Today's Top Stories Also Noted: Spotlight On... John Arnold calls it quits News From the Fierce Network:
Today's Top News1. An insider look at CEO succession at Goldman Sachs
Vanity Fair weighs in with a look at CEO succession plans at Goldman Sachs, Wall Street's favorite parlor game. The article, written by a respected financial author and former Goldman Sachs employee, surveys the candidates--"president and COO Gary Cohn, who within Goldman is described as 'Lloyd squared' or 'Lloyd on steroids,' and investment-banking co-head David Solomon, who is so connected to Blankfein that 'he even has the same haircut.' A candidate who, to his possible advantage, is less connected to Blankfein is vice-chairman J. Michael Evans, who a former partner describes as 'the ultimate gladiator' in a league of gladiators." Other people in the rumor mix include "London-based Michael Sherwood, vice-chairman and co-CEO of Goldman's international operations, and Harvey Schwartz, who, like Blankfein and Cohn, came up through the commodities division and is now a co-head of the securities division." The author gives great weight to the noisy resignation of Greg Smith, who will at some point produce a book that might garner as much publicity. While some consider the PR fiasco the final straw, I doubt that Blankfein is going anywhere until he is ready to go. It's hard to see how the board, as currently constituted, could make that happen. For those who want to see Blankfein step down--these people might number less than some would guess--the best hope is for a recovery that allows him to go out on a high. He will not resign unless he leaves the bank in good shape. For more: Related articles: Read more about: Goldman Sachs, CEO succession 2. Skirmishing ahead of Volcker Rule war
Do you get the sense that a massive showdown looms over the Volcker Rule? We're certainly seeing a lot of tactical maneuvering. This week, a group of big-name CEOs--including the likes of Lloyd Blankfein, Jamie Dimon, James Gorman and others--huddled with Treasury and Federal Reserve officials to talk about regulations. Obviously, few issues are bigger than the Volcker Rule, which is beyond controversial these days. Subsequent to the meeting, the New York Times reported that the rule "is on track for completion sooner than some bankers had expected, dashing the hopes of financial industry lobbyists, who have pressed for a delay. Regulators are making significant progress on a final draft of the regulation, the Volcker Rule, and some officials expected to complete it by September and possibly as early as this summer." The regulators are clearly making it known that they are sticking to their regulatory guns and are not being cowed by a strong offensive by the industry, which would like to delay the rule in hopes that the Senate goes to the Republicans. At this point, I expect all this will end up in court, as you can bet the industry is carefully putting together a legal strategy. The strike-down of the proxy access rule last year by the courts has left some optimistic that the industry can apply the same arguments, which focus on the costs and the lack of cost-benefit analysis, to kill the Volcker Rule. This is far from over. For more: Related articles: Read more about: Volcker Rule 3. Is David Einhorn shorting Herbalife?
Esteemed long-short hedge fund manager David Einhorn has the sort of market credibility that can be very uncomfortable for companies merely suspected of being in his cross-hairs. He's known for his ability to tank stocks with his criticisms and pointed questions. Just ask Allied Capital and Green Mountain Coffee Roasters. He also famously took on Lehman Brothers before it imploded. Does he now have a new target? Herbalife has fallen 25 percent this week amid rumors that Einhorn was building a short position. Einhorn made a cameo appearance on Herbalife's analysts conference call and asked several questions that one observer termed "basic," leaving it unclear what sort of position, if any, he has on the company. "Einhorn asked for details about the hierarchy of supervisors, distributors and consumers through which the company's products reach the markets. Herbalife President Desmond J. Walsh said 70 percent of sales were direct to users or consumed personally by distributors. Einhorn followed up by asking why the company stopped breaking out figures categorizing its lower-end distributors as self-consumers, small retailers or potential sales leaders," according to the LATimes. The mere whiff of bear attack pushed the stock sharply lower. To its credit, Herbalife is not sitting still. Girding for a war, it quickly announced that it has inked a deal to buy back $427.9 million of its common stock, the final piece of a previously authorized $1 billion buyback plan. For more:
Read more about: short selling, long-short funds 4. Warren Buffett invites stock analysts to annual meeting
For the first time, Berkshire Hathaway will invite stock analysts to its annual meeting, where they will be given the chance to pose questions for management. This follows the move several years ago to start inviting prominent journalists to ask questions, which can be uncomfortable at times. Last year, the journalists asked Warren Buffett about his former aide, David Sokol, who was in the news for buying shares of a company that Berkshire subsequently acquired. The analysts will perhaps be more likely to ask questions more directly related to the income statement. The three invited analysts, which you can bet were carefully chosen, are Cliff Gallant of Keefe, Bruyette & Woods, Jay Gelb of Barclays Capital and Gary Ransom of Dowling & Partners. Together, they will get to ask about one-third of the questions at the meeting, which is known as Woodstock for Capitalists. The idea of bringing in journalists and analysts is to enhance the substance of the questions, which in the past have veered far from business issues into religion and the like. Breakingviews notes that, "So it's not a bad idea to bring in the pocket-protector set to hopefully grill the Berkshire boss on some of the particulars that can get overlooked in the quest for his views on topics as wide-ranging as how to parent rich kids. It's even more true now that the company's book value has become so incredibly difficult to estimate - and can trigger future stock buybacks. It could make for a slightly more sober affair." Among the topics, Buffett will no doubt be asked about his recent cancer diagnosis. For more: Relaetd articles:
Read more about: Annual Meeting, Stock Analyst 5. Carlyle IPO runs into familiar problems
Carlyle Group's lackluster debut as a public company, even after it had reduced its offering range, was hardly a surprise. Publicly traded private equity companies have had trouble generating much excitement since they started going public. Oaktree was a recent reminder that these stocks tend to flop in the aftermarket. Deal Journal notes the others: "Fortress Investment Group had the best first-day pop but has also had the biggest fall since then. The investment firm went public in 2007, with its first day stock climbing 68 percent. But through Wednesday's close the stock is down 80 percent. Blackstone Group gained 13 percent on its first day in June of 2007, but is now down 57 percent from its IPO price. Apollo Global Management fell 4.2 percent on its first day and is now down 33 percent from its pricing." The fizzle that was the Oaktree IPO didn't really do Carlyle any favors, as it raised all over again the issue of whether limited partners in funds come before shareholders of the management company. Oaktree made all too clear that asset accumulation would never be the top priority of the company. But that led to a sell-off as investors tend to prize the steady revenue that stems from assets. At Carlyle, assets under management have soared. So you might think that the issue would be inconsequential. But perhaps the issue hangs over all private equity stocks in a generic way. Carlyle argued on its roadshow that it was fundamentally different from the other companies. We'll see if that message takes hold. For more: Related articles: Read more about: Private Equity Also NotedSPOTLIGHT ON... John Arnold calls it quits Hedge fund big wig John Arnold has called it quits, according to CNBC. He has informed investors that he is closing his Centaurus Energy Master Fund, which has made him a billionaire three times over. After negative gains in 2010, he rebounded last year with a 7 percent gain. It's unclear why he lost the edge. Many will invoke the specter of additional regulation, but that may not be the entire story. He says he wants to pursue other interests. It may be that simple. Article Company News: Industry News: Regulatory News: And Finally…Mortgage rates hit new lows. Article
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Friday, May 4, 2012
| 05.04.12 | Is David Einhorn shorting Herbalife?
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