Friday's nonfarm payrolls report easily beat Wall Street expectations but may not be quite what Wall Street wanted.» Read More
Some broad trends seem to have emerged from the Federal Open Market Committee meetings held on November 2nd and 3rd and released earlier today.
Parsing the cryptic language of FOMC minutes is never easy — because every point seems to have a counterpoint. But the minutes seem to suggest that most participants in the meetings are still concerned about growth and unemployment:
"Participants generally agreed that the most likely economic outcome would be a gradual pickup in growth with slow progress toward maximum employment. They also generally expected that inflation would remain, for some time, below levels the Committee considers most consistent, over the longer run, with maximum employment and price stability."
That would seem to suggest that the economy is growing, and unemployment is falling — but not as quickly as it should be. And that interpretation would seem consistent with recent policy actions taken by the Fed — namely a second round of quantitative easing.
Major selloff in equities on a dismal news day (MarketWatch) The bad news today was so varied that it's difficult to pick a single source of tribulation as the cause of a major decline in equities, both in the US and abroad. The day began with the beginnings of a major crisis on the Korean Peninsula — with North and South Korea exchanging mortar fire. Then, there were speculations about political instability in Ireland, driven by the broader story of a threatening European debt crisis. Next, a broadening of investigation in the United States into insider trading, which now includes large market players SAC Capital and Janus. Finally, a lowered forecast for domestic growth from the Federal Reserve.
The approach to insider trading that the government is lately employing got an interesting test today.
The government has reportedly been going after networks of experts and outside consultants that it says provide hedge fund traders with non-public, proprietary information.
Well, this afternoon, shortly before it was officially announced that shares of Janus Capital Group would stop trading pending a company announcement, the shares took a nose dive on spiking trading volume. In other words, a bunch of people apparently had the non-public knowledge that something was happening at Janus before it was announced.
Where did this information come from? If you look at the chart, the shares spike downward right around 1:48. So was some nefarious tipster letting his friends know about the pending halt and announcement?
In what may be today's most titillating—though maddeningly vague—newsflash, SAC Capital Advisors informed investors that they have received a government subpoena.
The subpoena is presumably in connection with a massive insider trading investigation , which began over three years ago, but culminated yesterday in a series of FBI raids on multiple hedge funds .
According to an article recently posted on MarketWatch , the subpoena received by SAC Capital is identical to the "extraordinarily broad" subpoenas received by other hedge funds.
The market watch article states that SAC Capital's letter to investors made the following points:
The financial blogosphere is beginning to buzz over new revelations about Countrywide Financials mortgage securitization practices. The new information came to light through the testimony of an employee of Bank of America , which now owns Countrywide Financials.
As I wrote in an article yesterday , the gist of the story is this: A Bank of America executive named Linda DeMartini testified in a New Jersey bankruptcy case that a promissory note, which later became relevant in a foreclosure proceeding, had not been properly transferred from countrywide to the mortgage's new owner. Countrywide had sold the mortgage to another financial institution, where it ultimately remained as part of a mortgage backed security. The pooling and servicing agreement, which governs the terms of the securitization, requires that the promissory note is physically transferred to the securitization trust.
But the biggest news in the article I wrote yesterday would seem to be a direct quotation from the judge's opinion in the bankruptcy case: "She [DeMartini] testified further that it was customary for Countrywide to maintain possession of the original note and related loan documents."
It’s no accident that Austrian economics is newly popular. It provides the best explanation for the business cycle we just lived through.
But the resurgent popularity of Austrian economics may actually be hampering the ability of the Federal Reserve to reflate the economy with low interest rate policies. Businesses, now aware of the dangers of a low inflation- sparked economic bubble, may simply be refusing to fall for the age-old boom-bust trap.
The Austrian theory of business cycles is rather straightforward:
*Update: Janus has resumed trading, as of 2:40*
*Update: MFS tells us that they have not received any request for information in connection with the federal insider trading probe.*
Trading in shares of the Janus Capital Group have been halted, apparently in anticipation of an announcement that federal authorities are looking at Janus as part of their insider trading dragnet.
What a strange love affair it's been between TPG Capital and J. Crew.
This morning the news broke that TPG Capital, with help from a Los Angeles private equity firm called Leonard Green & Partners, is close to a deal to acquire the preppy-clothing company for about $3 billion in cash, or around $43.50 per share. This news comes just 18 months after TPG Capital sold off the last of its previous stake in J.Crew at an average price of $14 .
The turnabout, while continuing a convoluted TPG/J.Crew affair, also may speak volumes about the state of private money today.
TPG first acquired a stake in J.Crew way back in 1997. It was one of the private equity firm’s first and most notable deals. Back then J.Crew was a huge brand, with a highly recognizable name and look, but with sales of just $600 million per year. In the catalogue business, Eddie Bauer and Land’s End have sales more than twice J. Crew’s. Banana Republic dwarfed it in brick-and-mortar retail.
Perhaps even more importantly, J. Crew’s management—primarily the founder Arthur Cinader and his daughter Emily Woods—had an uppity reputation that had reportedly already scared off one buyer, Bahrain’s Investcorp.
The original deal was messy. TPG and J. Crew had agreed to a sale price of $560 million, financed with $175 million in senior subordinated notes with a 10 percent yield and $140 million in zero-coupon junk bond notes offered at 54 cents on the dollar. Chase would finance about $30 million in receivables.
It appears Blackstone will not succeed in its buyout attempt of Dynegy, the Houston energy company specializing in power plant operations.
In reference to a meeting discussing the proposed takeover, The Journal writes:
"The meeting was recessed a week ago to give shareholders time to consider a revised offer Blackstone made. Facing intense opposition from Carl Icahn and hedge-fund operator Seneca Capital, Blackstone raised its bid to $5.00, a 50-cent increase over the August merger agreement, in an attempt to sweeten shareholder sentiment. "
But to no avail.
And the opposition of Icahn, as well as Seneca Capital, was indeed the rub.
The falling out between Bill Gross and his one-time partner Mohamed El-Erian has quickly turned into one of the ugliest bust-ups in recent history.
The founder of a hedge fund with $21 billion under management provided three investing rules and three favorite stocks.
Former executives at Dewey & LeBoeuf were accused of using accounting gimmicks to fool banks and investors.