Mo’ Money
While average Americans sat on their ever expanding butts this past trading week, Timothy Barakett and the crew at Atticus Capital were busy hoisting a cherry atop what has turned out to be a very tasty year.
As the largest shareholders of NYX Group, the boyz were no doubt singing a sweet song to their clients, to the tune of $150 million, as the stock rocked to all-time highs.
But those numbers pale in comparison to the coin they minted in Phelps Dodge. Freeport-McMoran’s $26 billion bid for PD lifted the shares 28% on the week. And with Atticus again showing up as the top shareholder, the hedge fund’s haul on this deal made the NYX windfall look like a pittance.
A filing on September 30th shows them holding 16.8 million shares. With the stock up slightly over 27 points this week, tack on another $450 million. True, they might have hedged their exposure on these two positions, but noteworthy all the same.
Not bad for a 3 and 1/2 day work week.
Wall Street’s Biggest Turkeys of 2006
Investors have been taken on a wild ride in 2006. A relentless ramp kicked off the year, led by all things commodity-related. But May turned ugly as the crowded leadership groups turned tail. Geo-political tensions ensured that June and July were better spent at the beach than a trading desk. But buying into fear usually works if you can survive the drawdown and ‘06 has turned into a decent year for most investors.
But not all.
15 lb Turkey
The Detroit Lions never scare anyone Thanksgiving Day. But Tigers are the most feared cat on the Street. Indeed, one can only surmise that tigers breed like rabbits given how many Tiger Cubs stalk the dark recesses of Broad and Wall. Tiger alum Dwight Anderson, of Ospraie Management LLC, took it on the chin earlier this year as copper prices defied his quantitative models and a short position in the metal tarnished his precious reputation. But don’t cry for Dwight. His other funds righted the ship and he is still in business. For now.
20 lb Turkey
The story of Brian Hunter and Amaranth Advisors has been beat to death. But we have a different take on it. Sure, losing $5 billion sucks, but we think he is a bigger turkey for driving his Ferrari in the snow.
25 lb Turkey
In Greek mythology Apollo is a god. On Wall Street Apollo is a turkey. Everyone involved with this company has been tarred and feathered. Apollo paid beaucoup bucks to slap the name of their University of Phoenix subsidiary on the new home of the hapless Arizona Cardinals. Two turkeys there.
The CEO and CFO have both recently left the company. No worries for them however...they can live off of the proceeds of suspicious options awards. Two more Turkeys.
Sands Capital dropped a cool $500 million or so on the position over the last year. Not exactly chump change for a firm that size.
And the Citigroup analyst covering the stock has been roasted to a crisp. After initiating coverage with the stock in the mid-$50’s, Shitigroup recently pulled the plug and downgraded. Of course, the cruel stock gods lifted the issue 5% or so on the news of the rating flip-flop. Contrary indicator indeed.
Turkey’s are a native species on Wall Street. Perhaps you are a turkey if you are reading this post on Thanksgiving instead of spending time with friends and family.
We gotta hop ourselves. An old friend needs some attention. Thirty-six years old and still holding up like a champ. But much like a turkey this bottle ain’t likely to survive the day.
Sleep it off and we will see you tomorrow. 
C(S,T) = SN(d1) - Ke^{-rT}N(d2)
Sometimes, after we make a trade, we wonder...who is the idiot on the other side of our order?
The Thanksgiving break has always given us a chance to catch up on our reading. When Genius Failed, Roger Lowenstein’s blow-by-blow account of the debacle at Long-Term Capital Management, was an instant classic back in the day. Myron Scholes, one-half of the famed Black-Scholes duo, plays a prominent role in the story.
Lowenstein relates a story that took place during LTCM’s capital raising roadshow, and we believe the exchange is typical of how cocky traders and investors really feel about the anonymous souls who take the other side of their trades…
At one point during the road show, a group including Scholes, Hawkins, and some Merrill people took a grueling trip to Indianapolis to visit Conseco, a big insurance company. They arrived exhausted. Scholes started to talk about how Long-Term could make bundles even in relatively efficient markets. Suddenly, Andrew Chow, a cheeky thirty-year-old derivatives trader, blurted out, “There aren’t that many opportunities: there is no way you can make that kind of money in Treasury markets”. Chow, whose academic credentials consisted of merely a master’s in finance, seemed not at all awed by the famed Black-Scholes inventor. Furious, Scholes angled forward in his leather-backed chair and said “You’re the reason---because of fools like you we can!” The Conseco people got huffy, and the meeting ended badly. Merrill demanded that Scholes apologize. Hawkins thought it was hilarious, he was holding his stomach laughing.
Alas, book smarts don’t always triumph over common sense. The hedge fund imploded and Conseco went bankrupt. It was a room full of bloated egos...and longer-term...losers.
Tomorrow UTC readers should give thanks...for all the fools out there willing to take other side of your trades. But keep the hubris in check.
Because even the smartest investors can end up looking like turkey’s.
Holiday Gifts for the Filthy Rich
Masters of the Universe love to lap up luxury goods.
You know the type. They blow by you on the Merritt Parkway in exotic sports cars. You often overhear them berating waiters who get stingy with truffle shavings. Their Blackberry’s get more attention than their children. They work hard and play harder...and are notoriously tough to please.
Coach (COH-NYSE) might be considered a luxury good to middle americans, but the average MOTU wouldn’t be caught dead schlepping cheap cow around 06831. They will re-gift it to their nanny’s, however.
And nothing is more insulting to the new money crowd than being on the receiving end of a bottle of cheap wine or booze. Critter labels and Two-Buck Chuck have no place in their McMansion. Indeed, they would probably admit to watching Savanna’s movies in their Range Rover’s before they would fess up to drinking her wine.
So what do you get the person who has everything?
The WinePod will likely pass muster with the Master...watch them plug a Bloomberg in and ferment away the slow trading days.
Getting crushed in a stock leaves a bad taste in your mouth. Crushing wine is a lot more palatable.
Win One For the Gipper
A legend of college football will be watching tomorrow’s game from the Big House in the Sky.
Michigan coaching legend Bo Schembechler has died after collapsing Friday morning, Detroit-area television station WXYZ reported. He was 77.
Schembechler collapsed at WXYZ’s studios in Southfield as he prepared to tape the “Big Ten Ticket” show and was taken to Providence Hospital, the ABC affiliate said. Story
Rest in Peace, Bo.
Maize and Blue by a touchdown…
A Thank You to Our Readers
Several Wall Street Conferences are on our schedule this week. Which means of course, we will be the recipients of a time honored wall street tradition, the conference satchel tchotchke.
tchotchke-A small, decorative item or souvenir, usually of no particular value.
These free goodies, which are typically emblazoned with the logo of the sponsoring investment bank, do in fact sport retail values equal to approximately 4.50 copies of Barron’s, and are highly coveted by the big money crowd. Portfolio managers and analysts often squeal with delight upon being presented with tchotchke’s at the registration table. Unseemly behavior no doubt, but all too common. It would seem overpaid, egotistical wall streeters love freebie’s more than main streeters.
The bags, which are theoretically used to tote annual reports and sell-side research, are usually emptied quickly of such useless garbage and surreptitiously filled with the candy and soda that are given away gratis to money managers in attendance. The contraband is then carted off the premises and consumed.
Based on this behavior we would guess that over 50% of buysiders have prior convictions for shoplifting.
Since we will likely be on the receiving end of such sell-side largesse, we thought we would take the opportunity to cull our closets of detritus and enrich a lucky reader at the same time.
And thus the first UTC Tchotchke Sweepstakes, which hopefully will turn out better than the sweepstakes run by Reader’s Digest (RDA-NYSE) some years back.
