Some Traders Win Big (WSJ)
Well that's pretty much a metaphysical reality: some trades win big. Though in this case its referring to a handful of funds that have profited handsomely from the Bear crash. We can only assume, then, that they were the instigators of all this. Not really, just fanning the flames. Among the names: Harbinger Capital Partners, Greenlight Capital, Tremblant Capital Group and Paulson & Co. Harbinger, of course, has been in the spotlight lately for its activist move against NYTCo. Paulson & Co. should not be confused with the new committee to save the world, which is sometimes referred to as Paulson and Co. That would be a conflict of interest.
True or False? Rumor Mill Puts Banks in a Tough Spot (WSJ)
Speaking of bear raids... the WSJ discusses the impact of rumor-mongering on some of these whipsawed financial firms. Apparently UK regulators, concerned about persistent rumors of bank failure, actually put out a statement admonishing people, saying they would investigate traders spreading false rumors. There are several interesting aspects to all of this, of course. There's the whole notion of information cascades, and how quickly a bank or an institution can be crushed under the weight of one. And then there's the question of passing on false rumors: well what if you really think its true? And what if its a self-fulfilling prophecy? Does that make it okay? It all goes back to the earlier discussion of trust-based business models, and an inherent frailty to them.
At Bear Stearns, Meet the New Boss (NYT)
JP Dimon went over to Bear yesterday to soothe the troops. He even trudged the rain, though we think this means walking into his care, getting whisked over, and then stepping out of his car (in the rain). The point: soothe the anger of executives who feel the company is getting a raw deal. There's some good dialogue there that's worth reading, as it underscores the drama (as if the drama of all this actually needed underscoring). The conclusion: it doesn't sound like Dimon made many people happy. He promised to retain the best, but said there would be a lot of layoffs, as expected. And nothing he could say would make Bear go back to $60, so ultimately, he couldn't say much to make them happy.
Starbucks Plans Return to Its Roots (NYT)
Starbucks CEO Howard Schulz is a bit like Ben Bernanke, quickly using up all of his bullets, as he tries to turn his coffee chain around. First it was the paring back on food to focus on coffee. And then there was the mid-day shutdown of the entire chain, so baristas could learn to reconnect with their craft. And now the company is launching a new quasi-social networking site, buying a coffee equipment company called Coffee Equipment Company and announcing a new espresso machine to be in all stores by 2010. Its all part of a plan to return to its roots -- the glory days. Somehow, we suspect, that nothing in all this will be able to stem the fact that today there are Starbuckses everywhere, and 15 years ago there just weren't.
Borders Group Announces Review of Strategic Alternatives and Financing Commitment from Pershing Square Capital Management; Reports Q4/Full Year 2007 Results
You've gotta love any press release that comes out at 1:30 AM. Borders Group, the bookstore chain, says it will suspend its dividend and search for strategic alternatives, including a possible sale. It also has commitments from Pershing Square to lend up to a specified amount of cash, as well as buy certain assets off of it. It warned that 2008 promised to be uncertain, in light of the economy, though as Steve Jobs says, nobody reads books anymore. So that part can't help either.
Credit Suisse warns Q1 unlikely to be profitable; writedowns smaller (Thomson)
Banking woes aren't over just because Lehman and Goldman did okay. Credit Suisse says Q1 won't be profitable, in light of difficult trading conditions in March. We take this to mean bad trades. Also it turns out -- get this -- certain CDOs had been mispriced, which it learned following an internal review. It doesn't plan to cut its dividend, however.
Asian Markets Mixed After US Losses (AP)
We're used to lockstep movement among the Asian markets, so this is a little boring. Basically mixed, with major indexes coming off their lows and others on holiday. Guess you don't have to feel guilty for having gone to sleep last night.
International Paper builds a cardboard empire (Oligopoly Watch)
You probably missed this in fretting about Bear, but International Paper is quietly amassing a cardboard empire. They can get away with this too, because people don't think about cardboard very much -- until they have to and its too late. Until the company has a total monopoly and can charge whatever it wants for cardboard. Then you regret taking your eye of the ball. Anyway, for a cool $6 billion, it took the cardboard business off of Weyerhauser, and it gives the company a 29 percent stake in the market, ahead of #2 Smurfit-Stone. Pay attention on this one.
Citigroup to Cut 2,000 More Jobs (NYT)
Title says it all. Based on sources, of course.