bizzXceleration: Performance, Value and Profit

We'll point you, however, at this column by Jon Markman as being very worthwhile in it's own right as well as encapsulating pretty much our whole argument about troubles that are coming. In addition, however, we'll also point to the article on Julian Robertson's reappearance and resurgance as a hedge fund manager and mentor who correctly anticipated all this around this time last year. The number of folks who looked at the structural flaws we're facing early and took advantage of them is beginning to be more than mere statistical anomoly. In other words the widespread idiocies we've now going to go thru would have been uncessary. The major requirement being competence and discipline. As opposed to greed, short-sightedness and lack of skill. They call it good business practice and we recommend it as a strategy :) !

A bad market? You ain't seen nothin' A worldwide decline may be harsher, longer and deeper than expected. Here's why financials may soon be in even more trouble. Likewise, we may come to look at the period between July 2007 and January 2008 as a sort of phony war in the worldwide credit crisis, because although the market has fallen 15% since summer, there have been no defaults of key bonds or asset-backed securities. The curious lack of real blowups has led even seasoned observers to believe that fears were exaggerated and that chaos will be averted. In reality, however, the skirmishes we've seen so far might be little more than a prelude to a deeper, harsher, longer decline than most yet perceive possible. And in a very postmodern twist, it is beginning to look like unexpected consequences of an investment instrument designed to mitigate risk could turn out to be the nuclear option that bombs the globe into the financial equivalent of World War III. That instrument is the credit default swap, or CDS. It was developed as a way for bondholders to buy insurance against the possibility that companies might fail to pay their debts, and later it morphed into a way for big traders to actively bet on the likelihood of the default of bonds and other credit instruments. But what is only now becoming clear is that major U.S. and European banks and hedge funds bought up to $20 trillion worth of that insurance to offset their exposure to mortgage-related securities they owned. And those banks and hedge funds are discovering the sellers of the swaps may not pay up.

 General/Special

Financial Sector: More Damage to Come Someone needs to inform the SEC that their job is to protect shareholders -- not wayward corporate management. For an SEC commission staff to even hint that its okay to move sub-prime junk off balance sheets is not only wrong -- its outside of their jurisdiction. That's FASB's purview, not the SEC. The goal should be accurate, transparent accounting -- not sleight of hand and misdirection. Allowing this kind of misleading reportage is simply unacceptable gimmickry from the regulatory body that is SUPPOSED TO STOP this sort of crap:

Tiger Fund's Julian Robertson roars again As I learned in a series of conversations with Robertson over the past six months, the man once known as "The Wizard of Wall Street" for the incredible success he had running his hedge fund firm Tiger Management has been on a magical run while most of the world wasn't watching. According to returns provided by Robertson exclusively to Fortune, he earned a stunning 76.7% return in 2007 managing a multi-billion-dollar portfolio of his own money. Since he shut down the Tiger fund on March 30, 2000, according to the records provided to Fortune, Robertson has generated a total return for his own pool of capital of 403.7%. Perhaps just as impressive - and just as lucrative - as Robertson's recent performance managing his own money, however, is the way that he's reinvented Tiger Management. The firm that was founded to support Robertson's own funds now provides infrastructure for and invests in a total of 34 hedge funds, employing a wide variety of different strategies, with a total of about $26 billion under management. That pool of capital grew tremendously over the past year as a number of the funds turned in spectacular returns - some of them even better than that of their mentor. Together, before fees, the 34 funds in which Robertson has an ownership stake averaged a return of 34% in 2007.

Finance Industry Readings

American Express earnings tumble American Express said Monday its profit slumped nearly 10 percent in the fourth quarter as it set aside more money to prepare for cardholder defaults. American Express' customers tend to spend more and have stronger credit histories than the average cardholder, so the company looks better shielded against a tough 2008 than many other lenders. Still, investors appeared concerned that AmEx is girding for deteriorating credit conditions and slower U.S. spending. AmEx CEO: "Clear signs of a weakening economy and business environment", Countrywide--1 in 3 subprime mortgages delinquent, BofA-Countrywide: Not Out of the Woods Yet ,

• Morgan Stanley Reclassifies Assets Morgan Stanley reclassified more than $7 billion of assets as Level 3 from Level 2, meaning they are more difficult to value, and separately has received subpoenas from regulators relating to subprime mortgages.
• UBS Reports Record Loss After $14 Billion of Mortgage-Related Writedowns UBS posted its first annual loss since the company was created through a merger a decade ago, with the fourth-quarter drop exceeding the records reported earlier this month by Citigroup Inc. and Merrill Lynch & Co. The collapse of the U.S. subprime mortgage market has led to more than $130 billion of losses and markdowns at securities firms and banks since June.
• Société Générale Missed Warnings Société Générale is coming under new strain as it said Jérôme Kerviel's risky trades, which led to $7.2 billion in losses, may have begun earlier than said, and warnings were missed. The woes are making the bank vulnerable to predators. 
• MBIA Posts Record $2.3 Billion Loss on Subprime Slump, Seeks Fresh Capital, More Subprime Pain in Store, MBIA, Ambac May Each Lose $11.6 Billion, Ackman Says
•  S&P: Financial institution Losses "will reach more than $265 billion", Banks May Face Additional $60 Billion in Mortgage Writedowns, Goldman Says
• FGIC Loses AAA Rating at Fitch After Missing Deadline, S&P Lowers or May Cut Ratings on $534 Billion of Mortgage Debt 

Buyout Traffic Report: Pileup On the Exit Ramp    M&A deals aren’t the only ones getting halted these days.Initial-public-offering plans also are getting shelved at a breakneck pace, as volatile stock markets keep investors on the sidelines. That has prompted 25 companies to call off IPOs this month, the most in at least 10 years, according to this piece Monday from Bloomberg. Carcases littering the IPO onramp include Tommy Hilfiger, the U.S. clothing company owned by U.K. private-equity firm Apax Partners. U.S. companies aren’t the only ones affected; Dong Energy of Denmark and Chinese department store owner Maoye are among companies that have canceled or put off sales, according to Bloomberg. It is yet another piece of bad news for buyout firms, who are seeing their businesses squeezed on both ends. Not only are there no big new deals to earn fees on in the works, but now their escape hatches have been sealed tight. Buyout firms depend on the IPO market as a primary means for selling their investments a few years after they make them. Now, it appears the deep freeze in the LBO market is complete. Indeed, IPO is fast becoming a four-letter word for buyout firms. Not only do Blackstone Group’s shares continue to languish — below $20, compared with their $31 debut last June — but KKR can’t even get itself onto the onramp, with that private-equity firm’s offering still stuck in IPO limbo. Deal Making in January: Is There Anybody Out There?