Thursday, June 30, 2011


An absolute bombshell from the New York Times...

The case against former IMF chief Dominique Strauss-Kahn is on the verge of collapse, as prosecutors have found serious holes in the evidence.
While there was evidence of sexual activity, Strauss-Kahn's accuser has repeatedly lied to prosecutors, according to the report, which cites a law enforcement official. And now, the prosecutors "do not believe much of what the accuser has told them about the circumstances or herself."
(So this isn't just that the accuser has a credibility problem that could make her story tough to prove. It's that prosecutors no longer believe her story.)

You can’t stop now. Read more:

Galleon Group: Ex-Ropes & Gray lawyer gave client secrets to traders

According to Reuters Arthur Cutillo, a former lawyer with the well-known Ropes & Gray law firm who admitted leaking corporate secrets, was sentenced on Thursday to 2-1/2 years in prison for his part in a sweeping insider trading case.

Cutillo's name featured prominently at a trial that ended on June 13 with the conviction of three traders on securities fraud and conspiracy charges brought by federal prosecutors in New York in a crackdown on insider trading at hedge funds.

Cutillo said at his plea proceeding in January that he received $32,500 in cash for providing inside information to trader Zvi Goffer about merger activity involving computer network equipment maker 3Com Corp and Canadian drug company Axcan Pharma Inc [TPGPH.UL] in 2007. Zvi Goffer once worked for the Galleon Group hedge fund, whose founder, Raj Rajaratnam, was also found guilty on insider trading charges after a separate high-profile two month-long trial that ended on May 11.

The Latest Bank To Cut Jobs

HSBC Holdings Plc is poised to axe about 700 jobs in its UK retail bank arm, as swingeing staff cuts begin in earnest at banks across Europe stung by a limp economic recovery, trading woes and tougher regulation, the good people at HuffPo tell us..

The fresh round of layoffs, affecting Switzerland's Credit Suisse Group AG and Italy's Banco Popolare among others, is hitting investment banking divisions and branch networks after months of mounting scrutiny on costs.

Job reductions at HSBC will mainly affect retail banking, people close to the matter said on Thursday. About 460 financial advisory positions are set to go across its UK branches, one of the sources said.


Wall Street Turns the Jobs Gun on Itself

According to the Wall Street Journal job cuts on Wall Street are nothing new. The industry is well known for its sponge-like quality, absorbing bankers when times are flush, squeezing them from the ranks when the business cycle slows. Hire, fire, repeat.

As a banker, one could play the game. Make a fortune—or at least a tidy sum—during a few years of employment, get laid off, hang out at a boutique shop for the resume and ride the next wave of hiring.

But the most recent rounds of cuts—5% or more at Goldman Sachs Group Inc., 400 to 600 employees at Credit Suisse Group Inc. and a combined 700 jobs at Barclays PLC since the start of the year—could snap the trend.

Those jobs might not come back for a long time. Goldman is even shipping some jobs to Asia. In addition, more layoffs are coming. It is only a matter of time. It is hard to believe that Bank of America Corp. will be able to sustain its 288,000-employee work force given that $8.5 billion settlement stemming from mortgage securities. Morgan Stanley famously hired droves of traders in the aftermath of the financial crisis in an effort to keep pace with rivals. That strategy has backfired badly as fixed-income trading tailed off…..

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Meet the Hedge Fund Manager Keeping $100 Million In His Savings Account (Purportedly...)

Yesterday Dealbreaker published a photo of an ATM receipt tossed away in East Hampton, which showed a $99,864,731 balance, after a $400 cash withdrawal, reports BusinessInsider.

Later in the day, the mystery owner of the errant receipt was revealed to be none other than hedge fund king, David Tepper.

While Tepper does own an amazing piece of land in the Hamptons, we were a little bit skeptical. Turns out our skepticism was justified: the New York Post contacted Tepper, who laughed and said he's too sophisticated a money man to leave so much cash in a low-yielding account...


Citi Accused Of Killing Indonesian Man Over $12,000 Credit Card Bill

Remember Irzen Octa? He’s the Citigroup customer who was allegedly killed by three debt collectors after they got angry when he contested his bill. Dealbreaker writes that Octa’s window is now suing the bank for $348 million and while the trio admit they may have laid a few hands on him, that they weren’t responsible for his death.

After dropping his younger daughter at school, Octa walked into Citibank’s credit card collection department on the fifth floor of the Jamsostek tower just after 10 a.m. Four hours later, he left the 25-story building slumped motionless in a wheelchair — a victim of what police allege was a violent assault by debt collectors. Driven to a nearby hospital in a Citibank car, Octa was pronounced dead on arrival.

There are starkly conflicting versions of what happened inside the room, barely larger than a broom closet, where Octa spent most of the time from 10 a.m. to 2 p.m. on March 29…Three collectors met with Octa in the Citibank office. Their attorney says they acknowledge that one of them “tapped” Octa on the shoulder, kicked his chair and thumped a table, but they claim the businessman died of natural causes. They say that brain damage identified in an autopsy was caused by a stroke and that Octa was still alive when he was taken to the hospital….

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Yes, Americans Are Still Addicted To Owning A Home

There's obviously something about owning one's own dwelling that's primordial, super ceding logic and reason. Even after homeownership has destroyed the financial lives of millions of American families, love of it persists.

A poll from NYT finds that for 9 out of 10 Americans, homeownership is seen as a key part of the American dream.45% of respondents think the government should do MORE to help homeowners, while only 16% think the government should do less (this at a time, when government doing anything is seen as somewhat evil)….

Feds Civil Action Against Ex-Goldman Director ‘Postponed Indefinitely’

Just when you think you've heard the last of the Rajaratnam Affair, a civil action against a former Goldman Sachs Group Inc. director who allegedly gave Galleon hedge fund founder Raj Rajaratnam inside tips about the investment bank has been “postponed indefinitely,” according to an SEC notice The Wall Street Journal saw.

The civil administrative action against former Goldman board member Rajat Gupta is one of a handful of known remaining cases stemming from the massive insider trading investigation involving the Galleon Group.

The SEC filed its administrative action against Mr. Gupta in March, shortly before Mr. Rajaratnam’s criminal insider-trading trial was slated to begin. Mr. Rajaratnam, who was found guilty of insider-trading charges in May, is expected to appeal the verdict…..

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Here’s Why Obama's Hedge Fund Tax Hike Won't Work

Barack Obama’s plans to reduce the budget deficit by raising taxes on hedge fund managers show that he’s more interested in political theater than responsibly dealing with the budget.

When Obama says he wants to end the “tax break” for hedge funds, what he presumably means is he would tax what’s known as carried interest as ordinary income. Currently, it is taxed at the lower capital gains rate. But the only comprehensive study to look at proposals to tax carried interest as ordinary income found the change would generate very, very little revenue. In fact, because hedge fund managers would change the way they get paid it would likely generate almost no revenue at all.

Before you get all outraged about this, it’s important to understand why it is so easy for hedge fund managers to avoid having carried interest taxed as ordinary income. The reason is this: Carried interest isn’t ordinary income. It’s a capital gain…

Firm. ordered to pay former trader $3.5 million

Citing "morally reprehensible" conduct by Wedbush Inc., an arbitration panel has ordered the Los Angeles securities firm to pay a former bond trader $3.5 million in withheld compensation.

Stephen Kelleher, who won the award, alleged in his complaint that company Chairman Edward Wedbush had personally withheld pay from many high-level staff members in recent years.

"This guy has been doing this to a lot of people for a long time," Kelleher said in an interview Tuesday…

Find out even more at;,0,4333442.story

Wednesday, June 29, 2011

Look who’s gonna cut 15,000 jobs, (and save $2.4 bln)

Marketwatch reports that Lloyds Banking Group PLC UK:LLOY +1.11% LYG +1.07% said Thursday that it will cut a further 15,000 jobs and withdraw from the majority of its international markets as part of a strategic review intended to save the bank 1.5 billion pounds ($2.4 billion) a year by 2014. As well as cutting jobs, the bank will find savings by reducing the number of management layers and centralizing its support functions. Lloyds currently operates in 30 countries and said it will cut that number by more than half by 2014. For 2011 the bank said its current expectations remain largely unchanged. Revenue will fall because of efforts to shrink the balance sheet and pressure on margins, though costs and impairments will also both decline. ….

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Goldman to Lay Off 230

Wall Street Journal Professional reports that Goldman Sachs Group Inc. (GS) has notified the New York State Department of Labor that the investment bank could lay off 230 employees, citing economic reasons.

In a notice dated June 29, Goldman said a "plant layoff" could affect those employees between late September and March 31, ..

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Investors pile into the bet against China

According to FORTUNE China Bear Jim Chanos is not alone. The well-known short-seller and vocal China bear spoke last month of not finding enough available shares to short some U.S.-listed Chinese companies with questionable accounting practices. Just a week after his interview, a short seller's report on a U.S.-listed Chinese timber company sent its stock tumbling 90%.

Indeed, the rush of traders making bearish bets on Chinese stocks is the latest evidence of growing trend among smart money: if you're not bearish on China, you're missing the next big trade.

"The market and foreign academics have both turned more pessimistic," says Dan Rosen, a partner at the Rhodium Group who follows U.S.-China relations.

Chanos started things off ….

The Job Cuts and Wall Street's Secret Sauce

A longtime secret sauce on Wall Street — derivatives trading — is drying up. And that’s having big blowbacks on Wall Street’s revenue and its bloated cost structure, as noted in today’s Wall Street Journal story.

The gross market value of derivatives contracts fell 40% from 2008 to 2010, according to the Bank for International Settlements. Credit-default swaps — which became poster children for the worst problems in the opaque derivatives market – fell 70% during the same period.

The declines come from a reduced appetite for risk at bank trading desks and among hedge funds who are looking to preserve clients’ capital in a difficult market environment…..
Find out what you need to know at

The Toughest Companies for Job Interviews

Think ultra-selective companies like Google give the toughest job interviews? At least 20 firms put job candidates through an even tighter ringer, according to

A new study from, a Sausalito, Calif.-based workplace culture website, ranked the toughest companies to interview at, analyzing user comments about the interview practices of specific companies. The toughest firms put their job candidates through several rounds of interviews riddled with brainteasers, technical questions and case study analyses. While a few of the usual suspects were in the top 20, some of the list-makers might surprise you.

At the top of the list were: consultancy McKinsey, proprietary trading firm Jane Street Capital and semiconductor manufacturer Cree Inc. Firms like BP (No. 10), Procter & Gamble (No. 12), investment fund Bridgewater Associates (No. 16) and Amazon (No. 18), followed. Notably absent from the top 20 were tech giants like Google and Apple, both notorious for their high levels of competition and challenging interviews…..

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News Flash: S&P Will Slash America From AAA To D If The Treasury Misses A Payment

Say it to yourself: A default is a default is a default.

According to BusinessInsider’s Joe Weisenthal, there's no such thing as a "technical default" whereby the US can miss a debt payment, but somehow not have the status of a country that defaulted, with no ramifications.

If the US does miss a coupon payment, the AAA rating is toast.
That's what S&P will do, according to Reuters, in such an extreme event.
The ratings agency's managing director John Chambers made that clear in an interview with Reuters.This should silence the folks who are citing Stan Druckenmiller (and others) who think a default wouldn't be that big of deal….


Obama Singles Out Hedge Funders And Corporate Jet Owners For Paying Too Little In Taxes

According to the BusinessInsider right now, President Obama is making a speech about how to deal with the debt and deficit problems.

He emphasized that tax cuts have to be on the table in order to curb debt, in addition to spending cuts.

I'm not asking for middle class Americans to pay higher taxes, Obama said. He is simply asking that tax breaks no longer be extended to millionaires and billionaires, he added.

Obama heartlessly then singled out hedge fund managers in that group of "millionaires and billionaires," who should not be getting tax breaks; not bankers, just hedge fund managers.

"I don't think it's real radical" to ask corporate jet owners and millionaires to pay higher taxes, Obama said. "No-one wants to see the U.S default."

Certainly not all the dedicated movers and shakers who have worked and sacrificed to make this fine country what it is today. Bless your pea-pickin' hearts!.

Read more:

Madoff Trustee Sues Citi Hedge Fund Services

The trustee in the Bernard Madoff Ponzi scheme has sued Citigroup's hedge fund administrator as part of his case against one of the fraudster's feeder funds, according to

Irving Picard said yesterday that he had served Citi Hedge Fund Services of Bermuda with a summons. The administrator, which Citi purchased in 2007, serviced the Kingate Global and Kingate Euro funds from 2000 through 2007, earning it more than $4.2 million.

But CHFS used Madoff's bogus numbers and trade confirmations that were "facially impossible" to value the feeder funds, Picard said. The trustee is seeking $975 million from the Kingate funds, and has also sued the funds' custodian, HSBC Bank Bermuda....

Read more now at:

The Dimon Chronicles: How Wal-Mart Swiped JPMorgan in a $16 Billion Battle

Bloomberg writes that Jennifer Cavallaro’s Twitter feed usually deals with matters like the free-range egg salad she serves at her Beehive Café in Bristol, Rhode Island. On May 17, 2010, she blasted a different message to her followers.

She cited her recent trip to Washington, where she lobbied to cut the average 44 cents that merchants must pay a bank whenever a customer uses a debit card. “Remember I went to DC?” she wrote. “Well believe it or not it worked! New law will cap fees for consumers and businesses soon!!!!”

Cavallaro was a recruit in the retail industry’s surprise victorious assault on one of the most reliable income streams for big banks, worth $16 billion a year. Her message hailed the U.S. Senate’s decision that week to include a cap on debit-card fees in its bill overhauling rules for Wall Street.

Far from ending the matter, the vote touched off one of the most intense lobbying duels in memory as the banking industry, Visa Inc. (V) and MasterCard Inc. (MA) sought to kill or delay the debit- card measure. It raged for more than a year, culminating on June 8 when the banks lost a cliffhanger of a vote in the Senate….

Wait, wait...this is just the beginning. Read more at;

Decline and Fall: Former Lehman Brothers Chief Arrested for Drugs

How the mighty have fallen. Bradley Jack, a former head of investment banking at Lehman Brothers, was arrested for trying to use a forged prescription to buy Oxycontin and Ritalin in Connecticut.

Jack, who owns the most expensive home in Fairfield, "was charged with second-degree forgery and forgery of a prescription drug," according to Fairfield Patch, via Dealbook.

The former co-COO of Lehman reportedly gave a pharmacist a prescription for 12 Oxycontin pills and nine Ritalin pills at a CVS in Fairfield.

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Layoffs Watch ’11: Goldman Sachs is Slashing Away Right Now!

Cuts have apparently begun at the House of Lloyd, Dealbreaker reports.

Layoffs are said to be going down circa now at Goldman, so far affecting operations but expected to “impact other areas” and exceed the yearly axing of the bottom 5% of the group….

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Brokerage ordered to pay former trader $3.5 million

According to the L.A. Times, citing "morally reprehensible" conduct by Wedbush Inc., an arbitration panel has ordered the Los Angeles securities firm to pay a former bond trader $3.5 million in withheld compensation.

Stephen Kelleher, who won the award, alleged in his complaint that company Chairman Edward Wedbush had personally withheld pay from many high-level staff members in recent years.

"This guy has been doing this to a lot of people for a long time," Kelleher said in an interview Tuesday…

Find out more at;,0,4333442.story

Wednesday Weirdness: The $1 Billion That Nobody Wants

Politicians in Washington hardly let a few minutes go by without mentioning how broke the government is. So, according to NPR, it's a little surprising that they've created a stash of more than $1 billion that almost no one wants.

Unused dollar coins have been quietly piling up in Federal Reserve vaults in breathtaking numbers, thanks to a government program that has required their production since 2007.

And even though the neglected mountain of money recently grew past the $1 billion mark, the U.S. Mint will keep making more and more of the coins under a congressional mandate.

The pile of idle coins, which so far cost $300 million to manufacture, could double by the time the program ends in 2016, the Federal Reserve told Congress last year…

Find out more at

Credit Suisse Set to Ax 600 Jobs

Credit Suisse Group is set to cut 600 investment-banking jobs after it continued to suffer from weak trading activities in the second quarter, according to a person familiar with the situation, The Wall St Journal rerpots..

The Zurich-based bank launched a consultation process Tuesday in the U.K., where 100 of the jobs are set to go. The bulk of the jobs slated to go are in the U.S., though roughly a dozen positions in …...

Find out the rest at

Tuesday, June 28, 2011

Ouch! Morgan Stanley Multi Million Dollar Trading Boo-boo

Bloomberg writes that Morgan Stanley (MS), the firm targeting a 2 percent market-share gain in fixed-income trading this year, was burned by a wager on U.S. inflation expectations in the second quarter, three people informed of the dealings said.
The bank’s interest-rates trading group lost at least tens of millions of dollars on the trade, which the firm has been unwinding, two of the people said, declining to be identified because the transaction isn’t public. Mary Claire Delaney, a Morgan Stanley spokeswoman, declined to comment.

Traders at the bank bet that inflation expectations for the next five years would rise in Treasury markets, while forecasts for the next 30 years would fall, according to two of the people. Such wagers on so-called breakeven rates involve paired purchases and short sales of Treasuries and Treasury Inflation Protected Securities, or TIPS, in both maturities.

The loss is a setback for Morgan Stanley…

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Wall Street Wielding the Ax

The trading slump on Wall Street has battered profits and is about to cost some people their jobs, according to the Wall Street Journal.

Credit Suisse Group AG started laying off investment-banking employees Tuesday, and the cost-cutting push could claim 400 to 600 jobs, according to people familiar with the situation.

This month, Barclays PLC has eliminated 100 jobs in its investment bank, including some stock-trading employees. The latest cuts are on top of 600 layoffs in January, a person familiar with the situation said.

And at Goldman Sachs Group Inc., the annual survival-of-the-fittest culling of 5% of the securities firm's employees won't be enough in ...

Read more about this at

French Banks Scramble To Prevent Another Global Collapse

The threat of a Greek default has become so real that French banks, which constitute some of the top Greek debt holders, have intensified their efforts to ease the country's floundering finances, BusinessInsider reports..

French lenders, along with their government, have suggested a debt rollover program, the first private-sector proposal to help save Greece. The proposal suggests reinvesting 50% of maturing Greek debt into 30-year Greek government bonds between now and 2014. The new securities would pay a coupon close to current loans' interest rates, and offer a bonus for additional Greek gross domestic product (GDP) growth

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Madoff Still Unbelievably Clueless About How Bad His Crimes Were

Bernie Madoff doesn't think he deserved 150 years in prison for his crime. Denny Chin, the presiding judge, did. But he did consider a 20 year sentence too, he's revealed to the New York Times.

After Madoff's lawyers urged Chin to hand down a prison sentence far less than the 150-year maximum, so he could at least live one year before his death outside a cell, Chin admits he did think about a 20-25 year term.

However, according to the New York Times, Chin decided that that "would have been just way too low. In the end, I just thought he didn’t deserve it. The benefits of giving him hope were far outweighed by all of the other considerations."
The Times (with extra quotes at Dealbook) spoke to Madoff about Chin's decision, and the Ponzi schemer thinks that Chin succumbed to the "mob psychology of the time" and made him "the human piñata of Wall Street":

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BofA Nears $8.5 Billion Settlement on Mortgage-Securities Claims

According to the NY Times, Bank of America is completing an agreement to pay $8.5 billion to settle a lawsuit by investors who purchased mortgage securities that soured when the housing bubble burst, representing what is likely to be the single biggest settlement tied to the subprime mortgage boom and the subsequent financial crisis of 2008.

The settlement would wipe out all of the company's earnings in the first half of this year, while encouraging powerful private investors to extract payouts from other banks that bundled troubled home loans and sold them as sound investments.

"I think this is huge," said Michael Mayo, a bank analyst with Credit Agricole in New York. "It's about time the industry resolves issues from the financial crisis and focuses more on righting their companies and improving the economy. This is the most significant step since the financial crisis that helps do that."

The proposed settlement is with a group of large investors including Pimco and BlackRock, as well as the Federal Reserve Bank of New York. Together they hold roughly $56 billion in mortgage-backed securities from Bank of America, based in Charlotte, N.C.

China Firm Looks to Buy 2 Funds

According to the NY Times' Dealbook Sunwah International of China says it is planning to buy two funds from the troubled British hedge fund firm RAB Capital, which recently decided to delist itself.

The Chinese company also said on Monday that it was also in talks to buy an 80 percent stake in PCE Investors, a British fund management business regulated by the Financial Services Authority, which would provide a platform for hedge fund investments. If completed, the deals would represent the first such moves by a Chinese firm into London.

Sunwah, a financial services firm listed in Toronto but conducting most of its operations in Hong Kong, began as a merchant bank and broker-dealer. But it has been expanding into hedge funds and private equity.


JPMorgan's Big Contrarian Bet

The giant lender seeks a source of cheap funds as rivals retrench. Businessweek says that analysts are skeptical...

Charlsey Smedley, a retired schoolteacher in Orlando, started moving her checking account last month to JPMorgan Chase (JPM) from Bank of America (BAC), where she has been a customer for more than 35 years. "The service at Bank of America was O.K., but they just kept adding more and more fees,".

Jamie Dimon, JPMorgan's chief executive officer, had people like Smedley in mind when he announced plans in February to open as many as 2,000 branches, more than half of them in Florida and California, expanding the New York-based bank's network by almost 40 percent. He's targeting states dominated by Bank of America, the biggest U.S. bank by deposits, and Wells Fargo (WFC).

The strategy runs counter to Bank of America's plan to close 10 percent of its offices as analysts question whether the industry needs a bank on every corner. As customers cut back on borrowing and mobile and online banking take hold, doubts about the expense of branches have arisen…

Find out the rest of the story at

CalPERS' $11-million legal bill: What were they smoking?

Some experts are surprised by the high price of an internal review of the public pension fund. CalPERS says it used the review's findings to negotiate $215 million in fee reductions.

According to the LA Times, The California Public Employees' Retirement System paid $11 million to a Washington, D.C., law firm and its advisors to conduct an internal review, an amount that has some of the fund's own directors proposing more stringent oversight of outside legal fees.

The review found support for allegations of corruption, bribery and influence peddling at the country's biggest public pension fund, but some lawyers and financial experts familiar with the scandal said they were surprised by the large legal fees. They also suggested that the investigative work could have been done by the state attorney general's office, which has sued two former CalPERS officials over fraud allegations…

Read more at,0,293172.story

Obama, Wall Street And The Love That Dare Not Speak Its Name

Seriously folks, according to Dealbreaker’s Bess Levin, last Thursday evening, President Obama held a fundraiser at Daniel as part of his reelection campaign. There was Vodka Beet-Cured Hamachi with Horseradish Cream. There was Zucchini Pomponette with Fontina and Tomato Confit. There was Vanilla-Raspberry Gelée. But there was no Lloyd Blankfein and there was no Jamie Dimon, and there was no Dick Parsons.

Some people interpreted the lack of JD and LB and other banking chiefs as indication that Wall Street is done with Barack Obama. Sure, he still has some big names backing him (like Daniel attendees Marc Lasry, Robert Wolf and Mark Gallogly) but the absence of Lloyd and Jamie, who, ironically, Obama was once so close with that his pet name for was “zucchini pompette,” seemed to suggest a broader trend and evidence that the rumors Wall Street had “abandoned” Mr. President were true. And while some big names, like Dan Loeb and Steve Cohen, who previously backed Obama in ’08 have made no secret about dropping him (and over the weekend likely inspired others to join them), others apparently continue to support BO.

They just don’t want anyone to know about it…...

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Goldman Comes Clean: Firing Employees In The US So It Can Hire 1,000 In Singapore

Goldman Sachs is going to fire employees in the U.S. and some other countries so that it can hire 1,000 in Singapore, where it's cheaper.

Charlie Gasparino heard the news from people who were briefed on the hiring in Washington. He says Goldman gave Washington the heads up because hiring offshore is likely to cause a backlash.

He didn't give a specific timeline, or say which units would be hit, but here's what's going to happen, according to Gasparino:…

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Why Apple, Google And EBay Are Bound To Burn Investors

Everyone is gunning for Apple. According to Forbes we are squarely in the middle of a point in history where the speed of innovation is causing entrepreneurs, innovators and investors to question everything they know about business. Never have we witnessed a point in time when companies that were thought to be bulletproof so quickly fall into the trash heap labeled: has been and wanna be.

To be an established technology company in such an environment is an exercise in prescription drug dependance and paranoia. To be an up and coming technology entrepreneur during such a time is an exercise in opportunity and limitless possibility.

Ten years ago investors thought companies like Microsoft (MSFT), Cisco (CSCO) and Yahoo (YHOO) possessed the dominance and relative value necessary to blossom into investments that would put their kids through college, fund an expensive bathroom with an odd looking sink, or perhaps support an addiction that had become way too fun to give up. Instead these companies have been left behind by investors as technology has already turned them into dinosaurs.

Even worse than becoming a dinosaur is becoming a fossil embedded in solid rock, covered up by mounds of dirt…

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Layoffs Watch ’11: Credit Suisse

Cuts have begun at the Swiss bank this morning, Dealbreaker reports..

Apparently layoffs “affecting equity, debt, finance, ops, I-banking” have been going down this AM and are expected to continue “through tomorrow.”

Meredith Whitney: Beware July 1!

Meredith Whitney literally phoned it in to CNBC this morning to discuss the Jersey Shoring-Up Loan. At the end of the discussion, she warned that July 1 is going to be a key date for the muni market, because that’s when new state budgets are going to take effect, slashing aid to many localities, the Wall Street Journal says..

Always the consummate professional scary person, she didn’t rise to a baited question from Carlos Quintanilla, who asked her if she was secretly wishing for a large muni default to make her much-derided call of widespread muni massacres look better.

“Of course not,” she said, unconvincingly, “but it’s sadly an inevitability.” “When I come up with numbers of defaults, I can think of dozens of large ones off the top of head,” she added.

There’s more…Find it at:

At Last! A 'Facebook fund'

Facebook is now trading publicly, if only indirectly.

The NY Post reports that GSV Capital, a newly public investment fund, made good on its promise to offer everyday investors a piece of Mark Zuckerberg's social networking giant by buying 225,000 shares of the private company on a secondary market at $29.28 each.

The $6.6 million investment, while just a sliver of Facebook's $70 billion value, nonetheless accounts for 15 percent of GSV's portfolio -- which has been open to investors since the fund's April IPO.

Investors were clearly encouraged by the Facebook deal and, perhaps anxious to jump aboard the fast-growing tech titan, lifted GSV 44 percent yesterday to $14.80, which was still below the IPO price of $15.

Find out more at

Monday, June 27, 2011

Chairman Mack To Retire From Morgan Stanley

John Mack, the former Morgan Stanley CEO who spent part of his exile from that firm at Pequot Capital Management, will step down as the investment bank’s chairman by the end of the year, finalternatives reports.

An announcement could come this summer, the Fox Business Network reports.
Mack stepped down as CEO of Morgan Stanley last year, handing the reins to James Gorman, his hand-picked successor. While some at the firm are likely to push for Mack to stay on, that is unlikely, Fox reports, though he could stay on in an advisory capacity…

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Goldman Is Pissed That A Star Is Leaving His Fund After They Bought A 20% Stake In It

BusinessInsider reports that one of the main reasons that Goldman Sachs invested in Trafalgar Asset Managers is because of a man called Lee Robinson.

But Robinson, "an outspoken hedge fund manager" and a native of Australia, is quitting Trafalgar to launch his own fund. And Goldman, which has a 20 percent in Trafalgar through its Petershill's fund, is not happy.

Robinson has been fundraising in Monaco, where he lives, "in defiance of the bank" FT reports…

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The Curious Story of The L.A. Dodgers, J.P. Morgan and a Pawn Shop Loan

According to the WSJ Deal Journal, the Los Angeles Dodgers turned to a hedge-fund manager owned by J.P. Morgan Chase & Co. to finance its operations–including meeting player payroll this week–while embattled owner Frank McCourt maneuvers to retain control of the baseball team through a bankruptcy proceeding.

Highbridge Principal Strategies, a unit of J.P. Morgan-owned Highbridge Capital Management, is extending a lifeline to the Dodgers is the form of a $150 million loan, according to papers filed Monday with the U.S. Bankruptcy Court in Wilmington, Del. The funding, which is subject to court approval, would allow the team to cut checks to its current roster,…..

Find the solution to the mysterious doings at:

Layoffs/Hiring Watch ’11: Goldman Sachs

Dealbreaker writes: “as you may have heard, Goldman Sachs, like a bunch of other banks, is bracing for some upcoming layoffs. But there is heartening news yet! Should you get the ax and not be able to imagine working for any other firm (after waking up each morning with the possibility of interfacing with, brushing up against, gazing at from across the room, or simply being on the receiving end of one of his Lloyd’s firm-wide voicemails, anything else would be a let down), your chances of getting rehired just skyrocketed, assuming you’re willing to relocate…..

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Look who wants to hire investment bankers in U.S.

Reuters reports that Bank of Montreal's BMO Capital Markets, fresh from a two-year hiring spree, is further staffing up its U.S. investment bank to take advantage of a surging market for merger advisory.

The bank is planning to hire investment bankers in the United States for its financial services, real estate and technology teams this year, Perry Hoffmeister, head of U.S. investment and corporate banking, told Reuters in an interview on Friday. The bank has already hired 32 people so far this year.

BMO has jumped higher in the rankings for advising mid-sized companies, according to data compiled by Thomson Reuters. It has also won advisory roles in bigger deals recently, having advised IntercontinentalExchange in its $11 billion bid for NYSE Euronext.

Find out more at:,0,1557977.story

Who’s No. 1? J.P. Morgan Is Top Investment Bank, Again

According to the Wall St Journal J.P. Morgan remained in the top spot in global investment-banking revenue for the first half of the year, according to data-provider Dealogic’s preliminary count of the first two quarters.

The nation’s second biggest by assets raked in $3.33 billion in revenue from activities including capital markets, M&A advice and syndicated lending. That sum was a 39% increase from the first half of 2010, giving J.P. Morgan 8.7% of the global market, according to Dealogic. In the three industries that generated the most investment-banking revenue–financials, energy and natural resources and industrials–J.P. Morgan was the top manager. It also led in health-care revenue, where the biggest percentage increase in revenue by industry occurred.

BofA remained in second place, with an 8% market share and $3.06 billion in revenue, up 33% from the prior year. After those two leaders, the drop off was steep in terms of market share.Morgan Stanley brought in $2.28 billion, slightly edging out rival Goldman Sachs, which brought in $2.27 billion. Each had a 6% market share, a bigger improvement for Morgan Stanley, which had just 5.2% of the market for the first half of 2010….

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HSBC Banker Who Got Knife Pulled On Him By Ex-Girlfriend For Going On A Date One Day After Break-Up Headed Back to the Big House

Anyone out there remember Toby Carroll? Serously...To recap, he’s a New Zealand-born real estate analyst for HSBC who’s been stationed in Dubai for the last several years. In January, he was jailed after his ex-girlfriend, Priscilla Ferreira, found him and a new girl, Danielle Spencer, in his apartment and proceeded to start slashing curtains, furniture, etc, and go after the Danielle with a knife.**

The police were called and all three were sent downtown because in Dubai, sex outside marriage is illegal. After a week in the clink Carroll, who friends describe as “a fun-loving party boy who was dedicated to his job, a snappy dresser who liked women but wasn’t womanizer,” was released (as were the ladies who became friends after being forced to share a mattress in the women’s cell at Bur Dubai police station.

Hopefully Carroll’s made the most of his freedom over the last 6 months, because he’s set to be sent back after receiving his sentencing last week….

Former Citi Worker Arrested For Embezzling $19 Million

Dealbreaker writes that apparently Gary Foster “used his knowledge of bank operations” to get the job done.

Foster, according to the U.S. Attorney’s Office in New York, is being charged with embezzling more than $19 million from Citigroup. He was arrested Sunday morning at JFK Airport when he arrived on a flight from Bangkok, the U.S. Attorney’s Office said in a news release.

According to a court case against him, Foster is charged with transferring money from Citigroup accounts into a cash account and then he wired the money into his personal account at another bank. Foster caused an incorrect contract or deal number to be placed in the wire transfer instructions to hide his activities, the DOJ said.
Let this be a lesson to those considering taking a page from Foster (or brother from another mother Jim Glover)’s playabook- attention to detail counts!

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Stock Gets Clobbered Just On The Rumor Of A Muddy Waters Research Report

Reuters reports that Muddy Waters Research's director of research Carson Block told Reuters on Monday he wouldn't comment on rumors his firm was planning to release a report on China Yurun Food Group Ltd (1068.HK).

"It is obviously not in our interest to comment on whether or not we are planning on releasing a report on a given company," Block wrote in an e-mail. "Investors should be skeptical and greatly cautious about rumors related to our upcoming reports."

Nanjing-based Yurun, a meat processor that has seen some of the world's most well known investors among its shareholders, suffered its biggest ever fall in local exchanges on Monday, hit in part on market talk that it would be a target of a report by the short-selling firm.

"We take pains to keep our research activities confidential, and a widespread market rumor would either represent a significant failure on our part, or is false," Block wrote.

If there was a Muddy Waters report on Yurun, it would be the first time it wrote about a company that wasn't traded on Western exchanges

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Kofi Annan Blasts Hedgies For Acquiring So Much African Land

The former secretary general for the UN, Kofi Annan, recently commented on hedge funds' buying a disturbing amount of land in Africa.

"It is very disturbing that a recent report found that agricultural land that adds up to the size of France was bought in Africa in 2009 alone by hedge funds and other speculators."

Oakland Institute says investors own land in Ethiopia, Mali, Mozambique, Sierra Leone, South Sudan, Tanzania, and Zambia. Oakland Institute made its research public. The report says that in 2009 alone nearly 60 million hectares (the size of France) was purchased or leased in a "land grab."

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Anatomy of a Market Meltdown

The Wall Street Journal reports that going into 2011, battered mortgage bonds looked like a relatively safe bet for Wall Street. Prices of bonds underpinned by subprime home loans had recovered from the depths of the financial crisis, and mortgage defaults—while still high—were easier to predict.

For months, banks were able to profit from buying the bonds and selling them to investors as they rose in value. In late 2010, Boston custody bank State Street Corp. sold $11 billion in mortgage- and asset-backed securities to investment banks including Goldman Sachs Group Inc. that quickly sold most of them to investors, a sign of market demand for ...

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John Paulson Didn't Go Down Alone -- Looks Like This Guy Lost Hundreds Of Millions In Sino Forest Too

John Paulson wasn't the only big investor to suffer a big hit because of the Sino-Forest mess, according to BusinessInsider.

The $30.8 billion flagship fund of Christopher Davis, the founder and head of Davis Funds, is also bleeding as a result of the decimation of the Chinese stock, Bloomberg reported.

Paulson owned 34.7 million shares as of April 29. Davis owned 30.9 million shares as of the same date So, if Davis held on at least as long as Paulson -- who told investors that losses may reach $750 million on the bad bet -- that makes him the second biggest loser on Sino-Forest, with potential losses of hundreds of millions…

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Preparing for a Worst Case Scenario: Europe Girds Up for a Greek Default

The Daily Telegraph writes that Greek politicians will vote on a radical €28.4bn (£25.2bn) austerity package in the coming days that they must pass if the country is to receive the vital fifth tranche of a €110bn bail-out agreed last year. The outcome is expected to go down to the wire as the ruling party's slim majority is pushed to the limit by the opposition's refusal to support the deal, a wave of national strikes, and another round of public protests.

Werner Faymann, the Austrian Chancellor, said on Sunday he "can't rule out" a Greek default and Wolfgang Schaeuble, the German finance minister, revealed that Europe is preparing "for the worst".

"We are doing everything we can to prevent a perilous escalation for Europe but must at the same time be prepared for the worst," Mr Schaeuble said…..

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Lampert sells AutoZone shares

Hedge fund manager and activist investor Edward “Eddie” Lampert is taking some profits on his stake in AutoZone. According to Marketwatch, and a recent regulatory filing, the legendary investor sold 5.9% of the fund’s position in the auto parts seller.

Lampert, founder of the hedge fund ESL Investments, still maintains a sizeable position in AutoZone AZO -0.35% but has been trimming his investment by small percentages at regular intervals since May 27 and this is his largest sale since then. ..

Lampert began purchasing AutoZone shares in 1998 and steadily amassed a sizable stake in the company. By 2001, Lampert’s hedge fund owned more than 30 million shares of AutoZone, which was more than 25% of shares outstanding at the time. As of June 21, he owned 9.5 million shares. The chain now accounts for 27% of Lampert’s highly concentrated portfolio and represents the second largest holding as well as one of his most profitable. Shares of AutoZone have gained over 870% since he began buying it at about $30 per share. As of Friday, shares are up 7% year to date and recently hit a 52-week intraday high of $299.60 on May 31.

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Biggest Banks Fitted for New Collar

Heel. The Wall St. Journal writes that that was the message regulators sent over the weekend to the biggest too-big-to-fail institutions. They must now hold capital equal to 9.5% of risk-weighted assets, compared with 7% for other big banks.

The Basel Committee's decision means Bank of America, Citigroup and J.P. Morgan Chase will together need about $150 billion of additional capital, according to Wall Street Journal and analyst estimates. The banks are unlikely, though, to have to raise fresh equity. Since the new rule doesn't fully kick in until 2019, banks should have time to build capital through profits while also reducing risk-weighted assets….

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Goldman's Solomon: Dark horse contender in CEO race

According to Reuters, David Solomon isn't your typical master of the universe, but he might have what it takes to lead Wall Street's most powerful bank. The 49-year-old co-head of Goldman Sachs' investment banking unit is an unassuming banker who moved into junk bonds early in his career and stayed in underwriting, even as other Wall Street businesses grew hotter.

He has been promoted into ever-more senior roles, and now works mostly behind the scenes, making sure that investment banking clients get what they need, that employees are happy and that Goldman's deal-making machinery operates smoothly. He has been behind some spectacular deals, even if he is not famous for them, and some clients view him as one of the best bankers in the business.

Some Goldman insiders believe that his low-key personality may be just the thing for a firm that has spent two years dodging charges of greed, conflicts of interest and fraud. With Goldman having recently named a third "co-head" of investment banking, these insiders believe that Solomon could be elevated to a more prominent position, putting him in the race for the chief executive job one day….

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Sunday, June 26, 2011

Has John Paulson suddenly become dead meat?

The Daily Telegraph writes: John Paulson, the hedge fund manager who made billions betting on a collapse in US house prices, has suffered heavy losses at Sino-Forest, a Chinese timber company, and people are wondering if he still has the magic touch.
John Paulson isn't used to losing money. Anticipating the worst financial crisis since the Great Depression turned him into one of the world's richest men in the space of a year.

And the now legendary Wall Street hedge fund manager has certainly never seen almost half a billion dollars of his fund's money disappear in the murky undergrowth of southern China's forests before. But that's what happened in the last ten days to an investor said to have taken home $5bn (£3.1bn) in profits last year alone….

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Warren Watch: Buffett zeroes in on Kravis debt fight

NY Post reports that Warren Buffett seems willing to lose money to make a point, especially against Henry Kravis.

Buffett's Berkshire Hathaway, in a letter filed yesterday with the Securities and Exchange Commission, said that "substantially all" of its $1.02 billion loss in the fourth quarter on fixed-income holdings came from an investment in the bonds of Kravis-owned Texas utility Energy Future Holdings.

KKR, TPG Capital and Goldman Sachs in 2007 bought EFH in a $44 billion buyout, the largest ever. Since then, natural gas prices have fallen and so has the worth of EFH.
Kravis this spring gave Buffett and other investors the chance to swap their unsecured debt in the unregulated part of the utility, TCEH, for new notes that were secured against assets but worth only 70 percent of the face value of existing notes and mature later.

While other investors swapped, Buffett has not.
"Maybe it is a principle for him," an energy strategist said. Economically, he should take the swap, but he might want to have the reputation as someone who will not back down, the source said. Buffett, by not swapping and holding on to loans that have principal due in 2015 and 2016, can in a few years give Kravis headaches….

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Wow! Madoff trustee triples JPMorgan suit to $19 billion

The trustee seeking money for Bernard Madoff's victims is now demanding $19 billion in damages from JPMorgan Chase & Co, more than tripling what he hopes to recover from what had been the main bank for the now-imprisoned Ponzi schemer, according to Reuters.

The amended complaint by the trustee Irving Picard adds new charges and was filed three days after the second-largest U.S. bank agreed to pay $153.6 million to settle U.S. Securities and Exchange Commission fraud charges.
Picard maintained that JPMorgan was "thoroughly complicit" in Madoff's fraud and ignored red flags. In his original complaint, made public in February, he had sought $6.4 billion, including $5.4 billion of damages and $1 billion for fraudulent transfers and claims….

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Is the Media Bitch-Slapping the U.S. Recovery?

Americans are becoming more pessimistic about the future, despite not seeing their own economic situations worsen One practical economic problem is that perception can sometimes dictate reality. Even if the economy is moving along well, if consumers get spooked -- whether for a legitimate reason or not -- it can take a step back. Of course, the reverse is also true: that's what causes bubbles. Irrational optimism about some asset, like houses, causes too much economic activity, which leads to a painful correction. Because perception matters, the media plays an important role. If it pushes the public in the wrong direction, then their sentiment about the economy could be skewed with a counterproductive result.

A new survey from the Pew Research Center for the People & the Press suggests that Americans are becoming more pessimistic about the future -- even though the present situation hasn't worsened.

Let's just focus on October 2010 and June 2011. Over this period, the U.S. economy appears to have slowed due in large part to consumers pulling back. So sentiment really matters here. For starters, most people's view of the current economy remained the same. Their financial situation also barely changed over these eight months. So people don't actually see the economy having worsened and aren't personally doing much better or worse than they were in October…

Yet, even more telling, Americans are much more pessimistic about what the future holds a year from now. Now, net 6% of respondents see the economy being worse a year from now. About the same margin see their finances getting worse in a year as well….


Friday, June 24, 2011

Paulson: Why I Invested In Sino-Forest And How Much We Really Blew

According to BusinessInsider, John Paulson has finally broken his silence on the Sino-Forest disaster, in a four-page letter to investors.

For weeks Paulson refused to answer questions about the investment, according to AR, He says now that the firm has sold out of the position, he can discuss it.
The shareprice of Sino-Forest, a Chinese plantation operator listed in Toronto, has collapsed in the wake of a Muddy Waters research report accusing the company of a fraud tantamount to the Madoff Ponzi scheme.

Paulson's hedge fund held a major position in the company, and reports of up to $700 million in losses have been widely reported. The firm's flagship is down at least 15% for the year, in large part because of the Sino-Forest implosion….

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Top Bank Stops Debt Collection Suits

The Wall Street Journal reports that J.P. Morgan Chase & Co. has abandoned more than a thousand debt-collection lawsuits across the U.S. that sought to recover soured credit-card loans from borrowers.

The nation's second-largest bank by assets, including more than $100 billion in credit-card accounts, wouldn't disclose the number of cases dismissed or the reasons for the move. State judges said the bank has dropped lawsuits targeting borrowers in California, Florida, Illinois, New Jersey and New York since April. In those five states, J.P. Morgan was owed $45.9 billion on outstanding credit cards as of March 31, including both current and delinquent accounts….

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Whoops! Goldman Unit Misstates $242 Billion of Pension Derivatives

Goldman Sachs Group Inc.’s pensions buyout unit, Rothesay Life, mistakenly told U.K. regulators it had entered into derivatives contracts valued at 151 billion pounds ($241 billion), Businessweek says.

The bank overstated the position by a factor of a thousand in its annual return to the Financial Services Authority, signed by the unit’s chief executive, Addy Loudiadis, and audited by PricewaterhouseCoopers LLP. The unit has 151 million pounds of inflation and interest-rate swaps outstanding, spokeswoman Fiona Laffan said by e-mail today. The firm told the FSA about the typographical error after filing in March and wasn’t required to resubmit it, Laffan said. PwC declined to comment.

Goldman, which set up Rothesay in 2007, manages about 4.3 billion pounds of pensions liabilities for companies including British Airways and RSA Insurance Group Plc. Firms such as Rothesay promise to pay pensions if retirees live beyond a certain age. They typically receive a portion of the pension plan’s assets in return and try to hedge the risk they take on with derivatives….

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Celeb hedge-fund managers Get Zapped

Masters of the universe no more The Economist writes that the superheroes of finance seem to have lost some of their powers. Several of the hedge-fund industry’s most exalted names are beset by problems more associated with mere mortals. Take John Paulson of Paulson & Co, a $37 billion hedge fund. He became famous after he bet against the housing bubble but is now in the limelight for less flattering reasons. Mr Paulson was the largest shareholder in Sino-Forest, a Chinese forest-plantation operator accused of fraud by short-sellers earlier this month. Its share price plummeted and Mr Paulson sold his stake, dealing his fund a reputational blow and around $500m in losses. His flagship fund is down 20% so far this year.

Hedgies’ woes are not just financial. Ikos, a big European quantitative hedge fund, has been shaken by domestic melodrama. Its two founders, Elena Ambrosiadou and Martin Coward, are going through an acrimonious divorce. But divorce courts are not the only ones to worry the industry at the moment….

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Jamie Dimon: The 5 Reasons Everyone Is So Gloomy About The Economy

BusinessInsider reports that Jamie Dimon is shockingly optimistic about the U.S. economy. He says that everyone has a negative outlook for 5 reasons:

Fiscal deficit

"That explains it," he says. He told the Australian recently, "We are in this kind of malaise of some sort. Some of that is understandable. There are real issues that we are facing from Japan, oil, Greece, politics, fiscal deficit, and that explains it."
Of course, with a list like that, who wouldn't be down on the economy? Everyone suspects that a Greek default would set-off defaults in Spain, Portugal, and whichever country is next on the list. And Spain would be a catastrophic default. Political issues are setting off debate about whether or not the U.S. might default on its debt, a scary suggestion that Dimon has admitted he's "praying" will never happen. The fiscal deficit needs to be cut, yet negotiations are going nowhere. It looks freaking terrible out there.

But Dimon says that's exactly why you should be optimistic. Not because it can't get worse, but because, "People are reacting at the moment to every short-term stimulus. If you look at the basics, the big picture, America still has one of the mighty economies in the globe."

The U.S. has "deep capital markets, innovation, capital expenditure, greater work ethics and great universities and that hasn't changed…

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Estimates Whacked Again for Goldman, Morgan Stanley

According to the Wall Street Journal…here come the earnings hatchets! It’s becoming a daily ritual. As Wall Street prepares to close the books on a pretty brutal second quarter, the market scribblers are ratcheting down earnings expectations.

Today, it’s the turn of the equity analysts at Deutsche Bank. They push 2Q earnings estimates on Goldman to $2.10 a share from $2.55, and take down expectations for Morgan Stanley earnings to 38 cents a share from 42 cents.

The culprit, of course, is the slowdown in trading…

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Court Says Ex-Wife May Keep Ponzi Dough

NY Times’ Dealbook reports that Stephen Walsh is fighting claims that he helped defraud investors of more than $550 million in a 13-year Ponzi scheme.
The Ponzi schemes that came to light during the depths of the financial crisis have spawned various lawsuits seeking to claw back money from divorce agreements. Now, in one case, a court has said: Hands off. On Thursday, New York’s highest court ruled that a woman could keep proceeds from a divorce agreement, even if those proceeds were the ill-gotten gains of a financial fraud perpetrated by her former husband.

The decision is a blow to the federal government, which is seeking to force the woman to disgorge what it says are millions of dollars in stolen money.

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Warren Watch: Buffett Closes ‘Backdoor’ to Berkshire

According to Bloomberg Warren Buffett’s plan to remove Wesco Financial Corp. (WSC) from the stock exchange will close what was considered a “backdoor” to investing alongside the billionaire.

Buffett’s Berkshire Hathaway Inc. has agreed to acquire the 20 percent of Wesco it doesn’t already own for about $545 million in cash and stock. Wesco shareholders will vote on the deal today at a meeting in Pasadena, California.

Buffett took control of Wesco in 1983 and assigned oversight of the firm to Berkshire Vice Chairman Charles Munger, who is now 87. Wesco retreated from its traditional business of lending and focused on insurance, furniture rental and steel storage. The firm also profited from deals Buffett struck for Berkshire. Investors that couldn’t afford the $11,750 price of a Berkshire share in 1992, could buy Wesco stock for $83 each.

“The only reason it’s been public for all these years is Charlie and Warren are so cheap that they didn’t want to pay a big premium to buy Wesco,…”

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JPMorgan Fighting 10,000 Lawsuits

JPMorgan Chase is a defendant in more than 10,000 legal proceedings and may be $4.5 billion short of reserves needed to cover those costs in a worst-case scenario, the firm said in a regulatory filing on Monday.

The New York-based bank's legal woes range from individual actions against JPMorgan Chase to class actions with "potentially millions" of litigants to "regulatory/government investigations." The suits include common law tort and contract claims, statutory antitrust claims, securities claims and consumer protection claims, the bank said in its 10-K filing with the Securities and Exchange Commission.

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Feds Launch Probe of Google

Federal regulators are poised to hit Google Inc. with subpoenas, launching a broad, formal investigation into whether the Internet giant has abused its dominance in Web-search advertising, people familiar with the matter told the Wall Street Journal.

On today's digits: the FTC is poised to serve Google with subpoenas as the Commission looks to explore the company's dominance on the Web; Walt Mossberg gives us his review of the Google entirely cloud-based laptop, the Chromebook; and, tips for creating protective passwords (first step: stop using "QWERTY", maybe?)

The civil probe, which has the potential to reshape how companies compete on the Internet, is the most serious legal threat yet to the 12-year-old company, though it wouldn't necessarily lead to any federal allegations of wrongdoing against Google..
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HSBC expects July ruling in $9 Billion Madoff “feeder” suit

Reuters reports that HSBC Holdings PLC will have to wait until the end of July to hear whether or not a U.S. judge allows the Madoff firm trustee to proceed with a $9 billion lawsuit accusing the bank of enabling the massive fraud.

Lawyers for the bank argued in Manhattan federal court on Thursday evening that the law did not allow trustee Irving Picard -- trying to recover money for former Madoff customers -- to bring the case of financial fraud and misconduct against HSBC. The bank has denied the allegations.

"I am going to spend a lot of time re-reading the papers," U.S. District Judge Jed Rakoff said at the end of oral arguments. "I will commit to a written decision by the end of July….

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Deutsche's Firing of Top Trader Sparks Probe

Reuters reports that in the fall of 2009, Deutsche Bank quietly fired one of its top derivative traders in London after a colleague in New York complained about finding "substantial trading anomalies" in a multibillion dollar portfolio of high-risk credit default swaps managed by the German-based bank, Reuters has learned.

The bank dismissed Alex Bernand after a quick internal investigation prompted by the employee's complaint led to the discovery of improper trading in one of Bernand's personal brokerage accounts, according to documents seen by Reuters and interviews with people familiar with the situation.

The documents, part of a Sarbanes-Oxley whistleblower action filed against Deutsche in May 2010 by the employee in New York, also reveal that the Securities and Exchange Commission opened an inquiry last year into a related allegation that some of the assets in the derivatives portfolio overseen by Bernand may have been improperly valued in order to hide trading losses....

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Thursday, June 23, 2011


About a month and a half ago, the billionaire hedge fund manager Raj Rajaratnam was convicted of insider trading. It was great news for Wall Street and hedge fund managers because it reaffirmed trust in the industry (whether or not it's deserved). Bloomberg Markets Magazine quoted big time hedge fund manager Lee Ainslie saying that his worst nightmare would have been Raj going free.

Even if you've been following the trial extensively, you'll be surprised by the new details revealed in an article in this week's New Yorker. Here are the new details:

Raj flew a group of people on his private plane to the Superbowl every year for a weekend of partying

The investigation into Galleon began with a letter that was sent to the SEC. It read:

“It is hedge funds like Galleon Group that create wealth for their shareholders and themselves at the expense of innocent investors... Insider trading word in this fund should be changed to insider partnership and prostitution... Prostitution is rampant for executives visiting Galleon. You will find that the Super Bowl parties for the executives, paid for by Galleon Group, include prostitutes and other forms of illegal entertainment. In return, the executives provide Galleon the unfair edge that the fund leverages so well. The letter was signed, Seeking integrity in business.

Even more fascinating: what happened when they all got caught….

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The Secret Genius Move Behind Today's Big Oil Release

BusinessInsider writes: Completely predictably, everyone is peeing all over the IEA/White House's big news about releasing money from the Strategic Petroleum Reserve.

It's true that it's a drop in the bucket, and it's also true that there's no oil emergency (just somewhat high prices), and so on its surface, this move comes off as more politics than sound energy policy.

But that misses the point. This is a gun fired right at OPEC.

Remember, it was just two weeks ago that an OPEC meeting ended in disaster, when the various countries openly split on production levels. Since then, things have even gotten more hairy within the cartel. Not surprisingly, Iran is already having a tantrum…,

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JPMorgan Gets a Break Where Goldman Got Bitch-Slapped

Bloomberg View columnist Jonathan Weil writes, “Once again the Securities and Exchange Commission has filed a complaint against a too-big-to- fail bank that hinges on the meaning of one word: “selected.” Last year, the bank was Goldman Sachs, which the SEC accused of intentional fraud. This week, the defendant was JPMorgan, which got far easier treatment.

Why the different approaches? The agency isn’t saying. Judging by the allegations, both companies in essence did the same thing. Yet JPMorgan caught a break, and Goldman didn’t.

The SEC says the securities arm of JPMorgan Chase & Co. (JPM) defrauded investors in a $1.1 billion bond deal called Squared CDO 2007-1. The SEC didn’t accuse the bank of defrauding anyone intentionally, however, only negligently. One quirk of the Securities Act of 1933 is that the courts have said the SEC need only show negligence to establish violations of the statute’s less-serious antifraud provisions. Hence, one of the great oxymorons of American legalese: “negligent fraud....”

The critical misrepresentation JPMorgan made was that the portfolio of mortgage-related investments underlying Squared was “selected” by a collateral manager named GSCP, according to the SEC’s complaint. That statement, contained in JPMorgan sales materials, wasn’t true, the SEC said. In fact, a hedge fund that shorted more than half of Squared’s portfolio, Magnetar Capital, had a significant role in selecting the collateral. That was something JPMorgan knew and that other investors weren’t told, the SEC said…

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Why the $5 Billion Man just can’t catch a break

John Paulson, the prominent hedge-fund manager who scored a $5 billion payday last year, has suffered further losses in two key funds of his $38 billion Paulson & Co, The Wall Street Journal reports.

The $9 billion Advantage Plus fund has lost about 15% so far this month, through June 17, leaving it down 20.9% for the year, according to an investor briefed on the performance. Meanwhile, Paulson’s Enhanced Partners fund, which had been on a winning streak until recently, has lost more than 8% so far this month, through June 17, leaving it up about 2% this year. Both funds lost about 1.5 percentage points in the week ending June 17.

The losses are a reversal of fortune for Paulson, who scored $20 billion in trading profits in 2007 and 2008 betting against subprime mortgages and financial shares. Even with solid but not spectacular returns of 17% in his Advantage fund last year, Paulson made $5 billion for himself for 2010 thanks to hedge-fund fees and winning bets on investments such as gold….

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How Come this Canadian Bank is Going Gangbusters in the U.S.?

Toronto-Dominion Bank is currently the eight-largest bank in the U.S. in terms of deposits. Based in Canada, the bank does more business in the U.S. than at home. Wall Street Cheat Street reports that with its $6.3 billion acquisition of Chrysler Financial, it is also one of the top 20 lenders in the country. Given Royal Bank of Canada‘s (NYSE:RY) recent retreat from U.S. operations with its sale of its struggling U.S. retail banking subsidiary to PNC Financial (NYSE:PNC), and the general tendency for Canadian companies to be pushed out of the country by U.S.-based competitors, Toronto-Dominion is an interesting study in how to do business from across the border.

Ed Clark, CEO of Toronto-Dominion, began his expansion into the U.S. market by purchasing just 51% of Banknorth Group of Maine in 2004. There were few opportunities for growth at the time, and it was a relatively small bet, but since then, Toronto-Dominion has made seven more acquisitions in the U.S.

Toronto-Dominion (NYSE:TD), unlike many other large banks, has focused mainly on developing as a retail banking institution. Clark has emphasized the bank’s reputation for convenience and customer service, adding evening and Saturday branch hours and conducting nightly customer satisfaction surveys. The surveys are actually used, instead of financial performance indicators, as a means for determining pay for bank employees. Clark also studied retailers rather than banks to get ideas for how to run his business….

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Madoff yacht 'Bull' slugged by bear boat market

Bernie Madoff's turbocharged yacht, one of the fastest on the French Riviera, is in the discount rack at 50 percent off its original asking price -- but even at that price, hedge-fund bargain hunters are showing little interest.

It's not because they can't afford the $11,000 it takes just to fill the diesel tank on the 88½-ft. custom-made yacht, named "Bull," or pay $250,000-plus a year for the captain and his two crewmen to keep it seaworthy. Apparently the boat -- the last luxury toy left from Madoff's swindler paradise -- doesn't have enough cachet to lure a buyer since it was seized nearly three years ago by authorities.

After eight months on the market, Bernie Madoff’s 88 1/2-foot custom-built yacht, “Bull,” has seen its initial price tag cut in half, to $4.3M, as it sits in Monaco harbor…..

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John Paulson Is Still Getting Slammed (Now He's Down 15% This Month!)

John Paulson has been getting crushed this year.

The Wall Street Journal has an update on his losses this month and he's now down 15% in his Advantage fund.

A week or so ago, Paulson's fund was down 13% in June. Today's news that he's down 15% means his YTD losses went from -19.65% to -20.9%.


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Hedge-Fund Founders Eye N.J. Schools

According to the Wall Street Journal a new group backed by two hedge-fund founders is taking aim at New Jersey's largest teachers union. Better Education for Kids wants to end the use of seniority in teacher-hiring decisions, implement an effective teacher-evaluation system and weaken tenure..

Better Education for Kids was started by New Jersey residents David Tepper and Alan Fournier, who founded the Appaloosa Management hedge fund and the Pennant Capital Management hedge fund, respectively. Better Education for Kids last week launched a $1 million ad campaign. In September, the group will evaluate its next steps, with an eye toward not only this year's November elections but also the 2013 legislative elections. In an unusual cycle, all 120 lawmakers are up for election in two straight cycles....

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WaMu ally u-turns, now opposes bankruptcy plan

Reuters reports that a hedge fund that helped craft a settlement at the heart of Washington Mutual Inc's (WAMUQ.PK) reorganization plan now opposes the deal, saying it unfairly enriches JPMorgan Chase, which bought the thrift's banking operations.

In a court filing on Wednesday, Aurelius Capital Management LP said the delay in implementing the deal has drained money from creditors, and that JPMorgan should contribute more to the settlement. Aurelius and three other hedge funds helped strike a "global settlement" last year that ended legal battles between Washington Mutual, JPMorgan and the Federal Deposit Insurance Corp.

In return for ending lawsuits, the parties agreed to divide about $10 billion of disputed assets. Washington Mutual ended up with about $7 billion, which it plans to distribute to creditors once it gets court approval to do so.

One of the disputed assets was $4 billion that Washington Mutual had on deposit at its former bank….

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Wednesday, June 22, 2011

Barclays Asks Judge to Throw Out Lehman $500 Million Bonus Claim

Barclays Plc, after defeating an $11 billion lawsuit by Lehman Brothers Holdings Inc., seeks to dismiss the defunct firm’s remaining claim for $500 million in allegedly unpaid bonuses, according to Businessweek.

Lehman asked U.S. Bankruptcy Judge James Peck in May to order the U.K. bank to pay the rest of the $2 billion in bonuses it agreed to when it bought Lehman’s North American business in 2008. Barclays, which contended the $2 billion was an estimate of both bonuses and severance payments, said it paid everything assented to in the purchase agreement, according to a court filing yesterday.

The bonuses were due to Lehman employees whom Barclays took on with the purchase, the former investment bank said. The annual bonuses for the 2008 fiscal year should have paid in full by March 15, 2009, Lehman said in a May filing. Instead, the employees received $1.5 billion, it said…..

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Ten Things That Can Get You Fired

According to’s Kelly Eggers nobody wants to get fired. Most people avoid it by generally doing good work and keeping complaints about their jobs to themselves or close family. Unfortunately, it's not that simple. There are many things that can get you fired beyond the obvious; you don't have to burn down the office to earn a pink slip.

Here are ten ways to get thrown off your job.

1. Get Conveniently Sick It's okay to take sick days when you need them, but if you take too many at the wrong times, it could mean more free time to convalesce.
"If you want to get fired, repeatedly call in sick on Mondays," said Randy Merrell, vice president of operations at Elite Network, a San Francisco-based search firm. "Muscle up and get yourself in there. Hangovers are no excuse..."

2. Lie on Your Job Application Everyone beefs up their resume, and assumes that once they have the job, it's no longer important what they did to get it. Not so fast. If your job performance lags, your resume may be reviewed again. An inconsistency or poorly timed embellishment could be used to get rid of you. If they're dissatisfied with you and then they find out that you lied, that's an easy ticket for them," said Cohen.

3. Be Disgusting If you aren't diligent with your hygiene, people probably aren't going to go out of their way to keep you around. "I have a number of clients who are managers that have employees who were unkempt," said Cohen. "When it came time for downsizing, they were at the top of the list...."

4. Stay Anonymous As the old adage goes, the squeaky wheel gets the grease. If you always keep your head down, never remind your boss of your accomplishments, and aren't a familiar face to the higher-ups, you aren't going to be remembered for what you're worth when headcount is being shaved....

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Revenge of the 'fat cats'

NY Post Reports that Wall St. finally breaks with Bam The man who once labeled Wall Street honchos "fat cats" deserving of scorn for their role in the 2008 financial crisis will be back in town tomorrow, pressing the fat-cat flesh at the swanky Upper East Side restaurant Daniel for a $35,800-a-head fund-raiser. A number of top Wall Street executives will show -- but some faces will be missing.

We're told JP Morgan chief Jamie Dimon won't be there -- nor former Obama supporters like Lloyd Blankfein and Gary Cohn of Goldman Sachs, Brian Moynihan of BofA and John Mack of Morgan Stanley, nor even Larry Fink of the money-management firm Blackrock….
The first cracks in Wall Street's relationship with Obama came with last year's passage of the Dodd-Frank "reform" law, which slammed the financial industry with new regulations (still being written) that have everyone afraid to make any aggressive moves.

Last fall, the Wall Street firms that supported Frank, Dodd & Co. over the years and lined up in unprecedented fashion behind candidate Obama in 2008 started to plow money into the coffers of Republican candidates for Congress…..

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UBS to axe 500 jobs

According to MarketWatch UBS AG UBS -1.15% said Wednesday it is cutting 500 jobs in information technology, part of cost-cutting efforts aimed at reducing annual spending by a double-digit million Swiss franc amount.

"Over the past few weeks, UBS has reviewed its entire global IT organization with the aim of creating a leaner structure, increasing efficiency and reducing costs," a spokesman for Zurich-based UBS said.

The bulk of jobs to go are in Switzerland, where 200 positions are being axed, and the U.S., where 180 jobs are set to go. The cuts represent 5.5% of UBS's overall IT workforce….

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Celebs Sued By Hedge Fund Investors For Underground Poker Ring Winnings

Tobey Maguire and other celebs are being sued by a group of hedge fund investors, who say Maguire and others won cash in an illegal poker ring, which belongs to them according to the BusinessInsider.

Ex-hedge fund manager Bradley Ruderman was convicted of running a $44 million Ponzi scheme back in 2009, and he used client money in these poker games.

Ruderman reportedly "lost $25 million of his investors’ money in twice-weekly poker games at the luxury Beverly Hills Hotel, the Four Seasons and the Viper Room on Sunset Boulevard," according to FINAlternatives.

$311,200 of that sum allegedly belongs to Maguire, including one losing hand of $110,000, the suit said….

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Hedge bosses sound alarm on super-sized funds

Hedge fund investors are turning cautious on huge, multi-billion dollar funds, say execs meeting in Monaco this week, and see better returns from the boutique funds that were once the driving force of the industry, according to Reuters.

"The feeling we have is that they (big commodity trading advisers and macro funds) all feel a bit too big compared to the real liquidity of the markets," said Patrick Fenal, deputy chairman of asset manager Unigestion in an interview on the sidelines of the conference.

So-called "two traders with a terminal" epitomised the rapid growth of the industry in the early years of the last decade, as bank prop traders setting up on their own profited from a long bear market in technology stocks and subsequent market rally. But investors deserted small funds during the crisis, and when they returned to the industry often opted for big funds, believing they were more likely to survive and could protect clients better from fraudsters such as Bernard Madoff.

Inflows coupled with strong performance helped funds such as Brevan Howard's Master fund grow to around $25 billion, while Winton Capital, which runs computer-driven funds, has around $17 billion and Moore Capital manages around $15 billion. However, investors are starting to see size as a potential danger again….

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Palin’s Tour Bus Vanishes! Where is Sarah Palin?

Not generally an area of interest to this blog, but hell...we have to admit it; we're suckers for terrific headlines.

The former Alaska governor embarked on a bus tour of the eastern United States last month, kicking off the trip Memorial Day weekend in the nation's capital. While Palin initially remained mum on where her travels would take her, her tentative itinerary reportedly included stops in Pennsylvania, Massachusetts, New Hampshire and Iowa. HuffPo reports.

Real Clear Politics reports:
Though Palin and her staff never announced a timeline for the remaining legs of her trip, aides had drafted preliminary itineraries that would have taken her through the Midwest and Southeast at some point this month. But those travel blueprints are now in limbo, RCP has learned, as Palin and her family have reverted to the friendly confines of summertime Alaska, where the skies are currently alight for over 19 hours a day and the Bristol Bay salmon fishing season is nearing its peak.
Earlier this month, Palin regarded her time on the road as "one of the best weeks" of her life in a web video released by her political action committee highlighting stops from the first week of her trip.

"Our family has been blessed with an opportunity to showcase all that is good and strong and free about our exceptional nation, bitches..." said Palin in a statement released in conjunction with the clip….

Bill Gross Just Said The Magic Phrase, And The Market Just Jumped

BusinessInsider writes that in a tweet, Bill Gross of PIMCO just predicted that QE3 would be revealed in August at Jackson Hole.

That tweet hit at 10:23.

On that prediction, stocks just jumped.

No wonder they call him God.

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Mumbles: The Short (Not So Sweet) Blogging Life of a Banking Intern

One of the summer’s most-anticipated financial blogs — at least by DealBook — appears to have met a swift demise. Tuesday, we got wind of a blog created by a summer analyst (read: intern) at a middle-market investment bank in Los Angeles, who promised to write about his trials on the job — under the pseudonym “Mumbles.”

Sadly, as of Wednesday morning, Mumbles is no more. The rogue blog, titled “Life of an Investment Banking Summer Slave,” had been deleted by the second day.

It’s too bad. The newcomer showed some promise. In the inaugural post, Mumbles introduced himself: “I don’t have a 4.0 G.P.A., play lacrosse or belong to any secret societies. Rather, I play real sports — basketball and golf, do enough to get by in school and prefer a C.F.A. to an M.B.A.”

This summer, I joined an exclusive club. A club filled with Ivy Leaguers, valedictorians, paper pushers, foot soldiers, and me, the chip-on-the-shoulder state school kid. We call ourselves: Investment Banking Summer Analysts — essentially, we’re superheroes without the capes.

Mumbles’s pair of posts included tips like “Never Go Home Before a V.P.” and ruminations on the grunt work that is expected of summer analysts….

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