Today's Top Stories Editor's Corner: Lloyd Blankfein speaks out Also Noted: Spotlight On... Facebook IPO to be delayed? News From the Fierce Network:
Today's Top News1. Private equity firms snap up foreclosed properties
Are residential homes a good investment right now? We may well be at the nadir. At least that's what a crop of new private equity real estate companies are betting. They are gobbling up residences, often at auction and at rock bottom prices, with an eye on renting them in preparation for an eventual exit. Bloomberg takes a look at the trend, focusing in part on Waypoint, which appears to be one of the pioneers. "Since 2007, investors have been trolling the cratered suburbs stretching from California to Florida (SPCSMIA) for cheap houses to flip," it notes. "Waypoint, which owns 1,100 houses and is buying five more a day, is betting that converting foreclosures into rentals is a better way to make a profit. Other firms, such as Landsmith LP in San Francisco, are now cropping up and pursuing the same strategy in Arizona, California and Nevada." Homes are cheap, and rents are rising, and that has made for a pretty good business. We're seeing more pensions tap funds that have been set up for this market. Columbia University's endowment is an investor. No less than CalPERS is an investor as well as a part-owner of the firm. Oaktree has invested in another firm. This bodes well for the housing recovery and for banks' ability to work through their foreclosure backlogs. For more: Related articles: Read more about: Private Equity, mortgages 2. Answers sparse regarding MF Global
Louis Freeh, the former director of the FBI, knows a crime when he sees one. And he's not about to let additional crimes occur on his watch as bankruptcy trustee for MF Global. He's rightfully put an end to the issue of whether MF Global execs will get bonuses, which would've struck many as felonious. That's probably a good decision, but he still faces some big challenges in getting to the bottom of the mess. He assured lawmakers in his testimony this week that he is investigating the implosion, with the assumption that he'll sue to recover assets if he finds unlawful acts were committed. As for the bigger investigative picture, the reality would appear to be that the effort has come down to perhaps one or two witnesses, who are seeking immunity deals. Their testimony will perhaps be the final chance for criminal charges against ex-CEO Jon Corzine and others. At the same time, the regulatory effort aimed at preventing abuse of customer funds proceeds, with some regulators favoring the idea of an insurance fund to cover customer losses, a fund equivalent to the FDIC, which insures bank deposits, and perhaps like the SPIC. Several proposals have been put forward, but we'll just have to see what survives. For more: Related articles:
Read more about: MF Global, Bank Bonuses 3. UBS, Bank of America swap executives
One way to show the world that you are a force to be reckoned with is to make an eye-catching executive hire, proving that you've got institutional cachet to reel in big fish. Now, in some cases, it can really make-or-break a company. A great example is MF Global, which landed a big fish by the name of Jon Corzine that generated lots of buzz, only to run aground disastrously. In the case of Bank of America Merrill Lynch, the circumstances surrounding its hire of Alex Wilmot-Sitwell were quite different. Bank of America Merrill Lynch is no pre-implosion MF Global. One man will not make or break it. But the hire followed the defection of Andrea Orcel from Bank of America Merrill Lynch to UBS, which he will be joining as co-head of the investment bank. So what you have essentially is a swap: Orcel for Wilmot-Sitwell. The latter, who was chairman of UBS investment bank, is expected to join BofA Merrill in the coming months and will be based in London. "The hire of Orcel had been seen as a dramatic move by UBS, which has been working to turn around its investment bank after a series of setbacks. His departure had left several big gaps at BofA Merrill after he shunned a promotion. Wilmot-Sitwell will now take on some of Orcel's former responsibilities in emerging markets, as well as taking on the top Europe job." It will be interesting to see how the swap plays out for each bank. For more: Read more about: Bank Executives 4. JPMorgan Chase: Analysts' darling
In a conference call with analysts to discuss JPMorgan Chase's first quarter earnings, CEO Jamie Dimon said this about the bank's decline in net-interest margins: "Think of that as like the cost of mozzarella for pizza. When it goes up, your margins go down a little bit. It doesn't mean you're selling less pizza." According to FOX Business, he then added, "That was a dumb analogy." But Dimon can afford such levity with analysts. They are firmly in his camp right now, growing more bullish on the bank by the day. Analysts have been busy raising their estimates for 2012 and 2013 earnings in the wake of the upside surprise the bank delivered for the first quarter. As much as could be expected at a time like this, the bank is hitting on most cylinders and may have the best mix of businesses to benefit from a rebound economy and repairing mortgage sector. Retail banking is the number one contributor to the revenue pie, and the bank is solidly positioned. But it gets decent contributions from the investment banking and trading side. No one line contributes more than 30 percent to the total. At the same time, the bank's capital position is solid--it constantly markets its "fortress balance sheet"--and its dividend hike was certainly a plus. So the bank has emerged as perhaps the darling of the sector, a good reason for Dimon's jovial mood. For more: Related articles:
Read more about: analysts, JPMorgan Chase
Are we at another inflection point in the prime brokerage industry? To be sure, hedge funds as a group are thriving. Assets have soared past the $2 trillion level, which has become something of a benchmark level. That said, the environment has changed, and the cost of doing business has risen. One expert tells Reuters that, "With Basel III coming, the expenses to run a prime brokerage business and do financing on certain asset classes are increasing. So we are seeing as an industry where many prime brokers are calling hedge funds and increasing rates on margin financing on less liquid securities, anywhere from 2 to 7 basis points." This has led to more primes putting an unusual pressure on clients. "Prime brokerages are less willing to finance clients if the returns are not big enough. That has even led to primes politely showing smaller clients the door. Under those conditions, prime brokerages are telling clients that the relationship is not going to work unless they start executing all their trading business through them. Prime brokerages can be attractive to parent banks if they pull in other, more lucrative business." Hedge funds sought to diversify a bit in the wake of the financial crisis, which led them to embrace more prime brokerages, creating lots of opportunities for smaller players. But that trend may be reversing, though apparently not by choice. For more: Related articles: Read more about: Hedge Funds, Prime Brokerages Also NotedSPOTLIGHT ON... Facebook IPO to be delayed? The media had widely reported that Facebook would price its IPO in the early part of May. But that has reportedly been pushed back to early June, reports CNBC. The delay should not be seen as a red flag. Deal Journal says that it "seems as if Facebook can do no wrong when it comes to timing its IPO." It calls the upcoming offering "the Teflon IPO." Some think the company wants some time to work through some recent acquisitions. Article Company News: Industry News: Regulatory News: And Finally…London firm orders employees out for Olympics. Article
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Thursday, April 26, 2012
| 04.26.12 | Private equity firms snap up foreclosed properties
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