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Third Point Looks Forward To The Juiced Up Future Of Yahoo

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Galleon Sentences Now Getting Serious

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Betracksuited Galleon trader Zvi Goffer got some bad news today:

Zvi Goffer, the ex-Galleon Group LLC trader, was sentenced to 10 years in prison for his role in a scheme to trade on inside information provided by lawyers. …

“I view this as a tragic day,” said U.S. District Judge Richard Sullivan, who handed down the sentence in a hearing today in Manhattan federal court. “Anything less than that would send the wrong message.”

Zvi, presumably, also viewed it as not one of his best days. It’s also of interest to upcoming main event Raj Rajaratnam, scheduled to be sentenced next week and whose sentence is presumably floored by Goffer’s. Raj, however, can take some solace from rumors that Judge Sullivan is particularly harsh on white collar offenders; he might do relatively better.

Here’s an update of our chart with Goffer added and with Judge Sullivan’s sentences broken out, suggesting that they are in fact above average: Read more »

  • 12 Sep 2011 at 3:34 PM

How Much Time In Jail Will A Little Bit Of Insider Trading Cost You?

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Raj Rajaratnam doesn’t want to spend the next 20 years in prison, which would be understandable for anyone, really, but especially for him given his unmentionable but Extremely Serious assortment of illnesses. But this perfectly sensible desire to not go away for two decades runs up against a problem, which is that the US Sentencing Guidelines call for a 19.5 to 24-year sentence.

Fortunately, those guidelines aren’t mandatory, so his lawyers are working to convince the judge that Raj shouldn’t get the longest insider trading sentence ever just because he is, according to the government, “arguably the most egregious offender of the insider trading laws prosecuted to date.”

I find insider trading sentencing a bit perplexing and took Raj’s case as a reason to try to make some sense of it – and to try to predict how long Raj is going down for.
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  • 06 Sep 2011 at 7:18 PM

Carlyle Group Spends Too Much Time Being A Private Equity Firm For Some People’s Liking

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Eeevil conspiracy theory source The Carlyle Group filed for its IPO today, which makes sense because the best time to file for an IPO is during a global financial meltdown (better than filing in normal times and launching your roadshow into a meltdown, or not). The not so great news: they’re too private equity-y for some people. Bloomberg reports:
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  • 18 Aug 2011 at 1:30 PM

Fed Researchers Say Europe Borrowed From China To Buy Crappy American Mortgages

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It’s by now a familiar story of the financial crisis: German and Icelandic bankers keep finding themselves the owners of mortgages on grandmothers’ houses in Kansas, and it’s hard to decide which side is more befuddled by it. The Federal Reserve yesterday went one step further up the value chain, publishing an interesting discussion paper called “ABS Inflows to the United States and the Global Financial Crisis” and adding some data and nuance to the story of how we got to a world where a banker flapping his arms in Saxony causes a foreclosure in Topeka.

The Fed researchers started out from a popular explanation of the financial crisis, that a “global savings glut” in certain countries (above all China but also other emerging markets, the OPEC countries etc.) inflated an asset bubble in the US as foreign savers searched for safe but yieldy investments. The puzzle with that theory, though, is that the Chinese didn’t really buy subprime ABS. They bought – and still buy – Treasuries, which worked out well for them. Europeans bought the shit:
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  • 27 Jul 2011 at 10:50 AM

If You Read Only One 192-Page Report on the Financial System Today, Make It This One

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Oops

The Financial Stability Oversight Council, the Treasury-Fed-SEC-FDIC-etc.-etc. joint venture designated by Dodd-Frank to prevent another financial crisis, released its first annual report last night and can we just say that we love it?

The purpose of the report is to convery recommendations about where the regulators see systemic risk. Some are expected (bank capital and liquidity issues, derivatives clearing, high frequency trading, housing market stabilization), but there are also some things that have fallen out of headlines, like: Read more »

  • 15 Jul 2011 at 1:02 PM

Today in Statistics: People Have Stuff (Had, Anyway)

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The Atlantic points out a chart in Bernanke’s report to Congress showing the mean ratio of Americans’ net worth to annual income. After bouncing around 5x for much of the early ’90s, it went well above 6x during the tech boom, dipped briefly, and then soared to 6.3x-ish in 2007 before plummeting to around 5x again today. The Fed report, and Daniel Indiviglio at the Atlantic, point to this as a key restraint on consumer spending, as consumer confidence won’t rebound until people have repaired their balance sheets.

Here at Dealbreaker we were more surprised that the ratio was so high, since we assumed that the average American didn’t have much in the way of net worth beyond a 47 inch flat screen, a Wendy’s Baconator Deluxe and an underwater mortgage. So we looked around for median data, assuming that the mean was dominated by the top and fluctuations are driven mostly by Tiger Woods’s property tax bills. And we put together a somewhat different chart, based on the Fed’s Chartbook, which is triennial and only goes through 2007 (and measures slightly different things from the report to Congress):
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  • 13 Jul 2011 at 12:06 PM

Today in Visual Display of Quantitative Information (Nerdy)

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Zero Hedge points out this awesome chart in an otherwise kind of back-test-eriffic Stanford paper on credit-equity correlation trading:

The chart graphs 2003-2010 investment grade credit spreads (left axis) versus the S&P (bottom axis), with the size of the circles corresponding to the level of the VIX volatility index and the colors distinguishing the year of the observations.
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  • 21 Feb 2008 at 3:39 PM

Jerome Kerviel: Charting His Trades

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Jerome Kerviel's Performance (small).pngOur eyes were already glazed over when we finally turned our attention to the the report released by Société Générale on the Jerome Kerviel scandal. The ocular varnish hardened to opaque as we skimmed through blather about how almost everything had gone right, everyone had done things well, and it was just a few bad eggs. It confirms much of what we had already concluded—that the back office lacked the knowledge and spine to really control the risk of the traders. “In some cases, according to the report, controllers who asked Mr. Kerviel about irregularities in his trades didn’t understand his explanations, but they dropped their inquiries,” the Wall Street Journal writes.
We woke up a bit when we read the Journal’s summary of the report: “The findings are likely to prompt widespread soul-searching within the banking sector.” Cue laughter.
But what really got our attention and tore the scales from our eyes was the chart attached to the report. Kerviel, according to SocGen, hid his real profit and loss by displaying an “official” P&L that was very small by comparison. After the jump, we bring you the chart.

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