About a year ago I was in San Francisco’s Pacific Heights, gazing down at the Golden Gate Bridge from one of Larry Ellison’s many spectacular homes. The Oracle chief executive wasn’t there – he had lent the house out for a reception. In any case, he would be the last person to apologise for enjoying the fruits of his success. But the view from technology executives’ balconies is getting stormier. After banks and bankers, could they be next to feel the sting of a populist backlash?
After six years of scrutiny, and repeated legal action against those around him, Steve Cohen remains a free man. His $15bn hedge fund SAC Capital is still in business and he still firmly maintains his innocence, despite the evident disbelief of regulators and prosecutors. It is time to prosecute him.
It’s the 18th annual Ira Sohn Investment conference, the must-have ticket for Wall Street investors. Held in New York’s Lincoln Center, money managers crowd the cultural heart of the city as the Philharmonic gives up its stage to the virtuosos of the hedge fund world. They are here to pitch their best ideas in public, all in the cause of cancer research (the most expensive tickets top $100,000).
There have been big calls at the conference before, David Einhorn’s (left) big short against Lehman brothers for one, and even SAC’s Steven Cohen appeared in 1999. This year the cast of 18 includes: Elliott Management’s Paul Singer to start proceedings, Bill Ackman of Pershing Square and investing legend Stanley Druckenmiller either side of lunch. Jeffrey Gundlach and Mr Einhorn will finish off the day.
The FT’s Dan McCrum and Arash Massoudi will be there to capture all the tips and report back on repercussions out in the market.
The Berkshire Hathaway annual meeting is like Woodstock for capitalists. It draws tens of thousands of shareholders, value investors, groupies and the curious to the midwestern city Omaha, Nebraska.
They make the pilgrimage each spring to sit at the feet of Warren Buffett and Charlie Munger, the two men who have spent half a century building a sprawling $260bn conglomerate.
The FT’s Dan McCrum is there to capture the weekend festivities and the wise words from the pair of octogenarian sages. He will be blogging from the cornfields and investor meetings on Friday and Saturday, so check back frequently. All times are BST.
Cerberus plans to sell its stake in gunmaker. Getty Images
The 12th and most difficult labour of Hercules was to vanquish Cerberus, the three-headed hound guarding the gates of the Underworld – without using weapons.
How appropriate, then, that California State Teachers’ Retirement System (Calstrs) has disarmed Cerberus Capital Management, the private equity firm, so quickly and comprehensively. On Tuesday, Cerberus said it would sell its stake in Freedom Group, manufacturer of one of the weapons used in last week’s Sandy Hook school shooting.
There are obvious reasons why Calstrs, which was reviewing its investment in Cerberus, moved so fast. In fact, it seems somewhat extraordinary that it had not previously noticed and severed the indirect link between its beneficiaries’ retirement funds and gun manufacturers. It is also arguable whether divestment by Cerberus – presumably to another, less sensitive buyer – will achieve real policy change. But it is a start. Read more
Things got quite exciting in London at noon on Tuesday. First Kweku Adoboli, the rogue trader formerly employed by UBS, was sentenced to seven years in prison for fraud. Then Hewlett-Packard accused the former management of Autonomy, the UK software company, of wrongdoing. The moral appeared to be, as a New York journalist wryly tweeted: “Don’t trust the British.”
It was a gritty campaign and it brought one last pivot for Barack Obama – the candidate who once promised the voters hope and change – as he appeared in Chicago to mark his victory. Amid a soaring speech about the US, he acknowledged that his job at the White House is to find jobs for others.
For me, the most poignant photograph of the destruction left by hurricane Sandy was of the Fairway supermarket in Red Hook, Brooklyn. I used to shop there on weekends and, in the café at the back, next to two disused trams, would enjoy the vista of New York harbour and the Statue of Liberty.
It is somehow apt that the explanations for the sudden departure of Vikram Pandit from Citigroup this week were utterly baffling. “No strategic, regulatory or operating issue precipitated the resignation,” said Michael O’Neill, the bank’s chairman. “I had a very good conversation with Mike O’Neill,” insisted Mr Pandit.
There is a contradiction at the heart of legal actions piling up against large banks, including Barclays, for distorting Libor. Half the plaintiffs are complaining that the rate was kept too high; the other half that it was kept too low.
One lawsuit filed in New York by Berkshire Bank in July accuses the Libor-fixing banks of hurting lenders by artificially depressing the lending rate. As the Wall Street Journal reported:
The lawsuit effectively argues that the alleged manipulation short-changed lenders by helping borrowers pay less for mortgages and other loans.
To read the scathing condemnation of Chinese telecoms equipment suppliers fired from Washington this week, you would think we still lived in another world. In that world, telecoms networks were built by national monopolies such as AT&T, France Telecom and British Telecom, and outsiders stayed away.
US national security concerns apart, China’s Huawei has one of the strangest governance structures of any multinational company: a “panel” of three chief executives each of whom rotates into the top executive role every six months.
On the issue of Huawei’s links with the Chinese military, the telecommunications equipment company has proved the equal of any western counterpart when it comes to using spin-doctors to push out a strong and consistent message that it has been maligned. But when it comes to the rotating CEOs, its founder, Ren Zhengfei (who is one of the trio), is remarkably frank that the arrangement is a bold experiment. “Even if we fail, we will not regret our choice because we have blazed a new trail,” he said in the most recent annual report. Read more
It is bizarre to come back to London after seven years in New York to find the UK struggling to launch 4G high-speed mobile services and European companies lagging the US. “If we do nothing in Europe, all the innovation will fly away,” José María Álvarez-Pallete, chief operating officer of Spain’s Telefónica, told an FT conference this week.
Next week, the Financial Services Authority is due to announce tighter listing rules to deter abuses by London-listed companies. There is cause for disquiet: this week’s implosion of Bumi , the Indonesian coal-mining group part-owned by Nathaniel Rothschild, the financier, follows governance wrangles at the Kazakh-focused Eurasian Natural Resources Corporation.
It is natural to regards any merger proposed by BAE Systems, the UK’s biggest defence company, with suspicion. Had it a better record of predicting its industry’s future and doing deals at the right price, it would be in less of a pickle.
Mitt Romney’s presidential campaign has been a bit of a trainwreck for the private equity industry.
First, its image of being a bunch of ruthless asset-strippers has been revived by the Democrats (and even Romney’s Republican primary opponents) and now his tax affairs are casting a dark shadow.
As the New York Times reported this weekend, Eric Schneiderman, the New York attorney general, has launched a broad inquiry into whether private equity firms evaded tax by turning their 2 per cent management fees into performance fees, which are taxed at a lower rate. Read more
This weekend, NBC kicked off its expensive coverage of the London Olympics by cutting out the part of the opening ceremony that commemorated the victims of the July 7, 2005 bombings, in favour of a soft soap interview with Michael Phelps, the record-breaking swimmer. Then, when Phelps swam (and lost) the next day, it waited eight hours to televise him in action.
Nearly four years after the Wall Street bailout, the beneficiaries of the US government’s support are battered and unpopular, but still in business. Meanwhile, the regulators that rescued them are in trouble.
Around the turn of the last century, I heard Jack Welch recount how he had visited a clothing store on New York’s Fifth Avenue to buy a sweater. A sales manager approached the then boss of General Electric, said he was a fan, and in an embarrassed whisper, sought his advice. Was it essential to get rid of the worst-performing 10 per cent of his staff every year, even though his own team consisted of just three people? “Of course,” Mr Welch replied breezily.
Rupert Murdoch has a few things in common with Warren Buffett. They are both 81, they both love newspapers and they both run public companies named after their worst investments from the past. Mr Buffett’s is Berkshire Hathaway, a New England textile company, Mr Murdoch’s is News Corp.