Euro zone rate rise signals ECB serious-policymakers guardian.co.uk - By Krista Hughes FRANKFURT, July 4 (Reuters) - The European Central Bank's interest rate rise sends a signal that it is serious about combating inflation, policymakers said as they staged a public relations offensive to justify Thursday's increase. FOREX-Euro steadies nr 1-wk low, weighed down by Trichet ECB's Interest Rate Hike Gets Mixed Reception |
 Spiegel Online | Outlook Darker as Jobs Are Lost New York Times - By LOUIS UCHITELLE The nation’s employers eliminated tens of thousands of jobs in June for the sixth consecutive month in a steady chipping away of the work force that seems likely to leave the economy very weak through Election Day. Jobs Continue to Be Lost Fragile economy takes toll on jobs |
 RTE.ie | UBS Says It May Avoid Quarterly Loss, Doesn't Need More Capital Bloomberg - By Elena Logutenkova and Warren Giles July 4 (Bloomberg) -- UBS AG may avoid a loss in the second quarter and has no plans raise capital after 3 billion Swiss francs ($2.9 billion) in tax credits offset damage from the subprime crisis. UBS says it may avoid loss for quarter DJ MARKET COMMENT: European Stocks Lower On Banks, Miners |
 Washington Post | ANA Considers Possible A380 Order Wall Street Journal - By BRUCE STANLEY Japan's All Nippon Airways Co. is considering whether it will end its reliance on Boeing Co. for large aircraft and order superjumbo A380s from rival supplier Airbus. ANA sets up committee to evaluate A380 and 747-8 UPDATE 1-Airbus to sell five A380s to Japan's ANA -paper |
 ABC News | Nebraska Beef Recall Expanded Washington Post - AP Nebraska Beef is expanding a recall announced earlier this week to include all 5.3 million pounds of meat it produced for ground beef between May 16 and June 26. Kroger Warns Customers Of Ground Beef Recall Nebraska Beef expands recall to 5.3 mln lbs: USDA |
Kentucky: Mistrial In Fen-Phen Case New York Times - By AP Two lawyers accused of defrauding their clients in a diet-drug settlement of $65 million were sent back to jail, after a jury in Covington deadlocked and a federal judge declared a mistrial. Mistrial declared after diet-drug jury deadlocks Mistrial declared for Curlin's minority-share owners |
 eFluxMedia | Apple Slashes Prices For 64GB SSD MacBook Air By $500…Trouble In ... eFluxMedia - By Dee Chisamera Maybe because of 4th of July, maybe just out of generosity, or maybe because of the 3G iPhone release, Apple decided to make a delightful surprise to its customers by making an overnight cut of $500 for its most expensive laptop. Save 16% on Apple’s solid-state MacBook Air Apple Drops Price Of MacBook Air |
 ABC News | Crude oil tops $145 on supply concerns International Herald Tribune - NEW YORK: Oil and copper hit record highs Thursday but various commodity markets ended down on cautious trade ahead of a long weekend in the United States to mark the Fourth of July. Oil heads past $145 for 1st time; pump cost up too Oil Rises for Second Week as Investors Seek Stocks Alternatives |
 CNBC | Fed Ponders Private Equity In Banks Forbes - The US Federal Reserve has already taken several unprecedented steps to assist investment banks, including allowing them to access its short-term lending facilities, collateralize their borrowings with illiquid securities of questionable market value, ... Bear Stearns Assets Accepted By Fed Lose $1 Billion in Value Fed Cuts Bear Stearns Asset Estimate to $28.9 Billion (Update2) |
 Online Gambling Paper | Penn National Gaming Cancels Its Sale to Private Equity Firms New York Times - By MICHAEL J. de la MERCED Another big corporate buyout fell apart Thursday, as Penn National Gaming announced that it had terminated its $6.1 billion sale to two private equity firms. Fortress, Centerbridge Scrap $6.1 Billion Penn Buyout (Update1) Penn National says takeover deal terminated |
$$$ The Upside Of Being Downsized [Portfolio]
$$$ Israel told the court he tried to commit suicide by swallowing pills two days ago. "I thought it was better to do myself in than to turn myself in."
"I ate the balance of my fentanyl patches because I thought it was better to do myself in than to turn myself in," Israel said. "I woke up battered and bruised and I realized God didn't want me to do that and I turned myself in."
When that attempt failed however, Israel said he thought God had wanted him to surrender. This and his mother's pleas, made him leave the campground where he had been hiding out in a mobile home and ride his blue scooter to the nearest police station in Southwick, Massachusetts, officials have said. [CNBC]
$$$ Why They Should String Samuel Israel Up On Wall Street With A Note Saying "Fraud Isn't Painless" [Timothy Sykes]
$$$ Newspapers [WallStrip]
Worn out by another ugly week in the markets? Don't worry, you still have time to sign up for BeachComber, DealBreaker's summertime email-only special newsletter. Even if you missed the first two editions, by now you've probably heard DealBreaker launched a weekly newsletter focused on escaping work and engaging in leisure, especially in the Hamptons. Every Friday afternoon we'll update you on the expected weather, traffic and parties you'll be encountering in the East Egg of the twenty-first century. We might throw in a couple of links to business stories too.
The third edition of BeachComber will published over email in a few minutes. Sign up below by simply entering your email address. It's free!
(Also, if there's anything you'd like to see--such as league tables for nightclubs, Further Lane party invitation origami--let us know. We'll be happy to oblige.)
Someone at BusinessWeek recently decided that short sellers are hot, and something should be done to acknowledge that hotness beyond staring into the dreamy eyes of (a picture of) David EinPorn and self-gratifying. But it's hard to write an article with only one hand so they went with a slideshow instead. It's called "The Wizards of Short Selling," which is apt because while long investing involves diligent research and fundamental analysis, short selling involves immersing oneself in the dark arts and sacrificing live goats following a bestial ceremony.
All the usual suspects are there (a group of people who, when the moon is full, show up to their respective trading floors in full attire, i.e. robes and those pointy hats with the stars). You've got your Tice, you're got your Paulson, you've got your Einhorn, you've got your Ackman, and of course you've got your Chanos. Additionally, you've got your deceased Winslow Jones, who is often summoned in candle-lit Ouija board sessions. Sadly, a few pretty important names o' the short selling game were left off the list, which we've taken the liberty of including after the jump.
Morgan Stanley commodities chief John Shapiro has decided to follow Michael Lewis advice about what "the really shrewd people" do when times get tough on Wall Street. They "abandon the big firms for which they have happily worked for many years, and sneak off," according to Lewis.
Shapiro is stepping down from his positions as the head of Morgan Stanley's huge commodities trading desk. He's been with the firm since 1984, and gets credit for building its energy-trading business. But lately Morgan Stanley has seen a sharp decline in revenues from commodities. Shapiro's surprise retirement will inevitably be read as a signal that things haven't improved.
As the Wall Street Journal tells it:
The firm recently said a decline in commodity revenue from the first to second quarter of this year was due in part to wrong-way bets in the power sector. But a person familiar with the matter said the overall commodities business in the first half of 2008 is running on a par with the first half of the prior year.
Writing on the wall seen.
Morgan Stanley's Shapiro Resigns as Commodities Chief
He grew the beard for the egret and the verdict? The egret likes. [NYT]
Henry Paulson focused on market discipline yesterday, saying we need reforms that would allow the unwinding of failed financial institutions. Speaking at Chatham House, the British think tank, on the financial markets and regulation, Paulson said that the Treasury Department and other policymakers were focused on "the immediate turmoil," seeking to promote market stability and minimizing the negative impact of stresses in the capital markets. However, further regulatory reforms, such as the Blueprint put out by the Treasury in March, were also necessary, both to fix problems exposed recently and to head off future problems.
Paulson delivered an accurate state-of-the-union on the financial markets, commenting on deleveraging and noting that US and UK financial institutions had recapitalized greater than 95% of their losses to date. Frankly, It's nice to see a policy maker so-grounded in the reality-base community.
The new fad these days among parents trying to make their children even more savvy is sending them to finance camp, where they are learning slick little phrases like "Assets feed you, liabilities eat you."
In the past such camps were limited to "high-achieving high school students," which we read as, "those trying to puff up their college resume." Now, the audience has expanded to grade-school students.
Many of the camps "[teach] campers how to rebalance portfolios, invest in real estate and use credit cards without getting dinged on fees."
Camp Millionaire, over a five day period, has its campers build a minieconomy , where the kids use mayo moola as their mock currency.
One little fucker, Andrew Adams, 10, told his mommy that "her credit-card billing cycle had changed, and that she wasn't keeping up with payments. Her delays were racking up late fees, jacking up her interest rate and hurting her credit score." Roughly translated as, "Mommy, you numbnuts! Get your shit together and pay the bills on time."
On the other hand, I guess it's not a bad idea to teach kids some financial sense now, so that they won't take out mortgages that they can't pay and rack up massive debt in the future.
--Senior Camp Counselor Travis
Two Goldman Sachs funds launched to take advantage of the credit squeeze saw serious losses last month, according to a person familiar with the situation. Goldman's liquidity fund and its credit opportunities fund were meant to capitalize off bad situations, buying distressed assets in the credit and mortgage markets. Both were down in the high double digits for June, the person said.
GS Liquidity Partners was launched when the credit crunch first hit last fall, with $1.8 billion to make investments in distressed credit. The credit opportunity fund is a more recent creature, launched this year to invest in mortgage market dislocations.
Oil prices near $146 (AP)
Iran, US stockpiles, comments from the Saudis about not boosting production, etc. etc. Also, interest rate hike possibilities in Europe, potentially weakening the dollar.
ECB hikes key rate to 4.25% (Market Watch)
The European Central Bank lived up to its promises this morning, hiking interest rates by a quarter of a point. The move initially inverted yield curves in Europe, traditionally a signal that an economic recession may lay ahead. It also highlights the differences between the missions of the Federal Reserve and the ECB. The Fed is charged with maintaining general economic and financial stability, balancing growth, jobs and inflation. The ECB is charged solely with monetary stability, making it institutionally more hawkish on inflation. The Euro will likely rise against the dollar, as will oil.
Gelato Goes Gourmet (WSJ)
The gelato industry is going global, using fancy names and fancy ingredients to tout itself as the discerning man's ice cream. Of course, it's always just been ice cream with a fancy name, but whatever. Nonetheless, we were thinking last night, as we walked by a gelatoria: hasn't gelato lost its moment? For awhile there, it was the frozen dessert, but it just seems like the gourmet frozen yogurt wave, characterized by a million Pinkberry clones, continues to hold onto its grip of dessert seekers. Unless that's peaked. As much as you might roll your eyes everytime you see a new Pinkberry, from our vantage point, it still has a ways to go before it crests.
A Lucrative Deal for Rush Limbaugh (NYT)
This is the Drudge effect in action. Yesterday, he "reported" that the NYT Magazine was going to announce this weekend that Rush Limbaugh had signed a deal in the hundreds of millions. That seems to have prompted the paper itself to run this piece today, spilling some of the beans from the magazine. Anyway, good for him. And he's not even exclusive on either XM or Sirius. Pretty impressive.
India Bans Corn Exports to Control Domestic Prices (Bloomberg)
We had no idea that India was the world's sixth largest corn producer. Anyway, it doesn't matter now, because we won't be eating any Indian corn anytime soon (not that we would, since it's pretty much the sugariest vegetable there is... but that's a digression). In an effort to cool prices, which are up in India (probably not due to the flooding in Iowa, and possibly not even to US ethanol policy, though maybe), the government has banned the export of the golden stuff. The ban will run from now until October 15th.
New Steps to Aid Economy Are Advocated (WSJ)
As the last batch of counterfeit money stimulus checks rolls off the printing press, politicians are already discussing what can be done next to boos the economy. Hey! What about more stimulus checks?
Predictably Irritating (Infectious Greed)
We're pretty tired of all the Freaknonomics-clones out there, too. It's not that the books are wrong, or that they don't have some interesting examples of stuff that make you go "hmm" it's really just that the whole genre has gotten stale. As Paul Kedrosky puts it: "More broadly, however, I had a deeper problem, and it has to do with the whole subject. Because I just don't care anymore. I'm not interested in more freakonomo-clones about those nutty human satisficers. I've heard the stories. Over and over. And I've heard enough to make me wonder how all we supposedly idiotic humans manage to step off sidewalks without being killed if we're so dumb. I'm really, really tired of carnie cognitive sideshows about stupid mind tricks. I get it. We're dumb. We're flawed. We take mental shortcuts. I get it. Really. Now stop telling me that, and tell me something how we idiots survive in our chaotic world." But if you must know, he was reading a book called, predictably, Predictably Irrational, which sounds like it has the exact same premise of another book that's out Sway: The Irresistible Pull of Irrational Behavior.
Picks to win Nathan's Hot Dog Eating Contest (SportsOdds.com)
Pretty much the main thing we look forward to every 4th of July is the Nathan's Famous Hot Dog eating championship. Sadly, we won't be there this year, though we'll obviously be watching on ESPN from a pool party in New Jersey. You know the backstory, right? Last year, world champ Takeru Kobayashi went down to the American Joey Chestnut, though both broke Kobayashi's previous world record was amazing. The two are back this year, and now Chestnut is the favorite. In fact, the Vegas odds on him are 5-6. Meanwhile, according to Gambling911, the line on the winning hot dog number is 68.5.
$$$ Michael Lewis's Rules to Keep Your Skin in Wall Street Massacre [Bloomberg]
$$$ JPMorgan Chase "Accidentally" Breaks Into Your House And Steals Everything You Own [Consumerist]
$$$ Mexican Woman Theory of Women [LoSC]
$$$ Bear Stearns portfolio value a litmus test for bonds [Reuters]
Such talk has sounded more and more sane as the company struggles with huge losses and sagging sales. Last year, G.M. lost $38.7 billion.
"Bankruptcy is not impossible," wrote John Murphy, an analyst with Merrill Lynch in cutting his recommendation on G.M.'s stock to "underperform" from "buy."
Shares of G.M., already at lows not seen since the 1950s, tumbled 13 percent today. The stock is down more than 70 percent over the last 12 months.
"The key change in our outlook is a much lower forecast for U.S. auto sales that is driving a higher cash burn, necessitating a much larger capital raise than the market is currently anticipating," Murphy wrote. "Furthermore, we believe there is potential downside in the stock below $7 and that bankruptcy is not impossible if the market continues to deteriorate and significant incremental capital is not raised."
The analyst's outlook came a day after the auto industry reported very weak sales for June. G.M.'s sales were better than expected, but that came largely on the back of zero-percent financing incentives.
Talk of a bankruptcy filing haunted G.M. in the early 1990s, and it plagues Chrysler under its new private-equity owners. (Chrysler said last week that it had no plans to file for bankruptcy protection.)
For G.M., there is no danger of a bankruptcy anytime soon: The company had $24 billion in cash or cash equivalents at the end of its first quarter.
But Murphy believes that G.M. will need to raise as much as $15 billion to shore up liquidity.
If it ever happens, a bankruptcy filing would be a cataclysmic event. Thousands of suppliers and other companies depend on G.M. It is also the largest issuer in the corporate debt market. A bankruptcy would set off a chain reaction that would ripple through the economy and the credit markets.
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Today, Israel surrendered to police in Southwick, Massachusetts, near Springfield.
That's just 105 miles from Stamford, Connecticut, the home of his Ponzi scheme hedge fund, Bayou Group.
From the beginning, his escape was not very convincing. On the day he was due to report to federal prison to begin serving a 20-year sentence, his S.U.V. was found abandoned on the Bear Mountain Bridge by the Hudson River. The words suicide is painless were written in dust on the vehicle's hood. (The song "Suicide Is Painless," was of course the theme of the M*A*S*H film and TV series; but the "suicide" in the film lived.)
Nearly every body of a jumper from Bear Mountain Bridge has been found. His was not.
Ten days later, his girlfriend was arrested. She told investigators that Israel had fled in a recreational vehicle (did he take Albert Brooks' Lost in America literally?) with a motor scooter inside. The U.S. Marshalls Service noted that Israel, who turns 49 this month, suffers from back pain, a heart condition, and is addicted to painkiller medication. Not a good candidate to get very far.
Earlier this year, Israel pleaded guilty to defrauding investors of his fund, Bayou Group. Since its founding in 1996, the fund covered up trading losses by falsifying auditing records from a fake accounting firm. They kept it going by taking new investor money and handing it to older investors. It lasted until the summer of 2005.
The one remainder of the fraud that was not a complete loser: a business card of Israel's—with the fund's name, a heron, and contact info—sold on eBay recently for $61.
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Someone make it stop—now!
But today there is a new twist to the Microhoo romantic melodrama: Maybe if I can get a bunch of friends together, we can all go out and it will be a date, sort of.
Matthew Karnitschnig and Robert Guth of the Wall Street Journal report that Microsoft has been talking to Time Warner, News Corp., and others about joining it in a plan that would acquire and break up Yahoo. Under this scenario, Microsoft would get Yahoo's search business, while its partners would get the rest.
But Microsoft has apparently had trouble getting anyone to sign on. A meeting set for Monday with Yahoo's chairman to float the new idea was canceled, the Journal reports.
Henry Blodget on Silicon Alley Insider says the canceled meeting is more likely a sign that Microsoft C.E.O. Steve Ballmer is focusing on a possible deal that Kara Swisher described on All Things Digital last week.
Swisher argues that Microsoft could win over Yahoo shareholders and effectively take control of the company by improving the terms of its search-ad alternative partnership to Google and by buying a third or more of Yahoo at a hefty premium.
With Yahoo shares down 30 percent since the beginning of May, that would be an attractive proposal to many investors.
Microsoft has often appeared clueless in its dealings with Yahoo. But whatever it decides to do will be helped by the fact that Yahoo's only alternative strategy is coming under closer regulatory scrutiny.
Peter Whoriskey of the Washington Post reports that the Justice Department has opened a formal antitrust investigation into the search-ad partnership between Yahoo and Google.
While the upgrading of an antitrust investigation is not uncommon, the Post says that the kind of requests being made by the Justice Department in this case is far from routine. Investigators are seeking documents from media and internet companies, as well as from Google and Yahoo, the Post reports.
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Most people think the steam engine—that paragon of the Industrial Revolution—was invented in the 18th century, maybe even later. That would be wrong.
The first steam engine was actually invented in ancient Rome in about A.D. 60. The inventor was a Greek mathematician living in Alexandria, Egypt, named Hero. He also invented a windmill and a water-pressure device that could open and close doors.
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No one knows if Hero suggested any practical use for his simple engine, such as mounting it on a ship. Yet one wonders how the Roman authorities of his day would have responded to the contraption, which would have challenged what was then the main source of locomotion for ships, besides wind: slaves and oars.
Nearly 17 centuries later, in 1710, an Englishman named Thomas Newcomen built a working steam engine. This time, the invention stuck and the British embraced it, creating the modern industrial world.
The question today, when it comes to alternative fuel technologies is: Will we be like the Romans, or the British?
This was essentially the question asked a few days ago in a testimony to the U.S. Senate’s Committee on Energy and Natural Resources by Jason Pyle, C.E.O. of Sapphire Energy, a leader among "next-generation" bio-fuels companies ("first generation" bio-fuels being ethanol and biodeisel made mostly from corn).
At its headquarters in San Diego, Sapphire Energy is developing fuels from algae, a highly versatile plant that produces oily lipids that can be transformed and refined into high-octane gasoline and even jet-aircraft fuel using existing refining facilities.
Sapphire has developed a still-undisclosed technology it says can make an oil substitute for $60 a barrel, less than half the price of light, sweet crude right now on futures markets. Pyle says that the raw ingredients for his bio-fuel come from photosynthetic microorganisms (algae), sunlight and carbon dioxide.
“They are carbon neutral and renewable,” Pyle said of his fuel, “and don’t require any food crop or agricultural land.”
Granted, there are many hurdles—some of them quite high—that Sapphire has to clear to make this technology viable. Not least of them is how to scale up from a few greenhouses to the millions of acres of algae ponds that would be required to make even a modest dent on the world’s consumption of fossil fuel.
To grow enough algae to supply the world’s energy needs would mean covering a space one-quarter the size of the Egyptian desert, according to a Kinsey & Company report cited by Pyle. That’s roughly 250,000 square miles, which is almost the size of Texas—an extraordinary undertaking.
Still, there are ample reasons to investigate algae's potential. Unlike corn-based ethanol, which takes almost as much energy to make as it produces and does little to curb CO2 emissions, algae can be produced more efficiently and absorbs about as much carbon dioxide as it emits.
Corn’s output is about 6 million tons per acre per year, says Pyle. Algae produces upwards of 30 million tons per acre per year. “That’s the buzz about algae,” he said.
Making bio-fuel from algae also is unlikely to affect food supplies and prices as much as using corn for ethanol has been blamed for doing.
“It’s hard not to get excited about algae’s potential,” said Paul Dickerson, chief operating officer of the Department of Energy’s Office of Energy Efficiency and Renewable Energy. “Algae can flourish in non-arable land or in dirty water, and when it does flourish, its potential oil yield per acre is unmatched by any other terrestrial feedstock.”
The problem, in Pyle's view, is that Congress, prodded by powerful agricultural lobbyists, is providing huge subsidies to corn growers to produce ethanol.
“By continuing to subsidize mostly the existing technologies instead of emerging alternatives,” said Pyle, “the government runs the risk of discouraging a real future of renewable energy."
Pyle's proposal: Get Congress to back away from favoring any technology—whether ethanol, biodiesel, or fuels from algae—and stop mandating the use of one alternative fuel over others. "A growing competitive market should separate winners from losers," he said.
Sapphire is funded by venture firms ARCH Ventures and Venrock, and by Britain’s Wellcome Trust. It's also working with the Energy Department, the University of California at San Diego, and the Scripps Research Institute.
The U.S. desperately needs an energy policy that encourages both conservation and alternatives to fossil fuels—everything from solar and hydrogen power to synthetic organisms that might one day be designed to make fuel.
But algae may be one of the earlier contenders for a technological fix for our energy woes because it uses the existing infrastructure of refineries, pipes, gasoline pumps, and internal-combustion engines.
Algae does not solve the problem of pollution from petroleum-based products, but it does have a cleaner over-all carbon footprint than oil from the ground, Pyle said.
Sapphire expects to be producing 10,000 barrels of algae oil a day in five years, which is about what an offshore oil platform produces, and 200,000 barrels a day by 2022. (By comparison, Chevron produces about 2 million barrels a day in its worldwide operations, Pyle said.)
Rome survived another 300 years after missing the significance of Heron’s invention, but eventually the empire unraveled as its economy grew stagnant and its technological achievements stalled. This made it more vulnerable to turmoil within and attack from outside.
We won’t have 300 years to coast on our current sources of energy and technologies. This is why we need to be nimble and adaptive, like the British in 1710, and not like the Romans in AD 60. Related Links
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The Seattle coffee giant announced plans to close 600 underperforming stores in the U.S. in a move that will eliminate 12,000 positions and cost it as much as $348 million in the next few quarters. Once the closures are complete, Starbucks expects the effort will boost its earnings by $100 million annually.
Starbucks, which is in the midst of a major restructuring to cope with increased competition and a more budget-conscious population, had already announced plans to close 100 of the 600 stores.
The company also said it plans to open 200 stores through September 2009, which is about half the number it had previously announced. In April, Starbucks said it would open less than 400 new stores each year between 2009 and 2011.
The retraction comes after a period of aggressive expansion for Starbucks. It doubled its number of outlets during a four-year period before it saw its customer growth plateau.
Starbucks' founder Howard Schultz returned to the helm of the company in January, and since then it has introduced a number of new initiatives, including a milder drip coffee.
Investors were clearly pleased with the news that the company planned to eliminate even more costs than it had previously planned. In after-hours trading, shares of Starbucks rose 7 percent.
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Onetime targets of Eliot Spitzer's legal fury must be feeling pretty good about their prospects these days. There is the recent rise in prominence of Hank Greenberg, the former chief executive of American International Group, not to mention Spitzer's own legal problems.
Now Richard Grasso has won his legal fight to keep his $185 million compensation package. Nearly five years ago, the outcry over his pay led to his resignation as chief executive of the New York Stock Exchange.
A New York state appeals court today dismissed the two remaining charges in the lawsuit against Grasso, saying that the state lost the authority to pursue its claims when the exchange became a for-profit company.
"We conclude that the attorney general's authority to prosecute the causes of action seeking that relief lapsed with the merger, the court said.
Last week, the state's highest court, the New York Court of Appeals, threw out four of the six claims against Grasso.
Andrew Cuomo, who succeeded Spitzer as New York attorney general, said that he would not pursue an appeal.
Grasso, 61, led the exchange for eight years.
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Under those long-term agreements with artists like Madonna (a $120 million deal) and Jay-Z ($150 million), Live Nation handles all of the artist's business, from recordings and publishing to tours and merchandise.
The strategy pits Live Nation against former partners like record companies and ticketing businesses. And investors have been skeptical that Live Nation can recoup its investments: Shares of the company have fallen by more than half since October.
But there are signs that Live Nation is going full steam ahead with its aggressive approach.
The New York Post reports that the company is near a $70 million deal with Colombian pop star Shakira. The Wall Street Journal had reported three weeks ago that they were in talks, and the Post now says that a deal could be announced "within weeks."
In other steps toward becoming a one-stop music shop, Live Nation has named Nathan Hubbard to be chief executive of its new ticketing business. Hubbard was previously head of Musictoday, which Live Nation acquired in 2006.
And Live Nation may be encouraged by recent signs of strength for its new marquee artists. More than 90 percent of tickets for Madonna's Sticky and Sweet world tour have already sold out. Jay-Z, meanwhile, was a hit at the Glastonbury music festival last weekend.
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Banks are scrambling to try to get out of the credit-crisis quagmire, but many investors don't believe that they can.
Financial shares fell in Europe today after the Swiss bank giant UBS announced a shake-up of its board.
In the United States, shares of Lehman Brothers fell 8 percent on Monday, to the lowest point since 2000, amid a broad sell-off of financial stocks in the United States. Lehman has been buffeted by rumors about whether it can survive as an independent investment bank, and there was a rumor on Monday that Barclays had made a discount offer of $15 per share for Lehman, which closed on Monday at $19.81.
Andrew Ross Sorkin of the New York Times dismissed that talk on CNBC this morning. And Lehman shares may get a boost from a "buy" recommendation from Morgan Stanley analysts.
"We think near-term risk of incremental write-downs is balanced by solid liquidity and capital footing," the analysts wrote.
UBS announced its changes in response to shareholder criticisms that the bank did not react quickly enough when the U.S. subprime mortgage market collapsed. Since October, UBS has written down nearly $37 billion worth of assets.
Four directors will step down this fall. The bank also outlined new corporate governance guidelines and increased the role of Sergio Marchionne, the nonexecutive vice chairman. Marchionne, the chief executive of Fiat, will also become the senior independent director on the board.
Saying that "bringing UBS back to its leading position" is his top priority, Peter Kurer, who became chairman of UBS in April, said that, "we have the foundations for the energetic and rigorous execution of our mandate."
But the moves did not impress shareholders, and they came a day after the United States Department of Justice asked a court on Monday to order UBS to turn over data on wealthy American clients suspected of evading taxes.*
Shares of UBS fell as much as 7 percent, to a 10-year low, in Zurich trading before recovering a bit. Other bank stocks slumped in Europe.
"We reiterate our cautious investment recommendation on UBS as near-term challenges are significant," said Folkert Jan Van Der Veer, an analyst with Dresdner Kleinwort, according to the Financial Times' Alphaville blog. "The threat of legal action in the U.S. could put management in a delicate and undesired position whereby it may have to hand over client information in order to avoid legal repercussions."
All the bad news surrounding UBS has clearly had an impact on employee morale. The bank's chief executive, Marcel Rohner, sent an email to UBS employees this weekend in an effort to lift their spirits, the New York Post reports. The good news? Lower-level employees will get an extra day off this year.
*Update 4:26pm: A Federal judge in Miami authorized the Internal Revenue Service to request the information from UBS.
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He will be missed—although not by customers now staggering under mortgages they cannot afford, or disappointed shareholders who saw their shares plunge, or the many regulators who are investigating Countrywide's practices and Mozilo's sales of stock.
Mozilo is a colorful character whose like we may not see again on the center stage of American business for some time to come. What other C.E.O. would take the time to read customer complaints or to help the friend of a friend of a friend? (For more on that, see Portfolio.com's complete coverage of Countrywide's V.I.P. loan program here.)
Sure, other entrepreneurs will emerge from this nation's working class to found giant companies, but they will certainly be more savvy about their public image or at least more circumspect than the brash and blunt Mozilo.
A self-made man, Mozilo was not afraid to shoot off his mouth and made no apologies for his huge pay packages. If he were a character in a film or a novel, he might be an unbelievable caricature with his stylish suits, cuffs and handkerchief, and that deep, lined tan. The son of a Bronx butcher, he has long carried a chip on both shoulders.
To mark his exit, here are some memorable Mozilo moments:
THE IMPERIAL C.E.O.: Union pension funds pushed for a resolution at Countrywide's 2007 annual meeting that would give shareholders a nonbinding vote on management compensation. Countrywide opposed the measure. "The shareholders have no clue," Mozilo said at the time, according to the Wall Street Journal.
THE THIN-SKINNED C.E.O.: Congressional investigators this spring released an October 2006 email from Mozilo to a compensation consultant for Countrywide: "Boards have been placed under enormous pressure by the left wing antibusiness press and the envious leaders of unions and other so-called C.E.O. comp watchers. I strongly believe that a decade from now, there will be a recognition that entrepreneurship has been driven out of the public sector, resulting in underperforming companies and unwillingness on the part of boards to pay for performance."
THE BROKEN PROMISE: In October, after Countrywide reported its first quarterly loss in 25 years, Mozilo sought to ease investors' worries, saying that the company would be back in the black in the next quarter. Countrywide had "laid the foundation for a return to profitability in the fourth quarter," he said. In January, after fending off rumors of an imminent bankruptcy filing, Countrywide posted a larger-than-expected loss of $422 million for the fourth quarter.
THE WAYWARD EMAIL: This May, Mozilo mistakenly replied to an email from a troubled Countrywide borrower who was seeking a loan modification. Mozilo wrote: "This is unbelievable. Most of these letters now have the same wording. Obviously they are being counseled by some other person or by the internet. Disgusting."
Not so with Angelo.
Angelo Mozilo, who started Countrywide Financial in 1969 with David Loeb, will bid adieu to the torn-and-tattered remains of the company today as it formally completes its sale to Bank of America.
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The fallout from the subprime debacle will likely continue to unfold in courtrooms for years to come. With foreclosures still on the rise and with home prices still falling, the full impact of the mortgage meltdown is still incalculable.
Countrywide, the nation's biggest lender, and by all appearances the one with the most aggressive sales tactics during the housing boom, has already been named in many shareholder and employee class-action lawsuits, a discrimination suit, and suits filed by three state attorneys general.
But while Mozilo may be ending his involvement with Countrywide's operations, he can't separate himself from its legal troubles. Mozilo has been named as a defendant in nearly all of the class-action suits, as well as in the complaints filed last week by the attorneys general from Illinois and California. Florida joined them with its own suit filed yesterday.
In all likelihood, more is still to come. Attorneys general from Connecticut and Iowa have also indicated they are weighing suits. The states seek restitution for borrowers who may have been victims of Countrywide's allegedly deceptive business practices. Senator Charles Schumer has also asked the Federal Trade Commission to investigate Countrywide's treatment of homeowners in bankruptcy.
But the real problems for Mozilo lie in what legal actions could come from the Securities and Exchange Commission and the Department of Justice, which are conducting separate investigations of Mozilo and Countrywide.
The securities class actions and the state suits would be indemnified by Bank of America, while any forthcoming suits from the S.E.C. or the Justice Department would result in Mozilo's own personal liability, according to Columbia University law professor John Coffee.
The Justice Department has already demonstrated its interest in bringing responsible parties to trial for their roles in the mortgage crisis. Last month, it charged 406 individuals with mortgage fraud as part of its Operation Malicious Mortgage effort. It also charged two former Bear Stearns hedge fund managers for fraud relating to losses from their subprime investments.
"I'm guessing the government wants to start at the bottom and move its way up the ladder," Coffee says.
While we've certainly not likely heard the last from Mozilo, he may stay quiet in the coming weeks and months as the ongoing investigations continue. "I suspect his lawyers are telling him to keep a low profile and make no statements," Coffee says.
That might be tough for Mozilo, but he'd be wise to find the strength to follow that advice.
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FINTAG COMMENT
That hurt.
Yesterday I was asked to complete an FSA questionnaire regarding Market Rumors. My lawyers couldn't stop laughing and nor could I as the naive questions droned on about if we had a policy and how often was it amended and how did we react to market rumors and if we kept a log how often was it reviewed. And not once did it define what a rumor was.
And then a friend of mine who runs a corporate finance boutique (not quite as busy as he was last year) said he used to compete 1 return a year to the FSA. Now they want him to complete 20 and put then into a system called Gabriel, the cousin of Edgar I suppose, via the internet. How can they ask a Corporate Financier to use the internet? It is like asking a small child to perform a surgical operation on the brain. So now he has to hire someone to fill these forms in. His costs have gone up and all because the FSA was berated for not spotting Northern Rock.
The FSA once prided itself on Principals Based regulation. That is no longer the mantra. Today it is all about CYA. Just like a Japanese bank, they want to collect lots and lots of information. For no other reason than collecting information means they feel good about themselves and protects them with a layer of data and information