Proctor & Gamble firewworks about to go off. $PG

Go! Go! Ackman

Go! Go! Ackman (Photo credit: Wikipedia)

Proctor & Gamble (NYSE:PG) fireworks may soon be going off. Long considered a marketing machine from which all others emulated or just copied they have attracted the attention of activist hedge fund owner Bill Ackman of Pershing Square. As in $2 billion dollars of interest. With his track record many already view P&G suspiciously.

Lets take a look at a few issues that probably attracted Pershing Squares attention.

Five members of the board (out of ten) are active serving CEO’s of major companies. It is highly unlikely that they have the time to really scrutinize P&G. Also serving CEO’s are unlikely to rock the boat and undertake lobbying campaigns to proactively change issues. They also fill nine of fifteen committee memberships on the board’s three key standing committees

Since Robert McDonald became CEO of P&G in July 2009, operating income has collapsed 12% from $15.2 billion in 2009 to $12.3 billion in 2012 EPS is also collapsing have fallen from $4.49 to $3.82 (down 15%) over the same time period. Clearly this is not creating wealth. Robert McDonald has announced a major restructuring and cost cutting program. but you have to wonder why it took so long.

In 2012, P&G insiders have sold over $38.5 million of shares. In fact, since the beginning of August, insiders have already dumped over $33 million worth of stock. Last year  insider sales at Procter & Gamble totaled less than $3.7 million. Money does talk the loudest.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti

 

George Soros buys into Manchester United $MANU #shortsales #soros #hedgefund

DAVOS/SWITZERLAND, 27JAN10 - George Soros, Cha...

DAVOS/SWITZERLAND, 27JAN10 – George Soros, Chairman, Soros Fund Management, USA, captured during the session ‘Rebuilding Economics’ of the Annual Meeting 2010 of the World Economic Forum in Davos, Switzerland, January 27, 2010 at the Congress Centre. (Photo credit: Wikipedia)

George Soros hedge fund extraordinaire bought a huge and I mean huge slug of Class A Manchester United (NYSE:MANU) He has somewhere around 7.8% but claims he is not mounting a takeover. Basically he can’t; the Glaser family controls enough Class B shares which have super voting privileges that can out gun anything in the boardroom. Therefore no one will try.

George Soros is known to have invested in soccer (Excuse me football as non Americans refer to it) in the past. After all it is the worlds most popular sport. The stock is down a little after a summer time IPO. Manchester United is heavily indebted and will not produce huge amounts of free cash flow soon. So what’s the attraction.

According to a blog post on FT/Alphaville on Aug 20, 2012 by Joseph Cotterill the shorts are starting to circle. They think they smell blood in the water. OK there is some blood in the water. But you do not have the makings of a short raid. What you probably have is the makings of a classic short squeeze. George Soros by tying up a large junk of the public float just eliminated a lot of liquidity making shorting an even higher risk venture than normal.

So George Soros is aware of the sharks circling. Hell he may even throw some cheap hamburger in the water to excite them a little more. Right now if he may even decide to lend the stock to shorts and charge a rental fee. If the shorts beat down the price he can call the shares and create buying momentum as shorts sellers scramble to cover.

He may buy more at lower prices in the future.

Unethical you say. Hell this guy broke the Bank of England.

Illegal you say. This guy operates globally and could do this behind closed doors where you have banking secrecy that says it is not illegal. So there.

In any event isn’t it interesting that we refer to him as George Soros and rarely if ever mention any hedge fund name. It’s always George Soros this and George Soros that.

George Gutowski writes from a caveat emptor perspective.

Bank of America Toadies to Hedge Funds $BAC #hedgefunds

Photo of Bank of America ATM Machine by Brian ...

Photo of Bank of America ATM Machine by Brian Katt, Framingham Rest Stop, Massachusetts. (Photo credit: Wikipedia)

Bank of America (NYSE:BAC) is working hard at toadying to the hedge fund business. They have appointed Elizabeth Hammond as  the head of its capital introduction team in the United States. The business, which is part of Bank of America’s prime brokerage unit, specializes in connecting hedge funds with prospective investors like pension funds and endowments.

Of course Bank of America hopes to generate transaction fees from all the frenetic buying and selling that hedge funds supposedly do.

Now if I was a pension fund, endowment or had some huge money with Bank of America I would be very nervous about this relationship. Whose interest is Bank of America really looking after.

Anyway in the mean time lots of lunches and dinners for Elizabeth Hammond.

George Gutowski writes from a caveat emptor perspective.

Morgan Stanley Vengeance Move Against Former Employee – Actions Speak Louder Than Words $MS $C $JPM $GS

Invitation to join the Morgan Stanley Alumni n...

Invitation to join the Morgan Stanley Alumni network (Photo credit: Lars Plougmann)

Morgan Stanley (NYSE:MS) recently won a court case against a former employee and has judgement for about $10 million. Maybe paper judgement but the judge has ruled in favour of Morgan Stanley. Whats this all about? $10 million at Morgan Stanley is a rounding error. Well usually it is but in this specific case Morgan Stanley is building corporate culture and drawing lines in the sand.

It seems that a former employee Joseph F. Skowron, the onetime star hedge fund manager is serving jail time for insider trading, and now needs to pay $10.2 million to his former employer Morgan Stanley. Not a rounding error for Joseph F Skowron. But wait the $10 million is still not enough for Morgan Stanley they are seeking $45 million in civil court.  The case becomes a lawyers delight.

The entire case may not seem strategic but as reported by NYT Dealbook the stakes are high. Morgan Stanley is taking the opportunity to show other employees who may consider some form of malfeasance that they will be subject to both civil and criminal proceedings. You can make rules but for some people it’s not about the rule it’s about the consequences. So while Morgan Stanley could have relied on its insurance policies or just written a cheque and hoped to keep it quiet it now is embedding into its corporate culture that if you are found guilty of securities infractions you will be prosecuted. You will be persecuted. You will be hounded. And if you are married and have children we will not be taking care of them. jail time will not be an embarrassment.

Usually I write negatively about publicly traded companies and I have not been a big fan of the bulge bracket firms. But in this case I appreciate what Morgan Stanley is doing to protect investors and themselves.

Just by way of quick summary if you are not aware of the timeline:

  1. Joseph F. Skowron is a former star hedge fund manager for  Morgan Stanley-owned FrontPoint Partners.
  2. Joseph F. Skowron  is a Yale educated doctor who was lured into the hedge fund world.
  3. FrontPoint partners was acquired by Morgan Stanley in 2006.
  4. Skowron tried to bribe another French  doctor to reveal the results of confidential clinical trials.
  5. Skowron who was also called “Chip” was caught, sent to prison for five years and was ordered to pay $5 million.
  6. No evidence if he has been able to write this cheque or others from his prison cell.

So note to employees who are thinking about it. Don’t do it. especially if you work for those bastards at Morgan Stanley. They’ll come after you.

A short news search of Goldman Sachs (NYSE:GS), Citigroup  (NYSE:C) and JPMorgan (NYSE:JPM) failed to identify a similar situation. Or perhaps it failed to identify a vigorous defence of corporate culture and therefore mitigation of future and embarrassing losses.

George Gutowski writes from a caveat emptor perspective.

 

Hedge Funds Capitulate! No new money tipping point #hedgefunds #stockmarket

Lincoln on U.S. one cent

Image via Wikipedia

Hedge funds are showing signs of capitulating in the market place. Many are just simply not taking new money. Can you imagine a hedge fund not wanting the leverage. That’s the poker tell. The eyes have twitched and we know what they think. Sure some of the funds are huge but when you want to take chips off the table that is the only forecast investors need to know.

Watch for some pathetic investors suing and claiming not enough notice was given. Watch for some low-level hedge funds springing to life hoping to suck in the newly freed up money flow.

But in the end you should consider it a capitulation. Cleverly done during the supposed summer doldrums when we were all consumed  with the debt ceiling the big boys want to go home.

Disclosure: George Gutowski writes from a caveat emptor perspective. I do not invest in or manage a hedge fund. I have no plans to invest in or start a hedge fund in the next 72 hours as well.

Morgan Stanley Volckerized

Morgan Stanley's office on Times Square

Image via Wikipedia

Morgan Stanley (MS) is being Volckerized. That’s the new buzz word that refers to the Volcker clause of the Barney Frank Financial Reform Bill. Morgan Stanley is shedding in-house hedge funds by Q4 2010 which means in around 60 days. Employees will be coming up  with billions to purchase equity and get Morgan off the hook.

Financial engineering reigns supreme. These guys were good but do they have a few extra billion kicking around? Watch for compliance and governance nightmares to make this one work. After the mortgage mess we will have the hedge fund mess.

The immediate secret benefit will be to reduce mega compensation off the books of Morgan Stanley and hide it on the books of a private entity. Morgan Stanley and copy cat financial institutions will achieve the necessary political optics.   

Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post.