Levine on Wall Street: Physical and Synthetic

I'm not saying I *want* Lloyd Blankfein's head on a pike, mind you, I'm just saying that's where things seem to be heading.

JPMorgan is selling its physical commodities business .

For regulatory and economic reasons, I guess now is a good time to get out of the business of trading physical commodities. Less clear is whether it's a good time to get out of the business of employing Blythe Masters, or whether it's a good time for her to get out of the business of working for JPMorgan; she will be deciding over the next few months. I actually find it kind of weird that Mercuria agreed a dollar price for the business without negotiating whether Masters comes with it. I suppose you could believe that her value-add to the business is negative (I do not), but it's hard to believe that it's zero.

Ukraine will be paying its debts to Russia.

And Russia won't be accelerating those debts. This is very polite behavior for two countries, one of which just invaded the other, and you should think about that next time someone talks about greedy and rapacious financial markets. For myself I still sort of like the plans where the U.K. changes its debt laws to help Ukraine stiff Russia, but I guess there are financial-market stability problems there, for Ukraine and also maybe for the U.K.

Carl Icahn wants a partial split-off of PayPal .

He wants eBay to sell 20 percent of its PayPal subsidiary in an IPO. "A partial separation of PayPal is not a new idea, and we're glad to see that Mr. Icahn now seems to agree that a full separation of PayPal is not a good idea," says an eBay spokeswoman with appropriate gloating. This does seem a bit like a step back for Icahn, though his plans for eBay have never been crystal clear. Anyway how long do public companies usually last with another public company owning 50 percent < x < 100 percent of their stock? This feels like a not-so-serious plan.

Synthetic Alibaba !

Since Yahoo consists basically of shares in Alibaba, shares in publicly traded Yahoo Japan, and less than nothing else, you can construct synthetic Alibaba stock by buying Yahoo, selling Yahoo Japan, and I guess doing something to hedge the possibility that Yahoo's core business becomes worth even more negative amounts of money. So some investment banks have done exactly that. "One hedge fund manager said the process was simple, and questioned why investors would need a bank's help," which rather misses the point of banks.

Preferred stock can go wrong .

Here is a convoluted story of Goldman Sachs taking a company private, leaving its preferred stock outstanding, not paying the dividends, not making public filings, generally making life difficult for the preferred holders, and then apparently buying up a lot of the preferred for cheap. An important lesson here is that if you buy junior fixed-income securities, your only rights are the ones you find in the contract, and they're usually not so great. Another important lesson is that Goldman can be mean when they want to be. On the other hand I have my doubts about this conclusion:

Not surprisingly, the preferred shares plummeted in value. They had a value of $25 a share, but sank to a low of 5 cents. (The real estate slump and the dividend cessation probably accelerated the drop, but the opacity surely hurt, too.)

My money is on "turning off the dividends" as the main culprit, and "opacity" as very, very secondary.

Game of Thrones finance .

The kid who plays Bran Stark is a paper trader: "I have an app on my phone, a simulator, so you can buy stocks," says this rebellious teen, who wants to be a quant and "subscribes to e-mail updates from the Financial Times." George R.R. Martin has "a lot in mutual funds." Meanwhile Stephen Friedman, the former Goldman Sachs senior partner, "has a brief cameo in the upcoming season of the HBO series 'Game of Thrones.'" I'm wondering if the next digitally generated head on a pike will be Lloyd Blankfein's.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

    (Matt Levine writes about Wall Street and the financial world for Bloomberg View.)

    To contact the author on this story:
    Matthew S Levine at mlevine51@bloomberg.net

    To contact the editor on this story:
    Toby Harshaw at tharshaw@bloomberg.net

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