Charles M. Elson, professor of finance and director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, had this to say about the current Volkswagen scandal in which the company rigged automotive software in at least half a million of its diesel-powered cars to cheat on U.S. pollution tests (and there’s a chance the same ruse was used in Europe where as many as 10 million cars might have the shady software):
The governance of Volkswagen was a breeding ground for scandal. It was an accident waiting to happen.
It takes a real intellectual to point out the obvious, to wit: VW’s “supervisory board,” dominated by Ferdinand Piëch from 2002 until his ouster this past April, was such a joke that shareholders elected Piëch’s fourth wife, a former kindergarten teacher and his former governess, to the board in 2012. Well, even an educator of five-year-olds should know that after getting caught misbehaving as deplorably as VW has, it’s probably best to keep a low profile. So what did the company, founded by the German Nazi government in 1937, do for an encore?
Like a mid-binge drunk figuring that there’s no point in wasting a bottle that’s half-finished, it threw itself a big party, with Lenny Kravitz providing the musical entertainment. As reported by the New York Post: Continue reading
Reported last week, the recent contretemps that resulted in the resignation of United Continental CEO Jeff Smisek raises a question often debated in the sordid aftermath of shameless crony capitalism: Was it a bribe or blackmail?
Back in 2011, United Continental, the largest airline by passenger volume (70% of traffic) at Port Authority-controlled Newark International Airport, sought to renegotiate its lease agreement there (and get approval for a wide-body maintenance hangar) as well as obtain funding from the PA for a $600 million extension of the PATH commuter train from downtown Manhattan to the airport. At a fat-cat dinner in September of that year, PA Chairman David Samson, who was appointed PA potentate by Chris Christie but resigned in March 2014 as US Attorney Paul Fishman’s “Bridgegate” investigation widened (to include topics like United’s dealings with the PA), did what any self-respecting New Jersey autocrat would do:
Halfway through dinner at Novita, an Italian restaurant in Manhattan, Port Authority Chairman David Samson surprised the group with a request of his own. He complained that he and his wife had grown weary of the trip to their weekend home in Aiken, South Carolina, because the best flight out of Newark was to Charlotte, North Carolina, 150 miles away. Until 2009, Continental had run direct service from Newark to Columbia, South Carolina, 100 miles closer. In a tone described by one observer as “playful, but not joking,” Samson asked: Could United revive that route? An awkward silence fell over the table.
Morgan Stanley’s equity research report on Tesla Motors is nothing more than a sci-fi short story. (Photo: http://www.360here.com)
Bud Fox News has learned that on Monday, August 17, Morgan Stanley accidentally published a laughably optimistic equity research report on Tesla Motors (price target $465 vs $218.87 today) that was written by analyst Adam Jonas. The 39-page tree-killer was actually a homework assignment for the Science Fiction & Fantasy Writing class that Jonas is taking at the Gotham Writers’ Workshop. According to the course description:
Whether extrapolating science into futuristic technology or conjuring new forms of magic, these genres imagine what might have been or what might be, opening the door to any possibility.
Jonas’s report does indeed open the door to any possibility, to wit: the fantastic price target is based on how much a currently non-existent division (direct-to-consumer ride sharing), which the company in no way has suggested it’s creating, might be worth in the sci-fi worthy world of 2029, by which time one hopes that analytical robots will have replaced investment-banking-compromised human equity analysts for the benefit of investors everywhere. On the company’s 2Q earnings call, Tesla CEO Elon Musk wouldn’t even entertain a question about what has become Jonas’s entire investment thesis: Continue reading
Florence and Grace, shown yesterday after the resumption of trading, are the only two NYSE employees allowed in the exchange’s “nerve center.” (Photo: wikipedia.com)
At 11:32 a.m. yesterday, the New York Stock Exchange suspended trading for almost four hours (it reopened at 3:10 p.m.). Apoplectic Cassandras everywhere were immediately screaming that the US financial markets were under a “cyber-attack,” but at 12:09 p.m, the NYSE, in attempt to quell fears, issued an explanatory press release so incoherently worded that it may have been fed through the Nazi Enigma machine. The Exchange attributed the problem to a “configuration issue,” and here is an excerpt from the NYSE’s atrocious attempt at corporate (mis)communication and damage control:
On Tuesday evening, the NYSE began the rollout of a software release in preparation for the July 11 industry test of the upcoming SIP timestamp requirement. As is standard NYSE practice, the initial release was deployed on one trading unit. As customers began connecting after 7am on Wednesday morning, there were communication issues between customer gateways and the trading unit with the new release. It was determined that the NYSE and NYSE MKT customer gateways were not loaded with the proper configuration compatible with the new release.
In attempt to parse the gobbledygook, yesterday afternoon Bud Fox News‘ Silence Bellows slipped past the NYSE’s security detail and went looking for the real cause of the outage. She quickly reconnoitered the trading floor, full of high powered computers and dazzling technological equipment, and decided the answer wasn’t there. Then down a dark corridor on a mostly unoccupied floor of the NYSE building at 11 Wall Street in lower Manhattan, Silence came upon a door cryptically marked “Ticker Tape Room: Authorized Personnel Only.” Behind that door was a room that time had forgotten, and Silence discovered that like the Wizard of Oz, who’s really just an ordinary old man from Omaha standing behind a flimsy curtain, the US’s best known stock exchange, for decades a symbol of American capitalism, is really just a Potemkin village of CNBC photo ops, behind which two anachronistic ladies, Florence and Grace, armed with a ticker-tape machine and tote board, try their best to prevent the NYSE from losing more market share to NASDAQ. Continue reading
Fieri and Cohen: They probably deserve each other. (Photo: Getty Images (left), EPA)
As reported in last week’s New York Post, Steven A. Cohen, the erstwhile ringleader of insider trading emporium SAC Capital, was in Los Angeles recently and made a brief appearance on Guy Fieri’s Food Network Show. The article also revealed that Fieri, shameless huckster of a disgraceful concoction called Donkey Sauce, and Cohen have been friends ever since the latter paid the frantic “food personality” (it’s not clear that he can be called a chef) $100,000 to drive around with him in Connecticut and provide a private version of Fieri’s puzzlingly popular TV show, Diners, Drive-ins, and Dives.
According to sources associated with the Food Netowrk, it was only while the fatuous foodie Fieri was basking in the sordid afterglow of Cohen’s visit that the former realized that he’d been played for a fool as badly as that octogenerian neurologist who was corrupted and hoodwinked by one of Cohen’s underlings. A production assistant who asked to remain nameless told Bud Fox News:
After the taping was over and Cohen had taken off, we were all standing around having some “Salted Whiskey Caramel Fool” [BFN: supposedly one of Fieri’s signature dishes, it’s an alimentary-canal-affronting hodgepodge of sea salt whiskey caramel sauce, macerated strawberries, toasted house made pound cake, fresh whipped cream and hazelnut brittle], when it hit Guy like a ton of bricks: Cohen had stolen all his secret recipes for his upcoming restaurant chain. It was like that scene in The Usual Suspects when Chazz Palminteri drops the coffee cup and realizes that Kevin Spacey is Keyser Soze.
Steven Cohen’s trainees will learn a new twist on a classic line from the movie “Glengarry Glen Ross.” (Photo: Alec Baldwin in movie “Glengarry Glen Ross”)
In news that is beyond parody and a big middle finger to regulators and those simply trying to lead ethical lives, Bud Fox News has learned that Steven Cohen’s Point72 Asset Management is starting a training program. The excerpt below is not from The Onion or some other satirical organization; it’s from Friday’s New York Post:
Steven A. Cohen has hired a hedge fund industry veteran to head a new training program designed to pass the billionaire investor’s stock-picking skills to a new generation as he rebuilds after an insider trading scandal.
The program, which will be composed of an eight-week summer program for 15 college interns/juvenile delinquents and a longer program for 15 recent college graduates/potential convicts, will cover financial modeling, stock research, securities laws (ludicrously, in a 2011 deposition, Cohen said he was not familiar with Rule 10b5-1, the SEC rule that defines insider trading), and, if you can believe it, ethics and compliance. It’s as if Tiger Woods were teaching a class titled How to Resist Cocktail Waitresses and Stay True to Your Wife.
According to sources, the curriculum will focus on three modules:
- Doctor, Doctor: The trainees will interview 50 doctors (all with access to market-moving, non-public drug trial data) and cull out the five best candidates to be dupes in insider trading schemes. Each trainee will have to justify his/her picks with a five-page paper. Coursework will be based on former SAC analyst, and convicted insider trader, Mathew Martoma’s relationship with erstwhile U. Michigan neurologist Sid Gilman, who was oh so eager to help.
- Consulting 101: Trainees will be taught how to extract insider information from the professional consulting class. Rather than use too many examples from SAC’s own knavish history, instructors of this module will perform a case study of the Raj Rajaratnam insider-trading case, highlighting how the urbane Rajat Gupta, the former Managing Director of McKinsey & Company, flushed his reputation (and two years of his life, thanks to a prison sentence) down the toilet by passing to the fat man insider information on Goldman Sachs (Gupta was a board member), P&G (again, board member), and Berkshire Hathaway.
- Six Degrees of Steven A. Cohen: This technique is quite possibly Cohen’s pièce de résistance. Trainees will be taught how to create a complicated chain of communication with sufficient contacts between them and the original source of insider information (Consultant A tells analyst B, who tells trader C, etc…) that trainees will have “plausible deniability” with respect to the current preposterously lenient insider trading laws, which we wrote about here. One might argue that Cohen cunningly used this technique in the Martoma case.
Buffett to Obama: “…and I want lifetime supplies of Coke and ice cream, a choo choo train, and a veto of the Keystone Pipeline.” (Photo: Huffington Post)
Last week, Fortune published an interview with Warren Buffett, the world’s third richest man (worth $73 billion), in which he revealed that he drinks at least five Cokes a day and tries to eat like a 6-year-old child. Given the Omaha Oracle’s crackpot comments, it’s about time to consider a new theory for his years of successful investing: The guy is a complete idiot who’s riding the greatest dumb-luck investing streak of all-time. Here are some of the interview’s highlights: Continue reading