This is what happens to girly ‘fund managers’


“…Stuart Sugarman, described by The New York Post as a 48-year-old hedge-fund manager, admitted to the paper that he was the noisiest member of his cycling class, prone to cheering himself on during classes with phrases like “You go, girl.” But two weeks ago, he said, a broker attending the same class at the Equinox Gym in Manhattan’s Upper East Side took matters into his own hands — and shoved him and his bike into a wall.

Then it got weirder.

What began as a request from Christopher Carter, 44, to quiet down escalated into a shouting match between the two, The Post said. Finally, Mr. Sugarman’s lawyer told the Post, Mr. Carter charged Mr. Sugarman “like Leonard Marshall of the New York Giants hitting a practice sled,” shoving him into a wall and leaving a hole in the sheetrock.” [Dealbook]

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Brazil: ‘sustainable’ trends in low income homebuilding


…“‘We are redirecting our efforts to that lower-middle-income sector,’ said [CEO of Brazilian developer Gafisa]. ‘All the big companies are moving in that direction because it is going to bring us more business. And it’s not a bubble, it’s sustainable. Just look at the demographics.’

…Confirmation comes in the lending figures. The number of houses financed by Caixa Economica Federal Peyrelongue more than doubled in three years, to more than 600,000 last year from 261,327 in 2003. The amount lent by the bank doubled in the first three months of this year over the same period in 2006.

…Banks are lending more thanks in large part to a 2004 law that makes it easier for them to seize property from borrowers who fail to repay their loans. Previously, repossessing homes took banks six to eight years. Now it can take less than a year.

…The only possible downside is the chance that the newfound investment will drive up land prices. …[A]n analyst for Merrill Lynch warned that the influx of cash could push up prices, although he said that such oversupply would probably come only at the higher end of the market and that ‘three to four years out, there is enough pent-up demand to take on the supply.’”*

*“Loan Changes in Brazil Motivate New Buyers and Home Building” – The New York Times, July 5, 2007

Charlie Finch @ Artnet.com talks leverage spillovers in the art markets

 

“The unseen leverage factor in contemporary art lies in the way many galleries do business: using the rising value of inventory as the basis for bank credit to pay day-to-day expenses, top-of-the-line rents and expansions to hot new neighborhoods like Loisaida. As art prices rise, debt becomes easier to acquire, gallery wall space increases to showcase the hot art for day-tripping collectors who write more checks, increasing the base value of all present and future works by in-demand artists, whose inventory valuations allow galleries to gain more credit. Reduce surplus collector cash and these equations unravel quickly, the way the inability of middle-class home owners to pay their mortgages is unraveling hedge funds managed by Wall Street’s most prestigious firms, who should know better, but never seem to.” [link]

(above: the work of Jenny Saville)

CFA material: shedding light on the ave. American’s rocky retirement future


I’ve started to notice a disjoint between my generation (read: me) and older generations regarding what should pass as a reasonable rate of return to expect on a retirement portfolio projected into the future. The older generation appears to be much more optimistic than myself. Many of their cohort have no qualms about applying hefty annualized growth rates to their portfolios. Granted, this observation is anecdotal, though I was reminded of the issue while reading through an example in one of the Schweser books:

Assume a 35yr-old investor wants to retire in 25yrs
She expects to earn 12.5% on the portfolio prior to retirement, and 10% thereafter
She wants to withdraw $25k per year for 30 years after retiring

So, how much does she need to deposit in each of the 25 years in order to secure that payment stream? A simple calculation shows that depositing approx. $1,800/yr in the 25 years preceding retirement should allow her to secure the desired income. Suppose her HH income hovers around an ave. of 60k after taxes (generous for the ave. American HH), 1.8k/yr would amount to about 3% of the HH’s ave. annual after tax income over the accumulation period.

Now imagine we change a couple of assumptions, namely we apply a pre-retirement growth rate of 8% and a post-retirement growth rate of 5% to the portfolio (because we may or may not ever see a spike in the 10yr like the one experienced between 1979-1985), change the desired withdrawal to 35k (predicated on the expectation that food and medical care will not get cheaper), and finally we increase the ave. after tax HH income over the period to 70k (due to a 2nd technological revolution, etc.).

How much does she/the HH need to sock away annually in order to meet the desired withdrawal? Approx. 7.7k, which amounts to about 11% of the HH’s ave. annual after tax income over the accumulation period.

The difference between deferring 3% of today’s income to live comfortably tomorrow is significantly different than deferring 11% for the same outcome. At 11% you start eating into your present quality of life in a meaningful way. I get the sense that the generation I will age with is hopelessly unaware, but again, my observations are mostly based on anecdotal information gleaned from identifying cases-in-point. I’ve yet to sit down with the data, and there are too many exogenous factors that could change the underlying assumptions and thus generate a more positive outlook. For instance, maybe technological revolution part II propels the ave. American to work well into the 70’s, thereby prolonging the pre-retirement cash-flow stream and allowing the base to compound longer. This seems more likely than an overhaul of government sponsored entitlement programs to support pensioners living into their 80’s, or asset growth rates that would secure annualized portfolio returns in the low-teens for the ave. American –high-net worth clients with access to skilled investors, yes not unlikely; but for the ave. HH with a takeaway in the mid 60k’s, not so much.

And it doesn’t help that stay-at-home moms are taking out home-equity loans to parade larger racks to soccer practice.

Chapman 13D: Great advice you might not yet have received


From Chapman Capital’s most recent 13D filing:


From: Robert L. Chapman, Jr. [Chapman Capital]
Sent: Thu, 31 May 2007 6:11 am
To: Edward Rogas Jr. [Chairman of the Board, Vitesse (OTC: VTSS)]

Ed,

As I have been informed that you are gallivanting around the Czech Republic (without having left the entire executive team at Vitesse a means of reaching you for any matter requiring expedient response during this event-filled period for the Company*), I doubt you will be made aware of this important development in the options backdating scandal…

Robert L. Chapman, Jr.


From: Ed
To: Bob

Bob,

I am now in Warsaw to attend my nephew’s wedding. I think it is appropriate for you and me to meet…

Ed


From: Bob
Sent: Friday, June 01, 2007 11:42 AM
To: Ed

Ed,

As empathetic as I am for your nephew’s imminent loss of his independence and freedom of choice, waiting until June 12, 2007 is not practical…

Robert L. Chapman, Jr.
  
  

‘Past Perfect’: The New Yorker profiles Fifteen Central Park West

robert-am-stern.jpg 


In some ways, the building seems less a piece of architecture than a creation along the lines of Woody Allen’s “Manhattan,” an homage to the city by someone who not only loves the New York of the twenties and thirties but actually believes that he can will it back into existence.”

Considering the fact that many of the residents’ net worths are governed by a common oscillator (save for the Denzels and other non-Wall Streeters), the herd mentality which drove the “prices that started at more than two thousand dollars a square foot and were subsequently raised nineteen times” may result in a common devalueing among the non-Loeb units, albeit a mild one. It’s not as if the goods in question are Renoir’s –the building boasts over 200 units, but the architect is responsible for more than 5x that amount in high-end luxury units on Manhattan island alone.

Links:
The official website
The New Yorker profile
Curbed coverage: [2005: scaffolding goes up] [2006: construction shots] [2006: Hulking Leviathan] [2007: fire] [2007: nearly complete] [2007: sold out] [2007: makes NY history]

In the news: Tuesday


UAE restates 2006 GDP growth rate: 9.4% [Khaleej Times]
The country’s economic ministry revised their 2006 full-year growth rate to 9.4% from the 8.9% reported earlier this year. They attributed the gain to (surprise) fast expansion in the oil/gas sector, which accounts for about a quarter of the country’s GDP. The oil/gas sector is expected to slow down this year.
2005 GDP: 10.5%
2004 GDP: N/A
2003 GDP: 11.9%
If aggregate growth rates that beat China on account of smaller denominators interest you, you may want to look into the following ETF: SPDR Emerging Middle East & Africa (AMEX: GAF).

Physics + Economics = Milton Friedman, Meet Richard Feynman [Slate]
Economists at the NBER are working with physicists to draw pictures of economic space in order to explore explanations for why poor countries remain poor. The idea is that the progression from a poor economy to where it would be when rich may not be smooth. “For instance, to move from drilling oil to making silicon chips might require simultaneous investments in education, transport infrastructure, electricity, and many other things. The gap may be too far for private enterprise to bridge without some sort of coordinating effort from government—a ‘big push.’” The maps plot countries’ export goods according to their degree of similarity, and show that poor economies tend to exhibit clustering around unrelated goods, while rich economies are diversified and tend to produce goods focused at the center (taking advantage of production synergies and such). The problems that then arise concern how governments should push production toward the center, and whether it’s a worthy goal to do so at all.

Profile on the carbon-emissions trading group @ Credit Suisse [Trader Daily]
Interesting read. Bigger groups devoted to trading carbon credits should be the way of the future. David Moss @ Trader Daily interviews Paul Ezekiel of Credit Suisse.