Fuzzy thinking and winging it might not lead to total disaster at a place like Goldman, which eventually worked its way out of the Long-Term Capital mess, but it could, and did, at a place like MF Global, a midsize brokerage firm where the CEO has a free hand. “That’s why the meltdown didn’t really surprise me,” says another former colleague. “What happened is typical Corzine.” [TDB/Charlie Gasparino]
Archive for November 2011
“…the firm’s most troubled fund, the Renaissance Institutional Equities Fund, is staging a major comeback. RIEF, with assets of $6.1 billion, is up 31 percent this year, notching returns of nearly 5 percent last month, sources said.” [NYP]
Mayor Bloomberg Knows What It’s Like To Yearn For Change, Would Like To Impart Some Wisdom On Wall Street Protesters Re: Strategy
By Bess Levin
Since the demonstration known as Occupy Wall Street began nearly fifty days ago, Mayor Bloomberg has publicly stated on numerous occasions that protesters stationed in Lower Manhattan have the constitutional right to remain there, and so long as no laws are being broken, he’ll allow them to do so. At the same time, Hizzoner has mentioned on other occasions that, personally, if it were him, he’d 1) realize that not all of the demands may be realistic and reevaluate what he was asking for (like the time he desperately wanted to outlaw the publication of photos in which he appeared looking bloated, before stepping back and realizing it probably wasn’t an achievable goal, as frustrating as it was) and 2) more generally, use different tactics to get what he wanted.
“My personal view is, why don’t you get out there and try to do something about the things that you don’t like, create the jobs that we are lacking, rather than just yell and scream,” Mr. Bloomberg said Thursday. “But if you want to yell and scream, we’ll make sure you can do it.”
Make that two seats!
Dear Members of the Board of Directors:
As you are aware, Third Point LLC (“Third Point”) manages investment funds that are, collectively, the second largest shareholder of Yahoo! Inc. (“Yahoo” or the “Company”).
We are deeply concerned by news reports that you are considering a leveraged recapitalization that will allow private equity firms to gain substantial equity positions that will, when combined with Jerry Yang’s and David Filo’s ownership, effectively establish a controlling position in Yahoo. More troubling are reports that Mr. Yang is engaging in one-off discussions with private equity firms, presumably because it is in his best personal interests to do so. The Board and the Strategic Committee should not have permitted Mr. Yang to engage in these discussions, particularly given his ineptitude in dealing with the Microsoft negotiations to purchase the Company in 2008; it is now clear that he is simply not aligned with shareholders. At a bare minimum, Mr. Yang must declare whether he is a buyer or a seller – he cannot be both. If we are correct and he is effectively a buyer, corporate ethics require him to recuse himself from any further discussions on behalf of the Company. He should also be requested by the Company to promptly leave the Board and join Mr. Filo in solely an operating capacity.
According to Bloomberg, a search and rescue team has located $658.8 million of MF Global customer funds that went missing earlier this week. According to JPMorgan, however, while it is indeed “holding MF money,” it’s not “the missing money” you’re looking for. Go talk to Goldman, maybe they’ve seen it.
DealBook today dug up some neat stuff on MF Global that, if you let it, will make your head hurt and fuel your conspiracy theories about Goldman alumni:
Months before MF Global teetered on the brink, federal regulators were seeking to rein in the types of risky trades that contributed to the firm’s collapse. But they faced opposition from an influential opponent: Jon S. Corzine, the head of the then little-known brokerage firm. … The agency proposing the rule, the Commodity Futures Trading Commission, relented. Wall Street, which has been working to curb many financial regulations, won another battle.
What they’re talking about is a proposed revision to CFTC regulations 1.25 and 30.7, proposed about a year ago, which would have cut back on the securities that futures commission merchants like MF Global can purchase with segregated customer money. In the olden days, and also now, FCMs could put that money in a variety of safe and safe-ish and mock-safe investments, including notably foreign sovereign debt. The proposed changes would cut back that list dramatically, eliminating foreign sovereigns. A summary of the changes is here.
Besides foreign sovereign bonds, the CFTC also tried to get rid of “in-house” repos and reverse repos, in which futures merchants used segregated customer cash to fund their own securities portfolio. As the CFTC explains it:
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Standard Price Is Right rules, closest without going over, guesses in by 3:45PM. Continue reading »
John Paulson, the hedge-fund manager having the worst year of his career, rebounded 2.4 percent in his main fund in October and climbed in all his strategies…Paulson’s main fund, the Advantage Plus Fund, which seeks to profit from corporate events such as takeovers and bankruptcies and uses leverage to amplify returns, reduced its year-to-date loss to 44 percent. The gold share class advanced 3.3 percent last month and declined 27 percent this year. Paulson, 55, posted positive returns in all of his funds in October as stocks rallied. [Bloomberg]
Corzine Resigns From MF Global (DealBook)
“I feel great sadness for what has transpired at MF Global and the impact it has had on the firm’s clients, employees and many others,” Mr. Corzine, 64, said in a statement. “I intend to continue to assist the company and its board in their efforts to respond to regulatory inquiries and issues related to the disposition of the firm’s assets.”
Job report hints at some improvement (Reuters)
U.S. employment rose less than expected in October, but a drop in the jobless rate to a six-month low of 9.0 percent and upward revisions to prior months’ job gains pointed to underlying strength in the labor market. Nonfarm payrolls rose 80,000 last month, the Labor Department said on Friday, missing economists’ expectations for a gain of 95,000. However, figures for August and September were revised to show 102,000 more jobs than previously reported.
MF Global Masked Debt Risks (WSJ)
For the past two years, MF Global Holdings Ltd. may have disguised its debt levels to investors by temporarily slashing the debt it was carrying before publicly reporting its finances each quarter, according to an analysis by The Wall Street Journal. The activity, referred to in the financial industry as “window dressing,” suggests that the troubled financial firm was shouldering more risk and using more borrowed funds to facilitate its trading than investors could easily detect from the firm’s regulatory filings.
Groupon Prices at $20 a Share; More Than 10x Oversubscribed, So It Adds 5M More Shares (AllThingsD)
Groupon has priced its public offering at $20 a share, several dollars above the expected price range of $16 to $18. That will garner $700 million for the start-up, which is only several years old, at a valuation of close to $13 billion. The offering for the Chicago-based daily deals site — which has had a controversial IPO process — was well upward of 10 times oversubscribed.
Italy accepts IMF monitoring, EU looks for support (Reuters)
Italy, under fierce pressure from financial markets and European peers, agreed to have the IMF monitor its progress with long delayed reforms of pensions, labor markets and privatization, senior EU sources said on Friday. Prime Minister Silvio Berlusconi, his government close to collapse, agreed to the step in late-night talks with euro zone leaders and U.S. President Barack Obama on the sidelines of a G20 summit in Cannes.
Hey, Bro, That’s My Little Pony! Guys’ Interest Mounts in Girly TV Show (WSJ)
Bronies—a mash-up of “bro” and “ponies”—established a quarterly New York convention, called BroNYCon, this year. They’ve spawned at least two Pony-themed websites and enjoy a thriving subculture of artists whose creations include Pony-inspired music and their own writings about Twilight Sparkle and the gang. … Mr. Subhani tried to get his rock-band mates to play some Pony-inspired covers. They declined, so he formed a new band of bronies called Neighslayer, in which he plays guitar-heavy renditions of such “My Little Pony” songs as “Art of the Dress.”
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$$$ SEC Said to Review Possible Insider Trading in MF Bonds [Bloomberg]
$$$ AIG Posts Loss Tied to AIA, Mortgage-Bond Drop [Bloomberg]
$$$ “Frankly, banks have done a very poor job of explaining how we contribute to society,” Barclays chief Bob Diamond said. “Second, we have to accept responsibility for what has gone wrong. Finally, most importantly, we have to use the lessons learned to become better and more effective citizens.” [ThisIsLondon]
$$$ “When I meet with CEOs — I met with one today — I say, ’I’m the most persistent man in America,’” Ackman said. [BusinessWeek] Continue reading »
Inspector General David Kotz Really Inconveniencing SEC Staffers’ Ability To Look At Porn, Not Uncover Fraud, Gripe Employees
By Bess LevinIn recent years, the Securities and Exchange Commission has been known more for its fuck-ups than successes. The regulator took a pass on heeding the warning signals by Bernie Madoff himself that he was running a Ponzi scheme, it chose to go after David Einhorn rather than Allied Capital when the hedge fund manager suggested all was not right at the company and right now, as we type, the regulator is presumably fucking up in ways we cannot imagine but will hear about two years hence. Separately the Commission happens to employ a not insignificant number of people who like to look at porn all day, every day, in lieu of working, which perhaps could explain some of the slip-ups, though it’s a very chicken or egg situation.
In past times, none of this (the failures and the 24/7 surfing of www.ladyboyjuice.com, www.anal-sins.com, www.fuck-my-wife.com, among others) proposed a problem. Business as usual. Then Inspector General David Kotz had to come in and start asking people, “Why didn’t you think to follow up when Madoff said the whole thing was a scam?” and “Why, on Wednesday, August 20th did you make approximately 385 attempts to access a website called www.ladyboyx.com from your work computer?” And now, it’s war. Continue reading »
