“failed to disclose the risks and fees to the investors before they bought the notes.” and possibly failed to disclose “potential conflicts of interests, such as selling a note linked to the stock of a company it is advising.”
Initially, I meant this response as a comment to a recent blog post, Arbitrage Pricing Theory – MBA Mondays with Darwin, however as I began to write, it has taken on a life of it’s own.
I commend Darwin in his endeavor to educate the general public, however to quote Darwin himself from a previous post :
“Not only do I disagree with his opinion, but I’m concerned that his advice is actually dangerous and gullible readers will lose money as a result.”
I realize that merger or risk arbitrage is presently alluring due to the raft of deals! coming to the fore. In Risk Arbitrage back on?, I gave the reasons why many arbitrageurs are gearing up for what could be a banner year. I would caution, however that the subject is somewhat daunting, the scope of which cannot be covered in a single blog post.
T2 Partners eagerly anticipated investor letter (H/T maketfolly.com) is finally here and what a doozy it is!
Why was it eagerly anticipated? Well in early December T2 managing Partner Whitney Tilson publicly disclosed his short trade analysis on Netflix ($NFLX).
Whether that analysis was posted as a genuine critique of the stock or as an attempt to pressure the price, no one can know for sure, but there are many arguments for and against such a post. In any case I commend him not only for putting his analysis up for scrutiny, but also for acknowledging in his most recent January investor letter that he was wrong, albeit belatedly and significantly lighter in the wallet.
“If you lay siege to a town, you will exhaust your strength and resources. Therefore, feed off your enemies and forage for their resources.”
~ Sun Tzu
With a war chest of $2.85 trillion, and a renewed swagger it was only a matter of time before China flexed its economic might by diving back into investing in western banks. After ill-fated multi-billion dollar investments in Blackstone Group LP, Morgan Stanley and Barclays PLC, last week a Chinese bank agreed to buy a stake in the US arm of Bank of East Asia.
Industrial and Commercial Bank of China (I.C.B.C.), the largest of China’s “big 4” state owned commercial banks agreed to pay $140 million for an 80% stake in the United States subsidiary of the Bank of East Asia, which is based in Hong Kong and has 13 branches in New York and California. The rationale was: