Sunday, March 31, 2013

Meet The Man Who Lost $25 Billion In One Year

A year ago, Eike Batista was Brazil’s richest man, and his goal of climbing to No. 1 in the world seemed within reach, according to Bloomberg. After founding five publicly traded natural-resource companies in six years, he’d just sold a stake in his EBX Group conglomerate that valued his holdings at $34.5 billion. His companies had yet to turn a profit, so the deal, struck with an Abu Dhabi sovereign wealth fund, was mainly a testament to Batista’s vision: an integrated empire of companies, shipping oil and iron ore to China from a port he was building near Rio de Janeiro. “I think Eike is a special kind of entrepreneur,” said Brazil’s President Dilma Rousseff during a visit to the port project in April. “He’s a person who comes up with extremely ambitious dreams and then seeks to fulfill them.”  Today, Batista’s empire is under siege….

Read all about it at

Friday, March 29, 2013

Cheesiest Crook of the Day: Illinois Man Charged In 21-Ton Muenster Heist

A man faces the cheesiest of criminal charges in New Jersey. Veniamin Balika, 34, of Plainfield, Ill., was accused of stealing 42,000 pounds of Muenster cheese from a Wisconsin cheese company.  He was arrested at a Bergen County rest area on the New Jersey Turnpike on Monday, the result of a joint investigation with the Saddle Brook New Jersey Police Department and the New Jersey State Police.

“He was charged with receiving stolen property and fencing,” New Jersey State Police Sergeant Adam Grossman told  Balika allegedly attempted to sell the load of 1,135 cases of cheese at the rest area….

Cyprus: Threat Contained, No Plan to Leave Euro

FYI The president of Cyprus said on Friday the risk of bankruptcy had been contained and the country had no intention of leaving the euro, in a speech laden with criticism of Europe's currency union for "experimenting" with the island's fate...

Read all about it at

..And another SAC Capital Trader Charged With Fraud

From WSJ: Early Friday morning, Federal Bureau of Investigation agents arrested a longtime SAC Capital portfolio manager on insider-trading charges, making him the most senior employee of one of the nation’s most prominent hedge funds to be snared in the government’s sprawling probe. Michael Steinberg, 40 years old, was led out of his building on New York’s Park Avenue in handcuffs around 6 a.m. Mr. Steinberg has worked at Stamford, Conn.-based SAC since 1997 and at its Sigma Capital Management unit in New York since 2003, dealing closely with SAC’s billionaire founder Steven A. Cohen.

“Michael Steinberg did absolutely nothing wrong,” his lawyer, Barry H. Berke, said in a statement Friday. “His trading decisions were based on detailed analysis” and information “he understood had been properly obtained through the types of channels that institutional investors rely upon on a daily basis….”

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Taking a Break

Taking a break.  Posting will be light tomorrow for Good Friday. Enjoy the holiday; we’ll see you back here on Monday.

Judge balks at SAC's $602M settlement

Maybe hedge-fund titan Steve Cohen should have waited to buy that $155 million Picasso to celebrate his insider-trading settlement with the Securities and Exchange Commission.  Manhattan federal Judge Victor Marrero said he may not approve a record $602 million settlement between the SEC and an affiliate of Cohen’s SAC Capital because he has questions about controversial language allowing the hedge fund to “neither admit nor deny” wrongdoing….

Thursday, March 28, 2013

Hippie Commune Thrives as Europe Tires of Chaos

CNBC reports that as Europe's financial woes deepen and depositors increasingly question the safety of their savings, some European citizens are looking to escape their economic troubles by joining an Italian commune, replete with its own monetary, political and economic system.

Located in Piedmont in north-western Italy, the "Damanhur" commune calls itself an "eco-society," operating with the help of its own social and political structure and money, the Credito. Since the financial crisis, the community says that there has been a "significant increase" in ordinary people asking to visit or join its community, whose economic system is based on "a mix of free enterprise, solidarity, communal sharing and co-operative trade"….

RIM Swings to Black, Sells a Million Z10s

From WSJ: Research In Motion Ltd., showing a burst of staying power amid two years of dwindling sales and eroding market share, beat most analysts' expectations early Thursday by reporting a surprise profit and maintaining a strong cash position in its fiscal fourth quarter—the first period to include any sales of its new BlackBerry Z10 smartphone, which appears to be selling well so far…

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Bitcoin the Global Economy's Last Safe Haven?

But seriously folks....From Bloomberg: One of the oddest bits of news to emerge from the economic collapse of Cyprus is a corresponding rise in the value of Bitcoin, the Internet’s favorite, media-friendly, anarchist crypto-currency. In Spain, Google searches for “Bitcoin” and downloads of Bitcoin apps soared. The value of a Bitcoin went up to $78. Someone put out a press release promising a Bitcoin ATM in Cyprus. Far away, in Canada, a man said he’d sell his house for BTC5,362.

Bitcoin was created in 2009 by a pseudonymous hacker who calls him or herself Satoshi Nakamoto (and who might be several people). It’s a form of virtual cash used to buy goods and services online. Even by Web standards, it’s a strange and supergeeky phenomenon….

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JPMorgan eyes league’s top spot

From FT: The four biggest deals of the year so far all have one thing in common: JPMorgan Chase played a role, advising the buyers or sellers on the sales of Heinz, Dell, Virgin Media and General Electric’s stake in NBCUniversal.

That string of high-profile advisory work makes it likely that JPMorgan will overtake Goldman Sachs at the top of the league table for quarterly M&A volume for the first time in two years, according to Mergermarket….

Read all aboujt it at

Hedge Fund Titan Buys Hamptons Property for $60 Million

Steven A. Cohen is known for his rapid-fire trading style, moving in and out of stocks with dizzying speed at his hedge fund SAC Capital Advisors.  He seems to be taking a similar approach to his real estate, Dealbook reports.

Mr. Cohen reached a deal last week to pay $60 million for an oceanfront property on Further Lane in East Hampton, on Long Island, according to a person with direct knowledge of the sale. The home, which was listed for sale late last week, is down the road from one he already owns. At the same time, he has put on the market his duplex apartment in the Bloomberg Tower on the East Side of Manhattan, this person said. His asking price: $115 million.

News of Mr. Cohen’s real estate activity surfaced a day after reports that he purchased Picasso’s “Le Rêve” for $155 million from the casino owner Stephen A. Wynn…..

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Cyprus’s Banks Open After Two Weeks as Controls Curb Panic

Cyprus’s banks opened for the first time in almost two weeks, with new rules curbing access to cash preventing an initial panic to withdraw deposits, according to Bloomberg.
 “We expected much more people,” said Argyros Eraclides, manager of a Bank of Cyprus Plc branch in the Stavrou area of Nicosia. “Fortunately there are only some people who needed cash for the day, but customers reacted fantastically. We expected some people to be more aggravated.”
Banks opened at midday local time today, with lines of about 15 to 20 people waiting to enter branches in the Cypriot capital. They close at 6 p.m. The Central Bank of Cyprus’s controls include a 300-euro ($383) daily limit on withdrawals and restrictions on transfers to accounts outside the country....


Wednesday, March 27, 2013

Wall Street’s Biggest Fear!

It’s enough to make financial moguls s#*t in their pants. The departure of Senate Banking Committee Chairman Tim Johnson (D-S.D.) has left a vacancy atop the powerful panel that could fall to one of Wall Street's most outspoken foes, a possibility that has bank lobbyists fretting.
Sen. Sherrod Brown (D-Ohio), whose call to break up and cap the size of major banks has spooked Wall Street, is behind three senators who would have dibs on the gavel, but all three are likely to bypass the opportunity. A Brown chairmanship would also be a boost to his ally Sen. Elizabeth Warren (D-Mass.), strengthening her hand on the panel. Brown's office didn't immediately return a request for comment….

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From Our Time is Money Dept.: Rich Russians Are Hiring Ambulances To Beat Moscow Traffic

Wealthy Moscow residents are reportedly hiring "ambulance-taxis" to beat the city's terrible traffic jams, The National Post reports.

The vehicles, which can cost more than $200 an hour and have been advertised on the internet, supposedly use their sirens to glide through standstill traffic.
Now police are on the lookout for such vehicles…..

Introducing…Quant Trading for Little Guys

Ta-Da!  A new technology shop wants to bring quantitative investing to the masses.

From Hedge Fund Alert: QuantConnect is rolling out a cloud-based service that gives aspiring quant managers the tools to design and execute trading strategies and back-test their programs with historical market data. The offering promises to remove a big hurdle for many quant traders — namely, the high cost of accessing years of market data and the computing power needed to crunch the numbers. QuantConnect is offering the technology free of charge.

The New York firm has been beta-testing the service for the past year with 20-30 programmers, including computer engineers already employed at financial firms and graduate students pursuing careers in quantitative-investment management. In recent months, it has signed up nearly 600 prospective clients at conferences such as TechCrunch in San Francisco and Finovate in London — among them, dozens of Facebook and Google staffers. ...
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Close Your Eyes and Think of England: From Finance to Sex Therapy- London Bankers Escape

From CNBC: Simon Broomer, managing director and founder of career specialists CareerBalance, told CNBC that he had seen a dramatic increase in the numbers of City workers calling on his company for advice on what to do after losing their jobs.  Many of those workers are turning to career coaches and advisors to enhance their resumes as the competition heats up, while others, Broomer said, "just want to get away from the City and do something different."

Case in point: Mike Lousada, an investment banker turned sex therapist, told CNBC that City workers should "follow their passion" and find an interest they could even develop into their own business. Having worked for two decades at Nomura, JP Morgan, Barclays and Societe Generale "amongst others," Lousada told CNBC that his change of career from banking to sexual healing was a life choice.

Called the "orgasm guru" among London's chattering classes, Lousada has built up a reputation as a talented sex therapist with a long waiting list of clients paying 300 pounds ($454) for a therapy session with him...

Read all about it at

Goldman Sachs run for public office? Not.

Goldman Sachs Group, the investment bank nicknamed “Government Sachs” because of senior executives who have moved into public posts, won’t be entering politics itself, Bllomberg notes.

A shareholder proposal that the New York-based company run for office instead of funding political campaigns was discarded, according to a letter last month from the Securities and Exchange Commission, which agreed the firm can exclude the measure from its annual meeting.

Harrington Investments Inc. President John Harrington submitted the proposal last year, saying the $6.39 million in 2012 political contributions from the firm’s employees risks doing more harm to its reputation. He said the bank should explore running for office, using a U.S. Supreme Court ruling that corporations have similar political rights to individuals….

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How Hedge Funds Will Have to Change …Or Else

Institutional investors have spoken – the time to change is now.  "Me-too" funds, products over solutions, and plain old performance - these are the areas in which institutional investors are demanding change or hedge funds will be left for dead, a survey has shown.

Almost three-quarters of investors responding to a survey by SEI Investment Management Services (IMS) complained that there were too many "me-too" funds in the sector - some seven out of ten of them said they were looking for new ideas.

Finding a fund or approach that covered a range of objectives in an investor's portfolio was an important factor, SEI IMS found. Rather than pitching products, fund managers would be well advised to use an interactive, problem-solving approach….

How to Make America a Global Tax Haven

The U.S. corporate-tax rate is higher than that of any other developed country. We have kept it at 35 percent even as other countries have reduced theirs. Republicans, unsurprisingly, want to cut the rate; most of them think 25 percent is the right target. President Barack Obama has suggested that eliminating loopholes would enable a reduction to 28 percent, Bloomberg reports.
A lower rate would lead to more investment, and thus higher wages, in the U.S. But most businesses, especially small ones, don’t pay corporate taxes. They file under the individual income-tax code, partly because it treats investment better than the corporate code does. These businesses have no stake in seeing the corporate-tax rate fall -- especially since their own taxes just rose at the start of the year, when the Bush tax cuts on high earners expired….

Wall Street's Richest Man Is On The Attack

From Forbes: Carl Icahn’s offices carry a distinct museum quality. Three decades of scalps, resulting from some of the most famous hostile takeovers, proxy fights and board assaults in American financial history, cover every cranny of his wood-lined corridors…. Icahn’s backward-looking perch, near the top of Manhattan’s old-school GM Building, has never been more relevant, as fortysomething billionaires like Michael Dell and Bill Ackman are learning to their chagrin. In the last 15 months the 77-year-old has taken positions in and then launched campaigns against 14 companies, a burst that has made him, at an age when he would have long been expected to fade away, the most disruptive individual in business, with a hand in almost every major corporate story in America…..

Read all about it at

Tuesday, March 26, 2013

$27 million Silicon Valley insider-trading ring busted

AP’s Larry Neumeister repoer that the former chief information officer for a technology company and an analyst for a Bay Area hedge fund were arrested Tuesday in a $27 million insider trading case that prosecutors say involved several Silicon Valley companies.

Federal authorities arrested David Riley, 47, a former vice president at Santa Clara-based Foundry Networks, which made networking hardware before it was acquired by larger San Jose rival Brocade Communications Systems for about $3 billion in December 2008; and analyst Matthew Teeple, 41, of Artis Capital Management, a San Francisco-based hedge fund. Each was charged in federal court in Manhattan with conspiracy to commit securities fraud and three counts of securities fraud. If convicted, each could face up to 65 years in prison….

It Looks Like Jim Chanos Is Nailing Another Short — And People Are Starting To Notice

From BI: Last November Jim Chanos spoke about his "two favorite shorts" at London's Ira Sohn Value Investing Conference, both were Brazilian companies. Today we'll just talk about one —Petrobras, Brazil's state oil company. This month it's getting negative attention from journalists and investors alike.

But first, Chanos' thesis (in case you don't remember). He said that state management was suffocating Petrobras' profitability. Basically, the company is drilling expensive oil fields with expensive machinery and hiring workers while the government suppresses oil prices…..

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Introducing Texas, The Germany of America?

Achtung Y'all!!  According to WashPo: Texas has generally been the at the front of the pack of a certain variety of uber-hawkish, vaguely paranoid monetary policy talk over the last few years. Recall it was the state’s governor, Rick Perry, who while running for president strongly suggested that Ben Bernanke would be committing treason should the Federal Reserve print any more money.

But now some in the state, including Perry, are looking to put their money where their mouths are. Literally.  Perry and some in the Texas legislature want to bring the roughly $1 billion worth gold held by the state university system’s investment fund onto Texas soil, rather than in its current resting pace in a vault in New York.

“If we own it,” Perry said on Glenn Beck’s radio show last week, according to the Texas Tribune. “I will suggest to you that that’s not someone else’s determination whether we can take possession of it back or not.”

23 Ways Your Wall Street Job Will Ruin Your Life

According to BI’s Linette Lopez and Julia La Roche: If you're considering going to Wall Street, you should really know what you're getting into.

Yes, you will get paid better than average people all over the world. Yes, you will get to learn new things constantly, and yes, you will be involved in important transactions (well, hopefully) and meet interesting clients. However, there is a downside, and it's generally all in your head.

A Wall Street veteran, who will remain anonymous, gave us a laundry list of ways working on the Street can actually ruin your life. Wall Streeters have to deal with a distorted sense of money, questions about self-worth, arrested development and most importantly, the fact that they never ever have enough time. They can try and pay for it, but that only gets you so much.

The point is — you better love finance if you're getting into this business, because it's going to take over your life….

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Weird’s Deep Thoughts (Tuesday Noon Insight Edition) Has Wealth Inequality in US Sparked Fed's Interest?

From CNBC: The gap between the wealthy and the rest of America is a hot-button issue in Washington–especially in the White House and Congress. And especially during battles over taxes.  But recently, the Federal Reserve has also taken a greater interest in the topic. And some analysts are asking whether financial inequality in the U.S. might soon become part of the Fed's decision-making process.

In a recent research note, Credit Suisse research analysts Neal Soss and Dana Saporta wrote that "the issue of growing income and wealth disparity in the U.S. is gaining stature among Federal Reserve officials and may become the next important macroeconomic variable for monetary policy…."

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Look Who Goldmans’ Biggest Shareholder Will Be

Yes, dear reader.  According to Bloomberg Warren Buffett’s Berkshire Hathaway gave up an opportunity to become the biggest shareholder in Goldman Sachs Group Inc. (GS), choosing to take stock instead of cash profits he might make on a 2008 grant.

Berkshire held warrants that allowed it to purchase 43.5 million Goldman Sachs common shares for $115 apiece until Oct. 1. Under revised terms announced by the companies today, Berkshire will get stock equal to the difference between the average closing price during the 10 trading days preceding Oct. 1 and the exercise price, multiplied by 43.5 million.

The new deal eliminates some of the risk for Omaha, Nebraska-based Berkshire, which would have had to spend about $5 billion to exercise the warrants and then eventually sell the shares to cement a profit…

Read all about it at

Rengan Rajaratnam Pleads Not Guilty to Insider Charges

Rengan Rajaratnam, the younger brother of imprisoned hedge-fund founder Raj Rajaratnam, pleaded not guilty to charges that he took part in an insider-trading scheme tied to his brother’s fund, Galleon Group LLC…

Retail Therapy: Hedge Fund Mogul Treats Himself to a $155M art deal

Feeling sorry for Steven A. Cohen, whose SAC Capital just settled two insider-trading lawsuits with the government for $616 million?  Save it.  Cohen has bought himself a gift — Picasso’s “Le Rêve” for $155 million, the NY Post has exclusively learned.

Billionaire Cohen secretly bought the masterpiece from Vegas mogul Steve Wynn, who famously put his elbow through the 1932 painting of Picasso’s mistress, creating a six-inch tear.  The price is estimated to be the highest ever paid for an artwork by a US collector — and it’s even more impressive because Wynn had previously agreed to sell the masterpiece to Cohen for $139 million in 2006, but accidentally tore the painting the following day….

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BRICS Nations Plan New Bank to Bypass World Bank, IMF

The biggest emerging markets are uniting to tackle under-development and currency volatility with plans to set up institutions that encroach on the roles of the World Bank and International Monetary Fund.

The leaders of the so-called BRICS nations -- Brazil, Russia, India, China and South Africa -- are set to approve the establishment of a new development bank during an annual summit that began today in the eastern South African city of Durban, officials from all five nations say. They will also discuss pooling foreign-currency reserves to ward off balance of payments or currency crises…..

'Funny money' has officially entered the real world

From Fortune: Last week, new U.S. government rules regulating online currencies affirmed the value of what was previously passed off as funny money. Now companies that issue or exchange online cash would have new bookkeeping requirements. For instance, transactions of more than $10,000 would have to be reported.

While one of the big draws of virtual currencies is that they're independent and generally sheltered from the government's watch, the new rules are unlikely to ruin their allure. If anything, they effectively pull the currencies offline and into the mainstream world of finance, making them infinitely more valuable…

Yahoo Wonder Kid Eyes More Startups After $30 Million Sale

From CNBC: The 17-year old founder of mobile news app Summly plans to finish school and start more companies, not resting on his laurels after Internet giant Yahoo purchased his product and made him a multi-millionaire.

Nick D'Aloisio's Summly summarizes and aggregates whole news stories into snippets regardless of who publishes them. The app was snapped up on Monday for an undisclosed fee. Media reports suggest the deal is worth around $30 million…

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A Gigantic Pension Fund Is Reportedly Considering A Change That Should Make Investment Managers Freak Out

Investment News reports that California CalPERS, the second biggest U.S. public pension fund, is weighing taking its massive $255 billion assets under management and moving it to an all-passive portfolio.

Why would this matter?   Well, it would matter a lot for active managers who receive management fees from CalPERS, Josh Brown, who runs the popular financial blog the Reformed Broker, points out on Twitter.   The California Public Employees' Retirement System already has more than half of its investible assets in passive strategies. CalPERS is expected to make the decision in about five months, the report said.

Monday, March 25, 2013

Nobody's Safe! Eurogroup President Spooks Markets By Saying Cyprus Deal Is A New Template

Cyprus finally got a deal done with the EU to bail out its troubled banking system last night.  Instead of levying a nationwide "tax" on bank deposits, the plan follows a more typical restructuring approach, seeing shareholders, bondholders, and uninsured depositors in the country's two biggest banks take heavy losses in restructurings.

This way, Cyprus will avoid increasing its own public debt stock as much as it would have done if it were to take loans from the troika to finance the full amount of the bailout.

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SEC Approves Facebook IPO Compensation Plan

From the WSJ: The Securities and Exchange Commission approved Nasdaq OMX Group Inc.’s plan to pay customers as much as $62 million for losses stemming from last year’s bungled Facebook stock-market debut, according to an order made public on Monday by the regulator….

Falcone Follows Michael Jackson Path Taking Fortress Loan

Hedge-fund manager Philip Falcone, beset by declining assets, federal securities regulators and the bankruptcy of his largest investment, is borrowing money against personal real estate he bought during better days, Bloomberg reports.

Falcone and his wife, Lisa, pledged their $39 million Caribbean villa to Fortress Credit Corp., the lender that provided Michael Jackson with a mortgage on his Neverland Ranch when the late pop idol was close to insolvency, according to a February regulatory filing. Within the past year, the couple also agreed to post both of their Manhattan townhouses as collateral for about $25 million of personal loans, real estate records show.

Assets under management at Falcone’s Harbinger Capital Partners LLC have plunged 89 percent since Falcone bought several of the properties in 2008, reducing the fees generated by the New York-based firm’s hedge funds. While it’s not unusual for wealthy individuals to use real estate as collateral, Fortress Credit specializes in higher-rate loans to borrowers who have difficulties getting bank financing, and it isn’t shy about seizing assets in a default, according to Steven Altman, an attorney who participated in litigation involving Michael Jackson’s debt….

Cyprus Salvaged After EU Deal Shuts Bank to Get $13B

Cyprus dodged a disorderly sovereign default and unprecedented exit from the euro by bowing to demands from creditors to shrink its banking system in exchange for 10 billion euros ($13 billion) of aid according to Bloomberg.

Cypriot President Nicos Anastasiades agreed to shut the country’s second-largest bank under pressure from a German-led bloc in an overnight negotiating melodrama that threatened to rekindle the European debt crisis and rattle markets.

The revised accord spares bank accounts below the insured limit of 100,000 euros. It imposes losses that two EU officials said would be no more than 40 percent on uninsured depositors at Bank of Cyprus Plc, the largest bank, which will take over the viable assets of Cyprus Popular Bank Pcl, the second biggest....

Reaed all about it at

Fund Directors Feel the Heat

From WSJ: …Six former directors of Morgan Keegan Inc. mutual funds "abdicated" their responsibilities, says the Securities and Exchange Commission. A civil enforcement action filed in December against the directors and two former Morgan Keegan employees who were directors of the same funds is headed for an April 2 hearing by a judge.

People familiar with the case say both sides are in settlement talks, though terms of the potential deal aren't clear. The former directors deny any wrongdoing. Deal or no deal, legal experts say the case already is making waves across the mutual-fund industry. It is a "stark warning" that the SEC is revving up its scrutiny of mutual-fund directors and is likely to hold them more accountable than the agency has in the past,

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Sunday, March 24, 2013

Deal Reached On Cyprus Bailout.

Whew!   The Eurogroup of euro zone finance ministers met in Brussels tonight to approve a plan to bail out the Cypriot banking system.

The new deal will see uninsured deposits at the country's two largest banks take a substantial haircut, but insured depositors – those with less than 100,000 euros in their bank accounts – will be spared from the one-off "tax" that was being considered just a week ago.

Reports of a deal between Cypriot and EU officials being reached prior to the Eurogroup meeting caused the euro and the Australian stock market to spike.  Now, the Eurogroup has signed off on the deal as well...

Blackstone, Icahn Set up 3-Way Battle to Buy Dell

Dell appeared to have received competing offers following a $24.4 billion agreement last month to be taken private by its founder and private equity firm Silver Lake, setting up a tug-of-war for the world's No. 3 PC maker.

Blackstone Group LP submitted an indicative and preliminary offer ahead of the expiration of a "go-shop" period on Saturday that allowed Dell to explore other options, a person familiar with the matter said.

The buyout firm has not yet arranged bank financing, though it has put potential lenders on stand-by, a a second source familiar with the matter told CNBC...

Read all about it at

Deep Thoughts (Sunday Morning Insight Edition) What American Manufacturing Renaissance?

From BI: One of the big emerging economic stories in the world today is the American manufacturing renaissance.  This is the idea that low energy prices, increasing productivity, and rising costs overseas would invigorate the production of goods in the U.S.

Goldman Sachs' Jan Hatzius acknowledges that much of the recent economic data seems to support the idea that U.S. manufacturing is improving. However, Hatzius argues that all of the signs reflect a recovery that is "squarely cyclical," not structural. … 

Saturday, March 23, 2013

DOJ Criminal Probe Into JPMorgan Whale Trade At 'Advanced Stages'

CNBC is reporting that the Department of Justice is in "advanced stages" of a criminal probe into the JPMorgan Chase "London Whale" trades, investigating whether former traders mismarked positions in an effort to disguise the size of losses that have reached more than $6 billion.

The Zen of Index Liquidity: More Is Less

You would think that the whole point of a stock index is to be, well, an index of the stock market's performance.  But, according to a WSJ report, thanks to the popularity of exchange-traded funds, or ETFs, stock indexes have in recent years been doing double duty as investment vehicles. At the same time, there have been subtle but important changes in the way indexes are constructed.

Bottom line: The indexes aren't measuring exactly what they used to.  It is a lot easier to manage an ETF if the stocks that underlie it are easily traded. If, instead, the stocks are illiquid, there is a risk their prices will get artificially inflated when money flows into the ETF. The opposite can happen when money flows out….

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Wallflower of a day for new BlackBerry

According to the NY Post shares of smartphone maker BlackBerry got slammed yesterday — and it was as though investors knew what was happening inside AT&T’s Rockefeller Center store.

On its first day on the shelf, the new BlackBerry Z10 had a hard time attracting customers at the Midtown Manhattan location.  There were no customers lining up to buy it. In fact, there weren’t even signs heralding its arrival at the store.  No, the new BlackBerry — its touchscreen redesign saddled with the pressure of saving the company — sat lonely in a nondescript corner among a row of rivals.

By comparison, the iPhone 5 had its own wing with a giant poster and two demo devices. Not that Apple’s phone needs the help….

Inquiring Minds Want To Know: Why Russian Oligarchs Are Laughing Off The Cyprus Haircut

If Russian oligarchs still have money in Cyprus, where a lot of them base their businesses, they aren't letting on.

"You must be out of your mind!" snapped tycoon Igor Zyuzin, main owner of New York-listed coal-to-steel group Mechel , as he dismissed a suggestion this week that the financial meltdown in Cyprus posed a risk to his interests….

Why Can’t David Einhorn Get Apple to Budge on its Cash Award?

It was shaping up as an especially good episode of The David Einhorn Show. The founder of the $8.8 billion hedge fund Greenlight Capital was speaking in May 2012 at his favorite venue, the Ira W. Sohn Investment Research Conference, held that year at New York’s Lincoln Center, to a packed audience of money managers eager to hear which stocks were in his cross hairs.

....Then he began to speak about Apple (AAPL). The day before, Greenlight had disclosed in a regulatory filing that its stake in Apple was valued at $877 million, almost 10 percent of the fund’s assets. Einhorn had been buying shares in the company since 2010, initially paying an average of $248. Now they cost $553, a 123 percent gain, and Einhorn told his audience that Apple still had plenty of room to grow, with a price-earnings multiple that was below average. “I have a hard time seeing how anyone ranks Apple as below average,” Einhorn said, arguing that the company could hit a market capitalization of $1 trillion.

Unlike the other stocks he had mentioned, shares of Apple barely budged—King Midas had touched a table, and it stubbornly remained wood. Partly this was a function of Apple ….

Read all about it at

Friday, March 22, 2013

Krugman: Why You Should Really Worry About The Cyprus Crisis

A couple of years ago, the journalist Nicholas Shaxson published a fascinating, chilling book titled “Treasure Islands,” which explained how international tax havens — which are also, as the author pointed out, “secrecy jurisdictions” where many rules don’t apply — undermine economies around the world. Not only do they bleed revenues from cash-strapped governments and enable corruption; they distort the flow of capital, helping to feed ever-bigger financial crises.

One question Mr. Shaxson didn’t get into much, however, is what happens when a secrecy jurisdiction itself goes bust. That’s the story of Cyprus right now. And whatever the outcome for Cyprus itself (hint: it’s not likely to be happy), the Cyprus mess shows just how unreformed the world banking system remains, almost five years after the global financial crisis began….

Read all about it at

SAC: Inside a Star Hedge Fund: Lots of Big Bets, Built Fast

From WSJ: SAC Capital Advisors LP bet big on a firm called Ardea Biosciences Inc. at the beginning of last year.

Diving into a small stock it never before reported owning, the hedge-fund firm bought 1.2 million shares, which at the end of the first quarter were valued at $26.7 million.  Three weeks later, a stake of that size was worth $12.1 million more. On April 23, Britain's AstraZenec said it would buy Ardea, the culmination of two months of confidential negotiations. The deal sent the stock soaring 52% that day.

Such high-stakes trading over the years has made SAC the subject of admiration and envy on Wall Street….

Billionaire Raj Rajaratnam’s Brother Indicted on Insider Trading Charges

From hereisthecity: US authorities have charged the brother of fallen hedge fund billionaire Raj Rajaratnam with participating in his insider dealing scam.

Rajarengan Rajaratnam, younger brother of the Galleon hedge fund boss, now lives in Brazil and the US is likely to press for him to be extradited to face the charges. The indictment comes as a deadline to bring charges for securities violations approached...

Read all about it at

Thursday, March 21, 2013

Is JPMorgan Chase America's New Bad Bank?

From Forbes: "...The steady stream of negative news, congressional appearances and scathing Senate reports  is something more familiar to the likes of Bank of America, Citigroup and Goldman Sachs than JPM; but now Dimon & Co. are forced to play defense much more often.

 “….It’s the tone-deafness of comments like Dimon’s ‘tempest in a teapot’ remark that is staggering,” says Cornelius Hurley of Boston University’s Center for Finance, Law & Policy.

"It’s not just its massive London Whale trading loss that has JPM in a funk. Consider yesterday’s $107.5 million settlement with MF Global trustee, James W. Giddens. JPM was MF Global’s clearing bank before it failed and lost $1.6 billion in client money in October 2011. Giddens threatened to sue JPM last year if it didn’t return funds that belonged to MF Global customers which he said the bank received in the final days before the bankruptcy.  The pact with MF Global customers clears up one of JPM’s bigger legal problems but as Steve Schaefer points out it’s just one of many headaches for Dimon’s behemoth bank these days….."

Fund manager's beautiful 'personal assistant' admits stealing almost $1million

From the Daily Mail.(UK): After over a year of denials, Renata Shamrakova, the pretty personal assistant of hedge fund manager Todd Meister admitted she did steal nearly $1 million while working for him. The glamorous 28-year-old had maintained since her February, 2012 arrest that all the money she illegally spent was gifted from Meister, but in court on Monday she finally came clean to avoid a 15-year prison term.

Admitting identity fraud, Shamrakova escaped any time in jail by promising to pay back $821,000 to Meister within the next to years - although her parents have had to sell their upstate New York home to finance this....
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News You Can Use: Ten words that should never appear on a financial services CV

Hereisthecity's Sarah Butcher writes:  You’re applying for jobs in financial services and you’re trying to assemble the perfect resume. The definition of perfection will vary depending upon the job you’re applying to: the best résumés are usually tailored to particular job descriptions.
However, there are also some universal rules of CV writing –  and there are some words that should never, ever, inveigle their way in:

1. ‘Unemployed’  On no account should your CV mention the words, ‘unemployed’, ‘unemployment’, ‘redundancy,’ or ‘layoff’.  They are all too negative. Instead, you should use positive and empowered phrases like, ‘career break,’ advised Jeremy L’Anson, a career coach and author who works with investment bankers.

2. ‘Dynamic’ Professional résumé writers warn against using clichéd words and phrases which appear on almost every CV. “There are words which are used so much that they’re meaningless,” said Victoria Maclean at City CV in London. Maclean said these include: ‘dynamic’, ‘proven track record’, ‘team player’, ‘succeed in a fast paced environment’ and ‘innovative.’ “You see ‘innovative’ written on 90 percent of CVs,” she added...

ECB Threatens To Cut Off Cypriot Banks

From the WSJ: The European Central Bank ramped up pressure on Cyprus to seal a bailout agreement with the European Union and the International Monetary Fund by Monday, making further funding for the island’s ailing banks contingent on a deal.

The ECB said it would extend emergency funding that has kept the island’s banks in operation while the bailout plan was being negotiated in recent months only until Monday. “Thereafter, Emergency Liquidity Assistance (ELA) could only be considered if an European Union/International Monetary Fund program is in place that would ensure the solvency of the concerned banks,” the ECB said in a statement….

Wednesday, March 20, 2013

Fake Hedge Fund Manager Who Ripped Off Kim Kardashian’s Fake Husband Sentenced To A Few Years In Prison

Dealbreaker’s one and only  Bess Levin writes: Remember Andrey Hicks? For those who can’t keep their founders of fake hedge funds straight, he’s the guy who ripped off Kim Kardashian’s 72 day husband, Chris Humphries, along with a bunch of other investors in his Locust Offshore Management fund, and in 2011 was arrested and had his assets frozen by the Securities and Exchange Commission, which took issue with the “brazen web of lies” he’d fed people that included:

The claim he received a Ph.D in Applied Mathematics from Harvard in two years (he neither earned his doctorate from Harvard nor his undergraduate degree and in fact only lasted three semesters in Cambridge, taking a single math course, in which he got a D-)….

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Last But Not Least: Large asteroid heading to Earth? Pray, says NASA

Forget duck and cover.  NASA chief Charles Bolden has advice on how to handle a large asteroid headed toward New York City: Pray.  According to Reuters, that's about all the United States - or anyone for that matter - could do at this point about unknown asteroids and meteors that may be on a collision course with Earth, Bolden told lawmakers at a U.S. House of Representatives Science Committee hearing on Tuesday.

An asteroid estimated to be have been about 55 feet in diameter exploded on February 15 over Chelyabinsk, Russia, generating shock waves that shattered windows and damaged buildings. More than 1,500 people were injured.  Later that day, a larger, unrelated asteroid discovered last year passed about 17,200 miles from Earth, closer than the network of television and weather satellites that ring the planet.

The events "serve as evidence that we live in an active solar system with potentially hazardous objects passing through our neighborhood with surprising frequency," said Representative Eddie Bernice Johnson, a Texas Democrat…..

JPMorgan agrees to deal that will return $546M to MF Global customers

JPMorgan Chase has agreed to a deal that will return $546 million to former customers of trading firm MF Global Holdings Ltd., which collapsed in 2011 with $1.6 billion missing from its accounts….

Mini flash crashes: A dozen a day

According to Maureen Farrell of CNNMoneyInvest fame  there may not have been any major market malfunctions recently, but mini flash crashes still happen nearly every day.  Stock exchanges don't publicly release data about these mini crashes -- when a stock rapidly plunges then rebounds -- but most active traders say there are at least a dozen a day.  Dennis Dick, a proprietary trader at Bright Trading in Detroit, said he stopped tracking them because they happen so frequently.

While none have been as disruptive as the "flash crash" of 2010, or the ones that marred the IPOs of the BATS exchange and Facebook in 2012, they highlight the fragility of markets increasingly dominated by high frequency traders who count on fancy algorithms to make a quick profit. So far this year, these mini crashes have taken place in shares of Apple, Berkshire Hathaway, insurance broker Aon  and apparel maker Hanesbrands....

Top Firm Trader: 'They Have Obliterated Our Rates Desk'

When we hear about Wall Street layoffs we usually hear about them in the hundreds or (more likely) thousands. So normally a dozen or so layoffs doesn't make an impact. This is different.
Reuters reports that Credit Suisse has sacked the head of its NYC rates desk along with about a dozen salespeople and traders.  This is dramatic, but it isn't shocking. The Fed's low interest rate policy makes rates trading dismal business as there's such low volatility.  Remember it could be worse, it could be UBS...

Judge orders bogus fund manager to prison for 40 months

From Reuters: Andrey Hicks, who invented an Ivy League resume and Wall Street credentials to steal $2.3 million from investors for a made-up hedge fund, will spend more than three years in prison, a judge ordered on Tuesday.

U.S. Federal Judge Patti Saris sentenced Hicks, 29, who most recently lived in Massachusetts, to serve 40 months in prison and ordered him to pay $2.3 million in restitution.

The sentencing ends one of the more brazen hedge fund frauds at a time wealthy investors are still reeling from the fallout of the Bernard Madoff and Allen Stanford investment swindles...

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Tuesday, March 19, 2013

Is SAC’s Michael Steinberg about to be criminally charged?

From FierceFinance: For months now, federal prosecutors have been weighing whether to bring criminal charges against Michael Steinberg, a former technology portfolio manager with SAC Capital's Sigma Capital division and confidante of Steve Cohen. He has long been thought to be the ultimate prize in the insider trading investigations.

Steinberg had been named previously by prosecutors as an unindicted co-conspirator in a criminal prosecution involving convicted hedge fund traders, Todd Newman and Anthony Chiasson. Any charges would likely involve trading in Dell, as evidence in trials made clear that Steinberg and his colleagues discussing Dell's earnings performance before they were publicly released. Trading in Nvidia may also be included….

Read all about it at

MEREDITH WHITNEY: I Have Not Been This Bullish On The US And Equities In My Career

Meredith Whitney was just on CNBC's Closing Bell with Maria Bartiromo and the normally skeptical bank analyst came out as a super-bull for the U.S. economy and equities.
"Would you put new money to work in this market right here?" Bartiromo asked her.
"Yes, absolutely," said Whitney. "I have not been this constructive and bullish on US equities in my career."

Whitney discussed two specific financial stocks that she really liked. First she mentioned Bank of America saying that it came out of last week's Fed stress tests looking better than any other bank on the Street. This is partly because the bank started cutting costs back in 2010 before any other Wall Street bank, said Whitney. The stock has "value, catalyst, and momentum" and she expects it to shoot up another 15% in the coming months.

"This is not sexy stuff... it's all cost cutting it's all operational," she said....

Worst Company In America Round 1: Best Buy Vs. Walmart

The first-round fisticuffs continue with today’s centerpiece bout that pits two big-box boxers to a fight to the death, all for the bloodthirsty enjoyment of WCIA fans around the world.

In one corner, wearing the blue and yellow trunks and trying to sell you an extended warranty, is the Minnesota Mauler — Best Buy! He’s had a rough go of it this year, losing head trainer and CEO Brian “The Dishes Are” Dunn to scandal. Meanwhile, the guy who got Best Buy into the game in the first place, Richard “Richard” Schulze, failed to woo his former pupil back to his gym.
In the other corner, wearing blue and white trunks and taking a smoke break just as you need his assistance, is the Brawler of Bentonville — Walmart!  It may be the nation’s largest retailer, but it never fails to disappoint. Just look at the latest American Customer Satisfaction Index, which had Walmart rated lowest in both the Supermarket and Discount/Dept. Store categories for 2012….

Business CEOs Push To Limit Taxes On Record-Breaking Offshore Profits

At a time when major U.S. corporations have a record amount of cash stashed abroad, a group of influential CEOs want to make it even easier for companies to pay less in U.S. taxes on those profits, HuffPo reports.

The Business Roundtable, a lobbying coalition of business leaders, plans to spend six figures on a campaign aimed at convincing lawmakers to lower the top corporate tax rate to 25 percent from 35 percent and shift to a territorial tax system, according to The Hill. The group argues that the changes would help U.S. companies compete against their foreign counterparts.

A territorial tax system allows businesses to put money overseas and only pay taxes to the foreign country where it’s parked. Currently companies pay U.S. taxes on any overseas profits they bring back home….

FDIC begins to reveal settlements related to financial crisis

The online posting of previously undisclosed deals comes after a Times story on the regulator's policy of quietly settling claims involving failed banks.  The Federal Deposit Insurance Corp. has begun posting online more than 200 previously undisclosed settlements related to bank failures that accompanied the financial crisis.

The revelations come in response to a Los Angeles Times story last week that examined the FDIC's policy of quietly settling civil claims involving failed banks, sometimes with "no press release" clauses to help bankers avoid embarrassment.

The first three settlements, involving Florida banks that failed in 2008 and 2009, were put online Friday at The agency said all such agreements reached from 2007 through 2012 would be posted by the end of the day Monday. Settlements from 2013 were to follow "shortly," with regular updates made thereafter…

Find out more at,0,6161684.story

Apple Seen Raising Dividend More Than 50% to $16 Billion

Apple will probably lift its quarterly dividend 56 percent to $4.14 a share, for an annual payout of $15.7 billion, according to the average estimate from six analysts. The resulting yield of 3.6 percent would be higher than 84 percent of the companies in the Standard & Poor’s 500 Index paying dividends. Apple could fund a payout with existing cash flow without using profit from overseas, which can be subject to extra taxes, Gene Munster, an analyst at Piper Jaffray Cos told Bloomberg.

CEO Tim Cook, who a year ago this month reinstated a dividend and announced a $10 billion buyback, faces mounting pressure to take bolder steps to pay out more of Apple’s $137.1 billion in cash and investments. Investors including David Einhorn’s Greenlight Capital Inc. are pushing for more money as growth slows and competition from rivals such as Samsung intensifies....

Monday, March 18, 2013

Hedgie couple go Hollywood with Frederick’s

Hedge-fund honcho Phil Falcone just got his fashionista wife, Lisa Maria, a hot gift — lingerie chain Frederick’s of Hollywood, according to a NY Post report..

A division of Falcone’s publicly traded Harbinger Group handed over $10 million to the troubled underwear retailer in exchange for the right to control the company, FOH announced.  If it exercises that right, Harbinger’s Five Island Asset Management will appoint a majority of the board.

FOH, founded 66 years ago by Frederick Mellinger, inventor of the push-up bra, was peddling sexy lingerie (left) 30 years before Victoria’s Secret emerged.  FOH operates 118 stores across the country and has been struggling amid sagging sales…

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