Archive for May 2012

Rochdale analyst Dick Bové loves fairy tales as much as the next guy. He loves the romance, he loves the drama, he loves the idea of magical footwear. Does he start every morning asking the question, “Mirror, Mirror on the wall, who’s the fairest analyst of them all?”? Yes. Does he consider Mike Mayo and Meredith Whitney his evil step-sisters? Yes. Does he dream about being awoken from his slumber by a handsome prince? YES. But even Dick knows that five minutes after the prince wakes you up you’re going to be bitching to your girlfriends about being stuck with this asshole who lets the dishes pile up like you’re the god damn maid service. Read more »

  • 24 May 2012 at 12:37 PM

Reducing High Frequency Trading By Regulating It Less

Market microstructure is a thing that I don’t really understand and that seems daunting to me so I’ll pass this along as tentatively as possible, but: I thought this piece was really good.* Again, not my area, so if you disagree just get furious at me in the comments, but I thought it might be fun to talk about it as a parable of financial regulation.

The background here is that there is a thing called high-frequency trading in which (i) people, and by “people” I mean “computers,” (ii) trade, and by “trade” I really mean more like “post bids and offers” – they trade, too, but the activity that they’re optimizing is posting bids and offers, (iii) frequently, and by “frequently” I mean “in tiny fractions of a second.” There are various worries about this thing, of which the two biggest are:
(1) computers are scary and
(2) the amount of resources devoted to this activity is staggering and probably out of proportion to its social benefit.

Worry (1) is hard to address** but maybe you’ll be a bit soothed to learn that humans can be scary too? No, I mean, fat fingering is a problem and seems to be a bigger problem with virtual fingers but let’s just bracket that and talk about worry (2). Read more »

Opening Bell: 05.24.12

Europe Plans Girds Greece Exit (WSJ)
Emerging from Wednesday night’s informal European Union summit, Italian Prime Minister Mario Monti said most leaders had backed issuing common debt, or euro-zone bonds, to help support troubled members. But Germany and others opposed them and demanded Greece do more. “We want Greece to remain in the euro zone,” German Chancellor Angela Merkel told reporters after nearly eight hours of talks. “But the precondition is that Greece upholds the commitments it has made.”

Citi: Greek To Exit Euro, New Currency To Fall 60% (CNBC)
Greece will leave the euro zone next year and the country’s new currency will “immediately fall by 60 percent,” according to Citi chief economist Willem Buiter. “The elections (on June 17th) will not produce a viable government that can follow the troika plan, leading to a stalemate between the Greek government and official creditors, and to the suspension of EFSF-IMF funding,” Buiter wrote in Citi’s latest Global Economic Outlook.

Slim Family Sees European Crisis As Good Time To Invest (Bloomberg)
Carlos Slim sees Europe’s debt crisis as a “good moment” to apply his strategy of investing in times of turmoil, said the billionaire’s son, America Movil SAB Co-Chairman Carlos Slim Domit. America Movil, controlled by the elder Slim, announced a $3.4 billion bid to increase its stake in former Dutch phone monopoly Royal KPN NV earlier this month. While the acquisition would be Slim’s first major European foray, it follows a longstanding pattern, his son said. America Movil tries to stay as efficient and financially sound as possible so that it can quickly capitalize on fresh opportunities, he said. “When hard times come, you can look at opportunities in a very agile way,” Slim Domit, 45, said in an interview this week in Mexico City. “Europe is in a good moment.”

After Facebook Fiasco, NYSE-Nasdaq Rivalry Heats Up (WSJ)
“In the short term, if I’m deciding which platform to go with, I’d think twice at this point” before choosing Nasdaq, said Sang Lee, managing partner with Aite Group, a consultancy that researches exchanges.

Investors Leery Of Paulson’s Big Gold Bet (NYP)
Investors are upset over Paulson’s huge gold positions — specifically, his outsize holding of AngloGold Ashanti, down 20 percent this year. That has dragged down two of Paulson’s funds. “I would be happier if he cut the gold position in half,” says one investor who put in a notice to take his money out of the fund in June. “He would have been up 4 percent in the first quarter if it weren’t for the goddamned gold.”

Auction Of Ronald Reagan’s Blood Stirs Debate (WSJ)
Since his death in 2004 at age 93, President Ronald Reagan’s popularity has only increased. Republican candidates invoke his name and policies. About 400,000 visitors a year flock to his hilltop museum outside Los Angeles, where a gift shop sells biographies, photos and his favorite jelly beans. Many people, it seems, want a piece of Mr. Reagan. But now, the sale of a very personal effect of the late president is stirring a controversy. Bidding for a vial purported to hold Mr. Reagan’s blood topped $14,000 Wednesday in an online auction scheduled to end Thursday—if the Ronald Reagan Presidential Foundation doesn’t try to block the sale first. PFC Auctions, based in the British Channel Islands, is offering the vial, said to have been obtained from a Maryland laboratory after the failed assassination attempt on Mr. Reagan in 1981. The sample was sent to the lab to test Mr. Reagan’s blood for lead. A lab employee kept the vial as a memento and later passed it on to her adult child, according to the auction site. The head of the Reagan Foundation, a nonprofit group, called the sale “a craven act” and is fighting to stop it. It is uncertain what claims, if any, the foundation may have on the vial, which appears to contain dried blood residue, as depicted in a picture on the auction site…The seller, an admirer of Mr. Reagan’s free-market policies, said in comments on the auction page, “I was a real fan of Reaganomics and felt that Pres. Reagan himself would rather see me sell it rather than donating it.” Read more »

Write-Offs: 05.23.12

$$$ Euro-Zone Leaders Step Up Greece Contingency Plans [WSJ]

$$$ Facebook Banks Said To Make $100 Million On Stabilizing Stock [Bloomberg, earlier]

$$$ The Modest Worth of Big Banks [NYT]

$$$ Cardiff Garcia on Brad DeLong on Walter Bagehot [FTAV]

$$$ “While we’re on the subject, we’d be remiss not to note that Mr. Muniyappa wore jeans and an untucked plaid button down, prompting New York Times legal eagle Peter Lattman to poll observers on the last time they’d seen a witness take the stand without a necktie. ‘Maybe not at the trials The Times covers,’ a wiseacre snapped.” [NYO]

$$$ Stress! An Energy Source Of The Future? [The Awl]
Read more »

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  • 23 May 2012 at 6:49 PM

Layoffs Watch ’12: UBS

Cuts are said to have gone down at the Swiss bank today. Read more »

Is that how it is? Read more »

It did not take long for plaintiffs’ lawyers to realize that there was good money to be made by complaining about the Facebook IPO – there are at least two class actions against the company and underwriters so far, not to mention other class-action lawsuits against NASDAQ for screwing up trades.

The securities-fraud lawsuits are the bigger tickets; the one filed in New York today claims $2.5bn in losses though I guess that number is down slightly today. The legal theory here is that Facebook lied in its prospectus, which would entitle buyers in the IPO to “rescission,” that is, to the right to hand their shares back to Facebook in exchange for the price they paid for them. This is a problematic theory in that the only lies that the plaintiffs point to are along the lines of: Read more »

After Raj Rajaratnam got what prosecutors say was an illegal tip about Goldman Sachs Group Inc. (GS), a partner at Galleon Group LLC who was excluded from the trade turned red-faced and angry, a witness at the Rajat Gupta trial testified. Prosecutors claim that Gupta, who was a Goldman Sachs director, tipped Rajaratnam on Sept. 23, 2008, that Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) would make a $5 billion investment in the firm…Ananth Muniyappa, then a Galleon trader, told jurors yesterday that Rajaratnam instructed him to hurriedly buy Goldman Sachs shares that day, before the Buffett deal was announced. Today, Muniyappa described the reaction of Leon Shaulov, the Galleon senior portfolio manager who hadn’t bought shares in Goldman Sachs, when the Buffett transaction became public and the shares rose after the close of trading on the New York Stock Exchange. “He was pretty angry,” Muniyappa told jurors. “Hair all over the place, red face, eyes popping out.” [Bloomberg]