MBAs are making even more money. [Business Week]

There aren't many (any?) male personal assistants in UK investment banks. [The Devil's Personal Assistant via WallStFolly]

Why does the new KKR fund have a Luxembourg subsidiary? No withholding or capital gains taxes! [Going Private]

Jon Corzine was so beat-up by Hank Paulson during the 1998 struggle to control Goldman that he wouldn't even enter the building and conducted his business from a limo outside. [New York Post]

We suppose you can read the reporting on today's Google conference call from Reuters or CNNMoney. They are good enough as far as they go. But the most complete treatment comes from John C. Ogg on the 24/7 Wall Street blog. It's little more than a hastily written transcript but its got the goods on who asked what, which is always one of the best parts of these calls.

Google's Investor and Analyst Conference Call [24/7 Wall Street]

Update: Seeking Alpha has the complete transcript.

Today seems to be Hank Paulson day here at DealBreaker. The Observer ran a good profile on the incoming Treasury Secretary today, with details on his fly-fishing habits (catch and release). Meanwhile, over on Slate, Timothy Noah provides the details on Paulson's political contributions (heavily Republican).

In light of what we've heard about Paulson leaving a sappy voicemail for Goldman's employees yesterday, this older story from Fortune is particularly telling.

I've never used e-mail, but I'm a huge voicemail user. I do a couple hundred voicemails a day. And I return every call right away, whether it's a client or someone in the firm. There are positives and negatives to this. I don't have a lot of time for small talk.

Occasionally there are wing nuts who call, and I pass them on to Julie, my assistant. But Julie doesn't screen my voicemails. The people at Goldman Sachs have to be able to get to me. Clients have to be able to get to me.

I've always spent a lot of time on the phone. Even when cell phones were a novelty in the 1980s when I lived in Chicago, I was using one of those huge Motorola phones as I walked from the train station to the office. This past Christmas, my wife, Wendy, and my daughter, Amanda, and her husband and I spent ten days hiking in Chile, and my daughter took so many pictures of me with this big satellite phone attached to my ear.

If anyone has yesterday's voicemail and wants to send it our way, that would be like super. Actually, if you've got any Paulson voicemail you should send it to TIPS at DealBreaker.com.

Secrets of greatness: How I work [Fortune via CNN Money]

Yesterday we were trying to remember just how long we had been hearing that Treasury Secretary John Snow was on his way out. Weeks? Months? A year? It feels like it's been forever.

Actually, people have been talking about this at least since 2004! This Wall Street Journal story [subscription required] even lists Hank Paulson as a probable candidate for the job.

Eric Savitz has launched a blog over at Barron's, Tech Trader Daily. From the initial post.

Well, here it is, the first-ever post of Barron's first-ever blog. It's been a long time coming: Barron's has been online for a decade now, but our approach until this point has focused largely on writing stories for the Web that look a lot like the ones we write in the magazine: in-depth company stories with an investment angle. And the site will continue to do a lot of that. With Tech Trader Daily, however, I'll try to apply some of the same Barron's logic to daily coverage of the tech sector. Like other bloggers, I'll be linking off to interesting stuff around the Web, from both other print publications and various places in the blogosphere.

Today he's more or less live-blogging from the Wall Street Journal's"D Confernce" and provides this quote from Sony CEO Howard Stringer: "Microsoft whips out patches like hot meals."

Tech Trader Daily [Barron's Online via Random Roger's Big Picture]

Not everyone is happy with the appointment of Goldman CEO Hank Paulson to takeover from John Snow as Treasury Secretary. Here is what the free-marketeers at the Competitive Enterprise Institute* had to say.

"No conservative administration should consider appointing anyone who works for the Nature Conservancy to any position and certainly not to one carrying the high responsibilities of Treasury Secretary. The financial scandals at the Nature Conservancy uncovered by the Washington Post are only the tip of the iceberg. The Nature Conservancy has served as the agent for turning millions of acres of productive private land into federally-owned land and has made huge profits doing so," said CEI's Director of Energy & Global Warming Myron Ebell. "The question that needs to be asked is, what will Mr. Paulson be able to do as Treasury Secretary to benefit the Nature Conservancy and its big corporate partners?"

Translation: Treehugger!

Trouble at Treasury: Paulson Wrong Choice for Secretary [CEI]

* Disclosure: John Carney's brother Timothy P. Carney is the Warren T. Brookes Journalism Fellow at CEI. He did not contribute to the article discussed here.

It seems some people find this very funny. To be honest, though, we don't really get it.

Actress and blogger Helen Green (pictured left) is upset that the financial services community isn't paying enough attention to the Tom Cruise-Katie Holmes situation.

There are about 10 IBs about 5 feet away from me and one of them is explaining the "Tom Cruise is gay and Katie Holmes is contracted to play his wife" theory. They are all acting SHOCKED. Just shocked!

FOR REAL!?

"Where did you hear THAT?!"
"Oh this stuff is underground, it's not even IN US Weekly."
"What? NO!"
"Maybe that would make sense."
"Well I guess 'Pieces of April' doesn't pay the bills."

This just isn't acceptable. A year ago- MAYBE. Not 2006 though. No way

Actually Helen, you might want to reconsider the idea that you want to marry any man who knows too much about Tom Cruise.

Why I Can't Marry An Investment Banker [And I'm Helen Green]

Boston blogger Kinjo complains that lunching bankers are destroying the peace of his park.

It's like every investment banker in the Financial District has shown up and is sprawled out on the lawn waiting for Michael Buble to show up to torture their eardrums with some pop-crooner revivalist Sinatra-esque mediocrity while they loudly eat their overpriced sandwich-wraps from Così2 and talk on cellphones in front of the friend they invited to come out to lunch. Asshole Woodstock.

We've seen what happens when bankers swarm at our own lunch spot. It's black pants and open-necked dress shirts everywhere. Salad lines wrapping around the back of Bazzini. The sad look of greed combined with resignation that, yes, this is all life has to offer.

Asshole Woodstock [Kinjo Vents His Spleen]

For all we know, Slate's Dan Gross is a totally a nice guy. So we're going to stop picking on him. But not yet.

Just now, while reviewing those Treasury Secretary articles on Slate's Moneybox, we noticed that each article has a "Related in Slate" section. The Related section for Gross's original "No Wall Street A-Lister to Treasury" article had a snarky little aside pointing out that Gross's record predicting things wasn't exactly sterling.

Last week, John Dickerson wondered whether Josh Bolten would change anything at the Bush White House; in November 2004, Daniel Gross dissected John Snow's strong-dollar statements. Last fall, Gross inaccurately predicted that Bush would name Glenn Hubbard to succeed Alan Greenspan as chairman of the Federal Reserve. In March, Gross pointed out that Morgan Stanley's John Mack is one of the CEOs who receives income tax gross-ups.

The "Related in Slate" section for Gross's latest article is a kinder, gentler version.

In April, Daniel Gross wrote about John Snow's potential successors, and John Dickerson wondered whether Goldman Sachs alumnus Josh Bolten would change anything at the White House. In November 2004, Gross critiqued Snow's strong-dollar statements. In January 2002, Tim Noah took Robert Rubin to task for discussing Enron's travails with a treasury department official.

Maybe the interns (who presumably write those things) just felt bad for Gross.

As it turns out, being married to an investment banker has its advantages. The Universal Critic blogger watches as his sterner half convinces a reluctant British National Health Service doctor to cough up the desired prescription:

At that point, a stare down ensued. Now Universal Wifey is not your average Notting Hill yummy mummy. For starters, she's not a mummy. She is a hardcore investment banker, and you don't get there without being able to stare someone down. She sat across from the doctor, wearing her smart work suit, and stared. Slowly the rustling from the waiting room became louder and louder. She stared. The clock ticked towards hometime. She stared. His phone rang with and enquiry from the desk to see if everything was OK. She stared. He picked up his men and doodled on her card. She stared. She clicked his pen a few times. She stared. He may even have perspired a little. She stared.

We were wondering how everyone was getting adderall prescriptions to fuel those all nighters.

London Life [Universal Critic]

Yesterday we poked fun at Daniel Gross, the Slate "Moneybox" writer who offered to eat the first chapter of Dow 36,000 if John Snow's replacement was an "A-list Wall Street CEO." You don't get much more A-list than Hank Paulson, so we expect Gross to be digesting those pages soon.

Gross himself has now admitted his error, albeit while taking a weird swipe at the book he promised to devour.

In April, I said I'd eat the first chapter of Dow 36,000 if President Bush could convince a Wall Street big shot to succeed the flailing John Snow as treasury secretary. This morning, Bush nominated arguably the biggest of the big shots on Wall Street-Goldman Sachs CEO Henry Paulson. (At least it'll be a cheap meal. Dow 36,000 is going used on Amazon.com for as little as four cents a copy.)

Well, sure you can buy a used copy for four cents. But would you really want to eat a used book? We imagine that books aren't exactly the cleanest thing you can shove down your gullet. Wouldn't it at least be a good idea to start with a new copy? Look, Daniel, if it's a money issue you can relax. Our offer to buy you a copy, a new copy, still stands.

Good as Goldman [Slate]

Bloomberg spills on the latest golf club in the Hamptons, Sebonack. Membership costs $650,000, with yearly dues running at 12 grand. What's that get you?

They will have access to a yet-to-be-built 28,000-square-foot clubhouse and a 19th hole with a green rather than barstools; it's a par-3 constructed especially to break ties and settle wagers.

So you won't really have a club house for a while. Still, that hasn't stopped the founding members from ponying up $1.5 million each. According to DealBook the founding members include:

Stanley Druckenmiller, chairman of Duquesne Capital Management; Richard Santulli, chief executive of NetJets of Woodbridge, N.J.; Paul Desmarais Jr., chairman of the Power Corporation of Canada; and Johann Rupert, chief executive of Cie. Financiere Richemont of Geneva, the world's second-largest luxury-goods company.

Rob Cox at Breaking Views argues that, okay, sure, Hank Paulson's jump from Goldman to Treasury was motivated by patriotism. But if he liquidates his stock in his old firm he also stands to make a ton of money.

Goldman recently reported mind-blowing profits. The stock, while off its highs, is up 60% in a year and has tripled since Paulson led its IPO. So leaving now with about $500m of stock under his belt seems sensible. That's especially true given the dominance of the trading businesses to Goldman's bottom line. It's only natural that a former client banker like Paulson would now pass the baton to Lloyd Blankfein and his merry traders

Hawking America [Breaking Views]

Can Paulson Be More Than a Salesman in Treasury Role? (Dealbook)
Dealbook asks what we can actually expect out of a Secretary Paulson. If Paulson is to be more than a salesman, it'd be quite impressive, since as far as we can tell, that's about the only job description. Unlike, say, the Fed chief, which actually has control over something, the Secretary only has the 3 j's at his disposal: jib-jabbing, jawboning, and jabbering. Really, what else is this position actually responsible for, other than being a whipping boy, and denying that the country is in recession when it gets to that point? One other interesting note about Paulson comes from Marginal Revolution, which notes that he's an advocate of the dividend tax cut. Perhaps that was chiefly a function of his private sector job, but so-called income investors might find this stance interesting.

M3 or not M3? (Econbrowser)
America has a proud tradition of government cover-ups: Area 51, the Kennedy assassination, the Communist plot to fluoridate the water, the moon landing hoax and more recently the decision to stop reporting M3. M3 had been seen as the broadest measure of the money supply, and conspiracy theorists have reacted strongly since its reporting was discontinued. Their central claim is that it's proof that the government is covering up rapid inflation. But few people, when pressed, can actually tell you what it is (at least that's what happened to us when we found ourselves in such a person's company, honest). So if you're curious, economist James Hamilton has a nice explanation of what M3 really is, and why it barely has any use to economists. Might come in handy the next time you're in a bar and the conversation comes up after 3 shots of whiskey.

Clarke's task: Boosting GM market share (Detroit Free Press)
This year's top-performing Dow stock, GM, continues to make moves that investors seem to like. The latest is that CEO Rick Wagoner will cede control of the company's North American operations to GM veteran Troy Clarke. While we must admit to being impressed at GM's mini-turnaround, it must be noted that it's been completely devoid of substance heretofore. There have been several interesting moves and announcements, and one profitable quarter, which was based entirely on accounting tricks. But it's hard to call anything a comeback until, you know, sales actually do come back.

Research Firm Sees Microsoft Entering Handheld Game Business (Barron's Tech Trader Daily)
Working at a third-party research firm seems like a fun racket. Basically, your job is to come up with various possible scenarios (Apple to produce their own phone, Nokia to produce standalone music player, etc.), write up a report about it, and then flog it to your clients... oh wait. The latest is buzz is that Microsoft may enter the handheld gaming market, though it's not clear how they plan to do it. Will they manufacture their own handhelds, or will they license out the Xbox operating system to a company like Samsung, for them to produce their own handheld? If you want to know, you probably have to pay $20,000 to The Diffusion Group, which did the report. Obviously, they have a pretty good track record when it comes to licensing out operating systems, though of late they've wanted to be more associated with the specific device. Either way, it probably makes sense to extend and modify the Xbox platform in some way.

Blogger Derick Punaro describes how he almost wound up on Jim Cramer's "Mad Money." Here's the email that nearly (but not quite) landed him the spot.

Jim!

A big Buffalo Booyah to ya!

Help me out! The King of Beers has me in a Castle of Pain. I bought BUD in my time B.C. (that's Before Cramer) over $50. The whole beer market is looking bad with both Budweiser and Molson Coors reporting earnings down again for Q4. What's your outlook on BUD? Should I stock up, or find another spirit to drown my sorrows?
--------------------—
Derek J. Punaro
Buffalo, NY

All it takes is email and a dream. And some regrettable investments.

How I almost got on Jim Cramer's Mad Money [Punaro.Com]

If there's anything the growing scandal over options backdating seems to demonstrate, it's that the brute force approach to dealing with corporate malfeasance is failing. In other words, you can't just ban stuff and make it go away. Boards and executives will simply delve deeper into accounting exotica in order to avoid scrutiny. Harvard economist Jeffrey Alan Miron thinks the answer is to legalize fraud:

Should corporate fraud and malfeasance be crimes? Should the SEC dictate corporate disclosure and accounting practices? What would happen if all such matters were left to private parties?

To answer these questions, consider the following.

So an alternative to the criminal / regulatory approach to corporate misconduct is private contracts. Under this scenario, shareholders would attempt to design and enforce contracts for executives that discourage fraud. This could mean organizational structures that limit the power of any one executive, checks and balances like outside audits, and deferred compensation that is conditional on good performance.

Despite clever contracts, some fraud would still occur. But under the contracting approach, this would be a civil matter between shareholders and the corporation rather than a matter of criminal law.

I did quit [my job], and it felt really good although I just put a letter of resignation on my boss's desk and slunk away. On Tuesday I'm going in to confirm my resignation, which should be the really harrowing part, except not really since I win and my boss loses forever. I AM GOING TO D.C! I MARRIED AN INVESTMENT BANKER! This is all pretty awesome.

Good to see feminism is alive and well on the internet.

Guess what I did today, homies [Felonious Couch]

The finance corridors of the interwebs are echoing with reactions to the President today naming Hank Paulson to follow John Snow as Treasury Secretary.

Larry Kudlow's pleased.

Mr. Paulson is a well-regarded, top-rated Wall Street exec at the powerful Goldman Sachs who will bring considerable credibility to the top Treasury job. He is a confirmed free trader who strongly supports deepening economic relations with China.

Mr. Paulson also supported Bush's investor tax cuts, and has worried out loud about the impact of SarBox on American competitiveness.

Goldman insiders tell me that he is something of a "greenie," having been active in the Nature Conservancy, but they say he's no Al Gore, and prefers technology advances by private enterprise to solve energy and any global warming issues.

Ah-hem. "Goldman insiders" tell him that? Somebody should be reading DealBreaker. Or maybe somebody is reading DealBreaker.

Rick Karlsgaard is bullish.

Snow has been replaced by Henry Paulson, the chairman of Goldman Sachs. Like Bill Clinton's Treasury Secretary, Paulson will have credibility with Wall Street that Snow never enjoyed. This should be good for the stock markets, even if Paulson doesn't alter any of Snow's policies. Paulson provides better optics for investors.

The Republicans face a wipeout in the 2006 and 2008 elections. Forget immigration and all the stuff you read about in the papers. The only thing what will save Republicans now is if the investor class is happy and votes to give Republicans another turn at the wheel. Given the underlying economic strength of the U.S. economy, stock markets should be doing better. With a Wall Street guy at Treasury, maybe the markets will catch up. That is the Republican hope.

DealBook wonders what happens to all those shares of Goldman Sachs currently held by Hanks.

The Treasury Secretary is typically called upon to give up control of any investments that may present a conflict of interest. In 2001, for example, pressure from public interest groups forced Treasury Secretary Paul H. O'Neill to reverse his previous stance and agree to sell about $100 million worth of Alcoa stock and options

And even though this is hardly new, we like this profile of Paulson which emphasizes his commitment to Christianity ("My wife and I try to begin every day by affirming Jesus. Sound ethics and morals have got to be the underpinning-the basis-of everything we do") and notes that he once aspired to be a forest ranger. Tree-hugger indeed.

David Phillips has taken a look at the proxy statement filed by Bed Bath & Beyond. Among the items of business are resolutions calling for the Company to be nicer to workers in other countries and not quite as nice to white people (the Board of Directors is currently all white). Phillips thinks this a distraction from some real problems with the employment agreements the company has with its two co-founders.

Under the agreements, if Messrs. Eisenberg and Feinstein decide to retire prior to election of their Senior Status Period, the Company must pay them them $700,000 (+) per annum for ten years (or, if the Company chooses, in a lump sum on a present value discounted basis of $7.0 M plus).

Bed Bath & Beyond: Bargain Bedding...Bargain Stock Price? [10Q Detective]

It was bound to happen. Anytime a scoundrel takes a sucker for everything he's got, someone will eventually blame the sucker. Afterall, he shouldn't have been a sucker in the first place.

So what about the victims that suffered at the hands of the above mentioned individuals when they lost their life savings, jobs, pensions etc.? I am sorry - but if someone had their life savings in one and only one stock, I would question their sanity. In fact, retirement money, pensions and other such assets should always remain in diversified funds. Pleading ignorance to this rule of thumb is like the smoker who pleads ignorance to the warning printed on the carton. So honestly, those who lost their livelihood due to the shenanigans at Enron really can't blame anyone but themselves for not being careful with their own money. They put their eggs in one basket - their job, retirement savings and their future and now they want someone to pay for their own mistakes.

This reminds us of the con-man's justification of his trade--"You can't cheat an honest man." Or, in the words of Mike Skinner (aka "The Streets"), "Using the following, I'm going to show you: A) How to con someone using their own greed, B) That you won't feel bad 'cos they're trying to con you anyway, and C) TAKING THEIR MONEY!"

So, see, you don't have to feel bad for the Enron investors. They deserved to have their savings wiped out by crooks because they were stupid and greedy. The stupid and greed deserve what they get. The smart and greedy, well, that's another story. We guess that's how it works.

My Opinion on the Enron Folly [Stocks Advice by StocksandBlogs.com]

Just as youth is wasted on the young, wealth is certainly wasted on the wealthy. All too often, people who are earning the serious money have no idea how to spend such money. They end up doing silly things with it. Like dying with it so their idle offspring can fritter it away on expensive chemical habits or political causes. Or losing it to the ex-wife.

Fortunately, Kaiser Edamame of Long or short capital provides some advice.

Some of you may have heard that working at a hedge fund you can make "a lot of money". Well it's true. Now some of you might be saying to yourself: "Wow, how am I going to get a job at a hedge fund so I can make all that money?" which is a good question. But, there are a few of you who are more foresighted that are saying "Wow, how am I going to SPEND all that money?" And that's really the more important question, because let me tell you, it's not easy.

How To Be A Mini-Baller [LongorShortCapital.Com]

Last week, we mentioned that one of the things that Ken Lay was doing during the hours between his conviction and the time he emerged from the Houston courthouse was standing around with his family. Seemed fair enough. We'd probably say a couple of prayers if we were convicted of crimes that promised to put us in jail for the rest of our lives too.

But when Lay emerged from the courthouse, he decided to deliver a miniature sermon on God's role in our fate. Now we see professional athletes do this all the time, thanking God for their victories. But you usually don't see the losers blaiming God, which is pretty much what it sounded like Lay was doing when he went on about remembering that "God is in control."

Jeff Matthews was pretty disgusted.

The only thing missing from the whole tableau was Tammy Faye Baker dabbing those big raccoon-shadowed eyes of hers for the cameras and declaring her eternal affinity for the good Christian Ken.

As always, piety is the last comfort of the corrupt.

How to Give Christianity a Bad Name [JeffMatthewsIsNotMakingThisUp]

Eddy Elfenbein reminds us that back in April Slate's Daniell Gross was prediciting the Bush administration wouldn't be able to recruit a high level Wall Street exec to replace John Snow. Specficially, Gross wrote:

The probability of Bush being able to draft any of these guys-virtually all of whom have signaled their disinterest-is incredibly low.

Gross then went on to put his money where his mouth was to put his mouth where his predictions were.

John Snow will have a replacement, and he may very well come from the corporate world. But if it's an A-list Wall Street CEO, I'll buy a copy of Dow 36,000 and eat the first chapter.

We think it's unfair to ask Gross to follow through on this promise entirely. Gross is, afterall, an internet journalist. So we here at DealBreaker hereby promise to buy Gross a copy of Dow 36,000 and mail him the first chapter. But he's got to eat those words.

Snow's Job [Slate via Crossing Wall Street]

The buy-out of pipeline giant Kinder Morgan announced today includes a massive amount of debt. Fourteen and a half billion according to the buyer's press release. That number includes both the refinancing of existing debt and new debt being taken on by the company to pay the purchase price.

So how do the Kinder Morgan management team intend to rack up that much borrowed money? Well, first of all, they don't intend to borrow anything. In deals like this, the company itself borrows the money to support the acquisition by the management and the collateral will be the assets of the company. It's like financing your new car, except that instead of you promising to pay back the loan, the car makes the promise. It's Herbie the Lovebug financing Lindsay Lohan's purchase of the car.

The meaning of Goldman's "Highly Confident" letter after the jump.

At least according to former White House staffer Jonah Goldberg John Podhoretz on National Review's blog "The Corner."

Do you wonder where the White House got the idea to offer Henry Paulson of Goldman Sachs the job of treasury secretary? Well, White House chief of staff Josh Bolten used to work at Goldman Sachs. Even though, as a matter of statute, the secretary of the treasury does not work for the White House chief of staff, basically as a matter of practice the chief of staff is his supervisor...Interesting psychological development for both men....

That Harley in the picture with Bolten is not, of course, a hybrid.

It's Fun to Be Your Boss's Boss [The Corner]

One of our commenters mentions that Hank Paulson left a "sappy voicemail" to GS employees this morning. Anyone got a transcript for us? Send to TIPS at dealbreaker.com.

With Hank Paulson gone to the Treasury who will be taking up the helm at the goodship Goldman? The general consensus seems to be that the next cheif executive will be Lloyd Blankfein, a veteran of Goldman's trading side and current the bank's president and chief operating officer.

According to a recent Fortune magazine profile, this will be the first time the new Goldman CEO is chosen by the Board of Directors rather than the management committee.

Rising Star: Lloyd Blankfein, Goldman Sachs

Going Private revists the KKR offering memo.

Typically, private equity funds have provisions to "claw-back" fees paid to general partners of the fund in the event the fund closes with a net-loss. Not so here. To wit:

"Distributions that are made to the general partners of a KKR private equity fund pursuant to a carried interest in the returns generated by the fund's investment generally are subject to reimbursement in the event that the fund is in a net loss position upon the termination of the fund. Distributions that are payable to KKR's affiliates in connection with our co-investments and opportunistic investments will not be subject to similar reimbursement, although such distributions will take into account prior realized and unrealized losses."

In other words, KKR PEI could be a total bust except for three big LBOs that KKR Proper was only able to complete because of the additional funds available from this public entity. Those LBOs would pay 20% carries to KKR Proper, but the rest of KKR PEI's investments could tank and drop the fund to below the initial offering price. Despite this, KKR Proper keeps the LBO gains, and keeps the management fees it has packed in over the last many years.

You can read the whole KKR Prospectus here.

They're KKRrrreat! (Part II)

8:15. Rumors everywhere that Treasury Secretary John Snow is stepping down. What to make of Snow? Kevin Hassett sure likes him. Who will replace him? Will it be former Commerce Secretary Don Evans? Goldman Sach's Hank Paulson?

8:20. Wires are saying it's Paulson! Dollar rising on the news. Apparently, the NY Times said Evans would favor a weaker dollar.

8:22. Bloomberg very certain it's Paulson.

8:29. Yep. It's going to be Paulson according to "media reports." DealBreaker says its true so it must be!

8:47. What? According to marketwatch, dollar is falling on the news of Paulson.

8:58. Still an empty podium outside the White House. I need another cup of coffee.

9:07. CNBC keeps saying we're moments away! I'm so excited! I've put altogether too much sugar in my coffee!

9:14. John Snow walks out with George Bush and...Hank Paulson. Suck it Goldman Sachs shareholders! Watch your stock sink like the President's poll ratings! You just lost your chairman and CEO.

9:16. The President is saying nice things about Snow. That's sweet.

9:17. Wow. Not a lot of nice things. That was quick.

9:17. Now the President is saying nice things about America. "The American economy is powerful, productive and prosperous," he says. He really seems to like us. I feel kind of bad the feeling are not reciprocated. So Hank shares the president's philosophy of trusting the American people to save, spend and invest their money as they see fit. Is the President a tree-hugger?

9:18. Restrain spending! Cut the deficit in half by 2009! That's "our" goal. "He'll help ensure America's trading partners play by the rules...respect intellectual property and maintain a market-based exchange rate." Suck it China!

9:20. Snow is talking now. The President and Paulson look confused! Was Hank supposed to speak next? Why do we even have to hear from the guy going out? Snow keeps aiming his eyebrows at Paulson! I think they are growing while he's talking. Does that mean he is lying or telling the truth?

9:22. Paulson speaks. Mentions "the competitive zeal of the American people." Holy crap. We're all working at Goldman now!

Oil Prices Rise As U.S. Enters Summer (AP)
Inappropriate determinations of causation are rife in AP articles on the economy, but these are our absolute favorites. Memorial Day weekend is the start of something called, get this, the 'Summer Driving Season'. Apparently people's cars, which go dormant in the winter, get taken out of mothballs, get a new coat of wax, and people finally start driving them. Most importantly, as soon as Memorial Day comes along, traders realize they should buy some oil to take advantage of all this driving. Now, you'd think that traders, having experienced several Memorial Days and seen this bizarre ritual known as 'Summer Driving Season' would know in advance that it was coming along. Some might even be so devilish to buy gas, oh, the week before, to get a jump on their fellow traders. You know, having seen the pattern so many times. But apparently they're all much to honorable to exploit ineffincies such as this. And so each year, they pretend to be surprised that Memorial Day is upon them and they then decide to buy gas. Who knew it was so easy? Lest you think we're being sarcastic, check out this cherry quote from an analyst: Many traders believe gasoline demand will increase in the United States as Americans are more likely to take domestic vacations due to a weakening U.S. dollar and rising airline ticket prices, Shum said.

Scrushy's lawyer says Lay strategy was wrong (USA Today)
After Ken Lay was convicted, he spoke on the courthouse steps and claimed to be a lucky man for having a loving and Christian family. Jeff Matthews skewered this moment brilliantly over the weekend. But more amusing is that Donald Watkins, the lawyer for HealthSouth's Richard Scrushy (who got off), claims that the Lay defense team should have gone with a different strategy. Scrushy, if you'll recall, basically positioned himself as Jesus himself. He became a born again and hosted his own Christian family radio show in Birmingham (which, you know, plays pretty well there). According to Watkins, the Lay defense team shouldn't have concerned themselves so much with the, you know, facts of the case. In other words, don't save the Jesus stuff for post-conviction -- make it central to the defense. Hmm, wonder if it would've worked for Martha.

Wal-Mart and the Buck (Big Picture)
Don't look now but gas prices may be having an effect on consumer spending. Yes, they've been warning about this for years now, and it really hasn't materialized, just as they've been warning that if real estate started to soften, people's homes could no longer be the equity ATMs they once were. But new evidence from Wal-Mart suggests that the first part of the scenario may get fulfilled. Same store sales at the behemoth from Bentonville are expected to be weak, as low-end shoppers get pinched by higher gas prices. As further evidence that the spending patterns of the lower-end shopper are changing, some have noticed a change in purchase timing. Instead of seeing purchases smoothly throughout the month, consumers are concentrating their purchases around the 1st and 15th of the month -- so they're living paycheck to paycheck, with little in between. So if this part of the prophecy comes to pass, will the one about real estate-as-ATM happen as well? Time will tell.

Google Hates The Troops (Outside The Beltway)
Uh-oh, Google may have inadvertantly alienated a large chunk of the population by forgetting to change the logo at Google.com in honor of Memorial Day. The company likes to change their logo for all sorts of things, like Arthur Conan Doyle's birthday, most recently. This is one of those things that could go away and be forgotten, or we might see conservative bloggers urging their readers to switch to Ask.com for their search queries (Michelle Malkin enter stage right), in which case they could suffer some unnecessary hits to their reputation. Already this meme is getting spread around conservative circles (apparently they're the only ones who care about Memorial Day).

(We've been dying to use that headline forever.**) CNBC and the WSJ are reporting that, as previously speculated, Hank Paulson will be John Snow's successor as Treasury Secretary. Bush is expected to announce the appointment in half an hour or so. We predict that this time next year the entire Treasury Department will be stuffing themselves into Ozocars and the Bush administration will be pointing to said Ozocars as evidence of the administration's seriousness about energy conservation and overcoming oil dependency.

** Since 5 minutes ago.

Bush Favors Paulson as Treasury Secretary [WSJ]

There will be no posting on DealBreaker on Monday, the 29th. The market is closed for Memorial Day and so are we. We'll be back on Tuesday with the usual assortment of planestalking posts, commentary on the sex lives of investment bankers, and Vonage-IPO-bashing (gratuitous and deserved).

We're sorry you are still in the office and not already plowing through your third mojito and sailing away for the first weekend on the summer on blackout island. We'd at least like to bring you the good news that the roads are still clear and you won't spend the first five hours after leaving the office stuck on the LIE inhaling exhaust.

We'd like to but we can't. According to Traffic.Com, you are totally screwed. The 0 traffic jam rating from this morning has shot up to 8. So it looks like it is eighter the LIRR or another Friday night in your usual Friday night haunts, except that they'll be weirdly abandoned. Good luck.

Leveraged Sellout tells the story of what happens when 4 bankers found themselves inside the East Village's notorious Mars Bar.

When Team Gentrification got to 2nd Ave and 1st Street and had to ask a homosexual (eek!) where the bar was because it had no sign, they knew they were markedly out of place. Blake was scared of the façade's pentagrams and wanted to go watch reruns of West Wing, and John (the hedger) did some quick stochastic analysis and concluded they'd be better off wrapping themselves in American flags and grabbing beers in Fallujah, Iraq.

I won't spoil the ending. But don't try this at home kids. Mars Bar is the real deal.

Bankers on Mars [Leveraged Sellout]

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 have to say I'm starting to get really irritated at the recruiting infrastructure in many of the top banks here in New York and London. The bankers they are hiring are terrified of women.

I had three dates with this young man, let's call him "Dean" from one of the "big name" banks in town some months ago. He was actually very charming and quite a Renaissance man. When we went out the first time for drinkies and then dancing later I was pretty impressed and I am sure all my fans know how hard I am to please when it comes to things like this.

Eugene Plotkin, who allegedly masterminded the Stripper-Eastern Europe-Business Week-Mail Dude-Insider-Trading scam from inside his post at Goldman Sachs, was indicted yesterday. He's now sitting in jail, waiting to make bail. Apparrently the young man has had some trouble coming up with co-signers on his $3 million bail bond.

The NY Post has details about the bail bond haggling.

At a bail hearing yesterday, Plotkin's lawyer, Martin Schmukler, said the aunt and uncle agreed to put their $1 million home on the line. But they don't want to co-sign on the bond, which could make them liable for the entire $3 million if Plotkin fled.

Plotkin's parents are willing to co-sign on the bond, but they are no longer willing to put up the $250,000 in cash they'd promised because his father, Mikhail, was concerned about not having any cushion if his health failed, Schmukler said.

DealBook reports that Goldman confirmed our young Plotkin's been fired from Goldman Sachs. Earlier he was merely under suspension.

Wall St. Scammer to Stay in Slammer [New York Post]

Ignore the puffery in the lede on the Telegraph's story on Alexey Mordashov, the boss of the Russian company Severstal, which Arcelor has agreed to buy in an effort to block Mittal Steel's hostile bid to take it over. The rest of the story has some useful information, although you have to translate it to understand exactly what it really means.

A boyish 40-year-old, Mr Mordashov emerged from Russia's era of primitive capital accumulation with a vast fortune and has gone on to build vital establishment credentials during the rule of President Vladimir Putin.

Translation: Mordashov is not an oligarch or a gangster because in Russia today those words mean someone who isn't a friend of Putin. Mordashov is a friend of Putin.

He has lobbied for Russia's bid to join the World Trade Organisation. His purchase of a stake in commercial channel REN TV last year amounted to a demonstration of loyalty towards a Kremlin which tightly controls the broadcast media.

Translation: Mordashov is Putin's boy.

Analysts said Mordashov would never have been able to pull off the Arcelor deal without first getting the nod from President Putin.

"It's about who you are and it's about what you've done," said Rob Edwards, metals analyst at Renaissance Capital. "He's always been politically well placed."

Translation: Mordashov is the guy behind Severstal. Putin is the guy behind Mordashov.

Going Private has read the KKR offering memo so you won't have to. The post is full of nifty diagrams. It describes the structure and answers some important questions, such as how KKR will be made to continue to invest in the public fund.

A bit of a warning. If you were planning on curling up with the offering memo this weekend, you might avoid clicking the link below. It's full of spoilers and we wouldn't want to ruin your beach reading.

They're KKRrrreat! (Part I) [Going Private]

Court papers filed on behalf of Martha Stewart yesterday indicate that she will fight the SEC's civil charges of insider trading related to her sale of ImClone stock in 2001. The decision to contest the charges surprised some observers who expected Martha to attempt to avoid another public trial. Someone familiar with the case, however, tells DealBreaker that Martha instructed her lawyers to turn down any settlement offer that involved an admission of wrongdoing.

Fortunately, the first hearing is not scheduled until November so Martha's summer schedule is intact.

Stewart to fight insider trading charges [Bloomberg in Chicago Tribue via
DealBook]

The roads east from New York City are in good shape this morning. But as you know, that can change fast. Traffic.Com's LIE page provides real time updates on Fire Island and Hamptons bound traffic. Right now the LIE is rated "clear" with just a bit of construction, all scheduled to be cleared up before this afternoon.

...expensive?

Let's face it. Between the house out east, the new summer wardrobe, the car rentals and the sundry costs of living well between Memorial Day and Labor Day, summer in and around New York can get a bit pricey.

This advice from the Natty Banker won't help at all.

Ford to Pay 10.6 Percent Yield in U.S. Debt Exchange (Bloomberg)
Psst... want some high-yield corporate paper? If so, Ford is offering over 10% in a new bond offering. It's a bold move for a company, and strategically probably a wise one. The company is in a high-leverage situation here (remember, people keep referring to auto stocks as options anyway) and since they have to survive now, it makes sense for them to give it everything they've got, not necessarily preserver for a future they won't have. It's like when you're down 3-1 in the World Series and your ace is rested. You don't bench him because you're worried about who you're gonna pitch in game six. You worry about that in game six. So Ford is saving its cash now, deferring some payments, and devoting their resources (they claim) to developing some hot new cars which will go toe-to-toe with the Japanese. Sounds exciting. When the cash is owed down the line, they'll worry about that then.

Phone Tax Laid to Rest at Age 108 (NYT)
There really should be a law that requires all laws to sunset after 10 years and disappear if not renewed. Yes, this does get into a college-philosophy dilemma; but does that law sunset too? Nevertheless, the phone tax, as you know, was initially passed 108 years ago to help pay for the Spanish-American War, which ended after a few months. Even though the war finished up sometime ago, the congress -- surprise surprise -- never got around to repealing the tax. Hey, would you? But now they're even repealing the tax retroactively, so if you go through all of your bills, and figure out how much you paid over the last three years, there will be a place to indicate that on your 2006 tax return. You might get as much as $50 back. Awesome. Of course, it's not really a tax cut without an equivalent spending cut, but...

Arcelor Plans $1.59B Merger With Severstal (AP)
Arcelor was supposed to be spending this week mulling over the Mittal buyout offer. Apparently, that's not all that was going on behind closed doors, the company found the time to negotiate and agree on its own merger with Russian steel concern Severstal. And in case there was any doubt, this would seem to be their answer to Mittal, nyet. This isn't the first defensive merger they've announced though, since Mittal's initial offer. Who's to say that this won't make them more attractive, as it only means the combined company will be larger?

Fed May Be Less Concerned With Wage Inflation After Pay Data (Bloomberg)
The market may find relief (or even cheer) in surprisingly "benign" wage data. In other words, at least according to the official measure of statistics, wages aren't going up very fast. The market can take comfort too, in some evidence that the economy is slowing (yesterday's GDP number notwithstanding). But not too mention the obvious fact, that none of these statistics are, you know, good, it's not like the Fed's rate hikes have really been damaging to the market. All that stuff about not fighting the Fed has to be thrown out the window, or will at least need revision, when this chapter of the market comes to a close.

We've been so wrapped up with our EV Day coverage that we haven't mentioned today's other big White Collar Criminal news. Today is the deadline for Martha Stewart to respond to the three-year-old SEC civil suit claiming she engaged in insider trading when she sold shares of ImClone in 2001. Stewart's responses to investigators during the investigation into that sale eventually led to her conviction for obstruction of justice, serving jail time and having to wear a really ugly device around her ankle.

There is speculation that Stewart will settle the case with the SEC. Her lawyers were reportedly still in settlement negotiations yesterday with lawyers for the SEC.

The Return of Martha Stewart, the Civil Case

Despite Wendy Straker's warnings against dating investment bankers, some of you kids are still doing it. Or at least trying to. Because sometimes you might only think you're dating a banker.

Meet Shane, a shy administrative assistant who likes to make up stories about himself when he meets women.

Enron Verdict Day (EV Day?) continues! Not surprisingly, the Houston Chronicle has some of coverage of the post-verdict scene. Here's the Chronicle's reporting on what memebers of the jury told the press after the verdict. This story runs down the reactions of ex-Enron employees, including one who speculates that Lay and Skilling are aliens from another dimension.

Enron Verdict Day continues here at Dealbreaker with a round-up of the latest blog commentary.

Former Enron executives Ken Lay and Jeff Skilling will still be the smartest guys in the room. It's just that the room will be in prison. [Red State Diaries]

"Retirement cost-saving tip: Die in prison." [Xenophile]

The only bad thing is that other Enron hotshot - the egomaniac that had sex with hookers in the office after hours? Yeah. He's probably on an island somewhere, flashing cash and laughing it up. Damn. What's his name? I can't find it. Maybe later. [BiblioSquirrel]

The jury has spoken in the Enron case. While I did not follow it closely, I did read bits of the defendants' testimony. Each of them at one time or another showed the jury a quality in a part of their personalities that is more than deadly in a jury trial. The quality? Arrogance. [Flares Into Darkness]

The other reason he took so long is that his children were signing over their houses so that he could get out on bond. [ Born at the Crest of the Empire]

Tom Skilling of WGN-TV Chicago is the best TV weatherman in America, all classes and probably all-time. He has the misfortune to be the brother of Jeff Skilling, of Enron infamy, who has just been convicted of everything but aggravated sidewalk-spitting and a count or two of insider trading. It's an interesting morality play of two brothers, products of the same genetics and environment and all that, both very talented guys, one of whom used his abilities for Good and the other‚... not so much. [Corrente]

On a day when telecom stocks generally went up, Vonage managed to drop more than ten percent. Nyquist Capital is predicting that the class action lawyers are probably already preparing lawsuits.

I'll be the first to call it - the class-action attorneys are going to try and monetize the Vonage customer class of shareholders that took 13.5% of this deal. Vonage used tactics of a bucket-shop, pitching yours truly by email, voicemail, and snail mail. Fair? No. Reality? Yes.

Seeking Alpha has a round up of other reactions to the Vonage slide.

Telecoms mostly gain, but not Vonage

Vonage - Lipstick on a Pig [Nyquist Capital]

This seems like the perfect moment to bring you this (totally fake but pretty much otherwise plausible) Enron advertisement.

Okay. So this is a bit meta. But while we're waiting for Ken Lay to be let out of the courthouse--apparently he's standing in prayer circle with his family--let's take a moment to note that CNN's coverage in the hour long build-up to the Enron verdict was basically premised on the idea that an early verdict meant there would probably be an acquittal. The bald dude they had outside the courthouse definitely predicted that the less long than expected jury deliberation meant that they were going to acquit. As it turns out, that's not exactly right. Or right at all.

CNBC got it right. Largely thanks to having former SEC boss Harvey Pitt on air, the impression conveyed by CNBC was that the early verdict meant that the jury had found Lay and Skilling guilty. We like to poke fun at them around here but they definitely made the right call here.

Apparently, Ken Lay has not yet left the courthouse because the judge is afraid he and Skilling are flight risks. From Bloomberg TV:

Ken Lay has not left the courthouse, you will notice, and that is because he has not surrendered his passport yet. The judge said he wants a $5 million cash bond and for him to surrender his passport before he allows him to leave the courthouse. Apparently Jeff Skilling did post a bond and did surrender his passport--the judge wanting to make sure that neither defendant is able to leave the country before the sentencing. Obviously, that is a great concern of his.

More judge weirdness: (also via Bloomberg) He also asked the courtroom sketch artist to do portraits of the jurors, and told the jurors he'd give them copies. Souvenirs from white collar criminal trials. Normally that sort of thing would only appeal to, well, us.

Guilty: The Roundup

Lay Is Convicted on All Counts In Both Enron-Related Trials [WSJ]
Lay, Skilling Convicted of Fraud that Destroyed Enron [Bloomberg]
Lay, Skilling found guilty at Enron trial [MSNBC]
Lay and Skilling guilty: Ex-CEO and founder convicted on fraud and conspiracy charges in Enron case. [CNN]
Enron Chiefs Guilty of Fraud and Conspiracy [NYT]

An area man witnessed the death of the entire cast of CNBC's late morning program shortly after it was announced the Enron jury verdict would come in at noon.

"They got really excited. And then more excited. And then they sort of just exploded," a witness said.

Others were unlear exactly what happened.

"I watch with the volume down. I thought maybe there was an attack or something."

As it turns out, the announcement near 11 am EST that the Enron verdict would be declared at noon proved absolutely lethal to the staff of the business news program.

"The buildup really was too much," a medical specialist said.

Spontaneous combustion is rare among television news program staff members but not entirely unheard of.

Paul Kedrosky says it's time for the Microsoft honcho to go.

With today's news that Microsoft's Vista could indeed slip further into next year, as I had promised would happen, there is only one rational response from Microsoft's board: Fire Steve Ballmer. He has long been an erratic force inside the company -- someone with real strengths, but also horrible deficiencies (among which is being utterly tonedeaf) -- and it is finally clear that the latter permanently outweigh the former. Of course, Ballmer had any decency he would simply resign. The odds of that happening, however, are very low.

Everyone's hating on poor Ben Bernanke these days. Kudlow says Bernanke's lost the plot.

His admission to Senator Jim Bunning of a "lapse of judgment" in the Bartiromo kerfuffle is pure process-not content. His "data-driven" approach to policy is backward looking driving through the rear view mirror.

Bernanke should go back to his confirmation hearing statement, when he stated that price stability is the cornerstone of economic growth. This should be his main message. He should resurrect his numerical inflation target. And he should publicly say that enhanced dollar value is vital to price stability.

Meanwhile, the Austrians have regathered and are taking time to display their ire.

The problem today is simple to state but difficult to solve: The derivatives market is huge. It is far beyond the ability of any or all central banks to solve, once cascading cross defaults spread to the international bank payment system. The modern division of labor, which keeps billions of people alive, has a sword of Damocles above it: the threat of fractional reserve banking's gridlock in a wave of defaults. This is the ultimate fire sale.

The combination of moral hazard, fractional reserve banking, faith in central banking, and speculators' desire to make a bundle of money from highly leveraged futures contracts has created a time bomb condition.

Bernanke, following Milton Friedman, thinks that a government-licensed monopoly, the Federal Reserve System, can overcome cascading cross defaults. He has bet your life on this.

Off Message [Kudlow's Money Politics]

Bernanke's Bet on Derivatives [LewRockwell.com]

Why Wasn't Spitzer Involved in the Milberg Weiss Investigation? (WSJ Law Blog)
Now there's a question we'd love to get an answer to. Why is it that Spitzer, with his Superman quality of being able to show up at any crime at any time, was totally absent from the investigation of class-action law firm Milberg Weiss? Is it because they were big Democratic supporters? Or is it simply because it really didn't come across Spitzer's radar? And even if we give him the benefit of the doubt, that he really never had an opportunity to become involved in the Milberg Weiss investigation, what about now? Why isn't he announcing a new initiative to look into practices and class-action firms? Surely, a case like this should give the impetus to look deeper at the workings of the industry. It's at least as outrageous as how mutual funds time their trades, no? Just curious.

Starbucks and the Bee (Conglomerate)
At some point, Starbucks decided that the coffee business was boring and that it wanted to be a media company, or at least an "editor of culture". They sold CDs there, they reasoned, so why not do more to leverage their physical locations. Perhaps, if you've walked into a Starbucks of late, and the odds are pretty good that you have, you've noticed that they've gotten into film promotion, heavily flogging the film Akeelah and The Bee. Well, in case your curious how Starbucks has done as a film promoter, the answer is 'not good'. Revenue has been disappointing for the film. Though the company claimed that it chose Akeelah and The Bee, in part, due to its positive social message, CEO Howard Schultz smartly didn't 'go there' when asked about it on the conference call. So is Starbucks really a media company or are they a coffee company? Somehow we think it will take them several failed experiments before they see the answer.

Hello, Young Workers: One Way to Reach the Top Is to Start There (NYT)
Have you been on The Street for several years and still aren't making as much as you think you deserve? Still haven't attained the level of professional achievement you expected to by now? It could be due to the job you took when you get out of college. A new study demonstrates that the job people get when they first get out of college goes a long way in dictating career success in other respects. The study looked at the cohort of Stanford University graduates in 1988, coming into the job market right after the crash. Because there were few good banking jobs, their average salary was lower than in surrounding years. 18 years later, people in that group are still making less, on average, than other Stanford graduates around them. One possibility though is that the condition of the time simply pushed these people away from finance and they never got back into it. Still, the advice of the researchers is to do well, and have luck on your side. Of course, that doesn't really help you now, 18 years later.

Dell's Minimalist Stores (BusinessWeek)
Dell's been doing a lot of pride swallowing lately as their stock has cratered, and the company's lost share to HP. First they announced that after years of resistance, they would finally relent to the AMD juggernaut. Now they're bowing to the retail wave, opening up two trial stores. Well, they're not actually stores in the traditional sense, but rather Dell galleries where people can try out products and order new ones. This retail question isn't minor for the company. If they actually decide that having physical locations, pre-fab computers and channel partners is the right way to go, it's going to involve massive restructuring and expense, with no guarantee of success. It'll be interesting to see what the company says about their new locations, which are in Dallas, TX and Nyack, NY. By the way, the Apple stores get a lot of attention, which is fine, but the gallery model can be awesome too. If you work in the area, go check out the Samsung gallery in the Time Warner Center. It makes the Soho Mac store look like a Radio Shack (almost). Anyone up for a road trip to Nyack?

Both the Wall Street Journal and the Financial Times reported today that Robert Zoellick may jump from the goodship Bush Administration for a post at a Wall Street firm. He's been spotted at Merrill and Goldman. Supposedly Zoellick is disapointed that he hasn't been offered the job as Treasury Secretary.

This makes sense. But there might be a simpler answer. Look at the shape of this administration. Would you stick around until the bitter end?

Zoellick Would Leave State If Passed Over for Top Treasury Job [Bloomberg.com]

A reader points us to this month's "UrbanCougar of the Month", which despite our daily if not hourly reading of UrbanCougar.com, we somehow missed. The UCOTM is "Molly" (left), who is described thusly:

Molly shares the floor everyday with some of the most vocal cougar lovers in the land: Wall Street traders. To succeed in that world, she's had to learn to take what she wants. And what she wants right now is "to mold a younger man."

A reader points us to this month's "UrbanCougar of the Month", which despite our daily if not hourly reading of UrbanCougar.com, we somehow missed. The UCOTM is "Molly" (left), who is described thusly:

Molly shares the floor everyday with some of the most vocal cougar lovers in the land: Wall Street traders. To succeed in that world, she's had to learn to take what she wants. And what she wants right now is "to mold a younger man."

GroovyStocks has the scoop on Pfizer's new drug.

New Blockbuster Drug Approved for Pfizer (PFE)
Pfizer Inc (PFE) announced today that the FDA has approved a new drug, Trythinking, which will help hedge fund managers and other investors cope with a host of maladies.

One of the most common diseases among hedge fund managers is Monthitis which prevents those afflicted with it from thinking about consequences and events that stand to occur after the end of upcoming calendar month, which is when results are typically report to partners. In clinical trials, patients on Trythinking had a median holding period for their investments of 2 days vs. 42 minutes for those on the placebo.

We've heard Trythinking works even better than crushed adderall. And it doesn't leave blue stains on your nose.

New Blockbuster Drug Approved for Pfizer (PFE) [Groovy Stocks]

The S&P 500 headed into negative territory for the year today. Some quick reactions to recent declines from around the web.

"Maybe this will act as some sort of psychological support." [Ticker Sense]

"Doh!" [Random Roger]

"Combined with the deeply oversold market conditions, I think this bodes well for a strong bounce very soon." [In The Money]

This morning the jury in the trial of former Enron chiefs Ken Lay and Jeffrey Skilling deliberated for a fifth day on Wednesday asked the judge for transcripts of trial testimony. No one really knows what this means in terms of acquittal or conviction, except that it means the jury is still deliberating. Shares of "Lay Guilty" at Tradesports.com (who provided the chart above) continued a moderate decline that began in the early morning hours before the news broke.

Enron jury asks for trial transcripts [Reuters]

Enron Trial Page [TradeSports.com]

We suppose it was inevitable, but post-KKR-IPO, there's a bit of bandwagoning, despite the fact that KKR performance has been less than stellar so far. From the WSJ:

Weeks after Kohlberg Kravis Roberts & Co. raised $5 billion in a European public stock offering, Apollo Management LP is following suit, with a planned $1.5 billion offering, and other private-equity firms are making similar plans.

Investors in the publicly listed fund will be earning far lower returns than those that private-equity firms generally promise their investors, because traditional investors write checks only when the firms are ready to invest the money in actual deals, while the public investors provide their cash at the time of the offering.

To entice investors, though, Apollo's fund promises to invest its money on a tight timetable.

But re: LP advantages: our favorite private equity anonyblogger, GoingPrivate (who is fending off extortion threats at the moment), pointed us to KKR's offering memorandum (downloadable here) a few days ago. One counterintuitive risk disclosure: KKR warns prospective investors that they'll be receiving less information than LPs (p. 34/35.) All the downside of investing in public equities and none of the reporting benefits, apparently.

Apollo Will List Fund in Europe [WSJ]

William P. Kucewicz, editor of GeoInvestor.com and former Former Wall Street Journal editorial board member, argues for the immigration liberalization being pushed by President George Bush in NationalReviewOnline today. The problem is that Americans aren't having enough babies to replace our aging population and prop up the governments burgeoning entitlement programs, according to Kucewicz. The solution? The government needs to import more people.

While it's too late to change the boomers' baby-making habits, policymakers can do the next best thing: that is, import as adults via liberalized immigration policies the children who were never born. Working-aged immigrants would do just as nicely as native-born Americans in terms of maintaining a viable ratio of workers to retirees.

This makes sense because, as everyone knows, governments are very good at second-guessing the independent decisions of millions of independent actors. And it's totally not surprising that a "conservative" magazine thinks that government totally knows how many Americans there should be. No really.

DealBook provides the goods on this weekds Citigroup analyst report on banks which might be ripe for the picking by larger buyers.

Inspired by the recent pickup in bank mergers, analysts at Citigroup issued a 21-page report this week handicapping which banks might be in play — and which might be the players.

The banks with the "highest potential upside in a sale" - as defined by the difference between the current share price and the expected takeover price - are SunTrust Banks, Washington Mutual, First Horizon National, City National, AmSouth Bancorp and Compass Bancshares, according to the report.

This, of course, has folks wondering if Citigroup is going to get back in the acquisition game. Meanwhile, it strikes us as an excellent excuse to provide you with our favorite WaMu advertisement. We're totally using the "I got trapped in a truck disguised as a bar" the next time the missus asks where we've been all night.

Citi Analysts Pick Favorites in Banks' Dating Game [DealBook]

If there's money to be made somewhere, you can be pretty sure someone standing nearby is making money selling advice on how to make money there. Apparently the porn industry is no exception and now has its own investment research firm.

AdultVest.com, the first and only investment website serving the $57BN/yr adult industry, has set a blistering pace recruiting broker dealers, venture capital, private equity, hedge funds and accredited investors, announcing today that 1,000 investors have registered at AdultVest.com to research adult industry investments.

The money quote comes from a certain "J. Handy" who says "It is very exciting to be working with AdultVest." We're sure it is plenty, uhm, "exciting."

AdultVest Heads to Exxxotica With 1,000 Registered Investors [via WallStFolly]

As it turns out, investment bankers have a lot of money but are chronically short on time. The Chicago Tribune's review of former NY Post writer Wendy Straker's (pictured to the left) new book In Men at Work: A Job-by-Job Search for Mr. Right breaks the news.

So a handsome investment banker asked you out, and you really clicked. You're wowed by his brains, his confidence and, sure, his income. But if you're dreaming of long, luxurious weekends spending his money with him, Wendy Straker is here to throw cold water on your fantasy...she says that while investment bankers fall in love just like anyone else, they are not for the emotionally needy; they have no time to spend their money and are constantly postponing plans.

It goes on to say that you should date a musician. But that, as a good friend of DealBreaker once said, is "poor people talk."

New book says forget the banker and date a musician[Florida Sun-Sentinel]

It turns out that the authors of "Wages of Wins" have a blog! As we noted yesterday, "Wages of Wins" is the book reviewed for the New Yorker by Malcolm Gladwell. The authors claim to have derived a new algorithm for evaluating the quality of professional football and baseball players. The problem with the algorithm is that it overweights rebounding so much that it produces some weird results: claiming Dennis Rodman was a better player than Michael Jordan, for instance.

There's plenty more on the Wages of Win blog, though, and Steve Sailer is already there trying to start a conversation with them in the comments section.

Meanwhile, Abnormal Returns is using the occassion to spell out some thoughts on investing.

Arbitrary algorithms is a good description of the way many investors go about identifying trades. Frankly, many are lucky if that have an alogorithm beyond the "seat of their pants." While that may work for some from time to time that is not a durable, long term strategy.

Long term investment success is ultimately driven by embracing greater rigor in one's investment process. Some investors were able to acquire this over time and through (costly) trial and error. In this day and age however the introduction of cheap data and even cheaper computing power frees us up to explore financial data in ways unimaginable only a decade ago.

Summarizing Our Thoughts on the NBA [Wages of Wins Journal]

Arbitrary algorithms [Abnormal Returns]

Andy Kessler writes in, joining the Vonage-bashing fray, and explaining the full extent of the screwed-ness:

When you use retail to price a deal, you are always asking for trouble. The syndicate dude at Citigroup lost the poker game--he stupidly tried to signal that the deal was over-subscribed, but only raised the number of shares, not the price. then pricing it at the midpoint of $16-18 at $17 was another signal of weakness. Breaking price is bad form, but breaking that $16-18 range in the first hour is even worse, every Tom Dick and Scary retail investor is now unloading their 1300 shares. also looks like the specialist at the NYSE stepped away. U-G-L-Y

it may still trade up. there are always tricks, like Citigroup buying in, but no way to really know another case of Wall Street Buffoonery. Citigroup smelled the 7% IPO fees on $500 million, but may lose that much keeping this stock above $15.

(The above left graphic, in case you're wondering, is "screwed on crack.") Speaking of Scary Retail Investor, see below: the email that went out to the "Vonage Customer Directed Share Program" about the IPO. And from now on, we're going to refer to questionable friends-and-family rounds as "customer directed share programs."

On Seeking Alpha, Venture capitalist Kevin Chou compares Vonage to Pets.Com, writing:

Vonage (VG) is a horrible IPO to invest in. Avoid it like a rabid dog stumbling down your street. The company is nowhere near turning a profit, is spending crazy amounts of money on advertising (Super Bowl ads with sock puppets, anyone?), and is facing some of the most intense competition of any industry I track in the technology space.

And it's already slipping from its $17 initial offering price.

Vonage, The Worst Tech IPO Since Pets.com [Seeking Alpha]

Smith Barney has agreed to pay $98 million to settle claims made by class action lawyers, including one who is almost freakishly devoted to Star Wars, on behalf of thousands of current and former brokers that they are owed overtime pay and other reimbursements.

The proposed settlement is the latest and largest by securities firms that contend brokers are exempt from state and federal overtime laws because they are salaried, administrative employees. The brokers' draw on commissions, a monthly loan most receive, qualifies as a salary, they [the class action lawyers] argued...

In February, the UBS Wealth Management unit of UBS AG agreed to pay $89 million in a nationwide settlement to financial advisers who sued for overtime pay and to recover charges assessed by the firm for sales assistants, computers, and trading errors.

Last year, Morgan Stanley agreed to pay $42.5 million, and Merrill Lynch & Co. Inc. acceded to pay $37 million, to settle claims involving only California brokers. Additional claims against the firms are pending in Connecticut, New York and New Jersey.

More settlements are expected. Too bad the story has no direct quotes from Mark "Obi Wan" Thierman. We're sure that at some point Thierman must have greeted news of the settlement by saying "You were right, Master. The negotiations were short."

Smith Barney to pay $98 million [Philadelphia Inquirer]

Eddy Elfenbein draws attention to the Expeditors International of Washington, Inc (EXPD) 8-K which is full of what our grandmother would have called "sass." Right from the start the filing sets the tone.

1. Is there an inherent difference in the requirements for ocean freight volumes that allows better resource utilization than when handling airfreight volumes?

This is one of those questions that we puzzled and puzzled over and we are still not sure we understand the question.

But our favorite was about whether salary and other expenses were sustainable. Expeditors answers, "'Sustainable?' Given enough time, the sun is not sustainable, however, we think it is a good bet that there will be daylight tomorrow."

The Bitchiest 8-K Report [CrossingWallStreet]

Expeditors 8-K [Edgar]

Fed Chief Swears Off Improvising (NYT)
Ben Bernanke regrets his bon mots with Maria Bartiromo and he intends to avoid loose lips from now on. But if history is any guide, this won't be the last time he's misunderstood. In fact, as long as the legacy of Greenspan remains intact, and the fed chief is expected to be cryptic, there will be plenty of misunderstandings. Of course, it can be debated whether there was ever any misunderstanding in the first place. Didn't Maria's original warning to the market prove prescient? Shouldn't investors appreciate the whole situation for helping to tempter gains that eventually melted away? And really, what's a Fed Chief without improvisation. Keep it cool man; play jazz.

The dollar is still a currency you run to ‚... (RGE Monitor)
Well, some people do. Emerging markets seem to be getting schooled in the concept of the market for lemons. Among the hot emerging markets, investors know that X number of them are lemons, but in times like these they don't know which ones. So selling becomes indiscriminate, without any concern for quality. Inflation-prone Turkey is getting whacked, as is surplus-running resource-rich Brazil. And a lot of investors still don't seem to be able to answer a key question in the dollar debate. If not the USD, then what else? But then, why the US? Economist Brad Setser notes the irony of fleeing a country with a surplus, like Brazil for a country with a deficit, such as US. Also of note is that it's not the whole world seeking safe haven, but mainly speculating Americans, who are closing positions and returning to their home currency.

H-P Lost Faith in Fiorina, But Not in Merger (WSJ)
So with HP's resurgence, have Carly and the Compaq merger been vindicated? It's an interesting question, and a testament to the company that anyone, today, is even having this discussion. The company's CFO recently performed an internal study on merger, and by the broadest measures of profitability and market share gains it would appear that all of the goals from the merger have been satisfied. But does that really vindicate the merger? Or are backdating, or retrospectively writing history. In other words, does today's success necessarily stem from the merger, or are they two separate things that can be nicely tied in a bow. Not an easy question, though it's dazzling how often conventional business wisdom seems to be turned on its head.

GM offers $1.99 gas in Florida, Californian (Reuters)
Remember last summer when GM was offering steep discounts on cars and at least for a few months, their market share started to spike, causing Ford to do the same thing? It was great from a volume perspective, in terms of clearing out inventory, but it wasn't so good for the bottom line. Everyone, including the company itself, agreed that it had to wean itself off of incentives and start selling cars for full price. So, they eventually ended the discount program (goodbye market share). But since then they've just replaced it with one cockamamie scheme after another, including this one to sell subsidized gas for SUV buyers. But as long as they're going to keep up the incentives, why not just cut the price of the car, which actually worked really well? Any backdoor incentive will still lose money, while not being as affective at moving units. Seems like someone needs to work on their marketing strategy.

Business Week is reporting that President George Bush recently signed an executive order granting intelligence czar John Negroponte "broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations." Spookier still, he signed the order on the same day that CIA director Porter Goss resigned.

Business Week explains:

Unbeknownst to almost all of Washington and the financial world, Bush and every other President since Jimmy Carter have had the authority to exempt companies working on certain top-secret defense projects from portions of the 1934 Securities Exchange Act. Administration officials told BusinessWeek that they believe this is the first time a President has ever delegated the authority to someone outside the Oval Office. It couldn't be immediately determined whether any company has received a waiver under this provision.

Of course that couldn't be determined! If you had the ability to let companies say they were keeping certain things secret in their financial disclosures, would you then force them to admit that they were doing so?

Intelligence Czar Can Waive SEC Rules [BusinessWeekOnline]

Fannie Mae got hammered by the Office of Federal Housing Enterprise Oversight, which issued a 340-page report detailing the mortgage giant's misdeeds and levied $400 million in fines.

"Our examination found an environment where the ends justified the means. There was a systematic effort by senior management to manipulate accounting, reap financial rewards and prevent the rest of the world from knowing about it," said OFHEO Acting Director James B. Lockhart.

It seems to be open season on Morgan Stanley's Stephen Roach, the banks London-based chief international economist. Two weeks ago the National Post's David Berman laid into him, and today Rich Karlgaard labels him "Wall Street's Worst Economist."

Who else but Morgan Stanley's Stephen Roach? In November 2004, he said the U.S. had "no better than a 10% chance of avoiding economic Armageddon." Since then the economy grew about 4% annually. This kind of shocking error has been, alas, typical of Roach. Since the recession of 2001-2002, Roach has been unremittingly bearish. He was last bullish in, no kidding,1999. Don't bet on Roach, in other words.

We're not ready to jump on the anti-Roach bandwagon, even after a former collegue told us that "Roach is more of a marketing thing these days. No one invests on his advice." Whenever we're tempted to dismiss Roach we remember his article arguing that Tom Friedman's 'The World Is Flat" thesis was just plain wrong. Check it out. Roach comes off like a Matt Taibbi you could invite to dinner with your mother.

Wall Street's Worst Economist [Digital Rules at Forbes.com]

Eddy Elfbenbein points out that Vonage has admitted it may never, ever be profitable.

Check out this gem from a Reuters article on Vonage:

Vonage has acknowledged that it may never be profitable and is viewed with skepticism by many analysts, who cite the growing competition it faces in providing voice-over-Internet protocol (VoIP) services.

"We haven't liked the offering since we first saw the registration," said David Menlow, president of IPOfinancial.com. "There are so many other companies out there that can deploy this strategy or this product in a heartbeat."

For the love of carbs! May never be profitable??

On the other hand, last week over a late night at Houston's (mmm, spinach dip) we asked one of our hedge fund pals about the IPO. He said his market guys told him it was a good short term bet and so he was going in on the IPO. Not with his fund's money but with his own. But, then again, he used to be a lawyer so you should probably take his advice with a grain of salt.

The Vonage IPO [CrossingWallStreet.Com]

Related:
Is Vonage Screwed?

WallStFolly reports that Fed boss Ben Bernanke made his first public comment today on BartiromoGate while testifying before the Senate Banking Committee.

"Senator, that episode you referred to was a lapse of judgment on my part. In the future, my communications with the public and with the markets will be entirely through regular and formal channels."

One of our trader friends reacted over instant messaging.

Trader: Holy crap! "Lapse in judgment?" We're totally screwed when the guy running our monetary policy is admitting to lapses in judgment!
Dealbreaker: Not so sure. How well did imagining the Fed chief as an omniscient narrator of the market work out under Greenspan?
Trader: Great. Now we have the Fed as an unreliable narrator? We screwed!
Dealbreaker: Don't tell the guys at the desk you were an English major.

Ben Bernanke: Comments to Maria were a "lapse of judgment" [WallStFolly]

Update: Reuters has the full report.

Last night after a few too many drinks in one of our usual watering-holes, a friend of DealBreaker turned and asked, "What year is it again?"

"Right. You're cut off."

"No. I know its 2006. I'm just trying to figure out what year it is again? Is it 1999, with an internet bubble getting ready to pop again? Is it 1987 and a huge crash is coming? Is it 1997 with another currency crisis looming? Or 1979 with an oil crisis?" he said.

It's always some year again, we guess. Today TickerSense tells us why it's probably not 1987 again.

While there are certainly similarities between now and then (falling bond market and weaker dollar), there is one glaring difference between now and 1987 which makes a similar crash unlikely. The market's run up to now has been modest when compared to the gains leading up to the crash.

And over on The Big Picture, a letter from Ryan Fischer says its not 1994-95 again.

Please, please, I beg of you: quit talking about 1994-995. 2006-07 has no similarities whatsoever -- except in your hope.

Does anyone remember what the bond market did in 94-95? Anyone? The yield on 10 yr treasuries went from basically 5.5% at the beginning of 94 to 8% by year end. That being the number the bond market erroneously thought the FED would go to. By the end of 1995 the yield on the 10 yr was back at 5.5% a dramatic easing of financial conditions. And, on cue, assets went wild, housing and consumption caught the wind in their sails coming off the bond market and off Risk ran.

1987 and Now: One Major Difference [TickerSense]

Dear God, Please stop talking about 1994-95 [TheBigPicture]

Lloyd Bentsen, who served as a congressman and U.S. senator from Texas, Treasury secretary in Bill Clinton's administration and 1988 Democratic vice presidential candidate, is dead at age 85. In his first run for the Senate , Bentsen defeated Congressman George Bush. In the 1988 presidential race, Bentsen and presidential candidate Michael Dukakis were beaten badly by George Bush and running-mate Dan Quayle. Bentsen, however, had perhaps the most memorable line of the election, famously telling Dan Quayle, "Senator, I served with Jack Kennedy. I knew Jack Kennedy. Jack Kennedy was a friend of mine. Senator, you're no Jack Kennedy."

Former Democratic Sen. Lloyd Bentsen Dies [Houston Chronicle]

Lloyd Bentsen [Wikipedia]

This commercial flashed across our screen this morning while flipping between CNBC and, well, whatever was on MTV during the commercial breaks. We're definitely trying this out the next time we find outselves confronted with potential crime at the New York Athletic Club.

We're not used to turning to Bill Moyers for insight into anything, much less economics. But maybe we've been too harsh, turned off by the dopey earnestness and knee-jerk politics of his PBS specials. This piece from his commencement address at Hamilton College is actually very good stuff.

Bread is the great re-enforcer of the reality principle. Bread is life. But if you're like me you have a thousand and more times repeated the ordinary experience of eating bread without a thought for the process that brings it to your table. The reality is physical: I need this bread to live. But the reality is also social: I need others to provide the bread. I depend for bread on hundreds of people I don't know and will never meet. If they fail me, I go hungry. If I offer them nothing of value in exchange for their loaf, I betray them. The people who grow the wheat, process and store the grain, and transport it from farm to city; who bake it, package it, and market it--these people and I are bound together in an intricate reciprocal bargain. We exchange value.

Pass the Bread: Text of Bill Moyers' Address at Hamilton College [Commondreams.org via LewRockwell.com blog]

Jeff Matthews describes his encounter in his local Greek diner lunch spot with a hospital worker looking for investment advice. Since we find ourselves in similiar situations, we really like his response: play psychologist.

She: "Which fund should I buy?"
Me: "Which fund do you want to buy?"
She: "I'm not sure. Which country should I buy?"
Me: "Which country do you want to buy?"

In their next encounter, the hospital worker informs Jeff she's selling everything. His natural response: does this mean it's time to buy?

The last time we got asked for investment advice was over brunch at the new West Village spot Ditch Plains. It went like this.

Her: What should I be buying?
DB: Try the lobster roll.
Her: That's not what I meant.
DB: If you're not hungry, then just go with the shrimp salad.
Her: Are you always like this?
DB: Usually. At least until we get our first bloody mary.

Panic at the Greek Diner [Jeff MatthewsIsNotMakingThisUp]

DealBook this morning runs down which business schools have landed which commencement speakers. The clearest win is Harvard's grab of Goldman Sachs CEO Hank Paulson. Sloan MBA's will get to hear from Federal Reserve Chairman Ben S. Bernanke, but Sloan loses points since it is sharing him with the rest ofr MIT at the university-wide graduation ceremony. Columbia pulled NBC Universal's Bob Wright.

More at DealBook.

For Some M.B.A.'s, It's Pomp, Circumstance and Hank Paulson [DealBook]

Is Malcolm Gladwell a "freakonomist?" A freakonomist might be defined an economics writer who has the ability to transform contrarian arguments into conventional wisdom almost overnight. Steven Levitt and Stephen Dubner, for instance, created a popular consensus that abortion cuts crime. Unfortunately, the trip from contrarianism to consensus is often a result of psychology rather than the merits of the arguments. We like contrarianism because contrarianism is, well, kinda cool.

Fortunately, we have Steve Sailer around to deliver sharp reality checks against these freakonomics claims. Way back in 1999 he pointed out that abortion didn't actually cut any crime in the first cohort of young men from whom legalized abortion supposedly culled the worst criminals. Serious crimes actually went up among this group. Most recently Sailer's aimed his reality guns at Malcolm Gladwell's New Yorker article touting a book by a couple of economists who argue that, among other things, that far from being the top NBA player in the season he won the Most Valuable Player award, Allen Iverson was only the ninety-first-best-play in the league.

Euronext Backs Merger Proposal By NYSE Group (WSJ)
The courtship of Euronext won't be as smooth as the NYSE would like. The Deutsche Börse anow has a bid in (as we predicted yesterday), which they claim will be superior for Euronext shareholders. One disadvantage that faces the Deutsche Börse is that they can't offer the possibility of being a trans-Atlantic exchange, the way NYSE can. At the moment Euronext still favors the NYSE, but it would be unfathomable for The Deutsche Börse to not make another offer. And it wouldn't be a surprise to see a third get into the mix.

And Now For The Vonage IPO (GigaOM)
The market is bracing for the IPO of Vonage, the first good old-fashioned unprofitable tech and consumer giant we've had in years Like Google, lots of people including the non tech-savvy have heard of them. Unlike Google, they're not pulling in mountains of cash. If there's a parallel from the .com years, perhaps it was the IPO of Louis Borders' WebVan, which promised to delivery the groceries. Eventually, some companies have fulfilled its vision, but at the time the company had spent too much on distribution centers around the country, without much hope of profitability. Now with all of the cable and telecom giants offering cheap IP phone calls, not too mention free phone calls from more exotic offerings like Skype, Vonage faces the same profitability questions.

Large-Cap Internet Courtships: Do They Make Sense? (PaidContent)
The answer is probably no, they don't make sense. JP Morgan is out with the report exploring the possibilities for some of the large internet players (MSN, eBay, Google, Yahoo) to tie the knot with one another. Take one that gets bandied about from time to time, MSN-Yahoo. There's some idea that if the two of them teamed together, they could possibly take on Google in search. But let's ask a practical question: How do you merge two search engines? Do you make a page with two searchboxes? Do you just redirect MSN visitors to Yahoo.com? Do you just merger their databases and server farms? Do you just tell MSN users to try Yahoo now? It can't be done, unless we're really missing something. The same phenomenon would be true to a lesser extent in some of the other tie-ups, though perhaps eBay is unique enough to complement another player. Should prompt some chatter today.

Stock options probe extends to Seattle company (Seattle Times)
Depending on your perspective, the widening net of the stock options investigations will either demonstrate the need for even tougher regulations like Sarbanes-Oxley, or prove that they're a useless albatross that doesn't really make shareholders any safer. Arguably, not only don't regulations protect shareholders (much), but they make the situation worse, as companies find more exotic ways to disguise payments. The problem is not the payments themselves, but rather the difficulty shareholders have in measuring the operations of a company. The idea that financial trickery can be outlawed and then stopped is a flawed one, but there's no doubt that the continued escalation in regulation and compliance costs will continue to burden many legitimate operations.

From today's announcements in Reuter's "Move" column.

Goldman Sachs said on Monday that Yoel Zaoui is to become sole head of investment banking in Europe, in a reshuffle of the U.S. investment bank's top European management.

Zaoui, who has played a key role in building up the firm's European M&A business, was previously co-head of investment banking in Europe alongside Chris French and Matthew Westerman.

French is to become chairman of European investment banking, while keeping his job as head of investment banking services.

Westerman will continue as sole head of the bank's European financing group, within the investment banking division.

The Zaoui (which we really hope is pronounced "Zowy!") family is really something to behold. Yoel's brother Michae holds the equivalent position at Morgan Stanley. So, basically, if you're doing a big M&A deal in Europe, the odds are pretty good one of the Zaoui brothers has a hand in it.

Moves [Reuters]

Zaoui takes helm for Goldman in Europe [Financial Times at MSNBC]

Business Week interviews Gemma Townley, novelist and soon-to-be MBA.

Like her characters, Townley has undergone many transformations over the years. She started out editing Financial Management, a magazine for finance directors, and having her work appear in the Sunday Telegraph. Then she headed communications, first for the Charter Institute of Management Accountants and then in a government department.

Finally, in 2003, she began the MBA program and launched her career as a novelist virtually at the same time. Unafraid of a busy schedule, Townley also got married just as her first module for the MBA was starting. Recently she decided to give up her corporate job to work full-time from home as a writer. She's also close to earning her MBA degree once and for all.

We hate her and love her already for all the same reasons.

The Lives and Loves of a B-School Co-ed [Business Week]

According to Planespotter [but not otherwise confirmed], the IAC Bombadier (tail number N393BZ) is on the move. This time from Germany's Bremen Neueland airport to Van Nuys in Los Angeles. Also unconfirmed: a Lear registered to Denise Rich, whose husband Marc famously recieved a lame-duck pardon from President Bill Clinton, today flew from New York's Westchester Airport to Arkansas's Rogers Municipal Carter Field and back again.

Traders Magazine Gregory Bresiger explains how the policies of President George Bush recall the Nixon era.

President George W. Bush's statist policies should not been viewed as a departure from the Republican traditions. Bush's economic policies are a continuation of Nixonomics.

We should also understand that Bush, like Nixon, cannot resist the political temptation of public-sector spending and various price controls to achieve short-term political goals. Bush, backed into a political corner, may well re-impose wage and price controls. He certainly has done nothing that will lead anyone - even his allies - to believe that he is a fiscal conservative.

Ouch.

George W. Bush's Nixonomics [Mises.Org]

Paul Kedrosky provides a trio of links to the work of Eric Lie, the University of Iowa scholar whose work is at the heart of the Wall Street Journal's ongoing backdating investigation.

Backdating of Executive Stock Options (ESOs)

On the Timing of CEO Stock Option Awards [Management Science] [pdf]

Does backdating explain the stock price pattern around executive stock option grants? [Journal of Financial Economics] [pdf]

F. Scott Fitzgerald's The Great Gatsby was perhaps the first great piece of 20th Century finance fiction. WIth its narrator spending his free time learning about the bond market, it was its era's Wall Street, Liars Poker and American Psycho. News today that Montenegrins voted to disolve their union with Serbians reminded us that the first time we heard of Montenegro was from the mouth of Jay Gatsby himself.

"Then came the war, old sport. It was a great relief, and I tried very hard to die, but I seemed to bear an enchanted life. I accepted a commission as first lieutenant when it began. In the Argonne Forest I took two machine-gun detachments so far forward that there was a half mile gap on either side of us where the infantry couldn't advance. We stayed there two days and two nights, a hundred and thirty men with sixteen Lewis guns, and when the infantry came up at last they found the insignia of three German divisions among the piles of dead. I was promoted to be a major, and every Allied government gave me a decoration-even Montenegro, little Montenegro down on the Adriatic Sea!"

Little Montenegro! To be independent at last!

More from The Great Gatsby after the jump.

Our obsession with Goldman Sach's tree-huggerish use of OZOcar hybrids to move its bankers through our fair city was reignited by Sunday's New York Times Magazine interview with architect Richard Rogers, the British architect recently chosen to redesign Tower 3 at the World Trade Center site.

Looking ahead, how do you feel about having to spend so much time in New York, presiding over your many projects?

I love New York. I have five sons, one of whom lives in New York, and I stay with him when I visit. He runs a company called OZOcar, which is the first limousine company which is environmentally friendly. All their cars use hybrid fuel.

Do you drive a hybrid car?

I don't own a car. I drive a bicycle.

Hear that Goldman folks? Be grateful for your hybrids. One generation up the Rogers family doesn't believe in cars at all!

Socially Conscious Construction [New York Times Magazine]

The Times reports this morning that Harvey Weinstein** is putting money into aSmallWorld.net, which is ostensibly the Swiss boarding school equivalent of Facebook/MySpace. It's friendster for people who self-identify as being dually-based in two large cities with modern Western economies, an abundance of 8-figure real estate and a luxury resort or two. Normally, it would be too small a deal to feel relevant to us, except that half the bankers/traders/private equity guys in New York have a profile, and the founder, above left with Harvey, is an ex-banker.

Of course, the first rule of aSmallWorld is that no one talks about aSmallWorld, or so implied a recent communique from the founders noting that someone had talked to the press about the service and had been booted out a result. (We're not sure if this counts as "talking about it" to the press, given that we are the press and given the newly added "press center" on the homepage. Guess we'll see if our profile gets pulled.)

** We were first introduced to Mr. Weinstein a few years ago, after some light skewering on our part--fake letters to Santa, and whatnot. "See?" he said, "I'm not so fucking bad, am I?" We declined to point out that he was speaking at a decibel level that technically constituted "yelling". Then again, we were at Marquee, there was loud music, and yelling may have been in order.

A Weinstein Invests in Exclusivity

Today's Wall Street Journal points an accusatory finger at new batch of companies who awarded top executives stock option grants dated just ahead of a sharp rise in the company's share price. Dealbreaker is happy to bring you the highlights.

First off, the following companies are the subject of today's story: KLA-Tencor Corp., a leading semiconductor-equipment maker, Boston Communications Group Inc., a prepaid-wireless-technology provider, Renal Care Group Inc., a dialysis service company, chipmaker Trident Microsystems Inc, and telescope maker Meade Instruments Corp. Also mentioned in the article is aircraft interior manufacturer B/E Aerospace Inc., whose CEO reseigned from the board of Brooks Automation after options backdating there came to light.

Second, an answer to the question: what the big deal with backdating?

Now that anybody willing to browbeat a CEO is a "shareholder activist" (and that, mind you, is a good thing), Barron's uses the emergence of shareholder activism (if it was ever submerged) to browbeat the SEC for increased regulation of hedgefunds, which they argue will result in fewer shareholder activists (which would, mind you, be a bad thing):

HERE IS A NEW GROUP OF ACTIVIST shareholders who are holding CEOs' feet to the fire. ... With all the emphasis of the past few years on aggrieved investors, one would think the Securities and Exchange Commission would embrace this new class of corporate watchdogs. But instead, the SEC has taken steps to make it more difficult for these shareholders to hold management of their companies accountable. Why is an agency whose mission is investor protection putting roadblocks in the way of reform-minded investors? These particular shareholders are the dreaded hedge funds, blamed by some for everything from high oil prices to shortages of Treasury bills.

** As well as our general amorality, and as long as we're feeling confessional, occasional nihilism...

The Shareholder's Friend [Barron's]

DealBook, in pointing to a Boston Globe story about Ted Turner's departure from the Time Warner board, notes that Turner left "quietly". (The Globe calls it "uncharacteristically understated.") The TW shareholders were, during the course of Turner's leaving, subjected to a video tribute to Turner that we didn't get to see, but that probably included shots of Turner smiling and laughing in slow motion, against a track of "Wild Horses" by the Rolling Stones. Or at least that's how we imagine it.

But we say all of that not without a pang of sadness. We loved Turner for the same reason we loved Scott McNealy: he was so damn quotable. So in memory of Ted Turner's TWX board tenure, we give you Ted Turner quotes for all occasions:

Most relevant: this one - "I know what I'm having 'em put on my tombstone: 'I have nothing more to say'."

Ted Turner Steps Down Quietly

In the continuing Yahoo! Finance vs. Google Finance vein, a reader offers the following screenshot from Yahoo! analyst day presentations:

(Click for large version.) Our conclusion: There seems to be more blue. Recommendation: Neutral. Also: Yahoo! will have "widgets" as well.**

** Obvious pandering to bloggers. Not that we mind being pandered to...

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

Probably False Rumor Alert! Ballmer To Be Fired? (Ars Technica)
It can take a couple of days for a story to percolate up from the bowels of the trade press and get some exposure, but last week an article in, uh, Client Server News (yes) reported that certain key experts were predicting a move to push Microsoft CEO Steve Ballmer out. First off, congratulations to Client Server News for getting some desperately needed attention; it's been awhile since they've had anything resembling a scoop. Second, the rumor is probably false. Though Microsoft has been weak of late, it seems likely that a new CEO would do little to boost the street's confidence, or anyone else's. We'll keep you posted if Client Server News, or even Network Administrator World gets any more on the story.

NYSE Group Plans to Buy European Exchange (NYT)
For a while there, there was news about stock exchange merger activity every day. Then it seemed to go away for a month, though really it was just that the executives shut up for a little bit. The NASDAQ has been gobbling up more of the LSE on a daily basis, with their position now topping 30%. Not to be outdone, the NYSE has announced plans to purchase Euronext, and pending approval from Euronext shareholders, it looks like a done deal. Of course, in the cr-cr-crazy world of stock exchanges, who knows what white knight is going to come along and disrupt the deal.

Punch Taverns to sell 380 pubs (Reuters)
Given the financial world's love for business exotica, this could be a really hot sale. The UK's largest operator of pubs plans to sell 380 of them sometime this year. We wouldn't be surprised to see the banks battle it out with the hedge funds for this kind of asset. But anyone bidding should probably know a little about the scene. Naturally, this year it's all about the World Cup, as the chain hopes that the event drives attendance. Presumably, a decent showing for England will be important, though a bad performance should also drive pint sales. Also, like NYC, a smoking ban has recently been put into effect in Scotland, which could prove detrimental to some locations. Caveat Emptor.

Is Qwest Ready to Sell Out? (IP Democracy)
Did Qwest CEO Dick Notebaert signal that the company is looking to sell out? In an interview with the NY Times, the CEO is seen as indicating that the company might be in a good position to get taken out. The company received a mini-boost after their staunch claim that they did not provide information with the NSA, and now the CEO is playing up the fact that the company is profitable, and financially as healthy as ever. But the company has little future in some ways, as the company has no wireless infrastructure, or any plans to roll out IP video. So the time may be right to take them out of their misery.

How come due diligence trips were never like this when we were in finance?

Rick's Cabaret International Inc., which in 1995 became the first "gentleman's club" to go public, this week wooed investment bankers and analysts with free admission and reduced drinks at its second quarterly "Due Diligence Ball."

Inviting guests to check out the swanky Manhattan club, Rick's chief executive officer Eric Langan gushed about the delicacies offered, from live lobsters in the restaurant to exotic pole dancers by the neon bar.

Regulators "can tell analysts not to go to strip clubs, but they'll never tell them not to do due diligence," Mr. Langan told Reuters at the club's VIP lounge overlooking a stage, where dancer after dancer paraded their wares.

Public 'gentleman's club' Rick's brushes off Wall Street chill [Globe and Mail]

Here are the lyrics to the Coors Light "Wingman" song shown above.

This chick's rockin' your bro on the dance floor

But she's towing an anchor

A junior investment banker

Who's talking about herself and not much more, oh

So buy her a beer, it's the reason you're here

Mighty wingman

You're taking one for the team

So your buddy can live the dream

Wingman!

Heh. There's nothing worse than getting stuck with the junior banker chick, according to the Coors Light ad team.

Every third Thursday, the Sydney Gay & Lesbian Business Association hosts a cocktail hour called "Fruits in Suits." Single in the City paid a visit recently, and ran into his dream date.

Marc was an investment banker (ding), lived in a trendy apartment building nearby (ding), had a cute face and body (ding) and was single (ding..ding..ding). I love to shag airline pilots, cabin crew and doctors but dating‚... I've always wanted to date an investment banker. Charlotte from Sex in the City would be proud..if only he was Jewish and not Anglican.

So there you go.

Fruits in Suits [SingleInTheCity]

There is so much blind-item goodness here that we couldn't resist bringing it to your attention. We have no idea who any of these people are, or if they even exist outside of this blogger's imagination, but a CNN Producer involved in porn, an small easily distracted Investment Banker vacationing in Europe, angry anti-American Europeans...this is the stuff Friday afternoons were made for! And then, of course, there is always a chance that someone will recognize one of their friends or collegues in the description.

Hmmm.. So, Rome Girl's friend, The Investment Banker is comming to visit in about eight days.

He's a really smart, nice guy, but suffers from both Short Man Complex and ADD.
He was supposed to come with the CNN Producer that Rome Girl once stared with in a porn film, but CNN Producer backed down at the last minute.

I like The Investment Banker, but he's only going to be here for eight days and he wants to see Barcelona, Nice, The Last Day of the Cannes Film Festival and like five other things.

Which means he's only going to like be in Montpellier for two days, but he'll be dragging me, Rome Girl or both all the fuck over creation.

On the other hand, The Iceman and Mr. Bitch love making fun of Americans and taking the piss and I can't fucking wait for them to get to work on him.

Also, Trixie, who is currently living in Barcelona, has seen his picture and wants to fuck the shit out of him, and he's seen her picture and likes her tits.

So, I know who is going to be his guide in Spain.

Hmmmm [Drunken Ex-Pat Writerl]

Yesterday it was announced that M&A big John "Studs" Studzinski is leaving the HSBC Group for the Blackstone Group. Studs made his reputation as the top dog for Morgan Stanley's M&A business in Europe during the 1990s. Originally from Boston--he graduated from St Paul's and Bowdoin College-- Studs moved to London a few years after getting his MBA from Chicago. While working at Morgan Stanley, he gained a reputation as a master dealmaker and networker, as well as a philanthropist and patron of the arts. A few years back the Pope even knighted him for his good deeds. Three years ago he left Morgan Stanley for HSBC, where he was charged with ramping up the banks M&A business.

We'd write more but the sources below pretty much cover the story. Also, writing about wealthy, successful people who are also so ridiculously...uhm...we guess the work is "good"...well, it makes us uncomfortable. We can already feel the brimstone scorching our souls without having to be reminded of it by guys like Studs.

HSBC Banker Jumps to Blackstone [NY Times]

Studzinski leaving raises doubts about HSBC's commitment [Financial Times]

HSBC's Top Global Banker Quits [WSJ]

BankersBall has pilfered uncovered a survey of compensation for private equity associates. We have no idea whether this information is accurate, misleading or just plain made-up. But here are the goods.

* 1st year associate: (based on 48 data points) Average - $86k / $87k / $172 Median - $80k / $80k / $160k

* 2nd year associate: (based on 15 data points)
Average - $95k / $111k / $206k
Median - $85k / $105k / $210k

* 3rd year associate: (based on 4 data points)
Average - $98k / $159k / $256k
Median - $98k / $160k / $263k

If that makes you feel good about your compensation, we suggest you go home and have a good weekend. Whatever you do, don't try to break it down into hourly compensation until Monday. Trust us.

Hot, Hot, HOT! Private Equity Comp[Bankers Ball]

When Carl Icahn was pursing Time Warner, we kept hearing that Icahn didn't really understand the business--or businesses, as it were. (And we couldn't help but think that Icahn's assertion that TWX was big and bloated and might function more efficiently in smaller pieces wasn't exactly a rocket-science observation.) But Dick Parsons directly suggests as much in an interview with The Oxford Press, while indirectly suggesting that the shareholder base as a whole understands the company better than Icahn:

Our shareholders who have been with the company a long time. They understand its strengths, they understand the industry. ... I'm not sure that Carl really did. While I would be wrong to say there isn't a lot of frustration, the whole media sector right now is in a little bit of a malaise. No one who really has been around this space for any period of time believed that Carl had any answers that were novel or likely to result in the stock moving up.

Conversations with Dick Parsons [The Oxford Press]

As we've mentioned before, we occasionally plug "banker" in the search box on Craigslist just to see if anything interesting comes up. Generally, results fall in one of two categories: "randy banker seeks young hot thing for no-strings relationship, willing to pay" or "young hot thing seeks randy banker to finance exorbitant lifestyle, willing to do whatever randy banker wants." In the latter category, the young woman to the left posts the following: "if you are an m&a banker, hopefully on the young side ie (22-25), i need a favor and in return, i'll make your head spin." Which begs the question: why an M&A guy specifically? (We realize that reliably good transaction advice is in short supply, but...) Why not a nice LBO guy? Or a hedge fund guy? We hear they're hot (in one sense of the word.)

M&A Bankers W4M (22) [Craigslist]

$$$ Even the little guys get screwed by SOX [Marketplace (audio)]

$$$ Gratuitous goldbuggery: "Why the global financial system is about to collapse".

$$$ A link for all the individual investors who are inevitably going to rush into hedge funds now that (A) everything increasingly resembles a hedge fund, (B) hedge funds are "hot" and (C) greed still exists, just as it has since the beginning of time: HOW TO READ A PROSPECTUS. [Associated Content]

$$$ Patrick Byrne wants your opinion. [WSF]

Yet another [totally unconfirmed**] report yesterday from The Planespotter:

Who says Americans don't know what's going on outside our borders? IAC's Bombardier Global Express twinjet took the overnight flight from Teterboro to Cote d Azur today and Morgan Stanley Management Services took their G-V to Geneva yesterday. Sequoia Capital is really taking the lead in burnishing our image overseas, though. First, the G-IV registered to Sequoia partner and Google director Michael Moritz took off to Le Bourget just days after returning from a three day trip to Sevilla. That I get. Sequoia's other plane, though, a Falcon 50, is currently en route from Iqaluit in way northern Canada to Florence (or as they call it there Firenze). Oil sands to olive oil? No clue on that trip.

** Well, okay, not totally. IAC has a Bombadier (tail no. N393BZ), MS Management Services has a couple of G-Vs (N123M, N223MD), etc. We just don't know where they are at all times.

Yesterday brought you the startling news that some mutual funds are starting to look like hedge funds (er, sort of). Today, the Times of London says some banks are starting to look like hedge funds, thanks to an increase in prop trading.** :

"Some investment banks are beginning to look more like hedge funds than investment banks," [Lehman director Henry Kaufman] told a City audience. "That's an enormous departure from the past."

** Tomorrow's news: DealBreaker looks increasingly like a hedge fund.

Investment Banks Getting More Like Hedge Funds, Says Dr. Doom [TOL via Dealbook]

Milberg Weiss Case May Resemble Arthur Andersen's, Lawyers Say (Bloomberg)
It was a shame to see Arthur Andersen go. There were thousands of lost jobs, billions in destroyed economic value, and countless hours wasted in the process. Their problems were isolated, and eventually the conviction was overturned, which only added salt to the wound. But we won't have the same sympathies should a similar fate befall the lawfirm Milberg Weiss, one of the most prolific litigators of class-action lawsuits in the country. Now the indictments have rolled in, and the allegation that they paid clients to participate in class-action lawsuits is an ugly one. The company has won more than $45 billion in awards for their clients, and it's unfortunate that no verdict would compel those clients to hand back the money to the affected firms. Should be a great story to watch, as we'll get a peek at the inner-workings of a class-action factory. Can't wait.

Leading Indicators Reinforce Idea That Growth Is Slowing (NYT)
When it rains it pours, eh? What's that word? Starts with S, ends with N... Stagflation. The latest reading of leading economic indicators points to slowing growth (the stag part), though as you would expect, Wall St.'s finest are spinning it in the most positive light possible. See, it's not the economy is getting weaker, it's that growth rates will become more sustainable. And in fact, according to the chief economist at BOA, the news is "welcome", though they'd like to see a downtick in inflation at well. Wouldn't we all, wouldn't we all.

KDDI, Google team up on mobile search (Telecom Asia)
Google's been going out and making several deals to become the official search engine at many mobile operators around the world. There's nothing wrong with it, and it makes sense for them to become the default search engine on as many different screens as possible, big and small. But wasn't Google just whining to the DOJ about how Microsoft shouldn't be allowed to have MSN be the default search engine in their forthcoming browser? Yes, they were. They said it was an anti-trust violation and that consumers deserved choice. What about the consumers at KDDI and whatever other operator, do they deserve choice too? Look out for them if they get the China Mobile deal, that's the biggest operator in the world, and could instantly give them a great position in China.

Dell to Use Chip Made by A.M.D. (NYT)
Dell finally bit the bullet and will start using AMD chips in some servers. They had been the last Intel-only house, and some had seen this as contributing to their ills. AMD chips have seen a slight edge over Intel for sometime, so customers went elsewhere looking for the top of the line. The deal only applies to servers, but now that they have a relationship, it's not hard to imagine they'll be in PCs before too long. There's no question that it's a blow to Intel, which is already reeling.

What would the world do if headline writers weren't engaged in a perpetual battle to one-up each other with punning headlines? The Burger King IPO has spawned a rash of them. We rate them below.

Investors Business Daily--"Burger King heats up on Wall Street's menu" Oh. Please fellas. It's like you aren't even trying.

CNN Money-- "Burger King makes whopper of a debut". Not bad. Not bad at all.

South Florida Business Journal--"Shares of BK Sizzle during NYSE debut" Ding! We have a winner!

DealBook has the details on the ongoing debate about In-Q-Tel, the CIA's venture capital firm. The gist of it is that NY Post columnist Byron York says In-Q-Tel is a mess and the In-Q-Tel folks say that it just aint so.

Mr. Byron's declaration that In-Q-Tel "continues to funnel agency money into penny stock and micro-cap companies in Wall Street's murkiest back alleys" is also countered in The Red Herring. "In-Q-Tel does not invest in public companies," Mr. Tighe said. Further, it has "no involvement in any of those countries mentioned" by Mr. Ryals...

On Wednesday, The Red Herring followed up on Mr. Byron's claims. It interviewed Donald Tighe, In-Q-Tel's vice president of marketing and communications, who said the firm has a list of promising candidates for the chief executive job. Furthermore, the company's portfolio has shown overall returns of more than 26 percent, he added. Some In-Q-Tel-backed companies do lose money, The Red Herring wrote in its unsigned article, "a situation not unknown to all venture firms."

What you won't find in DealBook, the Post or the Red Herring, however, is any more information on Donald Tighe. So who is the marketing and communications guy for the spook venture fund?

At least in some quarters, the notion Wall Street is overrun with free-market Republicans persists despite tons of evidence to the contrary. Tim Carney provides details of the finance and business community's support for leading Democrat Charles Schumer in today's NY Sun.

The secret to Mr. Schumer's success is his close friendship to big business, especially Wall Street. In the last election cycle, according to the Center for Responsive Politics, Mr. Schumer was among the top three lawmakers (not counting presidential candidates) at getting contributions from many industries, including securities and investing, accounting, real estate, architects, liquor, banks, software, and textiles. In turn, the key to his friendship with big business is his liberal big-government agenda.

[Full disclosure: Tim Carney is the brother of Dealbreaker's John Carney, who occassionally writes for the culture pages of the NY Sun.]

Schumer's Way [NY Sun]

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:

Wondering in Washington

QuantLogic has uncovered a very useful article on how to get a quant job in finance. As it turns out, it's helpful to be good at math and finance. Unfortunately, it takes more.

And, importantly, seek to gain intuition. Quantitative finance isn't mathematics or chess; it's not a field for brilliant idiot savants; it's an attempt to model the world of markets and people, and you need a little wisdom and experience to know what can work.

There's not much there about how to "gain intuitiion" though, so good luck with that. While you are at it, you might try gaining super-powers and esp too.

Finding A Job In Finance [QuantLogic]

Finding A Job In Finance [pdf--Risk.Net]

Earlier today the SEC released its plan for dealing with some of the problems with Sarbanes-Oxley an SEC advisory panel highlighted last month. Jack Ciesielski has the goods.

One of the biggest concerns raised by the advisory panel was the disproportionate impact of tougher accounting requirements on smaller companies. According to the plan released today, the SEC solution is to give smaller companies more time to meet these requirements.

Non-accelerated filers will have until years beginning after December 16, 2006 to implement Section 404 rules. Currently, they'd have to comply in the first year ending after July 15, 2006 to comply. This will make a 404 report on internal control on non-accelerated calendar year filers first show up in 2008, on the internal controls in effect at the end of 2007.

We're sure that smaller companies will appreciate the extra time. And so will the accounting firms who get to bill them during those additional six months.

404 Relaxation: The SEC Opens Up [The AAO Weblog]

What's been pushing biotech stocks down for the last couple of months? Thinkblog says it's fear of a Democratic Congress.

I think there is a lurking reason in the background, proving yet again that Wall Street is a clever discounting mechanism. I see a shadow lurking of a Democratic Congress, and that impliies to many not only a stricter regulatory environment; it means to many a resurection of the discussion of cost containment in healthcare, whether that entails price caps, rationing in some way, dicsussions of pharacoeconomics, as well as a debate on insurance. If this is the lurking malady causing the symptoms seen, it is unlikely to go away soon.

But is the prognosis really so dire? What would Thinkblog prescribe to alleviate the affliction? Can we see the patient's charts again? How many more healthcare related metaphors can one post possibly tolerate?

What is Ailing Biotech? [Thinkblog]

Marketwatch's David Weidner says Harry's of Hanover Square is in and the NYSE Luncheon Club is out**:

After three years under lock and key, the institution*** is back, along with symbolic Gordon Gekko and Tom Wolfe references in the New York Post. Under the watch of the founder's son, Peter Poulakakos, the eatery is buzzing with its same financial clientele and new customers from downtown's growing residential base. Step into a time machine and go where men were men, women were dames and "gentlemen's clubs" didn't get you fired for cause. Along with the rebirth of Stone Street, Harry's is helping to make downtown a scene again.

We're also wondering if we should post Spot Market sightings at Harry's or any of the usual midtown lunch places. (We've mildly threatened to station interns with cameraphones outside of the Racquet Club, but that seemed a bit sadistic, even for us.) Any suggestions? Send to TIPS at Dealbreaker dot com.

** Weidner also says we're in and the New York Post is out. Note to self: remember to extoll Weidner's subtle genius re: next Marketwatch column.
*** And NYC Young Republican Meetup Venue

In and Out on Wall Street [Marketwatch]
Off the Menu [NYTimes]

Speaking of white collar crime (and in honor on Enron Jury Instruction Day) we feel obligated to point you to FindLaw's helpful "crash course in white collar crime," which seems to be targeting potentual perpetrators. A sample from the outline:

3. AVOIDING INDICTMENT
A. Getting Indicted Is Bad
B. Learning How to Shut Your Mouth
C. Know Your Prosecutor
D. Be Nice To Your Prosecutor

White Collar Crime: A Crash Course [FindLaw]

White Collar Crime Prof Blog points out that the seemingly obvious co-conspirator-protecting alibi in a recent insider trading case--"I overheard the stock tip in a bar"--isn't holding up:

Stephen Messina will plead guilty to violating Sec. 1001(criminal information here) for making a false statement during an SEC investigation of his purchase of call options in Electronic Boutiques right before the announcement of an acquisition of the company by Game Stop that triggered a 34% increase in the stock price, giving him a profit of over $300,000. It turns out that the information came from Messina's friend Robert Downs, an attorney at the time at Philadelphia law firm Klehr Harrison, which worked on the deal, although Downs was not involved in the representation.

Would You Believe I Overheard Two Guys in a Bar Talking About the Deal? [White Collar Crime Prof Blog]

Tech Central Station's Dominic Basulto suggests that the plebes are getting into hedge funds inadvertently by putting their money into mutual funds that employ hedging strategies. We guess he's technically correct, since some mutual funds take small positions in hedge funds, but we think think there's a difference between portfolio diversification and the sort of hedging strategies the funds that actually hedge (and increasingly, fewer do) employ. At any rate, you know it's bad when Kiplinger's is recommending Hedge Funds for the Little Guy:

According to David Landis of Kiplinger's, "a growing number of mutual funds offer nearly all of the benefits of hedge funds with none of the drawbacks. And all you need to get through the door is a minimum investment of $1,000 to $2,500." While all of these funds deploy their capital in different ways, they all share a common attribute: the desire to create relatively low-risk hedged positions for investors.

DIY Hedge Funds [TCS Daily]

Stagflation (Econbrowser)
It's simply too horrendous a word for the media to utter, so at the moment all you see are articles proclaiming that the markets are getting slammed on inflation worries. But let's be honest; a lot of this inflation we're seeing is nothing new. The real devilish specter is stagflation. If the 70's are indeed back, it's a logical component of the potential economic malaise. The housing story, which everyone had forgotten about, is getting play again, and of course the headlines aren't as rosy on the backslope. The declines in starts and prices (in some markets) are real, as is the decline in consumer sentiment (which might be related). So start saying it baby, stagflation.

Mittal set to launch bid for Arcelor on Thursday (Reuters)
Game on. Mittal steel formally launched their bid for Arcelor after several months of pre-game interviews and activities. The company has received regulatory clearance from the relevant nations. The offer values Arcelor at $24.5 billion, and could have strong ramifications across the industry. Steel is one of the more fragmented of the industrial materials industries. There are just a couple of suppliers to their industry (BHP Billiton, Rio Tinto) and not a whole lot of buyers (car companies being some of the biggest); meanwhile there's thousands of steel companies, hundreds in China alone. The deal could be more important than ever, if there's an industry downturn and a possibility of overcapacity.

Hedge-Fund Manager Arrested (WSJ)
An Atlanta hedge-fund manager whose clients' funds mysteriously disappeared has been arrested in Miami. This is gonna be an interesting story, and we can only hope it gets turned into a TV movie. The manager, Kirk S. Wright, had a lot of money that had belonged to football players. At one point, they tried to hunt the man down at his home, when they realized that their money was missing. Also, at some point, he was able to deliver 30,000 to a Brooklyn ex wife, for alimony payments. Any suggest of wrongdoing is, of course, alleged. But if he did do something wrong, and it appears from all the evidence that something weird was going on (you know, being on the lam in Miami and all), it could be like one of those movies, where someone makes a bad decision and gets themselves into a world of trouble. Or maybe someone kidnapped his wife and demanded $100 million, and the attackers surgically implanted a microphone into the Wright's throat, so he couldn't talk to the police, and so he had to embezzle the money -- something like that. Hopefully, the story is more interesting than regular crime.

Stopping the Sprawl (BusinessWeek)
Check out the picture of HP CEO Mark Hurd at BusinessWeek. He must be quite the visionary with looks like that. Right now HP is doing everything that Wall St. likes; they're increasing sales, gaining share, shutting down factories and moving to China. The company announced that it plans to slash $1 billion in costs, which is the kind of announcement one expects after bad earnings. When it comes after good earnings, that's a major bonus. But right now, HP is simply playing it by the book, playing the outsourcing game, etc. which is fine. But Dell is still keenly focused on their strengths, manufacturing excellence, and they may rumble back to life yet.

Footnoted points out that Mylan Laboratories employment agreement with CEO Robert Coury gives the big guy access to the corporate jet for three years after he leaves the company. And just in case he doesn't use it too much, they'll pay him for unused time! Guess being a CEO means never having to fly commercial again.

Flying into the sunset‚... [Footnoted.org]

Is it just us or is it incredibly spooky that the Dow dropped 214 points on the 214th birthday of the NYSE?

No. We're pretty sure it is spooky.

Consumer Inflation Nails Stocks[WSJ]

As WallStFolly notes, today the New York Stock Exchange turns 214-years-young. Dealbook provides a whole host of relevant links. Us? We're going out and celebrating the birthday by raising a glass and toasting the original intentions of the founders of the NYSE--keeping the outsiders out and making lots of money for the insiders.

As the legendary Buttonwood Agreement put it:

We the Subscribers, Brokers for the Purchase and Sale of Public Stock, do hereby solemnly promise and pledge ourselves to each other, that we will not buy or sell from this day for any person whatsoever, any kind of Public Stock, at a less rate than one quarter per cent Commission on the Specie value and that we will give a preference to each other in our Negotiations.

Emphasis emphatically added.

Happy Birthday New York Stock Exchange! [WallStFolly]

214 Years of Bids and Asks [DealBook]

An Illinois-based company needs a CFO with 7 to 10 years of senior management experience in international finance. And, oh yeah, Jesus has to be your favorite management guru.

Qualifications include being a Christian, having a personal relationship with Jesus Christ and also agree with the Bible League's Statement of Faith.

Turns out that under Title VII, religious institutions are exempt from certain federal laws covering religious discrimination. We're not sure exactly what qualifies as an exempt religious institution but the folks hiring here-the "Bible League"-sure sound like good candidates.

CFO Careers [CFO.Com]

Here Is the City surveyed financial professionals in London on what they would do if they discovered that a close work colleague (and friend) was involved in unethical behavior. Citigroup topped list of snitching ethical firms.

1. Citigroup - 99.3% said that they would blow the whistle, 0.7% said they weren't sure, 0% said that they would keep quiet 2. Morgan Stanley - 97.4%, 2.6%, 0% 3. Jefferies & Co - 96.8%, 3.2%, 0% 4. Deutsche Bank - 95.1%, 4.9%, 0% 5. Bank of America - 91.4%, 8.6%, 0% 6. UBS - 89.1%, 6.0%, 4.9% 7. JP Morgan - 85.1%, 9.8%, 5.1% 8. Goldman Sachs - 83.6%, 10.3%, 6.1% 9. Merrill Lynch - 73.6%, 18.4%, 8% 10. DrKW - 72.3%, 19%, 8.7%

And The Most Ethical Staff In The Financial Markets.... [HereIsTheCity.Com]

Guides to dating and mating in New York City continue to proliferate. We're pretty sure these things are popular because so many New Yorkers are convinced that they must be doing something wrong, and maybe a guide would help. It's kind of reassuring to think that a well-written guide would rescue us from bad dates and worse relationships. The alternative is that we're all destined to live long lonely lives in proximity to someone of our preferred sex who we really can't stand and we suspect just wants us for our money, looks or club memberships.

Today the reigns of Bankersball have been given over to former finance professional "Ex-Working Girl" to describe for women the different types of dating candidates they might stumble across.

Finance/I-Banking Guys - Ah, what can I say about my counterparts. It's definitely a love-hate relationship. These guys are driven and successful, which can be great because that also means that when they have time to play, funds are not an issue and they love the finer things in life (thus their love of beautiful women). However, that's just it - "when they have time to play". They often don't. And because of their jobs they are often stressed out. Even after they get off work, it takes a while for them to decompress. But if you're the kind of a girl who likes a challenge (like me) then I think you can appreciate these guys. If nothing else, they make a great fling.

Just in case her message isn't clear, we offer this translation: "Investment Bankers=Good short term positions."

Ex-Working Girl Presents: The Guys Guide [BankersBall]

Registered Rep mag profiles Mark Theirman, a class action lawyer (it's Class Action Day at DealBreaker) and ginormous Star Wars fan who is bringing suit against several large financial services firms for failing to compensate brokers for overtime work:

Thierman is now bringing his legal campaign east, with about 35 more class-action lawsuits, including some in New York, New Jersey and Pennsylvania. The list includes nearly every firm you'd expect, and then some: A.G. Edwards, Bear Stearns, Merrill Lynch, Morgan Stanley, Smith Barney, Edward Jones, Wachovia Securities and Raymond James & Associates. Thierman estimates that the suits represent about 100,000 brokers, past and present.

Wall Street Wage Fight [RegisteredRep.com]

We've said before that Jamie Dimon has a bit of a "story" problem (as in, nothing's happening and he doesn't have one) but you could generally rest assured that he was off cutting costs somewhere because, well, that's what he does. But now it appears that JPMorgan's cost-cutting back (as in, Dimon's pay):

Executive pay has been a sensitive topic at JP Morgan, which awarded Chairman William Harrison and Chief Executive Jamie Dimon $22.3 million in compensation in 2005, representing increases of 39 percent and 47 percent from the year before. By comparison, JP Morgan's stock gained 1.7 percent in the period.

JPMorgan Investors Back Resolution It Opposed [Reuters]

Related: Jamie Dimon: Is There Any There There?

The various deadlines for the class action suit against Salomon/Citi for Jack Grubman's analysis of AWE circa 2000 are approaching. (If you traded AT&T during that period, you're probably going to get the litigation flyer in the next few days.) As a reader points out, "sometimes scumbag class action lawyers do good things, like keep stories alive."

The proposed settlement is for a little over $74 million, to be split between the millions of middle American grandmas who were allegedly victimized by bad sell-side analysis. We figure it works out to $2.67 per victimized grandma and roughly $2 million per class action lawyer.

Salomon AT&T Litigation [Berdon, LLP]

A reader charts the devolution of the JPMorgan summer analyst blog, based on changes to its tagline and a recent post indicating that it has only days to live:

The path to disillusionment:

April 29: As everyone knows, corporate finance is the most important part of every bank, especially JP Morgan. This group is dedicated to the corporate finance summer analysts at all JPM offices for Summer 2006. This summer is going to be an orgy of Excel-induced I-Banking pleasure. Goldman Who? Shiti-Bank.Lame-man Brothers. Deutsche-Bag Bank. No bank can compare.

May 01: As everyone knows, corporate finance is the most important part of every bank, especially JP Morgan. This group is dedicated to the corporate finance summer analysts at all JPM offices for Summer 2006. This summer is going to be an orgy of Excel-induced I-Banking pleasure.

May 10: This group is dedicated to the corporate finance summer analysts at all JPM offices for Summer 2006. This summer is going to be an orgy of Excel-induced I-Banking pleasure.

May 12: This group is dedicated to the corporate finance summer analysts at all JPM offices for Summer 2006.

May 14: "As you can see, the blog has been down-sized a bit. Seeing as we are starting in a couple of weeks, this blog will only be up for a few more days."

JPMorgan Summer Analysts 2006

Indiana Tries to Be First in Line for a New Honda Plant (NYT)
The Asian automakers still haven't gotten the memo about the decline of the American manufacturing base. Don't they realize that labor is inherently too expensive here to build cars? Shouldn't they be moving their design teams to lower Manhattan and their factories to Mexico? That being said, if you're interested in testing your econ. skills over your lunchbreak, here's a little quiz: if you want to support the "US economy" is it better to buy a Mexican-made car from a company that employs a lot of Americans (e.g. GM) or an American-made car from a company that employs mainly people in Japan (e.g. Toyota)? We found this question here last week; put your answer in the comments.

Bausch & Lomb, Securities Fraud, and Director Liability (The Conglomerate)
Well, it wasn't hard to see this coming. America's finest regulatory agencies are turning the screws on Bausch & Lomb over the spiraling problems of ReNu with MoistureLoc. The FDA is claiming the company was tardy about disclosing problems, while questions are emerging that will interest the SEC. Just so you have a heads up on the issues involved (and because you'll never get the facts from the press, which will be fascinated mainly by the fungus), Law Prof Elizabeth Nowicki notes some interesting facts. One is that RiteAid and Target both sell generic solution, which might just be repackaged Bausch & Lomb stuff. If so, could they get ensnared in this? Also, there was already a lawsuit last year from a woman who claimed that she needed a corneal transplant after using ReNu with MoistureLoc, so there are some big questions looming over all the timing of what Bausch knew and when. Stay tuned.

Hewlett-Packard Shares Rise as Profit Beats Analysts' Estimates (Bloomberg)
HP continues to make the case that it's actually taking major shots at Dell. What's not clear is why. All of the sudden, people are touting the retail model, saying that it's more convenient for people to go just get a cheap PC from a nearby electronics shop than it is to buy a computer online, and wait a few days for it to be customized and delivered -- but again, what changed in the PC industry that people stopped caring about customization? Have PCs just become affordable enough for most people that they don't have to spend much time tweaking features and making tradeoffs that optimize the box for their tastes? Or are people more concerned about design than they are guts? HPs do look a little nicer than Dells. Who saw AMD and HP both starting to cruise against their more dominant rivals?

Music Labels Sue XM Over Recording Device (Washington Post)
You may not realize it now, but the record labels are dead. Sure, they're still making a lot of money, and they've got vaults and vaults of great stuff that they'll be able to sell for sometime (maybe), but they've ceased having any economic function. Their corporate strategy is to do whatever the lawyers tell them to do, whereas it should be the exact opposite. As internet distribution takes hold, their business of selling CDs is toast, while efficient mechanisms for word-of-mouth to spread will make their ability to promote artists irrelevant. They're suing everyone in sight, like the drunk guy at a bar who is convinced that everyone around him is a drunk asshole; they want $150,000 for every song that a user recorded to a device, which means they're not just drunk, they're high. Sort of ugly to see such a public meltdown.

Jossip confims our earlier report about the probable end-destination for Duke lacrosse players--investment banking:

While we're still sorting out which Wall Street financial house has the unlucky fortune to be associated with Evans (perhaps we'll let Dealbreaker.com in on the fun), we do know he was already apartment hunting, looking for a three bedroom flat in the $4-5,000 range somewhere in Greenwich Village, Union Square, Central Park South, Midtown, East Village, or SoHo.

Duke Rape Suspect Dave Evans' Grand I-Banking Plans [Jossip]

Update: WallStreetFolly speculates that the bank in question is probably Merrill Lynch.

A probably unavoidable brokeback parody: Brokeback Bankers.

Central to the Enron defense team's closing argument today was the contention that all those smart, tough guys and gals who ran Enron when the going was good were tricked and intimidated by prosecutors into testifying against their former bosses.

Petrocelli dismissed the line of 22 witness presented by the government as people "robbed of their free will" who chose to lie in order to avoid a government persecution.

WallStFolly has unearthed this article about the Stanford tennis star who interned at Goldman last summer.

But that's totally last summer's news. We want to find out about this summer's interns. Any stars out there heading into the playing fields of conference rooms, cubicles and spreadsheets this summer? Feel free to nominate yourself. Maybe we'll even have a "Intern of the Summer" contest.

By any number, Stanford a success [SF Chronicle via WallStFolly]

You already know that gasoline costs ten cents a gallon in the alternate universe where we are still on the gold standard. Now Glen Williams demonstrates that gasoline is cheaper today than twenty-five years ago when measured as a fraction of household income.

Even looking at the poorest fifth of the population, the fraction of income required to buy gasoline is still lower than it was in the early '80s. Not surprisingly, the fraction has risen a great deal over the last few years, but it still has not surpassed its historical peak. The same holds true for every other income quintile, but the effect is more muted, since higher income means any given price difference will correspond to a smaller fraction of income.

Broker Joseph Blood is suing Citigroup for unpaid overtime wages, according to the Boston Globe.

Blood said he was not given overtime pay, as he claims is required by the US Fair Labor Standards Act. Under that law, nonexempt employees must be paid time-and-a half after working more than 40 hours in a week.

Boston lawyer Shannon Liss-Riordan, who represents Blood, said her client typically began working at 7 a.m. and left the office at 9 p.m. on weekdays.

He also worked half-days on weekends, she said. ''Financial consultants work a tremendous amount of hours," she said. ''The impact on family life is huge."

Welcome to the next great American labor movement. Rise up financial professionals. You have nothing to lose but your chains.

Broker denied overtime sues Smith Barney [Boston Globe via Under The Counter]

Goldman Sachs will be advising ClubCorp, a top owner of golf courses, on a possible sale of the company.

Before you get too excited, however, please note that the Dedmans, ClubCorp's founding family, are holding on to what may be the crown jewel of the ClubCorp properties, the nearly perfect Pinehurst courses and resort.

ClubCorp Hires Goldman Sachs as Advisor [Cybergolf.com]

Everyone hates when lawyers make money. Fortunately, they don't really make that much money at all. At least when compared to the fees of investment banks setting up the deals.

"New York transactional lawyers are extremely busy," [American Lawyer editor in cheif Aric] Press said. "For you and me, what they are charging is a king's ransom, but compared to what the bankers are earning and the size of the deal, the lawyers' fees could often be regarded as a rounding error."

M&A boom provides a bonanza for lawyers [Reuters]

Attention finance nerds (Finerds?) : John Bogle is blogging (Bogling? Blogling?).The inaugural post from The Man Himself:

The Bogle Blog. Can you believe it? A few months ago I barely knew what on earth a "blog" was, and now here I am blogging. I'm excited, however, about the opportunities this new website will offer me, and hope that what you find here keeps you coming back to check in...

John C. Bogle Blog

$$$ The new breed of club kid (and alleged Goldman Sachs employee): The Popper Monster [Manhattan Offender]

$$$ Everything you thought you knew about SWOT is wrong. [BusinessPundit]

$$$ Why arguments over email are nastier than arguments in real life: because you're egocentric. [Christian Science Monitor]

$$$ "Cool Stuff Being Made": The blog of the National Association of Manufacturers. Recent videos: "How Krispy Kreme Donuts Are Made", "How BMW z-4s are made"... [ShopFloor.org]

$$$ Ken Lay's personal website. The sky blue theme makes him seem so trustworthy, so innocent. [KenLayInfo.com]

Andy Kessler predicts that Skype is going to sucker punch Vonage just before their IPO--and Vonage is already hurting:

The buzz on the Street is that the Vonage IPO is on the rocks. They HAVE to raise money or they are in a world of hurt. Their investors don't want to put another penny in and the company seems to still be bleeding cash, $75 million in the first quarter of 2006. Geez, Vonage is begging customers to buy 20% of the deal - not a great sign.

The AP has just discovered Ivan Boesky's ex-wife's essay anthology, Seema Says:

One of the promotional blurbs on the back of the recently published anthology of columnist Seema Boesky's work says her offerings "have made thousands of readers smile, scratch their heads and wonder." Indeed. Wonder things like: How fabulous is it to be obscenely rich? What do you talk about over sirloin and champagne when your seven-pound Maltese terrier has impregnated a Bijon? What do you do when geese overrun your own personal orchard? And, seriously, how fabulous is it to be obscenely rich? These and other answers to life's pressing questions—but mostly the one about being rich—can be found in the oeuvre of Boesky, a columnist for the monthly Westchester Wag magazine, in suburban Westchester County north of New York.

Of Being Rich, Plastic Surgery, and, Uh, Being Rich... [AP]

Last week, we brought you a rare glimpse of the elusive Goldman hybrid in its natural habitat. It did not appear to have swallowed any bankers at the time the photograph was taken, but was no doubt waiting patiently for its prey, which would soon be folded into its belly, a jumble of knees, Turnbull & Asser and pitchbooks. Today, a reader sends us photo evidence of an entire flock of hybrids, noting that the size of the flock would seem to indicate that the whole "hybrid black car" idea hasn't exactly caught on (though the source suggests this has more to do with a lack of drivers than a lack of demand)**:

But, says the source, "For all the entitled banker-wankers whining about their precious knees getting brushed by the back of the passenger seat, let it be known that the Prius is not the only option. There are both Highlanders and Lexus (see below) available:"

We should also note that the Ozocars have in-car Internet, which means... mobile DealBreaker!

** Our tipster also points out that the cars are just sitting there, and Ozocar probably got a decent bulk deal on them from Toyota. So maybe the new business strategy should be flipping them to private buyers, given the hotness of the secondary market right now.

Related:
A Goldman Hybrid, Photographed in the Wild
I Would Like the Most Blinged Out Eco-Friendly Towncar Available
The Most Blinged-Out Towncar Available

Yet another update from The Planespotter:

So, either legendary global investor Gary Brinson or Lone Star Global Acquisitions president Ellis Short are taking their fractionally owned G-IV to Pulkova at St. Petersburg, Russia overnight. Good luck. Natural resources are hot if you don't end up in the Russian pokey. Likewise, Thomas H. Lee's G-IV that was out in Denver last week is now at Dallas-Ft Worth. Natural resources are hot. While they're at that, I hope execs at Thomas H. Lee are either planning a deal in the Low Country region or have killer handicaps right now considering how often their other G-IV has taken them to Savannah-Hilton Head, Charleston, and Brunswick, GA in the past two weeks. Check for the golf-glove tan.

In other news, Nokia pulled their G-V into Teterboro yesterday. In another unlikely combination, the G-IV fractionally owned by the New York Stock Exchange, Chesapeake Energy and Gagosian Gallery spent their weekend in Paris, landing at Le Bourget. I don't like de Gaulle, either. Happy trails.

Related: Planespotting archive

Wal-Mart's 1st-Qtr Profit Rises 6.3% on Easter, Spring Sales (Bloomberg)
Wal-Mart posted a strong quarter fueled by Easter and spring... uh, cause Easter and spring didn't happen last 1st quarter? The company has been lagging its rival Target, which is probably why Bloomberg saw fit to include this gem: The stock has gained less than 1 percent in the year through yesterday, compared with a 1.1 percent increase for Target, the second-largest U.S. discount retailer. It's almost certainly this %.1 difference that's spurring CEO Lee Scott to invest heavily in remodeling their stores, adding sushi, organic foods, and higher-end clothing. Update: The company has also warned that sales would be hit on gas prices. Too bad you can't have Easter and spring every quarter.

Credit agencies punished (SF Gate)
Those non-profit credit-counseling services that always seemed oddly competitive and smarmy are no longer non-profits. All 41 of them (they all seem to have names like Ameridebt didn't they?) had their non-profit status revoked, as it was determined that they functioned primarily for the benefit of officers and directors, who profited handsomely. Typically, the advantage of being a non-profit is tax-exempt status, but in the case of the credit counseling agencies, the non-profit status probably served as a good way to get customers looking for an ally.

Bush Proposes Sending Troops to Border (Washington Post)
At a cost of several billions of dollars, President Bush will attempt to affect a marginal change to the number of illegal immigrants who come across the Mexican border to work each year. According to the media and the President and his dwindling base, the border is broken and needs fixing, though it's not at all clear what happened in the recently to convince everyone of this. How did they all come to this at once; and when did this become a national priority. The President, according to his handlers, will also push for new tax cuts in an attempt to appease his base with 'red meat', but here his base and our astute readers are on par. For as you know there never has been a tax cut, and it's likely that more tax cuts won't be enough to appease the core -- they want to see spending cuts. They want to see entitlement reform and that the President doesn't have the will or political capital to do.

Lawyer: Talks Underway in Quattrone Case (AP) (via Wall St. Folly)
Will it truly be the year of vindication, or will the disgraced class of 2000 suffer some major setbacks in 2006? Obviously, you've got the biggie coming up in a matter of weeks, that being the Lay-Skilling verdict. But we've also seen the return of Henry (now a tech blog prince), Mary Meeker (who just managed to hang around by being quiet), The Jacob Internet Fund, and perhaps Quattrone. He's already been tried twice, with a second conviction and 18 months of prison time overturned. Prosecutors say they want to try him again, but he can make a reasonable argument that enough is enough. Then, of course, there's the question of whether he can petition the SEC to work on the street again. Who would hire him? Who knows; he'd probably start is own boutique firm, or hedge fund.

Lower court judges should exercise discretion in deciding whether to grant injunctive relief in patent cases, the Supreme Court said in an important, unanimous decision today. The court overturned an earlier decision by the Federal Circuit Appeal Court which had held that injunctions stopping further patent infringement should always be granted in such cases.

Them's the boring bits. The fun part of this case was the way it pit Big Tech-Ebay, Microsoft-against Big Pharama-like Pfizer and Johnson & Johnson.

The FT's interview with Maria Bartiromo overflows with all sorts of juicy details, from what Bartiromo ordered for lunch at San Pietro to her relationship with Joey Ramone.

As Wall Street Folly points out, the reporter is clearly smitten with her.

Maria, of course, does nothing to discourage this, dropping arousing little comments like, "They are waking up with me and they are going to bed with me and I love that."

We love it too.

Lunch with FT: She's the One [Financial Times]

Maria Bartiromo dishes at San Pietro [Wall Street Folly]

Last week, we took note of FT columnist Stefan Stern theory that the quiet reaction of economists to the death of John Kenneth Galbraith was fueled by for his commercial successes. We might have said the reaction was "quiet, too quiet"--like an action movie hero knowing he is walking into an ambush. This week they've come after the corpse of JKB with guns ablazing.

Jane Galt tells us that JKB was instrumental in keeping her from getting caught up in the last tech bubble. Sounds promising. Then she adds:

It was natural enough, then, that when my introductory macro professor was outlining the various schools of economic thought, I should ask into which school JKG fell. My professor furrowed his brow, thought for a moment, and finally said "his ideas are less of a school than a conspiracy theory."

From Market Watch.

Lehman Brothers Holdings Inc.'s (LEH) biggest geographical gap lies in Asia, the fastest-growing markets for investment banks, the company's chief financial officer said Monday.

Lehman generated 37% of its revenue outside the United States last year, beating all its peers, CFO David Goldfarb said in a Webcast of a UBS investors' conference in New York. However, the company trails them in most businesses in Asia and in some areas such as prime brokerage and investment banking.

The firm's share price and profitability have beaten its competitors in recent years as it strives to close gaps through hiring and some acquisitions, he said.

Goldfarb has previously said that Lehman's top investment priority this year is building its business in Asia. The firm employed 800 people there in the late 1990s, currently has about 1,500, and expects to grow the number to 2,500.

Lehman's biggest gap is Asia, CFO Goldfarb says [Market Watch]

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.

So the people on my deal team are total asses. It is not every day that people get to visit London, but they insist on spending hours and hours "working," which translates to sitting around in conference rooms and hotel rooms and hotel conference rooms (and by the way, someone has to do something about hotel conference rooms, I can't believe my co-workers sit for so long without moving and without their butts hurting) and reviewing "documentation." Personally, I don't call a bunch of spreadsheets "documentation." Documentation is suppose to explain something. Like how to work your iPod, or the best way to keep the leather on your purse in good condition or something. Why the hell did we come to London if they are just going to be in a hotel or conference rooms the whole time? They might as well have been in Atlanta or something. And let me tell you, dear readers, Atlanta is no picnic.

Anyhow, I started taking pictures of the "deal room," which is another totally stupid term since there is no dealmaking going on in there, just reading of more "documentation," but this total bitch of a receptionist told me there was no photography allowed. That is totally stupid considering there were video cameras all over at every corner of the hallways. Hello, how can there be "no photography" when you have cameras everywhere? So I just took pictures when she wasn't looking but then some obnoxious guy actually took my camera away. Can you believe it? That's assault, you know. He gave it back to me but my memory card was missing. Assault and theft. Isn't that robbery or something? Anyhow, I plan to ask Dad what can be done but I didn't get the guy's name. That was stupid.

They were boring pictures anyhow. Just a bunch of boxes with papers in them. I thought I had some pictures from the night before on there but I don't really remember for sure and I can't find the business cards I collected because I left them at someone's house. Anyhow, I got a new memory card and went out to M&S before I had to go to the Airport.

After the camera incident I got a call from a partner at the prestigious investment bank I work for. He had heard about the entire thing already and suggested that I should come home immediately. He was kind of mean but then my Dad's friend on the executive committee called and apologized and said there was lots for me to do for the Ambassador Program back home. Of course, he's right. They had been so beastly there was no reason to let them take advantage of my contributions to the team any longer.

This sign explains a lot. I think the British just have too much attitude. Wedding insurance must be a good bet considering the number of broken off engagements that must pop up once girls find out what dicks British men are. I left a bunch of things at this guy's place and he wouldn't call me back so I could get them back.

Henry Blodget explains.

So maybe the outlook for free cash flow growth isn't as bad as it seemed. Unless Google plans to become a REIT, approximately $750 million of the $1.5 billion in CAPEX estimated for this year should disappear. When/if it does, this will provide a nice lever for cash flow acceleration.

Where Google's CAPEX is really going [Internet Outsider]

"The definition of 'overpaid' is 'someone else who is paid more than I think they should be,'" a friend once told us. And, indeed, despite numerous journalistic forrays into the realm of CEO compensation, no-one has ever been able to discover a specimen of the human beast who believes that his own compensation counts as 'overcompensation.'

Now the Becker-Posner blog is taking up the question of why America CEO's are paid so much. CEO compensation in the U.S. has grown six fold over the last quarter century, and CEO's of U.S. companies make close to twice as much as their counterparts elsewhere. Becker points out that the growth of CEO pay is proportionate to the growth of the companies they manage.

...the average size of large American companies has grown in real terms about six fold during the past twenty-five years, regardless of how "large" is measured, as long as the same measure is used consistently over time. The other important fact is that the largest 50, 100, or 500 American publicly traded companies are much bigger than the largest companies in other countries.

The India Times blog today warns bright young Indians about the reality of investment banking.

3. Now what an analyst does. First of all they work mind numbing hours. They are supposed to work 18 hrs a day, 7 days a week. non stop! night outs are frequent. You are always on call. you can not plan anything. no vacations! This life is hell.

It almost goes without saying but a lot of the work at our investment banks is done by young people hopped-up on various chemicals. So it is with a glad (if somewhat erratically racing) heart that we bring you the news that drinking coffee may keep your ticker ticking longer.

One to three cups of coffee a day may protect people from heart disease and strokes, according to research which contradicts numerous studies that have suggested that coffee is bad for you.

Drinking coffee 'is good for the heart' [Telegraph]

Lehman and Goldman both came in at the top ranks of Barron's survey of corporate performance. DealBook has the details.

Both companies, of course, have benefited from hot capital markets around the world. Barron's depicts Lehman, which ranked No. 1, as having successfully transformed itself from a stodgy old bond house into a hot-shot player in both investment banking and asset management. It recorded record profits this year, and its stock price has doubled.

Phrases like "hot capital markets" and "hot-shot player" make us happy. It's as close as we get to literary bank smut.

Lehman, Goldman Top Barron's 500 List[DealBook]

News Corp will begin offering episodes of Fox's "24" on MySpace next week, according to the Wall Street Journal. This seems to be the first step of News Corp's plan to expand the social networking website into a mainstream media source. Episodes will be priced at $1.99, which is exactly what Apple's iTunes charges for the episodes. At least two episdoes will be sponsored by Burger King and offered free on MySpace. Com.

Jack Bauer, of course, already has his own MySpace page.

Myspace to Offer Dowloads of TV Show '24' [Wall Street Journal]

Bloomberg columnist Mark Gilbert wrote a column comparing investment banks to rocks stars. Now Bankers Ball has responded with the I-Bank equivalents of sushi rolls.

We like this game. A reader has already send us "If I-Banks Were Hit Films" but we invite more contributions in comments.

If Banks Were Musicians [Bloomberg]

If I-Banks Were Sushi Rolls [Bankers Ball]

SUMNER Redstone, who split his giant Viacom media empire into two separate companies, is now trying to get the chairmen of the firms to stop fighting with each other and play nice.

Insiders say that nasty stories have been leaked to reporters about Viacom chief Tom Freston and CBS boss Les Moonves - and that staffs of each man believe the stories are being pitched by the rival camp.

When the chief flack for one chairman called the flack for the other and accused him of spreading lies, the spokesman allegedly confessed, "You're right. I work for a deeply insecure man who made me do this."

Page Six then goes on to note that spokepersons for both both companies deny the exchange took place but, well, they would say that anyway. Maybe the Viacom and CBS spokespeople need their own spokespeople.

Dirty Tricks By Viacom-Rades [Page Six] [Free Registration Required]

J&J to Skip Network TV's 'Upfront' Market (WSJ)
Johnson & Johnson is the latest company to raise doubts about the TV advertising market, with their announcement that they won't participate in the 'upfront market', when advertisers usually commit to buying a certain amount of ad minutes for the following season. Officially, J&J wants to harmonize their ad buying with the rest of their budget planning, but it's clear that the TV stations just don't have the same leverage they once did. They'll probably get it all sold still at a decent rate, but they can't force major advertisers to commit several months in advance as once they could. Obviously, the proliferation of alternative media has a lot to do with it. Another company rumored to be mulling a similar move is Coca-Cola.

More Like the 'Ostrich of Omaha' (BusinessWeek)
Zing! Michael Mandel at BusinessWeek tears Buffett a new one, deriding his pessimism of the US economy, while arguing that things are pretty good here. Mandel's approach is the good old USA inc. approach, trying to give us a DCF. If you believe him, he pretty much debunks all of the pessimists, trade-deficit worriers, dollar bears, market bears, and Cassandras in 500 words or less. To him, it's as simple as the US adding $4-7 trillion per year in value to the economy, while going $1 trillion per year deeper in to debt. We can assure that this article will be the subject of withering attacks by the end of the day; stay tuned.

MySpace to Offer Downloads of TV Show '24' (WSJ)
Fox News is getting into the online-downloads game via their MySpace subsidiary, which they bought last year for $500 million. The company will offer episodes of the show '24' for $1.99 each, with Burger King sponsoring the program. This is the first time MySpace has dipped its toe into the content distribution market; does it pose a threat to iTunes? Time will tell, but if they only serve Fox content, in an unoriginal way, it's hard to see it having much of a dent.

Oil falls on economic worries (Reuters)
Apparently, oil can move for other reasons that simply the vague "supply worries". Demand counts too (Lindsey Graham are you paying attention?). It took precisely two days of a down stock market to give the oil market jitters, something the oil market is used to giving, not receiving. It's not just the oil market, commodities such as copper and zinc were down huge. Apparently, the sinister cabal that controls all raw materials met over Skype last night and decided to bring down the price of their goods in concert. It probably wasn't the stock market, so much as it was fear of yet another week of browbeating from Bill O'Reilly and Lou Dobbs. There is some bad news here since commodity players have been among the main drivers of the stock market, and you probably have some (a lot?) in your portfolio. So any relief you get at the pump may just come out the other end.

Henry Blodget on Susan Kalla's (Caris & Co) suggestion in BusinessWeek** that Microsoft taking over Time Warner would be a "great move":

I don't know Susan and it's certainly possible that she was misquoted. If not, however, I have some questions: Where was she five years ago, when AOL bought Time Warner? Would she care to expound on why a proposal frighteningly similar to what has been deemed the most disastrous merger in business history would be a "great move"? Would she like to explain how the same company will be effective at competing against IBM and Linux on one end and sitcom production companies on the other? Would she care to hazard a guess as to where the headquarters of this fantastic new $100 billion corporation will be located? Would she... Never mind.

Other than that... terrible idea!

** We've said it before, but... people read BusinessWeek?

Inaugural "Doh!" Award Goes To... [Internet Outsider]

We've been hearing rumors about the JP Morgan reorganization for a while now. Word is that JP Morgan has overturned the old regionally based organization in favor of a global structure based around asset specific groups.

Now Traders Magazine has the details.

‚... the new head of global equities, is Carlos Hernandez. Until recently, the executive was in charge of origination and distribution of equities and debt securities in North America.

The changes have affected at least two other top execs. Patrik Edsparr oversaw trading of both equities and fixed income securities in North America. He is now global head of rates. John Corrie, in charge of European equities, had his job eliminated.

Other changes are in store for the 1,000-person strong equities group. Hernandez is expected to announce a new managerial line-up that may or may not include a global head of cash equities, say sources.

Now, Scott Harrington is in charge of U.S. sales and sales trading while Jim Brett runs U.S. cash trading. Dan Keegan was in charge of sales trading and co-head of electronic services. He just resigned to take a post at ATD.

JP Morgan Reorganization Takes Global Strategy [Traders Magazine]

A couple of weeks ago we sat in on a meeting discussing some new debt products that bankers are marketing to their corporate clients. Lots of people with the eyes of the-dead-who-have-been-buried-in-cubicles, and suit jackets stretched into U-shapes from being hung over the backs of chairs for too many late nights. Usually, we try to entertain ourselves in these meetings by playing with a calculator--typing "h3110" over and over again, or seeing what my phone number adds up to. This time, however, we spent the entire meeting amazed at two gentlemen sporting giant shiny watches over their shirtsleeves.

Economist and libertarian George Reisman argues that gasoline is at ten cents and falling. Or it would be, if we were on a gold standard.

Gold is now at $700 per ounce, and rising. To the [left] is a picture of a $20 United States gold coin known as a Double Eagle. If you look carefully, at the bottom of the coin, you can actually see where it says "Twenty Dollars."

This coin contains approximately one ounce of actual gold, which means that at today's market price of gold, it's worth $700. And this means that one gold dollar is worth $35 of today's paper dollars. And that means that one gold dime is worth $3.50 in today's paper money. This last, of course, is roughly what a gallon of gasoline costs in today's paper money. Which means that a gallon of gasoline costs just 10 gold cents.

Gasoline at Ten Cents a Gallon and Falling
[LewRockwell.Com]

Hot shot New York Times Magazine Freakonomics columnists Steven Levitt and Stephen Dubner have had to beat a not-so-hasty retreat from their claim in last Sunday's magazine that people born in the early months of the year are over-represented on World Cup soccer teams. Commenters on their blog and writer Steve Sailer have convinced them that this just isn't so.

$$$ Net Neutrality, as explained by a ninja. [AskANinja via Valleywag]

$$$ Michael Eisner is a tall, black man. [Infectious Greed]

$$$ Google nerdiness, run amok:

When it filed the regulatory documents for its stockmarket listing in 2004, it said that it planned to raise $2,718,281,828, which is $e billion to the nearest dollar. A year later, it filed again to sell another batch of shares-precisely 14,159,265, which represents the first eight digits after the decimal in the number pi (3.14159265).

As we've said before, we love CNBC but for all the wrong reasons. This morning on Squawk on the Street Mark Haines reacted violently when a discussion of the possible restructuring of tobacco giant Altria turned to the possibility of a "smokeless tobacco product."

"Smokeless tobacco? Who wants that? Next it'll be...here's a flavorless beer for you."

Ah, Mark. Couldn't have said it better myself. Now how long until the intern gets back from the store with our smokes?

BreakingViews notes that commodities traders are in big demand right now, with the lemming-like investor rush into metals. In fact, it's a good time for traders to negotiate their pay packages and BreakingViews offers the following suggestion:

...ask to be paid in old UK two-pence coins— at least for the first year. The copper in each of them is now worth 3p. So that's a 50% bonus, just for melting them down. But be sure to get the pre-1992 variety. That's when the Royal Mint changed to copper-coated steel...

Arcelor to go ahead with 5 bln euro buyback plan (Reuters)
Arcelor is doing everything in its power to stave off the Mittal hostile takeover. Yesterday it sued Mittal for a patent violation -- yes, a patent violation for a steel product. Today it confirmed a buyback plan. This has Oracle, Peoplesoft written all over it, though we all know how that turned out. If Lakshmi Mittal really wants to lower the boom, and get the Arcelor shareholder panicking, he needs to lower the offered price, and then lower it by $100,000 every half an hour until management agrees. That'll be like the tactic that hostage take in the movies, in which they kill a random hostage every hour. Works every time; it's just devastating to the psychology.

Yahoo CEO laments not buying Google (CNET)
Uh, yeah, that one should be pretty obvious. When your rival is crushing you at every turn, stealing market share, and completely changing the game -- yeah, his regret is understandable. That being said, Yahoo's track record isn't good when it comes to nurturing products. They often build them, and then let them rot, failing to keep pushing them forward. It's not hard to see this same fate having happened to Google; the world should be thankful that it never happened.

Wal-Mart Eyes Organic Foods (NYT)
Wal-Mart is really making its pitch for the Hank Paulsens of the world. They're going upscale, and now they're going organic. Will they be able to overcome their image to get the shoppers of organic foods into the doors? We wouldn't be surprise (at all) to see some lobbying of the FTC to prevent the company from selling organics, as people claim that it's unfair to small organic retailers for a big company like Wal-Mart to also sell organic products. That being said, all this might reveal something pretty important with the company. All these moves about going upscale could be a pretty strong admission that growth in their core markets is over. Supposedly they see little slowdown in new store openings, but realistically it seems otherwise. Overhauling stores, adding sushi bars and organics are all risky things. They wouldn't be doing them if their bread and butter still had its groove on. Another angle, is that this is probably a mixed blessing for the organic farmers in America. It equals more volume, sure, but at the cost of dealing with the most powerful monopsony in the world, a buyer that has almost total pricing power. Good luck

This shot is from Wall Street Folly's screen-caps of CNBC's footage of alleged insider trader and Plotkin ring-member Jason Smith's perp walk. I guess Smith didn't get the Patrick Byrne memo about celebrating this sort of thing.

Many more here.

Reuters is reporting that Lehman Brothers and Goldman Sachs are battling it out for the love of George H. Walker, IV. Walker is President George W. Bush second cousin. At 29 he became the youngest ever partner at Goldman and currently heads its alternative investment group. He reportedly lives on Greene Street in Soho.

More importantly, according to at least one source inside of Goldman, he's a "total fox."
Lehman Trying To Poach Goldman Star Walker [Reuters]

Correction: Our co