This, the first of our regional blogs, is authored by the technology and financial journalist Dominic Basulto. Dominic is a New York native, has been a senior editor at Corante since day one and has written for a number of online and offline media companies. Send tips or story ideas to: basulto@gmail.com.
About this weblog
Here we'll report daily on the latest tech and business developments in New York City. Impossible we concede: comprehensive coverage of the city's every story. What we hope you'll find: tips, tidbits and perspectives you won't find elsewhere. As well as unique insights, original interviews and more that should be of interest to New York's vibrant community of technologists and those who track, invest in and report on them.
A New York start-up company, Instant Information, recently released a screen-based information & analytics tool (TouchPoint) for Wall Street traders and other financial markets professionals that acts in many ways like a Bloomberg terminal, but apparenly runs on any PC with off-the-shelf software (including Microsoft Office). There's a bit of a pedigree here, too: the company's founders include a number of principals from MULTEX.com. Not surprisingly, the company has already raised a round of early-stage venture capital from interested investors.
Instant Information is calling TouchPoint "an innovative approach to connecting financial professionals to the ideas, information, analytics, and individuals they depend on to do their jobs effectively and efficiently." Here's a quick blurb about TouchPoint from the company's Web site:
"TouchPoint supports the informal, dynamic and organic way ideas are created and shared without introducing artificial and time consuming workflows. TouchPoint is the single place where you can bring together relevant, specific items of content that are delivered from multiple sources (web, Outlook, IM, internal and vendor applications). As you find content on the web, in e-mail, or from other applications, it can be added to any of your TouchPoint folders with one click. When content is delivered via subscription, it can be added to folders automatically using detailed filtering. You decide how the content should be organized and shared.
TouchPoint enables you to discuss ideas and have the people, content and tools used in a discussion tightly bound in a shared “Workbook” that is automatically updated for all existing and new participants. The Workbook becomes the dynamic, historical view into all of the informal content sources that support a formal investment process.
TouchPoint works with the information sources you use today (including the Microsoft Office suite) allowing you to leverage your existing technology investment. TouchPoint is open and extensible. New data sources can be added on-the-fly without any additional development work."
According to the New York Post, an Estonian investment bank made close to $8 million by hacking into market-moving press releases before they became public. As part of the scam, two traders at Lohmus Haavel & Viisemann used a program that accessed information from press releases at Business Wire's Web site prior to their distribution. With use of a computer "spider," the two traders could hunt for specific keywords in hot-off-the-wires press releases, effectively giving the Estonian crooks a few critical minutes in which they knew more than the market. In total, the Estonian traders manipulated data from more than 200 U.S. firms.
In the BreakingViews column in last weekend's Wall Street Journal, there was extensive speculation that Mayor Bloomberg could sell his 79% stake in Bloomberg LP, his closely-held financial information business, if he wins re-election as New York City Mayor next month (which is all but a done deal, we hear). According to BreakingViews, "nothing motivates Michael Bloomberg more than philanthropy," but in order to get into the "charitable realm of a Bill Gates," Bloomberg needs to cash in his shares and convert his paper wealth into cold, hard cash. Then, he can start handing out dollars like there's no tomorrow.
Which led the folks at BreakingViews to do a few back-of-the-envelope calculations:
"Although Bloomberg's finances are not public, one can extrapolate a value for the firm. It has 200,000 clients paying around $21,000 a year, implying revenue of about $4.2 billion. Put that on a multiple of three times (in line with rival Thomson) and it's worth $12.6 billion. Vector in a 30% control premium and it could sell for about $16 billion, with nearly $12.64 billion for Hizzoner."
Who would buy Bloomberg LP? According to the WSJ, maybe Dow Jones or Reuters, but not likely. Probably Thomson, Reed Elsevier or McGraw-Hill. Or maybe, just maybe, a big Internet player like Yahoo, Google or Microsoft.
Over at Tech Central Station, I've written an article that takes a closer look at the reasons why so many people are afraid of financial derivatives. Most people are OK with the idea of common derivatives like options and futures -- but they tend to get a bit more bent out of shape when it comes to exotics like collateralized debt obligations or housing market derivatives or interest rate swaps. One basic problem is "folk finance" -- the tendency for people to take refuge in misguided, intuitive beliefs anytime that they don't understand the financial markets. As a result, they turn to the mighty hand of government to regulate away these perceived risks. Anyway, there's a double meaning to the title ("Derivative Thinking"), since part of the essay derives from some very fine thinking by one-time Corante blogger Arnold Kling.
Here's an excerpt from the piece:
"While regulators should be applauded for their attempts to make market participants more aware of the risks of using derivatives, these fears are overstated. As TCS Contributing Editor Arnold Kling pointed out in part six ("The Proper Attitude Toward Financial Regulation") of an earlier six-part series on financial markets, regulators and laypersons alike tend to approach the issue of risk from the wrong perspective. They do not always recognize that new-fangled financial instruments like credit derivatives, instead of creating risk, are actually a response to risk that already exists within the economic environment. Derivatives allow investors to re-allocate or transfer away diversifiable risk in ways that make financial markets more transparent, more efficient and more liquid... Derivatives seem to be pesky little creatures that always appear in all the riskiest markets. That makes sense, of course, if you believe that financial derivatives do not create risk -- they are a response to risk."
It seems like everywhere you go these days, the opportunity to gamble is omnipresent. There are OTB offices in every corner of the city, constant reminders about lotteries and mega-millions on the evening news and the local bodega, and all kinds of sports betting info in the daily papers. Oh, and Atlantic City is just a hop, skip and bus ride away. Well, there's more... The New York Post reports that Wall Street trading firm Cantor Fitzgerald is moving into the online gambling business with a new online gambling site, Cantor Casino. At the Cantor Casino, it will be possible to play roulette, blackjack, video poker, and video slots. To avoid all kinds of pesky regulations and rules in the U.S., the site will be operated by a separate subsidiary of Cantor Fitzgerald (Cantor Gaming) based in the British Channel Islands, and will not be available to U.S. consumers.
Anyone still doubt that Wall Street is just a giant casino?
Town Sports International, the holding company for New York Sports Clubs, is ready to proceed with a $172.5 million IPO, according to the New York Post. The health & fitness company is owned by a private equity firm, which has been negotiating with other private equity firms over the past few months about a potential sale. However, all of these bids were eventually rejected in favor of an IPO, which would bring a higher valuation for the company. Town Sports International, which has 140 clubs and 400,000 members, is currently valued at between $600 million and $700 million.
Christopher Byron of the New York Post must have spent the weekend sharpening his axe, since he came out Monday hacking away at the hedge fund industry. While we applaud Byron for his weekly exposes on criminal malfeasance and graft in the world of Wall Street, it appears he's overstating matters a bit in his denunciation of the hedge fund business. (Or, as he prefers to call it, the "hedge fund racket.") He also calls it the "murky and crime-infested world of hedge funds," where the latest case of hedge fund fraud is seemingly just around the corner.
For another take on the hedge fund industry, check out my article over at Tech Central Station ("Don't Trim the Hedges"), which makes the case that hedge funds actually play an important role in the international financial markets, supplying liquidity and promoting market efficiency. In terms of actual fraud cases filed with the SEC, the hedge fund industry is actually doing better than one would expect -- It's just that the media tends to focus on cases like Bayou, and not on the bigger picture. As I wrote earlier, hedge fund managers are not "James Bond villains with MBAs."
Stephen Bainbridge also agrees that the hedge bet is no winner, when it comes to the rule requiring hedge fund managers to register with the SEC:
"...Mandatory disclosure does not prevent fraud. Securities managers who are going to commit fraud will not be deterred from doing so by government disclosure rules -- they will simply use the approved disclosure form to do so. Hence, rigorously enforced proscriptions of fraud seem far more important than mandatory disclosure, insofar as one is the sort of thing that allegedly happened Bayou Securities."
Crain's New York notes that "a prominent hedge fund manager is urging Citigroup to break itself up, arguing that the financial conglomerate is too large to grow significantly and snap its stock price out of its slumber."
Over at Bankstocks.com, the hedge fund manager (Thomas Brown) lays out his future vision for Citigroup:
"When the new crop of bigwigs at Citigroup sits down and starts to consider what direction the company should take, here’s one alternative we hope they seriously consider: break Citi up into a group of constituent businesses, and let the value bloom. I should say up front I was never a big fan of the supermarket strategy that was behind the 1998 creation of the Citi monolith in the first place. Huge scale doesn’t count for much in financial services, for one thing. And in financial services, smaller, focused players tend to outcompete large, diversified ones..."
The four units would consist of Citibank (retail banking); a revived Salomon Brothers investment banking juggernaut; a Smith Barney brokerage unit; and an international banking arm known as CitiGlobal. According to Brown, "The Citi is sleeping - break it up!"
For any Wall Street types out there -- three former Oxford students have launched a new Web site, ConsensusView.com, that allows professional traders to post their forecasts on stocks, futures and currencies. After posting their forecasts, these traders can see the consensus views of all other contributors. Each month, the site will award a prize of $1,000 for the most accurate forecaster.
A funny item from Bloomberg: Ontario-based textbook company Apollo Publication filed for a $3.6 billion IPO with the SEC, but a few items within the registration statement tipped off regulators that something might be amiss -- like a "dream team" of directors that included U.S. presidents Jimmy Carter and George H.W. Bush, a former Canadian PM, Federal Reserve Chairman Alan Greenspan, and Washington insiders James Baker, Joseph Lieberman, Paul O'Neill and John Snow. Oh, and the company claimed that shareholders in the company included Dick Cheney, Al Gore, Bill Clinton, John Kerry and Ted Kennedy. In fact, everything about the deal smacked of either fraud or just plain lunacy -- like the claim that the company served a market of 70 billion people.
There's understandably a lot of bad blood about the New York Stock Exchange's decision to merge with electronic rival Archipelago, but this is out of control... Crain's New York reports that a member of the Big Board has been arrested for allegedly threatening another member who was suing to oppose the pending deal. The incident happened in July, when there was a call made threatening to blow up the victim's car in retaliation for opposing the NYSE-Archipelago merger. The caller - who has a history of being a hothead - has been charged with one count of aggravated harassment.
If you've noticed that the sales clerks at J.Crew stores around the city have been more exuberant recently, here's why: the preppy retailer just unveiled plans for a $200 million IPO. If you're more interested in the strategic vision at J.Crew, check out the recent New York Magazine feature piece on the company's CEO, Mickey Drexler.
Medical device maker Electro-Optical has postponed its $22 million IPO indefinitely. One factor probably looming large in the decision: the company has yet to receive FDA approval for its MelaFind system, which uses computer optics to capture images of the skin. Moreover, a similar system used to detect tooth decay was discontinued by the company in April, so there are apparently a few kinks to work out before the product is ready for primetime. Crain's New York notes that the company has cut the price range for its IPO twice this month. That's not a good sign, especially when Wall Street analysts have already "raised concerns" about the firm's profitability.
As might be expected, officials at Electro-Optical (based in Irvington, NY) weren't in a good mood after the IPO delay. Spokespersons for the company did not provide any reason for postponing the IPO and offered no guidance as to a future date for the IPO.
Famed corporate raider Carl Icahn - the leader of the barbarian investor hordes clamoring for the break-up of Time Warner - has secured a meeting this week with CEO Dick Parsons. No word yet on whether the meeting will occur at a neutral site, or whether it will occur high up in Time Warner's Columbus Circle stronghold. According to the Post, Icahn is out to "rattle the cages at Time Warner" -- but Wall Street thus far is not yet convinced that Icahn has the secret to unlocking value at Time Warner. After all, shares of the company are only up 6% in the past 10 days or so.
On news that legendary corporate raider Carl Icahn will attempt to push Time Warner to sell or spin off assets (e.g. its publishing or cable TV units), James Altucher of TheStreet.com weighs in on what it all means for Time Warner shareholders:
"I give Icahn credit for kick-starting the conversation. Time Warner stock has not moved in more than two years, while the rest of the market has gone up significantly, and earnings and revenue have improved in every division. Perhaps a breakup is best or perhaps Parsons is correct to not spend too much energy in financial engineering and to instead focus on bottom-line results. Either way, Icahn wins."
An interesting side question, of course, is: What will happen to AOL if Icahn manages to break up the entire Time Warner juggernaut?
Anyway, Newsday has a great breakdown of all the companies that Carl Icahn raided and greenmailed during the 1980s, while the Financial Times has commentary on whether Carl Icahn will be able to "dislodge value" from Time Warner. (Hint: "Shake a tree hard enough and something might fall out")
"I suspect the main reason people shop at Whole Foods, and are willing to pay more for the experience, is that it's fun. When you think about it, the Whole Foods concept is pretty revolutionary. It's reinventing food retailing, and might change agriculture. I think of it as a stealth Google, a company with huge potential but a small fraction of Google's hype. Like Google's founders, Whole Foods' top executives eschew the usual quarterly guidance and earnings predictions.
Wall Street analysts tend to think of it as a supermarket chain, which is myopic. Whole Foods is competing not just with the old-line supermarkets, but also with restaurants, catering businesses, coffee bars and chains like Starbucks, wine and beverage retailers, and even cosmetics sellers. Whole Foods is becoming what the department store was in its heyday — a destination, a meeting place, a community center, a town square."
Whew, that's a mouthful. The only problem, says Stewart, is that the company's stock recently traded at $140, a 52-week high, and trades at a very rich forward P/E of 54. If you think Google is a buy at $300, though, Whole Foods is surely a buy at $132.
Interesting piece by Serena Ng in the Wall Street Journal yesterday about "channel checkers" -- individuals paid $20 to $75 per hour who actually go into retail stores and other businesses and "kick the tires" in order to check out sales, customer attitudes and a whole host of intangibles that are impossible to quantify in a spreadsheet. These channel checkers then report back to their clients -- usually a small Wall Street research firm or a money manager -- who are then able to sell this information to hedge funds or other big institutional clients looking for an inside edge. Have a hunch that a company may report numbers below consensus estimates? Go out and hire a channel checker...
It's all part of a changing of the guard of Wall Street equity research, as smaller, more nimble firms (like New York-based Majestic Research) take a bigger chunk of the market:
"Channel checks -- collecting data from a company's customers, suppliers, employees and even rivals to find out how a business is really doing -- have always been part of a stock analyst's duties. But with most Wall Street firms unable or unwilling to devote significant resources to this qualitative and often time-consuming process, a growing number of independent research outfits are making a living out of this niche. The work involves more networking and investigative reporting than analyzing balance sheets and income statements. The channel checkers go out and kick the tires, in the parlance, rather than staying in the office to scan securities filings or call investor relations departments. The idea is to spot a trend before it is widely known."
Anyone thinking what I'm thinking? What about hiring armies of bloggers to go out and channel check?
New York Attorney General Eliot Spitzer is hunting for more dirt on Dick Grasso, former head of the NYSE, and may have found exactly what he was looking for -- a super-secret second e-mail account that may yield more insider secrets:
"Yesterday, during a routine hearing in New York State Supreme Court, Spitzer's office filed a discovery motion related to an additional e-mail account of Grasso's: cody@nyse.com. A lawyer with the AG's office declined to comment on whether Grasso's primary e-mail account, rgrasso@nyse.com, has yielded evidence aiding their civil suit."
Apparently, Spitzer doesn't realize that there is a third, even more secret, e-mail account that links Grasso to all kinds of phishing scams and viagra rip-offs: kissmygrasso@hotmail.com.
The New York Post is prone to sensationalizing any new story, and the battle over the future of the New York Stock Exchange is no exception. According to the Post, dissident seat-holder William Higgins, who is against the NYSE's merger with Archipelago, apparently received a death threat on his office answering machine. Like something out of a Goodfellas-type movie, an anonymous caller warned Higgins that he "better have somebody start his car if this deal doesn't go through..." According to Higgins, the NYSE has also engaged in a smear campaign against him, both online and in the mainstream media.
Following the news that China has revalued its currency, Crain's New York speculates about the impact on New York's economy of a stronger yuan.
According to Kathryn Wylde, president and CEO of the Partnership for New York City, the move "could help break the political logjam between China and the U.S. and eventually lead to more Chinese investment here... For many global companies based here, China is the most important market for growth. We stand to do nothing but gain."
Among other things, that means more Chinese businesses setting up shop here, more Chinese investment in U.S.-based companies and more Chinese tourists traveling to New York. On the flip side, it also means that goods made in China will become more expensive for Americans (the classic "Wal-Mart effect") and that interest rates could rise (impacting both the U.S. bond market and the real estate market).
Apparently, you don't need to be a rocket scientist to be a successful Wall Street investor... According to the New York Post, a group of researchers from Carnegie Mellon, Stanford, and the University of Iowa recently published a paper in a respected scientific journal concluding that "brain-damaged investors are more successful." Brain-damaged investors do not experience fear, and thus, are more able to take risks that rational investors would not be able to take. More risk, more reward.
Jim Cramer (the host of "Mad Money" on CNBC), though, dismissed the findings as "pop psychology," noting that an element of fear is important to any investor -- it keeps you from making some break-the-bank types of decisions. A lack of fear, he says, does not make you a better investor - only a foolhardy investor.
Not to be missed - at the end of the piece, The New York Post takes a gentle swipe at Cramer: "Cramer, who champions rationality despite the fact that he begins every "Mad Money" by being led into the studio in a straitjacket..."
If you follow the financial markets, you're probably familiar with CNBC's Squawk Box crew of Joe Kernen, Mark Haines, David Faber, Steve Liesman and Becky Quick. Anyway, the popular Squawk Box TV program recently launched a companion SquawkBlog using MSN Spaces. SquawkBlog is not updated that frequently (or at least, not as frequently as one might expect from a financial markets blog), but it was first out of the box with several breaking news stories, like the resignation of Morgan Stanley's Stephen Crawford. There's also a daily supply of new photos and a link to Larry Kudlow's Money Politic$ blog.
Anyway, in late May, TVNewser caught up with Squawk Box senior producer Matt Quayle for his take on how SquawkBlog ties in with Squawk Box:
"It's like The Today Show for business -- it's a morning show for business news junkies and investors, and it's the show of record -- it used to be for many many years -- and I want to return it to that. Getting to know the personalities on the show is a very important aspect of that... It's only been a week, but I think it's going pretty well. The goal is interactivity: To give the viewers more access to what I think is the best aspect of the show, which is the talent."
Just when the size and richness of Philip Purcell's $113.7 million severance package was starting to sink in comes word that Stephen Crawford, who served as co-president of Morgan Stanley for a paltry three months, is taking home $32 million in compensation after stepping down from the board. As might be imagined, the arrangement with Morgan Stanley's board is already raising the eyebrows of compensation experts: "CEO's get hired and fired every day, but their lieutenants don't get multimillion-dollar packages to walk away. You have to scratch your head and ask, what was the board doing?"
How much would you pay someone simply to walk away from a business? Try $113.7 million -- that's the amount of money that Morgan Stanley is planning to pay out to deposed dealmaker Philip Purcell in the Mother of All Exit Packages. Here's the breakdown:
Departure bonus: $42.7 million in cash
Restricted stock: $34.7 million
Stock options: $20.1 million
Retirement benefits: $11 million
Medical benefits: $250,000
Charitable donations in his name: $250,000 annually
Plus, Mr. Purcell is entitled to an office space that includes fully paid secretarial and administrative expenses every year for the rest of his life.
These guys waited a long time to cash in on the Internet... Last week, New York City-based software company IntraLinks filed for a $50 million IPO. And it's not like IntraLinks is getting some third-rate Wall Street firm to take them public -- the underwriters for the deal are JPMorgan and UBS Investment Bank. The company is hoping investors will buy into their concept of "secure online workspaces."
Now, flash back to 1999. (It's painful, yes, but try to do it anyway.) @New York ran a short piece on New York City-based IntraLinks, which at that time, had just raised $22 million in VC money and was talking about a $50 million IPO. Back then, though, the company was pushing the B2B mumbo-jumbo, calling itself a start-up that "provides a Web-based information transaction for the loan syndication industry and other business-to-business environments."
John Mack, the newly-appointed CEO and chairman of Morgan Stanley, has inked a five-year contract that will pay him as much as $25 million a year for the next year and a half. That may sound like a lot, but consider that the average compensation for a Wall Street investment bank CEO is $25 million a year, and that Mack actually made $27.8 million a year when he worked at the bank five years ago.
Statisticians, economists, and mathematicians are re-thinking the meaning of "risk" within the financial services industry. Current notions of risk -- like beta or VAR (value-at-risk) -- rely on bell curve distributions of financial returns. However, as Benoit Mandelbrot (a Yale professor and the father of fractal geometry) and Nassim Nicholas Taleb point out in Fortune magazine, the financial markets may not actually behave the way that finance theorists want them to behave. Most problematic, bell curve thinking is fundamentally unable to predict big one-day market jumps or drops:
"The professors who live by the bell curve adopted it for mathematical convenience, not realism... The common tools of finance were designed for random walks in which the market always moves in baby steps."
Mandelbrot, perhaps not surprisingly, advocates the use of the Fractal Theory of Risk, Ruin and Return -- a framework that is better able to explain "clusters and lumps" and huge, one-day volatility spikes.
John Mack has been selected as the new chairman and CEO of Wall Street investment bank Morgan Stanley, replacing the ousted Philip Purcell. For Mack, the return back to Morgan Stanley is especially sweet: four years ago, he lost a power struggle with Purcell to head the company.
The return of Mack is good news for the Morgan Stanley Old Guard -- but bad news for loyalists of Philip Purcell, says MarketWatch. Both Stephen Crawford and Zoe Cruz, appointed to the company's board by Purcell, will resign from their director posts. There could be more bloodletting on the way, according to rumors, as Mack re-installs a team of bankers loyal to him.
What's a brand name worth on Wall Street? Apparently, either a lot (when things are good) or nothing at all (when things are bad). Credit Suisse First Boston will now be known simply as Credit Suisse, thank you very much. First, the Frank Quattrone IPO scandal and general discontent about the dot-com bust tarnished the company's image. Then, the Swiss banker-gnomes in Zurich didn't much like the cost-cutting and head-chopping mentality of the American investment bankers when Morgan Stanley-bound John Mack was trying to right the ship.
As Crain's New York points out, it's the end of an era: "Add First Boston to the growing list of Wall Street brand names that have been retired... The investment bank's Zurich-based parent, Credit Suisse Group, said that at the start of next year it will drop the name whose roots go back to 1932. First Boston will join such distinguished brands as PaineWebber, Bankers Trust, and Kidder Peabody that have vanished from the scene."
Looks like everybody except John Mack has been voted off the Morgan Stanley island. The Financial Times is reporting that the big Wall Street investment bank will name Mack as its new head sometime within the next 48 hours. For Zoe Cruz and Stephen Crawford, the two other frontrunners for the position, it looks like it's time to pack your bags. The Morgan Stanley Tribal Council has spoken.
Rumors are already circulating that Mack plans to reinstall all the trappings of the Old Regime and bring back all of his Morgan Stanley cronies who have quit in recent months.
More on the internal mess over at Morgan Stanley: the latest frontrunner to become CEO of the Wall Street investment bank is the company's former president, John J. Mack, who lost out in the power struggle with Philip Purcell in 2001. According to CNN/Money, Morgan Stanley's board is under mounting pressure to name someone quickly -- either a long-time Morgan Stanley veteran or another respected name from a top-tier Wall Street investment bank.
The New York Post reports on the latest probe into potential wrongdoing by floor specialists at the New York Stock Exchange. According to an enforcement official with the NYSE, this probe is "similar in magnitude" to the one that occurred just a few months ago. In April, a probe conducted by the SEC, the NYSE and the Department of Justice led to the arrest and indictment of 15 specialists for criminal fraud.
For the NYSE, the second probe couldn't come at a worse time -- the exchange is in the process of merging with electronic trading network Archipelago and is under increasing criticism that the specialist system (in which traders match up "buy" and "sell" orders in stocks) is an anachronism of modern capitalism.
With oil prices topping the $59 mark, there was a modest sell-off on Wall Street as concerns grew that higher energy costs -- especially during the summer months -- may slow U.S. economic growth.
Says one investment fund manager: "Oil prices going up and up is definitely going to slam the economy into reverse. Lower stock prices are certainly expected from higher oil prices."
The good news, though, is that these historically high oil prices may not last long. According to a report published in Forbes, there has been talk that OPEC may deliver an extra 500,000 barrels of oil a day and increase its production quotas in order to relieve some of the pressure on the market.
The New York Times points out that Zoe Cruz is one of the frontrunners to replace Philip Purcell as the CEO of Wall Street investment bank Morgan Stanley. For all the fellas out there, don't think working for a woman will be a piece of cake -- Cruz is a 24-year veteran of Morgan Stanley and is known as "Cruise Missile" (Cruz Missile?) to her peers.
Hot off the wires: Morgan Stanley CEO Philip Purcell has offered to resign. As soon as the company finds a new chairman and CEO, Purcell will retire and ride off into the sunset.
Over the past six months, just about everything that could wrong did go wrong for Purcell. With investors breathing down his neck, it's probably the best thing for the future of the firm to bring in someone new. There's been a constant exodus of talent out of Morgan Stanley and a full-blown revolt by the Morgan Stanley old guard. To top it all off, 2Q earnings are going to fall short of Wall Street consensus estimates.
Gerald Putnam, CEO of electronic trading upstart Archipelago, is trying to make the transition from "maverick" to "market establishment insider," says the New York Times. After the upcoming merger with the New York Stock Exchange, Putnam will become one of three co-presidents of the 213-year-old Big Board, and that carries with it a sense of responsibility and a certain gravitas. For Putnam, that means no more youthful, fratboy-style pranks:
"Early in Archipelago's history, the firm briefly planned to hire a helicopter to toss Archipelago-logo toilet paper onto the New York Stock Exchange building, people close to the company say."
Oh, and there's more. In 1997, a big-time fund manager showed up to discuss using the Archipelago electronic trading system. What did he find? "Four guys in T-shirts, Teva sandals, baseball caps."
Yes, it took a while, but I finally figured out why Mr. Six, the mascot for Six Flags, is always so hyperkinetic and full of energy on those increasingly annoying TV ads for the New Jersey theme parks. Mr. Six is actually the normally sedate Alan Greenspan letting off a little steam after a tough day of questioning in Washington... For those not familiar with Mr. Six, USA Today has a brief summary of the theme park's mascot:
"For the ads, Six Flags enlisted a bow-tied, tuxedo-clad 'senior citizen' who looks like an octogenarian and dances like a twentysomething clubgoer to the song We Like to Party!, a 1999 hit by the Vengaboys. When the dancing dude — called "Mr. Six" by Six Flags — shows up in a neighborhood driving his tricked-out antique Six Flags bus, people drop their chores, get on board and head for the theme park."
Is that Alan Greenspan or what? He likes to party.
According to Newsweek, Wall Street is turning into a street just like any other street. The notion of "Wall Street" as a distinct location is losing its relevance as institutions decamp to other parts of the city or even to New Jersey or Connecticut. The move to electronic trading will only accelerate this erosion of Wall Street's power base:
"For generations, the Stock Exchange has been the anchor of the financial district, and its home—on Wall Street—has evolved as shorthand for an entire industry, in the same way Broadway has for theater. But now that the NYSE is headed to an electronic future, Wall Street's status as a power center will inevitably slip."
At a Securities Industry Association conference in Manhattan, "acquisitive-minded" Archipelago CEO Gerald Putnam hinted that additional market consolidation could be on the way for electronic trading networks. While Putnam has not discussed any concrete deals with NYSE CEO John Thain, he conjectured about the possibility of cross-border deals, in which U.S. markets join with foreign ones.
Putnam also shed some light on the details of the merger between Archipelago and the New York Stock Exchange. For now, the two exchanges plan to operate separately after the deal closes, with "no immediate plans to integrate the entities."
A group of dissident Morgan Stanley shareholders are calling on CEO Philip Purcell to spin off the company's institutional securities businesses as a separate firm. The new firm would be led by six "Old School" Morgan Stanley executives and, presumably, recapture the glory of the old investment banking days at Morgan Stanley -- the golden era before the company was forced to dirty its hands with businesses like retail brokerage.
In an open letter to shareholders, the eight retired Morgan Stanley executives (the so-called "Group of Eight") who have campaigned against Purcell for weeks released a detailed proposal that would, for all practical purposes, reverse the 1997 merger of Morgan Stanley with Dean Witter, Discover & Co.
The anti-Purcell faction has even created a Future of Morgan Stanley Web site that includes the full text of the open letter to shareholders, biographies of the "Group of Eight," and copies of advertisements that have appeared in the Wall Street Journal (in PDF format).
According to Dow Jones Newswires, Warner Music is cutting the size of its upcoming IPO, from approximately $750 million to less than $550 million. Insiders speculate that the company will reduce the number of shares it will sell to the public to about 27.2 million from 32.6 million; in addition, Warner Music is cutting the price range for the deal to $19 to $20 a share from $22 to $24 a share.
"A takeover skirmish among three of the nation's largest online stock brokerages erupted over the weekend," according to the New York Times:
"E*Trade Financial made an unsolicited bid to buy Ameritrade Holdings on Friday for more than $5.5 billion in a letter to its board, according to executives involved in the talks. Ameritrade, meanwhile, has been holding secret negotiations to buy TD Waterhouse, the executives said. The boards, managements and advisers of all three companies spent the weekend plotting their next moves. Competitors like Charles Schwab also spent telephone time discussing where they might fit in..."
The bad news, of course, is that any kind of consolidation among the big online brokers will likely lead to an increase in fees, commissions and the overall cost of trading for the individual investor. Online trading volume has never returned to levels seen during the dot-com boom, so online brokerages are looking for ways to squeeze out more revenue.
Warner Music Group is hoping that a little glitz and glamour will win over investors before its upcoming $750 million IPO... The New York Daily News reports that Sean Combs (aka P. Diddy, Puff Daddy) made a flashy appearance in New York for the big IPO road show:
"Looking dapper in a suit and big diamond studs, the hip hop mogul who just sold his Bad Boy Entertainment label to Warner Music, helped fill up the ballroom at the W Hotel in midtown Manhattan. He didn't rap - but did sign autographs for star-struck Wall Street execs..."
Legendary Wall Street investment bank Lazard raised $854.6 million in its IPO this week, transforming the 157-year-old private partnership into a public company accountable to shareholders. It's the end of an era for Lazard, one of the last major firms on Wall Street to cling to private ownership (Goldman Sachs went public in 1999):
"The IPO marks the end of a power struggle between Lazard's day-to-day boss Bruce Wasserstein, Chairman Michel David-Weill and the bank's founding partners. David-Weill and the founding families, who are currently entitled to about 36% of the bank's profits, will be bought out in part via the IPO for $1.6 billion."
Olga Kharif of Business Week looks at Wall Streeters who are trading stocks without a wire. According to Kharif, "Wall Street is becoming a nationwide hot spot, featuring round-the-clock trading, stronger security, and lower costs for investors on the go..." For example, there's the hedge fund manager who receives his QuoTrek feed on his BlackBerry; the retail investors who sign onto their brokerage accounts on laptops and PDAs at hotels or cafés; and research firms that provide real-time market and stock data specifically geared to wireless traders who need 24/7 access.
Following fast on the heels of deals announced by the New York Stock Exchange and NASDAQ to acquire electronic trading rivals: Jersey City-based Knight Trading Group will acquire Attain ECN from privately held Domestic Securities. Financial terms were not disclosed. According to the CEO of Knight Trading, the move to acquire an electronic communications network (ECN) was in response to the changing competitive environment on Wall Street: "The acquisition of an ECN marks the next step in the repositioning of our equity markets business to excel in the changing securities landscape."
The New York Stock Exchange recently announced a merger with the electronic trading network Archipelago, and Nasdaq followed that up just days later with a deal for Instinet's electronic trading network. As I argue over at Tech Central Station, the two moves spell the extinction of the Wall Street floor trader:
"In fact, the floor trader could be extinct by the year 2010: according to an informal Wall Street Journal Online survey conducted immediately after news of the NYSE-Archipelago merger broke, a majority of readers expected that the position of the Wall Street floor trader would no longer exist within five years. When that happens, the trading floor of the NYSE -- one of the last remaining places in the world where men wearing peculiar jackets wave pieces of paper in the air, run around frantically between the ringing of bells, and shout out orders into a delirious bedlam of money-making -- will become nothing more than a museum floor for 21st century capitalism, a quaint historical anachronism that failed to keep up with rapidly-changing technology and the needs of market participants."
A bunch of New York Stock Exchange insiders, led by former NYSE Chief Executive Richard Grasso and Home Depot co-founder Ken Langone, could be putting together a rival bid to head off any attempt by the NYSE to merge with Archipelago, says the New York Post. From the article, it sounds like the bid is motivated as much by bad blood between these executives and Goldman Sachs than by any real desire to create shareholder value or improve the efficiency of the open-outcry auction model.
Big news out of the canyons of Wall Street: the New York Stock Exchange will merge its operations with Chicago-based Archipelago, one of the biggest electronic trading systems, to form the NYSE Group. It's a final acknowledgement that the open-outcry system of trading stocks (lots of sweaty guys running around with pieces of paper in their hands and gesticulating wildly) may not be superior to anonymous trading handled electronically:
"The merger is the most significant acknowledgement yet that the Big Board's traditional market, driven by human traders, might not be able to survive in an era increasingly dominated by instantaneous electronic trades."
No doubt the timing of the deal has something to do with news that Nasdaq has been flirting with an acquisition of Instinet, another electronic trading system.
In this week's New York Magazine, professional hedge fund manager James J. Cramer explains that it's not too late to make some fast cash from the run-up in oil prices: "You can be your own OPEC! Okay, maybe that’s a little glib, but it sure beats the notion that I hear every day: that the rising price of oil is a no-win situation for American investors. You can, even after the tremendous run that crude has had, make a fortune owning a portfolio of oil and oil-related stocks..."
According to Cramer, here's five stocks worth holding: ConocoPhillips (an integrated oil major), EnCana (a Canadian oil play), Valero (a refiner), Cimarex (a wildcatter) and Halliburton.
Briefly noted on Crain's New York: "Nasdaq Stock Market Inc. has emerged as the likely winner of the auction for Instinet Group Inc., and a deal could be announced this week... Terms couldn't be learned, but Instinet has a market value of about $2 billion." Definitely worth watching over the next few days as Q1 2005 rolls to a close.
“No tricks, just trades. Where anonymity, neutrality and unbiased access to liquidity are the rule we live by every day.”
-- Instinet ad
Electronic brokerage firm Instinet is launching a “shot across the bow of traditional Wall Street firms” with a series of display ads in the Wall Street Journal, according to the New York Post. The ads will feature a tagline (“Still think the old way of doing business works?”) as well as headline clippings about all the troubles and scandals plaguing Wall Street brokerage firms.
A growing number of Wall Street analysts are bullish on blogs, says Crain's New York. During the days of the tech bubble, David Jackson was a Morgan Stanley telecom analyst. Now, he's the blogger behind Internet Stock Blog, which dispenses daily advice on what companies are hot in the Internet sector. According to Crain's, about a dozen former Wall Street analysts have launched blogs in the last few months "in an effort to strut their smarts before a new audience and revamp reputations that took a severe beating when the stock market bubble popped..."
On late Friday afternoon, Warner Music filed with the SEC for a $750 million IPO. Details are still being worked out: "In its SEC statement, the company did not estimate how many shares or at what price it planned to offer its stock..." In addition, the company isn't even sure whether it will list its shares on the New York Stock Exchange or on the Nasdaq." Since Goldman Sachs and Morgan Stanley are managing the deal, we trust that Warner Music has the matter under control.
JPMorgan Chase is thinking about building an Internet-based payment system similar to PayPal, according to senior executive Heidi Miller. During an interview with Reuters, Miller hinted that "the bank has a payments steering committee studying the best way for it to take advantage of changes in the way consumers and businesses make and receive payments... The creation of PayPal is a good example of how big banks in general, with extensive knowledge of payment systems and with infrastructure in place, failed to keep up with smaller, nimbler companies." The move would put JP Morgan Chase in direct competition with eBay, setting up a potential battle between a 20th century titan and a 21st century colossus.
As part of an ongoing attempt to turn itself into a "full-service financial firm," online brokerage E-Trade is planning to build a new 3,000-square foot flagship office on the ground floor of the Colgate-Palmolive Building at 300 Park Avenue. Once the new office is completed, the company will move from its current address at 445 Park Avenue. What's interesting is that 300 Park Avenue is also the current home of one of Charles Schwab's 8 branch offices in Manhattan.
The symbolism of a brick-and-mortar presence is key: "It shows customers E-Trade's not a virtual company that only exists on the Internet and could evaporate - but a tangible place that will take care of their assets."
Personal finance blogs, in which bloggers share tips and advice about how to manage money by using their own portfolios as examples, are becoming increasingly popular, says Terri Cullen of the Wall Street Journal. They're also becoming increasingly personal -- almost too personal:
"What really struck me about many of these blogs, and the people behind them, was the level of sensitive financial information they were willing to reveal. In the 'real world,' people tend to jealously guard the intimate details of their financial lives: What you earn, how much you've saved, what you owe is viewed as so personal that many are unwilling to share the details with anyone -- occasionally even their spouses... But the anonymity of the Web allows bloggers to open up the books and let others see how well, or how poorly, they're doing in the finance department."
One of the best personal finance blogs out there is PFBlog.com, which recently won accolades from InsideBlogging.com as the Best Personal Finance Blog of 2005.
As the electronic trading of stocks continues to grow in popularity, brick-and-mortar exchanges like the New York Stock Exchange are becoming increasingly anachronistic. As if to underscore how some fledgling electronic exchanges are disrupting the traditional Wall Street way of doing business, some money managers are calling Liquidnet, an e-marketplace that allows institutional investors to trade large blocks of stock anonymously, a "Napster for stocks." According to one equity trader, "Liquidnet was the first to bring the liquidity to you rather than us carving up our order flow and sending it out. The beauty is anonymity, lower rates than full-service brokers, and it comes to you--versus you having to go out.”
The valuation of Liquidnet is staggering: based on a recent financing deal, the three-year-old company is already valued at $1.8 billion. By way of comparison, the NYSE is worth about $1.3 billion, Nasdaq is worth $794 million and Archipelago is worth about $873 million.
The New York Stock Exchange as we know it -- the "iconic brick-and-mortar exchange" -- may soon no longer exist, says the New York Post. Quite simply, "proposed regulations, technology and competition from other exchanges are changing the way stocks are bought and sold, who sells them when, and where." The most obvious change is that electronic trading will eventually make floor trading obsolete. Says one enthusiast of electronic trading: "We always joke saying that the exchange would make a great bowling alley one day."
Shares of Manhattan-based electronic bond trader eSpeed fell by more than 11% after a judge ruled that technology used by Jersey City-based rival BrokerTec did not infringe on an eSpeed patent. At issue, it appears, is the amount of time of trading exclusivity that the two bond trading systems give buyers and sellers: BrokerTec's gives a buyer and seller three seconds of trading exclusivity before allowing others to participate, while eSpeed's does not put a time limit on exclusivity.
From Byte and Switch: Sun Microsystems is making a serious push to become the grid computing vendor of choice for Wall Street: "The Holy Grail for Sun, at least as far as grid computing is concerned, is the financial sector. The Santa Clara, Calif.-based firm is keen to tap the immense compute and storage demands of Wall Street firms, but it faces stiff competition from rivals IBM and Hewlett-Packard, which have already made inroads into this space."
At the Web Services on Wall Street conference this week, one IT director of a leading Wall Street investment bank talked up the appeal of grid computing (but only on the condition of anonymity): "There is a market for the Sun grid strategy... It could be particularly relevant for areas such as mortgage analysis and credit derivatives where calculations need to be done in a timely manner."
The New York Times asks whether the current Internet bubble is "half empty or half full." Ignoring the mixed metaphor for a second, the article does raise a good point -- some Internet stocks like Google and Yahoo are going gangbusters, while other Internet stocks like eBay and Amazon continue to slide downward. Google's stock, for example, is up 142% in just the past six months while Amazon's stock is down 33% from its mid-2004 highs.
On Wall Street, that's called a "market of stocks," not a "stock market."
The New York Post reports once again that the push to make the New York Stock Exchange a for-profit entity is gaining momentum: “Forty-one seat owners are asking their fellow Big Board owners to block any action taken by the NYSE board of directors that would hinder the move away from non-for-profit status.” The issue for these 41 rebels, as might be expected, comes down to money. They might talk about the advantages of converting to a for-profit status by citing issues like the need for a “more proactive management” and the need to remain competitive with electronic exchanges. But, the real issue is money, with NYSE owners attempting to overcome a multi-year trend of “shrinking” seat prices.
Speculation continues to build that the New York Stock Exchange could be preparing for an IPO. According to the New York Post, seat owners at the exchange are pushing CEO John Thain to move more quickly from a not-for-profit status to a for-profit status. At the World Economic Forum in Switzerland, though, Thain hedged his bets, only noting that the NYSE "may consider an IPO." Talk about an IPO for the Big Board has been around since at least 1999, when Slate wrote that "investors are salivating for a piece of the New York Stock Exchange."
MemeFirst takes a critical view of Henry Blodget's decision to embrace the Chinese economic boom: "Disgraced Merrill tech analyst and reborn Slate hack Henry Blodget has launched a series about the "China gold rush" in which he admits he knows zilch about the place but with a few books and a junket to Beijing, he'll have it all sorted out in a jiffy... Blodget argues that China is the latest fad, on par with tulips, railroads and dot.com companies. Thanks, buddy, I never heard that one before. Reminds me of the story about how John Rockefeller (I think it was he) realized the market was going to crash when he overheard the shoeshine boys trading stock tips. So maybe Blodget has a point, even if he's his own harbinger of doom."
If that doesn't dissuade you from reading Blodget's new series of articles at Slate, check out his first piece on the "China Gold Rush": Go East, Young Man.
Not only did the New York Post predict the bad news about StemCells, Inc. -- it also listed Manhattan-based Travelzoo as a "cult stock" that investors should avoid. Well, one day later, shares of Travelzoo tanked. Crain's New York reports that shares of Travelzoo fell 22% in early Monday trading after the company announced that regulators were probing insider stock transactions. Travelzoo also reported earnings that missed Wall Street forecasts.
So is this the curse of the New York Post? If Sirius Satellite Radio, Overstock.com or Taser International reports bad news later this week, we'll know. For now, Sirius looks OK -- in fact, it announced on Monday that it would be collaborating with Interscope Geffen A&M Records and its chairman, Jimmy Iovine, to develop new programming.
According to Crain's New York, Chicago-based Archipelago, which owns electronic stock market ArcaEx, is interested in acquiring Instinet's electronic communication network (but not its institutional brokerage business) at a price between $2 billion and $3 billion. On news of the rumor, shares of Instinet surged by nearly 10%. This past summer, Instinet, which is 62%-owned by Reuters Group Plc, attracted "a slew of suitors," including the New York Stock Exchange.
The New York Post reports that "the once-glamorous TheStreet.com is on the block after a roller-coaster ride for nine years with its maverick founder Jim Cramer." Immediately after news of an impending deal went public, shares of the company traded up by as much as 20% (of course, at $4/share, there was nowhere to go but up...). It seems like ages ago now, but TheStreet.com had "once been one of Wall Street's hottest media properties in the 1990s dot-com bubble." Anyone interested in the future of the company should check out James Cramer's Confessions of a Street Addict, especially Chapters 17 & 18, where he discusses the company's blowout-the-doors IPO in May 1999.
The New York Times takes a look at the economic data and concludes that the economy recovery already underway in NYC is taking place without the participation of Wall Street. Instead, the hospitality industry is becoming the new engine of core job growth. Tourism is booming, real estate prices are skyrocketing upward, the ports are bustling, and employment figures are the lowest since March 2000 -- yet, Wall Street employment numbers are flat. Is it just a statistical anomaly (Wall Street historically leads the way in employment growth for the city) -- or signs of a cultural shift in the city brought on by outsourcing back-office white collar jobs to places like Bangalore?
According to one analyst interviewed for the story: "The firms are in magnificent condition... The issue is, that doesn't mean the money is going to filter down to the middle-class guy who used to work in the back office. That guy once could make himself a large salary. He had options, he had stock, he had a fat pension. He is now replaced by a machine or an office in Bangalore, India."
Christopher Byron of the New York Post has the inside scoop on how bloggers (and a group of North Carolina newspaper reporters) helped to break up a pump-and-dump penny stock scheme. A group of ruthless stock promoters operated a multi-country, multi-state stock market scam over a period of at least eight years -- and SEC regulators were too undermanned or too overmatched to do anything about it... until bloggers entered the fray. (It's a great story, no doubt; unfortunately, the article doesn't actually name any of the bloggers involved.)
Byron does an excellent job of tracking the many incarnations of the fictional company, as it mutates from an aerospace company to a Chinese import/export specialist to a Hawaiian restaurants company to a company called HawaiiLove.com to an Internet gambling company to a health club company called Absolute Health & Fitness. Confused? Well, so was the SEC. It was a financial shell game, and as soon as regulators got wise to the story, it was too late. As Byron tells the story, "This company has had the lesions of fraud leaking from its every pore for years, and the SEC did nothing at all. Only after newspaper reporters in North Carolina and bloggers on the Internet did the work for the SEC did the commission even notice what was going on. And frankly, that's just not good enough. Shame on them."
P.S. If you're holding stock in a company called Juniper Group of Great Neck, Long Island, guess what? Yeah, you've been scammed -- it's actually a front for a company in Panama and an international villain named Marc Harris.
News that insurance giant AIG has applied for a dual listing on electronic exchange Arca Ex raises the obvious question: can electronic exchanges really take on the Big Board for stock market listings? The New York Stock Exchange, not surprisingly, claims that the answer is a resounding 'NO': "We do not expect to see any material difference in the trading of AIG. The NYSE will continue to be the primary market for the trading of AIG, for which we have an 82.4 percent market share in trading."
What's interesting is that AIG's decision to list on "electronic exchange upstart" Arca Ex seems to be motivated as much by emotion as by logic. After all, AIG's chairman, Maurice R. Greenberg, has "complained vociferously about the Big Board's market structure" and regulators have been poking around AIG, trying to determine whether there might have been improper trading of AIG shares around the time of a big acquisition. AIG, though, is putting its own spin on the matter: "Electronic markets can provide significant benefits to shareholders for efficient and transparent trading. Many market makers and others are moving toward, and investing in electronic trading platforms."
The New York Post reports that Mayor Bloomberg "may be getting ready to sell his financial information giant to fund a mammoth philanthropic effort after he quits public office." The estimated value of Bloomberg LP is $10 billion, according to investment bankers. That's a big chunk of change, and would allow Bloomberg to realize his post-mayoral charitable ambitions. (Hint, hint: he's mentioned Bill Gates as a role model) Among the rumored suitors for Bloomberg LP: Microsoft, Thomson and General Electric.
There's a difference between a "robust" IPO market and a "healthy" IPO market -- and right now, the IPO market appears to be more robust than healthy. Sure, deals keep getting done (242 in all of 2004), but the companies that are going public have financial profiles that are shaky at best. Consider Marchex -- the Seattle-area company went public when it was only 14 months old and had yet to post a profit. Yet, Marchex shares skyrocketed a dazzling 223% for the year, making it one of the IPO standouts of 2004.
Internet-dedicated mutual funds had a banner year in 2004, but that may not be enough to convince more investors to place their money in the red-hot Internet sector this year, says the New York Times. The main problem, of course, is that the Internet sector is unpredictably volatile -- in one example, an Internet fund was down 24% for the year in August, but still pulled out a 9.3% gain for the year, thanks to a stellar last quarter. These Internet mutual funds are also "incredibly expensive," due to higher transaction and tax costs.
Hedge fund manager Peter Siris predicts a wave of "corporate marriages" in 2005, rippling through every sector in the economy, from healthcare to energy to financial services to tech. After all, "many companies are sitting with lots of cash and limited growth opportunities." Instead of paying higher dividends or launching stock buyback programs, many companies will head out on to the acquisition trail. In the software sector, that means more mergers like the Oracle-PeopleSoft deal; in the Internet sector, "companies with huge market valuations (Google, eBay, Yahoo) will snap up companies with attractive technologies or market niches."
As much as we like the sound of music, the sound of money is even better. Ka-ching. Ka-ching. Seems that some Wall Street financial pros are playing around with new auditory display software that translates market fluctuations into sound. A few Dartmouth grads figured out a way for "an orchestra pit full of instruments to convey complex information" about financial market fluctuations and then turned that idea into a company. Hear that clarinet or harpsichord? Could be a trade involving a large quantity of short-maturity treasury bonds. (Hat tip: Kottke.org)
Bloomberg is reporting that Yasser Arafat, via a Palestinian investment company, invested millions of dollars in a number of New York-area businesses, including $2.1 million in Vaultus (software for wireless computers) and $1.3 million in Strike Holdings LLC (the owner of Bowlmor Lanes bowling alley in Greenwich Village).
UPDATE: With the New York Daily News splashing Yasser Arafat's photo all over its front page yesterday and the local news networks covering the story in-depth, it was only natural that Strike Holdings would reassess the million-dollar investment by the Palestinians. Almost immediately, the head of Bowlmor Lanes said that he was "hoodwinked by Palestinian-American money manager Zeid Masri and planned to return the cash and sever all ties with him." A hard-earned lesson, to be sure.
CBS MarketWatch reports that the IPO market could heat up in 2005. Two big names, Lazard and PanAmSat, recently announced plans to file for initial public offerings and more companies could be set to enter the IPO pipeline soon, according to Morgan Stanley.
Trigger-happer day traders are becoming more active, thanks to a rebounding stock market and an improving economy. It's not the "Joe Schmo trucker" who's trading these days, though, it's the "new breed of day trader": younger, hipper and more aware of the risks involved. One 30-year-old Yale graduate profiled in the story, in fact, claims that he earned $25,000 last month alone while trading for HLV (a small firm wedged into a 1-room office in Times Square). During the Internet boom, some day traders made as much as $30 million a year by rapidly moving in and out of new positions during the course of a day.
After a week or so of speculation, IBM finally announced a major contract to supply the New York Stock Exchange with handheld devices, servers and software. According to the terms of the deal, NYSE brokers will use 3,000 IBM wireless handheld gadgets to buy and sell orders on the trading floor; in addition, traders will use high-powered Linux workstations to establish a real-time information flow between the exchange floor and trading desks.
For more details on NYSE trading technology, check out this nifty 2-page PDF.
The New York Post has the details on a potential Warner Music IPO that could come as soon as March 2005. Making the deal interesting for Wall Street investors, though, could be problematic: "The company's push for an IPO has surprised many in the industry, who say that continuing problems with piracy in the industry — which has decimated CD sales in recent years — could put a lid on Warner's valuation on the public market."
"Defining the neurotechnology industry will increase the potential for successful exit strategies available to neurotechnology companies and investors," he says. "With the public markets pulling for the latest translation of research into successful treatments, the pool of capital that neurotechnology venture funds will have at their disposal will increase dramatically... If there was a simple way to invest in mental health wouldn't you want 10% of your retirement portfolio focused on neurotech ventures who are creating the next generation of tools for neurodegenerative diseases and mental disorders?"
According to a random sample of 100 New York City CFOs, there will be a net 5% increase in the hiring of accounting and finance professionals in the first quarter of 2005. Robert Half International, which has been conducting these surveys since 1992, comments on the data: "While still conservative, the hiring outlook is stronger than it was one year ago. In addition to seeking accounting and finance staff to assist with internal audit and corporate governance requirements, companies are also looking for professionals to support future business expansion."
Paid Content announces that Tolman Geffs of NYC investment bank Jordan Edmiston Group (JEGI) will author a monthly column "exploring the merger and acquisition side of the digital content economy." In addition to tracking deal flow in the sector, the column will "point out key developing trends" affecting online content, e-commerce and online advertising.
The most important deal during November, of course, was the $519 million Dow Jones/MarketWatch transaction, in which Dow Jones paid 6.5x revenue and over 50x EBITDA -- "one of the highest sets of multiples paid for any sizeable media business over the last two years."
For the past three days, all eyes have been on IBM's $2 billion PC unit. But what about IBM's "other" businesses, like IT services? InternetNews.com hints that a major announcement could be on tap this week involving IBM and the New York Stock Exchange: "It is most likely a combination of software, supported by IBM's vaunted Global Services division (IGS), to ensure that the NYSE's electronic practice runs at a constant." The piece provides a glimpse of IBM's push into service-oriented architecture (SOA), noting that the company is ready to defend its leading position in the financial services vertical, notwithstanding the increased competition from Sun.
New York-based DataSynapse, which provides commercial grid computing solutions to the financial services vertical, recently expanded its strategic relationship with Goldman Sachs. It's not just one of those hand-shake, hail-fellow-well-met type of strategic relationships -- it involves cold, hard cash. The amount of the investment was not disclosed, but additional investors in the Series D financing round included a number of big names: Bain Capital, Intel Capital, New York City Investment Fund and Silicon Alley Venture Partners.
What's most interesting, perhaps, is that Goldman Sachs will use DataSynapse’s GridServer® software for deployment in its global risk management area, starting in early 2005. With the deal, Goldman is touting itself as a "leader in leveraging grid-based computing for demanding financial applications."
Briefly noted: the 32nd Annual Media Week Conference, dubbed "the longest running show on Wall Street" by UBS Investment Bank, will kick off on December 6. The conference will "feature presentations by senior management from more than 70 leading advertising, broadcasting, publishing, multi-channel television distribution, entertainment, video gaming and new media companies from the United States, Europe, Australia, South America and Asia."
Despite a resurgent IPO market in which "Wall Street is giving away big bucks again," there has been little of the hype that accompanied the tech boom of the late 1990's. Since August, at least four deals (Google, Shanda Interactive, DreamWorks Animation, Shopping.com) should have sparked investor attention -- but they didn't. The ever-controversial James Cramer, co-founder of TheStreet.com, describes why:
"Why haven’t people talked much about the new IPO boom? Why hasn’t the financial press taken notice? I think it’s because the market itself has become such a hated animal. We all pay way too much attention to the financial-scandal follies and the boring same-old same-old techies—Intel, Oracle, Cisco, Sun Micro, Microsoft, Dell—and not nearly enough to the RightNow Technologies or the Volterra Semiconductors, both up more than 100 percent since they came public earlier in the year. Those two companies can’t buy a word of ink despite their fantastic Internet-tracking and mixed-signal chip-sets businesses, respectively. Their cause isn’t helped by research analysts who are afraid to be promotional, lest they be accused of shilling for bankers and be in the crosshairs of the regulators. You just can’t get the pizzazz IPOs formerly generated with these now-silent housemen sitting on their hands instead of pounding the table for new orders."
