News

Write-Offs: 02.09.12

By Dealbreaker

$$$ Greeks clinch austerity deal, lenders skeptical

$$$ House Votes to Tighten Insider-Trading Ban for Congress [Bloomberg]

$$$ Whitney Tilson is up 12.6% YTD [ValueWalk]

$$$ Goldman Retained Almost All of Fed’s Mortgage Bonds [Bloomberg]

$$$ Ace sleuth debunks GS elevator Twitter feed [Big Picture]

$$$ Important announcement: We are aware of “the awful cover letter all of Wall Street is laughing about.” We wrote about it three days ago. Eight thousand of you have sent it to us since, which means you are not reading Dealbreaker carefully enough.
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  • 09 Feb 2012 at 6:31 PM

Don’t Think He Hasn’t Tried

By Bess Levin

In addition to being known as one of the most loved and revered businessmen- some would say- ever, a savvy investor and a lover of Cherry Coke, Buffett is known for one thing above all else– going out of his way to awkwardly marry aberrant sex fetish with folksy business wisdom. Some of his greatest hits include telling Bloomberg, on the matter of why people should want to sell their companies to BRK, “You can sell it to Berkshire, and we’ll put it in the Metropolitan Museum; it’ll have a wing all by itself; it’ll be there forever. Or you can sell it to some porn shop operator, and he’ll take the painting and he’ll make the boobs a little bigger and he’ll stick it up in the window, and some other guy will come along in a raincoat, and he’ll buy it.” Telling investors on his decision to buy NetJets, “Once you’ve flown NetJets, returning to commercial flight is like going back to holding hands.” Telling investors, of the housing crisis, “As house prices fall, a huge amount of financial folly is being exposed. You only learn who has been swimming naked when the tide goes out.” Telling CBS, on the topic of bridge: “You know, if I’m playing bridge and a naked woman walks by, I don’t even see her. Don’t test me on that!” Telling Forbes, in 1974, on stocks being undervalued: “[I feel] like an oversexed guy in a whorehouse.” [Forbes changed "whorehouse" to "harem."] Today he added another track to the album in an excerpt of his annual investor letter to be released this spring.

As part of his argument for why one shouldn’t own gold, he noted, “Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers — whether jewelry and industrial users, frightened individuals, or speculators — must continually absorb this additional supply to merely maintain an equilibrium at present prices. A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops — and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.”

Only, as any Warren Buffett scholar worth his or her salt will tell you, that clearly wasn’t the line of his choosing but rather what Fortune, where it appeared, came up with after rejecting his previous drafts, reminding Buffett that theirs is family publication. We’ve obtained the originals and, in the interest of full disclosure and because its how Warren would have wanted it, will share them now. Continue reading »

  • 09 Feb 2012 at 5:13 PM
  • Banks

The Mortgage Settlement Is Fine

By Matt Levine

When people who hate banks and love homeowners are full of wild rage about this here mortgage settlement, and when people who love banks and hate homeowners are full of equal and opposite rage, that is pretty good evidence that the mortgage settlement is sort of meh and compromise-y and not that interesting, so let’s not talk about it. Oh, fine, let’s. You could go read all sorts of explanations and FAQs and diagrams and “top n things to know” (n = 3, 5) but I will give you a list of only one most important thing to know about it, which is that it will not reduce my mortgage so it’s all just noise. When will politicians start sticking up for me?

There is one sort of interesting thing that is probably most cogently explained here: Continue reading »

  • 09 Feb 2012 at 12:09 PM
  • FaceBook

Facebook Employees Just Want To Be “Liked,” Don’t Care About Money

By Matt Levine

Remember Facebook? Last night it filed an amended S-1 for its IPO including a bunch of contracts. Those contracts were so boring and bog-standard that … well, this:

SharesPost Financial Corporation completed its auction of 150,000 shares of the Class B Common Stock of Facebook, Inc. on February 8, 2012. A clearing price of $44.00 per share was established at the auction.

Using the 2.33bn shares implied by the “pro forma diluted share count” in its prospectus, that gets you about a $103bn pre-money valuation, or up about $10bn from this time last week. Assuming a constant price/Likes multiple, which is I assume how social networks are valued, that must mean that Facebook is approaching 3 billion “likes” per day.

The fact that you can get, um, weekly market prints for Facebook means that it is in a weird place for a private company, with a certain amount of liquidity and price transparency provided by private marketplaces. Investors who want to get out can, and accredited investors who want to get in also more or less can. So some think that FB is in essence already public, with most of the trappings of public trading for everyone but non-accredited retail shlubs. This is a good example of why that’s not necessarily so. Continue reading »

  • 09 Feb 2012 at 11:18 AM

And To The Employee He Saw Wearing A Name Tag, Exchanging Business Cards, And Sipping The Free Bottled Water Like Some Kind Of Common Noob: Your Days Are Numbered

By Bess Levin

PIMCO still radiates Gross’s workaholic culture. On a recent visit to PIMCO’s headquarters, the trading floor was graveyard quiet. People who have worked for PIMCO say Gross prefers traders to swap electronic messages rather than speak – believing too much talk is a distraction. It’s not uncommon for PIMCO traders and portfolio managers, who start work at 4 a.m. Pacific time, to find a sheet of paper with their bond holdings circled by Gross himself, asking them to justify their trades. Gross’s temper has been known to flare at work, where he has slammed desk drawers in anger. He discourages employees from socializing and speaking with competitors, and once fumed at an employee for attending an industry conference: “I don’t want you to attend the conference, I want you to be a speaker at the conference.” [Reuters]

  • 08 Feb 2012 at 7:42 PM

Bonus Watch ’12: UBS Suggests Senior Staff Get Comfortable

By Bess Levin

Earlier today, as in a few minutes ago, we learned that UBS announced it would claw back 2010 bonuses for senior-ranking employees in the investment bank. This may have put a damper on some people’s commute home but in happier news? Those individuals will be getting paid for last year’s work (albeit at a slightly reduced rate) and the only strings attached are that they can never leave UBS. Continue reading »

  • 08 Feb 2012 at 7:07 PM
  • Banks

Bonus Watch ’12: UBS Investment Bankers Thought Zero Was The Minimum Bonus? They Thought Wrong

By Matt Levine

UBS investment bankers yesterday learned that their bonus pool would be down by 60%, and that anyone inclined to grumble to division head Carsten Kengeter should be aware that (1) he would have none of it and (2) he himself was taking a bonus of zero, so see point (1). Rank-and-file bankers were perhaps a mite peeved, but they learned today that they have nothing to complain about compared to their formerly better-compensated elders, for whom “down 60%” or “zero bonus” would be an absolute joy when the reality is more like this: Continue reading »

  • 08 Feb 2012 at 4:36 PM

Charlie Gasparino: Steve Cohen Broke Bread With Chris Christie At Quality Meats Last Night

By Bess Levin

Naturally, Fox Business’s Senior Steakhouse Correspondent is on it: Continue reading »

  • 08 Feb 2012 at 3:46 PM

New Rules May Prevent Banks From Blowing Themselves Up For Cheap

By Matt Levine

If you’re in a certain line of work, and I bet you are, then your main concern about things like the Volcker Rule and increased capital requirements for banks is that they might reduce your comp. If you’re in that line of work, you’re also probably the sort of person who has a higher than average aversion to having your comp reduced. However, you’re also the sort of person whose comp everyone else would be happy to see reduced, because you make too much already you greedy jackass.

That poses a quandary because nobody’s all that interested in hearing your arguments against the new rules, even if they’re good arguments and not 100% about your own personal remuneration. One thing you could do is get proxies to make your arguments. If you think that the Volcker Rule will reduce liquidity in foreign government bonds, you could suggest to foreign governments that it’s really important that they lobby against the rule on your behalf. You did that. Good work. Let’s see how it turns out. If it turns out well, the next step would be to get other clients to say “well, we want liquidity in our [stocks/bonds/rate swaps/whatevers] too,” since that would then be a more compelling argument.

I think that’s what’s going on in this sort of amazing FT article, but something has gone terribly wrong: Continue reading »

  • 08 Feb 2012 at 3:11 PM

Expert: If You Want To Date A Wall Streeter, You’d Better Learn To Read A 10-K ASAP

By Bess Levin

Have you always wanted to date a man works on Wall Street but found them to be a difficult subset of human to figure out? Today’s your lucky day. CNBC, for some reason, is running an “article” penned by a professional matchmaker on that very issue. Having “spent the better part of 12 years learning all the their habits, their likes and dislikes when it comes to dating,” Samantha Daniels is eminently qualified to offer the tips you need to summit your Everest. Her how-to-guide includes advice like “keep stories short and sweet because the mind of a Wall Street man is always moving so rapidly and focusing on so many different things that his attention span for social stories is very short,” “be sexy,” “don’t expect him to be romantic,” “don’t get upset if your plans get scheduled by his assistant,” “don’t work on Wall Street” (“Wall Street men tend to be attracted to women who are in industries other than Wall Street”) and:

Learn a little something about the financial markets and notice if something huge happens on a given day, negative or positive. Things like the fact that Facebook is going public is not just financial news, it’s world news and you don’t want to seem clueless if you completely missed something like that. You don’t have to become an expert but at least if you know something you can participate in a conversation with your guy. Additionally, you need to be prepared that the volatility of the markets might make your guy’s mood unpredictable, especially on a day that his personal portfolio went down dramatically.

Obviously this one here is key but it’s not enough. If you’re serious about hunting big game, if you really want to impress him with the extent to which you’ve got your finger on the pulse, you must also: Continue reading »

  • 08 Feb 2012 at 1:04 PM

RBS Chief’s Troop-Rallying Memo Raises More Questions Than It Answers

By Bess Levin

Breaking his silence after the furore over his near £1m bonus and Fred Goodwin’s knighthood, Mr. Hester emailed employees admitting that such political and media attention makes the job more difficult. “There is no doubt that our position in the spotlight makes the job harder. But the best way to deal with it is to prove the critics wrong. To be purposeful, calm, and do our jobs to the best of our ability…We can’t control the outside world– whether the economic environment or the political one,” Mr. Hester, who noted RBS was still in a “loss-making phase” said. “That’s not unique to us. But if ever something has been proven over our last three years of history, it’s this – we can successfully overcome great obstacles. [Telegraph]