Levine on Wall Street: Edge, or 'Edge'?
SAC Capital was an edgy place
Basically, the way hedge funds work is, you try to have some "proprietary" information or analysis that is not already incorporated into market prices -- that gives you "edge" -- and then you use your proprietary edge to trade and make money. That or you just quietly index and talk a lot about edge. SAC Capital did the former. Some proprietary edge is legal -- "legitimate research" or whatever -- and some is not. Calling your buddies at companies and asking them for information on upcoming earnings, as SAC analyst Jon Horvath did, is probably illegal, though all of the areas are gray. Anyway, Horvath is testifying against his former boss, Michael Steinberg, because Steinberg "confronted him on the trading floor and demanded that he provide 'edgy, proprietary information' that produced profitable stock trades," which he took to be code for "get illegal inside information." But yesterday Steinberg's lawyer cross-examined Horvath and pointed out that the edge thing was literally his job description; showing him " a number of SAC documents explaining research methods that used the words 'edge,' 'edgy' and 'proprietary,' including an e-mail that he said Mr. Horvath was sent on his first day of work at the firm in September of 2006." The question, of course, and it's a difficult one, is: Did those e-mails, or Steinberg's demand, contain a nudge-nudge-wink-wink at the end? Was it like "get us some edge," or was it "get us some edge IF YOU KNOW WHAT I MEAN"? Hard to tell from an e-mail.
Some guys are mad at each other
In 2011, Egan-Jones, a little credit ratings firm, said that Jefferies, a little investment bank, was "unsustainable," and Egan-Jones managing director Sean Egan spent a lot of time running around on television arguing that. He was mostly wrong, though it is true that Jefferies is no longer a public company, but mostly not because of the European bond risks that Egan got so worked up about. As he'll be the first to admit. Well, as he'll admit. Here is a story about Egan apologizing to Jefferies chief executive officer Richard Handler that is so awkward that it makes for difficult reading. The summary is: Egan e-mailed Handler to apologize, Handler got mad all over again and sent him an angry e-mail back, Handler eventually invited Egan into his office to apologize in person, Egan came in and apologized, Handler yelled at him again for a while, Egan left, each side complained to DealBook about the other, and nobody is happy or edified. The moral is that, if the egos involved are big enough, you should never apologize for anything. You'll only make it worse.
Charlie Ergen is good at finance
I've said before how fond I am of the LightSquared bankruptcy maneuvering by which Charlie Ergen's Dish Network, a LightSquared competitor, gained control of the bankruptcy process and looks set to buy LightSquared's assets. Here is a comprehensive Steven Davidoff examination of that maneuvering, and of the so-far unsuccessful challenge to Ergen's work by both LightSquared's former owners (who think that, since LightSquared's credit facility prohibited "direct competitors" from buying its debt, the fact that Ergen bought it was cheating) and Dish shareholders (who think that, since Ergen bought the debt for himself and is now going to have it paid off by Dish, he's got a conflict of interest). Davidoff takes more or less the appropriately appreciative view of Ergen: "Mr. Ergen has also shown what a great poker player he is, pushing boundaries and taking advantage of every gray area in the law."
Bankers should spend more time with people, or at least with Facebook
Here is a post from management sociologist Daniel Beunza about cultural reform in banks. He describes a panel that reads Goldman's recent efforts to make its analysts and associates leave work on the weekends as a solution to "what one panelist called the problem of 'social atrophy' among bankers, and sociologists would call disembeddedness: by virtue of their work hours, bankers are socially disconnected from their family, friends and ultimately from society. This disconnectedness makes it easier to ignore the impact of their activity." I suppose the idea is that if they're not working on Saturdays, young bankers might hang out with their non-banker friends and be a bit more normal than if they just spent all their time at work being hazed and indoctrinated. Similarly, another panelist recommended that banks allow employees to use Facebook at work, since that too "would re-embed bankers in society."
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