Editor's Corner: Private equity diversification: possible conflicts Also Noted: Spotlight On... Hedge funds embrace repos News From the Fierce Network:
Today's Top News1. A snag in JPMorgan settlement talks?
The rumor mill is as active as ever in the high-stakes talks between the Department of Justice and beleaguered JPMorgan Chase. It would appear that the bank is prepared to pay a whopping $11 billion to settle a wide array of charges by a host of enforcement bodies, including the FHFA and the New York AG. But despite high expectations -- many expected a settlement by now -- a deal has yet to be announced. Have the talks hit a snag? The New York Post reports that JPMorgan Chase CEO Jamie Dimon "has become vexed that Attorney General Eric Holder and his regulators won't guarantee that in return for paying at least $11 billion, that federal and state regulators won't come back for more." The result: a stand-off that has delayed the announcement. Previously, expectations were sky high when it emerged that Dimon and U.S. Attorney General Eric Holder were directly negotiating the final sticking points, a clash of heavyweights to be sure. At this point, there is no reason to think that some sort of compromise cannot be worked out. Reasonable people would be able to work something out. That would clearly be in the bank's best interests. But compromise unfortunately is not in vogue in the Capital these days. If the deal talks fall apart completely, the government will commence suing the bank for a host of ills. For more: Read more about: settlements, Enforcement Action 2. Goldman Sachs banker brings home the Twitter IPO
Back in the dot.com heyday, Anthony Noto, then a Goldman Sachs Internet analyst, wrote glowing reports about doomed companies, the likes of eToys. That earned him some less than flattering internal nicknames, such as Anthony Don't Know and Anthony No-Dough, as noted by DealBook. But he stuck with it, and his stock recommendations eventually made him a top-ranked industry analyst. He also made partner. Noto has just scored his biggest victory ever: he has brought home the Twitter IPO for Goldman Sachs, which will serve as lead underwriter. So take that Morgan Stanley! While Morgan Stanley has led 8 of the top 10 IPOs in the industry, it didn't land Twitter, the most coveted mandate of the year. Whether the botched Facebook IPO, which Morgan Stanley led, had anything to do with the Twitter mandate remains debatable. For Goldman Sachs and Noto, the former West Point linebacker and one-time Ranger, this is a sweet moment. The bank did everything it had to in order to win the business. "Goldman features a Twitter widget on the company intranet, uses the service on its trading platform, and even advertises with Twitter." The pressure is on, however. The last thing they want is another botched deal. That said, if things go well, Goldman Sachs will be in good position to make a move on Morgan Stanley in the all-important Silicon Valley market. For more: Read more about: Goldman Sachs, Twitter IPO 3. Bank of America "Hustle" trial continues
The Department of Justice's case against Bank of America -- one of the first cases against a top bank for mortgage fraud -- is all about a Countrywide program, the High Speed Swim Lane, or HSSL, which came to be known as Hustle. The goal of the program was in a sense laudable, as the mortgage company sought to move away from subprime loans and back into prime loans. The issue is whether those prime mortgages were illegally fast-tracked. The central tension in this trial pits a whistleblower, Ed O'Donnell, a then-Countrywide executive who spoke out against the HSSL loans, against another manager, Rebecca Mairone. It's tempting to see her in the mold of Fabrice Tourre at Goldman Sachs and Brian Stoker of Citigroup. Both were rather low-level managers who ended up charged by prosecutors, in part because of email evidence. Tourre was convicted by jury, while Stoker was acquitted. In the case of Mairone, however, she was the chief operating officer at the time. She may be a more legitimate target for prosecution, given that she was tasked with implementing the program. Still, the email evidence against her may not be much stronger than it was against Tourre and Stoker. So the decision may well turn on the performance of O'Donnell, the star witness and False Claims Act whistleblower. He is in line to pocket $1.6 million if the prosecution prevails. For more: Read more about: Bank of America, mortgages 4. Will Facebook's troubled IPO weigh on Twitter?
Is Facebook a good or bad precedent for Twitter right now? One could argue that the sorry performance of the Facebook stock on offer bodes ill for other big consumer-oriented social media companies in the IPO queue. But more recently, the Facebook stock has soared, prompting DealBook to note that Twitter's IPO "comes at an auspicious time. Investors are once again keen to place highly optimistic values on social media companies. After a difficult first year on the stock market, shares of Facebook have soared as the company found its feet and posted resurgent revenue figures. In this climate, Twitter's bankers will probably feel they can persuade investors to accept a high valuation." The company released prospectus information this week, valuing itself at about $9.7 billion. Of course all the disclosure will be debated ad nauseam ahead of actual deal pricing. We're not going to wade into that debate. As Facebook proved, a lot can happen at the 11th hour. In the end, it boils down to solid communication with key constituents within the rules. There will be plenty of bullish sentiment voiced soon, enough to ensure a good debut. The key really is execution and staying on point, which means a lack of unnerving surprises and changes at the last minute. For more: Read more about: Facebook IPO, Twitter IPO 5. Bond fund redemptions to continue
Bond funds have suffered mightily for much of this year, as fears of a Great Rotation steadily mounted. But now that the Federal Reserve Board has decided to hold off tapering for the moment, awaiting more evidence of economic strength, will the environment change? It's a vexing issue for bond funds. Case in point: the DoubleLine Total Return Bond Fund, run by John Gundlach, which "had its biggest net withdrawals" ever as investors continued to redeem for the fourth straight month, according to Bloomberg. Clients withdrew an estimated $2.1 billion from the $35.1 billion fund in September. That follows redemptions of $1.2 billion in June, $580 million in July and $1.1 billion in August. Other bond funds have experienced much the same. So will the urge to redeem abate soon? One could easily argue that despite the Fed's reprieve, there is still a fundamentally sound case for a rotation over the next few years. At some point, rates will have to head higher, though that path may occur over a longer time span. For bond funds, this is a minor gift, as they more time to adjust their portfolio holdings and gird in other ways. You would certainly expect the composition of holdings to shift to a certain degree. Strategies will have to change regarding short-selling and derivative use. In short, this is where a really good bond fund manager can carve out a reputation. For more: Read more about: Bond Funds Also NotedSPOTLIGHT ON... Hedge funds embrace repos Repurchase agreements are a tougher market for big banks right now, as new capital rules have made it harder to enter these deals. For hedge funds, this spells opportunity, and they are jumping into the market in a huge way. The Financial Times reports that the likes of Och-Ziff and Moore Capital have begun "beefing up" their repo businesses. They are only too happy to step in as creditors as banks retreat. One big issue here is whether this portion of the shadow banking system will get even more opaque as highly regulated banks retreat. Article Company News:
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Monday, October 7, 2013
| 10.07.13 | Bank of America ''Hustle'' trial continues
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