Daily Archives: April 27, 2010

Apple too risky for investors?

There’s an opinion piece in today’s WSJ pointing out that Dodd’s bill is going to recreate this nonsense . Indeed, I remember my securities law professor, Nicholas Wolfson (“the Wolfman”, for those who attended) ranting that the state of Massachusetts was preventing its citizens from buying Apple stock in 1980 because these silly, stupid bureaucrats deemed it “too risky”.  Now we’re about to establish that as a national rule?

I wrote a few days ago about Dodd’s bill barring start-up companies from receiving funding from Angel investors. Now, they won’t be able to sell stock. This is all about cronyism and centralized control and death to entrepreneurs. Accident? I think not.

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Thank you, Mark Finerman

This CEO of Loancore Capital saw the town’s Christmas tree blown down in the recent storm and has paid for a beautiful replacement. I realize that I am risking being obnoxious and offensive here, and if I am please forgive me because I mean this in the best possible sense, but it strikes me that Mr. Finerman probably does not celebrate Christmas, which makes his gesture incredibly generous and in the spirit that I hope everyone in Greenwich can reciprocate for all our neighbors and all religions.

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Is this how it begins?

Crisis spreads in Europe

“Investors are increasingly thinking about the risk of the unthinkable in Europe,” said Stu Schweitzer, a global market strategist at J.P. Morgan Private Bank in New York. “The concern is contagion.”

That reality will force EU policy makers to confront the prospect that the crisis could spread to larger economies, in particular Spain. Greece and Portugal are small countries that account for only a fraction of the euro zone’s economy and most economists believe that the EU, if necessary, could bail them both out. That isn’t true for Spain, however, a country of 46 million and the euro zone’s fourth-largest economy.

Spain, which is trying to emerge from a steep recession following a housing bubble, is running a 11.2% budget deficit. That compares to Portugal’s 9.4% deficit and Greece’s 13.6% deficit.

Like past debt crises, this one has fed on itself. Europe’s failure to act decisively has led investors to sell off Greek debt, making it far more expensive for the country to borrow money, prompting further downgrades.

News of Tuesday’s rating cuts came as investors were already unnerved by signs that a €45 billion ($60 billion) aid package for Greece from the EU and the International Monetary Fund could be delayed by political infighting in Germany.

European Central Bank President Jean Claude Trichet and IMF Managing Director Dominique Strauss-Kahn are expected to meet with German lawmakers in Berlin on Wednesday and urge them to act quickly on the EU’s aid package.

The shuttle diplomacy amid the worsening market turmoil suggests officials’ previous claims of an EU-wide consensus on a rescue were premature.

Political debate in Germany over the Greek bailout has become particularly heated in recent days because the issue has blown up in the midst of a campaign for a crucial regional election set for May 9 that could influence the balance of power in Germany’s national parliament.

That has led a number of German politicians to berate the government over its handling of the Greek crisis, playing to domestic opinion even in the face of criticism from other EU governments that accuse Germany of unsettling financial markets.

Germany is ultimately expected to contribute to the Greek rescue as EU leaders have agreed, despite the domestic political posturing in Berlin, analysts say.

“What it’s down to is whether Germany is going to step up to the plate and vote in support of the euro,” says Mark Dowding, head of institutional fixed income in Europe for DB Advisors.

“You have a number of countries in Europe who have sovereign debt situations where the debt burden is barely sustainable, particularly if yields move higher,” Mr. Dowding said. “The thinking is that if a package is not agreed to on a timely basis, effectively what you could be looking at unfolding is the European sovereign version of the Lehman crisis.”

As Greek bonds yield jumped to new record highs, the selling spilled into Portugese, Italian and Spanish bonds. Even Ireland’s government bond market took a hit though the country’s efforts to get its own fiscal house in order are these days being held up as an example for Greece to follow.

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Money is no object – taxpayers must cough up

Worth $265 million? Hurricane damage? FEMA is here to shovel other people’s money your way. The left keeps harping on right wing “hate”. I suggest that we’re just fed up.

Unlike say, Nic Cage or Lindsay Lohan, Beyonce Knowles is living the life. She and her husband Jay-Z are worth a reported $265 million and she’s still the hottest singer on radio.

But did you know Beyonce’s father Matthew Knowles owns a block of property in Galveston, Texas that was devastated by Hurricane Ike? And did you know that FEMA is going to pay Beyonce and her father a cool $425,000 to reimburse them for close to the original value of the house? Yep, it’s true, according to an excellent report from Mother Jones.

The house is one of 68 that will receive a FEMA-sponsored buyout according to KHOU. Lucky them. So what’s the area like – or the house for that matter? We found a similar home right on Beyonce’s block thanks to Trulia.com.

UPDATE: Too funny – on the other hand, Obama has denied FEMA relief to individuals in Greenwich because well, you know …

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Our country’s doomed

This from Iowa. Iowa! If we’ve lost the heartland, what’s left?

(Teachers organize they’re stewdents to protest budget kuts)

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The market’s back!

That’s the thinking of some sellers, anyway, as I just had two really good – all cash, big numbers, close in two weeks offers – rejected by spec builders. Maybe so, but the Dow dropped 213 points today and Europe’s going nuts. I’m guessing that those builders are going to be looking back, a year from now, wondering how they could have been so stupid.

But that’s what makes a market. Maybe the builders can get their Senator to conduct a hearing on why bad bets went wrong. Next year.

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She has this right

NYT Op-Ed, Bethany McLean

But the transaction at the heart of the S.E.C.’s complaint is a microcosm of the entire credit crisis. That is, there are no good guys here. It’s dishonest and ultimately dangerous to pretend that Goldman is the only bad actor. And the worst actor of all is the one leading the charge against Goldman: our government.

Each of the supposed victims here was, at best, a willing accomplice. Let’s start with those who bet that the investment in question, Abacus 2007-AC1, would be profitable for them: a bond insurer called ACA Capital Holdings and a German bank named IKB Deutsche Industriebank. These companies allegedly didn’t know that Goldman, in exchange for $15 million in fees, had allowed a client, the hedge fund manager John Paulson, to help design the investment in order to improve the odds that it would fail.

But there was nothing hindering ACA’s ability to see that mortgages sold to people who probably couldn’t pay weren’t great investments. Meanwhile, the company’s insurance arm was covering as many subprime mortgages as it could to increase its own short-term profits. In some ways, the ACA story is the A.I.G. story: The company thought it had found free money — and basically bankrupted itself.

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Something wrong here?

One third of San Francisco municipal employees paid $100,000 + per year. (Hat tip, “Max”)

More than 1 in 3 of San Francisco’s nearly 27,000 city workers earned $100,000 or more last year – a number that has been growing steadily for the past decade.

The number of city workers paid at least $100,000 in base salary totaled 6,449 last year. When such extras as overtime are included, the number jumped to 9,487 workers, nearly eight times the number from a decade ago. And that calculation doesn’t include the cost of often-generous city benefits such as health care and pensions.

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Where is Sean Penn?

Chavez imprisons judge who angered him. This is an NPR story so perhaps the Peanut Farmer will hear it and tell his friend Sean.

In a move that has drawn criticism as an attack on judicial independence in Venezuela, President Hugo Chavez has jailed a criminal court judge. Her transgression, critics of Chavez say, was straying too far from what the government wants.

Human-rights groups say the independent-minded judge, Maria Lourdes Afiuni, was jailed on trumped-up corruption charges after she allowed the release of a former banker who had once benefited from his ties to the government.

Just 15 minutes after her ruling on Dec. 10, intelligence agents stormed Afiuni’s court, arresting her and her entire staff.

In a televised speech the following day, Chavez said Afiuni, 46, deserved a maximum 30-year jail sentence “in the name of the dignity of the country.”

Sitting in a tiny cell in an overcrowded women’s prison near the capital, Caracas, Afiuni told NPR she knew the ruling she handed down might anger the president, and she doesn’t hold out much hope that she will be freed.

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Field Point Circle

So what does $32 million get you in Greenwich? This house, for one, and it’s awesome. As it should be, of course, but there are other houses out there in this general price range that disappoint rather than awe.

There are great, sweeping views over Long Island Sound, a beautiful yard, and everything inside is the highest quality I’ve ever seen. Ever. There are old oak beams, remilled to fit, and the kitchen cabinets were made from “sinker logs” – timber lost off barges 100 years ago and salvaged from the bottom of the Great Lakes. An oak ceiling in the dining room is fantastic, and the entire house is just scaled perfectly, each and every room.  The “gallery”, or whatever you might call it, stretches 70′ (with windows overlooking the water its entire length) according to listing agent David Ogilvy, but it feels almost like three separate rooms, rather than an airplane hangar.

And so on, on and on. This was a really fun house to tour just because it’s so beautiful and so carefully made. Is it worth $32 million? Who the heck knows – Mr. Ogilvy did not make his reputation by under-pricing his listings – but it is certainly the nicest house I’ve ever seen. What that’s worth to someone who has this kind of money, I leave to him or her.

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Washington goes Ukraine, or is it the other way around?

Senator Carl Levin goes after Loyd Blankfein

The U.S. Senate’s been spending the day using the “S” word (rhymes with kitty) while in Ukraine, they’re working on emulating our wonderful democracy.

Lawmakers pelted the podium with eggs and catcalls before stalking across the aisle, putting their colleagues in headlocks and engaging in other tactics not exactly covered by Robert’s Rules of Order. Smoke bombs were set off in the chamber. Glue was poured into voting machines. The legislative leader directed the session behind umbrellas held by his aides, to protect him from projectiles.

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Rumored deals

27 Patterson Avenue

 

Brother Gideon tells me that 27 Patterson Avenue, listed April 12 for $3.495, found a buyer immediately, even before its open house. 

And, he says, 36 Lake Drive South, in Riverside, which also had a buyer but then lost him, ended up with three couples vying for it in the neighborhood of $3.650.

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Back from open house tour

33 S. Baldwin

 

I wrote about this house yesterday, before I’d seen it, complimenting the seller for pricing it just under its assessment at $3.995 million. I got into it today and it’s very nice – excellent condition, everything updated and with great views of the pond from almost every room. It’s pretty much a one-floor set up although I imagine you could go up if you needed to, but as it is, it’s an excellent value. Carolyn Anderson, one of the two listing brokers, told me she already has 18 showings scheduled which ought to tell you something about the demand for well priced houses.

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WGCH Sponge tech saga

Greenwich resident Michael Metter is getting attention, which I doubt he really wants.

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Greece goes down, Portugal next

The domino theory, in real life. No one in Washington wants to believe it, but you can’t borrow your way to prosperity.

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Did Jimbo Himes read this part of the health care bill?

Demmerkrats: Companies’ estimates of huge increases in health care costs were accurate.

NYT:

At issue is a section of the law that eliminates a tax break available to companies that provide drug benefits to retirees as part of their insurance coverage. The tax change, expected to generate $4.5 billion of revenue over the next 10 years, will help offset the cost of providing coverage to the uninsured.

Within days after President Obama signed the law on March 23, companies filed reports with the Securities and Exchange Commission, saying the tax change would have a material adverse effect on their earnings.

The White House suggested that companies were exaggerating the effects of the tax change. The commerce secretary, Gary F. Locke, said the companies were being “premature and irresponsible” in taking such write-downs.

Representative Henry A. Waxman of California and Bart Stupak of Michigan, both Democrats, opened an investigation and demanded that four companies — AT&T, Caterpillar, Deere and Verizon — supply documents analyzing the “impact of health care reform,” together with an explanation of their accounting methods.

The documents — hundreds of pages of e-mail messages and financial worksheets — include large amounts of data that substantiate the companies’ concerns. They have reignited a battle over the law in Congress.

Representative Joe L. Barton of Texas, the senior Republican on the House Energy and Commerce Committee, said, “From a financial standpoint, from a purely economic standpoint, many companies would be better off discontinuing health care as a fringe benefit, paying the penalty and pocketing the savings.”

In a memorandum summarizing its investigation, the Democratic staff of the committee said, “The companies acted properly and in accordance with accounting standards in submitting filings to the S.E.C. in March and April.”

Moreover, it said, “these one-time charges were required by applicable accounting rules.” The committee staff said this view was confirmed by independent experts at the Financial Accounting Standards Board and the American Academy of Actuaries.

Mr. Waxman, the chairman of the committee, and Mr. Stupak canceled a hearing at which they had planned to question executives on the effects of the law.

Too bad – would have been an instructive meeting.

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2 1/2 years of failure, $12 million payoff – I wanna be a bank president!

People’s Bank fires CEO, gives him a nice pat on the back (exit pay per Ct. NPR – looking for link).

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