Monday, December 31, 2012

The Latest: Biden, McConnell close to a deal on tax hikes but hung up on spending cuts

According to WaPo’s Lori Montgomery and Paul Kane Vice President Biden and Senate Minority Leader Mitch McConnell were close to a deal Monday to cancel historic tax hikes for most Americans. But they were still hung up on spending, with Democrats resisting a Republican proposal to delay automatic spending cuts for just three months.

As President Obama prepared to deliver remarks about the “fiscal cliff” at 1:30 p.m. at the White House, negotiators for the administration and McConnell (R-Ky.) appeared to have nailed down many of the most critical tax issues, including a plan to let taxes rise on income over $450,000 a year for couples and $400,000 a year for individuals, according to people in both parties familiar with the talks...

The Two Sides Are Now Absurdly Close On A Fiscal Cliff Deal — Here's The Latest Offer

From Clusterstock’s Main Man, Henry Blodget: The Democrats made several key concessions yesterday in the Fiscal Cliff negotiations.  As a result, the two sides are absurdly close together. If we don't get a deal at this point, the entire country will be justified in being outraged.  Here's the Democrats' latest offer, as reported by Lori Montgomery and Paul Kane of the Washington Post:

* The Democrats agreed to raise the income threshold for tax increases to $450,000 a year (couples) from the prior $250,000. The Republicans are insisting on $550,000 threshold. This is a massive tax cut for almost the entire country relative to the rates that will otherwise take effect on January 1. (So agree on $500,000 already and call it a day.)

* However, to the Republicans' chagrin, the Democrats insist on raise capital gains and dividend taxes to 20% on households over $250,000 and reducing some of the allowable deductions. Importantly, this, too, is a massive tax cut relative to the scheduled changes, which would boost dividend taxes to 40% on incomes over $250,000….

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Damage Already Done: Signs of Negative Economic Impact Growing

Even if lawmakers manage to avoid most of the $500 billion in tax increases and spending cuts set to take effect this week, the risks to the U.S. economy have risen as consumers and investors recoil from Washington's latest budget spectacle, the good folks at WSJ report.

Consumer confidence and stock prices have sagged and could continue sliding. Households and investors could pull back more if lawmakers fail to reach any agreement, or one that leaves in place several measures that would curb economic growth in 2013.

The latest negotiations resemble the 2011 debt-ceiling fight, which showed how 11th-hour deal making can cause serious trouble. Then, despite an agreement, the economy and markets faltered as the world outside Washington focused on the implications of an ugly process….

Trader Confidential: What'll Get Me Back Into Market

After recently exiting the stock market completely, OptionMonster's Jon Najarian revealed on Friday what would make him jump back in.  On "Fast Money," Najarian said that worries in the first few weeks of January about extension of the federal debt ceiling would push the stock market lower.

"I would like to see that same sort of panic that lifts us into the mid-20s for the VIX (^VIX). I don't want to see that, folks," he said. "I'll get back in because I anticipate that panic."

Najarian said that he expected to see more of the same kind of political gridlock that has marked efforts to avoid the series of tax hikes and spending cuts known as the "fiscal cliff."  "They will do the same thing with the debt ceiling, and that's why I think we're going to see a pop in the VIX," he added…….

Read all about it at

The Big Bummer: Experts Forecast the Cost of Failure to Compromise

Even if President Obama and Republicans in Congress can reach a last-minute compromise that averts some tax increases before Monday’s midnight deadline, experts still foresee a significant drag on the economy in the first half of 2013 from the fiscal impasse in Washington.

While negotiators in the capital focus on keeping Bush-era tax rates in place for all but the wealthiest Americans, other tax increases are expected to go into effect regardless of what happens in the coming days. For example, a two percentage point jump in payroll taxes for Social Security is all but certain after January 1, a change that will equal an additional $2,000 from the paycheck of a worker earning $100,000 a year.

Many observers initially expected the lower payroll-tax deduction rate of 4.2 percent to be preserved. But in recent weeks, as it became clear that political leaders were prepared to let that rate rise to 6.2 percent, economists reduced their predictions for growth in the first quarter accordingly…..

Treasuries Drop as Deadline for Fiscal Cliff Approaches

Treasuries fluctuated as Democrat and Republican lawmakers have just hours left to agree on a budget deal that both sides say is necessary to prevent a blow to the nation’s economy, Bloomberg reports.

U.S. government securities gave up their first-place rank among world bonds in 2012 as signs of improvement in the global economy cut demand for the safety of Treasuries. Benchmark notes rose last week as lawmakers failed to reach agreement to avoid the so-called fiscal cliff of more than $600 billion in spending cuts and tax increases set to start tomorrow. Allowing those changes to take effect would cause a recession in the first half of 2013, according to the Congressional Budget Office.

 “We’ve had a pretty significant move in Treasuries in the past few days,” said Owen Callan, an analyst at Danske Bank A/S (DANSKE) in Dublin. “The market got quite complacent and assumed a deal would be done a lot earlier. It does appear that the two parties are still some way apart but I still think they will come up with some kind of deal or stopgap. Both sides recognize the danger of not coming to an agreement.”  The 10-year yield was little changed at 1.70 percent at 7:37 a.m. in New York, according to Bloomberg Bond Trader prices…..

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N.Y. Wins U.S. Court Review of $415 Million Madoff Fight

New York Attorney General Eric Schneiderman persuaded a federal judge to decide a dispute with the Bernard Madoff brokerage trustee over distributing a $415 million settlement with a Ponzi scheme investor to victims of the fraud, according to the good folks at Bloomberg.

U.S. District Judge Jed Rakoff in Manhattan said he was convinced the case, started in bankruptcy court by trustee Irving Picard, requires a ruling by a higher court “after carefully considering the parties’ written submissions and oral argument,” according to an order filed today…..

Read all about it at

Markets Queazy: Last Trading Day of 2012 Becomes a Cliff Hanger


According to CNBC even if Congress cobbles together some type of "fiscal cliff" band-aid deal, it may only appease markets for a short time.

Stock futures were higher Sunday night but still pointed to a lower opening Monday,after Friday's steep decline.  Along weekend of budget talks between Senate leaders ended with no resolution,but the Senate returns Monday at 11 a.m. ET. The so-called "fiscal cliff" is the double slam the economy would feel from the $600 billion expiration of tax breaks and the onset of automatic spending cuts that will start hitting the defense department and other government agencies as of Jan. 1.

Monday promises to be a day of high anxiety as the Senate spends the final hours of the year trying to strike a deal on tax and spending elements of the so-called"cliff" that would also then have to be approved by the House….

Here's Why There's STILL A 2-1 Chance Of A Fiscal Cliff Deal Before The Deadline

From BI Lately we've been closely following Eurasia Group analyst Sean West (find him here on Twitter) who has been "dovish" all along on the outcome of the talks.  We asked him after today's festivities whether he is still optimistic, and he says he is, and that he puts the odds of a deal at "2-1."
The key development today, says West, is that Senate leadership has brought other Senators into the fold:

I'm looking for a deal to be announced overnight or in the morning.  Leadership has now brought all their members into the loop so they will have ownership and little reason to complain about swift Senate action. The House is more of a wildcard but I bet if the White House and Senate get a deal, The House will pass it and stop the fiscal cliff before it starts.

Why does this matter?
The caucus briefings today were an opportunity for rank and file Senators to be brought into the process and understand what each side had put on the table. It's no longer a secret one on one negotiation; some members might have had qualms about fast tracking the product of a totally private negotiation. Now swift passage of any deal will be easier, at least in the Senate.

And fundamentally, both sides really want a deal now...

Hedge Funds Cut Bullish Bets to Lowest Since June: Commodities

Did somebody use the word recession?  According to Bloomberg’s Elizabeth Campbell hedge funds cut bullish commodity bets to a six-month low as mounting concern that slowing economic growth will erode demand drove prices toward the first fourth-quarter retreat since the global recession.

Speculators reduced net-long positions across 18 U.S. futures and options by 11 percent to 675,625 million contracts in the week ended Dec. 24, the lowest since June 19, U.S. Commodity Futures Trading Commission data show. Gold holdings reached a four-month low, while those for copper dropped for the first time in five weeks. Investors are the most bearish on natural gas since May.
The Standard & Poor’s GSCI Spot Index of 24 raw materials fell 3.2 percent since Sept. 30, the first retreat for the period since 2008....

Pimco: 2013? More job woes and slow going

From Bloomberg: Bond guru Bill Gross has spoken: he expects stocks and bonds to return less than 5 percent in 2013 as high unemployment persists, he wrote in a Twitter post.

The message from Gross, manager of Pacific Investment Management Co., the world’s biggest bond fund, affirms what he wrote this month in his December investment outlook.

Newport Beach, Calif.-based Gross wrote yesterday in the post: “2013 Fearless Forecasts: 1) Stocks & bonds return less than 5 percent. 2) Unemployment stays at 7.5 percent or higher. 3) Gold goes up.”

US bond markets are scheduled to close early today and remain shut on Jan. 1 for the New Year’s Day holiday. Stock trading in New York will be closed tomorrow…..

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Sunday, December 30, 2012

Weird's Deep Thoughts (Sunday Worst Case Scenario Edition): The Biggest Banks Are Risking An Endless Cycle Of Bankruptcy

According to the Telegraph’s Harry Wilson, Large banks risk getting caught in "perpetual" cycle of bankruptcy like aerospace companies and carmakers unless they radically alter the way they do business, according to a leading industry consultant.

Alix Partners, one of the most influential advisers to senior banking executives, warns that global investment banks must tackle head-on issues such as bonuses and their addiction to the "steroids" of debt-fueled growth.

"Just look at the auto manufacturing and commercial aviation industries, where over the past two decades, changes in regulatory and operating environments combined to render formerly solid businesses into perpetual wards of the bankruptcy court," said the consultants…..

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Saturday, December 29, 2012

Evil SAC: A fascination of Wall Street, and investigators

From the NY Times: You want the headquarters of Steven A Cohen, one of the most successful financial speculators of our time, to look like Dr Evil’s secret lair. But it is just another office-park building, a low-slung affair of tinted glass and red brick, on the southern fringes of Stamford, Conn……

It is, perhaps, understandable. On Wall Street, Cohen is envied and feared in equal measure. Hedge fund managers like him have helped redefine what it means to be rich, even if most ordinary people don’t quite understand what they do or how they do it.

For years, the investigations had swirled around SAC, but that was about all. Then, on the afternoon of Nov. 28, the word went out across Wall Street: the Securities and Exchange Commission was warning that it might go after SAC, too….But there is also this undeniable fact: The government inquiry has linked six former SAC employees to insider trading while at the fund; three have pleaded guilty….

5 Totally Wild and Crazy Things You Should Do Before The Financial Apocalypse

Huffington Post’s  Catherine New writes: On Friday, President Barack Obama met with congressional leaders to work on a "fiscal cliff" compromise, but no deal had been reached as of happy hour. Should the country topple over the cliff, we've created a list of five crazy -- emphasis on crazy -- suggestions as to how you can save yourself from the rocky landing. 

1)Tell Your Boss You Want A Pay Cut. With the expiration of the Bush-era tax cuts, everyone's income tax rates will revert back to higher 2001 levels unless Congress reaches a compromise. Here's one sure way to lower the tax bill: Make less money next year and ask for more vacation in exchange. Heck, you might consider bartering your services for pine cones if the cliff dive takes a while...

2) Dump All Your Investments. In addition to market volatility making stocks wobble, high-income investors are about to get hit with a tax hike on their earnings starting Jan. 1. Meanwhile, the rest of us may as well cash out to take advantage of this year's lower capital gains tax rate; a key proposal in the fiscal cliff negotiations is a bigger capital gains tax bite….

Forget The 'Vampire Squid' — Goldman Made An Incredible Comeback In 2012

BI reports: Almost everyone loves to hate on Goldman Sachs, a.k.a the "Vampire Squid". Goldman's image and that of its CEO, Lloyd Blankfein, have been bruised by the criticism they have received over the bank's role in the financial crisis as well as the hefty compensation packages.

It's been a rough last three years. However, we've noticed that Goldman and Blankfein have made quite a comeback in the last year in terms of boosting their public image.  While other big banks that have seen the whale trade, the LIBOR and money laundering scandals, Goldman has avoided all of that making them look much better by comparison……

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Friday, December 28, 2012

Shopper Finds Chilling Letter In Halloween Decorations Describing Chinese Factory

Randy Rasmussen/The Oregonian reports:   Julie Keith, a 42-year-old vehicle donation manager at a southeast Portland Goodwill, at one point considered donating the unopened $29.99 Kmart graveyard kit. It was one of those accumulated items you never need and easily forget. But on a Sunday afternoon in October, Keith pulled the orange and black box from storage. She intended to decorate her home in Damascus for her daughter's fifth birthday, just days before Halloween.  She ripped open the box and threw aside the cellophane.  That's when Keith found it. Scribbled onto paper and folded into eighths, the letter was tucked between two Styrofoam headstones:
The letter describes conditions at a forced labor camp in China.

  "If you occasionally buy this product, please kindly resend this letter to the World Human Right Organization. Thousands people here who are under the persicution of the Chinese Communist Party Government will thank and remember you forever."
The graveyard kit, the letter read, was made in unit 8, department 2 of the Masanjia Labor Camp in Shenyang, China….

Only in America: Teachers Flock To A Free Gun Training After The Newtown Massacre

According to Peter Foster, The Telegraph, teachers have flocked to a Utah firearms training programme to teach them how to tackle an armed assault like the Sandy Hook elementary massacre that left 20 children and six teachers dead earlier this month.

More than 200 teachers responded to the course offered by the Utah Shooting Sports Council came a week after the National Rifle Association, the powerful national gun lobby group, launched a highly controversial campaign to put armed guards in every school in America.

"I'm thinking this would be a great opportunity to protect the children and protect the teachers if that opportunity arose. That's the reason I'm here," Stephen Pratt, a third grade teacher who was one of the 200 to get a space, told a local television channel…..

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Investment banks face hard times

Already struggling at home with weak revenues and tough new capital and leverage requirements, investment banks are now also facing a slump in their once most promising business - emerging markets.

Fees are plummeting because of a sharp decline in first-time share listings and mergers across such economies.  Given the shaky economic outlook and weak equity valuations it is hardly surprising that global deal-making volumes are taking a hit. But the slump in emerging markets, an area banks had most hoped would drive growth, is especially precipitous.

Western banks conducted over half of all equity financing deals in emerging markets last year, compared with just 22 percent back in 2005, James Sproule, head of capital markets research at Accenture in London, has said.  The big money came from…

Here Are 44 Companies That Get Slammed If The Government Slashes Spending

BI’s Rob Wile reports: Every company has been bracing for the fiscal cliff in their own ways.
Some have been delaying capital expenditures until uncertainty clears up, while others have been dumping cash on their shareholders in the forms of special or accelerated dividends.

But the companies significantly exposed to government spending can do little but lobby as they wait to see how sequestration will unfold…….

Weird’s Deep Thoughts (Friday Noon Revelation): Want to Recession-Proof Yourself? Join the Creative Class

Looking to thrive in our new, post-recession economy? Then it’s essential to focus on doing work that it would be near-impossible to program a computer or robot to do.  A fascinating study, published in the Cambridge Journal of Economics in 2012, found that Americans in the creative class — those in jobs such as engineers, artists, scientists and educators —  had a lower chance of being unemployed from 2006 to 2011 than those employed in the service sector or working class jobs, such as construction or manufacturing.

Other research has already showed that those with college degrees fared better than those who lack them in the last recession. This study looked beyond education levels alone and drilled down into how the jobs people do and the skills required to do them affected their employment rates.
Having a college degree alone isn’t a vaccine against unemployment, as many recent graduates know all too well. As the study shows, those who are most valued in today’s economy are applying whatever education they have–whether it’s a high school diploma or a graduate degree — to fields that require a high degree of knowledge, creativity and human judgement. The work they do can’t easily be automated….

Read all about it at

Massive East Coast Port Strike Averted

A possible strike by 14,500 longshoremen at 14 major East Coast ports has been averted, the Federal Mediation and Conciliation Service (FCMS) announced today.  The main issue of contention between the International Longshoremen's Association and the U.S. Maritime Alliance was container royalties, payments made to workers based on how much cargo they handle.

In a statement today, George H. Cohen, director of the FCMS, announced the strike, set to begin on December 30, would not go forward….

Hitler parody leaves French bank BNP red-faced

From mobile.france24: French banking giant BNP was left red-faced this week after it emerged managers were shown a motivational video featuring a parody of a famous scene from the film "Downfall" in which Adolf Hitler is portrayed as the boss of Germany's Deutsche Bank.
It’s a scene that has been parodied thousands of times before to comic effect. But it appears not many people have seen the funny side of one particular version made by executives of French bank BNP Paribas.

The moment in the 2004 German film "Downfall" when Hitler, played by Bruno Ganz, berates his generals upon realising the war is lost has been reworked to satirize just about every crucial moment in modern sport and politics.

Whether they portray the Führer realising that Manchester United have lost the league title or that Barack Obama has been re-elected, the spoof videos have proved undisputed hits on YouTube.
But the version created by two executives at BNP is unlikely to go viral. In the video, which was shown to around 100 managers from around the world at a seminar in Amsterdam last year, Hitler is turned into a fuming boss of Germany’s Deutsche Bank reacting furiously to news that BNP has gained an edge in the foreign exchange market…..

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A big ship storm: Dockworkers strike to cost US billions

With dockworkers threatening to strike this weekend, businesses that rely on tens of billions of dollars worth of cargo flowing through the New York-New Jersey waterfront are starting to make costly contingency plans.

The International Longshoremen’s Association, whose grip extends across East Coast and Gulf Coast ports, is preparing to walk off the job on Sunday after failing to reach a deal with a group of shippers and port operators over container royalties.

The threat of a huge port shutdown has already led some supply-chain managers to divert their goods to other ports and ship them by rail or air instead…

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High-Speed Traders Race to Fend Off Regulators

High-frequency trading firms are fighting to fend off regulation as scrutiny of their practice of unleashing blizzards of orders coincides with repeated technical glitches in the markets. As the firms work to convince policy makers their practices are benign or even beneficial, one of their primary tools has been research seeded by the industry itself, promoted by lobbying that has increased in recent years.

Yet research conclusions presented as firm endorsements of high-frequency trading don't always square with reservations harbored by some researchers themselves, who question how far existing studies can go to pin down the effect rapid trading has on the overall market….

Read all about it at

Pimco ♥ New York

From Bloomberg: Pimco’s Bill Gross more than doubled his holdings of municipal debt sold in New York, helping propel the world’s largest bond fund to its biggest investment in local securities in six years. The $285 billion Total Return Fund, which Gross runs at Pacific Investment Management Co., boosted its New York state allocation to about $3 billion in the quarter ending Sept. 30, from $1.4 billion as of June 30, according to a regulatory filing....

Thursday, December 27, 2012

Porsche wins dismissal of U.S. hedge fund lawsuit over VW

Porsche Automobil Holding SE on Thursday won the dismissal of a New York lawsuit by 26 hedge funds that accused the German automaker of causing more than $1 billion of losses by cornering the market in Volkswagen AG shares.  Reuters reports that a five-justice panel of the New York State appeals court in Manhattan unanimously found that Porsche had met its "heavy burden" to establish that the state was the wrong place in which to bring the lawsuit.  That panel reversed an August 6 ruling by New York State Supreme Court Justice Charles Ramos that let the case by hedge funds including Glenhill Capital LP, David Einhorn's Greenlight Capital LP and Chase Coleman's Tiger Global LP proceed.

The funds accused Porsche of engineering a "massive short squeeze" in October 2008 by quietly buying nearly all freely traded ordinary VW shares in a bid to take over the company, despite publicly stating it had no plans to take a 75 percent stake.  When Porsche revealed it had amassed control of roughly three-quarters of VW, shares of VW soared, briefly making the Wolfsburg-based carmaker the world's biggest company by market value. The surge caused losses for hedge funds that had bet on a decline in the stock price.

Downer: Why Apple’s CEO Pay Dropped By More Than $370 Million

Apple shares have stumbled since peaking in late September, but by almost every other metric the company had a blockbuster year in 2012. Forbes says that is reflected in the richer pay packages awarded to most of the company’s senior executives, with the exception of Chief Executive Tim Cook.

CFO Peter Oppenheimer, technologies chief Robert Mansfield, general counsel Bruce Sewell and operations head Jeffrey Williams will each bring home more than $68 million in total compensation in 2012, while Cook will take home a paltry-by-comparison $4.2 million. The figures turned up Thursday in a preliminary proxy statement the Cupertino, Calif. company filed with the SEC.

The reason is by no means a reflection of a bad job by Apple’s boss. When Cook was promoted to CEO in August 2011 — shortly after Steve Jobs stepped down and weeks before his death — the new chief was granted 1 million restricted stock units with a 50/50 vesting schedule five and ten years after the grant date.

Adventures in Banking: Citi, 4 Other Banks Fined $3.35 Million Over Muni-Bond Lobbying

Bloomberg’s Brian Chappatta writes:  Citigroup Inc. (C) and Bank of America Corp.’s (BAC) Merrill Lynch are among five firms that will pay $4.48 million to settle regulatory claims they used funds from municipal and state bond deals to pay lobbyists.

Local authorities were unfairly asked to reimburse payments that the firms made over five years to the California Public Securities Association, a lobbying group, to help influence the state, the Financial Industry Regulatory Authority, which oversees securities firms, said today in a statement. The firms inadequately described the fees, wrapping them into bond- underwriting expenses, Finra said....

Adventures in Retail: I Want To Buy A Sorbet Maker, Sears Keeps Hanging Up On Me.

From Consumerist: We have a hypothesis here at Consumerist. The Sears Holdings Corporation is no longer a retailer, but is only an anti-capitalist prank on a global scale. How else can you explain a company that has a global retail presence, yet seems determined not to sell anything? The latest chapter in this saga comes from Kelly, who wanted to buy a small kitchen appliance that turns frozen fruit into delicious sorbets. Sears, perhaps with a hangover and in desperate need of some personal space after spending the holidays with its more crass cousin Kmart, keeps hanging up on Kelly every time she calls to see whether the item is in stock. She’s taking the hint now.

In my search to purchase a nifty kitchen device that turns frozen fruit instantly into a sorbet/puree called the Yonana, I’ve come to learn that Sears has the best deal on these devices, at $29.99. When using the online portal, I quickly learned that they were sold out of the devices. Attempting to call my nearby Sears store, at [redacted], yielded no better results, but for a different reason. I’ve attempted to contact them no less than 4 times today…..

Some 'Cliff' With Your Coffee? Starbucks Urges Unity

You know how when a situation is desperate the Pope tells people to pray?  And you know how much good that does?  Well according to CNBC Starbucks will use its ubiquitous coffee cups to tell U.S. lawmakers to come up with a deal to avoid going over the "fiscal cliff'' and triggering automatic tax hikes and spending cuts.

Chief Executive Howard Schultz is urging workers in Starbucks' roughly 120 Washington-area shops to write "come together'' on customers' cups on Thursday and Friday, as U.S. President Barack Obama and lawmakers return to work and attempt to revive fiscal cliff negotiations that collapsed before the Christmas holiday.

Whether members of Congress actually drink in the message is another matter. While the concentration of Starbucks cafes is high in the vicinity of the White House, it's relatively low near the U.S. Capitol. Members of the House and Senate enjoy private dining facilities and many of their offices have coffee machines….

Hedge Funder Builds U.S. Largest and Most Expensive Home

When is too much too much?   It’s a question  the tiny hamlet of Hastings-on-Hudson is  asking these days.  The town will boast one of the largest and most valuable homes in the country when hedge fund founder David E. Shaw's new residence is completed according to rivertown‘s daily voice.

Shaw's Rivertowns residence, which is perched on a hill with a panoramic view of the Palisades overlooking the Hudson River, is being built on several prime properties along a stretch of Broadway just south of the Dobbs Ferry-Hastings line. The founder of D.E. Shaw & Co. had been planning the large house for several years.  Early reports estimated the home would cost $75 million, but the value of the home will be fully assessed when construction is complete. The 4.5-acre estate will include a 30,000-plus square-foot single-family house, said Hastings building inspector Deven Sharma. The land previously held two houses and a swimming pool that were removed to make room for the new project, according to Planning Board documents…

Rajaratnam agrees to pay $1.5 million in SEC case

U.S. hedge fund manager Raj Rajaratnam has agreed to pay disgorgement of about $1.5 million in a civil lawsuit filed by the Securities and Exchange Commission, and to waive his right to appeal the judgment, Reuters reports the court papers showed.

Rajaratnam would make the payment, representing the profits obtained by unlawful means, to the SEC within 90 days after the entry of the final judgment in court records, according to a filing.

Rajaratnam, currently serving a 11-year prison term, was convicted of securities fraud and conspiracy in May 2011. He was accused of running a network of friends and associates who leaked corporate secrets to him for years….

Geithner Warns: US Hits Debt Ceiling Monday

In case you've been have an extended senior moment according to the CNBC report: "I am writing to inform you that the statutory debt limit will be reached on December 31, 2012," he wrote in a letter to Congress, "and to notify you that the Treasury Department will shortly begin taking certain extraordinary measures authorized by law to temporarily postpone the date that the United States would otherwise default on its legal obligations."

Such measures, he said, can create some $200 billion in headroom under the debt limit, which would buy a couple months' time under normal circumstances. However, because of the impending "fiscal cliff," the effect of such measures can't be certain, he wrote…..

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Wednesday, December 26, 2012

..And Another Analyst Indicted .....This Time on IBM Insider-Trading Charges

From Bloomberg: Australian financial analyst Trent Martin was indicted in the U.S. on charges stemming from an alleged insider-trading scheme tied to International Business Machines Corp. (IBM)’s $1.2 billion acquisition of SPSS Inc. Martin was charged with conspiracy and securities fraud, federal prosecutors in Manhattan said yesterday in a statement. Martin also faces a civil suit over the alleged scheme filed by the U.S. Securities and Exchange Commission.

Prosecutors and the SEC didn’t identify where Martin worked when the alleged crimes occurred. According to the SEC’s complaint, Martin left a New York brokerage in September 2009 to join a “related” firm in Stamford, Connecticut, where he remained until November 2010….

Read all about it at

Belated Seasons Greetings From Madoff, Says Insider Trading Has Gone on 'Forever '

The recent rash of insider trading cases may be a shock to some on Wall Street, but not to one long-time market player: Bernie Madoff.

In a Christmas Eve letter from the medium security federal prison in North Carolina where he is serving a 150-year sentence for running a massive Ponzi scheme, Madoff tells CNBC that insider trading has been around "forever."

He also rails against what he calls a lack of transparency in the financial markets, and says the growth of hedge funds is forcing market players to take outsized risks in order to earn decent returns.

Madoff has granted only a handful of interviews since he went to prison in 2009. More recently, he has declined to speak on the record about his case. But he was willing to share some views about the financial markets in the e-mail, which he sent to CNBC and a handful of attorneys and academics he has been communicating with.....

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Hey Dudes.Guess What Time It is Garbage Time!

Joshua M Brown at the reformed broker:  Garbage time, also known as "junk time", is a term used to refer to the period at the end of a timed sporting event that has become a blowout when the outcome of the game has already been decided, and the coaches of one or both teams will decide to replace their best players with substitutes.This serves to give those substitutes playing time experience in an actual game situation, as well as to protect the best players from the possibility of injury.  Garbage time owes its name to the fact that that period in a game is frequently marked by a significant drop in the quality of game play.
1. Anyone who's had a good-to-great year is playing light, their books are closed and the track record is not being put at risk. Profits and losses at these same desks have likely already been harvested as well. So, in general, outsized trades are only being put on for window-dressing, tape-painting or other non-traditional reasons. Basically, this means not to make too much of what you're seeing, stop chasing cars like a cartoon dog with its tongue hanging out.
2.  Garbage Time is a total "amateur hour." Buysiders like myself (especially those who've been on the sell side) know better than to come into this week with any real orders of consequence. The kid who's been left behind to execute trades while the Big Dogs are in Turquoise is probably not your best bet, lol….

Can Pension Funds Be the Soul of Private Equity?


From New York Magazine: There’s a key scene in Big where Tom Hanks wakes up, stumbles out of bed, looks in the mirror, and discovers that he’s been turned from a 12-year-old boy into a full-grown, powerful man. Something like that happened in the financial world last week when the California State Teachers Retirement System, a public pension fund, found itself bossing around Cerberus Capital Management, the mighty New York private-equity firm. Cerberus, it emerged, owns the company that makes the Bushmaster semiautomatic rifle used in the Sandy Hook spree (along with other gun companies). CalSTRS, which has $750 million invested in Cerberus funds, made it known that it wasn’t happy about this news.

Hours later, Cerberus — whose CEO's father lives in Newtown — announced that it was putting its firearms holdings up for sale.

It was a rare turn of events in the private-equity business, which typically sees pensions bowing to buyout shops, not the other way around. And now….

Faster traders take all

In a new study, Andrei Kirilenko, the chief economist at the Commodity Futures Trading Commission, along with researchers at Princeton University and the University of Washington, examined high-frequency trading in a futures contract called the e-mini S&P 500, between August 2010 and August 2012.

The researchers did something they’d never been able to do before: Used actual trading data from individual firms, though none were identified.  What that data does is help explain the frenzy in today’s markets: The most aggressive firms tend to earn the biggest profits, hence the incentive to trade as quickly and as often as possible.  Furthermore, these traders make their money at the expense of everyone else, including less-aggressive high- frequency traders…..

Read all about it at

Lousy Holiday Sales for 2012

Hard times, fewer presents under the tree. Analysts are calling the 2012 holiday-shopping rush the slowest spending growth since the 2008 recession. Between the end of October and Christmas Eve retail sales for the season rose a mere 0.7 percent from last year, according to MasterCard’s research unit, SpendingPulse. SpendingPulse’s vice president of research called it “a lost season.” Hurricane Sandy was one factor suppressing growth, but even online sales registered lackluster gains….

Monday, December 24, 2012

That’s it for us today. We’ll be on a light schedule next week, and will see you back here full time on January 2nd. Happy holidays and to All A Good Night. Here’s hoping Santa leaves you some super presents!

Wall Street This Week Is Basically a Bunch of Robots

The children were nestled all snug in their beds, while HFT algo-bots checked on the spreads.

Seriously people, most people even peripherally involved in Wall Street trading are already ensconced in their holiday prep, and the rest will take off at 1 p.m. today, when the stock exchanges close. But don't let that fool you. Money never sleeps, and it sure as hell doesn't drink eggnog and watch A Christmas Story around the fireplace. And there's a lot to trade this week — most notable, the fiscal cliff negotiations, which could swing the Dow hundreds of points in either direction, depending on whether Congressional Republicans can get their acts together.

Which makes it all the more worrisome that traders are deputizing their computerized trading algorithms to take over for them during the holidays....

Funds for a Falling Apple

From Barrons: In a note yesterday, Cumberland Advisor’s David Kotok explains that the S&P 500-stock index (SPY) has gained just 0.6% from election day through Dec. 21–a fact that has many pundits blaming the fiscal cliff. Not Kotok–he blames Apple (AAPL).

Why Apple? Kotok looked at a bunch of exchange-traded funds that track different versions of the S&P 500–with much less exposure than the market-cap-weighted version’s 3.8% share of the portfolio–and finds that nearly all of them have outperformed.

Apple’s nearly 28% decline since mid-September hasn’t been kind to investors who bought  mutual funds with big stakes in the stock, reports Reuter’s David Randall….

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Weird’s Deep Thoughts (Monday Enlightenment Edition): Will 2012 Mark the Beginning of American Decline?

Bloomberg's Simon Jonson writes:  “A modest man,” Winston Churchill supposedly quipped about Clement Attlee, his successor as prime minister, “but then he has so much to be modest about.” We should say the same about economists, particularly their ability to forecast anything in a useful and timely manner. Those predicting an imminent American economic decline have usually been no exception. This time, though, they may be on to something.

Prevailing arguments about when the era of U.S. dominance would end, and which country would supplant it, have been wildly and consistently wrong for half a century. In the 1950s, Soviet leader Nikita Khrushchev was taken seriously when he told Western ambassadors “We will bury you.” Today, his country no longer exists. In the 1980s, Japan was supposedly going to be No. 1; now the question is whether the precipitous decline in its working-age population will generate a fiscal crisis.

The Germans -- or Europeans more broadly -- were thought to be on the brink of elbowing aside the U.S. several times, including in the run-up to the global financial crisis in 2008, when the euro seemed to threaten the dollar’s role as the pre- eminent reserve currency. Remember when Brazilian model Gisele Bundchen was quoted as saying she preferred to be paid in euros? Now the euro-area economy looks very sick indeed, and Ms. Bundchen is apparently long American icons (she married football player Tom Brady)……
Read all about it at

Lawsuits cast darker shadow over banks than Libor fines

While banks appear to be brushing off record fines for rigging interbank interest rates, investors are starting to worry about a rising tide of civil lawsuits from disgruntled customers, according to

UBS shares touched 18 month highs after U.S., Swiss and British regulators on Wednesday fined the bank a near record $1.5 billion for fiddling interest rates, the second regulatory fine for manipulating the London interbank offered rate (Libor) and its euro equivalent Euribor.  But the "big unknown" cost of repairing the damage caused by the fixing of rates used as a benchmark for pricing trillions of dollars worth of financial contracts is civil litigation, said Paras Anand, European equities head at Fidelity Worldwide Investment.

"That is one thing at the back of our minds that we have to be cognizant of," Anand said. Fidelity Worldwide holds around 1.2 percent of UBS stock….

There’s plenty of blood in those bank bonus pools

Wall Street banks have had a great year, with profits up above pre-crisis levels. So this is traditionally the time of year when bankers begin licking their chops and salivating over their share of the bonus pool, according to a NY Post report\.

Back in the day — before the crisis — managing directors would pocket between $1 million and $2 million for their trouble. This year, the starched shirt, gold-cufflinked crowd may be in for a bit of surprise — even though the balance sheet looks great.

So can you guess where those bank profits are coming from?  Yes, from the bankers’ silk-lined pockets. For the last several years, their paychecks have been shrinking....

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Look Who Paid Partners $436 Million Last Year

Brevan Howard Asset Management LLP paid its partners as much as 269.8 million pounds ($436 million) in the 12 months ended in March, more than double the amount it paid them a year earlier, after the hedge fund’s investment performance beat rivals...

The highest-paid partner, who wasn’t identified, got 78.9 million pounds, up from 64.8 million pounds in the year earlier, according to a filing by the London-based fund posted Dec. 22 on the U.K. Companies House website. Brevan Howard had 49 designated members during the period, meaning each partner received an average pay of as much as 5.5 million pounds, the filing showed,…

Sunday, December 23, 2012

A Firm That's Been Investing With SAC Capital Since The 90s Just Pulled Out Of The Fund

Titan Advisors, a wealth management firm that's been investing with SAC Capital is ending their relationship with the hedge fund, The Wall Street Journal reports.

Clients told the Journal that the firm, which invests $3 billion in hedge funds, was severing ties with SAC because of ongoing investigations into its activities by securities regulators….

HuffPo Blog: For Hedge Funds, It's All in the Game

"There are few greater examples of the irrationality of investors than the world of hedge funds. Hedge fund managers are paid enormous sums, usually 2 percent of the investment amount and 20 percent of profits above a fixed level. As money has poured into these funds over time, hedge fund managers and others working in the industry have become fabulously wealthy. But, now, here's the rub, the investors haven't benefited. In fact, hedge fund investments have consistently performed substantially worse than basic investments in low-fee equity index funds, exchange traded funds or a simple mix of equity and bond funds.

"I am an outsider to the world of hedge funds in that I neither work nor invest in hedge funds. Without an ounce of insincerity, I can state that I don't understand how this industry survives, let alone has thrived for so long. Hedge funds are not generally open to average investors, but rather receive their funding from institutional investors (the source of roughly two-thirds of hedge funds' assets) and people categorized as sophisticated investors (presumably wealthy individuals with investing knowledge/experience).

"Those investing in hedge funds are generally not naïve to the fact that these funds, on average, provide much lower returns than equity indexes. Moreover, investors generally are aware that the lower returns are due to the high fees that the hedge fund managers extract from investors. Yet, in spite of the historically poor return on investment, money continues pouring into hedge funds -- they currently manage $2.2 trillion in assets or roughly four times more than in 2000….
More?  Go read

Wall St. nixes Alpha traders and hires Beta baby sitters

Wall Street has had its fill with the Type-A risk takers who can cost a firm billions after they have made their millions and moved on.  The hiring focus now is on the back-office compliance staff to rein in the risk takers.  But the Street also can’t find enough rock-star talent to advise America’s wealthiest individuals.

These financial advisers and private bankers belong to an exclusive club — one of the few bright and rewarding exceptions in a generally dismal Wall Street jobs scene.

“It’s a solid business, more the tortoise than the fast-moving hare,” said adviser Gerry Klingman of Klingman & Associates on Avenue of the Americas. “Before the financial crisis, sales and trading, derivatives and hedge funds were strong,” he added. “Not anymore. Now the baby boomers are aging and need financial advice….”

Steak Lovers Brace Yourselves….

NY steakhouses suffer as Midwest drought sends meat prices soaring  The Midwest drought is putting a chill on the grill.  Meat prices are “through the roof,” said William Degel, owner of Uncle Jack’s Steakhouses in Midtown and Queens. “It’s at an all-time high.”

He says he’s been forced to serve smaller portions and raise prices — the porterhouse for two increased by $5 to $94 and the filet mignon by $2 to $35 for the 10-ounce and $45 for the 16-ounce. “Even chopped meat has gone up dollars a pound,” Degel said.

Beef was already in short supply — a victim of earlier droughts and rises in the costs of fuel and feed. During this year’s drought, ranchers reluctant to buy expensive grain feed brought young — and thin — cattle to market early, which will spur another shortage and could threaten fatter cuts of beef….

Saturday, December 22, 2012

Martoma indicted by grand jury

According to a report in the NY Post Federal prosecutors yesterday lost one opportunity to build a case against hedge fund manager Steven A. Cohen when a grand jury indicted one of Cohen’s former employees on charges related to an insider trading scheme, severely reducing the possibility he would cooperate as a witness against Cohen.

The grand jury returned an indictment against Mathew Martoma, a former portfolio manager at CR Intrinsic Investors, one of SAC Capital Management’s funds, in what prosecutors have called the “most lucrative” insider trading scheme ever…..

Friday, December 21, 2012

PIMCO's El-Erian: Ugh, Recession is Now More Likely

Fasten your seatbelts, Dudes and Dudettes, according to El-ERian: Here is a simple way to think about the political calculus of Washington's latest twists and turns. And — unfortunately — it suggests that economic and market dislocations may be needed to get our politicians to cooperate and govern properly.

A major issue from day one was the extent to which the lack of trust between our political parties undermined Washington's ability to govern.   Hoping to resolve this problem and thus deliver consensus, party leaders opted in the summer of 2011 for a very big stick: threaten the country with a major economic setback as a way to get the rank and file of both parties to cooperate.
The stick succeeded in catalyzing serious negotiations between President Obama and House Speaker Boehner. But the stick was not big enough….
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