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110810_moodys_ap_605Moody’s Corp. doesn’t often give away its thoughts free of charge. But the ratings firm made an exception recently, issuing an unsolicited credit rating to National Penn Bancshares Inc., a small community bank it had never assessed before. Moody’s grade was lower than one issued just weeks earlier by Kroll Bond Rating Agency Inc., which the bank had hired to rate a new bond. Kroll contends Moody’s deliberately lowballed its rating—a move that could have ripple effects through the market for National Penn’s bonds—to scare other small banks into hiring it for future deals. “It seems this was nothing less than intimidation,” said Kroll President Jim Nadler. “Investors and issuers are worried that Moody’s, if it’s not paid their ransom, will continue doing this until they bully their way into the market.” A Moody’s spokesman said the firm’s unsolicited rating for National Penn was due to the relatively large size of the debt deal for a regional bank. “We thought our opinion would be helpful to market participants,” he said. [WSJ]

Opening Bell: 11.14.14

BUDDYGoldman Sachs Recasts Its Reputation to Woo Tech Talent (Dealbook)
The firm rolled out a new, hipper website for engineering recruits in September, with lots of slick graphics. At the Columbia event, the screen at the front of the room had a word cloud showing the cool fields — at least for computer scientists — that Goldman engineers work in, among them “machine learning,” “data mining” and “cloud computing.” Last month, the firm ran its first Google Hangout for interested computer engineers. Mr. Chavez traveled to Boston last month to talk at the first big recruiting event of the year at the Massachusetts Institute of Technology. In all of these events, the bank is fighting old assumptions that the programmers who work for the firm are just back-office employees making sure the computers and phones work. All of the bank’s new recruiting materials emphasize that engineers at the firm are involved in its most basic businesses, trading securities and advising companies, developing the same sorts of high-level software that Silicon Valley companies work on.

Twitter Debt Rated As Junk (WSJ)
Twitter Inc.’s debt was rated as junk on Thursday by Standard & Poor’s Ratings Services, a sobering grade that comes a day after executives of the social media service tried to reassure skeptics on Wall Street of its long-term growth plan. S&P gave Twitter a double-B minus rating, noting that Twitter is investing aggressively and that, depending on the level of business reinvestment, the company may not generate positive discretionary cash flow until 2016. S&P said the unsolicited rating came in light of Twitter’s $1.8 billion debt offering in September. Twitter remains unprofitable, weighed down by stock-based pay that represented 47% of third-quarter revenue, reflecting in part the company’s hypergrowth phase as it offers cushy packages to compete for top talent.

Banks Said to Alter IPO Pitches as Finra Faults New Conflicts (Bloomberg)
Issuers typically interview analysts to get a sense of how investors might value the company ahead of going public. While bankers and analysts are required to be in separate meetings, investigators are concerned the research side may still feel pressure to inflate its valuation estimates to help the bankers at its firm win business, the people said. Banks may change their own rules and standards this month, before a settlement is announced, the people said. One possibility is to require that only analysts ask questions of the issuers’ management team, not the other way around, they said. That conversation could be logged, so that there’s a record of the topics discussed, they said.

Brazil Aims to Put Eike Batista Behind Bars (BusinessWeek)
Less than three years after President Dilma Rousseff dubbed Eike Batista “the pride of Brazil,” prosecutors are trying to send the former billionaire to prison for alleged insider trading in a trial set for later this month. If they succeed, Batista will be the first person in the nation to serve time for that crime in the 13 years since such activity was outlawed. “Insider trading is clearly widespread in Brazil,” says David Riedel, president of Riedel Equity Research in Greenbrae, Calif. “There is a consistent pattern of leaking. But the problem is not the laws—it’s that they aren’t enforced.” Of the 11 biggest mergers and acquisitions in Brazil in the past two years, at least seven of them were reported by newspapers and news agencies before the official announcement was made, according to data compiled by Bloomberg News. The stock of real estate developer Brookfield Incorporações skyrocketed 21 percent on Jan. 23 on rumors its parent company would take the unit private. That deal was announced four days later.

‘Corleone family home’ for sale (BBC)
The mansion which served as the fictional headquarters of the Corleone family in the 1972 film The Godfather has been listed for sale. The five-bedroom, seven bathroom mansion in Staten Island, New York, is being advertised for $2.9m (£1.84m). The house was gutted and renovated in 2012 after having been a family home for six decades…Real estate agent Joseph Profaci said that the film had had an impact on how the house had been renovated. “The current owners have done an amazing job renovating the home, including a first-floor office they remodelled to try to make look like the office in the Godfather movie,” he said. Mr Profaci said the kitchen was “to die for”. “It has anything you would want for entertaining – big open space, a huge island, and a very large eating area that opens up to the yard and pool” he added.

‘Cake Boss’ star Buddy Valastro tried to charm NYPD out of drunk driving charge: prosecutors (NYDN)
“Cake Boss” star Buddy Valastro tried to pull rank when police nailed him for drunken driving in Hell’s Kitchen, a prosecutor revealed Thursday. “You can’t arrest me,” he told cops. “I’m the Cake Boss.” Hoboken’s high priest of pastries then allegedly tried to sweet-talk his way out of trouble. “Is there anything we can do?” he asked. “I’m a good guy. You don’t have to arrest me.” The cops didn’t buy it. And on Thursday, a sullen-looking Valastro, dressed in dark blue jeans and a charcoal blazer, was released after a night in jail — and after he was arraigned on charges of driving while intoxicated and driving while ability impaired. Valastro’s alleged attempts to extricate himself from a jam were recounted in court by a Manhattan prosecutor who said the master baker admitted to the arresting officers that he had been drinking. “I had a couple of drinks about 30 or 40 minutes ago,” he allegedly said. The TLC star was released without bail after rejecting the standard offer to plead guilty. Read more »

Write-Offs: 11.13.14

$$$ Buffett Set to Save More Than $1 Billion on Taxes in Swap [Bloomberg]

$$$ Pimco flagship fund slightly reduces U.S. government holdings in October [Reuters]

$$$ Jobless Claims Extend Longest Sub-300,000 Stretch Since 2000 [WSJ]

$$$ Malcolm Gladwell: ‘Football Is a Moral Abomination’ [Bloomberg]

$$$ Power Wheels spoofs McConaughey Lincoln ad [UPI] Read more »

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Strip-steakKnown inside Merrill as the “wellness initiative,” Thiel has been advocating his employees embrace a New Age cultural lifestyle that includes meditation and drinking wheatgrass and cucumber juice during firm gathering…But at the meeting on Tuesday night, without Thiel present, the old Thundering Herd, as Merrill’s brokers are known, was back on display. Speeches from management included testimonials about veteran brokers, and remarks about financial markets. Also noticeably absent: Any trace of wheatgrass or cucumber juice on the menu, or any of the so-called wellness gurus or new age lifestyle experts Thiel featured at past events. Instead, brokers feasted on “meat, potatoes and booze,” according to one person who was present. “It’s the way you’re supposed to feed the Thundering Herd.” [FBN, related, related]

  • 13 Nov 2014 at 4:09 PM

Dan Loeb Channels His Inner Steven Spielberg

danloebthirdpoint-260x195As many of you know, Dan Loeb is something of a pioneer in the activist investing industry. Sure, there were others doing it before him, but he made a name for himself when it came to the art of disemboweling his targets via pen and paper. And while he continues to send various public company CEOs and their boards his trademark letters (all of which include a potent, poetic blend of sarcasm, self-regard, belittling attacks on management competence, and lengthy prescriptions for change), Loeb is not content to sit on his laurels vis-à-vis fucking up the universes of his objects of scorn, or to get left behind in the 20th century of activist investing. In April 2012, he debuted a blog exclusively devoted to his proxy battle against Yahoo– the first of its kind!– and today, he’s unveiled his latest reinvention of the wheel: a short film about Dow Chemical, complete with ominous music that is sure to haunt your dreams and make the Koch brothers proud. The film is a certain finalist for best picture at the Proxies, an annual awards ceremony honoring cinematic achievement in the hedge fund industry. Read more »

brain foodIf Google Ventures and Goldman Sachs represent the prestigious end of OnDeck’s dealings, then merchant cash advance brokers are at the other extreme. The field is rife with unsavory brokerages, staffed by many of the same people who pushed subprime mortgages a decade ago and worked the bottom rung of the stock market in the boiler rooms of the 1990s. One of them is Mario Figueroa, president of Chadwick Cashflow Advances, a brokerage in Saddle Brook, N.J. He got into high-interest small business loans in 2011, shortly after doing time in a Newark halfway house for stock fraud. OnDeck hired his brokerage to market its loans a few years ago, Figueroa says. Near his office in October, over a lunch of pizza, calamari, and tequila shots, his brand-new BMW 6 Series parked outside, he describes how an OnDeck representative offered to pay thousands of dollars for every borrower he brought in. He could hardly believe it was legal to charge such high rates, until he learned that most states’ usury laws don’t apply to business loans. His salesmen, who spend their days cold-calling businesses to offer easy money, are a colorful lot. The list of Figueroa’s past and present employees includes a former hedge fund manager convicted of stock fraud and a recovering heroin addict on probation for a motel stickup gone bad. One new hire stopped coming to work after he robbed a bank. “I saw an opportunity here,” Figueroa says of working with OnDeck. “The banking world is not using the cheap money the government is giving them to fund small businesses. Thank God we exist.” [BusinessWeek]

  • 13 Nov 2014 at 2:30 PM

Mexico Outsmarts Paul Singer

mexico-beachLike Argentina, our immediate southern neighbor from time to time likes to go cap-in-hand for some cash in New York. But Mexico is putting all of you, and especially the Elliott Management chief, who it sees eyeing its notes from time to time, on notice: If it should have some trouble paying its bills in the future, and those bills are coupon payments on debt it issues from now on, you’re going to have to buy a hell of a lot of it to avoid a close crop come restructuring time. And even then, you might not be able to make it pay. Read more »

  • 13 Nov 2014 at 1:26 PM

Bonus Watch ’14: James Gorman Is Proud Of Y’All

James GormanIn late January, in the year of 2012, Morgan Stanley had a lot of unhappy employees on its hands. Bonuses had just been announced, and the majority of the team was displeased. But while some bank CEOs might’ve paid lip service to the group, telling them how important they are despite what their bonus might suggest, or promised the slight would be made up next year, or simply ignored the grumbling and gone about their merry way, Morgan Stanley chief James Gorman was having none of it. “STFU or GTFO,” he essentially told MS employees, during an appearance on BloombergTV, “and don’t let the door hit your ass on the way out.” (Actual words: “You’re naive, read the newspaper, No. 1, No. 2, if you put your compensation in a one-year context to define your overall level of happiness, you have a problem which is much bigger than the job. And No. 3, if you’re really unhappy, just leave. I mean, life’s too short.”)

Now, nearly three years later, with what was no doubt a tear in his eye, Gorman had this to say: Read more »