“It was the best of times, it was the worst of times”
The year 2008 will be more remembered for the incredible failures and disastrous events rather than, as usual, the great moments shared by us all. For every Michael Phelps, Usan Bolt and the immensely successful Beijing Olympics, there is an AIG, Washington Mutual and Bear Stearns. While we lived through the most thrilling election in the history of these United States, perhaps the world, we also suffered through continuing wars in Iraq, Afghanistan and Africa, Terrorist Attacks worldwide, the invasion of Georgia and the sad and often embarrassing failures of our elected officials. Finally, despite great advances in medicine and technology, we remain paralyzed and undermined by the greatest detriment of all: our own faulty human nature.
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“We are all stupid, just on different subjects.”
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- Mark Twain
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So this author will adopt a time tested literary style, the TOP TEN list of 2008. It includes the sublime, the ridiculous and the humorous. All due apologies for those that didn’t make this author’s list, no doubt you are on many others: 1) Greatest Financial Debacle: not only the imploding of Lehman Brothers, but our governments’ decision to let it fail which set off a market panic that still reverberates. And to the Company’s Board and CEO Dick Fuld, congratulations for buying back $761 million worth of your own stock during the year of your implosion. Perhaps not very “Nostradamsish”; 2) Worst Decision by a CEO: Jerry Yang’s and Yahoo’s unbelievably bad decision to spurn Microsoft’s offer to acquire the company for $31 a share instead, holding out for $35. At the time of this writing, the stock hovers at $12 and has been as low as $9; 3) Worst and Most Shocking Performance by a Money Manager: the recent announcement that Bernie Madoff both supervised and oversaw the largest “ponzi scheme” of all time. The losing of $50 billion is almost incomprehensible and shook the confidence of small and large investors to the core. Between the Federal Reserve Mutual Fund “breaking the buck” and the Madoff Fund’s unwinding, where is capital safe anymore?; 4) The Best Policy Flip Flop: no doubt goes to Treasure Secretary Hank Paulson whom after announcing the creation of a “superfund” to buy troubled “structure investment vehicles” from Banks and institutions, then decided it wasn’t such a great idea after all. This further eroded the government’s already fragile confidence with the public; 5) While we were offered a host of viable candidates, the Governmental Official Turkey Award would no doubt have to go to the scandalized former Governor of New York. Despite his pristine outward crusader appearance, he failed his constituents miserably in a now, well known series of trysts with celebrity wannabe Ashley Dupree. The infamous Client #9’s fall from grace, played out on every media circus worldwide, must’ve offered some solace to his chief antagonists, Donald Grasso (NYSE), Kenneth Langone (NYSE), Hank Greenberg (AIG) and interestingly enough, the escort business in New York. Of course the current Governor of Illinois is giving the former Governor of New York a real run for his money; 6) The legal community was not exempt in 2008 as Marc Dreier, Founding Partner of the Law Firm of Dreier, LLP was corralled by Canadian authorities as he tried to defraud the Ontario Teachers Pension Plan of $33 million in order to replace a missing $38 million from his own hallowed lawyer’s escrow account. The law firm, and its 250 lawyers, has disbanded. So we offer Mr. Dreier the “Infamous Lawyer of the Year Award” whose prize is a lengthy prison term; 7) The automobile industry, so much in the news these days, and their CEOs were able to edge, by a nose and win the “Chutzpah Award” from the top producers of AIG whom immediately after accepting a $150 billion bailout from the government went on a $400K resort excursion to celebrate their great year. What did these Automotive CEOs do, they each flew private jets to Washington to ask for a $100 billion bailout.; 8) The “Hubris award” goes to New England Patriot coach Bill Belichick for his port in the infamous “Videogate Scandel” (especially Jet fans) and then, after finishing the season 18-0, losing to the highly underdog Giants of New York (really New Jersey) in the Super Bowl. Time to put the hoodie away Bill; 9) The Achievement of the Year goes to the aforementioned Michael Phelps whom despite great fanfare, actually lived up to and even surpassed our wildest imaginations and stretched the bounds of human physical achievement. A special kudos goes to the Tampa Bay Rays for being the “feel good sport story” of 2008; And finally, 10) This author would be remiss to not acknowledge the man that has brought back faith that we Americans’ can regain our pride and position in the world. While this author, nor anyone in his family voted for Barak Obama, it is never too late to admit one was wrong. While he takes over a fractured country and a world that has changed dramatically in the past 8 years, he fills us with renewed hope and imagination. Wishing the President Elect all God Speed.
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“The line separating good and evil passes not through states, nor between classes, nor between political parties either-but right through every human heart.” |
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- Aleksandr Solzhenitsyn
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It is official, our Country is in a recession. US factory production has fallen to its lowest level in over a quarter of a century and close to 200,000 individuals lost their jobs in November alone. The economic mood reflects dark pessimism and many believe that this recession will last longer than the prior post war average of less than one year. Many are predicting that the economy will shrink by close to 5%. One bright cloud in all this has been the continued depreciation in the price of oil, down over $100 per barrel since its high in July 2008. While consumers may drive the US economy, the price of oil drives the world. Most prognosticators have dramatically reduced their projections to between $60-$75 a barrel in 2009, thus a glimmer of hope for our fragile economy. However, production reductions, disruptions in supply or unrest in the Middle East, Russia, Venezuela or Iran continue to threaten volatility.
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“Great minds have purposes; little minds have wishes. Little minds are subdued by misfortunes; great minds rise above them.” |
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- Washington Irving
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One of the effects of the world’s financial meltdown was the almost immediate end to funding of venture capital type investments. Some VC's are actually selling their equity stakes in start-up companies at fire sale prices so that they don’t have to continue to fund them preferring to horde their cash for other investments. For other Venture Capitalist the cash crunch presents an opportunity to fund companies at big discounts. Many distress buyers are finding acquisitions and/or investments at more agreeable terms then in the recent past. Private Equity firms, on the other hand, have the distinct advantage of already owning these companies and having the access to capital, can offer “equity cures”. Yet this economic “tsunami” has not escaped the Private Equity sector as 25-50% of privately equity owned companies have defaulted (Standard & Poor’s) and one doesn’t have to look further than Chrysler and Cerberus Capital Management to watch the landscape play out in the national media over the next quarter.
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“If we are strong, our character will speak for itself. If we are weak, words will be of no help.” |
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- John F. Kennedy
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This past quarter, we have fortunately been able to offer our corporate clients participate in any or lead valuable Advisory and Consulting Services and assist them in navigating through the financial markets, muddy waters. In order to further advance these services, we have secured the services of Olga Slobodova to augment our Investment Banking and Corporate Finance staff. She recently left Credit Suisse, has an MBA and a Series 7 & and 63. Welcome aboard. We are glad to welcome to WP’s Corporate Advisory roster the following new members: Electro-Comp Services, Inc. (Greenwich, CT); Harrow Green UK (London, UK); Bombilla & Gourd, Inc. (Lyndhurst, NJ); Janel World Trade Ltd. (Symbol “JLWT”) (Jamaica, NY); Kit Ditigal (Symbol “KITD”)(Dubai); Matrix Green Air Fund (Georgetown, Cayman Islands); Genosys, Inc. (Symbol “GNYS”) (Provo, UT) and iSkoot, Inc. (San Fransico, CA). I would like to thank three particular members of our Advisory Board for their valuable help this past quarter: Gilbert Raker, Francis Elenio and Stuart Michael. In addition, in conjunction with MRM Finance, LLC in Beijing, China we are currently in the process of writing Research and/or Due Diligence reports on several additional companies: China Broadband, Inc. (Boulder, CO) and Wuhan Zhongye (Wuhan, China). Copies are available upon request and again, we acknowledge the efforts of Steve Vago and MRM’s Beijing based Chinese bankers.
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“My turn of mind is so given to taking things in the absurd point of view, that it breaks out in spite of me every now and then.” |
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- Lord Byron
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After four and a half years, we have decided to leave the brokerage firm with whom we were affiliated with, WestPark Capital, Inc. (“WPC”), Los Angeles, California and become associated with Sandgrain Securities, Inc. principally located in New York. We want to wish the members of management and staff well in all their future endeavors and in particular we want to thank Anthony Pintsopoulos, WPC’s President for his professionalism and personal attention to our branch. We are extremely excited with our new affiliation and expect a smooth and orderly transition. Below is a short bio on Sandgrain.
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“The greatest mistake you can make in life is to be continually fearing you will make one.” |
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- Elbert Hubbard
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About Sandgrain Securities, Inc.
Sandgrain Securities Inc. is a certified woman owned, full service brokerage and investment banking firm serving both institutional and individual investors. Founded in 1992, the 17 year old firm is certified by Empire State Development, New York City and WBENC. Sandgrain is a selling group member for a variety of new bond issues from New York City, MTA and NYS Dormitory Authority. On the investment banking side, the firm works with both accredited investors and a variety of companies, both public and private, in transactions that range from Private Placement offerings and PIPE transactions to Bridge Loans and Debt Recapitalizations. The Company has a SMALL CAP EXPOSURE PROGRAM which provides research (from affiliates) and sets up meetings with institutional and retail financial services companies for exposure to the “Street”. Sandgrain’s trading desks provide execution services for large municipalities and public pension plans in both fixed income as well as domestic and international equities. We have a marketing and clearing house contract with Pershing & Company, a division of the Bank of New York, / Mellon (BK) which has over $80 billion in assets and over 200 years of experience. Pershing/BNY enables Sandgrain to have direct access to the services of a world leader in the securities brokerage industry. All client assets are held at Pershing.
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“Adversity is the first path to truth.” |
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- Lord Byron
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On behalf of the management, employees and affiliates of Wellfleet Partners, Inc., we want to wish you and your families an enjoyable winter season and a Happy and Healthy New Year.