TABLE OF CONTENTS February 2008

Stimulus McMuffin Goes Kerfuffle

The stunning display of bipartisan cooperation we saw just a week ago is now officially over. In its place is a lot of bawling and scuffling over whether to increase benefits to the elderly/veterans, offer subsidies for low-income families struggling to pay their energy bills, provide mortgage counseling to distressed homeowners, extend unemployment benefits and boost food stamps/tax credits. We predicted this would be a full-on wet noodle of the first order, but even we didn’t think it’d turn out this lame. > read more

Subprime Primer: So Necessary

Since it is technically a holiday (though The Wall Street Journal is printing) we thought we’d keep it nice and light today with an unchallenging lead story. It’s really more of a lead PowerPoint presentation than a story, really. But don’t let that scare you away. There’s a reason why it’s been making the rounds on Wall Street lately: whoever pulled it together is clearly a real Rembrandt and, we might add, the bees’ knees. Here, definitive proof that the financial community does have a sense of humor. Read it; hilarity will ensue. > read more

Oil’s A-Boil

Why, despite the predictions of many, did oil shoot higher, touching $100.01 for the first time? Once again, nobody knows. Oh, there are theories, mind you: the front-month contract is about to expire, so ne’er-do-well traders are exploiting thinning volumes to push prices up; speculators are running amok, as usual; political instability in Nigeria and Venezuela (when are they not unstable, we’d like to know?); tightness in light crude supplies; more problems with rattletrap U.S. refineries; you name it. Whatever the reason, it’s happening again and investors are reviewing their assumptions about this strange, old market. > read more

Rumors Of Trading Losses Greatly Exaggerated

Except that’s not entirely true. Not at all true, actually. But just writing that headline made us feel a teeny bit better. Here’s the latest from Citigroup on how its traders pulled a full-on Kerviel, racking up losses of more than $100 million on 15 separate days (count it, 15; not a typo) of 2007. So, what the Sam Hill happened? > read more

That’s 7 Fake E-Mails, 24 Alarms And Our Arses Getting Kicked

So says Société Générale about the number of red flags overlooked by its staff as Jérôme Kerviel risked enough capital to fell the entire bank. (And since this was an internal probe, we assume that’s a conservative estimate.) Still, the revelation we find the most interesting is this: according to the bank’s investigation, those monitoring Kerviel’s trades were, in many cases, found to be unfit for their own jobs. Could there be a bigger problem afoot at SocGen than just wayward trading? > read more

Citi: Barring The Door

Banks and hedge funds are not making for very good bedfellows lately. While the eye-popping returns of hedgies earlier this decade prompted institutions to flock to the more promising funds like gummy teenage girls to a Poison concert, the party looks like it’s pretty much over as investors pull rank on weak returns. To the list of banks that have recently been burned by a string of redemptions (UBS, Goldman, et all) add Citigroup, which has just slammed the door on clients trying to pull out of its CSO Partners fund. So, exactly what took the bloom off this rose? And what might Citi’s CEO have to do with it? > read more

Eurotraders Break For Banks

Why Guy de Blonay, Philip Gibbs and Kokkie Kooyman, the managers of Europe's three top-performing funds invested in financial companies, say now’s the time to go hog-wild on bank shares after an 11 percent drop on a certain benchmark index. > read more

Stocks Vs Bonds

It may not smack of the war of the worlds, but it’s certainly a point worth considering: over the past decade, a pullback in high-yield debt has foreshadowed every decline of at least 10 percent in the Standard & Poor's 500 Index. This time bonds may be wrong, and stocks may prove more prescient, signaling corporate profits can withstand $162 billion in banks' credit writedowns and a slowing economy. But isn’t that line of thinking just a tad Pollyanna-ish? > read more

The Unbearable Lightness Of Biting Dust

Two versions of D.B. Zwirn’s Special Opportunities Fund are having a very special fire sale, which could take up to four years to complete (since the $4 billion of holdings include hard-to-sell private-equity investments and derivatives based on the underlying value of debt securities). Daniel Zwirn’s company, which has recently weathered a slew of redemptions, expects to tell investors sometime in March whether they can expect to receive cash back, or the usual assortment of moon pies and tin whistles. > read more

Newsflash: Stocks Are Not Grain

Stocks are getting pummeled much in the same way that grain is not. And yet $16.3 trillion of shares have traded on Wall Street so far this year. Stocks are not driving up the cost of Eggo waffles or Italian pasta. Stocks did not reach a record $11.53 a bushel last week. And yet…and yet traders remain hot as ever for equities. A look at how the advent of electronic trading, coupled with risk-takers’ affinity for price swings, has buttressed a rather surreal heyday in the stock market. > read more

There Will Be Blood

Actually, there is already blood. And lots of it. According to our energy-trading moles on Wall Street, word is leaking out of BP Capital that T. Boone Pickens is getting slayed in no uncertain terms by the indefatigable rise of oil to fresh highs – something that he had very publicly bet against, trumpeting to media outlets only days ago that oil prices would drop to $85 a barrel in the second quarter. “People trading the front end of the curve are getting raped,” exclaimed one big bank trader last night. Then, there are the traders that are doing the raping…like this castle-owning Brit. > read more

‘Corporate Espionage’ Hedgie Showdown

It’s all so very John le Carré. And even better than the actual story are the enlightened and, uh, enlightening comments posted on Dealbreaker in reaction to it: “I thought this was anything goes? If I ‘steal’ from you in the world of finance and you let me, that's your fault – isn't it?” asks one reader. And this: “What isn't stolen in this biz? Money, ideas, clients, wifes (sic)...get over it. Survival of the fittest, man. Darwin,” gloats another. > read more

The Full Kerviel

We’re still perfecting our full nelson, but to some, swinging the Kerviel comes oh so naturally. Like for this wheat trader at one of the world’s largest commodities brokerage houses. (By the way, you know a market is kicking it when it starts to produce its own bumper crop of rogue traders. These days, it’s the one true metric.) > read more

Spooked By Retail Sales Jump

First the subprime crisis runs the U.S. economy roughshod and now, clearly, we’re dealing with voodoo. How could retail sales rise 0.3% in January after falling in December without any let-up in markets getting smacked around? And while we’re at it, what gives with the 0.6% increase in auto sales, when other reports show auto sales declined last month? It’s voodoo economics all over again. It is the only plausible explanation. > read more

Human Wrecking Ball?

Jérôme Kerviel. First, he wins his bank more than a billion. Then he loses it more than a billion. Then his first billion, it is discovered, leaves his bank on the hook for taxes on gains that, sadly, no longer exist. Hence, still more losses. And now, it seems, this force of nature has left behind a very special legacy for his back-office brethren. > read more

Got Monday Blues? Let Schadenfreude Brighten Your Day

We were bored by all the boring news today. So we went to the Web site for Long or Short Capital to put the spring back in our step. As usual, it gave us the double espresso shot we needed. Long live Long (or Short)... > read more

‘MicroHoo’ Cyber-Spat: Let The Fur Fly

Ever since they stopped packing stadiums by letting humans duke it out with wild animals, we’ve felt that something very special was missing from the world. That said, we got a very light fix today after hearing that two well-known bloggers are going mano a mano over the price of Yahoo. Here, the blow-by-blow from the FT. > read more

Bored By ‘Monowhines’?

Tell us about it. Here’s a cure for the mono-blahs you’ve been getting. A cheeky spin on the issue, with a hefty dose of jeremiads for the ratings agencies. (Plus, it’s a little bit naughty.) > read more

Iraq-centric Hedge Fund Takes Spill

We were going to put this under “Friday Levity” until we realized this hedge fund is real. > read more

Going Stag

Just to make sure everybody’s on the same page here, stagflation happens when economic growth grinds to a halt, yet somehow, prices magically keep on rising. As the price tag on consumer goods in the U.S. inches toward a 16-year high, even as the Fed lowers its growth estimate for the year and unemployment ticks higher, going stag now appears to be a distinct possibility. That said, it couldn’t possibly get as bad as it did during the three recessions of the 1970s – could it? > read more

Lower Than Low

In a sign that the markets are assuming the Fed will let the greenback fall as far as it takes to generate dirt-cheap credit again, the dollar fell this morning to a record low against the euro and three-year low against the yen. So…how low can it go? > read more

Problems? Blame The Traders

Hey, if SocGen can do it, why can’t Credit Suisse? Just as we catch wind that U.S. banks have quietly borrowed $50 billion from the Fed in recent weeks, we hear CS has a revelation of its own to share: on the heels of better-than-expected earnings, it seems that the bank’s traders aren’t so good with numbers. Specifically, when it comes to valuing certain asset-backed securities. Which may not be so good for first-quarter earnings. > read more

The Magic Of S&P

Standard & Poor’s worked like a tonic on the stock market with its announcements of holding fire on bond-insurers MBIA and Ambac. But it had no such reassurance for another of their ilk if a $3 billion salvage operation doesn’t come through. > read more

Ah, To Be Young, Rich...And Trading

Albert Einstein believed a person who hadn't made a great contribution to science before hitting 30 was unlikely to do so. That same harsh law may also apply to trading floors. According to one London-based hedge fund that monitors these things closely, the most successful ideas usually come from traders in their late twenties. Was Société Générale's real problem not that Jérôme Kerviel was accumulating cruddy positions, but that at 31, he was over the hill? A far-fetched proposition perhaps, but one the FT sees as worthy of a closer examination. > read more

UK Hedge Fund Eats It

In a year that, so far, is kicking most fund managers’ arses, someone had to be named the biggest loser by somebody. Today, The Wall Street Journal casts the first stone, naming the London fund of Luca Bechis, an experienced trader with a track record of posting strong gains, as one of the worst performers of 2008. We hear that Bechis, conversely, plans to name the WSJ the worst newspaper (since it had to sell out to its mortal enemy, Rupert Murdoch, to stay on its A game) but no word of whether this announcement will be accompanied by the usual, all-night blowout. > read more

Dollar Drops To Record Low Vs Euro

It’s official: the market is pricing in more Fed rate cuts. But are expectations fully discounted yet and what does this say about moaning from the peanut gallery (in the following news item, for example) about a new regime for the greenback? > read more

Pain In The Grain

Why whoever came up with the idea that the same thing we eat should also be burned as fuel in our cars was either a genius – or a complete bonehead. > read more

Double-Whammy

What will housing starts, to be released early this morning, say about chances for the continuation of the deepest real-estate recession in a quarter-century? And what will inflation figures, to be released at the exact same time, confirm about consumer prices and chances for yet another rate cut? Here, a few forecasts that will hopefully help you brace for what could very well be a bumpy ride. > read more

China’s Yuan: Nowhere To Go But Up?

The tide waits for no man, and neither does the world's fastest economic growth nor the highest inflation rate in 11 years. Similar to what happens to a trader when a bet turns against him or her, China’s learning that the cost of taming this wildebeest may soon be more than even it can bear. > read more

What’s The Dilly, Bernans?

The Fed’s in another pickle. Its interest-rate cuts last month failed to lower the borrowing costs of many companies and households, increasing the chances of still more rate reductions by the central bank. But how soon will they come – and will they arrive in time? > read more

The Smart Money, Eh?

Credit Suisse, despite its bad news about unexpected trading losses yesterday, has taught investors a valuable lesson: there’s a very fine line between theoretical losses (losses that could happen, but haven’t yet) paper losses (real, but not yet taken) and, uh, real losses (real meaning real – unless that’s not clear enough for anyone anymore). But how to tell when the heavyweights don’t even know the difference? Good question. > read more

Keepin’ It Real, Wynn-Style

In the corporate world, we don’t often see people who are capable of – or even want to be capable of – telling it like it is. And then there’s that Picasso-smasher of a casino mogul, Steve Wynn (still a little sore about that Picasso, Steve). Still, his unapologetic, no holds-barred ways do have an upside, as aptly demonstrated in a conference call earlier this week. The following are just a few of the highlights. > read more

Know Your Curves

Right now, it pays to study your yield curves as assiduously as you might your favorite Brazilian model. Why? Because shifts in the relationships of U.S. government bonds with different maturities are not only flashing warning signs about the pace of inflation vs. growth, but also might make or lose you a bundle – depending on how much you’re paying attention. Good thing we’ve unearthed this tidy breakdown for you. > read more

Capitol Hill Grill

In hedgie showdown No. 2 of the day, we have activist investor Children’s Investment Fund in this corner and none other than Congress in the other. While one is very much under-the-radar and the latter is a monolith, this face-off will certainly be no David-and-Goliath match. Here, why TCI’s top dogs are being hauled in. > read more

Paulson Slams US Toothlessness

Never mind the rate cuts and the rescue plans. This housing kerfuffle is getting worse by the day and Treasury Secretary Henry Paulson is not liking it. In an interview yesterday, he issued what we could only call a gentle verbal spanking, charging that many of the boneheaded aid proposals being floated in Washington are nothing more than "bailouts" for reckless lenders, investors and speculators, rather than measures that would help cash-strapped, mortgage borrowers. Read on for more from the man who used to run Goldman. > read more

Beat Of The Street: Out Comes ‘The Knife’

John Mack didn’t get his famous nickname on account of his culinary skills. Behind the scenes of a Wall Street whacking. > read more

Expect The Unexpected

Chinese astrologer Tony Tan, a former broker at DBS Securities, made money for his clients during 2007 by telling them Asian equity markets would turn in ``peak performances'' in the Year of the Pig. Guess what he's predicting for 2008, the Year of the Rat? > read more

How To Keep Your Monoline In Line

If you’re interested in bailing out a monoline, you can’t just charge in there and expect it to skip to your loo. No, these fickle entities take a steady hand. You need to take pains to show it who’s boss. Act like a Nattering Ned and you will be doomed to doormatdom. But get in touch with your inner abusive tyrant – yeah! – and you’ll be yoking your quarry in no time. Some crucial dos and don’ts for anyone entering this brutal minefield. > read more

Mystery Man Haunts Conference Calls

William Schmitz, Deutsche Bank analyst: “Hey, guys, this guy, Joe Gutterman, every conference call this quarter, he logs on as somebody's name and asks these crazy efficiency questions. So going forward, keep in mind you should just disconnect him when he dials in. This is like the sixth call in a row he's done that. It's getting really annoying…” > read more

Munis Target Worst Month In Four Years

To the tune of Sinatra’s “It Was A Very Good Year”: When I was twenty-one / It was a very bad month / It was a very bad month for the $330 billion auction-rate market / (And state and local governments) / Who cheered on this farce / With that smoke up our arse / And it came undone / When I was twenty-one. > read more

Why The Superrich Love A Good Recession

Or a stag-cession, as the case may be. Some choice words from Jamie Johnson, heir to the Johnson & Johnson pharmaceutical fortune, publicly anointed boy who would be king and self-ordained rich-guy activist. > read more

Bush To Bernanke: If I Had To Be Toast, Glad I Could Do It With You

Why even if Fed chief Ben Bernanke, George W. Bush and Congress win the battle to thwart a recession this year, they risk losing the war to strengthen the economy in the long term. > read more

Bear: Still Under The Gun

A criminal investigation that’s progressing into the implosion of two hedge funds at one of Wall Street’s top banks could hinge on whether the funds' managers misled investors during a conference call last spring about the dire straits they faced. But in uncertain times, exactly what is a bank to say about a fund’s prospects for survival to investors? > read more

‘You Don’t Know When It’s Going To Happen’

”...And you don't know how much it is going to be," notes a Citigroup credit strategist in London, speaking on how the credit crunch is suddenly infecting investments linked to the corporate-debt market. That "makes everybody really nervous," he adds. More on the latest round of carnage from the front lines of the credit squeeze. > read more

Is It Over Yet?

So far in 2008, this is the only question that’s being asked (with annoying frequency, at this point) at every single trader-banker cocktail party we’ve attended. Obviously, no one has any answers, but no one’s willing to believe, either, that it’s not going to get much, much worse before it’s ended. Part of the reason for that is because regulators are now the new bulls in the china shop. And we need not ask if what they’re going to do will be any good. We know from past experience our crockery is about to get smashed. Like this. > read more

Friday Levity: Vicki C’s ‘Too Sexy’

How could that even be possible? In what we are sure is a marketing tactic, the CEO of Victoria's Secret admitted today that the brand has become "too sexy" and plans to win its customers back – presumably by ceasing to hock wares with more holes in it than a five-alarm Lil’ Kim fire sale. > read more

Buffett Targets Boffo Bonanza

Billionaire Warren Buffett is at it again, extending a lifeline to three insurance companies steamrolled by the credit crunch. But his services don’t come cheap. Here, a peek at how to line your pockets – and your portfolio – by garbage-picking like a master. > read more

On Breaking The Rules – And Getting Away With It

No one’s saying that Ukrainian trader Oleksandr Dorozhko didn’t use inside information when he slayed the stock-options market last fall. And no one is contesting that he obtained the information illegally. (His lawyer even called the exploit a “high-tech lock-pick” before an entire appeals court.) So, why is it that this man may be allowed to stroll away with his $296,456 of spoils while the SEC stands by frothing with rage and powerless to stop him? Ah, why indeed? > read more

Blackstone Goes For Gold As Oil Tops $102

Black gold, that is. (And being Blackstone, what could be more appropriate?) In a $2 billion partnership likely to be announced today, the massive private-equity firm’s bid on oil refineries is well-timed, as the sinking dollar boosts oil futures prices to a new record high. More on how deep-pocketed investors are increasingly chasing down less conventional opportunities like this one in hopes of booking fatter returns. > read more

Mystery Trader Death Solved

Perhaps. Prosecutors have examined the bizarre life and death of Seth Tobias, the Circle T hedge fund manager and sometime television commentator found lying face-down in his pool last year, and they’ve weighed in on whether the tragedy was accidental – or foul play. > read more

Running Of The Bulls – Literally

We’re seeing a lot of bulls running scared these days, but few do it with the gutless panache of Wachovia, which, happy to raise its hand to get in the thick of things when all’s going well on Wall Street, is suddenly finding there’s a price to be paid for hanging with the big boys. So, how now brown cow? Let’s just say, few are above eating their own. And Wachovia is no exception. > read more

As Banks Bail, Market Evaporates

The collapse of the auction-rate bond market, where state and local governments go to raise cash, again demonstrates the magnitude of regulators’ ignorance when it comes to all things Wall Street. Even worse, it lays bare how, even when they are forced to become aware of insider-trading and bid-rigging, they still prefer to look the other way. > read more

Squirrelly Kervielly?

Daniel Bouton, Société Générale’s embattled chairman, said earlier this week that the bank suffered an exceptional fraud, not an institutional failure. "What people do not understand is that what we suffered from is not a huge trading loss, as if our risk-measurement system had been false; it is an operational fraud of the 21st century," he said. So, how does that jibe with fresh revelations that Jérôme Kerviel racked up losses of as much as $3.2 billion as long ago as last July? > read more

The Thing About Those Hidden Risks

They tend not to announce themselves, do they? How mixing your bank-related debt investments with bank-related insurance purchases came come back to bite you when you dance with too many partners. Think of it as leaving yourself open to a risk-profile STD. > read more

Debt Crazies, From Coast To Coast

Today we hear not only one of the world’s foremost trailblazers of private equity on Wall Street (KKR) has begun delaying payments on obligations, appealing for the restructuring of billions of dollars in short-term debt, but also that California may soon see its first municipality (Vallejo) file for bankruptcy. And why would all this be? Could it have something to do with everybody being so addicted to cheap credit? Nah. > read more

US Home Foreclosures Leap 90%

Oh, and that 90% figure above? Also not a typo. It likely doesn’t help any that Joseph Stiglitz, a Nobel-prize winning economist, has chosen this exact moment to say that the world’s largest economy is ``probably'' now in a recession, with the housing-market collapse killing consumer spending. That said, the numbers warrant taking a closer look. > read more

Calpers Batty For Commodities

The California Public Employees' Retirement System, the largest pension fund in the U.S., is thinking about throwing some serious lumber at commodities, with plans to up its investments as much as 16-fold to $7.2 billion through 2010. If you happen to trade anything related to raw materials, you might want to keep the following under your hat. > read more

Ambac: Headed For Splitsville?

It takes a steady hand for a proud bond insurer to keep billions of dollars of securities underpinned by cruddy U.S. subprime mortgages afloat, but that’s exactly what this proud bond insurer endeavors to do – before loads of municipal bonds go south. That is, if it’s even possible. Which no one is sure it is. > read more

Baring It All

Hey, you don’t want to take it all off, for just anyone, do you? But the SEC begs to differ. Here’s how money managers in the U.S. may soon be forced to show a little more ankle than they’re strictly comfortable with. > read more

Screen Play

Thinkorswim’s spacious Chicago digs offer modern speed and power for those traders who still long for the deliciously atavistic feel of open-outcry. Here’s how they do it. > read more

Almighty It Is – But Here’s What It’s Not

If you, like us, have been watching too many National Treasure movies, you’re probably a little confused at this point about the true meaning of that seal on the U.S. dollar and whether there really is a golden city beneath Mount Rushmore. We cannot attest to the latter, but when it comes to the greenback, we want to set the record straight. > read more

Waxing Cuban

Some call it rank opportunism, others call it living in eternal hope, but as Fidel Castro finally steps down after five decades of iron-fisted rule, the FT calls it “not a bad time to take a punt on Cuba.” Here, a few reasons why. > read more

On Hedgies, Women...And Presidential Elections

“There comes a time in the life of every successful hedge-fund manager when he realizes that his political opinions are seriously undervalued. For me, that time has been slower in coming than for most. Even after I bought my first jet I thought of myself, politically, as an ordinary American citizen, not some ‘thought leader.’ It wasn't until one night, a couple of weeks ago, as I sat alone in my $17 million apartment, that it finally dawned on me: Ordinary people don't have a net worth of $475 million.” > read more

All Kerviel, All The Time

We don’t like it any more than you do, but don’t kill the messenger; we’re just here to keep you informed – and we will do so in abundance. Looks like still more revelations are cropping up in the case of Monsieur Kerviel. For example, the details of some choice trades he made as far back as July. > read more

Sky Captains And World Of Tomorrow

The Old Testament prophesied that the world’s takeover would begin with the skies. Okay, that is total malarkey. But it’s not going to stop us from getting all excited about the Delta-Northwest merger-of-behemoths that, according to press snitches, just moved one step closer to fruition. Hopefully, this brings us one step closer to selling our now-gathering-dust idea for interstellar double-wide airplanes with swank bars, dance floors and sound-proof sleeping cars. Hey, it could happen. > read more

Stupid…And Yet Strangely Entertaining

Like we said, the news is boring today (we have a theory, btw, that weekend reporting is always uninspired due to the fact that reporters are generally uninspired people – especially on the weekends, when they are in the fullness of their personal ennui) and, as devoted empiricists, we have proof. May we present to you The New York Times’s proud deconstruction of the poor investing habits of one particular blonde, car-crashing, paparazzi-blinded pop tart? Go Gray Lady. You really ripped the lid off this one. > read more

It’s All About The Toys

We all know that off Wall Street, its denizens have a bit of a reputation for hoarding toys. But did you know that they found a way to bring hundreds of them into their offices where they can brag about them too? Ah, yes; you’d better believe it. > read more

Bernanke: About That Spilled Milk…

The 54-year-old Fed chairman is about to give his semi-annual testimony to the House Financial Services Committee, and if you thought there was tension during the Dems’ presidential debate last night or post-earthquake smoke in the city of London today, you ain’t see nothing yet. Here, a sneak preview of what Big Ben’s expected to say. > read more

Simons Can Give Us $60 Million Anytime…

We swear, we are good for it. Here are the deets on his latest lucky beneficiary. > read more

Dropping The Dime On Refco

Remember that chief financial officer at the (formerly) world’s largest commodities brokerage who managed to bail out with a boatload of money just before the entire house of cards came crashing down? Well, he’s ba-ack. > read more

And Then There’s That Minor Matter Of Kerviel’s Bonus…

There’s been a great deal of palaver over whether or not Societe Generale actually knew about Jerome Kerviel’s billion-dollar-plus profits booked at the end of last year. It seems that the bank did not pay any taxes on them (according to reports from the press). This seems plausible, if SocGen, indeed, did not even know about them. But on the other hand, reports that Kerviel stood to get a much bigger bonus for 2007 than in 2006 seem to point to knowledge of his having done something right...at least temporarily, anyway. > read more

EU Slashes Growth Forecast

While perhaps not surprising, the direness of the European Commission’s warning today on the likelihood that the euro will suffer unprecedented levels of inflation since its launch as a single currency is worth taking a look at. > read more

Take That, SAC

OK, we have been remiss in not mentioning this tidbit sooner: Remember all those rumors last year about SAC Capital traders allegedly being forced to take hormones to emasculate their manly trading techniques? Well, it looks like Goldman Sachs, true to form, has taken this one step further. It actually lets traders enjoy sex-reassignment surgery on the house. Yep. No wussy hormones for them. These guys are hard core. > read more

Pretty Boy: Cutting Edge

Flex more than your trading muscle at Jim Chanos’s latest venture. > read more

‘Full And Fair’ – Or Full Of Hot Air?

“Full and fair” are the words Microsoft is using to describe its offer for Yahoo, but Yahoo is crying foul. And with that, the war of words has officially begun. If you happen to be following this closely, you might want to get out your decoder ring: what will no doubt ensue will be a weird, wacky, highly encrypted dialogue fraught with hidden meanings and double entendres. Contrary to what it might seem at first blush, this is not for your entertainment. Each company must choose its words wisely, as what they say could determine whether there are shareholder lawsuits later. Indeed, when Yahoo complains that Microsoft’s offer "substantially undervalues" it, that is a very different thing from Yahoo scorning it as “inadequate.” Catching on yet? No? Well, here’s a cheat sheet for those of you who have yet to receive your indoctrination to the rules and regs of the delicate verbal gymnastics that permeate the 21st century takeover. > read more

Not Fun Anymore: Writing Headlines (Even This One)

If you think reading horrible, indecipherable headlines written by manure-for-brains reporters is bad, imagine actually BEING one of those reporters. Yep, it could always be worse. And the following is a pitiful testament to that. > read more

Burned Alive

OK, we are not trying to be the bearers of bad news, but you should know this: remember that idea some banks had awhile back that municipalities should issue auction-rate bonds in combination with interest-rate swaps? Well, that one was a real bad egg. > read more

For Dedicated Yahoos Only

Translating a Yahoo CEO e-missive may be a fool’s errand for the average person, but our august and hallowed friends over at Long or Short Capital have been kind enough to apply their proprietary translation algorithm to a letter from Jerry Yang. Here’s the before and after. > read more

Trader Monthly Exclusive: Trades Of The Year

We don’t need to tell you that 2007 could very well go down in history as one of the most treacherous years of trading ever. Credit markets imploded. Equity markets shuddered. Commodities ran wild. Now we settle up with a robust recap of the year’s top subprime plunderings, commodities killings and other money-making marvels. Prepare to close the books on the year that definitively separated the men from the boys. > read more

When We Say ‘Good News,’ We Don’t Mean The Bible

We mean the bank that did the impossible: post fourth-quarter earnings. Hallelujah and glory be. That said, it couldn’t have done it without the help of two key contributors. > read more

Ask Not What You Can Do For Your Bank...

But what your bank can do for you. Today, Jérôme Kerviel finds out exactly what his bank will do for him, as the decision is made as to whether he should rot in jail for who knows how long while a full investigation is conducted into his trades, a process that will, no doubt involve many other people who will get to walk around free in the meantime. Asked what they think, Société Générale’s lawyers have – surprise, surprise – all but personally ordered a black-and-white-striped jumpsuit for their so-called “rogue trader,” lamely positing that they are “concerned that no one can make evidence disappear or put pressure on witnesses.” Yeah, right. Like a kid who teaches youngsters judo, willingly turns himself in (along with his passport) and gets rave reviews from his interrogators for being forthright is so totally the poster boy for Monsieur Devil Incarnate. We’ve had it. Next time you stick your neck out for your bank, think of how fast it’ll sell you down the river for a nickel. More here on today’s pivotal pre-trial hearing. > read more

Let It Rain: Trader Monthly Bonus Guide

In trading, sometimes bonuses pour from the skies; other times conditions are more arid than Reno in July. Over the past few years, the Street has been awash in compensation, but in 2007, it seemed that the pools had finally dried up. Or had they? Despite steep losses, shaky markets and violent financial storms, many on Wall Street have still found themselves flooded with bonus manna from heaven. Here’s the lowdown which deities have amply rewarded their disciples and which have not. > read more

The 5,000-Calorie Meal: Vegas Fix

Resolved to eat better in 2008? That’s cute. Double down on the actuarial tables and gamble away your presumed life expectancy with a politically incorrect feast at Fix, a Bellagio standby. > read more

‘I Will Not Be The Scapegoat’

Famed “rogue trader” Jérôme Kerviel has finally broken his unexplained silence, letting loose to Agence France Presse just as his alma mater, Société Générale, takes an equally defensive stance against foreign takeovers. Whether you see Kerviel as likely to be parroting his lawyers at this point or a veritable fall guy, these remarks are a must-read for anyone curious about what really happened – and what possesses a trader to literally break the bank on wild and wooly bets. > read more

Happiness Best Revenge? Or Is It Revenge, Period?

As the probe into Jérôme Kerviel’s bets deepens, it’s now coming to light that the trader spoke the truth when he claimed to have made a bonanza for Société Générale by the end of 2007 – to the tune of, oh, €1.4 billion. That, however, has triggered a chain of events that’s invariably led to the involvement of the dreaded tax man, who’s expected to want his pound of flesh from the bank for last year’s spoils. Never mind that said pound of flesh is long gone. > read more

Shocking: SocGen’s Risk Controls Too Lax

Not shocking? Okay, not shocking. What is shocking is that the French government has managed to throw together a supposedly comprehensive report, replete with final conclusions and a pat little press conference, this quickly. What about the deep analysis we were promised, following an exhaustive investigation? We don’t like things being so anticlimactic. More on the sea of authoritative reports to follow – from the likes of the Bank of France, the French stock-market regulator and, of course, the French Parliament – and whether any of them are likely to tell us much of anything, other than that the global financial system is being run, as we suspected, by a bunch of monkeys in suits. > read more

The Kerviel Diaries

For those easily offended, read no further (though, for the record, this was in today’s Financial Times and there was no such warning appended). For those rarely offended, unoffendable (or easily offended, yet still strangely able to arrest umbrage for the sake of peeking at someone else’s instant messages – in this case, those of one very infamous trader) read on for a look at the man whose language is, colloquially, rather less innocent than the “aw shucks” demeanor pervading his statements so far to the press. > read more

The 50-50 Conundrum

Congress has approved a $168 billion economic stimulus plan. Whoopdeedoo. But like everything Congress does (and we don’t think we’re being all that pessimistic here) it is probably too little, too late. And even if it isn’t, it likely will have only very slight utility for anyone who’s not a top Washington power broker or one of their sponsors. So, where does that leave the rest of us? If you listen to a recent survey of economists, it leaves us just as likely to fall into a recession as not. Here’s the new data. > read more

Americans: They Want A New Drug

But they can’t shake off the first: the almighty dollar. In the 1980s, Americans saved more than one-tenth of their incomes, according to the U.S. government. A decade later, that rate went down by half. Now, with their savings rate strictly in the red, what can be expected of our unwashed masses and their increasingly less disposable income? > read more

Nowhere To Go But Down?

”When it comes to life's certainties, data revisions rank right up there with death and taxes,” writes Bloomberg columnist Caroline Baum, who goes on to offer this cold comfort: the four indicators used by the National Bureau of Economic Research's Business Cycle Dating Committee to assess turning points in the U.S. economy have peaked. You know what that means, don’t you? > read more

Take A Walk On The Sell Side

The Oscar. The Heisman. The Nobel Prize. Summits of achievement where blows only rarefied air. To that lineup, we now add…the TMA. Conceived to establish the definitive Wall Street medals of honor, these inaugural Trader Monthly Awards are built to establish a benchmark for securities-industry superiority. > read more

The London Pound

And we mean “pound” in the verb, not noun, sense. As the Bank of England cuts its benchmark interest rate today by a quarter-point in hopes of kick-starting the economy, here’s why the U.K., a country that has staked its economic success on attracting other people's money since time immemorial, is facing a rude interruption to 15 years of unbroken growth. > read more

Inside Man?

Police investigating the trading scandal at Société Générale were moving on Sunday toward a theory that a certain alleged pusillanimous pussyfooter who will go unnamed, might not have acted alone, as he and the bank have claimed. > read more

Foiled By E-Mail…Again

Just as the SEC kicks off a probe of Société Générale (investigating, as we understand it, stock sales of a certain board member in the run-up to news of the bank’s breathtaking losses last month) e-mails between SocGen and the exchange that attempted to red-flag its suspect trades are now coming to light. Sadly, the communiques don’t exactly paint the bank as overly vigilant. In fact, depending on how you look at them, you might even describe Soc’s attitude as wholly cavalier. But don’t take our word for it. Judge for yourselves. > read more

Wanted: Your Toys

Self-proclaimed math major and “geeky guy you hated in high school” snidely lectures Americans who dared live above their means in the run-up to the subprime crisis before deigning to buy their assets on the cheap so they might heat their homes this winter. What follows is either a) yet another strange Craig’s List spoof on Wall Street-types or b) an authentic, if bratty, Wall Street-type diatribe. > read more

The “OO” Factor

And, by that, we of course mean the remunerative powers of “OO.” After all, how could it be a coincidence that Google and Yahoo should both have these twin vowels in their names? It’s all very suspect, really. Especially now, as they consider fusing their firepower in the battle royal against Microsoft. Cheers to the folks at Long Or Short Capital for making this connection. Here, the clever oeuvre that made us believers. > read more

Do It Because It Feels Good

We are speaking of trading, obviously (but if The New York Times simply cannot resist going THERE with hammering home the salacious connotations, well then, who are we to hold back?). With apologies to the many, many years of newspaper and magazine articles about how high-stakes bets and risk-taking will just fire your brain’s circuitry into some kind of unstoppable, addictive stupor, can you handle just one more piece on why you should have never touched that first swaption? We thought so. > read more

Hedgie Hit

Lo and behold, January really was a bummer for stock-pickers. Not that this needed any confirmation, but it’s always nice to feel right, even about the obvious. Now for the damage report: according to a survey out from Hedge Fund Research, hedgies who tangle with equities lost an average of 4.1% in January, marking the biggest monthly decline in, well, a very long time. Read on for the grisly details, plus a cheat sheet with the locations where drive-bys were the worst. > read more

Whatever: Payrolls Accelerating While Softening?

Only the bored-out-of-its-gourd press would ever be able to come up with a description that maintains BOTH are happening. Bottom line, things are looking better – but don’t break out that champagne yet. We mean better than bad, but not better than good. Get it? > read more

Plus, It’s A Gas

It is the cheapest it's been relative to oil since the 1991 Gulf War. Its liquidity is a godsent. Its windfalls are bountiful. And with a roughly 20% return, who, really, can resist? > read more

Turning The Corner On ETFs?

Regulators may be on the cusp of approving a highly anticipated new type of exchange-traded fund in a landmark move that could rattle the mutual-fund business to its very foundations. Hey, we kind of like the sound of that. > read more

Buffett To Bankers: Doo Doo Doo, Da Da Da

U.S. financial-sector doldrums are “poetic justice” for those who designed and sold complex investments that have since gone south, Warren Buffett pronounced this week, invoking a concoction of willy-nilly references to Kool-Aid, drinking and “dumb money.” As smug diatribes go, we give it an A+. > read more

Longing For Those Days Of Spilt Milk

“Is it just me or does Bernanke look like he hasn't slept in four days?” asks financial blogger, StatsGeek. “Wow does he look awful. I feel sorry for him. He inherited an unsolvable conundrum. There is no way for him to win. If he keeps cutting interest rates, the dollar falls off a cliff. If he holds interest rates steady, a severe recession develops. Maybe both are inevitable. He will be blamed for everything, even though the foundation for all the problems was put in place way before his tenure.” And, with that, may we present to you the results of a survey of economists on the Fed chief’s performance thus far. > read more

A Slight Case Of Influenza?

Or, more likely, pneumonia. With inflation and budget deficits nipping at their heels, policy makers representing the 15 nations that share the euro may be prevented from moving as aggressively as their U.S. counterparts in cutting interest rates and taxes. And that’s not all: though Europe has only caught a cold to the U.S.’s bona fide meltdown, its sickness might last longer. > read more

Er, The Downside Of Taking Your Guns To Town

Looks like thirty-seven-year-old former Credit Suisse executive, Hafiz Muhammad Zubair Naseem, had a good run of it before getting caught and convicted of insider trading following a rampage that reportedly spanned the globe, involving as many as nine deals, one high-level Pakistan trader-banker and an exceedingly incriminating e-mail account. > read more

Dollar’s Fortunes Bound To Turn?

Why the world’s top currency traders are now saying Big Ben Bernanke's decision to lower interest rates 1.25 percentage points last month will end the dollar's two-year swoon. > read more

Superbad

Whatever weirdness was afoot with the acquisition of Dow Jones & Co. by News Corp., it certainly seemed to bring out the worst in some people. (Hey, what with cosmologically twisted deals like this – read: anything that makes cousins out of Fox News and The Wall Street Journal – this can happen). In the wake of insider-trading charges levied against a group of folks on the Dow Jones side, federal regulators are now announcing one very expensive settlement. That is to say, we reckon the fine easily tops any Kerviel-like tab. > read more

Say It In Six – If You Dare

In everyday life, time is money. But in the world of trading, time is a damn lot of money. So choosing your words quickly – and carefully – is key. Here, a simulacrum of what you go through every day…only these guys had to sum up their entire lives in just six words. Try that on for size. No, really, we insist. > read more

Trading Up

Hairpin turns during the day have become the norm in the stock market lately, as traders grapple with the realities of an unstoppable economic slowdown – but perhaps not one that will lead to a recession. Better yet, here’s how it’s working in their favor. > read more

Goldman Swings For Fences

The G-men have now taken a 20% stake in $3 billion hedge fund Capula Investment Management, a fast-growing, fixed-income specialist. Is this a one-off, or could it help perk up the hedge fund industry? > read more

Zero To Hero

OK, we know we are still being obsessive about this, but, oh, just humor us, will you? How amazing is it that Jérôme Kerviel lost $7.2 billion – after initially threatening to destroy his bank – and yet still hasn’t lost his job? On that basis alone, you’ve gotta’ give the guy some credit. A look at the wildly diverse reactions of different factions to the so-called “Robin Hood of Finance” and the strange physics of unintended superstardom. > read more

The Trouble With Derivatives

At times like these, spare a thought for derivatives salesmen, exhorts the FT. It has been clear for a while that every time the there’s a rip in the fabric of the global financial system, these are the toxic wares that are to blame. But, truly, what is the real issue – the instruments themselves, or those who are attracted to them? > read more

Monolines: The Last Word?

It was the $109,000 photocopying bill that hedge fund manager William Ackman says made him realize how much he'd read and highlighted before betting against bond insurer MBIA five years ago. Here, a tale of all the trouble you can get into making cliffhanger investments. > read more

Taking Stock – Of Oneself

While the pending trade of Johan Santana to the Mets has shaken up Major League Baseball, a relatively unknown, submarine-throwing farmhand who might never reach the big leagues has also spent the week rattling his sport’s economics. Could this be the beginning of the sports star IPO? > read more

Outfox Father Time

It can be done. Just remember, beating old age is a lot like trouncing your rivals at work: if you don’t practically disembowel yourself in the attempt to win, you probably won’t. And if it doesn’t hurt a little bit, you’ve likely accomplished nothing. But giving in to it…now, that’s what brings you results. > read more

Friday Levity: A Different Type Of Stoli

Like Stolichnaya? Well, this is not that. (If it can be believed, this is actually much more sinister than any kind of Russian Vodka.) It is STOLI, or “Stranger Originated Life Insurance," which means someone you don't know can profit off your death. That couldn't possibly be a bad idea – could it? > read more

Goldman’s Gutterball?

Looks like the (supposedly) largest hedge fund launch in history likely had a difficult first month, as January wasn’t exactly the best time in the world to kick off a stock-picking fund (what with global stocks losing 10% of their value and all). Still, we posit the final tally isn’t so bad, considering what happened to other banks (hello SocGen?). > read more

NY Giants Win = Bull Market??

How has the S&P 500 Index performed in the past after an NFC team has won the Super Bowl? The answer courtesy of MarketHistory.com... > read more

Luxury Box

When securing your priceless valuables, no ordinary lockdown will do. > read more

Icahn: At Bloggerheads?

The so-called blogosphere is lighting up like a movie marquis today over confirmation that a Wall Street superstar may soon be joining its ranks. But knowing Carl Icahn doesn’t ever do something for nothing, what’s in it for him? > read more

Build Your Own Hedge Fund

Calling all financial advisors, traders, portfolio managers and analysts: if you’re contemplating starting your own hedge fund in 2008, miss this event at your peril. Here’s your chance to meet with the industry’s best service providers, running the gamut from legal to accounting to fund administration to prime brokerage. Discuss your upcoming launch and gain invaluable insights into the inner-workings of the crucial, operational side of running a fund – including your startup budget, operational responsibilities, capital raising and more. Also, meet others just like you. > read more

Friday Levity: Hardest-Working Man In Business

Show business, that is. You think you know all about toil and trouble? Let James Brown school you. He not only worked hard and played hard right up until the day of his death, but the lessons he left behind as his entourage and harem now take fighting over his spoils to comedic new heights are invaluable to anyone whose stability financially has not exactly been mirrored in one’s personal life. > read more

Pork Bellies Shine on Fat Tuesday

Historically Fat Tuesday has been kind to pork belly futures, according to MarketHistory.com. > read more

‘Deutsche Bank In Lack Of Bad News Shock’

Above, the brilliant headline emblazoned across The Financial Times’s blog today. A few years ago, who could have imagined a world where a plunge in fourth-quarter earnings would be embraced so enthusiastically, with such love? And yet here is DB, joyfully thumbing its nose at us with its steep decline. > read more

Return On Equity

Think you’re getting the most out of your equity-derivatives trading? Think again. Reserve your place at the CBOE’s 24th Annual Risk Management Conference, which runs from March 9th to 11th, and prepare to get schooled. Not only that, you’ll be able to catch some rays in the off-hours, as the event will be held in lovely Bonita Springs, Fla. > read more

Rich Blake on the Best Trades of the Year

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Keywords: Television Appearances

Reads: Bad News Bull

A few trading lessons from the twentieth century’s chaos and warfare. More or less in that order. > read more

2008 Sports Illustrated Swimsuit Issue: It's Research!

The S&P performs better when an American gaces the cover of Sports Illustrated's Swimsuit Issue, according to Bespoke Investment Group. > read more

Cojones Q&A: Predator’s Ball

Jeremiah Sullivan sizes up the world’s most dangerous sharks – and says “bite me.” > read more

Three Rules: Repo Man

Why trade for others when you can trade for yourself? HSBC repo trader Brett Hipkiss offers these few pointers. > read more

Knock Your Date’s Socks Off

Nothing says “be my valentine” like a $500-a-sip Burgundy. But is it worth all the lumber? > read more

Bubble Watch: Tech Two?

Why, nearly a decade after the turn-of-the-millennium technology-stock meltdown, that familiar whiff of exuberance is back in the air. > read more

Best Trade/Worst Trade

In the commodities world, the last trading day of the month (like today, in oil) can break you. Here’s how one trader once lost it at the CME. > read more

The Trade: Bring The Heat

If the weather outside is frightful, the volatility and trading opportunities in heating oil can be delightful. > read more

Performance: Right On DeMark

Long a secret weapon for the hedge-fund elite, Tom DeMark’s technical indicators are gaining a wider following. But how reliable are these signals? You’d be surprised. > read more

Friday Levity: Ignore Nerd CEOs At Your Peril

Why turning a blind eye to the taint of the nerd will not only lose you friends in high school (and in life) but also money. > read more

The Card Shark: Required Reading

Tracking hands, like tracking securities, demands strong analysis — and a willingness to forgo precision in favor of a range. Here’s how to get the upper hand on this latent talent. > read more

Head Coach: The Right Stuff

Most great traders have a specific style and approach to the markets — yet they all share some general traits. Here are the best of them. > read more

Charge Of The Light Brigade

How Bids CEO Tim Mahoney plans to illuminate dark-pool trading and reshape the equity business, one otherwise-obscured block at a time. > read more

Previously » January 2008

More recently » March 2008

Current » Morning Call: August 29