I've been gathering information on Lehman Brothers' demise over the past few months. The more I learn, the stranger the tale becomes. Whilst it may take a while yet for official documents to surface, I firmly believe that the "official" sequence of events misses many points.
Several colleagues and friends have finally convinced me to start writing a book about these events. I don't intend it to be a "screaming and raving" attack on individuals (unless I find out it's warranted, of course).
But I would be very interested to hear about any experiences from former Lehman employees (or clients) about those eventful few weeks. If you are in those categories, I am sure you have some valuable stories and points to share, whatever your role at that time.
Please feel free to write in (or email me if you would prefer to keep the communication private from public eyes). Confidentiality and anonymity will be honoured in all cases.
Sunday, 22 March 2009
Office nomads
I don't normally comment too much on individual company trading updates, but recent comments from Regus, a UK office rental firm, opens up some interesting points on the asset management business and the office property market.
In case you haven't come across them, Regus effectively allows companies (or individuals) to hire out meeting rooms or offices on shorter-term leases. In many cases you can also hire some IT support and catering (all for a fee, of course). Taking London as an example, they have several sites dotted around the city, particularly in the the major financial hubs of the West End and the Square Mile (Canary Wharf is dead right now, fyi).
When it works, it is a high profit margin business, since the rates being charged are sky high. And you get charged for EVERYTHING, including sugar for tea or coffee (I kid you not!). They provide fairly lacklustre business support, as they know you are dependent on them - after all, it does a firm no good to its reputation to keep moving addresses.
The more subtle point is that these buildings are a good barometer of the fortunes of financial firms, particularly small and mid size ones. Whenever I have to attend a meeting in one of these places, I wander about a bit to see what sort of firms are there. Trust me, the names on the board at reception change every week! And up until recently an alarming number of them were one room affairs...not exactly confidence-boosting. Yet a Regus office in (say) Mayfair offers a veneer of respectability - a nice postcode to have.
Needless to say, many firms are disappearing in the current climate. And as the nearby office blocks (with ever increasingly large "to let" signs) are not filling up, it either means landlords haven't started to lower their rent demands, or many firms are simply going bust. In all sincerity, I think it's a combination of both right now.
The bottom line is that if you are looking to rent offices in London, hold out - the yields have far to widen.
In case you haven't come across them, Regus effectively allows companies (or individuals) to hire out meeting rooms or offices on shorter-term leases. In many cases you can also hire some IT support and catering (all for a fee, of course). Taking London as an example, they have several sites dotted around the city, particularly in the the major financial hubs of the West End and the Square Mile (Canary Wharf is dead right now, fyi).
When it works, it is a high profit margin business, since the rates being charged are sky high. And you get charged for EVERYTHING, including sugar for tea or coffee (I kid you not!). They provide fairly lacklustre business support, as they know you are dependent on them - after all, it does a firm no good to its reputation to keep moving addresses.
The more subtle point is that these buildings are a good barometer of the fortunes of financial firms, particularly small and mid size ones. Whenever I have to attend a meeting in one of these places, I wander about a bit to see what sort of firms are there. Trust me, the names on the board at reception change every week! And up until recently an alarming number of them were one room affairs...not exactly confidence-boosting. Yet a Regus office in (say) Mayfair offers a veneer of respectability - a nice postcode to have.
Needless to say, many firms are disappearing in the current climate. And as the nearby office blocks (with ever increasingly large "to let" signs) are not filling up, it either means landlords haven't started to lower their rent demands, or many firms are simply going bust. In all sincerity, I think it's a combination of both right now.
The bottom line is that if you are looking to rent offices in London, hold out - the yields have far to widen.
Friday, 20 March 2009
Long and Weavering road
That a few hedge funds are turning out to be fraudulent is not a great surprise. The moment the good times cease, there's no more momentum to keep the deceit running. In the case of Weavering, which crashed and burned today, it appears to be a fairly straightforward con.
What is surprising is that anyone would have invested in that product in the first place, if they'd done some basic due diligence. After all, isn't it a bit odd for this type of strategy to have such a large trading volume with a Cayman entity, rather than with its brokers?
Amazingly, the auditors of the fund (Ernst and Young) signed off the accounts - including a statement there were no related parties able to exercise significant influence. And yet two swaps were on the books with a notional in excess of 75% of the entire fund.
You'd have thought that after the demise of Arthur Andersen (RIP) in the Enron debacle, the remaining auditor firms would have learnt the lesson.
What is surprising is that anyone would have invested in that product in the first place, if they'd done some basic due diligence. After all, isn't it a bit odd for this type of strategy to have such a large trading volume with a Cayman entity, rather than with its brokers?
Amazingly, the auditors of the fund (Ernst and Young) signed off the accounts - including a statement there were no related parties able to exercise significant influence. And yet two swaps were on the books with a notional in excess of 75% of the entire fund.
You'd have thought that after the demise of Arthur Andersen (RIP) in the Enron debacle, the remaining auditor firms would have learnt the lesson.
Wednesday, 18 March 2009
Federal Unreserved
Apocalyptically insane, as one of my colleagues would say - the Federal Reserve has thrown all caution to the wind and decided to roll into the last chance saloon. In addition to buying an additional $850Bln in mortgage bonds, Bernanke's crew are also going to buy $300Bln in Treasuries.
Sure, we duly got a pop in the Treasury market today as the Fed put its foot on the quantitative easing accelerator. Equity markets also got a kick up as a result.
It is a real shame that the US is following in the misguided footsteps of the Bank of England down the quantitative easing route. The structural changes that the economy needs to right itself cannot be absorbed by monetary policy. There is an inconvenient point of view that all these bailouts are merely postponing the necessary corrections - the final reckoning may yet prove higher.
That being said, PIMCO's Bill Gross proved to be right on the money - they suggested buying what the government will buy ahead of them. I admit to regretting not following that advice to a sufficient level. On the other hand, I take some comfort from the fact that even in these turbulent times there are ways to make money - one of which is simply not to watch the ghastly and naive CNBC.
Sure, we duly got a pop in the Treasury market today as the Fed put its foot on the quantitative easing accelerator. Equity markets also got a kick up as a result.
It is a real shame that the US is following in the misguided footsteps of the Bank of England down the quantitative easing route. The structural changes that the economy needs to right itself cannot be absorbed by monetary policy. There is an inconvenient point of view that all these bailouts are merely postponing the necessary corrections - the final reckoning may yet prove higher.
That being said, PIMCO's Bill Gross proved to be right on the money - they suggested buying what the government will buy ahead of them. I admit to regretting not following that advice to a sufficient level. On the other hand, I take some comfort from the fact that even in these turbulent times there are ways to make money - one of which is simply not to watch the ghastly and naive CNBC.
Tuesday, 24 February 2009
Spin Citi
The never-ending hesitation on the Citi case has been rattling the market, in spite of Bernanke's "no nationalisation" statements today. I don't want to cause further anguish, but those assurances remind me of the answer a chief executive of a soon-to-fail Icelandic bank when asked whether deposits were safe - you guessed it, the response was a cheery "Of course!".
Now, I'm not saying that depositors should pull their cash out of Citi (unless they are above the government guarantee limits, of course). But the assumption that the banks are even close to being out of the woods is simply pie in the sky.
Now, I'm not saying that depositors should pull their cash out of Citi (unless they are above the government guarantee limits, of course). But the assumption that the banks are even close to being out of the woods is simply pie in the sky.
Monday, 23 February 2009
The bane of Thain
It just doesn't stop - now we find out that Bank of America and their (sorely missed?) former employee John Thain have been interfering with an investigation by the New York attorney general.
You'd think that with everything else going (including Citi doing an ever more convincing "dead bank walking" routine), cooperation with the government might be a smart move. Trust Merrill/Bank of America to miss that. Then again, coming back to my "chercher le Merrill" theorem, perhaps I shouldn't be surprised
You'd think that with everything else going (including Citi doing an ever more convincing "dead bank walking" routine), cooperation with the government might be a smart move. Trust Merrill/Bank of America to miss that. Then again, coming back to my "chercher le Merrill" theorem, perhaps I shouldn't be surprised
Thursday, 19 February 2009
The Banker's bonus problem...solved!
Rest assured, I have found a way of sorting out the banker's bonus debate in a way that satisfies all parties. Rather than get paid in cash, why not pay them in CDOs, CLOs and leveraged loans - preferably the ones they advised on! If the deals are as sound as they say, surely they'd be happy to have a slice of their own action? Freescale debt anyone?
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