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  • 10 Apr 2014 at 12:50 PM

Judge Shows Mercy On SAC Capital

$1.8 billion fine and not a penny more, probably. Read more »

Surprise, surprise: Low-key investment funds that diversify their portfolios across asset classes to protect them for the long term are again proving their value. So-called “risk parity” funds—run by prominent investment firms like Bridgewater Associates, AQR Capital Management and Invesco—are up an average of 3.3 percent through March, according to data from Morningstar, easily beating returns for stocks and bonds. That also is better than a classic 60-40 percent stock-bond allocation, which gained 1.87 percent in the first quarter. [NetNet]

Earlier this week, we received a stark reminder that things change. It doesn’t matter if we don’t want them to; it doesn’t matter if we’re not ready. We can’t freeze time1. We can’t pretend things will ever be the same. The old sign is gone. So is the website. Who knows where an email sent to an old address will end up. There are so many questions. There are so few answers. But in the midsts of it all, there is still one thing we can count on: Read more »

  • 10 Apr 2014 at 7:00 AM

Opening Bell: 04.10.14

SAC Faces a Final Reckoning for 14 Years of Insider Scam (Bloomberg)
SAC Capital Advisors LP employees gathered in the hedge fund’s cafeteria on July 21, 2008, for a seminar by former Securities and Exchange Commission Chairman Harvey Pitt on compliance and how to prevent insider trading. Yet the U.S. government has alleged that the hedge fund’s portfolio managers and analysts were busy trading that very day, and in the weeks that followed, on inside information. Two of the trades, on drug and technology stocks, were at the heart of cases brought against some of the firm’s top traders: cases that unraveled an alleged 14 year-scheme to reap hundreds of millions of dollars in illegal profit. That scenario, Pitt said in an interview, reminded him of the baptism scene from “The Godfather,” in which a duplicitous Michael Corleone swears to reject evil on behalf of his godson as his henchmen busy themselves executing rival bosses. “Here I was going over the fundamentals about insider trading and you’ve got people at SAC who apparently on the day or nearly the same day were doing the business equivalent of what the Godfather did,” Pitt said.

New Jersey’s Rating Cut to A+ by S&P on Budget Imbalances (Bloomberg)
The downgrade puts the state’s credit four levels below the top, and leaves it with California and Illinois in the single-A category, lower than 47 other states. The New York-based company gave New Jersey a stable outlook. The state had $2.4 billion of general-obligation debt and $32.6 billion of bonds subject to annual legislative appropriation as of June 30. S&P lowered the appropriation debt to A, one level below the general obligations.

Brazil’s Mantega Rejects Criticism of World Cup, Economy (WSJ)
“I believe that the Cup is being politicized,” Mr. Mantega said in an interview with The Wall Street Journal in New York before attending a gathering of the International Monetary Fund. “For Brazil to host the Cup, it needs to meet FIFA’s requirements for a certain numbers of stadiums and seats, and that is being done,” he said, referring to the world soccer governing body. Brazil is racing to put finishing touches on its stadiums and airports two months before the June 12 kickoff of the tournament, which the host country has won five times, more than any other nation. Brazilians are increasingly concerned that the late dash to finish vital infrastructure will showcase something else: the inefficiencies of a once-blazing economy predicted to grow less than 2% in 2014 and 2015. Mr. Mantega rejected any idea that government policies contributed to the slowdown, mostly blaming it on the downturn in the global economy, starting in 2008. He said President Dilma Rousseff’s government has taken steps–such as a big stimulus package–to help Brazil avoid an even deeper slowdown. More investment would flow now that the currency has stabilized at a lower rate after a large decline last year, he contended. “As the exchange rate has stabilized, it has become more convenient to invest in Brazil,” Mr. Mantega said.

Big Hedge Funds Roll Dice on Puerto Rico Debt (WSJ)
Several large hedge funds doubled down on Puerto Rico in last month’s giant bond sale despite the U.S. territory’s financial struggles, according to confidential documents reviewed by The Wall Street Journal. Och-Ziff Capital Management LLC, Fir Tree Partners, Perry Capital LLC and Brigade Capital Management each bought more than $100 million of the bonds, according to a list of buyers of the $3.5 billion deal. The list doesn’t show whether the firms continue to hold the bonds, which carried junk credit ratings, or whether they sold some or all of their purchases afterward. John Paulson’s Paulson & Co. also purchased more than $100 million of the deal. It isn’t clear whether Mr. Paulson owned Puerto Rico debt before. His firm invested in a Puerto Rico hotel earlier this year.

Banks Ease Hours for Junior Staff, but Workload Stays Same (Dealbook)
A number of young bankers say that while they can now enjoy a leisurely brunch or a binge of television watching on Saturdays, their overall workload has not changed noticeably. It just gets pushed to a different day. “If you have 80 hours of work to do in a week, you’re going to have 80 hours of work to do in a week, regardless of whether you’re working Saturdays or not,” said a junior banker at Deutsche Bank, who, like the others interviewed for this article, spoke on the condition of anonymity because he risked his job by talking to a reporter. “That work is going to be pushed to Sundays or Friday nights.” “It’s well intentioned,” he added, “but I don’t know if it’s actually practical.”

Police: Man With Stolen Cop’s Badge Demands Discounted Spray Tan (CBS Houston)
With the badge pinned on his sweater, Dustin Lee Bell, demanded that he only be charged $10 for a $34 spray tan at a tanning salon, KOTV reported. The manager went to call police and when he returned he noticed that a bottle of tanning lotion was missing from behind the counter, he explained in a statement to police. The 25-year-old man claimed that he found the police badge at a car wash in South Tulsa, but police said it belonged to a Sand Springs officer after they called dispatch to confirm it was stolen. Police arrested Bell and while booking him into jail, they found a Sam’s Club card belonging to the Sand Springs officer in his wallet. Bell is facing charges of false impersonation of a police officer, larceny from a retailer and stolen property. Read more »

Write-Offs: 04.09.14

$$$ Fannie, Freddie shareholders lobby against U.S. housing reform bill [Reuters]

$$$ IMF Warns U.S. Is Struggling With Financial Markets Oversight [WSJ]

$$$ Chicago-based Citadel appears to be the most leveraged of the 25 biggest US hedge funds, with an implied leverage of about 8.8 times investment capital, according to a Post analysis. [NYP]

$$$ Hardcore Coddling: How Eleven Madison Park Modernized Elite, Old-School Service [Grub Street]

$$$ A Culpeper jury ordered an ex-town employee in Culpeper County Circuit Court on Monday to pay $5,001 to his former co-worker whose coffee pot he admitted to spiking with his own urine five years ago. [Daily Progress] Read more »

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JPMorgan Chase & Co., the biggest U.S. bank by assets, had a “tin ear” when dealing with regulators before settling probes into mortgage lapses and trading losses, Chief Executive Officer Jamie Dimon said. “Our response generally was, ‘We know what we’re doing,’” Dimon wrote today in a letter to the New York-based bank’s investors. “Well, we should have done more self-examination. We need to be better listeners.” [...] The bank missed signals when rivals faced scrutiny and must “do a better job at examining critiques of others so we can learn from other people’s mistakes, too,” he said. [Bloomberg]

Back in October, hedge fund manager Dan Loeb sent a letter William Ruprecht, to the CEO of Sotheby’s, in which he made the following points:

  • Sotheby’s is completely ignorant about contemporary art
  • Ruprecht is overpaid
  • Sotheby’s is a joke compared to Christie’s
  • In spite of all this, Sotheby’s future can be salvaged, but it’ll take firing Ruprecht and adding Loeb and a few directors of Loeb’s choice to the board

Shockingly, Sotheby’s did not appreciate the constructive criticism, and adopted a poison pill to ward off Loeb and Co. Last week, Loeb reiterated his position in an open letter to Sotheby’s shareholders, in which he underscored that, in his professional opinion, the auction house knows nothing about selling art. (He also reminded them to vote Loeb ’14 at the company’s annual meeting in May.)

Team Sotheby’s, apparently sick of Loeb’s shit, did what any corporate entity does when it’s decided its done play Mr. Nice Guy: assembled its top men and women in a conference room and declared that no one could leave until they’d come up with a 53-slide PowerPoint rebuttal.

Said rebuttal can be viewed in its entirety here, but it mostly boils down to: Read more »

Kai Lew was allegedly a little too open with the Monetary Authority of Singapore. Read more »