Wall $treet Folly

Maybe the bottom IS near: John Paulson is looking to invest in the banks and brokers

The early rounds of rescue financing for the banks and brokers hurt by the sub-prime credit markets implosion have so far produced big red catch-a-falling knife gashes for those brave enough to pony up.  Now, one of the funds that profited so handsomely from the massive slide -- to the tune of an estimated $3.7 billion -- is looking to profit on the upside as well by starting a hedge fund launching by December that will make investments in those cash starved financial firms.  John Paulson's Paulson & Co., which already runs around $33 billion, hasn't set a target size for the fund according to Bloomberg, and the plans aren't yet final. 

Paulson & Co. Plans Fund to Provide Capital to Banks - Bloomberg

Mr. Z-Score says that GM and Ford are "On the Verge of Bankruptcy"

Ed Altman, the finance professor at NYU's Stern School of Business famed for creating the Z-Score bankruptcy predictor model that so many business school students and finance professionals have studied for decades, says that GM and Ford are in big trouble.  He told Bloomberg TV that his model indicates that "both are in very serious shape and the markets reflect that", and that the model shows that the two companies are "on the verge of bankruptcy"....

President Bush: "Wall Street got drunk"..."and now it's got a hangover"

It's kind of hard to argue with what Bush said...

WSF Headline Roundup - 7/23/08 - Bailout cost could be $25B?; Fannie Freddie deal; Oil bill won't fly?; UBS faces Cuomo civil suit; $ losing bank stocks pop; YHOO earnings don't impress; Ghosn seens no 09 auto recovery; Costco warns

• Cost of Loan Bailout, if Needed, Could Be $25 Billion
• U.S. Lawmakers Reach Deal on Fannie, Freddie Bill
• Oil market bill's future dim despite vote
• Cuomo Readies UBS Civil Suit
• Five Banks Post Losses -- and Their Stocks Soar
• Dollar Trades Near Two-Week High on Paulson, Plosser's Comments
• Yahoo Second-Quarter Profit Drops as Spending Rises
• WaMu Has $3.3 Billion Quarterly Loss on Delinquencies
• Charles Schwab steps down as CEO of his brokerage
• Nissan's Ghosn sees no 2009 U.S. auto recovery
• JetBlue Plans Cuts in Seat Capacity, Jobs After Loss
• Costco Warns on Profit As Inflation Clouds Outlook

Merrill Lynch bigwigs get their private jet wings clipped

In the latest round of belt tightening indignities at Merrill Lynch, senior bankers won't be able to use private jets unless they have really good reasons. The Financial Times reports that they'll have to clear all private flight requests through the global head of investment banking and will have to be able to show that there's no more efficient transportation available.  In addition to the new private jet restrictions, bankers will have to limit their use of limos, opting for taxis instead, and their dinner allowances have been cut.

Of course, Merrill isn't the only firm reining in expenses.  At UBS, bankers can only fly business class in Europe for flights of three hours or longer, and five hours or longer in the U.S.  And at Goldman, the FT tells us that if staffers are at fault for breaking their Blackberries, they have to contribute to repairs.  Jeez, that's harsh.

WSF Headline Roundup - 7/22/08 - AXP earnings suck; More losses at Fannie, Freddie?; Apple Outlook disappoints; Genentech surprised by Roche bid; Brocade buying Foundry; Rich Brits in tax haven probe; Yahoo aftermath; ARod going Hollywood?

• American Express Declines as Earnings Fall Short of Estimates
• Fannie, Freddie May Record More Losses, Ofheo Says
• Apple Falls on Outlook, Questions About Jobs' Health
• Roche Bid Blindsided Genentech
• Brocade Agrees to Buy Foundry for $2.91 Billion
• Tax haven probe targets rich Britons
• Paragon in takeover talks with Blackstone
• Yahoo buys time with Icahn ceasefire
• So, No Joy in Yahooville?
• A New Big Play for Alex Rodriguez

Is CNBC's Erin Burnett "the ultimate growth stock"?

That's what Jonathan Wald, CNBC's svp for business news calls, her according to a relatively fawning article in the New York Times this weekend entitled "Needing a Star, CNBC Made One".  Burnett just signed a new three year contract with CNBC that will also give her more air time on NBC as a fill-in anchor on "Weekend Today".  Wonder how Wald would describe other on-air women of CNBC like Becky Quick, Michelle Caruso-Cabrera and Melissa Francis -- who seem to have taken a back seat to  Maria Bartiromo and  now Erin Burnett.  And we wonder what the other ladies think of all of the attention being lavished on the the network's "ultimate growth stock".

Yahoo wins, Icahn settles for one board seat now with two others from his slate to also be chosen

With the chances of success for Carl Icahn's proxy fight slate seeming more remote after Legg Mason's Bill Miller said that he was supporting the Yahoo status quo, a compromise deal was reached.  Carl Icahn is getting a seat on Yahoo's board of directors, and the company will choose two more directors from Icahn's slate.  So Jerry Yang and company sound like the big winners here, avoiding the proxy fight.  Icahn's representation on the board isn't in the majority with only three of eleven seats, as an insider, he's effectively muzzled from the press for now so he can't make lots of noise to the outside world, and we suspect that Microsoft isn't likely to want to negotiate with the company as a result, so the prospect of a full Microsoftl purchase is probably dead.  Bottom line for shareholders: They get the short end of the stick.  Blech.

Icahn said:

"I am very pleased that this settlement will allow me to work in partnership with Yahoo!'s Board and management team to help the Company achieve its full potential. While I continue to believe that the sale of the whole Company or the sale of its Search business in the right transaction must be given full consideration, I share the view that Yahoo!'s valuable collection of assets positions it well to continue expanding its online leadership and enhancing returns to stockholders. I believe this is a good outcome and that we will have a strong working relationship going forward. Additionally, I am happy that the board has agreed in the settlement agreement that any meaningful transaction, including the strategy in dealing with that transaction, will be fully discussed with the entire board before any final decision is made."

Is Icahn really pleased?  Somehow we doubt it.
Yahoo! Announces Settlement with Carl Icahn - MarketWatch

WSF Headline Roundup - 7/21/08 - Freddie may cut loan buys; Goldman banker to Paulson's rescue; FDIC mortgage mess; Roche wants the rest of Genentech; Union wants Citigroup break up; HBOS mess; Mervyns on the brink; Batman rules box office

• Freddie Mac May Slow Purchases of Mortgages to Preserve Capital
• Paulson `Very Optimistic' on Freddie, Fannie Rescue
• Banker Leaves Goldman Sachs To Aid Paulson
• FDIC Faces Mortgage Mess After Running Failed Bank
• Roche Offers to Buy Full Stake in Genentech
• Ex-SEC boss Arthur Levitt: Don't panic during economic downturn
• Union presses Citigroup to break up
• Morgan Stanley, Dresdner to Sell $7.6 Billion of HBOS
• Mervyn's Fights to Keep Its Store Doors Open
• Record-Setting Batman Sequel Leads Huge Movie Weekend
• Cuban, Canning Among 7 Bidders for Chicago Cubs, Tribune Says
• Thousands lose power in Brooklyn on fifth day of heat wave

Jeffrey Epstein's plea deal is under attack by three of the women who've sued him

Some apparently aren't so happy with Jeffrey Epstein's plea deal.  Page Six notes that three women who have sued him want a federal judge to kill the deal where Epstein serves 18 months in prison in exchange for admitting that he admit to soliciting a 14 year old hooker.

Their lawyer, Brad Edwards, has asked US District Judge Kenneth Marra to toss the deal - which included an agreement that Epstein's wouldn't face federal prosecution, which could have led to a longer jail term - because they weren't consulted on it. Marra has asked for more information before he rules. Epstein's rep, Howard Ruben stein, said, "The lawsuit has absolutely no merit. They're just looking for money. These women have lied repeatedly, and in no way shape or form were they victims. They were at his place freely and voluntarily. And one of them showed Epstein a fake ID."

Bid To Burn Epstein Plea - Page Six NY Post

Calpers suffers its worst return in 6 years

Although it probably could have been worse:  For the year ended 6/30/08 the $239 billion behemoth California Public Employees' Retirement System, aka Calpers, was down 2.6% vs a 19% gain for the prior year.  That's its worst showing in 6 years.  So it's a good thing that last year, Calpers diversified and was allowed to take positions in commodities, venture into the emerging markets, take private equity positions and was also able to go short. The stock portion of its portfolio was down 10.7%.....

Legg Mason won't be supporting Icahn's Yahoo slate; They're backing the status quo that they believe has "acted with care and diligence" in reviewing Microsoft's offers

The melodrama continues:  According to Reuters, Carl Icahn won't have the backing of Legg Mason's 60.7 million Yahoo shares (4.4% of the stock) in his quest to unseat Yahoo directors. Bill Miller is supporting the incumbants.

"We believe the current board acted with care and diligence when evaluating Microsoft's offers," Legg Mason said in a statement. "We believe the board is independent and focused on value creation for long-term shareholders."

Legg Mason to back Yahoo board slate - Reuters

Who's been doing well in this tough market? Perella Weinberg's Xerion hedge fund

Perella Weinberg's $837 million Xerion Fund, which they bought last October, doesn't seem to be having any problems making money in this tough market.   According to Bloomberg, per a letter they sent to their investors, the firm is up a whopping 24% year to date. That's after a 37% gain in 2007.  They've made money on distressed, and on bets that debt of financial services firms would go south.  According to Dan Arbess, who founded the fund:

WSF Headline Roundup - 7/18/08 - Citigroup's earnings not as bad as expected; Freddie might sell stock; Merrill's earnings continue to suck; Google, Microsoft disappoint; UBS nixes U.S. Swiss bank accounts; Barclays financing completed

• Citigroup posts $2.5 billion second-quarter loss
• Mortgage Giant Freddie Mac Considers Major Stock Sale
• Merrill Lynch Posts Fourth Straight Quarterly Loss
• Google, Microsoft Slide; Earnings Show Falling Demand
• UBS pledges to crack down on Swiss bank accounts
• LGT Group's Kieber Says Bank Helped Clients Break Law
• Barclays Investors Buy 19% of Shares on Sale in Offer
• HBOS Underwriters May End Up Owning 7% of U.K. Mortgage Lender
• AMD 2Q Loss Widens On Write-Downs; To Divest 2 Units
• Actors Union Says Studio Proposal Offers Too Little
• Mattel Wins Verdict Over Origins of MGA's Bratz Dolls

Merrill Lynch sank in after hours trading after announcing another bad quarter

Spitzer's hooker sued over alleged identity theft

Ashley Dupre, Eliot "Client #9" Spitzer's hooker, is being sued by Amber Arpaio, for allegedly stealing her drivers license and assuming her identity to convince "Girls Gone Wild" producers that she was old enough to be filmed nekkid in their video....

Begging to keep their jobs: Yahoo sends another nag letter to its shareholders: blah, blah, blah, blah....

The ongoing war continues as Yahoo's August 1 shareholder meeting gets closer.  Yahoo has sent yet another nag letter to its shareholders begging for their jobs while proclaiming that they continue to look for ways to maximize sharholder value (as if they've done such a great job so far) and warning them away from the evil, deceptive and self serving value destroyers Carl Icahn and Microsoft. Blah, blah, blah, blah....

The Icahn Report: Carl responds to criticism from the Chicago Tribune's Eric Benderoff

After Carl's blog finally went live, he was criticized in a 6/19/08 Chicago Tribune blog article penned by Eric Benderoff entitled "Memo to blogger Icahn: Give Power to the people, not your lawyers".  Benderoff took the new blog to task over its format and legalities.  Icahn responds, telling him that his activist status requires the format and legalities, but that he (Benderoff) has missed the mark: that the blog is looking to expose bad corporate governance behavior, and hopefully over time, some of the restrictions will ease, but for now, it is what it is.

WSF Headline Roundup - 7/17/08 - JP Morgan earnings beat; Fannie/Freddie lobbying $; Street gearing up for short selling changes; HBOS rights offer mess; FBI IndyMac probe; $100B Offshore Tax evasion cost to U.S.; AOL talks?; Airline losses; Eurotunnel pr

• JPMorgan quarterly earnings beat expectations
• JPMorgan Profit Declines 52% on Writedowns, Bear Stearns Costs
• BlackRock Earnings Rise 23% as Investors Seek Haven
• Battered mortgage giants spent about $186 million on lobbying, political contributions
• Paulson Optimistic on Fannie-Freddie After Meeting
• Congress Takes Up Plan To Stabilize Fannie, Freddie
• Street Gears Up for Short Changes
• Merrill Drops BlackRock Deal, Sells Bloomberg Stake
• HBOS Hits a Stock Snag
• Banks expected to feel pain until 2010
• How Short Sellers Operated Without Oversight
• FBI probing IndyMac for possible fraud: authorities
• Offshore Tax Evasion Costs U.S. $100 Billion, Senate Probe of UBS, LGT Indicates
• EBay Falls as Average Selling Price Drops on Its Retail Sites
• Microsoft Revs Up Talks With AOL
• Little Interest in Buying AOL as the Unit Is Shopped Again
• American Airlines, Delta Post Steep Losses as Oil Costs Soar
• Eurotunnel posts first interim net profit

Darden Restaurants gets free advertising with Playboy's "Girls of Olive Garden"

With Darden Restaurant's Olive Garden being one of Hugh Hefner #3 girlfriend Kendra Wilkinson's favorite places to dine, it's no wonder that she went out to scout for "the restaurant's sexiest servers".  The New York Daily News has a slide show of the ladies.

Currently DRI is up .96 to $30.which may or may not have anything whatsoever to do with Hef's free advertising gift.

JibJab makes hay with this year's presidential race with its latest poke-funfest: "It's Time For Some Campaignin'"

The talented guys at JibJab have been busy, putting together their latest equal opportunity poke-funfest campaign masterpiece

MBAs take to yoga as a stress reliever

Mirroring what many on Wall Street are already doing, especially in these uncertain times:  BusinessWeek cites the latest business school trend: MBA students are taking up yoga classes as a way to destress.  Students at University of Chicago, MIT's Sloan School, Harvard Business School and Northwestern's Kellogg School all are seeing increased popularity of yoga classes.

Even as Lehman's stock is under seige, the firm tops the ranks of fixed income dealers in the Greenwich Survey

Though the price of Lehman Brothers' stock has continued to erode under a cloud of uncertainty, a new Greenwich Survey that queried 1,246 institutional investors between February and April finds that Lehman is tops among fixed-income dealers by market share and service quality.  Its share of the fixed income trading market is 12% vs JP Morgan's 11.6%.  Lehman was tied with JPM as being the best in service quality.
Lehman Tops Ranking of Fixed-Income Dealers in Greenwich Survey - Bloomberg

Goldman's Blankfein doesn't seem to recollect key conversation with Bear Stearns' Alan Schwartz where he suggested GS traders were spreading false rumors

Wouldn't a conversation like this be kind of memorable?: Say that the CEO of a large investment banking firm was hearing rumors that traders at an even larger competitor's firm were spreading malicious rumors about its stock, and then called the competitor's CEO to ask about whether or not it was true.  Wouldn't it be kind of likely that that conversation would be a bit memorable to the guy on the receiving end of the call?   Apparently not in the case of Bear Stearns CEO Alan Schwartz, when he called on Goldman Sachs CEO Lloyd Blankfein to chase down the source of rumors that many believe were at least partially responsible for the demise of Bear Stearns.  According to this morning's WSJ, a spokesman says that Blankfein doesn't recall the conversation.  Blankfein's a pretty busy guy, but still, not recalling a conversation like that strains credibility.  So someone is fibbing about whether the conversation did or didn't happen.  Bizarre.  Goldman denies doing anything wrong.  According to Goldman spokesman Lucas van Praag "We went out of our way to be supportive of Bear and were rigorous about conducting business as usual."

Lehman's Dick Fuld is said to have had a similar conversation with Blankfein......

WSF Headline Roundup - 7/16/08 - Shocking: FNM/FRE may cut dividends; Paulson's Fannie plan's DC skeptics; Bernanke's gloomy outlook; Dollar sinks; Will Lehman be able to go private?; UBS auction rate buy; INTC profit; GM axes dividend, ad spending;.....

• Fannie Mae, Freddie Mac May Halt Dividends on Losses
• Lawmakers balk at taxpayer exposure in Fannie plan
• 'People are worried,' Bernanke acknowledges
• Dollar dives as Bernanke pours on more gloom
• Lehman: Private Property?
• UBS Seeks to Appease Clients With Auction-Rate Buy
• ICAP Sees Higher Profit as Debt Crisis Spurs Trading
• Blackstone Seeks More Green Projects, FT Deutschland Says
• India May Sell Wheat in Open Market to Cool Prices
• Intel profits excel in second quarter
• GM suspends dividend and eyes asset sales
• GM's Ad-Spending Cuts Likely to Ripple
• Cleveland-Cliffs to Buy Alpha Natural for $10 Billion
• Richemont Sales Growth Exceeds Estimates on China

Former Lehman Brothers CFO Erin Callan lands at Credit Suisse

Erin Callan, the former "best accessorized" Lehman Brothers CFO who was demoted last month in the Lehman management shake up has been hired by Credit Suisse in a new position as global head of their hedge fund business according to the Financial Times.  She'll advise hedge fund clients on fund raising including selling strategic stakes as well as  possible IPOs.  While she was with Lehman she was involved in providing advice to Fortress in their IPO.

In an interview, Paul Calello, chief executive of Credit Suisse’s investment bank, said he was creating the new post to focus on an increasingly important client base both in prime brokerage and strategic advisory services.

Despite her rough exit from Lehman, Mr Calello said Ms Callan “has a proven track record. She is extremely professional, exceptionally intelligent and we are very fortunate to have the opportunity to do this.”.

Credit Suisse hires Callan for hedge fund business - Financial Times

Round up the usual suspects: Over 50 hedge funds supoenaed

According to the Wall Street Journal the SEC has subpoenaed over 50 hedge funds in their quest to find out if there were false rumors spread, leading to the demise of Bear Stearns and the plunge in Lehman Brothers shares.  The firms subpoenaed may or may not be the focus of the probe; they were asked for information regarding their trading in the securities of BSC and LEH, as well as correspondences between hedge funds and others.  Reportedly among the names: SAC Capital and Citadel. 

Hedge Funds Subpoenaed in SEC Probe - Wall Street Journal

Christopher Hohn's TCI got hit big time in June

June was also a rough month for The Children's Investment Fund according to the Financial Times.  Christopher Hohn's fund suffered its worst month ever, down 12.5% -- or over $1 billion and its return for the first half of the year is now negative.  Hohn's investors have long lockups though;  half of them for five years, and the other half for three.  Around 20% of the $10 billion fund belongs to its partners and a charitable trust that's linked to it.  TCI has a history of rewarding investors with a history of 40 percent returns,  and they're warned of volatility in the fund....