Today's Top Stories Also Noted: Spotlight On... Credit unions build deposits faster than banks News From the Fierce Network: Today's Top News1. A model career for a hedge fund manager
Some guys make it look easy, and they tend to have good PR people. A DealBook article about hedge fund manager Richard Gerson was nothing short of a homerun for him and his company, Falcon Edge Capital, which has raised $1.2 billion for one of the more eye-catching hedge fund launches this year. The article recounts how Gerson got his start running the undergraduate investment club at the University of Virginia. He parlayed that into "an internship at Tiger Management, the vaunted hedge fund firm run by Julian Robertson. He then helped John Griffin, a top deputy of Mr. Robertson and the sponsor of the investment club, start Blue Ridge Capital." The he struck out on his own. Gerson stands as a good example of latching on with the right people. Both his early firms were known for incubating talent, allowing employees to cultivate the kind of network that will serve their entrepreneurial activities well. But industry pedigree is no guarantee of success. "Chris Shumway, a top deputy of Mr. Robertson, shut down Shumway Capital in 2011 after investors revolted over some management changes. The offspring of those Tiger cubs have faced their share of troubles, too. JAT Capital, started by an alum of Shumway Capital, is down nearly 20 percent in 2012, after stellar returns for years." In the end, good PR only matters if the firm can back it up with performance. Gerson seems like a great bet to many investors. For more:
Read more about: Hedge Funds
2. Bank of America's tricky dance with the Democrats
Banks have a lot at stake when it comes to politics, and it behooves them to avoid confrontation. So while Bank of America has good reason to align itself against the Democrats, which it can thank for the Durbin Amendment and lots of vitriol around the debit card fee fiasco last year among other things, the move would be anything but wise. The bank is way too savvy to blunder so blatantly, and it just so happens that the Democrats will gather for their nominating convention in Charlotte. In any other election cycle, such an event would bring forth big contributions and support from the big companies based in town. But this is anything but a normal election, especially for Bank of America. As of right now, both sides remain wary partners. The Democrats are certainly sticking to their line that banks continue to act irresponsibly and need strong regulation. Bank of America obviously thinks otherwise. Neither side can really embrace the other, nor can they completely eschew the other. An indication of the wariness is that, not too long ago, the Democrats referred to Bank of America stadium as Panther Stadium, as it was loathe to even utter the word. Still, "Bank of America has made several quiet contributions to convention planning. A bank spokeswoman confirmed last week that the bank is donating money to the nonprofit fund the host committee is using to promote Charlotte, and Bank of America is underwriting two newsmaker gatherings organized by media companies," according to the Charlotte Observer. It will be interesting what kind of treatment Democrats give the banks during the convention. It just might dampen the rhetoric. For more:
Read more about: Bank of America, Political Campaigns 3. Deutsche Bank analyst less bullish on JPMorgan
JPMorgan would be foolish to think that the London Whale "hedging" fiasco, which has cost it $5.8 billion so far, is behind it. The scandal continues to color just about everything the bank does, including the perceptions of the bank by regulators, investors and analysts. Deal Journal offers a telling quote from Deutsche Bank's Matt O'Connor, who met with JPMorgan's CFO Doug Braunstein the day J.P. Morgan announced its executive shuffle: "For most of the past 5 years, several US competitors have been focused on de-risking, boosting liquidity and rebuilding capital. But risks at most peers no longer seem to be outsized vs. those at JPM, liquidity and capital differences have narrowed and certain peers seem ready to be more aggressive in maintaining/gaining market share. We believe this implies additional market share gains for JPM will be less likely and may suggest some share loss in certain areas." The bank's once-bright halo may be dimming, and it will have to work hard in terms of IR to win back the sort of the good will and assumption of excellence that it enjoyed previously. That will not happen overnight. Deutsche Bank has cut its rating on the bank to hold from buy. We'll see if others follow suit. As for JPMorgan, hopefully CFO meetings with analysts will go better soon. For more: Related articles: Read more about: analysts, Stock Analysts 4. JPMorgan unit probed for possible energy manipulation
The California electricity market has been targeted by trading firms before. Enron famously had a field day in the market before its house of cards cratered. Recall Skilling's infamous quote: "What is the difference between California and the Titanic? At least when the Titanic went down, the lights were on." Now, another big firm finds itself in the spotlight. The Sacramento Bee reports that the Federal Energy Regulatory Commission is investigating whether a JPMorgan energy unit -- JPMorgan Ventures Energy, which has contracts with generators to trade their electricity in California and elsewhere -- "manipulated markets at the Midwest Independent Transmission System Operator, a multistate agency that's comparable to the California ISO. In court papers, FERC staff attorney Thomas Olson said he's investigating whether JPMorgan extracted 'inflated 'make-whole' payments' from the California and Midwest markets. Make-whole payments are fees paid to generators for keeping their plants operating at a low boil, on a kind of standby basis." A consultant told the paper that "JPMorgan found a way to manipulate two wholesale markets run by the ISO – the 'day-ahead' market, in which power is sold for future use, and the 'real-time' market, reserved for last-minute deals. In the day-ahead market, he said, JPMorgan priced its power cheaply – so cheaply that its bid was sure to be accepted. In the real-time market, he said, the company priced the power more expensively – so it was certain the market would buy little if any electricity." This represents yet another legal headache for the bank, which is becoming a lawyer's dream bank. For more: Read more about: JPMorgan, Energy markets 5. Jury acquits Citigroup exec of CDO negligence
In yet another bitter defeat for the SEC, a jury wasted little time in declining to convict Brian Stoker, who some might have felt was a mere scapegoat caught up in larger activities at Citigroup. The SEC had accused him of negligence in putting together the marketing documents to support a CDO deal, arguing that he misled investors by not disclosing that Citigroup helped select the underlying mortgage securities in the CDO (Class V Funding III) and then placed a large bet against it. The defense won points after it was able to get a Credit Suisse collateral manager to tell the jury that he in fact managed the deal. All in all, even a conviction of Stoker would have done little to heal the big wounds that the SEC has suffered in the wake of the financial crisis. Some are miffed that a high-ranking executive was never convicted or even charged, Angelo Mozilo notwithstanding. If Stoker was convicted, people would have said he was a small-dry executive in the scheme of larger crimes. What was really odd was the message the jury apparently wanted to have read to the prosecution: "This verdict should not deter the S.E.C. from investigating the financial industry and current regulations and modify existing regulations as necessary." It seemed to be saying that the even though the prosecution didn't have the goods, it was on the right track. My bet is the SEC will make a final push to settle with Fabrice Tourre, of Goldman Sachs, who no doubt feels emboldened by this decision. Should it go to trial, you can bet there will be lot more publicity and media coverage. For more: Related articles: Read more about: Citigroup, CDO Also NotedSPOTLIGHT ON... Credit unions build deposits faster than banks Deposit growth at banks and credit unions was about the same from 2006-2009. Since then, credit unions have started adding deposits measurably faster, according to an analysis from SNL. It looks as if the fiasco over Bank of America's attempts to impose a debit card fee had an impact. Some say consumers were ready to shift to an alternative and merely needed a catalyst. Article Company News: And Finally…Postal service runs out of money. Article
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Wednesday, August 1, 2012
| 08.01.12 | A model career for a hedge fund manager
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