Archive for February 2012

Write-Offs: 02.29.12

$$$ Banks turn to ECB for €530bn in loans [FT]

$$$ Market-Roiling Trade Likely Not ‘Fat-Finger’ Error [WSJ]

$$$ Fannie Mae seeks $4.6 billion in aid after Q4 loss [Reuters]

$$$ Ted Turner wakes up at 4am, goes to bed at 9pm, reads The Economist cover to cover, drives a Prius, and “alternat[es] among four girlfriends, each of whom gets approximately a week per month of his time. ‘Pretty much, that’s the general rule,’ he says.” [Hollywood Reporter via DI]

$$$ A well known investment bank is looking for an experienced cash equity salesperson to cover Latin American institutional accounts – might that be you? [DBCC]
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In the freezing rain a few yards away from Bank of America’s New York headquarters on 42nd Street, the man who made America see Goldman Sachs as a “vampire squid” was describing his research on a forthcoming article. “I called up my source and told him that I wanted to highlight all the really bad things Bank of America has done, and he said, ‘What, do you have 1,000 pages?'” Matt Taibbi was speaking to a group of Occupy Wall Street protesters about BoA’s central role causing the still-reverberating mortgage crisis, and explained the bank’s crimes thusly: “Mortgage backed securities are like banks selling oregano as weed. And that’s exactly what Bank of America was doing.” [Gothamist, Related: “Taibbi rushed in unannounced and, by way of congratulations, slammed a pie in his face. The pie was made with fresh vanilla cream, hand-puréed strawberry, and five ounces of horse semen]

I always feel bad bringing you academic papers because inevitably they’ve been on SSRN for, like, two years, but this one is new to me anyway and good glaven are these charts clever:

So these guys (Kenneth Ahern and Denis Sosyura of Michigan) went and looked at a bunch of stock-for-stock mergers. And they looked at the uptick in news coverage after those mergers were announced – and, far more interestingly, before they were announced but after negotiations had started (which they found out by reading the “Background” in the merger proxy) . Then they divided those mergers into (1) fixed exchange ratio mergers, where the acquirer could minimize the price it paid by pumping up its stock just before signing the merger (because buying a $540mm company for AAPL shares requires 1mm shares now, but would require many more/fewer if AAPL were not so over/underpriced, take your pick), and (2) variable exchange ratio mergers (“we’ll give you $540mm worth of stock based on whatever our stock price at closing” or more complicated versions thereof), where the acquirer could minimize the price it paid by pumping up its stock just before closing the merger. Then they charted where there were more – largely positive, company-driven, press-release-based – articles than usual. And lookit that!

Or if you like, like, words and numbers: Read more »

  • 29 Feb 2012 at 3:31 PM

The Interview Shame Thread

We, elderly Second-Year Sages, like to offer recruiting advice as if we know how it’s done. Truth is, we have no idea what these firms, who shop for new blood annually, are really looking for. Like giving birth and swimming, it’s something you just have to try yourself to find your best approach. Still, we’ve got a few thoughts on what not to do.

This time last year, I sent my worst interview flubs to some friends also beaten down by internship recruiting. Then unexpectedly and immediately, they all piped in with gems of their own. Highlights of the (continuing) shame thread below should reassure you that: i) it’s okay if you’re not perfect every time, and ii) someone else somewhere is botching it far worse than you ever thought you could. So you might as well just laugh off (and record) those special moments …

When your interviewer is an idiot, an ass, or both:

Interviewer: Two companies, A and B. A is 50/50 debt/equity, B is 100% equity. EBITDA doubles, multiple stays flat. Whose share price moves more?
Candidate: (fumbles, gets it wrong)
Interviewer: What does “applied math,” your undergrad major, mean?
Candidate: Ha. Well, I’m pretty good at long division

Interviewer: So how many people today have asked you about being an Eagle Scout?
Candidate: You’re the first one actually. Were you an Eagle Scout?
Interviewer: No.
Candidate: My parents wouldn’t let me [quit]. You get to high school, everyone is out on dates, and you’re at a Camporee. But we all looked back at it and realized it taught us an appreciation of the outdoors and good respect for your elders.
Interviewer: Elders. You guys are all about that, aren’t you? The elders.
Interviewer & Candidate: (extended awkward silence) Read more »

Charlie Gasparino is on the scene: Read more »

German finance minister Wolfgang Schauble was caught playing a game of Sudoku during a heated debate in Germany’s parliament over the latest Greek bailout. While his colleagues debated the merits of keeping Athens on life support with a controversial €130 billion ($174 billion) bailout, Schauble opted to hammer away at the numbers game on his tablet computer, according to a photo released by Germany’s Bild newspaper Wednesday…The finance minister declined the newspaper’s request for comment, but a spokesperson for his office said he was taking a well-deserved break from normal duties. [NYP, related]

  • 29 Feb 2012 at 11:31 AM

Bonus Watch ’12: Nightmare On Wall Street

At Bloomberg today you will find a piece that is a bit hard to stomach if you’re the type of person whose heart goes out to the suffering. A bunch of financial services employees’ bonuses were slashed last year and, as a result, their lives have been turned upside down. Perhaps recalling how well their colleagues came off in Bloomberg’s first piece in what is apparently a series on bankers who are down, out, and willing to talk on the record, these people thought it wise to turn to reporter Max Abelson to tell their tale.

First, there’s Andrew Schiff, director of marketing for Euro Pacific Capital. Schiff has almost too many woes to mention but they include having to scale back his Connecticut summer house rental from four months to one; facing the pressure of paying private school tuition for two kids; living in a “crammed” 1,200-square- foot Brooklyn duplex (Schiff and his wife were planning to buy a $1.5 million brownstone nearby but now, who knows); and traffic (“Schiff was sitting in a traffic jam in California this month after giving a speech at an investment conference about gold. He turned off the satellite radio, got out of the car and screamed a profanity. ‘I’m not Zen at all, and when I’m freaking out about the situation, where I’m stuck like a rat in a trap on a highway with no way to get out, it’s very hard,’ he said”).

Then there’s Cobble Hill resident Daniel Arbeeny, a headhunter whose “income has gone down tremendously” and now must buy discounted salmon at Fairway and “read supermarket circulars to find good prices for his favorite cereal, Wheat Chex,” which is one step from giving out hand jobs under the Brooklyn bridge to make ends meet. Hedge fund manager Richard Scheiner had to sell two motorcycles (though because he actually saved some money, Zelda the labradoodle and Duke the bichon frise still get to live the lifestyle they’ve grown accustomed to at $17,000/year). Michael Sonnenfeldt’s friends are suffering from “malaise and a paralysis that does not allow [them] to believe that generally things are going to get better.” M. Todd Henderson feels sick (“Yes, terminal diseases are worse than getting the flu,” he said. “But you suffer when you get the flu”).

All traumatic experiences to be sure. And yet none come close to that of Hans, whose harrowing story should serve as a cautionary tale to all. Read more »

Opening Bell: 02.29.12

Insider Probe Targets A Top Goldman Manager (WSJ)
David Loeb, a Goldman managing director who acts as a middleman between the Wall Street firm and some of its most important hedge-fund clients, is the latest Goldman official to be investigated in the insider-trading probe…Known at Goldman and among clients as self-deprecating and colorful, Mr. Loeb sometimes signs his emails “cbf,” for “chunky but funky.”

Dalio Earned Clients $13.8 Billion to Lead Hedge Funds as Paulson Slumped (Bloomberg)
Ray Dalio’s Pure Alpha hedge fund made $13.8 billion for its investors last year, while John Paulson lost clients almost $10 billion after an unsuccessful wager that the U.S. economy would recover, according to a report by LCH Investments NV. Pure Alpha, part of Dalio’s Bridgewater Associates LP, has earned $35.8 billion for investors since its inception in 1975, said LCH, a firm overseen by the Edmond de Rothschild Group. Losses for New York-based Paulson & Co. last year cut gains the firm has made for clients since its 1994 founding to $22.6 billion, LCH estimated..Paulson, who made billions of dollars betting against the U.S. housing market in 2007, remains the third-most profitable hedge fund manager ever after rivals at Bridgewater and Quantum, according to LCH. “Our performance in 2011 was clearly unacceptable,” Paulson, 56, wrote in a letter sent this month to clients…New to LCH’s list of the most profitable hedge funds through 2011 is Steve Cohen’s SAC Capital Advisors, which has made $12.2 billion for clients since inception in 1994, according to LCH. SAC, based in Stamford, Connecticut, replaced Edward Lampert’s ESL Investments Inc. of Greenwich, Connecticut.

Wells Fargo, Goldman May Face Charges Over Mortgage Bonds (Reuters)
Goldman received its Wells notice on Feb. 24, relating to a $1.3 billion subprime mortgage-backed securities deal in late 2006 that the bank underwrote. Goldman said it will be making a submission to the SEC related to the case and communicating with SEC staff to address their concerns. The bank has also received inquiries from governmental, regulatory bodies and self-regulatory entities concerning certain transactions Goldman entered with MF Global prior to the brokerage firm’s bankruptcy filing. Goldman said it is cooperating with all such inquiries.

Facebook Has More Growth Ahead, Says Co-Founder (CNBC)
Facebook has much more growth still left and will tap its existing users as well as secure growth by increasing the total number of users, Eduardo Saverin, one of the four co-founders of Facebook who retains a 5 percent stake in the social media giant, told CNBC Wednesday. The company is still “in the very early beginnings,” Saverin said, despite some analysts saying the social network had peaked. “There are a lot of things to get done. What Facebook has done today is it’s allowed us to have an identity on the web, but there is a lot more to do,” he said.

Ex-Bear CEO: We Wouldn’t Have Done Anything Differently (CNBC)
“You can go back and say, should we have done some things differently leading up to the environment we got in?” Alan Schwartz said today. “You know, you can always say that. Hindsight is 20/20. “Once the markets froze there was really very little we could do. The liquidity environment was what pushed us over the cliff. In retrospect, I didn’t think there was a lot that any one player could have done about that.”

JPMorgan’s Dimon Assails Newspaper Pay Levels in Bank’s Defense (Bloomberg)
“Obviously our business, in investment banking in particular, all of our businesses, we have high capital and high human capital,” Dimon said yesterday at a presentation in New York. “Newspapers — I went and got this one day just for fun — 42 percent payout ratio, which I just think is just damned outrageous…Worse than that, you don’t even make any money!” Dimon said, directing his comments to those in the media covering the company’s investor day and drawing laughter from his audience. “We pay 35 percent. We make a lot of money.” Read more »