Wall Street Is Bracing For Dismal 4th Quarter (NYT)
In recent days, analysts have been lowering their fourth-quarter earnings estimates for Goldman Sachs, Morgan Stanley, Citigroup and Bank of America. Analysts are also bracing for lower earnings from JPMorgan Chase, which on Friday will be the first of the Wall Street banks to report results. “It’s likely 2011 will be the worst year for revenue growth for the banks since 1938, and so far 2012 isn’t feeling much better,” said Michael Mayo, an analyst with Crédit Agricole Securities. “The industry simply grew too fast over the past two decades and now it’s downshifting. This process will take time, but the hit to revenue is happening now.”...For the fourth quarter, Goldman Sachs is projected to post a profit of $2.02 a share, according to a survey of analysts by Thomson Reuters. That consensus number is down from $2.81 a month ago. And it is likely to fall further in the coming days as more analysts weigh in with new estimates. Some analysts already have Goldman, which reports on Jan. 18, earning less than $1 a share in the fourth quarter.
Carl Icahn Bounces Back With Banner Year (NYP)
In a year when the average hedge fund fell between 4 percent and 7 percent — with some prominent funds down in the deep double-digits — the Far Rockaway native returned 35 percent in trading profits last year. “I didn’t think we’d do so great this year, but we did very well,” Icahn told The Post when asked about the returns. “I was pretty hedged this year too,” he said.
Merkel, Sarkozy Return to Work on Euro Rescue (Bloomberg)
German Chancellor Angela Merkel and French President Nicolas Sarkozy meet today for the first time in 2012 as they seek to craft a master plan for rescuing the euro over the next three months. The two leaders gather in Berlin to flesh out a new rulebook for fiscal discipline negotiated at a Dec. 9 summit that seeks to create a “fiscal compact” for the 17-member euro area. They meet at 11 a.m. local time at the Federal Chancellery and hold a joint press conference at about 1:30 p.m. The German and French leaders have sponsored a plan to install new guidelines by March. A crisis that began in Greece more than two years ago has moved to the euro area’s core, and leaders are struggling to persuade investors they can contain the risk and assure the euro’s survival.
Romney At Bain: Big Gains, Some Busts (WSJ)
...the full record has largely escaped a close look, because so many transactions are involved. The Wall Street Journal, aiming for a comprehensive assessment, examined 77 businesses Bain invested in while Mr. Romney led the firm from its 1984 start until early 1999, to see how they fared during Bain's involvement and shortly afterward. Among the findings: 22% either filed for bankruptcy reorganization or closed their doors by the end of the eighth year after Bain first invested, sometimes with substantial job losses. An additional 8% ran into so much trouble that all of the money Bain invested was lost. Another finding was that Bain produced stellar returns for its investors—yet the bulk of these came from just a small number of its investments. Ten deals produced more than 70% of the dollar gains. Some of those companies, too, later ran into trouble. Of the 10 businesses on which Bain investors scored their biggest gains, four later landed in bankruptcy court.
Huntsman Says Romney Presidency Would Be Status Quo on Wall Street Issues (Bloomberg)
If the U.S. banks “get infected with the flu that’s making the rounds in Europe, they have to be bailed out, because if they fail, we all go down,” Huntsman said, adding that’s “right for the taxpayers.” He suggested that some of his Republican rivals -- particularly Romney, who has received the most campaign contributions from the financial community -- would be captives of Wall Street if elected.
The Ex-Lehman Banker Who Doesn’t Get Why People Hate Bankers (New York)
"It’s just a grind now. I don’t get the whole Occupy Wall Street thing. Nobody is making that much money, and no one is having that much fun, so what are you trying to do? It’s the same outrageous hours and outrageous negotiations; everyone is trying to make a buck. But the money’s not there. I have this problem with my mother: She doesn’t understand we make a product. She doesn’t see it. And Main Street says you’re still getting paid too much: Even getting cut from $1 million to $500,000, they still think you’re earning too much."
Bronx principal under fire for outrageous 'sex machine' comments about photocopier (NYDN)
Elected officials and school staffers are calling for the removal of a foulmouthed Bronx principal who taunted female workers about having sex with a photocopier and a computer. Principal John Chase Jr. of Bronxdale High School made a series of outrageous comments to female staffers last July when his school received a new photocopier and a new computer, according to a November report by the Education Department’s Office of Equal Opportunity. “Have you seen the new copy machine? It does everything. It even has a hole in it where you can stick your d--- in it and get a b--- job,” Chase told two female staffers, according to investigators.
Geithner's Asia Trip To Focus On Iran (WSJ)
U.S. Treasury Secretary Tim Geithner headed to Asia Sunday to seek support from China and Japan for boosting financial pressure on Iran in an effort to prevent it from developing nuclear weapons...The Obama administration is attempting to squeeze Iran's government by curtailing its oil revenue. Some European Union members are taking the same tack, agreeing in principle last week to enact an embargo on all purchases of Iranian oil. A Dec. 31 law imposes U.S. sanctions on Iran's central bank and could penalize foreign firms that trade with the bank, which handles Iran's oil revenue. Investors are watching nervously, because any retaliation by Iran could send oil prices skyrocketing and threaten a fragile global economic recovery.
New Hire Will Mine AIG's Data (WSJ)
Seeking to transform sheaves of claims data into risk-management gold, American International Group Inc. has hired a chief science officer for its largest insurance unit. AIG on Monday plans to name Murli Buluswar to the newly created position at Chartis, its global property- and casualty-insurance business. The 40-year-old will oversee a research team that will draw in part on the immense collection of information the company has amassed around the world in the course of doing business. The goal of the effort is to improve loss forecasts, reduce costs and devise more accurate pricing for insurance policies—even for big clients in the commercial-insurance field, where such analysis is relatively rare.
Goldman, Citigroup CDOs Were Tip of Iceberg (BusinessWeek via Heidi Moore)
The complex mortgage instruments at the center of the 2008 financial crisis went so spectacularly wrong that many observers have said they were designed to fail. A new paper by Oliver Faltin-Traeger of the investment firm Blackrock and Christopher Mayer of Columbia Business School lends a lot of credence to that assertion. Faltin-Traeger and Mayer -- who are scheduled to present their preliminary results Saturday at the annual meeting of the American Economic Association -- focus on collateralized debt obligations tied to asset-backed securities, or ABS CDOs. For the most part, these were mortgages that had been pooled into bonds, which in turn were repackaged into CDOs...Using a unique database published by the investment firm Pershing Square Capital Management, Faltin-Traeger and Mayer identified the underlying bonds in some 528 ABS CDOs issued between 2005 and 2007, and compared their performance to similar bonds that weren't included in CDOs. They found that the bonds in the CDOs performed a lot worse. Even if one holds observable characteristics such as initial ratings and yields constant, the bonds in the CDOs suffered ratings downgrades that were 50 percent to 90 percent more severe. As of June 2010, for example, bonds with initial triple-A ratings had been downgraded by an average 11.84 notches, compared to 5.99 for those not in CDOs. The bonds in the CDOs were also more likely to have been rated by all three major credit-rating firms. The research provides strong support for the idea that banks -- with the help of pliant ratings agencies -- put together the CDOs and sold them to investors in a premeditated effort to get rid of some of their most toxic assets, or to provide vehicles for clients who wanted to bet against the worst possible assets. As the authors put it: "It would have been very hard to randomly choose securities with such poor ex-post performance."
Taxi Supply and Demand, Priced by the Mile (NYT/Bits)
On New Year’s Eve, Dan Whaley, a tech entrepreneur in San Francisco, got into a black Town Car and was driven one mile to a holiday party. The ride cost him $27. At the end of the night out, Mr. Whaley took a Town Car home from the party. This time, the exact same ride cost $135. Mr. Whaley was using Uber, a service that allows people to order livery cabs through a smartphone application. On New Year’s Eve, Uber, a start-up in the city, adopted a feature it called “surge pricing,” which increases the price of rides as more people request them.
Former Soros Trader Said to Return Outside Money in Asia Hedge Fund Penta (Bloomberg)
Former Soros Fund Management LLC trader John Zwaanstra plans to return outside capital in Penta Investment Advisers Ltd., the Asia-focused hedge fund he set up in 1998, said two people with knowledge of the matter. The company plans to give investors more details this week, said the people, who asked not to be identified. Penta managed as much as $2.9 billion in mid-2011, about 40 percent of which came from Penta principals, said another person. Its assets have fallen below $2 billion, said one of the people familiar with the plan to return investors’ money.
Disgruntled bankers threaten to sue or walk (NYP)
“There are alternatives to money to help resolve bonus disappointment,” says Sklover. “You could get a promotion to managing director or more staff on your desk, which gives you a better chance of making money next year.” Feel better now?
Workplace Confidential: The Per Se Waiter on Diners Who Vomit Up Their $500 Meals (New York)
Per Se actually has a list of people who aren’t allowed to go back. There’s a range of behavior that’s appropriate. We can accommodate wacky people, and for the most part, 95 percent of the guests are well behaved. Then you have the couple that goes and has sex in the bathroom—that happens quite a lot. You have people who throw up—they throw up a lot. There was one woman—it was a VIP tasting menu, I remember this: She just threw up on the table, in the middle of an extended tasting menu. They cleaned it up, and she “boot-and-rallied.” She finished the meal. I had an old woman tell me about giving her husband head, which was just disturbing.
Workplace Confidential: The Bikini Waxer (New York)
Sometimes piercings get in the way, depending on the shape and size of the vagina. I had one client who brought in a stencil of a W because that was her boyfriend’s name, and that was a challenge—T’s are easy, L’s are easy, W’s are difficult. We don’t offer dyeing at the spa where I work, but we do the Vajewel, which is Swarovski crystals that stick on the skin in a design, and vagina airbrush tattoos—stars, hearts, whatever. The Vajewel is really popular, I do at least one a day. I just did one of a cherry design.