Fortune says the new status symbol for hedge funds is a massive aquarium**:

City Aquarium, which he founded in 1999, now has a client roster that includes sultans, supermodels, Russian heiresses, Broadway producers, and an increasing number of hedge funds like SAC Capital Advisors and Sandell Asset Management (both declined to comment on their expensive toys). "Aquariums are status symbols," says [City Aquarium owner] Muir, who has also designed aquariums for hedge fund managers' homes. "These guys say, 'Okay, if we are going to do [an aquarium], it has to be hot.' " So what's the hottest thing right now in hedgie tanks? Sharks, natch. The price: around $2,000 each.

**One vendor in New York = trend.

Latest Status Symbol: $600,000 Aquarium [CNNMoney/Fortune]

RECAP: The OSTK call was less eventful than what we've come to expect from Byrne, but there was the usual hint of conspiracy and gratuitous media bashing (see Roddy Boyd, swipes at; Wall Street Journal, accusations of fabricated quotes). Byrne also says that one of the "big three" bulge bracket banks has been calling up some of OSTK's partners and telling them to drop OSTK. And guidance: next quarter will look exactly like this quarter.

11:59 - final comments. Jason: we stumbled and we know we stumbled and don't let anything we say make you think we're making excuses.. but in the long run it might be a good thing for the business... when we had the debacle we had, replacing all of our systems this year, and we shrunk a lot... it's given us time to take a deep breath and harden our systems. [our core business] is getting a lot of attention. As bad as the systems got, i think the core shopping business, as far as somebody orders a product and they get it on time, i'm not sure our business has ever been better... i think investors should be pleased and in the next 6 months to a year, you'll see a big difference in our financial performance. Byrne - to me this is all a function of bad decisions i made in the first half of '05, both in that they were belated, and that... we stumbled... To jason's point... we couldn't have gotten better or more refined looks at inventory or more refined looks at marketing... travel beat budget for the quarter, auctions was just a little behind budget...we don't really have any great new businesses planned. we're just refining what we have... i'm sure you welcome having Jason back to provide adult supervision... Expect that same thing for one more quarter..

The NYSE is closing its dining club, citing rising costs, lower membership and, of course, 9-11. (When we hit the decade, we assume blaming 9-11 will seem sufficiently ridiculous that people will stop doing it. But we usually give people too much credit.) At any rate, the club was at its peak... guess when. Guess. Just guess:

The Luncheon Club hit its heyday in the early 1980s, when it served up to 500 meals a day, according to one report. The club occasionally served as a backdrop for inter-member skullduggery, with four separate NYSE disciplinary actions over the years arising from misuse of members club charge accounts.

Congress has big ideas on gas prices (Seattle Times)
Forgive us if it sounds like a broken record, but it would seem that idiocy on a daily basea needs daily debunking. Real quickly, the latest proposal, you've probably heard, is for the government to send all drivers a $100 rebate check. This isn't much different than the $300 that Bush had sent back to each taxpayer a few years ago. What's funny, is if you were to ask the average person whether it's a good idea to just print up $100 bills and send them out, they'd probably recognize that you can't just print up currency to make people wealthier. That's why counterfeit currency isn't good. Yet, if you write everyone a check, and say it's a gas rebate, people will think it's a good idea -- even though it's the exact same thing. That being said, will our status as car-less New Yorkers prevent us from getting the coin?

Exxon's $8.4 Billion Net Faces Fire on All Fronts (WSJ)
It wasn't quite the $9.9 billion they made last quarter, but it seems that $8.4 billion is enough to piss off the politicians who did their usual tango. Still it came up a little short of Wall St.'s expectation. Perhaps it was intentional, maybe some knowingly wasteful expenses, a few more massages here and there for Lee Raymond, just to keep earnings a little low. Now, here's the lesson of the day Schumer, just in case you're reading. Suppose you imposed a gas cap, and earnings dropped to $3 billion/quarter. You'd probably go around saying that the company is still plenty profitable, so it's no big deal. But the stock would drop, thus meaning major capital losses for all of its investors. In other words, it's been a major loss of money. Their profit is an illusion, as the company has actually caused a loss for its owners. Got that Chuck?

Pfizer Shareholders Back CEO's $83M Golden Parachute (Forbes)
Congratulations to Hank Mickinell for securing his $83million dollar retirement. It's not quite as much as Lee Raymond's $400 million $99 million, but it's pretty good for an executive at a company that's not exactly firing on all cylinders these days. More importantly, it's a victory for what corporate law professor Stephen Bainbridge calls rational shareholder apathy. Basically, on matters like this, it's just not worth it for the shareholders to care. In a case like this, when the pay package barely represents pennies per share, why the did people rent airplanes waving a sign that said "Give it Back, Hank!" and fly them over the shareholders meeting? For more on the kind of demagoguery over CEO pay, particularly with respect to the Pfizer case, check out some of the writing of Larry Ribstein.

Microsoft's Pig in a Poke Problem (Infectious Greed)
A lot of people, including Eric Savitz at Barron's have been trumpeting the fact that Microsoft is heading into a very strong product release cycle. There's the new Vista, Office, etc., all of which should provide a tailwind for sales. But Paul Kedrosky notices a problem, after reading last night's earnings reports. All of the company's fat profits are being plowed into losers, like their endless quest to catch up to Google in search, and their costly XBOX program which isn't paying off. They're going to plow another $2 billion into search next year, few having much confidence that it will work out. So, yeah, winners subsidizing losers, that's a tough strategy.

$$$ "A sexy line of credit and a big revolver" Columbia B-school kids re-define sucking up to the teacher. [WARNING: This file contains a Vanilla Ice parody. Probably Safe for Work, But Not Recommended for the Weak.] [via LongOrShortCapital]

$$$ AOL launches bloggingstocks.com, a blog about individual stock performance. From the press release: "These blogs will focus obsessively on what average investors care about most, giving readers an interactive platform to get behind the headlines and exchange insights on some of the most widely held and talked about companies." (Average investors or the average investor? Eh, probably both.)

$$$ McKinsey predicts that investors will eventually tire of mediocre hedge fund performance and writes a report about it. It's just that sort of sophisticated observation that makes the seven-figure consulting fees entirely worth it. [Daily Dose of Optimism]

$$$ David Wittig, insider trading and now a surge in blind-pool offerings. The '80s are back. Again. [Forbes.com]

H-1B visa limits have been long stretched to the max for engineers, programmers and other people with specialty technical expertise. (Just ask the people in your newly-created Bangalore office.) But now another profession is hitting the H-1B ceiling: we're told by an agency owner that it's nearly impossible to get foreign-born supermodels into the country these days. See that on the left there? There will be no more of those. We've got enough, apparently.

(Now we better understand why Bill Gates wants to abolish H-1B caps.)

A few months ago, Overstock CEO Patrick Byrne got into an exchange with Jeff Matthews about the supposed existence of an Israeli mafia. (This discussion pre-dates his defense against more recent allegations of anti-Semitism.) In a post about the exchange, Matthews points out that Byrne is on record pointing to the "Israeli mob" (presumably among others--Sith Lords, etc.) as one of the conspirators in the alleged naked shorting movement against him. Byrne responds:

Jeff omits precisely the part of the quote that makes the connection, and that is, after I mentioned the Italian, Russian, and Israeli mobs, and the discussed the Russian mob, the interviewer said/asked, "I didn't know Israel had a mob?" To which I replied that, yes it does: for example, it is widely thought to control the US ecstasy trade.

The Israeli mob--in fact I was just reading Ha'aretz, which is an Israeli newspaper, ah, and a very good one, and you can Google this--If you Google "ectasy Israeli mafia" you'll find articles that basically the Israeli mob...is thought to control 75% of the ecstasy trade in the U.S."

In another Utah case, Holly McDonald-Korth was allegedly receiving shipments of Ecstasy from Antwerp Belgium, according to a search warrant filed by Salt Lake City police investigators... On paper, McDonald-Korth appears nothing like a drug dealer. She was enrolled in private school as a teen and then attended the University of Michigan before graduating with honors from the university of Miami with a degree in finance, according to court documents. After graduation, McDonald-Korth went to work for the Federal Reserve in Washington. The 25-year-old came to Utah 18 months later after obtaining a job as an analyst for Overstock.com

In keeping with our continuing coverage of the "New, New Economy" we have begun collecting a series of mergers and acquisitions analysis and valuation tools. Cumulatively, we expect these will give the modern investment banker a goodly number of financial arrows in her quiver. On Tuesday, we formalized the Idov Multiple. Today we bring you the Kanige Chaos Theory of M&A due diligence.

(You're welcome.)

Eventually, we expect that bankers who do not have these tools will be left behind in the fast-paced financial world, shortfalling $200 million dollar valuations of commerciablog firms and executing poorly vetted $500 million acquisitions of bricks and mortar publishing firms silly enough to sign a teenaged author.

According to this story in Philadelphia magazine, Donald Trump's new business partner in the area is Raoul Goldberg (nee Raoul Goldberger), a principal real estate bank/developer Multi-Capital Group. Goldberg has a colorful history that includes a 1999 conviction for ecstacy dealing. Upon learning of the conviction, Multi Capital and Trump have been distancing themselves from Goldberg:

"We were unaware of his past," Multi-Capital said, through the powerhouse Rubenstein PR firm, "and he is no longer associated with the marketing of the project and he is not a principal in the development."

But we're sure Goldberg will survive. After all, he's faced tough business problems before:

From a 1999 NY Post article: [Michel] Hemli, a resident of Belgium, sent shipments to Goldberger and Freund in a hollowed-out night table, the feds said. The trio began to panic earlier this month when a New York-bound shipment of 200,000 pills was "misdirected" to Spain, according to wiretapped talks. "I've been in this business for years," Goldberger told [partner Marc] Freund during an April 24 phone call. "There is nothing you can do when the s--t hits the fan."

China Central Bank Raises Benchmark Interest Rate (Bloomberg)
The Chinese interest rate/exchange rate puzzle always perplexes, and trying to figure out which direction things will go is a thankless task. Presumably, a higher interest rate for lending Yuan will crimp Yuan borrowers. The stock market is punishing shares of mining companies, who need to borrow a lot. At the same time, a higher interest rate on the Yuan should also boost demand for the currency -- whose exchange rate is fixed. Won't this simply require the company to print more Yuan, in order to sop up the demand, and won't this counteract the desire to make borrowing more expensive. Perhaps (surely) there's something we're leaving out in our analysis, but the more we think these things trough, the more we align with the central banks have no effect thesis. Put it this way, if central bankers really did have the power that everyone thinks they have, wouldn't we see a lot more crashes and depressions?

No sign of an end to mergers boom, says Goldman chief (Times of London)
Good news! Analysts expect that companies have no plans to stop merging, and even more importantly, companies will keep going private. Going private is truly the new IPO. Everybody wants in on it, and investors just wait around for word that private money is gonna come take them out. Also driving M&A is greater international integration (EU), and new wealth in different parts of the world (Middle East).

CBS CEO says considering sale of some radio stations (Marketwatch)
Whatever you think about the future of big media gloms, it's harder to be optimistic about their local TV & radio affiliates. New modes of distribution (satellite, internet) threaten to, eh, disintermediate them, to use a buzzword. So it's no surprise that companies continually will look for opportunities to dump the local guys. This isn't to say that they might not be good values, or offer some compelling cash flow opportunities -- but they're certainly not growing.

A Stunning Display of Pricing Power by Guess Who? (Bloomberg)
While many mergers turn out to be a colossal waste of shareholder money, some actually seem to pay off. The railroads, which have seen a good amount of consolidation over the years, are exhibiting great pricing pressure in the face of sky-high energy costs. Not only have their numbers been reduced, but it's really hard to start a railroad. It's comparatively easy to lease a few planes, hire an out-of-work pilot, rent a gate, and start an airline. That doesn't explain why there hasn't been more consolidation in the industry. One of the big culprits is pilot pay structure. It's all based on seniority, and when you merge two lists of pilots, the whole thing gets messed up. It's more evidence that labor inflexibility is a serious impediment to the economy.

We give up.

Previously:
Yahoo! Finance: 3; Google Finance: 0
Yahoo! Finance: 2; Google Finance: 0
Yahoo! Finance: 1; Google Finance: 0

We were just perusing the Vault.com IB message boards and buried under the pile of questions about internships, SAT scores and whether one can get a job at Carlyle as a managing director straight out of high school if one "knows someone" is a fairly extensive back-and-forth about what JPMorgan's next acquisition will be. The guesses revolve mostly around retail expansion, though someone throws in the Morgan Stanley canard for good measure.

Some of the names floated:
SunTrust (the usual name floated)
Wachovia (ditto)
USB (west coast expansion is attractive, but Grundhofers probably wouldn't sell)
PNC (nice east coast footprint but not a big enough deal for Dimon's ego),
Wells Fargo (deposit limit problems)
Washington Mutual (possible deposit limit problems, S&L component that complicates things)

Someone points out that Dimon's ostensible financial superstore strategy is exactly what Citi seems to be moving away from (see Legg Mason), which is ironic, unless Dimon's logic is that he can do Citi better than Citi does Citi. All we know is that Dimon doesn't have much of a story right now and he needs one. (And we need more material, so we're secretly hoping for that dark horse MS merger.)

File under "Good Use of Internal Resources": UBS analysts, using a similuation that employs sophisticated "scientific methodologies" (*cough* dart board *cough*), predict that Italy will win the World Cup:

According to the UBS simulation, further results will be as follows: Germany will lose to Argentina in the 3rd round and Italy will beat France at the same stage. They will be closely followed by the Netherlands, who will send England home. In the fourth pairing, the Brazilians will dominate the Spaniards. The semi-finals will then be down to the favorites: the Netherlands will draw the short straw against the Brazilians, the Italians will beat Argentina. In the final, the Brazilians will be forced to accept the fact that the Italians are the better team in this tournament.

UBS Analysts Predict the World Cup Champion [Yahoo! Finance]

Muffie Benson-Perella (muffie AT dealbreaker.com) is an Associate in the Investment Banking Division of a "Bulge Bracket" bank. She holds a B.A. in French and Art from Vassar College and an M.B.A. from Harvard Business School. Her regular column "Heard in the Suite" is a probing (and, ahem, fictional) weekly look into the secret lives and behind the velvet curtains of the investment banking world.

Dear Muffie:

Banking on Baking

The revolving door at Morgan Stanley is spinning so quickly we're having trouble keeping track of who's coming and going. So starting today, we're going to keep a running tally. Today's additions (or subtractions, as it were:

Bush takes aim at gasoline prices (Reuters)
It looks like our oilman President has gone completely to the other side and is now requesting an investigation into price fixing in the energy markets. Perhaps if he read any single news source or even Dealbreaker, he'd realize that crude oil is near record nominal highs these days, and that might have something to do with the high gas prices. While the merits of anti-trust law can be debated (anytime, anyplace buddy), shouldn't its application be something other than arbitrary? In fact it's always arbitrary. As many have pointed out, if you're looking for evidence of "uncompetitive behavior" you can find it in any market condition. Prices too low? Aggressive pricing! Prices too high? Price Gouging! Prices just right? Market collusion. Yep, anytime a politician stubs his toe, anti-trust is an easy outlet.

Sirius Signs Mark Cuban (TheStreet.com)
The man who claims that only hedgers, not speculators, should be allowed in the oil market, now has his own radio show. He also says that any stock which isn't paying a dividend is no different than a Ponzi scam -- yet mysteriously all of his holding are entirely speculative small companies. People seem to like reading him, and listening to his griping, so maybe they'll listen to him on Sirius.

Job cuts not Sun CEO's priority (Mercury News)
Yikes, looks like you can give up that big gain after the McNealy resignation. Either the new CEO is a)lying or b) Wall St. is in for a serious disappointment. The fact that Sun is supposedly on a growth track, and yet 6 years after the peak of the bubble still isn't profitable, is evidence that the company needs to do more than just explore areas of growth. If we were to be, we'd bet that, a), he's lying.

Muffie Benson-Perella (muffie AT dealbreaker.com) is an Associate in the Investment Banking Division of a "Bulge Bracket" bank. She holds a B.A. in French and Art from Vassar College and an M.B.A. from Harvard Business School. Her regular column "Heard in the Suite" is a probing (and, ahem, fictional) weekly look into the secret lives and behind the velvet curtains of the investment banking world.

It is really hard to get work done in London. Someone has got to do something about the Hotel situation in London. Why aren't 30 cash-flush private equity firms snatching up London hotels and converting them into something civilized? I mean, really. It is beyond the pale. So we get into the city and one of the deal team guys is trying to convince us to switch our hotel reservations to some place near the client. I have never stayed at a hotel in London so what do I know. Someone at the client suggests the "Millennium Hotel." Sounds good and modern to me so we go there. Disaster. Look at what passes for "modern" in London:

I mean really. Talk about boring. It's in the middle of this huge, dull square. There are a few trees but that's it. No boutiques. No where to sit and have a nice breakfast. No shopping nearby. Nothing. I am in London, I am going to want to see the city and do some tourist things, obviously.

Gary Weiss points out that Overstock's Patrick Byrne has been hanging out in the comments section of the Israpundit blog** lately defending himself against charges of anti-Semitism stemming from some commentary he made about Tom Friedman. Then he somehow laterals into a discussion of Jim Cramer and Herb Greenberg talking about him:

I do not think I have ever commented publicly on the Israel-Arab dispute. What I did in one blog was say that, regarding that dispute, Tom Friedman makes a habit of pretending to weigh the evidence, then always takes Israel's side. I have not said that he is wrong to take Israel's side, just that the "Let's see, Arabs, israel, Arabs, Israel‚... . OK, this time I gotta go with Israel!" routine gets a little old. (As a matter of fact, I think he is sometimes insufficiently pro-Israel for my taste, but that is a logically unrelated point.)

I brought this issue up in the conext of discussing Jim Cramer's and Herb Greenberg's endless discussions of me. They run more or less like this (in paraphrase):

Jim: "Byrne might be a good guy!"
Herb: "No he's a bad guy."
Jim: "Are you sure? I thought he might be a good guy."
Herb: "No he's a bad guy."
Jim: "OK, you win, he's a bad guy."

Over and over every time they discussed me. it reminded me of Friedman. That's all.

** As opposed to the Motley Fool message boards, and the Overstock auction boards, and ... hey, why isn't he commenting here?

Reuters is totally biting our rhymes** with this piece about McNealyisms, but we can still appreciate it. And we can mourn the loss of all the smartass remarks that McNealy never got to make. In that spirit, we present the Scott McNealy Memorial "Caption the Post-Truce McNealy/Ballmer Photo" Feature (not sure if this shot is before or after the hockey jersey exchange.)

Leave captions in the comments or send them to tips AT dealbreaker.com.

** Somewhere a Reuters reporter is Googling "biting my rhymes"...

"Get a Grip, Hairball" And Other McNealyisms [Reuters/MSNBC]

It wouldn't be Tuesday if there wasn't an insider trading scandal to blog. Today's candidate: Charlotte-based Lending Tree SVP of Biz Dev, David Anderson, who has been indicted on six counts of obstruction of justice, making false statements and witness tampering. Anderson tipped off his girlfriend about Lending Tree's acquisition by Barry Diller's IAC Interactive in 2003, and she made $7,895 on trading it.

Tipping off your girlfriend: Now that just strikes us as a failure of the imagination. Only $7K? An appalling lack of ambition. If Anderson wants to play with the big boys in the really chi-chi minimum security federal penetentiary, he's going to have to get in a lot more trouble involving a lot more money. (Also: he needs to dump the girlfriend.)

Lending Tree Executive Charged with Insider Trading [MarketWatch]

[Editor's Note: Some of you have asked for some sort of relief from the pressures of studying for the CFA. We offer you the following advice: Get out of banking while you still can. For the rest of you: it's always fun to witness other people's pain, especially if you've already jumped through the requisite hoops and barring the creation of a CFA Level IV, will never have to do that again. DealBreaker correspondent "JAK" reports:]

So for a lot of you June 3 is going to mark the end of a tortuous struggle to stay sober long enough to cram as much financial analysis goodness into your already overstocked brains. Well, you've almost made it. You can get hammered in 39 days. These last few weeks when you're getting approximately three hours of sleep a night, you lose all contact with friends and family and your girlfriend dumps you because you're too weak and dehydrated to pleasure her in any way, we'll be here for you. We'll have war stories AND study tips and we're even sending someone to sit in on the Stala CFA I Mock Exam as part of the DealBreaker Correspondent Abuse Program. (Okay, we're sending outselves.)

They sent us our Mock Admission Ticket today, which included tips on how to prepare for exam day: we have been instructed to lay our clothes out the night before. Thank you, Stala. Last time we took the CFA, we showed up without pants.

So let's kick it off with a look back at "Great Moments in CFA Studying History"

We just noticed a feature of InstitutionalInvestor.com's site redesign that incorporates an "industry gossip" section that includes finance-related blind items. And we're all for finance-related blind items. (You get to guess and we get to not get sued.) But today's is kind of a yawner:

Which European bank has delayed paying out bonuses to U.S. employees and is rumored to have brought on JPMorgan to assess its securities division, as it is considering selling off one or more units?

Then again, we spent most of yesterday talking about valuation. Pot, kettle, etc.

Industry Gossip [II]

Reynolds Agrees to Buy Conwood for $3.5 Billion (WSJ)
Sometimes there's market failure and sometimes there's market success. The fantastic performance of tobacco giant Reynolds, at a time when the whole world is against it (or they claim to be), is a testament to the market. That being said, Reynolds is now expanding their line of smokeless products (chew), with the purchase of privately held Conwood, the #2 smokeless player. We keep waiting for a wave of popularity in New York for the smokeless stuff -- or any other town for that matter where smoking is becoming increasingly illegal. When will we see dedicated chew bars, with spittoons at each table?

Tesco to raise cash from property (Reuters)
Tesco is moving forward to extract money from their land operations and pay a one-time lump sum dividend to their shareholders. This has been an increasingly popular strategy ever since Eddie Lampert showed that the real value of a retailer is the land it sits on. Some even think that the best thing McDonalds has going for it is its real estate holdings, though evidence would suggest it's their Dollar Menu. Still, it never makes much sense to us -- how do you extract value from real estate when it's got a freakin' Tesco sitting on it?

OTC BB Volume (The Big Picture)
Whoa, check out this chart of volume on the OTC BB market. This is one of those telltale signs of excess speculation that no amount of Larry Kudlow optimism can explain away. We knew that the penny stocks had been doing there thing again, but volume appears to be orders of magnitude higher than it was in 2000 -- and those were some crazy times for penny stocks. Wild!

The great Google float (RoughType)
If you're involved in financial services, you've got to love the float. For the rest of you, it's the lag time between when a bank or insurance company takes your money and gives it back to you. During this time, they can invest it, collect interest on it, or do whatever they want. Even Google loves the float. Any publisher using Google Ads must wait until they've earned $100 before they can cash out. During this time, any money raised can be invested, put in t-bills, whatever. It's not a small amount. There's tons of bloggers running adsense, making money at a snail's pace, making money for Google until the distant day when they get to $100. Gotta love the float.

God, this hurts:

Scott McNealy resigned from Sun today. He'll be replaced by Sun COO Jonathan Schwartz.

We're Dealheartbroken. No more Fun-With-McNealy quotes. (Side note: we haven't seen a stock jump like that since Carly Fiorina got pushed out, which is ironic considering McNealy's Carly-bashing.) More later...

Per our earlier post, private equity anonyblogger Equity Private re-values GE based on Michael Idov's assumptions about how Daily Candy gets to a $100 million valuation**:

General Electric trailing twelve months of revenue: $144.4 billion.
GE market cap (April 24, 2006): $358.8 billion.
Control premium for acquisition of GE (2005 average): 30%
Optimism factor applied to control premium: 20%
Resulting control premium: 36%
Theoretical acquisition cost of GE with control premium: $487.9 billion.
Cost of restructuring GE to an "internet focused firm": 15% of enterprise value.
Restructuring time frame: 1 year.
Dollar cost of restructuring: $53.8 billion.
Total cost of GE acquisition and restructuring: $541.72 billion.

Potential sale price via "Idov Valuation Methodology" (patent pending): $1,444 trillion.
Gains from sale: $902.3 billion.
Time period: 1 year.
IRR on transaction: 66.56%
Cash on Cash: 1.67x

**Idov asserts that "most companies" sell for 10x revenue. Incidentally, if that were the case, it would mean that New York mag was sold to Bruce Wasserstein at roughly 56%*** of market value.

***Then again, the more we think about the Lazard IPO, Wasserstein getting away with paying 56% of market for anything else would be par for the course.

Subjectively Objective [Going Private]

That's how a family friend describes the children of John Donovan, a Boston area entrepreneur and professor who is alleging that his children tried to extort him for his money and that the eldest, James Donovan, a money manager at Goldman Sachs, hired a couple of people he believes are Russian (no explanation as to why) to shoot him. According to his wife, he survived the shooting, because his belt buckle deflected a bullet. He went skiing almost two weeks later and more mischief making occured:

While Mr. Donovan and his wife were skiing, police responded to another alarm at their Hamilton home. They found white powder on two tables and a piece of paper with the word "killer" written on it.

Estate of War [WSJ]

Ken Lay took the stand today and offered the following assessment of the Enron trial, so far:

It's been very interesting,'' Mr. Lay answered. "We've seen a lot of interesting testimony. We've seen a lot of interesting people, a lot of allegations, a lot of lies, a lot of misinformation and some truth."

Mr. Lay has been in court every day since the trial began Jan. 31, seated in a swivel chair in the same spot, flanked by a legal team that includes his daughter. He takes notes while listening to testimony, appears attentive but relaxed, and smiles or even chuckles during lighter moments.

Kenneth Lay Takes the Stand at Enron Trial in Houston [WSJ]

The fresh-faced Andrew McCarthy lookalike above is David Wittig, Fortune magazine cover boy in November of 1986, former mentee of Kidder, Peabody's Marty Seigel (of insider-trading-with-Ivan-Boesky fame), who was recently sentenced to 18 years in prison for fraud and money laundering associated with his Kansas-based firm, Westar Energy. The story turns a bit shades-of-TYCO in discussing Wittig's use of company funds for personal gain:

The Wittigs' conspicuous consumption continued with acquisition of the Topeka mansion that had been home to Alf Landon, a former Kansas governor and 1936 GOP presidential nominee. Wittig pumped $6 million into the Landon residence, using company stock as collateral for loans from Capital City Bank in Topeka. Wittig added a theater, bar, game room and a basketball court. Cost was no object, since he had a clause in his employment deal that stipulated Western Resources would buy the home at no loss to himself.

The New York Times and New York mag both lead the week with return-of-the-dot-com boom stories about MySpace and DailyCandy, respectively. Conclusion: it's different this time. Sort of. Kurt Andersen, in a separate column, interviews former Flatiron Partner Fred Wilson, who explains how:

"It doesn't seem like really dumb things are getting funded," Fred says. "You're largely not seeing Webvans and Kozmos and Urban Box Offices."

New York mag also examines the much-buzzed-about (inasmuch as an 8-to-9-figure deal that doesn't involve a bulge-bracket investment bank or Carl Icahn can be "much-buzzed about") sale of Daily Candy. Reporter Michael Idov makes the completely inexplicable assertion that it's "impossible" to determine the value of Daily Candy:

It's nearly impossible to apply the usual valuation formulas to DailyCandy. According to the Wall Street Journal, the company projects revenue of "somewhere less than $20 million" this year. Most successful businesses go on sale valued at least ten times their yearly revenue, so by this standard, DailyCandy should cost $200 million or more.

**That said, we hope it's closer to $100 million, for our own selfish reasons.

Ch√°vez Plans to Take More Control Of Oil Away From Foreign Firms (WSJ)
There's a headline you probably never expected to see. Chavez is accusing the private oil companies of making large profits at the expense of the poor nation. Wait, what were those last two words "poor nation"? Isn't this one of the largest oil exporters in the world? Isn't the rest of the oil-exporting world making record profits (working with those same oil companies), building a Middle East theme park fantasy world in Dubai? And yet Venezuela, with its rigid socialist government remains poor? Yeah, nationalize... history shows it to be a proven winner.

Trying to Halt A.M.D., Intel Plays to Business Market (NYT)
According to this article, in The Times, Intel's been feeling the heat from AMD, and is altering their selling strategy to bolster their presence in business. It's too bad they're not the smaller company, then they could just file an anti-trust lawsuit -- like AMD is doing now. Of course, AMD has shown excellent market gains in the last year and a half, something that should be impossible if Intel really had a monopoly. In fact, you'd think that their recent gains would undermine their case, though real-world facts rarely seem to enter into the court system.

Microsoft, EU face off over antitrust (AP)
While we're on the subject: Are we dreaming, or is there really still an anti-trust case going on against Microsoft in Europe? The answer is of course we're not dreaming, and the Europeans (insert cheap joke about them being behind) still think that Microsoft has an unassailable fortress. For some reasons, the EU really doesn't like anything that smacks of bundling. The big issue remains (are you sitting down) the fact that Windows comes pre-loaded with the Windows Media Player. This is what the EU claims harms all innovation, and why the company should face huge fines. At this point all of Microsoft's enemies who championed legal attacks against the company might be wondering whether it's all worth it. Apple saw their iTunes "monopoly" dealt a setback in France, and Google is building what some believe is a monopoly on the web. How long before an investigation is launched into the company -- "But Judge, in the Firefox searchbar, one can easily change search engines". Yeah, that'll work.

Specter Says Rising Gas Prices May Lead to Tax on Oil Profits (Bloomberg)
How is it that politicians implore the oil companies to spend more money on exploration, yet threaten to tax them extra when they have more cash on their hands. And aren't oil companies already being taxed more as their profits are going up? Besides, as Peter Drucker famously said, "Profits are an accounting illusion, just the deferred costs of staying in business".

We tend to think that most business books fall into one of three categories:
· thinly-veiled self-help books
· shorter Ayn Rand
· vanity autobiographies

We're sure there are some good ones out there, but we don't think we've read them. Andy Kessler agrees:

I read a lot of business books. I don't know why, because they mostly suck. But folks keep asking me what books they should read. I like a good story and hope to learn something - business is the new intrigue.

We are, however, taking recommendations for Worst Business Books of All Time. Send nominations to tips AT dealbreaker.com with supporting evidence (i.e., egregious examples/excerpts). Consider it our attempt to save you from precious hours of unnecessary reading that could instead be devoted to things like vandalizing the DealBreaker wiki, figuring out how to expense bottle service at Cain or the mistress's hotel room, and building a leaning tower of dealtoys on the window ledge.

Muffie Benson-Perella (muffie AT dealbreaker.com) is an Associate in the Investment Banking Division of a "Bulge Bracket" bank. She holds a B.A. in French and Art from Vassar College and an M.B.A. from Harvard Business School. Her regular column "Heard in the Suite" is a probing (and, ahem, fictional) weekly look into the secret lives and behind the velvet curtains of the investment banking world.

I think I might have mentioned before that international travel is really uncivilized now. Nothing provides a more solid example of this frustrating fact than London Heathrow Airport.

First of all, you are funneled into this hallway, which goes on forever and ever. Why they can't provide some golf-carts or something is beyond me. There always seems to be some old, decrepit senior riding around in the back, as if they have anyplace other than the funeral home to get to in a hurry. Why some sort of transportation isn't provided for professionals on a timetable I will never know.

Rumors are flying that Sun CEO Scott McNealy might be shown the door for refusing to make layoffs:

This week, Sanford C. Bernstein analyst Toni Sacconaghi reported that Sun is examining every nook and cranny to cut costs, including research and development. "Anything but a massive restructuring of the workforce will prove disappointing, and that it remains unclear whether such a large reduction will occur under current management,'' he said.

If this happens, we'll be very disappointed because McNealy conference calls are only slightly less entertaining than Patrick Byrne conference calls. Our summary of all conference calls, presentations, reports, ever: "McNealy seemed defensive."

(Below the jump: our list of McNealyisms from the last McNealy presentation we attended a few years ago. More McNealy quotes here.)

Might McNealy Step Down at Sun? [San Jose Merc]

Google dazzles Wall Street (Mercury News)
It was another blowout performance from Google, whose revenues jumped nearly 80%. That's, well, staggering. If you recall, in late February, investors got unnerved after entirely predictable comments from their CFO about how growth would inevitably have to slow. Actually, he said that Google might feel the effect of large numbers. Uh, about that. The "law of large numbers" has nothing to do with slowing growth rates, and it has everything to do with the fact that statistical anomalies smooth themselves out over many iterations of an event; e.g. over a million coin flips, heads are more likely to be represented 50% of the time, than if you just flip 20 times. That should have been a clue right there, not to trade on the words of George Reyes.

Ford Posts $1.2 Billion Loss, Restructuring Cited (AP)
Question time -- how does a company that is in one of the deepest, most profound slumps that a company has ever faced, just start a massive restructuring now, in q1 '06? It seems obvious that there's very little, one-timey about big charges like this, these days... that the company is bleeding a lot of money as a cost of doing business. In fact, yesterday, GM reported a relatively narrow loss, of just a few hundred million. Didn't that seem like the rare one-time event? It sure did here. They should have made a not that the lack of charges couldn't be relied upon going forward.

The Oracle's Replacement (WSJ)
Worth Civils (?) at The Journal passes on an interesting point about Berkshire Hathaway once The Oracle from Omaha has moved on. One of the advantages that Berkshire Hathaway has is that managers like to be acquired by the company, because often Warren Buffet lets them stay on. In fact, if you read through any of his annual shareholder letters, he really plays up the important of personnel -- how nice it is to get a good manager, and then give them a lot of cash to play with. So when he's gone, the next chief won't be able to find as many bargains, unless managers trust that they can sell out to the company, without fearing their job.

JP Morgan Settles IPO Suit (NYT)
What? In 2006, there's still a lawsuit going on about stupid investors paying out the nose for dotcom IPOs? Apparently there is, and it's going to cost JP Morgan $425 million to settle. It's hard to follow the various lawsuits and fines relating to the excesses of the 90's. If history is any guide, we'll be hearing about various cases, winding their way through the court system, for a long long time. Here's another guess -- the big winners aren't going to be the people who lost their money, but the lawyers representing them. Yeah, easy guess.

$$$ Smith Barney, Why Do You Hate Your Customers?: A Play [Long or Short Capital]

$$$ This makes us nostalgic for the early '80s, when being a millionaire actually meant something. [Reuters via WSF]

$$$ Yet another way to make money off of Enron. (Previous way here.) [TradeSports via Dealbook]

$$$ Delta asks employees to clean planes on their own time. It's just that sort of brilliant management that put the stock where it is today: crumbling in OTC oblivion. [St. Petersburg Times via Consumerist]

From the Not-So-Funny Department:

One of the aspects of the Duke lacrosse scandal (which seems to be taking up ever more real estate on the Drudge Report) that's been the subject of much gossip in our Duke alumni circles is speculating about what happens to the players long-term if everyone is found innocent and the people whose mugshots have been circulating throughout the media are still household names. Our informal polling indicates that they'll all end up on Wall Street, with little or no negative repercussions. Several are--or were, before the aforementioned events--not surprisingly, slated to start i-banking jobs after graduation. Also: the father of Collin Finnerty, one of the two players who were arrested, is Kevin Finnerty (left), a former JP Morgan MD who ran mortgage-backed securities there and was on the board of the Bond Market Association, which, if our nepotism theory holds true, seems relevant. The possible exception: the kid who sent out the apparently ironic email referencing American Psycho. Informal polling indicates that he's probably screwed.

As everyone knows, wearing clothes that are commensurate with your status and wealth takes actual effort. There are extra buttons to button, more things to take off when you pass through the metal detectors at LaGuardia and more things that need to be dry cleaned, pressed and sung to in mild, soothing tones. So the WSJ's report about washable (*gasp*) dryable (oh god) wrinkle free suits (NOOOOOOO!!!!) has raised the ire of the traditionalists:

For Marc Psarolis, sales director for upscale British clothes maker Daks, the reaction is much more visceral. "This is the Antichrist of what we believe in," he sniffs.

But for those who need more specific guidance on what not to wear, we bring you Wall Street's own Chris Quick, who, in between vacations in Nantucket and St. Moritz found the time to sit down for an exclusive interview with tie-maker, Vineyard Vines. In hardhitting exchange of "finish the sentence," Quick reveals his sporting, political and fashion preferences:

Golf is analogous to life because...you play 18 holes with somebody, it tells you a lot about the person.

Of today's world leaders, be they economic, political, or social, I most admire...Bush, George W. W.

I wear vineyard vines because...every time I look down at my tie, it reminds me of all the fun things there are to do in life outside of the work place. Work's fun, but looking down and flying or fishing or boating or sailing, playing golf, lacrosse, watching lacrosse games, seeing squash racquets-they're lifestyle ties.

We were just at a panel on buyouts moderated by Maria Bartiromo, featuring Clayton, Dubilier & Rice CEO Don Gogel, SilverLake's Glenn Hutchins and JANA Partners founder Barry Rosenstein. We'd have live blogged it, but ... oh, who are we kidding? (This is part of our very occasional effort to bring you information that's actually useful.)

Some highlights:

· Panelists were universally negative on SarbOx, which wasn't surprising. Carlyle CEO was quoted as saying that Sarbanes and Oxley should now be forced to sit on the audit committee as punishment and that companies are going public outside of the US just to avoid it. "23 of the 25 top IPOs this year occurred outside of the U.S. ... People who have a choice don't come here."

· The boom in private equity is largely attributable to increased debt available to capital markets due to low interest rates. (Seeing multiples of 6 - 7x cash flow.)

· When asked if they were interested in doing business in Russia or India, Hutchins said Russia was "not a place where I would do business" and that its "actions with respect to Yukos have been criminal." He wasn't inclined to do business in India because it's a "discovered market" and multiples were "mind-boggling." He also thought there was a labor market arbitrage problem. Rosenstein passed on Russia as well because there's "no protection of shareholders or corporate governance at all."

· When asked if they would prefer to have Clinton or Bush in the White House right now, all prefered Clinton, largely due to deficit concerns.

Apple Earnings, All iPod All The Time (AP)
Despite the promise of the iPod spillover, and the switch to Intel chips, Apple's computer sales continue to grow anemically. That's ok, according to pundits, just wait until next quarter. Then, there will be versions of Photoshop available for the Intel-based Macs, and everything will be ok. Like Yahoo!'s shares, the day before, the stock jumped sharply, after hours, on disappointing revenue and guidance.

Wal-Mart boss: Changes no publicity stunt (Bloomberg News)
Don't let your coffee hit the monitor after you read this, but some are complaining that Wal-Mart's latest move to expand health care coverage to more of their employees is just a publicity stunt. How dare they do anything that benefits their employees... it's obviously a cynical ploy to improve the company's public image. So, it would be better if they didn't do anything at all? Hmm, are the unions looking out for workers, or are they looking out for themselves? Happier workers won't make it very easy to gain a foothold in the company. As CEO Lee Scott put it, "We did not become one of the most successful companies in the world by doing things the same way for 44 years. We have succeeded by sticking to our core values while always looking to improve." Meh... he should have just told the unions where they can shove it.

Senator urges inquiry as gas prices increase (Albany Times Union)
Let's drop the suspense right now. The senator in the headline is Chuck Schumer. Yes, he's unhappy with the current state of supply & demand and wants an investigation. If only we had a nickel for each time he uttered those words. Apparently, he hasn't been watching the international oil exchanges, and thinks that the domestic oil companies are manipulating prices. In fact, he has a novel explanation, In a conference call with reporters Tuesday, Schumer, D-N.Y., said big oil companies were artificially propping up the price of gas by taking more time than is normal to switch their refineries to making summer blends of gas that cut down on smog. He claimed that just a few weeks ago, U.S. refiners were at just 85 percent capacity compared to the typical 90 percent. Schumer shared a letter with reporters that he said was sent Tuesday to the Federal Trade Commission, asking the agency to investigate refining capacity. No snark needed, just let it all sink in.

Pallet Maker Target in Immigration Raids (AP)
In Texas, the goons at the Texas Alcoholic Beverage Commission have been going into bars, in full SWAT gear, and arresting people for being drunk... in a bar. Good to see that logic applied elsewhere, as the government is raiding factories and business to see if they can bust people for working... at work. Granted, these workers are so-called illegals, or illegal immigrants, but is it worth punishing a pallet maker (yes, pallet pallets), by hampering their production? What about the decline of our manufacturers? Apparently that takes a backseat to reducing the working population. Well done.

BusinessWeek's Tim Mullaney speculates that athenahealth's hiring of in-house PR screams "IPO" and notes that CEO Jonathan Bush is the brother of Access Hollywood's Billy Bush and by extension, cousin of George W (or the other way around.)
We hope the Harvard MBA is doing him more good than it seems to be doing cousin George.
Signs of Spring and IPOs [BW]

Nepotism has a long and storied tradition on Wall Street. From John Pierpont Morgan to Sanford I. Weill, handing jobs and entire businesses to immediate family members is as much a part of working at the highest levels of American business as wearing monogrammed French cuffs and having at least three layers of administrative assistants answer your phones before people get to speak to you. It is the erosion of that nepotism--that hallowed institution--that has contributed to the painful decline of this country's once-thriving plutocracy. But we're relieved to see that at least one New Yorker is doing his part to uphold the tradition. As Footnoted.org points out, SL Green Realty chairman Stephen Green has been dishing out $11 million worth of business to his son Gary's various business projects:

In the proxy it filed recently, the company added up just how much business Gary's various companies - a cleaning service, a messenger service, a security service and a restoration company (which is included in the proxy for the first time) - have with SL Green. The $11 million in business last year is a nearly 25% increase from 2004. As the proxy notes, that doesn't include any additional contracts that Gary's companies have with SL Green tenants.

A disgruntled 36-year-old investment banker who describes himself as "definately" a "catch" complains to entire female gender on craigslist when his superficial date requirements (busty, blonde, the usual) turned out to be more superficial than first expected:

Anyway, I take this girl I met the week before to Nobu. I thought she was pretty, a little on the skinny side but with gigantic breasts and she was all over me at the bar so I said what the hell. We arrive at Nobu and I notice in the light inside she has a ton of makeup on and fake blonde hair. In the darkness of the bar, I thought she was a natural blonde. She had that fried straight iron blonde hair thing going.. fucking awful and she barely touches the food she orders... She proceeds to get drunk so we are making out and at one point she take me to the bathroom. As I'm touching her breasts, I realize she is wearing a heavily padded bra. What the hell???!!! It was a complete turnoff she had no breasts but a bra that was so thick with gel or padding I have no idea...

According to the Washington Post, Morgan Stanley is now an "activist shareholder". Referring to MS Investment Management's call for the abolition of the Times' dual class stock structure, the WaPo writes:

The New York Times is the third major media company to be challenged by activist shareholders in the past year. Time Warner Inc. faced off with corporate raider Carl C. Icahn over its handling of its AOL Internet subsidiary in February, and investors, led by Private Capital Management, forced the sale of Knight Ridder Co. in March. Private Capital Management is the New York Times Co.'s largest public shareholder.

NY Times Control Challenged [WaPo]

The Observer re-reports a lot of the stuff you've seen here and on WallStreetFolly about Gene Plotkin's literary ambitions, indie film and ballroom dancing skills, but here's a bit we didn't have, from one of Plotkin's dancing acquaintances:

"Gene choreographed. We called the dance Double Bondage. It was a cha-cha/rumba medley with music from James Bond movies, including Goldfinger. Gene and I wore tuxedos; our partners had knives and pretended to try to stab us in the back when we weren't looking."

Yahoo! Hits the Spot, Bubble Back (TheStreet.com)
Yes, there's an overabundance of bubble talk these days, sorry. Yesterday Yahoo! reported earnings that were in line, with guidance that was in line as well, and the stock spiked after hours. Umm...? What happened to the days when you need to beat in order to say you had good earnings? This was the situation back in 1999 too, when investor's standards were so low, that anything constituted strong earnings. It's always fun to read the poor TheStreet.com writers whose job it is to explain inexplicable earnings and price movement.

China's Hu Pledges Action On Piracy (Bloomberg)
Speaking to Microsoft's Bill Gates, Hu Jintao declared that the company and his country were friends, and that friends don't let friends suffer from piracy. Apparently this is the standard in the country -- if you're a friend of Hu, you get your intellectual property protected, if not, you've got to take it to the WTO. It's hard to imagine he'll be able to get much done. Not too many people are going to spend a third of their annual salary on an operating system, when they get one for a nickel on the corner. The company has admitted in the past they benefit from piracy, as it's better to have people using illegal versions of Windows, than legal versions of Linux. It makes it seem like this whole piracy argument is a bit of a smokescreen for something else, though it's not clear what. Perhaps Microsoft is going to get the Boeing treatment, as China hopes to mollify a few well known companies and the Senators who claim that the company isn't doing enough make trade "fair".

Invest in Web 2.0 without getting burned (Fortune)
If Dealbreaker is the only blog you read, then perhaps you've mercifully been spared from the term Web 2.0, a catch all for a host new 'net startups. The name simply screams bubble (yes, that word again) and headlines like the one above should cause most people to run for the hills. Still, Fortune's Adam Lashinsky has the unenviable task of explaining how investors can invest in mania 2.0. The names he throws out are an odd mish-mish of 1.0 names and others: Cisco, Comcast, Akamai, Adobe, et. al. Not exactly sure how these are 2.0, or how he can guarantee that investors won't get burned from these, but investing in buzzwords, well, eh, not so much.

$$$ Pursuant to last week's discussion: Ten Best Films About Money [Forbes.com]

$$$ Who would you rather be threatened by: naked shorting nutjobs or the Mob? Gary Weiss prefers the Mob. They're more rational.

$$$ TYCO settles with the SEC for $50 million. (They've probably got that much in the petty cash drawer.) [NYDaily News]

$$$ Larry Kudlow on today's appointment of Rob Portman as OMB budget director: "this is a really boring, blah-blah-blah appointment. No zeal, no intensity, really no reputation as a budget-cutter..." [KudlowBlog]

If lunch is for wimps, then so is working out while failing to make money. Enter Brad Feld, venture capitalist and inventor of the "Treadputer," below:

Those are standard flat screens, but we're pretty sure you could bolt three Bloomberg terminals onto that baby and be off and running (so to speak). We've been speculating for months about who was going to buy Bloomberg, LLC, and now we've got an idea: NordicTrack!
The Treadputer [Feld Thoughts via ValleyWag]

According to USA Today, CEOs of all types and sizes (at least 12 of them, anyway) agree: People who are rude to wait staff at restaurants are, well... assholes:

... it seems to be one of those rare laws of the land that every CEO learns on the way up. It's hard to get a dozen CEOs to agree about anything, but all interviewed agree with the Waiter Rule... How others treat the CEO says nothing, they say. But how others treat the waiter is like a magical window into the soul. And beware of anyone who pulls out the power card to say something like, "I could buy this place and fire you," or "I know the owner and I could have you fired." Those who say such things have revealed more about their character than about their wealth and power.

A YouTube** member named "Warren Buffett" has been putting clips of Oliver Stone's "Wall Street" online.
You can find them here [YouTube]

**YouTube = the wildly popular video sharing service

• email
• link to

The Times kisses Sandy Weill goodbye this morning in DealBook, covering the fareWeill party at the Met:

About 350 of New York's political, financial and cultural elite were expected to attend, including James Dimon of J. P. Morgan Chase; Philip J. Purcell, the former chief of Morgan Stanley; the Rev. Jesse Jackson; and the cellist Yo-Yo Ma. Guests nibbled on tiny treats and toasted Mr. Weill's storied career.

The Times also says that Weill and JPMorgan CEO Jamie Dimon have "put aside their differences" and has a good-sport quote from Dimon describing Weill as "gutsy." (If any differences were put aside, we're guessing they're still within arms' reach.)

But we'll be celebrating Weill's retirement, nonetheless. Any excuse for champagne in the office before 10 AM. (And if anyone's attending today's shareholder meeting, send us reports. Tips AT dealbreaker.com.)

At Citigroup, the End of an Era [NYT]

Ex-Disney CEO Eisner invests in online TV (AP)
Apparently hosting a talk show isn't enough to hold Michael Eisner's interest these days. Now he's gonna take his poor track record at Disney, and try to prove himself in the world of venture capital. His first investment is in video sharing site VEOH, which emphasizes broadcast-quality content. Now why did it take him to leave Disney before he decided that online content would be pretty big? Did he have this revelation at some point in the last few months? Seriously, why wasn't he making investments into companies like that when he was at Disney, possibly improving his reputation and results?

Evidence Of Bubbly Sentiment (The Big Picture)
Barry Ritholtz chalks up the anecdotal evidence that froth is starting to rise in the cup. There's been a spate of financial IPOs (not just the stock markets, but second tier brokerages), while 90's TV fixture Joe Battapaglia is back on TV. Hadn't actually caught him, ourselves, yet, but this is the scariest news of them all. This man truly believed (still?) that bullishness was a religion. To him it probably was -- be wary.

Bear Stearns' Big Strategy (Forbes)
The news emerged yesterday that Bear Stearns may be close to receiving a major investment from a Chinese bank. Is this a small drop in the big wave of Chinese takeovers, which are bound to happen right around the corner? Aah, but what if Bear uses the money to make investments in the Chinese market? Then, we've basically kept the capital in China, with the company benefiting from its expertise and economies of scale. Either way, it highlights even more the meaninglessness of borders and national ownership when it comes to commerce these days.

Exxon's CEO didn't really get a $398 million retirement package (Truth On The Market)
You may have heard that at a time when the rest of us are paying record prices at the gas pump, Exxon CEO Lee Raymond is walking away with a $398 million retirement package. Well, it's not true. The actual number is closer to $99 million, with the remaining $300 million coming from options and other payments to which he was already entitled. So have some sympathy for the guy, he's gotta drive too.

For the email-a-phobic:

DealBreaker now has a tips line. You can leave us tips/hints/feedback/dirty messages/Gordon Gekko impersonations** on voicemail at:

(212) 625-5326

** Gekko impersonations may be recorded and used against you. Dirty messages will be passed around the office for internal corporate amusement. All other info will be utilized appropriately.

The New York Post reports that Gene Plotkin can't make the $3 million bail set by a judge who deemed him a flight risk:

Plotkin helped his co-conspirator, David Pacjin, flee to the Dominican Republic in August as investigators started tightening the noose around the pair. Pacjin, 29, later returned to the U.S. and has been spilling his guts to prosecutors and further implicating his former co-worker who has helped him go on the lam.

Per the continued piecing together of the increasingly intricate puzzle: A tipster notes that the website for Plotkin's film company is still available via the Internet Archive and that former Goldman VP and colleague of Plotkin's, Nikola Miljkovic has an account on the site. Possibly innocuous information, but a name we haven't seen before.

Per last week's speculation that Ron Burkle's divorce records may be sealed because he wants people to think he has more money than he does, Jared Stern writes in:

Burkle is actually worth much, much more than everyone thinks. In the divorce battle, the less $$ they can prove he has, the less he has to give to his ex.

So we guess it depends on which is more important to Burkle: ego or money. Tough call.

Also: Mickey Kaus finds a teensy bit of shameless hypocrisy in the situation:

When I shopped at Ralph's supermarkets in the 90s, when they were owned by Burkle, I remember row upon row of a particular product at the checkout counter. It was ... it's almost too disgusting to recall ... tabloids! Shoddy, standardless, gossip-obsessed tabloids!

Squaring the Burkle [KausFiles]

BusinessWeek has a story this week about Cerberus chief Stephen Feinberg's successful buyout of GMAC:

Wall Street has been buzzing over how the 46-year-old Feinberg snapped up a huge financial-services company for little more than its book value from Kravis, age 62. Kravis may someday look wise for having turned his back on a deal heavily laden with risk. But losing to Cerberus has to sting.

But not really. The BW piece is extremely flattering to Cerberus**, but the deal terms are fairly restrictive. There are risks associated with the leases and loans, an obligation to invest after tax profits for 5 years, and probably in the fine print somewhere, something about Feinberg's firstborn.

Related but not: While everyone was paying attention to GMAC, Cerberus bought Bushmaster, LLC, which manufactures assault rifles. We've always thought that in addition to Osama Bin Laden shooting targets, there should be Harry Whittington shooting targets. But how about a Henry Kravis shooting target? Just for Cerebus employees!

Cerberus to KKR: Eat Our Dust!
**"sources close to Cerberus" = Stephen Feinberg?

Muffie Benson-Perella (muffie AT dealbreaker.com) is an Associate in the Investment Banking Division of a "Bulge Bracket" bank. She holds a B.A. in French and Art from Vassar College and an M.B.A. from Harvard Business School. Her regular column "Heard in the Suite" is a probing (and, ahem, fictional) weekly look into the secret lives and behind the velvet curtains of the investment banking world.

International travel has become totally uncivilized. We are working on a very important cross-border deal and so I had to go to London to make sure things ran smoothly. Let me tell you, things have gotten really bad. I took along a camera to give you a sense of how bad it has gotten.

Dobbs, Schumer Fall For Mercantilist Fallacies (TCS Daily)
Why are trade and immigration so important here? Because protectionism is almost certainly a graver threat to the economy and then anything we need to be protected from. So keep reminding your friends that folks like Lou Dobbs and Chuck Schumer are falling for old mercantilist fallacies. Their mistake, as Don Boudreaux puts it, is assuming that the world's human capital is a fixed asset, and that the growth of it in places like Asia somehow lessens it here: But one of the defining features of the modern world is capital's expansiveness, its non-fixity. Capitalists the world over know that in every place governed by a rule of law and marked by a reasonably free market, a strong work ethic, and a spirit of commerce, profits can be made by employing workers there. And this employing of workers is done by creating capital in those places.

Have China's manufacturing powers been exaggerated? (RGE Monitor)
The China debate, in all of its forms, never ceases to confuse, yet somehow we feel compelled to follow each of its twists and turns. The latest chatter is on the question of the country's manufacturing prowess, whether it's overrated, and whether manufacturing is profitable there. Brad Setser says no, it isn't overrated. For an economy 1/6th the size of the US', it's excellent that they have a manufacturing sector 1/2 as big. He's also skeptical of the idea that it's all low-margin, no value added manufacturing, as they have built up a large capital reserve, and the cash to buy some big-ticket items from abroad.

Bandwidth Glut Almost Over? (GigaOM)
Could it be true that the nearly unlimited stock of bandwidth we build up in the 90's is actually becoming a scarce resource once again. No wonder the optical/fiber/networking stocks are back (hello JDSU). It also makes sense that they're all talking about merging (both to supply to the telecoms better, and to gain some pricing power for a future round of infrastructure buildouts. One difference is that bandwidth is now being added slowly, on an as-needed basis as opposed to massive buildouts. Still, it may be hard for operators to show restraint, and they may be tempted to build out big swaths, if their latest in-hand Gartner report tells them to do so. Perhaps Enron's broadband trading operations will be vindicated, too.

We were feeling defensive of Wal-Mart this morning, but now that we find out CEO Lee Scott is taking a month long vacation, we're less sympathetic. If lunch is for wimps, what are month-long vacations for?
Wal-Mart CEO Takes Month Long Hiatus [CNN/Money]

Muffie Benson-Perella (muffie AT dealbreaker.com) is an Associate in the Investment Banking Division of a "Bulge Bracket" bank. She holds a B.A. in French and Art from Vassar College and an M.B.A. from Harvard Business School. Her regular column "Heard in the Suite" is a probing (and, ahem, fictional) weekly look into the secret lives and behind the velvet curtains of the investment banking world.

Next Week in Muffie Benson-Perella:

Don't miss a brand new week of "Heard in the Suite!"

That's the question some people are asking about this week's insider trading scandal. Then again, most of those people don't work in finance. (The answer: They lose two employees. Otherwise, not much. Harvard probably considers it more of a problem than Goldman does.)

But: we're always interested in Goldman, so too lazy to do our own research, we clicked on TheStreet's "360" degree analysis of the company, which is designed to present opposing viewpoints, and began reading Harvard/Goldman alum Jim Cramer's analysis of the company:

Am I a house man for Goldman Sachs, having cut my teeth in the business at the firm? Did I get a thrill out of being the keynote speaker at the Goldman alumni association last night, in front of a half-a-trillion dollars' worth of managers?

Those aren't the reasons I am pounding the table on this stock and pounding it hard here...

On a typical day, we sort of imagine him rallying the Mad Money troops with the old "Patton's speech to the Third Army" trick, subbing "market reversal" for "Germans". Let's see if it works:

All through your Army trading careers, you men have bitched about what you call "chicken shit drilling". That, like everything else in this Army trading, has a definite purpose. That purpose is alertness. Alertness must be bred into every soldier trader. I don't give a fuck for a man who's not always on his toes. You men are veterans or you wouldn't be here. You are ready for what's to come. A man must be alert at all times if he expects to stay alive. If you're not alert, sometime, a German market reversal son-of-an-asshole-bitch is going to sneak up behind you and beat you to death with a sockful of shit!"

Nonetheless, the verdicts:
Cramer: says the stock's going to $225 (but uses Well Fargo as a comparable)
John Layfield: $190-200, (based mostly on competitive positioning)
Dan Fitzpatrick: wait for a pullback (based on the technicals)
Steve Smith: Slingshot options, if you anticipate GS climbing more than 7%+ (which actually tells us nothing about what Goldman is doing, only what to do if it climbs.)
Richard Suttmeier: builds an actual model and comes up with FMV of $159.86

The DealBreaker analysis: conducted via Magic 8 Ball:
"Better Not Tell You Now."

We have to give the guy credit: The more we know about him, the more we find Gene Plotkin interesting, if tragic. Turns out, he originally went to Cal Tech for physics and engineering then transferred to Harvard freshman year to study economics after freshman year to study economics. Given the choice between rocket science or banking, Plotkin chose banking. (Not that we blame him, particularly.)

CNBC, for lack of Morning Call programming, is currently showing a documentary about everyone's favorite big box punching bag titled "The Age of Wal-Mart." As far as we're concerned, Target is Wal-Mart with better branding and packaging, but you'll never see an "Age of Target" documentary. Our theory is that anti-Wal-Mart sentiment has more to do with class warfare and perception than fundamentals and that the same is true of many companies.

So when we're not clear on where a company stands PR-wise, we go to one the more fashionable 'burbs of NYC and find ourselves a hipster (hipsters, above left) and ask them what they think about a particular company. Hipsters make for an interesting litmus test because they pride themselves on non-conformity but have fairly homogenous tastes and value systems. We can't decide if media perception is reflective of their value systems or they're simply reflecting mainstream media perceptions, but the correlation seems to be very high. The conversation always goes something like this:

DealBreaker: Would you ever, under any circumstances, set foot in a Wal-Mart?
Hipster: (Glaring) Are you fucking kidding me? If I wanted to be exploited, I'd move to, like, the Bronx or something. Wait. Are you wearing Brooks Brothers? Like, unironically?
DB: Uh, okay. What about Target?
Hipster: (Glances around to see if other hipsters are within earshot). Yeah, sure. I got some rad socks there last week. I'm going to wear them as gloves.
DB: Right. Moving on. What you consider the fundamental difference between Wal-Mart and Target?
Hipster:... You know what? I'm not going to answer your little bourgeois questions. Get out of my borough, yuppie.
DB: How about Exxon?
Hipster: Fuck off.

The Age of Wal-Mart [CNBC]

Closed markets make for a bored DealBreaker staff, so today we'll be less "Wall Street gossip" and more "online business tabloid." Whatever that means.

Who's to blame for high gas prices? (Fortune)
Leave it to some low-rent rag like Fortune to start looking for someone to blame over oil prices. Some Senators are angry, claiming that big oil is profiting from high oil prices. They're right, that's what oil companies do. They sell oil, and when people are paying so much for it, they profit from it. Someone should give these Senators a Nobel prize for their brilliant work in energy economics, and the stuff they've done on international trade with China. Funny enough, the Fortune piece actually does a good job of explaining how you can't really set the price of oil, and no policy will solve the problem -- and then recommends that government pass fuel efficiency standards to solve the problem. Notice, when oil prices jump, everyone trots out their pet issue and explains that it's the one thing that will solve the problem.

Cuban Sells Blog Search Engine (Red Herring)
Most people probably didn't realize that Mark Cuban was the owner of a seventh-rate search engine called Ice Rocket. Nobody ever seemed to use it, which made it quite funny, a year ago, when he famously threatened to take all blogspot blogs out of his index. Oh damn, there goes 2 hits every month. It's too bad, actually, that he's out of the game because you'd think he gets bored just running a basketball time. He seems to come up with a new business idea every few weeks, but other than selling broadcast.com (which never did anything) to Yahoo! at the top of the bubble, he hasn't really done much. Guess he's more of talker like us.

Revolutionary New Fed Report On Demographics (Bloomberg)
Demographics is one of those iron immoveable forces that affect the economy. As you know, we're generally in the pro-population camp here at The Opening Bell, so we have to take seriously the results of any demographic shift that dramatically reduces workers from the economy. There's a new fed report out, coming out in July that warns of big changes to the economy as Boomers retire. The study projects a slower pace of workforce growth than most economists now forecast, suggesting the economy can't keep growing at the present-day pace without generating pressure for higher wages and inflation. To prevent that, the Fed will have to enforce a lower speed limit on the economy by pushing up interest rates. So let's get this clear. The economy could grow rapidly, but workers will have to pay up more for labor? Is the job of the Fed really to make sure that workers don't get paid more... we always thought it was to prevent monetary inflation. Oh wait.

Bloomberg notes that Jamie Dimon and Chuck Prince aren't doing so good vis-a-vis Sandy Weill's historic performance:

Citigroup shares barely budged since Prince succeeded Weill as chief executive officer in October 2003, the second-worst return among the Philadelphia KBW Bank Index's 24 members in that period. Dimon also trails his peers. JPMorgan Chase & Co.'s stock is up 8 percent since he joined the bank as president in July 2004, compared with the KBW index's 10 percent advance.

Option A: More retail expansion, focus on systems problems and cost-cutting.
Why Not: Eh, boring. Expansion would have to be selective and under the fed deposit limits, which rules out anything big and splashy unless Dimon goes shopping overseas. Then you have more systems problems. And Dimon will inevitably cut costs but doesn't like his reputation as such, so that'll be downplayed.

Option B: Merge with Morgan Stanley.
Why Not: Not. Gonna. Happen. But we mention it because we'd enjoy the Mack/Dimon turf war. Who could push who out faster and harder?

Option C: Insider Trading!!
Why Not: Because Dimon would have to start now on the indie film foreshadowing his future insider trading activity and cost-cutting has eliminated those little red pens you need to do storyboarding.

Option D: Have Jimmy Lee repeatedly assert to the press that Jamie Dimon is a "rock star."
Why Not: Already did that. The stock stayed put.

Any other suggestions? Send to tips AT dealbreaker.com

Citi's Prince; JPMorgan's Dimon Struggle to Meet Weill's Record [Bloomberg]

The most valuable commodity we know of is information, so while we're on the subject, here's a list of films TheStreet.com recommended to aspiring Wall Streeters a few years ago:

But really, Gene: We gave you your manhood, we gave you everything. You could've been one of the great ones, buddy. We look at you and see ourselves... WHY?

Want a Wall Street Job? Start Preparing Now [TheStreet.com]

Bloomberg cherry-picks the best quote from Gene Plotkin's film, ONE WAY:

"I had a dream job, a beautiful girlfriend, money, social access,'' says Plotkin's character, Dean Metrick, to Jude, the dealer played by Pajcin, according to the script. "Every door in the world was open to me. Look at me now! I'm on the run from the law.''

Goldman Sachs Employee's Indie Film Foreshadows Insider Trading [Bloomberg]

DealBook's Andrew Sorkin talks to Gene Plotkin's Director of Photography:

"He had some good ideas and wasn't as incompetent as a first-time director could be," Ms. Pezé said, though she was less sanguine about the acting abilities of either Mr. Plotkin or of his co-star - and now co-defendant—29-year-old David Pajcin.

It's sort of weird to know someone who's all over the news, especially when they're going to jail. I feel bad for him, it must be one hell of a day when it all crashes down on you and the FBI comes a-knocking with their fun little accessories (warrants and handcuffs and creepy sunglasses). Not that I think what he did was right at all, but he's gonna be wearing an orange jumpsuit for a while, and he's kinda pretty, so he's not gonna have a very good time there.

Related:
About That Novel...And That Film
Gene Plotkin: And Novelist...And Competitive Danver
Gene Plotkin: Insider Trader...And Aspiring Filmmaker?

Under New Policy, S.E.C. Will Rarely Subpoena Reporters (NYT)
The aging Ayn Rand-nik Christopher Cox must have convinced the agency of some Objectivist wisdom to get this policy through, or maybe it was his call alone. On the one hand, it's quite a relief to us here, though it's dissapointing we'll never get to see Cramer rip up a subpoena on live TV again. What's weird is that in all his years as Fed Chief, the other Objectivist, Greenspan, never got around to dissolving the Fed... yeah, weird.

Philadelphia Exchange Shooting For IPO (Reuters)
It's getting to be that the Opening Bell just writes itself. Well, at least there's always a stock exchange going public story to cover. Today it's Philadelphia, which most well known for putting together an index semiconductor stocks, though we assume there has to be more than that. Actually, the exchange has experienced a strong revival under the able hand of Charman Sandy Frucher, who took the helm in 1998. If they do indeed go public watch this name closely.

Merrill Lynch warns staff on ethical behavior (FT)
Just in case someone else at Merrill was thinking of breaking the law, management has a stern warning for employees: don't. As much fun as this whole fiasco has been (yeah, it doesn't get much better than Croatian grannies, strippers, Reebok, moles in printing plants and Indie films), it seems to expose the nonsense that is insider trading laws. For one thing, they only identify when someone engages in illegal action as opposed to illegal inaction. What about all the people who were about to sell, but then decided not to after getting an insider tip? How many of them are sitting in a jail cell somewhere? And is BusinessWeek really 'inside'? Shouldn't this mainly be a matter of BusinessWeek security, as opposed to the SEC? Just wondering.

DealBreaker.com: All Insider Trading, All The Time™

Continuing...

About Gene Plotkin's novel: we heard originally that the first chapter contained a scene where two characters discuss the possibility of infiltrating the printing department of a major bank. We haven't seen the manuscript, so we can't say, but Plotkin describes the plot of the film (which he considered calling, among other things, "Inside Information") in another email:

As a quick refresher, the plot of the film revolves around a recent college graduate who gets a dream job & great girlfriend, only to lose the one and be betrayed by the other when he find himself on the run, wrongly suspected of embezzlement and murder, with both sides of the law closing in and a link to an experimental street drug as his sole key to the puzzle. Think French Connection meets the Usual Suspects meets the Fugitive.

Full text of the email after the jump.

WallStreetFolly, which is just as enthralled with the ML/GS insider trading scandal as we are, notes that Plotkin was also writing a novel based on the aforementioned film. An excerpt from an email obtained by WSF that Plotkin sent to friends:

Folks, I just completed a novel - a work of fiction based upon a screenplay for an independent film which I also wrote, as well as produced, and which we will be submitting to the Sundance Film Festival later this year. The novel is approximately 60,000 words in length and covers a lot more ground than the film version. In the most general terms, it can be described as a suspense thriller set in and around New York City.

Publisher needed; inquire within [WallStreetFolly]

Per yesterday's scandal du jour: we just noticed this posting on a Yahoo! Harvard recent grads board:

From: "Kristen" Date: Mon Apr 7, 2003 5:05 pm Subject: OFFICE SPACE NEEDED FOR INDIE FILM

Cicero Productions, a film company founded by Harvard Alum Gene Plotkin, is currently shooting the independent film "One Way." We are in need of high-end office space to film some scenes that take
place is a high-end management firm. If you have any connections with such space, please email us at productionteam@... as soon as possible.

Thanks for your help!

That would be Gene Plotkin, Harvard '00, who was, until yesterday, an associate in the fixed income research group at Goldman Sachs. (A "high-end management firm"?) We're also hearing that David Pajcin, who was also nailed for insider trading yesterday was a partner in the film company. Related post after the jump...

In the continuing vein:
Yahoo! Finance: 3
Google Finance: 0

Previously:
Yahoo! Finance: 2; Google Finance: 0
Yahoo! Finance: 1; Google Finance: 0

For those of you still trying to parse the Ron Burkle/Jared Paul Stern situation:

One conspiracy theory circulating on the West Coast (and espoused by one of Burkle's rivals) is that Burkle had his divorce records sealed because they would disclose that he's not worth as much as people think he is and that his holdings aren't doing as well as everyone thinks. We're not sure if that's true, and a rival certainly has an incentive to push that theory, but if this photo is accurate, we'll acknowledge that the private plane needs redecorating.

The LA Times' Joel Stein consults the Freakonomics guys on the price-elasticity of extortion demands:

"He probably could have gotten away with it if he'd been reasonable," agreed "Freakonomics" co-author Stephen Dubner. "But by asking for $200,000 from one payola victim, he's basically saying his services are worth a few million a year because he could easily try to shake down a dozen or two [dozen] people at the same time."

Muffie Benson-Perella (muffie AT dealbreaker.com) is an Associate in the Investment Banking Division of a "Bulge Bracket" bank. She holds a B.A. in French and Art from Vassar College and an M.B.A. from Harvard Business School. Her regular column "Heard in the Suite" is a probing (and, ahem, fictional) weekly look into the secret lives and behind the velvet curtains of the investment banking world.

Ms. Benson-Perella is in London working on an important deal for her highly prestigious investment bank and cannot, therefore, be bothered to write an entry.

Corporate-Governance Concerns Are Spreading (WSJ)
Alan Murray notes the winds of change with respect to corporate governance, as more and more institutions place emphasis on it. He's probably right that companies would be wise to pay heed to the corporate governance-nerds and have independent directors. From an investor's standpoint, could there be an arbitrage opportunity? If some of the really big money (like CALPERS) is making investment decisions based on corporate governance, they're probably overlooking some fine companies that don't meet their standards. Yes, we're thinking Dealbreaker hedge fund; long the bad boys, short the choir boys.

Nasdaq Buys Stake In LSE (Guardian)
They don't call The NASD (Nasty) for nothing. The American exchange quietly bought up 15% of the LSE on the open market. While many stock exchanges just talk about merging with each other, the Nasdaq actually goes ahead and does it, giving it a big leg up next time talks erupt about the fate of the LSE.

Wall St. Buying Hollywood (Hollywood Reporter) (via Paul Kedrosky)
Sure, there's a million jokes and clever lines to be said about Wall St. getting into the movie finance business. Just be cause we didn't write them down, doesn't mean we didn't think of them. Suffice to say, many big banks and hedge funds are funding projects in some manner or another. Some might see this as yet another example of Wall St.'s love with exotic investments these days (strange private equity deals, hedge funds, etc.), but it might be good timing. There's the perception that Hollywood is a dying industry, no longer able to compete with new media. Much of this is probably based on recent box office receipts and reading too many blogs. In fact, the industry has gone through many slumps, much of it being due to Fortuna's cruel hand more than any micro-economic factors. Here's a solid starter to check out if you're looking for a good discussion on the economics of Hollywood.

Sorry. We're just too captivated by the scandal du jour to talk about anything else. It would only be better if the incriminating copies of BusinessWeek** were lined with coke residue and stuffed under the hooker's mattress.

But as Paul Kedrosky points out, this isn't the first time someone's traded illegally off of Gene Marcial's "Inside the Street" column. According to TheStreet's David Edwards, creative people shouldn't go into banking, but the exception would seem to be bankers who plan to engage in illegal activity. In that area, stultifying unoriginality would seem to be a disadvantage.

And the SEC complaint highlights even more clichéd attempts at white collar criminal activity:

Plotkin and Pajcin also contemplated various schemes involving exotic dancers, including having them garner information from bankers while dancing, and using them to induce investment bankers to provide Plotkin and Pajcin with information.

**On the upside, it's good to know someone's been reading BusinessWeek. Because we weren't sure.
***Apologies to Kurt Andersen.

CrossingWallStreet is tracking Lee Perry, Ken Lay's biggest supporter, who comes complete with his own homemade sign:

Perry claims to have independently audited Enron himself and found nothing wrong. Arthur Andersen claimed the same thing, and look what happened to them. Watch out, Mr. Perry. If Andersen is any precedent, you will eventually be dismantled and shut down.

We only hope that when Stanislav Shpigelman, Eugene Plotkin and David Pajcin go to trial, they have an equally enthusiastic cheering section. With better magic markers.

Ken Lay's #1 Fan [CrossingWallStreet]

As one reader points out, recently nailed insider trader Stanislav Shpigelman will now be able to read DealBreaker, as he won't be working for Merrill anymore. Which makes it all worth it, we think. (Do they have Internet access in minimum security federal prison?)

And the gossip is already spreading. Says one reader:

One of my colleagues opens the story and soon after shouts: "Hey, that's the guy in college whose homework I used to do!" Apparently, Mr. Plotkin was very persuasive even back in school.

Maybe we're just gettin' old, but kids these days are doing things earlier and earlier. Used to be, you didn't get arrested for insider trading till you were in your mid 40s or so. Now it's 29, 23 even:

Stanislav Shpigelman, 23, an analyst with Merrill's merger and acquisition division, gave secret information on about six pending takeovers to Eugene Plotkin, 26, an associate at Goldman's fixed-income research unit, and former Goldman analyst David Pajcin, 29, according to a complaint by U.S. Attorney Michael J. Garcia unsealed today. Pajcin, previously arrested for insider trading, is cooperating with Garcia's office.

Noting that the merger market is heating up and that there are "still some people out there motivated by greed'' he said that "memories of the industry in some cases seem to be remarkably short.''

ThinkBlog demonstates the importance of compound interest by calculating whether Peter Minuit got a good deal on the island of Manhattan in 1626. Their explanation and handy charticle:

To understand the magic of compound interest, in 1626, Dutchman Peter Minuit purchased the entire island of Manhattan for $24 from the Wappinger Indians... Compound interest has been called the eighth wonder of the world and with the help of the ninth wonder of the world, the HP 12C, we can calculate whether Peter Minuit got a good deal or not.

CNBC keeps running a trailer for an interview with Starbucks CEO Howard Schultz, where Schultz's major soundbite is:

If you want achieve your dreams, you have to dream big...

But frankly, we've heard worse. And you have, too. Admit it.

So we're collecting dumb business soundbytes. Send to tips@dealbreaker.com with attribution (or leave suggestions in the comments.) The reader who submits the Dumbest Business Soundbyte gets a copy of Schultz's book, good for use as a paperweight for loose pitchbook pages, a doorstop or a beer coaster.

** We'd say "wrote a business book", but who are we kidding?
***By that logic, dreaming smaller would result in failure to achieve smaller, ostensibly more easily achiveable dreams. And dreaming even smaller would result in even more failure to achieve even smaller dreams. And when a small dream is tucked inside of an even smaller dream, inside of an even smaller dream, it's a failure inside a smaller failure. And when a small dream inside a small dream...

Bausch & Lomb is suspending US sales of its ReNu MoistureLoc solution after CDC findings that the solution may be responsible for eye infections that can potentially lead to loss of sight. The stock is now careening southward on the predictable downgrades. Ah, the opportunities for bad puns:
- We didn't see it coming.
- Even though we had our eye on the stock.
- Still too soon to tell if pulling the product was a bad solution.

Also, we're using the stuff RIGHT NOW, so if DealBreaker goes dark, we've gone completely blind and it's B&L's fault.
JPMorgan Cuts Bausch & Lomb to Underweight [newratings.com]
B&L Plunges in Pre-market [IBD]

We are apparently Inconsistent With Merrill Lynch Principles: (click to enlarge)

But are we, really? From the Merrill website:
Client Focus? We're fine with that. Respect for the Individual? Generally, sure. Teamwork? Check. Responsible Citizenship? Uh-huh. Integrity?...

Okay, you've got us there.

Skilling's Debut (WSJ Law Blog)
You have to love a defendant that actually defends himself. There's no "well, technically that wasn't criminal" or "unethical? maybe, but criminal, never", as the former Enron CEO vigorously defends himself and his company, which he continues to claim was a picture of health. Yesterday's revelation was Skilling hoped (he now claims) to get a teaching post at Harvard Business School after his retirement. The happy retirement only lasted about three weeks, before things started collapsing at his old company -- like some other embattled executives, he blamed short-sellers.

Japan Central Bank Ends Easy Money Policy (AP)
You can't know the soul of an economy until it's tested in some way, like not having access to free central bank capital. For the first time in 5 years, last month, Japan's central bank moved interest rates over the zero line, forcing consumers and businesses to say whether they're for real in their newfound spending. If anything, it seems that the traditionally cautious Japanese are going in the extreme other direction, as day trading is soaring in popularity there.

Over-Share from Dr. Evil's Hideaway (Jeff Matthews)
Remember when people thought that Bill Gates was some software genius... or at least a visionary? He gave all these starry-eyed speeches about how one day we wouldn't need a wallet, and we would talk to computers, etc... well he's still giving the same speech and nothing he does says that extraordinary. If anything, he seems somewhat unaware of new technologies and possibilities. Jeff Matthews lampoons a recent Fortune cover story on the man: It is, I think, a sad read. Gates's words come across not as insightful and informative in the Jack Welch how-I-get-things-done management style, but as the self-impressed noodlings of a man in control of a very large, very rich and very powerful organization who appears to have lived almost frozen in time-the Doctor Evil of the software business, who sees the world the same way he saw it thirty years before without wanting to believe how radically it has changed. An overstatement, you say? Well, Gates begins the article by describing-and I am not making this up-the three computer screens on his desk. These three magical screens are "synchronized to form a single desktop" which allows him to drag items "from one screen to the next." This, he solemnly declares, "has a direct impact on productivity." Yes, the CEO of the world's largest software company begins "How I Work" by lovingly describing a desktop computer setup that sits on every trading desk in every high-rise office building from Wall Street to Moscow by the hundreds: multiple screens linked to the same computer.

$$$ DealBook provides a list of non-Ron Burkle moguls who have been mentioned in Page Six. So many alleged extortion opportunities; so little time. [DealBook]

$$$ Hey, another Saturday night: bankers and bottle service [Leveraged Sell-Out]

$$$ If we call them "quarter bags" can we raise the prices? New York mag presents: coke-dealing as a lucrative small business. (We did a variation of this a few years ago.)

From the "We're Not Saying He's Guilty, But We Find It Odd That the Affadavits Were Smoking and Smelled Like Burning Sulfur" department: Enron's Jeffrey Skilling, who we think of as the Harvard MBA who doesn't seem to understand accounting, took the stand today and protested his innocence:

"The charges against me are wrong. I am innocent of those charges and I will fight those charges until the day I die."

"Well, thank you very much, we appreciate that... asshole."

So we're told that DealBreaker is being blocked at Merrill Lynch and at part of JPMorgan (IB, but not the rest of the bank--someone's a little behind on their systems integration!) Herewith, a helpful chart of major investment banks where you can and cannot read DealBreaker.

Reader: "You left out BofA."

HAHAHAHA.

No, we didn't.

[Editor's Note: Trump Mortgage opened for business last week and we sent DealBreaker correspondent John Carney to cover the event. His report: ]

It's 10:32 in the morning and I'm already late for my first assignment. Midtown traffic is at a standstill and I'm kicking myself for trying to take a cab up sixth avenue on a weekday morning. I'm totally blowing this job.

"What do you think of Donald Trump?" I ask the driver.

"I saw him on television once," Mohammad Ali says. "He's a real stinker!"

Just to put things in context: Donald Trump is perhaps the world's most famous loan defaulter. (Not counting Argentina). This guy is getting into the money-lending business?

But it's not a joke. Or not really. Trump really is attaching his name to a new mortgage brokerage but it's going to be run by other people. Presumably people who aren't as busy doing more important things. Like humiliating aspiring apprentices on television. Or attaching his name in gold letters to the outside of buildings.

We finally get to Trump Tower fifteen minutes after the press conference was supposed to begin. There are hundreds of people gathered in and around the Atrium. There are even little kids here. Little kids dressed like mini-Donalds, complete with overly-processed hair.

Muffie Benson-Perella (muffie AT dealbreaker.com) is an Associate in the Investment Banking Division of a "Bulge Bracket" bank. She holds a B.A. in French and Art from Vassar College and an M.B.A. from Harvard Business School. Her regular column "Heard in the Suite" is a probing (and, ahem, fictional) weekly look into the secret lives and behind the velvet curtains of the investment banking world. Ms. Benson-Perella is currently on assignment in London.

I really love that I have an Analyst. Analysts are a great idea and they really make life easier for us Associates so we can concentrate on the important things.

When my Analyst, Phil, got assigned to me it was a godsend. Phil got in trouble for saying something mean about a Managing Director's wife when he thought the speakerphone was turned off but it wasn't. So they assigned him to me. He seems to think it was some kind of punishment but I think that it was because he needed someone with good "soft skills" to help him develop as a professional.

A few readers have asked me to share more about what I do during the day at the office so I thought I would share some of the emails I have had back and forth with Phil. He's great! But he works all the time and never seems to go out! I called him on Saturday night but he was still in the office working on some model we had to do for that Monday.

Here's some emails with Phil:

Wal-Mart Banking Plan Draws Objectors (AP)
Surprise surprise. A bunch of folks whose businesses might be threatened are coming out against Wal-Mart's aspirations to start a bank. As we've stated before, a First Bank of Wal-Mart would shake up the retail finance industry more than the internet has so far -- that's why everyone is so scared. Predictably, the critics argue that a Wal-Mart bank would destroy local banks. Of course they never finish the thought, i.e. it would destroy local banks because Wal-Mart would offer cheaper, more convenient, banking. Will there be a Wal-Mart M&A division as well?

A Contrarian Speaks (The Capital Spectator)
The bond market is finally capitulating to the strength of the economy, with rates rising on the long stuff to around 5%. But is the strength (most recently demonstrated by a strong jobs report) here to stay? Or is doom and gloom still right around the corner? James Picerno has an interview with Lakshman Achuthan, from the Economic Cycle Research Institute, who sees trouble going forward: Q: We keep reading that the economy's doing fine. The bond market certainly seems to be throwing in the towel after seeing the strength in the March employment report. And that follows other numbers in previous weeks suggesting that the economy has a head of steam. A: That's an ok view near term. I wouldn't argue with anything you just said for the next month or two or three. But once we get into second half of 2006, that logic falls apart.

Fun with USO (Naked Shorts)
Now American households can act just like their favorite airline and attempt to hedge their gas bill by buying oil. The new oil ETF (USO) will launch today and, according to Greg Newton, 25 shares of it will be enough to protect the consumer against oil spikes. Of course, prior to now, buying oil sector stocks would have been done the trick, but a lot of people might be intrigued with the chance to buy oil directly. Maybe if people learn to hedge their fuel bills, there won't be as much uproar about cartels and price fixing every time crude nears 70. On the other hand, pray to god that people don't start talking about where they hedged their fuel bill in casual cocktail conversation. Please, just don't.

Born and raised in the remarkably Jewy town of Livingston, New Jersey, Bess Levin is best known for starring in her 1997 Bat Mitzvah. Apparently, she attended Amherst College, where she received a first-hand account of the species known as the WASP and its manifold mating practices, ceremonies and rituals. Levin graduated from Amherst in May, and there are two conflicting stories as to how she landed at DealBreaker shortly thereafter. One version has her stalking Elizabeth Spiers for a rather lengthy period of time, during which Levin extolled her coffee-getting/making and photocopying skills to Spiers's great impress. The other is that she was found on the doorstep in a basket with a note pinned to her chest; each may or may not be wholly untrue, except for the part about how good she is with coffee and photocopying. (Ed. She excels at both). Bess often wonders if when the time comes, could she answer that all-important question: if you were an animal, which animal would you be? (She does not know. Yet.)

Bess can be reached at:
bess AT dealbreaker DOT com.

Equity Private, still on the Yahoo vs. Google beat, notes (while keeping tabs on KKR's IRR on the Sealy boyout) that Google Finance doesn't yet recognize the Sealy ticker. Someone's asleep (ZZ) at the wheel.

Despite Hank Paulson's earlier assertions that he wasn't being considered for the Treasury Secretary post, the Times reports today that a government job may be in Paulson's future after all. In other news, Paulson's alleged treehugger-iness is probably not being helped by this month's Vanity Fair "Green Issue" which features a full page Jonas Karlsson shot of Paulson ("The Conservationist Capitalist") in Central Park carry bird-watching binoculars and looking vaguely pissed off. (Text below, photo after the jump.)

Is Paulson Going Public? [NYTimes]

Muffie Benson-Perella (muffie AT dealbreaker.com) is an Associate in the Investment Banking Division of a "Bulge Bracket" bank. She holds a B.A. in French and Art from Vassar College and an M.B.A. from Harvard Business School. Her regular column "Heard in the Suite" is a probing (and, ahem, fictional) weekly look into the secret lives and behind the velvet curtains of the investment banking world.

One of my friends from Harvard, Sunny, came to New York to work in investment banking. Sunny was a year ahead of me so she was already a Second Year Associate when I started. I didn't really see much of her when I was interning.

Sunny and I used to be pretty good friends. Her parents and my parents played a lot of tennis together in Connecticut and they used to ski at our place in Telluride since my mother stopped going. (She thinks the Alps are much better skiing now and Telluride has gotten really crowded anyway since the third development in the Mountain Village got built). Sunny went to Brown when I was at Vassar and we didn't see much of each other until we met up again at HBS.

So I was a little annoyed when she wouldn't return my calls promptly. After all, here was one of her Harvard classmates, in a new city, well sort of, since I never spent much time in the city until my internship, but she wouldn't answer the phone when I called.

Finally, I ran into her at this party. She was talking to some guy (I found out later he's a Vice President and he went to Columbia and does a lot of coke) when I walked up to her. I just said "Hi Sunny!" She stared at me, really coldly, and said, "My name's not Sunny now, Muffie." She really spit my name out when she said it. "Its Jennifer."

Her name is actually Jennifer but no one ever called her that until she came to New York and started hanging out with Vice President Cokehead from Columbia. Even her mom still calls her Sunny.

There's no way I'm letting New York go to my head like that.

Senate Deal on Immigration Falters (NYT)
Things were looking good when we went to bed last night, but disputes over parliamentary procedure (the bedrock of democracy) threaten to delay the vote until after the Spring recess, "...raising the possibility that the painstakingly negotiated compromise might unravel as it is exposed to intense political scrutiny during the two-week Congressional break." It's a bad sign when two weeks of scrutiny threaten to sink the bill. It's always much better to just vote on it before the public has had a chance to check it out. Either way, they probably didn't have much of a chance to reconcile their bill with the radical one likely to come out of The House, which would make every illegal immigrant a felon overnight. Imagine that, 12 million more felons. Feeling secure? Hey, at least then the house would be ok with them working in agriculture, as their argument has been "let the prisoners pick the fruit". Quick question for those who think that all these immigrants are bad for the economy -- would China be the emerging powerhouse it is, if, say they had 300,000,000 like we do? Nope, people=growth. You've got to reread your Julian Simon.

U.S. senators unveil plan to rein in big oil, OPEC (Reuters)
Hmm, you think there's a direct correlation between oil prices, and politicians wanting to regulate the oil market? (duh). Haven't watched O'Reilly since the last time crude was near 70, but we imagine he's calling for Lee Raymond's skin once again. The latest plan in The Senate would allow class-action suits against OPEC for price fixing. Don't you wish you were a lawyer now, and could get in on some of that action?

Three Words You Never Saw in the Same Sentence (Jeff Matthews)
Jeff Matthews has been harping on the perceived idiocy of the bond market for some time, and the their inability to recognize inflation when it smacks them on the face. Today he points to more signs of inflation, like office space shortages, oil shortages, and a rare retracement in steel prices, as they head back to earlier highs. Our question: So? Why are any of these things signs of inflation, and not just rapid growth that are pushing the edges of our current capacity. Why should the fact that landlords have good pricing power, because office space is in such high demand, make anyone less interested in bonds? Perhaps all of these things do signal some sort of overinvestment, in which case the high prices serve as a very useful signaling mechanism, telling business to slow down.

Study shows stock spam boosts prices (Security Focus)
A study presented at a Vancouver, Canada conference suggested that stock spam can in fact boost the price of small companies, and that the spammers do tend to profit. The two authors found that the average stock rose 1.7% the day of the spam campaign, and then generally fell .9% the following day. Good to know. It's not clear whether sell-side analyst's daily reports sent via email were included in the study.

Since it's already Morgan Stanley Day at Dealbreaker....

DealBook reports that JPMorgan's Rob Kindler is moving to Morgan Stanley to be Vice Chairman of Investment Banking where he'll focus on client relationships, etc., etc.

The JPMorgan motto (er, "strategic principle") is, of course, "One Firm. One Team. Be a Leader."

Kindler's version, we're told, inscribed on a hat he kept in the office: "One Firm. One Team. Bribe a Leader." He will certainly be missed.

Robert A. Kindler Joins Morgan Stanley as Head of Investment Banking [NYTimes]

We'd like to raise the possibility that Morgan Stanley IT employees who were emailing about whether they should attend the Adult Video News porn awards in Vegas were doing so for investing purposes. Not because they were, but because it's plausible, thanks to AdultVest, "The World's First and Only Investment Community Designed Specifically for the Adult Industry". From the Website (WARNING: sound; WARNING: not necessarily safe for work:

Investors will now have an opportunity to review executive summaries from a pool of start-up, small, medium, and large adult related businesses. Companies and talent in the industry can submit opportunities for investors to participate in their businesses; and the investors, the companies, and the talent will all have an opportunity to meet together in the same room at the upcoming AdultVest 2006 convention in Las Vegas, NV.

AdultVest [AdultVest via Susannah Breslin]

At yesterday's Morgan Stanley shareholder meeting, activist Harry Korba took the opportunity to grill John Mack (who is apparently "sexy" according to at least one of you) about the details of the business:

There were 270 lawyers employed by the company in 2001, Korba said, how many are there now?
"About 328 full time," said Mack. "Not including compliance."
How much did it cost per copy to print this proxy, Korba asked.
"Eighty-five cents," Mack said, not missing a beat.

We generally like shareholder activists because they make the conference calls more interesting. (While we were working for one, he once showed up for a 9AM investor conference completely stoned, and asked questions accordingly.) So we're of the opinion that people like Harry Korba should be encouraged.

We were already looking forward to Overstock's April 25th meeting, but even more so since the activists will be out in full force. Questions for OSTK, anyone?

Score One for the Kooks [MarketWatch]

Former Morgan Stanley tech exec Arthur Reil is claiming that his discovery of what the Post calls "x-rated" emails between two of his overlords led to his firing. How x-rated?:

In a twist of fate, out of millions of e-mails, Riel said he found some of the terms in a thread between Kilcoyne and Tanaka. In one e-mail obtained by The Post, dated July 7, 2004, Tanaka describes her admiration for the prowess of Italian men, whom she called "Italian Stallions." She also graphically described her boyfriend's physical attributes as "The Italian Sausage." An earlier thread discussed the possibility of Tanaka and her boyfriend joining Kilcoyne and her husband, who also works in Morgan's IT department, to attend the Adult Video News porn movie awards in Las Vegas. Several weeks after he came across the e-mails, Riel said the firm accused him of violating the privacy of his colleagues.

Please. Our dry cleaner talks dirtier to us than that. (No pun intended.) But there's an easy way around email filtering for this sort of thing, as demonstrated by our own Muffie Benson-Perella, after the jump...

E-mail Troubles [NY Post]

Muffie Benson-Perella (muffie AT dealbreaker.com) is an Associate in the Investment Banking Division of a "Bulge Bracket" bank. She holds a B.A. in French and Art from Vassar College and an M.B.A. from Harvard Business School. Her regular column "Heard in the Suite" is a probing (and, ahem, fictional) weekly look into the secret lives and behind the velvet curtains of the investment banking world.

Since my first few columns, several readers have asked me how in the world I got hired in the first place (just for the record, I know it is New York and everything but let's lighten up on the profanity in reader email going forward ok?) and one or two have asked how I got into a cushy spot like the Associate Ambassador program at my firm. Since everyone is so interested, I thought I would give everyone a little history.

I had interned summer of my first year at business school at one bulge bracket, but that was so dull I just couldn't try to work there after the summer. So I just applied to all the banks except Bank Bore. Luckily, my current employer has a lot of Harvard graduates working. Also, my father knows a lot of people here because he's done a lot of business with them over the years. It was almost a natural fit. But when I was interviewing for internships first year I met this one Associate from here who was really rude and tired all the time. I figured I really didn't want to work with anyone like that so I didn't bother to apply for an internship. But when I looked again after the first year for my permanent spot I found I already had a ready-made business network and family even while I was interviewing! That worked out nicely.

NYBOT Board To Discuss Demutualizing (Reuters)
No, really, you don't say. The New York Board Of Trade is considering a change to their structure, and may become a for-profit enterprise. Some are whispering the greatest three words known to man: I P O. What's great is that a seat on the exchange sold for $875,000 yesterday (a new record) almost $150,000 higher than the previous record, 2 weeks earlier. Whoever sold the last one has to be kicking himself. Then again, all the seat holders must have the big $1,000,000 on their minds. Is there an exchange for seats themselves? Is there a company offering seat holders hedges/insurance in case the IPO doesn't come through as planned. C'mon, these are some hot markets to exploit. More: Because the day wouldn't be complete without at least two stock exchange bits of news, the Scandinavian Stock Exchange, OMX, is looking to hook up with the LSE.

A Business Traveler's Odyssey (AP)
This is bound to be a classic tale of the 21st century businessman; 10 years from now they'll be debating whether it was apocryphal or not. Recently, an Intel employee, intending to fly to Taiwan, mistakenly booked a flight to the remote Chinese industrial city Taiyuan, near the border of Mongolia. Once there he found himself with no money, no place to stay, taking abuse from strangers, fighting his way out of a brothel, and desperately trying to make an international phone call to his wife. Hopefully they'll turn his ordeal into a movie.

Japan Post to Be Privatized (BusinessWeek)
We've seen headlines like this before, so we won't hold our breath, but if the Japan Post goes public, it will be the granddaddy of all privatizations. Privatizing The Post would be on the order of privatizing Social Security, Medicare, The FDIC, and the Parks Service all at once, and it's long been a priority of Japanese PM Koizumi. The institution's $1.7 tln holdings had been predominantly invested in government bonds, which haven't paid a whole lot over the years. The process will take place over several years through 2017, long enough time for a recession to freak politicians out and demand the process be halted, but if it goes through, one of the winners will be Goldman Sachs, one of the few foreign companies to have a role in its privatization.

Muffie Benson-Perella (muffie AT dealbreaker.com) is an Associate in the Investment Banking Division of a "Bulge Bracket" bank. She holds a B.A. in French and Art from Vassar College and an M.B.A. from Harvard Business School. Her regular column "Heard in the Suite" is a probing (and, ahem, fictional) weekly look into the secret lives and behind the velvet curtains of the investment banking world.

I know that some people have a hard time believing that a woman can write a serious investment banking column and there is no small amount of jealousy out there. I do want to point out, however, that my hard work and creative thinking allowed Dealbreaker to scoop DealBook's boring piece on the topic and everyone else with my original "Apple and Microsoft" merger article. Now, suddenly, everyone agrees with me and DealBook didn't even bother to cite me. Really, I think that's quite low brow. How rude. That's why I never read the New York Times. Ugh.

It feels like the late 1990s all over again! Everything is possible with creative investment bankers doing the creative thinking.

Some anonymous commenter disingenuously suggested that a bland tech article was published before I wrote anything but this is totally false. I wrote my Apple piece 24 hours before it was published, and therefore 18 hours before the bland tech article was published. Like I would read some online tech magazine called "TechNewsWorld."

We still think Dick Grasso reminds us of someone:

That aside, opportunities for gratuitous mockery may be delayed until February 2007 because Grasso has agreed to the NYSE's request that the trial date be pushed back from October, as their lead counsel is involved in another case and will not be available until then.

Grasso Trial Delayed Until 2007? [CNN/Money]

Jet2's CEO Philip Meeson, annoyed that French air traffic controllers were striking last week (as they do), sent a strong message to the unions via Photoshop:

The French are not happy.

Jet2.com condemns French Strike Action and calls for lazy frogs to get back to work! [Jet2 via Kudlow]

But on the offchance that you're reading from home later:

bOINGbOING's guide to "defeating censorware". An excerpt:

Boing Boing reader Tom Jeziorny says, "I work for a BIG financial services company that apparently uses (not-so-) SmartFilter because BoingBoing has recently become a forbidden site. I use Bloglines as my RSS reader so that I can access the blogs I read from work and home. It turns out that Bloglines is acting as sort of a proxy, since it connects to your RSS feed and not my computer, I'm still able to read BoingBoing at work.

Guide to Defeating Censorware [bOINGbOING.net]

CrossingWallStreet combs through the Fed's 2000 transcripts (which were released yesterday) looking for the one element least likely to be found in Fed transcripts: jokes. A sampling:

CHAIRMAN GREENSPAN. Governor Ferguson.

MR. FERGUSON. I support both halves of your recommendation. And since we are confessing, I will confess that my heart is pure.

MR. GRAMLICH. You're obviously not a Catholic.

MR. FERGUSON. That is also true. I do think a 25 basis point move is appropriate today. As I said earlier, a 50 basis point move may be appropriate later.

VICE CHAIRMAN MCDONOUGH. You know what happens to those whose hearts are pure? Their strength is as the strength of ten.

MR. FERGUSON. He has to turn his collar around the other way.

If Carl Icahn can do standup, why not Greenspan? As far as we can tell, neither of them have concrete retirement plans yet anyway.

The Wacky FOMC [CrossingWallStreet]

In our experience, hedge fund conferences generally involve a lot of 40-something men in suits, speeches no one listens to and bad catering interspersed with occasional dealmaking that could have been done in the comfort and safety of one's own office. But you can't blame the English for trying to sex it up. Enter HedgeStock, "a festival of networking" that includes a rock concert by Roger Daltrey (which may officially constitute "trying too hard") during which a hedge fund awards ceremony will take place. Some of the categories:

Most Reliable Administrator, Most Enlightened Accountancy Firm, Legal Eagle, Outstanding Hedge Fund Technology Supplier, Best Risk Management Service to Hedge Funds, Best Managed Account Platform, Most Reasonable Leverage Provider for Investors, Most Reasonable Leverage Provider for Funds, Stock Loan 'Ranger, Best Execution - Exchange Traded Options and Futures, Best Execution - FX & Interest Rate Derivatives. Best Execution - Cash Equities, Jimi Hendrix Award for Outstanding Contribution to Hedgestock, Life Time Achievement

Well, Roger Daltrey ostensibly tops Roth Capital's recent conference-and-Black-Eyed-Peas-concert, but what does that say about Roger Daltrey? After the jump, the lyrics to "Money", to commemorate the passing of Roger Daltrey's artistic integrity:

Informal polling has indicated that you want certain things from us. In no particular order, here are some of the requests:

- More about Stevie Cohen (Thanks, Alan!)
- More lampooning of Lou Dobbs ("And tonight... The immigration special. Part 18 in a 40 part series.")
- More gratuitous references to the The West Garden Spa
- Instructions for how to get around the bank's IT department's DealBreaker-blocking program (English-to-English translation in Google)
- Instructions for how to block English-to-English translations of DealBreaker in Google. (Suck it, IT department.)
- Wall Street people sightings
- Items Of Prurient Interest
- More Muffie
- Less Muffie
- A date with Muffie (Thanks, Alan!)
- Bonus numbers
- A castle made of deal toys

What else do you want? Leave suggestions in the comments or email tips AT dealbreaker.com.

Muffie Benson-Perella (muffie AT dealbreaker.com) is an Associate in the Investment Banking Division of a "Bulge Bracket" bank. She holds a B.A. in French and Art from Vassar College and an M.B.A. from Harvard Business School. Her regular column "Heard in the Suite" is a probing (and, ahem, fictional) weekly look into the secret lives and behind the velvet curtains of the investment banking world.

I've been having a problem with my network since I changed around my laptop a little bit. IT people are supposed to help Associates like me so we can get things done. I have been mailing back and forth with an IT person a lot in the last two days and I think he's being really rude.

First of all, I don't know him at all so why he is using just my first name I have no idea. That's pretty cheeky. We aren't out for cocktails, after all.

I have attached my email so my fans can see that you have to deal with difficult people in Investment Banking sometimes.

The WSJ's Alan Murray on Stevie Cohen's Biovail-related woes and the negative publicity they rode in on:

It's almost possible to feel sorry for Stevie Cohen. Sure, the publicity-phobic hedge-fund impresario who runs SAC Capital Management LLC -- SAC stands for Steven A. Cohen -- brought home about half a billion dollars last year, thanks to a compensation scheme that lets him skim 40% to 50% of his funds' profits. And yes, home is a 14-acre spread in Greenwich, Conn., with a 31,000-square-foot house, a hockey rink and paintings by Jackson Pollock and Claude Monet. But what Mr. Cohen really wants -- like Greta Garbo and Howard Hughes -- is to be left alone.

But Murray admits he's part of the problem:

Ah, yes, but the problem with Google Earth is that you can really only vaguely make out the details. Driving up to Greenwich, parking outside of the gate and scaling the fence: much more effective.

But we're inclined to agree with Murray's assertion that covering Stevie Cohen more and more aggressively will only help society. Which is why we give you a Steven A. Cohen wiki entry to edit/add to/vandalize.

Hedge Funds Need to Open Up [WSJ]

Delta pilots OK a strike (Memphis Business Journal)
Normally, it's right to scoff at strike talk and pedantically explain how workers generally just hurt themselves when they do it. By now everyone knows that strikes don't do anything to bring either side to the negotiating table, that they reveal no new information, and that they don't magically give the company the ability to pay more. But a strike at Delta may give the dreamers something we've been hoping for, for a long time -- an airline that disappears. For a while it looked like the bankruptcies would do it, finally clear out the tired legacy overhead to make more room for the jetBlues, Southwests and Virgins. But airlines in bankruptcy courts is like Marxism at the universities, a place where rejected concepts get to live on forever (as Adam Smith once said), taking in new generations of thinkers and frequent fliers. A strike would put an end to that, so if it happens, we'll be marching right along side them.

Citi: Back in the M&A Game? (BusinessWeek)
Now that The Fed has lifted a Citi-specific merger ban, does this mean the behemoth will kick off a new round of consolidation in the industry? The company, which has been plagued by regulatory mishaps, may look for deals overseas. But maybe there's something to the idea that the company is just too big and unwieldy. Perhaps the management should take all of their problems as a signal that things won't get better by adding more units and divisions. Still, despite denials, let the dealmaking begin. Ousted CEOs make for good blog copy.

Wal-Mart Offers Aid to Rivals (NYT)
Talk about capitulation. In urban areas, where Wal-Mart's growth has been stymied, the company plans to offer seminars to small business on how to compete with a new Wal-Mart store. For example, they'll explain that customer service is a weakness of theirs, and if local operations can focus on that, they'll have a better chance of surviving. The company even plans to allow local companies to advertise within a Wal-Mart store. There's something creepy and brilliant about this. It may help them win over hesitant local boards, impressed with their 'community investment'. but it's really not likely to change the game much. If Wal-Mart is the low-price leader in the areas they go into, they should take a lot of business, seminars or not. The company has been very shrewd in trying to improve their image while hurting their competitors. Last year, the CEO, Lee Scott, called on Congress to raise the minimum wage. What? Are they crazy? Far from it; it's their competitors who are more likely to pay workers the minimum wage, meaning that any increase will put more of a squeeze on the mom and pop operations, than it will themselves.

We have a handful of DealBreaker correspondents who, in addition to their usual responsibilities (reading S-1s, stalking hedge fund managers, picking the green M&Ms out of the bowl, etc) do some occasional reporting. We sent one of our more intrepid correspondents to Jersey via the "luxury" SeaStreak to chronicle the high-end commuting experience to and from Wall Street. (High-end relative to... the Staten Island Ferry.) Our correspondent reports:

SeaStreak is a high-speed catamaran that, on a daily basis, shuffles hundreds of salarymen from Manhattan to Monmouth County. At $38 round-trip, it's one of the more cost-inefficient ways to get between Wall Street and New Jersey's lighthouse-studded shore, and it styles itself as a luxurious commuting option. The SeaStreak ethos may be summarized by the following hypothetical exchange, reproduced on its website:

Do you go to Brooklyn?
No, we do not operate any service to Brooklyn.

Supposedly, due to its cost and trajectory, SeaStreak hosts a lot of after-hours dealmaking. Overpriced journey to unappealing destination, all for the shot at seeing a few handshakes? I'm so there.

My first feeling, on boarding, is mild dismay. It turns out that one man's "luxurious" is another's "floating Greyhound." The ceiling in the main cabin is only about seven feet high; I see one tall guy who's gone bald on top, and I can only assume it's from rubbing his nog against the corrugated aluminum roof.

[Photographic evidence after the jump...]

Fortune has released its annual Fortune 500 List and the top ten are:

1. Exxon Mobil 2. Wal-Mart Stores 3. General Motors 4. Chevron 5. Ford Motor 6. ConocoPhillips 7. General Electric 8. Citigroup 9. AIG 10. IBM

The next time anyone complains about Time Warner being too big and bloated, the correct response is "Exxon is bigger and bloated-er."

We are, however, disappointed to see the military industrial complex so underrepresented. Sure, you have Boeing and United Technologies and Lockheed Martin and Raytheon, but we were hoping Halliburton would be at the top of the list. We're really starting to lose faith in the military industrial complex...

Fortune 500 2006 [Fortune]

"There Was a Discrepancy With Reality" is not the best thing we've heard all week. The best thing we've heard all week is analyst Jeff Harte's explanation of Merrill Lynch's $1.2 billion Q1 non-cash charge:

"At first glance $1.2 billion is a startlingly large number," said analyst Jeff Harte of Sandler O'Neill & Partners LP. "However, we remind investors that the charge represents early recognition of expenses that would otherwise have been recognized in future periods, as opposed to the creation of a new expense."

He's right, but $1.2 billion is a startlingly large number at second glance, too.

Merrill Lynch Shares Down After Charge [MSN]

The Festus and Helen Stacy Foundation has filed a claim charging TH Lee Putnam Ventures and Merrill Lynch Alternative Investments with inflating the valuation of their portfolio in reports to limited partners:

For example, even though 11 of the 37 companies that TH Lee Putnam had financed were shut down or had been written off completely, Merrill Lynch disclosed in its performance reports that the remaining 26 companies retained 91.8% of their value, the foundation's claim says. Wendell Bird, the attorney representing the Stacy Foundation, said it's unlikely that those 26 companies would be performing so well, while the other one-third were worth nothing at all. "There was a discrepancy with reality," said Bird...

Maybe we're cynical but we always assumed VC portfolios were inflated post-boom. We used to multiply total value by a percentage and refer to it as the "Limited Partner Discount Rate."

At any rate, "there was a discrepancy with reality" is the best thing we've heard all week.

Says The Accidental Consultant:

It is not just the Private Equity firms that have an interest in inflating values. The largest clients of the PE firms do as well.

[DJ/VentureWire via The Accidental Consultant]

Muffie Benson-Perella (muffie AT dealbreaker.com) is an Associate in the Investment Banking Division of a "Bulge Bracket" bank. She holds a B.A. in French and Art from Vassar College and an M.B.A. from Harvard Business School. Her regular column "Heard in the Suite" is a probing (and, ahem, fictional) weekly look into the secret lives and behind the velvet curtains of the investment banking world.

"Mergers with Muffie" will be a recurring feature where I review the often amorphous and unfastidious world of mergers and acquisitions and review proposed, pending or completed transactions.

It wasn't too long ago that the merger rumors were flying around about Apple and Disney. Just after the Pixar sale Steve Jobs was the largest individual shareholder of Disney. That was only one of several reasons an Apple Disney deal made sense. For instance:

Apple is very strong in the educational and artistic markets. Perfect for Disney synergies.

Digital media dominance, also Apple's to lose. Again, good dovetail with Disney, fading in the sector.

And, let's face it, Jobs has quite the ego. Disney, again, perfect match.

Lots of things make it sound tempting. But I am here to tell you that it will never work.

Board Still Has Faith In Wagoner (WSJ)
It's not clear, exactly, what GM CEO Rick Wagoner has done to earn the continued support of the board, but he claims to have it. Perhaps it's not so much faith in him, but a skeptical outlook on whether anyone else would be any better, and whether the upheaval of a CEO change is a good thing right now -- probably not. Interestingly, some big GM dealerships are coming to his defense as well. The dealerships may be a wild card in this whole affair; did you know that Michael Dell has been investing in this area? If he could shake this area up, do something to it like he did computers, it could be worth watching. Perhaps the Henry Ford of computers could become the Henry Ford of car dealerships, too.

Mittal-Arcelor, Oracle-Peoplesoft II? (Reuters)
Arcelor continues to gird itself against the increasingly aggressive Mittal, raising their dividend, and adopting other poison pill measures to ward of the suitor. None of this is deterring Mittal, which is holding the line on its offer, while deriding Arcelor management as being shareholder unfriendly.

NTL to buy Virgin Mobile in $1.7 bln deal (Reuters)
While the American telecom operators are talking about the triple play, Europe has long moved onto the quadruple play (TV, Data, Voice, Mobile Voice), and this is yet another example. Word of the deal originally floated last December, but only now went through, which should suggest very little remaining opposition to it. It's not clear what kind of synergies or cost-savings the new company can expect. Perhaps there will be some convenience to customers in being able to pay for all of these things on one bill, but often customers have seen the opposite -- operators use the bill as a way to tack on a bunch of hidden charges and fees, alienating the users.

Footnoted.org's Michelle Leder caught Dow Jones' late Friday 8-K filing detailing severances for husband-and-wife team ex-DJ-CEO Peter Kann and ex-WSJ-publisher Karen Elliott House:

According to Kann's agreement, he'll continue to collect a salary of $995K through next April while he serves as Chairman and is eligible for a target bonus of $896K this year. Then there's another $2.52 million worth of stock. In addition, once Kann retires as chairman, an unspecified number of stock options will continue to vest "as if you had remained in service with the company."...As for House, she'll receive $1.7 million over the next 24 months and continued vesting of her options. One other interesting little tidbit about the two agreements: Kann's was only 8 pages. But House's was a whopping 38.

(There's a reason why you file these things late on a Friday.) Kann's staying on as Chairman, presumably so that he can advise management on how to make the stock do this over the course of five years...

... and they can do the opposite. Kann also has a non-compete through 2007. Given the company's performance, it might have been competitively smarter for the Dow Jones to forgo the non-compete and let Kann manage the competition as well as he managed DJ.

His and Hers [Footnoted.org]

The Economist does a Henry-Kravis-for-Dummies piece summarizing the history of KKR and suggesting that Kravis should get out while the gettin's good:

The real test of KKR's new strategy will come in the harder market conditions that surely lie ahead-of tighter, pricier credit and perhaps an economic slowdown. One characteristic of those people history judges to be great leaders is timing: the ability to step aside at the moment of greatest triumph, leaving a successor to grapple with the tougher times ahead. Given the difficult outlook for the private-equity industry, perhaps Mr Kravis should retire now after all, while his standing is so high.

Well, maybe. But wouldn't it be more fun to raise $13 billion for a new fund? And why stop there, really? Why not raise $14 billion? Do I hear $15 billion? (At what point do we start calling it a "bubble"?) And which of the kids is going to run the place when Kravis leaves? (How does "Kravis Kubs" sound?)

These are the things that keep us up at night.

A Barbarian No More [The Economist via Wall Street Folly]
Texas Pacific raises record $14bn for new fund
[MSNBC via Paul Kedrovsky]

Muffie Benson-Perella (muffie AT dealbreaker.com) is an Associate in the Investment Banking Division of a "Bulge Bracket" bank. She holds a B.A. in French and Art from Vassar College and an M.B.A. from Harvard Business School. Her regular column "Heard in the Suite" is a probing (and, ahem, fictional) weekly look into the secret lives and behind the velvet curtains of the investment banking world.

I saw today on DealBook that first year lawyers are getting bigger and bigger salaries. Chicago firms apparently have raised first year associate salaries to $135,000. In New York it is supposed to be $145,000 or something.

First of all, this isn't a lot of money so I don't see what everyone is upset about.

Second of all, it is too much money to be paying a first year lawyer.

Or: How Many Valuation Experts Does It Take to Change A Lightbulb at Facebook.com?

College student/alumni site Facebook.com has decided that after turning down a $750 million dollar buyout offer to hold out for two beeeeeeeeellion dollars, it will now up the ante and hold out for one beeeeeeeellion dolllars.

Facebook gets 5.5 billion pageviews a month and ads are sold in the form of "flyers" that cost $5/10,000 times displayed, which would seem to indicate that they have $2.5 million worth of inventory to sell per month. =((5,000,000,000/10,000)*5)*12 = $30,000,000/year of potential inventory to sell (at the quoted CPM, which is probably higher than the effective) Unless they have another revenue line we're missing, that's, uh, 67x at $2 billion.

(We checked our own alma mater and stumbled upon the "Patrick Bateman Is the Man" group. Not surprising.)

Web Networking Service Exploring Partnerships, Buyout [WSJ]

Just when you thought Time Warner couldn't get any bigger or dumber**, TW CEO Dick Parsons tells the FT that he wants to move into wireless via acquisition or buying spectrum. His explanation:

"The ultimate table has to be constructed with four legs, not three. The fourth leg will be wireless — how one solves the equation I don't know," Mr Parsons said.

Well, that's simple: you divide the second leg by the sum of the tabletop and a chair, then subtract four.

On the upside for Parsons, the TW bar for what constitutes a successful acquisition is pretty low. (Thank you, Gerry Levin, wherever you are...)

** Statistical correlation between "big" and "dumb" = 0.96

Parsons Says Time Warner Needs Mobile Assets [FT]

Alcatel Jumps on Plan to Buy Lucent in $13.4 Bln Swap (Bloomberg)
It's official; they're merging. 8,800 jobs will be cut, Lucent's Patricia Russo will be the first female CEO of a large French company, and nothing says bubble like Alcatel, the acquirer, jumping 8.8% on the news. The merger will be judged, obviously, on cost savings, which are possible given the bloat that these two aging giants must have -- at least they didn't say synergies. All in all, pipes are back. Om Malik notes the return of second-rate optical stocks, whose shares have surged in the past few months -- at least they're not calling them internet backbone companies.

Microsoft's Big Year (Barron's)
Will this finally be the year of Ol' Softy. After basically flatlining since 2001, Barron's thinks the company may be back. Of course, they've been on the brink of being back before, but this time Barron's means it. The case for the company is based on an upcoming product release cycle, the biggest in the company's history, and renewed IT spending among corporations. It's a bold argument, as the magazine calls the company a growth stock once again. At the same time, the company seems to be poorly run. Product delays, which have always been part of their reputation, seem to be getting worse, and it's unclear that when (if?) the new Vista operating system will be released, it will have enough features to drive a rapid upgrade cycle. Remember when people were waiting in line on midnight the night before Windows 95 was released? Could you imagine anyone doing that on a cold night this coming January?

Capex Revival, For Real This Time? (WSJ)
Here's an argument we've heard a lot in the last year: When the consumer finally weakens because their credit card is tapped out, and their home stops rising in value so they can't use it as an ATM anymore, capital expenditure will make up for the loss and save the economy. But will companies actually start investing, or is this just wishful thinking? After several years of saving money, there has been a tickup in hiring and investment, with capex expected to grow by 6.5% this year, slightly higher than the recent average. Still, it looks spotty and the article is only able to cite a handful of examples, like Hasbro buying a puzzle maker (so?), or Guess re-modeling 30 of their stores. Hmm... capex rebound, maybe not so much.

Euronext looking for partner (Telegraph)
Stock exchange merger mania may continue, as Euronext may be the next suitor to try for LSE's hand. Both Australia's Macquarie, and more recently the Nasdaq, have been rebuffed when proposing to London. We'll be really disappointed if, in ten years, we don't have one single, global, 24-hour, 7-days a week electronic exchange that doesn't list every publicly available stock, bond and commodity. So from our perspective, get mergin' quick.