Unstructured Finance

Phil Angelides gives up his “secret formula”

By Matthew Goldstein and Jennifer Ablan

Phil Angelides, the former chairman of the commission set up by Congress to look into the causes of the financial crisis, is no longer part of a group seeking to turn a profit by investing in distressed mortgages.

A representative for Angelides emailed a statement to Reuters saying the former California state treasurer stepped down as executive chairman of the upstart firm, Mortgage Resolution Partners, on Jan. 27. Angelides, as we reported today, stepped down about two weeks after our exclusive story about his role with the firm was published by Reuters.

Angelides’ role sparked controversy because the firm touted its political connections as part of its “secret formula” for negotiating deals to buy distressed mortgages.

We only found out that Angelides left Mortgage Resolution Partners when we asked him to comment on a recent letter from a U.S. Congressman criticizing the firm’s marketing strategy.

On Feb. 10, Rep. Patrick McHenry, chairman of a House Oversight and Government Reform subcommittee on TARP program, sent a letter to Shaun Donovan, the Obama administration’s secretary of Housing and Urban Development, asking him for details about steps that are being taken to guard against “cronyism or conflicts” in the recently announced $26 billion mortgage settlement with the nation’s big banks.

Hedge funds against Obama

By Jennifer Ablan and Matthew Goldstein

Class warfare has been the topic du jour this year and is likely to be a major theme of the 2012 election. In a speech two weeks ago, President Barack Obama blasted his Republican foes and Wall Street as he portrayed himself as a champion of the middle class.

In a speech meant to echo a historic address given by former President Theodore Roosevelt in the same Kansas town more than 100 years ago, Obama railed against “gaping” economic inequality and pressed the case for policies he insisted would help ordinary Americans get through hard times.

Not surprisingly, some hedge fund managers were none too pleased.

In fact, hedge-fund industry titan Leon Cooperman “front-ran” Obama’s populist speech by widely circulating an “open letter” to Obama, arguing that “the divisive, polarizing tone of your rhetoric is cleaving a widening gulf, at this point as much visceral as philosophical, between the downtrodden and those best positioned to help them.”

The confession season

By Matthew Goldstein and Jennifer Ablan

The year is not yet over and already the confessions are starting to roll in from some of the biggest U.S. money managers.

Bill Gross, manager of the world’s biggest bond fund, sent out a “mea culpa” letter late Friday to his many mom-and-pop investors, saying he’s sorry for putting up such bad numbers this year. Mea culpas from Pimco’s guiding light and the self-styled “bond king” are rare, largely because his Total Return Fund has long been one of the industry’s top performers.

But this year has been a tough one for Gross, who guessed wrong by betting heavily against U.S. Treasuries, which have turned out to be one of the biggest out-performers of 2011. The fixed income guru, who helps manage more than $1.2 trillion at Pimco, wasn’t farsighted enough to foresee a flight to Treasuries prompted by events like the European debt crisis, the battle over the U.S. debt ceiling and the general anemic state of the global economy.

Welcome to Paulson-mart

By Matthew Goldstein

It’s been an ugly summer for hedge fund king John Paulson with two of his biggest funds down more than 25 percent. But what makes that poor performance all the more painful is how widespread it is being felt by wealthy individual investors around the globe.

Paulson’s flagship Advantage funds would appear to be exclusive terrain with a $10 million investment requirement. But that hefty entrance fee is something of a veneer because many of Paulson’s investors have gained entrance to his kingdom by plunking down as little as $100,000. That’s because Paulson’s Advantage funds are some of the most widely sold hedge fund portfolios on distribution platforms maintained by Wall Street firms, European banks and small investment advisory firms around the globe.

Paulson has built a powerful internal marketing force to make sure there is a steady stream of money from wealthy individual investors trying to get into his funds. This was one of the more surprising things my colleagues Jennifer Ablan, Svea Herbst-Bayliss and I found when we began taking a close look at Paulson’s problems this year.

Deals wrap: Novell deal a Microsoft maneuver?

MICROSOFT/Attachmate, a privately held provider of technology services, said it’s buying software provider Novell in a $2.2 billion deal. The deal marks the end of a drawn-out auction process the Novell board began back in March after rejecting an unsolicited proposal from Elliott Associates.

A chunk of the deal’s value also includes the concurrent sale of some Novell intellectual property assets for $450 million to a consortium led by Microsoft. Novell and Microsoft have crossed each others’ paths before when they struck a copyright deal over certain Novell assets in 2006. One theory is that this could be Microsoft’s way of maintaining control over the details of that agreement and out of the hands of rivals.

Bailed-out insurer AIG is still shopping around some of its larger assets, restarting its earlier campaign to sell its Taiwan unit Nan Shan Life.  A source close to the process told Reuters on Monday that first-round bids for the unit are likely in early December, shortly after due diligence ends. In August, Taiwan regulators rejected AIG’s plan to sell the unit for $2.15 billion to a Hong Kong-based buyer group. The insurance giant is still struggling to repay its bailout debts to the U.S. government.

Spitzer: S.E.C. still asleep at the switch

Former New York Governor at a September 2009 conference

Former New York Governor Eliot Spitzer at a September 2009 conference

Seems like old times. 

Eliot Spitzer, who rose to national prominence in 2002 when he forced a sleepy S.E.C. to crack down on conflicted analyst research,  is none too pleased to hear that his old rivals recently joined 12 Wall Street banks in seeking to knock big holes in that wall.

Asked for his thoughts on this Wall Street Journal article that broke the news, this is what he had to tell Reuters in an exclusive interview:

“For the S.E.C. to join with the banks to diminish consumer protections with respect to the quality of advice and research is absolutely and fundamentally violative of their duty to the public.  This one more example of the S.E.C. being in in the tank.”

Live chat: Rebuilding Wall Street

Thomson Reuters, Evercore Partners, and Korn/Ferry, the world’s largest executive search firm, have teamed up to deliver a live online forum that discusses where Wall Street is headed. Will it return to its former self or has the landscape changed forever? If you’re a financial services professional, join us here on Feb. 3 at 10 am. The panel is waiting for your questions. Leave them in the comments below and we’ll answer them on the day.

Our panel includes: Jane Gladstone, senior managing director, Evercore Partners; Alan Guarino, global sector leader, fintech & electronic trading, Korn/Ferry; and Dan Wilchins – editor-in-charge of Reuters’ coverage of U.S. banks and insurance companies.

Affluent Chinese help Tiffany make up for stingy US shoppers

tif1Normally double-digit sales declines don’t cheer investors.

But shares of jewelry chain Tiffany & Co rose 4 percent on Wednesday even though it reported that sales at its U.S. stores open for at least a year (“same-store-sales” in industry parlance) fell 10 percent in the third quarter. 

True, much of the hemorrhaging seems to have subsided since last year’s gruesome holiday fourth quarter when U.S. same-store sales fell 33 percent, and November is off to a promising start.

Seems that wealthy Asians and Europeans — in Asia outside Japan, overall sales rose 18 percent while European sales were up 10.5 percent in the quarter — are picking up the slack from rich Americans who seem to be curbing their shopping until the Dow Jones Index is more to their liking… like say 14,000. And analysts were encouraged that the jeweler is aggressively expanding overseas.

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