A couple of weeks ago, Guggenheim Partners was an under-the-radar funding source for Magic Johnson and Stan Kasten's successful marquee campaign to buy the L.A Dodgers. Just a $125-billion private firm in a world of much bigger fish. Goldman Sachs has almost a trillion in assets under management. Morgan Stanley has over $800 billion. Guggenheim hangs out in much lower reaches, with other broker-dealers in the realms below the exalted heights of major Wall Street investment banks.
Under CEO Mark Walter, however, Guggenheim is moving aggressively to break out of this mold and distance itself from shops like MF Global, the bankrupt broker-dealer that former Goldman CEO Jon Corzine was trying to bring into the big leagues — before a failed bet on European debt and some possibly illegal maneuvers with client money sent the firm into bankruptcy (and could send Corzine to jail).
Time for my weekly writeup of Friday's business and economy report on "American Now with Andy Dean." Obviously, we couldn't not talk about the Mega Millions lottery, even though we've discussed it before. Evidently, the lotto authorities are still tracking down the winners for the Friday night drawing. The fact remains, of course: These are people who spent $1 — well, OK, maybe they spent hundred or even thousands of dollars on tickets, I have no way of knowing — for a shot at $640 million. Negligible input for a monumental payoff. And a reminder that while the odds are waaayyy against you, as Andy points out, it can be worth it to play the lottery when it gets super-high, jackpot-wise. You're investing in a personal "black swan" event.
Otherwise, we discussed the Dodgers sale, including the masterful — and to some, malevolent — parking-lots side deal that soon-to-be-former owners Frank McCourt worked out. Also some back-and-forth about Goldman Sachs ultra-critic Greg Smith's $1.5 billion book advance, some more discussion of why Apple should buy Research in Motion as RIM's stock price continues to struggle, and to cap it all off, the breaking news that Keith Olberman was fired at Al-Gore owned Current TV.
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Greg Smith, formerly of Goldman Sachs, is not pictured.
In 12 years at Goldman Sachs, Greg Smith was probably already being lavishly rewarded (and by "probably" I mean "undoubtedly"). He quit the controversial investment bank in spectacular fashion, via an op-ed in the New York Times. Now he's scored a $1.5 million book deal. This is from The Wrap:
The former investment banker nabbed a $1.5 million advance from Hachette Book Group this week for a memoir based on his time at the firm, according to a report in the New York Post.
A spokesperson for the publisher did not immediately respond to requests for comment, and Smith's agent Peter [sic] Fedorko declined to comment.
The Post reports that Hachette beat out Penguin for rights to Smith's debut book.
There's a little publishing inside baseball there at the end. All it means is that Smith's book was so coveted that it inspired a bidding war.
I don't really want to do this $10 billion IPO. Really, I don't.
I'm officially arguing with Felix Salmon about venture capitalists. You can read the previous installments here and here. We've got even more fodder for debate now, based on Felix's excellent piece in the latest issue of Wired.
First off, I think he's talking about two things at the same time:
1. Why IPOs suck for tech companies (Duh, it's the title of the piece!) — and why the IPO model, once so useful, is now broken
2. Why venture capitalists are doing all kinds of things that are borderline despicable when it comes to funding companies and maximizing their greed
I don't entirely disagree with point number one. It's taking companies longer to get to the IPO stage, and it's debatable whether companies that are already quite successful really need to go public. Also, as William Cohan has argued, investment banking has become a Wall Street cartel, with the same big firms — Goldman Sachs, Morgan Stanley, JPMorgan et al. — getting to run all the IPOs. The model that Bill Hambrecht developed — the so-called "OpenIPO" model — and used to take Google public in 2004 has fallen by the wayside.
Listen in to my weekly business and economy report with Andy Dean on America Now Radio. We have some good fun in this segment, talking about lotteries and how playing when the jackpot gets WAAAYYY up there makes spiritual if not financial sense; market-based parking pricing in San Francisco and the legacy of Michael Bloomberg in New York; a Euro Vegas in Spain; why the Muppets actually are Goldman Sachs clients (I scooped the entire financial media on this one); and finally why liquor stores contribute to crime.
One small note: I mentioned the difference between Spain's financial crisis versus Greece's when we were discussing casino magnate — and Newt Gingrich SuperPAC funder — Sheldon Adelson's plan to play George Marshall and save Spain's economy, by building an unemployment-ending Euro Vegas in either Madrid or Barcelona. It was of course Spain — not Greece, as I said — whose banks fueled a property boom before the financial crisis. That was and is the difference between Spain's mess and Greece's mess.