Saturday, January 29, 2011

Here’s How John Paulson Made $5 Billion Last Year

Robert Lenzner for Forbes.com Jan. 29 2011
Original Post: http://blogs.forbes.com/robertlenzner/2011/01/29/heres-how-john-paulson-made-5-billion-last-year/


Smart Guys

The secret to the spectacular returns Paulson and his employees reported for 2010 is due to their keeping much of their money- $14.9 billion or 42% of the total assets under management($35 billion)– in the funds. That’s called putting your money to work alongside your clients. That $14.9 billion commitment is revealed in Paulson’s yearend letter to investors.

Some of Paulson’s personal share in his funds must come from reinvesting the $4 billion he made going short against the subprime mortgage bubble in 2007.

The Paulson funds made gross gains in 2010 of $8.4 billion before fees. So, 42% (their share) of the $8.4 billion meant $3.5 billion in gains for Paulson and his employees.

Add to that a 2% fee on $20 billion of capital from investors– $400 million– and then the 20% fee on the total profits made adds another $1.7 billion to the pot shared by Paulson and his team.

By my figuring then, the total take comes to roughly $6 billion before taxes.

Overall, the fund’s strategy made a transition during the year from a short equity bias with a focus on being long distressed securities to a long equity event focus, according to Paulson’s yearend letter.

This growing bullishness on the stock market is due to Paulson’s careful tracking of the equity risk premium measured by J.P. Morgan; the difference between the yield on equities and the yield on bonds. At present, the yield on stocks, the obverse of the price-earnings multiple, is 7-8%– while the yield on 10 year treasuries is only 3.34%. In this comparison the potential return on stocks is double the return on bonds.

Paulson is a buyer of stocks because he sees the equity risk premium in the market as “the highest it has been in over 50 years., indicating to us that equities are due to rise as the current economic environment is by no means the most challenging it has been in 50 years,” he wrote in his yearend letter which was posted Friday on the internet.

Last year, for example, Paulson made a 43% return or over $1 billion on Citigroup– buying shares at $3.20 a share and selling them for $4.60 a share later in the year.

The Paulson Gold Fund was up over 35% on the year, as positions in Anglo Gold, Osisko and GLD, the giant gold ETF all paid off bigtime. Paulson is optimistic that gold will outperform for the next 5 years and is “the ideal vehicle to hedge against the risk of the U.S. dollar.”

The funds held $20 billion in 40 different distressed situations where most of the companies have “repaired their capital structures.”

He also sold off positions in major banks like Bank of America, and went long Anadarko, the oil and natural gas producer.

Paulson’s hedge fund has piled up gains of 26 billion since inception in 1994– 3rd biggest killing of all hedge funds. Quantum Endowment Fund, begun by George Soros in 1973, has racked up $32 billion in net gains. Renaissance Medallion Fund, founded in 1982 by James Simons, has delivered net gains of $28 billion.

He expects all his funds “to outperform in 2011.”

Monday, January 24, 2011

When Luck Plays a Role in Selling a Home

By ANTOINETTE MARTIN Published: January 20, 2011

Original Post New York Times: http://www.nytimes.com/2011/01/23/realestate/23njzo.html?_r=1&ref=realestate

WITH the last year such a dismal and confusing period for so many home sellers in New Jersey, some inevitably decided along the way to drop one agent and try another.
Susan Stava for The New York Times


Danuta Tyszka of Weichert Realtors recently became the agent for a house on Homestead Street in Clifton, which hadn’t sold after six months with another agent.

.“Some people think the next Realtor will make all the difference, or be the lucky charm, or maybe just provide a fresh start,” said Linda Grotenstein, an agent with Coldwell Banker in Montclair.

“Of course, in today’s market,” she added, “really the most important thing is price.”

Or luck, added other brokers based in towns around the northern part of the state. Some say they see themselves as harder-working than others; several suggested that they were particularly talented at attracting as many people as possible to see a house or staging it in its best light. But each of about a dozen questioned about the logistics of the typical home sale says luck plays an indefinable yet crucial part in finding a solid buyer these days.

Danuta Tyszka, an agent at Weichert Realtors in Wayne, described having listed a four-bedroom two-bath house in Clifton last spring and shown it to 80 prospective buyers, none of whom made an offer. After four months, she advised the sellers to let the listing expire and allow her to relist the house for a lower price — $10,000 less, down from the high $500,000s — to see if “fresh” home shoppers would appear.

“The first people who came to see it made a full-price offer,” she recalled. “I don’t really know that the price drop made that big of a difference. It was more like lucky timing.”

Ms. Tyszka is now marketing another Clifton house, a four-bedroom bilevel at 70 Homestead Street, which was listed with another agent for six months. She picked up the listing in December after meeting the sellers through their son, whose apartment lease she had brokered.

With this house, too, she has dropped the price $10,000, to $469,000 from $479,000 — but lightning has not struck a second time as of yet. “The market is very, very difficult in Clifton,” she said. “I’ve had a couple of sales of other houses fall through just as they were about to close. The main reason seemed to be that people are scared, even when they find a house they like, at a good price.”

Using multiple-listing statistics from 2010, Margaret Miggins, an agent at Keller Williams Realty in Short Hills, found that fewer than 50 percent of listed homes sold within a year. She looked at 16 middle- to high-income communities — in Essex, Union and Morris Counties — in which she markets houses. Comparing the total number of homes listed in each town with the total number of closed sales in 2010, she found that Summit did best, with 48 percent of listings sold. (There were 448 houses listed, and 217 closed sales.)

Chatham and Madison came within a percentage point or two of Summit.

In West Orange, a large community in which sales have been slow, only 24 percent of listed houses were sold (1,001 listings, 240 closed sales).

“Price is, of course, a crucial matter,” Ms. Miggins said. “If you are not willing to change your price, do not switch Realtors. And even if you are, it does not always work.”

State regulations prohibit a broker from poaching another’s active listing, or even suggesting that a better job might be done. Still, it is common practice for them to try and snap up one another’s listings when they expire — typically after six months.

Ms. Miggins says she trolls the Multiple Listing Service Web sites for expired listings, and makes cold calls to homeowners if their names and numbers are listed.

“An agent who really knows an area, and knows how to market a particular house in the best possible way, definitely can make a difference,” she said. But she also said she avoided any sellers who seemed as if they might be inflexible about price.

“Every time we take a listing,” she said, “we spend a lot of money as well as time, on advertisings, Web sites, virtual tours, having floor plans done, setting up a computer on a table by the door so there are pictures scrolling the moment someone walks in — and I don’t want to waste all that.”

Roberta Baldwin, a broker with the Keller Williams NJ Metro Group in Montclair, echoed that sentiment. “It is every agent’s nightmare,” she said. “You put in the time and effort — I’ve even gone so far as to paint and refinish floors for a client — and the house doesn’t sell. Then someone else picks it up, and it goes.”

On the other hand, sometimes it is the real estate professional who decides to leave the client.

Ms. Baldwin said she had occasionally suggested to sellers that they might want to terminate a listing agreement. “If you can see that they are unhappy, and you are unhappy,” she said, “then the best thing to do is to bring that into the open and talk about it. Poor chemistry can occur, or the parties can simply get mired in a situation, although you have done the very best you can, and it is best for everyone to walk away.”

In today’s market, she said, “I think the main reason why some people decide to switch Realtors is that they just don’t know what else to do.”

In Montclair, there are half a dozen high-end homes that have not sold despite multiple price reductions and Realtor switches. One, a Victorian at 183 Grove Street with a third-floor ballroom where Enrico Caruso is reputed to have sung, was marketed by Prominent Properties Sotheby’s International Realty last year with an original asking price of $1.44 million, after selling for $1.4 million in 2007.

After six month, it was listed by Halstead Properties at $1.3 million; it is now listed as a possible short sale at $999,999.

A version of this article appeared in print on January 23, 2011, on page RE9 of the New York edition..

The Hottest New Home Technology - CNBC

The Hottest New Home Technology - CNBC

Friday, January 21, 2011

Cramer: Decline in Home Values Is ‘Over’

“These good numbers can’t be denied anymore,” Cramer said. “The decline in value of homes is over. It ended a year ago, as I told you it did. I await someone, anyone, to come out and admit that they were wrong this summer. But they never will. They have no accountability. It disgusts me. It should disgust you.”

Mad Money's Jim Cramer: Cramer: Decline in Home Values Is ‘Over’ - CNBC

Mad Money's Jim Cramer: Cramer: Decline in Home Values Is ‘Over’ - CNBC

Thursday, January 20, 2011

Trump on China Relations

Donald Trump, Trump Organization chairman/president discusses American businesses failure to compete against China.

Wednesday, January 19, 2011

Revamped Coney Island Plans Cause a Stir

Coney Island's developer Central Amusement International is opening a new amusement park this coming April, but the company has recently come under fire for evicting long-time Coney Island businesses like Shoot the Freak. WSJ's Joseph De Avila reports.

White Flag? Yahoo Bows to Facebook Connect | The New York Observer

White Flag? Yahoo Bows to Facebook Connect The New York Observer

Tuesday, January 18, 2011

Real Estate, Economy and Homes: Builders Still Betting on Mega-Mansions - CNBC

Real Estate, Economy and Homes: Builders Still Betting on Mega-Mansions - CNBC

Is Now the Time to Buy a Retirement Home?

Is Now the Time to Buy a Retirement Home?

A House of Glass Suspended in the Berkshires

Boston architect Warren Schwartz designed and built a modern home of glass, steel and concrete in the Berkshires for himself and his wife Sheila, a longtime violinist for the Boston Symphony Orchestra. The three-bedroom home climbs to more than 30 feet, with views across the wooded hills and a rooftop terrace, where the Schwartzes watch the night sky in the summer.

Generation Blue: Maya Paveza

Sorry Citizens, Goldman Not Selling Facebook Shares To U.S. Investors | The New York Observer

Sorry Citizens, Goldman Not Selling Facebook Shares To U.S. Investors The New York Observer

Tuesday, January 11, 2011

News Hub: Builders Bet Big on Big Mansions

Despite the current housing slump, a small but growing group of developers and investors is building multimillion-dollar mega-mansions for wealthy potential buyers who've never seen them. Candace Jackson explains why.

50 Cent's Penny Stock Plummets | The New York Observer

50 Cent's Penny Stock Plummets The New York Observer

Will the Euro split?

Dennis Gartman: Euro Crisis a 'Virulent Disease' Published: Monday, 10 Jan 2011

1:41 PM ET By: Drew Sandholm Web Producer

Original Post: http://www.cnbc.com/id/41002974/
 
 

The euro could soon unravel, said renown currency and commodities trader Dennis Gartman on Monday, as the European Central Bank threw Portugal a temporary lifeline by buying its bonds.

In the next several years, Gartman thinks the currency will break into a northern euro and a southern euro. Germany, he said, won't stand to continue to fund countries like Greece, Spain and Portugal — all of which have lesser average work weeks, lower productivity rates and lower savings rates, he said.

"A break-up of the euro would be so catastrophic to the economic environment, that China would not want that to happen," countered Brian Kelly, founder of Kanundrum Capital.

Just as the euro is about to unravel, Kelly thinks China will support the troubled currency, buy euro bonds and therefore gain more say in the International Monetary Fund. Gartman added that he, too, doubts China wants a break-up to happen, but also doesn't think China will be willing to spend money to keep it going.

Germany, France and other euro zone countries are pushing for Portugal to seek an European Union-IMF assistance program, as Greece and Ireland had, to prevent spreading contagion to Spain, according to a Reuters report citing a senior euro zone source. German Chancellor Angela Merkel, however, has denied the report.

The Portugal bailout talk is simply "random noise" and no reason to change your portfolio, said Gartman. Being as the euro is "demonstrably weaker," he thinks "a small bounce is to be expected." If one has no short position, however, he suggests using this rally to get short. Being as he thinks Europe's problems are long-term, he would sell any rallies in the euro.

With more than 30 years of experience as a currency and commodities trader, Gartman is a "Fast Money" contributor and publisher of the widely read "The Gartman Letter."

Thursday, January 6, 2011

Homeless Man With Golden Voice Finds Fame

Ted Williams becomes an overnight internet sensation because of what is being described as a "golden voice."


Facebook To Breach 500 Shareholder Limit, Go Public By April 2012

Original Post: http://blogs.forbes.com/wendytanaka/2011/01/06/facebook-to-breach-500-shareholder-limit-go-public-in-2012/?boxes=Homepagelighttop

by Wendy Tanaka for Forbes.com Jan. 6 2011 - 5:56 pm

Image by AFP/Getty Images via @daylife

The social networking giant said it’s planning to go over the 500 shareholder limit, which would require it to disclose financials to the Securities and Exchange Commission even though it is still a private company, according to a document obtained by the Wall Street Journal.


The private placement document filed with the SEC also indicates that Facebook could become a public company by April 2012.

This is the latest development in the big news earlier this week that Facebook received a $500 million investment from Goldman Sachs and Digital Sky Technologies for a nosebleed valuation of $50 billion.

The document filed puts to rest speculation that Facebook and its investors would sidestep the 500 shareholder rule via a “special purpose vehicle” that would allow Goldman’s high-end clients to invest in Facebook. Goldman plans to raise $1.5 billion for Facebook from this special purpose vehicle.

My colleague Jeff Bercovici says there’s so much scrutiny of Facebook because we don’t expect it to act like a business. We expect it to act like our friend.

Wednesday, January 5, 2011

Texas Oilman Tired Of Being ‘Victimized’ By Obama Drilling Moratorium, May Soon Invest In Israel

by Christopher Helman for Forbes.com Jan. 5 2011 - 2:56 pm

Original Post: http://blogs.forbes.com/christopherhelman/2011/01/05/texas-oilman-tired-of-being-victimized-by-obama-drilling-moratorium-may-soon-invest-in-israel/?boxes=Homepagelighttop


ATP's Titan platform

When T. Paul Bulmahn was a kid in rural Texas his family of seven sharecropped a garden down the road from their home. Because they didn’t have enough land for cows, they raised goats and made decent money selling their easily digestible milk to the lactose intolerant. “Instead of letting things happen or being a victim of society we made things happen.” What’s more, “I always felt that being able to milk goats growing up gave me a fabulous touch with a basketball.”


Bulmahn, 66, now the chief executive of Houston-based ATP Oil & Gas, is once again figuring out how to make the best out of a tough situation.

Bulmahn says that within weeks he will announce a new oil and gas deal (most likely in Israel) that will enable him to take the first steps in saving his company from what he sees as victimization at the hands of the Obama administration in its overreaching response to the BP oil spill. “What’s being done now under the guise of an emergency which has already passed is not fair,” says Bulmahn.

For a small oil company ($800 million market cap) ATP has built an outsized position in the deepwater Gulf of Mexico, operating 18 wells. When BP’s blowout and oil spill occurred last year, ATP had 10 permits outstanding to drill wells and lay pipelines in the gulf. It was also in the process of completing and installing two $600 million platforms to produce oil and gas from new deepwater fields. If ATP could get going on all its permits, says Bulmahn, ATP could stand a good chance of doubling its production to 50,000 barrels per day within a year.

But the deepwater moratorium stopped ATP dead in its tracks. ATP’s drilling plans are not nearly so risky as BP’s was at the Macondo prospect. It wants to use the drilling rig integrated into its new platform called the Titan, to merely drill a sidetrack (like a branch) off of an exisiting well into a reservoir that is already producing from 12,000 feet deep. The government approved ATP’s well location in Mississippi Canyon Block 941 back in June 2008 and ATP filed its permit to drill the sidetrack in July 2009.

Allowing this kind of drilling project should be a no brainer. ATP has supplemented, revised and amended its permit to meet every new request by BOEMRE. What’s more, the Titan platform exceeds all regulatory requirements for safety. Bulmahn is especially proud of the Titan–the first deepwater platform ever to be built in the U.S. with American labor. Designed three years before BP’s spill, Titan features a blowout preventer on the seafloor with two “shear rams” to seal the pipe, plus another BOP system above the water on the platform itself.

Over-engineering the Titan was just common sense to Buhlman, who says that as a small-fry in the deepwater ATP has always recognized it needs to be even safer and more careful than its bigger brethren. ATP has never had a spill, yet, gripes Bulmahn, “BP’s own partner Anadarko has already indicated publicly that there was gross negligence involved. And for that the safe and environmentally sound industry was shut down.”

Bulmahn sees the administration’s actions as a concerted effort to shut down and jeopardize the future of not just BP but “all the companies that had drilled safely and environmentally soundly.”

Can ATP survive even with permits? “The new environment for risk means that managers of most companies are betting the entire company on every well,” says Gary Adams, lead oil and gas consultant for Deloitte. Not many companies have the balance sheet to withstand a possible $30 billion hit for oil spill cleanup. Thus, says Adams, “the Gulf could become a game for only the biggest companies.”

So Bulmahn started looking for options. To ease ATP’s debt load he spun off Titan as a subsidiary and borrowed $350 million against it. More importantly, he began looking all around the world for oil-rich countries “that are desirous of developing their offshore resources, desirous of our expertise, and which would prefer to work with a smaller company like ours that may not have entanglements in other countries.”

Bulmahn won’t yet say where ATP is heading, but rumor is that a deal has been struck that would give ATP rights to develop oil and gas finds offshore Israel, near the area where giant new fields like Leviathan and Tamar have been discovered in recent years.

Going overseas wasn’t Bulmahn’s first choice. “I’m an American first. it’s not where we need to be for our own country’s interest,” he says. But he didn’t see much choice: “I don’t want us ever to be victimized again.”

He wrote as much in a letter to President Obama sent December 20: “Please Mr. President, give ATP a permit to return to work rather than forcing more American jobs to be lost.”

Maybe the President listened. Though the victimization isn’t over yet, on Monday BOEMRE announced a slight crack in the permit logjam. ATP was notified that its sidetrack permit would finally be allowed to proceed as long as ATP satisfied new safety rules.

Whitney Stanco, analyst at MF Global, says that these new rules will likely include a recalculation of a potential worst-case oil and gas discharges that could potentially erupt from all reservoirs intersected by a well if that well were to fail completely with nothing to stauch the flow.

This is far stricter than previous rules, and says Stanco, the companies named on Monday might not be able to get back to drilling if their new worst-case scenario is significantly higher than their old one. Stanco expects permits for brand-new wells, when they finally come, to include a requirement that companies conduct environmental assessments that could take as much as 12 months.

It’s an opening, and Bulmahn will take it. But he’s not happy about it. Delays are costing ATP $330,000 per day for labor and equipment that’s sitting around doing nothing. “For America to be great we need an abundance of energy, of all kinds, not just oil and gas. We need nuclear and solar and windpower and biomass,” says Bulmahn. “We need them in abundance and we need them cheaply to be able to continue to grow our great country and make it greater than it is now.”

Monday, January 3, 2011

New Facebook Fundraising Makes Zuckerberg A Far Richer Billionaire

Original Post: http://blogs.forbes.com/kerryadolan/2011/01/03/new-facebook-fundraising-makes-zuckerberg-a-far-richer-billionaire/?boxes=Homepagelighttop

by Kerry A. Dolan. Shades of Green. Jan. 3 2011 - 1:36 am



Facebook has raised another $500 million from Goldman Sachs and Russian investor Digital Sky Technologies, at a valuation for Facebook of $50 billion, the New York Times reports. That makes Facebook CEO Mark Zuckerberg worth more than twice the $6.9 billion Forbes said he was worth in September 2010 –when Facebook was valued at $23 billion.

It probably won’t change Zuckerberg’s low-key lifestyle, but the jump in net worth will, as the New York Times noted, put Zuckerberg closer to the ranks of Google founders Sergey Brin and Larry Page, both worth $15 billion as of Forbes’ Sept. 2010 ranking of the 400 Richest Americans.

The latest fundraising will also boost the billionaire fortunes of two other Facebook co-founders, Dustin Moskovitz (worth $1.8 billion on the 2010 Forbes 400) and Eduardo Saverin (worth $1.15 billion on the 2010 Forbes 400). Moskovitz left Facebook in 2008 to start another company, Asana; Saverin helped Zuckerberg found Facebook but stayed on to graduate from Harvard while Zuckerberg and Moskovitz dropped out.

It should also make the Winklevoss twins think twice about appealing their settlement with Facebook. The pair recently told the New York Times that they got a raw deal when settling for $40 million in shares and $25 million in cash with Facebook. As each month passes, the value of those shares just keeps climbing. I’ve said before that they are better off not appealing (See “Twin’s Facebook Fight Rages On“)

The New York Times reported that in the latest fundraising, Goldman Sachs put in $450 million, and Digital Sky Technologies, already an investor in Facebook, put in $50 million. It added that Goldman Sachs will start a special purpose vehicle to let its high-net worth clients invest in Facebook. That will put it in competition with several brokers, including Felix Investments, EB Exchange Funds and GreenCrest Capital, which have been buying shares of Facebook from ex-employees and selling them to accredited (high net worth) individual investors and hedge funds by creating limited liability companies (See “Frenzy for Facebook Shares Heats Up With New Auction“)

Anyone want to wager a guess on when Facebook raises another large round of cash?

Worth It?: Groupon


Daily deals darling Groupon, which sends subscribers free coupons via email, has gotten a lot of buzz in 2010. Is it worth it for consumers to sign up, even if they're not regular buyers of the deals? WSJ's Lauren Goode reports.

Is Bank of America Shaking Off its Woes?

By MIRIAM GOTTFRIED for Barron's MONDAY, JANUARY 3, 2011

Original Post: http://online.barrons.com/article/SB50001424052970203793504576059811600824004.html?mod=BOL_hps_highlight


Shareholders have reason to celebrate the news that the bank has agreed to buy back bad loans from Fannie Mae and Freddie Mac.


Are shares of Bank of America (ticker: BAC) finally shaking off their misery? It sure seems that way.

Early Monday, BofA announced that it would take a $3 billion provision to buy back bad loans from Fannie Mae and Freddie Mac that were issued by its embattled Countrywide Financial division.

BofA expects to post a $2 billion write-down in the fourth quarter as part of the repurchase agreement and said the charge will have no impact on its Tier 1 capital ratio or tangible equity ratios.

The settlement with Fannie and Freddie—the two leading so-called government-sponsored entities (GSEs)—is a huge step in the bank's effort to clean up problems that surfaced during the housing crisis. The mortgages originated by Countrywide emerged as some of the worst issued during the run-up to the crisis, and BofA has had to handle growing loan losses since it bought Countrywide in 2008.

BofA shares were up 60 cents, or 4.5%, to $13.95 in mid-morning trading Monday as investors cheered the better-than-expected terms of the agreement.

Indeed, the time looks right to hitch a ride on the bank's rebounding fortunes.

The deal represents the removal of one of the biggest issues overshadowing the bank's shares, and gives BofA CEO Brian Monyihan the opportunity to improve the bank's financial picture.

"This is a late Christmas present from [U.S. Treasury Secretary] Tim Geithner to Brian Moynihan," says Christopher Whalen, senior vice president and managing director of Institutional Risk Analytics.

Whalen said he was looking for $40 billion to $50 billion in total loan repurchase expense over the next few years, but after today's announcement, he now thinks the total will be a little under $10 billion—a fraction of what would have been expected based on the losses. This will be a positive for shareholders and bondholders, he said.

"To me, this is just evidence that Washington was listening to the Street," Whalen says. "We now have finality on one of the biggest issues facing Brian Moynihan, and he can now be much more aggressive."

To be sure, BofA's repurchase obligations with Fannie and Freddie are not the only problems facing the bank these days.

Mortgage repurchase demands from non-GSEs are not included in the settlement and could continue to pose a challenge.

In addition, some BofA followers remain concerned about a potential threat from WikiLeaks, the international non-profit organization that publishes leaked documents on its Web site. WikiLeaks founder Julian Assange has suggested that the site has access to documents that could damage a large bank, and there has been speculation that BofA was the bank in question.

But the Fannie and Freddie issue was the most important one for investors, Whalen says, and its resolution should send them piling into the sector.

Mike Mayo, an analyst with Credit Agricole, says that the issue brings important closure for the bank and could be symbolic of the beginning of a new chapter.

"While the dollar amount of the cost is in the range of what we expected for the GSE-related exposure, the move helps to eliminate the uncertainty as to the ultimate amount and effectively front-loads the GSE-related costs of the next couple years," he wrote in a research note.

"Moreover it shows a willingness of Bank of America to take more control of the situation, and sets a tone for the year by having this move announced on Day 1 of the new year."

Mayo rates BofA at Buy with a $15 price target.

Jeff Harte, an analyst with Sandler O'Neill, also rates BofA at Buy, but sets his price target at $20.

Harte wrote in a note that the provision would reduce his fourth-quarter earnings per share estimate to a loss of 20 cents from a gain of 20 cents, but expects minimal impact on tangible book value.

"This should be a net positive for Bank of America shares," he wrote.