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Financial Planning > Tax Planning > Tax Loss Harvesting

Levine on Wall Street: Strategic shifts and yet more SAC charges

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(Bloomberg) — What HFT is for. This is one of the better defenses of high frequency trading you can read, by Mark Buchanan, who is not particularly a cheerleader for HFT. But here he summarizes a recent paper by Oxford physicist Austin Gerig about how HFT “synchronizes” prices, making sure that for instance new information about Coke’s prospects is rapidly incorporated into Pepsi’s price. The result is that “price synchronization is broadly good for the market, as it makes prices more accurate and thereby reduces transaction costs,” helping uninformed investors at the expense of informed investors who would otherwise profit from price inaccuracy.

Barclays will have a new strategy for its investment bank.

The current strategy of bonuses going up while profits go down doesn’t seem to be working. Barclays’ meta-strategy of changing its investment bank’s strategy every year or so seems to be proceeding apace; the current heads of the investment bank “were only appointed by Mr Jenkins a year ago to replace Rich Ricci, a close ally of the previous chief executive, Bob Diamond, who was ousted in 2012 as a result of the Libor rate manipulation scandal,” and now they may be on the outs too.

UniCredit also has a new strategy.

It’s: Take a bunch of losses now, to reflect the bank’s actual best estimate of its economic position, instead of slowly leaking them out over the next few years. This is apparently a “courageous decision,” according to UniCredit, and the market more or less agrees. The first paragraph here discusses UniCredit’s “unpleasant decision” last Friday, whether to “announce a record-breaking loss or run the risk of displeasing investors and Italian regulators.” In a more normalized world announcing a record-breaking loss would displease investors and regulators; the goal is to make money. But not by, you know, pretending that losses don’t exist.

Gleacher also has a new strategy.

Gleacher & Company, an investment bank boutique slash bond brokerage that made $666,000 in fees last year, for a net loss of $99.5 million, has announced that it plans to liquidate, returning $60-90 million to shareholders. Umm. Yes? I feel like when you are a company named for a person, and you have no revenue and big net losses and that person has quit (Eric Gleacher left in January 2013), winding up and returning cash to shareholders seems like a good idea. Having the guy’s name on the door probably helps a bit with reaching that honorable conclusion, as opposed to the perpetual-public-company approach of pivoting to new business models until you run out of money altogether.

Imagine the synergies.

“Apollo Global Management LLC (APO), which acquired Chuck E. Cheese last month, is weighing a bid for another chain that mixes food and entertainment, Dave & Buster’s Inc.,” and it does seem obvious that you’d combine Chuck E. Cheese — described here as “a kid-oriented purveyor of pizza, arcade entertainment and animatronic robots” — with Chuck E. Cheese For Adults. Price synergies really are discussed, though really the growth opportunity is indoctrinating kids into the Chuck E. Cheese lifestyle and then having them graduate to Dave & Buster’s when they turn 21.

Hibor was only manipulated a little.

The Hong Kong Monetary Authority found that UBS tried to manipulate Hong Kong’s benchmark interest rate, but didn’t collude with any other banks so had only a tiny impact on the rate. Which is adorably UBS; the bank was generally the best at manipulating interest rates for unproductive or counterproductive ends.

“S.E.C. Brings Case Against 10th Former SAC Capital Employee”

Were you counting? I would have guessed this was number seven, but there you go. This one is Ronald N. Dennis, who insider traded in Dell and Foundry and settled for $200,000, after previously starring as an uncharged co-conspirator in several criminal cases. “His actions have cost him the privilege of working in the hedge fund industry ever again,” says an SEC guy, and I guess his charged co-conspirators would be happy if that’s all their actions had cost them. Speaking of uncharged co-conspirators, apparently Steve Cohen makes a cameo appearance in this one.

Liquidity causes volatility.

Or something. “Wells Fargo & Co. credit strategists are recommending a list of bonds not owned by ETFs that investors should consider buying to lessen price volatility when everyone from retirees to hedge funds pull cash from them.” Your model could be something like, panic selling expands to fill the available liquidity.

Goldman Sachs got lost in its dark pool.

“The bank sent the money to clients and other Wall Street firms that use its Sigma X pool for equity trades made in August 2011,” since apparently those trades were “executed at a certain point beyond the national best bid and offer.” The fact that it took two and a half years for anyone to notice — and that “Goldman Sachs appears to have taken the action voluntarily” — suggests a potentially lucrative business model for less scrupulous dark pool operators.

Are multi-level marketing businesses under-regulated?

“‘I do think this is an under-regulated industry,’ says William Keep, who is the dean of the business school at The College of New Jersey and has co-authored studies with a top economist from the FTC to define the difference between a legal MLM company and a pyramid scheme.” Talk amongst yourselves but I would not want to be the guy charged with defining the difference between a legal MLM company and a pyramid scheme. They share a certain … pyramidal shape.

Are poison pills unconstitutional?

I previously guessed that the answer was no. Marty Lipton agrees!

How bad are variable annuity scams?

The good news: They take advantage of a loophole in insurance companies’ rules to make money for individual investors. The bad news: They take advantage of terminally ill people by tricking them into giving up their personal information for investors’ profit. I have a soft spot in my heart for them, but the SEC does not.


Andrew Ross Sorkin is writing a Showtime TV show about “the collision and, at times, collusion between an aggressive U.S. attorney in New York and some of the richest hedge fund billionaires in the country.” So, like, a fictionalized Preet Bharara being in fictionalized cahoots with a fictionalized Steve Cohen? Also, will there be crossover episodes with other television shows born at DealBook?


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