Rupert Murdoch's bid for Dow Jones & Company is heating up again.

The family that controls Dow Jones agreed to meet with News Corporation, the media company headed by Murdoch . News Corp made an unsolicited bid for Dow Jones earlier this month. Until now the Bancroft family, which controls 64% of the voting power of Dow Jones largely through its super-voting class B shares, had refused to meet with Murdoch or representatives of Dow Jones to discuss the offer.

"Since first receiving the News Corporation proposal, the Family has carefully considered and discussed among ourselves and with our advisors how best to achieve that overarching objective, while serving the best interests of the Company's various constituencies,” the family said in a preliminary statement first reported by the Wall Street Journal, which is owned by Dow Jones.

“After a detailed review of the business of Dow Jones and the evolving competitive environment in which it operates, the Family has reached consensus that the mission of Dow Jones may be better accomplished in combination or collaboration with another organization, which may include News Corporation,” the statement says.

In early May, News Corp offered $5 billion for Dow Jones, a sixty-seven percent premium over where the stock price trading before the bid. Through representatives on the board of directors of Dow Jones, members of the Bancroft family representing a majority of the voting power declined the offer. The board of directors has officially take no action on the offer. Since making the bid Murdoch has attempted to win support from the Bancroft family, but he has not increased his offer. In recent weeks some analysts began predicting that Murdoch would withdraw the offer if the family continued to refuse to negotiate.

The Wall Street Journal said the statement would be finalized after the conclusion of a meeting of the board of directors, which was underway tonight. At the time this was posted, no statement had been filed with the Securities and Exchange Commission on behalf of Dow Jones or the Bancrofts.

The statement may mean that the Bancrofts are willing to accept an offer from Rupert Murdoch. But by indicating a willingness to sell, they may also be hoping to attract other bidders. Tonight’s statement affirms that the family will also consider other bids.

Bancroft Family Plans to Discuss Dow Jones Bid With News Corp. [Wall Street Journal]
Bancrofts' Statement on Dow Jones Bid [Wall Street Journal]

The extreme hours and often menial work that characterize the lives of many junior investment bankers were on display last night in an exchange between a first-year analyst and a more senior associate at a middle market investment bank. It all began with a note at 6:04 PM. Although the original back-and-forth was strictly between two colleagues, the emails were forwarded outside the firm by a later recipient. As these things are wont to do, the mêlée very quickly spread through investment banking circles.

The spat began after Roger asked Billy (we’re changing the names because we have been unable to reach the people involved) to put together a working group list for him within an hour. Working group lists are used by investment bankers and law firms to collect and disseminate the contact information of professionals working on a transaction. Putting the lists together is not difficult but it is notoriously boring work. Although Roger’s request is rather straight-forward, Billy objected to the request and told Roger he thought it sounded “testy.”

“There is really no reason to get testy, Roger,” Billy said. “I was here all night, you know that, and I am curious as to why you are passing this off to me. I am aware that it takes 5 minutes to do, but you should know there is a difference between ‘pushing back’ and wondering why (for the 2nd time this week) you are giving me in particular a WGL. I thought that’s what staffing is for.”

[The rest of the exchange, after the jump]

$$$ Mark Cuban doesn't think it's crazy to compete with the NFL [Blog Maverick]

$$$ Vegetable Arbitrage [Long or Short Capital]

$$$ Husky and handsome banker looking for stylish, fashionable female. [Craigslist]

What better way to celebrate summer (or at least the first day muggy enough for New Yorkers to complain about where spring went) than with the emergence of only slightly obstructed ladyparts? Now that winter coats have been shed and even the most melanin deficient specimens have been reversed bleached a bit, DealBreaker presents the first installment of our new PartPuzzler feature.

Over the next several weeks, the crack DealBreaker field & graphics team (the stream guys went on strike) will be compiling imagery of the most important anatomical features (and accessories that adorn them) of the financial world – the most bulging (er…brackets?) bulges, the loveliest pantsuits, the most aggressively holstered Blackberries...

The first PartPuzzler segment is a good old fashioned game of “Misaligned Mammaries” (“Whose Boobs?” to the layperson), courtesy of our new Senior Functioning Mammary Gland Research Analyst (ie – intern), Scott Bressler, who has had the arduous task of staring at baby feeders for the past two days. The category is Billionaire Heiresses, or “Billionairesses,” as we like to call them. After the jump there are twelve pairs of extremely valuable steamed milk dispensers – your job is to match them with one of the Billionairesses listed below. To throw you off the trail, one of the semi and sometimes artificially busty beauties is pictured twice.

Post your answers or send them to tips at dealbreaker dot com. We’re still figuring out a prize for the first set of correct answers, but rest assured there will be one (probably…).

Hedge funds are often touted as “early adopters” of new investment methods and developing strategies for doing this super cool thing called making money. Algorithmic trading, long short (cutting edge when Alfred Jones did it), the free gift-with proxy battle giveaway. All started at hedge funds. So it stands to reason that HFs will probably be ahead of the curve when they fire all of their equity analysts, as Tanya Beder, quant industry vet and noted hater of equity analysts, thinks they ought to do. She thinks computers should replace the EAs who, through her hate-tinted glasses, aren’t pulling their weight, not to mention not doing anything that couldn’t be done by a computer.

“Given the same set of factors, it will always produce the same result,” Beder hissed today. “Its signals are pure and systematic.” She argues that the next logical step is to supplant equity analysts with machines, and soon. Beder didn’t get her all-star returns at Caxton by tying a bunch of dead weights to her payroll.

Sandy Gross is gentler with regard to the unnecessary leaches whose services are no longer required at their companies. It’s not that hedge funds necessarily want to gather up their non-performing flock, take them around back and fire a few rounds off, they have to, in order to make room for the quant “rocket scientists” for which there is a “great demand.” (Here’s a good example of the difference between hedge funds and Dealbreaker: we demand mediocrity at best.)

[Insert obligatory Ren Tech/DE Shaw chest bump here, which symbolizes the proven success of quants].

Brad Hintz, financial services analyst at AllianceBernstein, noted that “there are lots of arguments as to why equity analysts are doomed,” and even rambled off a few ("regulatory investigations into analyst conflicts, the technology stock crash.") But you probably know something that Brad doesn't. Feel free--dare we say encouraged-- to share it with us now.

Equity analysts facing new quant challenge [Reuters]

Good news for the self consciously pudgy - now ice cream, cereals and granola may be able to give you cancer. Coca-Cola and Cargill are ready to release lines of products sweetened with rebiana, the latest low-calorie sweetener pending regulatory approval. The marketing rationale here is that as long as that calorie number on the package goes down, all is permitted (next up – low calorie bleach, low calorie gasoline). Now you can dip your trans-fat free french fries in that vanilla cookie dough blend without gaining a pound!

Coca-Cola also plans to make the obvious switch to rebiana in its soft drinks, in attempts to assuage the guilt of people who feel they need 200% of the recommended daily dose of B12 from sugar water (a market Coca-Cola now has covered courtesy of Glaceau).

Despite recent market share losses from the happy magic water and happy magic energy drink beverage categories, carbonated soft-drinks are the second most consumed food & drink item in the universe next to sandwiches, according to food industry analyst Harry Balzer at the NPD group (watch his MarketWatch commentary here).

Rebiana comes from a natural herb (the cyclohexatriene herb) and doesn’t add any calories – making it the presumed “holy grail” of sweeteners (or just the lowest calorie most sugary tasting of sweeteners).

Word on the Sweet [MarketWatch]

First entry: "Never have I ever tipped my friends off to a forthcoming deal and then charged 5 and 44 on the return."

Second entry: "Never have I ever used Mergers and Acquisitions for clean up." (These men are unconscionable liars.)

Commuters’ Cocktail Hour Likely to Keep Rolling [NYT]

Finally, the financial journalism community (yes, it’s a community) offers us something more than meaningless commentary. David Weidner, who we love, gets service-y today over at MarketWatch with a nifty how-to guide, re: insider trading. We’ll get right down to it:

Things that work:

+ Be within earshot of the mergers and acquisitions department at your local Wall Street bank

+ Keep it simple; it’s when you start to get too intricate and show-off-y that people get suspicious

+ When emailing conspirators about the insider trading you’re doing together, speak in code, but not in tongue. Say things like "Let the fun begin,” and not “ǂʼaama nǃei zhu”

+ Stay modest: pull a fast one on the Securities and Exchange Commission 10, maybe 20 times. 9 times is too few (we’re in this to make money, not friends), 25 is too many.

Things that don’t work:

+ Allowing your trade calls to be recorded on your employer's log.

+ Doing it with your wife

+ Recruiting conspirators at Turkish bathhouses

+ Laying out plans in Grand Central Terminal

The insider's path to beating the market [MarketWatch]

China isn’t gobbling up foreign assets at a rate that many expected, with overseas acquisitions this year on pace to reach only about 75% of last year’s volume. China more than doubled overseas M&A volume last year, acquiring over $20bn in foreign assets in 2006, up from $9.6bn in 2005. This year China’s overseas deal volume stands at $6.2bn, and most acquisitions have been attempts to bolster existing energy platforms.

One continuing problem with Chinese companies looking to buy abroad is that pesky disclosure and regulatory requirements often get in the way, forcing acquirers to put on a façade of being legit, or at least solvent (and this is before they even attempt to state a value-adding proposition).

For now, India is still the go-to emerging market for foreign deals in Asia. Last year, India barely edged out China in terms of foreign deal volume, with $21.7bn in deals. This year however, India is on pace to double China’s volume with $14.1bn worth of foreign deals completed so far this year.

One reason for this year's foreign deal lull in China is that Chinese officials are preoccupied with scanning the frescoes of the 1,600 year old Dunhuang caves that served as a religious center and trade hub on the Silk Road during the Sui and Tang dynasties. I don't know, it sounds like a good reason.

Chinese buyers gun-shy on overseas M&A [Reuters]
China's 1,600-Year-Old Dunhuang Frescoes Enter the Digital Age [Bloomberg]

The Shake Shack in Madison Square Park is open for business, and we’ve already heard reports of summer interns at Credit Suisse standing on the long lines to get burgers and fries for lunch.

This reminds us of the perennial question: who has the best lunch time eating options in finance? Credit Suisse’s offices, located on the east side of Madison Square Park, make it a clear nominee simply because the superb shake shack is located there. Please leave your other nominations in comments.

We know the big guns of Wall Street prefer places like Campagnola, Rao's, San Pietro and Four Seasons. We remember the Tom Wolfe essay which asserted that New York City was kept alive by the business lunch. But what we have in mind here is something a little less grand. Not lunch for the generals—lunch for the soliders. The lunch you grab before heading back to the trenches your desk. Lunch for the summers, the analysts, the associates and the newly minted VPs.

And a brief administrative note. Today marks the start of DealBreaker’s Summer Watch. The summer interns have started at the banks, the summer shares in East Egg kicked off this past weekend, Merrill Lynch is firing the sickly, and the market around the corner from DB HQ has peaches. We’ve assigned DealBreaker Associate Editor Bess Levin to the Summer Beat, collecting the best, brightest and most brutal stories of the summer.

She’s assembling information about everything you can imagine. And she needs your help. Email her at tips@dealbreaker.com. How many summers has your shop hired? What are they paid? Where do they go to school? Who has the hottest summers? What events are planned? Are they doing real work or holding your place on line at the Shake Shack?

Also, remember, whatever happens in the Hamptons never stays in the Hamptons. It ends up on DealBreaker. Send your stories of bankers gone wild near the beach to us. Send your stories of never making it out to your share because you’re stuck in the office. We’re here for you. Be there for us.

[Photo: Curbed.com]

Among the possible insider traders in CNBC’s fake portfolio challenge are an investment manager (with an MBA—from Stanford!), a radiology resident in Detroit (shocker) and a retired chemical engineer from Bollingbrook, Ill. CNBC said yesterday that in order to drum up interest in the network beyond the comings and goings of man meat Charlie Gasparino, it would be looking into unusual trading in the simulated contest. Timothy Sykes, “hedge fund manager and blogger,” told the LA Times yesterday, "There are always going to be cheaters. You can try your best to make it fair for everyone, but sometimes a few people are going to try to find ways around it,” which may or may not explain how he turned $13,000 into a pre-tax sum of just over $2 million. Concidentally, CNBC just happens to be airing a six-episode series next month called “American Greed: Scams, Scoundrels, and Scandals.” The b-roll of the day-trading (with not-real money) cheaters should be incredible.

Earlier: CNBC: THIS Is What We Choose To Take A Stand On

CNBC probes stock-game claims [LA Times]

Bill Hambrecht, founder of I-banking substitute WR Hambrecht & Co. wants to start a football league with Tim Armstrong at Google and Mark Cuban. Aspiring NFL competitors have a history of staying afloat for about as long as the Lusitania at a U-boat party, and Hambrecht has been a proud co-captain of at least one of these sinking ships – as a minority partner in the Oakland Invaders of the USFL (United States Football League), which folded after three years in 1985.

This time, the United Football League (Uniting Football rather than States this time) is bound to be successful, because it plans to focus on non-NFL cities and feature a public ownership structure. Buy your share of the Poughkeepsie Angry Pirates today. Hambrecht’s blistering chain of logic was basically that the Green Bay Packers are publicly owned and have an extremely loyal fan base willing to wear dairy products as accessories (something the 12 NFL championships (9 league championships before Super Bowls started and 3 Super Bowls) clearly have nothing to do with), so public ownership in small places must be an instant key to success. At least part public ownership, as teams will have a tripartite ownership structure between owners, the league and fans. Specifics from the New York Times:

Each owner will put up $30 million, giving him an initial half-interest in the team; the league will own the other half. But eventually the fans themselves will become shareholders — because each team is going to sell shares to the public. Then the owner, the league and the fans will each own a third of every franchise. Hambrecht and his executives believe that the initial public offerings will raise, on average, another $60 million per team, giving it about $90 million in working capital. They also hope that the stock sale will create intense fan loyalty.

So Billy H. has seen Rudy a couple of times and remains optimistic about the ability of guys with “heart” to provide footballtainment. After all, Tom Brady was a sixth rounder and Bill Walsh said the talent levels of the people cut from an NFL roster don’t differ much from the talent levels of the people who just make the team (in that you can say with equal conviction, “He’s no Jerry Rice”). This is actually part of Hambrecht's marketing spiel (or at least the denial portion of his stages of grief).

According to some random guy the New York Times asked (a “sports economist” at Stanford, which must have “sports economics” classes, which must be like the physical kinesiology of the econ department (and I only say this because it sounds cool and I’m jealous)), the real barrier to entry in terms of competing with the NFL is getting stadium deals in larger cities and not providing a watchable game of football with the world’s best players (think he may have over-thought that one).

First and Long — Very Long [New York Times]

Securities regulators will review the $11 billion distribution and service fees charged by many mutual funds. Yesterday the Securities and Exchange Commission said it will hold a roundtable discussion on June 19 to discuss the fees.

Often referred to as “12b-1 fees” after the Investment Company Act rule that allows them, the fees were instituted in 1980 as a temporary measure to compensate fund managers for the costs of marketing the fees and attracting new investment. The idea was that mutual fund investors would benefit from economies of scale if fund managers could use part of the fund assets to build larger funds.

Now the fees have become a regular part of the mutual fund business, with even some closed-end funds—which are closed to new investment dollars—charging 12b-1 fees. SEC Commissioner Chris Cox says that the fees need to be reviewed because their use has departed widely from the original purpose.

"When the Commission adopted Rule 12b-1 more than a quarter century ago, the idea was that 12b-1 fees would be a temporary solution to address specific distribution problems, as they arose. But today's uses of 12b-1 fees have strayed from the original purposes underlying the rule, and it is time for a thorough re-evaluation," said SEC Chairman Christopher Cox.

After the jump, read the full SEC release regarding the fees.

Gates, Jobs Make Joint Appearance (WSJ) Putting on the façade that they don’t both want to see the other one dead, Steve Jobs and Bill Gates made a joint appearance yesterday at a conference sponsored by the Wall Street Journal in Carlsbad, California to discuss—wait for it—the influence of technology on the world. Somehow, talk of computers managed to sneak its way into the conversation. Jobs and Gates balked at the idea that new and revolutionary internet services (like the kind that tell you when to get out of bed and what to do after that) will “obviate the need for advanced software on PCs” and argued that future software will be “a combination of increasingly powerful PC software that works tightly with Internet services, what some industry executives call "software as a service." When asked by a rapscallion of an audience member what qualities them men respected most in each other, Jobs went with “Bill’s philanthropic efforts” which seems like the easy way out. Gates noted wistfully that he’d “give a lot to have Steve’s taste,” which, as ardent lovers of mock turtlenecks, we would have to wholeheartedly agree with. The “I’m a (smug, arrogant) Mac, I’m a PC” commercials were also touched on: Jobs had the gall to comment that “the art of those commercials is not to be mean. It’s for the guys to like each other” to a “disbelieving Mr. Gates who shifted in his chair and scratched his chin.” We guess the whole thing is a bit moot anyway, though, considering that Gates still claims to have never seen the ads (that he can recall with total accuracy).

U.S. buyout firm interested in BCE not a 'barbarian': Henry Kravis (CBC News) Henry Kravis would like you to know two things: 1. He’s not a “barbarian.” 2. He loves Canada. During the annual Canadian Venture Capital and Private Equity Association meeting yesterday, Kravis, who’s been criticized for foreign takeovers of Canadian “business icons” (sidebar: what’s a Canadian business icon? Best answer in the comments wins a date with Carney), confirmed that his firm is a minority partner in the Canada Pension Plan Investment Board, the Caisse de depot et placement du Quebec and the federal Public Sector Pension Investment Board, and is interested in buying telecom goliath BCE Inc. Kravis also went on at length over the hurt feelings he and other private equity guys experience when they hear themselves and their work discussed using terms of aggression and noted that he’d rather be viewed “as a capitalist who repairs underperforming companies and listens to labor unions.” (“I’m just a regular guy! A Joe-Schmo! Your buddy, your pal! I’m not the enemy!”) Naturally, the K-man still reminded the crowd that there are important long-term benefits to debt-supported takeovers and delivered a somewhat precious line about his Montreal-born wife being “the best asset I’ve ever gotten" out of the Cannucks.

Wachovia buying A.G. Edwards for $6.8 bln (MarketWatch) Wachovia acquired A.G. Edwards yesterday for $6.8 billion, in a deal creating the nation’s second largest retail brokerage. A.G. Edwards stock was valued at a 16% premium to its Wednesday closing price. Wachovia will pay $89.50/share (in a mix of cash and stocks). The merger is expected to close in the fourth quarter, when the brokerage will have a combined $1.1 trillion in client assets.

Hedge Funds: With More Money Comes More Post-Nups (DealBook) Not at all breaking news: there is a Venn Diagram overlap between some hedge fund guys who like to horde money and get married several times. Apparently now de rigueur with that set is the “postnup,” which, like the pre-nup, divides the marital assets, only this time, as the name would suggest, it’s signed after the marriage. One US hedge fund (we’re looking at you, Third Point) is refusing to take on new partners until they agree to sign postnups that bar their spouses from making claims on the fund.

SEC Settles With Brocade Over Options Backdating, People Say (Bloomberg)
Brocade Communications systems has agreed to pay approximately $7 million to “resolve allegations that is improperly issued stock options to employees.” This is the first fine against a company for backdating stock options, and, according to federal prosecutor William Portanova, “will set the standard” and will be “a signal to the world exactly how bad their punishment is going to be.” The people who care about this decision are a. Steve Jobs (but not really) b. the smaller peons who backdated who might actually get in trouble for it and c. John Carney.

Saudi prince backs Citi's CEO (CNN Money) Alwaleed bin Talal, the Saudi Prince and Citigroup’s largest individual shareholder, said that he has “confidence” in Chief Executive Charles Prince. So he’s the one.

$$$The Backdoor into Stanford [Banker’s Ball]

$$$Wall Street Maverick Tilts at Football Giant [DealBook]

$$$A little about me: Blond hair (most of the time), blue eyes, 5’10. I recently turned 29 and work as an investment banker here in the city. In my spare time I love yoga, running, gourmet cooking and playing pool (see pic). The thing I hate most is sushi (sorry I just prefer steak). Let’s go nuts. [Craigslist]

...one of our favorite readers (and there are so many to choose from!) asks, and continues:

Because from this chart, that was the time to do it, as we limped across the finish line to reach a fresh record today on the SPX ... a mere 7 1/4 years after its last close at these levels. From here, I'll just remind you of that old adage: "The market climbs a wall of worry" --> and the NYSE reported that a record 11.76 BN shares (3.1%) of the total listed shares were sold short by mid-May, with the NASDAQ reporting similar record figures for May.

Some will pooh-pooh this indicator since there is such a high level of risk-arb activity (traders short the acquiring company, buy the acquiree) and HFs that engage in pairs trading, HOWEVER I think that's wishful thinking... short interst being artificially high or not, a lot of real money appears to be sitting on cash (waiting for that proverbial "other" shoe to drop after the Feb swoon) and the amount of cash that goes back to equity investors EVERYDAY in the form of PE/M&A activity ($2.3 TRILLION global volume YTD) dwarfs the amount of new supply...even though I got C's in both Econ 201 and 202 (weeder classes at U of M), I did remember that supply/demand thing...

So buckle up, keep your cool and buy stocks...k?

Four Ernst & Young partners were indicted today for allegedly creating illegal tax shelters for the firms wealthiest clients. At the same time prosecutors announced it would not bring charges against the accounting firm.

The four worked in a group Ernst & Young set up in 1998 to create tax shelters for clients making more than $10 million per year. At first it sported the color name Viper, which officially stood for Value Ideas Produce Extraordinary Results. At some point someone seems to have thought snakes in the accounting firm was not the best idea and the name was changed. But the goal of helping clients minimize taxes remained.

The accounting firm may have helped its clients create more than $7.56 billion in tax deductions, according to the business reporters at ABC News. The firm collected a fee of between 1.25% and 2% for ever dollar of tax deduction created, for a total of more than $115.7 million, according to the indictment.

The indictments come after a long investigation that stems back to the plethora of tax shelters that were big business for the accounting firms during the stock market rally of the late nineties. The decision not to charge Ernst & Young will likely be taken as a signal that the Justice Department is ratcheting down the investigations into the tax shelters of the last stock market boom. At one point it looked like law firms and investment banks might also be indicted. Declining to indict Ernst & Young may be a sign that the Justice Department is now aiming at the individuals involved with the allegedly abusive tax shelters rather than their employers.

At least one of those indicted today is not going quietly. A lawyer for Ernst & Young tax partner Richard Shapiro said today that his client was “disappointed that the Department of Justice and the United States Attorney’s Office have decided to go forward with the prosecution of an innocent man.” He went on to describe the charges against Shapiro as “baseless.”

Shapiro is a well known figure in tax circles. His views have been quoted widely in the press, and he has authored a booklet on taxes and investing.

How the Super Rich Avoided Taxes; Despite Making Millions [ABC News]

Ernst & Young Partners Charged in Tax Fraud [SmartMoney.com]

We’re told by a trader at a New York investment boutique that Google will split 10-to-1. There have been many rumors of splits in the past but our source claims that this time it’s for real.

If he’s right, this would mark a complete about face for Google. At the Google shareholder meeting earlier this month CEO Eric Schmidt told shareholders, “We are not considering splitting and have not for a long time.” That’s about as unequivocal as you can get. So we’re maintaining a skeptical stance about this rumor.

Google’s anti-split stance, however, makes it an anomaly among public tech companies. Yahoo, eBay and Microsoft have all split. And Google’s share price—it’s closing in on $500 and some analysts predict it might go as high as $600—make it a prime candidate for splitting. High share prices are considered by many to be a barrier to investment by ordinary investors, although there doesn’t seem to be having much trouble finding willing buyers for Google shares.

One person who doesn’t seem troubled by the high share price is Eric Schmidt, who exercised options for 57,086 shares of common stock under a prearranged trading plan, according to Securities and Exchange Commission filings on Tuesday.

Google: No Plans for Stock Split [thestreet.com]
Google: Where's the stock split? [cnet.com]
Google CEO Exercises Options [Forbes]

Federal prosecutors yesterday brought criminal charges against Pakistani banker Ajaz Rahim, who they allege traded on inside information leaked to him by a junior Credit Suisse banker. Rahim is a prominent figure in Pakistani investment banking, and until quite recently worked as the country head of investment banking of the Faysal Bank in Karachi.

The picture to the left appears to be of Rahim and Farook Bengali, the chief executive of Faysal. It was prominently placed on the bank's website until recently but has been removed. DealBreaker was not able to confirm that the picture is Rahim.

Earlier this month, federal prosecutors arrested Hafiz Mohammed Zubair Naseem, a junior associate in the energy group at Credit Suisse, on charges that he had leaked information on nine deals which his employer was involved with, including the buyout of Texas energy giant TXU. At the time of the arrest, prosecutors said that Naseem had leaked the information to a banker in Pakistan but did not name him. A little more than a week later, the SEC amended its civil complaint against Naseem and named Rahim as a defendant. The complaint alleges that in at least twenty-five instance, Rahim made trades several minutes after concluding phone calls with Naseem.

An arrest warrant has been issued for Rahim but his whereabouts are currently unknown. After the SEC named him as a defendant, Rahim’s lawyer , Spencer Barasch, had said that his client would not come the US for a deposition in the suit unless he received guarantees that he would not be arrested. Naseem had also said he planned to call Rahim as a witness for the defense in his own trial.

Through his lawyer, Rahim is denying any wrong doing. “Mr. Rahim looks forward to vigorously defending himself against the charges,” Barasch told DealBook yesterday.

U.S. Attorney Charges Pakistani Banker with Insider Trading [DealBook]
Banker faces insider trade charge [BBC]

A reader tipped us off to the following energy market shake up this afternoon regarding oil prices. US crude prices shot up 40 cents when a Tulsa, Oklahoma television station reported on its website that a regional refinery was on fire from a lightning strike. The only problem - there was no fire, save for the pants of the KOTV webmaster (Brain Hunter, as part of Solengo's new macro event-driven strategy).

Web site error rocks global oil markets [Reuters]

It’s refreshing to see, at least for anyone who prefers a little balance in the technological world order, that not everything Apple touches turns to gold, which has been the case since the iPod (although the Power Mac Cube was shelved just as the iPod was launching in 2001). The Apple TV, which is a $300 doorstep, furniture leveler or sushi platter according to Fortune’s Brent Schlender, is Apple’s very own Zune, crammed with features that are unusable because of compatibility issues and lacking common sense controls – like a volume gauge on the remote. Schlender points out that the advertising push for the Apple box in the very medium it’s trying to transform is non-existent and that Steve Jobs would rather talk about his ignorance of options dating practices than the Apple TV.

Although computing giants still pursue the holy grail of Web/TV integration, the real changes in TV have come from complimentary hardware (DVR) or the displacement of content across an already established medium (video sharing with high speed internet connections). This gives Apple a 1-1-1 record when it comes to transforming media platforms, with its overwhelming victory in shaping the way we listen to and store music, a trip back to the drawing board with a clunker of a TV set, and a push when it comes to home-computing (I don’t think OS counts as defining the home computing platform, despite what Apple enthusiasts will tell you).

The debate rages over Apple’s effect on wireless communication with the arrival of the iPhone next month. Will the device be another example of battery gobbling feature creep or compatibility turmoil, or will the iPhone finally integrate music, video and phone in a user-friendly way?

Apple (AAPL) shares are up more than 2% today, shooting past the $115 mark to a new 52-week high.

The trouble with Apple TV [Fortune via CNN]

Finally, something quasi-exciting today (other than the planning of our upcoming "Whose Boobs?" contest, which we'll tell you all about in good time): the Man Group plans to list a hedge fund on the NYSE! Man, one of the largest hedge funds in the world, will be selling a closed-end fund that employs hedge fund strategies. Shares of the Man Dual Absolute Return Fund will be pawned for $20 each, with a minimum order of 100 shares (to maintain
the farce of hedge fund availability only to "accredited investors").

The fund's assets will be invested by two managers: About 80% will be under the watch of quantitative manager Tykhe Capital, using a long/short equity strategy. The rest will by managed by Man's AHL Core program, a mangaged-futures strategy.

Everyone is excited to point out that this move is indicative of a "broader trend of hedge-fund managers boosting their assets through exchange-traded funds that can be bought by both institutional and retail investors" (or something to that effect). We're just psyched to be getting some mileage out of what we'd previously thought was our retired "bukkake party of IPOs" tag.

Man Group to List Hedge Fund on NYSE [Forbes]

Word broke this morning that Last.fm has been acquired by CBS for $280 million. The online music provider has been the subject of acquisition speculation for months. The most persistent rumor had Viacom buying the company for as much as $450 million. We may never know what happened to that deal, if it ever existed outside of the heads of London music fans and market watchers.

CBS, which was at one time a corporate sibling of Viacom, is comparing the deal to News Corp's acquisition of MySpace.

"We're emulating what Fox did with MySpace. There are a lot of super-cool, whiz-bang applications they have that I can't wait to apply to other parts of the business," CBS digital boss Quincy Smith tells Reuters.

CBS buys online music site Last.fm [Reuters via Dot Music]

CNBC has announced an investigation into “complaints of unusual trading among some of the 20 finalists in the CNBC Million Dollar Portfolio Challlenge [sic],” which was mercifully taken out back and shot on May 25. Ooo, insider trading, how trendy, how scandalous, how very “you are a bad boy,” indeed. While it’s true that we don’t necessarily have any hard evidence that this isn’t a plot by producers to drum up page views (on CNBC.com)/excitement about the Challenge and CNBC in general during this “we haven’t had a reporter go down on a source in a while, we’ve got to come up with something” period, we are allowed to speculate that this is the case, are we not? When John “I Bleed For CNBC” Carney and Tim “Pre-tax Sum of $2 million” Sykes stop taking your calls, you know something’s got to be done.

Earlier: CNBC Continues to Be Nonplussed Over Ethics, Lack Thereof

CNBC Probing Alleged Violations by Finalists in Million Dollar Challenge [CNBC]

Apparently all it takes is a mysterious departure of a CEO to make a company's shares shoot up almost 3.5%, as VeriSign (VRSN) is surging on news of Stratton Sclavos' resignation as CEO after 12 years. No one, aside from a secret cabal of VeriSigners knows why Sclavos bolted, but analysts speculate that the main internal squabbles regarded a lack of new talent and lackluster returns from VeriSign's aggressive acquisition platform. Former Science Applications International Corporation CFO William Roper Jr. was appointed to succeed Sclavos.

VeriSign is restating its financials from 2001-2006 and expected to take at least a $250mm hit from dodgy options dealing, but there is no official word on whether this had anything to do with the CEO shuffle.

VeriSign’s Chief Executive Resigns Abruptly [New York Times]

Robert Zoellick is not afraid of foreign relations, or panda relations, seen here last January with Jing Jing at the Chengdu Giant Panda Breeding Research Base in central China. "You want to know how the panda felt?" Zoellick asked. "Very soft."

U.S. Envoy Engages In Panda Diplomacy [Washington Post]
Zoellick to Be Nominated to World Bank [Forbes]

Former Goldman Sachs Asia investment experts Xiong Xiong and Vincent Ee will be launching Libra Greater China Fund, a long/short strategy, next week. Asian Investor reports that the Greater China strategy will focus on the mainland and will also invest in companies listed in Taiwan and Hong Kong. Libra will target 30-40 long positions and 10-15 shorts, with average exposure at 90-130% long and 50-70% short.

Goldman Sachs portfolio managers start hedge fund [Asian Investor]

This month, the number of shorted shares on the NYSE reached 3.1% of the total number of shares traded on the exchange. This is the highest percentage since 1931 (just to give you a sense of how long ago that is - in May of 1931 the Empire State Building had just finished construction). The bulls may carry the day though, as shares of the S&P 500 are trading at only 17.8x earnings on average, which is a far cry from the 32.8x earnings S&P 500 shares were trading at on average at the end of the last bull market. As short sellers continue to hold firm, they may continue to eat it, according to Bloomberg:

Hedge funds that focus on shorting lost 35 percent from September 2002 through the end of April, according to the Credit Suisse Tremont Hedge Fund Dedicated Short Bias Index. That compared with an 82 percent gain for the S&P 500 in the same period. The funds are the worst performers this year among 10 hedge fund strategies tracked by the Credit Suisse/Tremont Hedge Fund Index, dropping 1.1 percent.

Short Sales Break Record on NYSE; Market Bulls Get More Bullish [Bloomberg]

IntercontinentalExchange poured a little extra honey on its bid for the Chicago Board of Trade today, throwing a settlement over a longstanding dispute with the Chicago Board Options Exchange on top of its bid. ICE has been locked in a bidding war with the Chicago Mercantile Exchange for the Board of Trade.

Since its first days in the Nixon administration, Board of Trade has been battling the CBOE over exchange rights that allow members of the Board of Trade to trade options at the CBOE without having to buy a membership. The CBOE has been threatening to attempt to terminate those rights if the Board of Trade is taken over.

In the settlement announced today, ICE would pay Board of Trade members a total of $666.6 million for the the rights. Needless to say, the settlement offer only applies if ICE succeeds in its bid for the Board of Trade.

ICE and CBOE reach deal on exercise rights [Reuters]

Editor's Note: As Keith Hahn mentioned yesterday, Joe is off all week. Even DealBreakers need vacations. So the rest of the team is filling in for him as best we can.

Goldman's Global Alpha Hedge Fund Falls 3.4% Since Start of '07 (Bloomberg) Frankly, we think the "under-performance" of Goldman's Alpha fund is something of a non-issue. Yes, it is down close to three and a half percent for the first quarter of this year while some hedge fund average is up 4.9 percent. And, sure, it hasn't quite lived up to the "Goldman prints money in its basement" reputation that the fund got after returning 40% in 2005. But Alpha isn't meant to be anyone's primary investment vehicle. It's supposed to operate as a true hedge fund, offering uncorrelated returns. This means that some years will not be boom years. If anything, diverging from the performance of a hedge fund average that someone has cooked up simply means that Alpha isn't playing the same game of shorting volatility that so many so-called hedge funds are playing.

The World Bank and the Goldman Connection {DealBook) Basically, Goldman Sachs just bought the World Bank. Okay. That's not quite right. But it does sometime feel like Goldman is running the world. And this morning it just feels a bit more like that. Now they have the NYSE, the Treasury, the World Bank and have done their best to own China too.

ABN Bid: Sweet and Sour (Wall Street Journal) When ABN Amro agreed to sell it's LaSalle division to Bank of America, a lot of people assumed it was part of an attempt to muck-up the takeover bid from the group led by the Royal Bank of Scotland. Well, if that was the plan, it seems to be working. Yesterday the RBS group said the final price paid to ABN Amro shareholder may end being lower because of the cost of litigating the lawsuit that has resulted from their attempt to unwind that deal.

Debt risks grow in private equity boom (Reuters) As it turns out, leveraged finance involves lots of leverage.

My Recommended Federal Reserve Policy (LewRockwell.com) Gary North proposes a provocative policy for the Fed: stop doing anything. More particularly, stop buying or selling assets in an attempt to create a smoothly rotating economy with exactly the right rate of growth, price movements and interest rates. His main point is basically that we wouldn't tolerate a bureaucratic exercise to fix the price of anything else, so we should stop putting up with government meddling in interest rates.

Eurotunnel shares double for second day in a row (Reuters) We never really got the Chunnel. The ferry ride across the English Channel was one of the most pleasant international trips imaginable. You sat down with a bottle of something crisp on a fast boat that whisked you across a beautiful seaway as the Dover Cliffs faded into the background. If you were a literary or historical type you might remember some poem about Dunkirk. Now you cram into a commuter railway that shoves you through an underwater tunnel. Oh yeah, it seems that shares in the company that runs this bad experience are up because someone has figured out a way to let it pay off some of its massive debt load. Hurrah!

$$$ Guess what? Warren Buffett and Jimmy Buffett aren't related. This, and other stuff you never cared about, now brought to you by Sergey Brin's bride. [Fortune]

$$$ Balk vs. Cramer [Gawker]

$$$ I certainly could fill the page with adjectives, but to put it simply...I am fun, funny, not deceitful, a fierce friend, a finance professional by day and a Rocker by night. I am looking for a companion, not to be a cliche like a partner in crime, more like a partner in good times. [Craigslist]

$$$ Hedge Fund Manager’s Comments Irk Macquarie [DealBook]

It is apparently still news to some that the Securities and Exchange commission is very deferential to the securities industry. This morning the Wall Street Journal reported that “the agency has been publicly and noisily pressured by a congressman, a union leader and a Democratic presidential candidate, amid increasing consternation the agency is favoring business interests in its decision making.”

The focal point for the attention is a Supreme Court case that will decide on whether shareholders can sue investment banks for the fraudulent activities of their clients. The question is whether the SEC will file a brief with the court supporting the plaintiffs position that investment banks can be held liable. Prominent (some would say, notorious) plaintiff’s lawyer Bill Lerach is lobbying the SEC to take the side arguing that banks can be sued. Merrill Lynch, which is a defendant in a class-action lawsuit filed by lawyers representing former Enron shareholders, asked the SEC to take the opposite side.

Both sides, of course, claim that their position best protects investors. The plaintiff bar claims that holding banks liable will make banks better police their clients and avoid aiding or even looking the other way when companies engage in fraud. The banks see this opening the flood gates to a torrent of lawsuits.

Who’s right? That’s probably entirely besides the point. These things are rarely, if ever, decided on the basis of wise policy.

[After the jump, we pull back the curtains on what really decides these kind of public policy issues. Hint: it's not a great and all-knowing wizard.]

It’s a little upsetting to find out that one’s publicly professed deity includes the bit “A thief stole my wife's credit card, but I didn't report it. Guess why? The thief spends less than my wife!" in his set of “favorite” jokes. The chafing is slightly salved when reminded that the fallen god has previously told adversaries, “You’ll never work on Wall Street again” and “That’s the dumbest thing I’ve ever heard,” purposely “mangles” people names, and once told Ken Moelis, chief of investment banking at UBS that he was a “Mollusk.” But that’s nothing compared to the sunshine on one’s face that is this:

Investment banks like to make headlines by playing important roles in big deals. But publicity surely wasn’t what Merrill Lynch was after when it made headlines last week with it’s new sick-day policy. An internal memo announced that three sick days per year is acceptable but after that the company will start docking pay. More than eight is “unacceptable.” And nine days out is a firing offense. After it was reported on Gawker and DealBreaker, the memo quickly became a story on which the sun never set, showing up in the UK’s Guardian, the International Herald-Tribune, the Boston Globe, the Fort Wayne Herald Gazette, the Los Angeles Times. It even crossed the Pacific to appear in the Shanghai Daily.

Merrill’s flaks acted quickly to emphasize, well, anything other than the news that it has a policy of firing employees who are sick more than 2.4% of the year. Spokesfolks say the company permits three weeks of vacation time, four “personal days,” thirteen weeks of leave for hatching offspring (but only if you are the primary-care giver). Also, they say the policy is in keeping with policies offered by its rivals. (And, of course, none of the other banks are saying a word in connection with the story).

But there was no getting around the fact that the policy was a drastic change for Merrill employees, who were previously permitted to take as many as 40 sick days (provided they didn’t take more than 4 days in a row). Of course, 40 sick days is an awful lot but its not clear that Merrill’s employees were actually taking anywhere near that many. No doubt some employees abused the policy by “pulling a sicky”—as our Brit friends like to say. But in general, employees of US companies don’t use all the sick days they have available. “The average company offering the benefit provides 8.1 sick days a year. But workers on average only take 5.2, according to a survey by Mercer Human Resources Consulting,” Fort Wayne’s Herald Gazette reported.

So why the crackdown? As is usually the case with anything happening around Memorial Day, the summer beach share is to blame.

[After the jump, the implausible "the Hamptons made us do it" excuse.]

Bloomberg's Matthew Lynn submits:

Why are clever young graduates who have neither the taste nor the aptitude for markets choosing to become bankers?

Let's see: proclivities for ankle-grabbing, a love of Excel, this thing, the bitches, the homoerotic male bonding, the need to prove onself better than Keith Hahn? You would probably know better than us (me). Do tell.

Wall Street `Cubicle Warrior' Gets Even in Cruel Roman a Clef [Bloomberg]

It’s no surprise that Andy Roddick’s arms are not on the latest cover of Men’s Fitness (pictured). The resulting fallout has been plastered all over the internets since the cover came out a couple weeks ago. Roddick even jokes about the cover on his personal blog, exclaiming, “Little did I know I have 22-inch guns and a disappearing birthmark on my right arm.” The magazine insists that they didn’t just paste Roddick’s head on some jacked dude (and that they don’t have a piss poor Photoshop guy who can at least match skin tones), but rather enhanced his existing arms, like Jax, the main guy from I, Robot or at least John McEnroe.

It is only recently, however, that news outlets (or whatever you want to call Page Six) got wind of AMI chief David Pecker’s true fury over the ordeal, as Pecker supposedly went ape on AMI editorial director Bonnie Fuller on Friday. Rumors of Fuller’s departure have circulated pretty much since she was hired at AMI to repair Star, but this may finally signal the end up the Fuller era, as further reports indicate that Bonnie is coming in late to avoid the angry Pecker, among other things.

***UPDATE: Roddick just lost in the first round of the French Open to unseeded Russian Igor Andreev, because he has arms like this.

BONNIE BASHED OVER ARM JOB [Page Six]

Did a love of Parker Brothers board games, Monopoly in particular, get John Mack to return to the Dean Witter-tainted Morgan Stanley in 2005? According to the non-news driven article about the Lebanese Lothario* on Page One of today’s Wall Street Journal: maybe (always so vague, the Journalettes). As you probably know, after the train wreck that was the Morgan Stanley-Dean Witter merger, things got awkward between Mack and DW chief Philip Purcell, who became chairman and chief executive of the new company. So bad that Mack left in January 2001. Retirement (also known as running Credit Suisse Group) was going pretty well, until one day, Mack’s son, always the rabble-rouser, gifted his father with a “custom Monopoly board with a ‘Chance’ card that read: ‘A struggle with Phil Purcell finds you in a dilemma at MSDW. Should you stay or should you Go? You choose Go.” (Yes, let’s all pause to make sure we’ve taken that 72-hour pill within the allotted 72 hours. We’ll wait).

And that’s what it took to get the Mack Man back at helm of a Morgan Stanley whose business was in the toilet. MS had missed the train to private equity town. MS was dragging the dead weight that was (is) Discover. MS was making Merrill Lynch look good. Since sometime after that that fateful day, Mack’s been buying up everything from Tennessee Avenue to Waterworks (not to mention winning $10 after coming in second place in the beauty contest. True story).

As the J notes, “playing catch up” has come at a price. Namely: the $30 million to woo Stephen Trevor from Goldman and the concerns over the high risks of getting so involved in private equity by a staunchly investment banker bank. And they’re nowhere near Blankfein and Co., who have a $20 billion buyout fund/$28 billion in investments versus Morgan Stanley’s (projected to be) $6 billion buyout fund/$8 billion investments.

But Mack lives with the constant pressure of his Monopoly-gifting son breathing down his neck, and is working hard to make things better. He slashed paychecks for last year’s poor performers (a group that did not include John Mack, who got $41.4 million in 2006, a 38% raise). And Morgan Stanley’s share of global M&A deals grew to 39.6% this year, up from 2004’s 17.3% during Phil Purcell’s last full year in charge. And, of course, it landed the role of co-lead on the big Blackstone IPO. Morgan Stanley stock is up some ridiculous percentage too, although so is almost every other Wall Street stock.

A couple of years ago John Mack was telling Morgan Stanley’s bankers that they had lost their “swagger.” But, to judge from today’s Journal, it looks like the swagger is back with the Mack.

At Morgan Stanley, A Game of Catch-Up [WSJ]

*Carney'’s note: Calm down, boys. We’re not talking about Mack’s private life. We assume that the name “Mack the Knife” has nothing at all to do with his after-hours activities. We’re just referring to the fact that after he broke up with Morgan Stanley he certainly managed to get around Wall Street quite bit.

Earlier: Maybe If Dick Fuld Spent As Much Time Working On His Right Hook As He Did Worrying About Earnings, We Wouldn't Be Having This Discussion

Against all odds, the story of Overstock continues to get worse. The company has been a laughing stock to almost anyone who can be bothered to think about it anymore. It’s the focus of an SEC investigation. It is run by a chief executive whose name—Patrick Byrne—long ago became synonymous with wacky conspiracy theories. It regularly deploys nasty tactics to defame reporters who dare mention its deterioration. An it’s bleeding directors.

The latest news hit on Thursday when Ray Groves resigned from the board. Groves, who once ran Ernst & Young, was the head of Overstock’s audit committee. He was, in the eyes of some observers, the last and best hope the company had to maintaining a sense of credibility. His departure comes as only the latest of a series of resignations by board members. The past year has seen also seen departures by directors John Fisher and John Byrne, the CEO’s father. When your father bails on your company, you know you are in trouble. Or rather, you would know. Patrick Byrne seems to think it’s a sign of his company's strength. Or something. We’ve long ago given up trying to figure out anything about what goes on inside of Byrne-the-younger’s brain.

But other’s have not. After we took off for the long-weekend, Gary Weiss, Sam Antar and Herb Greenberg all looked into the latest resignation. What’s behind the latest departure? Well, the same thing that was behind the departure of Fischer and Byrne-the-elder: the CEO’s ridiculous “jihad” against the “sith lords” on Wall Street he claims are behind a naked shorting conspiracy that is depressing his company’s stock price.

“In a letter contained in an SEC filing this morning, Groves told the company, ‘My resignation relates to the company's prime broker suit.’ That's Overstock's suit alleging that prime brokers are somehow involved in a naked shorting conspiracy,” Greenberg reports.

[But is it more than the Overstock's lawsuit against prime brokers? Read more after the jump.]

It turns out you don’t have to be a real estate billionaire’s offspring to get a sense of Ivanka Trump’s huge (and artificial?) tracts of land. Jared Kushner, fellow member of the “Daddy’s a Real Estate Billionaire” club and vaguely heterosexual courter of Ivanka, succumbed to Yahoo’s Indecent Proposal and is letting the winner of the Yahoo Search Marketing Ultimate Connection contest go on an “executive meeting” with his non-girlfriend.

All you need to do is write three 500 word essays (start honing those “unique journey of self-discovery” narratives now) and send them to Yahoo by tomorrow by midnight, and have your guidance counselor fax your transcript.

If your business is small enough (under 99 employees) and wants to team up with the marketing wizards behind Yahoo’s recent surge (closest comparable – the Titanic), enter today. Other prizes include:

-A $25,000 Yahoo! Search Marketing budget to blow on your date with Ivanka
-A power lunch with your marketing mentor high above New York City, who may or may not be a peregrine falcon nesting on the Chrysler building
-Access to your marketing mentor and especially easy access to a Yahoo! Search marketing mentor throughout the year
-A web site makeover from Yahoo! Small Business and FastPivot and Divine-Interventions.com

Yahoo! A Date With Ivanka [webpronews]
The Ultimate Connection Contest [Yahoo]

Hewlett-Packard wants to be the tech-company of the future and, unfortunately, that goal may be coming a reality in a way they never planned. Instead of becoming a shining star of new technologies, the company has been plagued by an association with a darker kind of future—a sort of Max Headroom, Robocop-style dystopian future where corporations employ spies to steal confidential, personal and corporate information about competitors, employees and reporters.

The pretexting scandal that led to the departure of the chairman of Hewlett Packard’s board of directors, resignations by senior executives, humiliating public hearings on Capitol Hill and a lawsuit brought by the state of California is by now well known. (A recap: H-P apparently engaged private detectives—to snoop into alleged leaks to the press that seemed to come from board members—who used false pretenses to obtain the phone records of board members and reporters, possibly breaking the law in the process.) This morning, however, Fortune writer Nicholas Varchaver, breaks the news that Hewlett-Packard’s spying may have started long before that famous episode. And, disturbingly, his reporting suggests that the pretexting that made headlines last year might not be the anomaly Hewlett-Packard chief executive Mark Hurd claimed it was.

[After the jump, the nasty lawsuit and the new claims of possible pretexting.)

JPMorgan is ready to love again after leaving Nasdaq when the US exchange suffered some anger management issues in its hostile bid for the London Stock Exchange last March. JPMorgan and Nasdaq are back together harassing foreign exchanges – trying to make the Scandinavian OMX dance for $3.7bn. Morgan Stanley, Credit Suisse and Swedish firm Lenner & Partners are advising OMX.

After the Nasdaq bid for the LSE was rejected, Nasdaq began accumulating LSE shares (a downward self-shame spiral). Nasdaq could not obtain enough shares (over 50%), or a positive enough self-image to cement control of the company, but became the LSE’s largest shareholder in the process, with over 29% of the company’s stock. JPMorgan backed out as Nasdaq’s advisor primarily because JPMorgan’s Cazenove divison is joint broker to the LSE.

Advisor reprises role after LSE conflicts [Financial News]

Nice article in New York today by Jim Cramer about Jim Cramer. In it, he asks the question “Why does everybody hate me?” and then proceeds to answer it, with supporting statements and quotes by him. He also explains why he’s famous (fearlessness! And because he’s the only one who knows how the markets work) and why a C-note signed by Jim Cramer (“Wherever I go I get asked for my autograph”) could be worth up to $100 in five years, taking inflation into account. Not to spoil anything, but, for the most part, it’s basically everything we always hear by Cramer, about Cramer: worked at Goldman Sachs blah blah blah…Eliot Spitzer, who I went to Harvard with, is a god blah blah blah…thestreet.com blah blah blah…I predicted that Rosie O’Donnell would leave The View ten years ago blah blah blah…hilarious exchange between Cramer and Cramer blah blah blah. We’re not saying the six (web) page piece is worthless, but if you’re the sort of person that values your time, join us now, as we break it down: by the numbers.

Over 300k people are opening brokerage accounts every day in China and driving the most recent market surge, pushing Shanghai’s CSI 300 past the 4,000 mark. The index has quadrupled since 2006 and doubled since the start of this year, although Greenspan is wary of the bubble buzz, and warned of a possible dramatic correction last week. According to the BBC:

One of the main factors behind the surge in shares has been a willingness among ordinary people, such as students and pensioners, as well as investors and businesspeople, to buy shares [so…the main factor in the surge in shares has been that people are buying shares…insight does not grow on trees kids]. Instead of leaving their savings in bank accounts [or continuing to serve as human coffee tables], many people are now using the cash to buy shares in the hope of receiving better returns [and buying back female offspring from rural villages].

China's stock market hits record [BBC via Fintag]

It’s hard to throw a stone on Wall Street without hitting a senior investment banker who thinks the new kids these days are too much money. Just two weeks ago we saw John Whitehead, who was one of Goldman Sach’s co-heads exactly one billion years ago, griping about that he was “appalled at the salaries” on Wall Street. He had in mind more than just the junior bankers and newly recruited analysts—he even singled-out Goldman Sachs chief Lloyd Blankfein’s paycheck. But you don’t have to press to aim your tossed rocks very well to knock around a few grey-hairs covering the minds of those who think that salaries for associates are getting too high.

Not surprisingly, those on the receiving end of the "appalling" paychecks tend disagree. Fortunately for the youngsters, there are more places to take their finance degrees than ever before—and many of them hold out the promise of even more money to the next generation of would-be tycoons. Many recent graduates of some of the best finance programs look at Wall Street’s traditional investment banks more as finishing schools than as places to spend their careers.

Take “Fred”—the pseudonymous rising third-year featured in Liz Peek’s New York Sun column this morning. Fred is a top analyst at Lehman Brothers. You can tell he’s a top analyst because Fred’s been invited back for a third year at the firm, which means he is getting promoted upwards without going through the trouble of getting an MBA. He describes his work as “mind-numblingly boring.” And he’s leaving for greener—meaning, potentially more exciting and more lucrative—work in private equity.

It isn’t just the potential to make more money that is luring Fred away from Lehman. It’s also the transparency of how his new firm makes compensation decisions. The mysterious machinery of bonus decisions has long been a source of frustration on Wall Street. Exactly who gets what and why is often a mystery, fueling rumors of favoritism and envious speculation. It can even be more irksome for junior employees of Wall Street firms, who are often paid in lock-step with their peers regardless of personal or business group performance.

"The private equity guys tell us what they want and we do it," Fred tells Peek.

Indeed, contrary to the impressions given by headlines about bonuses and the gripes of retired bankers, these days Wall Street firms pay-out far less of a percentage of revenues to compensate their professionals. Last year, for instance, Goldman Sachs made news by handing out large bonuses but still managed to shrink its compensation costs to the lowest percentage of profits in recent memory. This is good news for shareholders but bad news from the perspective of the bankers who are doing the work generating those profits.

Perhaps even more troubling for traditional Wall Street firms is that they are losing some of their luster. There is widespread feeling that the last generation of tycoons has passed through the doors of the investment banks and that the next generation will arise elsewhere. A decade ago, investment bankers would describe themselves as the “hunters” of the tribe of finance, relegating the lawyers and others to the job “basket weavers.” But these days many Wall Street firms seem to be playing catch-up in a deal market whose biggest headlines are made by hedge funds and private equity firms, often serving in what are considered decidedly secondary roles by providing financing and bridge equity to deals cut by the new class of hunters.

“Whereas in the old days the investment bankers were the creative masterminds behind financial transactions, these days the intellectual baton has passed to the firms that are taking everlarger companies private at an accelerating pace. Investment bankers view themselves as necessary but not very exciting ingredients in the mix,” Peek writes.

Wall Street Adjusts as Top Hires Flee [New York Sun]

Editor's note: Joe is still memorializing (at least for a week), so the remaining DB staff will be filling his role this week. Welcome back to work (as dreary as that sounds)!

NBC Programming Chief Kevin Reilly to Leave as Ratings Slide [Wall Street Journal]
NBC is experiencing a sunset of sorts, stripping executives from its studio (and not just 60). The network, which was #1 in 2005, is now a distant 4th behind Fox, CBS and ABC, and is firing top programming executive Kevin Reilly, to be replaced with “The Office” producer Ben Silverman. NBC looks to stay in its current position (being the anchor in the 4x400 is a good thing, right?) with its fall lineup of a new 8-hour long “The Office” running over three days to compete with “American Idol,” a remake of the 1976 show “The Bionic Woman,” a show about a man who can travel through time and get laid in multiple eras called “Journeyman” and “Chuck” a comedy about a skinny, nerdy shot-put champion with super strength (and the 3rd planned “Heroes” spin-off).

Treasury Yields Could Throw a Curve [Wall Street Journal]
The Treasury yield curve is slowly but surely un-inverting itself (damning the formerly hot pick-up line, "I want to invert you like the yield curve"), with yields on the 10-year note rising to 4.86% last week, surpassing the yield on the 2-year note. The yield on the 10-year note has for the most part stayed below 5% since 2002, save for a 4 month span last spring and summer when it climbed to 5.25%.

British Airways Shares Rise on Takeover Speculation [Bloomberg]
Shares of British Airways bucked a negative trend (down over 8% this year) and rose almost 5% by noon in London, fueled by speculation that Europe’s third-largest airline may be the target of a PE takeover bid. Investors are also following Goldman, which upped its stake of British Airways from 3% to over 5% last week. No word on what happens if Goldman jumps off a bridge.

Tishman, Lehman May Buy Archstone for $12 Billion [Bloomberg]
Tishman Speyer Properties LP and Lehman Brothers are looking for a sweet pad, and may end up locking down US apartment developer Archstone-Smith Trust for just a shade over $12bn, which would be a prohibitive rent for most. Tishman would assume about $8bn in debt if the deal were to happen, bringing the total deal value to over $20bn. Archstone-Smith is the 2nd largest US apartment REIT (and the largest publicly traded apartment owner in Manhattan) to Sam Zell’s Equity Residential (of course Blackstone bought Zell’s EOP Trust for a whopping $39bn in February).

RBS group raises the stakes in ABN Amro bidding [MarketWatch]
RBS pumped up its cash offer for ABN Amro by 11% to bring its total bid with stock to over $95bn (that’s US dollars or over 71bn euros), surpassing rival Barclay’s offer by almost 4 euros per ABN share in value. The proposed deal would instigate an orgy of bank asset sharing, with RBS paying over 27bn euros for ABN's North American, Asian, Latin American (except Brazil), investment and corporate banking arms. Fortis, for 24bn euros, would get ABN’s Dutch, private-client and asset-management businesses. Santander would get the remaining scraps (the Brazilian and Italian divisions) for almost 20 billion euros.

We'll be keeping it real with trader Andrew through the holiday. Everyone regroup here Tuesday morning for some Goldman Sachs, Third Point, and what promises to be another great story about Dow Jones. Make good choices. Dealbreaker out.

$$$ The Plight of the Rich: No Lobsters, No Ferraris, No Butlers, No Oceanfront [Curbed]

$$$ That Gold Bikini: Star Wars' Galactic Dollars [Forbes]

$$$ Memorial Day Through Labor Day Outlook? That Depends On Today [Seeking Alpha]

$$$ Any older women out there? Memorial weekend is long and the market is closed Monday so I have 4 days to get wild. Hope to hear from you soon. [Craiglist]

Or does it? Steve Case keeps apologizing for the whole AOL/Time Waner debacle, this time in a graudation speech at the Ross School of Business at the University of Michigan in Ann Arbor (watch here).

Contrast that speech with this blast from the past (just look at the movies that are "Now Playing" in the first few seconds):

For New M.B.A.’s, Diplomas and Deal Wisdom [DealBook]

Things that had no effect on Apple's share price: Jobs's backdating, the iPhone-Engadget blooper, Portnoy fucking (an) Apple.

Joya Williams, a former secretary for Coca-Cola, was sentenced to 8 years in prison by a federal judge for conspiring to sell Coca-Cola trade secrets to Pepsi for $1.5mm. The judge did the nation a great service by issuing a harsher sentence than the one federal prosecutors recommended because Williams is that much of a threat to society.

Imagine a world in which there is no discernable difference between cola products. I don't know about you, but that's a place that makes me feel naked, alone and unsafe (like the 19th floor of 277 Park Avenue). Williams made a crucial mistake by not trying to pinch investors for a few million, or not getting elected to the the board before leaking info to another company. At least then she could've settled with the SEC without admitting any wrongdoing, and probably been fired while still collecting a nice severance and minimum end of year bonuses.

We're not saying Williams is a saint or condoning her actions, but 8 years?! Of all the corporate swindles in all the world... the poor black secretary is the real enemy?

Ex-Coke Worker Sentenced in Secrets Case [AOL Money & Finance]

What is Tim Sykes saying to the camera?

Breaking Views reports that, despite robust markets, boom in mergers/buyouts and astronomical investment-banking earnings in the first quarter, Goldman Sachs has begun a hiring “pause.” What does this mean for everyone else? Well, given Goldman’s position in the pecking order of things, and the tendency of humans to be sheep, that others will likely follow. BV believes this may even “herald the first industry-wide freeze since the tech meltdown.”

Breaking Views thinks the “pause” stems from Goldman’s realization that by 2008, the firm will drop to $21.10 a share and down to $19.30 the following year. And asking employees to take a cut in bonuses would be out of the question ($100 million to $80 million, are you out of your minds? Why don’t we just ask our top brokers to subsist on food stamps). Some think this is a prudent and necessary step. We think it’s BS, given that we were considering putting in an application down at 85 after the long weekend. Anyone heard anything? You know where to find us. (Crying into a gossamer pillow over no longer having a ticket out of this dump, that's where).

Freezer Burn [Breaking Views]

Just when you thought IBM's strain of red, white, and at least Blue ran a little Deeper, the company refuses to give the brave men and women who fight overseas a chance to succeed in corporate America. IBM faces a $5mm lawsuit for firing Vietnam War veteran James Pacenza for treating his post-traumatic stress disorder. His medicine just happens to be cyber sex. From the BCC:

Mr Pacenza says that seeing his best friend killed in action while they were on patrol in Vietnam in 1969 brought on his post-traumatic stress disorder. He says that his psychological problems have left him addicted to sex, especially adult internet chat rooms. When a fellow employee at IBM told managers that Mr Pacenza was visiting such sites while at work, he was fired. The stated reason was that he visited an internet chat site for a sexual experience after he had previously been warned.

Pacenza's lawyers claim that sex addicts don't get a fair shake, and that the "disease" should be treated like alcoholism (as a great PR move?), or rabies.

US 'sex addict' sues over firing [BBC]

HSBC said today that thanks to a strong showing in Asia, and its commitment to fixing that small $600 million pickle it got itself into, things are looking pretty okay. Chief Executive Michael Geoghegan gave a somewhat convincing speech to shareholders this morning:

Some commentators have asked, 'Should we be in this business?' We paid $14.8 billion for this business in 2003, and it has already generated profits for your group totaling over $9 billion. In my book, this is a good business for us.

[Wouldn't a simple "yes" have been a bit more believable? "For sure" seems out of the question, and "Definitely" just sounds silly but next time, we'd appreciate a little more enthusiasm.]

The bank noted that the subprime situation did not “deteriorate” during the first months of 2007 and that “underlying credit impairment experience in the UK bank was broadly in line with the previous quarter.”

Putting a damper on Geoghegan’s excitement is Deutsche Bank AG analyst Krista Yue, who said, of the “non deterioration”: “That’s not fully encouraging. There could be redefaults on the restructured loans, which will hit profitability. Our concern is the duration in which the deteriorations will persist.” [Germans, always with their nay saying and negativity, their god damn negativity].

Anyway. HSBC also announced that in Hong Kong, thriving equity markets boosted investment-related fees and brokering income, and in Latin America, revenue growth is “encouraging.” Private banking delivered “excellent results.”

On a more personal note, today marks the first anniversary of HSBC’s Chairman Stephen Green-Chief Executive Geoghegan management of the bank. We here at DealBreaker always knew they could do it. Call-girls and ice cream sandwiches on us.

In other news, high returns in the exploitative banking sector have boosted Satan’s Portfolio by 25 percent this quarter.

HSBC says makes good start to 2007 [Reuters]
Subprime troubles contained, HSBC says [Buffalo News]

The Guinness world record for sleep deprivation has been broken and to the complete shock of anyone who's worked in IB, the record breaker is not an analyst. Some random guy from Cornwall (Tony Wright) managed to stay awake for 11 days and nights. His recount, from the BBC:

During the record attempt, Mr Wright noticed his speech becoming incomprehensible at times and colours appearing very bright [now imagine he was trying to use Excel, perform line edits in pitchbooks or re-size bar graphs]. A webcam and CCTV cameras monitored him 24-hours a day [more impartial, less vindictive, than a pregnant staffer]. He argues that parts of the human brain require a different amount of sleep [the part of the brain that spreads industry comparables needs none] and it is possible to stay awake and remain functional for long periods. He said the hardest part was staying in one place - Penzance's Studio Bar [Goldman's London office] - in order to prove that he was not popping out for a sleep.

We think if the record for sleep deprivation isn't held by an analyst, the banks really aren't trying hard enough. I once has the misfortune of witnessing an analyst in my old group pull 3 all-nighters in a row, with only a few hours of sleep several nights prior. You didn't want to be near this guy on Friday afternoon of that week, trust me. My personal worst week was without irony called "Project Pleasure" (because it involved amusement parks - becausee that's somehow Tech, Media, or Telecom related) and involved several nights of going home, taking a one hour nap and showering, with the added bonus of getting yelled at by the staffer for leaving the bank and being unresponsive for 2 hours from 5am-7am.

Share your horror stories (or email: tips at dealbreaker dot com).

Man claims new sleepless record [BBC]

How do you trick a bunch of hedge fund managers into taking time out of their busy days (/nights) to care about children with cancer? Offer them the promise of tips on how they can make more money (and get a red wine stain out of a white shirt). At the 12th annual Ira W. Sohn Investment Research Conference this week, almost 1,000 hedgies were horses to the stock tip-carrot, cramming into an auditorium, all in the name of investment ideas pediatric cancer and other childhood diseases.

Performing sets at this year’s event were Steve Mandel (Lone Pine Capital); Dinakar Singh (TPG-Axon Capital); David Einhorn (Greenlight Capital); William Ackman (Pershing Square Capital Management); James Chanos (Kynikos Associates); and Larry Robbins (Glenview Capital Management). Here’s a rundown of their material:

Robbins gave a power point presentation and included a slide called “Honey, I LBO’d the kids.” He also told a joke about Blackstone buying Kohlberg Kravis Roberts. A solid, if safe, routine.

Mandel said that he’s into Google, because “paid search is still in its early innings.” (We’ve got to agree with him on this one, considering what we know about the Big G’s plans to take over all of our lives via ads/algorithms in 1-2).

Wilbur Ross urged the crowd to bet for coal, which he believes will have a larger role in the electricity generation by the fourth quarter of 2007. His strong opinions on the environmental killer are bolstered by Ross’s contention that coal can be made clean and skepticism over Congress doing anything punitive. Ross also told a cute one about his wife accusing him of trying to reinvent the 19th century. Those Rosses, so adorable with their bon mots.

A rumor that bananas carry viruses similar to SARS initially spread by text messages is causing a drastic price slump in the Hainan region of China, costing local banana producers over $2.6mm a day. China's Agricultural Ministry claims that bananas do not carry SARS, and that the malady is instead only caused by the practice of Falun Gong. Perhaps the Comunist Party of China's hold on ridiculous propaganda is weakening. The free dissemination of ridiculous ideas is the cornerstone of democracy, after all. More, from the BBC:

Hainan bananas had already been subject to rumours they caused cancer, after the banana plantations were hit by blight earlier this year. The banana fears come amid international concerns over tainted Chinese exports, including allegations of poisons in pet food and toothpaste.

Killer banana rumour grips China [BBC]

OMX shares surge on Nasdaq takeover offer; analysts broadly positive (Forbes)
The stock exchange mating dance has resulted in yet another hook-up as the NASDAQ will purchase Nordic stock exchange OMX for $3.7 billion. The cash and stock deal gives OMX shareholders a handsome 19% premium over its last closing price. Generally analysts were positive on the deal, and the Swedish government gave no indication that it would block the deal, which seems a bit surprising.

Profit slides as Gap reinvents itself (San Francisco Chronicle)
It can be a little weird to think that there was a time when The Gap was cool. Really, there was. Yeah, we know it's hard to believe, and maybe you never thought it was cool, but at one point that brand had real value. So the company doesn't even know what the company's main demographic is. The company's profits are sliding hard in the face of weak same-store sales numbers and a disastrous jaunt into clothes for middle-aged women. But, seriously, this time it's turning itself around.

Coca-Cola Buys Maker of Vitaminwater for $4.1 Billion (Bloomberg)
Vitaminwater and Smartwater are downright foul drinks, if you ask us, but apparently Coke likes the taste. Or maybe it's just enamored with 50 Cent, who endorses the stuff. Either way, Coke is buying out the parent company that makes these drinks, Glaceau, for $4.1 billion. Who knew it had come to be worth so much? A billion just isn't as big as it used to be, is it? The goal of the buy is to expand Coke's reach into non-carbonated beverages. Instead of focusing on non-carbonation, how about focusing on drinks without sugar? It's not so gross. The pure, Coke-made green tea, which is sold in Japan and at Asian grocers here is awesome. Meanwhile, you can be drinking all kinds of non-carbonated "sports drinks", but if you're just pouring sugar water down you're throat, then you're not doing yourself any favors.

More Than Ever, It Pays to Be the Top Executive (NYT)
The Times is so concerned with income inequality, that it even feels sorry for non-CEO c-level executives, whose pay lags far behind their boss in the big office. It's become routine for the chief to make 4x (or more) what the next highest paid person makes at the company. Seriously, this article is a trip the way it talks about non-CEOs getting "left behind". What the Times fails to note is that the high prize at the top is a reflection of tournament theory. It's not that the CEO is "worth" 4x what the CFO is worth, but that the company structures their incentives so that everyone, no matter how high up, will still work hard as hell to have their shot at the brassiest of brass rings, even though their likelihood of success is low.

$$$ Meet The Mets: Merrill Takes Stake In Wilpon Hedge Fund [FINalternatives]

$$$ Fwd: A Suitable Girl [The Leveraged Sell-Out]

$$$ A private equity matchmaker [MarketWatch]

$$$ Visitor looking for some light banker fun [Craigslist]

The FASB is working on ditching the rule that require companies to prove that hedges are for risk mitigation rather than just a speculative play for pure gains. Still no word on whether a company's "future" is an acceptable commodity to hedge. Is this the beginning of a new era in corporate liquid asset management? From CFO.com:

Under the fair-value approach being developed, FASB would shed the requirement that derivatives buyers assess the hedge and test its effectiveness, while continuing to require companies to mark their hedges to market. The rest of the formula would work the same as it does now: for fair-value hedges, the derivative and hedged item would be measured at fair value and the changes in value recognized in earnings. For cash-flow hedges, the derivative would be measured at fair-value, with the effective portion of the gain or loss reported in other comprehensive income and the ineffective portion reported in earnings.

Hedge Accounting: a Matchless Future? [CFO.com]

A long time ago NYT writer Austan Goolsbee had a thing for Warren Buffett, and for Berkshire Hathaway. In a “moment of weakness,” he bought one Class B share of BK. Oh, what a beautiful, moving, fulfilling day that was. One for the books, as they say. Why did he do it? Because he believed in Mr. Buffett and in Berkshire Hathaway, a “mutual fund but without the bad incentives.” Buffett was this great, wonderful man in Goolsbee’s life, who didn’t do things at the expense of shareholders. If one person, a God among plebes had the ability to beat the market, it was the beacon of light shining bright from Omaha. But you know how these things go: to shit.

Well, I still own that share, but it hasn’t worked out as well as I had hoped. My share has underperformed the S.& P. 500 since I have owned it. My colleagues have mocked me incessantly, but I have remained a closet romantic, hoping that Mr. Buffett would renew his secret formula and prove my colleagues wrong.

From there, it’s downhill, and fast. One minute you’re picking out curtains, the next it’s, “No, those in fact are not my underwear, and I’d be interested, thrilled even to know who they belong to.”

Then I found out that the 76-year-old Mr. Buffett had asked for applications from people wanting to become his successor. Many hundreds applied. So at the annual shareholders’ meeting in Omaha this month, he announced his new search strategy: rather than decide from old-style résumés and interviews, he planned to choose three or four top candidates and then give each $5 billion or so to manage and see how they do. The winner gets the job.

When I heard about this, the romance died. For all of Mr. Buffett’s reputation as the ultimate nonmutual fund, he may have just fallen into one of the biggest mutual fund traps of all — forgetting how incentives affect fund managers’ behavior.

Then it gets ugly. Really ugly. Don ugly.

On the show, Donald Trump would fire someone from the team that earned less money, whether $1 less or $1 million less. That gave the contestants an incentive to do crazy things for the camera. But it’s no way to pick an investment manager.

The whole benefit of Berkshire Hathaway was that Warren Buffett’s investment choices weren’t driven by the kinds of crass manager-level incentives that seem to pervade the mutual fund business. By announcing he intends to pick a manager through a contest, Mr. Buffett will have transformed the ultimate nonmutual fund into something very much like a mutual fund. It’s a move straight from the playbook of The Donald himself.

In a show of support, Carney even considered withdrawing his application for a second, to send a message to Buffett that this is not how you treat people you love. (But then he remembered his boyhood dream of living in Omaha and decided against it. Can't really blame him, either).

‘The Apprentice: Omaha Edition,’ Starring Warren Buffett [NYT]

Home Depot shareholders, who rejected proposals to more closely regulate executive pay and split the CEO and chairman positions. The directors up for election, however, were approved by a landslide. From the Wall Street Journal:

Chairman and Chief Executive Frank Blake said directors were each elected with at least 67% of the votes cast by shareholders, based on preliminary vote totals. Nine shareholder proposals were defeated, with the one getting the most support -- an effort to require the board seek shareholder approval of extraordinary retirement benefits for executives in the future -- garnering 44% of votes cast.

Despite affirming the doom and gloom scenario for this year (the low end of a projected 4%-9% decline in earnings with flat sales), Home Depot insists that its fortunes will change any minute now (minus any more unseasonably cold Aprils). In fact, 5% sales growth and 10% earnings growth is just around the corner, according to management (waiting for the ink to dry on those retirement packages that don't have to be approved). How will the company achieve such stellar growth after such a long period of stagnation? Blake responds:

It's gonna take money, a whole lotta spending money. It's gonne take plenty of money, to do it right. It's also gonna take time. A whole lot of precious time. It's gonna take patience and time, to do it, to do it, to do it, to do it, to do it, to do it right.

Blake didn't give much detail here. In fact, the new proposition places Home Depot firmly in Phase 2 of the official Underpants Gnome business plan (Phase 1: Collect Underpants, Phase 2: [silence], Phase 3: Profit!).

Home Depot Shareholders Elect Directors, Reject Pay Proposals [Wall Street Journal]

On Monday, Pali Research said Rupert Murdoch would “walk away” from his $5 billion bid for Dow Jones after not winning the support of the Bancroft family in a measly three weeks. Analyst Jeff Greenfield wrote in a note to clients, “We suspect News Corp. will officially announce the termination of its acquisition announcement over the course of the next couple of weeks and leave Dow Jones to fend for itself,” a conclusion he came to not by inside information or anything but just, you know, a feeling he got. All over in less than a month. Just like that.

Today Deal Journal throws a wrench in the “Eh, I’m Bored With This, says Rupert” theory with a report by Citigroup analyst William Bird. According to Bird, there’s a 65% chance that Murdoch will raise his bid to $65 and it will be accepted. We’re pretty sick of this tale, as are, it would seem, many of you, but to anyone out there who hasn’t lost interest, tell us what you think. Or don’t. Carney’ll be around soon enough with a 10,000-word dissertation of his own.

Could 65 be the Magic Number for Dow Jones? [Deal Journal]
News Corp. May `Walk Away' From Dow Jones, Pali Says [Bloomberg]

Alpha Magazine’s hedge fund rankings are in and the banks have faired quite well. JP Morgan and Goldman took 1 and 2 (despite the latter’s 6% loss last year), with $33 billion and $32.5 billion in total capital as of December 31. In third and fourth were Bridgewater Associates and DE Shaw, who both had over $30 billion. Citigroup moved up a respectable 32 places to 13th, from its previous spot at 45. Morgan Stanley clocked in at embarrassing 53, considering all the hedge funds it bought last year.

Everyone’s favorite quant fund, Renaissance Technologies was ranked in 6th place, with $26 billion in assets. Somewhere, David Leonhardt has worked himself into an apoplectic shock and plotting to send pipe bombs to Alpha headquarters.

As a side note, we’d like to thank Financial News for referring to Amaranth as a "notable absence" from the list.

Banks top hedge fund rankings [Financial News]

From DealBook:

Topps, the baseball card maker, said on Thursday that it has received a new, unsolicited offer from Upper Deck, as its rival hopes to best a rival bid by two private equity firms. Topps said that Upper Deck has offered $10.75 a share, which it will consider. The firms that Topps has already agreed to sell itself to for $9.75 a share — Madison Dearborn Partners and Tornante, an investment company run by Michael Eisner — have agreed to let the card company explore the offer.

Topps is appeasing a couple of dissident board members who were previously worried that Topps wasn't exploring the highest offer in agreeing to the PE bid. Other Topps board members are worried that Upper Deck may not be able to muster the financing for its most recent proposal.

Upper Deck Enters Fray for Topps [DealBook]

Yesterday, in a Chicago courtroom, prosecutors trying to take down press guy Conrad Black for racketeering brought an email into evidence that they believe stacks the cards against Mr. Black, sent from him to Donald Trump, prior to Hollinger’s 2003 shareholders’ meeting:

"Dear Donald", began Lord Black. "Could I ask a rather esoteric favour?" He continued: "Some of the [investing] institutions are engaging in an insurrection and I plan on a forceful rebuttal... If you were able to make a cameo appearance and put in a supportive word, I'm sure it would have an impact."

Does this prove guilt? Who knows. What we do know: Black got this great idea from close personal friend Dennis Kozlowski, who brought in Ken Lay (may he rest in peace…if he’s really dead...) to speak on his behalf when things were getting dicey with Tyco shareholders. (Koz had ripped it off from Stalin, who tried a similar tactic on the Soviets with the glowing recommendation of colleague Adolf Hitler).

Trial hears how Black played Trump card to mollify angry investors [The Guardian]

[Apparently the Don obliged and gave such a beautiful account of Black’s “tremendous management” that Melania was offered a spot with Hollinger’s board of directors, though in what capacity we’re unsure.]

The old Tang Dynasty (618-907) may have been responsible for starting the practice of foot binding, but the new Tang Dynasty, 3,828 retail outlets strong, is responsible for binding women's feet in pure comfort.

Tang Yu, the chairman of Belle International Holdings, and daughter Tang Ming Wai are the world's latest paper billionaires, controlling 34% ($2.9bn worth) of the leading retailer of ladies footwear in China. Belle began trading yesterday on the Hong Kong exchange. Shares of the company shot up by almost a third, giving Belle a $8.6bn market cap and culminating an IPO process that was 500 times oversubscribed. The IPO brings the number of billionaires in the world closer to that 1,000 mark (from 946 last year).

Even though gals are not as shoe crazy in China (they only purchase 2.3 pairs of shoes a year on the Mainlaind, opposed to the 7.3 pairs a year of furry, pointy or jellied abominations American girls "need"), Belle International does considerable business, offering 300-400 new styles a year in several brands commanding prices up to $260. Spending $260 for shoes in China has to be the equivalent of something insane in the US with the lower cost of everything over there.

Tang Yu is seen as a visionary of sorts, or at least one of the first people who realized that Chinese women would not always be wearing tightly bound ropes and cloths on their feet, kidnapped into villages (most sandals are built in-house) or aborted. Eventually these women, sans deformed lower extremities, would need shoes. Tang got a late start into the shoe game, starting in 1981 at the age of 46. His daughter went to UT-Austin with a degree in business administration, proving that even Longhorns can be billionaires if they just move to China.

Belle IPO Makes Tangs Billionaires [Forbes]

Yesterday a Bancroft clan meeting took place in Boston to discuss various ennui of the whole News Corp. offer-shtick (Will scantily clad pictures of the genetically blessed Murdoch spawn, Lachlan, be included in the deal? Were Rupert and Colonel Sanders separated at birth?). What transpired? As is the norm for this as-exciting-as-backdating story, a whole lot of nothing. Some people (William Cox Jr., his four children, who together control 15% of the family’s total Class B shares) didn’t even show up, though it didn’t stop them from weighing in on the situation. Christopher Bancroft said that he opposes the sale to News Corp., fearing that it would threaten the Journal’s independence. Viewed as an “influential” member of the family, with his two siblings, Bancroft controls roughly one-third of the family’s stake in Dow Jones, and is also one of the company’s sixteen directors.

Yesterday Bancroft said that he’s “open to any situation that benefits the Wall Street Journal and Dow Jones and its shareholders. At the moment, I don’t see anything that would do that.” He added that he has a “strong emotional connection to the paper” and doesn’t want to “pull the rug out” on the staff, who he feels responsible for. Bancroft said that he even sent replies to letters from fifty Journal reporters (it’s unclear if these were actual letters or email letters but the sentiment is duly noted).

Meanwhile, there’s a bunch of unexpressed anger going on within the family. Some—mostly the younger Bancrofts—feel they haven’t truly been included in the decision making process. The youth vote also wants to explore the idea of a third-party investor, as the question as been raised regarding whether or not Dow Jones can survive on its own. And of course there’s the heated debate over who should’ve been covering “Pinch” Sulzberger when he stole home during the Bancroft-Sulzberger Kick-Ball Jamboree of ’89. But that's been brewing for a while, and doesn’t really have much to do with News Corp.

Key Dow Jones Holder Cites Opposition To Murdoch Bid [WSJ]

Latest bonus charts, now with 100% more RBC Capital Markets. The median bonus has risen a full $5k per year since the BonusBumer exercise began - so keep emailing in and pressuring staffers to bump those bonuses! Send info to : tips at dealbreaker dot com.

Renaissance founder James Simons, the 69 year old former MIT and Harvard Math professor, likes to keep things in the academy of higher learning, and higher returns. This noble search for veritas has produced a few years of $1bn+ take home pay, which is some tenure track. Does Simons even dip into the Wall Street talent pool? No, according to his keynote address at the International Association of Financial Engineers annual conference in New York:

We hire physicists, mathematicians, astronomers and computer scientists and they typically know nothing about finance. We haven't hired out of Wall Street at all.

Is this proof that the machines, or at least the cyborg quants (that kid who never talked in your freshman dorm, who you only saw in the hall bathroom, and not to shower) have won? Arguably the most successful hedge fund in the world completely ignores Wall Street (and the US, as most new hiring is done from the international talent pool), and even gets away with asking people to drop their drawers when investing.

Renaissance has varying fee structures but is most known for the 5 and 44 gouging in the $6bn Medallion Fund, which we still think counts as gouging, just on principle, despite the post fee 33% annual returns in the 15 years prior to 2004 (at least according to marketing materials - what happened in 2005 anyway?). We don't begrudge it, we know the returns are still nuts, and if people will pay it, Simons is more than entitled to jack those fees up, but 5 and 44 sets that disturbing precedent for the cocky hedge fund manager who's had a couple of good years (in this market - real tough...) and starts charging an insane amount (then takes a bath in the next market correction). Hedge fund fees are going up across the Street (along with the minimum liquid net worth requirement from $1mm to $2.5mm), making hedge funds even more inaccessible to the mid-level rich, opposed to the very rich.

The 2005 vintage RIEF fund, which consists of 3,000-4,000 mostly long positions on any given day has lower fees, and a reported capacity of $100bn (imagine $5bn a year just in management fees, or at least $2bn+).

Renaissance hedge fund: Only scientists need apply [Reuters]

European Stocks Drop on China Concern; BHP, Volvo Shares Fall (Bloomberg)
Apparently, stocks in Europe fell after Alan Greenspan voiced some concern about the Chinese stock market. Wait, what? Let's repeat that again: Apparently, stocks in Europe fell after Alan Greenspan voiced some concern about the Chinese stock market. So this would mean that Greenspan still has the power to jawbone down markets (for a day at a time), though we probably didn't need Greenspan to tell us that the Chinese stock market looks like a bubble a tad overheated. And so what if Europe declines for a day if it resumes its astounding upward ascent tomorrow? We wonder if all this lip exercise is a way for Greenspan to prove his value to potential consulting clients. After all, who wouldn't hire him if he can just talk and get the markets to move the way he says they will? All that being said, while Europe supposedly heeded Greenspan's warning, China didn't seem to care at all.

Oil Industry Says Biofuel Push May Hurt at Pump (NYT)
One of the big conspiracy theories out there is that the oil companies intentionally don't build refineries so that the price of gas stays inflated. That's never sounded particularly legitimate to us though. Apparently, however, the government's love for ethanol has got some oil companies worried enough to want to postpone plans for building new refineries. At first this sounds like a load of rubbish, and the conspiracy theorists may think that oil companies will look for any excuse not to build new refineries. But, this sounds legitimate to us. After all, if its the policy of the government to reduce fuel consumption by 20% over the next 10 yeas (which it is), why in the world would we need new refineries? That wouldn't make any sense. On the other hand, if this is just bluster and posturing from the government, then maybe our politicians need to realize that words have meaning and consequences.

Congress Calls For New Measures Against China During Wu Visit (Bloomberg)
Not surprisingly, members of Congress are starting to talk protectionism once again, even as Chinese government officials come to the US to talk trade. What's really irritating is when you read stuff about Congressman getting all upset because they don't like the way the Yuan is valued, and you just know that they don't have a clue about how currency markets work or what the implications of an artificially-low Yuan actually are. Instead, they probably just read some articles about it in the Times, or maybe got a call from a union leader and started repeating what they heard.

Lawmakers scramble to act on pump prices (Houston Chronicle)
Meanwhile, some good news for you motorists. We're finally going to get some relief from high gas prices, since Congress has passed a new law that makes price gouging a federal offense. Awesome. Sure, some cynics might wonder how much price gouging really has to do with current high prices at the pump. But that's the great thing about this. Because price gouging is a vague and nebulous concept that can be defined any which way, there's a lot of leeway for politicians and attorneys to go after people if they don't like the price that's being charged. So there you have it, pencil in that roadtrip this summer. It's on.

$$$ In a World Without Blackberry… [Banker's Ball]

$$$ The Most Versatile Investor in the World [Jeff Matthews]

$$$ Good news for any CFA candidates in India who need more study time. [Analyst Forum]

A favored reader e-mails: "US markets (supposedly) reacted negatively to comments made by the ESTEEMED former Fed Chair Alan Greenspan, this time regarding his warning of a dramatic fall for Chinese markets...check this chart and tell me again why we should pay that close attention??"

[click to enlarge. via Gawker]

Houston, we have a problem, we're getting a "PC Load Letter" message here...

From a Reuters story:

Hewlett-Packard said on Wednesday it had won a seven-year technology contract with the U.S. National Aeronautics and Space Administration worth up to $5.6 billion. HP, which competes with Dell and Gateway, said products to be provided to NASA under the "indefinite delivery indefinite quantity" contract include desktops personal computers, workstations and printers.

HP wins $5.6B NASA contract [Reuters via CNN]

Equal opportunity genocide supporter Warren Buffett scored another point for the good guys when he refused to meet with representatives from the Yurok, Karuk and Hoopa Valley Tribes several weeks ago to discuss why he won’t stop savagely murdering salmon. The group was capping off its cross country pilgrimage to Omaha on May 5 with a protest outside of Berkshire Hathaway’s annual shareholder meeting and what they’d hoped (in vain) would be a few minutes to plead their case with the old boy. Unfortunately, Buffett is a hands-on chairman of the board and Buffettstock required his full attention: there were capitalists to pat on the back for making money again this year and hits to be taken from bongs made out of Coke cans and Bic pens.

If he had been able to draw himself away from the fun for one or two secs, Buffs would’ve been able to continue to defend Berkshire Hathaway’s vote against a resolution to reverse the actions of PacifiCorp, a Berkshire subsidiary, that is purportedly endangering the salmon population (and lowering the water quality) in the Northwest. The Yurok, Karuk and Hoopa Valley Tribes were attempting to demand, specifically, the removal of four Klamath damns that PacifiCorp owns, which they believe are responsible for the “decades-long decline of salmon, steelhead and other species on the Klamath River.” One commercial salmon farmer’s wife from the Klamath area, Ronnie Pellegrini, commented that her husband and his colleagues are “barely hanging onto their livelihoods because of the Klamath River crisis.” (The Pellegrini family lost 95% of its income last year).

Buffett has said that there are too many parties involved in the issue for Berkshire Hathaway to take any sort of substantive stand. One protestor (/many) don’t buy it and noted, “It would have been more heroic to agree to meet with the people affected and to put his weight behind a fair and proper solution. We all know the immense influence Buffett has; he personally saved Salomon Bros. from liquidation.” So close and yet, sO far.

Next up on Buffett’s plate to snub: Holocaust survivors. He’s lucky we love those Cavemen so much or we’d probably have a problem with that.

Warren Buffett Refuses to Meet with Klamath River Tribes and Fishermen [Indy Bay]

Or 0.59 tubes of ChapStick, which considering how much this person is going to suck, will be sorely needed. What is the real purchasing power of these bloated analyst bonuses, or at least how long will it take to save up for that Phantom Drophead convertible?

Thanks to Forbes' "Money Meter" you can find out, and compare yourself to semi-significant people (or at least celebrities) in the process. Let's say that the BEST first year analyst at Goldman (aiming high, as he/she (well, it's Goldman, so he) should) wants to buy...Berkshire Hathaway.

The BEST Goldman first year makes $170k a year with that top tier bonus of $110k and a base of $60k. Berkshire Hathaway's market cap is around $170bn, which means that it will only take one million years (in a special version of hell) as the BEST Goldman first year IB analyst to buy Buffet's bloated baby (assuming no taxes, no growth, no premium, and that Buffet consumes the souls of the living (salmon) to stay eternally youthful). This combines the dreams of the BEST first year analyst at Goldman - he gets to be an IB analyst forever, and one day be a super big deal, or at least full of folksy wisdom.

The average American, on the other hand, makes only 22 cents on the dollar of every BEST Goldman first year. Warren Buffet makes almost $600 in this time.

The Money Meter [Forbes]

The bid for OSI Restaurant Partners, owner of the Outback Steakhouse chain, is creeping upwards due to pressure from major OSI institutional investors. Bain Capital and Catterton increased their initial bid of $40 a share ($3.1bn total) to $41.15 a share. This 2.9% bump still isn't entirely satisfactory, as Lord Abbett (the #2 institutional shareholder in OSI) claims that with a decent turnaround the company could carry a valuation in the $50-$60 range, and therefore may reject the most recent bid. Shareholders are voting on the proposal on June 5.

Outback's profit has dropped six quarters in a row due to higher beef and labor costs, gas prices, the housing slump (what?), an unseasonably cold April, global warming, the downward career spiral of Paul Hogan and cosmic rays.

Inexplicably, steaks at the Outback in Manhattan continue to trade in the mid $30 range (who came up with that price point, Sony?), despite industry peers (street meat) trading at a 80% discount. Seriously, it's shocking. They should give you a T-shirt that says, "I could've eaten at Strip House for the same $$" for eating at that place.

Parent of Outback Chain Accepts Higher Bid [New York Times]

Are you completely incapable of making the most basic decisions on your own, including “What should I have for dinner” and “How should I touch myself?” Don’t sweat it—while it’s true, yes, you are not in tune with your own body, some day, in the very near future, none of that will matter, thanks to a little thing called Google, another little thing called invasion of privacy and another little thing called monetizing this racket.

Eric Schmidt, Google’s chief executive, said gathering more personal data was a key way for Google to expand and the company believes that is the logical extension of its stated mission to organise the world’s information.

Asked how Google might look in five years’ time, Mr Schmidt said: “We are very early in the total information we have within Google. The algorithms will get better and we will get better at personalization.

“The goal is to enable Google users to be able to ask the question such as ‘What shall I do tomorrow?’ and ‘What job shall I take?’ ”

Yes, in just a short time, Carney will be able to sit comatose, while a computer tells him that he should indeed bite the bullet and buy 1,000 shares of Vonage (sidebar: is that thing bankrupt yet?), take that last hit of meth and RSVP to his twentieth high school reunion, even though he hasn’t yet secured a date. And Google will make another few billion off of what sounds like it’s shaping up to be quite an evening.

In other news, Yahoo sat around and twiddled its thumbs.

Google’s goal: to organise your daily life [Financial Times]

Donald Steinbrugge, former Managing Director and Head of Institutional Sales for Merrill Lynch Investment Managers (and, previous to that, a founding principal of Andor Capital Management) is starting a consulting and third party marketing firm for hedge funds, called Agecroft Parterns. Agecroft will focus on “large hedge funds located outside the United States looking for distribution in the U.S., large funds in the United States that are looking to increase their penetration into the institutional marketplace, and mid-sized, high-quality funds that are looking to significantly expand their asset base across all types of hedge fund investors.” AP plans to target pension funds, endowments, foundations, insurance companies, institutional consulting firms, hedge fund of funds and large family offices.

Former Merrill Sales Head Launches Hedge Fund Marketing Firm [FINalternatives]

Canceling conference appearances may be the latest pump and dump scheme, or just blowing off JPMorgan. Shares of Palm, maker of wireless handheld devices like the Treo, shot up more than 4% on merger speculation created by CFO Andrew Brown’s “back troubles.” Always a euphemism for an impending takeover or unveiling a new wireless megadevice, Brown used his “back trouble” to get out of speaking at a JPMorgan tech conference in Boston. Palm quickly issued its “No, Seriously” press statement, insisting that Brown was not only experiencing back trouble but was “at the physical therapist right now.”

Palm (Nasdaq: PALM) shares have recoiled slightly, trading down over three quarters of a percent in morning trading.

Skyrocketing Health Costs at Palm, Sort of [WSJ Deal Journal]

Ben Weston, Chief of Merrill's hedge-fund development and management group, left the firm yesterday after two years. Weston primarily directed sales of hedge funds to clients. Merrill plans on further centralizing its hedge fund sales business, after rolling the dedicated fund of fund sales group into Weston's group last year. This follows the string of departures from IB hedge fund related divisions last week - with Bear Stearns losing Leonard Feder, co-head of prime brokerage, and Lehman losing fund of funds CIO Jin Park and senior marketing specialist Anoop Dhakad.

Dow Kim, co-president of the global markets and investment-banking group at Merrill, also left last week, to start a new investment firm.

Merrill Lynch's Ben Weston, Hedge-Fund Chief, Resigns [Bloomberg]

Yesterday, CNBC offered us the unwelcome news that CEOs are going to have to start earning their keep (moral and performance accountability if you can believe that) if they want to stay in the good graces of their shareholders and in their jobs. Today, New York Times columnist (and probable communist) David Leonhardt basically tells us the same thing (for the purpose of this post), vis-a-vis hedge funds: shape up or ship out. But he doesn't just want the average hedge funds to just improve their returns, he wants them to improve them to insanely high, going to happen when small-mouthed-bass-rule-the-earth levels.

Leonhardt is losing sleep over a 2 and 20 and the fact that, "in a good year, a fund's managers bring in stunning amounts of money, and in a bad year, they still do very well." He has a problem with hedge fund people not being served a hard dose of reality (no paychecks for you) when they fail to be anything but flat (like the average have for the last several years). Leonhardt is taking out a campaign against the combination of extraordinary pay and ordinary performance. Raymond T. Dalio, who made $350 million last year after his fund, Bridgewater Associates earned a net return of less than 4% (in '05 and '06) should fry. Goldman, raking in the fees despite its flagship hedge fund losing 6% in 2006 should be torched to the ground.

All of this malarky serves to get Leonhardt riled up and brings him to the conclusion that today's hedge fund managers are only worth it "if they deliver the sort of performance that Mr. Simons has." That's right: you're not worth jack unless your top guy matches Papa Bear's personal $1.7 billion/year. If you can't do that, wind things down and put in an application at Kinkos. (It may be of interest to note that Mr. Leonhardt was an applied mathematics major at Yale, which could account for some, though not all, of his quazy quant ideas).

It seems like everywhere we turn, we're being told to try and be better, to try and be the best, to try and be more like your brother, Noah (stop yelling at me!). We can't speak for Tom Hudson, but, to us, this seems to be asking too much.

Worth a Lot, but Are Hedge Funds Worth It? [NYT]

Alcan: Alcoa takeover bid is inadequate (AP)
Canadian aluminum firm Alcan has rejected Alcoa's takeover bid, calling the offer inadequate. However, this hardly means that it's a done deal. Either Alcoa will come back with a "sweetened" deal, or a third (or forth) party will emerge and get into a bidding war. If nobody else in the industry wants to take a shot, there's always private equity. Apparently Alcoa has actually been interested in the company for two years now, which further suggests that the company won't go quietly into the night. Perhaps Alcan should listen to the Wall St. analyst that thinks it should do the "pac-man" defense and purchase Alcoa. That'd be fun for us.

Tate Says Splenda Costs to Hurt Profit; Shares Fall (Bloomberg)
Apparently, all is not well in the world of Splenda. The company that makes the yellow-packeted stuff has said that increased production costs, legal expenses to defend the patent and, oh yeah, poor sales, will work together to hurt the company's profits. That last one seems sort of thrown in there, but it's probably the most serious issue. After all, a hit isn't much of a hit if people aren't using it as much. But what are people turning to now? Inquiring minds want to know. Seriously, they're not going back to regular old sugar again, are they?

Fannie, Freddie Regulation Advances (WSJ)
An observer from another planet would have a very hard time figuring out what the deal was with Fannie and Freddie. That's a joke. An observer on this planet that follows these things closely would have a similarly hard time. First of all, there's the fact that the companies have never been particularly good about reporting financials, which is usually how you get delisted -- but that's never even been an issue for these guys. Then there's the fact that they're public, for-profit enterprises, that are are basically subsidiaries of the government. What's really odd is that nobody has picked up on the fact that all of their problems is due to their odd quasi-public status, and not in spite of it. If anyone had realized this, it'd be highly unlikely that the government would think the solution is more regulation and oversight, but that's the way things go.

Avandia Concerns Reopen a Wider Debate (WSJ)
On Monday, news that GlaxoSmithKline's diabetes drug Avandia could lead to an increased risk of heart attack dinged the stock pretty bad. Even if the drug isn't pulled from the market, it's likely that patients will seek out alternatives. But, as is always the case with these kinds of things, once a problem is discovered with one drug, people start to hunt for others in the same family that use the same method of action. And there's a host of potent drugs out there and in development that share similar characteristics to Avandia. Definitely worth a read. Meanwhile, if you're interested in reading more, one of our favorite Journal writers, Carl Bialik, "The Numbers Guy", tries to clear up some of the difficult statistics.

$$$ Hedgie to invest in "low-budget, independently-produced films." (We won't say it but you know we want to).

$$$ This Quarter In IPOs [The Stalwart]

$$$ The Buyout Boom, Now Even Boomier [DealBook]

It’s widely known that Blackstone had a powerful real-estate arm. Its $39.2 billion purchase of Equity Office Properties broke records and made headlines for weeks. The firm manages six general real estate funds and two internationally focused real estate funds, and has somewhere in the neighborhood of $20 billion of assets under management for its real estate deals.

But it wasn’t until the most recent filing by Blackstone that we learned how lucrative its real estate business has been in recent months. The firm’s real estate business garnered pre-tax income of $762 million in the first three months of this year alone, according to the prospectus filed with the Securities and Exchange Commission on Monday. That puts it well on pace to soundly beat the $902.7 million of income from real estate last year.

Blackstone doesn’t disclose the details of this huge increase in income but we suspect a good deal of it comes from flipping EOP properties. At the time the deal was announced, there was lots of tut-tutting from those who simply could not believe the gods of finance would not punish the hubris of Blackstone for daring to take on such a huge deal. Isn’t that the lesson of all of Greek tragedy?

Blackstone’s Jon Gray, who orchestrated the EOP buyout, looks to be following the path of a writer from another era who told us: fortune favors the bold.

Are you a CEO (who found his/her way over here from SuperMogul)? If so, drop the blow, dead hooker and, for those of you driving, the bottle of Jack. Your shareholders may try and use these things against you! CNBC reports that—in addition to Forbes.com employees, research analysts, and Kamikaze pilots—turnover among chief execs is high, especially the compulsory, by vote of the board kind. In a study by Booz Allen, it was found that from 1995-2006, the annual turnover of CEOs grew 59%; the number of CEOs who left their companies as a result of conflicts with the board increased from 2 to 11% during that period. In ’95, only one in eight CEOs were forced to leave office, versus last year’s one in three.

And, to add insult to injury: while in ’95 underperforming CEOs were permitted to stay in office just as long as their high(er)-performing colleagues, last year, the guy with above average returns was “nearly twice as likely as one delivering below-average returns to remain CEO for more than seven years. In 1995, underperforming CEOs stayed in office as long as their high-performing colleagues.” Those fascist shareholders want moral and performance accountability? What’s next, mandatory monthly drug tests and a bible in the nightstand? This is unconstitutional.

CEO Turnover Remains High As Boards Get Tougher, Survey Says [CNBC.com]

Compensation consultant Johnson Associates projects that trader and IB bonuses will increase up to 15% from last year, although this is slightly less than the 17% growth the securities industry bonus pool experienced last year. Private equity bonus pools are expected to increase 20%+, mostly because of deal volume, but also because they're still scrambling to match or out-pace IB (I know many PE firms were jacking up bonuses at the last minute last summer when partners got wind of projected IB comp for analyst and associate levels). Retail banking incentives are expected to stay relatively flat, with growth in the 0%-5% range.

Wall Street pay headed even higher - study [Reuters]

It’s not enough that people associate Merrill Lynch with branch managers trying to manage your assets out of a kiosk in the mall and throwing in a free 9-hole round at the local par-3 where they can tell you about all the revolutionary Merrill structured products that can return less than t-bills (before fees). Now, nine days sick in the calendar year will get you canned. From Gawker, who for some reason has a Merrill Lynch correspondent:

Attendance Guidelines (Effective May 14, 2007)
A good attendance record and demonstrated reliability is one attribute of successful performance and is expected of all employees. These guidelines are in place to enable managers to address and foster improvement when an attendance problem has been demonstrated.

To hear Steve Schwarzman tell it, Blackstone went to China hoping to win the People's Republic as a client. And accidentally walked away with a $3 billion equity investment. Possibly the best business trip ever.

Ours never worked out quite like that. The trouble would start as soon as we got the the airport. We used to fly out of the country regularly for deals, and inevitably found ourselves subject to the highest level of scrutiny. Buying your ticket at the last minute and travelling alone—or with in a group of young men—apparently is a good way to get coded as a potential terrorist. We’d try to explain to the security personnel that there was no way anyone would implant a bomb in a pair of lace-up Gucci boots or a new pair of Church’s. For some reason this rarely won them over. We got so good at understanding the codes on the tickets that we could predict exactly what level of search we’d have to endure.

We’re not travelling as much these days. But, judging from our emails, a lot of you are. So we’re wondering when was the last time you had to travel for business. Below find a poll asking when you last travelled internationally for business. In the comments section below we hope you’ll share your best and worst tales of international air travel. Or at the very least tell us where you went.

There may be a new way to go down for insider trading on the horizon and it has a wicked cool name: the “Big Boy Letter.” The BBL, Jenny Anderson writes in today’s Times is a way for buyers and sellers to first say “We are all big boys here, so let’s not sue each other” and secondly, “Now that that’s out of the way, who wants to trade on some info the market doesn’t have?”

Simple enough: the Big-Boy protects investors with the off the record information from being sued by the buyer. Problem is, sometimes the stock is sold in the market and proceeds to plummet and that leaves people angry and litigious. (Related: Carney and I have a Big Boy letter that states that I can’t take legal action, should I incur any splinters).

Next month, a Texas hedge fund will argue that Smith Barney (Salomon Smith Barney) took it for a ride vis-à-vis one of these BBLs, when SSB sold in excess of $20 million of World access bonds to Jefferies. Barclays also has an impending trial.

For now, lawyers can’t come to a consensus on the legality of deals using the Big-Boys, and, oddly, the Securities and Exchange Commission has not yet weighed in (is Chris Cox going through some sort of a personal crisis?).

Howard Seife, head of the bankruptcy practice at Chadbourne & Parke, said: “If I am the buyer and I want to resell, it would be prudent for the new seller to enter into a big-boy letter. You are protecting yourself to the new buyer in the chain.”

Others disagree. “The existence of a big-boy letter is not a material fact that needs to be disclosed in connection with a sale,” said Mr. Block from Cadwalader, Wickersham & Taft.

The outcomes of these cases will surely play a pivotal role in the way individuals go about committing crimes in the future. We don’t really have an opinion either way: it’s your life, do what you want. But a name change is in order—“Mature Adult Letter”? “Mutually Beneficial Prosecution Avoidance Letter”? “Jail Isn’t Conducive to Our Lifestyle Letter”? “Arby’s Letter”? You can do better.

Side Deals in a Gray Area [NYT]

We understand that the name is officially being changed to CSI: Wall Street.

[After the jump, read the press release from CBS]

I bumped Lehman, after a slew of emails, comments and a couple of poisoned goldfish really brought Lehman's planned comp package into focus for this year. Still no word on UBS, Credit Suisse, Lazard or SUNTRUST, but plug those holes (or bump those existing bonus numbers) by sending any info to: tips at dealbreaker dot com.

Kevin Ham is one of the world’s most successful “domainers,” or people who have profited from buying up internet domain names. His websites get over 30 million hits a day and are worth over $300mm in aggregate. Kevin is also a Christian, and wants you to know he’s a Christian. Kevin is so Christian, that many of his most valuable domain names are rooted in Christian mythology (god.com, satan.com, christianrock.com (Jars of Clay is mythically bad)). Kevin is so Christian that he steers most business conversations back to the Bible. Kevin is so Christian that he’s made a fortune through teaming up with the government of Cameroon to exploit the “cm” instead of “com” typo and registered most of his domain names using registration spamming software and by exploiting a free registration loophole. It is god’s work, after all. From CNN Money:

Working mostly as a solo operator, Ham has looked for every opening and exploited every angle -- even inventing a few of his own -- to expand his enterprise. Early on, he wrote software to snag expiring names on the cheap. He was one of the first to take advantage of a loophole that allows people to register a name and return it without cost after a free trial, on occasion grabbing hundreds of thousands of names in one swoop.

And what few people know is that he's also the man behind the domain world's latest scheme: profiting from traffic generated by the millions of people who mistakenly type ".cm" instead of ".com" at the end of a domain name.
…
The difference is that hardly any .cm names are registered, and the letters are just one keyboard slip away from .com, the mother lode of all domains. Ham landed connections to the Cameroon government and flew in his people to reroute the traffic. And if he gets his way, Colombia (.co), Oman (.om), Niger (.ne), and Ethiopia (.et) will be his as well.

The man who owns the Internet [CNN Money]

Just because some of Blackstone’s managed funds had a tougher first quarter this year than last year doesn’t mean the private equity firm has slowed down its growth. The most recent filing suggests that the firm’s assets under management grew by nearly $10 billion between March 1 and May 1, from $78.7 billion to $88.4 billion. That would mean that Blackstone tacked on an additional $163,934,426.23 each day. If the last twenty-one days have followed the pattern, Blackstone would now have over $90 billion under management.

Despite the lower rate of return earned by its funds of funds, one of its hedge funds and its mutual funds, the alternative asset fund management business is clearly driving this growth of assets under management. The bulk of the additional $9.7 billion came from this area—which grew from $29.9 billion on March 1 to $35.3 billion on May 1.

Blackstone has also been adding finance professionals, tacking on five more “investment and advisory professionals” since March. The total headcount of finance professionals now stands at 340. With $88.4 billion under management, that breaks down to around $260 million per man or woman.

Hank Paulson is getting antsy. He's been in DC for almost a year now and the old boy doesn't have much to show for it. When Paulson left Goldman Sachs, he planned on using his Hammer-like deal-making skills to get stuff (Social Security, Doha global trade talks, China) done. But, according the Wall Street Journal, the same qualities that made Paulson an efficient higher up at Goldman, and allowed him to outs Jon Corzine from the company (while JSC was away with his family for Christmas in Colorado)--impatience, forcefulness, an insistence on interrupting people and monopolizing conversations--just make him a dick at the Treasury, and a frustrated one at that.

Kirk “Rifle Right” Kerkorian, CEO of Tracinda Corp, wants to throw one more jab at Steve Wynn and the Las Vegas luxury market before becoming a nonagenarian. Tracinda released a statement yesterday that says the company intends to make a bid for MGM’s Bellagio and CityCenter properties.

Kerkorian is going to turn ninety on June 6. He was born the day after “Army registration day,” or the day conscription for World War I began in the US. After failing to meet Army registration requirements in the maternity ward as a one-day old, Kerkorian went on to drop out of school in the 8th grade, become an amateur boxer, then a fighter pilot, then (just like that) the father of the megaresort with a net worth of $15bn.

Kerkorian has been vying with Steve Wynn for dominance of the Las Vegas luxury market for decades, in a battle that previously culminated in MGM’s purchase of Wynn’s Mirage property. Oh, that’s right, Kerkorian owns 56% of MGM, and virtually controls the company through his majority stake. Essentially he’s making a bid for his own assets, and causing the stock of the public company to skyrocket in price. The Tracinda filing sent MGM shares (NYSE: MGM) from almost $63 to almost $80 this morning. This means that in the last 12 hours, Kerkorian’s personal MGM stock has increased over $2.5bn in value. Kerkorian gets to, in one analyst’s words, “cherry-pick the best assets and growth from the public company” and reshuffle an asset pool, concentrating luxury properties in the private company. Some view this as problematic, from the Wall Street Journal:

Mr. Kerkorian controls the company through his majority stake. He is close to both the company's board and its management. Those relationships could raise questions about how minority shareholders might fare in any deal that rejiggers the company's assets. Analysts speculated that Mr. Kerkorian might want to pay cash or swap his MGM Mirage stock for the Bellagio and CityCenter.

Kerkorian Pushes MGM Shake-Up With Offer for Two Prized Assets [Wall Street Journal]

Blackstone’s fund management business is growing but its performance slipped a bit over the past year, the firm’s most recent filing with the Securities and Exchange Commission suggests. The revised IPO prospectus filed by Blackstone on Monday said the firm had $35.3 billion in its funds of hedge funds and hedge funds, nearly $6 billion more than it said it had in March. But it also shows modestly lower returns in several categories of funds.

The new prospectus provides a rare glimpse into something like a quarterly earnings statement for Blackstone by revealing changes in the past few months. Until now, only Blackstone the wealthy individual and institutional investors in the firm's funds have received reports on their investments. But the public has not been privy to such detailed information. After the IPO, Blackstone will have to begin filing quarterly reports with the SEC.

The new information came to light because the updated prospectus dates uses different dates to measure the performance of the funds than the earlier prospectus. The original prospectus measured annual returns from January 2006 through December 2006. The new prospectus measures the returns from April 2006 through March 2007. This allows the public to see how the performance of the funds has changed and may even provide a glimpse at their prospects. In most areas, the returns have declined. This suggests that returns in the quarter beginning January 2007 were lower than returns from the first quarter of the prior year.

[Details on the changing returns of Blackstone's funds after the jump.]

Lowe's profit slump weighs on retailers (MarketWatch)
Like its archrival Home Depot, Lowe's reported punk earnings in the latest quarter. Both companies are pretty sensitive to the housing economy, so given everything else, it's no surprise that they're slumping. Also like Home Depot, the company made sure to spread the blame around so that things didn't look too bad It noted that comparisons were tough -- not because of bad weather this quarter, though it was -- but because of bad weather in the past (Hurricane Katrina), and the subsequent rebuilding efforts. But really, it's all about the housing market, regardless of what they say.

CBS Does Indeed Scoop Up Wallstrip (NewTeeVee)
As was rumored early last week, CBS has in fact purchased Wallstrip. And it sounds like the initial reported price tag of about $5 million was more or less correct. Apparently, according to Howard Lindzon, there were actually multiple bidders, but CBS was selected because it will offer the best opportunity for the show's employees, including, most notably, Lindsay Campbell. That's probably a wise move for her, since with A.J. not doing so well, she probably won't be reprised very much as his college English prof. That and the Sopranos is ending soon.

China Appeals to US to Preserve Ties (AP)
A delegation of Chinese trade reps is here, hoping to convince the US that despite the trade deficit and all that, it should not impose any kind of trade barriers on the country. There's been a lot of talk about resurgent protectionism lately, but it's hard to see it actually happening, at least at the moment. Granted, the whole poisonous food thing didn't help. And the fact that neither the Congress nor the President are really into free trade, like Clinton was, makes things even worse. But it would probably be too much effort to substantially throw up any kind of meaningful limits on trade.

Phone Company Deal Irks Would-Be Bidders (NYT)
Some questions are being raised about the bidding process in the Alltel buyout, well, actually, there doesn't appear to have been much of a bidding process. Other PE firms are complaining that they thought they had longer to submit a bid, and they're angry that there's no "go shop" provision included in this one. It's a little early to see how shareholders will react, though you can imagine they'll be upset if it seems that they left money on the table.

China Investigates Contaminated Toothpaste (NYT)
Contaminated pig feed is one thing. It's bad, but people won't freak out about it too much, because it only effects on the second degree -- there's a pig between humans and the food, thank god. Contaminated toothpaste seems a bit more serious. The Chinese government, which already has its hands full, does not need to be examining toothpaste right now, but unfortunately it has to. So far, there's only evidence that it was exported to the Dominican Republic, where authorities say they've found chemicals that are used in antifreeze. The FDA says there's no evidence of that here (yet), but that it's taking a hard look.

$$$ Carlyle employees wear $3,500 bags and "love to consume." [DealBook]

$$$ Mark Cuban "feels sorry" for Donald Trump. [Blog Maverick]

$$$ Motivated Prostitutes [Long or Short Capital]

Hell is not a place that is usually invoked in discussing corporate mergers and acquisitions. But it has come up frequently in discussions of the unwinding merger of Daimler-Benz and Chrysler. When news of the sale of the Chrysler unit to a private equity fund broke, The Wall Street Journal’s DealBook compared the 1999 merger to the “Deals from Hell” discussed in a book of that title from Robert Bruner, dean of the Darden School of Business at the University of Virginia. The phrase also made it into the title of a Newsweek article by business columnist Allan Sloan.

"This is definitely in the hunt for being one of the all-time deals from hell," said Bruner tells Sloan.

One of the inspirations for all this is the name of the private equity firm acquiring Chrysler—Cerebus. The firm takes its name from the three-headed dog said to guard the gates of Hades in Greek and Roman mythology. Another, however, seems to be the hellish negative return the Germans appear to have received for their purchase of Chrysler. The company then known as Daimler-Benz paid $36 billion to acquire the company, and took on enormous unfunded health care and pension costs—usually called “legacy costs”—as part of the deal. Last week Daimler cut a deal in which it will wind up paying the new owners to take it off their hands.

We already know that there’s an extremely high turn-over rate at Forbes.com because of the “sweatshop”-like conditions, but would somebody like to explain the attrition rate of 50% among analysts at Citigroup, Credit Suisse, Goldman Sachs, Lehman Brothers, Merrill Lynch and Morgan Stanley? Surely Dick Fuld isn’t making anyone stitch t-shirts by hand for 16-hours a day as part of his partnership with the Gap. (He knows plenty of less uppity kids in Vietnam).

So what then? Institutional Investor reports that 47-62% of analysts at those firms, who published research in 2003, dropped all coverage by 2006. There was no indication of who switched to other firms, went buyside or retired. The study noted surprise at such steep attrition rates and attributed the highest factors to “commission compression, the sell-side business model changes brought on by the Global Research Settlement, and increased competition for research from the buy-side.” But we want more details—did associates peace because their jobs sucked? Because Lloyd Blankfein was/is too palsy with his employees? Because they wanted to be shepherds? Let’s hear if from the horse(s)' mouth(s).

50% Of Analysts Dropped Out Since '03 [Daily ii]

The Backstreet Boys are coming to NYC, performing live at the Supreme Court of New York County. The still-wishing-they-were-pubescent outfit claims boy band impresario Lou Pearlman and Trans Continental Records (TCR) still owe around $4mm to cover subsequent career mistakes of individual group members. The group maybe should have realized they were getting a bum deal when they paid Lou over $29mm in 2000 to be freed from future contractual obligations in the first place. The current suit was originally filed in Florida but has since moved to New York because of the humidity.

Unfortunately, Lou Pearlman and TCR are bankrupt, and Lou has some legal troubles of his own after conducting one of the most lucrative (documented) Ponzi schemes ever. Pearlman used his Trans Continential Airlines aircraft leasing company as a front to set up a falsely FDIC certified savings program that promised a 6-8% return. Now, everyone is suing the hyper-extended LP (including a NYC dentist, and 1,800 others), and his assets are in liquidation (including his Rolls, with a steering column that gave Justin Timberlake just enough head room). He's since left the country and no one can find the guy (authorities thought he was here until the last minute).

People (admit it) apparently bought 86,000 Backstreet Boy albums last year.

Backstreet Boys still got it goin' on [TampaBay.com]

This much is certain. One way or another, the $5 billion offer from News Corp to buy the Dow Jones company will not be outstanding forever. At some point News Corp will offer more money for the company, the controlling shareholders will accept an offer, a new bidder will emerge or News Corp will withdraw its offer. Jeff Greenfield, an analyst at Pali Research, is telling his firm’s clients that the last possibility—a withdrawal of the offer—is most likely.

''We suspect News Corp. will officially announce the termination of its acquisition announcement over the course of the next couple of weeks and leave Dow Jones to fend for itself,'' Greenfield writes in a note to clients (quoted in the Associated Press).

Greenfield does not appear to have any inside information about the plans of News Corp or its chairman, Rupert Murdoch. Instead, the note relies on something more like common sense to make the call that the company will walk away from the bid. The Bancroft family, which controls Dow Jones through its super-voting class B shares, has twice indicated it won’t accept the offer. Greenfield describes waiting for them to change their mind as “silly.”

The note reflects the widespread impression that News Corp and Murdoch are growing frustrated with the refusal of the Bancroft’s to enter into a deal. So far, the Bancroft’s have refused to even meet with Murdoch.

Reuters quotes from the note: "We believe News Corp. is increasingly frustrated with the Bancroft family," said Pali Capital analyst Greenfield . "Given no apparent desire by Dow Jones's controlling shareholders to negotiate, News Corp. is left with little choice other than to walk away from Dow Jones [for now]."

Greenfield’s prediction that News Corp will withdraw its bid seems to rest on his view that the acquisition of Dow Jones is not a “must-have” for the company.

Murdoch may lose interest in Dow Jones bid [Reuters via CNNMoney.com]
Analyst Expects Murdoch to Drop Bid [Associated Press via Forbes.com]

The Blackstone public offering is back in the news. The private equity firm today released a revised prospectus in a filing with the Securities and Exchange Commission, revealing for the first time the price it expects its shares to fetch at the initial public offering—between $29 and $31 dollars. Blackstone also said it expects to sell 133.3 million units. (The revised prospectus also revealed that Blackstone will be getting another infusion of cash from a different equity sale—the sale of limited partnership shares to China for $3 billion. More on that later.)

At the mid-range of the expected price—$30 a share—the offering would fetch $4 billion, which the number everyone was talking about when the offering was first announced. In the original prospectus, DealBook reminds us. Blackstone had estimated that $4 billion was the upper-end of what it expected from the IPO. Today’s pricing suggests that Blackstone might get as much as seven hundred and fifty million more than that, for a total of $4.75 billion.

DealBook points out that while the estimated share price indicates the IPO might fetch more than expected, the new prospectus also suggests that the firm might be valued lower than the $40 billion often cited in reports on the IPO.

The proceeds may be getting larger, but the new filing also suggested that Blackstone won’t quite reach the $40 billion valuation that was previously reported. Based on the firm’s own estimate of 1.085 billion units outstanding after the offering and a per-share price of $31 — the high end of the expected range — that would value the firm at about $33.6 billion.

By way of comparison, that figure would make Blackstone larger than securities firm Bear Stearns, which has a market capitalization of about $21.9 billion, but smaller than Lehman Brothers, whose market cap is about $38.9 billion.

Eddy Elfenbein points to another comparable—Fortress Investment Group, which sold shares in an IPO earlier this year. At the high end of the price range, Blackstone would be valued at about three times Fortress, Elfenbein writes on his Crossing Wall Street blog. Of course, that might be comparing apples to oranges. Fortress has a much higher market capitalization than its IPO price would have suggested in advance—shares traded up as much as 68% as soon as they hit the public exchanges. It’s possible Blackstone’s shares saw a similar rise on the first day of trading. “Of course, if Blackstone’s shares rise after the I.P.O., its market cap could easily top the $40 billion mark,” DealBook writes in its initial reading of the new prospectus.

There will no doubt be lots more on this story once everyone has a chance to read through the new prospectus.

Blackstone Seeks Up to $7.75 Billion in Stock Sales [Bloomberg]
Blacktone Prospectus [Sec.gov]
Blackstone I.P.O. Could Reach $4.75 Billion [DealBook]
The Blackstone IPO [Crossing Wall Street]

Breakingviews.com sparks a "what can Lehman do to recapture the magic?" brainstorming session. The rationale is Lehman's recent relative shortfalls - only 20% net revenue growth last year and not increasing its market cap by $30bn (or 50%) in the last couple of years like Morgan Stanley and Goldman (Lehman measures up a lot better over the last five years, (here) with Morgan Stanley and (here) with Goldman Sachs).

Breakingviews' solution - it's deal time. No, not a DLJ-esque mega-merger, most likely with Bank of America or Wachovia to try and get a deeper insta-foothold in IB, but a Cazenove style venture with HSBC. This deal would compliment Lehman's focus on emerging and Asian markets and provide the IB infrastructure to support existing HSBC relationships.

Band of Brothers [breakingviews via DealBook]

Meet Josh. He’s an audit associate at KPMG. Josh is featured in the most recent issue of Fortune’s cover story about today’s twentysomethings, who “have their own rules” with regard to the workplace. Fortune thinks this is a cute way of saying “here are a bunch of entitled brats—enjoy!” (and it sort of is, the rapscallions). Josh, who has a “broad networker’s smile,” a “stiff white collar,” and wears “polished onyx cufflinks,” thinks KPMG should work for him.

With a “body made for gladiator movies,” Josh knew that he needed to have a job where if he had to take off for a few weeks, he had to take off for a few weeks, and that would be okay. KMPG proved itself to Josh when they told him he could tailor his schedule to train for a bodybuilding competition. The firm also “got his attention” when it kowtowed to his demand to be moved to New York, Josh’s “chosen city.” In fact, he was so impressed by the fact that KMPG “got” what he’s about, that Josh said to himself, “You know what? This firm has shown a commitment to me. Let me in turn show some commitment to the firm.” And he didn’t stop there. Joshua also came up with a sexy analogy: “This is a merger, if you will—Josh and KPMG,” he said, with a twinkle in his eye. The article doesn’t mention anything about the J-man sending his superiors out to pick up his lunch/dry cleaning/tab at Scores, but this was likely just a copy oversight.

Is Josh representative of all twentysomethings in the work force today? Are first-year analysts no longer earning their keep in Keith’s favorite position, the ankle grab? Are they cutting out at 8 instead of 11 (or 12 instead of 2, during big deals)? Or is Josh merely one man, one prick, one gladiator? You tell us.

Attracting the twentysomething worker [Fortune]

Yahoo has $1bn sitting around (of its $2.35bn of cash on the balance sheet) and it really wants to buy a social networking site with it. Yahoo's been slutting this billion around for a couple years now, and it's been in some abusive relationships. Yahoo's $1bn courtship of Mark Zuckerberg ended badly, when Zuckerberg said he could do better (it turns out he was right, unless the bubble bursts) and things got weird.

Now Yahoo's billion is on the rebound and courting British social networking site Bebo, which has 25 million users (measured against the MySpace behemoth of 100 million increasingly believable porn advertisements registered users). According to the British press, Bebo co-founder Michael Birch would rather float the company than sell it.

Yahoo is feeling a bit left out of the internet dealmaking party as of late, especially since the formation of Yacrosoft in a Yahoo/Microsoft merger is seen as (even more) unlikely after Microsoft's temporary insanity $6bn acquisition of aQuantive.

Yahoo may buy UK's Bebo for $1 billion: report [MarketWatch]

To all the IB analysts - since everyone but you will have next Monday off (at least you get to wear jeans), here is an updated taste of your comp for this year. Recent additions include BoA (the $50k you get to just hang out for a year not included) and Bank of Montreal, despite those huge trading losses.

Base salaries for 1/2/3 years are $60k/$70k/$80k, making total (pre-tax) comp in the top tier at Goldman $170k/$200k/$235k. Of course, almost half of that bonus flies out the door instantly from taxes.

There is another analyst bonus spreadsheet running around that is much more homogenous than other initial reports, with only a couple banks bringing up the rear and everyone else matching the very top (the current $110k/$130k/$155k). I think this might be dubious, since it seems like extrapolation rather than any hard numerical report. It seems like in a lot of cases the staffers at banks are throwing the analysts a bone and saying that "sure, Bank X will match the top of the Street." Then someone plugs in the top numbers on the spreadsheet for that bank. Granted the goal is to pressure all the banks to match the top here, and bump bonuses upwards until that happens, but I'm skeptical of that report thus far.

Everyone on the Big Board mass email knew that the day would come when the floor of the stock exchange would be turned into Colonial Williamsburg; that time is now. With almost two-thirds of the bodies being cut and the survivors pretty much standing around twiddling their thumbs (floor traders handle only 18% of trades now, versus 86%, pre-electronics), the logical thing to do was to start giving out tours to the public and dressing in drag. The Post reports that “storied floor” has become a major hotspot for out-of-towners, and a good way for employees to pass the time.

Head tour guide is John O’Shea, chairman and CEO of Westminster Securities, who, by finally “realizing his career-long goal of qualifying as a floor broker” earlier this year, is now bestowed the great honor of escorting couples from Peoria dressed in Hawaiian shirts and BluBlocker Clip-Ons(tm) around the living history museum. "We can now bring down four people at a time, when in the past it used to be just two," he told the Post. "There's more free space." No word on the rumored plan to widen aisles even more to accommodate 6 large tourists astride.

Jonathan “Nat” Niles, living in denial, sees it differently: “If the exchange is not careful, this place will become just a tourist attraction.”

Traders Say NYSE Floor Still Hot Venue-- For Tourists [NYP]

This morning opened with news of another private equity buyout. If this deal had happened a few years ago, it would have made headlines as a blockbuster deal. It’s not that the $24.7 billion Goldman and the Texas Pacific Group have agreed to pay for Alltell is now chump change. But in these days of mega-buyouts, it’s just one more on the list.

Last Thursday we discussed the causes of the going private boom. Is it CEOs looking for even bigger paydays than those available at public companies? Loose credit? The regulatory burden? Intemperate and impatient public markets? The jumping off point of our conversation was David Wessel’s Capital Exchange column in the Wall Street Journal. But somehow we forgot to touch down on our favorite landing strip: the minds of our readers.

So this morning we bring you a reader poll asking: what’s behind the rush out of public markets?

Goldman, TPG Agree to Buy Alltel for $24.7 Billion (Bloomberg)
Wireless carrier Alltel's been on the block for some time, so news that the company is going private isn't too much of a surprise. There had been some speculation that it could be scooped up by one of its rivals, like Verizon or Sprint, but in the end, nobody can compete with private equity's seemingly unlimited reservoir of cash. The $24.7 billion price tag, to be split by TPG and Goldman, represents a nearly 10% premium over Alltel's Friday close. The company insists that the new owners plan to invest heavily to grow the business. Ah, but that's what they all say. Now get ready for the articles that ask: is no industry off limits?!

Booming China stocks test government's will (Reuters)
In the media, the Chinese stock market has now been anthropomorphized. It's its own entity with its own free will, seeking to match wits against all comers. Actually, it's more like the plant in Little Shop of Horrors, screaming "Feed Me Seymour, Feed Me!", with the Chinese government playing the role of the nebbish Seymour, reluctantly feeding the beast while trying to figure out a way to stop it without drawing its wrath. At this point, however, it's too late to be subtle. Mere interest rate adjustments and currency band expansions aren't going to do very much. It's gotta just chop of its limbs one by one, and then finally electrocute the damn thing.

RiskMetrics Considers Going Public (WSJ)
RiskMetrics, the parent company of ISS, is considering an IPO, which as you might guess, is triggering all sorts of concern. Some are worried that the company will find itself bending its ethical standards in an attempt to meet the market's demands for strong quarterly numbers. Also, who's going to be advising shareholders on such important questions. The bigger concern that people should have is whether ISS is a fading concept that hasn't provided much value. After all, isn't the undue focus on governance at the heart of all of our problems?

With Corn Prices Rising, Pigs Switch To Fatty Snacks (WSJ)
It's not often you get to apply the lessons learned in Econ 101. Or maybe it's the other way around, beyond econ 101, there's not much useful stuff to learn. Either way, the Journal has an article about hog farmers that are finding corn-based food to be too expensive amidst the demand for "yellow gold" (ethanol). So they're feeding their pigs trail mix, yogurt-covered raisins and dried papaya. Other snacks include candy bars, french fries and peanut butter cups. It's actually a little scary to think that these pigs, which are being reared for human consumption are eating such garbage, but then again corn isn't great either. Unfortunately, it's only a matter of time before the government realizes that all of these other things can be gases too, if only we burn them, which will send the farmer scurrying for new feed.

$$$ A special report on international banking [The Economist]

$$$ Hedge fund food fight [Business Week]

$$$ Red sues Bank of New York for $22.5 billion [Forbes]

$$$ Stevie Cohen's halfway house [NYO]

$$$ Budding Buffetts and The Best of All Worlds [Jeff Matthews]

It's been a while since we benefited from the mind-blowing advice offered on the planet's most important website - Yahoo Personal Finance. Here we have Yahoo's "Brazen Careerist" Penelope Trunk with Five Steps to Being More Productive. We think she even gets paid to write this stuff. Keep reading below and change your life:

1. Do the most important thing first.

Gina Trapani, the editor of Lifehacker.com, calls this a "morning dash [others call it “The Angry Pirate”]." She sits down at her desk and does the No. 1 item on her to-do list [apply to the editorial staff of a more widely read site than Lifehacker.com] so that she knows it's finished.

This requires a lot of prior planning [an updated resume, a long-standing grudge]. You need to write an accurate, prioritized list [of co-workers you could beat in a fight] and you need to block out [the firewall at work] a portion of your morning to accomplish your No. 1 task uninterrupted.

The hardest thing about living by a to-do list is that you have to constantly ask yourself the difficult question [Is it possible to solve all non-deterministic polynomial-class problems in polynomial time?], "What's the most important thing to me right now? [finding an uncensored Lindsay Lohan “slip” photo]"

A good to-do list includes [an animated talking paperclip] long-term [the Great Wall] and short-term [the Not-so-Great Fence] projects, and it integrates all aspects of your life [and you thought picking up the dry-cleaning had nothing to do with your former alcoholism]. "Pick out lawn furniture" is on the same list as "go to the board meeting" [same list, different Queer Eye guy] because both are competing for the same, limited amount of your time [only if you’re on the board of Home Depot].

2. Keep your inbox empty [not even the brazen careerist is immune to the influence of the abstinence lobby].

Your inbox is not your to-do list [your to-do list is not your other completely unrelated thing]; your to-do list is something you compile and prioritize. If your inbox is your to-do list, then you have no control over [the coherence of the thought expressed in this paragraph] what you're doing -- you've ceded it to whoever sends you an email next [StiffyMail, your next J-date].

Productivity wizards [but not productivity clerics] experience less information overload [with the right helmet] because they deal with an email as soon as they've read it -- respond, file, [tattoo] or delete. Nothing stays in the inbox [TSS can really screw you up]. Reading each email four or five [or six] times while it languishes [or just sits] in your inbox [spam folder] is a huge waste of time, and totally impractical given the [time and money already spent on natural and safe enlargement] amount of email we all receive.

Keep enriching your existence after the jump...

Gridskipper has compiled a list of the best places on Wall Street (Broad, Stone, etc) to eat on the days that you’re allowed to leave your desk. There are some notable absences—Harry’s, Nebraska’s, Ulysses—and we’re a little bit disappointed that they didn’t think to include any full body massage-type establishments (sometimes that’s more important than food), but it’s quasi-comprehensive and the girl who did most of the heavy lifting used to work on Wall Street so, you know, it could be helpful. If you have to buy your own power lunch, if you’re willing to take advice from the gender of (a former) banker willing to eat salad when there’s meat available, if you can stand having Russian dressing dripping on your Ferragamos while eating standing up, weigh in now!

Wall Street Emergency Lunch Rescue Guide [Gridskipper]

Dresdner Kleinwort is no longer facing a class action lawsuit from six women who alleged the bank was discriminating against women. This morning the news broke that the bank had “read an out of court settlement” with the women. The terms are undisclosed so all we have is a vague outline—the bank didn’t admit to any wrongdoing, but the women are satisfied. We’re going to check with our brother blogger David Lat at AboveTheLaw, but we’re pretty sure that in this case satisfied is a technical legal term meaning “they got a bunch of money.”

Dresdner Kleinwort says U.S. anti-discrimination lawsuit is settled [Market Watch]

Ever wondered what it would be like to party with a bunch of hedgies? Besides the obvious—Loeb is a mean drunk,* Hudson claims he has no idea why he woke up wearing a skirt and heels,* Griffin is always suspiciously missing when it’s his turn to pick up the round*—there’s not that much in the public records about what doing lines off of a HF manger’s girlfriend’s girlfriend’s exquisitely sculpted (and handsomely paid for) breasts feels like (Stevie Cohen owns the rights to publish those photographs).**

Until now!

Thanks to hedge fund manager Saleem Siddiqi, who threw a soiree for his HF friends (in the name of charity) we’ve now got a hazy picture of what a bitchin’ time we’re scheduled to have with James Simons next Thursday (quant guys always have the best acid). Let’s take a look.

*Libel lawyers please note : We're kidding around here. Obviously we've never actually seen Loeb drunk, Hudson in drag and, for all we know, Griffin might totally be generous when it comes to buying shots for the table.

**Yeah, sorry, we also made up that thing about Cohen. The guy has lots of pictures but we don't really think he owns the rights to those ones.

We’re starting to hear chatter about a hedge fund meltdown. The outlines are still vague. Multi-strategy fund. Something like $3 billion under management. But nothing more.

There are way to many hedge funds that fit that description to get anywhere with just that information. So we’re opening up the comments for random guesses, rumor mongers and, who knows, maybe some actual intelligence.

Keep in mind that these stories come and go, sometimes never amounting to anything.

Officially it’s being called an 85% premium from where the stock traded yesterday. But since aQuantive’s shares were trading below $30 a few short months ago—before Google’s acquisition of DoubleClick started a frenzy of speculation about who Microsoft might acquire to get into the internet advertising business—it might be fair to say that the premium is closer to 105%.

Any way you look at the numbers is mind boggling. It’s ten times sales. It’s 45 times cash flow. It’s $6 billion.

It’s hard to make sense of this deal except to look at it through the eyes of Don Lapre.

That’s right. That Don Lapre. The man who brought us the Money making System and taught us all how we were going to get rich. Three words: Tiny classified ads.

His earnest enthusiasm provided a lot of laughs around the dorm room but the campaign also brought him a lot of criticism from those who thought his multi-level marketing plans were pyramid schemes or scams designed to separate the gullible from their money.

As it turns out, Don Lapre was just ahead of his time.

Microsoft snaps up aQuantive for $6 billion [MarketWatch]

Bloomberg reports that the volume at which Acxiom—who recently agreed to be acquired for $3 billion by two private equity firms—has been trading indicates that some buyers “knew more than the normal trader did.” Which is a nice way of saying: “There are thieves among us.”

On May 10, the number of call options trader in Acxiom shot up to 1,400, ten times the average of 135 from the previous twenty days. 1,300 contracts traded on May 14 and on the 15th and 16th. Investors had the right to buy the most actively trader contract at $25 until May 19, with the price of those contract increasing fivefold since yesterday to $2.50 at 4 pm ($1,000 on a contract two days ago is worth $10,000 today). The May $25 calls all occurred during the last seventy minutes of trading yesterday.

Michael McCarty, who looks for unexplained options patterns told Bloomberg, “They knew the exact date, if not what time, the announcement was going to be made. In 72 hours these things would have expired worthless.” Stay tuned to find out which husband and wife team will go down first.

Acxiom Options Trading Jumped Before Buyout News [Bloomberg]

Some major departures at two bulge-bracket bank hedge fund related divisions: Bear Stearns loses Leonard Feder, co-head of prime brokerage for personal reasons (personally starting a hedge fund?), and Lehman loses more people in its fund of funds (CIO Jin Park, senior marketing specialist Anoop "There it is" Dhakad). For Lehman, this follows a string of departures in the fund of funds unit after the November departure of former fund head Jolyne Caruso. The undercurrent here is that banks are trying to capture more and more hedge fund business, but finding attrition at the top a problem, presumably to actual hedge funds or more prestigious divisions of the bank.

Bear and Lehman lose hedge fund experts [Financial News]

There were 116 financial restatements in corporate public filings in 1997. Almost ten years later (2006), that number has grown over 15 fold to 1,876. Hank Paulson wants to know why. Paulson has ordered a Treasury study of restatements, their predominant causes, and effect on investors that will be headed by former SEC chairman Arthur Levitt and former SEC chief accountant Donald Nicolaisen.

The main reason restatements are thought to have increased so dramatically in number is because of tougher accounting oversight, and the fact that accounting firms have become increasingly aggressive in the face of so much exposure to litigation. Projected recommendations of the study include reducing the liability of public accountants and diluting the auditing industry so that it isn't as dominated by the same few firms.

A restatement explosion seems an odd justification for a major deregulatory push. This would assume that companies are not using dodgy accounting tricks to mask true performance and that financial restatements are somehow onerous to companies that misstate financials in the first place. One would think that tougher accounting rigor in audits followed by a spike in restatements is a sign that a lot of violations were going unnoticed, not that accouting firms are creating unnecessary restatements through nit-picking.

Treasury Targets Financial Fixes [Wall Street Journal]

Yesterday we mentioned that we heard through the Streetvine that BoA was paying a bunch of analyst recruits $50k to defer BoA employment for a year. We wondered if there was something BoA wasn't telling us, and if the move is an indication that entry level hiring across the Street is contracting.

It turns out, according to some BoA folk, most of the deferrment offers are due to space limitations at 9 W 57th. These limitations will be solved by the new Bryant Park building, but that won't open for at least another year or two. What ended up happening - a fair chunk of the incoming BoA analyst class (around 30-40 people) was offered relocation to a non-NYC BoA office. The people who didn't want to relocate got $50k to start up in NYC next year.

How does BoA overestimate its entry level capacity by that many people? Were they expecting that much more end of year attrition? Did they hire a bunch of sadists over the past several years who mostly decided to stay in banking?

Mortgage problems are manageable, Bernanke says (AP)
This is odd. Apparently some guy named Ben Bernanke (?) who says he's the head of the Federal Reserve (ooookaaay) says that the nation's mortgage woes are manageable. Ok Mr. Chairman, you're the boss, whatever you say. But in America, we take our cues from Mr. Greenspan, not fly-by-night impostors. Meanwhile, a number of Congressman grilled Bernanke on the lax regulations that supposedly got into this mess. Hey Congress, regulations are your job, not the Fed's. Meanwhile, as for this Bernanke fellow, Alex Tabarrok says he's not a credit snob, which is a major compliment.

GE said close to selling plastics to Sabic or Basell (MarketWatch)
If the trade deficit keeps you up at night, this is the kind of news that you don't like to see. GE is close to selling its plastics division and the leading candidate is Saudi Basic Industries Corp. In othewords, all that oil money that they get from us is now being used to loot our assets -- just like Lenovo taking the computer division away from IBM. Of course this is just one way to look at it. GE is going to be $11 billion richer in cash, which is pretty nice for them. And it's the company that's pushing for a sale, so they're not really being looted in some way. In fact, it's been a pretty weak unit for 'em, just like computers were to IBM. So if all of our cash will come back home in exchange for some low-margin underperforming units, then by all means.

China widens yuan trading band to half-percent a day (MarketWatch)
Get out the Drudge siren. China has expanded the trading band of the Yuan to half-percent of a day. If you think this has any significance then take note.

Wolfowitz Quits World Bank; Successor Search Starts (Bloomberg)
Under a ton of pressure, Word Bank Prez Paul Wolfowitz will finally be stepping down amid allegations that he used his position to help out his girlfriend at the bank. Felix Salmon has finally got his wish, though it's worth noting that Wolfy did have his share of defenders, including a lot of folks at the Journal. Of course his successor will come from the US per tradition. Any suggestions?

$$$ Art Funds Again [The Stalwart]

$$$ Hedge fund fraudsters: always blame the lawyer. [FINalternatives]

$$$ Prostitution Insurance [TCS Daily]

$$$ Great Wall Street: Downtown as Asian bedroom community [NYM]

Everyone knows that you’re nobody until somebody loves you stalks you slips a rohypnol in your drink accuses you and your kind of being criminals (it’s true). A “number” of people in Wall Street’s securities lending business may earn that kind of recognition in the very near future: Business Week’s Matthew Goldstein reports that federal prosecutors in Brooklyn are close to charging current and former Street employees with “taking part in a complex kickback scheme that may have collectively cost the financial houses and short sellers million of dollars in higher and unnecessary fees.”

Three Sal Bonpensieros are already cooperating with prosecutors. Past and present stock loan desk employees from Bear Stearns and Morgan Stanley are being the most thoroughly investigated. Prosecutors also have their eye on Goldman (and former Goldman) employees, as well as Janney Montgomery Scott, Merrill Lynch and Nomura Securities.

No doubt this has left many short-sellers on the train back from Greenwich this afternoon with mixed feelings. On the one hand, finally someone is uncovered for criminality in the short-selling business and it turns out they weren't working for a hedge fund. Take that anti-naked short-selling conspiracy theorists! On the other hand, it means that all those brainiac business school grads at the hedge funds were being taken to the cleaners by a bunch of guys at the stock lending desks of Bear Stearns and Morgan Stanley! Talk about humiliating.

The Crackdown on Stock-Loan Schemes [Business Week]

“The only sure thing that can be said about the past is that anyone who can remember Santayana’s maxim is condemned to repeat it,” Walter Isaacson wrote in Sunday’s New York Times Book Review. “As a result, the danger of not understanding the lessons of history is matched by the danger of using simplistic historical analogies.”

This came to mind this morning while when we came to the end of David Wessel’s Capital Exchange column in the Journal. Wessel uses the Cerberus purchase of Chrysler as a jumping off point for a column describing the causes of the recent rise in the number of companies going private. Twelve companies on the S&P 500 are set to go private, with a price tag of $179 billion.

Wessel’s column runs through the now-familiar causes: over-regulation, readily available leverage, freedom from pressure of unions and other so-called “stakeholders,” and the desire of many of the most capable corporate executives to get out of public markets (which they view the highly-risky—executive turnover is high, new regs threaten personal financial liability and possible jail time—and under-compensated).

But it was his conclusion that got stuck in our craw. “Whatever the cause -- and all these factors play a role -- this isn't a permanent shift. The leveraged-buyout boom of the 1980s ended when credit got tighter, takeover targets got expensive and squeezing fatter profits from acquired companies got tougher. And that will happen again. The only question is when,” Wessel writes.

We’re not sure Wessel should so confidently discount the possibility that something more fundamental might be happening to corporate structure in America. While the current boom in private equity will certainly not last forever, there is at least some evidence that we may be witnessing the nascent stages of a shift in the way our companies are owned. law professor (and Ideoblogger) Larry Ribstein has written extensively about the rise of alternatives to the publicly held corporation.

Larry Ribstein responded to the news of the Chrysler deal by reminding us that this may be a good illustration of what he has called “a fundamental shift of American business away from publicly held corporations.”

“Maybe the public corporation will be replaced by the public uncorporation, giant umbrella LLCs like Fortress that manage large hedge funds that run slim little operating companies, like the future versions of GM and Ford,” Ribstein says.

At the very least, Ribstein's scholarship in this area has demonstrated that there is no reason to simply assume that this shift in ownership and organization is a temporary phenomenon. A phrase that we know is familiar to Wessel might be more useful than Santayana’s here: past performance may not be indicative of future results. Just because the last few years of this decade may have resembled the buyout boom of the 1980s doesn’t mean we are condemned to repeat what followed.

Closing the Door: Going Private Offers Rewards [Wall Street Journal]

Eddie Lampert may be betting that former US Treasury Secretary Robert Rubin is poised to take over as chief of Citigroup, according to a former colleague of both Lampert and Rubin. Earlier this week, Lampert’s ESL Investments disclosed that it had accumulated a 0.3% stake in Citi, setting off speculation about Lampert’s intentions. Speculation ranged from notion that Lampert might view Citigroup as cheap relative to it’s banking peers—this came from an unnamed banker who happens to work at Citigroup—to the idea that he might be poised to take an “activist investor” stance and agitate for change. Shares of Citigroup role 4% following the disclosure of ESL’s position.

“Lampert is tight with Rubin. He loves the man. Idolizes him. He may think that Rubin’s about to become a lot more involved at Citigroup, maybe even to take over for Prince,” the source said, referring to Citigroup chief executive Chuck Prince.

Rubin rose to Wall Street at Goldman Sachs before being appointed to the Treasury position by Bill Clinton. He is now the chairman of Citigroup’s executive committee. Early in his career Lampert worked under Rubin when he was an arbitrage trader at Goldman Sachs. This morning’s Wall Street Journal described Rubin as one of Lampert’s “leading role models.”

Yesterday CNBC’s Charlie Gasparino said that there was pressure for Rubin to take a more active role in the management of Citigroup. His position at the head of the executive committee brings him a hefty paycheck—reportedly $17 million—but some have said he doesn’t exercise much responsibility for the management of the bank. At least one banker employed at an investment bank described Rubin as “a relationship guy” whose job mainly involved using the connections he has made during his long career in finance and government to win business for the bank.

Prince’s tenure at the top of Citigroup has not been a happy one. The bank has been under-pressure from investors to change its management and some have even suggested that it spin off some of its constituent businesses. Prince is widely seen as unwilling to fundamentally change the structure of Citigroup.

Will Chorus Grow at Citi? [Wall Street Journal]