S.E.C. Is Reported to Be Examining a Big Hedge Fund (NYT)
What's happening to the Barron's roundtable? First Mario Gabelli gets into trouble, then Marc Faber becomes unhinged, and now the SEC may be looking into Pequot Capital a fund headed by Art Samberg. The $7 billion fund allegedly made a whopping $18 million by buying a stock that soon after announced a merger. At one point the company also shorted GE (the acquirer), and that stock dropped all of 2.3% on the news. If the company had prior knowledge of the acquisition it may have been betting on a typical buyer's slump, though the article ties the GE short in with a drop later that month as the Honeywell merger failed to materialize. So let's get this straight. The company shorts GE because it knows about a minor acquisition, then it holds GE until another acquisition falls through, and the stock loses more ground. Thankfully we have the SEC to keep us safe from these menaces. And, of course, because this is a Gretchen Morgenson piece we get the full background about how Hedge Funds operate in this shadowy unregulated world, where managers are free to fling their money about as they please with little oversight or transparency. Thanks, hadn't read that any time in the last few years.
Ailes: FOX Business Channel in 2007 (Controlled Greed)
Somehow this story was stayed low on the radar this week; apparently it may still be game on for the Fox Business Channel. A few weeks ago, the indication coming out of the Murdoch camp was that plan was dead, but now the plan is to launch in 2007. Get this, Murdoch thinks that CNBC needs competition on TV and the web. Let's not mince words, the CNBC website is a joke. Stupidly, it's buried inside the MSN.com website, and the site itself is a disaster. None of the reasons that people watch CNBC carry over onto its website. So it shouldn't be tough for Fox to beat them on that side of the game. As for TV, we've never seen CNBC do a special on how the gay-rights lobby is affecting housing starts (as you might see on Fox's weekend morning money shows), so there's certainly a niche to be filled.
James Altucher: "The Underlevered American Household" (The Big Picture)
Barry Ritholtz takes down financial writers like it's his job. This morning he sets his sights on Real Money's James Altucher who argues that the American household is underlevered. Yep, don't believe all those gloom and doom reports about how we're up to our necks in debt and addicted to stuff from Wal-Mart bought on credit. According to Altucher, it's just bogus numbers. But Ritholtz makes a key, simple point. Looking at a historical chart, the current negative savings rate is clearly anomalous. Sure, you could try to fiddle around with the numbers, perhaps poke a few holes in them, etc. But in the past, the measured savings rate has been positive, and now it's negative. If that's not a problem, it's at least a rare situation. Oh, the last time it was like this? Right after the great stock market crash, which preceded the Depression.
Digg Expands Site Beyond Tech; General News Site (PaidContent)
Watch out mainstream media, the site that's been called the future of media (or at least newspapers) is about to expand beyond its geek-tech roots and move into areas like sports and business. The site asks users to submit stories that are voted on by the others (some call it user-generated content). At the moment, it's just a bunch of programmers voting about which "Microsoft Sux" article they want to look at each day, so it's not clear whether a broader format will work out. This broader format is what's being tried by the recently re-launched Netscape.com. Time Warner is still working on that plan to monetize AOL, as you know. Netscape basically turned itself into a Digg clone, though so far it doesn't seem to be working Most of the stories that make the front page haven't even been voted upon, and the very top story is about Digg itself. Ouch. For now, if you're in the business media, we think your job is probably safe.
Iran to Halt Gasoline Imports, Impose Rationing (Reuters)
Iran may have a lot of oil, but it doesn't have a lot of gas. It's lack of domestic refining capacity means it has to import most of it, meaning the country's drivers don't get a lot of access to the cheap stuff, like they do in some countries. Smartly, the company has decided to forgo price controls, though in place, it's imposing gas rations. Seeing as Ahmedinijad is single-handedly driving up the price of oil (and thus gas) these days, you'd think his domestic energy woes would prompt him to alter his approach. Hmm, or maybe he doesn't have control over the oil markets the way we think he does.
AB Ports backs Goldman's improved bid (RTE)
Goldman isn't going to let Macquarie just walk away with Associated British Ports Holdings. After seeing their first offer trumped by the hot bank from Australia, Goldman has upped its bid to £2.795 billion from £2.577. The move comes after the bank has lost a series of high-profile bidding wars for European assets. Unfortunately, the more aggressive they are, the more likely they'll end up overpaying -- it would be better if they could just collude and split the ports, but that may not be received so well.
As Workers' Pensions Wither, Those for Executives Flourish (WSJ)
Most stories about executive compensation are such gossamer, that it just seems better to ignore them. The Journal, though, has an interesting piece on executive pensions, which according to their analysis can add up to some real money. At the same time companies are complaining about legacy costs and discontinuing pensions, they've been increasing their executive liabilities. In part, this is due to generous salary replacement promises, much higher than those offered to the rank and file. Now to be clear, this doesn't sound like a scandal. Nobody's being swindled here; this isn't about laying off American workers to pay for the CEO's trip to the Bahamas, but it may leave investors with an unclear picture. Because the obligations are wrapped in with the rest of the pension accounting, it may not be clear how much compensation executives are actually getting. Is that a problem? It's worth thinking about, and reading the article.
Zocor losing patent protection (CNNMoney)
Today, the patent on Merck's anti-cholesterol drug, Zocor, expires, and it's expected to cost the company a lot of money perhaps billions. This month Pfizer will also lose protection on a big blockbuster, Zoloft, an antidepressant. Here's our question, how many analysts will downgrade these stocks on this news, citing concerns about pipeline or loss of revenue? Even though there's nothing new at all here, and pipeline weakness is an old story, this could be one of those things like the first snow of the year (sometimes causes a lift in natural gas prices) or the start of the "summer-driving season" (which prompts analysts to raise their gasoline forecasts). All of these things are known well in advance, but that doesn't stop people from treating them as actionable news.