Today U.S. prosecutors charged former JPMorgan CIO traders Javier Martin-Artajo and Julien Grout with various crimes for mis-marking the London Whale structured credit portfolio positions. The complaints are here and here and reading them you get the strong sense that Bruno Iksil, the Whale himself, was the hero of the whole saga. Oh, sure, he built a colossal portfolio of what turned out to be massively money-losing speculative trades, and yes, he did sit by and watch as his boss Martin-Artajo and his underling Grout conspired to mis-mark that portfolio to disguise hundreds of millions of dollars of losses, but: it made him angry.1 So that’s something? Anyway, he is not being charged and is cooperating with authorities, and I guess one benefit of cooperating, in addition to the not prison, is that you come across pretty well in the complaints.
Meanwhile Martin-Artajo and Grout were not pure of heart, per the complaints; they conspired to mis-mark the book to, in Martin-Artajo’s case, make sure that their bosses didn’t take it away from him,2 and in Grout’s case, I dunno, to do what Martin-Artajo told him to do I guess. The dynamics of this terrible terrible team are a bit unclear. From the emails and recorded calls Martin-Artajo seems like the sort of guy you would not want to work with if you were law-abiding and massively money-losing; he spent a lot of time yelling at Iksil for his conscience.3Read more »
JPMorgan Trading Charges Said to Be Announced Today (Bloomberg)
The U.S. may announce charges as early as today related to JPMorgan Chase & Co.’s trading losses last year, a person familiar with the matter said. … “The penalties in the U.S. are significantly higher” than in the U.K., said Jeremy Summers, a lawyer at Slater & Gordon in London. “People faced with the possibility of being charged here or the U.S. have sought to be dealt with here because they are less draconian,” Summers said.
U.S., Filing Suit, Moves to Block Airline Merger (DealBook)
“We looked very carefully for six months at this deal, and we think it’s pretty messed up,” said William J. Baer, the assistant attorney general in charge of the department’s antitrust division. “It looks pretty bad for consumers.” He told reporters that the merger could cost consumers “hundreds and hundreds of millions of dollars.” He said regulators reached that conclusion after reviewing internal plans for the merger at US Airways and American and studying how much fares rose after the other giant mergers. Asked if some type of compromise might still be possible, Mr. Baer said, “We think a full-stop injunction is the right course for the consumer.”
Dalio Patched All Weather’s Rate Risk as U.S. Bonds Fell (Bloomberg)
As the bond market plunged in late June, Ray Dalio convened the clients of Bridgewater Associates LP, the world’s largest hedge-fund manager, to tell them that a fund designed to withstand a broad range of market scenarios was too vulnerable to changes in interest rates. Bridgewater, citing months of study, said it had underestimated the interest-rate sensitivity of various assets in its All Weather fund and was taking steps to mitigate the risk, according to clients who listened to or read a transcript of the June 24 call. By the end of the month, the Westport, Connecticut-based firm had sold off $37 billion of All Weather’s most rate-sensitive assets, Treasuries and inflation-linked bonds, according to fund documents and data provided by investors.
AOL CEO apologizes to staff for public firing (NYT)
Tim Armstrong, the chief executive of AOL, issued an unusual apology on Tuesday to his entire staff for the public manner in which he fired an employee during an internal conference call last Friday. … “If you think what is going on right now is a joke, and you want to joke around about it, you should pick your stuff up and leave Patch today,” Mr. Armstrong told the employees. But right after that statement he can be heard reprimanding Mr. Lenz, Patch’s creative director, who was videotaping the meeting, then firing him. “Abel, put that camera down right now! Abel, you’re fired. Out!” Five seconds later, to stunned silence, he proceeded with his message.
Russian surgeon arrested for taking heroin from patient’s stomach (Reuters)
A Russian surgeon has been arrested for taking a five-gram bag of heroin he found in a patient’s stomach. “The doctor was intoxicated at the time of detention,” police for the Siberian region of Krasnoyarsk said in a statement on Tuesday, adding he faced up to 15 years in prison for theft and possession.
Missing Iowa Border Collie Found Stuck in a Tree (AP)
A 7-year-old border collie who was missing from his Iowa home for a few days didn’t get very far – he only went up. Laddy the dog was found Sunday morning stuck up a tree two blocks from his Davenport home … Weeks said she believes Laddy escaped Friday from an invisible electronic fencing system thanks to a non-working battery in his collar. She said his love for squirrels and chasing things probably led him up the tree. Read more »
Once upon a time before there were activist hedge funds there were corporate raiders, whose business model was
buy stock in company,
sell stock back to company at higher price.
This model had many delights of which perhaps the greatest was that you couldn’t really, like, do damage to your reputation. The more annoying you are: the more the company wants to get rid of you! So the more they’ll pay. And since you’d really only get into this business if you had some natural predisposition to annoyingness, it was a nice way for some people to make a living doing what they loved. Sadly it sort of petered out after the 1980s, though you still see variants on it occasionally.
It’s fun to contrast Bill Ackman’s 2,000-word letter to the J.C. Penney board referencing his previous “several-thousand-word email to the board outlining my concerns about our current trajectory” with Carl Icahn’s 280characters about Apple. Read more »
Earlier today we learned that executive search committees tasked with finding people to run banks now look for candidates who possess”self-awareness” and “humility,” in a departure from pre-crisis hiring practices. Also changing is the CEO interview process, which is much more rigorous and places a significant amount of emphasis on one’s ability to deal with a wide array of pressures, from the need to inspire employees whose morale has taken a hit, telegraph confidence on earnings calls, and survive scrutiny by the press. But saying you can do all those things and more during an interview is quite different than actually doing them in real life, which is why some firms have gone so far as to make candidates engage in some high-intensity role-playing.
Recruiter Korn/Ferry International was tapped by a Wall Street firm to put a prospective executive through a two-day interview session in which the candidate played CEO. The candidate had to give a webcast presentation and get filmed being ambushed by people posing as television journalists, among other tests. “It’s your most challenging year, crunched down into one day,” Mr. Maxwell-Grant says.
For those worried about how they’ll perform during the CEO simulation, breathe easy. We’ve prepared a study guide filled with mock test-prep questions likely to appear on the test, broken down into questions that could be posed by journalists and “scenarios” you might be thrown into. We recommend doing the exercises with a friend or co-worker; to ensure real-life accuracy, they should be completed within 15 minutes. Read more »