At Goldman, Board Samples New Guard (WSJ)
Goldman Sachs Group Inc. has stepped up its efforts to groom a new generation of leaders, as it broadens the list of executives who could eventually run the Wall Street firm. As part of those plans, Lloyd Blankfein, Goldman's chairman and chief executive, has been arranging private dinner meetings between younger managers and the firm's directors, according to people familiar with the matter. The gatherings, which began last year, are designed to showcase the executives' expertise on a variety of topics that fall outside formal reviews of their businesses and share the firm's views on important issues, the people said...The push comes as Mr. Blankfein, who took over in 2006 when Henry Paulson became Treasury secretary, has shown no interest in stepping down soon. "A job like this is hard to come by," Mr. Blankfein, 59 years old, said in November at an industry conference. "I'll be slow to get out of it." Were Mr. Blankfein to retire suddenly, Gary Cohn, the firm's 53-year-old president, remains the board's choice for the top job, people familiar with the matter said. But the open-ended nature of Mr. Blankfein's commitment increases the chance that Mr. Cohn's window to run the firm will close before a successor is needed, current and former Goldman executives said...The board dinners thus far have featured leaders of the firm's major divisions, including Pablo Salame, co-head of Goldman's securities arm, as well as others such as Paul Russo, co-COO of equities, and Anthony Noto, a technology banker who left the firm in June and was recently named finance chief at Twitter Inc., a former client, the people said.
Returns From Activist Hedge Funds Are Causing a Stir (WSJ)
Activists are once again at the top of the hedge-fund heap, after a profitable stretch of clashes with companies around the world. Activist managers gained 6.5% in the first half of the year, almost double the total for the average hedge fund, according to data to be released this week by research firm eVestment. Activist investing, in which managers buy stakes in companies and then agitate for changes in the form of buybacks, divestitures or management shakeups, was also the top-performing strategy among hedge funds in 2013. The fund managers could earn millions for themselves—and billions for their investors—if the gains stick through the end of the year.
Soros Hedge Fund Sued by Ex-Manager Seeking Back Fees (Bloomberg)
George Soros’s hedge fund was sued by a former portfolio manager who claims the firm wrongfully withheld at least $19.5 million in unpaid fees after firing him without explanation eight months into the job. Aaron Cowen, who joined Soros Fund Management LLC in 2010 after serving as portfolio manager and chief investment officer at SAC Capital Advisors LP, had a “stellar” track record at Soros’s firm before being terminated in November 2011, according to a complaint in Manhattan state Supreme Court. “Shockingly, Cowen’s employment was terminated despite his positive returns, when other Soros portfolio managers were failing,” according to the complaint filed July 3 and made public today. Soros, 83, invited Cowen to his home in South Hampton, New York, days after the termination and told the former employee during a 30-minute conversation that he didn’t know why he’d been fired, according to the complaint.
American Apparel, Charney Sued Over Alleged Misconduct (Bloomberg)
American Apparel Inc. (APP) and ousted Chief Executive Officer Dov Charney were sued by shareholders over claims directors ignored Charney’s misconduct that violated the company’s sexual harassment and discrimination policies. The lawsuit cites a June 18 letter by directors suspending Charney as CEO and describing how he authorized severance packages to former employees, and raises and bonuses for current employees, in exchange for agreements protecting him from personal liability for sexual misconduct. American Apparel, a Los Angeles-based maker of casual clothing, has racked up about $270 million in net losses since 2010 and had to raise capital several times. The removal of Charney, who has grappled with sexual-harassment allegations and drawn flak for suggestive advertising, has added to the turmoil.
The Letters That Warren G. Harding’s Family Didn’t Want You to See (NYT)
in 1964, after the historian Francis Russell gained access to letters from Harding to his longtime mistress, Carrie Fulton Phillips, the Harding family sued to halt their publication. Rumors of the affair were not new, but the letters — written between 1910 and 1920, before Harding assumed the presidency — confirmed the infidelity in startling detail. The Harding family feared that publishing them would further tarnish Harding’s legacy and hurt the entire family...In 106 letters, many written on official Senate stationery, Harding alternates between Victorian declarations of love and unabashedly carnal descriptions. (While Phillips’s notes and some drafts of her letters have been preserved, her actual replies were not.) The president often wrote in code, in case the letters were discovered, referring to his penis as Jerry...Sept. 15, 1913: "Wouldn’t you like to get sopping wet out on Superior — not the lake — for the joy of fevered fondling and melting kisses? Wouldn’t you like to make the suspected occupant of the next room jealous of the joys he could not know, as we did in morning communion at Richmond?...Oh, Carrie mine! You can see I have yielded and written myself into wild desire. I could beg. And Jerry came and will not go, says he loves you, that you are the only, only love worthwhile in all this world, and I must tell you so and a score or more of other fond things he suggests, but I spare you."
Banks' Cuts Fall Short as Growth Stays Tepid (WSJ)
The biggest Wall Street banks have slashed tens of thousands of jobs and pruned all manner of expenses since the financial crisis. But expanding pay packages and the rising cost of complying with government regulations have neutralized those efforts. With revenue pinched by a slowdown in trading and tepid loan demand, profits are coming under pressure this year. The squeeze is leading banks to look for new ways to save. Cost-cutting "is something that we need to continue to focus on and drive because the recovery…has obviously taken longer than what we all would have expected," Bruce Thompson, chief financial officer of Bank of America Corp., said at a recent investor conference.
Coconut Water Beats Out Hedge Funds, Luring Ex-Trader (Bloomberg)
When former hedge-fund trader Jane Gottschalk went back to work in Hong Kong after having five children, the finance world wasn’t her top pick. Her more-dynamic choice: coconut water. Jing Holdings Ltd., the company she founded with her husband and two Hong Kong-based businessmen, attractedElton John as a shareholder and now sells its Jax Coco brand of coconut water in 30 markets worldwide. After debuting in June 2012 in London’s Harvey Nichols department store and Hong Kong’s City’super markets, Jax Coco can be found in Whole Foods Market Inc. (WFM) in the U.S., the first-class lounge of Eurostar trains, a Nobu restaurant in London and the Upper House, Peninsula and Four Seasons hotels in Hong Kong.
Argentina asks mediator for stay on U.S. court debt ruling (Reuters)
Argentina's economy minister on Monday told a mediator in the country's dispute with holdout investors that the U.S. court ruling against the country is "impossible" to fulfill and a stay is necessary in order to reach a solution for all creditors. The country needs to make a deal with the holdouts who rejected debt restructurings after its 2002 default if it is to avoid a new default just as it struggles with recession and dwindling reserves. Kicillof spent four hours hashing through the case in New York on Monday with the special master, Daniel Pollack, who was appointed by U.S. District Judge Thomas Griesa to find common ground in the years-long dispute. The minister re-iterated that Argentina could not carry out Griesa's ruling to immediately pay $1.33 billion plus accrued interest to the group of holdouts led by Elliott Management Corp and Aurelius Capital Management, according to a ministry statement.
Inside the brain of a trader: A biomarker for irrational exuberance (CNBC)
Certain areas of the brain associated with reward and response to gut feelings have shown links to trading behavior and success, according to research published Monday in the journal Proceedings of the National Academy of Sciences. The study shows that activity in one area of the brain actually tracks price bubbles—and that higher earners get signals from a different area that are associated with selling before a price bubble peaks. The work, done by researchers at the California Institute of Technology and Virginia Tech, sheds light on what goes on in the brains of traders in periods of irrational exuberance—that time of extreme market enthusiasm that can precede a bubble. It also showed more successful traders got brain signals that told them to listen to their gut and sell before a bubble burst.
Escaping, Literally, in Budapest and Beyond (NYT)
There are now somewhere around 50 room-escape games scattered throughout the Hungarian capital. The quality and settings vary dramatically, but all share a premise: Lock a small group in a room or rooms filled with clues and obstacles, and see if, through deductive logic, teamwork and a bit of luck, they can figure their way out. In other words: a live-action video game. “Have you heard of flow theory?” Attila Gyurkovics asked. It’s an unlikely explanation for the games’ appeal, but coming from a former social worker who created ParaPark, Budapest’s first room escape, it makes sense. “You lose yourself,” Mr. Gyurkovics said. “You’re not standing outside yourself saying, ‘Oh, I have to call my mom’ or ‘My boss is watching over me.’ You become completely absorbed by the game.” Mr. Gyurkovics got the idea for ParaPark from his work in team-building. He had originally thought of building a kind of rope course to help businesses and schools foster collaboration. But a Big Fish video game made him think there was a better option. “At first, people looked at me like I was crazy: ‘You want to open a place where you lock people inside?’ ” he recalled. But with a clear vision, and the help of some family money, he opened ParaPark late in 2011. Today, Mr. Gyurkovics has four games in two locations in Budapest, and has franchised several more elsewhere in Hungary and abroad. The oldest takes place in a pair of crumbling windowless rooms not far from the Nyugati rail station in Budapest. Locked inside its rough walls are ruined furniture and dozens of curious objects (wooden puzzles, a scary jack-in-the-box, a computer monitor that mysteriously turns itself on) that may or may not contain clues.