Thursday, November 01, 2007
Minyanville Raises a Cayne
by Ken Houghton
The winner hands down is Minyanville, which produces enhanced graphics as well:
While Felix and Yves are rising to something resembling a defense, the Sainted Bess at dealbreaker, FT alphaville, and minyanville treat the WSJ's rehash of James E. Cayne's sins today.
The winner hands down is Minyanville, which produces enhanced graphics as well:
.jpg)
Labels: Naked Capitalism, PortfolioMarketMovers, The Old Firm, WSJ
Friday, September 14, 2007
Eye-Catching Headlines from the Wall Street Journal
by Anonymous
Because, you know, the subprime lending problem wouldn't be so bad if more 5-year olds were qualified for no-money-down mortgages.
"How to Improve Your Child's Credit Rating."
Because, you know, the subprime lending problem wouldn't be so bad if more 5-year olds were qualified for no-money-down mortgages.
Labels: Naked Capitalism, subprime, W$J
Monday, July 02, 2007
What's the Inflation Rate in India?
by Ken Houghton
The plural of anecdote is certainly not data, but this datum implies (rounding down) that wages in Bangalore have been rising at a rate of about 65% per year faster than US wages. (From 20% of x to 75% of x' over, rounding up, about 2.5 years.)
Since no one is talking about India's hyperinflationary economy, the apparent conclusion is some combination of (1) Bangalore is a relatively insignificant part of the Indian economy, (2) the rising tide there not only isn't lifting boats, it's increasing income inequality, or (3)the requirements of Like.com are so different from all the other companies hiring workers that only a very select few Bangaloreans are capable of working for the company, even though it has no trouble hiring U.S. workers.
Maybe the earth really isn't as flat as Tom Friedman claims. Or maybe we need India to stop being a representative democracy.*
UPDATE: Just to be clear, FX rates don't explain anything near the magnitude of the change, as Yahoo! makes clear:
*The link between this last sentence and the first two possibilities is left as an exercise to the reader.
The glorious Naked Capitalism makes an economist's heart flutter with talk of convergence:
Like.com, a search engine company that uses image recognition software to find pictures on the web, took the step of closing in India after seeing the wages of top-level engineers in some cases rise close to US levels....
In the next few months, Like.com would have had to lift the salary of one of its Bangalore engineers to 75 per cent of the US level, even though the same engineer earned only 20 per cent as much as an equivalent US-based worker two years ago, Mr Shah said.
The plural of anecdote is certainly not data, but this datum implies (rounding down) that wages in Bangalore have been rising at a rate of about 65% per year faster than US wages. (From 20% of x to 75% of x' over, rounding up, about 2.5 years.)
Since no one is talking about India's hyperinflationary economy, the apparent conclusion is some combination of (1) Bangalore is a relatively insignificant part of the Indian economy, (2) the rising tide there not only isn't lifting boats, it's increasing income inequality, or (3)the requirements of Like.com are so different from all the other companies hiring workers that only a very select few Bangaloreans are capable of working for the company, even though it has no trouble hiring U.S. workers.
Maybe the earth really isn't as flat as Tom Friedman claims. Or maybe we need India to stop being a representative democracy.*
UPDATE: Just to be clear, FX rates don't explain anything near the magnitude of the change, as Yahoo! makes clear:
*The link between this last sentence and the first two possibilities is left as an exercise to the reader.
Labels: convergence theory, Economic Development, Income Inequality, Naked Capitalism
Wednesday, June 27, 2007
A Non-Defence of The Old Firm
by Ken Houghton
This is the closest I'm going to come to saying anything directly about The Old Firm: If things had been done differently at the time of LTCM, we might not be talking about Bear so much right now. Via Naked Capitalism, this Bloomberg Exclusive:
As I noted previously, there is good reason that Bear trades lower than its comps. "[T]he most sharp-elbowed culture on the Street" may be a competitive advantage, but then there are the (rare?) times when "collegial" is more important than competitive—most often, in a time of crisis.
PART 2: There was, of course, a time when Cayne thought differently, as noted in When Genius Failed:
(Moved up due to addition of Part II, below)
This is the closest I'm going to come to saying anything directly about The Old Firm: If things had been done differently at the time of LTCM, we might not be talking about Bear so much right now. Via Naked Capitalism, this Bloomberg Exclusive:
Bear Stearns Cos. is getting a taste of its own medicine.
It was Bear Stearns, the biggest broker to hedge funds, that nine years ago declined to join 14 other investment banks in the bailout of Long-Term Capital Management LP. Then last week, as New York-based Bear Stearns pleaded for help to rescue two of its hedge funds teetering on the brink of collapse, many of the same firms refused to come to its aid.
Merrill Lynch & Co., which pumped $300 million into LTCM, said no and seized $850 million of bonds held as collateral for loans it had made to the funds. Lehman Brothers Holdings Inc., JPMorgan Chase & Co. and Cantor Fitzgerald LP also pulled out, leaving Bear Stearns to sort through the wreckage of bad bets on subprime mortgage bonds and collateralized debt obligations.
As I noted previously, there is good reason that Bear trades lower than its comps. "[T]he most sharp-elbowed culture on the Street" may be a competitive advantage, but then there are the (rare?) times when "collegial" is more important than competitive—most often, in a time of crisis.
PART 2: There was, of course, a time when Cayne thought differently, as noted in When Genius Failed:
Labels: hedge funds, Market Failures, Naked Capitalism, subprime, The Old Firm
Monday, June 25, 2007
In Defence of the Old Firm
by Ken Houghton
It may well happen, but it won't be cause and effect. Dealing strictly with public information:
That said, both of their conclusions are reasonable:
"Never seemed eager to sell itself" is appropriately wishy-washy, but leaves an impression that is (being wishy-washy myself) arguably inaccurate.
More accurate is Naked Capitalism's own comment:
The second part may be true, even if Ken Lewis doesn't think so. On the first, you have to assume that the "best talent" would be able to find acceptable compensation elsewhere.
In short, there is a reason that BSC trades lower than its "comparables," and the takeover price would, were the market efficient, adjust accordingly. As usual, it would be a matter of haggling over the price.
If it does happen, the delay has probably cost BSC shareholders several dollars per share. But, again, Jimmy Cayne isn't getting any younger, and may see last week as an opportunity.
The authors of Naked Capitalism (h/t cactus at Angry Bear) post the first discussion taking last week's events to their logical conclusion.
It may well happen, but it won't be cause and effect. Dealing strictly with public information:
- There have been rumours of other firms (most noticeably HSBC) making serious bids for the firm in the past several years
- There are firms that would be a very good fit (most notably, imnvho, this one).
- James E. Cayne isn't getting any younger.
That said, both of their conclusions are reasonable:
However, [Merrill Lynch analyst Guy] Moszkowski estimated that if Bear Stearns loses half the amount of its loan, that would knock roughly $7 a share off its net earnings in a year. That's about half this year's forecast profit, the analyst noted.
He added that if such losses mount, Bear Stearns could become vulnerable to a takeover....
Bear has never seemed eager to sell itself, but would benefit from a greater global presence, Moszkowski wrote.
"Never seemed eager to sell itself" is appropriately wishy-washy, but leaves an impression that is (being wishy-washy myself) arguably inaccurate.
More accurate is Naked Capitalism's own comment:
But that begs the question of who would be so rash as to purchase Bear. Investment bank acquisitions have a terrible track record, and Bear would be a particularly tough deal. It has the most sharp-elbowed culture on the Street, and also the highest payout on revenue production, a toxic mix to any acquirer (bringing pay practices in line with those of the new parent would lead to an exodus of the best talent). And its most attractive business, its number one spot in prime brokerage, appears almost certain to be on the verge of a cyclical, if no a secular, decline.
The second part may be true, even if Ken Lewis doesn't think so. On the first, you have to assume that the "best talent" would be able to find acceptable compensation elsewhere.
In short, there is a reason that BSC trades lower than its "comparables," and the takeover price would, were the market efficient, adjust accordingly. As usual, it would be a matter of haggling over the price.
If it does happen, the delay has probably cost BSC shareholders several dollars per share. But, again, Jimmy Cayne isn't getting any younger, and may see last week as an opportunity.
Labels: Angry Bear, Market Failures, Naked Capitalism, The Old Firm
