1980s

Hostile deals back in vogue

Jim Kim — Mon, 28 Jul 2008 14:46:00 -0400

We've noted that hostile deals are back in vogue, which may be making some people feel like they're back in the 1980s. What with Michael Milken back on the scene and all? The Financial Times notes data from Dealogic showing that hostile deals are at their highest level since 1999. This year, unsolicited bids have accounted for 20 percent of merger activity worldwide. Of course, many of these bids result in friendly negotiated deals. You get the feeling that strategic buyers sense an opportunity right now, with private equity players still on the sidelines. An unsolicited bid certainly would grab attention. Indeed, the failure rate for unsolicited bids stands at 31 percent, compared with an average failure rate of 42 percent since 1997, according to Dealogic.

For more:
- here's the Financial Times article

Are we in for a wave of bank failures?

Thu, 24 Apr 2008 06:59:54 -0400

Remember the thrift crisis? Few people predicted the decimation of the S&L industry in the late 1980s and 1990s. Many went under due to imprudent real estate lending and, in some big-name cases, fraud. The pundits have yet to seize on this analogy, but it makes sense in light of comments John Dugan, the Comptroller of the Currency, made to the Financial Times that we may be in for some outright bank failures. Smaller banks that perhaps lent too aggressively for condo projects and some commercial properties are in for some turbulence. Failures may not rise to S&L levels of course. But given that there have been almost no commercial bank failures in recent years, any sort of uptick would be significant.

For more:
- here's the Financial Times article

FBI now looking into subprime mess

Wed, 30 Jan 2008 06:59:57 -0500

This is not a good sign. But we should have expected it. Big booms tend to end with loud bangs that draw the attention, rightly or not, of criminal prosecutors. The merger boom of the 1980s. The dot.com boom of the 1990s. And now, the subprime boom-bust? The FBI has announced it is probing 14 firms in a wide-ranging look at the subprime daisy chain, joining the SEC and many state regulators. Mortgage fraud has been on the radar of the FBI for a while now. But if they decide to go after the top firms, the Merrill Lynchs and Morgan Stanleys, that would big news indeed. Stay tuned.

For more:
- here's a New York Times article
- regulators seek mortgage info from Goldman Sachs, Morgan Stanley. Article

No spate of outright bank failures expected

Thu, 24 Jan 2008 06:59:55 -0500

It's not inconceivable that the credit crises can lead to wholesale failures. Just look at the savings and loan crisis of the 1980s. But in this current crisis, Fortune notes that we're not likely to experience any major failures. That's in part due to the aggressive capital raising moves being effected at Citigroup, Merrill Lynch and other banks. Recently, there has been only one bank shut down by the FDIC: Internet start-up NetBank, which filed for other reasons. But while no outright failures are expected, we could see some banks merged into a new existence. No one would be surprised if Bear Stearns were bought and merged into another company. Same goes for Wachovia.

For more:
- here's the Fortune article

Petrodollars moving abroad

Wed, 28 Nov 2007 06:59:59 -0500

We've seen this before: cash reserves abroad being put to work in the U.S. Japanese buyers were thought to be in a position to buy up New York in the 1980s. China has been on a shopping spree as of late. Citigroup, the Carlyle Group, Och-Ziff, the NASDAQ. All are seeking or have sought a deal with Middle East funds. In the case of Citigroup, sovereign wealth has been something close to a lifesaver. It's unclear whether $7.5 billion is enough, but it sure can't hurt. By one estimate, gulf countries have to place $5 billion a week, the New York Times notes. So we can expect some more big deals. For euro-based assets as well. Stay tuned. - Jim

Fear settling in on Wall Street

Wed, 07 Nov 2007 06:59:57 -0500

As the crunch rolls along, it's clear that there's going to be a lot more layoffs on Wall Street. The bonus season in most places will be gloomy but not a downright disaster thanks to good results in the first two quarters. The overall forecast is for bonuses in aggregate to be just 10 percent lower than last year's record $30 billion ($136,000 per employee). The threat of layoffs right now is real. Some estimate that the lingering crunch will lead to job cuts of up to 20 percent of the industry total in the NYC area, according to the New York Sun. That's in line with the most recent industry recession back in the late 1980s. So it pays to have your resume polished up. And make sure your in-house supporters know you're still working like a horse. The first to go will be the iffy performers (you know who you are). Good luck.

For more:
- here's the New York Sun article
- here's a CNNmoney.com article

Paul Tudor Jones 20 years after the crash

Mon, 15 Oct 2007 06:59:56 -0400

Paul Tudor Jones II--and his friend Robert Prechter, of Elliott Theory fame--famously called the crash of 1987. It burnished their images, that's for sure. Jones of course went on to have a great 1987 (a 200 percent gain that year) and has been an icon of the hedge fund world ever since. Right now, according to the New York Times, he's struggling through a not-so-great year, but at least publicly, he is not predicting another stock market crash. Prechter on the other hand is not only suggesting a big crash is on the offing but an actual depression as well. Yikes. Tidbit: "Trader," the 1980s documentary about Jones, goes for nearly $300 on the Internet.

For more:
- here's the New York Times article

Bear Stearns in talks with Buffett

Thu, 27 Sep 2007 06:59:58 -0400

So the rumors turned out to be true. The New York Times has confirmed all the rumors that Bear Stearns was in talks to sell a large stake in itself. But who could have guessed they were talking to Warren Buffett? Other interested parties are said to include Wachovia, Bank of America and two Chinese institutions. This may be a great time to invest. The firm has been rocked by the credit crises. And, alone among the premiere firms, its earnings really suffered in the 3Q. And then there's Jimmy Cayne, the 73-year-old CEO, who may want to step aside soon. An opportunity for major change. Buffett and Cayne are both avid bridge players, but I'm not sure if they are friends. Recall Buffett once took a stake in the old Salomon Brothers way back in the 1980s.

For more:
- here's the Times article

Related articles:
- Winners start emerging
- Goldman Sachs hits one long, Bear Stearns whiffs
- Joe who? Takes a stake in Bear Stearns

The 'private equity effect' in full force

Tue, 12 Jun 2007 20:01:34 -0400

With massive amounts of cash at hand, there are few companies that do not have to worry about private equity companies. We used to joke about Microsoft--but it seems less like a joke these days. The effect on Corporate America: Preventative medicine. Business Week puts it this way: "A growing number of public companies are taking action to stay beyond the grasp of the private equity firms. They're spinning off assets, rethinking their portfolios, and overhauling their balance sheets to keep the buyout barons at bay." This is starting to sound a bit more 1980s-ish, when the "raiders" had executives in fear, all but threatening to take over their company. Whether all this will truly unlock more shareholder value remains to be seen. But 'the effect' is certainly being felt.

For more:
- here's the BusinessWeek article

Former short seller thrives going long

Wed, 07 Feb 2007 19:01:34 -0500

Remember Matt Feshbach? He was best known as one of the short sellers of the 1980s, who was ultimately dealt some big blows by bull markets. His short funds were all closed by the early 1990s. Well, Matt is back. Now, he's a long, and doing quite well. MLF Partners, the activist hedge fund he started in 2001, returned 29 percent after fees last year. Since inception, it has generated returns of more than 360 percent. That thoroughly trounces the S&P 500. Feshbach doesn't buy into the super-confrontational approach of other activist hedge funds. Rather he seeks partnerships with executives who act like owners.

For more:
- here's a MarketWatch article