Archive for November 2011

  • 22 Nov 2011 at 2:34 PM

You’re Going To Have A Lot Of Time To Run Your Fund When You’re Running It In A Van Down By The River

By Bess Levin

When all is said and done, there are two types of people in this world: those who would feel comfortable conducting or taking part in a “business” meeting held in an unmarked van and those who would not. It’s important you know which camp you belong in, because according to the Times, the travelling office is officially a thing.

Steve Kantor admits that he likes to travel in style. He is an affable investment banker, concerned about flaunting his wealth, but he drives around Manhattan in what looks like a simple black delivery van. Of course, most vans do not have chauffeurs, as Mr. Kantor’s has. Or a built-in office, custom installed. “I have two big-screen televisions; I have a couch in the back that goes into a bed,” Mr. Kantor said. “I have four chairs that go back and massage you. It has a desk, a table and an intercom so you can have meetings in there if you want to.”

The most popular model is made by Mercedes: a stripped-down, basic version of the van, the Sprinter, starts at $41,315; Mr. Kantor’s version, which Mercedes-Benz Manhattan arranged to have customized, is fitted with satellite television, a Wi-Fi network and flat-screen monitors, and sells for $189,000. Even that is not quite enough for some New Yorkers, who employ designers to install even pricier custom details that easily drive up the total cost to $500,000…And although the modified Mercedes van is popular in several large cities, Howard Becker, president of Becker Automotive Design in Oxnard, Calif., said New York, with its executives in hedge funds and finance, had become his best market…[some owners request] the installation of a vacuum cleaner so the chauffeur can remove every crumb and grain of sand…the vacuum option could be seen on a recent morning on Park Avenue, when Carmelo Umpierre, a 44-year-old chauffeur, idled the $425,000 van he drives for an executive based in Connecticut.

And these things don’t just appeal to people who are attempting to up the sketch factor of their business dealings by leaps and bounds (“Martin Brass, a 43-year-old former Wall Street executive turned investor…said he simply wanted to “have meetings and presentations in those vehicles”). Apparently 18 years and no pre-nup also means family car/conference room. Continue reading »

  • 22 Nov 2011 at 2:29 PM

Who Wants To Buy Deutsche Bank’s Asset Management Business?

By Bess Levin

They’re willing to entertain an offer. Continue reading »

  • 22 Nov 2011 at 2:07 PM

Netflix Will Sell You Unlimited Streaming For $7.99 A Month, Buy It Back At $15.98

By Matt Levine

If you run an investment bank, which basically takes a cut of economic prosperity, it’s good to have a backup plan for when there’s not so much prosperity. So you try to build some countercyclical businesses. In boom times you lend lots of money to people to let them buy McMansions. In crises you make lots of money on widening bid/ask spreads and volatility. In recessions you, I don’t know, get free money from the Fed and hunker down and ZIRP and buy gold! That’s the theory. Sometimes it doesn’t work.

Now of course that theory is not equally good for everyone in all of those businesses. The ranks of cupcake bakers and artisanal dog walkers these days are filled with former MBS structurers. Guys who set up distressed commercial real estate funds in 2009 were often shut out of the market by the time they’d raised money.

The smart move is to be in a business that makes money in boom and bust. Some whole firms look like that. Places like Lazard and Greenhill are basically in two businesses, M&A and bankruptcy, and bankers who can do both well are relatively insulated, stitching together big levered deals in the good times and selling off the bits when they go bankrupt. I worked in a group that did both equity-linked issuance and stock buybacks. Buybacks tend to be done when companies are flush with cash and investment opportunities are limited; equity-linked securities often come from companies that are a bit down on their luck but still have ways to put money to work. So you’ve gotten long some economic volatility, and you’ve got both peaks and troughs covered.

But, of course, if someone is making money both ways, then someone is losing it both ways. Companies build empires at expensive prices and divest them cheaply, paying transaction costs both ways. And boy do they ever sell stock low and buy it high. Still, it is rare to see an illustration of that quite as breathtakingly perfect as Netflix’s announcement yesterday that it was issuing $400 million of equity and convertible bonds, after spending most of the last year and a half buying back stock. Now, first of all: Continue reading »

  • 22 Nov 2011 at 12:27 PM
  • Happiness

And If You Would Take A 98% Pay Cut In Order To Work At Citi, That’s Okay Too**

By Bess Levin

As you may have heard, many of your colleagues in the financial services industry will be laid off in the coming months, if they haven’t been already. Wall Street is in the process of cutting 200,000 positions, and those who aren’t escorted into a room with an HR representative and a box of tissues should consider themselves lucky, particularly if they need money to live, have a family to support, and/or like their jobs. For others, however, being told they have 20 minutes to box up their things, walk out the door and not come back unless they want to tussle with security turns out to be the best thing that ever happened to them. These would be people who’ve either been suppressing a nagging voice telling them to go after a passion that doesn’t involve working on Wall Street or for whom the appeal simply lies in not spending the majority of their day fantasizing about life that doesn’t so closely resemble hell. Among those who fall into the latter category, coming into the office has gotten so bad that if you gave them the option to leave their current situation to take a 95% pay cut and run the risk of death by stabbing, they’d go jump at the opportunity. Wyatt Laikind knows what we’re talking about. Continue reading »

Opening Bell: 11.22.11

By Dealbreaker

BofA Warned To Get Stronger (WSJ)
BofA’s board has been told that the company could face a public enforcement action if regulators aren’t satisfied with recent steps taken to strengthen the bank, said people familiar with the situation. The nation’s second-largest lender has been operating under a memorandum of understanding since May 2009, following repeated tussles with regulators over the purchase of securities firm Merrill Lynch & Co. and a downgrade of the company’s confidential supervisory rating. The memorandum, which isn’t public, identified governance, risk and liquidity management as problems that had to be fixed, according to people familiar with the document.

Supercomittee Failure Poses Threat to U.S. Recovery (Bloomberg)
Still, Standard & Poor’s reaffirmed it would keep the U.S. credit rating at AA+ after stripping the government of its top AAA grade on Aug. 5. Moody’s Investors Service reaffirmed its AAA rating with a negative outlook. Fitch Ratings noted in a statement that it said in August that a supercommittee failure would probably result in a “negative rating action,” likely a revision of its outlook to negative, and that a review would be concluded by the end of this month.

Soros Calls For ECB To Stop Bond Run (CNBC)
“As regulators still treat government bonds as the safe core of the financial system, this vicious circle threatens the stability of financial institutions not only in the euro zone but also in the rest of the world,” Soros, the chairman of Soros Fund Management, said in a co-written article with Peter Bofinger of Würzburg University in Tuesday’s Financial Times. Without action, Soros believes recessionary pressures will intensify making the situation in the bond market worse. “It’s a perfect vicious circle,” he wrote in the article.

EU Warns Greece On Bailout (WSJ)
“There is enough money for another 20 days,” a senior Greek government official said. “Without the loan tranche we will default on the €2.8 billion bond payments in December and we won’t be able to pay out salaries and pensions. The situation is very serious and this issue has to be settled this week.”

Journalists Protest Occupy Wall Street Handling (ABC)
Media organizations sent letters on Monday to city officials complaining about the police handling of journalists covering the Occupy Wall Street protests and called for meetings to address their concerns. They said New York police blocked journalists from seeing when authorities cleared out the Occupy camp in lower Manhattan’s Zuccotti Park last week and said police officers used force and arrested some journalists as they were trying to do their jobs. “The police actions of last week have been more hostile to the press than any other event in recent memory,” a coalition of media organizations and journalist groups said in a letter to chief New York Police Department spokesman Paul Browne…”The numerous reports we have received and have learned of make clear to us that the NYPD is aggressively blocking journalists from doing their constitutionally protected work and in some instances is even targeting journalists for mistreatment,” that letter said.

Man catches fire in Gothenburg train station (The Local)
An unidentified man sustained serious injuries after suddenly catching fire in Gothenburg on Sunday evening, leaving police flummoxed as to who he is and what really happened. ”All we know is that it’s a man. We have no knowledge of his identity, nor of his age or any motive or even the circumstances of the incident,” said police officer Åsa Andersson to local paper Göteborgs-Posten (GP) According to eye witness accounts, the man was standing outside a record shop at the central train station around 10.30pm, when he suddenly caught on fire. Continue reading »

Write-Offs: 11.21.11

By Dealbreaker

$$$ Debt Panel Fails to Reach Deal [WSJ]

$$$ S&P Keeps U.S. Rating at AA+ After Panel Failure [Bloomberg]

$$$ Ex-Madoff trader admits faking records since 70s [Reuters]

$$$ Robert Kelly: Inside the fall of a superstar banker [Fortune]

$$$ George Soros: The ECB must step in to save the eurozone [FT]

$$$ Let Gisele Bundchen pick your stocks [Stockerblog]
Continue reading »

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  • 21 Nov 2011 at 6:37 PM

Comment Of The Day: 11.21.11

By Dealbreaker

HungryIntern on Hank Greenberg Estimates If The Government Had Minded Its Own Damn Business Back In ’08, AIG Would’ve Been At Least $25 Billion Ahead Right Now: Continue reading »

  • 21 Nov 2011 at 5:57 PM

Trades Not Workin’ Out For Ya? Area Hedge Fund Manager Will Show You How To Save A Buck

By Bess Levin

“I save a small fortune in taxi and subway fares—plus untold hours sitting in traffic or on a subway platform—by riding my bike everywhere in Manhattan,” Whitney Tilson told the Journal, which estimates you can save “at least $4,000 a year,” in addition to what you spend on the gym, using Tilson’s chosen mode of transport. “Plus, it’s great exercise!” [WSJ]

  • 21 Nov 2011 at 4:26 PM

Hank Greenberg Wants To Know Why His Bailout Was So Much Crappier Than Everyone Else’s

By Matt Levine

The complaint in Hank Greenberg’s lawsuit against America is now online, and strange and entertaining in equal measures. I’m pretty sure Occupy Wall Street will be interested to hear his theory that the Constitution allows Fed bailouts of struggling financial institutions, but requires those bailouts to be much gentler than the one handed to AIG.

There is some sensible stuff here. Greenberg’s suit makes good use of the SIGTARP report finding that the government didn’t exactly conduct hard-nosed negotiations with AIG’s CDS counterparties. Instead, it bought off the assets covered by CDS at par (even though some of the counterparties might have accepted a haircut), tore up the CDS contracts, and waived any claims AIG might have against those counterparties. And the description of how the government avoided and ignored legal requirements to get a shareholder vote to authorize new shares for the government, and kind of maybe lied about it a bit in disclosure documents, is kind of interesting for shareholder-voting nerds, of whom there are about five and I am one.

But that’s all just a political smoke screen: lots of people are good and mad that the government funneled too much money through AIG to Goldman Sachs or Deutsche Bank or whatever, but pretty much zero of them think that money should have gone to Hank Greenberg instead. And lying in disclosure documents, like insider trading, isn’t a crime if the government does it.

Greenberg’s case really boils down to two claims. First is the constitutional argument that the bailout-in-exchange-for-equity was unconstitutional because “everyone else got a no strings attached bailout, so we should have gotten one too.” And “everyone” included “Libya”:

Throughout the global financial crisis, the Government allowed many domestic and foreign institutions access to the discount window. … [D]iscount window loans peaked at about $110 billion at the end of October 2008. Foreign banks borrowed approximately 70% of that amount; for example Dexia SA of Belgium borrowed about $33 billion; Dublin-based Depfa Bank, Plc, subsequently taken over by the German government, received approximately $25 billion; Bank of Scotland borrowed $11 billion; and Arab Banking Corp., 29% owned by the Libyan Central Bank at the time, received 73 different loans. Wachovia also borrowed $15 billion, and numerous investment banks were also granted access. At no time did the Federal Reserve Board require that it be given control of, or an equity stake in, these institutions. … If AIG had been given similar access to the Federal Reserve’s discount window or other sources of liquidity like these other institutions, AIG would easily have met its liquidity needs.

Well, okay. Maybe! The legal theory of “the constitution requires that anything you give to Libyans you have to give to me” is a bit untested – if true, I am planning to assert my Constitutional right to call down air strikes on my enemies (who are legion). Continue reading »

  • 21 Nov 2011 at 2:46 PM

What? No One Ever Said Math Was Their Forte

By Bess Levin

The trustee overseeing the wind-down of MF Global Holdings Ltd.’s brokerage said Monday that more than $1.2 billion in customer funds could be missing from the failed firm, more than double the original estimate of missing cash. [NYP]

  • 21 Nov 2011 at 12:58 PM

Layoffs Watch ’11: Credit Suisse

By Bess Levin

The Swiss bank sent a handful of employees to a farm upstate earlier today. Continue reading »