Archive for November 2011

Write-Offs: 11.30.2011

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$$$ Markets cheer bank liquidity move [FT]

$$$ Q+A: Why everyone cares about dollar liquidity swaps [Reuters]

$$$ Warren Buffett bought his hometown paper [Bloomberg]

$$$ Last week, I had a conversation with a man who runs his own trading firm. In the process of fuming about competition from Goldman Sachs, he said with resignation and exasperation: “The fact that they were bailed out and can borrow for free — it’s pretty sickening.” Though the sentiment is commonplace these days, I later found myself thinking about his outrage. Here is someone who is in the thick of the business, trading every day, and he is being sickened by the inequities and corruption on Wall Street and utterly persuaded that nothing has changed in the years since the financial crisis of 2008. Then I realized something odd: I have conversations like this as a matter of routine. I can’t go a week without speaking to a hedge fund manager or analyst or even a banker who registers somewhere on the Wall Street Derangement Scale. That should be a great relief: Some of them are just like us! Just because you are deranged doesn’t mean you are irrational, after all. Wall Street is already occupied — from within. [DealBook/ProPublica]

$$$ “I love cold calling. It’s the best thing in the world,” says 22-year-old who thinks cold calling is the best thing in the world [BI]
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  • 30 Nov 2011 at 6:56 PM

Housekeeping: Dealbreaker Is Hiring Freelancers, Intern

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Do you want to write things on Dealbreaker? We are looking for one or more freelancers to write regular columns. Topics could include private equity, hedge funds, b-school, stripping one’s way through b-school, or something that has absolutely nothing to do with any of those things but which you are particularly passionate about. If you’re interested, get in touch and let us know your background and what you’d be interested in writing about. If you are currently gainfully employed on Wall Street (and would like to stay that way) for a firm that would not look favorably on a part-time writing career, anonymous/pseudonymous columns are fine. Read more »

  • 30 Nov 2011 at 6:38 PM

Mike Bloomberg: You Can Take Unlimited Bathroom Breaks Or You Can Actually Make Something Of Yourself. Your Call.

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Maybe you’re a first-year analyst at Goldman Sachs who’d like to run the place. Maybe you’re a SAC trader who wants to be the next Steve. Maybe you’re the CEO of JPMorgan, though you’d prefer the title of Mr. Treasury Secretary. Maybe you’re a mega successful hedge fund manager who dreams of breeding dogs and, one day, taking your best dog to Alaska to run and win the Iditorad in record time, with you driving. You’ve all got a dream but the question is, how are you going to make it happen? If you really want to know, Mike Bloomberg will tell you. The first thing you’re gonna do, the Mayor said in an recent interview, is you’re gonna stop being afraid. You’re not going to have a defeatist attitude that causes you to miss out on things. You’re going to seize every day as an opportunity and you’re going to realize that every situation has an upside if you look hard enough. Sayeth Hizzoner:

“You have that drive to look at the bright side. There’s never been a day I haven’t looked forward to going into work- even the days I knew I was going to get beat up, even the day I knew I was going to get fired…I had never been fired before and wondered what it was like-I thought okay, let’s go find out.”

Second, and most importantly, you’re going to put in the time. Now, Mike knows that anyone can spout off vague cliches about working hard and blah, blah, blah. He’s not here to do that. He’s here to tell you to keep your ass glued to that god damn chair and not get up for anything. Not fresh air, not lunch, not to take a leak. Think he’s not speaking literally? Think again! He doesn’t care if you’re about to piss your pants or if you have a family history of kidney failure. You get out of that chair and it’s over. Read more »

  • 30 Nov 2011 at 4:33 PM

James Gorman: This Isn’t The End. No Way. We’re Gonna Show This Market A Thing Or Two.

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“The stock price in no way reflects how well the firm is doing,” Gorman said last night at a private party for current and former Morgan Stanley executives. “We have a strategy in place, the market isn’t appreciating that yet.” [FBN]

  • 30 Nov 2011 at 4:23 PM

Someone Doesn’t Like Tone Of Leon Cooperman’s Voice

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…and has issued a missive of her own in response to the hedge fund manger’s open letter to President Obama:
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There’s Only One Person In This World Stephen Schwarzman Would Give A Bite Of His Soft-Shell Crab Sandwich And His Name’s Mitt Romney

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“First of all, this is a personal choice. From a corporate perspective, we have a lot of Democrats at the firm and my partner, Tony James, has been a supporter of the president. This is my choice, not a Blackstone choice. When we started Blackstone in 1985, the first investment we made in private equity was a joint deal with Mitt Romney at Bain. This turned out to be a marvelously successful deal with a profit of a company making aluminum wheels which expanded very rapidly. We made about 16 times profit. The second deal we did, Mitt led that one – we did that deal at Blackstone and we invited him to be the minority partner and we made 24 times our money. In finance, that’s a way to make friends.” Read more »

  • 30 Nov 2011 at 2:29 PM

John Paulson: I’ll Get The Losses This Year, Next Year We Go Dutch?

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When one is an investor in a hedge fund, letters from the top that include lines about being “disappointed,” “clearly wrong in our judgment,” and this year being notable for being “the worst in the firm’s history” are tough to take. Sure, they’re slightly more palatable than those that attempt to explain why the last month/quarter/year went ass-bleedingly bad by deflecting the blame with something like, “We lost it all but you can take solace in knowing it’s not us, it’s the market. The global financial markets are wrong, and we happy few at [insert firm here] are correct, in a way that has yet to reveal itself but rest assured, is coming” and/or offer a silver-lining à la,“Now hear the great news: we’ve turned every dollar you invested in the beginning of the year into 15 cents,” but whether you get a “sorry” or “sorry, we’re not sorry” letter doesn’t really much matter. In both cases, a whole bunch of your money is gone. Generally speaking. If you’re speaking of hedge fund Paulson and Co, however, such is not the case! According to the Times, the fact that the firm has suffered its worst performance since inception is actually of little matter to investors, as John Paulson has “guaranteed” he will be covering their losses, whatever they may be, come year-end. For the purposes of not getting anyone’s hopes up, it should be noted that the guarantee only applies to one investor. Everyone else, past performance yadda yadda still applies to you- better luck next year. Read more »

  • 30 Nov 2011 at 12:33 PM

And Now Some Mockery

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I am now going to take a mock CFA exam. In order to replicate actual testing conditions as closely as possible without leaving my apartment, I will do the following:

1. Spend 2 hours* on the first session (120 questions)
2. Lunch, beer
3. Spend 2 hours on the second session (120 questions). Another beer.
4. Check answers, post results
5. Mockery. Another beer.

The CFA’s commitment to “past performance does not reflect future results” extends to its own products, saying “Performance on a mock exam should not be used in any way to predict performance on the actual exam.” But you and I know better. So tell me:
Read more »

  • 30 Nov 2011 at 12:18 PM

Layoffs Watch ’11: Citi

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The previously mentioned cuts have continued to go down this morning. Read more »

  • 30 Nov 2011 at 11:56 AM

Maybe If The Elves In Fixed Income Hadn’t Bailed Out Of Treasuries Earlier In The Year, We Wouldn’t Be Having These Tough Discussions

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Are you an investment bank managing director whose underlings’ bonuses will be down 40 percent this year? Are you a hedge fund manager in the midst of quite the rough patch, whose traders’ take-homes won’t likely please them? Are you hoping to outsource the awkward preliminary bonus chats? Might we suggestion giving these guys a call, or at the very least, using their lines? Read more »

  • 30 Nov 2011 at 11:16 AM
  • Banks

NY Fed Researchers Want To Make You Mark Your Potential Bonus Clawback To Market

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The Fed has three basic functions: central banking, bank regulation, and calling down police brutality on Occupy Wall Street protesters. While the first function is getting all the attention today, the New York Fed’s blog is spending some time on the second. Specifically, they’re trying to figure out how bankers should get paid.

Optimal design of banker compensation is a thing that people like to think about, and that regulators like to regulate. We’ve talked about it before, and I’ve suggested that the right way to reward bankers is not to give them mostly equity or extra-levered equity, which encourages asymmetric risk-taking, but rather to give them exposure to their firm that roughly matches that of their main stakeholders. Which, for a bank, means basically various flavors of creditors. So a bank CEO whose net worth consists 20% of equity of his firm and 80% of unsecured debt of his firm, like Brian Moynihan, in theory has better incentives to do the right thing by bondholders, depositors and the financial system than someone who’s 100% in out-of-the-money stock options. And a banker who is paid in structured credit products that can’t be foisted on to clients has incentives … well, he’s an interesting case study at least.

I like the NY Fed researcher-bloggers because they’re pretty sober people who want to optimize banking regulation but don’t spend their time freaking out about stupid popular things like how CDS will kill us all, banning short selling, or just generally hating on bankers. So I’m pleased to see NY Fed researcher Hamid Mehran is with me on this whole comp thing: Read more »