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Wall Street Insider – Financial News, Headlines, Commentary and Analysis - Hedge Funds, Private Equity, Banks
Write-Offs: 02.16.12
$$$ Athens faces tough bail-out terms [FT]
$$$ ECB to Exchange Greek Bonds [WSJ]
$$$ I give up, what would you do about Greece? [Crooked Timber]
$$$ Yelp Sets Terms for March IPO [WSJ, possibly related]
$$$ Goldman hires Harvard students because Harvard is bad at educating them [Bloomberg / Ezra Klein, possibly related]
$$$ Australia’s richest person wrote the universe’s worst poem (“Develop North Australia, embrace multiculturalism and welcome short term foreign workers to our shores / To benefit from the export of our minerals and ores” etc.) [Telegraph via The Jane Dough]
$$$ You could be a Credit Risk Senior Analyst at Genworth in Stamford [eFinancialCareers]
$$$ Icahn Offers to Buy CVR Energy in at Least $2.6 Billion Deal [Bloomberg]
$$$ The SEC raised the qualifications for being charged 2 and 20 [SEC]
$$$ Merrill brokers are fine selling bad advice but draw the line at selling BofA banking services [Reuters / Felix Salmon]
$$$ Welcome to six months ago Art Cashin. Some tips: buy NFLX; don’t take any Tuscan cruises. [MarketBeat]
$$$ Former U.S. Vice President Al Gore wants to end the default practice of quarterly earnings guidance and explore issuing loyalty-driven securities as part of an overhaul of capitalism which he says has turned many of the world’s largest economies into hotbeds of irresponsible short-term investment. [Reuters]
$$$ Toddler Rescued From Inside Claw Game [ABC]
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After The STOCK Act It Will Still Be Legal To Trade On Congressional Inside Information*
Here’s a sort of
touching monologue from David Einhorn’s call with Punch:
If you’ve done the analysis, and come to the conclusion that on it’s own, the company is not going to make it, it makes all of the sense in the world to raise equity at whatever the price is, so that you can know that the company, you know, is – is going to make it. Now, what that brings to my mind though is, you know, obviously we haven’t done your analysis, we haven’t done — signed an NDA; I don’t know that we’re going to sign an NDA, because we prefer to just remain investors, but from my perspective, and I’ll be just straight up with you, is that gives a lot of signalling value. And the signalling value that comes from figuring out the company has figured out that it’s not going to make it on it’s own is that we’ve just grossly misassessed the — you know what’s going on here. And — and that, that will cause us to have to just reconsider what we’re doing, which is not the end of the world to you. You will continue on even if we don’t continue on with you.
You could sort of see why the FSA read that to mean that he was
insider trading. Like …
(1) You have told me something with signalling value. Sorry – “a
lot of signalling value.”
(2) I will now act on that signal.
(3) Don’t be mad.
“Signalling value” sure sounds like it means “material
nonpublic information,” doesn’t it?
Now as we’ve discussed before, trading on that information would not be enough to make Einhorn guilty of insider trading in the US, though maybe it wouldn’t be exactly a great idea here either. Why? Because in our weird but sort of sensible insider trading laws, it’s just not illegal to trade on material nonpublic information. It’s only illegal to trade based on material nonpublic information that was obtained in violation of some sort of duty of confidence. Since Einhorn didn’t sign an NDA, he had no duty of confidence. And since the Punch CEO and bankers weren’t tipping him for nefarious purposes, but were instead sounding him out on the company’s behalf as a shareholder and potential investor in a new capital raise, they weren’t breaching their duty of confidence. You could quibble with the details of that but it’s basically the law here. In England not so much.
That also seems to be the law for our friends in Congress, who recently passed a law making it illegal for them to insider trade, which is worrying some people who make their living from trading on Congressional inside information:
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Tags: Congress, David Einhorn, Greenlight Capital, Hedge Funds, insider-trading, political intelligence, SEC
Whitney Tilson Was As Surprised As You Are To Learn That He Was Long Netflix On The Way Up
NFLX is up 75% year to date so you probably assumed that Whitney Tilson had gotten rid of it sometime last year. You were not alone:
We thought it was a little strange when Whitney Tilson and Glenn Tongue’s hedge fund T2 Partners’ latest 13F came out earlier this week and Netflix wasn’t included.
We sent the hedge fund manager an email to find out why and there’s now a corrected version of the fund’s regulatory filing out.
It turned out, it was just an error.
As of December 31, 2011, T2 Partners had combination of 89,771 shares and 81,000 call options in Netflix, according to the updated 13F.
Here’s Why Whitney Tilson’s 13-F Didn’t Have Netflix In It When It Came Out [BI]
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Tags: Netflix, oops, T2 Partners, that's nice, validated theses that actually produce a profit, Whitney Tilson
Football? Yep. Oscars? OK. The VIX? Really?
I was scoring up the Super Bowl (small loss) when Ocean called. Ocean is a good customer. He had a couple questions, and I told him fire away.
First he wanted to know if we were doing the Oscars again this year. Of course we are. I’m not thrilled about it –I’m half paranoid about inside information bubbling on the Internet, but I’m learning to embrace the inside mis-information. Most importantly, we do it as a service, so the customers won’t start betting online with bookies in Costa Rica.
Ocean was pleased. For what it’s worth, he likes The Artist at very short odds. He watches rom-coms. With his wife, he says. His favourite movie though is Love Story, and he cries shamelessly every time he watches it: he truly believes that love means never having to say you’re sorry. I’ve never figured that out. I’m forever apologizing to my wife for doing boneheaded things and saying stupid shit. And apologizing is a necessity But whatever. A happy customer is a beautiful thing. And I thought the phone call was over. And then Ocean said it.
“What do you have on the VIX for this summer?”
I asked him what the hell he was talking about because I didn’t compute what I was hearing. He then said how he had been watching CNBC. He went to his mutual fund guy determined to buy the VIX, and the salesman blew him off with “Oh, that’s just gambling”. So, hey, I must surely book the VIX, right, because I take bets from gamblers?
Well I totally had my pants down and started mumbling about monthly contracts and the need to be a sophisticated investor and how there were a few products out there and…he cut me off. He understood how “the 1% were trying to make this complicated” and he just wanted a near-even-money type bet that the VIX would be over 30 at the end of June, as per the top of the screen on CNBC.
I gave him the bet. 30′s a pretty big number, and I figure this’ll make me learn about trading the VIX instruments so I can lay it off if I want to. (I’ve never done anything more sophisticated than buy a put spread when I was afraid of a downturn. Go ahead, laugh.) 30′s a lot. So I let him have it at 6-to-5. He was only expecting even money or slightly worse, so he was pleased.
Ten minutes later I was using this episode as an object lesson for my Faithful Assistant, a guy who is muddling through an MBA while living in his parents’ basement. Garage loft, I stand corrected. Anyway, good customers need to be kept happy, good customers lose, and happy customers pay. The Hollywood-movie days of kneecapping customers who stiff you were over before I was born, if they ever even existed, and—and the phone rang again.
Ocean again, wanting an over/under number on where Apple would be in a couple months’ time. Oh, and Facebook. I told him I would have to call him back. I started throwing coffee cups and in between my screams my Faithful Assistant told me he’d just pretend I have Tourette’s. He’s cold. Then he asked me what was going on. And after I told him, he smiled, and tried to give his boss an object lesson of his own:
“This is great. You trade the odd option. All my electives are Finance. We just set the over-under price, I mean you KNOW he’s going ‘over’, high enough that we can buy calls a couple strikes below that number. We use his bet to buy the calls, if he wins we clean up, and we’re covered.”
And when I asked what would happen to Ocean’s bankroll over time, the answer came back that we would sodomize it.
I just shook my head. My young friend may well end up in a business career where the necessary m.o. is to grab-it-all and grab-it-now, but that’s not how my business works.
I actually want my customers to win 45-50% of their bets, lose fairly small amounts over time, and never lose so much in one fell swoop that they can’t pay or that they decide to stop playing. There’s a purpose behind all that languid ritual at the Baccarat table in the high-limit room at the casino: try to keep the House’s earn slow-and-steady. It makes the news when a whale beats Vegas for $10 million, or drops $10 million, but the casinos tolerate those lumpy earnings—aside from a little ink, they don’t really want them. The casinos want everybody playing dollar-slots, losing three cents a spin.
His eyes kind of glazed over, so I thought, what would Suze Orman do to get her point across? I figured Suze, to make the young’uns understand, would probably Go Gangsta. So I said “Look, we make money by drawing blood from our customers.” His eyes lit up as I continued: “We’re blood collectors. We need a nice orderly blood bank. What you’re proposing, is a drive-by.”
(Well, I actually said “drive-thru”, but we sorted it out after a little confusion.)
So we’ve told Ocean that these bets are going to be for peanuts and we’re going to have fun with them. He’s on board, and he’s all excited. Faithful Assistant is going to make the numbers and I told Ocean to give us some requests for stocks he thought would go lower. “Oh you mean I could bet ‘under’ too? Not just ‘over’?” Yep, ‘under’ too.
February’s a shit month in the bookie biz—the regulars are there, but football’s over and it’s a ways before March Madness. Ocean’s stockpicking is going to keep me interested.
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Tags: anger managment, betting on the VIX, casinos, drive-by, keep customers happy, options, slow-and-steady earn
SI Swimsuit Model Doesn’t Have To Worry About Things Getting Weird With CNBC Reporter Because He’s Known Her Since She Was 17
Something you may have picked up on when watching CNBC interviews is that if an anchor or a reporter has fond feelings for their interviewee, they often find it difficult to suppress. Joe Kernen, for example, more or less fellated David Tepper when the hedge fund manager appeared on Squawk Box a while back, telling Tepper his “entire body had chills” at the thought of having him on set (Bill Murray received the same treatment last Friday). To that end, perhaps you saw Darren Rovell’s interview with Kate Upton?
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Tags: CNBC, Darren Rovell, every other guy out there wants to you know be with her whereas I want to marry her, I KNOW HER BETTER THAN ANYONE IN THE MEDIA, I took her to the White House Correspondent's Dinner, Kate Upton, pretty good explanations
David Einhorn Said No To A Capital Raise, Kept The Door Open For A Pub Crawl
Remember how David Einhorn got in trouble in England for insider trading on Punch Taverns stock and he was all “what?” and we were all “what?“? Well, you can judge it for yourself because now the entire disputed call with Punch is available online (at the back of this). So go read it, or read the highlights here. The FSA still thinks it’s insider trading, but the count of people confused by the whole thing is rising, and now includes the Merrill banker on the call. There’s lots of insider traderiness on this side of the pond today too so we should talk about that in a bit.
For now, though, two other things. One is quick – no one can resist one part of the call and I can’t either so here it is:
DAVID EINHORN: Hi, I’m sorry I didn’t get to see you when you were in New York.
PUNCH CEO: No, no, we — well, we’ve — we’ve only had the chance to speak once, although we have seen [reference to Greenlight Analyst] a few times since then.
DAVID EINHORN: Oh, you’re — you’re — you’re getting more than — than I could help with anyway. So, this is good.
PUNCH CEO: Okay. That’s fair enough. Well, one day we’ll get you around on a pub crawl around some English pubs.
DAVID EINHORN: Oh, that sounds fun.
PUNCH CEO: It is. You’re right.
English readers: Is it? I just assumed that Punch Taverns are rather grim places, like TGI Friday’s but with more … punching? … but maybe I’m totally off base here. Also, here is a hypothesis: vice investments do well because, for the same level of profitability, they get more analyst/investor coverage and enthusiasm. Wouldn’t you rather go on a pub crawl instead of like a tour of an auto parts factory in Queens? Would that influence your stock recommendations / money allocations? Someone should do a study.
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Tags: Banks, David Einhorn, Greenlight Capital, Hedge Funds, insider-trading, Punch Taverns
Occupy Wall Street To Give Fashion Week A Piece Of Its Mind
A group of protesters plans to infiltrate the Calvin Klein show at 2 p.m. today by persuading attendees to wear makeup that gives the illusion of eyes dripping blood. The look is designed to show solidarity with protesters who have been pepper-sprayed and to draw attention to the conditions of the 99 percent — certainly…
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Tags: Calvin Klein has gotten a free pass for too long, fashion week, Occupy Wall Street, the does actually sound kind of scary, the illusion of eyes dripping blood
Opening Bell: 02.16.12
Moody’s Places Big Banks On Review (WSJ) In the latest setback for investment banking, Moody’s Investors Service placed the ratings of Bank of America Corp. , Citigroup Inc., Goldman Sachs Group Inc. and three other global financial institutions on review for possible downgrade because it says the business’ profitability will be diminished longer term. Moody’s…
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Write-Offs: 02.15.12
$$$ Some Creditors Consider Delaying Full Greek Bailout [WSJ] $$$ New York Fed to Take More Direct Role in Repo Market [Real Time Economics] $$$ A hedge fund bets big on a Canadian mega quarry [Fortune] $$$ Turns out issuers are worried about the Volcker Rule’s effect on liquidity [DealBook] $$$ Diamond Fiasco Gave Kellogg…
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Marc Lasry Is One-Part Hedge Fund Manager, Three-Parts Motivational Coach
Observe. Avenue Capital Group founder Marc Lasry and Bruce Grossman, his senior manager of investment, were on a private jet returning to New York from Harrisburg, Pennsylvania, in 2005 when they felt the plane’s cabin suddenly heat up. Outside the window, smoke billowed from one of the engines. The two men looked at each other…
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Tags: Avenue Capital, Bruce Grossman, conquer your fears, Marc Lasry, private flying
Phil Falcone Will Show You. He’ll Show All Of You.
Hedge fund manager Philip Falcone is ruling out a bankruptcy filing for his telecom startup LightSquared Inc, one day after U.S. regulators said they planned to yank the company’s approval to build a national wireless broadband network. “It is clearly not on our table,” Falcone said in an email to Reuters on Wednesday when asked…
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Tags: Harbinger Capital Partners, Hedge Funds, LightSquared, Phil Falcone, there is a plan
Layoffs Watch ’12: JPMorgan
Cuts are said to be going down tomorrow. “Heads up that cuts starting at JPM IB (S&T) tomorrow– London supposed to be going first.”
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Tags: bummers, JPMorgan, Layoffs
John Paulson Ditches Banks, Drums Up Some Business For Them
I think everyone who’s ever worked at an investment bank saw at least a little something of themselves in the Journal’s fat asshole article this morning. My own feelings are mixed since, for me, investment banking was a lifestyle improvement over a previous job that left me partially paralyzed from overwork (true story! I got better). So in a sense I don’t have that much to complain about, but I did, and do, constantly and loudly and now on the internet.
Part of what sucks about banking – that I think the Journal article missed – is the frequent pointlessness of your activity: you get on a plane, go see a guy, tell him about this awesome merger or financing or whatever you’ve got planned for him, shake hands, and fly away never to see him again. And by “never” I mean “not until six months later, after he’s printed a deal away from you, when you go and do the same thing, but this time maybe you don’t shave.” You’d probably still be a fat, stressed, overworked cabbie-puncher if most of your ideas actually got executed, but you’d perhaps be less suffused with metaphysical dread. That’s how I’d feel anyway. Then, I blog now.
Anyway, a thing that I don’t know anything about, and never ever want to know anything about, so don’t tell me, is the proper price-to-book trading multiples of life vs. P&C insurance companies and whether there’s a conglomerate discount for being in both businesses. So with that as a disclaimer I found this pretty damn convincing:
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Tags: activism, investment banking, John Paulson
Greek President Would Like To Know If German FinMin Kisses His Mother With That Mouth
Greek President Karolos Papoulias slammed Germany’s finance minister for recent comments about his country as stalled bailout talks stoked tensions between Greece and the northern European countries funding its rescue. “I don’t accept insults to my country by Mr. Schaeuble,” Papoulias, who fought in the resistance against the Nazis during World War II, said in…
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Tags: Germany, insults, Karolos Papoulias, OH NO HE DI'INT, Wolfgang Schaeuble
The Yet-To-Be Finished Memoir Of Wilbur P. Falcone
Wilbur glanced down at her watch. 12:13. Usually, she hated when people were late and, under normal circumstances, this would have gone beyond the point of what she’d tolerate. Hell, make her wait more than 5 or 6 minutes and you were ensuring you’d be receiving a series of irate texts inquiring sharply as to “WHERE THE HELL ARE YOU??????!!???” and threatening “If you’re not here in 30 seconds I’m leaving.” But today she was practically willing Tom to continue making her wait under the bodega awning. Just another minute. Just one more minute.
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Tags: Boris, Bottom's Up, fan fiction, Harbinger Capital, Harbinger Capital Partners, LightSquared, memoirs, Phil Falcone, pigs who play the piano, Wilbur, Wilbur Falcone
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