We have been eager for a long time to hear the other side of last year’s mega losses at Société Générale (SCGLF), where a lone trader allegedly gambled away EUR 4.9 billion without anyone realizing it. Having worked at a French bank for a while ourselves, we have always felt that Kerviel’s losses were possible only due to the acquiescence of his superiors, who chose not to look too closely at his stellar track record. The beauty of that strategy, which we have witnessed on a smaller scale in the enterprise we worked at, is that everyone is happy while things go well. But if there is a turn of events to the worse, you can blame it on a rogue trader. Read the rest of this entry »
Short-extension strategies, also known under 130/30, 120/20 or even 150/50 monikers, are the latest fad to hit money management. Amidst the excitement over this new product, it has been lost on most of its advocates that the implementation actually starts with a negative alpha.
“For 40 days, the Topps board could shop like Paris Hilton.” Vice Chancellor Leo Strine, Delaware Chancery Court, on Topps’ go-shop provision (prior to Hilton’s incarceration)
Michael Eisner’s attempted Mickey Mouse buyout of playing card and Bazooka bubble maker Topps (ticker: TOPP) has been relegated to the history channel after a Delaware court enjoined the deal and allowed Upper Deck to launch a tender offer for Topps’ shares at a premium to Eisner’s proposed price. Topps’ management frustrated all attempts by Upper Deck to buy Topps in a classic example of a principal-agent conflict, where management prefers a financial buyer over the purchase by a competitor in order to keep their jobs, although shareholders would get a bigger payout from a strategic buyer.
The NYSE’s takeover advances to the London Stock Exchange captures headlines, but another merger involving the NYSE risks having more far-reaching consequences for the financial industry in the U.S.: the merger of the regulatory divisions of the NYSE (NYX) and the NASD (NDAQ). The SEC demanded this merger when the NYSE became a for-profit organization, as the for-profit status may compromise the NYSE’s regulatory zeal.
The principal beneficiaries of the merger will be the 200 large brokerage firms with dual membership of the NYSE and NASD, whose compliance costs will be reduced significantly. The bulk of the 5,100 NASD members see no obvious advantages. Read the rest of this entry »