Archive for July 2010

  • 28 Jul 2010 at 9:30 AM

Opening Bell: 07.28.10

Obama To Test Wall Street Ties (WSJ)
Both of tonight’s New York City fundraisers are both sold out, planners said. But antipathy toward the Democrats will limit the number of events in New York, said one long-time Democratic fund-raiser. This person said he tried to recruit Wall Street figures to attend one of this week’s events and found that many were uninterested or wanted to go so they could complain to the president.

Citigroup May Move Prop Traders to Hedge Funds for Volcker Rule (Bloomberg)
Traders in the Citi Principal Strategies unit, led by Sutesh Sharma, would be reassigned to Citi Capital Advisors, which mostly oversees money for outside investors, said the people, speaking anonymously because the talks are preliminary. The bank would set up the traders as hedge-fund managers and seed their funds, then raise money from outside investors to redeem its stakes, the people said.

In Study, 2 Economists Say Intervention Helped Avert a 2nd Depression (NYT)
In a new paper, by Alan S. Blinder, a Princeton professor and former vice chairman of the Fed, and Mark Zandi, chief economist at Moody’s Analytics, the economists argue that without the Wall Street bailout, the bank stress tests, the emergency lending and asset purchases by the Federal Reserve, and the Obama administration’s fiscal stimulus program, the nation’s gross domestic product would be about 6.5 percent lower this year. In addition, there would be about 8.5 million fewer jobs, on top of the more than 8 million already lost; and the economy would be experiencing deflation, instead of low inflation.

Goldman Already Step Ahead Of FinReg (FBN)
The bank has moved about half of its prop trading operations into its asset management division, where these traders can talk to Goldman clients and then place their market bets. Other Wall Street firms are watching Goldman’s moves closely and are considering similar measures. “If these traders become more client focused they can survive,” said a senior executive at one of the big banks.

Tiger Club’s U.S. Millionaires Pounce on Berkshire’s 19% Return (Bloomberg)
Members of New York-based Tiger 21 picked Berkshire as their top stock in a survey of preferred investments because they like Buffett’s strategy of buying companies, according to Michael Sonnenfeldt, a founder of Tiger 21, which is an investment club of 140 members, most of whom have a net worth of at least $10 million, totaling more than $10 billion in collective assets. “No one wants to be a stock picker, but if they are, they’re going to back someone who has essentially created his wealth through buying stock,” said Sonnenfeldt.

Moody’s: BofA, Citi, Wells Fargo Outlook Negative (Reuters)
“Over the next 12 to 24 months … we expect that our support assumptions for systemically important banks will likely revert to pre-crisis, or even lower, levels—though we do not anticipate that we would completely eliminate support from these firms’ senior debt and deposit ratings,” Moody’s said.

Soros set to buy stake in Bombay exchange (FT)
Soros Fund Management is planning to pay about $40m for its stake, valuing Asia’s oldest bourse at about $1bn, said a person involved in the negotiations. Read more »

  • 27 Jul 2010 at 5:42 PM

Write-Offs: 07.27.10

$$$ The hospitality of Wall Streeters has helped a pair of New Zealanders overcome thunderstorms and a broken-down van on their quest to play golf at a different course every day for an entire year.

$$$ The Hypocrisy Of Dodd-Frank’s Million Dollar Fraud Bounty [CNBC]

$$$ Christie Brinkley has an “extremely optimistic” view of the Hamptons housing market. [WSJ] Read more »

“Don’t go expecting a movie that will give you some great intellectual or emotional insights into the Wall Street crisis. Sure, there are the obligatory “life on the trading floor” scenes and quasi-faithful recreations of arguments between Treasury and Wall Street at the oak-paneled New York Fed. And there are lots of cameos of CNBC anchors and Nouriel Roubini (as “Dr. Hashimi”) to give the movie “authenticity.” But the authenticity is as phony as Bernie Madoff’s investment returns. How many Fordham-educated prop traders with the last name “Moore” speak fluent Mandarin?” [WSJ via BI]

  • 27 Jul 2010 at 3:40 PM

Dodd-Frank Provisions We Can All Safely Ignore

The following post is by Dealbreaker reader and commenter Infinite Guest.

Laws go unenforced for any of several superficially distinct reasons, but ultimately because of political failure. Mostly a reiteration of desuetudinal laws, Dodd-Frank seems deliberately written so that it can’t be enforced. Dodd-Frank is a gigantic recipe for political failure. Read more »

To: Viking Investors
From: O. Andreas Halvorsen

Our second quarter performance was a loss of 5.0% for VGE and a loss of 11.9% for VLF net of all fees on a composite basis

On an unlevered basis, VGE’s long portfolio was down 11.2% and the short portfolio was down 10.3%, yielding a long-short spread of negative 0.9% (see the attached Base Case Analysis). In the quarter, five long positions cost us 0.5% or more while no short contributed an equal amount.

We are greatly disappointed in Viking’s returns both on an absolute basis and relative to the indices. We do not blame factors outside of our control, but acknowledge that changes in the global macro-economic, political, and regulatory environment; a broad-based fall in stock prices around the world; and unusually high levels of correlation among these prices have increased the degree of difficulty in generating a profitable long-short spread. We are paid to deal with such challenges at all times and are in a business that requires hard work and consistent processes every day. When the market gives us a disappointing score for our efforts, we examine our results and our methods to ascertain whether we need to make adjustments – this is the Viking way. Rest assured that our objective remains to achieve maximum capital appreciation commensurate with reasonable risk, and we remain firmly dedicated to meet this goal. In light of this, we have engaged in a thorough examination of our results.

Read more »

At some time in the future, near or distant, at least a few of you are going to have to explain why you brought in a bunch of prostitutes for your colleagues and/or clients. Given. The circumstances will vary, as will the types of girls hired (Peter likes brunettes, Jim wants someone who will call him Judy, the guys on the commodities desk like to attend rodeos) but it’s likely that you’ll all have to provide a rationale for the impetus behind this particular perk of the job, and why, in the eyes of the law, it should be seen as no big deal. And when that happens, I think you should all consider taking a page from David Brooks’ playa-book. Read more »

Barney Frank is a pretty well-known Representative. But you know what? Some people just don’t keep up with the who’s who of Congress. Having said that, I’m pretty sure Mr. Frank did not go to the trouble of crafting this financial reform bill thing so that he could show up to various establishments (night-clubs, the supermarket, the ferry to Fire Island, what have you) and suffer the indignity of not only having to ask “Do you know who I am?” but have the answer be “No” and/or “I don’t care, sir.” Read more »

  • 27 Jul 2010 at 10:50 AM

Here Are Some Thoughts On Men And Wall Street

Maybe not sounding so crazy anymore?

And the one way this thing can apparently be saved (think ‘e’).

The Alpha-males running America are textbook examples of the Oedipus complex in action. Men? No, inside they’re still little boys who secretly want to win mommy’s favor by knocking off big daddy. Basic psychology, except they’re overdosing the real world with too much edgy testosterone … aggressive, arrogant, narcissistic … bullies on the playground overcompensating for an inferiority complex … they love games, fights, contests, winning, deals, risks, wars, anything to prove they’re king-of-the-hill … like owning truckloads of money, enough for several lifetimes … think Liar’s Poker, they play for bragging rights, to tell “the guys” how they beat “the other guys” on the playing field … but psychologically they really are just little boys in big-boy costumes playing “grown-up” … especially the new breed of Wall Street traders gambling in history’s greatest casino, the $700 trillion global shadow banking system for derivatives…America is a nation ruled by Alpha-males with a death wish, yet blind to their fatal self-destructive flaw.

Read more »