Archive for October 2012

Write-Offs: 10.31.12

$$$ More Probes Add to Barclays’s Woes [WSJ]

$$$ Corzine Searches for What’s Next [WSJ]

$$$ London Whale’s Boss Martin-Artajo Sued by JPMorgan [Bloomberg]

$$$ “The growth in [European government bond] futures volumes is unbelievable,” said one senior credit trader. “The same short interest still exists – economically it’s identical. If you thought the short interest was hurting the market then it makes no sense to say cleared derivatives are good and OTC derivatives are bad.” [IFRE]

$$$ Remember: it’s not Halloween if you’re in New Jersey [nj.gov via Counterparties]

$$$ Dear College Kids, If You Dress in an Ironically Racist or Insensitive Costume, You May Get Punched In the Nose Like I Did [Gawker Updates]
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For those of you who do not keep up with the drama in the Twitter universe, many, many people are very angry with a user who goes by the name @comfortablysmug, for spreading false information during the worst of Hurricane Sandy that included claims that ConEd workers were “trapped in a power station,” that ConEd was shutting down “ALL power in Manhattan,” and that the New York Stock Exchange was under three feet of water. These reports turned out to be complete lies and @comfortablysmug was shamed in the town square, outed, and forced to offer a “sincere apology to the people of New York,” noting that “while some would use the anonymity and instant feedback of social media as an excuse,” he would take “full responsibility” for his actions. Many in the media, however, are still quite miffed and one guy who’s really pissed? The dude who happens to have the same name (in real life) as comfortablysmug AKA Shashank Tripathi. Read more »

If I were the sort of guy who could come in to a company, yell at them a bunch, and get them to sell themselves to someone else at a premium, I would:

  • do that often!, and
  • buy lots of call options on the stock before doing it.

Right? If I bought the call options for, I dunno, $23 an option, and they had a strike price of $36 per option, let’s say, and I bought 5 million of them, and the company eventually sold itself for like $80, then I’d be stumping up like $115 million initially and getting back $220 million for a profit of $105 million, or ~91% of my original investment, and that would be sweet. If instead I boringly bought shares at, say, $59 per share, and it eventually sold for $80, then I’d be putting down ~$295 million to get back ~$400mm for only a ~36% profit. More importantly if somehow I failed to convince this company to sell itself, or even worse if I failed to convince others to buy it, the stock might go lower – maybe really low. If the stock went to $20, I’d lose my entire $115mm option premium, but that’s better than losing $195mm if I’d gone and bought the stock.

In other words, putting a company into play increases its volatility. Options gain value with volatility. Buying an option and then making it more valuable through your own actions – going out and making volatility happen – is a good strategy. So good it’s basically magic.

So good it’s impossible! Because: what kind of idiot would sell you that option?

Let’s ask Carl Icahn. Today he announced a just-under-10% position in Netflix this afternoon. The stock closed up ~14% (after being up ~21% earlier) on the news. And as it happens, Icahn’s Netflix position was almost entirely in the form of call options, so he just made a bajillionty dollars on paper.

Here is what Icahn says about those arrangements:1 Read more »

And management is going to fire you without pay over it, realize they did so in error, not show any remorse and tell you to shoot HR a cover letter and résumé if you’d like the opportunity to try and get your old job back. Read more »

  • 31 Oct 2012 at 2:01 PM

Severance Watch ’12: UBS

Some details on the packages offered to those fired post-Hurricane. Read more »

  • 31 Oct 2012 at 1:26 PM

Knight Capital Having Difficulty Catching A Break

Knight Capital is experiencing “power issues” and told clients to trade equities elsewhere, according to a memo from the company. No new orders are being accepted, said the Jersey City, New Jersey-based company, which almost went bankrupt in August after a computer error flooded the market with unintended trades. [Bloomberg, earlier]

…when Falcone and five LightSquared colleagues met over a meal of white-truffle pasta and Barolo at a Washington restaurant in January, they failed to come up with anything they could have done differently, according to a person who was there who asked not to be identified because the meeting was private.– Falcone Waits For Icahn Doubling Down On Network

When JPMorgan, which earned the most of any of the six banks over the four quarters, decided to thank employees for their performance this year, it sent 161,680 individually wrapped buttercream-frosted, chocolate chip, oatmeal-raisin and sugar cookies to retail branches and call centers in the U.S., U.K., Philippines and India.– No Joy On Wall Street As Biggest Banks Earn $63 Billion

Cooperman, 68, said in an interview that he can’t walk through the dining room of St. Andrews Country Club in Boca Raton, Florida, without being thanked for speaking up. At least four people expressed their gratitude on Dec. 5 while he was eating an egg-white omelet, he said.–Bankers Join Billionaires To Debunk ‘Imbecile’ Attack On Top 1%

American International Group Chief Executive Officer Robert Benmosche, 66, a Kappa Beta Phi member who disclosed in October that he was undergoing treatment for cancer, was there. He looked energetic, the two attendees said. In 1930, the dinner was beefsteak. This year, the meal featured lobster salad, shrimp, pigs-in-a-blanket, lamb chops and pistachio ice cream.– Wall Street Secret Society Kappa Beta Phi Adds Dealmakers With Lehman Rite

Wall Street headhunter Daniel Arbeeny said his “income has gone down tremendously.” On a recent Sunday, he drove to Fairway Market in the Red Hook section of Brooklyn to buy discounted salmon for $5.99 a pound.–Wall Street Bonus Withdrawal Means Trading Aspen For Coupons

The clam-juice cocktails at the private Stock Exchange Luncheon Club, where brokers lined up three deep at the raw bar, contained tomato juice, cooled water from boiled chowder clams, ketchup, celery salt and the option of a freshly shucked clam. Add vodka and they called it a Red Snapper.–How America Ceded Capitalism’s Bastion To German Boerse Seizing Big Board

As someone once said, you can find out a lot about a man or woman’s character during moments of great crisis. Do they fall apart? Do they become shells of their former selves? Do the worst parts of them come out? Do they turn their backs on everything they supposedly once stood for? Or do they, even in moments of darkness, rise to the occasion and demonstrate the morals and values they held when times were good are the very same ones they choose to live by when times are bad? For Bloomberg News reporter Max Abelson, Hurricane Sandy was a test. Would he turn in an article containing few if any reference to the food people consumed during the natural disaster? Or would his commitment to bringing readers exhaustive details re: what his Wall Street subjects eat (see above, here, and here) burn ever bright, to the extent that sources and interviewees elaborating on their situation beyond provisions would find themselves cut off and told, “Just the food and drink, toots. I got a lotta calls to make”? Read more »

Let’s disclose some conflicts of interest. I want to be all “go read this post from the NY Fed’s Liberty Street blog about the Facebook IPO greenshoe, it’s good, you’ll like it,” but I have this nagging sense that I’m mostly saying that because the New York Fed cited Dealbreaker, and what are the odds of that, so I want you to see it with your own eyes. But the post is fun, if you like this sort of thing, so, now you’ve got the recommendation and the disclosure, make your own call.1

Anyway the Fed researchers look at the Facebook IPO and the underwriters’ price stabilizing activity on its first trading day, Friday May 18. And they note, as I did, that there was a whole lot of buying at the IPO price of $38, which was probably largely due to the underwriters and which kept the stock above $38 going into the weekend before it cratered Monday morning. But they also note that there was a whole lot of buying at $40, which kept the stock above $40 for … 15 minutes.

Based on this they deduce: Read more »