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[Investment Outlook

  • 03 Apr 2013 at 3:18 PM

S&P Cries “Conspiracy!”

Area 51. The Warren Commission. Watergate. Bush v. Gore. Ben Affleck’s Academy Award. All lead to only one conclusion: The lawsuits against S&P are a vast government conspiracy designed to take down the occasionally inaccurate—but not in a legally-actionable way, it assures—ratings agency by covering up something that does not need to be covered up. Read more »

Once, in 2007, the people who ran RBS though it would be a good idea to buy a Dutch bank with lots and lots of toxic assets. It proved to be not so good an idea, so RBS needed to raise some cash. So it sold £12 billion worth of new stock in June 2008.

In the face of a £28 billion net loss it announced a few months later, that fresh capital evaporated rather quickly, forcing a new share sale to Her Majesty’s Treasury. The people who bought those £12 billion in shares, unsurprisingly, aren’t thrilled about what happened to the value of those shares before and after nationalization. So 12,000+ are suing, seeking several billion pounds from Fred Goodwin & Co., which makes the loss of his knighthood seem rather a bargain. Read more »

  • 03 Apr 2013 at 12:56 PM

Steve Cohen Needs To Go Stress Shopping, STAT

In objective terms, worse things have happened to Steve Cohen than the news he received today. The charges against Mathew Martoma re: allegedly masterminding the largest insider trading scheme ever during his time at SAC. Friday’s arrest of high-ranking employee Michael Steinberg. The $614 million he needs to personally pony up to settle with the Securities and Exchange Commission (which he may not even be allowed to do without an admission of guilt). The slanderous claim his house clocks in at a mere 14,000 square feet. The circling of federal investigators who want him bad. And yet presumably none of that compares to today’s hit, which must have him in a fury that only the purchase of the Mona Lisa can assuage. Read more »

Here you can read an independent review of how Barclays lost its way and I submit to you that the fundamental problem was grammar:

In 2005, John Varley launched the Group’s five Guiding Principles – ‘customer focus’, ‘winning together’, ‘best people’, ‘pioneering’ and ‘trusted’ – demonstrating intent to oversee the Group through one set of values. (Section 8.14)

Are your five Guiding Principles nouns or adjectives?1 None can say. Even 30 Rock’s six sigmas were more grammatically consistent. If your five guiding principles are clearly just some mismatched words that someone wrote down and never edited, and that no one could actually use in a sentence, then: they’re not guiding anyone.2

And they didn’t. The lack of a shared understanding of values across Barclays spawned this chart, which might be my favorite thing ever:

Other than that though the report is kind of boring.3 Read more »

Let the outflow begin: as of last week, headhunters say UBS’s investment banking staff have banked their (allegedly paltry) cash bonuses for 2012 and are ready and willing to leave the bank. “Cash bonuses hit their accounts on March 25th,” one fixed income headhunter told us, speaking on condition of anonymity. “A lot of UBS fixed income people are trying to leave and already under offer. You will see around 20% of their fixed income people leaving over rest of this year,” he predicted. [eF]

Opening Bell: 04.03.13

Barclays High-Pay Culture Brought Disrepute: Report (WSJ)
Barclays PLC suffered from “a lack of self-awareness” in recent years as a culture of high pay and short-term incentives brought the bank into disrepute, according to an independent report by lawyer and investment banker Anthony Salz. The Salz Review, which was commissioned by Barclays’ former chairman after the bank admitted to trying to rig interbank interest rates last summer, describes how in about 10 years the lender expanded to become a disparate set of businesses, each with its own culture. “The result of this growth was that Barclays became complex to manage,” the report published Wednesday said. “Despite some attempts to establish group-wide values, the culture that emerged tended to favor transactions over relationships, the short term over sustainability, and financial over other business purposes.” The 235-page report—which cost Barclays about £17 million ($25.7 million) to have produced—recommended a series of reforms aimed at trying to foster a common sense of purpose across the bank. To this end, Barclays’ board must play a more active role in overseeing the business and Barclays’ human resources department must be given more power to stand up on issues such as pay, the report said.

Ex-Goldman Sachs Trader Taylor Said to Surrender to FBI (Bloomberg)
Former Goldman Sachs Group Inc. traderMatthew Taylor planned to surrender today to the Federal Bureau of Investigation, a person familiar with the matter said. Taylor was accused Nov. 8 by the U.S. Commodity Futures Trading Commission of concealing an $8.3 billion position in 2007 that caused New York-based Goldman Sachs to lose $118 million. Morgan Stanley hired Taylor in March 2008, less than three months after Goldman Sachs disclosed in a public filing that he had been fired for building an “inappropriately large” proprietary trading position.

Cyprus Bailout Details Emerge After IMF Deal (WSJ)
The IMF statement set out the tough terms the tiny nation of 800,000 has to meet to get the bailout, calling the task ahead “challenging.” Cyprus, an economy of roughly €17 billion in annual output, needs to push through cuts and savings worth 4.5% of gross domestic product by 2018 to hit a primary-surplus target of 4% of GDP outlined in the bailout deal, the IMF statement said. These cuts will come on top of savings worth 5% of GDP the government is already implementing through to 2015. An extra 2% of GDP in extra revenue will come from an increase in the country’s corporate tax from 10% to 12.5% and an increase in the tax on interest income from 15% to 30%. The country’s corporate-tax rate will remain among the lowest in Europe, on an equal footing with Ireland’s, and will allow Cyprus to continue to use its tax regime to attract businesses, but the increase in withholding tax will make it substantially less attractive as a place for individuals to leave their savings.

Cyprus Leader Invites Family Firm Probe (FT)
Cyprus president Nicos Anastasiades has urged judges investigating the country’s banking disaster to examine transactions handled by his family law firm as “a priority” in a bid to defuse public anger over last-minute transfers by well-connected Cypriots, Russians and Ukrainians who thereby avoided a “haircut” on their uninsured deposits. The move followed questions over whether a company managed by the president’s son-in-law made use of inside information to transfer more than 20 million euros out of Laiki Bank days before its collapse.

Marc Lasry In French Follies (NYP)
Lasry, the CEO and co-founder of Avenue Capital, is on his way to getting a plum assignment as the US ambassador to France as a reward for his many years as a big Democratic fundraiser. But the Moroccan-born, French-speaking American could encounter some uncomfortable moments when he lands in Paris, given his views on the land of fine wine, crusty baguettes — and European socialism. “We don’t invest in France,” he said at a New York hedge-fund conference sponsored by French bank BNP in June 2010, even apologizing to his hosts as he made the comment. Lasry, who is a bankruptcy lawyer by training, loves to chide other countries for their creditor-unfriendly ways. His $11.7 billion distressed debt fund buys up beaten-down credits of companies headed towards bankruptcy, with the payout determined by their ranking in the process. That can be dicey in countries like France, he explained at the BNP conference, as “the legal system is very much tilted towards helping unions and workers.” As a result, he said, “you might find your claim disallowed.”

1,000 pot plants seized in Queens in warehouse raid (NYDN)
A massive drug operation went up in smoke Tuesday when law enforcement officials raided an indoor marijuana farm in Queens. Authorities seized more than 1,000 pot plants – along with grow lights and other gear – from the 44th Rd. warehouse in Long Island City just after 3 p.m. , police sources said. Officials from the NYPD, state police and the federal Drug Enforcement Agency also rounded up five suspects in the sweep. Read more »

Write-Offs: 04.02.13

$$$ Hedge Funds Have a Brutal Quarter, but Loeb Stands Out [CNBC]

$$$ Half of Hedge Funds Think Their Competitors Are Cheating [Deal Journal]

$$$ Things are pretty good at Fannie Mae [Counterparties / Ben Walsh]

$$$ Pope to review Vatican bureaucracy, scandal-ridden bank [Reuters]

$$$ Tesla’s New Buyback Scheme—A Lease With Tax Arbitrage [Slate / Matt Yglesias]

$$$ Notorious B.I.G.’s Childhood Apartment in Brooklyn Selling for $725,000 [DI]
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