“Sorry everyone” - the latest resignation email

The M&A drought notwithstanding - there are obviously deals out there to keep some poor souls chained to their desks day in, day out.

The latest in the genre of IB resignation emails has hit London - and this time it’s a UBS banker who has made a snap career change and dispatched a heartfelt missive to his colleagues. Sent at 7.02am on a Sunday morning after a long, long night, one healthcare banker in the New York office had had enough.

—– Original Message —–
From: Mauldin, Jonathan-IBD+
To: XXXXXXXXXXXXX
Sent: Sun Sep 16 07:02:32 2007
Subject: Sorry everyone

I’m leaving the bank now.

‘m not made to do this. If I put my mind to something as much as I do here to mindless text editing, copy and pasting, and getting yelled at for stuff other people can’t/won’t/don’t do, I would be much better off.

It’s 6:43 a.m. on a Sunday, and I have at least 14 more hours of work to do today that will not be fulfilling, useful, appreciated, recognized, or paid for. Sorry this is last minute, but it’s just not worth doing more

My blackberry is on my desk

Apparently that failed staffing request was fatal (no, not as in I’m going to kill myself, hehe, I’m just going to go enjoy life). There is no happiness here.

I took all my personal stuff. No one needs to contact me for anything (except for a drink for those of you with my personal number). I will only be at my New York address a few days longer.

Good luck y’all,

Jonathan Napier Mauldin
UBS Investment Bank
Global Healthcare Group
299 Park Avenue, 36th Floor
New York, NY 10171

(P) 212.821.5273
(F) 212.821.5482
Jonathan.Mauldin@ubs.com

P.S. I’ll be waiting for some smart-ass associate to send a
“best-practice e-mail for how to quit properly”. Thank you XXXX,
XXXXX, and XXXXX for your previous e-mails. I will be sure to keep
your tips in mind.

Dealbreaker has been on the case with Mr Mauldin (who was maudlin). He told them: “After my 120th hour this week on the job, I decided to peace out. I hadn’t had a day off in three weeks (day off meaning a Saturday or Sunday either), and I got yelled at at 6 in the morning.”

A downtrodden employee deserving of our sympathy or a whinging little toe-rag who knew what came with the big pay cheque? You decide.

This entry was posted by Helen Thomas on Wednesday, September 19th, 2007 at 9:20

Pursuit of love and happiness

In one vibrant paragraph of the Declaration of Independence, Thomas Jefferson managed to compress theory that justified the struggle for independence and a précis of a revolutionary “All men are created equal”; they enjoy “unalienable Rights; these rights include “Life, Liberty and the pursuit of Happiness.

How did he appreciate to incorporate the word “pursuit” in his famous declaration? It is such an unmistakable truth of mankind. We can only pursue happiness… however, achieving it is which we can strive for but never achieve.

Many people get confused with the notion that being in love is being happy and vice-a-versa, however, that isn’t true. Maybe Gordon Gecko was right. What is love…?? It is the oldest running myth created by man to prevent him from jumping out of windows! It’s nothing but a haunting illusion…

... And what is Love
but a captivating illusion
in a forbidding reality?
life is nothing
but a mutual benefit
association

... and those who use us
often bring welcome relief
from the weight
that bears us down

Life becomes so much easier
when you accept the fact
that nothing you have
is really yours.

Not even the ones you love

For they are like the waves
that break gently upon the shore
soaking your feet in their cool embrace
as you walk along the sand.
Alone....

Goodbye to Love

Twilight time
Me and you and a dog named boo
Dream lover, Whispers in the wind
It just feels right tonight

How can I tell her?
It sure took a long long time
I’d love you to want me

It does not matter anymore
It’s all in the game
I would come back to you, would you?
Would you still love me tomorrow?
I would do it again

It’s all in the game… the game of life
The winner takes it all, and the loser has to fall

(Source: Titles of songs by Lobo)

The Holy Trinity predicament!

The RBI governor YV Reddy has overcome several intricate problems that would have flummoxed the best of the best in the business of managing the finances of a country such as ours.

Circa 1997, the Asian Financial crisis ravaged the entire South Eastern economies. So much so that Russia defaulted on its debt (fallout was LTCM bailout). However, India was spared, thanks to the astute policies of the then Finance Minister Dr. Manmohan Singh and his round table. Unlike the SE Asian countries that had the deadly combination of pegged exchange rate and CAC (Capital Account Convertibility), India followed managed float.

The vicious cycle of external funds:-

FDI à $$ à RBI buys $$(to manage USD/INR) à inflow of Rupee à increasing liquidity à inflation à increasing CRR / interest rates à increasing FDI / FII to tap high yields

What RBI can do is follow global best practices from say China and Singapore. What if RBI stops buying dollars from the open markets? It starts accumulating USTs or starts buying into sovereign issues of Euro and UK. This will help in diversifying the reserves in other currencies and hedge against depreciating dollar.

Another solution on which the government needs to act fast is creating our very own investment arm. Let’s name it ‘Global India Alpha Fund’J. On the lines of Teamasek it will be managed by professionals and would not be run like an typical politburo office. It will identify global opportunities and invest in them. At the same time support Indian India inc. in global acquisition.

It does not equate the problem of inequality of the ‘Impossible Trinity’ but comes real close to it. We have INR within a manageable band, free capital movement (on a good pace to Full capital account convertibility) and at the same time an independent monitory policy (though not fully independent).

Hedge Funds Delta going toxic waste and gamma going out of whack!!

One of the best articles I have read recently on Sub-Prime woes: on a humorous note: Hedge Funds Delta going toxic waste and gamma going out of whack!!

Hedge-Fund Guy Atones for His Subprime Bond Sins:

Mark Gilbert2007-08-15 19:34 (New York)Commentary by Mark Gilbert Aug. 16 (Bloomberg) --

Dear investor,

we'd like to take thisopportunity to update you on the recent performance of our hedge fund,Short-Term Capital Mismanagement LLP. As you know, market selection for the entire fund is guided by aproprietary investing tool we like to call ``a dartboard.''Once the asset classes are decided, individual security selections aregenerated by digitizing our unique hexagonal cuboid models. Unfortunately, it transpires that our hexagonal cuboids are not asunique as we thought. Hundreds of other hedge funds possess identicaldice. The technical term for this is a ``crowded trade.'' You may alsosee it referred to as ``climbing on a bandwagon already headed for thewall.'' As our alpha generation collapses, our beta has turned negative,our delta hedging has gone toxic and, trust me, you do not want to hearabout our gamma. We can't even find our epsilons in the dark with bothhands. You will appreciate that accurate pricing is essential forevaluating our investment strategies. This has proven to be extremelychallenging in recent days. Previously, we have relied on Bob, the salesguy at Hokey-Cokey Bank. Bob assured us the securities were still worth100 percent of face value, so everything was cool. Bob sold thecollateralized debt obligations to us in the first place, so he knowswhat he's talking about. Bob, however, appears to have had a nervous breakdown, judging bythe maniacal laughter that greeted our requests for price verificationthis week. Our efforts to implement an in- house CDO valuationframework, using a technique the ancients knew as ``making things up,''proved unsatisfactory.

Where's the Bid?

Currently, all of the portfolios we manage are undergoing arigorous screening known as ``crossing our fingers and praying that wedon't have to try and find a bid in the market.'' This is supplementedby a cross-market statistical analysis originally developed by the U.S.military called ``don't ask, don't tell.''This ``unmarking-to-unmarket'' procedure has been the benchmark for thehedge-fund industry for the past, ooh, 72 hours. We have, of course, been in touch with the rating companies toupdate our default-probability scenarios, particularly on the AAA ratedinvestments we own. They recommended a forecasting method usingstochastics to regress the drift-to-downgrade timescales for the past100 years and throw them forward for the next five minutes. Thetechnical term for this is ``induction,''though those of you of a less quantitative bent may know it as``guessing.''

AAA or Toast?

We are pleased to report that, contrary to what current marketprices might suggest, all of our top-rated securities remain absolutelyAAA. Provided, that is, the future performance of the underlyingcollateral is identical to its history.Otherwise, the rating companies say our investments are likely to bereclassified as ``toast.'' We have also been checking our back-up credit lines with ourfriends in the investment-banking world. As soon as they return ourcalls, we'll be able to update you on our emergency liquidity position.We are sure they are fine. Some of you have written to us asking for your money back, citingclauses in the fund documentation called redemption rights. Frankly, wenever expected you to actually read that prospectus, which cameprepackaged when we bought the Microsoft Hedge-Fund Guy software. Wecertainly have no idea what all those long words mean. We have filed your letters in a special drawer in the filingcabinet marked ``trash'' for now. Do you have any idea how much troubleyou all would be in if we actually sold this stuff in the market today?At these crazy prices? Fuhgeddaboudit. You'll thank us later.

Not a Rescue

Speaking of crazy prices, we know you'll be thrilled to learn thatwe've invited a bunch of our rich pals into the fund to participate inthis once-in-a-lifetime opportunity. But this is not a rescue. Do noteven think the word rescue. This is an opportunity. Not a rescue. Anopportunity. In fact, we think this is such a fantastic opportunity, we'veagreed to forgo our usual management fee, and we'll only take half ourusual slice of the profits. Provided there are any profits to slice.You, of course, are absolutely invited to participate in this offer bysending us yet more of your money on exactly the same revised terms asour rich pals. Finally, a word for all of you who have been kind enough to inquireabout my personal financial situation. I am relieved to report that mydirectors and officers insurance is fully paid up.Furthermore, my Bentley Continental was paid out of the 2 percent fee welevied when you wrote your first check to us, so I will still be able totrundle into the parking lot each morning in an open-necked shirt toignore your telephone calls and e-mails.

Yours, Hedge-Fund Guy.

Indian debt markets – father to premature baby named CDS!?

This sure isn’t just going to be boulevard of broken dreams. SEBI/RBI is finally going to introduce credit derivatives in the Indian debt markets (well a circular / draft has been issued to that effect). It is one among several definite steps undertaken by RBI as India moves towards CAC (Capital Account Convertibility). RBI had recently introduced an analogous concept in the lines of MTNs (Medium Term Notes) in the US.

However, one question still needs to be addressed. Are the Indian debt markets broad enough to sustain and develop CDS instruments? The market and liquidity for corporate bonds in India is still very thin. Given the fact that latest fetish for the corporate houses are ECBs (External Commercial Borrowings). This is done by leveraging the low yields in the developed western countries where the yields are low as compared to the Indian scenario of 8%. Than there are the more innovative instruments called FFCBs (Foreign Currency Convertible Bonds). Given the appreciating rupee, FFCBs are also becoming more cost effective and a darling of India Inc.

RBI still needs to stimulate the corporate debt market before CDS can be successful in India. Till than CDS will be like premature baby in the Indian capital markets.

How can this be done?
- Encourage borrowings from domestic markets – this will also mope up the intemperance liquidity from the system – reduce strain on RBI (Buying $ leads to increase in money supply – RBI than issues MSS to mope up excess rupee in the system – now given the limit on MSS at 100,000 crores and 3000 crores for reverse repo RBI will be forced to use unproductive measures like the CRR)
- FFCBs and ECBs should be used only for foreign exposures and global M&A activities (thwart excess $ getting into Indian markets – prevent rupee appreciation and maintain it at a more manageable levels)

There are two pronged benefits of these. First, it is a positive step towards developing the debt markets. And the second, it also addresses the current tribulations of excess dollars flowing into the Indian economy and fueling rupee appreciation and inflation (which currently is under control – not likely to sustain if the inflow of dollar continues).

After all the hooplas of the equity markets, this sure is going to be the next big thing to watch out for. Till than its wait and watch for the Indian investors in the bond markets. As the old saying goes: ‘sometimes it takes time for all the good things to come –‘

Note – CDS instruments do exist on Indian bonds issued by corporates like Reliance, TATA etc. however, they are issued on dollar denominated bonds issued in the global markets.

US Bond Market Outlook for 2008 and beyond –

The year 2006 was in interesting year to go by. And so 2007 seems to follow the same theme, the buccaneers of change and multitude of events that shape the financial districts of the globe. The increase in global M&A activity (most notably Leveraged Buy Outs) have led to considerable increase in the bond market liquidity and depth. The high liquidity in the markets has also helped in increasing bond market activity. With the hope that companies being LBO’ed (pronounced elbowed) will finance the deal and help in repayment of debt and service the interest liability of the deal; one interesting thing that showed up on a research paper by a prominent investment bank was that after an LBO the sponsorer of the buyout (mostly PE firms) issue more debt to increase the dividend payout for its investors. If this is really true than we have a problem. And that a big one too. Now I don’t want to sound like a harbinger of distress, but it’s only a matter of time when all the dominoes start to fall.

The benign growth in the US economy and increasing profits has reduced the spreads of junk bonds over the treasuries. And also the CDS spreads have been on the fall. Are the investors neglecting the risk?? The inverted yield curve of US tells us another story. The inverted yield curve which shows that the economy is heading into recession was a false signal. If we look at the recent trends in the CDX index, we will see that the spreads have stared to widen. And the main reason attributed to it is the recent CDOgate. The delinquencies in the mortgage and related derivatives markets have added supplementary jet fuel to the fire.

The reason for falling spreads was that reducing risks premiums and growth in the emerging economies. Yields in the USTs were very low, and what better place to reap higher yields than emerging economies growing at around 10% a fiscal. Strong fundamentals, supporting currencies and higher yields as compared to the G8 nations resulted in higher FIIs for Emerging Economies.

However, one interesting fact to note is the reverse funneling hypothesis – where by the emerging economies have been finding the increasing fiscal and budgetary deficit (twin deficit) of US. This has been the driving factor for preventing the economy in going into recession.

The FED has increased the interest rates for consecutive 17 times by 25 bips over the past 5 years. Now the economy is on short finals for a soft landing. The fall in real estates prices and depreciating dollar has led to analysts discount a fall in the fed rates that is now at 5.25%

The increased LBO activity is not going to last long. Once the liquidity in the market has dries up and the risk premium spreads starts to widen, the default rates in the junks will increase. And the markets will fall like a pack of cards. Now I don’t want to sound like a harbinger of distress, but the fact is that the economy has stretched out too thin. To collaborate this we look at the VIX index and the XO index (crossover index). The index has shown a significant growth in volatility in recent period, mainly due to sub prime delinquencies.

The demand of dollar and USTs will reduce once the petrodollars find its way into emerging economies and alternative investments. This will have a negative impact on the US economy and will have a cascading effect on the global economy. However, looking at the depreciating dollar against all the major currencies, and simultaneously the growth in E8 economies, we clearly see that dependence on US is reducing. We can’t totally ignore US economy though. It still is the cue for the global markets.

After Bank of England increased interest rates to match US with 5.25% and further to 5.75% in the last BOE meeting, over inflation and runway £, the investments have shifted from US to UK. This has again put pressure on the US yield curve. The fed has only two solutions. First wait and watch and the second is preferential reduction the interest rates in the next quarter review.