Can't get enough of proxy access coverage? Check out Steve Bainbrige's take here and the Business Law Prof blog's insights here.

$$$ How to Get Rich In Dollars [LoSC]

$$$ "I'm a VP for an international investment banking firm who only does 2 things - work and work out. I appreciate a woman who can take some initiative and imagination in the bedroom. Plus, you'll be amazed at how turned on you get describing it. I just did this for the 1st time a few weeks ago, and things worked out fantastic. The email I received was out of this world, and our subsequent meeting was equally impressive." [craiglist]

$$$ Paul Kedrosky [WallStrip]

Brought to you by Financial Times

To the tune of lowered income, increased spending and plummeting value of the dollar, major indexes down on the day. The DJIA down -17.31 to 13895.63. The S&P 500 lost -4.63 to close at 1526.75and the Nasdaq fell -8.09to 2701.50. Random Index spinner: Hang Seng Index: up 77.32 to close at 27,142.47.

Personal consumption expenditures declined 0.1% compared to last month. Excluding food and energy the PCE rose 1.8%. Construction spending increased by 0.2% defying expectations of a -0.3% slip.

On the NYSE Friday, 1,337 stocks up and 1,984 down, totaling 883.5 million shares traded.

The euro was at $1.4261 from $1.4147 against the dollar - closing at another high. The dollar was at 114.78 yen from 115.65 yesterday. Crude closing at $81.63 and after reaching a 27 intraday high, gold closed $750.50.

For more market action FT Alphaville

Warren Buffett has once again—for the fourth time—reduced Berkshire Hathaway’s stake in PetroChina, to 7.99 percent from 8.21 percent. Though he claims it’s just about money, Buffett’s actions are indicative of a desire to distance himself from a company which human rights activists have a problem with because of its investments in the Sudan, a region that is currently going through a restructuring of its population. Just as nauseatingly, the sale also hints at Buffett’s intent to raise cash in order to buy up a bunch of Bear Stearns (though that has less to do with a dwindling interest in genocide than it does the early stages of dementia). The man cannot be helped. We are done.

Earlier: Why Doesn’t Warren Buffett Want To Fund Genocide Anymore?

Somebody Save Warren Buffett From Himself, Bear Stearns

Buffett Further Cuts PetroChina Stake [AP]

The myth of shareholder democracy holds a powerful sway over public opinion. The comments we’ve received on our two articles on the proxy access rules now up for comment at the Securities and Exchange Commission demonstrate that people continue to be bedeviled by the misguided analogy with democratic political regimes.

One of the mental levers the mythologists of shareholder democracy use to make their case is a kind of demonology of corporate managers. Although corporate insiders, especially chief executives, have demonstrably lost power in recent years to shareholders and independent directors while the risks of running a public company have increased, the continued climb of executive pay seems to have convinced many that executives are somehow fleecing shareholders. The evidence for this is underwhelming, however. While bad characters exist in executive suites and board rooms, they hardly justify enacting wide-ranging corporate governance reforms. Bad CEOs make bad law.

It’s important to remember that our system of corporate governance has generated enormous wealth for shareholders and workers over the years, bringing us unprecedented prosperity. We should exercise caution when seeking major reforms, especially when the costs of those reforms will be difficult to measure and the reforms will be next to impossible to reverse. By creating a uniform, national rule for proxy access, the proposed reforms would shut off jurisdictional competition and experimentation between the states. Worse, the proxy access reform is clearly viewed by many of its proponents as a first step in what they view as a revolution in corporate governance. There will be more to come. The proxy access reforms are precedent not a final resting place.

Some of the most thoughtful criticism of our first essay came from Beth Young, who I believe is the author of the Shareholder Proposal Handbook and a senior research associate at the Corporate Library.

We rough up Young’s objections to our articles after the jump.

Former Fed Chairman-cum-author/Deutsche Bank consultant Alan Greenspan said in interview with BBC Radio that he and other regulators were fully—blithely actually—aware of the risks imposed by the complex financial derivatives that helped to fuel the recent market turmoil that’s messed with your shit. So why wasn’t any action taken prior to last week? Because you knew the risks involved, and if you didn’t, you’re dumber than Greenspan had previously thought.

“I must admit that I do not have considerable concern about the net worth of [wealthy individuals investing in hedge funds] going from $40 million to $5 million, which in many cases is what has happened,” he said. In fact, he saw the whole thing as the perfect opportunity to teach you a lesson, not unlike the time he illustrated the dangers of binge drinking to a bunch of middle school students by standing idly by while they downed shot after shot of tequila, saying only to a concerned-looking aide, “this is the only way they’ll learn. Nothing like the memory of a good stomach-pumping to make ‘em think twice about that next drink.”

Oh, and there’s maybe going to be a recession. Maybe.

Greenspan: Recession chance less than 50-50 [CNN Money]

Whoever said sexism isn’t alive and well in America has been asleep behind the wheel or living under a rock for, well, forever. Now, before you get all PC on us, save your breath. The glass ceiling here at Dealbreaker is not only buttressed by myself and Bess Levin – but John Carney smiles down on us and his other female minions from time to time sitting on his glass thrown in his ivory tower.

In addition to Dealbreaker, Neiman Marcus management has an interesting division of how they divvy up “allowances” to their CEO’s. Karen Katz, President and CEO gets an annual $25k allowance for clothing while CEO Burton Tansky doesn’t get jack. He does however, get a $12k car allowance (will that even get you a Ford Festiva?). James J. Gold, president of Bergdorf Goodman received a $167k “cost of living” adjustment for relocating from Texas to New York and an additional $296k for NY state taxes. Footnoted.org poses the question – are women simply more focused on clothing while men are more focused on cars and taxes?

Dealbreaker.com gets to the heart of the matter – men get more tail when they drive a hot car. Women can only get men to listen to them if they dress slutty.

On how men and women differ… [footnoted.org]

The New York Stock Exchange has released it’s calendar for 2008 and 2009. Get excited because in 2008 there will be two extra trading days! It’s a leap year, giving us an extra day in February. And there is one less holiday on the schedule—this year we honored the death of Gerald “stagflation” Ford by refusing to work. Unless a former president dies this year, we should have one more day of trading.

Leap years tend to outperform other years, with particularly strong Augusts. Of course, leap years are also presidential election years, which may have more to do with market performance than that extra day in February.

Click chart for larger version.

NYSE Euronext Holidays & Hours [NYSE]

By now you know the rumor that Bill Gates has lost his mind and is considering an investment of $300-500 million for a 5 percent stake in Facebook, which would value the social networking site at twice what Rupert Murdoch paid for Dow Jones. (Making trashtastic MySpace worth $11-12 billion, according to Lehman Brothers analyst Vijay Jayant.) The fact that ‘book CEO Mark Zuckerberg was spotted Tuesday in Seattle, according to ‘Fortune’ reporter/stalker David Kirkpatrick, gives weight to the rumor, and lowers the chances that it’s not all some horrible joke and/or plot by Steve Jobs to make Bill Gates bad.

But since we’re still holding out hope that Microsoft isn’t planning on parting ways with a truckload of money for a website filled with worthless plug-in applications and at which one user can “poke” or “tickle” another and then laugh to him or herself about it, we’re going to come up with a more plausible explanation for Zucks’s visit to Washington and stick with it. The continued existence of the Bill & Melinda Gates Foundation, and the disenfranchised who so desperately need its help, depends on this rumor being bull shit. So you tell us:

The real reason Mark Zuckerberg has been seen in Seattle is:

a. Tonight’s Bryan Adams with George Thorogood concert at the WaMu theater

b. For a naughty game of hooky with David Kirkpatrick, who writes that, having “gotten to know [Zuckerberg],” who is “driven by a conviction that what he is doing will make the world a better place” and “is a nicer person than Gates,” has come to the conclusion that “it may be…worth quite a few hundred million for any company to get into bed with Mark Zuckerberg.”

c. Adidas shower shoes.

d. Coffee date at flagship Starbucks with Kofi Annan to discuss how Facebook can get involved in the Arab-Israeli conflict.

e. Annual pilgrimage to Brandon Lee’s grave in Lake View Cemetery.

f. a. and b

g. a. and c.

h. a and d.

i. a and e.

j. b and c.

k. b. and d.

l. b. and e.

m. c and d.

n. all of the above

o. none of the above

Zuckerberg Sightings Fuel Deal Speculation [DealBook]
Facebook CEO visits Seattle, Microsoft schemes [Fortune]

Copyranter's seminal Pure Horseshit™ Award. [copyranter]

Sears Holdings doesn't seem to be working out. Eddie Lampert was supposed to be the next Warren Buffett, and Sears Holdings the next Berkshire Hathaway. But this week shares in the company hit a new 52-week low after investors digested poor earnings performance, bad news on same store sales and worries that we might be entering a rough sector for the entire retail sector.

The logic that boosted Sears Holdings from a $50 per share company to a $200 per share was built on the value of its real estate. Lampert was said to have a plan to leverage the underlying real estate assets of Sears Holdings to make other investments, basically turning an old fashioned retailer into a twenty-first century hedge fund or private equity firm. But with consumer sentiment down and real estate deflating, the real estate to investment company play looks a lot less feasible.

Even as short interest in most NASDAQ stocks fell in September, short interest in Sears Holdings shot up by almost 15 percent. Short positions stood at about 13.7 million shares in mid-September, nearly 10 percent of the outstanding stock in the company. This puts it up there with short favorites, for lack of a better term, like Crocs, Lulumon and Pet Smart.

So does Lampert, who Business Week once called an "investment wizard," have some magical plan for Sears Holdings? Will Skull & Bones somehow rescue the company with a Dear Island strategy? Lampert is supposedly obsessed with protecting his downside. So when we think about the future of Sears Holdings we can't help but ask: What Would Eddie Do?

Well, if we can't have Sears Holdings, at least we'll always have the Mets, right? Hello? Anyone still listening?

Sometime in the next few weeks, Securities and Exchange Commission chairman Chris Cox will likely have to decide how he will vote on a pair of competing rules on shareholder access. One “proxy access” rule would shift power from boards of directors to cliques of outside shareholders by permitting certain shareholders and groups of shareholders to include in company proxy materials proposals for amendments to bylaws that would mandate procedures to allow shareholders to nominate board of director candidates. The other preserves longstanding rules that make it difficult and costly to for dissidents to mount proxy fights.

The SEC’s commissioners are evenly divided along partisan lines on the question. The Democratic commissioners favor increased proxy access. The Republicans favor the status quo. Cox holds the deciding vote. Which way will Cox vote? We’re not in the predictions game. But if we take Cox at his word about his own agenda at the SEC, it seems clear that he should vote against the new proxy access rules.

After the jump, we look at how the new proxy access rule hurts ordinary investors.

Bond Traders Begin to Get Up Off the Canvas (WSJ)
It really is looking like the whole liquidity crisis was nothing more than a really bad dream. Maybe we have Ben Bernanke's aggressive actions to thank. This time the committee to save the world was just a committee of one. Well, two if you count Ben Bernanke's consiglieri Jim Cramer. Anyway, banks are finding it easier to sell debt again, as they've been able to unload twice the volume of First Data debt than they had originally anticipated. It's not totally clear why that is. Maybe it's due to the return of liquidity, or maybe it's just that everyone's quote screens started working again, so they can price these deals.

The Long Petard: The New York Times and Sarbox (The American Thinker) (via Ideoblog)
This may come off as a bit of applied nitpickery, but The American Thinker does a good job explaining how the New York Times, long a fierce advocate of SarBox, may have violated one of its principles through its decision to give MoveOn.org an ad at a discount rate, and how it dealt with the followup inquiry. Clearly the Times is in bad need of better internal controls.

AMR Draws Fire From Iceland (Forbes)
Shareholder activists in Iceland urged AMR yesterday to unlock value, and were behind a much talked about report that suggested AMR's frequent flyer unit had more value than the airline itself. That's hilarious, although a little confusing. Sort of reminds us of when people used to say that GM's lending arm had more value than the car operations. Yes, but... that lending was for people buying GM's cars (that, and mortgages, which, well, we know how that turned out). Anyway, interesting to see Iceland step up to the Shareholder activism game. We thought the only thing they did there was hydrogen energy and selling the genome of its populace.

Greenspan's Memoir Racks Up Sales (WSJ)
Quite surprising that folks are actually reading Greenspan's book. Maybe they'll be interested in something that would really help them understand economic conditions these days. May we suggest this?

$$$ That Maria painting. [thestreet.com]

$$$ Banker Needs Swedish Nanny for Self [craigslist]

$$$ Jefferies figures out a way to pay for all those dwarfs. [Investment Dealers' Digest]

More news from planet LBO. Despite the rocky news on Archstone this morning, things are looking up this afternoon. The banks financing Kohlberg Kravis Roberts & Co. buyout of First Data Corp began selling around $10 billion of the deal’s bank loans.

As predicted, the loans sold at a discount. But at 96 cents on the dollar, the banks seemed to have little trouble placing the loans. Most have now been purchased by investors, DealBreaker can report.

The success of the First Data loan sell-off is being greeted as a welcome sign that there’s still life in leveraged loan land. “It's a significant event on the road back to normality,” a London based hedge fund bond manager tells Bloomberg. “It shows that investors at least will accept a market clearing price and that wasn't the case a month ago.”

KKR Banks Selling $10 Billion of First Data Loans [Bloomberg]

Do you remember what you were doing on 9/11, pre-8:45 am? I was in math class, trying to come up with a totally bull shit but failsafe excuse for why I hadn’t done my homework. You were probably doing something like that too. A reason you hadn’t sent your associate that model. A justification for why your fund dropped 47 percent in two weeks. Then, something happened, and the world changed. I won’t get into it here, but suddenly, we all had the ultimate excuse on our hands, one that could work in any and every situation. One that put “my alarm didn’t go off” and “there’s been a death in the family" to shame. You know what I’m talking about—9/11. And we’ve used it in sickness and in health ever since (usually in health, because “I’ve got a head cold” is a pretty good excuse on its own). It’s almost, dare we say, the silver lining to a very unfortunate event.

Today we kiss that silver lining good bye. A dangerous precedent has been set, and Morgan Stanley is to blame. The bank agreed to pay $12.5 million to settle charges that it failed to provide arbitration plaintiffs with e-mails it claimed were destroyed on September 11, 2001, when, in fact, it was discovered that the e-mails had been saved on backup files, more or less ruining it for the rest of us. So, thank you, Stan O’Neal Phil Purcell. For a whole lot of nothing. We all now have our work (to get out of work, among other things) cut out for us. Ass.

Morgan Stanley to Pay $12.5 Million in E-Mail Case [Reuters]

Brought to you by Financial Times.

Tomorrow is the last trading day of Q3 and we expect to see some increased volatility in trading Friday. Today saw the highest rise of the Nasdaq since July despite weakened new-home sales which declined 8.3%. New home purchases have slowed to a crawl - 795,000 its lowest level in 7 years with prices declining by the most since 1970. Did someone say more interest rate cuts??

Market movers: Sallie Mae's stock climbed to its highest level in six months amidst expectations of a new takeover agreement. Exxon and Chevron also saw plenty of action as crude prices continue to rise.

Major index numbers as follows: The DJIA up 32.51 to close at 13910.66. The S&P 500 rose 5.18 to 1530.60. The Nasdaq ascended 9.23 to 2708.26 to it's highest since July 19th. The Russell added 4.89 to 814.01. The 10YR Note also up 13/32 to close at 4.573%. Random index spinner of the day: CAC 40 Index up 42.60 to close at 5,733.37.

Total number of shares traded on the NYSE 1.18 billion with 2,215 in the green and 1,078 seeing red. The US Dollar flexed it's muscle moving up to $1.4147 from $1.4125 against the euro. The greenback up ten yen cents or whatever the heck you call it from 115.55 yesterday to close at 115.65.

Tomorrows numbers to look out for: Construction spending and Consumer sentiment both at 10:00 ET.

Stay up all night with FT Alphaville

“On the Money” is going, going, gone.

The official word is that on October 10th the show will go on “hiatus”—and, as it turns out, that word has nothing to do with shenanigans on the Kennedy compound. It means, we think, that the show is pretty much canceled but no one wants to tell Melissa Francis.

The New York Times TV Decoder blog has the scoop.

The program’s pending departure is one of a series of programming changes CNBC is planning, as the Oct. 15 debut of the Fox Business Channel draws near. In place of “On the Money'’ at 7 p.m., the official said, CNBC is moving in “Kudlow & Company,'’ which can currently be seen at 5 p.m. In its place at 5, CNBC is installing “Fast Money,'’ the traders’ roundtable led by Dylan Ratigan, which currently appears at 8 p.m. — and still will, in rebroadcasts.

We’ll miss OTM. What the New York Times describes as “hip and almost flip approach to the day’s business news” was just about our speed. The show had an edge to it that a lot of the more sober daytime programming on the network lacks. It was probably the only show on the network that was produced in the traditional news magazine sense. We’re hoping it comes back after some sort of redesign. Or that Fox produces something like it.

But, of course, there are more serious matters at hand. And most of them are about OTM host Melissa Francis. “Left to be determined is the next assignment for Melissa Francis, the anchor of ‘On the Money,’” TV Decoder reports. Memo to CNBC: Pay attention.

CNBC Jettisons ‘On The Money,’ Shifts Kudlow and Ratigan [New York Times]

In 2004, Basis Capital was named Macquarie Bank Ltd.'s "Skilled Manager of the Year." In 2005, "Fund of the Year." In 2006, Basis fell off the legitimate awards circuit radar, but we've heard reports that while vacationing in a small village just outside of Melbourne, manager Steven Howell entered a Vanilla Ice lookalike contest and won. So that's something. In 2007--yesterday, in fact--the Australian hedge fund took home the George Washington "I Cannot Tell A Lie" "Award" for being totally upfront and truthful about the piss-poor job of managing their clients' money they've done this year.

BC said Wednesday that its Aust-Rim Fund--the one not currently seeking bankruptcy protection--is down 50% this year, following what numbers men characterize as a "pretty much abysmal" summer. (In August, the firm closed its flagship Yield Fund, which is thought to have lost as much as 80% of its value, though managers Steven Howell and Stuart Flower claimed they were unable to "accurately estimate" the value of units left in the fund.)

Securities and Exchange Commission Chairman Chris Cox holds the swing vote in one of the most important questions of corporate control currently being considered by the government. Sometime soon he’ll have to decide whether to support the proxy access proposals put forward by the Democratic commissioners or cast his lot with Republican proposals to maintain the status quo.

As is so often the case, at the heart of the matter is a confused concept. In particular, the concept of shareholder democracy seems to have broken out of its academic box and run rampant through the minds of some otherwise sensible people. Fortunately, the proxy access proposals are the subject of two of the most important articles published today—one from law professor Lynn Stout in today’s Wall Street Journal and the other from Larry Ribstein on Ideoblog.

Stout takes the argument for shareholder democracy head on, arguing that the “proposed proxy access rule is driven by the emotional claim, unsupported by evidence, that American corporations benefit from ‘shareholder democracy.’" Current shareholders, who are only temporary owners with easy entrance and exit strategies, have incentives to exploit and loot a company for immediate gains—which is exactly what some well-known activist shareholders have been urging on public companies. A stronger shareholder franchise will only acerbate the problem, Stout says.

What makes US companies function so well is the fact that they are managed by strong central boards and run by powerful managers. “Successful corporations are not, and never have been, democratic institutions. Since the public corporation first evolved over a century ago, U.S law has discouraged shareholders from taking an active role in corporate governance, and this ‘hands off’ approach has proven a recipe for tremendous success,” Stout writes.

Ribstein is less enthusiastic about traditional models of corporate governance. In fact, he thinks that the traditional public corporation may be on its way out—or at least in for some real evolution. But he agrees with Stout that attempts to force change on corporations through a new national regulation on proxy access are a very bad idea. “[T]he reason why the SEC should keep its hands-off here has more to do with the appropriate limits of SEC power than with the substance of the proposal. This is a matter of internal corporate governance which should be for the states,” Ribstein writes. “There is no justification for making this a federal matter unless you buy in to the shareholder democracy myth.”

What neither Ribstein nor Stout touch on today is the actual mechanism for the disfunction of shareholder democracy. Both understand that it won’t work as promised but they don’t spell out the reasons why. But fortunately you read DealBreaker, so you are about to learn why.

Clearing up the puzzle of shareholder democracy after the jump.

Kenneth Heebner’s CGM Realty Fund is liquidating its positions in SL Green Realty Corp - Manhattan’s largest office landlord.

"You're seeing a retrenchment in the private-equity, hedge-fund and brokerage businesses, and there could be a lot of layoffs,'' Heebner, 66 told Bloomberg in a recent interview. "That could have a devastating impact on high-end residential real estate in New York. Appetite for office space will also decline."

More from the Heebner after after the jump.

Apparently we’re “snickerers.”

We like to think we’re more belly-laughers. But we like this description of why DealBreaker is important: “Because every classroom needs a kid in the back row, throwing spitballs.”

Sorry. We’re getting ahead of ourselves. Let’s back up. Market Mover Felix Salmon has posted “An Interactive Guide to the Econoblogosphere.” It maps out the econblog space into a number of categories and isn’t afraid to pick favorites. We’re not only Salmon’s favorite back of the class clown blog. We’re also the only one.

After you check it out the guide, stop back here and let us know if you can figure out exactly who is doing what in the icon Portfolio assigned to us.

The Econoblogosphere [Portfolio]

Filing annual reports and auditing financial statements according to US GAAP standards is excruciating for all public companies but for NEC electronics, it’s become a debilitating factor in their American depository receipts trading on our exchange.

The company formerly known as Nippon Electronic Company’s ADRs will no longer be traded on the Nasdaq as of today. Not only are they unable to file their Form 20-F for the fiscal year rounding up in March ’06, they announced their US filings dating back to 1999 are unreliable.

According to a report by CNN Money, the NEC said a restatement (of their annual report) "is not practicable" because of the complexities involved in determining the necessary adjustments. We previously reported that the Europeans are also taking issue with our accounting principles and filing standards and realize we’re seeing a trend here.

Are our accounting standards REALLY that difficult? Is this our problem or theirs? Have our accounting rules become so arcane they're driving companies away from us? A bunch of you have your CFA designation – tell us what’s going on here.

Nasdaq Takes Step to Delist NEC Corp. [Wall Street Journal]

NEC Will Not File Fiscal 2006 Report [CNNMoney.com]

The rumor about Syndicated Leveraged Finance analysts at JPMorgan, currently in training, being rounded up and told “there will be people leaving this group” has been given not necessarily legs but perhaps (very small) feet. While out for sushi last evening, our dinner companion received an email that read:

I won’t send this to her directly but since I know you’re out to dinner with BL, feel free to pass along that I’ve heard the same rumor about the SLF guys. Good, I say, less JPM dicks at Snafu when I get my drink on at five. Don’t put my name on that. Describe me only as being “in the know” and “an employee of Barclays.”

And another, less crazy tipster writes today:

Confirmed JPM analysts rumor, though I’ve heard the senior guys are also planning on cutting non-first year analysts.

Want to get something off your chest pertaining to Jamie Dimon's toy soldiers but feeling similarly gripped by paranoia? Shake it off and let us know.

There’s no doubt that Planet LBO is a calmer place now than it was through much of the summer. But it’s not exactly terra firma yet. One of the shakiest deals in the pipeline is the buyout of real estate investment trust Archstone-Smith Trust. Lehman Brothers and Tishman Speyer are putting just $500 million of their own money into the $21 billion deal, with the rest coming in the form of bridge equity and debt.

Yesterday Lehman Brothers and Bank of America began their attempt to sell $3.15 billion of the $4.96 billion bank loans financing the debt. The loans consist of a $750 million revolver and a $2.4 billion term loan, each priced at 300 basis points over LIBOR. But word is that they are running into resistance from investors who are surprised the debt is not discounted more heavily.

Reuter’s Jonathan Keehner reports that banks are offering the term loan at 99 cents on the dollar, and this has some would be investors balking. As Keehner gently puts it, the one cent hair cut prices the loans substantially “above where other recent buyout financings have closed or been discussed.”
Not everyone is being so delicate.

"Archstone is a good company, it's got great assets, and bankers probably thought they could sell at this price," said a buyside analyst tells Keehner. "But my initial view is that a lot of deals are coming in at the mid-90s, and this is coming in at 99 cents on the dollar. It looks rich to me.”

We’re told the situation is beginning to look hopeless. And part of the problem may be Lehman’s conflicting interests. As both the buyer and one of the lead lenders—a dual role that many banks considered a win-win situation in happier times—Lehman may have put itself between a rock and a hard place.

Let’s go to the Keehner tape again, this time from Reuter’s Dealzone blog. “Either way Lehman takes a hit: as a principal, renegotiating on any terms could hurt potential profits. But by also banking the deal, Lehman otherwise risks having the debt clog its balance sheet or sold at a loss,” Keehner writes.

Archstone loans appear priced at pre-crunch level [Reuters]
Lehman’s double trouble in Archstone [DealZone]

With Ben Bernanke doing as he’s told, you’d think there wouldn’t be much for CNBC pundit Jim Cramer to go batshit crazy over in public, right?. Wrong. You clearly underestimated the depths of Cramer’s dementia. Last night at a Gin Lane party for the man who knew about the News Corp./Dow Jones deal eleven years before it happened, Baird Jones asked Cramer if he’d ever wear a hairpiece. This was the response:

"I would rather blow my head off . . . Never, ever, ever . . . They are phony. They are horrible. Same with hair transplants. I like cornrows when they are in an Iowa field . . . I would never even dye my hair. The only thing I have is my authenticity. No, no, no!"

And sources tell DealBreaker Cramer was later heard telling a group of revelers outside the men’s room that he still cannot get over the fact that back in the Holocaust, Hitler didn’t round up Europe’s hairpiece-affixing men when he was gathering the gypsies and Jews. “I said to him, ‘Adolf, they are just as offensive, if not more. Don’t phone this one in'.”

One wonders if Cramer’s nephew, having inherited the Cramer male pattern baldness gene, shares the philosophy. After all, it’s not like he needs hair to impress anyone—he’s got the iPhone.

Too Much Gin [New York Post]

Congratulations to Tom Hudson, whose hedge fund ended its proxy battle with Angelica, a healthcare linens company, after Angelica kowtowed to the Jolly Rogers’ demand to explore a possible sale. In July, the Pirate team, which owns approximately 9.8 percent of Angelica, told the firm to put itself on the block or prepare to go to war, and nominated two of its own to the board. Angelica stated yesterday that has given its financial adviser Morgan Joseph* the green light to pursue a sale. Hudson then withdrew his nominees for the board, based on the assumption that Morgan Joseph will have time to work on a deal, what with inner-office bitching between associates and analysts taking up a large portion of the day.

Though a previous proxy fight with energy company Aquila saw Pirate distributing buttons and t-shirts, circumstances of late, including but not limited to managed assets falling to $375 million from last year’s $1.802 billion, rendered the free-gift with purchase deal too costly. Why nobody thought to offer burned copies of Michael Bolton’s greatest hits is beyond us. Hindsight.

Pirate Ceases Fire on Angelica [HedgeFund.net]

*heh.

It's not everyday you get to watch a girl get naked with a chairman of the Federal Reserve. But some folks on Lexington Avenue wound up doing exactly that recently when they found themselves side by side with former chairman Paul "Ben Bernanke is a Bitch" Volcker while a voluptuous blond showed her own discount window to passersby in the window of an art gallery.

What was going on? This morning Ben Widdicombe of the Daily News explains how all this came to be.

"It turns out Volcker (who led the Fed for eight years under Presidents Jimmy Carter and Ronald Reagan) is the uncle of the lady in question, performance artist Lisa Paul Streitfeld," Widdicombe writes.

Ugh. Performance art. It's like pornography but even more boring. Usually involves women you don't necessarily want to see naked who insist on getting that way and then smearing stuff on their bodies. Surely this isn't what Volcker's niece was doing.

Except that it was. And is. Streitfeld is currently performing one of five chapters in her performed "novel" The Alchemy of Love. You can watch video versions of four of the chapters on the novel's blog. Of course it has a blog. Or you can stroll by The Lab, an art gallery in the Roger Smith hotel and see the thing live. It runs through September 29th.

If you run into Volcker, remember to ask him what he think the prospects for inflation are now that the Fed is back in rate cutting mode.

His interest is purely avuncular [Daily News, third item]
Alchemy of Love blog [Blogspot, of course]

Bear Stearns shares shot up over 8% yesterday after reports surfaced that the Wall Street bank in serious talks with Warren E. Buffett about selling the Oracle of Omaha as much as 20 percent of the firm. But is Warren really riding to the Bear’s rescue? We're skeptical.

It’s hardly news that Bear Stearns has been out shopping a 20% stake to potential investors. There’s been talk of several US bidders and, of course, a Chinese take-out bank making bids. But does Warren make sense? That old guy made out decently with Salomon Brothers but he still hates on them. Yesterday Bess quoted him as saying he how much he found the “brash Salomon culture of big egos, big risks and even bigger salaries to be out of step with his down-to-earth demeanor.” Do you want to be the person who sells him the story that Bear is totally different? We’d rather tell him why Bess Levin was called DQ in high school than try to explain Bear’s internal culture to him.

More importantly, there's little about Bear Stearns to suggest that Buffett would look to put in that kind of money. Trading below book value? You're going to tell us anyone knows what Bear Stearns book value is? Even Bear Stearns admits its guessing about the value of some of the assets it owns. Reliable revenue stream? This company makes much of its money trading securities.

It's also hard to see what Buffett brings to Bear Stearns apart from money and a reputational boost. Bear Stears needs a large cash infusion and a partner that can help it build global exposure. How does Buffett add value to the business? We don't see it.

Probably the strongest point in favor of the rumor is that Buffett is unpredictable. And so that wascaly wabbit might have something this wacky up his sleeve. Just when you thought he was buying trains, he turns around and buys traders.

Yesterday, CNBC’s “simple country reporter” Charlie Gasparino sounded a skeptical note. Nothing we heard would cause us to think that the Old Man of Omaha is anywhere close to buying a huge chunk of Bear Stearns. We do a lot of rumor sorting here at DealBreaker, and we call bullshit on this rumor.

Yale Endowment's Performance: A+ (WSJ) Yale Beats Harvard—in investing. Ba dump bump. Yeah, that was too easy, but I’m only wearing one contact and you would’ve gone there, too. The Yale Endowment posted a 28 percent return for the fiscal year ended June 30, leading the academic world in investment performance for the tenth straight year, and increasing its total value to $22.5 billion from last year’s $18 billion. Though the Crimson’s endowment is significantly larger, at $34.9 billion, it only saw returns of about 23 percent, and as Yale’s chief investment officer David F. Swensen always says, “it’s the motion in the ocean that counts.” The second-best-performing school was Amherst College, which was up 27.8 percent to $1.7 billion, followed by UVA (25 percent, $4.3 billion), Harvard, MIT (22 percent, $9.9 billion), and Johns Hopkins (19 percent, $2.8 billion). University officials would not specify which assets it held or which ones performed the best, but many believe alternative investments, of which Swensen is said to be a big fan, were to thank.

Analyst cuts Merrill Lynch on possible $4B writedown (AP via CNN Money) Goldman Sachs analyst William Tanona said in a note yesterday that Merrill Lynch will have a horrible third quarter. Citing a possible $4 billion writedown in assets, Tanona cut his profit estimate to 15 cents per share from $1.95/share, and lowered his target price on ML to $94 from $108. Though the distressed financial markets have left everyone in bad shape, the AP, playing everyone’s favorite parlor game of “Who’s the biggest loser on the Street,” noted that things look the worst for Merrill because its fiscal third quarter covered more of the downturn in the market than the banks that already reported (Merrill’s Q3 ended September 30, Goldman and Morgan Stanley’s on August 31). ML’s stock dropped down to $69.91 after the note came out, bouncing back slightly to close down 37 cents at $71.75.

BA ditches Boeing jumbo for Airbus A380 (Reuters) British Airways cut its blood brothers bond with Boeing’s 747, forged over several decades, when it announced its switch to Airbus’s new A380 superjumbo. In a mixed plane order worth up to $8.2 billion, BA will be replacing 34 of the airline’s older longhaul planes with 12 superjumbos from Airbus and 24 787 Dreamliners from Boeing Co. BA Chief Executive Willie Walsh denied that there was any political pressure to buy parts that will be manufactured in Britain. "There was absolutely none," he told reporters. "There was no contact, be it formal or informal. The decision was made in the best interest of British Airways. In the engines, the choice of Rolls-Royce was because British is best."

Chuck Norris's Tears Might Solve Credit Crunch (Bloomberg) We’ve always counted “Walker, Texas Ranger” among our top three heroes. For a while, they balked at the idea of devoting an entire column to him on their “serious business website,” but today we get down on our knees and thank god Bloomberg has seen the light of day, and come up with an entire page of gems such as, “Chuck Norris subprime collateralized debt obligations still trade at 100 percent of face value,” "Chuck Norris charges the Bank of England a penalty rate for borrowing. And guarantees its deposits,” and “Chuck Norris doesn't buy gold to hedge against inflation. Gold buys Chuck Norris to hedge against inflation.” (“Chuck's iPhone never needs recharging” wasn’t so good.)*

The Mideast Money Flows (New York Times) Carlyle and other U.S. buyout firms are looking to the Middle East, they claim because it’s a great place to invest. The real reason, which nobody else will tell you, is because you can’t beat Dubai’s public school system.

$$$ Day in the life: JPM trader [IvyGate]

$$$ FOR MEN MAKING $500,000 OR OVER - A QUESTION FROM A REAL WOMAN [craigslist]

$$$ Halo 3: And the Geeks Shall Inherit the Earth [thestreet.com]

Brought to you by Financial Times

Up, up and away. Major indexes pressed close to record highs. It's like we're erasing August from the calendar.

The DJIA up 131.61 to 13910.26, not far from its record close of 14000.41,The S&P 500 up 11.03 to 1528.24. The Nasdaq up 18.08 to 2701.53. The Russell up 6.12 to close at 809.12. The 10-YR Note remains unchanged on the day.

Durable goods orders numbers out today with a decline of -4.9% to $219.53 billion. Orders for nondefense capital goods (excluding aircraft) fell -0.7%. While commercial planes orders fell -41.0%. Transportation orders down -11.2%.

The dollar gained some momentum on the euro $1.4126. The greenback also up against the yen at 115.50. Crude up 77 cents to close at $80.30.

Total number of shares traded on the NYSE today: 1.27 billion. With 2,161 rising and 1,150 declining by market close.

Hunker down for the night with FT Alphaville

Warren Buffett’s petition for membership to the egalitarian brotherhood of People Who Are Fucking Nuts has been officially accepted. Last year, he decided that Berkshire Hathaway-owned Geico would not take part in the Caveman sitcom. Last week he reduced his company’s investment in genocide to an embarrassingly trivial 8.93 percent. Today comes the news that he’s in serious talks to buy a stake in Bear Stearns. Three times = a trend, this one being WB’s insanity.

The New York Times reports that Buffett first approached James Cayne about the purchase last month, when the bank’s stock was about to celebrate its one-year low of $100. Deals have faltered in the past because the bridge player (first, CEO second) has often insisted on premiums as high as 40 percent above share price from outside investors. This time, and no one can say for certain but it may have something to do with two failed hedge funds, a 61 percent decline in third quarter profits and the fact that BSC can no longer afford its much-needed cleaning staff, Cayne is reportedly holding out for a premium of only around 20 percent.

Bear’s shares jumped on the rumors of possible sale this afternoon, with the stock trading up over 8 percent. Punk Ziegel analyst Richard Bove upgraded BSC from “sell” to “market perform.” Spokesmen for both Bear and Buffett declined to comment, which generally means they’re up to something, though CNBC’s Charlie Gasparino said that he “doubts” the reports are true. (Gasparino also noted with what sounded like hurt feelings that “Jimmy Cayne has not returned my calls,” presumably because it’s a beautiful day for golf.)

In 1987 Buffett took a 12 percent stake in Salomon Brothers, a move he later regretted, finding the “brash Salomon culture of big egos, big risks and even bigger salaries to be out of step with his down-to-earth demeanor.” Hopefully he can be reminded of the bad taste SB left in his mouth, which not even a dozen Oreo Blizzards could purge, before it’s too late. Carney's got the keys to his house-- everyone meets there tonight at 8 for an intervention (power of attorney papers have already been drawn up). We lost him on the Sudan. Let’s not lose him on this.

Earlier: Why Doesn’t Warren Buffett Want To Fund Genocide Anymore?

Buffett Among Those Said to Consider Bear Stake [New York Times]

It is over. Sallie Mae has just said that JC Flowers is pulling the plug. A representative of the buyout group led by Flowers apparently informed them of the news today. The buyers have told Sallie Mae that they won't close the deal under the terms of the merger agreement.

But it's never really over till the fat girl sings. And in this case, the Delaware Courts will be the ones making the fat girl noises. Sallie Mae says it doesn't believe that the buyers have any contractual basis for terminating the merger agreement. It "intends to pursue all remedies." Read: sue the Flower children for the $900 million break-up fee.

There are still some who are saying that the deal could close on new terms but that looks highly unlikely now. This break-up is too public, and Sallie Mae's lawsuit threat too obvious, to lead us to think its very likely that the buyers and sellers are going to come to new terms. (But, you know, we've been wrong before. We're just whiskey-soaked reporters speculating on a hypothesis.)

And the Bess Levin Award for unintentionally dirty headline writing goes to whoever it was at Big Charts who came up with this one: "PRIVATE-EQUITY SUITORS OF SALLIE MAE SAY THEY WON'T CONSUMMATE $25 BILLION DEAL."

Text of SLM press release after the jump.

Update: Yep. It's over. This post has the honor of almost certainly being the last thing ever published on this deal before the world learned that it wasn't happening. That's special.

That’s what folks are wondering today. Now that First Data has closed and Harman International Industries and Genesco have fallen apart, eyes are on Sallie Mae. Which way will it go? Will the buyers call a MAC and bail on the deal?

The MAC speculation arises from legislation Congress passed this summer that expands financial aid to students while cutting back on subsidies to student loan lenders. But the odds of the deal falling apart went way up this morning when Bank of America chief executive Ken Lewis made comments that seemed to indicate that the legal changes were causing the buyers to re-evaluate the price they agreed to pay for Sallie Mae.

"We obviously have seen the change in the (education lending) laws. We are trying to assess the impact that might have on the price," Lewis told the Charlotte Observer. Bank of America part of a group of investors led by buyout firm J.C. Flowers & Co. that agreed in April to by Sallie Mae.

Shares of Sallie Mae sunk on the news. And the price of bond insurance for Sallie Mae’s debt sunk to the lowest levels since July.

Things could get ugly. If the buyers do call a MAC, the sellers may well sue. This morning’s Deal Journal outlines the legal argument that Sallie Mae might make if the buyers tried to walk away. “At stake is the $900 million reverse break-up fee the buyers are on the hook for if they want to walk and can’t prove a MAC,” Deal Journal writes.

Sallie Mae shares fall on Lewis comments [Charlotte Observer]
Sallie Mae Credit Protection Costs Fall Amid Buyout Doubts [CNNMoney.com]
Sallie Mae CEO’s Counterattack Against Waffling LBO Buyers [Deal Journal]

Real estate blog Curbed recently sat down with an investor in the field to discuss whether or not Andre Balazs’ High Line-squatting Standard Hotel is symptomatic of a developmentification of Manhattan that’s turning the island into a place where only utterly lame (but sufficiently rich) people will live. A simple ‘yes’ would’ve sufficed, but the expert, perhaps going through some sort of personal problem or maybe having had the unfortunate pleasure of drinking at Joshua Tree last night, took it one step further.

Fuck it, I say. Manhattan is one big joke. I think they should let highrises go up anywhere at this point. What's the point of communities on the island anymore?

Everyone's so priced out, does it matter anymore?

If you want a neighborhood/community, move to Brooklyn.

Let Manhattan be just one big bullshit skyscraper. Tower of Motherfuckin' Babel. But for douchebags.

And the Lord spoke and said, "Let us make sure these douchebags do not understand each other, less they build a Tower of Douchieness. Let one douchebag not understand the other." And thus the languages of Goldman, Lehman, and Morgan were formed and the Lord saw it and it was good.

First of all, this tower already exists, and its name is Windsor Court (and on the UES, Dormandy). Second of all, and we’re just passing this along, analysts from Merrill Lynch and Bear Stearns would like to know, “Hey, why weren’t we included on that list?”

Investor Rant: 'Manhattan is One Big Joke' [Curbed]

Piranhas are nasty little fish known for their sharp teeth and an aggressive appetite for meat and flesh. And today the Commodity Futures Trading Commission announced that it had hooked one of the little buggers.

In a case first brought by the the CFTC in May, a federal court in California has fined Robert Joseph Beasley and his firm, Longboat Global Funds Management, for committing fraud by misrepresenting certain investments held by his commodity pool, Piranha Capital. The CFTC claimed the defendants had Piranha Capital loan $4 million to other Beasley controlled entities without letting investors know that Beasley was running them. They say Beasley misled investors about the security of the loans, and then didn’t collect interest or principal on them. He then allegedly used the value of the unpaid interest payment to calculate his fees. Nice work if you can get it. And not get caught.

The order imposes restitution totaling $13.8 million, of which Beasley is responsible for $4.5 million. The order also requires Beasley to pay a $500,000 civil monetary penalty and Longboat to pay a $1 million penalty.

“One has to wonder about a firm that names itself after a flesh eating fish,” the hedge fund newsletter FinAlertnatives quips.

CFTC Press Release [CFTC]
CFTC Fines ‘Fishy’ Hedge Fund Firm For Fraud [FinAlternatives]

Geoffrey Raymond, the greatest artist of our time, who brought us such masterpieces as “Big Lloyd I (.6 Billion)” (a rendering of Lloyd Blankfein), "Big Jim I: Get Up (I Feel Like Being A) Sex Machine" (Jim Cramer), and “Big Dick I (Hundred Million)” (Dick Grasso), is at it again. This time it’s Maria Bartiromo, whose portrait will be exhibited in front of the NYSE and around Wall Street for the next ten days, and available for purchase on eBay until October 6 (minimum bid is $4,999).

For his latest venture, Raymond chose to interpret the CNBC anchor as the Virgin Mary, which doesn’t seem like much of a stretch to us, if detailed accounts as to what went down on the Citigroup jet and the tips we get from the chippies in our Christian youth group about “how to be a bad girl while maintaining that you’re a good girl at the same time” are to be believed. Raymond, whose work has been described as “early crazy,” also uses the space to weigh in on the alleged friction between Bartiromo and Erin Burnett, because nothing drives the art market like a good catfight. Check it out today (the first 100 passersby will be given the opportunity to jerk off on their favorite part. Credit Suisse employees—you really have no excuse not to).

He’s got all the re-mastered DVDs. He hosts ‘TOC’ marathons with Chuck Prince and Sandy Weill, drawing straws to determine who has to prepare the Chex Party Mix. He’s written op-ed pieces about Felix Unger’s sexual ambiguity. Two summers ago, he laid out $15,000 at a silent auction for a lock of Jack Klugman’s hair. And now Vikram Pandit, who joined C after the bank bought his Old Lane hedge fund last year, will sleep where Tony Randall slept.

The Citi Alternative Investments head has paid $17.9 million for the late Randall’s CPW co-op, topping Widow Heather’s original asking price of $17.85 million. The ten-room residence occupies an entire floor of the Beresford apartment building and, according to the Corcoran Group, “enjoys superb light and impressive park views through 20 windows spanning two exposures.”

For his part, Pandit, according to people familiar with the matter, has apparently said that he would’ve paid that much “or more” for a “1-bedroom shithole” on the corner of “fifth floor walk-up” and “this is the only neighborhood in Manhattan that hasn’t yet been gentrified,” if its presence had once been graced by Tony. (VP already owns Randall’s boyhood home in Tulsa, Oklahoma.) Pandit could reportedly “not give a baker’s f**k” about new neighbors Jerry Seinfeld and John McEnroe.

Upon joining Citi last year, Pandit was greeted by an approximately 40% drop in CAI profit. Old Lane fell 5.9% in August.

What Bubble? [New York Post]

We hear Syndicated Leveraged Finance analysts at JPM, currently in training, were rounded up yesterday and told that “there will be people leaving this group.” No mention of how or when the cuts will come. Heard anything similarly vague and sinister? Let us know.

You're just jealous. You know you wish you had the chorizo to announce an acquisition dressed as Superman.

Our man here is Jose Maria Ruiz-Mateos, one of Spain's more controversial and colorful business figures. He's got everything you want in a cartoon version of a dodgy Spanish business man. Ties to Franco and Opus Dei, mutual legal recriminations against the Spanish government (the socialist government took his assets and called him a thief, he says they're a bunch of socialist jerks), ownership of a football club, and a private army of 13 children. ¿Quien es mas macho? If this guy didn't exist, the Italians would probably have to invent him. And then elect him prime minister.

Now word comes that he's leading a group of Spanish investors who want to buy Northern Rock, the bank that broke Britain. Even though the Brits are totally over their fear of Spanish Popery, there's some doubt about whether Superman's bid will fly. As the Financial Times dryly put it, "the Bank of England and the Financial Services Authority might have to think twice before allowing Jose Maria Ruiz-Mateos take control of the mortgage lender."

Ruiz-Mateos an unlikely bidder [Financial Times]

[Nice to see Eddie Lampert supplementing last month's losses with some choice endorsement work, isn't it?]

Trading IS Sex, Baby [copyranter]

The story of job cuts at Credit Suisse are all over the wires today. The official body count is 150. The most serious carnage came in an unsurprising area of originating and processing residential mortgages. The same areas that Lehman and Bear Stearns cut back.

These aren't considered "Wall Street" jobs by most folks in finance, and cuts those positions have been met with shrugs. If you've spent at least a couple of hours sober in the last two months, you probably knew mortgage origination was taking a haircut.

But at least some of those losing their jobs were New York based mortgage bond traders and sales staff, according to a Credit Suisse executive who spoke to the New York Post's Roddy Boyd. This is the first time we've heard the credit crunch monster chewed up some actual traders.

Good news is that the actual number of job cuts seems to be far smaller than the rumored four hundred. The better news is that lines might be a bit shorter at the Shake Shack. Those bond trader boys can eat.

Credit Suisse's A Bond Victim [New York Post]

If you are wondering why you weren't chosen to serve on the Treasury Department's two blue-ribbon panels that will focus on minimizing hedge fund risk—step one: repeal August—we have the answer: you weren't smart enough to work at Goldman Sachs. And everyone knows that only Goldman Sachs alumni can be trusted to run our economic policy.

At least three of the ten members of the hedge fund managers' panel selected by Goldman alumni Treasury Secretary Henry M. Paulson Jr. and Deputy Undersecretary Robert K. Steel are also Goldman alumni. Panel chair Eric Mindich and members Edward A. Mulé and Daniel Och all emerged from the temple on 85 Broad. Others on the panels are tied to Goldman in various ways. Some manage funds that are Goldman clients, for instance.

But this isn't some sort of secret society type conspiracy. It's just that Goldman fosters a culture of public spiritedness. You can tell this is true because they use those tree-hugger cars to get home at night and totally shorted subprime mortgages, betting against the government program to fool Americans into accepting the burdens of home ownership.

PWG Announcement [Treas.gov]

GM-UAW reach deal to end strike (CNN Money)
Well that was short and sweet. The GM and the UAW have come to an agreement, ending the two-day strike. That's barely long enough to qualify as a real strike in our book -- more like a long weekend, really. It's doubtful that the strike really helped much, although perhaps it resulted in longer "marathon" bargaining sessions, whereas previously the two sides would've stopped for the day at 5 pm. As for the details of the agreement, they're not completely known yet, but it does involve some sort union-controlled trust fund for healthcare. Anyway, good news all around. Now they can get back to the business of losing money on car production, which is much better than losing money from not producing cars.

Vonage Crashes After Losing Patent Case (Forbes)
The perpetually screwed-on-crack Vonage plummeted yesterday after losing yet another patent fight. This time it was against Sprint. Just a quick question: doesn't the fact that they're infringing on the patents of two separate companies suggest that the patents in question are overly broad? It would certainly seem that Sprint or Verizon is probably infringing on the other's patents in the same way, no?

Moody's, S&P Answer Critics Over Bond Calls (WSJ)
The model-builders at S&P and Moody's certainly deserve to take some heat, and we've never been crazy about the whole structure of these companies. All that said, we really don't know what good it will do to bring the companies up on capitol hill, only to get upbraided by politicians who think that the mortgage collapse is somehow a consumer-centric disaster, rather than something mainly causing pain to lenders. And we very much doubt that politicians will ever become introspective and wonder if the government-sanctioned ratings oligopoly is wise, from a regulatory perspective.

Bonanza of mining deals (Oligopoly Watch)
We've missed some of these, but Oligopoly Watch hasn't. This week saw three more deals in the mining sector -- one in gold, one in iron ore, and get this, one in the explosives sector, which is awesome. Orica, the world's #1 explosives maker, bought out Excel mining systems, which makes other mining support equipment. Sorry for missing those, we though there couldn't possibly be any other mining news worth knowing besides BHP Billiton's big gold find. We were obviously wrong.

Update 11:45 PM: DealBook is reporting that the investment bank is laying off about 150 workers from its mortgage-backed securities unit. Sourced to "a person with knowledge of the matter."

Earlier reports: Credit Suisse is rumored to have laid off a massive amount of New York employees today. The whisper number for the layoffs was 400 people in New York. Two people familiar with the situation say that within the bank that's the number people are talking about. DealBreaker has been given strong reason to believe that the actual number number is far lower. We're also told that no investment bankers have been laid off.

The layoffs are said to be a continuation of similar layoffs in mortgage related units at other investment banks, according to a knowledgeable source. The gossip had been that the structured products group took the hit. But we spoke to someone at the structured products desk at Credit Suisse who says that his group is still hiring.

This summer’s credit crunch and subsequent drying up of the leveraged buyout market, have sparked persistent rumors and predictions of job losses on Wall Street. It's clear that there are lots of jitters all across Wall Street.

Credit Suisse could not immediately be reached for comment. We'll update this space as we get more information.

Update 6:30: We're sending a reporter over there to see what's up. Will scout nearby bars for CSers drowning their sorrows.

Update 7:00 We're out of here. Check comments below for additional rumor-mongering. We'll check back in later tonight when we've had a chance to check our email again.

$$$ Deals: A Resurgent Week

In our M&A Roundup for the week ended Sept. 23, transaction values nearly tripled, thanks to four billion-dollar-plus acquisitions. [CFO.com]

$$$ Milwaukee futurist predicted subprime collapse [Milwaukee Biz Blog]

$$$ Intellectual Property Among Magicians [Portfolio]

$$$ Why Sentinel failed [Chicago Business]

$$$ Gaiam Inc. (GAIA) [WallStrip]

Brought to you by Financial Times

Consumer confidence index at its lowest since November 2005 – down even more than the Conference Board’s index prediction of 105.6. Along those lines, existing home sales saw their lowest numbers since August 2002 – dropping 13% since September last year. In spite of these down numbers, it didn’t shake up stocks too much as indicated below.

Musings of two additional Fed interest-rate cuts before year-end persist as economists site sluggish consumer spending and falling home prices. This forecast riding on the coattails of Lennar – home builder who reported a loss of 4% on earnings and as a result has had to cut its employee force by 35%.

Major index numbers as follows: The DJIA up 0.14% to close at 13778.65. The Nasdaq up 0.58% ending the day at 2683.45. S&P 500 down -0.03% to close at 1517.21. The Russell down -0.35% closing at -0.35%. And the 10-Yr Note up 0.09% or 3/32 at 4.626%. And today’s random index:
NASDAQ TRANSPORTATION IX – up 0.79% closing at 2,878.73.

On the NYSE 1,338 stocks were up and 1,938 in the red. Total volume traded today - 1.33 billion shares.

For your reading pleasure, FT Alphaville

Ever the persistent bunch, the Europeans will stop at nothing to get a slice of that delectable American pie. If it’s not attempting to rename the simple hot dog into something called a Frankfurters, it’s our wallets they are after. Now it seems they want the SEC to confirm to their dodgy accounting principles. The New York Times reported today, “In a letter released yesterday, the European Association of Listed Companies said the Securities and Exchange Commission should allow the use of international accounting standards but should not insist that companies follow all the standards. Instead, the group said, the S.E.C. should accept modifications imposed by the European Commission.

Such a change, if approved by the S.E.C., would reduce the power of the International Accounting Standards Board, which is based in London and sets rules now used in many countries.

Currently, companies whose securities are registered in the United States must either prepare their financial statements in accordance with American rules (known as generally accepted accounting principles, or GAAP), or reconcile them to those rules. The proposed S.E.C. rule would eliminate that requirement starting next year.”

Sure, sure. It would probably help our exchanges out by making it easier for foreign companies to list on US exchanges. And there are some advantages to those fancy European principals based accounting standards. But we’re still suspicious of letting the E.U. start issuing instructions to the SEC.

Just keep your mayonnaise off our freedom fries you Belgian busy-bodies!

A Plan to Let S.E.C. Accept Foreign Rules Is Opposed [New York Times]

Fifty years ago today, paratroopers from the 101st Airborne Division escorted nine black students the the doors of Central High School in Little Rock, Arkansas. As Shelby Steele points out on the editorial page of the Wall Street Journal today, the events in Little Rock in 1957 had a dramatic impact on the way the nation thought about segregation, integration and civil rights, in part because of the effect of television. The events were broadcast live across the nation, and watched by something like 100 million viewers.

It was, for instance, the first time that our military leaders had ever looked directly at troops in action over a field commander's shoulder nearly a thousand miles away. And, for many on Wall Street, it seemed to bring them into direct contact with the realities of segregation for the first time. “People on all sides of the civil rights issues in 1957 were shocked by the sight of white mobs and the Arkansas National Guard, under orders from Governor Orval Faubus, blocking nine black children from entering the city's Central High School,” Juan Williams writes in Time Magazine.

The Financial Times, which we once held in high regard for its excellent business coverage (and charitable donations to this very website), goes Live Journal on us today. With the new editorial direction comes exactly what you’d expect: oversharing, misinformation, and horrible (and unsolicited, we might add) advice. And Britney Spears. Not surprisingly, it can all be traced back to Jim Cramer.

The SEC implied yesterday afternoon that Dwight “Sean” Jones, former defensive lineman for the Raiders, Oilers, and Packers blocked regulators from examining the business records of his investment advisory firm, Amaroq. Jones allegedly evaded requests for information, and then told the SEC that the records were no longer available, because

(There’s nothing else to add, because this story is hilarious as is. But maybe just don't give your money to football players-cum-money managers, with the exception of OJ Simpson. He got away with murder. Investing should be easy, by comparison.)

Former NFL Star Sacked By Feds [New York Post]

From the mailbag:

Date: Sep 25, 2007 12:18 AM

Subject: Pirate August Reports & AUM Sept 2007

The monthly was written by a junior analyst name Tassos. Isa Bolotin, Director of Investor Relations, is too busy managing her volatile relationship with Tom Hudson. Hudson is too busy planning the $1mm mausoleum for his clan.

Funny Pirate's only treasure of the month was generated by the most senior analyst that left the firm in early Sept. Who else do they have to put new names on the books? No one. Notice that Pirate's shipwrecks in August is basically its entire portfolio as Pirate sold out of every position except for the four names (BCO, PBY, AGL, and ADG). Can't wait to see the upcoming "Confidential Report."

I highly doubt Pirate has cash to deploy. Its top 4 holdings total about $270mm. According to the AUM as of Sept 07, Pirate listed $374mm. I bet they have over $100mm in redemptions at the end off September.

First of all, we don’t know actually know if there’s anything impure going on between Pirate Captain Tom Hudson and Michael Bolton’s daughter, Isa Bolotin. It would represent a grave error on both their parts—for Isa, because the guy’s two bad bets away from sleeping on her couch and being asked, “Have you moved from that position when I left this morning?”, for Tom, because "Can I Touch You There" takes on entirely new meaning when the person inquiring is your girlfriend's father.

What we do know is that the Jolly Roger’s two activist funds, Activist Fund LP and Activist Fund LTD were both down -6.43% in August, -24.39% /-22.84% August YTD, and -16.17%/-14.65% since inception. And that in September 2006, Pirate was managing $1.802 billion. September 2007? $375 million. If those numbers don’t say “Let me get back to you on those redemption requests, I'm getting a BJ from the investor relations woman right now,” we don’t know what does. (In which case, good for them. Shame about those losses, though.)

Pirate AUM Sept 2007 [pdf]
Pirate Returns August 2007 [pdf]
Pirate August Monthly 2007 [pdf]

That huge rush of Alan Greenspan publicity last week seems to have penetrated into the last hold-outs of the ruins of the evil empire. Yesterday, pictures surfaced of Fidel Castro sporting a copy of Greenspan's book, The Age of Turbulence. Perhaps most interestingly, Castro’s copy seems to bear a discount sticker from Barnes & Noble. Amazon could not be reached for comment.

But you know who was reached for comment: fake Jeff Skilling!

“Alan Meatspin needs to learn that it’s better to have no friends than to have Communist friends,” Skilling allegedly writes from insider his jail cell.

Click the picture for a close up of the Barnes & Noble sticker.

Greenspan and Castro, sitting in a tree, agreeing on monetary policy [Newsgroper.com]

Yesterday we posted an item on the looming end of fee based brokerage accounts that involved some confusion about how brokerages use the term "wrap account." We've since corrected the item by simply deleting the term "wrap account," which our brokerage friends tell us is a specialized term that shouldn't be used to refer to just any fee based account.

Wrap Accounts, in the formal language of brokers, are accounts where clients pay for investment advice, and the firms and brokers selling the advice need to be registered investment advisers with the bonding and heightened duties that go with being an investment adviser, according to a broker we spoke to. The non-wrap, fee based accounts had the advantage of charging a fee structure similar to the wrap accounts but could be sold by brokers who were not also registered investment advisers.

"The 'Wrap Account' and 'Fee Based Account' distinction is a narrow one, and could be seen as a distinction without a difference," a ex-broker writes. "When I was a retail broker at Morgan Stanley we were constantly reminded that our asset based fee accounts were not wrap accounts, and that we were not charging our clients for the advice we were giving them. Fee based accounts, or asset based accounts, or asset based fee accounts—I remember all three names being used - were merely a different way of billing for transactions. MSDW (as it was called at that time) called them Choice and we were paid nicely on them."

Of course, this distinction seems to be more of a matter legal formalism than real practice.

More on it anyway, after the jump.

Apple issued a stern warning yesterday to cult members that they may “permanently damage” their cell phone/iPod combos by using “unlocking programs” in an effort to get the Cadillac of mobiles to work on unauthorized, non-AT&T networks. Speaking in hushed tones the company was vague in describing the actual technical problems, only saying that fraternization with the evil programs (that might jeopardize their licensing agreement with AT&T) would render the phone “permanently inoperable” when users install future software updates. Any issues that arise from the installation of forbidden software are not covered in the warranty.

In a recent interview, Mock Turtleneck cackled at the idea of being threatened by such programs. "It's a cat-and-mouse game," the High Priest of A said. "We have a lot of really good cats."

Apple Sounds Warning on iPhones [WSJ]

First Data was supposed to be one of the big leveraged buyout deals teetering on the edge of extinction thanks to the credit crunch this summer. The debt load of the company was said to be at the outer limits, leaving it with razor thin margins for slip-ups. But last week investors snapped up its $5 billion buyout loan. In fact, the loan was over-subscribed by about $2 billion.

Last night First Data said the deal had closed. First Data has gone private, and its stock has been removed from the New York Stock Exchange.

Earlier this month, the buyout firm behind the deal, Kohlberg Kravis Roberts & Co, was said to be in a nasty negotiation with the seven banks involved in arranging the First Data transaction. The banks had become nervous about massive loans on their books, and were pressing KKR to renegotiate its deal. KKR eventually did offer one concession—a leverage ratio financial test in its bank loans that has been described as “toothless” and “mere optics.”

While there are still questions about the financing—banks continue to look for ways to syndicate the nearly $24 billion in debt financing they committed to the deal—but fears that the credit crunch might derail the biggest deals, or leave a the financing banks with large losses, seem to be abating.

KKR completes $26 billion First Data takeover [Reuters]

Increasingly, it seems that the way up on Wall Street is reached via an exit ramp. There was a time when leaving Wall Street’s big firms to launch a small investment fund was viewed as a way of getting off the fast track. It may have been bold or it may have been a semi-retirement but it was seldom seen as a way of climbing upwards. Last year, however, things began to shift as Wall Street firm began buying hedge funds and hiring their managers to take over their own alternative management division. Suddenly the path to the top of the firm—or at least, the path to serious riches—led through places with names like Old Lane.

The latest version of this story comes from in the form of news that Morgan Stanley is in talks to buy a minority stake in Traxis Partners LLC, a $1.5 billion hedge fund run by the investment bank’s former chief strategist, Barton Biggs. The outspoken Biggs is a frequent guest on CNBC and the author of tell-all Hedgehogging. During his thirty years at Morgan Stanley, he became a well-known figure to many on Wall Street.

He comes from Wall Street blood. His father was chief investment officer of Bank of New York. After Yale, where he studied under the poet and novelist Robert Penn Warren, Biggs taught English at a prep school and wrote some short fiction. In 1961, he joined EF Hutton. He joined Morgan Stanley in 1973. He left the firm in 2003 to start Traxis.

He was well-liked by brokers and traders at Morgan Stanley.

"Barton Biggs was a joy to listen to every morning," one former broker tells us. "I felt like I got smarter just listening to him. He was one of those guys who seemed to have it all together. He had an amazing grasp of everything that was happening in the markets. He was an optimist, even in the dark, cold winter of 2001."

Traxis reportedly faired decently in August, losing just 2.5 percent for the month. It’s up about 9 percent this year, according to the Financial Times.

Morgan in talks over Traxis stake [Financial Times]

EchoStar says to buy Sling Media (Reuters)
Last night, satellite TV operator Echostar announced the acquisition of Sling Media, the company that brought 'placeshifting' into the public lexicon. Ok, our spellchecker is indicating that placeshifting isn't a word, so maybe it's not so common yet. So in case you didn't know, the company's box sits next to your TV, a la TiVo, allowing you to watch what's on your tube anywhere you get an internet connection. Pretty cool. Naturally, they've faced legal threats, but for the most part, they've yet to run into too much trouble.

AMR shares sink on analysts' worries (BusinessWeek)
Uh-oh, are we entering another season of discontent at the major airlines? After all it has been several months of good news, which is probably a record boom cycle for the industry. A bust is always on the horizon; the only question is how far away the horizon is. Anyway, AMR recently said in a filing that the all-important revenue per passenger mile measure was trending down, prompting analysts to worry, prompting the stock to sell off (a great example of efficient markets, mind you). Unless there's something unique to AMR here, we could see a similar condition across the others.

China Construction Bank up 32% in Shanghai debut (MarketWatch)
Another bank booms out of the gate in its IPO debut in China. Actually, not so fast. Apparently the 32% one-day pop was actually a bit on the low side, leading people to speculate the flood of new shares into the market (not to mention the availability of Hong Kong investments) may be sopping up some of the excess liquidity going into stocks. Analysts had been calling for a 47% jump.

Gas Emissions Rarely Figure in Investor Decisions (NYT)
Well this has got to be the most obvious headline of the day. Investors aren't factoring in gas emissions when picking a stock? Who'da thunk? Just try imagining it. You want to buy a share of YKK Zipper, it has great CAGR, a low PE, even more compelling EV/EBITDA, a nice dividend, so big that when you strip out net cash, they're practically paying you to own the stock. And yet, the company emits a lot of greenhouse gasses, because obviously the pants zipper business is rather energy intensive. Gotta say, pretty hard to imagine folks not buying for that reason. Also, reveals the ludicrousness of forcing companies to put this info in their SEC filings, seeing as it really has no bearing on investment decisions.

$$$ Soccer mom and investment banker dad for same [craigslist]

$$$ Suit Up: Loro Piana [Banker's Ball]

$$$ Official UAW strike Car Pundit Drinking Game [Jalopnik]

$$$ Swedish game show host vomits live on air (it's better without the volume), gets back on the horse. [Breitbart]

A pair of academics at MIT have published a paper that seems to confirm the Rothman Theory of this summer’s Quant Bloodbath. The Rothman Theory—named for Lehman Brothers analyst Matthew Rothman who laid it out in a note published in the midst of the blood bath—held that the initial quant fund losses were triggered a large hedge fund unwinding one or more market-neutral portfolios.

Now Amir E. Khandani and Andrew W. Lo have used financial models to simulate this summer’s bloodbath, and what they found largely confirms the Rothman Theory.

The findings are likely to be welcomed by the quants, who are still smarting from what they think was biased reporting about their troubles this summer. Their findings suggest that the quantitative nature of the losing hedge funds was incidental, and the main driver of the losses in August 2007 was the firesale liquidation of similar portfolios that happened to be quantitatively constructed. That firesale was likely set-off by a hedge fund facing margin calls or seeking to pre-emptively reduce risk after its credit portfolio was hit by this summer’s collateral and credit crunch.

You can see why this is appealing to the quants. The math magic still works! It’s was just those 25-standard deviation moves triggered by subprime. How were the funds supposed to know they were all following the same strategy? This is why the Rothman Theory was so popular with quants to begin with.

But the quants might not like the conclusions the egg-heads draw. Their findings also suggest that hedge funds may have grown more dangerous since the demise of Long-Term Capital Management in 1998, according to Portfolio magazine’s Odd Numbers blog. Part of the problem is that long-short equity hedge fund returns are increasingly correlated. What’s more, the finding that the source of this summer’s long-short bloodbath seems to lie in a completely unrelated set of markets and instruments—the credit market—suggests that systemic risk in the hedge-fund industry may have increased in recent years.

Hedge funds are becoming more like banks, and the reason that the banking industry is so highly regulated is precisely because of the enormous social externalities banks generate when they succeed, and when they fail. Unlike banks, hedge funds can decide to withdraw liquidity at a moment's notice, and while this may be acceptable if it occurs rarely and randomly, a coordinated withdrawal of liquidity among an entire sector of hedge funds could have disastrous consequences for the viability of the financial system if it occurs at the wrong time and in the wrong sector.

What Happened to the Quants in August 2007? [SSRN; link downloads pdf file]

Doomsday Clock for Hedge Funds Is Ticking [Portfolio.com]

You’d think that Jeffrey Epstein would want to go out with a bang, before he is (most likely) sentenced to 15 months in prison to be followed by 15 months of home confinement, for asking underage girls to work out the kinks in his back and then chill for a sec while he got physical with a towel. For the Epstein fans in the crowd (these are generally the same people who count John Carney and Jeffrey Jones as heroes), we are sad to report that for his finale shebang, the man has gone soft (hahaha, get it? Like a penis going soft? You liked that).

Johanna Sjoberg was a “church-going” brunette studying psychology at Atlantic College when she was approached by Ghislaine Maxwell, Epstein’s consigliere of jailbait. She was hired to answer phones and serve drinks at Epstein’s home for $20/hour, a job which she described as a “great opportunity,” of which all of her friends were “jealous.” She soon got a raise. Instead of fielding calls from noted pal Bill Clinton (“Just tell him I said ‘Well done, Sugar Tits’”), Johanna was making $100 for “rubbing feet.” The coed found it “fun” and “really liked [Epstein” and “didn’t get any sexual vibes from him” and “viewed him as a great uncle who wanted me to be happy.”

During the next several years, Epstein showed Sjoberg “the basics of massage,” introduced her to Prince Andrew (who shook her breast, which is a standard greeting in the UK), asked her “to do the nipple thing,” paid for her schooling and flew her to the Virgin Islands, where they watched movies.

Even though Sjoberg says the whole thing was “like a fairy tale,” she still decided to keep it a “secret” that Epstein “was a dirty old man,” preferring tell friends and family that he was “like [an uncle].” And that’s all there is.

Disappointed that the best anyone could do by a man who kept the makers of terry cloth in business for the last twenty years and whose police report required a cigarette and a shower after being read was this half-assed Made-for-TV-Movie, he-was-like-my-uncle-who-molested-me-in-the-poolhouse slop? Us, too. Really disappointed. So much so that we almost considered sending Carney in to work his magic, but then remembered you can’t get much done with a eunuch. So we’ll just say this-- were YOU made to “do the nipple thing” to Jeffrey Epstein? Call 212-334-1871. We’ll wring something sick and twisted out of this yet.

Prince Andrew's friend, Ghislaine Maxwell, some underage girls and a very disturbing story [Daily Mail]
The Truth About Jeffrey Epstein and 'Vanity Fair' [Gawker]

Brought to you by Financial Times

Off to an optimistic start, stocks took a downturn after late morning trading. Even less optimistic, the euro $1.4086 against the dollar. Notice the influx of tourists brimming the streets of Times Square? The dollar will also get you 114.85 yen.

In major indexes, the DJIA fell down 31.95 to 13788.24. The S&P 500 declined 5.99 to 1519.76, and the Nasdaq declined 3.80 to 2667.42. The Russell 2000 index down 9.05 to 804.06. Finally, The 10-year note rose 2/32 to yield 4.624%. Today's Index Spinner: S&P EURO INDEX 1,780.76-3.37-0.19%

The tech sector saw a bit more action than others today with AAPL up 2.6%, MSFT up 2.6%, and EMC up 6.8% in anticipation of the Halo 3 launch.

Tomorrow sees Consumer Confidence announcements as well as Existing Home Sales. Both report at 10amET.

For more market hotness visit FT Alphaville

We’ve just begun the last week of fee-based brokerage-accounts.

This spring a federal court struck down the rule allowing the accounts, requiring brokerages to shut down the programs by October 1st. The accounts were a popular choice with some brokerage customers, particularly those who traded frequently. Where traditional brokerage accounts charge per-transaction fees, the flat fee accounts charged a flat fee—usually between 1% and 3% of assets—for an unlimited number of trades. For frequently traders, the accounts could create substantial savings.

Wall Street brokerages loved the accounts, and so did federal regulators. In fact, the accounts were first created under a rule proposed by the Securities and Exchange Commission in 1999. At the time the SEC was trying to find a way to discourage “churning”—the practice of brokers and financial advisers encouraging customers to make more frequent trades to generate fees. After brokerages started offering the accounts, churning complaints dropped 43%.

More on the growth and death of the flat fee accounts after the jump.

In the Anglo-Western world, financial institutions left and right are patting themselves on the back for adding more of that “other” gender to their echelons of upper-management.

According the Financial News Online, “The number of female directors on the boards of the 20 banks surveyed has increased by 75%, from 20 to 35, and the overall percentage of female directors has risen from 7.7% to 12.3%. More than half of the respondents increased the number of female directors in the past five years.”

And according to a diversity survey conducted by Financial News, it’s important for banks to hire more women and for these banks to encourage support groups to “mentor” women. Because clearly, the fairer sex needs more mentoring…?

Women Gain Larger Presence on Banks’ Boards [Dealbook]

Banks bring in more women as directors [Financial News]

Do Women Belong In The Kitchen? [Askmen.com]

This week Greenspan was everywhere defending his decision to encourage millions of Americans to take out variable mortgages in 2004, even while he was about to embark on a huge interest rate raising campaign.

Even Barbara Walters poked fun at her old boyfriend, scoffing at Al's real estate record on "The View" this week. Walters recounted how Greenspan convinced her not to buy a Fifth Avenue apartment in the mid-'70s because it was a "bad investment.

Listen To The Shillers, Not The TV Shills [New York Post]

Sadly, the amount of activity on the famous floor of the NYSE is dwindling. A space once filled with the roar of brokers and clerks on the floor buying and selling stocks has been largely replaced with computerized trading . From it’s peak of over 3,000 members, the crowd has tapered off to about 1,700.

Dealbook reports this morning: "The decline in activity at the exchange’s headquarters at 11 Wall Street is palpable. Tourists no longer queue up by the hundreds to survey the floor from the visitors’ gallery or watch the ceremonial ringing of the opening and closing bells. Excluded for security reasons since 9/11, they can only wander by the building that has long symbolized the heart of American commerce.
If they could get inside, they would see that a once-vital organ has been reduced to a reliable backdrop for financial shows on cable."

In the coming weeks, the exchange will close down two trading areas it added decades ago. Dealbreaker is wondering what the NYSE plans to do with this extra space. After tossing around some ideas – here’s what we came up with:
- A Starbucks or two. The floor of the NYSE might be the most expansive area that doesn’t have a Starbucks.
- A food court, featuring a Cipriani, Robert’s Steakhouse
- A dry cleaning service – have you seen the pit stains under those guys arms?
- An apprenticeship booth manned by Tim Sykes

You guys are a creative bunch, surely you must have some ideas what the NYSE can do with the added floor space.

New York’s Shrinking Exchange Floor [Dealbook]
Next to Downsize on Wall Street? The Exchange Floor [New York Times]

Why is Oliver Stone sitting idly by while someone else makes his sequel? Old boy doesn’t much care for the Street, in its current form. For one thing, it’s no longer a place where a little guy can earn himself some ill-gotten gains on his own two feet. “Gordon Gekko couldn’t manipulate the markets like he did back then,” Stone says. "It's so big, so huge, that to be a minor player, you need to be a major bank."

Also, even though he has Google Alerts set for “greed,” “CEOs and secretary hos,” “Schwarzman + crabs,” and “Wall Street + movie ideas,” nothing’s jumping out at him. Plus, stuff’s harder to “get” than it was twenty years ago. “The biggest dramatic story is Enron…But frankly I read the books, and I still can't understand what they did. It's very hard to do a financial movie, to make stocks and bonds sexy and interesting."

Though one of Wall Street’s original consultants, Carl Icahn, has yet to kick it (a Snapple fact the director may not have been aware of), Stone feels “the flamboyant tycoon” has been displaced by big corporations, and thus renders a Part II of his own making impossible. This may be for the best, considering Stone’s opinion of the behaviors of these men, which he compares to peacocks swelling, and characterizes as “tasteless and disgusting.” And though in doing so we may simply be creating a crib sheet from which Stone can carry out his hate-crimes, just for fun, let’s see if we can name any flamers with some material ripe for the taking. You start.

Oliver Stone: Life after 'Wall Street' [Fortune]

And it seems to be, roughly:

- Don’t monumentally fuck up--> get a nice bonus.

- Screw things up beyond all of our wildest hopes and dreams--> don’t get a nice bonus.

Reuters reports that Bear Stearns’s nine-month compensation fell 6 percent to $3.10 billion ($199,730/employee). Payout for all of last year was $4.34 billion. Anyone who can correctly identify the event that may have imparted losses on BSC’s trading, financing and hedge fund businesses is in for a treat.

On the other side of James Cayne’s golf game: Morgan Stanley, which set aside $13.4 billion for the first 9 months, up 25 percent and set to match or exceed last year’s $14.4 billion ($280,000/employee) and Lehman Brothers, which set aside $7.33 billion for the first 9, up 14 percent and about $255,000 per employee.

Goldman, because John Carney predicted it would, is also set to increase bonuses ($565,000 per employee), though this would be the case even if Lloyd Blankfein’s top secret hair restoration project went over budget. GS said it reserved $16.9 billion in the first nine months, up 21 percent from last year’s period and already exceeding the $16.5 billion set aside for all of 2006.

Goldman 3rd quarter shows bonuses poised to rise [Reuters]

The whole mortgage meltdown situation—don’t much get it, don’t much care. Per usual, we’re not really interested in delving a lot further than “Who’s to Blame?” but apparently, we can’t even do that right. Previously, we (in cahoots with Bear Stearns, who’s always in cahoots with someone) had sent singing telegrams dripping with vitriol and pipe bombs to the poor and Alan Greenspan. Over the weekend, we found out that represented a grave error in judgment on our part (conveniently, we—meaning me—were able to atone for our misguided sins against the country’s underprivileged/that crazy old guy. Carney, having no such get out of jail free card, will be going to hell).

As a guest on Rupert Murdoch’s “Forbes on Fox,” Richard Karlgaard, publisher of the magazine, was asked by host David Asman “what’s the deal” with home foreclosures, the economy, etc. His response, if you’re not Jerry Falwell taking part in this dialogue from the grave, may surprise you:

Well, what I think is that we're seeing the first generation of home buyers who, in school, were taught to put condoms on bananas instead of learning about compound interest. This is not a good thing, but, ah, we have to work our way through it and the only way the market can clear, as Neal [Neal Weinberg, a senior editor at Forbes] said, is for the foreclosures to happen.

Other horrible events you can trace back to schools teaching kids to put condoms on bananas include but are certainly not limited to: 9/11, the theory of evolution and Global Alpha’s disastrous August (which actually hinted toward Sex Ed. being to blame in an earlier version of its letter to the investors).

Incidentally, if this was meant to be a preview for what we can expect from the Fox Business Network, color us excited. High school health classes have been getting a pass for TOO LONG.

The Publisher of Forbes Magazine, a Regular on Fox, Blames the Mortgage Meltdown on Sex Ed [News Hounds]

Few now believe that Northern Rock has any chance of continuing as an independent entity. Its executives are scrambling now to find a way to keep the rock floating while a deal to sell the bank or find a cash-rich partner can be put together.

Over the weekend, rumors began spreading that several hedge funds might bid on Northern Rock’s mortgage book, hoping to pick up the home loans at a significant discount. Chris Flowers, a former Goldman Sachs banker who now runs his own shop called JC Flowers, may be joining with Citadel and Cerberus to bid on the assets, according to a report in the Sunday Telegraph. may join with hedge funds Cerberus Capital Management LP and Citadel Investment Group LLC to split up the U.K. lender, The Sunday Telegraph reported, citing an unidentified person familiar with the proposal.

Flowers first came to public attention when he lead the consortium of new creditors that bailed out Long Term Credit Bank, and in the process made a hefty profit. JC Flowers led the consortium of investment firms and banks buying Sallie Mae. Citadel has gained a reputation for picking-up the assets of financially strained companies at a steep discount. Last year it bought Amaranth’s assets as that hedge fund collapsed and this year it bought assets from Sowood.

King of the dealmakers [Sunday Telegraph]

Actually, not off to a bad start. She's in two mutual funds.

And, sorry, Jim Cramer. She's never heard of you.

TheStreet.com Video [TheStreet.com]

Hat tip to Crossing Wall Street.]

Rumours of massive gold find boost BHP Billiton (Guardian Unlimited)
Shares of base metals miner BHP BIlliton jumped on rumors that the company had found the world's largest gold reserve. Good for them, if true. This reminds us of the age old question relating to gold-backed currencies: what if someone were to find some ridiculous amount of gold in their back yard? Would that destroy the currency overnight, as the value of the world's existing gold plummeted? (The picture on the left, of course, is of a man adding value to the economy, while dipping a pan into water, looking for gold).

Banks Reduce Backlog of Unsold Debt to $370 Billion (Bloomberg)
The gigantic debt overhang was reduced by 2% last week to a mere $370 billion. Banks were able to find buyers for loans for First Data and Allison Transmissions. $370 billion may seem daunting, but don't worry. Remember back in 2001, when people said we'd never work through all of the internet bandwidth we'd built up? Well now it's 2007, and once again, we're laying more fiber across the oceans. Just last week, news emerged that Google lay a pipe to China. Of course, it's not quite a perfect analogy, we're just saying, stuff does get worked through in due course.

Wal-Mart Asks Suppliers to Rate Energy Use (WSJ)
Wal-Mart will ask its suppliers to measure the amount of energy that goes into making their products. Some might see this as yet another cynical attempt on the part of Wal-Mart to ingratiate itself among activists. Or, it could have a legitimate business reason to do this. After all, given two equal products, the one that required less energy is probably more efficient. Any company can fall on their sword with respect to pricing, but by looking at a company's energy consumption, you can get a good sense of how tight a ship they're running. So by asking companies to calculate this stuff, Wal-Mart should build a good profile of its suppliers.

Dell to sell PCs, notebooks in China through Gome stores (MarketWatch)
Dell continues to do what once would have been unthinkable: find retail partners for its computers. While it looks to eke out shelf space in the US at some second-tier electronics shops, the company has signed a deal with GOME, China's biggest electronics store, to distribute its computers there. We're not sure if they're having the same problems in China as they're having here (namely that consumers want to touch and feel a laptop before they buy it), though it would make sense. As such, this sounds like a decent score.

$$$ Liquidity Feedback Loop [Going Private]

$$$ Stephen Schwarzman has a coke problem. What? [NewsGroper]

$$$ Wallstrip Chat: David Eun [WallStrip]

Brought to you by Financial Times

This week had investors adjusting to Tuesday's Fed announcement and seeing increases in stocks, currencies and commodities. Texas Instruments finishing up the week as they launched a $5 billion stock-buyback plan and increased their cash dividend 25 percent, launching its shares up 3.2%

The euro hit a new record high above $1.41. The dollar was at 115.40 yen down from 114.42 yen late yesterday. The euro was at $1.4080 from $1.4066 late Thursday.

Most active stocks on the Nasdaq. ORCL, MSFT, QQQQ and JAVA.

The DJIA up 52.68 or 0.38% closing at 13819.38. The S&P 500 added 6.94 1525.69 up 0.46%, and the Nasdaq up 16.93 to 2671.22.

On the NYSE today, 2,089 stocks in the green and 1,186 in the red, with total number of 1.41 billion shares traded.

Finally, we leave you with this sage like pearl of wisdom from Jack Caffrey, U.S. stock strategist at J.P. Morgan Private Bank who told the WSJ, "Good earnings news will make people happier."

It only gets better at FT Alphavile.

Tim Sykes has chosen to respond to Trader Monthly’s response from earlier today, re: them not letting him come to their party. We have nothing else to add. Let’s just all stand back and let the two parties destroy each other, like the Sunnis and Shiites, Betty and Veronica. That’s what you want anyway, isn’t it?

a. You didn't behave like a responsible member of the financial community

In what way? Or do you mean I should wear suits all the time, hide any sign that I have a personality, sugarcoat everything I say, act confident at all times, never talk to industry outsiders and live a superficial and ultimately meaningless life? If so, then you are 100% correct.

b. You felt no remorse at losing people's money

This is horrifically untrue. Losing money for the first time in my life has been very difficult to deal with. If you had read the complimentary copy of ‘An American Hedge Fund’ I sent to you, you’d see that my relationships with many friends and family members have been greatly damaged by my fund’s losses. In short, these losses have changed my life.

c. Other traders didn't want you at the party

I get 50-100 emails/day from traders and non-traders alike, telling me how my story inspires them, but you can’t please everybody!

d. You called yourself a "cheap Jew" on episode of wall street warriors

You’re actually gonna try and play this card—are you that desperate to try to find a legitimate reason for banning me from your ‘trader community’? Yes, I do believe I called myself this because I believe in self-deprecating humor. Somehow I think ‘Borat’s’ $260mm worldwide gross kinda makes this statement null and void.

The one episode I said this in has now aired over 200 times, was it your first time watching it over the weekend when you flip-flopped allowing me to your party and then changing your mind?

_________________________________________
What’s particularly revealing is that none of these ‘reasons for turning on a fellow trader’ were even mentioned in Randall’s email to me. Sounds like ‘Traitor Monthly’ is scrambling around, trying to justify stabbing a trader in the back.

Here’s a friendly tip, for better or worse, my book is brutally honest, why don’t you read it and then use ACTUAL FACTS against me. That way you’ll find some much better reasons to expel me from your community.

Uh-oh. For the fourth time in a decade, Prada is considering an IPO, according to Bloomberg. We remember all too well the last time this happened—in 2002. The markets promptly the beat a hasty retreat—five years backward, to 1997 levels. The dollar declined to historic lows against the euro.

Prada blames the declining markets for their cancelled IPOs but would be investors are lucky they were scrapped. When the company first considered a public offering, analysts valued it at as much as 8 billion euros. Now they’re saying it’s worth between 3 and 4 billion. As Portfolio’s Felix Salmon points out, This decline came at a time when the 14-member Bloomberg European Fashion Index has more than doubled since 2002.

So what happened? To begin with, Prada made two costly acquisitions in 1999 that now look like serious mistakes.

“Jil Sander and Helmut Lang were disasters for Prada,” Fashionista’s Faran Krentcil tells us.

Another challenge has been the crowding of the market niche that Prada once dominated. The list of Prada competitors is far longer than it was in 2001. Brands like Burberry, Marni, and Marc have all made huge strides in what our Fashionista sisters call “quirky chic”

“Prada used to own that aesthetic,” Faran says.

Prada Seeking Advisers for Luxury IPO, People Say [Bloomberg]
Prada's Underperformance [Portfolio]

In honor of the upcoming holiday, Mattel’s executive vice president, Thomas Debrowski, issue an apology to China on behalf of Mattel, for a massive number of recalls on toys following the revelation that some had contained excessive levels of lead paint. “Mattel takes full responsibility for these recalls and apologizes personally to you, the Chinese people and all of our customers who received the toys,” Debrowski said in a press conference today. Then he added in a statement that the 21 million take-backs were “overly inclusive, including toys that may not have had lead in paint in excess of U.S. standards.” The reason cited for the (possibly) unnecessarily high number of recalls was that the company “puts safety first.”

So, you know, if you think about it, Mattel’s not really at fault here. If the toy-maker is guilty of anything, it’s being too cautious. And not to go there, but perhaps Mattel’s the one that deserves the apology. (Which is exactly how the DBJ’s celebrate Yom Kippur—by asking others to atone for what they’ve done to us).

Mattel apologises to China for toy recalls [Reuters]

A representative from the “Trader Monthly” community just called to let us know that Tim Sykes was disinvited from the mag’s Tuesday night party for reasons greater than “the pink bathrobe.” They include the fact that:

a. Tim doesn’t behave like a responsible member of the financial community.

b. He showed no remorse for losing other people’s money (TM cited an e-mail from Cilantro in which the fund’s manager noted, “At least I didn’t lose double digits this month,” which Global Alpha only wishes it could say to investors).

c. Other traders didn’t want Tim at the party.

d. On this episode of Wall Street Warriors, Sykes refers to himself as a “cheap Jew.”

If Tim promises to atone for his self-loathing comments tomorrow, TM will consider allowing him to attend next year’s celebration. In other news, we’re told that Zach Michaelson was also banned from the party, and resorted similarly unsuccessful begging tactics, as well. E-mail exchanges (should they exist) TK.

Earlier: ‘Trader Monthly’ Will Not Have Its Reputation Tainted By Tim Sykes (Zach Michaelson, Sure)

We’re on the record as being skeptics of the charity industry. But even we were surprised to read how little Blackstone’s Stephen Schwarzman gives away. The latest issue of Contribute magazine carries a story by Michael Gross describing the paucity of Old Crab Claws charitable donations.

Perhaps to get him started in that noble pursuit [of charitable giving], the venerable New York Public Library chose to honor him at its annual corporate dinner in June—prompting the usually businessman-friendly New York Sun to pointedly note that Schwarzman’s name appears nowhere on the Chronicle of Philanthropy’s list of the 61 most generous givers. Nor is it on BusinessWeek’s Top 50 Most Generous. And it’s no wonder: the 2006 tax return for his Schwarzman Charitable Foundation shows five-figure assets of only $63,424 and notes that only $991 of that is being held for charitable purposes.

Gross is shocked that Schwarzman gives so little to charity. “You’ve proven you can bring home the bacon better than anyone else right now. But so what?” he writes. “When are you and your colleagues going to start spreading around more of the pork?”

We had a different reaction. This is a man with a will of iron, we thought. Anyone with as much money as Schwarzman has is no doubt besieged by charity racketeers seeking to exploit feelings of charitable obligation to fund their favored causes. To stand up against this horde, to refuse to seek public approval lavished upon the likes of Warren Buffett, to turn a deaf ear on the mockery from media types like Gross, to resist the temptation to attempt to buy a VIP ticket through the pearly gates...well, it strikes as heroic.

But then again, maybe he’s just cheap.

Hoard The Bacon [Page Six]
Hedgehog Heaven [Contribute; pdf file]

So okay, Absolute Capital’s insane manager Florian Homm abruptly resigned on Tuesday. Okay, the shocking departure caused investors to pull more than $100 million, in turn revealing that the positions were illiquid. Okay, Ab-Cap was then forced to halt redemptions for a year, causing stock to drop an impressive 90% this month. Are those reasons for the AIM-listed hedge fund to not ask investors if it’s okay to reset performance fees so it can continue to earn income while it attempts to wind down nearly $530 million in undisclosed holdings in illiquid shares of US companies? If you answered ‘No,’ you’re in good company with Absolute, who sees no problem with slapping people in the face, either.

Chief executive Jonathan Treacher said yesterday that he will be asking permission of investors in five of AC’s eight equity funds to agree to split off the illiquid holdings, “leaving a rump fund that would be locked up for a year,” and requesting a reset of the base for calculating performance fees, so they can continue to do stellar work. Unless two-thirds of the investors say “Sure, light more of our money on fire,” liquidation will likely follow, the company said.

Do you think even Tom Hudson would have the pair to make such a request? If he had any investors left to ask, probably yes!

AbCap to reset performance fees [Financial Times]
Absolutely Ridiculous [Breaking Views]

The row over “Trader Monthly” disinviting Tim Sykes to this year’s “30 Under 30” party is so fantastically petty and stupid we can hardly keep our legs crossed. Basically, the week before Tuesday's awesome soiree at Gold St.—and make no mistake, it was awesome, if you’re into the B&T crowd—a VP from the magazine emailed Tim to say that while he could not bring a camera crew from MSN with him (which had previously been tentatively approved), he was still welcome, on his own. This was last Friday. On Monday, young Sykes received a second email, informing him that actually, he couldn’t come, either.

When Tim called “Trader Monthly”—which he now refers to as “Traitor Monthly”—to press the matter, he was told that the reason his presence was no longer necessary was that he’d made a mockery of the magazine after he was named as one of 2006’s top thirty traders under thirty. How was the mockery made? By “wearing a pink bathrobe” while executing trades during this episode of Wall Street Warriors (Ed. Note: uh, let’s get our facts straight, people: it was royal blue) and “showing up drunk to interviews.” Possible color blindness issues aside, these were two points that Timmy could not argue. Obviously, a stalemate had been reached.

So Timmy decided to take it up with the VP’s boss, Randall Lane, Editor-in-Chief of the magazine. After sending what he describes as “at least ten emails,” Sykes finally got a response. A dialogue ensued. Tim made the following points, in an effort to be allowed to attend:

1. He’d already told his friends he’d be going. They were all going to meet there and then go out after. Did “Trader” really want to force him to break these plans?

2. He wouldn’t bring cameras. He’d try to keep his inner media-whore in check. (But a harlot’s a harlot, so he made no promises, just said that he’d try.)

3. He had two girls lined up to come with, and they’d bought new dresses and everything.

4. CNBC and Penthouse believe in him.

5. This isn’t fair.

"Trader Monthly" countered with:

1. You are a “self-promoter.”

2. The pope is Catholic.

3. Your results for last year were “laughably horrid.”

4. a. Your circus-freak behavior made a mockery of us, a legit publication.

b. Nobody makes a mockery of “Trader Monthly” but “Trader Monthly.”

c. Except maybe Zach Michaelson.

d. And a yet to-be-named top “30 Under 30” trader from 2008’s list.

But, really, you have to read the e-mails for yourself, courtesy of TM, which reprinted them on its website this morning. Enjoy, after the jump.

One of the stunning things that Goldman Sachs said yesterday was that they had offset losses arising from this summer's credit crunch by shorting mortgages. With hindsight that seems like such an obvious bet that you want to kick yourself for not thinking of it first. But one thing we've been trying to understand is what exactly Goldman means when it says it was "short mortgages" in the third quarter. What asset classes was it shorting?

We can think of a few obvious ways to short mortgages by going short assets that are correlated with the mortgage market. Short the common stock of mortgage companies. Short ABX. Buy protection on correlated bonds. But these are just guesses. We want to know more. How do you think Goldman minted the kind of money they say they did by "shorting mortgages?"

Gold Hits 28 - Year High as Dollar Struggles (Reuters)
You probably could have guessed this even if you hadn't been paying attention, but gold has hit a fresh 28-year high, as they're now charging $735 an ounce for the stuff. $735 an ounce! Remember, gold does nothing. It just sits there and looks pretty. You can't plant it and you can't run your car on it. And, for the most part, you can't buy anything with it until you turn it back into dollars. So it's quite remarkable that people would pay so much for it. It's obvious that when it comes to money, our reptilian brains still dominate in times of fear. Anyway, we agree with Eddie that the weakness in US money has more to do with our new bill designs, with all kinds of multicolor, than it does to do with inflation. As we've always said, "third world looking currency warrants third world valuations". What's next, holes in our coins?

UAW rejects retiree health care proposal (Thomson Financial)
Don't worry, the world hasn't changed, the UAW and GM are still at an impasse about retiree health care, with no solution in sight. Thank god, because if the two sides did agree, our worldview would be shaken. Too much for a Friday.

Sheikdom shakedown: Dubai moves on Nasdaq (WorldNetDaily)
Has the Opening Bell hit a new low by linking to WorldNetDaily? Perhaps. Nonethless, they're running a completely reasonable and logical article about the reaction among politicians to news that Dubai is looking to take a stake in the NASDAQ; naturally, they're worried about the political and national security implications. This is, of course, totally backwards. If you want peace with the middle east, then Middle East power need a bigger stake in our economy. After all, you're not going to fund terrorism with your oil money, when you've got a big chunk of your money locked up in a major US stock exchange. Just wouldn't do it.

State investment firm buying stake in Carlyle (Toronto Star)
Forget what we just said above; we've seen Farenheit 9/11, so we know all about the shady Carlyle group and its connection to Mideast money (and its connection to the Bush administration; which if you put the two together means that 9/11 was an inside job). Anyway, as if Carlyle hadn't already sold us out, it's now selling a significant stake of itself to an invest group owned by the Abu Dhabi government. We just hope congress is looking out for us.

$$$ Where Venture Capital Meets Bestiality And Dinner [Mainichi Daily News]

$$$ Fed Chairman Flunks Final Jeopardy [Jeff Matthews]

$$$ Lindsay Campbell: stoner. [WallStrip]

Steve Jobs has been subpoenaed by the SEC to be deposed in a backdating case against Apple's former general counsel, Nancy Heinen. Though the news sent shares of the fruit down 1 percent, with a $140.31 close (-0.33%), investors should rest assured that while Heinen may fry, this doesn't mean jack for the company or Steve.* Why? Because, in SJ's words, "Fuck you, that's why, I'm Steve Jobs. Death to the right click. Buy an iPod. Or don't. I could really care less either way. It's your funeral."

Jobs subpoenaed over Apple stock scandal [The Guardian]

*Who backdating specialist Al Gore cleared of any wrongdoing earlier in the year.

Unwinding the Trade: The the stripper carry trade that it. As the Canadian dollar hits equality with the US dollar, the traditional Canadian stripper arbitrage trade has become completely unwound. Au revoir Club Super Sexx!

Sponsored by the Financial Times.

Not surprisingly, the Fed-inspired frenzy that followed Tuesday's rate cut announcement ground to a halt today. Stocks slumped, oil climbed and the dollar tried to convert to the peso.

Every major index declined. The Dow Jones Industrial Average lost 54.30 points to land at 13761.26. The S&P 500 declined 8.88 to 1520.15. The Nasdaq Composite Index dropped 12.46 to 2654.02.

Goldman Sachs' earnings were so spectacular they immediately launched Wall Street into a fit of envy, snark and conspiracy theories. The difference in performance between Goldman's premiere hedge funds for clients and its internal proprietary trading provided grit for the snarkiest to chime in that the message of the day was that you should buy Goldman's stock but not its client hedge funds. The conspiracy minded wondered whether Goldman was keeping its best traders for its internal desks, or perhaps engaging in something even more nefarious. There's no evidence for any of this of course. But it's not exactly the kind of talk you want going around the day you report stellar earnings.

After Lehman Brothers seemed to have surprisingly escaped the wrath of the mortgage market relatively intact, some began to wonder if Bear Stearns might have engaged in some clever move to avoid the brunt of the credit crunch. While it didn't quite escape catastrophe, it seems to have convinced many that the worst days of losses, particular from hedge-fund losses and bailouts, are behind it. The stock actually climbed a bit today.

On the New York Stock Exchange Thursday, 941 stocks rose and 2,357 declined. Volume was light, with just 967.8 million shares trading on the exchange.

Seeking alpha? Check out FT Alphaville.

For reasons totally lost on us, Warren Buffett has once again scaled back Berkshire Hathaway’s stake in PetroChina. In July, Berk sold holdings in the company worth $27 million. Last week, it was $136 million. And just today, 28 million shares valued at $40 million, reducing BRK’s interest to a paltry 8.93 percent from over 11 percent this year.

For those of you who don’t know what this means, we’ll tell you what this means: slowly but surely, Warren Buffett is distancing himself from a government-run company that human rights activists claim has extensive involvement with the Sudan oil industry, and perpetuates what they call “the humanitarian crisis” in Darfur. (This is an overly dramatic way of spinning the truth, which is simply that the region is going through a restructuring of its population.)

Until fairly recently, Buffett had stood up to the anti-genocists, including BRK shareholder Judith Porter, who told WB that cutting ties with PTR would “send a signal to China and to the Sudan that there are costs for continuing this destruction." Buffett argued that he and Berkshire had nothing to do with the “situation,” and that Judy and everyone else ought to quit their bitching. And when asked if today’s and last week’s and July’s sale had anything to do with a decision to take responsibility for aiding and abet serial killers, he said no. And analysts are in agreement: they think it’s just about “the money.”

But we know they’re lying. Nobody wants to admit it, but something’s going on with that old kook, and he’s going soft. Is it the new, young, probably liberal wife’s influence? A sudden fear that John Carney, against all odds, might’ve been onto something when he asked, “is Warren Buffett going to hell?” The fact that in May, two months before he started selling, we called him an “Equal Opportunity Genocide Supporter”? (That was a compliment!) A near-death, life-changing experience? An Oreo Blizzard epiphany?

Don’t answer that. ‘Cause we don’t want to know why this happening, we just want it fixed. Let things go back to the way they were, and no one gets hurt (except maybe the Sudanese. Whatever: details). If we isolate the problem now, we may be able to salvage this thing, but we have to act fast. Today he sells a percentage of his stake in PetroChina for allegedly purely monetary reasons. Tomorrow it could be standing up in a local Dairy Queen and saying “not on my watch.” I just pray it’s not too late.

Earlier: Warren Buffett Is An Equal Opportunity Genocide Supporter

Warren Buffett Trims PetroChina Stake for Third Time [CNBC]

Melissa Francis is a favorite around here. Readers recently favored the host of CNBC’s On The Money in our most popular poll ever, where she beat out competing CNBC starlets like Erin Burnett, Becky Quick and Maria Bartiromo. We’re frequent guests on her show, so we’re hardly impartial. But clearly OTM’s brand of high-energy, edgier business reporting is close to DealBreaker’s heart. If only it weren’t on during happy hour!

Market Watch’s Jon Friedman profiles Francis in his latest column. He tells the tale of a child star gone good. When still a wee lass, Francis played Cassandra Cooper on Little House on the Prairie. She describes herself to Friedman as a ham on the set, craving attention. Michael Landon, also known as ‘Pa’to viewers, would entertain the youngsters on set by puting a frog in his mouth, and letting it leap out just as they were about to say their lines.

Francis went from acting to Harvard, where she studied economics and got mixed-up with the business of business reporting. She worked as a summer intern to Michael Jensen, a long-time NBC News financial correspondent. When she landed at CNBC, she was first assigned to be an energy reporter. And here’s where the story get’s interesting.

Early in her CNBC career, she covered an OPEC meeting in Vienna, trying hard to gain the trust of the influential Saudi delegation. "After enduring several verbal exams on my knowledge of the space, I was invited to the big-night-before-the-meeting dinner," she recounted by email. Her CNBC colleague Steve Liesman had stressed that the dinner was a big deal. "He said the outcome of the meeting [whether the cartel was going to change the quota and by how much] is usually revealed to one reporter at dinner the night before the meeting. It was sushi, which I can't stand. So I was trying to swallow something with eyes (whole) when the minister's right-hand man said, 'That's why we'll cut by 500,000 barrels a day tomorrow.'

"Needless to say I nearly choked (really). I had heard that from another delegate shortly before, so this was the confirmation I needed. I excused myself and went to the ladies' lounge with my cell and called our assignment desk. I kept saying into the phone, 'Tell Maria [Bartiromo that] OPEC's gonna cut by 500,000 barrels a day! Tell Maria OPEC's gonna cut by 500,000 barrels a day!' Maria went on with it. It turned out to be right, and I was suddenly no longer the new kid on the OPEC block."

The question Friedman doesn’t answer is: will she or won’t she? There’s been a spate of defections from CNBC lately, as reporters and anchors leave to join the fledgling Fox Business Channel. Is Melissa Francis going to join them, as some have whispered? If he knows, Friedman isn’t telling. His column sounds ambivalent.

“You could make a case that her CNBC bosses have overlooked her, too, even though they have given her her own show,” Friedman writes. “For her part, Francis is happy to hold down the 7 p.m. slot and evidently has a good time doing interviews with a variety of people.”

So the question of Will She or Won’t She remains open. For now.
CNBC's Melissa Francis isn't over the hill [Market Watch]

You already know the spiel about Global Alpha, but to recap:

- In an August to Remember, assets dropped an impressive 22.7 percent.

- The fund is currently valued at $6 billion, down a bit from last year’s valuation of $10 billion.

- In the first two weeks of September, GA fell 2.8 percent, bringing the year-to-date decline to 34.9 percent.

- The reason Global lost (and continues to lose?) so much money is because too many quant funds—in an effort to be as great as Goldman—emulated its strategy of losing enormous amounts of money, and crowded the playing field.

- Global Alpha will not be receiving a get out of jail free card, like Global Equity Opportunities did after it lost more than 30 percent in August. Possible reasons for GA getting the short end of the favoritism stick include the fact GEO, after being injected with $2 billion, fell 1.9 percent MTD, and ruined it for everyone; Goldman doesn’t love Global Alpha as much; and, most plausibly, the bank of Maurice Greenberg is just plain sick and tired of this shit—bail yourselves the fuck out of this one.

- Now that it’s seen what rock bottom looks like, Global Alpha “promises,” “vows,” and “swears” it will do better. “Better” doesn’t necessarily mean “good,” just “not as catastrophically bad.” (Goldman does not make promises it can’t keep.)

- The aforementioned improvement in performance will be accomplished in one of two ways: either Global Alpha will change its strategies so as to make money instead of lose it, or, and this sounds a lot less labor intensive, just “benefit from troubles that have driven other quant funds out of business.” (James Simons’s comment? “Suck it through my pocket protector, Goldman.")

- They’re not sorry. (And why should they be? According to Global Alpha, their disastrous approach "remains attractive." (Beauty really is in the eye of the beholder). The real question is, why have *you* apologized to *them*?)

Full letter from Mark Carhart and Ray Iwanowski, after the jump.

Both Goldman Sachs and Bear Stearns beat analyst expectations today: the former, in its unfailing ability to emerge from a building on fire while everyone else burned to a crisp, the latter, in its unfailing ability to push the bounds of failure. BS posted its biggest decline in over a decade, with third-quarter net income dropping 61 percent to $171 million ($1.16/share), from $438 million ($3.02/share) last year (total net revenue fell 38% to 1.3 billion, from $2.1 billion quarter on quarter).

In a press release, Jimmy Cayne made mention of “difficult securitization markets” and “high volatility,” though chose not to name check the pair of pink elephants (Bear Stearns High-Grade Structured Credit Strategies Master Fund Ltd., Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Master Fund Ltd.) that gifted the firm with $200 million in losses.

Taking a cue from the CEO’s precipitously falling bridge scores, shares of BSC dropped 29% this year (though the stock was up 2.31% ($2.67) to $118.31 by noon today, after the company announced that it would be smooth sailing from here on out).

Matt Albrecht, an analyst at Standard & Poor's recommended a sell, but ever the glass half full kind of guy, spun a silk purse from a sow’s ear, noting: ``If there's a market turn, Bear Stearns has the most upside to go because its share price has dropped so much.” (Don’t even act like you’d pass up the chance to use such a fantastically old-timey proverb, given the opportunity.)

Bear Stearns Net Drops Most in Decade on Credit Rout [Bloomberg]
Press Release [Bear Stearns]

It’s the absolute height of provincialism (and symptomatic of what’s wrong with this country) that you can’t solicit underage teen girls for sex, ask them to give you a naked massage and then jerk off into a towel while they stand there awkwardly, without people throwing a hissy fit and calling for jail time, am I right? Damn straight I’m right. Which is why it is through gritted teeth and alongside the ashes of a burned American flag that I pass on the categorically BS news that Jeffrey Epstein may be going downtown.

Page Six reports this morning that Epstein’s team of lawyers (including Kenneth Starr) are in negotiations with federal prosecutors for a deal that would put him away for 1½ to 2 years. The proposed “bargain” (an even more narrow-minded jury would go for a much longer term) requires that Epstein plead guilty to at least one charge (of loving too much), and breaks down to 15 months in a Florida state prison and 15 months of home confinement. No word on whether an ankle bracelet would be involved, but since we all know the monitoring devices add an instant layer of naughtiness to any intimate moment, Victorian prosecutors will likely put the kibosh on that. In which case we’ll pick one up on West 4th, and have it FedExed to FL, on Carney, who understands (all too well).

Earlier: When It Comes To Legal Counsel, Jeffrey Epstein Does Not Fuck Around

Jail Looms For Sex-Case Mogul [New York Post]

Is it even possible for an analyst to correctly estimate the earnings of a secretive investment bank like Goldman Sachs? If so, someone should tell the analysts how to do it.

Goldman blew them away again this morning. It not only beat expectations. It reported Wall Street's only profit gain, as Bloomberg reported this morning. A good piece of that profit gain was thanks to the sale of Horizon Wind Energy LLC, a Houston based alternative energy company that Goldman bought five years ago for $150 million and recently sold to a Portuguese power company for $2.1 billion.

Ironically, the man behind that purchase was Mark McGoldrick, who headed Goldman's special opportunities group. Earlier this year, McGoldrick left Goldman after becoming convinced that the firm wouldn't adequately compensate him or his group for the outsized gains they were earning.

This morning's earnings report is a nice little birthday present for Goldman topdog Lloyd Blankfein. As he blows out his candles on his ice-cream cake this afternoon, Blankfein should at least make a wish for McGoldrick, the man who helped make this birthday exta-special. Oh, and maybe wish a little something for whoever it was who shorted mortgages at Goldman and turned this summer's subprime-led credit crisis into a profit opportunity.

Goldman Profit Rises 79 Percent as Gain Boosts Trading Revenue [Bloomberg]
Goldman Sachs 8-K [SEC]

Trade Group: Holiday Sales to Grow Slow (AP)
It's never too early to talk about what a disappointing shopping season it's going to be. As far as we're concerned, we should just give up on the notion that the holiday season will ever be good again, because for as long as we can remember, retailers have complained. And if we assume some sort of long-term, macro negative from all of this credit stuff, well, then, that makes it even harder. Anyway, retailers are calling for just 4.0% growth this year, which is down from 4.6% from the year before, although it's above the doldrums of the last recession? Our forecast? 3.0% Bam, we said it.

Dubai to Buy Large Stake in Nasdaq (NYT)
Forget about middle eastern investors snatching up European exchanges (although they're doing that too). Word is that Dubai is going to take a large stake in the NASDAQ, which is altogether unsurprising and surprising at the same time. The deal, which has yet to be announced officially, would see Dubai with a 20% - 30% stake in the exchange. See, all that oil money which we've watched leave our shores over the past several years are coming home (to roost, some might say) where they belong.

Euro breaks past $1.40 for the first time (MarketWatch)
As you know, we're not real big on causal explanations here at the 'Breaker, but we still can't help feeling like the fresh highs on the Euro aren't totally unrelated to the 50 bps cut by the fed. Meanwhile, the odds continue to grow longer against us taking another European vacation at any point in the next several years. And with gas prices the way they are, there's simply no reason to ever leave New York.

China Freezes Prices in Inflation Move (AP)
China's come up with a novel way to fight inflation that the US government might consider looking at if things get worse: freezing prices. So brilliant, and yet so simple. Actually, we're a little skeptical about this story, since it doesn't look well-verified, and the Chinese government has a way of saying a lot of different things based on who is doing the talking. Can't always trust those trusted unnamed Communist Party officials, who find their way into plenty of stories.

$$$ The Donald Celebrates Trump Soho Sales [Daily Intel]

$$$ Trader in the Making [Banker's Ball]

$$$ HF managers scared to buy stuff. [New York Times]

$$$ The Llama of Lame [LoSC]

$$$ Feed your inner trader [WallStrip]

Workers of the world party crash!

Protesting in front of the Waldorf Astoria apparently was not enough for the tens of protestors from organizations with misleading names like the Working Families Party. This afternoon the protestors stormed the ballroom where 1,000 analysts and investors were gathered for a private equity conference sponsored by Dow Jones.

The protestors were armed with banners emblazoned with rhetorical questions, snarky signs and rhyming chants. They were quickly hustled out by actual working people who realized that every private equity job pays for about five other jobs in New York City, including security guards.

Brought to you by Financial Times

Post Fed rate cut, stocks saw their largest gains of 2007. Meanwhile Morgan Stanley laid down and played dead today sighting a 17% dip in Q3 earnings. But that's old news.

The Labor Department announced CPI which fell 0.1% Core CPI up 0.2%

Major indexes numbers as follows: The DJIA rose 82.02 to 13821.41. The S&P 500 rose 9.95 to 1529.73, and the Nasdaq UP 13.59 to 2665.25. The 10-year note down 18/32,to yield 4.540%.

The dollar down to $116.01 against the yen. Little movement against the Euro -$1.3969 to $1.3967 today.

Finally, on the NYSE today, 2,179 stocks up and 1,121 down, on total number of shares traded - 1.09 billion.

For more sweet market action check out FT Alphaville.

Finding a new home is hard! Merrill Lynch execs engaged in a little bitching and moaning to the Post (who gloriously came up with the headline "For Merrill, Size Counts," because Q. Who doesn't love a penis joke? A. No one) today, re: its search for new Headquarters and it sounds, completely objectively, and not taking league tables into account, like it sucks to be ML. The options at the World Trade Center and World Financial center are "simply too small" and moving downtown would force the bulge to add a second building in Jersey City. And as someone who knows the Garden State, such an unseemly measure would not bode well for Merrill Lynch, which fancies itself a Goldman Sachs (more on that later).

What about the Hotel Pennsylvania spot, located across the street from Penn Station (which, let's not kid ourselves, many Merrill employees must, by the constraints of the commute, must pass through at least twice daily, anyway)? Not "attractive enough." (Stan O'Neal only cares about looks.) Furthermore, the property, owned by Vornado Realty Trust, requires "prolonged civic and city variances and approvals to be as large enough to fill the bank's needs—at least 3 million square feet with one large 80,000-foot trading floor" that are "too iffy."

Hudson Yards? Let's not get ahead of ourselves—the site's nowhere near ready, and, as a Merrill exec pointed out, he and his men "[are] not pioneers," or heroes, either.

Brookfield Properties and Silverstein Properties are reportedly vying for Merrill's affection, but are not winning any points with traders, who are asking for one big floor, so as to facilitate "eye to eye contact," as opposed to several smaller ones, which B and S are proposing. One source went to far as to call the head of Silverstein "insane," but maybe what's insane is beating the dead horse that is Goldman Sachs favoritism ("They put $600 million into our competitor's pocket…at a bare minimum, we know that . . . first and foremost, we are at a competitive disadvantage.") and not focusing on the task at hand? Who's to say.

We are reminded, of course, that things could be worse for Merrill Lynch—they could be JP Morgan, and stuck with a hideous eyesore of a building that is being proposed for the bargain price of $2 billion, and is practically begging for a terrorist attack.

We'd like to help out the Lynchettes, but the only other options we can come with are the soon-to-be-vacated Trump Casino in Atlantic City, and West Bushwick, which actually strikes us as perfect. Got any ideas?

For Merrill, Size Counts [New York Post]

Glitch! It’s not just the NYSE anymore. Electronic trading of financial and agricultural derivatives at the Chicago Board of Trade has ground to a halt. They’re blaming “a technical glitch.” It’s all open outcry now.

When a company starts missing earnings estimates, showing same-quarter losses over the previous year, and doesn’t have a clear plan to turn things around, Wall Street firms usually don’t hesitate to tell it that it had better start cutting costs and slashing payrolls soon or face investor’s wrath. Now that turnaround logic may be applied to Wall Street’s banks and brokerages.

When Morgan Stanley revealed this morning that the monster that ate the credit market had chewed a big hole in its earnings, many began to wonder whether the damage all along the Street might be more extensive than previously thought. Lehman Brothers, which was supposed to be on the bottom of the pile (only Bear Stearns was viewed as worse-off), beat estimates. What does it mean when smaller, more credit-focused Lehman can out maneuver the credit crunch but the second-largest securities firm gets stung so badly.

This now has people saying that the current credit crisis is worse than what happened when Russia default on its debt and Long-Term Capital Management collapsed.

So far Wall Street has resisted broad layoffs. Some mortgage origination units have been shuttered but there’s been little news of more far-reaching cuts. There were predictions that cuts would be made as soon as the week after Labor Day. But here we are a few weeks into September, and everyone is still at their desks.

But don’t get too comfortable there. The latest number being thrown around is 10,000 jobs lost on Wall Street. And that’s not even the worst case model.

Oh, and if you’re some kind of struggling artist waiting tables and you wait to be discovered, you probably shouldn’t
smile too much at the news. Much of this city runs on the fuel that Wall Street pumps out. Losses there get multiplied out into the service sector across the city.

“Economists at the city's Independent Budget Office have calculated that for every job lost in the securities industry, there are eventually another four to five jobs lost across the city economy,” the New York Post reports today.

Remember what they used to say: “When France sneezes, Europe catches a cold.” New York City, your France is called Wall Street.

Brace For Big Job Losses On Wall Street and City [New York Post]

It’s not easy working in private equity. First, you have to contend with kiss-ass underlings wanting “face time” pitching their latest money-making scheme. Then you have to deal with continuous media coverage deriding you for how much more money you make than everyone else. Really, can’t a private equity manager exist in at least semi-gold-dipped peace?

Even attending a conference is not as fun as it once was. The Dow Jones Private Equity Analyst Conference was awash with protestors at noon today by members of the Working Families Party and ACORN waving signs that read “Why does David Rubenstein pay taxes at a lower rate than an NYPD officer?" and “Why do New York state pensioners see risk while David Rubenstein sees profits?”

A revolution, some revolutionary once said, is not a tea party. Apparently, this time a revolution is a semi-snarky sign with a rhetorical question. We asked our editor in chief to comment on this question because he was the only sober person in the room.

“Don’t those types of people get paid by the hour?” Carney said. “If they’ve got time to protest, they’re clearly getting paid too much.”

It’s hard not to notice the irony that private equity has attracted its very own protest movement just at its eclipse. The owl of Minerva flies at happy hour. Note to the forces of the poor: you’re too late! The golden age of private equity is so fifteen minutes ago.

The Poors To Protest New York's Richest At Waldorf-Astoria At Noon [Gawker]

Read the press release after the jump

The resignation of Florian Homm, the German hedge fund manager who many a media outlet have taking to describing as “colourful,” which a colleague in the field claims is a kind—though less apt—displacement of “bat shit fucking insane,” has been “not so good” for Absolute Capital Management. Following Homm’s departure, announced yesterday in a letter to shareholders to the surprise of everyone, shares in the company dropped 69.6% (271.5p to 118.5p), knocking nearly £190m off its market value. Today Ab. sunk another 48%, on the news that investors will not be privy to their money from eight equities funds (previously) managed by Homm, for one year.

A spokesman for Absolute registered shock over Flo’s decision to leave the firm, noting that the board is “completely perplexed by his actions. We can’t quite understand why he would go about it in this way.”

According to Homm, there’d been a bit of a disagreement between him and the board regarding his insistence that they should all take one for the team, and sacrifice their bonuses and compensation, as well as pay top-dollar to retain competent managers. The difference in opinion was apparently insurmountable, and enough to cause Big H to walk away from his day to day roll over seeing Absolute’s three best-named funds: European Catalyst, Activist Value, and Octane. Yes, Octane. Sounds crazy to us, too, but that’s a German for you. (Incidentally, Homm was shot in the chest in Caracas last year, and been fined twice for market manipulation.)

Though he’ll no longer have a desk at the office, Homm will still be invited to family barbeques, as he retains a 19% stake in the company. Could be awkward, though.

Absolute Capital Halts Redemptions After Homm Quits [Bloomberg]
Shock resignation at hedge fund [The Guardian]
Absolute Capital Halts Hedge-Fund Redemptions [WSJ]

Frankly, we’re disappointed. We’re disappointed in you. Our readers.

All morning long we tried to get our mitts on the letter to investors sent by the managers of Goldman Sachs Group's Global Alpha hedge fund. And so far we’ve got nothing.

By now everyone’s heard the gist of it. Goldman isn’t closing the fund or pumping it up with any of its own money, Goldman Equity Opportunities-style. They’re just going to try harder. Think more. Move faster. Maybe borrow a little less money. Walk it off.

One promise that’s apparently made is that they plan to profit from the woes of other quant funds. How exactly? That’s for them to know, and the rest of us to find out. Because they’re smarter than we are. You can tell because they lose more money.

Actually, it looks like the new secret strategy might just be to keep using the old strategies and hope the other quants go out of business. At least that’s how we read the following two sentences from the Wall Street Journal.

The letter conceded that there was more money invested through quant strategies across the market than the managers realized. But it said Global Alpha would benefit from troubles that have driven other quant funds out of business or to change their strategies.

Oh, and have we mentioned we’d like to see the letter for ourselves? Email it to tips@dealbreaker.com. Win back our respect. Please.

Goldman Vows to Do Better [Wall Street Journal]

As we previously posted, the “wolf” of Wall street aka Jordan Belfort is out of prison and is promoting a piece of literature based on his sordid life at Stratton Oakmont during the coke infused 80’s-90’s. After having thumbed through this self-promoting read (which has been optioned by Warner Brothers as a Martin Scorsese film), it became clear that the book has some positive qualities. First and most important – If you’re into porn, you’ll enjoy The Wolf of Wall street. Had he been a woman, he could easily have written Harlequin romance novels from the big house. His descriptions of his “luscious” wife whom he dubs "The Duchess" are… shall we say, stimulating.

In addition to sex everywhere and in every position, if you’re into hookers, blow and Quaaludes (or at least reading about them) then this should make a nice little bedtime story. Disregard the dissonance he experiences as he attempts to balance the two personas 1) despicable pill popping prostitute enthusiast with 2) respectable family man. It’s not convincing and feels like filler. That said, there’s enough dirty goodness in here to go around. The Wolf of Wall Street lands on shelves September 25th.

Alan Greenspan has sometimes been accused of being intentionally inscrutable. While it may have once been a fair charge, a very different Greenspan was on display last night when he appeared on the Daily Show with Jon Stewart.

Some of his explanations were startlingly frank, expansive and plain-spoken. For instance, when he explained what it is the Federal Reserve does he uttered exactly the sort of thing that the tinfoil hat Fed conspiracy theorists think that an establishment type would never say. And when Jon Stewart tried his own version of Fed conspiracy talk, he got bitch slapped.

“It seems to me that we favor investment, but we don’t favor work,” Stewart said. “The vast majority of people work — they pay payroll taxes, and they use banks. And then there’s this whole other world, of hedge funds and short-betting and — it seems like craps. And they keep saying, no no, no, don’t worry about it, it’s free market. That’s why we live in much bigger houses. But it really isn’t. It’s the Fed, or some other thing, no?”

“I think you better re-read my book,” Greenspan said. “What a sound money system does is to stabilize all the elements in it, and reduces the uncertainty that people confront. And the one thing all human beings do when they are confronted with uncertainty is pull back, withdraw, disengage, and that means economic activity, which is really dealing with people, just goes straight down.”

There’s more on the exchange at the Wall Street Journal’s Real Time Economics blog. Or you can just watch the video above. It’s “Safe For Work”…to the extent that watching fake news programs can be considered “Safe for Work” at all.

Argh, matey. Yesterday it looked as if Wall Street might have found a way to dodge serious losses from this summer's credit crunch. Lehman, which was widely viewed as one of the most vulnerable Wall Street firms (along with Bear Stearns), beat expectations with its earnings. The brokerages and banks soared after the Fed announced rate cuts.

This morning looks a little different. Morgan Stanley "missed" this morning, with earnings that fell short of analysts' estimates. The short fall seems directly tied to the credit crunch, with the biggest losses coming in loans for leveraged buyouts and a decline in fixed-income trading revenue.

Third-quarter profit from continuing operations declined 7 percent to $1.47 billion, or $1.38 a share, from $1.59 billion, or $1.50, a year earlier, the New York-based firm said today in a statement. The people who sometimes seem as if they are paid to get earnings wrong had estimated that Morgan Stanley would report $1.55-a-share.

So how did Morgan Stanley get hit worse than expected and Lehman less? Some believe the difference may be a matter of accounting. With banks marking down assets due to the crunch there is some room for judgment calls.

"It looks to me that Morgan Stanley took a conservative, worst-case approach to the losses," one veteran Wall Street investor told DealBreaker this morning. "Lehman may simply more aggressive with its accounting, and may plan to roll the losses out over several quarters. Or it may believe it can overcome the losses as the credit markets ease."

GM Seeks Shift to 401(k) Pensions for New Employees (Bloomberg)
It's almost stunning to us that the auto industry is just now getting into these things called 401(k)s, as possible alternatives to traditional pensions. It would seem as though a lot of problems facing the companies and the workers would never have come up if this had been the model to being with (invest your own damn money), although then again, there's probably a nice analogy to Social Security and the whole private accounts debate. That seems about right: Detroit automakers and the US government as the two institutions staggeringly behind the times. Oh, apparently the NFL is having pension problems too.

Apple Picks Deutsche Telekom for IPhone in Germany (Bloomberg)
Steve Jobs is big in Europe. Well, at least he's trying to get big in Europe as he does a European tour in support of his latest album. Deutsche Telekom is the latest operator to win the iPhone derby, gaining the exclusive right to sell the thing in Germany. Also, if you're looking for a nice contrarian take on the iPhone from someone who knows their stuff, do read: Steve Jobs Takes The Jedi Mind Trick Roadshow To The UK.

New Push Into China by N.B.A. (NYT)
Keep saying it to yourself: Our cultural exports will reverse the trade deficit. Case in point, the NBA is quickly working to establish a subsidiary in China, having hired an ex-Microsoft exec to deal with things like winning TV approval and opening up new stadiums. It's a huge growth market for China, which has hundreds of millions of basketball fans and players, according to the league. Then again, the most popular NBA player in China is probably Yao Ming, who's Chinese. So even the stuff we're exporting to China is actually just a repackaged 'made in China' item.

Rate cut sends oil to fresh highs (BBC)
Oil prices hit fresh highs following the fed rate cut, with traders possibly operating on the assumption that the dollar continue its aggressive tumble. Seems pretty logical. That's the nice thing about living in New York. Your portfolio jumped a couple percent yesterday, but you don't have to drive. Sucks for the suckers that drive a lot but don't own stock.

$$$ 'I Am No Friend of Hedge Funds' [Spiegel]

$$$ Bear Can’t Catch a Break [DealBook]

$$$ "Perhaps because it is the only way Portfolio magazine can persuade anyone to even look at their rambling, ad infested prattle that passes for financial journalism, I have somehow been sentenced to a term on their mailing list." [Going Private]

$$$ Professional banker-type, but a little scruffier and more interesting...I'm basically just looking for someone with whom I can have a couple of drinks and some hot no strings sex tonight, particularly older jewish women. [craigslist]

You can’t fight the tape. Lehman comes out ahead of expectations and has a killer conference call. Bernanke & Co stomp down interest rates. Equities markets shoot for the moon.

Wall Street’s economists have had mixed and contradictory reactions to unexpectedly deep cut. Some think the 50 basis point cut is the full-monty. Others think there is more to come.

“The FOMC makes it sound like ‘one and done’ as it cuts both the Fed funds and discount rate by 50 basis points but continues to note inflation risks,” Drew Matus of Lehman Brothers is quoted as saying in the Wall Street Journal’s
Real Time Economics blog. “As of this writing, we no longer look for the Fed to cut rates in October but that position, like the Fed’s, remains data dependent.”

“I don’t think this was a one-and-done as some are interpreting it to be,” Jane L. Caron, chief economic strategist at Dwight Asset Management, tells the Journal’s Market Beat blog. “The fact that it was a fully supported move by all FOMC members suggests to me the board is indeed seriously concerned about downside risk in the economy.”

Merrill Lynch’s David Rosenberg says its impossible to tell. “The Fed kept its cards much closer to its vest than anyone would have guessed,” Mr. Rosenberg tell the New York Times. “It’s not at all clear they think they have more to do.”

For what it’s worth, both the Journal and the Times seem to have interpreted the accompanying statement as signaling that more cuts may well be on the way.

Around the blogosphere, the reactions to the unpredicted Fed cut were relatively predictable.

“The Fed now has a third problem to deal with: They have become Wall Street's bitch. They may find that's a difficult condition to wriggle out from ,” Barry Ritholz said at the Big Picture.

“Like a drug addict who stumbles upon a cache of powerful drugs, the market finally got its fix as Bernanke & Co. decided that the way to solve our economic problems is by lowering interest rates more than expected,” the Kirk Report moaned.

“Once in a while you get it right. One time in a row,” wrote Larry Kudlow, who has not been a big fan of Bernanke through the credit crunch. Apparently, this cut wasn't enough to win him over.

Market Beat led off with a one word lede: “Kaboom.”

And longtime trader-blogger Random Roger just admitted he was caught off guard by the move. “Maybe I shouldn't be, but I am shocked that the Fed went fifty on the Fed Funds rate,” he wrote.

Brought to you by Financial Times

Active stock trading today after the Fed announced rate cuts of half a percentage point – Fed-funds lowered rates for the first time since 2003 to 4.75% while the discount rate stands at 5.25%.

The PPI announced today with a decrease of -1.4% sighting decreases in energy costs and food prices as catalysts for the decline. Food prices fell -0.2%. Gasoline prices down -13.8% and producer prices for energy down -6.6%.

Major Indexes closed as follows: DJIA up 2.51% rising 335.97 closing at 13739.39. Nasdaq up 2.71% rising 70.00 closing at 2651.66. The S&P 500 up 2.92% closing at 1519.78. The 10-Yr Note down -6/32 with an end of day yield at 4.489%.

On the NYSE 3,033 stocks in the green, 341 in the red with a total volume of 1.37b shares traded.

Crude oil prices inching toward $85 per barrel closing today settling today about $81 per barrel.

Banks and broker/dealers’ shares exploded upward with LEH up 9/5%, GS up 6.4%, MS up 6% and BSC up 3.3%

For the text of the Fed statement

Think you can handle more market intelligence? Check out FT Alphaville. They keep us coming back again and again.

And now an update on the greatest story ever told. Stuart Sugarman, the hedge fund manager who—while still seated on his bike—was thrown into a wall for “loudly” grunting, commenting “Great song!” and yelling “You go, girl” throughout a spin class at an Upper East Side Equinox in late August, is mad. Not at himself, though he should be, for being one of those horrible people who are practically begging to be thrown into a wall for audibly working out in public, but at the prosecutors who aren’t treating the assault by fellow rider and Maxim Investments Group broker, Christopher Carter, as a felony.

“This wasn’t just a playground fall where Stewy fell down and went boo hoo,” Sugarman, referring to himself in third person, said yesterday when he was informed the assailant was only charged with a misdemeanor. "The reality is I spent two weeks in Lenox Hill [Hospital], including a week in ICU and six hours in surgery. My life has been altered, possibly permanently. This is not a misdemeanor."

While “Stewy” maintains that he suffered a concussion and damage to six discs in the vertebrae of his neck (see: the brace), the criminal complaint filed yesterday against Carter only accuses him of causing “sustained lower-back pain” and “substantial pain” in general. The Sugmaster is livid that there is no mention of the fact that he was told to “shut the fuck up,” nor that, allegedly, his surgeon described the sustained injuries as being so severe that SS was “one click away from a wheelchair.” (Obviously his placement in the chair on wheels at left was for purely photo-op purposes.)

Carter’s lawyer, Michael Farkas, rebutted that his client "did not commit any criminal acts."

No word yet on whether or not Equinox had reinstated Sugarman’s previously revoked membership, or if the New York Sports Club, an obvious step down, would have him.

Earlier: Spinning OUT OF CONTROL

Gym Victim Is Wheely Angry [New York Post]

Overcoming my turbulence by cutting interest rates [Ben Bernanke’s Blog via NewsGroper]

Not sure how many of you can get the time off, but if you're not doing anything September 26th and 27th, Kobre and Kim LLP founder (and Brian Hunter apologist) Michael Kim will be speaking at C5's 12th Annual Fraud, Asset Tracing & Recovery conference in London. K&K graciously emailed yesterday to invite us, but, sadly, we will not be able to attend, because we don't want to. If you'd like to go in our place, please send an email to tips at dealbreaker dot com. Ideas for your contribution to the question and answer portion of the program include, "Have you recently sued a small internet company" and all queries must be prefaced with, "As the representative of the fraud-committing community..."

The monetary central planners delivered an upside surprise of their own today, cutting both the federal-funds rate and the discount rate by 50 basis points. Stocks immediately surged when the numbers were released. The Fed had widely been expected to cut its main short-term interest-rate target by a quarter of a percentage point.

The vote was unanimous, and the statement is pure bull-feed. The words about market turmoil posing a threat to economic growth clearly indicate a Fed willing to respond to trouble on Wall Street even before there is clear evidence of a broader impact on the economy. The FMOC also signaled that further rate cuts could be coming. We can't help but be reminded of those words from earlier in the decade. Shock and awe. Pre-emptive doctrine. Let's Roll!

Some had said that the Fed might have to cut the target rate by at least 50 basis points, however, to have a real effect on the economy. For the past few weeks, the effective Fed Funds rate—the rate at which banks lend to each other overnight—has been well below the official target rate, prompting some to say there had already been a “stealth cut” in the rate. The argument was that if the Fed still viewed interest rates as posing a threat to the health of the broader economy, it would have to cut by more than 25 basis points.

Although the bulls charged into the market at the news, not everyone is happy about the decision. As the Wall Street Journal reported, many believe that the rate-cut is a bailout for speculators and Wall Street that poses a “moral hazard” problem. The words “Bernanke Put” are already on the lips of some.

“50 BPS=Fifty Bailout Points,” one bearish investor to us just after the cut was announced. "That sound you hear? That's the sound of Ben flying over head in his helicopter."

Ironically, the cut comes just a day after the Guardian quoted Alan Greenspan, who is perhaps most famous for holding down interest rates to historically low levels during his tenure as Fed Chairman, as saying the that "inflationary pressures are going to start to build." (Hat tip Barry Ritholtz's Big Picture.)

FOMC statement after the jump.

We’re ten minutes or so from the announcement of the Fed’s interest rate targets. Yesterday a majority of DealBreaker’s readers responded by saying that they predicted a 25 basis point rate cut. The next favorite position was no cut at all.

Rather than blather in the minutes before the announcement, we’re deciding to listen. Let’s make this an open comments thread for thoughts on the Fed, the markets and the economy.

Blind hedge fund guessing game: Which multi-billion dollar multi-strat hedge fund manager, located far from Wall Street and Greenwich, is rumored to be “blowing out” its arbitrage positions this morning as all eyes are focused elsewhere this morning? What prompted the selling-off is unclear, but it has tongues wagging.

Before the Fed, Dealbreaker is considering lunch. A little salad action perhaps? Or maybe you’re hung-over, in which case we recommend the duo pepperoni slices with extra Tabasco slathered on those bad boys [nothing like that to get all systems running again after a heavy night out at Scores]. We realize that working in an open environment with either rows of desks or even cubes can cramp a person's lunch style. Out of consideration for your coworkers and to avoid being publicly flogged/ridiculed/ostracized from the floor here are some foods you may want to avoid while eating at your desk:

ANYTHING and let us repeat that ANYTHING that once resided in a body of water. You may not win friends with salad – but you’re going to make enemies with fish. Just say no.

Indian Food. Sorry, but chicken tiki has a pungent way of filling up even the largest rooms. You don’t want the trading floor smelling like Curry in a Hurry.

There’s something about cooked broccoli that rubs people the wrong way. It’s reminiscent of someone who has serious intestinal distress. Proceed with caution.

Eggs – maybe it’s the touches of sulfur and while not common lunch fare this can be met with a snide utterance along the lines of, “Is SOMEONE eating eggs???” while standing up and publicly humiliating the guilty party.

Surely there are other odious culprits not mentioned on this list that rub people's noses the wrong way... Feel free to vent to us about your neighbor who eats fish tacos every day for lunch.

It has been traditional for quite some time for those leaving investment banks to send an email to their colleagues on the day of their departure. The messages typically follow-up a standard format: announce the departure, wish well to others, praise mentors at the firm, perhaps indicate the next job and provide contact information. They are, in a word, boring. And usually get read—or, well, glanced at—briefly before being deleted.

But every now and then an investment banker decides to aim a little higher. Or, perhaps, lower. Over the past few years we’ve seen the development of a counter-genre to the Boring Leaving Email. Call it the Fed-Up genre. Or, less politely, the Fuck-Off email. Some of these, such as our own Keith Hahn’s email to colleagues at JP Morgan, become internationally circulated. (The counter-genre is so well known that frequently fake FO emails get circulated.)

Yesterday we reported on the latest FO email making the rounds, from a banking analyst at UBS in New York. Over-worked and under-appreciated, Jonathan Napier Maudlin decided he had had enough and wasn’t going to take it anymore. At 7:03 in the morning, after spending the night toiling away in his cubicle, he launched an email to seventeen or so of his colleagues at UBS announcing “I’m leaving the bank now.”

The letter went on to describe his job at the bank as “mindless text editing, copy and pasting, and getting yelled at for stuff other people can't/won't/don't do.” The job simply was “not worth doing,” he wrote. “There is no happiness here.”

Last night, Maudlin told DealBreaker that the relentless workload had pushed him over the edge.

“After my 120th hour this week on the job, I decided to peace out. I hadn't had a day off in three weeks (day off meaning a Saturday or Sunday either), and I got yelled at at 6 in the morning,” he said.

The email concludes with a note of finality. “I took all my personal stuff. No one needs to contact me for anything (except for a drink for those of you with my personal number). I will only be at my New York address a few days longer,” Maudlin wrote.

The email quickly circulated among investment bankers, as they forwarded it to colleagues with their own comments. Many sympathized with the sentiments of Maudlin says.

“Well said,” one person who forwarded the email wrote. “Note day of week and time email was sent.”

Banks discourage employees from sending out these FO emails. Often, they violate the email policies that banks try to make workers adhere too. Unfortunately, given the sentiments of those who are inspired to write such emails, such policies have little effect. In his post-script, Maudlin notes that his email probably violates UBS’s policies.

I'll be waiting for some smart-ass associate to send a ‘best-practice e-mail for how to quit properly,’” he writes. “I will be sure to keep your tips in mind.”

The full email is reprinted after the jump.

"Hairy Day" Illustration via BiffSniff.

It goes without saying that here at DealBreaker, we judge people. Obviously looks, arrogance, dental records and the ability to swing a racquet are all taken into account when there's sizing up to be done, but how do we decide who should be summarily dismissed from our line of vision? Two words--finger dexterity. Are you a good person? Intelligent? Kind? We don't care. Can your appendages move with speed and competence? This is the stuff that matters to us.

Which is why, when WallStrip asked if we'd like to enter Myrna Moss into its annual Ms. Blackberry Pageant '07, we willingly shoved her in L. Campbell's direction. Of course we wanted Moss to be a contestant, if only to see if she's up to snuff, re: our aforementioned litmus test. Despite having some suspect difficulties with a keg of cheese balls that must be indicative of a much deeper personal problem, the mistress of RIMM put in a very respectable show, not necessarily reflected in the outcome of the contest. (Sorkin--you've got our number.)

Apropos, the Wi-Fi here at Promises is really quite impressive.

Here's JPMorgan's latest brilliant propaganda video, which you can watch here. A walkthrough:

The video lets you know right from the start that “Elena is participating in JPMorgan’s Investment Bank 2007 Global Training Program.” You know Elena is still in training because she is still smiling. Elena is shown looking at slides, one of which has the heading “About our culture” and a subheading “PLAY” (and a disclaimer “may not be an actual slide”). Of course, that section of the training presentation is empty, and the video quickly moves on.

Some more text flashes on the screen - “Employees receive rigorous technical training and learn about JPMorgan’s culture,” as demonstrated by a still of a bunch of people taking out books from JPMorgan bags (the extreme biodiversity in the firm represented by the fact that one of them is bald), then a still of a blood orgy in the TMT group.

Elena complains that you learn about a bunch of different asset classes that have nothing to do with your future job, and that it’s difficult to get to know anyone because JPMorgan is always switching the seat assignments in the room.

Elena laments that it was also difficult to get to know anyone at the Outward Bound training offsite, because everyone had to climb these stupid ropes and row down a body of water with large blocks of wood.

Judging by what you just saw, JPMorgan admits that it has a shitty training program, but promises that by the time you sign up, it will be markedly better. That’s why the firm is proud to state that Vault voted JPMorgan the best training program out of all Investment & Commercial Banks for 2008. In the future, JPMorgan will be better. It swears.

Always one to top itself, JPMorgan saved the best for last. The last shot of the video is a black screen with an arrow pointing to the right and the phrase “This is where you need to be.” By “this,” JPMorgan either means “in total hopeless and all-encompassing darkness,” or, slightly to the right at UBS at 299 Park Ave.

Inside JPMorgan’s Global Training Program [Bankers Ball]

Shares in Lehman Brothers are trading up this morning after the firm said its third-quarter earnings dropped only a wee bit from a year ago. The subprime lending crisis has hit its fixed-income business, which was down nearly 50%, but its equities trading, asset management and investment banking businesses were strong. The total price tag of the credit crunch last quarter came in at $700 million in lost revenues.

The bottom line numbers look very good, at least compared to what many expected. Net profit fell 3% to $887 million ($1.54/share) from $916 million ($1.57/share) a year ago. Revenue rose to $4.31 billion from $4.18 billion. Wall Street analysts had predicted Lehman would file $1.47/share on $4.23 billion in revenue, which means that Lehman performed better than expected. "Better than expected" are magic words for investors, and Lehman immediately jumped in futures.

The bulls are now running. And we hate to ruin the china shop party, but it looks to us like some financial engineering and unsustainable growth went into those numbers. We can't really make heads or tails of the tax accounting, for starters. But when we looked between the pre-tax and post-tax numbers, tt looks like they are recording something like $70 million in tax savings from second-quarter to third-quarter, which might be due to writing down the valuation of leveraged loan commitments and mortgage positions. Did someone call the guys in the tax department and ask them to find a way to tack an extra dime onto earnings per share?

How about those additional revenues from investment banking? If you think that's sustainable, you might want to come take a walk with me to lower Manhattan. I've got a bridge to Brooklyn Heights I'm looking to unload.

More importantly, Lehman says it recorded "substantial valuation reductions" on some fixed income assets but we're basically supposed to trust that they've marked these things correctly. Because, you know, Wall Street banks have done such a great job at valuing fixed income assets recently. Why would anyone get suspicious of their valuation models now? To put it differently, many expected that the credit crunch would cost Lehman more than $700 million. We're still not confident it hasn't.

We know that we're fighting the numbers here. Sorry for being so churlish. We were up till 4 am with insomnia last night. Which always makes us feel bitter. If you're going to be up to 4 am on a Monday night it should involve whiskey, women and at least a little bit of crime.

So we'll let Dick Fuld have the last word. He sounds like he had a better night's sleep than we did.

“Despite challenging conditions in the markets, our results once again demonstrate the diversity and financial strength of the Lehman Brothers franchise, as well as our ability to perform across cycles,” Lehman chairman Richard S. Fuld said in a statement.

Press Release [Lehman Brothers]

Lehman Beats Estimates, Limits Losses on Mortgages [Bloomberg]
The hit is light at Lehman [FT Alphaville]

New York Times site drops fees for access to columnists (AP)
"Joshua fit the battle of Jericho, Jericho, Jericho/Joshua fit the battle of Jericho/and the walls came tumbling down." That should obviously be today's theme song, as the New York Times is finally giving up on its much-maligned TimesSelect program, which locked its star columnists (along with certain blogs and non-start columnists) behind a paywall. The announcement comes basically two years since the start of the program, which nobody liked and few people signd up for. People have been calling it stupid for a long time, but we may come to rue the change. Now we're going to hear a lot more from guys like Paul Krugman and Thomas Friedman again. Oh well, it was fun while it last. That being said, the pay wall isn't even the most outrageous thing about the Times' site. The real crime is the company's obnoxious click on a word feature, which pops up a definition in a new window. Wish they'd drop that too.

I.B.M. to Offer Office Software Free in Challenge to Microsoft’s Line (NYT)
Here's a true story: we spent all day yesterday at a tech business conference in Manhattan. It was a fairly tight-laced crowd, particularly for tech, probably because many of the attendees were bankers. Just to give you some idea, everyone was wearing suits, and there were only a few Mac to be found. Most we're on PCs. That being said, everyone was using Google Docs to take notes. Okay, there was one guy on Word, but he was definitely the only one. So Microsoft can insist up and down that people don't want free online apps, but they clearly do. Meanwhile, IBM has announced that its oft-forgotten Lotus suite (word processing, spreadsheets, presentation software), will now be completely available as a free download. Unfortunately, they won't be online, though there's Google for that. But if you want a high-powered office suite without paying for Office, this might be the way to go.

Effort to Get Companies to Disclose Climate Risk (NYT)
Does this make sense to anyone? An effort is afoot by environmental groups to get companies to disclose their "climate risk" in SEC filings. What the hell is 'climate risk'? They seem to want companies to disclose the effect that global warming might have on their business (okay), but then as an example, the article cites Andrew Cuomo's investigation into coal companies for not discussing the risks associated with their plants and global warming. So are companies supposed to discuss how their business contributes to global warming, or how their business would be affected as the earth starts to warm? Perhaps before these groups start demanding stuff, they should get their demands straight.

Discount Rate Is Also on the Fed's Table (WSJ)
Oh right, and there's some Fed meeting today, which has been anticipated for weeks. A great reminder that ultimately, we live under centralized planning. That may be an exaggeration. Just the most important sector of the economy -- finance -- is centrally planned.

$$$ Our weekly M&A round-up finds that after gradually slipping over the past two-and-a-half months, with occasional flurries of big-deal excitement, last week's quiet merger-and-acquisition market officially left the stratospheric first half behind. The 36 deals with a total value of $3.36 billion were a new low for the year. [CFO.com]

$$$ Was the supposed war between Erin Burnett and Maria Bartiromo cooked-up by Erin’s agent?
[Daily News]
$$$ Carney versus Gasparino on CNBC’s On The Money tonight. The topic: Biz school vs. Hedge Funds.
$$$ Bess Levin returns from her assignment in San Francisco tomorrow!
$$$Mutual funds versus hedge funds, Mac vs. PC style, with reader favorite Tim Sykes.
[MSN Money]
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With customers mobbing Northern Rock branches across the UK and the stock plummeting so fast that trading in the shares was briefly halted today, the British government moved to quell panic by issuing a statement that it would guarantee all deposits in the bank.

Chancellor of the Exchequer Alistair Darling said the guarantee was being made in conjunction with the UK's Financial Services Authority and the Bank of America.

"That is unequivocal, I've put the matter beyond doubt," he said. "People will be able to get their money back."

One question: if you are a Northern Rock depositor, why should you put yourself at risk of even a temporary delay in getting your funds out should the bank fail? Whatever the government says about guarantees, it's unlikely that the money will be as readily available from government as it would be from a sound financial institution. Why not withdraw and put your money some place with less trouble? We're sorry if those questions seem irresponsible but that's what we'd be asking ourselves if we had money in Northern Rock.

Update: Lots of readers have asked why the customers of Northern Rock would rush to get their savings out of the bank. Don't they have the equivalent of a the FDIC? Aren't bank deposits insured by a government agency?

The answer is that the UK doesn't insure bank deposits the way the US does. To begin with, the total amount covered by deposit insurance is much lower than the US, which insures up to $100,000 in deposits. Only thirty-five thousand pounds is covered by insurance for depositors in the UK.

More importantly, the UK employs an insurance practice called "co-insurance" which shifts part of the risk to depositors. After the first two-thousand pounds of savings, only 90% of each persons total claim on a failed bank is covered by insurance, even for amounts below the insurance cap. The move is intended to impose tougher