Wall Street Folly

So why did Jimmy Cayne spend so much time on the golf course last year while his now departed Bear Stearns was sinking into the briny abyss?  This might help to explain it: The quest for eternal (or at least longer) life.  Turns out that those who play a lot of golf (and especially those with low handicaps) have a 40% lower death rate than others of the same sex, age and
socio-economic status according to a new study published in the
Scandinavian Journal of Medicine & Science in Sports.   Cayne’s handicap is 15.9 according to figures compiled by Bespoke Investment Group. Others angling for a longer life include former Merrill CEO Stan O’Neal (handicap 9.9), Lehman Brothers CEO Dick Fuld (10.3) and Morgan Stanley CEO John Mack (17).  Interestingly, Merrill’s John Thain isn’t a golfer — according to an interview with the Financial Times last year: "I can’t play at all,"  "I never learnt.".  Perhaps he should take up the game.

This equates to a five-year increase in
life expectancy, scientists led by Anders Ahlbom and Bahman Farahmand at the
Stockholm-based Karolinska Institutet said. Golfers with a low handicap – a
measure of a player’s ability – are the best protected, they said.

“A round of golf means being outside for 4
or 5 hours, walking at a fast pace for 6 to 7 kilometers (3.7 to 4.4 miles),
something which is known to be good for health,” Ahlbom said in an e-mailed
statement. “People play golf into old age, and there are also positive social
and psychological aspects to the game that can be of help.”

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Tags: Bear Stearns, Dick Fuld, Golf, Jim Cayne, John Mack

• Former UBS Banker to Plead Guilty in U.S. Tax Case
• Former EADS chief charged for insider trading
• Ernst & Young Ex-Partner Is Indicted

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Tags: Insider Trading, Lawsuit, Legal

• Regulators Step Up Probes Of Trading in Oil Markets
• Oil Falls a Second Day as High Prices Cut Demand for Gasoline
• Corn Heads for First Monthly Drop Since August; Soybeans Fall
• Dell Profit Advances on Overseas Sales; Shares Surge
• Merger of United Airlines, US Airways Is Off the Table for Now
• Silverjet Stops Flights as Oil Cost Cripples Industry
• GM Gets 19,000 UAW Buyouts as Wagoner Readies Shift to Cars
• Courts Reject Two Major Vioxx Verdicts
• J.Crew Drops on Profit Forecast Below Previous Range

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This in from a reader who said he was at Bear Stearns’ shareholder meeting this morning (Thanks!).  Given the friction between them, was Jimmy Cayne intentionally dissing Ace?

I attended the Bear Stearns annual meeting
this morning and I found one interesting slight.  Ace  Greenberg
arrived late to his last annual meeting of The Bear Stearns Companies, Inc. 
Ace arrived in the room a minute before the 10am  official starting time,
however, whether Jimmy Cayne did it on purpose or not, Cayne said he was
starting the annual meeting a few minutes before 10am.  Ace was finding a
seat in the front, while be marked tardy by those in attendance.  I wonder
how Ace, who had a reputation when he was running the annual meetings of locking
the doors at the appropriate starting time, felt about being late to his last
annual meeting of the company.  Thanks, Jimmy.

Tags: Alan "Ace" Greenberg, Bear Stearns, Jim Cayne, JPM Chase

Or as they euphemistically say, "due to market conditions".  According to Reuters:

Goldman Sachs’ efforts to launch a new kind
of "blank-check" company, Liberty Lane Acquisition Corp, got the cold
shoulder both from hedge funds and the traditional stock buyers the bank hoped
to win over, and the deal was pulled.

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Tags: Goldman Sachs

According to CNBC, the merger will be completed tomorrow. Jimmy Cayne and Alan Schwartz reportedly both addressed those behind the very short and organized closed door meeting.  Cayne noted that Bear was being acquired by "a first class firm".

Tags: Alan Schwartz, Bear Stearns, Jamie Dimon, Jim Cayne, JPM Chase

In today’s WSJ is their final installment of the fall of the Bear: "Bear Stearns Neared Collapse Twice in Frenzied Last Days".
One  thing we found pretty funny in this totally unfunny story:  On the
conference call among Wall Street CEOs on the fateful Sunday night when
the $2 Bear deal was announced, there was an exchange between Jamie
Dimon and Citigroup’s Vikram Pandit, the junior CEO on the block:

Messrs. Geithner and Dimon led off with
some brief remarks, noting that J.P. Morgan would be guaranteeing Bear Stearns’s
debts and that if the pact hadn’t come together, the market impact may have been
catastrophic. During the question-and-answer session, Citigroup Inc.’s new CEO,
Vikram Pandit, spoke up.

Mr. Pandit — who did not initially identify himself — asked a shrewd but
technical question: How would the deal affect the risk to Bear Stearns’s trading
partners on certain long-term contracts?

The query irked Mr. Dimon. "Who is this?" he snapped. Mr. Pandit
identified himself as "Vikram." Offended that Mr. Pandit was taking up
time with what he considered granular inquiries, Mr. Dimon shot back, "Stop
being such a jerk." He added that Citigroup "should thank us" for
staving off further mayhem on Wall Street.

Tags: Alan "Ace" Greenberg, Alan Schwartz, Bear Stearns, Jamie Dimon, JPM Chase

• Sears Swings to a Loss As Weak Sales Hit Results
• Fed Should Increase Rates If Inflation Accelerates, Fisher Says
• Resignation of Mishkin leaves Fed board ranks thin
• Bank of America decides not to retain Countrywide’s No. 2 executive
• Microsoft Discussing Yahoo Partnership, Yang Says
• Exxon Mobil leader keeps both hats
• United and US Airways head for talks
• Costco’s Net Income Rises 32% On Sales, High Gas Prices

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Another venerable name is expected to fade away into extinction some time after Thursday’s shareholder vote that will seal the merger deal between Bear Stearns and JP Morgan.  The name is expected to be removed from the Bear headquarters within weeks and won’t be replaced with JP Morgan’s for a time — a “purposeful delay”, according to someone said to be an insider, so that it doesn’t look like JP Morgan is dancing on the grave of the dearly departed….

Bear shareholders are widely expected to
approve the firm’s shotgun marriage to J.P. Morgan Chase & Co. at a
special meeting Thursday morning, and it won’t be long before the Bear name
vanishes after being a Wall Street fixture for 85 years.

“The name generally will go away,” says a J.P. Morgan insider. “What kind
of brand value does Bear Stearns have at this point, anyway?”

One person familiar with the matter said it’s possible that the Bear name
could survive through the firm’s retail brokerage operation, a relatively tiny
business that generated less than $150 million in commissions last year. The
retail unit, though barely known among the general public, is one of the few
areas where Bear does not overlap with J.P. Morgan.

J.P. Morgan says bye-bye to the Bear – Crain’s NY

Tags: Bear Stearns, JPM Chase

• Sex, Leisure Habits Of Others Sink Bear Stearns
• Bear Bond Traders Odd Men Out in Merger
• SEC Will Scour Bear Trading Data

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Tags: Bear Stearns, Eliot Spitzer, Hookers, JPM Chase, Revolving Door

Last night’s annual Robin Hood Foundation gala, held at the Javits Convention
Center, raised over $56.5 million for New York charities according to the
organizers.  Attendees numbered around 3,700, including KKR founder Henry
Kravis, and Pequot Capital’s chairman Art Samberg.  Entertainers in the
crowd were also plentiful, including rapper Jay-Z, Rush Communications Chairman
Russell Simmons, former Talking Heads head David Byrne, and former NBC anchor
Tom Brokaw.  Conan O’Brien was the host for the evening.  Performers
included Columbian hip shaking cutie Shakira as well as Sheryl Crow and John
Legend.

Musician David Byrne, who attended the gala with his girlfriend Cindy Sherman, said the gala bustling with so many entertainment and finance-industry stars was “quite a scene.”

“The bids are probably going to be outside of my tax bracket,” Byrne said in an interview about the event’s auction while waiting outside the Javits Center.

After a dinner of filet of beef, grilled chicken and bow-tie pasta, the attendees listened to live music performed by Shakira, the hip-twitching Colombian pop singer, and rock star Crow, who made a surprise appearance and took the stage for a rendition of “Lean on Me.”

Robin Hood Raises More Than $56.5 Million as
Shakira, Crow Sing – Bloomberg

Tags: Hedge funds, Music, Philanthropy

With the summer season barely underway, page Six highlights the latest Wall
Street feud in the Hamptons.  No, it’s not short seller Jim Chanos again
battling over shrubbery / the width of the path to the beach with his Goldman
Sachs heavy hitter neighbor Marc Spilker.  This time its Jana Partners hedge fund head Barry Rosenstein practicing his activist craft in a battle with his neighbor Christopher
Clark, chairman of W.G. Clark Construction Co.  At issue: the number of
cars parked by guests at the birthday party of Clark’s 9-year old kid that
spilled on to  Drew Lane in East Hampton.  It seems that Rosenstein (or
his maid by some accounts) had the cops show up over the illegal parking,
pissing off Clark. Apparently this feud has been brewing for quite some time.  And with the summer so young, who knows what’s bound to happen next.  We’ll stay tuned….. 

Among the guests who scrambled to avoid a ticket were Allure editor Linda Wells, vineyard owner Christian Wolffer and designer Nicole Miller, who told us, "It was a mass exodus. Everyone ran out to cram their cars into the [Clarks'] driveway."
 
  Another source said Rosenstein didn’t call the police, "his maid did," and that his wife,
  Lizanne, went to the Clarks to say she was sorry, but they didn’t accept her apology.

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Tags: Hamptons, Jana Partners, Jim Chanos

This morning’s WSJ has part 2 of its 3 part must-read fall of Bear Stearns Saga.  This installment chronicles what led to the run on the bank, first described by CEO Alan Schwartz at a March 13 lunch as "a whole lot of noise".  Execs at the meeting, like Mike Minikes, weren’t so sure that’s all it was.  And as we all know now, the noise was a killer;  by the end of they day they had blown through $15 billion in cash and Alan Schwartz had to interrupt Jamie Dimon’s 52nd birthday party celebration looking for help.  Ultimately, JPM agreed to provide financing for 28 days, and Bear thought that it had bought some time to arrange more permanent financing….

Out in the audience, Michael Minikes wasn’t
so sure. The 65-year-old Bear Stearns veteran had spent much of that week
fielding calls from worried clients. Some had yanked large sums from their Bear
Stearns accounts. The worst news had come when Renaissance Technologies Corp., a
major hedge fund and trading client, said it was shifting more than $5 billion
to competitors.

"Do you have any idea what is going on?" Mr. Minikes asked, cutting
off his boss. "Our cash is flying out the door. Our clients are leaving
us."

It was the beginning of a frantic 72 hours that would bring the Wall Street firm
to its knees and threaten the stability of the global financial system.
Interviews with more than two dozen current and former Bear Stearns executives,
directors, traders and others involved show how quickly a company that took 85
years to build could unravel.

Fear, Rumors Touched Off Fatal Run on Bear Stearns – WSJ

Tags: Alan Schwartz, Bear Stearns, Credit Crunch, Jamie Dimon, JPM Chase

• Oil Falls to Lowest in a Week on Concern Prices Hurting Demand
• Indonesia to Pull Out of OPEC
• JPMorgan defeats $700m claim for compensation
• Realtors to open listings to settle lawsuit
• Fannie, Freddie Appraisal Agreement May Violate Law
• Will KKR take Infineon private?
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• Eurotunnel Raises EU641 Million to Buy Back Bonds
• AMR Announces Route Cancellations
• LG, Haier May Bid for GE Appliances Unit, Immelt Says

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SocGen’s angry mob spoke at today’s annual meeting, and it wasn’t pretty. (But it sounds like it would have been fun to be there!)….

Shareholders heckled and jeered management
of French bank Societe Generale at its annual general meeting on Tuesday, taking
them to task for the loss of billions blamed on a rogue trader.

Chairman Daniel Bouton, who has resisted heavy pressure to resign over the
scandal, was booed down when he insisted that rogue trader Jerome Kerviel’s
multi-billion euro (dollars) trades were "concealed" from management.

"The employee was jailed but it is the bosses who should have gone,"
said one man to loud applause, charging that management had turned the bank into
a "casino."

 

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Tags: Jerome Kerviel, Rogue Traders

• U.S. Economy: Consumer Confidence Slides as Home Values Decline
• HSBC’s U.S. Mortgage Business May Incur More Losses
• Elton John Pianos May Fetch 80,000 Pounds at Bonhams in London

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Tags: Credit Crunch, Economy, HSBC, Music

The Memorial Day weekend, the kick off for the busy Hamptons social season, seemed really subdued this year.  We were dumbfounded at how light the road traffic was and how short the lines were to get into our usually super-crowded favorite Hamptons haunts. Store / restaurant managers that we spoke to seem hopeful but worried about what it ultimately all means.  Personally, we like it when its less crowded — we LOVE going to our house in the off season, when there are NO crowds — but this year, with all of the fall out from Wall Street the signs seem pretty ominous and dark. 

Tags: Hamptons

Just days before the Thursday shareholder vote where JP Morgan will swallow up venerable Bear Stearns for a paltry $10/share, front and center in this morning’s Wall Street Journal is the first of a
three part series doing a post mortem on the fall of Bear Stearns. Today focuses on "Missed Opportunities" which explores the internal turmoil and executive squabbles over how to raise capital and cut mortgage inventory.  Part 2 is entitled "Run on the Bank" focuses on the rumors that led clients to pull funds, and Part Three: "Deal or No Deal?" focuses on the deal that was cobbled together with the Fed’s intervention….

Lost Opportunities Haunt Final Days of Bear Stearns – WSJ

Tags: Alan Schwartz, Bear Stearns, Jamie Dimon, Jim Cayne, JPM Chase

• Recession still likely in US, says Greenspan
• SocGen to face shareholders in shadow of scandal
• Rice Drops as Cambodia Ends Ban on Overseas Shipments
• Blackstone and Apollo in talks with Chemtura
• BCE allowed to appeal against ruling
• Vodafone Chief Sarin Steps Down After Record Profit
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• LG Looking at GE Appliance Unit
• Linens Mulls Closing 50-100 Additional Stores
• Indiana Jones’ raids box office – ‘Crystal Skull’ unearths $311.1 mil worldwide

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• UBS Says More Losses on U.S., Global Mortgage Markets Possible
• Blackstone Group and private equity peers fall from Wall Street’s heights
• Bondholders oppose BCE request for quick appeal
• Harry Macklowe to Sell GM Tower to Boston Properties
• EADS Forecasts 2008 Profit, Targets Bigger Dividend
• `Indiana Jones’ Opens With $101 Million in Sales

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J.R. Simplot, the billionaire founder of
the Boise, Idaho-based agriculture business that bears his name and who helped
make French fries a staple of the American diet and waistline, died on Sunday at
the age of 99, officials said.

After pioneering the first commercial frozen French fry in the late 1940s,
Simplot eventually became a major supplier of Idaho potatoes to McDonald’s,
Burger King and Wendy’s. His privately held company, where he was chairman
emeritus, reported $3.3 billion in sales in 2006.

An official at the Ada County Coroner’s office said Simplot died at home on
Sunday morning of natural causes.

Potato king J.R. Simplot, U.S. fry innovator, dies – Reuters

Tags: Food/Drink, Obits

A shocking end: Recently convicted of bilking investors in his International Management Associate hedge fund out of millions, and facing a prison sentence of up to 710 years, Kirk Wright hung himself in his prison cell on Saturday.

The 37-year-old Marietta resident was found
dead in the cell where he was being held while awaiting sentencing; his prison
term was expected to be lengthy. No foul play by another person is suspected,
and the man’s death was a suicide, said Betty Honey of the Fulton medical
examiner’s office.

A federal jury convicted Wright on
Wednesday of all 47 counts of mail fraud, securities fraud and money laundering
stemming from a scam run through his firm, International Management Associates.

Michael O’Leary, one of Wright’s two
attorneys, said Sunday night that he was "shocked and saddened" by the
news. Wright was upset about his conviction, "as any other defendant would
be," O’Leary said. "It’s a very sad state of affairs and I feel very
sad for his family."

Marietta man in hedge fund fraud commits suicide – Atlanta Journal Constitution

Tags: Hedge funds, Kirk Wright, Lawsuit, Legal

Back in Februrary, a group of traders at Credit Suisse were discovered to have mismarked securities with a hit to earnings of around $1 billion.  Now Merrill Lynch has disclosed that they may have their own mismarking issue, albeit comparatively much, much smaller….

Merrill Lynch & Co., the third-largest
U.S. securities firm, is probing one of its trading desks in London and has
suspended a trader after discovering he may have overstated the value of some of
the bank’s equity derivatives.

“The firm routinely reviews the marks our
traders set,” Merrill spokesman Jezz Farr said today in an e-mailed statement.
“Our preliminary review determined that one desk used marks that appear to be
outside of our accepted policy. We have suspended a trader and we continue to
review this matter.”

The trader, whom Merrill declined to
identify, was a member of a team that traded derivatives based on individual
stocks for the firm’s own account, according to a person with direct knowledge
of the matter. Merrill, based in New York, has determined that he may have
overstated the value of some holdings by less than 10 million pounds ($19.8
million) during April, when his marks were detected, the person said.

“This case shows our oversight system
works,” Farr said in the statement, referring to the firm’s detection of the
suspended trader’s conduct. Merrill dropped $1.64, or 3.7 percent, to $42.86 at
1:05 p.m. in New York Stock Exchange composite trading.

Ya, it shows that their oversight system works. Eventually.   Nice spin job.

Merrill Suspends Trader, Finds Overvalued Derivatives – Bloomberg

Tags: Merrill Lynch

Too little, too late….

In an interview with the Financial Times,
Mr Weill said he and the board should have fostered competition among Citi’s
top managers for the chief executive post rather than handing the job to Mr
Prince.

The technique has been used by large
companies such as General Electric, which selected Jeffrey Immelt as Jack
Welch’s successor after a race with two other executives.

Mr Weill did not mention Mr Prince by name
but said: “I certainly have responsibility for working with the board in
devising a plan of succession and I would not give myself very good grades on
that. At the time, I thought I was doing the right thing but it did not turn out
to be, did it?

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Tags: Chuck Prince, Citigroup, Robert Rubin, Sandy Weill