Archive for June 2012

One thing many tend to forget when thinking about multi-billionaires is that multi-billionaires are people too. People who just want to be loved. People who just want to feel good about themselves. People who just want to be beautiful. And just because they are worth mucho dinero does not necessarily mean that when they look in the mirror, they like what they see back. So they try and improve their appearances, thinking a tighter ass or more sculpted calves or higher cheekbones will make them happy and when things don’t pan out like they’d hoped, they get a little upset. Take Jim Rogers, for instance. He supposedly wanted movie star teeth. So he went to his dentist in Singapore and had a new set put in and when they started falling out, well, can you really blame him for storming the office and making a scene? Read more »

Although the Morgan Stanley’s handling of the social media site’s disastrous stock offering is under scrutiny by just about every business news outlet under the sun, a Wall Street insider tells us the  investment banking’s corporate communications warriors are blaming CNBC for engaging in some pre-IPO hyping of their own. CNBC senior vice president and editor in chief Nik Deogun “is under fire,” says the source. “Morgan Stanley is telling him, ‘How dare you criticize us when you guys promoted this IPO worse than anybody.’ ” The source recalls examples of CNBC’s on-air exuberance in the days leading up to the IPO, including treating Facebook CEO Mark Zuckerberg ’s entrance at the kick-off of the company’s investors road show at the Sheraton hotel in midtown as if it were “the President’s State of the Union Address” with multiple cameras and reporters. Then on May 17, the day before the actual IPO, the hosts of CNBC’s “Fast Money” appeared on camera wearing hoodies — a reference to Zuckerberg’s favorite fashion item, which came off like an homage to the baby billionaire. That same day, controversial “Mad Money” host Jim Cramer told his viewers, who tend to be mom-and-pop investors and market-playing college students, “If you can get in on the actual IPO, then I think Facebook is a no-brainer.” He added: “We all know this one’s going to pop like crazy on its first day of trading, so if you can get in on the deal, I think you should try to get your hands on as many shares as possible.”…CNBC spokesman Brian Steel said: “CNBC’s Facebook coverage has been widely acknowledged as fair, balanced and insightful.” [NYDN, related, related]

One piece of financial advice that is well known among the cognoscenti but less obvious to some folks in Florida is that you can do 90% of your investment due diligence just by looking at a fund’s name. The tricky thing is that the scale sort of wraps around, like so:
(1) Name that specifies how safe it is (“Global Securities Safety-First Principal Protection Ultra-Conservative Fund”) = probably a Ponzi scheme;
(2) Mythological figure, geological feature, wealthy neighborhood, etc. = you’re good, past performance should predict future returns;
(3) Word from Tolkien = dealer’s choice;
(4) Name that specifies how unsafe it is (“Death Star,” “Terrible Ideas Investment Management”) = probably not a great sign but maybe?

White Elephant Trading Co. LLC Conservative Fixed Income Fund” is the first case I have ever seen of flunking at both ends – it is both “an object, scheme, business venture, facility, etc., considered to be without use or value” and a Conservative Fixed Income Fund. It was also the dream of one Gurudeo “Buddy” Persaud, who promised* investors high and stable returns with one teeny little catch: Read more »

  • 21 Jun 2012 at 12:10 PM

Car Alarm Salesman Alarmed By Stock Sales Practices

I recommend reading this letter from Darrell Issa and friends to the SEC about reforming IPO practices, it is a nice mix of boring and thought-provoking and subtly crazy.

The basic intuition here is (1) it is weird and un-American that IPO prices are set by the judgment and good graces of investment banks rather than “the market,” and (2) it is weird and suspicious that on average those prices are mostly “too low” compared to the post-IPO market price. This creates a bit of cognitive dissonance in the letter, which was of course sparked by the Facebook IPO: Facebook’s offering price was it is safe to say “too high,” and so the lawmakers express some pious concern about whether investors were ripped off, but then spend most of their letter lamenting how “[i]mposing non-market-based charges, by under-pricing IPOs, places a direct drag on economic growth – it is a tax on the issuer of capital akin to hurting the goose that lays the golden eggs.”

Painful though that metaphor is, the thought is maybe not too dissonant: non-market prices mean that someone gets ripped off; that’s usually issuers but every so often it’s investors. Also the compositions of the ripper and rippee investor groups are different; the lawmakers cite evidence that institutions get allocated more hot IPOs while individuals get allocated more dogshit IPOs so I guess “non-market-based” pricing does in fact help the smart and hurt the dumb. I submit to you that so does, y’know, market-based pricing but whatever. Read more »

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

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

$$$ 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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“Of course I would like to be CEO of Goldman Sachs, but I am very happy in the role and job I’m in now and I’ve a great job and a great opportunity in front of me. I am very happy doing what I am doing.” Read more »