Archive for June 2012

  • 21 Jun 2012 at 11:47 AM

UBS Concerned With The Company Some Of Its Employees Keep

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The following is a (not at all comprehensive) list of things that UBS could legitimately be embarrassed about:

- Losing so much money that a rogue trader’s $2billion loss barely registered above ‘meh’ on the Do We Care scale
- Awarding 4-figure bonuses to managing directors
- Employing a guy who “implored bankers to make a more concerted effort to streamline the firm and likened the strategy to slashing expenses like a ‘Jewish shopkeeper’”
- This
- Having the entire healthcare team decide Jeffereies is a better place to work
- Being scammed by a bunch of ops guys
- Pulling a reverse Field of Dreams and spending all the money it didn’t have to build a 103,000-square-foot trading floor, in a 700,000-square-foot building, that no one wants to work on or in
- Getting no respect from the people of Stamford, who’d prefer “a nice big Costco” move into the space
- Having to distribute a step-by-step guide re: how to tie a tie

And yet, rather than worry the suggestion its employees have been wearing clip-ons reflects poorly on the institution or taking the time to send out a memo that reads “Subject: Hey, Body: Stop losing so much fucking money!”, the bank’s execs are devoting their energy to this:  Read more »

Opening Bell: 06.21.12

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SEC Said To Depose SAC’s Cohen In Insider-Trading Probe (Bloomberg)
Cohen, 56, was recently deposed by Securities and Exchange Commission investigators in New York about trades made close to news such as mergers and earnings that generated profits at his hedge fund, said one of the people, who asked not to be identified because the investigation isn’t public. Neither Cohen nor SAC Capital, which oversees about $14 billion, has been accused of wrongdoing.

Four-Week Jobless Claims Average Reaches 2012 High (Reuters)
Initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 387,000, the Labor Department said. The prior week’s figure was revised up to 389,000 from the previously reported 386,000.

Lawmakers Call For IPO Overhaul (WSJ)
A bipartisan group of lawmakers called on regulators to overhaul the way initial public offerings are conducted, concerned that last month’s flubbed stock sale by Facebook shows the current system unfairly punishes small investors. In a letter to Securities and Exchange Commission Chairman Mary Schapiro, Rep. Darrell Issa (R., Calif.) prodded the agency to revamp rules for pricing and disclosure in IPOs. Mr. Issa, who wrote the letter on behalf of the House Oversight and Government Reform Committee, said the social-networking company’s steep share-price decline since its May 18 offering is a sign that investment banks are able to “dictate pricing while only indirectly considering market supply-and-demand.” Separately, the Democratic chairman of a subcommittee of the Senate Banking Committee said regulatory changes are needed to bolster investor confidence sapped by Facebook’s botched debut.

Facebook’s 22% Rally Helps Stock Avoid Worst IPO Return In U.S. (Bloomberg)
So that’s something!

Riskier Bets Pitched To Asia’s Rising Rich (WSJ)
In Japan, brokers are dangling what they claim is a tasty product in front of wealthy investors: a “triple-decker” that uses options to squeeze higher returns from stocks, “junk” bonds or other assets. If a triple-decker doesn’t suit an investor’s fancy, there is the increasingly popular—and slightly less complex—”double-decker.” Elsewhere in Asia, so-called hybrid bonds and other high-yield varieties can be had. Investors in Singapore recently could buy so-called perpetual bonds through ATMs. Across Asia, brokers are pushing to sell increasingly complex products to the region’s expanding ranks of investors, especially wealthy ones. These types of products appeal to those hungry for yield who normally focus on stocks and real estate but are worried about falling equity markets and the sudden shortage of initial public offerings.

BlueMountain Said To Help Unwind JPMorgan’s Whale Trades (Bloomberg)
A hedge fund run by a former JPMorgan Chase executive who helped create the credit- derivatives market is aiding the lender as it unwinds trades in an index at the heart of a loss of more than $2 billion. BlueMountain Capital Management LLC, co-founded by Andrew Feldstein, has been compiling trades in Series 9 of the Markit CDX North America Investment Grade Index in recent weeks, then selling the positions to the New York-based bank, according to three people outside the firms who are familiar with the strategy. JPMorgan tapped BlueMountain as a middleman after trades in its London chief investment office grew so large that the bank was creating price distortions that hedge funds sought to exploit, said the market participants, who asked not to be identified because they weren’t authorized to discuss the trades. BlueMountain was one of the funds that benefited from the price dislocations, the people said.

US Olympic committee send cease and desist letter to knitting Olympics (TNT)
The US Olympic committee has sent a cease and desist letter to the social networking group Ravelry, who had organised a Ravelympics in which contestants would compete in events such as ‘scarf hockey’ while watching the actual Games on TV…The US Olympic Committee has said that “the athletes of Team USA have spent the better part of the entire lives training for the opportunity to compete at the Olympic Games and represent their country in a sport that means everything to them” and that “using the name ‘Ravelympics’ for a competition that involves an afghan marathon and sweater triathlon tends to denigrate the true nature of the Olympic Games”. Read more »

Write-Offs: 06.20.12

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$$$ Fed Extends Twist, Signals Concerns [WSJ]

$$$ Reasons to be sad about the Fed [Tim Duy]

$$$ Berlusconi Casts Doubt on Austerity Plan [WSJ]

$$$ Rompuy Blueprint Said To Include Options On Debt, Bank Oversight [Bloomberg]

$$$ Standstills in Change of Control Transactions [HLS]

$$$ With all words from Greek, Roman, Norse, etc. myths already taken, Peter Thiel named a fund after a metal from The Lord of the Rings [DI]
Read more »

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  • 20 Jun 2012 at 1:11 PM

Broker Involved In Unsanctioned “Wolfpack Ragematch” At New York Athletic Club Not Going Down Without A(nother) Fight

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At a brief court appearance yesterday, prosecutors said they want one of the three men — Peter Doran, 28, of Glen Head — to serve a half year in jail for throwing punches during the April 13 fracas. Doran allegedly threw the first roundhouse against another guest at the NYAC’s usually sedate second-floor Tap Room. Prosecutors also said they want a second man, Matthew O’Grady, 31, of Glen Cove — accused of joining in on the fisticuffs — to serve eight days of community service. Both O’Grady and Doran said through their lawyers yesterday that they have no interest in pleading guilty to misdemeanor assault and taking the DA’s recommended sentences. “That’s no offer at all,” said O’Grady’s lawyer, Richard Leff. Prosecutors haven’t even made an offer to the young broker charged with causing the most severe injuries, Colin Drowica, 30, of Glen Head. Drowica allegedly punched another guest hard enough to fracture his eye socket. “We are conducting our own investigation,” said Drowica’s lawyer, Isabelle Kirshner. [NYP, earlier]

  • 20 Jun 2012 at 12:49 PM

A Euroblather Arbitrage

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No human can realistically be expected to understand or focus on the constant stream of Eurozone gyrations and in fact humans increasingly don’t, with the half-life of blather-driven euphoria declining rapidly. The latest gyration seems to be that Germany is contemplating letting the Eurozone collective rescue funds think about maybe one day putting up for discussion the possibility of considering buying bonds of distressed countries directly to try to drive down funding costs for those countries.

This seems to have helped Spanish yields more than did the announcement earlier this month that those funds might consider giving Spain €100bn in special senior debt to get its banks sorted, for sort of obvious reasons. If the EFSFSMCBFFFFF is buying hundreds of billions worth of Spanish bonds right alongside whatever brave dopes are buying them already, that buying pressure should push up prices and push down Spanish borrowing costs and improve Spanish sustainability in a virtuous circle etc. etc. If the EFSFSMCBFFFFF is instead putting in its money at a more senior level than those bondholders, then those bondholders are subordinated and, empirically, sad about it.

One weird thing though is that there is little assurance that “EFSFSMCBFFFFF buying the same bonds that everyone else is buying” is actually the same thing as “EFSFSMCBFFFFF ending up with the same bonds that everyone else is buying.” The (not yet ratified!) ESM treaty maybe requires the ESM to be senior to market creditors (maybe!), but also maybe allows it to buy market bonds, which generally are not senior to themselves. Seniority is ordinarily a matter of contract: if you buy one of a series of totally fungible publicly traded bonds, you generally expect to be treated pari passu with the rest of those publicly traded bonds.

Ordinarily! Read more »

  • 20 Jun 2012 at 12:24 PM

Dispatches From The World Series Of Poker

By Senior Dealbreaker Poker Correspondent

What do you do when you’re a mid-20s male that dropped out of college to play online poker for a living, and the government suddenly cuts off your source of income? The answer, it seems, is move to Mexico. That’s right; apparently there is an expatriate community of American online poker professionals that have relocated to Baja California, just across the border from San Diego. A larger group is centered in Cabo San Lucas, which is much nicer but also more expensive and farther from the States. Hundreds of players have made the move and resumed playing on Pokerstars and the smaller European sites. However, right now it is June, and that means poker players live or online are in Las Vegas for the World Series of Poker. Read more »

Opening Bell: 06.20.12

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Dimon Receives Tougher Treatment (WSJ)
The lectures appeared to rankle Mr. Dimon. Certain questions received sharp, defiant retorts. “We lost $2 billion to Chrysler. I assume you’d want us to continue to lend to Chrysler,” Mr. Dimon shot back when Rep. Gary Ackerman suggested the bank’s hedging amounted to gambling. “We don’t gamble,” Mr. Dimon said curtly. “We do make mistakes.”

Dimon gets grief from pols — and cleaning lady (NYP)
After taking his lumps during his second grilling on Capitol Hill over the bank’s $2 billion trading blunder, he was confronted by Adriana Vasquez, a 38-year-old janitor who says she earns $10,000 a year cleaning JPMorgan’s tower in Houston. “Despite making billions last year, why do you deny the people cleaning your buildings a living wage?” Vasquez asked the bank chieftain at the end of his two-hour grilling before the House Financial Services Committee. As a member of the Service Employees International Union, Vasquez, who says she cleans 24 bathrooms on 11 floors of the bank building, is putting pressure on JPMorgan. The union put out a press release in advance of the hearing, announcing that it would send Vasquez to confront Dimon over the issue of janitorial pay. A JPMorgan spokeswoman told The Post that the bank is a tenant of the tower but doesn’t set pay for the janitors, who are hired by the building’s management. Dimon, who was expecting to hear from the union, told Vasquez to call his office.

BOE Seen Likely To Increase Stimulus (WSJ)
The Bank of England looks set to pump more stimulus into the U.K. economy after minutes of its June policy meeting revealed that Governor Mervyn King was narrowly defeated in a knife-edge vote on a fresh bout of bond purchases.

Moody’s Upgrades Turkey (WSJ)
Moody’s said the move, which raised Turkey’s sovereign-debt rating by one notch to Ba1—just below investment grade—was driven by the fast-growing economy’s improvements in its public finances and the shock-absorption capacity of the government’s balance sheet.

UK Reveals New ‘Say On Pay’ Laws (WSJ)
The British government unveiled legislation Wednesday to give investors more say on the pay packages of senior corporate executives, a key milestone in a shareholder rebellion that has been rippling through the U.K. in recent months. The measures include giving shareholders a binding vote on how much directors are paid and increasing transparency by requiring companies to annually publish a simple figure totaling how much directors received.

Falcone’s Harbinger Capital Turns To Dell’s MSD For Loan (Bloomberg)
Philip Falcone’s hedge fund, having taken out a loan earlier this year at an effective annual interest rate of 24 percent, has found a new source of financing: the money-management arm of billionaire Michael Dell. Harbinger Capital Partners Master Fund I Ltd. entered into a note purchase agreement on June 14 with a credit fund run by MSDC Management LP, according to a June 18 regulatory filing. MSDC Management is an investment adviser backed by MSD Capital LP, the private investment firm for Dell and his family. Under the financing agreement, the MSD credit fund can swap as much as $50 million of loans extended to Falcone’s Harbinger Capital for part of its stake in Harbinger Group, his publicly traded investment vehicle.

Honeybee Swarms Increase In NYC After Mild Spring (NYT)
When Happy Miller, the Seaport restaurant manager, saw tourists flailing their arms in a cloud of airborne black specks late last month, he closed the glass door and quietly panicked. “Oh my God, what do I do?” he thought before calling 311, security guards and local news outfits. The television trucks, he said, were first to arrive. It took several hours before Officer Anthony Planakis, the New York Police Department’s unofficial beekeeper in residence, arrived with a metal swarm box and a vacuum to collect the 17,500 or so homeless creatures. Officer Planakis, who has been responding to swarm calls since 1995, said this had been New York’s busiest year of swarming he had ever experienced. Since mid-March, he said, he has tended to 31 jobs in the five boroughs, more than twice the number he handled last season, which is normally mid-April through July. “It’s been pretty hectic,” he said, adding that this week’s warmer temperatures could encourage more bees to take off. Read more »

Write-Offs: 06.19.12

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$$$ Markets are building up a tolerance to Eurozone blather [Sober Look, RTE]

$$$ Germany set to allow eurozone bailout fund to buy troubled countries’ debt [Guardian]

$$$ EU official says Greek bailout terms up for talks [Reuters]

$$$ Goldman Stuck With a Defense Tab, and Awaiting a Payback [DealBook]

$$$ College graduates with arts majors are pretty employed [Gawker]

$$$ Mark Ruffalo Joins Call for a Tax on Wall Street [DealBook]
Read more »

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Hank Paulson: Don’t Worry About Europe

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Former Treasury Secretary Henry Paulson said the U.S. will emerge relatively unharmed from the debt crisis in Europe as efforts by Greece, Spain and other nations to stabilize their economies persist for the long-term. “Although Europe is a drag, the U.S. will continue to muddle along with growth that really isn’t enough to make a dent in employment,” Paulson, who was Treasury secretary from July 2006 through January 2009, said at a biotechnology industry conference in Boston today. Europe will eventually stabilize and avoid a “catastrophic outcome,” he said. [Bloomberg]

  • 19 Jun 2012 at 6:09 PM

Doing Well By Doing Financial Reform

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There’s a thing called socially responsible investing where
(1) you invest other people’s money,
(2) poorly,
(3) but it’s okay because you’re doing it not to make them money but to save the whales, er, penguins, and they like penguins, so they keep paying your fees. This is a good racket as rackets go but it turns out that people mostly don’t like penguins as much as they like money so it is sort of a limited racket. The trick if you can manage it is to appeal to people who like penguins to give you other people’s money, because people typically like penguins more than they like other people having money. This can be great for you and also for penguins, and for the right value of “you” and “penguins” can be a diabolical way to achieve real social good, which is my favorite.

Two great recent stories in that vein. One is a proposal to use eminent domain to seize underwater mortgages and refloat them. The idea, schematically, is (1) seize property,* (2) sell it back to homeowner at fair value, and (3) lend money to the homeowner to pay for the house, which the municipality then uses to pay fair value to the mortgage lender whose collateral was seized in step (1). Any dope of a municipality could presumably get their act together to do (1) and (2), but the problem is (3) coming up with the money for new mortgages to pay fair value to the old mortgagee. You could see why oh I don’t know BANKS would not like this scheme – it will cost them in servicing rights and refinancing fees and second-lien writedowns** – and so the money has to come from non-banks. Some folks think they can find the money, for a small fee of course, and so are roadshowing the idea to municipalities. It seems to be popular in California, go figure.

The other is this gloriously cynical play from TCI to try to extract some value out of Lloyds Bank while also improving the stability of the British financial system, maybe. Read more »

Chuck Schumer’s Gonna Have To Do A Lot Better Than Dinner If He Wants A Piece Of Cliff Asness

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Earlier today, Politico ran a story titled “Can Chuck Schumer win back Wall St. for Democrats?” Apparently the New York Senator recently “embarked on a fence-mending campaign with senior Wall Street executives, many of whom have grown furious with the Democratic party,” in a charm offensive that has included “holding private dinners [including one put on by Pershing Square manager Bill Ackman], organizing high-end fundraisers for Democratic candidates and quietly pressing for super PAC donations.” According to Politico, “the outreach appears to be working: Hedge fund and private-equity executives have held six different fundraisers for Democratic challengers and senators at Schumer’s request, sources say.” Some financial services employees, however, are not so easy. Take Cliff Asness for example. The AQR manager happened to read the piece and here’s what he had to say about it: Read more »