As you may know, there might actually be consequences to spreading totally unfounded rumors about firms that may or may not actually be experiencing some level of financial difficulty. How are you the reader expected to know which rumors are ok to spread overtly and which require the use of special clandestine services tools like a hoarse whisper outside of Dick Fuld’s office?
Fortunately, DealBreaker has initiated coverage of several Collateralized Rumor Securities and Collateralized Gossip Obligations (CRS and CGO instruments respectively). Of course, since we underwrite both the underlying rumorous assets and these securities our ratings are entirely unreliable and hopelessly inflated, but that shouldn’t stop you from using a lot of leverage to buy them up. After all, you can diversify across multiple tranches and multiple instruments. We should point out that if you need something closer to cash you can invest in our Auction Rate Secrets (ARS) instruments too. We maintain a good liquid market for them or their rates reset. Really, it will be fine.
Rating / Description
- Investment Grade-
AAA / Very Reliable
AA / Reliable
A / Mostly Reliable
BBB / Might Be True
-Speculative-
BB / Sketchy
B / Countrywide Sketchy
CCC / Unlikely
CC / Really Unlikely
C / Heard it From The Iraqi Minister of Information
D / Heard it From A Lehman Conference Call
BRK
GS
LEH
BCS
Disclaimer: The Federal Government in NO WAY guarantees these instruments or their underlying assets. No really, not at all. Seriously.
rumors
At the end of last week we saw something of a bear run at Lehman Brothers, with traders pushing the stock down 6.2% on Friday. Options traders bought heavily in out of the money puts, including some heavy buying in some really far out of the money options that bet the stock will drop at least another ten dollars.
This morning both Bank of America and Sanford Berstein slashed their earnings estimates for Lehman. Many investors now expect Lehman to post a loss for the quarter. The price of default protection on Lehman debt blew out to 246 basis points.
Some are now saying that Lehman will have to engage in another round of capital raising to shore up its balance sheet and reassure investors that it won’t face a liquidity crisis. At the more extreme end of the bearish outlook, some are saying that Lehman might already be talking to the Federal Reserve about emergency measures.
“With the sinking dollar, my bet is that these guys are already talking to the Fed in a similar bailout that was fashioned for Bear Stearns,” an anonymous market watcher tells Christopher Cruden, the founder of Swiss hedge fund Insch Capital Management.
That’s some pretty wild speculation coming from a totally unknown source. But these are wild times, and unknown sources have made some pretty spectacular and spectacularly right calls in recent months. We just thought we’d pass it along.
Update: A spokesman for Lehman categorically denied the wild speculation.
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Posted in:
Commodities
Commodities Slump As Traders Exchange Rumors Of New Margin Requirements
By John CarneyCommodities slumped across the board today. Most market watchers are saying that aid for the mortgage markets encouraged some investors to move money from commodities to bonds. But commodities traders had more on their minds than bonds today, as rumors of additional margin requirements made their way across trading desks via instant messaging and phone lines.
What sparked concern was a rumor that the futures exchanges or regulators—or maybe both—were considering raising margin requirements for “non commercial” commodities traders—especially non-com energy traders. Non-commercial traders speculate on the price of commodities but do not ever take delivery of the commodities. Amaranth was a non-commercial trader, while Exxon-Mobil is a commercial trader.
The Commodity Futures Trading Commission, which is charged with overseeing trading in futures contracts, does not set margin requirements. This responsibility falls on the exchanges, such as NYMEX and the CME, which are viewed as having a better, ground-level view of the market’s volatility and risks. Spokespeople for the CFTC said they had no plans to begin regulating margin requirements.
A move to increase the margin requirements for non-com traders could be aimed at diminishing price-volatility, and might reduce commodity prices. This, in turn, might be viewed as aiding a faster recovery as investment dollars would be re-directed at areas of the economy that fuel growth. What’s more, it might tamper—or at least obscure—inflation fears by reducing prices in things like oil and gold.
The exchanges rarely distinguish between commercial and non-commercial traders, however. Market watchers DealBreaker contacted were skeptical that they would put in place such a distinction now. One economist also said that the move could actually fuel volatility, at least in the short term, by obscuring efficiency-creating arbitrage in the markets.
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Posted in:
Henry Blodget
Does Henry Blodget Have An Enemy On JP Morgan’s Trading Floor?
By Joe Weisenthal
A last minute change in a software industry group’s meeting has raised questions about whether famed and infamous tech stock analyst and Silicon Alley Insider founder Henry Blodget may have a highly placed enemy among the traders at JP Morgan.
Shortly after noon today, the New York Software Industry Association changed the location of its monthly meeting from JP Morgan’s headquarters at 270 Park Avenue to 277 Park Avenue, a building that is also occupied by JP Morgan and is directly across the street. An email from the NYSIA said the meeting was being moved “due to a flood at the JPMorgan HQ at 270 Park.” But a JP Morgan spokesperson denies that there has been a flood at the building. Others at JP Morgan also said that they hadn’t heard anything about a flood.
So if the flood hadn’t occurred, why was the meeting being moved? JP Morgan Chase didn’t offer any further comment on the subject, and NYSIA did not immediately return our call. But some of the emails recipients have begun to speculate that the meeting may have been moved because Blodget, who was accused of securities fraud in connection with his stock recommendations in the 1990s and was scheduled to speak at the monthly meeting, could be persona non grata at 270 Park Avenue.
“I’d wonder if maybe some high-up didn’t want Blodget around,” a person familiar with the situation told DealBreaker.
The meeting has been moved from one JP Morgan office to another, which might imply that it is a very particular group or person within JP Morgan who has declared the premises off-limits to Blodget. Although a variety of units within JP Morgan Chase are scattered throughout it’s various Park Avenue offices, the 270 Park is home to a large number of its traders while 277 Park is home to many investment bankers. So does some high level trader have a problem with Henry Blodget?
Our research couldn’t produce a credible account of who might be feuding to Blodget or why. Many in the securities industry, however, still resent what they see at Blodget’s role in besmirching their business. Blodget’s first book, The Wall Street Self-Defense Manual, did not paint Wall Street in a particularly flattering hue.
Neither Henry Blodget nor JP Morgan Chase could be reached for comment on this important question irresponsible speculation.
Rumors are swirling that Alopex Capital, the equity volatility arbitrage hedege fund manager founded by ex-Goldman Sachs and Soros trader Peter Van Dooijeweert is shutting down. The Global Vega Fund (no relation to Vega Asset management) was apparently seeded by Tudor Investments in 2003 and in a document filed with the SEC in April 2006 the company listed only $226 million in assets under management –although people we spoke with list current assets significantly higher.
Looking for info from anyone who knows anything. Alopex could not be reached for comment.
–DealBreaker contributor A. Barber.
Shares of mortgage insurer MBIA are halted, news pending. The company is widely expected to announce it is raising new capital but rumors persist that it may be darker news. What are you hearing?
Update (thirty seconds later): Oh, never mind. They’ve announced. Warburg Pincus is buying a $1 billion stake.
Update (30 minutes later): Of course, there was darker news. Word of this investment comes with news of that the mortgage insurer faces significantly higher losses from a decline in the value of securities it guarantees. Here’s a link to the Bloomberg story.
We’ve just heard, as we sometimes do, that Greenwich Capital laid off a bunch of senior guys last night, and will be moving on to the peons this morning. 2.5 months from bonus time—ballsy! As always, we would appreciate if anyone who can definitively confirm or deny the allegations would do so now.
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Posted in:
Goldman Sachs
Layoffs Watch ’07: Isn’t Goldman Supposed to Be Immune From This Shit?
By Bess LevinA bunch of people have all told us, “Word is Goldman has laid off about 250* in ABS, CDO, cash from jr-md level,” or something to that effect, this morning. Think it’s true? KNOW it’s true? Guess it’s true? They’re all pretty much the same to us. Don’t hesitate to call.
*And, according to one, “it’s not going to be reported anywhere,” because the first rule of being fired from Goldman Sachs is, you don’t talk about being fired from Goldman Sachs (or Blankfein’s bald spot, which is a sensitive topic).
The rumor about Syndicated Leveraged Finance analysts at JPMorgan, currently in training, being rounded up and told “there will be people leaving this group” has been given not necessarily legs but perhaps (very small) feet. While out for sushi last evening, our dinner companion received an email that read:
I won’t send this to her directly but since I know you’re out to dinner with BL, feel free to pass along that I’ve heard the same rumor about the SLF guys. Good, I say, less JPM dicks at Snafu when I get my drink on at five. Don’t put my name on that. Describe me only as being “in the know” and “an employee of Barclays.”
And another, less crazy tipster writes today:
Confirmed JPM analysts rumor, though I’ve heard the senior guys are also planning on cutting non-first year analysts.
Want to get something off your chest pertaining to Jamie Dimon’s toy soldiers but feeling similarly gripped by paranoia? Shake it off and let us know.
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Posted in:
Hedge Funds
Blind hedge fund guessing game: Which multi-billion dollar multi-strat hedge fund manager, located far from Wall Street and Greenwich, is rumored to be “blowing out” its arbitrage positions this morning as all eyes are focused elsewhere this morning? What prompted the selling-off is unclear, but it has tongues wagging.
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