At one point in last night’s NFL draft, probably sometime after Central Florida quarterback Blake Bortles was taken with the third pick and before Texas A&M quarterback Johnny Manziel was selected 22nd by Cleveland in a stirring turn of draft day deal-making -- maybe it was right around the time two of Manziel’s teammates were drafted ahead of him (back to back, with the sixth and seventh picks) -- the camera flashed to Manziel with his head in his hands, and one of the announcers on the broadcast said, “This is shoulder-chip building time,” or words to that effect.
Get over it.
Manziel and his parents got their wishes last night, avoiding Texas, as his parents wanted, but not going to Jacksonville, the city Manziel wanted to avoid. (That’s where Bortles went.)
But they had to wait for it, and when the Dallas Cowboys passed on Johnny Football with the 16th pick, the tension rippled out from Radio City Music Hall and into living rooms everywhere. Because Manziel was supposed to go at that moment and no later.
Instead he tumbled until the Browns finally took him after engineering their way around the board to snare two first-round picks. First they grabbed Clemson wide receiver Sammy Watkins as a target, then they dealt for Philadelphia’s pick to get Manziel, or as he’s now known, Johnny Cleveland. It feels right, doesn’t it? A personality pick for a great football town.
The New York Giants got close to nabbing the man most had chosen for them, North Carolina tight end Eric Ebron, who went two picks earlier at No. 10 to Detroit. But the Giants did get another pair of hands for Eli Manning to throw to in wide receiver Odell Beckham from LSU.
The Jets picked a defensive player with their first selection for the fifth consecutive year, grabbing Louisville safety Calvin Pryor to bolster a secondary that, well, could use bolstering. Pryor apparently hits like a train, so that should be fun to watch.
See you all at training camp in July.
Not a lot of numbers today, but after the past two weeks of earnings and rate decisions and more, it’s a welcome pause. U.K. manufacturing growth in March fell to 0.5 percent from 1 percent in February, exceeding economists’ forecasts for a gain of 0.3 percent. In the U.S., we’ll get the JOLTs job openings and wholesale inventories at 10 a.m. New York time. Hilton Worldwide (HLT:US) is scheduled to report earnings before the bell.
It’s tempting to look at Wall Street as being a megalith of an institution and assume things have always been the way they are. Sure, computers have changed a lot of things, and prices are no longer based on Spanish doubloons, but otherwise it’s got a sense of forever to it.
Which is why today’s history of the market in initial public offerings by Leslie Picker is fascinating. In examining the tweaks Alibaba is bringing to its initial public offering, Picker sat down with Eric Dobkin, who was a 41-year-old block trader for Goldman Sachs in 1984 when he was given the assignment of building up the firm’s business in equity underwriting, which back then was mostly a retail thing.
Dobkin devised the system of directing sales to institutional investors and money managers, and the rest is history -- especially for the retail investor, who was now pretty much cut out of the process. Though we can’t argue with the results, there are arguments, and Alibaba is aware of them.
“One side will say the retail investor shouldn’t be dabbling in IPOs anyway because it’s a very risky investment, one that’s difficult to value, and it’s hard for someone who isn’t doing this full time to really understand the risks involved and understand whether they are getting a good or bad deal,” Picker tells us. “The other side says that equity-capital raising is one of the most democratic things you can do here in the U.S. and it should be fair and open to all people and that access should be made easier to anyone who wants a slice of the pie.”
Because underwriters are now so dependent on institutional investors like mutual funds and pension plans, the IPO system has built in a privilege for the institutions at the expense of the company going public. Underwriters will arrive at a price that typically gives the institution room to make a little money on the first day of trading before selling, but that leaves money on the table.
“What Alibaba is doing is that by giving some of the fee pool as an incentive, they ensure that, during the process, these banks, these middlemen, if you will, work in Alibaba’s favor in addition to the institutional investors’,” Picker says.
She takes us through the earliest days of initial sales, from Alexander Hamilton’s Bank of the United States to J.P. Morgan’s (the guy, more than the firm) private underwriting syndicates to the modern day and Dobkin’s arrival as “the father of the modern equity capital markets,” as one of Dobkin’s successors at Goldman put it.
Factions on both sides of the Russo-Ukrainian conflict appeared poised today to celebrate the end of the Second World War by lighting the fuse on their own. May 9 is celebrated in Russia and Ukraine as their version of VE Day. There’s a military parade on Moscow’s Red Square and, if the warnings prove true, violence in the streets of Odessa, where at least 40 people died May 2 after being chased into a building that was set on fire. It’s also a Ukrainian city that’s uniquely divided in its sense of identity.
“Unlike the rest of Ukraine’s large cities, where an influential and overwhelming majority of the populations lean either east or west, Odessa is completely divided now, and it is the complexity of the division that makes Odessa’s situation so treacherous,” the Daily Beast wrote yesterday. “It’s not really linguistic; almost everyone speaks Russian. It is not ethnic, geographic or economic. It is psychological.”
Ukrainian security forces who arrived in Odessa from Kiev Monday to restore order, “have virtually disappeared. There seems to be an undisputed consensus by all parties that Friday will be a day of black vengeance.”
So far, nothing to report. Let’s hope the consensus was wrong.
Remember at the start of the year, when the common wisdom was to buy stocks and sell bonds? Neither does the bond market.
Perhaps Michael Lewis could start writing more books about injustices (whether real or perceived).
Only six weeks or so following the publication of “Flash Boys,” IntercontinentalExchange Group CEO Jeffrey Sprecher is moving to address at least one aspect of trading that has drawn criticism of unfairness, cutting back on the types of orders the NYSE will handle. Some of these order types are accused of providing some of the advantage high-speed traders have over normal trading.
Is this a response to the book?
“That’s certainly the context,” says Nick Baker, Bloomberg’s team leader for coverage of market structure. “The criticisms of these order types are twofold: They make things too complicated and they allow allegedly nefarious behavior. It’s complex because -- think about trading at the most basic level: You say I want to trade now or I want to trade at this price. These order types allow all kinds of other more sophisticated ways of posting trades, and it also allows you, allegedly, to kind of hide in the market. People who read the Michael Lewis book and liked the Michael Lewis book certainly are going to like this proposal.
Next up, Lewis takes on immigration.
No other U.S. pension, endowment or foundation manager has invested as heavily in emerging-market ETFs as the New Jersey Pension Fund, a $3.2 billion gamble at its height. Now the state’s reversing course.
Think that National Climate Assessment report this week was just about spotted owls and Cliven Bundyâs turtles? There’s a lot of money in climate change, and most of it is going through the energy industry. Jim Polson follows the money away from coal and oil to natural gas, wind and solar power and to the many companies that surround and support the industries most affected.
As of this week, about $5 billion had flowed into energy ETFs this year, 17 times more than in the final quarter of 2013. Energy took 63 percent of the total, Polson writes, and at the top of the heap are natural-gas producers.
‘‘The total market for North American natural gas has been transformed in two months,” Donald Coxe of Chicago’s Coxe Advisors tells Polson. “A thousand cubic feet of natural gas in the ground for delivery five years from now is probably worth 30 percent more than it was.”
Now about those trees.
How were your early years in this business? Was it all Charlie Sheen and cocaine, or did you manage to make some lasting personal relationships?
With people. People outside of Wall Street.
Did you ever question what you were doing or why you were there, working your way up the hierarchy with 90-hour weeks? Was there something psychically redeeming about putting deals together that your family, college friends, perhaps a lover or two, just never understood? Or was it really about the reward you’d reap at the end? Are you trading the best years of your life so that you can have a boat when you’re too old and tired to take it out?
We used to laugh at the boilerplate line that an executive was leaving to spend more time with his or her family, but after reading Dawn Kopecki’s deeply researched story for Bloomberg Markets magazine about how the hours of junior bankers are killing them -- literally in one case -- maybe we shouldn’t have been so cynical.
The Wall Street firms are starting to take notice of the problem, Kopecki finds. Never thought investment bankers would be clock-punchers, but they are now -- to make sure they’re not working too much.
We learn that, regardless, junior bankers -- no matter how many admonitions and policies about taking Saturdays off and using vacation time -- are simply grist for the mill. There are more where they came from.
“As one set of depleted bankers leaves, the next is already moving through the door,” one observer Kopecki spoke to says. “It isn’t bad for banking in the least, and that’s why nothing has changed.”
Time to take the dog to the woods. His name is Gatsby, by the way.
We didn’t have time to do movies this week, so hereâs a rambling video review of this weekend’s projected top draw, “Neighbors.”
The NHL playoffs continued last night with two games. Boston tied its series with archrival Montreal at two games each with a 1-0 overtime road victory on a goal from a player they had called up from their farm team on Wednesday. Game 5 is Saturday night in Boston.
Anaheim avoided going into a 3-0 series hole with a 3-2 win over Los Angeles, snapping the Kings’ six-game postseason winning streak. Game 4 is Saturday night in L.A.
In the NBA, Brooklyn’s coming home hoping to turn things around after falling into a 2-0 series hole with last night’s 94-82 loss to Miami, meaning the Nets need to win four of the next five games to advance. Good luck with that. Game 3 is tomorrow.
In San Antonio, the Spurs breezed to a 114-97 victory over a rattled Portland team to go up two games to none. The series moves to Portland for Game 3 on Saturday night.
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