Archive for February 2012

Opening Bell: 02.28.12

Insider Trading Targets Expanding (WSJ)
The government currently is investigating whether roughly 240 individuals, including hedge-fund traders and company insiders, improperly shared insider information, said Mr. Chaves. Roughly half of those, or 120, are “targets,” meaning the government believes they have violated insider-trading laws and is actively building cases against them, according to Mr. Chaves, who oversees one of two white-collar crime squads handling the New York-based insider-trading investigations. The rest are what the FBI calls “subjects,” meaning investigators believe they could have committed crimes and have approached them or could do so to build cases. The large number of “targets” of the investigation—dubbed “Perfect Hedge” by FBI agents—illustrates that the insider-trading probe is broader and deeper than previously believed and potentially the most expansive of its kind in modern history.

Merkel Wins Greek Aid Vote After Warning (Bloomberg)
“Angela Merkel’s strident insistence that bailing out Greece is vastly preferable to the alternative was important,” Kit Juckes, head of foreign-exchange research at Societe Generale SA, said in a note today as he forecast the euro rising to $1.50. “Europe’s leaders have always stepped back from the edge of the abyss after flirting with disaster.”

Focus Turns Now to Greek CDS Payouts (WSJ)
An unidentified market participant has asked a committee of the International Swaps and Derivatives Association to rule on whether the passage of legislation approving collective-action clauses for Greek debt should trigger payouts on credit-default swaps tied to Greek sovereign bonds.

Stanford Declines To Testify At Fraud Trial (Bloomberg)
R. Allen Stanford opted not to take the witness stand at his criminal fraud trial in Houston before his lawyers rested their defense. Prosecutors said they had no rebuttal witnesses, so U.S. District Judge David Hittner in Houston yesterday told the jury to return to the courtroom tomorrow. Lawyers will have two hours each for closing arguments and instructions to the jury will take an hour, the judge said. “The case is over,” Hittner told the jury. Opening statements were delivered Jan. 24.

Wealthier People More Likely To Lie, Cheat (Bloomberg)
The “upper class,” as defined by the study, were more likely to break the law while driving, take candy from children, lie in negotiation, cheat to raise their odds of winning a prize and endorse unethical behavior at work, the research found. The solution, Piff said, is to find a way to increase empathy among wealthier people. “It’s not that the rich are innately bad, but as you rise in the ranks — whether as a person or a nonhuman primate — you become more self-focused,” Piff said. “You can change that by reminding upper-class people of the needs of others. That may not be their default, but have them do it is sufficient to increase their patterns of altruistic behavior.” Read more »

Write-Offs: 02.27.12

$$$ Mike Mayo wants JPMorgan to be split up [DealBook]

$$$ S&P downgrades Greece to selective default [Reuters]

$$$ Merkel Hoses Down Talk of Firewall Boost [WSJ]

$$$ Should We Quit Subsidizing Corporate Debt? [John Carney / NetNet]

$$$ Goldman Fights UniCredit for Prized Oktoberfest Conference Slot

$$$ This cold calling guy again [BI, earlier, earlier]

$$$ Chicago-based proprietary trading firm Spot Trading LLC is looking for a quant trader [DBCC]
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Every year starting in around late December and continuing until around this time, I found myself at the end of each day hoping that the S&P had gone down. Rooting against GS, of course, made obvious sense, but I was also keenly aware that I was soon going to be buying a whole lot – relatively! – of equities and it would be nice to get them at a discount. This guy knows what I’m taking about:

The logic is simple: If you are going to be a net buyer of stocks in the future, either directly with your own money or indirectly (through your ownership of a company that is repurchasing shares), you are hurt when stocks rise. You benefit when stocks swoon. Emotions, however, too often complicate the matter: Most people, including those who will be net buyers in the future, take comfort in seeing stock prices advance. These shareholders resemble a commuter who rejoices after the price of gas increases, simply because his tank contains a day’s supply.

Like everyone in my former industry, I had no emotions, so I simply counted my expected-value gains when stocks went down. And because I dealt in derivatives, I spent some time thinking about the inflection point: when, in expectation, do you stop being a net buyer and become a net seller? For a profitable and growing P&C insurer is the answer never? For a banker … well for me at least it was in March of every year as my bonus-time discount rate of future bonuses was extremely high for reasons you can probably guess. (Hint: Now I blog.) For Warren Buffett … I mean … what should you take away from this long letter explaining why BRK is undervalued? (Also: does this change your discount rate?) Read more »

“The movie was fiction…the problem is real.” Read more »

CNBC: You’re very optimistic about the future not only of this country but also of the stock market. If you have a list of worries, what’s at the top of that list? Buffett: Nuclear, chemical, and biological attacks. Whether by government or some rogue group. That will happen some day in our future and it will be anything from a large tragedy to an unbelievable tragedy. [Video]

How serious? Fictional characters-as-deterrents serious, if that tells you anything. Read more »

For the last several years, Mike Mayo has had a fairly contentious relationship with Citigroup. Since telling investors to pull their money and run in October 2007, he’s warned people the bank is not to be trusted, detailed what he believes are Vikram Pandit’s cruel and unfeeling ways, and bitched about the fact that their ATMs still require you to use envelopes for deposits. Most recently Mayo took aim at Citi chairman Dick Parsons and while he gets points for dramatic effect, one can’t but help feel that a certain other analyst would’ve made more of a ripple. Read more »