The Perfect Ten-Year Circle

It has been, I think, four or five weeks since I talked to Sean. We tend to talk every day but he’s been busy traveling to Japan and England. Then today I picked up the phone and it was Sean calling, having arrived in New York maybe two hours before. “I was catching up with your blog,” he informed me.

This was news. He doesn’t care about Enron. I didn’t even know he read my blog. After I posted this picture he said he was never going to read it again because he just didn’t want to know what the hell I was saying:

Sean said, “Do you know a guy named Greg Whalley?”

I nearly screamed. In fact, I might have screamed. Okay, I screamed. “How do you know Greg Whalley?” I demanded.

Then he told me a story of such crazy serendipity that it left me dazzled and dazed. When he was leaving for Tokyo, he yanked his suitcase out of the closet and a wheel popped off, so he used an older one that had all the requisite parts, including wheels. The morning after he arrived in Tokyo, he was looking for his hotel card key so he could leave the hotel and he unzipped a compartment in his case, thinking he might, for some reason, have thrown it in there. His fingers brushed something, he grabbed it and pulled up a business card for one Greg Whalley of Enron Corporation.

It had been in that case for at least ten years. I have begged him to mail it to me, and he says he will drop it in the post on Monday. Meanwhile, there is a story behind how Sean ended up with Greg Whalley’s business card. However, he doesn’t know what it is. He says he has no memory of meeting with anyone from Enron. He says that the name “Ken Rice” sounds familiar – which might make sense if he was dealing with Whalley because they were both traders. But he draws a blank when I ask for names and dates and places.

How could any mortal forget anything to do with Enron? It is impossible! I have to send Sean to a hypnotist or something, because somebody has to go into his brain and bring out the ore. I must know the story of how he came into possession of Greg Whalley’s business card. I will feel completely ripped off and incomplete if I don’t know it. It can not be allowed to die.

BGC Earnings Call

I just finished listening to the 2Q earnings conference for BGC.  Most of the information from the prepared statements had been already reported. As always, the question and answer session was the best part. A few highlights:

* Re: quarterly dividends. The industry generally declined the second quarter but BGC experienced double-digit growth. The C’s (especially co-CEO Howard Ludnik) credited that to the expansion of electronic trading and fx markets.

* One analyst (I didn’t get his name) wanted to know if the seasonality of August-September was typical. Frankly, I wasn’t really sure where he was going with the question and I doodled on my notepad while Howard answered.

*Daniel Harris of Goldman Sachs asked a question about BGC’s new lower commission structure: “how do you incent brokers with lower commissions?” The answer was simple: volumes. Howard Ludnick said there was a certain “law of friction” and that when one went up, the other went down (volume and commissions). He said that brokers now receive 15% on fx options and credit swaps. Later, another question came up about this issue (“how do you combat commission pressure?”) and Howard Ludnik said you scale across the products.

*Another analyst (name and company missed) asked what products are driving the shift to fully electronic trading. Howard put special emphasis on fx options and credit swaps (again). He pointed out that BGC’s electronic platform was fully electronic – it didn’t just capture the information to complete the trade later. He said “We are excellent at this” and it was one of the two brightest points of the call, I thought. He was very passionate and said it two or three times: we are excellent.

*Howard Lutnik stressed that equities, commodities and energy were three big drivers of growth of growth for the company. BGC doesn’t have a big percentage of their revenues from these operations and they provided big opportunities for the company.

*One analyst asked if Howard could give us an idea of the impact of competitor’s potential mergers and Howard said, “We say acquisitions” and the execs laughed. I thought that was pretty funny.

* Howard Ludnik pointed out that electronic trading was a global initiative and pointed out there was still much growth to be had in Europe, Asia, and US.

BGC Posts Dramatic Results For 2Q 08

I’ve been very vocal about my love for all things Cantor Fitzgerald. And this is why. The results the second quarter 08 have been golden:

– Pre-tax distributable earnings(2) increased by 146.8 percent to $42.3 million in the second quarter of 2008, compared to $17.1 million in the second quarter of 2007;

– Pre-tax distributable earnings per share more than doubled to $0.22 in the second quarter of 2008, compared to $0.09 in the second quarter of 2007;

– Post-tax distributable earnings increased by 70.2 percent in the second quarter of 2008 to $32.2 million, compared to $18.9 million in the second quarter of 2007;

– Post-tax distributable earnings per share were up by approximately 70 percent in the second quarter of 2008 to $0.17, compared to $0.10 per fully diluted share in the second quarter of 2007;

– The pre-tax distributable earnings margin expanded to 13.8 percent of revenues while the post-tax distributable earnings margin increased to 10.5 percent, both of which were significant improvements when compared to 6.3 percent and 6.9 percent, respectively, in the prior-year quarter;

– Income before minority interest and taxes, calculated in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), increased by 196.2 percent in the second quarter of 2008 to $32.1 million, compared to $10.8 million in the year-earlier period;

– GAAP net income for fully diluted shares increased by 137.7 percent in the second quarter of 2008 to $30.1 million, compared to $12.7 million in the year-earlier period;

– GAAP earnings per fully diluted share more than doubled to $0.16 compared to $0.07 in the year earlier quarter;

– Revenues increased by 11.9 percent in the second quarter of 2008 to $305.5 million, compared to $273.0 million in the second quarter of 2007;

– BGC Partners’ Board of Directors declared a quarterly cash dividend of $0.13 per share payable on September 30, 2008 to Class A and Class B common stockholders of record as of September 15, 2008.

Gorgeous. I’m going to be on the earnings conference tomorrow at 8:30am so I can get the full context.

Primary Dealers: Analysis & Gossip

There are presently 19 primary dealers (the firms that deal directly with the Fed to provide liquidity to the banking system.) The Primary Government Securities Dealers reporting to the Government Securities Dealers Statistics Unit of the Federal Reserve Bank of New York are:

BNP Paribas Securities
Solid.

Banc of America Securities
They were hit on Friday with a lawsuit over auction-rate securities.

Barclays Capital
Like everyone, had write-downs but is looking up again. Had a 7.4% surge at the closing bell on Friday.

Bear Stearns
Sad.

Cantor Fitzgerald
Newest prime dealer on the list; they were certified late last year. I always listen to the opinions of Marc Pado and Derrick Brown from Cantor.

Citigroup Global Markets
Citi has lost $32 billion in six months. I don’t know what’s wrong with them. I just can’t figure it out.

Credit Suisse
They just hired Lehman’s CFO, Erin Callan as head of hedge fund business. I’m curious to see the result of that hiring decision.

Daiwa Securities
Jeff Skilling would hate these guys. They’re establishing a brokerage in India.

Deutsche Bank
Quiet. Nothing to report.

Dresdner Kleinwort
Quiet.

Goldman Sachs
The gold standard. Love Goldman Sachs. Except they’re being accused of helping spread rumors about Bear Stearns and Lehman.

Greenwich Capital
Quiet.

HSBC
Heavily invested in mortgages and China. They’re offering savings accounts with an interest rate of 3.5%, which makes me unspeakably sad.

JP Morgan
Legacy deals!

Lehman Brothers
Save this fine company

Merrill Lynch
Poor Merrill. After $4.9 quarterly loss on bad mortgage assets and various smaller problems inside the company, they’re going to struggle valiantly for a few quarters.

Mizuho Securities
Opening a brokerage in Saudi Arabia.

Morgan Stanley
Generally quiet.

UBS
Quiet.