, could happen by mid-July.”
$$$ Hiring: Morgan Stanley, HSBC, CIC and more. [The Deal]
$$$ Investor’s Widow Says Madoff Murdered Husband [Dealbook]
$$$ Stalkers: Erin Burnett will be in Hoboken tonight. [NJ.com]
$$$ RIEF Outperforms S&P by 2.06% MTD, RIFF Plunges [ZH]
$$$ Job of the Week: A multi-strategy hedge fund seeks experienced portfolio manager for launch of new fund focused on inflation/interest rate strategy. That could be you. [DB Career Center]
$$$ Consider making your next hire a shark: “Great white sharks have some things in common with human serial killers, a new study says: They don’t attack at random, but stalk specific victims, lurking out of sight.
The sharks hang back and observe from a not-too-close, not-too-far base, hunt strategically, and learn from previous attempts, according to a study being published online Monday in the Journal of Zoology. Researchers used a serial killer profiling method to figure out just how the fearsome ocean predator hunts, something that’s been hard to observe beneath the surface.
“There’s some strategy going on,” said study co-author Neil Hammerschlag, a shark researcher at the University of Miami who observed 340 great white shark attacks on seals off an island in South Africa. “It’s more than sharks lurking at the water waiting to go after them.” [AP]
His wife (among others) is looking for him.
The Best Advice Bernie Madoff Ever Got: A Sucker, And By That We Mean Potential Investor, Is Born Every Second. Get Somea That.
By Bess LevinUnfortunately, he wasn’t interviewed for the latest issue of Fortune, for which the cover story is “The Best Advice I Ever Got,” but presumably that’s what he would’ve said. People who were actually questioned for the article include Lloyd Blankfein (who said the best pearl of wisdom ever laid on his ass was “empower a subordinate“), Mohamed El-Erian (“Push beyond your comfort zone“), Jim Rogers (“read“), and Meredith Whitney (who lied and said the best piece of advice she ever got was “set realistic goals” when we all know it was “establish a safeword beforehand”). The wisest thing anyone ever told Julian Roberston was that you’ll make a lot more friends/clients getting hammered and doing magic tricks at parties than you will talking shop.
