UPS

Big debate rages about charges against Bear Stearns execs

Jim Kim — Mon, 18 Aug 2008 18:35:35 -0400

Recall that Ralph Cioffi and Matthew Tannin, portfolio managers of the two Bear Stearns hedge funds that collapsed a little over a year ago, have been charged with fraud--essentially for not disclosing the true extent of the funds' portfolios to clients. As TheDeal.com notes, a big debate has erupted over the legitimacy of the charges. One line of thought has been that the two were charged as scapegoats for the entire mess. Another line suggests that the two were charged to alleviate the pressure to charge others higher up the food chain. It starts sounding a little conspiracy oriented. We may not have seen the last of the charges, though you get the feeling the top execs will not be charged with anything. However, if the Bear Stearns managers decide to go to trial, we may hear a lot about the higher ups and what they did or did not do.

For more:
- here's some commentary from TheDeal.com

Google's chances as a VC

Jim Kim — Sun, 03 Aug 2008 10:27:07 -0400

Like a lot of tech titans before it, notably Microsoft and Intel, Google wants to spread some of its wealth to start-ups. Running a VC operations presents certain benefits. If you can find the right firms... Intel, notes Fortune, never had much luck. Perhaps Google will find a new model. Article

Kleiner Perkins and the next big thing

Jim Kim — Tue, 22 Jul 2008 13:27:12 -0400

In some ways, you could call Kleiner Perkins Caufield & Byers the Goldman Sachs of the venture capital industry. The storied firm has long defined excellence, and is associated with some of the great start-ups in recent memory, like Genentech, Netscape, Amazon and of course Google. (I was tempted to call it the Google of the VC industry). But as the VC industry stands at a turning point, Kleiner Perkins is ready to make a bold move. Fortune reports it is leaving the Internet behind in search of billions in the inchoate green tech industry, specifically alternative energy firms. Kleiner Perkins' $500 million Green Growth Fund launched in May. This is a small fund compared with the funds raised by leveraged buyout shops, but it represents a huge bet, and one that the industry will watch carefully. You get the feeling this is the beginning of the something grand, or the end.

For more:
- here's the Fortune article

Ready for 'write-ups' in the second quarter?

Thu, 15 May 2008 06:59:56 -0400

Breakingviews notes another reason to think that the worst of the credit crisis may have passed. Credit default swaps on collateralized debt obligations and leveraged loans have staged impressive rebounds. Prices have really rebounded. That raises the prospect of "write-ups" for the second quarter, which would certainly help offset expected weakness in other areas. Who'd have thought that just a few quarters ago. Still, there's no point getting too excited now. The article notes that the rebound has affected all securities; there are plenty of stinkers in plenty of portfolios. As well, the rebound may have been a bit of a dead-cat bounce, if you know what I mean. Still, there seem to plenty of distressed securities buyers out there. We'll see where this mini-rally leads.

For more:
- here's the Breakingviews article

Second-quarter earnings still a question mark

Thu, 15 May 2008 06:59:55 -0400

Goldman Sachs analyst William Tanona has reduced his second-quarter earnings estimates at Bear Stearns, Lehman Brothers and Morgan Stanley, notes the AP. For the second-quarter, the sources of reduced earnings growth likely will shift. The key contributors this time will not be writedowns from troubled securities, CDOs and leveraged loans. Rather, it will come from weakness in core business lines, such as investment banking and principal and proprietary trading. As noted previously, losses from credit spreads on their own debt (a fair value issue) will lead to losses, even though there might be write-ups from other securities (see previous item). All in all, he also believes that on a valuation basis, top banks are now a good buy.

For more:
- here's the AP article

Will Robert Rubin step down at Citigroup?

Mon, 28 Apr 2008 06:59:57 -0400

In the past, Robert Rubin has described himself as Citigroup's consigliere. But the credit crunch has not been kind to the big bank, and there has been persistent speculation as to whether he would resign as chairman of the executive committee. The New York Times says he's not stepping down, but one insider told the paper a change in job titles may be in order. It's fair for shareholders to ask what role Rubin played as the bank's struggles mounted. CEO Charles Prince, of course, departed in ignominy. Rubin defends his performance, noting that few could predict the perfect storm that hit banks hard. He's still a rock star in the banking world. He'll likely survive.

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

VCs still pouring money into net

Tue, 22 Apr 2008 06:59:54 -0400

First-quarter investments in Internet companies more than doubled from a year ago, to $1.58 billion in 170 deals, both record numbers (Dow Jones VentureSource). The amount invested was up nearly 50% compared with the previous quarter. The striking thing was the amount invested in web 2.0 start-ups, and that overall VC investments declined. This amounts to a huge bet on behalf of VCs, as it is unclear how the overall economy will affect web start-ups. The fact that cashing out is difficult adds another big element of risk. But there is one view that holds that web start-ups require smaller investments to thrive in a tough environment. This allows the VCs to spread their bets and boost exposure.

For more:
- here's the Business Week article

Search the web for: VC investments

Citigroup struggles to keep clients and brokers

Mon, 21 Apr 2008 06:59:54 -0400

Citigroup's first-quarter earnings weren't hugely inspiring. You have to wonder whether this will accelerate the move by many clients and brokers to leave the company. Business Week reports that after some hedge fund blow ups--which required $660 million infusion--some irate clients are threatening to defect to another firm. They seem to be following brokers. One big producer apparently has already made the move to Morgan Stanley. Others are said to have hired attorneys to draw up separation agreements. Things likely aren't as bad at Citigroup as they are at Bear Stearns, but that is hardly comforting. Sallie Krawcheck is said to be in damage control mode.

For more:
- here's the Business Week article

Search the web for: Citigroup | Morgan Stanley | Bear Stearns | Sallie Krawcheck

SPOTLIGHT: Hedge funds betting on distressed debt

Mon, 07 Apr 2008 06:59:52 -0400

Hedge funds have got to make money, whether the markets move up or down. So it's not surprising that the majority of them are loading up on distressed securities. Many also are expecting more blow-ups in 2008. Article

More hedge fund failures this year?

Fri, 28 Mar 2008 07:59:55 -0400

Somewhat surprisingly, the number of hedge fund failures in 2007 declined compared to 2006. Forty-nine hedge funds shutdown in 2007, representing $18.8 billion at their higher valuation, compared with 83 hedge funds that shuttered themselves--worth $35 billion--the year before, as calculated by Absolute Return. Will this hold in 2008? Well, we've already seen a lot of big blow ups. Financial News Online notes the Amaranth, Peloton and others. But by the end of the year, it's possible that the numbers will look good. We've seen a lot of distressed credit funds start up. The worst of the credit crunch may be over.

For more:
- here's the Financial News Online article

Related Articles:
Ailing hedge fund asks investors for a decision. Article
Hedge funds turn away from sell-side research. Article
More hedge funds shutting down redemptions. Article