Lodestone Natural Resources is packing it in. Read more »
A thing that happens from time to time, and also yesterday, is that people in or around the financial services industry say furious things about Ben Bernanke:
“Ben Bernanke is running the most inappropriate monetary policy in the history” of the developed world, said Stanley Druckenmiller, the retired head of Duquesne Capital Management.
A thing that happened a lot today and yesterday is that people asked, well, why do they say such horrible things? “Because they’re true” is a possible answer and if it’s yours you might want to stop here, not much good is going to happen from here on out.
If you don’t believe that Bernanke is a war criminal or whatever, you can read some other proposed answers – by Joe Weisenthal, Neil Irwin, and Matt O’Brien – but be warned, they’re tough going if you like 2-and-20 fees and/or gold. Here, though, is a take from Matt Yglesias that I’m particularly fond of: Read more »
Ringleader Of Insider-Trading “Fight Club” Didn’t Want Any Sarcastic Comments With His Inside InformationBy Matt Levine
I suppose in like 1985 there were people who worked on Wall Street and un-self-consciously ate cheeseburgers for breakfast, got shoeshines at their desks, went to strip clubs every night, and slammed down their phones hard enough to break them, but my assumption is that in 2013 any remaining “stereotypical Wall Street behavior” is mediated through popular culture. Some people go into finance with the goal of having a memoir that reads exactly like Liar’s Poker,1 and no one wears contrast-collar shirts because they look good. You wear them – if you do (do you?) – because you saw them in that movie.
In 2009, Tortora e-mailed a group that included Abbasi and Adondakis: “Rule number one about email list, there is no email list, fight club reference. Rule number two, only data points can be sent, no sarcastic comments. Enjoy. Your performance will now go up by 100 percent in 09 and your boss will love you. Game theory, look it up.”
Look it up, yo. That’s also from Bryan Burrough and Bethany McLean’s amazing Vanity Fair article on the endless pursuit of Steve Cohen, and while the fact that Tortora and his crew of cheeseballs called themselves “Fight Club” has been reported before, the fact that Tortora had to remind them of it BY SAYING “FIGHT CLUB REFERENCE” AFTER HIS FIGHT CLUB REFERENCES is new to me and makes me ashamed to be a human.
Why did these tools insider trade? Read more »
My favorite financial news story of 2013 so far might be the Reuters story last Friday about how NYSE and Nasdaq each listed more IPOs than the other during the first quarter. A normal human might find that odd: listing an IPO is the sort of thing that you tend to notice and keep a record of, so you could pretty easily just add up the IPOs you listed and compare. But to a banker, it’s obvious that everyone would claim, with some sort of semi-plausible justification, to be first in every league table. In fact the explanation is perfectly, almost paradigmatically natural: Nasdaq excludes REITs, spin-offs, and best efforts deals.1 I remember when I used to exclude REITs! Excluding REITs is, like, 20% of what a capital markets banker does.
A deep tension at the heart of the financial industry is that it attracts a lot of quantitative logical evidence-oriented people and then puts them to work in essentially sales roles, and a lot of what it sells is unsubstantiated mumbo-jumbo. You wrote your senior thesis on geometric Brownian motion in the prices of inflation-linked Peruvian bonds from 1954 to 1976? Great, go make a page telling clients why Bank X is so much better at underwriting commoditized debt deals than Bank Y. Or: your thesis took for granted the truth of the efficient markets hypothesis? Great, go market a hedge fund that charges 2 and 20 to beat the market. You have to be quantitative enough to manipulate the data to get it to say what you want (“This fee run is 0.2% higher if we exclude REITs” “Well, do that then”), but not so quantitative that you find the whole process revolting. It’s a hard line to walk, and it’s not surprising that Eric Ben-Artzi or Ajit Jain or the quant truthers at S&P end up disgruntled and either blowing whistles or writing regrettable emails.2
Does that explain Lisa Marie Vioni? I dunno, her economics degree came with a side of French, she became a hedge fund marketer, and she’s done it for over 20 years, so I’d have pegged her as pretty comfortable in the gray areas. But in January 2012 she went to work for Cerberus as an MD selling its RMBS Opportunities Fund, and in February 2013 they fired her, and now she’s suing them. She’s suing in part for gender discrimination, which is hard to evaluate from her complaint but sure, maybe.3
But she’s also suing as a Dodd-Frank whistleblower, because she complained about what she thought were misleading marketing materials and was more or less told to go pound sand. And those accusations go like this: Read more »
Will stocks go down? Sure, maybe, whatever. I mean, they have so far today, I don’t know. It’s a thing that might happen and you might want to bet on it, one way or another. If you want to bet against it – if you think stocks won’t go down, or won’t go down by that much – then broadly speaking you can do one of two things, which are:
- Buy stocks, and get paid for taking the risk of stocks going down by getting the chance that they’ll go up, or
- Sell puts, and get paid for taking the risk of stocks going down by getting money.
That’s basically the world: you take a risk, and you get paid for taking that risk either with a fixed payment or an uncertain upside.1 You could imagine some sort of long-run expectation in which those strategies would be equivalent and I guess you wouldn’t be entirely wrong. Here is a graph:
That’s from a Goldman Sachs Options Research note out yesterday, and compares (1) buying and holding the S&P 500 (light blue line) with (2) selling one-month at-the-money puts on the S&P 500 stocks every month (black line), as well as the somewhat less relevant (3) just buying bonds. GS is recommending that you sell puts so the rest of the report is full of ideas to make that black line go higher but I hope you’re not here for investing advice so I’ll leave that to them. Read more »
They’re also pretty sure a fair amount of their colleagues have an elastic view of securities laws. Read more »
Once upon a time there was a settlement between the SEC and Citigroup over some bad stuff that Citi did, or maybe did, since the settlement did not require Citi to admit any guilt. But then the judge overseeing the case, Jed Rakoff of the Southern District of New York, bravely stood up and said: No, this settlement is Not Right, in small part because of that not-admitting-guilt thing.1 And lo he was a hero throughout the land, except in the Court of Appeals for the Second Circuit, which will likely reverse him.
I’m sure Judge Rakoff’s colleague Victor Marrero didn’t hold up SAC Capital’s proposed settlement with the SEC last week with the express goal of getting financial bloggers to say on Twitter that “Victor Marrero is the new Jed Rakoff,” but … kind of, right?
Here you can read the New Yorker‘s John Cassidy getting all exercised about the settlement, saying that “To his credit, Judge Marrero has, at least for now, refused to go along with this travesty.” I guess a lot of people don’t like this not admitting or denying thing that’s all the rage in SEC settlements these days (and, to be fair, always). But there’s an important difference between the two cases; Judge Rakoff had a reason for rejecting the Citi settlement, and Judge Marrero doesn’t particularly seem to have a reason for rejecting the SAC one.2 Read more »