Wall Street Folly

For the 2nd year in a row, Sullivan & Cromwell was the top legal dog in M&A:

The New York-based firm advised on $330 billion in transactions this year, according to data compiled by Bloomberg News as of Dec. 28. Procter & Gamble Co.’s $57.3 billion purchase of razor maker Gillette Co. and Gas Natural SDG SA’s plan to buy Endesa SA for $51.4 billion was almost a third of the total.

“The level of activity has been building up the last month or two,” said Frank Aquila, a Sullivan & Cromwell partner. “We have a very strong pipeline headed into 2006, as do most of the M&A law firms and the investment banks.”

Law firms benefited from this year’s 31 percent surge in the value of all mergers and acquisitions to $2.58 trillion, behind only 1999 and a record $2.95 trillion in 2000. The value of deals Sullivan & Cromwell advised on rose 19 percent from last year. The No. 2 firm, London-based Clifford Chance, saw its total jump 78 percent to $328.3 billion.

Here are the rankings for 2005:

Top-Ranked M&A Law Firms for 2005

Firm                       Value of Deals (in billions)

Sullivan & Cromwell      $330.3
Clifford Chance            $328.3
Freshfields Bruckhaus    $301.7
Linklaters                     $260.0
Jones Day                    $259.4
Simpson Thacher          $253.8
Wachtell Lipton            $248.0
Skadden Arps                $237.5
Cleary Gottlieb             $197.0
Osler Hoskin                 $195.4

Based on data compiled as of Dec. 28, 2005

Sullivan & Cromwell Tops M&A Legal Adviser Rankings a 2nd Year – Bloomberg

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Tags: Law firms

A Heady Job Market for MBAs – Business Week

After some lackluster years, 2005 B-school grads are fielding multiple offers — and the outlook remains upbeat, recruitment experts say Helga Vanthournout, a 2005 graduate of the International Institute of Management Development in Lausanne, Switzerland, was pleasantly surprised by her success in the job market this past year. The 31-year-old, with five years of experience in business-software and high-tech manufacturing, received five job offers within a month of graduation.  After much deliberation, Vanthournout accepted a job in the Switzerland office of McKinsey & Co., the New York-based management consulting firm. Vanthournout says employers used to overlook her because of a somewhat choppy list of work experience, but her MBA and a solid job market afforded her more options than she ever imagined….By all accounts, top consulting firms and investment banks, the perennial MBA recruiters, have returned to campus in full force after shying away during the economic downturn. ESADE Business School in Barcelona has seen the number of consulting firms and investment banks on campus increase by 50%. McKinsey hired around 90 INSEAD graduates in both 2004 and 2005, up from 56 in 2002. At the Wharton School at the University of Pennsylvania, McKinsey hired 57 graduates in 2005, up from 48 the previous year and just 24 in 2002….

UPDATE 2-NYSE seat sells for $3.55 mln – below peak – Reuters

A membership seat on the New York Stock Exchange sold for $3.55 million on Thursday, a day before such sales cease as the 213-year-old Big Board gears up to become a public company.  The price is down $50,000 from the last seat sale of $3.6 million, which occurred earlier in the day on Thursday. Seat prices, which give the owner the right to trade on the Big Board, were at a record $4 million prior to Dec. 6, when exchange members voted to approve the NYSE’s plan to buy electronic trading company Archipelago Holdings Inc. and go public.  Under those plans, seat sales will cease at the end of the year before the NYSE goes public — expected in late January 2006. The last day for seat sales will be Friday….

A stodgy City turns boom town – International Herald Tribune

Stand on the corner of Cornhill and Gracechurch Street in London’s financial district, and you get a sense of the new energy and buzz of the place. Smartly clad workers pour out of restaurants and through the revolving doors of office blocks. The sidewalks are packed and, above the busy avenues, new architectural wonders reach into the clear Christmas sky. 

Seven years ago some pessimists predicted that all this was doomed: After decades of postwar decline, London’s fate as a financial center would finally be sealed by the advent of the euro. With Britain opting to keep the pound out of the European single currency, which came into existence on Jan. 1, 1999, the City – as the financial district is called – would be sidelined and much of its business would shift to rival financial centers in the euro zone, like Paris or Frankfurt. The ancient and colorfully named streets – Poultry, Cheapside, Lombard – would empty. 

In fact, the opposite happened. The international business generated by the euro made its way to London, and the bankers followed suit. Many of continental Europe’s biggest banks relocated major operations to the City. Today, 330,000 people crowd into this small area beside the Thames. The City’s local government, the Corporation of London, predicts this number will rise to 400,000 over the next decade. Frankfurt, by contrast, employs 100,000 in financial services.   

The business figures are equally astonishing: $679 billion in foreign exchange flows daily through London’s financial district, according to the City’s Foreign Exchange Joint Standing Committee. As well as more traditional business, London is becoming a center for the new boom in hedge funds. According to the Corporation of London, 60 percent of Eurobonds are issued in London. A total of 287 foreign banks have operations in the City, compared with 152 in Frankfurt, according to figures from the Corporation of London and Frankfurt’s Chamber of Commerce and Industry….

De Beers, Sotheby’s Battle Tiffany in Diamond Jewelry (Update2) – Bloomberg

Atsuko Tamura says she hopes her husband splurges on a 1.3 million yen ($11,000) De Beers flower- shaped Cocktail Fizz diamond ring for their 15th wedding anniversary. She already has a Tiffany & Co. necklace.  “The diamonds are just sprinkled all over,” Tamura, 40, says as she steps out of the De Beers shop in Ginza, one of Tokyo’s busiest and most glamorous shopping neighborhoods. “De Beers is the most genuine of all.”  Competition is intensifying in the $70 billion diamond jewelry market as rising wealth in Asia increases demand for higher-priced pieces. De Beers, the world’s largest supplier of diamonds, is winning customers from companies such as Tiffany and Cie. Financiere Richemont AG’s Cartier four years after creating a retail venture with LVMH Moet Hennessy Louis Vuitton SA. Sotheby’s Holdings Inc. began selling a line of gems this month….

Who’s Who in PowerPicks 2006 – Business Week

S&P’s analysts exlain why they expect their favored stocks to perform strongly in the new year By sector, here are the 40 members of Standard & Poor’s PowerPicks 2005 portfolio — the collective "best ideas" of S&P’s equity research staff (see BW Online, 12/30/05, "S&P’s Top-Shelf Selections") — and a brief investment rationale from S&P for each…

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Is it April Fool’s day already? 

It must be, because in a story in the New York Daily News, "Republican sources said The Donald – who in 1999 toyed with the idea of running for the White House on the Reform Party line – is mulling a bid to persuade New Yorkers to hire him as their next governor."

Senate GOP leader Joseph Bruno tantalized reporters yesterday by declaring a wealthy mystery candidate is "thinking" about seeking the party’s backing to replace Gov. Pataki.

Bruno – a longtime Trump admirer who has gained new clout within statewide GOP circles as Pataki prepares to leave state politics – wouldn’t name the potential candidate.

"When it gets public, you are all going to become excited, interested, and will want to write about it," said Bruno. "This person is thinking about it, and I bet you you’ll vote for him if he ends up running."

Won’t The Donald have to make financial disclosures if he decides to run?   That alone might keep him out of the race. 

Well, would you hire this man to be gov? – New York Daily News

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While Rates Technology Inc of New York may be a little known firm to most of us, it’s sure well known to many technology companies, including the likes of Microsoft, Lucent and Avaya among approximately 120 others.  Those companies have paid what seem to be ransoms to RTI to settle threatened lawsuits over patents that they own and claim have been infringed upon.  Currently it has suits against Alcatel, Vonage and Cablevision seeking billions of dollars in damages, presumably hoping for fat settlements without actually going to trial.  It’s also in settlement talks with Ebay’s Skype division over alleged infringements.

RTI has a new deep pocketed, high profile prize in its sites:  Google.  It claims that Google Talk, that company’s new VOIP service, also infringes on patents it owns and has slapped them with a lawsuit. 

Jerry Weinberger, the president of RTI, said talks broke down earlier this year due to Google’s "arrogance."

"Google thinks we’re peons who can’t bring them to their knees," he added, "but they’re wrong."

A Google spokesman dismissed the lawsuit as "without merit" and pledged that the company "will defend against it vigorously."

Although the lawsuit does not specify damages, Weinberger said that if Google refuses to settle the lawsuit and RTI prevails, the company would seek $5 billion in damages based on royalties that will have accrued over the course of the trial, which could last for four years.

While that number may seem high, the VoIP market is poised to explode — industry analysts have predicted the global VoIP market could exceed $30 billion by the end of the decade….

"It looks like RTI goes after every VoIP company that comes across its radar screen," said Rich Tehrani, of Internet Telephony magazine. "And if they don’t pay, RTI sues them."

Google Warned Over VOIP Patent by Serial Suit-er – New York Post

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We have to admit it.  We’re hooked on the fascinating Overstock.com story.  It provides almost daily sources of amusement as we observe the easy-to-poke-fun-at antics of front man Patrick Byrne and the numerous headlines related to the company.  Here’s another one to add to the list.   The Register, a UK techie type newspaper, was apparently flamed by someone named "Andy" from Virginia over a recent story that they published on Overstock.com.  They’ve dubbed this their Flame of the Week (FoTW):

You are a LIAR and scum NO good piece of trash wannbee journalist. I guess you are the payroll of Rocker and his filth SCUM to. WHO PAYS YOU TO WRITE THIS GARBAGE??
ROT IN HELL Pseudo HACK

Andy

Here’s the response from story author Ashlee Vance that was published in The Register:

We’ve been accused of a lot of things over the years. This week’s flame, however, sets a new low. Andy in Virginia has charged us with being the payroll for Rocker Partners – a firm that Overstock.com’s CEO Patrick Byrne has sued.

It’s unclear what part of our recent Overstock story inspired such a claim. We can assure you that we are not and never have been Rocker’s payroll.

Andy, if you’re reading this, just to let you know, we can honestly say that we’re not affiliated with Rocker Partners either. 

‘You’re nothing but a payroll’ – The Register

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Do women compete in unhealthy ways at work? – USA Today

As founder and president of a fitness training enterprise, Beth Shaw used to deal with management issues at her fitness training and education company, which is largely composed of women.But Shaw says she soon got weary of dealing with all the competition between her female staff.  "Women complain that they’re not getting what they need, but are nice to each other’s face. Everything is behind the back, (and) nothing is on the up and up," says Shaw, whose company, YogaFit, is based in Redondo Beach, Calif. "Women really need to be trained to be assertive and outspoken so it’s not passive-aggressive."The feminist movement that took root in the 1960s embraced the concept of women as standing shoulder-to-shoulder in their effort to open new doors in male-dominated businesses. But today, with the number of women in the labor force at record numbers, another question is being raised: In the workplace, are women sometimes their own worst enemies?….

Intel to Replace Corporate Logo, Simplify Labeling (Update1) – Bloomberg

Intel Corp., whose processors run more than 80 percent of the world’s personal computers, will replace its corporate logo and simplify product brands in a major shakeup of the company’s marketing.   Intel will add the tag line “Leap Ahead” to the logo, which will no longer feature the dropped `e’ version of its name used since 1969, the year after the company was founded, Intel spokesman Bill Calder said. The image change, to coincide with the Consumer Electronics Show in Las Vegas next week, is part of an effort by new Chief Executive Officer Paul Otellini, 55, to win a place for Intel’s chips in consumer electronics for the home. Intel, based in Santa Clara, California, is pushing into the consumer market to stem an anticipated slide in sales growth from computer chip sales….

Windows Security Flaw Is ‘Severe’; PCs Vulnerable to Spyware, Viruses – Washington Post

A previously unknown flaw in Microsoft Corp.’s Windows operating system is leaving computer users vulnerable to spyware, viruses and other programs that could overtake their machines and has sent the company scrambling to come up with a fix.  Microsoft said in a statement yesterday that it is investigating the vulnerability and plans to issue a software patch to fix the problem. The company could not say how soon that patch would be available.  Mike Reavey, operations manager for Microsoft’s Security Response Center, called the flaw "a very serious issue."….

Restatements of earnings in 2005 to break record – USA Today

The stock market hasn’t been able to get close to its previous highs, but Wall Street will boast at least one record when it closes today: The number of earnings restatements in 2005 will shatter all previous marks. According to Glass Lewis, which provides research to institutional investors, 971 public companies restated their earnings in the first 10 months of this year, vs. 619 for all of 2004. Although final figures for the last two months of the year aren’t in, the total number of restatements for the year could hit 1,200, says Lynn Turner, managing director of research at Glass Lewis.  "There’s no doubt that the number of restatements will be an all-time record, by a long shot," Turner says….

China’s B-School Boom – Business Week

Walk into any classroom at one of China’s elite business schools and what you’re likely to see isn’t all that different from what you would find at Harvard, Wharton, or MIT’s Sloan School. True, there’s a preponderance of Asian faces and the occasional smattering of Mandarin. But the classes, course materials, subject matter, and even the teachers are virtually identical to their U.S. counterparts.  Indeed, in most cases the MBA programs attended by China’s top students are very much the product of Western educational institutions, which in recent years have rushed to establish programs on the mainland. The idea: to tap into the enormous demand for talent created by China’s white-hot economy…..

Wikipedia chief considers taking ads – Times Online UK

The founder of Wikipedia, the charitably funded online encyclopaedia, says that the website is considering carrying advertisements in a move that could raise hundreds of millions of dollars a year in revenues.  Jimmy Wales told Times Online that despite widespread "resistance to the idea" of advertising on Wikipedia, "at some point questions are going to be raised over the amount of money we are turning down."  Wikipedia would be in a prime position to exploit the current boom in online advertising. It expects to record around 2.5 billion page impressions this month and traffic volumes are doubling every four months. According to figures released this month by Nielsen/Netratings, it was the ninth-fastest growing site on the web in 2005. However, "wikitopeans" – the members of the public who create Wikipedia’s articles on a voluntary, unpaid basis – are likely to oppose any suggestion of commercialisation of the site….

Junk names show preference for loans – Financial Times

Junk-rated US companies borrowed a record $295bn in the loan market this year, trumping 2004’s volume, itself a high. Meanwhile, issuance of high-yield bonds dipped 26 per cent this year compared with last year.  The contrast partly reflects a transfer of some financing activity to the so-called leveraged loan market from the high-yield bond market, which experienced several rocky patches this year, notably during the turmoil sparked by the rating downgrades of General Motors and Ford in May.  "Through most of this year, the loan market has been technically stronger," says Chris Linneman, head of syndicated and leveraged finance at JPMorgan….

NSA Caught Serving Cookies – Red Herring

The National Security Agency got caught with its hand in the cookie jar, literally, on Wednesday.  The NSA, which functions as the United States’ information systems watchdog, admitted it has been posting cookies on the computers of visitors to its web site, despite federal rules banning such activity….

If They Only Had a Taser – Motley Fool

Unless you have sworn off television sets over t
he holidays, you have probably seen Monday’s tense standoff in New Orleans that ended with a knife-wielding suspect being gunned down by the police. The camera reveals only so much of this tragic event, though my first thought was how differently this situation could have turned out if the cops has been armed with Tasers (Nasdaq: TASR) instead of handguns.  The traditional media approached the story from sensationalist angles. Did the officers overreact? Were their lives being threatened? Could New Orleans survive yet another black eye?….

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Just what the world needs.  Another discount broker.  At a time when commissions at discount brokers had seemingly found a floor, another lower priced competitor has emerged to compete with the likes of Ameritrade and E*Trade:  TradeKing.  It’s apparently charging a flat $4.95 for stock trades and $4.95 plus $0.65 per contract for options.  Ameritrade advertises $10.99 for equity trades while E*Trade advertises stock and options trades at $6.99 and $9.99.  Trying to capitalize on the new technology bandwagon, TradeKing will also be offering financial blogs and podcasts, as well as "social networking tools".   Social networking tools? We wonder if those are something akin to the social networking tools at Trader Monthly, with their easy-to-ridicule "Trader Dater" search  *snicker*…

The site boasts:

We don’t have a pricing structure, we have a price.

For stock trades, we charge $4.95 per trade. For option trades, we charge $4.95 per trade, plus 65 cents per contract. That’s it.

At TradeKing, we charge the same rates to everyone – beginner or expert, large account or small, regardless of how often you trade with us, for both Market and Limit orders, with no hidden fees. We think that’s fair and simple.

Price comparison chart from their site

TradeKing jumps into online trading, boasts low fees – Reuters

Press Release

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Around 3,000 lucky investment bankers, fund managers, brokers and private equity financiers in London are bonus lottery winners who will snag bonuses in excess of £1 million or more this season.

Thousands of bankers are receiving their bonuses this month while others get theirs in the New Year. The total bonus pool is set to increase by between 15 and 40 per cent from last year, Brewin Dolphin predicted. The total bonus pool will run to billions of pounds. In the last bonus season, financial payouts were £1bn higher than in the previous year, according to the Office for National Statistics, which does not publish a total figure…

Deal makers and specialised derivatives traders are expected to get the biggest pay-outs this year, trumping their colleagues in fixed income who pocketed the lion’s share of the bonus pool during the downturn in equity markets. Martin Smith, chief executive of Brewin Dolphin Wealth Management, said: "2005 has been a good year for the City… However, not everyone working in the Square Mile will receive much bigger bonuses than last year as there is a growing trend to focus more of the rewards on the star performers. This is often influenced by which areas they work in."

The Brewin Dolphin survey of customers also found that people working in private banking should also see hefty bonuses. Securities firms typically allocate almost 50 per cent of their revenue, after interest expenses, for compensation.

‘More than 3,000 City workers to bag £1m bonuses’ – independent.co.uk

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Tags: Bonuses

Shorts Feel the Byrne – New York Post

The chairman of Overstock.com has emerged as a major supporter of a group aimed at stomping out short-sellers, who have had the online retailer’s shares under siege for the past year.  The little-known group, Nevada-based National Coalition Against Naked Shorting, acts as an Internet clearinghouse for information about naked short selling, which involves the short sale of a stock without first properly borrowing it….

‘Santa Kind To HFs’ A Lot Of Ho-Ho-Hokum? – Institutional Investor

Two curious Georgia State University researchers and one from the London Business School are trying to solve this puzzle: Why are hedge fund returns in December almost three times higher than the average of any given month during the rest of the year? The answer, they suggest, comes in two flavors. Either "underwater" funds increase their exposure in December "to catch up," or that the risk exposures of the funds "remain the same but factor risk premium realizations" happen to be large in the month; or that, in December, underperformers "manipulate" their returns to earn incentive fees. The authors of the report "Why Is Santa So Kind To Hedge Funds? The December Return Puzzle", Vikas Agarwal and Naveen Daniel of GSU and Narayan Naik of LBS, don’t think the first suggestion completely explains the "phenomenon," and their 46-page report states that "We find that fund managers whose incentive fees contacts are near the money are more likely to engage in such returns management."   Hogwash, says one anonymous hedge fund manager who told The Telegraph that "December just tends to be a very good month."…

Goldman’s Draghi seen as new Bank of Italy governor – Reuters

Goldman Sachs executive Mario Draghi was poised to become new Bank of Italy governor on Thursday, succeeding Antonio Fazio who quit in a bank takeover scandal that tainted the nation’s image.  The Bank of Italy’s board of directors, or Superior Council, gave Draghi its unanimous backing before a cabinet meeting which government sources said was almost certain to choose the 58-year-old investment banker. The cabinet began meeting at around 1130 GMT.  Fazio resigned after being put under investigation for possible financial crimes in the takeover scandal that has thrown a spotlight on Italy’s protected banking sector….

Hedge-fund manager charged – Marketwatch

A hedge-fund manager was charged in federal court Wednesday with insider trading for allegedly buying Charter One Financial Inc. stock last year after a Citizens Financial Group Inc. employee tipped him to its plans to acquire Cleveland-based Charter One.  U.S. Attorney Michael Sullivan and Kenneth Kaiser, special agent in charge of the Federal Bureau of Investigation in New England, announced in a press release that Michael Tom, 36, of Waltham, Mass., has been charged with five counts of insider trading.  Tom managed and partly owned a Burlington, Mass.-based hedge fund called GTC Growth Fund, the release said. He started the fund in December 2003 and made its investment decisions….

Bay Area tops in pay, but it comes at a price – Mercury News

Bay Area workers are the highest-paid in the nation, making 17 percent more than the national average, according to a report released Wednesday by the Bureau of Labor Statistics.  The study, based on 2004 data, shows the region pays 6.4 percent better than New York and 4.5 percent better than Boston.  The report takes into account regional differences. For example, the study adjusted salaries in the Bay Area because it has a larger number of higher-paid computer programmers than the rest of the nation. The adjustment finds San Francisco “professional workers” make 18 percent more than their counterparts elsewhere.  But without that adjustment, a direct comparison would have shown San Francisco professionals earn an annual salary 31.5 percent greater — $80,412 compared with the national average of $61,152….

Rich Buck Luxe – New York Post

A disproportionate number of America’s wealthiest consumers were on the ski slopes or at the beach in the week before Christmas — not at the shopping malls, according to the findings of one analyst.  The  trend bodes well for the travel industry, but not for the nation’s high-end retailers.  The findings dovetail with predictions made by other analysts who see a slowdown in spending on luxury goods — especially apparel — which have been a driving force behind the generally robust sales of the past two years….

A Trump? Not his style  – International Herald Tribune

There are only 10 known billionaires in China, and he is one of them. His name is Xu Rongmao, and he is no Donald Trump. He is bigger.   Xu, who is the chairman of the Shimao Group, controls much more land than any private developer in the United States and builds luxury real estate projects that put Trump to shame for their sheer scale and flamboyance.   But unlike Trump, who is never at a loss for words and who goes out of his way to attract photographers, Xu almost never grants interviews and is highly secretive about his operations.   But for all his reserve, Xu, a former textile factory worker, is one of China’s wealthiest entrepreneurs and a prime example of the mainland’s first generation of real estate tycoons….

Web Ad $$ Keep Growing – New York Post

The shift to online advertising is happening faster than some analysts expected, prompting at least one to boost his forecast for next year.
The Internet ad market will increase 32 percent in 2006, reaching $16.6 billion, Credit Suisse First Boston analyst Heath Terry wrote in a report.  The flood of dollars to the Internet is good news for Google and Yahoo!, while coming at the expense of traditional media such as television, radio and print, the report said….

Status of high-profile corporate scandals – Business Week

A look at some of the high-profile corporate scandals of recent years and the status of legal action in each….

Overstock shares fade as CEO warns of ‘drugs or dead body’ caper – The Register

Overstock.com CEO Patrick Byrne continues to break new ground as the head of a publicly traded company. In a single TV interview last week, he shocked investors by revealing that holiday sales were far below expectations, perplexed the financial crowd by talking about drugs and dead bodies being found in his trunk and initiated a verbal war with billionaire blogger Mark Cuban. This latest round of gaffes adds to a tradition for Byrne that includes admitting that he lied about being gay and a coke-head to financial analysts and initiating a program to uncover a "Sith Lord" seeking to ruin Overstock.  You can’t make this stuff up…..

Wall St expects confusion in new numbers – FT.com via MSNBC

New rules on how US companies account for stock options are set to cause widespread confusion on Wall Street early next year as investors struggle to make sense of the numbers, according to investment analysts.  That will increase the number of investors who simply ignore the new numbers. Some warn it could eventually undermine the effect of the accounting change, which took more than a decade to bring about and forces companies to deduct the cost of employee options from their reported profits….

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Poor beleaguered Overstock.com.  Now Piper Jaffray analyst Aaron Kessler has jumped on the revision band wagon after the company’s comedic front man Patrick Byrne revealed less than stellar holiday season results.  He’s not only revised estimates downward, but also downgraded the stock from Market Perform to Underperform, and lowered his target from $31 to $22.  He said in a just issued research note:

Can OSTK Achieve Profitability?  Under OSTK’s current business model, it could prove very difficult to achieve any meaningful level of  profitability….In our opinion, the best situation for OSTK at this point would be if OSTK could increase its conversion rates which would enable them to cut back on marketing spend and still achieve solid sales growth.  At this point however, there are no indications that OSTK’s initiatives to increase conversion rates have worked…. 

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Most Americans will not buy from bankrupt automaker: survey – Reuters

Almost three of every four American consumers polled would not buy a car from a manufacturer that had declared bankruptcy, according to a recent survey, giving struggling U.S. automaker General Motors Corp. <GM.N> something else to think about.  Seventy-four percent of respondents said they would not purchase or lease a new car from a bankrupt automaker, according to a survey released by Cincinnati-based research firm Directions Research Inc. Twenty-six percent said they would buy from a manufacturer in that position….

Our relationship is terminated, Arnie – This Is London (Evening Standard)

This time he won’t be back. Arnold Schwarzenegger’s love-affair with his Austrian hometown has been well and truly Terminated.  The large metal letters spelling out the actor-turned-politician’s name have been torn down from the Arnold Schwarzenegger Stadium in Graz.  And every reference to the city’s former favourite son has been wiped from its official website.  The California governor was once the local hero, having been born just outside Graz in 1947 before becoming one of the world’s most famous film stars. But former fans are blanking him out in protest at the execution of gang leader Stanley ‘Tookie’Williams….

The Hire Authorities – On Wall Street

They don’t think it makes sense for Merrill Lynch to be buying Advest or for Smith Barney to be adding Legg Mason. They fret over the quality of the remaining regionals and what that means for brokers’ career options. They see richer recruitment deals–but only for advisers willing to sign on longer. They think Morgan Stanley will take the steps necessary to rebound.  Those are some points that emerge in our seventh annual recruiters’ roundtable, which starts on the next page….

A ball for the ‘king of jewelers’ – International Herald Tribune

PARIS The ball opened at midnight, with tiaras out-twinkling the chandeliers hanging overhead or glittering as table centers. The venue was a crimson tent pitched in the Tuileries Gardens at the spot where the royal family palace once stood and blood flowed during the revolution.   
But the current French revolution is to re-embrace exclusivity and luxury. A crowd in evening dress streamed down to the tent via the Place Vendôme, where footmen with lanterns lined up beside the Christmas trees and where miniature theaters on the sidewalk showcased an opera diva and an Indian dancer.   It was all in the name of Cartier, whose historic store on Rue de la Paix reopened last week on two levels behind its black marble façade.   Cartier is on a high, as the jeweler that was one of the first brands to democratize luxury is now reclaiming its elitist position as the "king of jewelers and jeweler of kings." …

A Change in Arbitration Process – On Wall Street

January 1, 2006 – No longer are customers making claims against brokers and their firms forced to rely on the New York Stock Exchange staff to choose arbitrators for the disputes. Now they can get an arbitrator selected though a random computerized process.  The new development, which took effect in November, comes via a change in rules approved by the Securities and Exchange Commission. The random method of choosing an arbitrator is only available for a customer who is not a member of the exchange. The client also has to request this process within 45 days from the time the claim is filed….

Vinik’s excellent year – Boston Globe (from Nov 29)

Did semiretirement disagree with Jeff Vinik?  It’s been five years since the former Fidelity Magellan manager turned hedge fund star gave his Vinik Asset Management clients their $4 billion back so he could dedicate more time to family and personal interests.   Even without clients, Vinik kept the lights on at his firm to manage his own money and invest for a few friends and family. The private Vinik portfolio fluctuated, but tended to be modest by his standards of size and number of stocks.  That’s all changed now. The stock investments managed personally by Vinik had ballooned to nearly $1.8 billion as of Sept. 30. That money was invested in 128 different stocks, including 58 positions worth at least $10 million each. Turnover of investments within the portfolio is high….

Hedge Fund Horror – Forbes

The U.S. authorities say Michael Lauer built his $1.2 billion hedge fund on deceit and lies. But two and a half years after they shut him down, he still hasn’t gone to trial.  Michael Lauer was nearly penniless when he came to America. He dabbled in the restaurant business, then drove a cab to put himself through school. Two decades later he was running a hedge fund, impressing the rich and famous with a sixth sense of when stocks were about to move and a confident air that suggested he knew things others did not. Sotheby’s ex-boss, Alfred Taubman, invested, as did the Dayton family (of department store fame) and Britney Spears. Hundreds of millions flowed in, and Lauer indulged himself–a house in Greenwich, Connecticut, a Mercedes racecar worth $1.5 million and a Cessna plane….

www.wallstreetfolly.com

No need to shed a tear for GLG, the large London based hedge fund ($11.2 billion at the end of 2004), over the Financial Services Authority Investigation into a trade made by one of their star managers, Philippe Jabre.  In spite of that ongoing flap, they did just fine:

Documents obtained by the Financial Times show three-quarters of GLG’s offerings had notched up double-digit returns for the year to December 9, with several key funds returning more than 20 per cent and most of them beating their benchmarks and industry averages.

Only one fund posted losses: the Credit fund took a blow in the spring along with many credit-arbitrage funds and was down by just under 6 per cent….

"In spite of all the headlines, this has been GLG’s best year ever by a huge margin," said one person familiar with the firm’s returns. GLG declined to comment on performance.

GLG has best year in spite of inquiry – Financial Times

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Tags: FSA, GLG Partners, Philippe Jabre

Bear Stearns revealed two pieces of CEO James Cayne compensation in an SEC filing on 12/27.  He was issued a stock bonus valued at around $10.3 million, in addition to options on 56,573 shares of Bear stock.  Seven other top Bear execs received a combined $33.8 million in stock units.  They include co-Presidents Alan Schwartz and Warren Spector, CFO Samuel Molinaro, Chairman of the firm’s executive committee, Alan "Ace" Greenberg, Treasurer Mike Minikes, controller Jeffrey Farber, and general counsel Michael Solender.

Cayne’s prior year compensation totaled $24.7 million, including $10 million in cash, stock valued at $9.5 million and options valued at $4.9 million.

Bear Stearns Pays Cayne $10.3 Million Stock Bonus (Update1) – Bloomberg

Edgar Filing

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Heard on the Street: Lucent’s Profit Crutch — Pensions – Wall Street Journal

Lucent Technologies Inc. is proud of its turnaround, which just produced its second annual profit after the troubled years of the telecom bust. What the company doesn’t brag about is that 82% of this year’s earnings are from its pension fund, not improved equipment sales.   At issue are something called pension credits — the amount by which the pension fund’s income exceeds its current expenses. The year before, such credits accounted for more than half, or $1.1 billion, of the Murray Hill, N.J., company’s reported $2 billion profit. Without the $973 million pension credit in fiscal 2005, its $1.185 billion profit would drop to $212 million….

Big Board Fees Bleed Traders – New York Post

Trading at the New York Stock Exchange continues to get more expensive, as the Big Board announced that it will charge floor traders $5,000 to use handheld trading devices.  Two weeks ago, the Big Board axed 72 clerical positions, including low-wage coat- room and bathroom attendents in a bid to trim expenses before it goes public.  The filing also detailed Big Board plans to cut $1.28 million in compensation costs over the next two years, largely by reducing non-regulatory staff….

Japan Post Bars Goldman for Violation – New York Times

The Japanese postal system, Japan Post, which operates the world’s largest savings bank, says it will exclude the Goldman Sachs Group when it next selects asset managers to offer investment trusts to customers.  Japan Post said that a breach of rules by Goldman’s asset management unit would block it from consideration.  The Financial Services Agency, the Japanese financial regulator, reprimanded the Goldman Sachs Asset Management Company yesterday for violating investment advisory rules. The company was ordered to report plans for strengthening compliance and internal controls…..

U.S. MBA’s Mortgage Applications Index Falls to a 3-Year Low – Bloomberg

The number of mortgage applications filed last week fell to the lowest level in more than three years, more evidence the U.S. housing market is stumbling.   The Mortgage Bankers Association’s index of applications to buy a home or refinance an existing mortgage declined 6.8 percent to 554.1 last week, from 594.6 a week earlier. The gauge is the lowest since 554.9 in the week ended June 7, 2002….

‘Stern Effect’ Pushes Sirius to 3M – New York Post

Sirius Satellite Radio yesterday said its subscriber base has more than tripled since the company last year announced that shock-jock Howard Stern would hit its airwaves beginning in January 2006.  The satellite broadcaster now has 3 million subscribers — 500,000 more than the 2.5 million it had forecast earlier in the year — suggesting that Stern’s 12 million fans have begun migrating to Sirius in anticipation of his Jan. 9 debut.   "The ‘Stern effect’ is real," wrote Citigroup analyst Eileen Furukawa in a note to clients. The company’s shares jumped 2.34 percent on the announcement, closing at $6.99 yesterday on the Nasdaq stock market….

KPMG Probe Raises Concerns Over Conflicts – Wall Street Journal

Should people entangled in the government’s investigation of KPMG LLP’s tax shelters serve on the boards of public companies audited by the accounting firm?  That’s a question that arises from the involvement of two people in the KPMG saga, one a bit and perhaps unwitting player, the other a more central figure.  The bit player is Edward Lampert, a prominent hedge-fund manager who bought a KPMG tax shelter that federal prosecutors say was used to declare a bogus $52 million loss on his 1999 income-tax return. Though the government has moved to recoup unpaid taxes related to KPMG shelters, there is no indication that prosecutors think Mr. Lampert, who also is chairman of Sears Holdings Corp., or other KPMG clients intended to do anything wrong. Mr. Lampert also serves on the board of AutoNation Inc., a KPMG audit client based in Fort Lauderdale, Fla….

M’SOFT eyes Yahoo! Ties – New York Post

Fresh from losing the AOL sweepstakes to Google, Microsoft is wasting little time seeking another ticket to battle the search giant — and industry analysts believe the most likely candidate is Yahoo!   Speculation about an alliance between the two companies has been mounting since Ian McAllister, a program manager at Microsoft’s MSN division, wrote on his blog last week that he had recently met with "senior players at another Tier 1 Internet company" about "ways in which our companies might work together."  McAllister wrote that one of the participants in the meeting expressed interest in finding ways to help Microsoft’s search and advertising businesses, "with one of  the goals being to prevent Google from dominating those spaces even more than they are now."   Although McAllister didn’t name the company, several industry observers said they were convinced he was referring to Yahoo!…

Sweet Times For Dealmakers – Business Week

Mergers should accelerate in 2006, with lots of action coming from the financial, energy, and tech industries While workaday traders and portfolio managers were struggling to generate returns in 2005, one corner of Wall Street was thriving: mergers and acquisitions. When the books close on the year, U.S. M&A activity likely will have touched $1 trillion, up from $824 billion in 2004, according to Thomson Financial.  Many signs point to an acceleration in deals in 2006. The hottest sectors, according to market watchers: finance, technology, and energy. Plus anywhere cash-rich private-equity funds care to dabble. Naturally, M&A specialists such as Goldman, Sachs & Co. and Morgan Stanley will happily egg on — and profit from — the action as well. "The environment is pretty ripe," says James W. Paulsen, chief investment strategist at Minneapolis-based Wells Capital Management. "You have a rising stock market, tons of corporate cash, and low interest rates," he says….

Fidelity Unbundling Plan Not Catching On – Institutional Investor

Fidelity Investments has made high-profile announcements about deals with Lehman Brothers and Deutsche Bank to pay for research out of its own pocket, but so far it hasn’t caught on. The New York Times reports that other companies are not jumping on the Fidelity bandwagon, because, among other things, paying out of pocket means a smaller bottom line. What’s more, says the Times, Wall Street has a tough time putting a price on research, and regulators themselves fear requiring unbundling can harm smaller funds. The paper did suggest that mutual fund managers might actually start performing internal unbundling by breaking down commission allocations between research and trading for the benefit of their directors.

Bear Stearns To Pay $10m For Bad Advice – Institutional Investor

A federal court jury in New York has fined Bear Stearns with a $10 million for giving bad advice to executives of start-up Internet companies, The New York Post reports. The jury found Bear Stearns guilty of five counts of fraudulent and negligent behavior when in 2000 it advised the owners of Internet service providers who sold their companies to ClearData Communications to give up their shareholder rights to $13 million should ClearData not complete an initial public offering….

Bonanza for bankers as takeover fees soar – thisismoney.co.uk (Evening Standard)

INVESTMENT bankers are guaranteed bumper bonuses after the fees earned by the world’s top banks on takeover deals soared by almost a third during 2005.   Figures released today show that global merger and acquisition fees earned by the investment banks rose 27% to $30.3bn (£17.5bn from $24bn).
The top four banks – Goldman Sachs, Morgan Stanley, JPMorgan and Citigroup – each did the equivalent of at least a deal a day and together earned $6bn in M&A fees. Last year, only Goldmans and JPMorgan breached the $1bn barrier….

Knicks’ Embarrassment of Riches – New York Post

Forget winning — the Knicks still come out on top as the most valuable team in the National Basketball Association.  Despite the Knicks’ dismal court play, which draws more jeers than cheers, it’s ranked as the NBA’s most valuable team, worth $543 million at the end of the 2004-05 season, according to Forbes.   That’s a hefty 10 percent jump in value from the prior season. Over the past three years, however, the average franchise soared by 31 percent, Forbes said….

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Thomas Weisel Partners analyst Colin Sebastian lowered his estimates for Overstock.com today in a research note entitled "OSTK: 4Q a Little Light Despite Solid E-commerce Trends".

He lowered Q4 revenue estimates from $356 million to $335 million, and eps from $0.10/sh to $0.00/sh.  He also adjusted 2006 estimates down from $1.23 billion revenue / ($0.50) eps to $1.19 billion and ($0.55) eps.

He said:

"We also believe margins continue to be negatively affected by more aggressive shipping promotions offered by Overstock, which included free express shipping on selected items during the quarter."….

Significant long-term leverage potential in the model:  We believe that OSTK remains focused in the near term on building an infrastructure capable of handling significant growth over the long term while also building market share and brand.  We therefore continue to expect a near term tradeoff of profitability for growth, while, longer term, we believe that there is a significant leverage an profit opportunity in the OSTK model.  We maintain a current fair value for Overstock of $33-37 (midpoint of $35), which is based on our discounted cash flow (DCF) analysis.  We maintain our Peer Perform rating on OSTK.

Merrill Lynch analyst Justin Post also lowered estimates, but had a more interesting comment in his research note regarding the announcement made by Overstock.com’s Patrick Byrne.  He cited what he described as the company’s "Questionable Disclosure Strategy":

Overstock will need to clarify why company chose Bloomberg TV as the forum for a material earnings disclosure….

Tags: Merrill Lynch

If you go to a strip club, can you deduct it as a business expense?  You can try…

Conveniently, the mega-clubs have “meeting rooms” just in case there’s a question by some uptight IRS agent as to how on earth a red-blooded American executive could even think, no less talk, about business in the nightclubs themselves. But at least some meeting rooms have the versatility to be transformed back into private play spaces after all that rigorous work is done….

There is some risk to claiming spending at strip clubs as a business expense, though it’s fairly small. The IRS audited 20 percent of all companies with $10 million or more in assets in the year ended Sept. 30, 2005. In other words, the vast majority of companies don’t have to worry if their traders or marketing chiefs are using corporate credit cards to buy “Diamond Dollar” tips for the girls at Scores.

When audits do happen, strip joint visits are frequently excluded for reasons other than the suitability of the meeting place. The IRS requires record-keeping that includes the date, place, amount, client and purpose of the expense. Many taxpayers don’t keep such detailed records, says Derk Rasmussen, a forensic accountant in Salt Lake City who has evaluated the books of four strip clubs during work he did in divorce cases….

Buy a Lap Dance at a Strip Club, Cut Your Taxes – Bloomberg

The LA Times has a piece on the highlights and lowlights of 2005.  The uber-shrieky Jim Cramer and Google were among them:

They call him crazy, but they call him. In a U.S. stock market short on excitement in 2005, CNBC-TV’s Jim Cramer made his own. The 50-year-old host of the financial network’s "Mad Money" show used such props as animal grunts, plastic toys and flying chairs to make his point about stocks he liked or didn’t like.

Detractors call this money porn, but viewers, either in the studio audience or calling in, seem to eat it up. Give Cramer a ticker symbol for any of 2,000 stocks and the former money manager will give you an instant opinion — buy, sell, hold or "boo-yah."…

Internet Mania II, table for one. Google gave investors who missed the dot-com insanity of the late 1990s a second chance to enjoy all the thrills, sleepless nights and bitterly jealous friends that accompany participation in a genuine stock craze….

Money, Mania, Memories of 2005 – Los Angeles Times

It’s been several days of watching CNBC following their extreme makeover.  And one thing is clear to us:  it’s a big fat flailing flop.  There’s not one thing that we like about it.  Not one.  Zip.  Zero.  Grade: F.

It’s hilarious to hear the on air personalities like Maria Bartiromo do their little commercial spots where they speak so earnestly, touting the new ‘improved’ ticker, now with the companies’ names.  Why is that such an improvement?  Now it’s slow as molasses, and there’s only a small fraction of information scrolling across the screen.  Seems like that’s a big step back, not forward.

Then there’s new ‘bug’.  It’s completely illegible.  We have a 60 inch TV in another room, and it’s more or less legible, but on the 20 inch screen we have in our office, it’s simply unreadable.  Bring back the old bug.  What were they thinking?

Then there are their new and also supposedly improved 3D charts.  Unless that peacock they’ve now plopped on to the charts is some sort of new kind of cycle indicator, it’s gotta go.  The charts are too busy, and that bird is just an ugly, pointless distraction.  Stick to the relevant info in the chart, not the shameless CNBC/NBC bird placement.  And the sounds are just plain annoying.

This morning as they were running a video clip to accompany a story, they superimposed unrelated jagged graphics over the film, so that one third of the screen was obscured and you couldn’t see much of the video.  Sheesh.  Show us the footage, not your silly graphics!

And then there’s the morning cast reshuffle.  UGH.  Putting Mark at the exchange is such a waste of talent.  And there’s that horrible din in the background that they practically have to shout over.  Bad move, guys.  Really stupid.

And then there’s the stretching out of Squawk Box.  Another waste.  And the new set: who cares?

Sorry CNBC.  But you screwed up.  Again.  This is worse than your misguided remake attempt from a couple of years ago where you were seemingly trying to morph CNBC into MTV, CNN, ESPN, and E! all rolled up in one (Remember all of those bad musical groups we were treated to at lunch time? And the long patches of golf coverage? ACK!).   Whoever is responsible for this remake version needs the boot.  While we normally swap back and forth between CNBC and Bloomberg throughout the day, we’ll probably be watching Bloomberg a whole lot more now.

We don’t seem to be the only haters of the new format.  Here’s a thread over at EliteTrader.com devoted to CNBC’s new format: New CNBC Format – Big Mistake .  And if you search the web, it’s not hard to find scores of other articles and blog posts that also give big thumbs down to the changes.

Bet the folks at Bloomberg TV are the only ones loving the CNBC extreme makeover, because of all of the new viewers they must be getting.

In FCC auctions, Gabelli was behind the scenes – Post-Gazette.com

When the government auctioned off slices of radio spectrum for cellphone service, one big winner was Victoria Kane, an aerobics instructor who had no experience in the industry. Her start-up firm, Aer Force Communications, paid $18.9 million for five licenses that were later sold in a deal valued at $144 million.  Ms. Kane’s firm entered the auction as a "very small business," a designation that brought it millions of dollars in federal subsidies. They included a 25 percent bidding discount and a low-interest loan through the Federal Communications Commission. But her small business was backed by a big one: that of wealthy money manager and mutual-fund impresario Mario Gabelli, one of the most prominent names on Wall Street.  Affiliates of Mr. Gabelli incorporated her firm, filed its FCC applications and handled its bidding, according to documents filed in a civil suit in federal court that names Mr. Gabelli, Ms. Kane and others. Through various entities, the documents say, he also held a large stake in her company, lent most of the money she bid and profited handsomely on the sale of the licenses. In all, Mr. Gabelli or his affiliates backed more than a dozen bidders for radio spectrum, which is a license to use a portion of the airwaves in a particular region.  Call it the friends-and-family plan: Each of the principals had social, business or family ties to Mr. Gabelli….

"Ivana Go Broke?" Ex-Wife gets "Trumped"! – CBS2chicago.com

While Donald Trump’s ex-wife Ivana THINKS she can emulate her former husband’s real estate success — so far it hasn’t worked out that way.
Only a week after Ivana Trump’s much-hyped Las Vegas condo project fell apart — we now get word another project (also named after her) has been "re-structured" in Australia. Financial sources Down Under say they don’t expect the Ivana luxury resort in Airlie Beach in Australia will ever come about. Instead, they expect the Ivana Trump project to be replaced by another group who have plans for more affordable housing….

Overstock Is Overly Optimistic – Motley Fool

If you were waiting to celebrate Overstock.com’s (Nasdaq: OSTK) first year of producing breakeven results, I hate to tell you that the finish line has been bumped into 2006 … at the earliest. Tuesday morning, the company issued a press release indicating that it will fall short of its earlier guidance and close out the year with a loss, despite posting top-line growth that will come in at 60% or better. For the holiday quarter, the closeouts-and-clearances retailer will produce breakeven or better results on the basis of earnings before interest, taxes, depreciation, and amortization, but it will fall short on operating cash flow for the year as a whole….

Overstock Hammered on Byrne Outlook – TheStreet.com

President Patrick Byrne is getting good at apologizing.  Byrne says his company "had a nice holiday season, just not as nice a season as we’ve had in the past or as I’d hoped for." The statement came in a press release Tuesday summarizing an interview Byrne gave Bloomberg on Friday.   Shares of the Salt Lake City retailer, which have slumped 51% this year, fell $3.38, or 10%, to $30.26 in premarket trading.

Calamos Investments to Re-Open, Rename the Calamos Market Neutral Fund – PR Newswire

The Calamos Market Neutral Fund will reopen to new investments under the modified name the Calamos Market Neutral Income Fund. The Fund’s objective — high current income consistent with stability of principal –  remains unchanged. The re-opening and name change will be effective after the end of business on December 30, 2005.   To provide a broader set of investment opportunities and the potential for improved long-term returns and greater stability, the Fund will be including a covered call writing  strategy as a complement to its convertible arbitrage strategy…..

Hedge Fund Investors Plan to Go With Stock, Macro Funds in 2006 – Bloomberg

Hedge fund investors, frustrated by the lowest returns in three years, say they are giving more money to managers who bet on stocks and macroeconomic trends because they expect them to post the biggest gains in 2006.   "`Global macro will produce the highest returns, followed by equity hedge funds,” said Luis Rodriguez, head of risk management at New York-based Manhattan Family Office, which invests more than $1 billion on behalf of a wealthy family. He expects returns from both strategies to exceed 8 percent next year….

Portus boss Manor makes first court appearance – Globe and Mail

The founder of collapsed investment company Portus Alternative Asset Management Inc. attended a hearing in a Tel Aviv district courthouse yesterday, looking calm and confident in his first proceeding.  Boaz Manor, the 35-year-old co-founder of the troubled firm, had not been seen at any of the court proceedings until now. He fled to Israel from Toronto when his hedge fund company was forced into receivership in late March. Mr. Manor was raised in Israel until 1988 when his family moved to Canada.  Portus’s receiver, KPMG Inc., is trying to recover more than $800-million in assets, and has gone to court in Canada and Israel to force Mr. Manor to co-operate. It has alleged that he has moved money through several offshore jurisdictions. And, in the course of unravelling the Portus operations, KPMG has been trying to locate nearly $9-million in diamonds that Mr. Manor allegedly purchased with Portus funds….

Cleaning Up After the Fall – Liquidating Enron’s Maze of Partnerships Could Cost More Than $1 Billion – Washington Post

Four years after Enron Corp. collapsed, the Houston energy trader clings to life as "the financial equivalent of a Superfund site," its chairman said.  New managers are struggling to clean up after the firm’s December 2001 bankruptcy — a process they say is likely to run into 2008. Two operating divisions must be unloaded. Lawsuits against banks that helped the company hide debt must be settled or brought to trial. Leftover cash must be dispensed to creditors claiming some $60 billion.  As with everything else at Enron, a company that became a synonym for greed, a punch line for comedians and a curse word for thousands of workers who lost their retirement savings, closing shop hasn’t been simple….

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Overstock.com Gives Holiday Sales Update – PR Newswire

Overstock.com(R) (Nasdaq: OSTK) president Patrick Byrne appeared on Bloomberg Television on Friday December 23, 2005.  During that  appearance, Byrne said that fourth quarter growth had slowed to two times the industry average rather than the three to four times that the company had posted in the past.  …."Incidentally, during the interview, the Bloomberg reporter asked me about our lawsuit against Rocker and Gradient," said Byrne.  "As part of my response, I mentioned the SEC’s investigation of Gradient (see http://www.shareholder.com/overstock/downloads/DeclarantSECletters_AddressesRe
dacted.pdf) for a copy of the SEC letters which I had previously provided to
Bloomberg).  Curiously, at that moment, Bloomberg cut away from the interview without warning to a commercial and returned midstream to the interview only when I had finished discussing the SEC’s investigation of Gradient."…. 

Online gift auctions temper post-Christmas blues – Financial Times

From an economic point of view, gift giving ranks as one of the most inefficient of human activities. The reason is simple: most gifts are not quite what we would choose ourselves – so we value them at less than their purchase price.   But now the internet has a solution for the wanton destruction of human wealth that takes place every Christmas: online auctions. People have been recovering value from an unwanted gift since the dawn of time by re-wrapping it and giving it to somebody else – who probably also does not want it. But selling gifts online is far more efficient: the goods end up with someone who values them; and the original recipient gets cash to buy the thing he wanted in the first place.   Over the next few weeks, thousands – and possibly millions – of people will be selling off their unwanted Christmas presents online – and buying things they really want instead…..

China and India to Face Daunting Risks in 2006: Andy Mukherjee – Bloomberg

In the holiday-season euphoria, analysts appear to have become excessively upbeat about Asia’s economic prospects for 2006.  According to Credit Suisse First Boston’s latest forecast, the 10 biggest economies in Asia outside Japan will expand at a weighted average rate of 7.5 percent next year. Three months ago, CSFB’s prediction for 2006 growth was just 6.4 percent.   China and India, the region’s two biggest economies, are expected to race ahead, expanding 10.1 percent and 8.5 percent respectively, while gross domestic product in smaller economies — from South Korea and Hong Kong to Singapore and Malaysia — will grow between 4 percent and 6 percent, CSFB says.   While an optimistic outlook for Asia is hardly implausible, it’s important to recognize that there are risks….

Prudential’s Shah Sees Few Bargains in India’s `Armani’ Market – Bloomberg

Nilesh Shah, manager of the best- performing “value” mutual fund in India this year, is having a hard time finding bargains after the nation’s 2005 stock rally. He says the hunt for cheap shares relative to earnings “will separate the men from the boys” in 2006.   “Indian stock markets are like the Hugo Boss and Armanis of the world: premium and expensive,” said Shah, 37, manager of the 8.65 billion rupee ($192 million) Discovery Fund at Prudential ICICI Asset Management Co. in Mumbai.   Shah’s fund has returned 61 percent this year as India’s benchmark Sensitive Index, or Sensex, increased 40 percent as of Dec. 23 to a record. International investors have flocked to India, attracted by its second-fastest economic growth rate — after China — among the world’s biggest economies….

Kerry Packer, Australia’s Richest Man, Dies Aged 68 (Update1) – Bloomberg

Dec. 27 (Bloomberg) — Kerry Packer, who expanded his father’s television and magazine business to become Australia’s richest man, died in Sydney last night. He was 68.   “He died peacefully at home with his family at his bedside,” said Tony Ritchie, head of news at Packer’s Nine Network, the nation’s most-watched broadcaster. No cause of death was given…The owner of Publishing & Broadcasting Ltd. turned two of his favorite hobbies, gambling and cricket, into business successes. In 1977, he shook up 190 years of cricket tradition, signing the world’s top players after being refused TV rights, replacing their white uniforms with brightly colored clothes, and playing the first night games. In 1999, he bought Australia’s largest casino and last year teamed with Hong Kong tycoon Stanley Ho to expand in Macau….

eBay gambles on offering free services in China – TMCnet

eBay Inc’s move to offer certain free services to some users in China is a gamble aimed at fending off competition from its main rival, online auction site Taobao.com, analysts said. "(Ebay is) desperately trying to win back their user base," said Edward Yu, president of Beijing IT research house Analysys International. eBay announced on December 20 that it would allow users to set up "online stores" on its site in China free of charge. eBay China’s online stores — of which there are currently around 100,000 — offer advanced functions such as inventory listings to help users manage their online business. These features are generally for higher volume users. Regular eBay users in China, however, will remain subject to the usual listing fees and a commission on their sales. Jim Sun, an analyst with Evolution Securities in Shanghai, sees the move as a short-term bid to regain lost market share. "They’re trying to get more market share. In the short term, they’re competing on price," he said, adding that eBay had already lowered its fees to users this year. Taobao, which is a subsidiary of privately-held Alibaba.com, offers its full range of services free of charge to users. Analysys International said Taobao held a 57.1 percent share of the market in terms of gross merchandising volume for the first three quarters of this year. eBay’s share stood at 34.1 percent. eBay led the market with a user base of 29.8 million, with Taobao close behind in second. But Analysys predicted Taobao will surpass eBay in both user base and transaction volume in the first half of next year….

Paul Allen: poor little rich man – Sydney Morning Herald

After he left Microsoft, Paul Allen had cash to burn but little to do, writes Mark Coultan.   BILL Gates and h
is wife Melinda are on the cover of Time magazine this week, along with Bono, as persons of the year for their work in helping the world’s poorest people. Gates founded Microsoft with another man who also went on to become a billionaire, and is also a great philanthropist. That guy doesn’t appear very often in Time.  Unlike Gates, whose recognition rating is the equal of a Tiger Woods or a Tom Cruise, this other guy could walk down the street untroubled by autograph hunters. In fact, he would probably have trouble getting recognised at a computer convention.  He’s Paul Allen, and he’s worth a cool $US21 billion ($28.6 billion)….

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We found the transcript of Bloomberg TV’s interview with Overstock.com’s comedic front man Patrick Byrne.  It’s reproduced below.

Bloomberg TV

Read the rest of this entry »

Herb Greenberg: Making the Grade – Marketwatch

For those of you who follow this column, or my subscription newsletter, Herb Greenberg’s RealityCheck, what kind of a year has it been?  The best judge is the RealityCheck Watch List. That’s where I track the performance of every stock mentioned…

Amazon Says Holiday Sales Set Record on IPods and Video Games – Bloomberg

Amazon.com Inc., the world’s biggest online retailer, said holiday sales worldwide set a record this year on demand for Apple Computer Inc.’s iPod music players, video games and jewelry.   Shoppers bought more than 108 million items between Nov. 1 and Christmas, the Seattle-based retailer said today in a statement. The company did not provide revenue figures. The busiest single day was Monday, Dec. 12, when customers ordered 3.6 million items.   Ipods were one of the top three-selling items in electronics for Amazon.com. Overall, online sales in the U.S. are expected to jump 24 percent to about $19 billion in November and December as the convenience of Internet shopping and free shipping lures consumers, according to ComScore Networks Inc. The most popular goods on the Web include clothing, electronics and toys….

Review of the Year: Merger mania gives the City a Christmas to celebrate – The Independent

A rundown of the major headlines, month by month.

A look at Joe Nacchio – Denver Post

Until the Denver detour that could put him in prison, his story was as American as apple pie…New York – Brooklyn’s gritty neighborhood of Red Hook is less than an hour’s drive from woodsy Mendham, N.J., but the two places are worlds apart.   Red Hook, near where Joseph Paul Nacchio’s family lived around the time he was born in June 1949, is a waterfront district of aging shipping yards, warehouses, tenements and stone streets.  Mendham, by contrast, is a secluded enclave of 5-acre estates tucked amid rolling hills of birch, oak and hickory trees.   Nacchio lives there with his family in a colonial-style, 9,000-square-foot red-brick mansion valued at $2.96 million by county tax assessors. It is gated and surrounded by an 8-foot-high fence.  Joe Nacchio’s journey from near Red Hook to Mendham is a classic American success story – except for the detour in Denver that could cost him his freedom and much of his fortune….

No Red Carpet For This Star — He’s a Short Seller – Wall Street Journal

This year, David Rocker’s hedge fund is up nearly 50%, after fees, compared with the industrywide average of 7%.  With returns like that, you wouldn’t expect Mr. Rocker, 63 years old, to be such a contentious figure in the investment world. However, he’s been kicked out of meetings, blocked from investor conference calls, and sued by a retailing executive who puts him at the center of a conspiracy controlled by an unnamed "Sith Lord."  The reason: He’s one of the leading figures in the controversial world of short selling — where investors place high-stakes bets in the market that stock prices will fall, in hopes of profiting from declines. Shorts, as such traders are called, sell borrowed shares in hopes of replacing them with cheaper shares bought later. "No one has ever had a warm spot in their heart for short sellers," Mr. Rocker said recently in his Millburn, N.J., office, which is adorned with several toy bears, reflecting his bearish bent.  The community of short sellers is small, and little wonder: For the past 15 years or so, it’s been tough to make money betting that stock prices will fall, given that the market was on a tear for much of that time.   Investing’s Sith Lord or Rodney Dangerfield? David Rocker of Rocker Partners….Today he is well known in the investment community for his aggressiveness and nose for troubled companies. Rocker Partners is credited with being among the first to highlight problems at the speech-recognition company Lernout & Hauspie Speech Products NV, which filed for bankruptcy-court protection in 2000 amid charges of accounting fraud; the company admitted exaggerating its revenue in its largest unit…..Rocker Partners is currently being sued by online retailer Overstock.com Inc. in Superior Court of the State of California in Marin County. The suit alleges the firm told Gradient Analytics, an independent research outfit, to delay publication of negative research on Overstock.com so that Rocker could build up its short position. Overstock.com alleges the parties conspired to denigrate the company’s business for profit.  This past summer, Patrick Byrne, Overstock.com’s chief executive, featured a photo of Mr. Rocker in a letter to investors describing a cabal of short sellers and journalists he termed "the miscreant’s ball," and referring to a conspiracy spearheaded by an unnamed "Sith Lord," referring to a group of menacing "Star Wars" characters….

Trump-Corcoran TV Round – New York Post

THE battle between Barbara Corcoran and Donald Trump is getting nastier. Last week, Corcoran sued Trump for $1.7 million in what she claims is unpaid fees. Now they’re battling it out on Fox News Channel. On Thursday, Corcoran told Neil Cavuto: "And Donald, of course, likes to take money, as many of us do, and doesn’t like to pay it. Of course, he owes $2 million, or $1.7 million, to be exact. It was promised. We saved his life 11 years ago. We saved him from bankruptcy." Trump went on "Your World With Neil Cavuto" a day later and fired back: "That is total nonsense. In the early ’90s, obviously a lot of people in the real estate business were in trouble . . . I was one of them. I never filed bankruptcy, and she understands that. She did nothing to save me. In fact, she should save herself because from what I understand they really just threw her out of her own company. She is no longer in the Corcoran company as I get it and I hear it wasn’t a very pleasant situation for her . . . the last thing I would ever call Barbara is a mogul, and I know her well."

Hedge funds are getting their way – Chicago Tribune

To hear Awadhesh Sinha tell it, Steven Madden Ltd. is a shareholder-friendly company.  The shoe designer and maker has returned $21 million to investors so far in 2005 by doling out dividends and by repurchasing stock, more than double what it spent on share buybacks in 2004. Among the reasons: "Our commitment to enhance shareholder value," Madden’s chief operating officer told a group of Wall Street analysts Dec. 7.  But the relationship between Madden and its stockholders hasn’t always been as warm as a pair of the company’s $130 faux-fur lace-up boots. Left unsaid by Sinha was that Madden’s more generous share repurchase program was instituted after a New York hedge fund threatened a proxy battle last year for control of the company.  Such boardroom dramas, with hedge funds as lead actors, are unfolding at scores of companies nationwide, including a few household names in the Chicago area. McDonald’s Corp., OfficeMax Inc. and Bally Total Fitness Holding Corp. are all under the gun because of hedge funds….

Tilting To Profits – NY Post

This year, deep-pocketed investors have used their muscle like never before to force changes at some of America’s biggest and best-known companies.   Behemoths such as Time Warner, McDonald’s and General Motors are just a few of the brand names that have been targeted by well-heeled corporate agitators. Their goal is to goose the stock price by pushing for board seats, management overhauls and strategy changes.   "Activists are increasingly going after larger targets, and next year we are likely to see even more agitating from hedge funds and others," said Robert Kindler, global head of mergers and acquisitions at J.P. Morgan….

Overstock.com’s Patrick Byrne announced that sales at his company for the holiday season have so far been a "tad disappointing".  In a story in the Salt Lake City Tribune, from Bloomberg News, Byrne made other comments:

”We’re used to growing three or four times as fast as the industry but for this quarter we’ll probably only have grown twice as fast,” Byrne said. ”Twice as fast is good enough for some people, but I’m a little disappointed.”…

In comments that ranged from the demographics of Internet shoppers to sarcastic predictions that enemies would frame him with drugs, Byrne said the company would be close to breaking even this year. Overstock has posted an annual loss every year since going public in 2002.

”It’s going to be close one,” said Byrne. ”We won’t lose very much money if we lose money. If we make money, it won’t be very much. It’s within a percentage of break-even.” …

Then he chimed in on his now famous battle with short sellers:

”Cuban’s friends, what they’re going to do is come after me in January,” said Byrne. ”They’re trying to get the SEC to launch an investigation. I think they’re going to try to get the DOJ to investigate me,” Byrne said, referring to the Securities and Exchange Commission and the U.S. Department of Justice.

”Some of the people I’m up against are mobsters,” he said. ”I fully expect you’re going to hear about the police stopping me with a pound of heroin, or a dead body, or something in my trunk."

Never a dull moment with Mr. Byrne, is there?

Overstock says it’s going to be close to break-even – Salt Lake City Tribune

Google’s AOL Investment May Lead to ‘08 IPO – Washington Post

Google Inc.’s $1 billion investment in America Online could lead to an IPO in 2008, giving the online search engine leader and AOL parent Time Warner Inc. an opportunity to capitalize on an Internet advertising boom that they hope to fuel through their partnership.  The possible timeline for an initial public offering by AOL emerged in a Friday filing with the Securities and Exchange Commission. The documents provide additional details about a deal announced earlier this week that extends the business ties that Google and AOL formed when they began working together in 2002….

Tis The Season To Be Settling, Charging – Institutional Investor

Rack up another four hedge funds in trouble with the Securities and Exchange Commission, bringing the total to six in the past couple of days. First, without admitting or denying the charges, Texas-based Veras Capital Master Fund and VEY Partners Master Fund – along with Veras Investment Partners, the funds’ investment adviser – have agreed to pay a total of $37.7 million to settle allegations by the Securities and Exchange Commission and New York Attorney General Eliot Spitzer that they engaged in market timing and late trading in mutual funds.  According to the SEC, a $35.6 million chunk of the settlement will go to repay investors, while managing members Kevin Larson and James McBride, who also agreed to be barred from the industry for 18 months, will each pay a fine of $750,000. The balance of the settlement are interest charges….

Great Trading Disasters Of Our Time – Here is the City

The so-called ‘fat fingered’ typing error which caused that $335m trading loss over at Mizuho Securities earlier this month has prompted CityNews to have a quick look at some of the other trading disasters which occurred in recent years. Note that these are genuine foul-ups, and not losses down to rogue traders….

The Hedge Fund Report: Registration Battle Lines – TheStreet.com

Much has been written about hedge funds’ last-minute attempts to avoid registration with the Securities and Exchange Commission. One widely reported tactic has been to increase the length of time in which investors’ money is "locked" into a fund beyond two years. But an ambiguity recently arose over whether such restrictions apply to partners’ money.    "You would be surprised by the number of managers who thought they wouldn’t be locked up," says one industry veteran. "They don’t see their participation as an investment."     Now, the SEC has spoken. In a response to letters from two lawyers, Paul Roth, partner at Schulte Roth & Zabel, and Todd Lang of Weil, Gotshal & Manges, the SEC has unequivocally stated that in order to avoid registration, funds invested by general partners, managing partners and their families must be locked up….

Shakers: Less rewarding year for Harvard official – International Herald Tribune

Jack Meyer, the money manager whose market-beating returns built the world’s biggest endowment for Harvard University, did not do as well for himself in his final year.  Meyer earned $6 million as chief investment officer in the year that ended on June 30, down from $7.2 million in 2004, the university said in a report late Wednesday.   Meyer and his top five lieutenants made a combined $56.8 million, a 28 percent reduction from a year earlier.Harvard was criticized by alumni last year for paying excessive salaries to its investment staff when the money could be used for scholarships, buildings and teachers’ pay. Meyer stepped down in September to start the hedge fund Convexity Capital Management, taking about 30 colleagues with him. Meyer has said the complaints about compensation played a role in his decision to leave….

Warner subpoenaed in NY probe of music industry – Reuters

Warner Music Group Corp. has been subpoenaed by the New York Attorney General in connection with an anti-trust investigation into pricing of digital music downloads, the company said in a securities filing on Friday.  Warner said it received the request for information on Tuesday.  "As part of an industrywide investigation concerning pricing of digital music downloads, we received a subpoena from Attorney General Spitzer’s office as disclosed in our public filings. We are cooperating fully with the inquiry," said Warner Music Group spokesman Will Tanous….

Hank Greenberg Tells Bloomberg TV: Leaders Need Courage, Loyalty – PRN

In a half-hour interview that will air on Bloomberg Television(R) tomorrow, Saturday December 24, former American International Group Inc. Chairman Maurice "Hank" Greenberg discusses leadership, his battle with New York Attorney General Eliot Spitzer, his views on China and his plans for C.V. Starr and Starr International, the two companies he still runs with combined assets of nearly $25 billion.    During the Bloomberg Television interview, Greenberg talks about his disappointment in the AIG Board of Directors who forced him out last March. Greenberg talks about the "courage and loyalty" that leaders of a company need, telling Bloomberg TV, "There are two things that you need as a leader … you can have vision, you can have strategy, if you don’t have courage and you don’t have loyalty, those are two things that may be lacking in some people."….

Institutional Investor has compiled its list of the Best and Worst of 2005.  The list includes the implosions, like Refco, Delphi and Portus;  Malcolm Glazer for his ‘hutzpah’ in buying English soccer club Manchester United, and the Group of 8 ex-Morgan Stanley employees who successfully orchestrated Phillip Purcell’s ouster.   It cites Superfund Asset Management’s Christian Baha for his not so successful TV advertising campaign to promote his "non-hedge fund-labeled hedge fund." (We HATED those ads!).  "You can’t blame a guy for trying", II notes. 

Sure to give many of you a chuckle are II’s comments about Overstock.com’s colorful CEO Patrick Byrne:

Most Likely To Replace Chris Rock As Emcee Of The Next Oscars.

Patrick Byrne
Investor Mark Cuban summed up the outburst by Patrick Byrne, chief executive of Overstock.com during a quarterly conference call, best in his blog. "Never before in the history of Wall Street has a single conference call mentioned the following topics: miscreants, an unnamed Sith Lord he hopes the feds will bury under a prison, gay bathhouses… phone taps, phone lines misdirected to Mexico, arrested reporters, payoffs, conspiracies, crooks, egomaniacs, fools, paranoia, which newspapers are shills and for who, payoffs, money laundering, his Irish temper, false identities, threats, intimidation, and private investigators. All in 61 minutes." Give the man a cigar.

Best and Worst of 2005 – Institutional Investor

In a slap to Ebay, the US Patent and Trademark office seems to have sided with MercExchange in their ongoing patent war which is proceeding to the US Supreme court.   

MercExchange, LLC announced today it has reached an agreement with the US Patent and Trademark Office in the reexamination of U.S. Patent No 6,202,051 (the ‘051), the online auction patent, concerning the patentability of this important innovation. The USPTO has accepted MercExchange’s clarifying amendments to the claims of the patent, and has agreed that these claims are a patentable innovation.

"We wish to thank the USPTO and its dedicated staff for their tireless effort in reviewing this complex legal matter," said Thomas G. Woolston, founder of MercExchange. "Our four years of bitter litigation with eBay (NASDAQ:EBAY) has created an extremely large record, one that would be a challenge for any government agency to sort through. The USPTO and its examiner corps have done an admirable job."

In 2003, a jury in the District Court for the Eastern District of Virginia found eBay to be willfully infringing two of MercExchange’s patents, awarding $35 million in damages, but the Court declined to issue a permanent injunction against eBay. The Court of Appeals for the Federal Circuit reversed that decision, finding that the District Court should have issued the permanent injunction, and reduced the MercExchange award to $25 million in damages through March 2003. In addition, the Court of Appeals ordered the District Court to conduct a trial on the ‘051, which had been eliminated from the initial jury trial by a summary order of the District Court….

"eBay was found to be a willful infringer of our patents over two and one-half years ago, and we are now proceeding to the conclusion of their final appeal at the Supreme Court on the issue of the injunction. We look forward to returning to District Court to obtain our relief in this matter, and to finally competing with eBay by practicing our inventions free of infringement," Woolston said.

Patent Office Sides with MercExchange on Auction Patent – PRW