Last month, Citigroup announced that it was mulling over the idea of relieving 3,000 employees of their commitments to the firm. A couple weeks later, it decided that yes, that sounded like a good idea, and began giving people the signal. Perhaps to a) send a message that no one should get comfortable yet and b) make it clear to existing staff holding out hope that it was true their direct report just ran out for a pack of smokes and would be “back in 10″ that no, Daddy’s not coming home, Uncle Vik announced today: Continue reading »
Archive for December 2011
CFTC Makes Sure That MF Global Won’t Be Able To Lose Any Customer Money Other Than The $1.2bn It Already Lost
By Matt Levine
I find the “MF Global rule” confusing, and to understand it I have to start with some very basic basics. Let’s say I put money in my account at MF Global, which I want to hold as cash or a cash-like thing, because I need it to provide margin for my futures positions. That money is “segregated,” meaning that in some loose sense it belongs to me and not to MF Global, but MF Global can invest it. Now, because I am ignorant, I had to stop here and ask, “why do they do that?” In general, there are two plausible answers:
(1) Because they want to make money for you, or
(2) Because they want to make money for them.
Now I didn’t know which was the right answer. Answer (1) would be like your brokerage firm, which invests your cash sweep into things that make money and then pays you that money. It is a marketing thing: you’re more likely to choose a brokerage that pays you a decent return on your cash sweep. But it turns out that MF Global actually lives in regime (2): they invest your money not to market how they make money for you, but to make money for them. If MF Global puts your $100 into a popcorn popper and $101 comes out, they keep the $1. Continue reading »
Cuts still going down at the House of Vikram. Continue reading »
Area Greenwich Man Will Bet You $252 Million / His Life Local Powerball “Winners” Are Fronting
By Bess LevinLast week in Connecticut, a theory was put forth: that the three asset managers who’d come forward with the winning Powerball ticket were doing so as a favor for a client who was too embarrassed to do so himself. To the naked eye, this seemed to check out. First off, it took Brandon Lacoff, Tim Davidson, and Gregg Skidmore nearly a month to claim their $252 million prize, and they only did so after lottery officials essentially waged a manhunt to find them. Second, they didn’t seem excited at all about their post-tax lump sum of $103 million. No smiles, no jazz hands, no chest bumps for the camera. Third, the guys all work for a firm called Belpointe Capital, an asset manager that, while it affords them the luxury of living in Fairfield County, is not at the point where it’s making everyone rich beyond the dreams of avarice or where the principals are in a position to be telling clients what’s what or failing to acquiesce to their demands, unconventional as they may be. Finally, a “person familiar with the matter” swore it was true. So most people chose to accept the theory and move on with their lives. The crack investigative team at the Stamford Advocate, however, decided this wasn’t over. Instead, they demanded to see a copy of the ticket, in addition to “passport and driver’s licenses of the winning trio and a photocopy of a check made out for $103,586,824 to a trust set up by Davidson, Lacoff, and Skidmore,” all of which they were able to obtain it under the Freedom Of Information Act, which was conceived with exactly this sort of matter of public importance in mind.
Upon viewing Davidson’s signatureprinted name on the above scan, despite being unclear what it proves exactly other than that he signed the ticket after the fact, one might be satisfied that three men did in fact pool 33, 33, and 34 cents each to buy that winning ticket. Like the Advocate, however, someone else is not yet finished here. Continue reading »
November performance. Continue reading »
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Posted in:
Love
JPMorgan Analyst Strangely Impervious To Married Ex-Boyfriend / Colleague’s Romantic Gestures
By Bess Levin
Time was, Daniela Rausnitz and David Gray had something special. Following a summer of flirtation across cubicles- Daniela was an intern at JPMorgan, David a “high-flying” third year analyst- the two got together after Daniela graduated from Duke and their relationship was “cemented” when David consoled her over being “sexually harassed by a senior member of the bank.” Things were said to have gotten so serious that David, a Cornell ’04 graduate, even entertained the idea of leaving his wife. Unfortunately, things hit a rough patch after Daniela transferred to JPMorgan’s London office and Big D began “stifling” her. Consequently, Daniela decided to pump the brakes and end things. Still Married David, however, knew better. These two, Daniela and Dave, were meant to be together. Meant for each other. So he did what any other romantic in his shoes would do, and waged a campaign to get her back. Said campaign included the following moves:
* Sending her 176 text messages and 23 emails over just 16 hours
* Using his old key to get into her apartment
* Claiming “he was critically ill in a desperate effort to attract her attention.”
* Hacking her email
* Planting “a tracking device in her phone”
At this point, there’s a chance Gray stepped back and asked himself, “Is it possible I’m coming on too strong”? A silly question, obviously, as he already knew the answer, which was: “No, no strong enough.” So he doubled down on Operation You’re The One For Me. Continue reading »
S&P Jumps Into Politics Again With EU Outlook Warning (Bloomberg)
The ratings firm put Germany, France and 13 other euro-area nations on review for a downgrade yesterday, saying “continuing disagreements among European policy makers on how to tackle” the region’s debt crisis risk damaging their financial stability. The move came four months after S&P cut the U.S. to AA+, saying “extremely difficult” political discussions over how to reduce America’s more than $1 trillion budget deficit tainted the credit quality of the world’s largest economy. “S&P should back off,” Anthony Valeri, a market strategist with LPL Financial in San Diego, which oversees $330 billion, said in a telephone interview yesterday. “It complicates the job of the EU leaders to resolve the debt problem.”
Angela Merkel Minimizes Possible S&P Downgrade (AP)
“What a rating agency does is the responsibility of the rating agency,” Merkel told reporters in Berlin, refusing to elaborate further. She said, however, that she expected a meeting of European leaders later this week in Brussels would help restore markets’ confidence. “We will meet on Thursday and Friday as Europeans and take those decisions that we consider to be correct, and through them stabilize the eurozone and also regain confidence,” she said.
Geithner To Add US Weight To Euro Zone Talks (Reuters)
U.S. Treasury Secretary Timothy Geithner arrived in Germany on Tuesday for a three-day blitz of euro zone officials to urge them to take decisive action to backstop their currency union and resolve a crushing debt crisis. Geithner will press French President Nicolas Sarkozy, the new leaders of Spain and Italy and Germany’s finance minister to agree at a crucial European Union summit on Friday to take steps that will give markets confidence that no euro zone countries will default, and that the region’s banks will stay solvent.
Abby Joseph Cohen: First Half Of 2012 Will Be ‘Difficult’ (CNBC)
The first half of 2012 “will be difficult,” both in Europe and in the U.S., Abby Joseph Cohen, Goldman Sachs senior investment strategist, told CNBC Monday. She also expects that U.S. fiscal policy will get tighter. However, “things will start to look better in the second half” of next year, the long-time bull said in her latest forecast. Stocks will stay undervalued until “confidence is rebuilt,” Cohen said.
Corzine Rebuffed Warnings (WSJ)
The executive, Michael Roseman, whose title was chief risk officer, also expressed concerns directly to Mr. Corzine in meetings of just the two men and with other people present, people familiar with the situation said. Mr. Roseman contended MF Global didn’t have enough spare cash to withstand the risks of its position in bonds of Italy, Spain, Portugal, Ireland and Belgium. He also presented gloomy hypothetical scenarios of what could happen if MF Global’s credit rating was downgraded because of the exposure. Mr. Corzine, who started betting on the bonds shortly after arriving as chief executive in March 2010, responded to Mr. Roseman’s concerns that some of the scenarios were too extreme and likely impossible, people familiar with the matter said. The former New Jersey governor and Goldman Sachs Group Inc. chairman said MF Global’s exposure was limited, adding that the likely profit was worth the risks, these people said. The CEO suggested to board members earlier this year that he might leave the company if they didn’t trust his judgment about the bet, according to people familiar with the matter. Continue reading »
$$$ S&P Puts Most of Euro Zone on Watch for Downgrade [WSJ]
$$$ John Paulson is down 3% in November, 32% YTD [Reuters]
$$$ Jeremy Grantham: “I despair that this country and its government have failed to take at all seriously the most important and the most dangerous issues: depleting resources, development of a comprehensive energy policy, and, yes, global warming. Wake up dudes!” [GMO]
$$$ Michael Lewis: “Ordinary Greeks seldom harass their rich, for the simple reason that they have no idea where to find them” [Bloomberg]
$$$ Fox Business News: “If you want to be fair, why not have a Barney Frank Muppet? Though Barney Frank looks like a Muppet anyway, so that wouldn’t be much of a stretch.” [NYO]
Continue reading »
If Goldman Sachs Can’t Appreciate Ed Forst’s Outside The Box Style Of Negotiating Then Yeah, This Is For The Best
By Bess Levin
He’ll take his talents elsewhere. Continue reading »
We’ve talked before about the theory that paying investment bankers in stock gives them an incentive to maximize the volatility of their businesses, which is a thing that some people don’t want so much. This starts from the notion that in a 10 or 20 or 30:1 levered bank or broker-dealer or futures merchant, the bulk of the money at risk belongs to the creditors, whether unsecured or depositors or repo or ex-wives or whatever. So it’s plausible to think of the equity as an at-the-money option to buy the assets from the creditors. And as any Level I CFA test completer could tell you with approximately 70% probability, the value of an option increases with volatility. If you own the equity in a bank with $29 billion in debt and $1 billion in equity market value, then you’ll prefer equally likely payoffs of [$25, $35 billion] to payoffs of [$29.99, $30.01 billion], because the higher volatility payoff increases the expected value of the equity (which, after all, can’t go below zero). If, however, you are a creditor of that firm, your preferences are the opposite.
This is all pretty straightforward and orthodox, and it probably ought to inform how you think about the incentives to bankers from owning their bank’s equity, and if you think that way then maybe you come up with ideas like “pay them in CDS” or whatever. On the other hand this theory shouldn’t be taken too seriously. When your entire net worth is in Jefferies stock, “the equity can’t go below zero” isn’t all that comforting.
But it’s worth remembering that incentives from owning equity are not exactly the same as incentives from being paid in equity: people who have a lot of stock feel different from people who stand to one day get a lot of stock. That’s the interesting takeaway from this weekend’s DealBook piece about the fact that bank stocks sometimes go up. (And sometimes they don’t.) For example:
Continue reading »
Former Occupy Wall Street Protester Can Sleep At Night Knowing Few People Would Recognize Her New Employer As Being On Wall Street
By Bess Levin
Other than when writing Penthouse forum entries or relaying tales of experimentation with barnyard animals, it’s not often that people tell stories which include the words “I never thought I’d be doing this.” On that note, remember John Thomas Financial? To recap, it’s a four year-old brokerage best known for being run by a guy (Thomas Belesis) who 1) last year took it upon himself to organize a “rally” to “bring back the pride of Wall Street” (which marked the first time anyone that worked on Wall Street had heard of the place) and 2) May have wanted to bring back not only pride but the sort of corporate culture that accepted, nay, encouraged “lesbian strippers on the trading floor,” a lack of judgement re: “virtual hailstorms of sexual harassment,” and a can-do attitude from junior employees when “assigned to mop up the whipped cream and bodily fluids resulting from an exec’s midday frolic with his secretary,” as was the case as his former firm. Anyway, JTF is back in the news on account of trolling Occupy Wall Street for employees and finding one in Tracy Postert, who apparently wouldn’t have accepted the offer unless she were really, really desperate which, lucky for Belesis, she was. Continue reading »
