Archive for June 2012

  • 19 Jun 2012 at 3:22 PM

Jamie Dimon Chats About Managing Duration Risk With Friendly Congressman

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The House’s ping-ponging alternation of smacking and caressing Jamie Dimon today got pretty boring but I was struck by one number that Dimon mentioned, perhaps because it was about the only number that he mentioned. One Republican, with somewhat unclear intent,* suggested that the biggest risk to JPMorgan is that interest rates go up and asked Dimon how JPMorgan hedges that risk. And Dimon pointed out that actually JPMorgan is well set up for that, since it will make money if rates go up, and said “It probably cost us over $1 billion a year to benefit from rising rates.” You can’t as far as I can tell find that number in JPMorgan’s disclosures, but here is a potentially related thing: Read more »

  • 19 Jun 2012 at 2:20 PM

Layoffs/Hiring Watch ’12: RBS

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The bad news is that 600 of the Queen’s corgis are being let go. The good news, while it probably comes as little solace to those who will no longer receive birthday chickens, is that 300 or so new ones will be hired in their place. Read more »

2010′s Best Performing Hedge Fund Manager’s Next Big Investment Idea Involves Becoming A Landlord

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Don Browstein is a former philosophy professor, the founder of Structured Portfolio Management (named the best performing hedge fund in 2010, after returning 49.5 percent and 134.6 percent in 2009), a guy who supposedly once told a trader “The only way you can leave this firm is in a body bag” while brandishing a baseball bat, and the person his new tenants will have to answer to if next month’s rent is one day late. Read more »

So What You’re Saying Is…It’s Possible

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Congressman: “Mr. Dimon, is it possible that JPMorgan could lose $2 trillion?”
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  • 19 Jun 2012 at 11:32 AM

Meredith Whitney Not Worried About Jamie Dimon’s Ability To Handle House Financial Services Committee, Unlike Some Chief Executives She Knows

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As you may have heard, later today Jamie Dimon will once again testify on Capitol re: a certain whale’s multi-billion dollar losses. Unlike last week’s hearing, conducted by the relatively reasonable Senate Banking Committee, this time Dimon will face questions and screeching from the relatively bat-shit House Financial Services Committee, a group of people we hope will not hold back. Yet despite the HFSC’s history of making witnesses look good, not matter how egregious their offense, by conducting inquiries in a manner that would suggest recreational bath salts abuse by the Congressmen and women, Bloomberg’s Tom Keene was still worried earlier this morning about Dimon’s ability to navigate the hearing.  One person who wasn’t? Keene’s Bloomberg TV Surveillance guest Meredith Whitney. According to the analyst, Dimon be more than fine and while we’re on the subject, not that you asked, she can think of another bank CEO who’d crack under Congressional questioning on account of the fact that he doesn’t have Dimon’s eyes, which you could get lost in. Read more »

  • 19 Jun 2012 at 10:06 AM

Bruno Iksil: Genius

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Mr. Iksil [who sometimes wore the same clothing several days in a row] once confided to the colleague that when he wanted to avoid questions from supervisors about his trades, he sometimes would start discussing a mathematical term, equation or other technical jargon, to confuse and end the conversation. “He wasn’t trying to evade, he sometimes just didn’t have patience if it was his trading idea,” the colleague said. [WSJ]

Opening Bell: 06.18.12

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Banks Worry As Breakup Talk Revived After JPMorgan Loss (Bloomberg)
“There seems to be growing interest in some type of breakup proposal,” said Sheila Bair, a former chairman of the Federal Deposit Insurance Corp. The concept is expected to arise today as JPMorgan Chief Executive Officer Jamie Dimon testifies before the House Financial Services Committee on the trading debacle. Last week he told the Senate that the losses, which carved about $23 billion from the bank’s market value, were due to a poor investing strategy coupled with management failures. Senator Sherrod Brown seized on that admission. “It appears executives and regulators simply can’t understand what is happening in all these offices at once,” the Ohio Democrat said during the June 13 hearing. “It demonstrates to me that too-big-to-fail banks are, frankly, too-big-to-manage and too-big-to-regulate.”

Greece Set For Bailout Reward As EU Sees Tweaked Aid Terms (Bloomberg)
Greek voters are likely to get a reward for backing pro-euro parties, with European creditors set to ease bailout terms on the debt-swamped country mired in the fifth year of recession. A first step will be when Greece’s still to-be-formed government requests modifications to the 240 billion-euro ($303 billion) rescue programs, leading to a revision of Greece’s economic-performance targets sometime before September, a European official told reporters in Brussels today.

Greek Coalition Needs ‘Breathing Room’ From Creditors: MP (CNBC)
Kyriakos Mitsotakis, an MP for New Democracy, which won most votes in Sunday’s election and was Tuesday locked in negotiations with historic rivals Pasok and the Democratic Left to form a coalition, told CNBC: “Giving a very sick patient nothing but the same medicine when this has not had the required result would be madness.”

Austerity Doesn’t Pay As Debt Markets Ignore Rating Cuts (Bloomberg)
“I don’t think we should be slaves to the ratings agencies,” Mervyn King, governor of the Bank of England, told lawmakers on Feb. 29. “What we’ve seen is, the action they took recently did actually have no impact on the yield that people in the market were willing to lend to the U.K. government at.”

Buying Opportunity All Over Europe, Even Greece, Says Donald Trump (CNBC)
FYI: “You’re getting it for nothing, you’re getting the land for nothing, you’re getting everything for nothing,” he said. “You have to sit with it for a while, but there are a lot of great opportunities in Europe. There’s no question about it. I’m actually looking at something — it’s so ridiculous, it’s laughable — and yet I’m thinking about doing something over there with a group that is very smart, and frankly there is an opportunity.” Read more »

Write-Offs: 06.18.12

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$$$ Clogged Credit Weighs on Fed Policy Makers [WSJ]

$$$ Ex-Expert Network Consultant Pleads Guilty in Insider Case [WSJ]

$$$ TCI is trying to guilt the FSA into forcing Lloyds to redeem TCI’s holdings of Lloyds contingent capital bonds at above-market prices [FT]

$$$ Homeowner Aid Boosts Big Banks [WSJ]

$$$ World’s population is 17 million tons overweight [MSNBC]

$$$ Do you have plans on July 17? Do you fancy yourself a poker player? A really good poker player? Do you think you could beat David Einhorn, even if he’s working the table like it’s Lehman Brothers circa 2007/2008? Do you think it would not be so awkward that the two of you could then enjoy a meal together and talk shop after which he picks up the tab? If David’s not your thing, do you think you could envision yourself in the same scenario but with Bill Ackman? If you answered yes to most of the above and also consider yourself a fan of humanity, helping others and all that jazz, you should most definitely clear your schedule and sign up for a poker tournament led by Caesars that benefits the Rewarding Achievement (REACH) program, which was co-founded by Bill Ackman and Whitney Tilson and gives inner-city high school students academic support  for passing AP exams. The event is taking place at Gotham Hall in New York and Einhorn (your competition) will be playing, as will Ackman and Tilson. Prizes for winners include the aforementioned meal (a lunch), with Bill, David or Seth Klarman, five nights at a “world-class private beach home in Lamu, Kenya,” a private poker lesson with 2012 and 2011 WSOP bracelet winner and 2011 WPT Player of the Year, Andy Frankenberger and more.  Alternatively, if you’re not one for cards but still want to help kids, guests can try their hand at black jack, roulette and craps.
Read more »

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  • 18 Jun 2012 at 6:46 PM
  • M&A

You Can Buy That Hot Social Networking Company But You’ll Never Be Able To Capture Its Magic

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One of the more fertile areas of academic finance is explaining why M&A is so bad – mergers seem to be on average value destructive, so why do they keep happening? Are CEOs just stupid? Are bankers just evil and persuasive? Here’s one answer that may be worth considering, which is that it looks like a good idea to acquire a successful company run by a talented and dedicated founder-CEO, but then things go pear-shaped because that founder-CEO either (1) departs, voluntarily or otherwise, with his giant bags of loot, or (2) suddenly loses interest in running his or her company when it’s owned by someone else and that someone else is now the founder-CEO’s boss:

Bidder gains are lower for acquisitions that involve targets with a founder CEO than for acquisitions of targets without a founder. The difference in bidder gains between takeovers of targets with founder CEOs and those without a founder is statistically significant, economically material, and robust to several model specifications that include a wide variety of deal- and firm-level control variables, like form of payment, competition, relative size, as well as some characteristics of the target CEO, such as his cash flow and voting stakes, age, and tenure.

That’s from this paper by Nandu J. Nagarajan, Frederik P. Schlingemann, Marieke van der Poel and Mehmet F. Yalin. It doesn’t clear up the whole mystery – non-founder mergers have also destroyed some value here and there, though I guess statistically less so – but I found it kind of fun. Read more »

  • 18 Jun 2012 at 6:36 PM

Citi Not Sweating This Europe Business

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“The [Greek] election is certainly positive for keeping the euro together,” Pandit said in a brief interview on CNBC’s “Squawk on the Street” on the floor of the New York Stock Exchange. Pandit was there to ring the opening bell to commemorate the bank’s 200th anniversary. “We’ve long thought that its important for Europe to have one strong currency. Having said that, we’ve got to be ready for every eventuality as a back up,” Pandit added. Over the last 18 months, Pandit says Citi is preparing by “very tightly managing” exposure to financial institutions in Europe. In percentage terms, Citi’s holdings have been scaled down to 10 percent from 40 percent during the tumult of the European debt crisis. “The risk we have is extremely manageable, particularly given our capital and our liquidity,” says Pandit. [CNBC]

  • 18 Jun 2012 at 5:07 PM

Jamie Dimon To Be Asked Why He Was Running JPMorgan Like SeaWorld, Hopefully

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If we’re being totally honest, while it had its moments, last week’s Jamie Dimon Congressional hearing to discuss Whale Boy was a bit of a letdown, theatrically-speaking. This was probably due in large part to the fact that it was conducted by the Senate Banking Committee, and the Senate typically comes off intelligent and reasonable compared to the House,* and proceeded accordingly. As we surely don’t have to tell you, this is not the kind of hearing we are interested in. Read more »