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Today's Top News1. Sell-side analyst leaves Bank of America Merrill Lynch
Can an independent research shop make it in today's market? The esteemed analyst Guy Moszkowski thinks so. He has announced that he will leave Bank of America Merrill Lynch to join an independent research boutique in London known as Autonomous Research, which is headed by a former Merrill Lynch executive. Had this happened five years ago, it would have been easy to couch the move in the then-burgeoning independent research movement. The bloom was off the rose when it came to sell-side research, which was seen as drifting in search of a business model to replace the one discredited by the dot.com bust. To be sure, independent research is alive and well, though not necessarily the growth industry people predicted a while back. At the same time, the sell-side analysts corps have reasserted themselves. But right now, there aren't necessarily an excess of commission dollar floating around. The traditional buy-side has been forced to allocate more of their commissions to research just to maintain what they have now, and this trend will likely continue. So independents will have a huge sales job ahead of them, getting tight with the buy-side such that it demands their research be placed on the shelf for CCA payments or traditional soft dollar payments. All in all, if the research is compelling, if the ideas are good, it will find a ready market. There's always room for astute analysis. For more:
Read more about: independent research, Stock Research
2. Hedge fund returns down in May
Will the month of May prove to be an inflection point when it comes to 2012 hedge fund performance? After a decent start to the year, hedge funds definitely hit a rather jarring speed bump. The average fund lost nearly 3 percent, the worst month since September. That's not as bad the Standard & Poor's 500 index, which fell 6 percent for the month, however. Some of the big losers include John Paulson, who is struggling again after a tough 2011 that saw his flagship funds cut in half. According to Reuters, "His gold fund tumbled 12.7 percent in May and is now off 22.5 percent for the year. But his credit fund rose 0.93 percent in May, and is up 5.26 percent for the year. Meanwhile, losses in the closely-watched Paulson Advantage Plus fund were limited to only 0.6 percent. For the year, the fund is off 10 percent. Other Paulson funds recorded losses in May but still managed to keep returns in positive territory for the year. The Enhanced fund lost 1.3 percent last month and is up 10.7 percent for the year. The Recovery fund lost 2 percent for the month, and has returned over 5 percent for the year. The firm's merger arbitrage fund is up 5.2 percent for the year after losing 0.7 percent in May." You do have to ask just how bad performance has been for Paulson's gold-denominated funds. Paulson is hardly alone in his suffering. William Ackman's Pershing Square Capital Management fell 7 percent, and Daniel Loeb's Third Point Partners dipped 2.6 percent. Many managers are still in the black for the year. Hopefully, that state will hold for the next six months. For more: Related articles: Read more about: Hedge Funds, Hedge Funds Performance 3. Evercore shareholders reject compensation plan
Earlier this year, the conventional wisdom was that banks wouldn't face serious challenges at annual shareholder meetings in part because they have worked hard to boost capital and profits in 2011. That proved to be woefully naïve. The best example is the stunning "no" vote delivered by Citigroup shareholders on the say-on-pay issue. The pressure is on management to respond to the rejection of the Vikram Pandit's $14.8 million compensation package, punishment for a 44 percent drop in the price of the stock in 2011. Now we have another example. As noted by Deal Journal, Evercore, the boutique investment bank founded by former Deputy Treasury Secretary Roger Altman, has noted in a filing that 57 percent of shareholders voted against a proposal to increase the firm's stock incentive compensation plan by 11 million shares. "Evercore recorded the results, based on 36 million votes cast, at the company's annual shareholder meeting Thursday. If the proposal had passed, it would have added to the 20 million shares of common stock that Evercore has available for such pay awards under its 2006 incentive plan." For banks, it's clear that shareholders feel emboldened and that there will be even bigger battles to come if stock prices don't start to appreciate. More will likely follow the Goldman Sachs model and try to appease key shareholders on specific issues ahead of meetings. For more: Related articles: Read more about: Say on Pay, Proxy Access 4. JPMorgan's Dimon faces Congress
The best show in Washington today will be the appearance by JPMorgan Chase CEO Jamie Dimon at a hearing in Congress. There's a lot of ground to cover, and a lot of grandstanding to be done, but the big question hanging over the entire multi-billion dollar "hedging" fiasco is whether the bank messed up plain and simple or whether it broke any laws as it racked up its losses. Investigations are underway across the regulatory landscape. As an exercise, Reuters outlines a route that the SEC in theory could travel if it were bent on charging the bank. The bank has been beaten up for its decisions to adopt a new VAR approach ahead of the fiasco. But few have seen it as a possible enforcement issue until now. JPMorgan Chase's failure to disclose "a major change in how it measured risk could become the centerpiece for an enforcement action by U.S. securities regulators as they probe the bank in connection with its multibillion dollar trading loss. By omitting the change from its earnings release in April, the bank disguised a spike in the riskiness of a particular trading portfolio by cutting in half its value-at-risk number. JPMorgan did not tell investors that the model for its Chief Investment Office had been changed until May 10, the same day it revealed the failed hedging strategy had produced a loss of at least $2 billion." We'll see if this comes up at the hearing. We're not at the point where the CEO should plead the fifth amendment, but it's a safe bet his attorneys are nervous. For more: Related articles:
Read more about: fraud, trading 5. New capital rules spell the end for thrifts
Is Basel III a huge gift to big consumer banks? The very questions would strike many as risible. Executive continue to chafe at the capital requirements imposed by the new rules, but the new requirements just might prove to be a medium- to long-term benefit. They may hasten the demise of the savings and loan industry, which will reduce competition in the mortgage business and will play to the advantage of big consumer banks that have stayed the course in the retail mortgage market. Wells Fargo comes to mind as perhaps the biggest beneficiary. A report from KBW has generated a lot of attention for its stark prediction about the coming end of thrifts as we know them. Basel III has been harsh on these institutions. "With last week's Federal Reserve announcement of new planned bank capital standards for banks and thrifts, the savings and loan industry has finally been eliminated, in our opinion. While remnants remain—an official thrift charter, institutions with 'savings and loan' in their name—the key pillars of the industry, which have been fading since financial crisis, are gone…The financial metrics that allowed thrifts to be profitable—high loan-to-deposit ratios, low expenses, and high leverage—are no longer possible," the report says, as noted by Forbes and others. Thrifts have been on a roller coaster since the financial crisis. Some conclusions are that mortgage profitability will rise for banks, and nonbank mortgage lenders may find an opportunity. For more: Read more about: banks, Savings And Loan Also NotedSPOTLIGHT ON... Goldman Sachs partner returns Mark Schwartz started at Goldman Sachs in 1979 as a banker. By the time the company went public in 1999, he was a partner. A few years later, he called it a career. He sat on boards and formed a green energy investment company, and now he's heading back to the mother ship. The bank has rehired him to serve as the chairman of the bank's Asia Pacific region and as a vice chairman of the overall bank. DealBook says the move "is sure to turn heads" as "the bank rarely rehires top managers who have left." Article Company News: Industry News: > Italy banks less exposed than Spain's banks. Article And Finally … Apple vs. Google war continues. Article
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Wednesday, June 13, 2012
| 06.13.12 | Sell-side analyst leaves Bank of America Merrill Lynch
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