Owner: Prince of Wall Street URL:http://www.princeofwallstreet.com Join Date: Mon, 25 Feb 2008 02:42:57 -0600 Rating:0 Site Description: Prince of Wall Street is a regularly updated finance blog featuring original finance news, gossip, trades, and commentary. The commentary predominately focuses on M&A, private equity, hedge funds, and investment banking. Prince of Wall Street also p Site statistics:Click here
Is FICO a Good Metric for Originators? 2008-03-06 02:27:45
Richard Bitner recently released a book about the mortgage meltdown from the perspective of an originator of Mortgages. The book, entitled Greed, Fraud & Ignorance: A Subprime Insider’s Look at the Mortgage Collapse, gives investors some food for thought in considering the faults in the originate, securitize, and issue to investors chain that mortgages went through. The Prince is intrigued by Mr. Bitner’s book mainly because he seems to confirm much of what investors assumed and observed about originators once mortgage securities began to plummet in value.
Richard Bitner spent 14 years in the mortgage industry, five of those as the president of Kellner Mortgage Investments, a subprime mortgage company. He was also a Director for GMAC Residential Fundin Read more:Metric
, Originators
Banks Thinking Long-Term on Analyst Recruiting? 2008-03-05 02:35:46 Every school year aspiring financiers or merely financial opportunists begin the summer and full-time investment bank recruiting process. The most prized positions in the capital markets and investment banking divisions are intensely desired by these undergraduates. Each student dreams, realistically or not, to snag a spot in the M&A group at the most prestigious bank possible, and fantasizes about the doors that would open from acquiring such a position. The thought process goes something like this: "Kill myself to get interviews, get a summer offer, kill myself over the summer in the best group, get a full-time offer, kill myself for 12 to 24 months as a full-time analyst, learn a lot, hope that the sacrifice part of my 20s is worth the long-term rewards, maybe Read more:Analyst
Silver Lake’s Fundraising - Cheap Tech Targets? 2008-03-04 18:31:24 4 Mar 2008 - Silver
Lake Partners announced yesterday that it closed its third tech-focused buyout fund with $9.3 billion in committed capital. LBO Wire and peHUB broke the story but Silver Lake has not confirmed it publicly. This fundraising started back in 2006 with $7.5bn target. Silver Lake’s previous fund closed at $3.6bn. Silver Lake is still fundraising for its new $750mn+ middle market fund. CalPERS bought a 10% stake in the private partnership which valued the firm at $2.75bn in 2008 but Silver Lake has not announced an acquisition this year. Obviously, debt for buyouts is unavailable right now but given the recent and growing weakness in global technology spending caused by the U.S. recession Silver Lake is likely to see some cheap assets avail Read more:Fundraising
, Cheap
Microsoft Talking to Little Company named Yahoo? 2008-03-04 18:08:13 4 Mar 2008 - Take a look at this excerpt from a piece on Deal Journal.
Today at a Morgan Stanley Technology Conference, Microsoft
finance chief Chris Liddell brought up, completely voluntarily, the company’s bid for Yahoo
. Here is the conversation between Liddell and Morgan Stanley technology analyst Mary Meeker, from an SEC filing: MARY MEEKER: In our remaining minute, anything that you’d like to address that we’ve missed? CHRIS LIDDELL: Well, no one asked me about Yahoo, which is interesting. But I’m sure everyone is vaguely interested in it. You know, their…" MARY MEEKER: What was that? What was that? CHRIS LIDDELL: Yeah. The small company that we’re looking to acquire. There is — there?s no fundamental news. I mean, the & Read more:Talking
, named
Covad Communications Buyout Arbitrage Update 2008-03-04 13:48:05 4 Mar 2008 - Check out this update from Intelligent Speculator on the Covad Communications
buyout arbitrage opportunity. The Prince also blogged about Covad and attempted to handicap the deal based on public information. Intelligent Speculator points out that the deal is now closer since the acquisition has cleared anti-trust and the shareholders have approved the deal.
Read more:Buyout
, Arbitrage
, Update
The Municipal Bond Conversation Moves Forward 2008-03-03 12:14:08 3 Mar 2008 - Felix Salmon over at Market Movers on Portfolio.com has some interesting commentary on how municipal ratings between different firms diverge and some commentary on this NYT article this morning. Many thanks to Abnormal Returns for drawing attention to The Prince’s idea for how municipal bond issuers should respond to the current market for insurance. Felix has two earlier posts, here and here, worth taking a look at on the subject of muni bond yields. Naked Capitalism also weighs in here on the ratings agency conflicts in muni bonds. Dealbreaker offers a little more commentary on the NYT article.
Read more:Municipal
, Conversation
, Forward
Munis Should Form Cooperative Entity to Self-Insure 2008-03-03 01:25:51 The Prince has been following the troubles of the bond insurance business for the last few weeks. Many thanks to Naked Capitalism, Alea Blog, and Information Arbitrage for their commentary to supplement The WSJ. It now appears that many of the largest monolines (bond insurers), if they are able to raise additional capital and follow through with the recommendations of the rating agencies, may maintain their AAA ratings. The possibility of keeping the top rating seemed highly unlikely for MBIA and Ambac, the two largest monolines, just a few weeks ago.
The recent failures of many municipal bond auctions combined with the pulling of many expected municipal bond issuances has created more turmoil in the market related to the insurers. The spike in rates has caus Read more:Entity
, Insure
CMBS Declines: Speculation or Fundamentals? 2008-03-03 01:10:30 2 Mar 2008 - Despite many professionals and many of his friends in structured finance telling The Prince that CMBS is a completely different animal than residential MBS, it apperars something is afoot. The Prince must have heard it a thousand times that the fundamentals, financing structures, and incentives in CMBS are more sound than MBS. Yet, all along Goldman kept telling The Prince to sell CMBS and indices of derivatives linked to CMBS. Now this article in the WSJ, tells The Prince that GS might have been right. Yet, did GS’s advice, flying in the face of other analysis like that from DB, cause traders to oversell CMBS when the fundamentals are actually quite strong? If that is the case then maybe CMBS is a bargain as a long-term investment.
Read more:Fundamentals
The Prince’s Weekend Audience 2008-03-01 16:12:10
A Prince
Turned Pauper - WSJ - Sympathizing with another member of the aristocracy. The Prince does love those petro dollars.
Surveying the Best Deals - The Deal - The attitudes and perspectives of top executives, investors, advisers and outside consultants in the emerging-technology industry during 2007.
Wall Street Compensation: Issues, Structure and Accountability - Information Arbitrage - Some more interesting ideas and commentary on fixing compensation incentives on Wall Street.
# of Homes Sold -foreclosu.htm">Where foreclosures > # of Homes Sold - The Big Pictures - Falling home sales and rising foreclosures. Can it get worse in housing?
Schwarzman’s School Ties - DealBook - C Read more:Weekend
, Audience
Buy When There’s Blood in the Streets 2008-02-27 11:20:46 Baron Philippe de Rothschild, ever an opportunist, is said to have advised, “Buy when there’s blood in the streets.” Investors like Warren Buffett do just that all the time. Hedge funds have been set up specifically to take advantage of carnage in the markets. But for some inexplicable reason, many corporate C.E.O.’s can’t seem to stomach making a big deal when the going gets tough.
The New York Times ran an interesting story (Mergers in a Time of Bears) yesterday morning by Andrew Ross Sorkin. The article comments on a recent study, which examined how successful mergers were based on when in the merger cycle they were announced. While the findings of the study are not exactly earth-shattering, they do confirm what many investors have long b Read more:Blood
More Trouble On PE Deals Ahead 2008-02-25 06:00:26 Now that the Alliance Data buyout is supposedly “back on" (after an attempted shutdown by Blackstone), some in the financial press might anticipate that future private equity buyouts will go more smoothly than the Alliance Data deal. It would be a mistake, however, to believe that other buyout deals have an easy road ahead. Many interested parties have incentives to hold up the deals. Investment banks want to see deals collapse so they don’t have to take a bath on the committed financing packages they have given to PE shops for the deals. Regulators are also becoming more careful about approving deals that have foreign investors as co-investors. Even the PE shops themselves in some cases don’t want to finish some of their completed deals Read more:Trouble
Featured Trade: BAC and CFC Drama Continues 2008-02-24 14:26:24 On its face this deal seems like a merger arbitrageur’s dream. The deal has tacit/implicit government support, the two companies stand to gain in both the short and long term, there hasn’t been any negative news from the top counterparties regarding the deal, another suitor for CFC hasn’t materialized. However, opposition to Bank of America’s proposed acquisition of CFC is continuing to grow. Now some may dismiss the actions of large shareholders as just posturing for a better price. Some may even say that we should interpret their actions as not expressing opposition to the deal being consummated but to the price at which the deal will be struck. Many of my readers have been emailing me asking if I still think BAC is getting a good dea Read more:Featured
, Trade
CFC Cuts Ad Spending But Why is the Real Question 2008-02-23 19:02:19 Here is some very interesting data posted by Paul Kedrosky over at Infectious Greed which shows that Countrywide’s online ad spending fell off a cliff in January. Yet, it wasn’t just Countrywide that cut back, financial servicers advertsing was off by 17% on a month-to-month basis. The Prince isn’t surprised by this since anything that isn’t necessary for the company to survive is going to be cut aggressively with ad buys falling in this category. Experian dramatically increased its spending month-to-month I wonder what the story is behind that. Nonetheless, Paul does provide us with another interesting indicator of the pain going on in the financial services industry. However, that isn’t the whole story an alert reader commented Read more:Spending
, Question
The Prince’s Hostile Makeover Archives V2 2008-02-23 13:11:31 29 Feb 2008 - Lloyd Blankfein
25 Feb 2008 - Angelo Mozillo
22 Feb 2008 - John Mack
18 Feb 2008 - Ben Bernanke
17 Feb 2008 - Steven Schwarzman
Technorati Tags: Angelo Mozillo,Steven Schwarzman,John Mack,Ben Bernanke,HostileMakeover
,The Prince
’s Hostile Makeover
Read more:Archives
Why Do Banker’s Get Paid So Much? 2008-02-23 01:52:21 24 Feb 2008 - While The Prince was scanning Wall Street Oasis for the latest members that are angry with him he happened upon this very interesting forum post. Basically, the forum ask the members of WSO to comment on why bankers get paid so much even though the job as an analyst is basically mindless and not very challenging. The forum discussion moves from talking about analysts to really focusing in on the senior bankers. It is really worth a read if you want to get inside how investment bankers justify their enormous salaries and the value they believe they add to the companies that are their clients.
Read more:Banker
Monoline Ambac Breakup 2008-02-22 14:07:52 22 Feb 2008 - Here is an interesting piece of commentary from Accrued Interest which presents yet another viewpoint on the Monolines. It specifically makes the case for why breaking Ambac into two companies is the best course of action right now. Worth a read through after you take a look at the blogger’s posts in The Prince’s Monoline Roundup.
The Prince’s Monoline Roundup 2008-02-22 12:39:52 The Prince
has come to the conclusion that the financial blogosphere is doing a much better job covering the monoline (i.e. bond insurers) debacle than the traditional financial press. There has been a plethora of interesting analysis and thought provoking work done on the recent trauma involving bond insurers by bloggers.
The Prince has contributed his own commentary on the bond insurers here. However, this information and analysis is outdated now that many of the monolines are considering and some have proposed splitting into separate entities. The Prince’s analysis pales in comparison to some of the work done by his fellow financial bloggers. Here is a brief sampling of some of this work with comments from The Prince.
1) This post by Informati
The Worth of Wall Street Blogs 2008-02-22 12:32:22 22 Feb 2008 - Here is an interesting post from a newly started blog, Wall Street
Know-It-All about the worth of Wall StreetBlogs
. It offers an interesting perspective on how blogs level the playing field between institutional investors and individual investors. Not sure if The Prince agrees but the article is interesting nonetheless.
Read more:Worth
Fitch: Insurers have Enormous Unrealized Losses 2008-02-21 16:31:07 The WSJ is out with an article about how much exposure life insurers have to subprime assets as estimated by Fitch
. The Prince is just smiling as the contagion from the subprime crisis just continues to be felt in new and unanticipated areas and ways.
Excerpt from the WSJ:
Fitch Ratings said U.S. life insurers have an estimated $7 billion to $8 billion in unrealized losses on subprime and Alt-A investments.
The credit rater said that amount totals 13% of exposure and 3% of total industry capital. Fitch expects the industry to have recorded losses of $2 billion to $3 billion in the fourth quarter.
Life insurers have been among the many investors burned by investing in securities backed by subprime or Alt-A mortgages. As delinquencies on those loans have surged, the securities’ p Read more:Insurers
, Losses
Missed Signs 2008-02-21 16:14:16 21 Feb 2008 - I guess The Prince can’t really believe anything SocGen says about their knowledge of what their rogue trader was doing. First, they say they only had 2 warnings and now a report comes out today showing numerous, as many as 75, warnings of Jerome’s acclivities. Here it is for your enjoyment from the Times Online:
Societe Generale missed 75 warning signs on the activities of rogue trader Jerome Kerviel, an independent report has found, as France’s second-largest bank posted a 82 per cent fall in last year’s profit.
A preliminary report by a three-personal panel appointed in the wake of the scandal found that there were 75 alerts between June 2006 and the beginning of this year that should have alerted Mr Kerviel’s managers to his unau
U.K. Braindrain 2008-02-21 02:46:04 21 Feb 2008 - The Telegraph in the U.K. is out with a story tonight about how the brain drain of educated U.K. citizens is the worst it has been in 50 years. You can read the article for yourself here. To quote The Telegraph, "Britain is experiencing the worst "brain drain" of any country as highly qualified professionals settle abroad, an authoritative international study showed yesterday." "No other nation is losing so many qualified people, it points out. Britain has now lost more than one in 10 of its most skilled citizens, while overall only Mexico has had more people emigrate." "The most popular destinations are English-speaking countries such as Australia, America, Canada and New Zealand and holiday areas including France and Spai
Marrying Another Banker 2008-02-21 01:47:17 21 Feb 2008 - Here is an interesting forum thread from Wall Street Oasis on whether a banker should marry another banker. It contains some really interesting perspectives and is worth a read through.
Read more:Banker
Top 50 Buyout Firms - May 2007 2008-02-21 01:45:07 20 Feb 2008 - Here is an interesting list ranking PE shops by size of all PE funds combined. It is only as of May 2007 and some of these funds have raised more funds since then however, it is interesting none the less. Here are the top 20:
1 The Carlyle Group $32.5 billion 2 Kohlberg Kravis Roberts $31.1 billion 3 Goldman Sachs Principal Investment Area $31 billion 4 The Blackstone Group $28.36 billion 5 TPG $23.5 billion 6 Permira $21.47 billion 7 Apax Partners $18.85 billion 8 Bain Capital $17.3 billion 9 Providence Equity Partners $16.36 billion 10 CVC Capital Partners $15.65 billion 11 Cinven $15.07 billion 12 Apollo Management $13.9 billion 13 3i Group $13.37 billion $ 14 Warburg Pincus $13.3 billion 15 Terra Firma Cap Read more:Buyout
Book Review - The Accidental Investment Banker 2008-02-21 01:25:14 While this book has been on the market for some time, The Prince thinks it is worth highlighting. The Accidental
Investment Banker
is a fresh and easy-to-read look at the investment banking industry and the ethos of bankers in general. The author, Jonathan Knee, worked at Goldman Sachs and Morgan Stanley but was hired as an associate (not an analyst) since he worked for a few years on the corporate side. The book truly gets inside how investment bankers pitch and execute business. It also chronicles the decline of relationship investment banking and explains the transactional nature of banking today. The story is not all negative, though, since it also emphasizes the immense sway that a trusted banker can have on a CEO or a company. Knee shares his opini
Fed Downsides 2008-02-20 15:11:23
20 Feb 2008 - Federal Reserve policy makers said downside risks to the economy remained even in the wake of recent interest-rate cuts, according to minutes of their Jan. 29-30 meeting. In their quarterly economic summary, central bank officials lowered the forecast for gross domestic product this year to 1.3% from 2%. In addition, the central tendency for core inflation was revised up, with officials now expecting core inflation in 2008 to range between 2% and 2.2%. The officials said inflation could tick higher if energy and commodity prices were to weigh on consumers more heavily than expected. The severity of the housing downturn, tightening in the credit markets and high oil prices were factors leading to the cloudier outlook, the officials said. - Source WSJ News Alert
Comment on Inquisitor 2008-02-20 14:02:52 20 Feb 2008 - Checkout this great post from the Inquisitor. It is basically the best guide The Prince has come across on how to get through investment banking superday interviews. Definitely worth a read for anyone who is thinking about banking or applying to get a job in banking. Keep the great and useful content coming, Inquisitor.
Read more:Comment
Wishing Going Private a Happy Birthday 2008-02-19 19:50:42 The Prince wants to congratulate Equity Private
on the 2nd anniversary of her blog Going
Private. Here is a post she put up about the accomplishment. This is one of The Prince’s favorite blogs and he sincerely hopes that it never goes away.
Read more:Wishing
, Happy
, Birthday
, Happy Birthday
19-Feb-2008 - Wall Street Oasis Boutique Bank Listing 2008-02-19 14:33:34 19-Feb-2008 - Check out this post on Wall Street
Oasis for CapitalIQ screens by region of boutique PE shops and investment banks. The thread is here and is really useful for job hunting and not missing firms that you should be applying to.
Read more:Wall Street
, Boutique
Speculation and Fraud in Mortgages? A Blind Eye. 2008-02-19 03:12:23
One angle of the mortgage crisis that has been incredibly under-covered by the financial and mainstream press is the adverse role that fraud and speculation played in the crisis. The Prince first began to seriously consider the scale and reach of fraud in obtaining mortgages by single home homeowners, originators, originating mortgage brokers, wholesale originators, and speculators after a call done by Deutsche Bank on CDOs during the heat of the mortgage crisis. In this call some anecdotal information was provided by some of the analysts about what kind of color they were hearing from mortgage originators about the actions of the owners of foreclosed properties. Now it is already acknowledged in the industry that many people with negative equity in their homes who are u Read more:Blind
Credit Suisse Cuts Value of ABS 2008-02-19 02:05:33 18 Feb 2008 - Perhaps The Prince spoke too soon when declaring victory for CS over UBS in his recent post. The WSJ is reporting tonight here that CS is going to take a write-down on its asset backed securities because of a trading error of up to $2.85bn. They are blaming some of the pain on "mismarkings and pricing errors" by traders. To The Prince this sounds like CS is trying to create scapegoats and we may learn later that it is when the analysts tear into CS’s latest updates. The writedown will probably affect the 2007 results issued last week by CS. The mismarkings could also lead to an investigation similiar to what Merrill is going through by the SEC to insure that CS did not knowingly mismark mark-to-market assets when it announced resu Read more:Value
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