Archive for October 2011

Opening Bell: 10.25.11

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Hard line adopted on Greek debt loss (FT)
European negotiators have asked Greek debt holders to accept a 60 per cent cut in the face value of their bonds, a hardline stance that far exceeds losses agreed in a deal between private investors and eurozone authorities three months ago. The stance, delivered to a consortium of international banks at the weekend by Vittorio Grilli, Italian treasury chief and lead eurozone negotiator, is a victory for German-led northern creditor countries who have been pushing for Greek bondholders to accept far more of the burden for a second bail-out. According to officials briefed on the talks, France, the European Central Bank and the International Monetary Fund remain concerned the tough stance could trigger bondholder insurance policies known as credit default swaps, sparking investor panic because of uncertainty over which financial institutions face CDS losses.

In Cautious Times, Banks Flooded With Cash (NYT)
Though financial institutions are not yet turning away customers at the door, they are trying to discourage some depositors from parking that cash with them. With fewer attractive lending and investment options for that money, it is harder for the banks to turn it around for a healthy profit. … “We just don’t need it anymore,” said Don Sturm, the owner of American National Bank and Premier Bank, community lenders with 43 branches in Colorado and three other states. “If you had more money than you knew what to do with, would you want more?”

Go West, Investment Banker (WSJ)
The New York state comptroller’s office predicted this month that Wall Street would cut 10,000 jobs by the end of 2012, bringing the total losses since January 2008 to 32,000. Bank of America last month announced global staff cuts of 30,000, or 10% of the firm’s workforce. Meanwhile, regional banks like KeyCorp, Fifth Third Bancorp in Cincinnati, SunTrust Banks Inc. in Atlanta and U.S. Bancorp in Minneapolis, have been adding bankers for stock, bond and loan offerings, as well as mergers and acquisitions. KeyCorp, for example, has increased its investment banking unit by 36% since the beginning of 2010 and Fifth Third has 20 investment bankers, up from zero a year ago. Investment-banking generates hefty fees that could help the smaller banks offset declining interest income from their core business of lending. “It’s a great opportunity for the KeyCorps of the world to lift talent,” says Michael Karp, a managing partner at executive search firm Options Group.

Regulator Flagged SAC Stock Trades (WSJ)
In the 18 referrals made by Finra and the NASD between 2002 and 2011 that were reviewed by the Journal, investigators said they were vexed by SAC’s repeated appearance in routine screens of suspicious trading near mergers and acquisitions, earnings announcements and other market-moving news. SAC in a statement said, “Every day our firm transacts in thousands of securities,” adding that “it is not surprising that we would be included in a small percentage of Finra referrals.”

UBS Profit Falls After Trading Scandal (DealBook)
UBS said on Tuesday that profit fell 39 percent in the third quarter from the period a year earlier after a rogue-trading scandal had cost it $2.3 billion. Profit fell to 1.02 billion Swiss francs ($1.2 billion) in the three months ended Sept. 30 from 1.66 billion francs in the period a year earlier. The trading loss and charges linked to a cost-cutting plan were partly offset by an accounting gain on the bank’s own credit of 1.8 billion francs and the sale of some investments.

Mayo Concedes He Dialed Wrong Number (Fox)
Glad that’s cleared up.
Read more »

Write-Offs: 10.24.11

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$$$ Charlie Munger: Europe Leaders ‘Behind the Curve’ on Debt Crisis [Bloomberg]

$$$ The Romney Economy [NYMag]

$$$ Occupy Wall St. protester and aspiring member of the ‘1%’ are 23 year-old twins [The Daily] Read more »

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  • 24 Oct 2011 at 6:35 PM

Feds Deny Raj Rajaratnam’s Postmortem

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According to a spokeswoman for Manhattan U.S. Attorney Preet Bharara, “a number of the assertions” made by the convicted insider trader in a recent profile for which he cooperated were “inaccurate.” Whether they’re referring to everything he said or to a) Raj’s claim that he was offered a plea deal to wear a wire b) his claim that the day he was arrested, Bharara commented in his ear, “Your wife doesn’t seem so upset. Because she’s going to spend all your money” c) the claim that he was “on an exercise bike” when they busted into his apartment or d) some combination thereof, it wasn’t made clear.

  • 24 Oct 2011 at 4:42 PM

Berlusconi Is Probably Not Happy With European Regulators’ Stance Against Nakedness

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Europe’s multi-faceted plan for saving itself from itself includes not only offering investors CDS on periphery bonds while also preventing CDS on peripheral bonds from paying out on default; it also extends to banning naked CDS on any European government bonds, along with naked shorting of stocks and government bonds. Except nobody exactly knows what “naked” means.

First of all, in common usage (and in the European Parliament’s usage), “naked” short selling is shorting without a locate, i.e. without borrowing the shares/bonds. It’s a settlement-fail problem. “Naked” CDS buying, on the other hand, doesn’t have anything to do with a locate or settlement: it’s just buying protection when you don’t own the corresponding reference debt. (Or something else, see below.) The two things have nothing to do with each other except the word “naked,” or as the EU draft regulations blushingly put it, “uncovered.”

If you want to protect settlement systems, you ban shorts without a locate – as the U.S. has kinda-sorta done, for years, with few ill effects. If, however, you want to prevent asset prices from going down, ever, you (might decide to) ban shorts that don’t hedge an offsetting long position – which is what the EU proposes to do for CDS but not for physical. The schizophrenia of the rules makes it hard to avoid the conclusion that the EU doesn’t know the difference and is just really, really upset by the notion of financial nudity in any form.

But, whatever, at least we know what “naked” means when it comes to CDS, right? Right?
Read more »

Maybe Phil Falcone Had A Good Reason For Waiting To ‘Til The Month Was Almost Over To Report September’s Losses

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He could have been busy putting the finishing touches on Wilbur‘s Halloween costume (he’s going as a slutty butcher** this year). You don’t know. Read more »

Put That Cash to Work

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The long/short equity strategy is comin’ back, according to Dave McMillan, Partner at Mercer Investment Consulting.

Companies are looking to take back their marketshare, he says, and that “creates winners and losers.” He says that moving forward, the long/short strategy will also offer a good risk-reward balance. Read more »

  • 24 Oct 2011 at 3:08 PM

This Post Brought To You By Occupy Wall StreetTM

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Citing the potential of “Occupy Wall Street” to become a “global brand,” a Long Island couple has filed to trademark the name of the amorphous organization responsible for the protests and encampments in lower Manhattan and other U.S. cities…In a U.S. Patent and Trademark Office (USPTO) application, Robert and Diane Maresca are seeking to trademark the phrase “Occupy Wall St.” so that they can place it on a wide variety of goods, including bumper stickers, shirts, beach bags, footwear, umbrellas, and hobo bags. [TSG]

  • 24 Oct 2011 at 2:41 PM

A Conundrum

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The EU authorities propose to entice investors to return to buying peripheral sovereign bonds by offering tradeable first-loss protection on those bonds. This protection is described as functioning like credit default swaps. At the same time, the EU authorities assert that the solution to Greece’s sovereign debt overhang is for private holders of Greek debt to “voluntarily” agree to take losses on their GGBs. The holders of these bonds will be strong-armed into taking these losses in such a way that CDS will not trigger and therefore provide no cover on those losses. That’s sort of like trying to woo your girlfriend with promises of everlasting fidelity, as demonstrated by how quickly you’ll leave your wife for her. Read more »

Confidential To Connecticut Commuters: Bypass Parking Lot Purgatory And Still Be Able To Look Yourself In The Mirror

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How does one know when they’ve made it in Connecticut? Is it when their net worth is north of $5 billion? Is it when news of their impending arrival downtown causes workers to roll out the fleece carpet? Is it when the Radio City Christmas Spectacular becomes known as the poor man’s version of the holiday light display on their front lawn? Is it when they can finger a horse and no one says anything? None of the above, peasants. One knows they’ve made it in Connecticut when they can board the Metro North train without having to walk 12 miles to the platform in the morning and the same amount back after getting bombed on the way home at night.

In the Metro-North parking lots along Connecticut’s Gold Coast, the haves and the have-nots aren’t defined by their clothes, car or even their net worth. Here, it’s about whether they have a flimsy green piece of paper visible on their dashboards. A public parking pass in this and other towns along the Long Island Sound has become a precious asset. The waiting list for a Fairfield Parking Authority permit has 4,200 people and stretches past six years. In another town, Rowayton, the annual permit sale is an epic frenzy similar to that surrounding the release of a new iPhone, with residents camping out overnight to ensure they get a $325 pass.

Think it’s no big D? Think again. Most people would sell their first born into White slavery for one of these elusive bad boys. Read more »

  • 24 Oct 2011 at 1:06 PM

Layoffs Watch ’11: Dick Bové Suggests Girding All Of Your Loins

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Sources believe that Europe’s banking giants, including Deutsche Bank, UBS and Credit Suisse, along with Societe Generale and Dexia, are preparing to wield the ax in a way not witnessed since the depths of the financial crisis in 2008. “People will be fired everywhere,” said Dick Bove, an outspoken bank analyst at Rochdale Securities. [NYP]

Raj Rajaratnam Was Done In By Multiple Moles

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Less than two weeks ago, Raj Rajaratnam was sentenced to 11 years in prison, after being convicted on 14 counts of securities fraud and conspiracy last May. Over the course of the trial, Raj had remained silent, choosing not to take the stand on his own behalf and offering no sound bites to reporters outside the courthouse, speaking only when it was absolutely necessary (to request “extra mayo“) and allowing his lawyer, John Dowd, to do the talking (asking a Wall Street Journal reporter how long one could reasonably expect him to continue “sucking on [U.S. Attorney for the Southern District of New York Preet] Bahara’s teat,” declaring the guilty verdict a “23-14 victory” for the defense, and telling CNBC to “get the fuck out of here“). Recently, however, the former hedge fund manager decided to open up, allowing a reporter into his home where he pulled the curtain back on how this whole thing went down, starting with the state in which the Feds found him that fateful morning.

It was 6 a.m. on Oct. 16, 2009, and Raj Rajaratnam, head of the Galleon Group hedge fund, was at home on* his exercise bike looking out over Manhattan’s Turtle Bay.

Raj could have mentioned that he next moved on to shirtless arm curls and was on 1,003 at the exact moment Bhara and his crew busted into the apartment but felt like bragging. For posterity’s sake, though, it should be noted that he did over 1,000.

Moving on.

What he was actually doing at tipster Rajiv Goel’s home all those times, contrary to what the press and the government would have you believe?

…the prosecution noted that Rajaratnam would visit Goel’s house in Silicon Valley, presumably to talk about Intel. But the real explanation is more human. “His wife makes really good chaat [a savory snack]!”

Okay, that’s believable, but what about the material non-public information he got elsewhere? Read more »