Archive for October 2012

Write-Offs: 10.31.12

By

$$$ 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]
Read more »

Click Here
  • 31 Oct 2012 at 9:19 PM

Guy Who Shares The Same Name As “Hedge Fund Analyst” Spreading Lies About Hurricane Sandy On The Internet Would Appreciate Not Being Mistaken For Said “Hedge Fund Analyst” Spreading Lies About Hurricane Sandy On The Internet

By

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 »

  • 31 Oct 2012 at 6:01 PM

Who Is Doing What To Whom On Carl Icahn’s Netflix Trades?

By

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 »

  • 31 Oct 2012 at 2:01 PM

Severance Watch ’12: UBS

By

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

By

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]

  • 31 Oct 2012 at 12:51 PM

Bloomberg: How Wall Street’s Stomachs Fared During The Hurricane

By

…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 »

  • 31 Oct 2012 at 11:59 AM

How Hard Did Morgan Stanley Try To Lose Money On The Facebook IPO?

By

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 »

  • 31 Oct 2012 at 10:29 AM

UBS Is Done Losing Money In FICC, Will Focus On Losing Money In Equities

By

A thing we sometimes do here is hold ad hoc seminars in reading press releases and UBS provided a good one yesterday. When you read this:

UBS announces strategic acceleration from a position of strength

and it goes on to say this:

Group CEO Sergio P. Ermotti said, “This decision has been a difficult one, particularly in a business such as ours that is all about its people. Some reductions will result from natural attrition and we will take whatever measures we can to mitigate the overall effect. Throughout the process we will ensure that our people will be supported and treated with care.”

You pretty much know that it’s going to end in this (and this!), right?

UBS turned its plan to cut 10,000 jobs into reality when it prevented dozens of London-based employees from entering its offices on Tuesday.

Some of the Swiss lender’s fixed income traders discovered that their passes were no longer working when they tried to get to work at its Finsbury Avenue offices on Tuesday morning, bank insiders said. … “I was glad to see that my pass was working this morning,” said one banker who made it into the offices.

Were you? Why?

Anyway, yes, as noted, UBS is basically getting out of the FICC business: Read more »

  • 31 Oct 2012 at 10:11 AM

Layoffs Watch ’12: UBS Tells Employees Not To Bother Themselves With Figuring Out How To Get Into Work (Ever Again)

By

Earlier this week, before a natural disaster struck the East Coast, UBS announced that it would be calling it quits on its fixed income experiment and focusing on wealth management, letting go of approximately 10,000 employees as it transitioned back to its tax evading roots. That was Monday morning, and while the bank had said that it planned to start cuts on Tuesday, most people assumed that the Swiss would wait at least 24 hours between the time Connecticut Governor Dannel Malloy told residents to seek safety from the storm on their roofs or power for the many who lost it was restored or NY/NJ/CT mass transit started functioning again to can a bunch of staff. Those people, however, thought wrong. Apparently when UBS higher-ups decide to do something, neither wind nor rain nor is gonna stop them. Read more »

Opening Bell: 10.31.12

By

Questions Cloud Market Reopening (WSJ)
The New York Stock Exchange said Tuesday that it plans to open as usual at 9:30 a.m. and that its trading floor and headquarters in lower Manhattan were “fully operational” despite widespread blackouts and flooding in that part of the city. The Nasdaq Stock Market and other exchanges will open as well. Bond markets will follow suit. While investors and industry officials breathed a sigh of relief, critics argued that the storm exposed how ill-prepared exchanges and their Wall Street customers are for such an event. Regulators on Tuesday said they plan to probe whether more needs to be done to get exchanges and the trading community ready for such disasters.

After Hurricane, Wall Street Back To Work (Dealbook)
On Tuesday, the scene around Wall Street was desolate. While the New York Exchange’s building appeared to be unscathed, many other offices in the vicinity were flooded. After an underground parking garage two blocks from the exchange was inundated with water, several cars floated to street level. Two Citigroup buildings were without power. The bank told employees in a memo on Tuesday that one of the buildings, 111 Wall Street, sustained “severe flooding and will be out of commission for several weeks.” Some JPMorgan Chase employees outside New York City were working in central New Jersey. At the bank’s main trading floor in Midtown Manhattan, employees, many in jeans, shirts and rain boots, booked hotels for the night and discussed strategy. The bank, which sustained minimal damages at a building downtown, expected to resume normal operations in Midtown. Credit Suisse also planned to open for business on Wednesday, with its main offices by Madison Square Park running on backup power. In downtown New York, Goldman Sachs was one of the few buildings with power. The firm has a generator in the event of outages, allowing its trading floors to continue to run. On Tuesday, televisions sets and lights inside the building were on, although few employees were there…In a memo to staff, Goldman announced its headquarters would be open on Wednesday. The firm also booked hotels in various locations to make sure employees could get to work.

Deutsche Bank Rides Debt-Market Wave (WSJ)
Deutsche Bank reported a surge in investment-banking revenues in the third quarter as a rebound in client activity fueled the best quarter ever for its fixed-income division. Deutsche Bank, Europe’s largest lender by assets, reported group revenues of €8.7 billion ($11.5 billion), up 19% from the third quarter last year. The result was better than analysts expected, but the bank’s legal problems and restructuring efforts nearly flattened net income. At €747 million, the total was up 3% from €725 million a year earlier. The bank’s revenue increase was driven in part by bond-buying initiatives announced by the U.S. Federal Reserve and the European Central Bank in recent months. The moves have fueled a resurgence in client activity, including in fixed-income trading—an area where UBS AG and other competitors have announced significant cut backs, allowing Deutsche Bank to gain market share.

UBS Moves Quickly On Job Cuts, Revamp (WSJ)
Scores of traders at UBS were locked out of the Swiss bank’s London offices Tuesday as the institution moved quickly to implement the first of thousands of job cuts in a strategic restructuring. The revamp effectively brings an end to UBS’s attempts over the past two decades to build a world-class investment bank, which brought the institution to the brink of collapse in 2008 when it incurred more than $50 billion in losses from the fixed-income business that it is now exiting. Instead, UBS’s strategy will center on its private bank, the world’s second-largest in assets after Bank of America and a mainstay of the group’s earnings. UBS confirmed Tuesday that it will cut risk-weighted assets by around 100 billion Swiss francs ($107 billion) by the end of 2017, eliminate about 10,000 jobs across the bank and reorganize its investment bank to deliver more products and services to ultra-wealthy clients at the private bank. The bank also said Tuesday that charges related to the moves, which come in response to a tougher regulatory and economic climate, helped push it into the red in the third quarter. UBS Chief Executive Sergio Ermotti said that London would bear the brunt of the cuts as the bank attempts to exit almost completely from fixed-income activities and move back to its wealth-management roots.

Storm Cripples US East Coast, Death and Damage Toll Climb (CNBC)
The U.S. death toll climbed to 50, according to The Associated Press, with many of the victims killed by falling trees. Damage estimates reached into the tens of billions, while the storm disrupted campaigning and early voting ahead of the November 6 presidential election. More than 8.2 million households were without power in 17 states as far west as Michigan. Nearly 2 million of those were in New York, where large swaths of lower Manhattan lost electricity and entire streets ended up under water.

New York Subway System Faces Weeks to Recover From Storm (Bloomberg)
If you laid the New York City subway system in a line, it would stretch from New York to Detroit. Now imagine inspecting every inch of that track. That’s the job ahead for Metropolitan Transit Administration officials, who must examine 600 miles of track and the electrical systems with it before they can fully reopen the largest U.S. transit system, which took a direct hit by Hurricane Sandy. Seven subway tunnels under New York’s East River flooded, MTA officials said. Pumping them out could take days, and a 2011 state study said it could take three weeks after hurricane- driven flooding to get back to 90 percent of normal operations. That study forecast damages of $50 billion to $55 billion to transportation infrastructure including the subways.

How CEOs Improvised In The Wake Of Sandy (WSJ)
When the approach of Hurricane Sandy left Lands’ End Chief Executive Edgar Huber stranded on a business trip, he retreated to an impromptu backup headquarters—in his mother-in-law’s apartment complex…Foot Locker CEO Ken Hicks disregarded the shutdown of his New York headquarters on Monday and worked at his office until 3 p.m. Then he picked up the work again six blocks away at his home in Manhattan’s Murray Hill neighborhood. When the power went out, he put on iTunes, lit a lantern and did paperwork for another 2½ hours. “You can be reasonably self-sufficient with a cellphone and a lantern,” the CEO says.

Celebrities React To Northeast Hurricane (NYDN)
“WHY is everyone in SUCH a panic about hurricane (i’m calling Sally)…?” Lindsay Lohan tweeted Sunday night. “Stop projecting negativity! Think positive and pray for peace.” Read more »

Write-Offs: 10.30.12

By

$$$ NYSE Expects Trading Floor to Be Ready to Open Wednesday [WSJ]

$$$ Goldman Sachs offering water, charging stations for residents of Battery Park City [GS]

$$$ Gary Cohn expects to see you all tomorrow: “In New York, a lot of our people live in Lower Manhattan and I would consider them to be within walking distance to our building. We also have a large portion of employees in Battery City. We’re confident we can get a lot of people to work. We’re working on contingency plans right now on how to move people logistically are around the city…The clients that really need people in the building are more of the trading clients. The securities division personnel, the sales and trading personnel are those that will be our number one priority to get into the building. And once you bring in the sales and trading people, then you need to bring in your back office, your support, technology support, and payments and settlements.” [Bloomberg TV]

$$$ NYC transit crippled after storm; No one knows when New York’s subway will reopen [NYP, The Atlantic]

$$$ UBS to Cut 10,000 Jobs in Major Overhaul [DealBook, earlier]

$$$ Behind the Inscrutable Mien, Clues to Merkel’s Methods [NYT]

$$$ Shashank Tripathi, Last Night’s Twitter Villain @ComfortablySmug [gofwd]

$$$ Chris Christie may reschedule Halloween [SFGate]

$$$ That’s it for us today. We’ll see you back here tomorrow. Stay safe!
Read more »

Click Here