December 2009 Mailbox

RE: “Research Renegades”
November 2009
I really enjoyed your piece on independent research. The large broker-dealers use predatory pricing when they “sell” their research to institutions. They operate their research departments unprofitably and subsidize the operations with investment banking fees. One of the biggest problems faced by independent research firms is leakage. Our rating changes are distributed without our permission before we can distribute them to our clients by firms that repackage them as consensus numbers. We live in exciting times in the world of research. Let’s see what the universe looks like in three years.
Peter Sidoti, chief executive officer, Sidoti & Co., New York

RE: “Out of Paulson’s Shadow”
November 2009
That is a great story on Paolo Pellegrini. This is Jim Clark, a founder of Netscape: I met John Paulson in the summer of 2006. John came to my apartment in New York, where he explained what was happening in the housing market. He wanted me to invest in his fund. Of course, I called my “financial advisers” at Goldman Sachs, and they told me that Paulson was a little-known bit player in the hedge fund world. I didn’t invest. Had I met with Pellegrini, I’m sure I would have committed $20 million-$30 million. I no longer use Goldman, and I have about $60 million with Paulson. I’ll invest with Pellegrini if I get the chance. Jim Clark, Palm Beach, Florida
Editor’s note: Goldman Sachs declined to comment.

“You need a system where people won’t be incentivized to take risks,” Pellegrini says. “We don’t need bankers to take risks with our money.” Wow! This is commentary coming from a hedge fund manager?

It would be very interesting to know how much risk Pellegrini is taking when he generates his 80 percent return figure, because we also do not want hedge fund managers being incentivized to take risks with our money, Mr. Pellegrini.
Michael Wright, Salt Lake City

RE: “London’s Cocaine Survivors”
November 2009
These people are hopeless hedonists. When I think of all of the poppies being cultivated in Afghanistan and the brave-and underpaid-men and women fighting there in order to, at least, attempt to stem the tide of global heroin trafficking, I simply sigh and get back to my job.
Joe Rudd, Arlington, Texas

RE: “Diamonds Aren’t Forever”
November 2009
I have to admit that I am quite surprised and disappointed to see how partial your article is. While it is true that the low end of the diamond market has suffered for obvious reasons, I am quite shocked that no one took the trouble to speak about the real high end of the market, which is doing quite well in spite of what everyone says.

When I read that people with money “feel guilty” about buying luxury goods, nothing could be further from the truth. Real luxury sells very well still and, as a matter of fact, for the first time in America, consumers realize that investing in fine- quality gems or colored stones is not such a bad idea, even in these strange times.
Henri Barguirdjian, President and CEO, Graff Holdings, New York

RE: “The Pickens Power Play”
November 2009
Your story includes a line that indicates the fracturing wells can harm underground water supplies; this is a favorite statement of environmentalists. But there has been no evidence in the 60-plus years of hydraulic fracturing of that happening.

The depths and types of geologic formations between the areas where fracturing is taking place and “close to the surface” fresh­water aquifers eliminate that possibility. Any geologist can tell you that.
Larry Trom, Richmond, Virginia

RE: “Malaysia’s Capital of Cronyism”
October 2009
Many thanks for your terrific article about cronyism in Sarawak. You put the pieces together beautifully, guiding the readers through a very messy web and with great sympathy for Sarawak’s marginalized peoples. We’d love to see more.
Judith Mayer, Ph.D., Borneo Project, Berkeley, California

RE: “Evolving Markets”
August 2009
Simply and plainly put: a magnificent piece. Your reporters should keep track of Andrew Lo’s adaptive-markets hypothesis. This may well prove to be for economics the equivalent of the unified theory for physics.
Yannis Kouletsis, Marfin Egnatia Bank SA, Athens

UPDATES

Simons Calls It a Day
Jim Simons, the billionaire founder of the quantitative hedge fund firm Renaissance Technologies LLC, told investors he would step down as chief executive officer at the end of 2009. Co- presidents Peter Brown and Bob Mercer will take over as co-CEOs effective Jan. 1, 2010, while Simons, 71, will become nonexecutive chairman. Under Simons, who was profiled in “The Code Breaker” (January 2008), Renaissance grew into one of the world’s most successful hedge fund firms, with assets hitting $30 billion in 2007.
RICHARD TEITELBAUM and SAIJEL KISHAN

More Financial Pain for Britons
In “The Artful Dodger” (October 2009), Bloomberg Markets reported how David Cameron, leader of Britain’s opposition Conservative Party, was ducking the question of how to reduce the U.K.’s 175 billion pound ($285 billion) budget deficit if he wins next year’s election.

George Osborne, the Conservatives’ finance spokesman, says his party will abolish tax breaks for middle-class families and tighten welfare benefits. The ruling Labour government plans to freeze the salaries of the highest-paid civil servants. Both Labour and the Conservatives are betting that voters will favor the party with the most credible program to trim a deficit that the government forecasts will rise in 2009 to 12 percent of national income, the most of any Group of Twenty country.
RICHARD TOMLINSON

Jail Time Sought for Vilar
Alberto Vilar, convicted in November 2008 of 12 criminal counts including fraud and conspiracy for stealing $40 million from investors, should spend at least 22 years in prison, U.S. prosecutors in Manhattan say. Gary Tanaka, Vilar’s partner at Amerindo Investment Advisors Inc., who was convicted of two counts of fraud and one count of conspiracy, should be sentenced to at least 1712 years, they say. Lawyers for Vilar, 69, and Tanaka, 66, asked Judge Richard Sullivan for leniency in court papers filed on Sept. 1.

Bloomberg Markets reported in “The Fall of Alberto Vilar” (November 2005) that the money manager had pledged more than $200 million to opera companies and charities. The story showed that Vilar and Amerindo were out of cash by mid-2002 after a drop in the value of holdings in technology stocks.
BOB VAN VORIS

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