Saturday, June 30, 2012

Only In America: Spoiled Rotten

The New Yorker’s Elizabeth Kolbert writes “…With the exception of the imperial offspring of the Ming dynasty and the dauphins of pre-Revolutionary France, contemporary American kids may represent the most indulged young people in the history of the world. It’s not just that they’ve been given unprecedented amounts of stuff—clothes, toys, cameras, skis, computers, televisions, cell phones, PlayStations, iPods. (The market for Burberry Baby and other forms of kiddie “couture” has reportedly been growing by ten per cent a year.) They’ve also been granted unprecedented authority. “Parents want their kids’ approval, a reversal of the past ideal of children striving for their parents’ approval,” Jean Twenge and W. Keith Campbell, both professors of psychology, have written. In many middle-class families, children have one, two, sometimes three adults at their beck and call. This is a social experiment on a grand scale, and a growing number of adults fear that it isn’t working out so well: according to one poll, commissioned by Time and CNN, two-thirds of American parents think that their children are spoiled.

“The notion that we may be raising a generation of kids who can’t, or at least won’t, tie their own shoes has given rise to a new genre of parenting books. Their titles tend to be either dolorous (“The Price of Privilege”) or downright hostile (“The Narcissism Epidemic,” “Mean Moms Rule,” “A Nation of Wimps”). The books are less how-to guides than how-not-to’s: how not to give in to your toddler, how not to intervene whenever your teen-ager looks bored, how not to spend two hundred thousand dollars on tuition only to find your twenty-something graduate back at home, drinking all your beer…..”

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Consumer Spending In U.S. Stalls As Hiring Weakens:

Consumer spending stalled in May as stagnant wages and slackening employment held back the biggest part of the U.S. economy, Bloomberg’s  finest report.

Purchases were little changed after a 0.1 percent rise the prior month that was smaller than initially reported, according to Commerce Department figures issued today in Washington. Another report showed household sentiment dropped this month to the lowest level of the year.

A lack of jobs may prompt Americans to keep focusing on replenishing depleted nest eggs, hurting sales at retailers from CarMax Inc. (KMX) to Red Robin Gourmet Burgers Inc. (RRGB) Economists at Goldman Sachs Group Inc. and Morgan Stanley were among those cutting forecasts after the figures, indicating the economy slowed further in the second quarter.

Falcone to argue $113 million loan was best for investors

Go figure. According to the NY Post report hedge-fund honcho Phil Falcone — accused of taking out an improper $113 million loan to pay a personal tax bill — plans to fight the charges by arguing that his other options carried greater risks for investors.

On Thursday, the Securities and Exchange Commission slapped Falcone with civil fraud charges, accusing him of spending up a storm in 2009 despite the looming tax bill — and then dipping into a fund he had just barred investors from tapping. The SEC claimed Falcone could have borrowed against his personal assets but didn’t want to crimp his lavish lifestyle.

The first glimpse of Falcone’s defense strategy reveals the 49-year-old founder of Harbinger Capital Management plans to knock down the allegations by claiming that the alternatives, such as withdrawing his money from another fund, could have created even bigger headaches for investors, according to a person familiar with Falcone’s thinking.

Former Citi VP Who Helped Himself To $23 Million Gets 8 Years

Screw with Count Vikula at your own risk.

Former Citigroup VP Gary Foster was sentenced to 97 months in prison for embezzling almost $23 million from the bank, according to federal prosecutors in Brooklyn, New York. Foster pleaded guilty to bank fraud in September, admitting that he transferred money from various Citigroup accounts to his own at JPMorgan Chase. He concealed his activities by making false accounting entries, according to the government.
He used the money to buy real estate and luxury sports cars, including a Ferrari and a Maserati, prosecutors said. The government has seized or restrained property from Foster valued at a total of $14 million. “I executed a scheme to defraud Citigroup,” Foster told U.S. District Judge Eric Vitaliano at his plea hearing last year in Brooklyn. “I directed funds to be wired into my personal account at JPMorgan.”

Friday, June 29, 2012

Dow Poised For Best Month Since October On Europe Pact

U.S. stocks joined a global advance, sending the Dow Jones Industrial Average toward the biggest monthly rally since October, after European leaders reached an agreement that alleviated concern banks will fail, Bloomberg reports

All 10 groups in the Standard & Poor’s 500 Index rose as industrial and technology shares had the biggest gains. Citigroup Inc. (C) and Bank of America Corp. rallied at least 3.1 percent as European lenders surged. Alcoa Inc. (AA) and Exxon Mobil Corp. (XOM) added more than 2.2 percent as commodities jumped. KB Home (KBH) climbed 12 percent as the homebuilder reported a narrower loss. Nike Inc. (NKE) tumbled 8.2 after profit unexpectedly declined.

The S&P 500 jumped 2.1 percent to 1,356.34 at 2:22 p.m. New York time, rallying 3.5 percent in June. The Dow added 232.46 points, or 1.8 percent, to 12,834.72, extending its monthly gain to 3.6 percent. The Nasdaq Composite Index climbed 2.7 percent, the most in 2012, to 2,926.16. Trading in S&P 500 companies was 9.9 percent above the 30-day average at this time of day.

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Goldman's crown under threat

Efinanicalnews’ Matt Turner writes: Goldman Sachs could lose the number one spot in Dealogic's global M&A table for the first half of 2012, while retaining its position at the top of a rival ranking, as a result of a last-minute $20.1bn deal and data providers' differing approaches to deal credit.
Belgian beer company Anheuser-Busch InBev confirmed this morning it would acquire the remaining stake it does not already own in Mexican brewer Grupo Modelo for $9.15 a share. The deal is worth $20.1bn. The firm has fully committed financing for the deal, having added $14bn of additional bank facilities.

....In the Dealogic preliminary first half M&A rankings, published earlier this week, Goldman ranked first with $16.8bn more in deal credit than nearest rival Morgan Stanley. However, at $20.1bn, the Anheuser-Busch InBev deal could change this….

Tearjerker of the Week: From Wall Street Legend to Wall Street Loser

The sob story according to businessweek John Paulson, the founder of Paulson & Co., one of the world’s largest hedge funds, has close-cut black hair, dark eyes, and a soft voice. There’s a fuss when he arrives, befitting a man who made one of the biggest fortunes in Wall Street history, as his general counsel and PR consultant jostle for seats next to him. Paulson’s decision to buy credit-default insurance against billions of dollars of subprime mortgages before the market collapsed in 2007 earned him almost $4 billion personally and transformed him from an obscure money manager into a financial legend. Then came the kind of disastrous run that can unmake a career. In 2011 he lost billions.

“We clearly stumbled last year,” Paulson says. “We became overconfident as to the direction of the economy and took a lot of risk.”

Bank of America's $40 Billion Screw Up

Bank of America Corp. thought it had a bargain four years ago when it paid $2.5 billion for tottering mortgage lender Countrywide Financial Corp. But the ill-fated decision has already cost the Charlotte, N.C., lender more than $40 billion in real-estate losses, legal expenses and settlements with state and federal agencies, people close to the bank told WSJ.

"It is the worst deal in the history of American finance," said Tony Plath, a banking and finance professor at the University of North Carolina at Charlotte. "Hands down."

The acquisition of Countrywide, which was completed almost exactly four years ago, turned ...

Grim News: A Former Wall Street Trader May Have Swallowed A Deadly Pill In Court Before Dying Minutes Later

A former Wall Street trader and Yale-educated attorney, who was convicted of arson yesterday for burning down his Phoenix mansion, appeared to pop a pill after hearing the guilty verdict in court and died minutes later, according to Fox 10 News in Phoenix via New York Daily News.

Michael James Marin, who once reached the summit of Mount Everest, was convicted in Maricopa County Superior Court "of arson of an occupied structure" after setting his $3.5 million Biltmore Estates mansion on fire because he could no longer pay his $17,500 monthly mortgage, according to media reports. 

At the time, he was reportedly found outside the home wearing a SCUBA gear after escaping from the second-floor...

Bank rate rigging scandal widens

According to Reuters a scandal over the rigging of key interest rates could plunge the global banking industry into a legal morass for years, analysts said, as the head of Barclays (BARC.L) fought to hold onto his job.

With the Times newspaper naming RBS (RBS.L) as the next bank facing a fine for its alleged involvement in manipulating the key lending rate between banks, the head of the Bank of England said there needed to be "real change" in the industry's culture. Referring to what he called the "deceitful manipulation" of rates, Mervyn King told a news conference on Friday the London Interbank Offer Rate (LIBOR) should be reformed to reflect actual market transactions.

U.S. and British authorities fined Barclays $453 million (288 million pounds) on Wednesday for manipulating LIBOR, which underpins some $360 trillion of loans and financial contracts around the world - and analysts forecast more banks would soon be named for collusion.

"Reading the statements by the authorities we expect to get settlements by others in the course of time which could be more punitive," analysts at Credit Suisse said.  Others predicted Barclays and other banks could face billions in costs from litigation, especially in the United States, in much the same way that oil major BP (BP.L) ran into drawn-out legal rows over its oil spill.

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Be Afraid, Very Afraid: Rogers


Even as markets cheered the agreement by European leaders to allow the direct use of the bloc’s bailout funds to recapitalize struggling banks, well-known investor Jim Rogers told CNBC the move does nothing to help solve the region’s biggest problem, which is its high debt levels.

“Just because now you have a way to get them (the banks) to borrow even more money, this is not solving the problem, this is making the problem worse,” Rogers said on Friday.

“People need to stop spending money they don’t have. The solution to too much debt is not more debt. All this little agreement does is give them (banks) a chance to have even more debt for a while longer,” he added.

After negotiating late into the night, European policymakers agreed on Friday morning that the bloc's bailout fund, the European Stability Mechanism (ESM), would be able to lend directly to recapitalize banks without increasing a country's budget deficit, and without preferential seniority status.

Rogers argues that the deal does not improve the solvency of indebted nations…
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Layoff Watch 2012: Goldman Sachs Slashes Dozens of Jobs


Goldman Sachs Group cut several dozen jobs from its U.S. operations on Thursday, aiming to cut costs amid a slowdown in capital markets activity, three people familiar with the matter told cnbc.

The job cuts took place at Goldman Sachs headquarters in Lower Manhattan, as well as offices in New Jersey and Salt Lake City, said the people, who spoke under the condition of anonymity.  It was unclear whether similar cuts occurred globally, but they affected employees at all levels, two of the sources said.  The bank, which employed 32,400 people at the end of March, cut dozens of jobs earlier this month.
Wall Street is bracing for weak second-quarter earnings reports from global investment banks next month, due to weak trading volumes and a sharp drop in deal activity.  Analysts and consultants predict that banks will cut more jobs this year — perhaps another 5 percent of staff — due to weak profits, even after thousands of job cuts last year….

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Huge Surge In Dow Futures, Euro In Blastoff Mode After Announcements From EU Summit!

From BusinessInsider: Dow futures are also up over 100 points.  What explains the spike?
At a ridiculously late hour of the night, the EU Summit appears to have resulted in modest advances towards bailouts without the need for harsh penalties.

This headline from Bloomberg, as tweeted out by Bloomberg's Michael McDonough:

Remember, after the European bailout a few weeks ago, the hitch was the the funds (to be provided by the ESM bailout fund) would be senior to existing sovereign debt, and this was seen as a problem for Spain keeping market access. Evidently Europe has agreed to not have this new money be senior to other sovereign debt, which is a minor pressure relief.

Thursday, June 28, 2012

And Now For Something Completely Different: Local Porn Stars Will Make Good on Offer to Give Anyone a BJ After Heat Championship

Talk about good sports!  From the Miami New Times: During the NBA finals, local porn stars Angelina Castro and Sara Jay made a bet with two of their Oklahoma City counterparts: If their team won, they'd give the team's fans free blowjobs. Now, Castro and Jay are making plans to keep their word. Yes, a free blowjob for anyone. The event is set for August 2 at Miami Velvet but be warned there are a whole lot of stipulations on the event's semi-NSFW official site.

First, to collect your beej, you must follow both @SaraJayXXX and @AngelinaCastroX on Twitter. You must also be 21 or older and pay for your own STD testing from Talent Testing. Results must be submitted 48 hours before the big blow-off.

Participants must also consent to having their blowjob filmed and either streamed live, posted on the Internet, or sold on DVD. You can wear a mask….

Should J.P. Morgan's Jamie Dimon be history?

From Fortune: Amid reports from the New York Times that J.P. Morgan's London unit trade losses could climb as high as $9 billion, some are wondering whether it's time to seriously reconsider CEO Jamie Dimon's fate at the bank. 

"Dimon has either failed to supervise, failed to tell the truth, or both. Pleading ignorance doesn't help," Tufts University business professor Amar Bhide told me. Bhide believes the board should fire Dimon, saying Dimon's tenure can be characterized by "repeated incidents that exemplify an absence of the duty of care, which impacts the public good."

Some might argue that concern over Dimon's behavior and J.P. Morgan's (JPM) activities are overblown. But, according to the recently published Bank for International Settlements' annual report, while banks may "appear well capitalized," they "remain highly leveraged," holding "outsize derivatives positions." Both high leverage and the use of trading as "a major source of income … are moving the financial sector towards the same high-risk profile it had before the crisis," the report stated. "Recent heavy losses related to derivatives trading are a reminder of the dangers…."

Firms Cringe at Revealing CEO-Worker Pay Gap

As the final shareholder votes on executive pay round out this year's proxy season, companies are already fighting on another pay-related front, according to a WSJ report.

At issue is a rule that could force them to disclose the gap between what they pay their CEO and their median pay for employees, a potentially embarrassing figure that many companies would like to keep private.

The rule's supporters—a group that includes labor unions, institutional shareholders and left-leaning activists—say it would force companies to consider rank-and-file workers during boardroom discussions over CEO pay and could put the brakes on executive compensation, which has been rising faster than ….

Citi Slashs The Big Investment Banks

According to businessinsider Citigroup bank analyst Keith Horowitz and his team have cut their price targets and second quarter earnings estimates for Wall Street's biggest banks.
This downgrade stems from a downturn they have seen in fixed-income trading, which was strong in the first quarter but reversed in the second quarter.

This slowdown stems from signs of slower growth in the U.S. and the global economy, rising concerns over Europe, wider credit spreads, a risk-off flight to quality, and declining equity and commodity prices…

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Warren Buffett Wants To Get One Thing Straight: He Loves A Good Booze Cruise

Dealbreaker’s Bess Levin writes:  Earlier this month, Denis Abrams, CEO of Berkshire Hathaway-owned Benjamin Moore was fired, because, one story claimed, he’d arranged a “corporate trip to Bermuda on the company tab,” which included an “island dinner cruise aboard a yacht some believed was owned by singer Jimmy Buffett.” According to Warren Buffett, however, that is a bald-faced lie and any suggestion otherwise is downright offensive. Abrams was fired over a “strategy disagreement” and, more importantly, Buffett would never can anyone for mixing it  up on a booze cruise, a point he cannot stress enough, in case anyone out there was considering not inviting him to their next bash. In case you hadn’t noticed, Nebraska is landlocked and there is nothing WB loves more than knocking back a few while strolling the deck and mentioning to other ‘cruisers that “the water is freezing and there aren’t enough lifeboats– not enough by half…

Shocker: JPMorgan Trading Loss May Reach $9 Billion

According to the NY Times’ Dealbook losses on JPMorgan Chase’s bungled trade could total as much as $9 billion, far exceeding earlier public estimates, according to people who have been briefed on the situation.

When Jamie Dimon, the bank’s chief executive, announced in May that the bank had lost $2 billion in a bet on credit derivatives, he estimated that losses could double within the next few quarters. But the red ink has been mounting in recent weeks, as the bank has been unwinding its positions, according to interviews with current and former traders and executives at the bank who asked not to be named because of investigations into the bank.
The bank’s exit from its money-losing trade is happening faster than many expected….

Meet The New Google: Gadget Maker

Google stepped up its campaign to become a major player in consumer electronics, topped by a $199 tablet computer that could pressure  while adding yet another challenger to market leader Apple Inc., the WSJ reports. The company unveiled the tablet at a developer conference Wednesday alongside other hardware it designed for the first time—a $299 home-entertainment player called Nexus Q and futuristic eyewear dubbed Google Glass that embeds a computer display in a glasses-like device.

For Google, the transition to hardwar¥e has become necessary as Apple continues to encroach on the Internet-search giant's territory with major software applications.  Earlier this month, for instance, Apple touted a number of new software products, including a mapping service that would replace Google Maps as the default system for Apple devices. Meanwhile, software titan Microsoft Corp. MSFT +0.50% last week added its own branded tablet to the fray, furthering the turf wars….

Wild and Crazy Trader faces five-year sentence

Former Societe Generale trader Jerome Kerviel should serve five years in prison for his role in France's biggest-ever rogue trading scandal, a state prosecutor told a Paris court yesterday. Kerviel is appealing a three-year jail sentence handed down in 2010, as well as an order to repay SocGen €4.9bn (£3.9bn) lost by the French bank when it closed the trader's massive risky bets in 2008….

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Goldman Debuts Its Bond Platform

Goldman Sachs Group Inc. recently started trading corporate bonds on a new electronic platform designed to bring investors together to trade at specific times, as the New York securities firm looks to respond to a growing threat from rival trading venues that could woo customers away.

Goldman last week launched "GSessions," a platform it developed over the past year to trade corporate bonds in large volumes, company officials said. The firm is looking to attract hedge funds, mutual funds, pension funds and other large investors to use….

World's Largest IPO After Facebook Soars Over 20%

Shares in Malaysian palm oil firm Felda Global surged 20 percent in their trading debut on Thursday, as investors cheered on the world's second largest IPO after Facebook's rocky initial public offering cnbc reports.

The strong debut beat market expectations of a first day pop of 10 percent and brushed aside, for now, a widely flagged 36 percent drop in Felda Global's first quarter profit to 223.2 million ringgit ($70 million) that had initially unnerved some investors…

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Wednesday, June 27, 2012

Top Company Is Threatening Massive Layoffs

This is kind of a weird way to hear about a layoff announcement, but what's key is that there's an exact date for the cuts Jan 1, 2013 and Buck Mckeon is a Congressman from Southern California who serves on the Armed Forces Committee in the House  businessinsider reports
So basically Lockheed is saying in a not-so veiled way is: Stop the mandatory defense spending cuts (that were agreed to as part of last summer's debt ceiling deal) or 12,600 workers get it.

Madoff brother to plead guilty

According to Reuters Peter Madoff, the brother of imprisoned swindler Bernard Madoff, is expected to plead guilty to criminal charges on Friday, the first family member to do so since the Ponzi schemer's fraud was uncovered in December 2008.

In a letter filed Wednesday in Manhattan federal court, U.S. Attorney Preet Bharara said Peter Madoff is expected to plead guilty to charges of conspiracy to commit securities fraud and other crimes, as well as falsifying records. He agreed not to seek a sentence other than 10 years in prison.

Madoff, who had been chief compliance officer at Bernard L. Madoff Investment Securities LLC, also agreed to a criminal forfeiture of about $143.1 billion, including all real and personal property, the letter said. The amount is symbolic, being more than twice the estimated size of the fraud….

Dr Doom: Europe heading for depression

According to fundweb economist Nouriel Roubini has claimed the recession in Europe could turn into a depression after highlighting falling output levels and high unemployment figures.  In an interview with Bloomberg TV, Roubini - dubbed “Dr Doom” for his bearish economic outlooks - said output had fallen from peak levels, noting high unemployment in Greece and Spain.

He says: “This could become like Japan, but worse: Japan did not have a sovereign debt crisis because it was a net creditor country, but all these [European] countries are net debtors., so they would be lucky to end up in the stagnation, multi-decade like Japan.

“It’s getting worse there is already a sovereign debt crisis, a banking crisis, there is a balance of payment crisis, an economic crisis and all of those things together are getting worse….”

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Drought May Rival 1980s U.S. Scorcher That Cost $78 Billion

The drought in the U.S. Midwest that has pushed up corn prices 28 percent since June 15 may eventually rival a dry period in 1988 that cost agriculture $78 billion, a government meteorologist told Bloomberg.

This year’s weather pattern, which settled into the Great Plains and the Southwest last year and has spread into the Corn Belt, resembles those of a quarter century ago, Matthew Rosencrans, a drought specialist with the National Weather Service, said today at a forum in Washington. Sparse rainfall may drive crop costs up further, destroying livestock profits and raising food prices, said David Anderson, an agricultural economist at Texas A&M University.

 “Everyone’s worried about this,” Anderson said in an interview after speaking at the forum. Corn “stockpiles are already low,” he said. “We thought this was the year we might get some relief from that, and that may not happen. We’re going to have highly volatile prices the rest of the summer…”

Weird’s Deep Thoughts (Heatstroke Edition): Google’s past is Facebook’s future

From TradingWithCody’s Cody Willard: Let’s talk Facebook again this morning and I’ve got some great historical perspective for you from another once much-maligned Internet IPO — Google.

I bought Google the day it came public and I held it for the next four years until I closed my hedge fund to become a news anchor on national TV. The stock popped 20% its first day and then languished and faded for a few weeks after as Wall Street tried to get its arms around Google’s business model. My analysis told me that Google was revolutionizing its industry — simple search — and was about to figure out new ways to use that Google platform to lock in users and create what I used to call “a burgeoning super-Internet called GoogleNet.” With Gmail and YouTube and all the other daily applications that hundreds of millions of people now use every day, having some understanding and vision of how networks scale and how platforms create their own eco-systems was frankly pretty darn prescient.

I remember a couple weeks after Google came public that Barron’s ran a cover article on how Google was doomed to fail and it quoted a couple analysts who said that they’d be interested in buying Google when it was at $20 a share. The stock was at $100 or so at the time. It never went below $100 again. Did you see all those comments from my blog and my friends telling me that they would be interested in buying Facebook at $5 a share? Hmm…

Surprising Factoid: The Military Is Paying Nearly $1 Billion To Support Its Jobless Veterans

The cost of unemployment compensation for troops leaving the military without jobs approached a billion dollars last year, though the rate of increase slowed to just 2percent over 2010, figures from the Department of Labor show.

A key factor behind the trend easing was that the Army, the largest of the services, saw the benefits it pays out decline slightly from 2010 to 2011. The military spent $944 million last year in unemployment benefits -- the largest amount since the recession of 2008....

If You Are A Central Banker, You've Gotta Read This

From the Economist: The Bank for International Settlements is known as the central bank to central banks. It shouldn't be surprising, then, if the misjudgments common to central bankers are occasionally distilled in BIS analysis into a somewhat curious view of the global economy: one in which heroic, blameless central banks have done their utmost to keep the world economy afloat, in the face of ceaseless governmental incompetence and despite a constant bombardment of baseless outsider criticism. The ability of central bankers to bandage over the harm inflicted by bumbling politicians is limited, warns the BIS in its latest annual report. Unless the world embraces the sober leadership of the wise central banker disaster looms….

Bank Gets Off EasyWith A $450 Million Settlement

Barclays PLC and its subsidiaries have agreed to pay more than $450 million to settle charges that it attempted to manipulate and made false reports related to setting key global interest rates, HuffPo reports.

The rates indirectly affect the costs of hundreds of trillions of dollars in loans that people pay when they get loans to go to school, purchase a car or buy a house.
The U.S. Commodity Futures Trading Commission said Wednesday that the incidents occurred between 2005 and 2009 and sometimes took place daily. The $200 million civil penalty levied against Barclays as part of the settlement is the largest in the agency's history.

Barclays is also paying $160 million to the U.S. Justice Department and almost $93 million to British regulators…

Only in America: A Comprehensive Concierge Service for Dogs

HedgeCo net reports that former NFL player and hedge fund manager Mitch Marrow has teamed up with real estate firm Rose Associates to provide luxury dog amenity services for Rose’s residential real estate portfolio in New York City.

“Our dog amenity program is the first-of-its-kind, and is a win-win for both residential real estate landlords and residents.” Marrow, CEO and founder of The Spot Experience, said, “It allows building owners to present a unique selling service to residents seeking quality service for their beloved family member – their dog, while tenants benefit from having access to the highest caliber of dog services in the city.”

As part of the partnership, Spot will offer dog services to residents in more than 30 buildings managed by Rose. This is the first deal in New York City of its kind giving residents full-scale access to both in-house and off-site pet care, providing the ultimate amenity for the dog owning tenant…

Hedge fund CEO's shoe suit against ex-wife bound to backfire

Wealthy hedge fund CEO Daniel Shak is going after his ex-wife in one of the most lowdown and dirty ways a man can go after a woman.

No, he's not after custody of the kids. He's after the shoes.  Specifically, he wants to get his hands on his ex-wife Beth's extensive collection of designer stilettos.

We're talking Christian Louboutons (a/k/a red bottoms), which start at about $600 and can cost upward of $4,000. Beth owns about 700 pairs of those alone, not to mention numerous pairs by the likes of Walter Steiger, Yves St. Laurent and Jimmy Choo. All together, Beth owns about 1,200 pairs of the designer shoes….

The New American Dream: California's Stockton to File for Bankruptcy

From Reuters: Stockton in northern California will become the largest U.S. city to file for bankruptcy after its city council on Tuesday approved a budget based on the assumption that the municipality will seek protection from its creditors.

The Chapter 9 bankruptcy filing for the city of nearly 300,000 in California's Central Valley could come as early as Wednesday.  The council, which voted 6-1 in favor of the 2012-13 budget, had previously authorized Stockton's city manager to file the bankruptcy.

Confidential talks between Stockton and its creditors aimed at averting bankruptcy concluded on Monday with the city failing to win enough concessions to help it close a deficit of $26 million for the fiscal year beginning on July 1, City Manager Bob Deis said….

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Big banks write "living wills" in case they fail

Five of the biggest banks in the United States are putting finishing touches on plans for going out of business as part of government-mandated contingency planning that could push them to untangle their complex operations, Reuters reports.

The plans, known as living wills, are due to regulators no later than July 1 under provisions of the Dodd-Frank financial reform law designed to end too-big-to-fail bailouts by the government. The living wills could be as long as 4,000 pages.

Since the law allows regulators to go so far as to order a bank to divest subsidiaries if it cannot plan an orderly resolution in bankruptcy, the deadline is pushing even healthy institutions to start a multi-year process to untangle their complex global operations, according to industry consultants..

Tuesday, June 26, 2012

Google to Unveil Tablet

Google Inc. is expected this week to show off a tablet running its newest mobile software and a service for companies to rent computer servers to store data, according to people familiar with the matter told the Wall St Journal.

The unveiling of various new devices and Web services is part of Google's annual software-developers conference, where the company hopes to win over mobile-app creators and device owners in a continuing battle with Apple Inc.
The three-day Google I/O event kicks off in San Francisco on Wednesday, a week after Microsoft Corp. announced it was adding its own tablet to the fray….

Read all about it at

Lawsuit: High-Frequency Trading Machines Favored Over Humans

From HuffPo: A small band of humans is fighting what it warns is the rise of the machines in financial markets.  A group of two dozen brokers and traders has sued CME Group, the owner of major commodities exchanges in New York and Chicago, arguing that a new rule that took effect on Monday would benefit high-frequency traders, favoring machines over people and putting hundreds of jobs at risk at futures and options exchange the Chicago Board of Trade.

Under the current trading system, the final prices for futures contracts for everyday commodities like corn and soybean oil are negotiated in person, on the floor of the exchanges in an area known as the "pit." This "outcry market system," as it is known, is responsible for the noisy, frantic trading environment -- in which brokers and traders yell and hand-signal buy and sell orders with one another -- that many still associate with the floors of stock exchanges. Some of the customers that these traders and brokers work for are farmers looking to hedge the price of various crops.

The CME's new rule replaces this in-person trading process with a blended system that takes into account orders placed by computerized traders when arriving at a final settlement price for these contracts.  According to the lawsuit, this change "will, for all practical purposes, eliminate the open outcry pit based system..."

Hedge Fund Manager Who Faked His Own Death Has A Few Theories About Other Famous Murders, Real And Imaginary

Andrew Ross Sorkin writes: “I’m a proven liar. Don’t believe anything I say.” That was what Samuel Israel III told me last week. He is the hedge fund manager convicted of running a $450 million Ponzi scheme who faked his own suicide in the summer of 2008 to avoid his prison sentence before turning himself in after a worldwide manhunt.

He was sitting across from me in the visiting center of the Butner prison complex, about 45 minutes north of Raleigh in eastern North Carolina. (Bernard L. Madoff is in the same complex.)
….I was there to talk to him because his story is a cautionary tale of the highly sophisticated, often endemic, fraud that still lurks on Wall Street. People I spoke with who dealt with him are still mystified about the breach of trust and how no one had a clue about his deception until it was too late.
“Everyone cheats,” he said as a matter of fact.  “I’m not a liar,” he insisted, affably. “I became a liar.”

Read all about it at

Weird’s Deep Thoughts (Tuesday Non Edition): Time to Occupy State Pensions?

Walter Russell Mead writes:  The biggest scam going in American financial life may be the collusive effort by Wall Street, the political class, and public sector unions to use union retirement money to prop up Wall Street speculation.

Step One: state politicians promise big pension and health care benefits to their unionized work forces, but don’t set aside enough money to fund those benefits when the bill comes due. This makes union leaders and unions look good, because they can point to the shiny new benefits they have negotiated with the politicians. Meanwhile, it makes the politicians happy because the unions support them with contributions and volunteers at election time, but because the unions don’t insist on full funding for the benefits, the politicians don’t have to raise costs or otherwise disturb the big majority of voters who don’t work for the government.

Step Two: Make aggressive assumptions about the rate of return on pension investment funds. This has two consequences: it covers the gap between promise and reality (for a while), thereby postponing the day when the politicians have to face the voters and the union leaders have to tell their members that those beautiful benefits were bogus from the start....
But whether or not the investments work for retirees, they work very, very well for Wall Street. Fees from giant public sector pension funds played a significant role in creating Wall Street’s buccaneer culture and speculative frenzy that the left hates….

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Accused Fraudster In Deep Doo-Doo Over 'Luxury Expenses'

Life Lesson: when one settles fraud charges with the Securities and Exchange Commission, it's best to keep one's personal spending quiet according to finaltneratives.

That's advice that hedge fund manager Lawrence Goldfarb allegedly failed to heed. Goldfarb, head of LRG Capital, was held in civil contempt last week by a federal judge in San Francisco; authorities say that Goldfarb spent almost $300,000 on "personal luxury expenses" while paying only $80,000 of the $14.2 million he agreed to pay last year to victims of his alleged fraud.
Among the big-ticket items Goldfarb bought since striking the deal were $43,000 tickets to see basketball's Golden State Warriors. 

Goldfarb also alleged spent more than $46,000 on three chartered flights, some $39,000 on luxury hotels and a vacation house, nearly $12,000 for an engagement party and $8,000 at the Pottery Barn.

"This guy is living high on the hog while the poor, defrauded investors get nothing," Judge Alsup said.

Chinese Target US Homes

Lennar Corp., one of the U.S.'s largest home builders, is in talks with the China Development Bank for approximately $1.7 billion in capital to jump-start two long-delayed San Francisco projects that would transform two former naval bases into large-scale housing developments, according to people familiar with the discussions,  the Wall St Journal reports.

The negotiations aren't final and the financing arrangement could still fall through. But if completed, the deal would reflect a changing dynamic between the U.S. and Chinese economies, as an American company turns to China for help funding a long-delayed and partially publicly funded project that otherwise wouldn't get done.

The developments, Treasure Island and Hunters Point Shipyard, also have the potential to alter San Francisco's housing market by providing nearly 20,000 new homes, a sports arena and millions of square feet of office and retail space…
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FBI Nabs Insider Trading Exec

Reuters reports that law enforcement authorities said on Tuesday they arrested and charged an executive at an investment research firm as part of the government's wide-ranging probe of insider trading at the now-defunct Galleon Group hedge fund.

Tai Nguyen of research firm Insight Research LLC surrendered to the FBI Tuesday morning, an FBI spokesman said, and was expected to appear in federal court in Manhattan later in the day.

Nguyen was facing charges related to insider trading, the FBI said, but the exact charges have not yet been made public.

The FBI and federal prosecutors in Manhattan have mounted a campaign to root out insider trading on Wall Street, focusing in part on employees at so-called expert network firms who they say helped funnel corporate secrets from consultants at companies to hedge funds. The FBI said Nguyen was charged as part of its investigation of wrongdoing at billionaire Raj Rajaratnam's Galleon fund…

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Buffett’s Margaritaville memo: Execs may walk plank

The boat that sank one of Warren Buffett’s top execs has been identified, and some of his crew may still get thrown overboard.

Denis Abrams — who, as exclusively reported by The Post, was canned as CEO of Berkshire Hathaway’s Benjamin Moore unit this month — chartered an extravagant cruise off Bermuda in a yacht called The Lady Charlotte, The Post has learned.

“Abrams had a lot of his ‘yes men’ on that cruise who were responsible for a lot of what has gone wrong,” one former exec groused. “They can’t turn it around without clearing those ranks.”

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Did Somebody Say Recovery? What Oil Prices Say About the Economy

According to, there is some economic hope in the new government in Greece, but if oil prices are any sort of barometer, the global economy has a long way to go before 2008 is in the rear-view mirror.

In general, crude oil prices are down more than 20 percent for the year, amid lingering concerns that a dismal European economy will do anything to encourage demand.

Iranian threats early this year caused a spike in oil prices, but those fears have eased.  Now, as prices move further away from $100 per barrel, it seems the threat to global economic recovery comes not from decisions made in Tehran but from the lack of decisions in the Eurozone.

It may be premature, however, to pull the net away…..

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The Truth about the Economy: In the 1980s, Greed WAS Good... Then We Went Overboard

Henry Blodget writes: The movie "Wall Street" was made in 1987, which means that it was likely written in the mid-1980s.

And guess what?  In the economy in which Gordon Gekko was operating--the economy of the early 1980s--Gordon Gekko was right.  Greed was good. U.S. corporations had become too much of a feeding trough for their senior executives--at the expense of their shareholders. The American economy did need to be kicked into shape. And the aggressive takeovers and restructurings and "greed" that emerged from that era were actually an effective way to do that.

But there's a time and place for everything.

And what was true in the early 1980s--that American companies had gotten fat, happy, and lazy--is no longer true. Three decades of ever-increasing shareholder "greed" have worked their magic, transforming the U.S. economy into a hyper-efficient, shareholder-rewarding money-machine.
Unfortunately, in that process, American companies have also come to neglect the most important engine in the U.S. economy: The tens of millions of "average employees" whose work allows companies to create value for their shareholders--and whose spending powers most of the American economy.

How important is the difference between then and now? Critically important….

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Goldman, Carl Icahn fight over fees

In a heavyweight battle, Goldman Sachs and activist hedge fund manager Carl Icahn are tussling over $18.5 million in fees.

Recall that CVR Energy, the oil company controlled by Carl Icahn, hired Goldman Sachs in March to advise it on how to deal with Icahn's tender offer. Last month, Icahn "won control of CVR with an 80 percent stake after a majority of shareholders accepted his $30 per share tender offer, which valued the Sugar Land, Texas-based company at about $2.6 billion," notes Reuters.

When Goldman Sachs bankers tried to get paid, however, CVR requested an invoice, which Goldman sent on May 3. But four days later, the company advised Goldman Sachs that "Icahn had instructed CVR not to pay the invoice," according to the complaint. Former Goldman Sachs banker Matt Levine, now a pundit, says Goldman Sachs may be on firm legal ground. And "Goldman's 52.5bps fee here doesn't seem way out of line," he writes....

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Microsoft's Big Bet

Microsoft announced on Monday that it would buy Yammer, a social network service for businesses, for $1.2 billion in cash, as it seeks to strengthen its enterprise software business and compete more directly with Yammer, which calls itself "the enterprise social network," is a sort of Facebook for business. Its Web-based service allows companies to create private social networks, where employees can privately chat, shares files and collaborate on projects. Though Microsoft's suite of software has become ubiquitous in homes and offices, the company has fallen behind on social networking applications for businesses. The company offers SharePoint, a collaboration platform, but the service is primarily used to share and manage documents. With Yammer, Microsoft will be able to pin its applications to a social graph flush with communication tools…


Layoffs 2012: Credit Suisse to Axe 3,500 Jobs

Credit Suisse Group is moving ahead with its plan to cut more than 3,500 jobs as it is set to shed up to 30% of senior jobs at its European investment-banking department, people close to the bank told foxbusiness.

Last year, Switzerland's second-largest bank disclosed plans to cut as much as 7% of its workforce. At the end of March, the bank said 2,000 of these jobs had already been eliminated.
The next business to feel the axe is the investment-banking department in Europe, where between 20% and 30% of jobs will be eliminated, the people said. This business includes activities such as advisory, mergers and acquisitions, as well as equity and debt-capital markets. It is a unit of the broader investment bank, which includes fixed income, currency and equity trading.

The cuts come as Credit Suisse, like many of its rivals, is under pressure to reduce costs, as the industry never fully recovered from the 2008 financial crisis. Credit Suisse suffered a dismal second half in 2011, and earnings in the first quarter this year were lackluster. The second quarter promises to be no better, analysts said…

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Monday, June 25, 2012

Another E-mail Uproar! Top U.S. Firm’s German head offers resignation

According to Reuters the head of Morgan Stanley's German unit has offered to step down following an uproar over emails he reportedly exchanged with a regional politician, and the bank has not yet decided whether to accept his resignation, according to two people familiar with the matter.

The departure of Dirk Notheis would be a blow for the U.S. investment bank, which had come to rely heavily on him to deliver lucrative advisory roles in mergers and acquisitions, known as mandates.

The 44-year-old Notheis is one of Germany's best-connected dealmakers with close ties to Berlin, a fact that rivals say has helped Morgan Stanley snare mandates involving companies that are partially state-owned….

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The checks are in the mail! Madoff vics’ big $

Talk about a nice fat summer bonus!  Bernie Madoff’s investors could finally see fat checks after the US Supreme Court yesterday greenlighted the bankruptcy trustee’s plan for calculating payouts to victims of the huge Ponzi scheme.

The court declined to hear an appeal by lawyers opposing Madoff trustee Irving Picard’s method for determining victims’ losses — a decision that frees up as much as $2.3 billion for burned investors, based on The Post’s calculations.

Picard said that only investors who withdrew less than they invested with Madoff should be entitled to a slice of the recovery pot. He went after so-called net winners who he said took out more than they put into the scheme.  But some investors argued that his loss formula should be based on their final account statements from Madoff — even if those turned out to be bogus.

By declining to review the case, the high court sided with Picard and the lower-court decisions that have upheld his method..... 

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What panic? Kepos' quiet touch wins favor among quant funds

When Mark Carhart meets with the world's largest pension funds and endowments he brings along an appealing proposition: His new hedge fund makes money during a crisis or so Reuters writes.

To be exact, Kepos Capital's computer driven trading models have earned returns of more than 5 percent this year as Europe's worsening debt crisis washed away gains elsewhere, leaving investors increasingly uneasy over where to put their money.

"The last year has been great for our approach," said Carhart, who used to co-manage Goldman Sachs Group Inc's once vaunted $10 billion Global Alpha fund and who has been concentrating on macro investing, including currencies, at his own firm since late 2010.

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Groupon Is Setting Off Major Accounting Red Flags

From BusinessInsider: Ever since Morgan Stanley led Groupon’s initial public offering in November 2011, the company has had a dismal performance in the market that some had foreseen. In June 2011 the Grumpy Old Accountants, a blog by Anthony Catanach of Villanova University and Edward Ketz of Pennsylvania State University, wrote that “overall, the (Groupon) balance sheet stinks. The income statement reeks. Cash flows are in the toilet. Instead of participating in this IPO, we would rather purchase lottery tickets.” After warning readers in August 2011 not to trust Groupon’s accountants, the grumpy old professors have continued to hammer away ever since. (GMI did not comment on Groupon because it only rates publicly traded companies.)

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Soros to EU: You’ve Got Three Days!

Billionaire investor George Soros called on Europe to start a fund to buy Italian and Spanish bonds, warning that a failure by leaders meeting this week to produce drastic measures could spell the demise of the currency, Bloomberg reports.

Policy makers should create a European Fiscal Authority to purchase sovereign debt in return for Italy and Spain implementing achievable budget cuts, Soros said in an interview in London yesterday. Funding for the purchases would come from the sale of European Treasuries, which would have low yields because they would be backed by each euro member, he said.

France and Italy are urging Germany to take decisive action to end the 2 1/2-year-old debt crisis after Spain’s 10-year bond yields jumped to more than 7 percent last week, a level that economists consider unsustainable. Leaders are at an impasse as they prepare to meet in Brussels on June 28. That risks disaster because Europe is running out of time to show investors it will do what’s necessary to save the euro, Soros said….

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Grim News: Goldman Sachs, UBS cut jobs

Reuters reports that onvestment banks and brokerages across Asia have launched a sweeping round of job cuts as Europe's debt crisis and China's economic slowdown bite into the region's financial activity.  Speaking to bankers and other industry sources, Reuters was able to confirm at least 50 people were let go in the past three weeks, a cull that includes senior expatriates as well as junior bankers. The cuts mainly target the equities business, with more layoffs expected in coming weeks.

CLSA , Deutsche Bank, Goldman Sachs, and UBS were among the banks and brokerages that cut jobs, the sources said.  "In response to a market environment far worse than anticipated and considerable over-capacity in the industry, we have made the difficult decision to make some positions redundant," said Anna Tehan, a spokeswoman for CLSA…..

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Think U.S. Banks are Ready for the Coming Euro Crisis? Think Again.

From Bloomberg: Even the optimists now say openly that Europe will only solve its problems when the alternatives look sufficiently bleak and time has run out. Less optimistic people increasingly think that the euro area will break up because all the proposed solutions are pie-in-the-sky. If the latter view is right -- or even if concern about dissolution grows in coming months -- markets, investors, regulators and governments need to worry not just about interest-rate risk and credit risk, but also dissolution risk.

What’s more, they also need to worry a great deal about what the repricing of risk will do to the world’s thinly capitalized and highly leveraged megabanks. Officials, unfortunately, appear not to have thought about this at all; the Group of 20 meeting and communique last week exuded complacency and neglect.

Very few people seem to have gotten their heads around dissolution risk. Here’s what it means: If you have a contract that requires you to be paid in euros and the euro no longer exists, what you will receive is unclear…..

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SEC probes Dark Pool

One of Wall Street’s most celebrated Dark Pools, Liquidnet, told its institutional clients last week that its new Equity Capital Markets (ECM) business was under investigation by the Securities and Exchange Commission, the NY Post reports.

At issue was an agency inspection that revealed “some shortcomings,” at ECM, according to a memo by Liquidnet CEO Seth Merrin.  The brouhaha revolves around its electronic tool that assisted in luring trading volume from issuers. While details are sketchy, the black eye for Liquidnet could be ironic.

Large investors, such as mutual and pension funds, welcome Dark Pools since, unlike “lit” markets, they are not supposed to publicly reveal details about their trades, according to Joe Saluzzi, co-head of equity trading at Themis Trading….