Archive for May 2012

Back in February, in his annual letter to investors, Berkshire Hathaway chief Warren Buffett spent a good bit of time discussing why one shouldn’t own gold. Beyond the fact that, according to WB, gold doesn’t “change in size and [is] incapable of producing anything,” and you’d be much better off buying farmland (which “a century from now will have produced staggering amounts of corn, wheat, cotton and other crops and will continue to produce that valuable bounty”) or shares of Exxon Mobil (which “will probably have delivered trillions of dollars in dividends to its owners”), the Oracle of Omaha had one incontrovertible, be all end all reason for eschewing the metal: its unfuckability. Oh sure, you can do things to a cube, you can fondle it, you can talk dirty to it, you can send nude pictures of yourself, you can even drill a hole in it and fuck it senseless, but, the thing is, the cube will not respond. No reciprocation, no gratitude, not even a sign it enjoyed itself.  For Buffett, no further argument was necessary as to the worthlessness of the commodity. (Silver, on the other hand, will make you feel like you’re 18 again.) Anyway, David Einhorn sort of feels the same way about the dollar. Read more »

Nassim Taleb, author of “The Black Swan,” said he favors investing in Europe over the U.S. even with the possible breakup of the single European currency in part because of the euro area’s superior deficit situation. Europe’s lack of a centralized government is another reason it’s preferable to invest in the region, said Taleb, a professor of risk engineering at New York University whose 2007 best- selling book argued that history is littered with rare events that can’t be predicted by trends. A breakup of the euro “is not a big deal,” Taleb said yesterday at an event in Montreal hosted by the Alternative Investment Management Association. “When they break it up, there will be a lot of fun currencies. This is why I am not afraid of Europe, or investing in Europe. I’m afraid of the United States.” [Bloomberg]

Update: NNT says he’s not looking forward to a Euro break up at all actually, and that a “tawdry” Bloomberg reporter took his words out of context.

Opening Bell: 05.30.12

Anger Over Christine Lagarde’s Tax-Free Salary (Independent)
Lagarde was accused of hypocrisy yesterday after it emerged that she pays no income tax – just days after blaming the Greeks for causing their financial peril by dodging their own bills. The managing director of the International Monetary Fund is paid a salary of $467,940 (£298,675), automatically increased every year according to inflation. On top of that she receives an allowance of $83,760 – payable without “justification” – and additional expenses for entertainment, making her total package worth more than the amount received by US President Barack Obama according to reports last night. Unlike Mr Obama, however, she does not have to pay any tax on this substantial income because of her diplomatic status.

EU Proposes ‘Banking Union’ (WSJ)
The 17 countries that use the euro should consider setting up a “banking union” that allows them to share the burden of bank failures, the European Union’s executive arm said Wednesday in a report on the currency union’s crisis-fighting efforts. To further stop expensive bank bailouts from pulling down governments’ own finances, allowing the euro zone’s new rescue fund to directly boost the capital of banks “might be envisaged,” the European Commission said.

Greeks Flock To Germany Even As They Criticize It (CNBC)
Germany, Europe’s economic powerhouse and a country which has been criticized by many Greeks over its harsh demands for austerity cuts in return for bailout cash, has experienced an influx of young skilled immigrants. Der Spiegel magazine noted that while Greek newspapers “printed cartoons depicting the Germans as Nazis, concentration camp guards and euro zone imperialists who allow their debtors to bleed to death,” the Greeks have kept arriving — bringing an “anything is better than Athens” attitude with them.

Pissarides Says Euro Exit Would Aid Rich Greeks At Cost To Poor (Bloomberg)
Nobel economics laureate Christopher Pissarides said wealthy Greeks would benefit at the expense of poorer citizens were the country to exit the euro. “A lot of Greeks” have withdrawn money and deposited it with banks elswhere in the 17-nation currency zone, Pissarides said in an interview in London today. If the country returned to the drachma, the new currency would be so devalued they could buy it cheaply on international markets with the cash they’d exported, enabling them to buy more assets in Greece. While poorer Greeks are equally able to appreciate the difficulties facing their country, they’re not as able to shield their funds from an exit from the common currency, Pissarides said. They need to preserve quick access to their savings, which isn’t as easy to do if it’s held at a foreign bank, and such lenders may not always accept small deposits.

Zuckerberg Drops Off Billionaires Index As Facebook Falls (Bloomberg)
The 28-year-old’s fortune fell to $14.7 billion yesterday from $16.2 billion on May 25, as shares of the world’s largest social-networking company dropped 9.6 percent to $28.84.

Woman’s Boyfriend Took Car Without Permission Before She Slammed It Into House (NYP, earlier)
Dan Sajewski, 23, arrived at his family’s Huntington estate last weekend with Anderson, 21, his on-again, off-again waitress girlfriend. While his parents vacationed on Long Island’s North Fork, the duo helped themselves to his mother’s 2003 Mercedes-Benz CLK 320, a birthday gift from Sajewski’s anesthesiologist father, a source said. They took a joyride to the Hamptons, where they had a little too much fun. A field Breathalyzer test revealed that Sophia Anderson drove home with a .30 Blood-Alcohol Content — nearly four times the legal limit and the equivalent of about 15 drinks, prosecutors said at her arraignment yesterday. They drove back to Huntington and she was speeding along Southdown Road when she failed to turn at a T-instersection — ramming through the front of Indiere’s house, obliterating her kitchen, and exiting through the back wall, prosecutors said. “We can’t believe he just let this girl drive a car he wasn’t even supposed to have in the first place,” a Sajewski family member said. The relative added that Sajewski didn’t call his father about the accident until two hours later. In the police report, Anderson told cops “her power steering got stuck, causing her to crash,” and that she only drank “three beers.” Read more »

Christine Kenney, a triathlete who works the equity capital markets execution desk at Citigroup (C) in Manhattan, starts every morning at work with a bowl of low-fat yogurt, honey, and a heap of chia seeds. Throughout the day she subsists on chia snack bars. “It’s better for my job because I’m not supposed to be off the desk very much,” she says, noting how she’s gotten most of the co-workers from her desk hooked on the seeds. “There’s other seeds out there that are nutritious, but this is the best. It’s the alpha seed.” Among Wall Street’s trading desks and bullpens, chia seeds are becoming the stimulant of choice. Healthier than coffee, cheaper (and obviously more legal) than cocaine, and less juvenile than a 5-hour Energy drink, chia has undergone a total metamorphosis from 1980s punchline (Chia Pet’s “ch-ch-ch-chia” jingle still haunts Gen Xers) to superfood. [BusinessWeek]

Just something to keep in mind. Read more »

When the London Whale thing came out, JPMorgan made one sort of clever attempt to minimize it by saying this:

Since March 31, 2012, CIO has had significant mark-to-market losses in its synthetic credit portfolio, and this portfolio has proven to be riskier, more volatile and less effective as an economic hedge than the Firm previously believed. The losses in CIO’s synthetic credit portfolio have been partially offset by realized gains from sales, predominantly of credit-related positions, in CIO’s AFS [available-for-sale] securities portfolio. As of March 31, 2012, the value of CIO’s total AFS securities portfolio exceeded its cost by approximately $8 billion. Since then, this portfolio (inclusive of the realized gains in the second quarter to date) has appreciated in value.

What did this mean? Well, I think it roughly meant what it said, which is that as if March 31, JPMorgan’s Chief Investment Office had about $375bn worth of bonds for which it had paid about $367bn, and that after March 31 (1) that portfolio of bonds increased in value to at least $375,000,000,001 and (2) JPMorgan had sold at least some of those bonds at a profit. But one nice thing about it is that, if you squinted, you could read it as “our hedge decreased in value, yes (and by $2bn), but that’s because the underlying portfolio increased in value (by $8bn), so net-net we’re way ahead, and it was a hedge, and whaddarya gonna do, hedges go down when things-hedged go up, that’s life.” That turned out to be an entirely wrong reading but hey they tried!

Reuters moved that story forward a bit with this kind of interesting parsing of Jamie Dimon’s words, including particularly the statement that JPMorgan had realized $1bn of gains on the CIO portfolio of available-for-sale securities between the end of the first quarter and the beginning of that super-awkward whale-confession conference call. Read more »

Planning to knock off work early every evening from now through Labor Day and/or take the edge off life with some adult beverages during lunch because it’s summer and you deserve it? Want to have “fun” but not do anything “crazy“? If parking your car in a stranger’s backyard via their house constitutes a line you don’t want to cross, and you have roughly the same alcohol tolerance as a 21 year-old female, consider telling co-workers and friends you want to be cut off at a dozen drinks. Fourteen, max. Read more »