Archive for March 2012

Write-Offs: 03.30.12

$$$ Corporate pension funds break away from equities [Reuters]

$$$ Dealpolitik: What’s H Partners Up to at Sealy? [Deal Journal]

$$$ Bias, penguins in CDS auctions [FTAV, part 2 here]

$$$ Co-Pilot Who Landed JetBlue Plane Was Voted ‘Most Understanding’ (in high school) [Bloomberg]

$$$ How to Prank Your Boss (and Keep Your Job) [Bloomberg]

$$$ A leading global investment bank is looking for a single stock options trader to join their team in New York, in case that might be a good fit for you [DBCC]
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Today the EU issued a discussion paper about how it plans to forcibly write down the debts of shaky banks if it ever comes to that, which for some reason is called a “bail-in,” I guess in the sense that the bailing is coming from creditors who are already in the bank’s credit rather than from taxpayers who aren’t. It’s pretty interesting, go read it, or read Bloomberg’s piece about various bits of squabbling over it and also somewhat counterintuitively a statement from EU guy Michel Barnier (left!) that “There’s a big international consensus on the principle.”

Actually there probably is; the principle is pretty sensible, which is that there comes a time in many companies’ lives where the best way to preserve value not only for the enterprise but also for the creditors is to write down some of the debt to allow the company to continue as a going concern that can pay off the rest of the debt. This is why we have bankruptcy, but bankruptcy seems to be too slow and scary for banks. The worry is, you have a bank and it’s got like $15 of equity and $100 of debt and its assets go from $115 to $90 and all of the debt holders start looking at their watches and being all “hey this has been fun but I’m actually late for this thing so would it be too much trouble for you to give me my money back?” and the bank has to sell a bunch of stuff to meet those demands then that looks like a fire sale and people figure it out and all of a sudden that $90 becomes, like, $60, and the debtholders get back 60 cents on the dollar instead of the 90 cents, and they’re like “crap, if I’d just said ‘I’ll take $90, and also whenever you have it is fine, no rush,’ I’d have much more money.”

Of course that’s all sort of obvious so one thing that the creditors could do is just not do that, and voluntarily and quickly write down their debt so that the bank wouldn’t have to have a fire sale to meet their claims, but, knowing creditors, that’s not what would happen, so you need some sort of resolution mechanism to protect them from themselves. Read more »

  • 30 Mar 2012 at 5:58 PM

Layoffs Watch ’12: Bank Of America

On the one hand, Brian Moynihan et al plan to cut staff next month, which hurts. On the other, they’ve been suggesting to certain at risk employees that they might want to see if they can find a home elsewhere inside the bank prior to D-Day, so that’s nice. Read more »

Jonathan Soros, who stepped down in September from day-to-day management of Soros Fund Management LLC, plans to hire at least one of his father’s key employees, say two people familiar with the situation. The two sources said Soros’ son intends to set-up his own family office – something the Soros Fund converted to last year – with the help of David Kulsar, currently chief risk officer for the Soros Fund. “Jonathan wants to manage some of his own money so the (Soros Fund) family office has made that accommodation for him,” said a source familiar with the situation but who was not authorized to discuss the matter. [Reuters]

[via CGasparino]

One way I like to imagine the world is that there’s sort of a constant amount of financial risk and entropy tends to increase, so that as time goes by everyone increasingly ends up facing the same financial risks as everyone else (though quantities and leverage vary) and idiosyncratic risk is a rare and beautiful flower and so I dropped a good portion of my net worth on Mega Millions this morning because what else can you do? Entropy increasers could include index funds, or converging bank business models, and I guess you could profitably ponder the fact that the big banks are now living on DCM fees until M&A comes back and what that could mean for a model of “we need to split up the big banks to avoid too-big-to-fail risk.”*

One thing it could mean is get the hell away from banks. So for instance you could quite reasonably be worried about putting all of your money in collateral accounts with the banks who are your derivatives counterparties because hey MF Global just lost all the collateral you put with them, and so you are, reports the Journal based on the Fed’s Senior Credit Officer Opinion Survey on Dealer Financing Terms: Read more »

  • 30 Mar 2012 at 2:37 PM

When Lucky Brass Balls Fail

“Of the top 25 earners of 2010, 15 did not make this year’s list [of highest paid hedge fund managers]. Among them: Appaloosa’s David Tepper, whose Palomino fund fell 3.33 percent, and Edward Lampert of ESL Partners, which plunged 12 percent on big losses from Sears Holdings. Mr. Tepper did not respond to requests for comment. A spokesman for ESL declined to comment. Mr. Paulson — the $5 billion manager in 2010 — failed to make the list this time. One of his largest funds lost more than 50 percent, after bets on the economic recovery soured. A spokesman for Paulson declined to comment.” [Dealbook, AR, related: “Mr. Tepper keeps a brass replica of a pair of testicles in a prominent spot on his desk…He rubs the gift for luck during the trading day.”]

Think about it.

From: [redacted]
Sent: March 28, 2012 9:12 AM
To: Team
Subject: Spring Ahead

For those with direct/indirect coverage responsibilities, pls take out your lists today to remind yourselves who we have money out to and that your name is on the ComCom coverage team that got that money approved. Anecdotal observation I conclude is that where we pay attention in some reasonable, non-trivial ways (meeting, meal, call, insightful email), we get paid back in flow DCM capital markets participation

It’s just how this game works, the money doesn’t flat out speak for us, we need to speak for it, and we don’t have to stomp/yell, just be around, consistently the more frequency, the more client comfort, the more they feel reminded of their commercial obligations to us, the easier it is for them to remember to take care of us — lubricate to prevent rust, just like a motor engine or morning exercise

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