Goldman Sachs announced this morning that second quarter profit fell eleven percent, with net income dropping to $2.09 billion ($4.58/share) from last year’s $2.33 billion ($4.93/share). The earnings, which beat analysts’ prediction of $3.42/share, are the lowest second-quarter result since 2005. As you’ve probably heard, the decline has largely been attributed to debt-related losses. But we know the real story, which you can bet Lloyd hopes no analyst brings up during today’s conference call.
The How to Think About Series
A lot of you have been wondering if C’s new slogan, “Citi Never Sleeps” is for real. It is. I know it’s a stretch to ask a rational human being to accept, but stay with me, ‘cause it’s all about to make sense.
Sources tell DealBreaker (enough with the anonymity, talkin’ Jimmy Cayne here, informant #1**) that the new tagline is the first step in Vikram Pandit’s “Double Secret Plot To Golden Parachute” plan. You see, reader, Vik is smart enough to recognize that there’s no way to fix the train wreck that is Citi. The inevitable end game of this folly is “I get shitcanned and get my payout.” And, as an astute businessman, Vik knows that the sooner he gets fired, the less the board can hold him accountable for, and “the more loot Vickie keepie.” He’s got a much stronger case to demand mucho dinero after 6 to 8 months of inane ideas and stock price dropping directives (“come in to work on no sleep! It’ll help us to better assess risk!”) than after three years.
Which is why, as fast as he and the brain trust can come up with them, he’s implementing as many stupid ideas as possible, and has even set up a tips line that the public can use to proffer suggestions (we’ll send over any worthy ideas from the comments section this afternoon, so start thinking). As Cayne tells us, “It’s basically Vik’s ‘accelerated path’ to joining his boys—me and Stan, no Prince—in Maury Povich’s basement.” Cayne added that while he’s “skeptical” that Pandit will be able to approach “Jimmy levels of fuck up,” he supports VP’s plan wholeheartedly, “’cause we’re running low on snacks, and the two– yes two– assistants Bear’s still got working for me act all put out when you ask them to make chip runs.”
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The How to Think About Series
How To Think About How Phenomenally Failing Citi Is Still A (Sacred) Cash Cow
By Bess LevinThe billions upon billions of dollars that Citi wrote down under the umbrella of “stuff we fucked up on” today (and the resulting “negative revenue” of $5.1 billion) shouldn’t give investors the confidence that C has the vaguest notion of what it’s doing. And yet, the bank’s stock is up almost seven percent. There is only one logical explanation for this surge. People want to see more of this:
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James Cramer
How To Think About Jim Cramer’s Insane Confidence–Even For A Crazy Person–In Bear Stearns
By John Carney
How easy would it be to chalk Jim Cramer’s horrifically bad guidance to a Mad Money emailer last Tuesday to keep his money in Bear Stearns up to Jim Cramer being just plain clueless? I don’t know, very? But let’s think about this for a sec. JC’s given what’s known in the business as “shitty investment advice” in the past, that’s an incontrovertible fact. But has he ever been this off? As far as we can tell, he’s not officially retarded—or Tim Sykes. So what was it then, that made him tell “Peter,” “No! No! No! Bear Stearns is not in trouble. If anything, they’re more likely to be taken over. Don’t move your money from Bear”? Once again, the answer lies with Eliot Spitzer’s love of whores. As you well know, JC was very shook up about not being brought into the inner circle of Spitzer’s prostitution ring. He was in no position to be giving counsel about anything. Once the shock of the betrayal, or as he’s been referring to it among friends and colleagues “My Personal Crying Game,” wore off, Cramer came to his senses and said the common stock was “worthless” on Friday. What we’re trying to say, Peter, is that you should cross “Uncle Jim” off your To Maim List, smear some red lipstick on your mouth, and start thinking about how to make Spitzer, and not James, pay for your losses (sources in his pants tell us Silda’s already gone for the obvious, so you’re really going to have to think outside the box on this one).
Oops – CNBC’s Cramer Said ‘Don’t Move’ From Bear a Week Before Collapse [Business & Media Institute]
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Citigroup
How to Think About I-Bank CEOs, Dumb-Money Arabs and Their Sitcom Counterparts
By Bess Levin
As keepers and dispensers of business wisdom, people often ask us to explain certain mysterious aspects of the world of finance to them that they cannot explain to themselves. Since we think on a higher plane about this stuff than most, it’s generally helpful to use a pop culture analogy to elucidate. Don’t think of this as us dumbing down the material for your benefit, but merely-actually, that’s exactly what it is. But what I’m saying is, don’t feel bad about it. In fact, today’s question comes from a dear reader who embraces his own limitations, and asks us to answer his thorny question in a way that any simpleton can understand. “Steve in Stamford” writes, “My favorite memories from childhood involve ‘sick days’ from school, where I would sit in front of the tube eating Tasti Cakes and watching reruns of ‘Beverly Hillbillies,’ ‘That’s My Mama,’ ‘Flintstones’ and the Hulk. The lessons gleaned have informed my investment decisions later in life. Lately, I’ve been at a loss on Citi — I don’t get it. Any insights to be drawn from TV Land?”
Great question, Steve, and topical, too. On Tuesday, Sameer Al-Ansari, the head of Dubai International Capital said at a private equity conference, “In my view it will take a lot more than that to rescue Citi and other financial institutions.” This was sort of a “no shit” statement that pointed out something every 2-brain celled human being’s been thinking since Meredith Whitney told him/her to back in October but apparently it knocked some sense into the 1-brain cell guys, who still saw some value in C, and the courage to short that shit—resulting in a four percent drop in Citi’s stock price. Then, today, Dubai International said in a statement, “Dubai International Capital has never expressed an opinion on the investment merits or financial condition of Citi.” That’s right, Steve—it was all in your head. Am I saying Citi’s largest shareholder outright lied to you? No, they’re not smart enough for that. What we’re saying is, they have no idea what’s going on. Which brings us to this—Citi, and its ragtag coterie of hangers-on, is the TV equivalent of the seminal sitcom, “Hogan’s Heroes.”
Think about it, Steve: the premise of the show was that the POWs at Stalag 13 were actually active participants, using the camp as a base of operations for sabotage against the Nazis. Their leader was senior ranking POW officer Colonel Hogan. The prisoners were in contact with Allied command, and running the show, aided by the incompetence of camp commandant Colonel Klink and his aide, Sergeant Schultz. Citi is the Third Reich. The failed experiment. Weill would be Hitler but he flew the coop with Eva Braun, and let Pandit do the whole “Third Act in the Bunker” thing. Meredith Whitney is Hogan. Alaweed is Klink. Dubai International is Schultz– “I zhee nothing.” We almost said Pandit is Schultz, but that would be giving him too much credit.
That’s really it. Hope this helped, Steve. If you have a question you’d like answered, shoot us an email at tips at dealbreaker dot com, or give us a call at (203) 890-2000. We know what we’re talking about.
Dubai International Says It Takes Back Citi Comments [DealBook]
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The How to Think About Series
How To Think About, And Work Around, Antiquated Values Regarding Bribes
By Bess Levin
Fidelity agreed yesterday to pay $8 million to makes claims that members of its staff accepted improper gifts from brokers go away. We find the fact the firm neither admitted nor denied any wrongdoing (I know this is how it works but silence for a sec and go with me) to be tacit indication that the people in charge approved and continue to approve of the Wimbledon tickets, flights on the Concorde, passes to the 1999 Ryder Cup golf tournament, hits of E, and dwarf-featuring bachelor parties bestowed upon 13 current and past employees, including former Magellan fund manager Peter Lynch. And frankly, we could not agree more.
You should be able to use all the resources at your disposal to get your shit done, and if you happen to be on the receiving end of a cigar-filled humidor worth $1,300, good for you. Not so much with the dwarves but we don’t yuck other people’s yums. The only problem is Fidelity’s self-imposed limit on gifts to employees, which is $100. Raise the bar, or drop it all together, and make this business what it should be, which is a free for all. While we’re waiting for the paperwork to go through, take a cue from Blarney, and introduce your clients to the various Times Square peep shows (only cost a quarter, so it would take awhile to butt up against the limit), or the pseudo-straight married men of NJ, who’ll do it for free. At the risk of ending this on a self-serving note, we’ll remind you at this time that DealBreaker has no monetary restrictions on whatever treats you’d like to drop in our laps, which you probably already intuited if you’ve ever observed Don Klarney in the Meat Packing district on a Saturday night.
Fidelity to Pay U.S. To End Case Over Gifts [NYT]
A lot of people are acting all shocked and dismayed over the little slip-up that happened at Credit Suisse. Saying they can believe something like this would happen over at Bear, where Jimmy Cayne spends all the money on chips and forgets to leave an IOU, and UBS, where God retroactively punishes, and Citi, where you’ve got eight people sharing one chair and nobody can even hear themselves think, but not at CS. Bad things don’t happen to good people and bad things like multi-billion dollar mistakes certainly don’t happen to good people who live within 200 feet of the Shake Shack. I’ve got news for those of you failing to “get” how Credit Suisse could suddenly come up with this gigantic fuck-up, worthy of even Citigroup’s praise, when just last week Brady Dougan told reporters everything was cool– there never was any “error.” Well, never any error that D-gan didn’t orchestrate himself.
And no, I’m not talking about fraud. Let’s leave that up to Goldman, the professionals. Listen to D-gan’s wording from yesterday’s call: he defends the bank’s controls, saying it was a “very good sign” the “errors” were caught “rapidly, and…by our internal processes.” You can almost see him cocking his eyebrow slightly, just ever so slightly, too, can’t you? That’s because he’s got a secret– this whole thing was a drill. Not a joke, a drill. Dougan wanted to test the controls in real-time; make sure everything was up to code. Two something billion dollars was sacrificed now so that twenty something billion dollars doesn’t have to be sacrificed later. Don’t believe us? That’s fine, you’re entitled to your own (woefully misguided) opinion, and we know you’ll come around eventually. Get into my head and it’ll make sense. In the meantime, I challenge you all to come up with a more plausible explanation for what happened. It’s an impossible task but nonetheless, the best answer wins lunch at the SS, on Carney.
Credit Suisse Suspends Traders After Mispricings [DealBook]
Dougan’s Assurance of Shareholder `Comfort’ Proves Immaterial [Bloomberg]
It was recently suggested by someone too close to the matter for objectivity that I, as in Bess Levin, am “unnecessarily harsh” on Steve, as in Steve Cohen. “You’re always calling him fat or bald” said the person with eyes. Obviously, my initial reaction was “watchu talkin’ about Willis?” because I can’t remember the last time I called the Big Guy (BG) fat. “Fine, rotund, portly. You called him ‘portly’ just today,” his mother countered. In his mind, he had won this “You’re too mean to Steve” argument and there was nothing I could do to sway him (he didn’t believe me when I said I described the BG as rotund so as to paint him as a distinguished gentlemen, a man of wealth and taste, or that I just wanted to know, not for fat reasons but just because I was interested, if the BG ordered out three Monte Cristos and a coke yesterday or four, in light of the circumstances, those being that SAC had really shitty offerings for lunch), so I did what any person faced with an insurmountable obstacle of words placed before her would do, and signed offline. Dramatically. Without saying goodbye. I had won the war.
But now, thinking about it, I wonder, am I unnecessarily harsh on Steve Cohen? One could theorize that with these posts I’m doing the whole “pull the BG’s ponytail on the playground,” but that doesn’t really work, for several but one notable reason in particular.
What the leading light complaining to me doesn’t realize is something the Big Guy surely does and appreciates: With a few exceptions (Timmay, Blarney, Alexey), being mocked by Ms Levin is one of the great trappings of big-swinging-dickdom that very few ever achieve (Crab Hands, Fatty, ValueStockTipguy). I know nothing about Wall Street, so if I have heard of you, you’re big. But Stef-Boy (people think he is called Stevie, but his true friends know otherwise) won’t come out of his hermetically-sealed full-body condom to clarify this matter on my behalf so I’ll leave it to all of you to decide by poll. Am I too mean to him? If yes, you had better come up with somebody else for me to mock or I will find you and make you my next bitch. If no, congratulations, you answered correctly.
(Eff the Vizu poll. And not because it doesn’t let you use curse words — though you know that grinds my gears — but because I want a forum. The Internet is a collaborative medium; as far as I can tell I’m the only one doing the work here. Except this guy:)
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clothes
Getting You Promoted, One Pair Of Assless Chaps At A Time (Provided You Work For Larry Robbins)
By Bess Levin
The Wall Street Journal has one of those paint by numbers articles today about how it’s inappropriate to dress casually in the office. It’s full of helpful information like “don’t wear ripped jeans that haven’t been washed in three weeks and smell like wet dog” and “Take off your cock ring before you come to work, unless you plan to ‘liaise’ with your secretary that morning.” So it’s not *entirely* useless.
But my issue is that it seems to be addressing idiots. People who don’t get why cargo pants might not be the best choice to roll up to an interview wearing (full disclosure: I don’t either). Toilet cleaners who are just trying to get by without getting fired. And that’s not you, the highly affluent DealBreaker audience that advertisers love. You’re moving up, or at least you’re attempting a vertical climb and since the Journal won’t belay you up there, DealBreaker will. I’m going to tell you a secret someone once told me: talent doesn’t matter. Same thing with initiative and work ethic in general. All that matters is the clothes, and remembering three words: act as if.
Are you a P&L analyst at SAC looking to impress the grand poobah by mimicking his sartorial picks? You wear a zipup sweater, cookie crumbs, no pants. Bottom feeder at Blackstone? Fine Italian suit with bib. Nobody at Merrill? unitard. Interning for Brian Hunter (unpaid, college credit only)? Shroud yourself in a cloak of failure and call it a day. You get the idea. Now, who’s ready to start dressing the part and making a name for himself?
Law Without Suits: New Hires Flout Tradition [WSJ]
Earlier this morning, I received the following instant message-”RonBlarneyIsGod (08:58:46 AM): whoa, for a second there it was almost like 1929 again!” Because this person is prone to hyperbole and lies, I ignored it. Then Opening Bell Joe emailed me about some “worse than usual” fight Cramer had with Rick Santelli. Cramer making a spectacle of himself for ratings-didn’t sound like a big d to me, but OBJ usually knows what he’s talking about, so I made a little “hmm” noise before going back to sleep. When my very enchanting and aesthetically-pleasing roommate got cancelled on by four of tonight’s five dates, all citing “margin calls,” I finally opened myself to the notion that maybe something was up (lucky number five is on the Bear mortgage desk and as of 10:00 am, had no idea anything was going on. He does now but doesn’t much care and just wants to know if “6 at the Olive Garden is still good?”).
I tried to console her with a little history lesson, and the writer even offered to read the post out loud over the phone, because “its sheer brilliance might not transfer to the page” but it was useless. Then, a lightbulb. What’s the one thing that always makes everyone feel better about themselves, even when they really have no conceivable reason whatsoever to get out of bed in the morning? When they should just pack it in and give up entirely? When they’re staring down the barrel of a gun and even Mrs. Blarney’s going, “You know I like to look on the bright side of things but you should probably just pull the thing and be done with it”?
Obviously the answer is ex-hedge fund manager Seth Tobias and his stripper boyfriend Tiger who can’t remember if they’d ever had sex because he’s slept with “too many” hedge fund managers to keep track, gay pimp/personal assistant Billy Ash, widow Filomena, and celebrity fitness trainer Doug Caporrino. Below I invite you to help yourselves to a conversation between Ftobias8 (Filomena) and Sneffer (Seth), which have been entered into evidence by lawyers attempting to prevent Fil. from helping herself to the deceased’s $25 million estate. It helped ROB (Roommate of Bess) get through this difficult time, and I think it might help you, too. ROB’s favorite part is “Ftobias8: I hope you rot in hell you sick fuck. Ftobias8: After this last hurrah…enjoy you [sic] pathetic life…..in your rat hole house with your drugs and alcohol…I hope you get aids with all the whores your [sic] fuk [sic] too. Ftobias8 signed off at 4:48:27 PM. Ftobias8 signed on at 6:48:26 PM. Ftobias8 is idle at 7:08:55 PM.” What’s yours?
IM Convo [PDF]
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The How to Think About Series
The Wit and Wisdom of Bess Levin, Celebrated Jewish Financier And Raconteur
Or How To Think About The Markets, And Your World
By Bess Levin
I’ve seen a lot in the markets in all my years — the nightmare of ’73-’74, which led to my barbituate phase (and my first divorce, but who’s counting?); the joys of being at the ground floor when JWM was gearing up the boys at Solly (chronicled in my book, ‘Liar’s Poker’); the coke-fueled days riding the Nasdaq like a Thai hooker during the late ’90s, then riding it down. Since I’ve made and lost fortunes and made them again, in markets like this I like to pass along my accumulated wisdom and historical perspective to the younguns on the desks today. I was cutting my teeth trading EM bonds when most of you were crapping yellow, so you should listen to me. Here are two not unrelated thoughts to put this week in a little perspective. The first comes from my boy JK Galbraith (don’t get me started telling stories; God, I miss him). Might sound familiar to a few putting money to work today. The second is a more recent vintage; keep it in mind when your broker calls you saying it’s time to buy.
The singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to ensure that as few as possible escaped the common misfortune. The fortunate speculator who had funds to answer the first margin call presently got another and equally urgent one, and if he met that there would still be another. In the end all the money he had was extracted from him and lost. –John Kenneth Galbraith, “The Great Crash”
For my second Pearl o’ W, please turn to Page 2
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