Does anyone else remember that Rick Sherlund went to Galleon Group after Leaving Goldman Sachs?

October 16

So, I was wondering how long it would take Rick Sherlund to leave Galleon Group.

To be honest, I had forgotten all about Rick until today, when the insider trading scandal at Galleon broke.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aQFoJVX3k8Ho

The founder of Galleon, Raj Rajaratnam, was charged today with insider trading, in a really juicy case. His co-conspirators included a senior person at Intel Capital and McKinsey – of all places. Based on the complaint, these people traded on inside information in a "you scratch my back, I'll scratch your back" scheme - which was working really well until the FBI got tipped, and began recording the phone calls of various participants.

Like I said, really juicy.

In any event, Sherlund left Goldman Sachs to join Galleon Group in March of 2007.

http://files.wallstreetfolly.com/wordpress/2007/03/goldmans-rick-sherlund-lands-at-the-galleon-group/

Interestingly, you will note from his LinkedIn profile, that Galleon Group is not mentioned.

http://www.linkedin.com/pub/rick-sherlund/5/121/750

This profile indicates that Rick formed Ketchum Capital group in 2009, and has been there less than a year. When I originally sat down to write this entry, my thought was that Sherlund was still at Galleon, though he would announce his departure from Galleon before the weekend was over in order to avoid any of the stench.

However, it looks like he didn’t like what was going on at Galleon, and left before this scandal broke.

Based on the story published by Bloomberg, it sure sounds like a lot of people at Galleon knew what was going on.

I wonder why it took Sherlund 2 years to figure it out?

How is your Mexican?

So......I'm sure those politicians in NC that gave Dell all those tax breaks 4 years ago to get Dell to build their facility in NC will be sleeping well tonight. ...NOT!!


Dell to outsource N.C. jobs to Mexico

Dell Inc. is outsourcing to Mexico and other countries the work done at the North Carolina manufacturing plant the company is closing.

Round Rock-based Dell (Nasdaq: DELL) revealed the plans in a Trade Adjustment Assistance Act petition that the computer maker filed this week with U.S. Department of Labor, according to several published reports.

Dell is cutting nearly 1,000 jobs as a result of the move. The first 600 workers will lose their jobs next month.

“Our work volume is being transferred to a global manufacturing network,” Dell reported in the filing. “The work will be given to third-party providers who operate in Mexico and other countries around the globe.”

Dell, the No. 3 computer maker in the world, employs about 16,000 Central Texas workers.
Company officials said the North Carolina closing is “simplifying operations and improving efficiency.” Dell has been attempting to reduce annual operating costs by $4 billion.

Meanwhile, the company continues with the $3.9 billion acquisition of Plano-based Perot Systems Corp., which was announced last month. It would be the largest acquisition in Dell’s history.

Do you know who is managing your money?

I was speaking to the CIO of a large university endowment fund recently.

I have a very strong quant background, so numbers have been my life, for, well…my life.

During the conversation with the CIO, I asked him whether he uses performance attribution measurement products from either Barra or Northfield to determine the performance attribution of the various external investment managers engaged to manage the various asset classes.

He told me that he doesn’t, but has someone on staff whose entire job is to do this performance attribution computation. Since I have many years of experience designing, building, testing and interpreting the type of statistical equations required to systematically attribute performance, I was more than a little surprised. I’ve been spinning regression equations for over 30 years, so unless this “full time” person was doing that, which I doubt, then he was attributing performance via a spreadsheet.

I also asked him whether he planned do add these products in the future. He told me that he may look at it. In other words, I doubt it.

Here is my point.

Although the numbers have not been reported, I think the endowment lost about 30% or more last year – which is in line with other endowments across the country, so it doesn’t really stand out as abhorrently poor on a relative basis – even though the absolute number is very poor. In other words, when asked to explain his crappy performance to the University President, his reply will be, “Well, we did no worse than anyone else.”

Among other things, the endowment is used to fund the construction of new buildings as well as to fund scholarships and to employ people. Earlier this year, Harvard cancelled the construction of a new medical research building, graduate housing, parking and a Center for Government and International Studies. , significantly reduced the number of scholarships, and laid off employees. Harvard has also frozen employee salaries, slowed hiring, cut staff and offered other workers early retirement as part of a cost-cutting program to compensate for losses in its endowment. (see Forbes story on Harvard’s slump, entitled “How Harvard’s Investing SuperStars Failed”, February 20, 2009.

http://www.forbes.com/2009/02/20/harvard-endowment-failed-business_harvard.html

Bloomberg just published a story indicating that Harvard’s unwinding of interest rate swaps cost the Endowment Fund almost $500mm, and unwinding those positions cut significantly into its operating budget which led to the cutbacks described above.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aHou7iMlBMN8

The press announcement from Harvard which detailed these cutbacks specifically pointed to the significant negative returns of the Harvard Endowment fund.

I’d be surprised to learn that the reaction was any different from the University President and administration staff at the College I was speaking.

The bottom line is that this endowment is valued at over $1.0 billion – and is managed entirely by external asset managers that specialize in various asset classes – Bonds, equities, real estate, etc. The attribution question comes down to the following: are those external managers managing to the strategy defined by the University, or are they simply reporting returns. A hedge fund will confidently say: “we are hedging beta.” However, no one ever asks them, “Which Beta?” Beta computed daily, computed, weekly, computed monthly, quarterly? Moreover, how does the Beta of the component return change over time, and how is the Beta being hedged based on the current market. A hedge fund may be hedging P/E, but in this market, mid-P/E needs to be hedged more than low P/E or high P/E.

It all makes a difference – are the managers being paid to do what they have told you they are doing, or what they are doing today to generate returns?

.....I can't believe it. This team is managing over 1 billion,...US Dollars, and they have no clue.

Wow!, that was really arrogant!!

One of my RSS Feeds is "The Post Money Value".

Rick Segal tells of a really funny, but all too frequent occurrence in the Valley, and something I have experienced one too many times.

There is a coffee shop here in Palo Alto called The Prolific Oven. I’ve been sitting here for a quite awhile catching up on email, building spreadsheets and other things for my company before heading to the airport.

So far, I’ve unintentionally managed to overhear not one but 4 pitches to Venture Capitalists. I wasn’t trying. I know it was VC pitches because the ritual of the VC giving the sales pitch was carried out with laser-like efficiency.

The first thing I’ve noticed is there must be some kind of secret handshake whereby no two people working in the same general area show up at the same time. It appears nobody cares if there are 50 people listening to a loud pitch and dialog going back and forth.

The second interesting thing is when some investment person doesn’t want to be in the meeting, they are not shy about showing it. Wow. You are sitting with two people and you pull out your iPhone and start tapping while the entrepreneur is talking and looking directly at you? Really? Wow, that just is 20 for 10 on the rude scale.

4 meetings, total of 15 or so people, with mostly Macs and mostly RIM devices being rudely pulled out of the holsters.

And loud. Yowsa, whatever happened to sitting in a quiet corner?

Theme songs:

“Let me take it back to the team and socialize this opportunity for portfolio synergy.” (No, really!)

“Can I get the business plan and your [] year forecasts?”

“Very interesting, let’s continue the dialog.”

“You’d need to move here and we don’t invest in Maine.”

“Isn’t Google Wave going to do this?” (I almost choked on my tea when this got blurted out.)

And at the 50% level: “No, I don’t sign NDAs.”

I love this place….

Were they Lying, or just plain stupid?

Here are series of quotes compiled by BreakingViews.

Is this what you need to do in order to be identified as a "Leader"? Is this the character "quality" that Boards look for when they are trying fill the role of CEO?

Those of us, who work on Wall St., and understand how the "real world" works (not the dream world moderated by Sarbanes-Oxley, are not surprised by these comments.

Years ago, one wise Research Director was evaluating me for a job. At the end of a long day, he asked me a simple question: “How do you know when a company executive is lying to you?” My answer: “His lips are moving.” I got the job.

Resounding dismissal

“I’d just like to set the record straight here and now. There is absolutely no plan, strategy or intention for GM to file for bankruptcy.”

Rick Wagoner, GM CEO, in an internal memo to employees, November 2005

“I don't care which junior analyst on Wall Street or two years out of Harvard B-School says – ‘Oh, well, General Motors inevitably headed for bankruptcy’ - Well you know, our view of that is, that's a crock. It's not going to happen."

Bob Lutz, GM’s vice chairman of product development, January 2006

“Bankruptcy is a very bad idea, and just about everybody associated with GM, from customers, to employees, to retirees, to suppliers, just about anybody, to dealers, loses…I think we can do better for our employees, too, than running and hiding from problems by bankruptcy. We think we can sit down across the table and say: ‘Hey, we can't maybe give you everything we've given you in the past, but we can continue to offer very fair benefit programs, but we're going to need to work together in cutting the costs of those.’”

Wagoner, interview with PBS, April 2006

The pressure builds anew

"We have no thought of [bankruptcy] whatsoever."

Wagoner, responding to a question from the audience at an event in Dallas, July 2008

“Clearly we face unprecedented challenges related to uncertainty in the financial markets globally and weakening economic fundamentals in many key markets. But bankruptcy protection is not an option GM is considering. Bankruptcy would not be in the interests of our employees, stockholders, suppliers or customers.”

General Motors statement, October 2008

It’s just the worst option possible, honest

Bankruptcy would force GM to "liquidate the company because you wouldn't have any revenue". So GM has "concluded it should put virtually all effort into avoiding" bankruptcy.

Wagoner, before the House Financial Services Committee, November 2008

"We developed a plan that would allow us to be robust and pay back the loans, even with a very difficult set of economic assumptions.”

Fritz Henderson, General Motors president, explaining why bankruptcy isn't a viable, or indeed necessary, option for the struggling US carmaker. December 2008

Accepting the inevitable

Bankruptcy is “certainly more probable…Our preference would be to use the next 60 days to accomplish [restructuring] out of the court process," said Henderson. "If we're not successful doing it out of court, we'll do it in court."

Henderson, now GM’s CEO after Rick Wagoner forced out by Obama administration, speaking to reporters, March 2009

“There are no second chances. We won’t need one.”

Henderson, speaking to reporters after GM filed for bankruptcy, June 2009

Here's a good question on Sotomayer

I've been reading the histrionics of the new political debate that is just beginning.

It doesn't matter who asked this question - as I don't want to have it pre-judged as originating from one side of the political spectrum or the other.

It's just a question.

So....Madame Sotomayor said the following at a speech at Berkeley: "I would hope that a wise Latina woman with the richness of her experiences would more often than not reach a better conclusion (as a judge) than a white male who hasn't lived that life".

Question: if you invert the placement of "Latina woman" and "white male", and have anyone else say it......in a public forum.........would their career be finished?

Good question, isn't it?

What's that I hear?

What’s that I hear??

HP acquiring EDS for $13.9 Billion, or $25 per share. Expected to be accretive in 2010. Expected to reduce costs by $1 billion, mostly through employee reductions. Very little duplication of top customers.

What’s that I hear?

Is it a nail in the coffin of Dell?

How will Steve Schukenbrock spin this one? Here’s a preview: Dell is targeting the SMB market, which will be totally abandoned by the HP-EDS merger. Dell will focus on remote diagnostics in their service programs.

EDS employees are looking to make a double windfall. The first one will occur when the deal with HP closes. The second windfall will occur with Schukenbrock spending some time in Plano with his checkbook signing new recruits.

…or is more likely a stake through the heart of Dell? Don’t’ bet against the stake.

Perhaps Michael and Don should fly over to China and negotiate an acquisition with Lenovo.

In case you are wondering, Dell would be the target.