Yes, it’s part of the Occupy Wall Street protest but still- his own personal marching band and choir! If I’m Vikram, I’m pretty psyched about this, especially considering all Brian Moynihan is getting are a bunch of paper airplanes. Continue reading »
Archive for October 2011
High School Marching Band And Choir Of Thousands To Serenade Vikram Pandit Tomorrow Today
By Bess Levin
As you may have heard, things have not been going so hot for MF Global lately (though CEO Jon Corzine would beg to differ, saying yesterday on an internal call that “things are fine, pretty much”). The brokerage firm reported its biggest quarterly loss ever this earlier this week, Moody’s cut its rating to one step above junk on Monday, and Fitch, not wanting to feel left out of the gang bang, downgraded the company to BB+ from BBB, as well as placing it on Rating Watch Negative. Supposedly, the wheels really started to come off when Corzine began actively realizing his dream of refashioning MF-G in the likeness of his former employer but now is not the time for pointing fingers- now is the time for working the phones and selling off (part) of this bitch. Continue reading »
The Greek CDS situation is sort of puzzling, but it’s possible, and popular, to overstate its puzzlingness. We have probably been guilty of doing so in the past. In brief: if you hold Greek bonds, you sort of have to hand them over and get back other, shinier Greek bonds with half the face value. How sort of? The text of the statement is “we invite Greece, private investors and all parties concerned to develop a voluntary bond exchange with a nominal discount of 50% on notional Greek debt held by private investors,” which is an attractive invitation although it does not exactly indicate that the party is occurring right now. But that sentence is code; it was negotiated by the banks’ trade group and is a sort of quid pro quo for bank recaps and general regulatory approval so you’d expect most – not necessarily all – of the banks to be onside. The fact that the statement was released suggests that everyone thinks there are soft commitments to exchange from the banks holding the large majority of Greece’s debt, though they’ve thought that before.
If everyone who holds Greek bonds does the exchange, then Greece never defaults. They just did a voluntary exchange. This presents a problem for Greek CDS: if there’s no default, there’s no credit event, and CDS never pays off even though bondholders lost 50% of principal. This is ISDA’s official conclusion and it’s just sort of self-evidently right, although some people disagree.
Felix Salmon sums up the general outrage:
[O]n one level, the ISDA statement that this still isn’t a Greek default, for CDS purposes, makes some sense. I’d probably make the same decision myself. But on the other hand, this does make a farce of the idea that credit default swaps constitute default protection, at least in the sovereign arena. If they don’t protect you against this, what earthly use are they?
Well, with most derivatives, it’s important to remember that the marginal investor isn’t buying them for payoff-at-maturity but for the market moves along the way. People equate CDS to insurance but it’s not. If you buy life insurance, it pays out if you die and it doesn’t if you don’t; if you just decide to take up drunk cliff-diving you don’t get any interim payment. Most CDS never pays out because defaults are rare, but it’s still a healthy market. Most investors don’t primarily care if CDS pays off when they crystallize a loss by handing in a bond in a pseudo-voluntary pseudo-default, because they’re unlikely to do that. They care if their CDS mark goes up, in a realizable way, while their mark on the bond goes down. And it sort of does:
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…from those hoping to occupy James Gorman’s domain. Continue reading »
Occupy Wall Street Protesters Hoping For 5-Star Meals This Weekend Will Have To Occupy A Restaurant, Says Cooking Staff
By Bess Levin
Earlier this week, we discussed a civil war brewing inside Occupy Wall Street, between those who are pro-drum circle bangings and those who are decidedly not, preferring their brethren pipe down, lest the neighbors be furthered annoyed by the racket. Now, according to the Post, the protesters are fighting another internal battle, this one over food. Specifically, the cooking staff has had it with the “vagrants, criminals and other freeloaders who have been descending on Zuccotti Park in increasing numbers every day” for the free breakfasts, lunches, dinners and sometimes snacks. Yesterday, kitchen volunteers “refused to serve any food for two hours” (and served sub-par offerings at other times), after Rafael Moreno charged the group with “limiting the amount of food we’re putting out to curb the influx of derelicts” and starting tomorrow, they’ll be really cranking up the heat. Continue reading »
As you may have heard, yesterday morning, former McKinsey managing director Rajat Gupta was charged with insider trading. Is he worried he might be headed to jail in the not too distant future? Not in the slightest. Because 1) As previously mentioned, that time he took part in a fall 2008 conference call with GS management and fellow board members and after hanging up, made himself wait exactly twenty three seconds before getting Raj Rajaratnam on the horn with the details? Wasn’t with the intent for the Galleon manager to actually trade on the material non-public information Rajat was sharing. And 2) Even if a court of law should interpret the evidence otherwise, someone’s got his back. Continue reading »
Europe Forges Greek Deal (WSJ)
French President Nicolas Sarkozy said after the marathon negotiating session that the leaders had reached agreement with private banks on a “voluntary” 50% reduction of Greece’s debt in the hands of private investors. He also said they had agreed to expand the firepower of the euro zone’s bailout vehicle, known as the European Financial Stability Facility, by four- or five-fold—suggesting it could provide guarantees for around €1 trillion, or about $1.4 trillion, of bonds issued by countries such as Spain and Italy. Mr. Sarkozy expressed satisfaction that the Greek debt agreement wouldn’t be forced on holders of Greek bonds. “France wanted to avoid the drama of a Greek default, when you remember the consequences of the failure of Lehman Brothers, and it’s done,” he said.
Greek PM Says 50 Percent Haircut Means Debt Now Sustainable (Reuters)
A deal that imposes 50 percent losses on private sector bondholders means Greece’s debt burden will be sustainable, Greek Prime Minister George Papandreou said on Thursday. Greece will produce no more primary budget deficits from next year, but some of the country’s banks may face temporary nationalization as a result of the debt relief, he warned. “The debt is absolutely sustainable now,” Papandreou told a news conference after a meeting of euro zone leaders, which reached agreement with private investors on a 50 percent write-down.
Europe’s Debt Threatens MF Global And Corzine (Dealbook)
A sale would almost certainly mean an abrupt exit for Mr. Corzine, age 64. His entrance, shortly after losing his bid to remain governor of New Jersey, generated enormous interest in what had been a respectable but small financial player. MF Global put such a premium on his presence that this summer, it included a “key man” provision in the sale of $325 million worth of bonds. Should Mr. Corzine leave to join the Obama administration by July 1, 2013, it agreed to pay a higher interest rate on the notes. Now, his reputation is intertwined with MF Global’s fate. “This is Corzine’s legacy, and this is where he’s got to step in,” Mr. Repetto said. “If you have a dominant leader like that, he needs to step in and reinvigorate the business and reassure investors and clients.”
RIM Hit With Lawsuits After Blackberry Outages (Reuters)
The U.S. lawsuit, filed on Wednesday in federal court in Santa Ana, California, was brought on behalf of all U.S. BlackBerry owners with an active service agreement at the time of the email, internet and messaging interruptions. It accuses Research in Motion of breach of contract, negligence and unjust enrichment.
US Economic Growth Probably Fastest In A Year (Bloomberg)
Gross domestic product, the value of all goods and services produced, rose at a 2.5 percent annual pace after advancing 1.3 percent in the previous three months, according to the median forecast of 83 economists surveyed by Bloomberg News. Household purchases, the biggest part of the economy, may have climbed more than twice as fast as in the second quarter…“The U.S. economy finished the third quarter a lot better than it started,” said David Semmens, a U.S. economist at Standard Chartered Bank in London. “While the recovery at first appeared to have lost its way, it is certainly not off track.”
Currency Traders In Worst Year Since 1991 (Bloomberg)
“What’s really frustrating is that we’re supposed to do well in a lousy world market,” said John Taylor, the founder of New York-based FX Concepts LLC, the world’s largest currency hedge fund. Taylor said in an Oct. 19 interview in London that he has lost 12 percent this year and assets under management fell to $5 billion from as much as $8 billion. “We’re doing very badly.”
Occupy Wall Street Seeks Winter Residence (NetNet)
Plans are underway to rent an enormous space capable of housing up to 300 people so that Occupy Wall Street can continue through the winter…”We’re going to find a place where people can sleep at night, store their stuff. We’ll maintain a continuous presence in the park but you can’t ask people to put their lives in danger. It’s Occupy Wall Street, not Freeze to Death In Zuccotti Park,” he said. Continue reading »
“Tap Dat A$$et” Continue reading »
With a lot of attention on the CBO report finding that out that income inequality has increased dramatically in the past 30 years, you might have a momentary lapse and think something like “say, maybe those protesters are onto something.” Resist the urge! A reader pointed us to this from Greg Mankiw, who is presumably planning his counter-demonstration now:
Here is a fact that you might not have heard from the Occupy Wall Street crowd: The incomes at the top of the income distribution have fallen substantially over the past few years.
According to the most recent IRS data, between 2007 and 2009, the 99th percentile income (AGI, not inflation-adjusted) fell from $410,096 to $343,927. The 99.9th percentile income fell from $2,155,365 to $1,432,890. During the same period, median income fell from $32,879 to $32,396.
Take that, Wall Street protesters! Sure, it may suck that you lost your job, but it probably didn’t pay that much anyway. John Paulson has lost millions!
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“Goldman could benefit from MF Global’s plight,” Bove said in a note today. “One might argue that Goldman is over capitalized and that it has too much liquidity. Buying some or all of MF Global might create the opportunity to make a windfall profit.” MF Global, run by Chairman and Chief Executive Officer Jon Corzine, is exploring strategic options, including a potential sale, after reporting its biggest quarterly loss ever and having its credit ratings cut by Moody’s Investors Service, a person with knowledge of the matter said today. [Bloomberg]
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T2 Partners Just Wants To Make It Clear They Are Of Sound Mind And Judgment
By Bess LevinSeriously, all is good in the hood. Having said that, it was no easy task, emotionally, going long you know what after…all that’s happened. Continue reading »
