Archive for December 2011

Write-Offs: 12.30.11

$$$ U.S. stocks are set to end a volatile year up 0.3% [FT] [Update: down 0.003%]

$$$ Banks Face Off For Facebook IPO [WSJ]

$$$ “Our theories of shareholder value maximization and stock-based compensation have the ability to destroy our economy and rot out the core of American capitalism.” [Forbes]

$$$ “There are two sustainable ways to make money in finance: find people with risks that need to be carried and match them with people with unused risk-bearing capacity, or find people with such risks and match them with people who are clueless but who have money.” [Project Syndicate]

$$$ “Investment banking is a young person’s game, or the calling of an individual … who has found nothing more exciting and satisfying to do that will actually pay him money. Some—a very few—even manage to come out the other side of the tunnel with their morals intact and the financial security and means to give back to society in a meaningful way. They go into politics, they become philanthropists, they build schools in Bolivia. They might even write a blog.” [Epicurean Dealmaker]

$$$ Kelly Clarkson supports Ron Paul, does “not support racism” [Fox]

$$$ That’s it for us today. Like the NYSE, we’ll be off Monday and regular posting will resume on Tuesday. Have a HAPPY NEW YEAR and see you in 2012!
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Holiday Bell: 12.30.11

BofA Posts Worst Showing In Dow Average (Bloomberg)
The 59 percent decline through yesterday erased almost $80 billion of shareholder value at Charlotte, North Carolina- based Bank of America. It’s the firm’s largest drop since a 66 percent plunge in 2008, when a U.S. bailout staved off a collapse. The bank probably will also end 2011 last in the Standard & Poor’s 500 Financials Index and the KBW Bank Index. “What you have is like a three-ring circus, and in all the rings for Bank of America, the show isn’t any good,” said Greg Donaldson, chairman of Evansville, Indiana-based Donaldson Capital Management LLC, which oversees $500 million including Bank of America shares. He cited new regulations, mounting costs of bad loans and a lack of confidence in management. “You just got one surprise after another this year,” Donaldson said.

Deepening Crisis Over Euro Pits Leader Against Leader (WSJ)
On a chilly October evening in her austere chancellery, Angela Merkel placed a confidential call to Rome to help save the euro. Two years after the European debt crisis erupted in little Greece, the unthinkable had happened: Investors were fleeing the government debt of Italy—one of the world’s biggest economies. If the selloff couldn’t be stopped, Italy would go down, taking with it Europe’s shared currency. Her phone call that night to the 16th-century Quirinale Palace, once a residence of popes, now home to Italy’s octogenarian head of state, President Giorgio Napolitano, trod on delicate ground for a German chancellor. Europe’s leaders have an unwritten rule not to intervene in one another’s domestic politics. But Ms. Merkel was gently prodding Italy to change its prime minister, if the incumbent—Silvio Berlusconi—couldn’t change Italy…Her impatience shows the extent to which Italy’s woes undid Europe’s strategy to fight the crisis. Until then, Europe had followed a simple formula to preserve the euro: The financially strong would save the weak. But Italy, with nearly €2 trillion, or about $2.6 trillion, in national debt, was simply too big to save…Ms. Merkel, widely criticized for not dealing forcefully with the crisis in its early phase, was at the center of the action, grappling with personal tensions and Byzantine politics among the 17 euro nations.

German FinMin Sees Crisis in Check Within a Year (Reuters)
German Finance Minister Wolfgang Schaeuble said he expects the euro zone will be stabilized within 12 months and ruled out a break-up of the single currency in an interview published on Friday. “I believe that in the next 12 months we will be so far that we will have the risk of contagion under control and will have stabilized the euro zone,” Schaeuble told Handelsblatt newspaper in an interview. Asked whether he could rule out a break-up of the currency bloc that has been rattled by a sovereign debt crisis for more than two years, Schaeuble said: “With everything I know at the moment: yes.”

HP Ex-CEO Hurd Pursued Sex With Jodie Fisher: Letter (Bloomberg)
During dinners, hotel-room visits and other meetings in cities such as Los Angeles, Atlanta, St. Louis and Madrid between 2007 and 2009, former HP chief executive officer Mark Hurd kissed and embraced Fisher, brushed his hand against her breast and attempted to initiate an affair, according to the letter sent to Hurd on June 24, 2010, by Fisher’s lawyer, Gloria Allred. Hurd, who is now a president at Oracle Corp. (ORCL), wasn’t found to have committed sexual harassment by Hewlett-Packard, and Fisher herself later said the document contained inaccuracies. “You had designs to make her your lover from the onset using your status and authority as CEO of HP,” Allred said in the letter to Hurd, the contents of which were first reported by Bloomberg News. “At times you would behave professionally seemingly ‘getting’ that she was not going to have sex with you. At other times, not, and you would relentlessly attempt to cajole her into having sex with you.”

Flash Crash Threatens to Return With a Vengeance (FT)

SAT taker-for-hire tells ’60 Minutes’ it was easy to cheat (NYP, earlier)
Speaking out for the first time, the Long Island teen who took college-entrance exams for cash told “60 Minutes” that his scandalous scheme couldn’t have been simpler to pull off. “I would say that between the SAT and ACT, the security is uniformly pathetic,” a cocky Sam Eshaghoff says in a segment to air this Sunday. “In the sense that anybody with half a brain could get away with taking the test for anybody else.” Now a student at Emory University, Eshaghoff was arrested in September, and the bust set off a national debate on entrance-exam integrity and trained a harsh light on his tony hometown of Great Neck. The 19-year-old whiz kid says his bustling business started with a casual proposal from a classmate. “He’s like, ‘Yo, you’re good on your SATs and I’m not. And you know this is possible. How much is it going to take?’ ” The answer was a cool $2,500. Eshaghoff told “60 Minutes” that he took the tests — both the SAT and the ACT — roughly 20 times for score-starved clients. “My whole clientele were based on word of mouth and, like, a referral system,” Eshaghoff said. He offered up his SAT wizardry gratis only once, for his then-girlfriend. With his business booming, Eshaghoff began to feel like he was performing a noble public service rather than a criminal act that would lead him into handcuffs. “I mean, a kid who has a horrible grade-point average, who no matter how much he studies is gonna totally bomb this test, by giving him an amazing score, I totally give him this . . . new lease on life. He’s gonna go to a totally new college. He’s gonna be bound for a totally new career and a totally new path on life.”

Customers Say to Cable Firms, ‘Let’s Make a Deal’ (WSJ)
Every three to six months, when his most recent promotional deal expires, Carey Anthony blocks out an hour of his day to negotiate with his cable company. Each time, the president of a software company in Los Angeles says he can knock $20 to $30 off his monthly bill. “Negotiating works every time,” says Mr. Anthony, 46, who estimates he has saved more than $350 a year over the past decade. “Sometimes you have to threaten to cancel service, or switch to another provider, or sit on hold for an hour, but I’ve never failed to get a discount,” he says. “You just have to be diligent.” Read more »

Write-Offs: 12.29.11

$$$ Goldman, Morgan Stanley Fight For Facebook Gold [WSJ]

$$$ Gold Bubble Seen by Soros on Brink of Bear Market [Bloomberg]

$$$ Princeton Brews Trouble for Us 1 Percenters [Bloomberg]

$$$ Marching Orders for Paul’s Volunteers: Do Shave, Don’t Tweet: …they say they are under strict orders: To look, dress, shave, sound and behave in a way that will not jeopardize Mr. Paul’s chances. Even before flying here on their own nickel, some students said they had been instructed to cover up tattoos and told that their faces should be fresh-shaved or beards neatly trimmed, wearing only nice clothes that one described as “business casual.” “No tats,” another volunteer, Rocco Lucente, said as he ticked off the rules after arriving at the airport Tuesday night. No liquor, no drugs and, he said, no “fraternizing in the dorms, nothing like that.” He said the standard expected of volunteers was: “What would Ron Paul do? [NYT] Read more »

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Holiday Bell: 12.29.11

Dithering at the Top Turned EU Crisis to Global Threat (WSJ)
In April, after a year of drama and bailouts, the euro zone seemed to have contained the immediate crisis to Greece and other small countries. Crucially, euro-zone economies such as Spain and Italy had avoided the panicked flight of capital. They were still able to borrow money at affordable rates in the bond market. But by July, the rift among euro-zone leaders over who should bear the burden of Greece’s debt had prompted investors to shun all financially fragile euro nations. Like a wildfire, the spreading uncertainty threatened to engulf the whole of Europe’s indebted south, to outstrip the resources of its richer north and to burn down the symbol of Europe’s dream of unity, its single currency.

US jobless claims rise to 381,000 (FT)
New claims for jobless benefits rose by 15,000 to 381,000 in the week ending December 24, the labour department said on Thursday, higher than the 375,000 economists had forecast. Analysts said volatility tends to be higher over the holidays as some employers, such as retailers, bring on temporary staff to help with the Christmas rush. But the four-week moving average of claims continued to decline, dropping to 375,000, the lowest level since June 2008. Analysts say that a trend below 400,000 is consistent with a growing labour market, and the four-week average has remained below that level for nearly two months. “The unemployment claims data continue to signal that the pace of improvement in the labour market may be gaining momentum,” said John Ryding and Conrad DeQuadros of RDQ Economics.

Alibaba hires U.S. lobbying firm as it eyes Yahoo (Reuters)
Alibaba Group’s founder, Jack Ma, said in September he was keen to buy all of Yahoo if the opportunity presented itself. Hiring a Washington lobbying firm could help Alibaba address any U.S. political opposition to a complete takeover of Yahoo by a company from a country that controls and censors the Internet. Chinese companies, such as telecoms giant Huawei Technologies Co, have run into opposition when they have tried to buy U.S. assets over the years. “The national security concern is sometimes just an excuse for commercial concerns for any country, but certainly for the United States,” said Mark Natkin, managing director of Beijing-based consultancy Marbridge Consulting. “I don’t think there should be a big concern (for Alibaba buying Yahoo). Users may share or keep as much data as they like. If they subscribe to Yahoo and (they know) Yahoo is owned by a Chinese company, they are going to have to make the decision themselves,” Natkin added.

Italian bond sale fails to spark markets (FT)
The Treasury in Rome sold €2.5bn of bonds due in 2014 at a yield of 5.62 per cent on Thursday, down from 7.89 per cent at the previous sale on November 29, and priced €2.5bn of 2022 bonds to yield 6.98 per cent, compared with 7.56 per cent on November 29. Italy also sold €2bn worth of bonds due in 2021 and a floating-rate security due in 2018. However, the auction of both the 2014 and 2021 maturity notes fell short of the Treasury’s target, clouding what would otherwise have been a relatively successful follow-up to the six-month bill auction. “Whilst the main focus of the auction was on the 10-year issuance, it was also a chance for people to see the effect the LTRO would have. Overall the results were less than encouraging,” said Nikhil Talwar, a strategist at RBC Capital Markets.

Q: What Does It Take to Get to the Oracle? Buffett Plans Fix After Fidelity Staffers ‘Game the System’ (WSJ)
Among investors, there are few prizes more coveted than the opportunity to ask Warren Buffett a question at Berkshire Hathaway’s annual shareholders meeting. But this year, Fidelity Investments mysteriously claimed more than its fair share. … “There’s no question they figured out how to game the system,” Mr. Buffett says. He said he didn’t like Fidelity’s ploy because “it’s not in the spirit of the meeting.” … Other regular pilgrims to Omaha say the meeting’s dirty little secret is that, with a little planning, it is not that hard to get microphone time. Whitney Tilson and Glenn Tongue, managing partners of New York investment firm T2 Partners LLC, both asked questions this year after taking part in a drawing held in an “overflow room,” a ballroom with a video link that accommodates hundreds of attendees who arrive late or can’t find seats in the main auditorium. Mr. Tilson, who has also asked questions in previous years, says he noticed some time back that few people in the overflow room signed up for the opportunity. He says he has long watched the meeting from that location simply “because it’s less chaotic and more comfortable.” (“He figured out the weak link,” observes Mr. Buffett.)

The Houses of the Hopefuls (NYT)
[Newt Gingrich’s] 5,206-square-foot stone mansionette, built in 1987, sits on a cul-de-sac in McLean, Va.. The photo of the Gingriches’ master bathroom on the Web site of their designer, Ann Kenkel, indicates that the couple’s style tends toward the ornate. The floors are marble, the long lacquered vanity is topped with dark granite, with gold fixtures. The room is lighted by brass sconces and a chandelier, the windows are dressed in brown fringed swag valances. And, of course, there are all the mirrors, which make simply emerging from the shower an act of supreme self-confidence.

Samoa and Tokelau to Skip December 30 (AP)
The tiny South Pacific nation of Samoa and its neighbor Tokelau will jump forward in time on Thursday, crossing westward over the international date line to align themselves with their other 21st century trading partners throughout the region. At the stroke of midnight on Dec. 29, time in Samoa and Tokelau will leap forward to Dec. 31 — New Year’s Eve. For Samoa’s 186,000 citizens, and the 1,500 in Tokelau, Friday, Dec. 30, 2011, will simply cease to exist. … Under a government decree, all those scheduled to work on the nonexistent Friday will be given full pay for the missed day of labor.
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Write-Offs: 12.28.11

$$$ European Bank Worry: Collateral [WSJ]

$$$ Elsewhere, Italian debt costs tumble after auction [FT]

$$$ Fed seeks to curb repo market risk [FT]

$$$ Allen Stanford’s Bid to Delay Trial Denied [Bloomberg]

$$$ Nadex Files To List Options On 2012 Presidential Election Outcomes [Dow Jones]

$$$ Feuding monks brawl at Church of the Nativity in Bethlehem [NYDN]
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Holiday Bell: 12.28.11

Internal BNY Mellon Documents Show Panic (WSJ)
An informant in a state fraud case against Bank of New York Mellon Corp. has provided prosecutors a rare inside peek into how the bank allegedly scrambled to contain the fallout from a fast-growing government investigation, according to hundreds of pages of confidential documents. As investigators sought to determine whether the bank overcharged clients to execute their currency trades, a senior BNY Mellon executive nicknamed “Rambo” urged traders not to tell clients how much money they made on trading, according to the informant. Bank officials worried clients would switch to negotiating their own foreign-exchange trades, where the bank’s profit margin was far lower, an internal bank memo states. The bank also altered its website, changing the wording of its trading practices. And when a veteran bank official heard about the government investigation, she said: “It’s over, it’s all over,” according to the informant.

Hedge-fund executive Steven Cohen is bidding for the Dodgers (LA Times)
Cohen…has engaged one of America’s notable sports architecture firms to propose renovations to Dodger Stadium, allied himself with one of baseball’s power brokers, secured the support of at least two prominent Angelenos and met with several major league owners. He was joined in those meetings by Arn Tellem, an influential sports agent who could run the Dodgers if Cohen were to buy the team. The developments were confirmed by several people familiar with the Dodgers sale process, each of whom said he could not comment publicly. Jonathan Gasthalter, a spokesman for Cohen, declined to comment. Cohen is among the first bidders submitted to Major League Baseball for approval, according to a person familiar with the process but not authorized to discuss it. Initial bids for the Dodgers are due Jan. 13.

Facebook to Lead Biggest U.S. Internet IPO Year Since 1999 (Bloomberg)
Facebook Inc. and Yelp Inc. are set to lead the biggest year for U.S. initial public offerings by Internet companies since 1999, testing demand for IPOs after investors lost money on Zynga Inc. and Pandora Media Inc. With Facebook considering the largest Internet IPO on record and regulatory filings showing that at least 14 other Web-related companies are planning sales, the industry may raise $11 billion next year, according to data compiled by Bloomberg. That would be the most since $18.5 billion of IPOs in 1999, just before the dot-com bubble burst.

Woes Weigh On Sears, Eddie Lampert (WSJ)
The 49-year-old Mr. Lampert has struggled to retain qualified executives: Under his watch, the company c-suite has become a revolving door. Stores have been criticized for showing their age. Its once highflying shares—which peaked at $191.93 in April 2007 amid speculation that Sears would be an investment vehicle for Mr. Lampert akin to Warren Buffett’s Berkshire Hathaway Inc.—plunged 27% to $33.38 Tuesday. They have lost more than half their value this year and are down 73% since the merger closed in March 2005. The market capitalization of Sears by the end of Tuesday had dropped to $3.6 billion. That is far from what Mr. Lampert envisioned when he launched an $11 billion purchase of venerable Sears, using money from Kmart, a company he had steered out of bankruptcy earlier in the decade. He predicted the merger would create a “powerful leader in the retail industry.”

Japan Renews Pledge To Act Over Yen (WSJ)
In its semiannual report on foreign exchange, the Treasury also repeated its assertion that China’s yuan is undervalued but again stopped short of declaring China to be a currency manipulator. But it was the harsh language toward Japan that came as a surprise to the foreign-exchange market. It also appeared to put Japanese officials on the defensive. “There is no change in our thinking regarding Japan’s foreign-exchange policy, and there is no change in our stance that we will respond to excessive rises in the yen,” a senior Japanese government official told reporters. “We have informed [Japan’s foreign counterparts, including the U.S.] of that point through various channels, and we will explain it whenever that becomes necessary.”

Get set for DSK: the movie (NYP)
Director Abel Ferrara is working on a film inspired by Dominique Strauss-Kahn, with French actor Gerard Depardieu playing the former International Monetary Fund chief who was embroiled in a sex scandal, reports.

Chile daily must pay readers for exploding churros (AP)
Chile’s Supreme Court has ordered a daily newspaper to pay $125,000 to 13 people who suffered burns while trying out a published recipe for churros, a popular Latin American snack of dough fried in hot oil. The publisher of La Tercera must pay individual damages ranging from as little as $279 to $48,000 for one woman whose burns were particularly severe. The high court’s ruling was announced Monday, seven years after the readers burned themselves while trying out the recipe. Judges determined that the newspaper failed to fully test it before publication, and that if readers followed the recipe exactly, the churros had a good chance of exploding. Read more »

Write-Offs: 12.27.11

$$$ The Worst C.E.O.’s of 2011 [DealBook]

$$$ Obama to Name Two Fed Board Nominees [WSJ]

$$$ Banks Boost Lending as Economy Slowly Warms Up [CNBC]

$$$ Carlyle’s timing pays off for investors [FT]

$$$ SEC Seeks Emergency Hold On Citi Suit [WSJ Law Blog]

$$$ Goat Flees Nativity Scene, Still On The Lam [HuffPo]
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Holiday Bell: 12.27.11

Economic Downturn Took A Detour At Capitol Hill (NYT)
Largely insulated from the country’s economic downturn since 2008, members of Congress — many of them among the “1 percenters” denounced by Occupy Wall Street protesters — have gotten much richer even as most of the country has become much poorer in the last six years, according to an analysis by The New York Times based on data from the Center for Responsive Politics, a nonprofit research group…While the median net worth of members of Congress jumped 15 percent from 2004 to 2010, the net worth of the richest 10 percent of Americans remained essentially flat. For all Americans, median net worth dropped 8 percent, based on inflation-adjusted data from Moody’s Analytics.

SEC Cracks Down On Rogue Firms (WSJ)
It is the Securities and Exchange Commission’s new “most-wanted” list: a chart covered with handwritten notes, yellow highlighter and the names of about 100 hedge funds. The hedge funds have one thing in common: Their performance seems, to the SEC, too good to be true, with some trouncing the overall market and others churning out modest results without ever suffering a down month. Some funds on the list stumble but still always outperform rival hedge funds. “There is serious fraud in this space, and we have been attacking it,” said Bruce Karpati, co-chief of the SEC’s asset-management enforcement unit. The hedge-fund chart dominates a corner of his lower Manhattan office.

Obama Wins Most Demand for Debt of U.S. Presidents Since Before First Bush (Bloomberg)
The Treasury Department attracted $3.04 for each dollar of the $2.135 trillion in notes and bonds sold, the most since the government began releasing the data in 1992 during the George H. W. Bush administration. The U.S. drew an all-time high bid-to- cover ratio of 9.07 for $30 billion of four-week bills it auctioned on Dec. 20 even though they pay zero percent interest. While Standard & Poor’s stripped the U.S. of its AAA credit rating on Aug. 5, Treasuries due in 10 years or more returned 25.6 percent this year.

S&P Index in 2011 Moves Least Since 1970 (Bloomberg)
The S&P 500 rose 3.7 percent last week, sending the measure to a gain of 0.6 percent for the year. The last time it moved less on an annual basis was in 1970, when it fell 0.1 percent.

Kynikos, Third Point Are Dismissed From $8 Billion Fairfax Suit (Bloomberg)
James Chanos’s Kynikos Associates LP and Daniel Loeb’s Third Point LLC won dismissal from an $8 billion lawsuit accusing the two hedge funds of spreading negative information to drive down Fairfax Financial Holdings Ltd.’s stock price…In September, Hansbury dismissed billionaire Steven A. Cohen and his Stamford, Connecticut-based SAC Capital Advisors LP from the case. Fairfax, a Toronto-based insurer, sued the hedge funds in 2006, alleging they acted to harm the company because they were betting its stock price would decline. The hedge funds named in the suit have denied Fairfax’s accusations. “We thought Fairfax was engaged in some pretty blatant forum shopping and it took a while but the judge saw through it,” Bill Carmody, a lawyer for Third Point at Susman Godfrey LLP in New York, said in a phone interview.

Moynihan: ‘Our job is to be fair to customers’ (Boston Globe via BI)
Q: How badly did the plan to impose a $5 debit card fee hurt your reputation, and how do you repair it? A: We didn’t do our best work there…We struck a chord with customers that no one anticipated. We learned our lesson and stopped it.

A Rash Of Tuba Thefts At Southland High School (LA Times via Matthew Goldstein)
As Southern California awoke to the wreckage from a recent massive windstorm, music teacher Ruben Gonzalez Jr. was assessing a different sort of devastation in his band room at South Gate High School. Thieves had pried open a door and torn the room apart while hunting for a specific instrument. “All they took were tubas,” Gonzalez said. Losses included an upright concert tuba and a silver sousaphone — or marching-band tuba — worth a combined $13,000. Several weeks earlier, band members at Centennial High School in Compton experienced a similar shock when they found that eight sousaphones were missing. And on Tuesday, burglars broke into Huntington Park High School and spirited away the school’s last tuba, according to band instructor Fernando Almader. A silver Jupiter tuba had been stolen earlier in the school year. Those are just the latest in what police and music instructors are describing as a rash of unsolved tuba thefts at high schools in southeast Los Angeles County.

Outrage Over Caged Wall Street Bull (NYP)
Six weeks after Occupy Wall Street was evicted from Zuccotti Park, the nearby Wall Street bull is still completely corralled behind police barricades — enraging tourists and members of the downtown community who want cops to uncage the bronze beast. Protesters first gathered at the sculpture on the first day of the demonstrations, Sept. 17, before squatted in the park for two months, leading cops to barricade the 3 1/2- ton “Charging Bull” ever since. Although officers will sometimes ease up and let visitors briefly enter the barricades, climbing on the bull and snapping photos with its famous cojones are strictly off-limits. The barriers have driven away tourists and the money they spend, community leaders say. “One of the most popular monuments and sources of tourism is being kept away from the public,” fumed Arthur Picollo, chairman of the Bowling Green Association. “It is an outlandish decision to keep those barricades there. Uncage the bull!” Read more »