Archive for February 2012

Opening Bell: 02.27.12

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Buffett’s Board Selects Manager to Eventually Take Over as Berkshire CEO, Won’t Say Who It Is (Bloomberg)
…saying instead that directors were “enthusiastic” and have had “a great deal of exposure” to the person designated to take over as CEO. Buffett, 81, didn’t specify a timeline for the switch.

Buffett On Hormones, Housing (Berkshire Letter)
Every day we are creating more households than housing units. People may postpone hitching up during uncertain times, but eventually hormones take over. And while “doubling-up” may be the initial reaction of some during a recession, living with in-laws can quickly lose its allure. At our current annual pace of 600,000 housing starts – considerably less than the number of new households being formed – buyers and renters are sopping up what’s left of the old oversupply.

Buffett Says BofA Warrants Have ‘Great Value,’ Praises Moynihan (Bloomberg)
“Some huge mistakes were made by prior management,” wrote Buffett, 81. “Brian Moynihan has made excellent progress cleaning these up, though the completion of that process will take a number of years. Concurrently, he is nurturing a huge and attractive underlying business that will endure long after today’s problems are forgotten.”

Berkshire Profit Falls 30% on Insurance, Derivatives (WSJ)
Berkshire Hathaway Inc. said fourth-quarter profit fell 30% as the conglomerate’s insurance units struggled and derivatives bets added less to the bottom line. Mr. Buffett, who serves as Omaha, Neb.-based Berkshire’s chairman and chief executive, has urged investors to evaluate the firm by how it is growing in relation to the broader market. He often draws attention to Berkshire’s book value, a measure of assets and liabilities that he says understates the company’s actual value but can serve as an objective indicator of the company’s performance over time. Berkshire’s book value increased 4.6% in 2011, exceeding the 2.1% return of the benchmark Standard & Poor’s 500 Index. It marks the first time in three years that Berkshire’s book value increased more than the return of the S&P, according to data provided by Mr. Buffett on the second page of Berkshire’s annual report released early Saturday.

Buffett–Adding IBM but more tech unlikely (Reuters)
Berkshire Hathaway Inc has bought more shares in International Business Machines Corp during the first quarter but is unlikely to do much more investing in the technology sector, Warren Buffett told CNBC on Monday. Buffett, asked about Apple Inc, said he has never bought the shares. He did note, though, that Apple’s late CEO Steve Jobs contacted him a few years ago seeking advice about that company’s substantial cash pile.

Actress Lucy Lawless arrested in oil-ship protest (AP)
Police arrested actress Lucy Lawless and five Greenpeace activists Monday, four days after they climbed onto an oil-drilling ship to prevent it from leaving a New Zealand dock. Police removed the protesters from their perch atop a 174-foot (53-meter) drilling tower on the Noble Discoverer in Port Taranaki. Chartered by oil company Shell, the ship had been due to leave over the weekend to drill five exploratory wells in the Arctic. Lawless and six activists climbed the tower early Friday to stop the ship’s departure and raise awareness about Arctic oil drilling…Lawless, 43, a native New Zealander, is best known for her title role in the TV series “Xena: Warrior Princess,” and more recently for starring in the Starz cable television series “Spartacus.” Read more »

Write-Offs: 02.24.12

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$$$ Bonus cuts hide bigger problem for investment banks [FT]

$$$ Newsletter Flagged Possible ‘Japanese Madoff’ in 2009 [WSJ]

$$$ Gray in position to succeed Schwarzman [FT]

$$$ Apple would like to break the law of large numbers, for very loose definitions of “the law of large numbers” (or very strong forms of EMH?) [NYT]

$$$ BREAKING: Jim Chanos eats bread [BI]

$$$ Lenny Dykstra can go to Gary Carter’s funeral [NYP]
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  • 24 Feb 2012 at 6:24 PM

UBS Hitches Its Wagon To Bear Stearns Alum’s Star

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Princes of Bear Stearns, kings of Lehman Brothers– have you attempted to gain new employment in the last several years only to encounter prejudice among people who learn of your past? Is pounding the pavement with Bear and Lehman on your resumes not unlike being forced to knock on the doors of your new neighbors and let them know about your registration on a certain list of individuals? Take heart– one investment bank would like to let it be known that while you may have an asterisk next to your name, it believes in second chances. Read more »

  • 24 Feb 2012 at 4:52 PM

Someone Is Running Around Newport Beach Pulling Bill Gross’s Signature Move

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As many of you know, PIMCO chief Bill Gross is fond of weaving life stories throughout his monthly investor letters. One of his favorites, and a “Gross family legend,” was featured in a March 2011 correspondence entitled “Two Bits Four Bits Six Bits A Dollar.” It is the tale of the time he gave a waitress “negative tip,” noting on a napkin: “Thanks for the shitty service…you owe me 25 cents.” So, clearly, acting like a cheap prick to waitresses is kind Gross’s thing, as indicated by the fact that he proudly wrote about it in a note disseminated to thousands. Which is why it distresses us to report that someone has not only been flagrantly stealing BG’s move but doing so in on his own turf. Examine the evidence with us. Read more »

  • 24 Feb 2012 at 3:01 PM

Wynn Was Shocked, Shocked To Find Its Bribe-Loving Director Was Paying Bribes

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There’s a possibly true anecdote about Greek uncompetitiveness that goes like this:

“An online store is more complicated than a regular store basically because of the way payments are carried out,” explained Fotis Antonopoulos, one of the co-founders of www.oliveshop.com, which sells olive oil-based products such as cosmetics, mostly to foreign markets. …

Antonopoulos and his partners spent hours collecting papers from tax offices, the Athens Chamber of Commerce and Industry, the municipal service where the company is based, the health inspector’s office, the fire department and banks. At the health department, they were told that all the shareholders of the company would have to provide chest X-rays, and, in the most surreal demand of all, stool samples.

This is contrasted with the US system, where Antonopoulos says “I contacted the FDA and they sent us an e-mail with directions immediately. I filled in an online form and was done in five minutes. We received the approval 24 hours after making our application.”

Now, I’m sure you’re as horrified as I am that the people in charge of protecting our health and safety will let us smear olive-derived creams on ourselves without so much as examining the poop of the people providing the funding to the people selling those creams. Fortunately, though, US regulators keep watch over some aspects of our lives to make sure they’re not affected by shareholder irregularities. Specifically, they keep watch over our slot machines.

That is I suppose the genesis of this awesome Wynn thing. Quick recap (based largely on this report from former FBI director Louis Freeh because why not have a former FBI director involved): Steve Wynn had a friend, a Japanese engineer named Kazuo Okada, who runs a company named Aruze that was a 24.55% investor in Wynn Resorts when it IPOed in 2002 and a 19.66% shareholder as of … last week. Okada tried to open his own casino in the Philippines, maybe doing some shady stuff with Wynn resources including the “city ledger” account set up by Wynn to, as far as I can tell, allow Okada to gamble more efficiently. Also maybe doing some shady stuff like kind-of bribing Philippines regulators, which is a violation of US law and also a serious no-no in the casino world. Things got unpleasant and Okada accused Wynn of doing some bribing himself, which was followed by that Freeh investigation by Wynn finding conflicts of interest and bribery by Okada.

Then things got amazing: Read more »

  • 24 Feb 2012 at 2:49 PM

Fast Money Types Can Sit On Rich’s Mustache And Spin

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While a small group of protesters marched outside Apple’s shareholders meeting this morning over labor practices in China, investors inside were mostly saying thank you. And with good reason. Take Rich Bleyle, a retired teacher attending the annual meeting from Buffalo, New York. He and his wife Mary spent $16,000 on Apple shares in 1997, about the same time late co-founder Steve Jobs returned to the company. Today, the couple has about $2 million worth of Apple shares. Bleyle, wearing a handlebar mustache and wearing a blue t-shirt that said “Macho Man,” said the couple sold only 200 shares since that initial investment and still owns another 3,800…Mark Barchas, who has owned shares for about 14 years, owns an iPhone, iPad, iMac and Apple TV. He’s such a fan that he can’t bring himself to sell the shares, even as they hit record highs. “One time he sold and couldn’t sleep until he bought it back,” said his wife, Kay. [Tech Blog]

  • 24 Feb 2012 at 2:18 PM

Jon Corzine’s Weekend Just Got A Bump

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The last several months have not been the best of times for Jon Stephen Corzine. His fund went down for the dirt nap. He was forced to shelve his dreams of becoming a count. He made the tearful decision to put his Hoboken hideaway on the market, probably to free up some cash should it become necessary to pay legal fees. And while some pissant MF Global clients have in fact served him with papers, today brings the joyous news that any sleepless nights spent worrying over doing time were all for naught. Read more »

  • 24 Feb 2012 at 11:58 AM

Layoffs Watch ’12: Credit Suisse

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Cuts are coming to the House of Dougan next month. Read more »

  • 24 Feb 2012 at 9:30 AM

Opening Bell: 02.24.12

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Lampert Gains $160 Million on Sears Shares (Bloomberg)
Eddie Lampert, the hedge fund manager who controls Sears Holdings Corp. (SHLD), has more than $160 million in paper profits on shares of the retailer acquired last month from a long-standing client, the Ziff family. The billionaire paid $130 million in early January to personally acquire Sears shares from ESL Investors LLC, a partnership he runs for the Ziffs that follows the same strategy as his hedge fund, according to court documents and regulatory filings. The retailer’s stock has more than doubled since then, rebounding from a three-year low and ranking as the best- performing member of the benchmark Standard & Poor’s 500 Index.

AIG Cites ‘Sustainable Operating Profit’ (Bloomberg)
AIG’s biggest unit, property-casualty insurer Chartis, and its plane-leasing business swung to operating profits in the period, the New York-based company said in a statement yesterday as it posted net income of $19.8 billion.

Japanese Fund Loses $2.3 Billion (WSJ)
Japan’s financial regulator said Friday it has halted operations of a little-known Tokyo money-management company after the firm allegedly lost billions of dollars in client money. In one of the biggest cases of its kind in Japan, with Tokyo’s reputation as a financial center still bruised by the billion-dollar Olympus Corp. accounting scandal, the regulator said investigators found that AIJ Investment Advisors Co. can’t account for “most of” the 183 billion yen, or about $2.3 billion, in pension-fund assets under management.

Delusions About The Detroit Bailout (NYT)
Steve Rattner: “As a presidential aspirant, Mr. Romney evidently hasn’t felt a need to be consistent or specific as to what should have been done to address the collapse of the auto industry starting in late 2008. But the gist is that the government should have stayed on the sidelines and allowed the companies to go through what he calls “managed bankruptcies,” financed by private capital. That sounds like a wonderfully sensible approach — except that it’s utter fantasy. In late 2008 and early 2009, when G.M. and Chrysler had exhausted their liquidity, every scrap of private capital had fled to the sidelines. I know this because the administration’s auto task force, for which I was the lead adviser, spoke diligently to all conceivable providers of funds, and not one had the slightest interest in financing those companies on any terms. If Mr. Romney disagrees, he should come forward with specific names of willing investors in place of empty rhetoric. I predict that he won’t be able to, because there aren’t any.”

ECB’s Mario Draghi Takes Tough Line On Austerity (WSJ)
No more Mr. Nice Guy! “You know there was a time when [economist] Rudi Dornbusch used to say that the Europeans are so rich they can afford to pay everybody for not working. That’s gone,” Mr. Draghi said.

There’s ‘No Quick Fix’ to Sharp Rise in Oil Price Says Geithner (CNBC)
Geithner attributed the rise in crude prices, which have sent gasoline above $4 a gallon in some parts of the country to two factors: Better growth expectations, along with “saber rattling” from Iran over its desire to advance its nuclear program. “There’s no quick fix to this, no short-term fix,” Geithner said. “The best strategy for the country is to continue to make some long-term investments, to expand production in the United States, to reduce our dependence on foreign oil, to encourage Americans to use more efficient clean sources of energy, to encourage Americans to be more efficient in how they use energy.”

Darren Rovel Did An Investigative Report On Girl Scout Cookies (CNBC)
It turns out that Thin Mints are made in the same factory as Keebler Grasshopper cookies. Tagalongs are made in the same factory as Keebler Peanut Butter-Filled cookies and Samoas are made in the same factory as Keebler Coconut Dreams. One might think that Kellogg is cannibalizing sales of Girl Scout Cookies by producing look- and “tastealikes” year round, but Amanda Hamaker, manager of product sales for the Girl Scouts says that’s not the case. “We’ve had the conversation about the cookies being made in the same factory,” Hamaker said. “But we haven’t seen a decline in Girl Scout Cookies because of what they’re doing…Girl Scout consumers love our cookies, but they purchase them because there are supporting girls. That’s not happening at the supermarket.” Read more »

Write-Offs: 02.23.12

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$$$ Commerzbank CEO Slams Greek Bond Deal [WSJ]

$$$ Blueprint for China to open up markets [FT]

$$$ AIG posts huge 4th-quarter profit on tax benefit [Reuters]

$$$ Berkshire Struggles With Being Ignored [WSJ]

$$$ UVA Murder Verdict Will Embolden Victims. Of murder? [Bloomberg]

$$$ You have to go up the escalator or stairs. And across this walkway. And then down another flight of stairs. Then you’re on the ground. Then you keep walking until you come to the door. Then you open the door. Then you cross the lobby. And then to the elevator. You have to go up to your floor in the elevator. Then you have to walk to your desk. Then you sit down in your chair. And then turn on your computer. And then open a web browser. And then navigate to Business Insider. And then you come to the worst part of this route. [BI]
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  • 23 Feb 2012 at 7:34 PM

RBS Puts 10,000 Employees’ Pay On Ice

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Earlier today the Royal Bank of Scotland reported a loss of £2 billion ($3.13 billion) for last year, which CEO Stephen Hester noted was in line with the estimates he projected in his five-year turnaround plan for the bank. To that end, Hester told reporters that contrary to popular belief, his team is working quite hard, “defusing the biggest-ever time bomb put in a banking balance sheet” and so, looking at it that way, “we are making progress.” Progress which should be rewarded monetarily, which is why bonuses were in fact distributed this year, to the ire of the many, many critics giving Hester guff for keeping his people moderately happy or at least not homicidal. Having said that, those thinking the firm has the money to not only pay bonuses but raise base pay *and* bring in dancing chickens should think again. Read more »