12 Ways Obama Could Make "Occupy Wall Street" Happier

Here are 12 specific actions Obama could take that would make many within the Occupy Wall Street movement happier.

Read the full Forbes post here.

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Erin Burnett Is Vapid, Occupy Wall Street Matters

Erin Burnett condescension at Occupy Wall Street is embarrassing for her.  This group's feelings and motives come from a real place of pain which should be addressed.

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The HP Board Hires Trusty Bankers to Protect It From Fiendish Imaginary Activist Investors

The HP Empire is under grave threat from peasant shareholders who actually want its stock price to increase. The board must not allow it.

Read the full post in Forbes

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5 Things Meg Whitman Wants You to Forget

Some home truths about Meg Whitman.

Read the full post here on TheStreet.com

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Gupta's Charges Latest Sign that Goldman's Board Too Cozy

By Eric Jackson03/01/11 - 04:35 PM EST

NEW YORK (TheStreet) -- The news that the Securities and Exchange Commission was charging the former head of McKinsey & Co., Rajat Gupta, with insider trading for tipping off hedge fund manager Raj Rajaratnam were shocking.

Gupta was a blue-chip business executive. McKinsey's corporate reputation as an adviser has been beyond reproach prior to this (although another lower-level McKinsey consultant was swept up in this sameGalleon probe earlier). He moved in rarefied corporate circles since leaving the top job at McKinsey.

Gupta had served as a corporate director forGoldman Sachs (GS_) and Procter & Gamble(PG_) and is also a board member of AMR(AMR_). He'd advised the World Economic Forum and the United Nations' Secretary General.

If Rajat Gupta is tipping off hedge fund buddies, an observer must ask: How pervasive is this kind of insider trading among other corporate executives and directors?

We will likely never know the full answer to that question, but I had previously criticized Goldman Sachs for allowing Gupta to serve on its board more than 18 months ago. I said the board was too cozy with old friends of Goldman and people who were ill-equipped to strongly question the strategy of the firm presented by CEO Lloyd Blankfein and COO Gary Cohn.

I said that Gupta was likely someone who had personally consulted for Goldman for years (for compensation, of course). Even though I thought that Gupta would try to fulfill his job as a director in a professional manner, any human would feel beholden to a former client (Blankfein and Cohn), especially in a role (as director) that brings good compensation and unspokenopportunities to invest in different opportunities that Goldman uniquely has access to (like the recent private investment in Facebook for example) and general prestige that would be associated with the job.

I also disliked that Goldman's board had five former or current CEOs who were also presumably former Goldman clients, including current ArcelorMittal (MT_) CEO Lakshmi Mittal, Colgate-Palmolive's(CL_) former COO, Lois Juliber, former chairman and CEO ofFannie Mae (FNM_) James Johnson, former CEO of Medtronic(MDT_) William George, and former Chairman and CEO of Sara Lee (SLE_) John Bryan.

They could also have a hard time saying "no" to Blankfein and Cohn, for the same reasons Gupta would.

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[** This post is an excerpt of the full article, which is available on TheStreet.com by clicking here. Free Site.**]

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Video: Gupta's Charges Latest Sign that Goldman's Board Too Cozy

Contributor Eric Jackson says that the SEC's charges against Rajat Gupta show that boards have become too cozy with directors who swap information and pat each other on the back for their brilliance. It's been obvious for a while that Goldman Sachs board - on which Gupta used to serve - needs major reform.

Tue 03/01/11 16:56 PM EST -- Eric Jackson

Stocks in this video: GS | MDT | WMT | SLE | PG | MT | CL

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The Second-Order Effects of Goldman's Investment in Facebook

Eric Jackson says that you should look for other companies who will be valued from a 10-year potential revenue and profit stream projection, as Facebook was by Goldman Sachs. Eric owns YOKU and SINA.

Fri 01/07/11 11:00 AM EST -- Eric Jackson

Stocks in this video: SINA | GS | DANG | YOKU

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The Goldman-Facebook Deal's Troubling Fine Print

By Eric Jackson
RealMoney Contributor
1/6/2011 4:59 PM EST
Click here for more stories by Eric Jackson

This week's biggest news by far was the announcement that Goldman Sachs (GS - commentary - Trade Now) was putting $450 million of the firm's capital into Facebook. The part of the deal that sent tongues wagging was the $50 billion valuation that Goldman placed on Facebook. However, there's a smaller aspect of the deal that's getting increased scrutiny, which is letting Goldman's high-net-worth clients put in some of their money too.

There are many reasons for Goldman to have done this deal with Facebook, even at this rich valuation. First, Goldman has put itself in the pole position to win the Facebook IPO. This is Goldman Sachs, so you know it wants to get a return on its $450 million investment -- and not a 10% return either. I doubt Goldman would do it unless it expected to double its money.

This means that Goldman expects to win the underwriting business for a $100 billion IPO. Typically, banks get 7% in fees for an IPO. You know that Facebook won't pay full price, though, given the size of the IPO. So let's knock the bankers' fees down to 4%.

Companies going public typically issue 15 – 30% of the company’s shares to the public. So, at 4% fees on 30% of a $100 billion company, Goldman would get a $1.2 billion payday in fees.

You think I'm being unrealistic thinking that Facebook would be worth $100 billion by 2012? OK. Let's say the company stays valued at $50 billion. So Goldman has made nothing as a firm on its $450 million investment. Too bad, so sad. In that worst-case scenario it will have to comfort itself with $600 million in fees from the IPO underwriting.

Heads Goldman wins, Tails Goldman wins.

I'm surprised no one has discussed this point. It's a no-brainer investment for Goldman. And we haven't even talked about the goodwill that Goldman will bring to its best institutional and high-net-worth clients when they start distributing the pre-IPO Facebook shares like Santa Claus.

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[*** This post is an excerpt of the full article, available by clicking here to go to RealMoney.com. Note: subscription required. ***]

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Ripple Effects of Goldman's Facebook Deal

By Eric Jackson
RealMoney Contributor
1/3/2011 5:00 PM EST
Click here for more stories by Eric Jackson

The investment world is abuzz today with news that Goldman Sachs (GS - commentary - Trade Now) has made a $450 million investment in the popular social networking site Facebook, a deal that values Facebook at $50 billion. A few weeks ago, Facebook's private shares were reported to be trading on market exchanges such as SecondMarket and SharesPost at levels that valued Facebook at $56 billion. Some people didn't believe it -- or else they were on Christmas break and didn't pay attention. Several pundits said that a $56 billion valuation for the company wasn't real because Facebook wasn't trading publicly. "Wait until it goes public and there's real liquidity," the critics said.

After last night's news, those critics are going to have to face facts: Facebook's valuation is real, and Goldman's investment last night means that valuation will likely double in the next 12 months, whether or not there is a Facebook IPO. According to the New York Times article, Goldman is "considered one of Wall Street's savviest investors," so the value must be real! In all seriousness, though, Facebook's value is real, and people are just going to have to deal with it. Just because it's private and fairly new, the terminal value of the company is rich.

Facebook is reported to have $2 billion in revenue this year. Google (GOOG -commentary - Trade Now) had $27 billion in revenue for the last 12 months. On the surface, it appears way out of whack that Facebook should have a valuation that's one-quarter Google's (which is just under $200 billion). The market must be wrong, some assume.

Obviously though, the market believes that Facebook will grow at a much faster pace than Google over the next five years. The market believes that in five years, Facebook's revenue will be much bigger than $2 billon a year.

This argument has been going on for some time, between the value investors who complain about a highflying stock with piddly revenue and profits, and the growth investors who argue that you need to look ahead. Amazon (AMZN - commentary - Trade Now) was the subject of such an argument for 10 years. It's clear now that the growth investors won that one. Just this morning, Morgan Stanley raised its price target on Amazon to $225 because it believes its revenue will triple from here by 2015. Amazon has gone up only 180x since its IPO close.

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[*** This post is an excerpt of the full article, available by clicking here to go to RealMoney.com. Note: subscription required. ***]

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Wall and Main Streets -- The Pensioners' Perspective

By Eric Jackson, Senior Contributor09/22/10 - 07:46 AM EDT

I attended the annual fall meeting of the Council of Institutional Investors over the past couple of days in San Diego. The council is a non-profit organization that exists to represent the interests of American pension funds with combined assets of more than $3 trillion (that's trillion with a "t"). The council's views on how our largest companies are run matter because, unlike many large institutional or mutual fund companies, these pension funds aren't afraid to rock the boat and speak up to corporate management.

The pension fund world sits at an interesting crossroads between Wall Street and Main Street. The people who oversee these substantial assets in their plans have to be sophisticated enough to understand how Wall Street works and the games that Wall Street plays to benefit itself (and not always the shareholders). However, these investors also live in the same world as their pensioners. They are keenly aware of their responsibilities to their members and the real-world challenges that their members face each day.

The keynote speaker for the conference was Neel Kashkari, the former Goldman Sachs banker, who worked in the Treasury Department under Hank Paulson and later oversaw the $700 billion Troubled Assets Relief Program. Now Kashkari works for Pimcocreating a new active equities program for the global asset manager.

Kashkari's talk was the standard Pimco "new normal" pitch, but it was enhanced with his views from three years spent on Capitol Hill. He said that he was amazed that both parties had come together to pass TARP. He confessed he didn't think that they would beforehand. He had believed -- based on his time in Washington -- that politicians could only respond after a crisis, not in anticipation of one.

Although most of the pension fund audience told me they thought very highly of Kashkari's talk later, there was no shortage of people lined up to challenge him during the Q&A session of his talk. He gamely tried to answer the questions of why Treasury couldn't save Lehman Brothers but just two days later saved AIG(AIG) . (His answer, which is a variation of Paulson's revisionist explanation, is that Lehman didn't have the collateral to pledge against a bailout while AIG did, giving Treasury the authority to act in one situation while not in the other).

However, the big questions posed by this audience to Kashkari were: "How can Wall Street, so quickly, start repaying itself huge bonuses when the rest of America is hurting?" and "When and how are things going to start to get better for the rest of America?"

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[** This post is an excerpt of the full article, which is available on TheStreet.com by clicking here. Free Site.**]

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Basel III Barks Up the Wrong Tree

By Eric Jackson
RealMoney Contributor
9/13/2010 5:00 PM EDT
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All the bank stocks are rallying this morning on news that the Basel III requirements are not as taxing as feared. Many analysts are applauding the new rules, saying that the Basel Committee struck the right balance between stability and growth. The committee did no such thing, in my view, because these new standards will have no bearing on causing future growth or preventing future crises.

The new rules which came out yesterday in the Basel Committee press release state that banks with now have to put aside 7% in capital for every loan they make. What's more, the banks will have eight years to get in compliance with this new standard. This 7% includes a 2.5% "buffer," which, I suppose, suggests that the committee believes it's really unnecessary. It's like the committee is saying that this buffer is the equivalent of putting banks under "extreme stress tests."

The market feared much higher levels than 7%, thus leading to this morning's rally. But, put another way, 7% capital requirements really mean that for every $1 in deposits, banks can make $14.29 in loans -- eight years from now.

Perhaps the Basel Committee thought 20:1 leverage -- when banks were asked to set aside only 5% of their capital on loans -- was perfectly acceptable and now 14:1 is severely conservative. Maybe when you compare it with the 25:1 ratio carried by Goldman Sachs (GS - commentary -Trade Now) or the 32:1 ratio carried by Morgan Stanley (MS - commentary - Trade Now) back in 2007, these new standards seem austere.

Yet the Canadian banks such as Royal Bank(RY - commentary - Trade Now), Bank of Nova Scotia (BNS - commentary - Trade Now), Bank of Montreal (BMO - commentary - Trade Now) and Canadian Imperial Bank of Commerce(CM - commentary - Trade Now) have current leverage ratios (and did through the crisis) of 21x, 23x, 19x, and 29x respectively. Yes, you read that last one correctly: Canadian Imperial Bank of Commerce has a current leverage ratio of 29:1.

I thought the Canadian banks were the ones we were supposed to emulate. I thought they were smart. I thought they were conservative. They had a single regulator who was on the job. Even men's magazines are writing articles declaring these obvious facts, so it must be true.

....

[*** This post is an excerpt of the full article, available by clicking here to go to RealMoney.com. Note: subscription required. ***]

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Why Take a Chance on Moody's?

By Eric Jackson
RealMoney Contributor
4/29/2010 1:15 PM EDT
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Investors have been lulled into a sense of complacency about the prospects for Moody's (MCO -commentary - Trade Now) since its recovery off the March 2009 lows. Even though the stock has dropped since the SEC leveled charges against Goldman Sachs (GS - commentary - Trade Now) a couple of weeks ago, investors seem to have looked past all the market turmoil over the last two years and assumed that life is going to go back to normal for Moody's.

That is a false assumption. There are many reasons to avoid holding Moody's long at the moment.

The case in favor of owning Moody's is that the government is going to take a hands-off approach to regulating the ratings agencies that control anoligopoly (including S&P, which is owned byMcGraw-Hill (MHP - commentary - Trade Now), and Fitch). If this is the case, and if you have a recovering economy, then companies will need to issue debt as part of the lifeblood for growing their businesses, and they will need Moody's (and others) to sign off on that debt.

Moody's has historically printed money from this business. Gross margins for Moody's in 2007 were 74%. As a friend of mine who used to work for Moody's said to me, "The only people who get margins like that are gun-runners and drug cartels."

Up until the SEC's case against Goldman, I might have had to buy the status-quo argument -- as much as it sickened me. After all, how can you not say that Moody's and the other ratings agencies don't deserve to be further regulated after the Lehman market meltdown? Yes, there were many actors who deserved blame (including politicians and consumers, not just Wall Street banks). Yet the ratings agencies' remarkably blissful ignorance and failure to warn investors of possible risks to the housing market are shocking even now.

In the fall of 2008, post-Lehman, the agencies threw kerosene on a fire by classifying formerly AAA-rated super-senior tranches of housing-related debt as junk -- overnight. I'm not saying it wasn't junk, but how does AAA become junk in 12 hours? Clearly, the agencies should have flagged this as a concern much earlier and gradually marked the assets down. Instead, their helter-skelter move sent shockwaves of panic through the market, leading to a further decline in market prices.

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[This post is an excerpt of the full article, available by clicking here to go to RealMoney.com. Note: subscription required.]

Note: Jackson had a short position in MCO at time of publication.

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