The following post is by Dealbreaker reader and commenter Infinite Guest.

President Obama has nothing to gain by negotiating with Republicans in Congress in order to raise the debt ceiling. The Department of Treasury doesn’t need Congressional approval to issue more debt and it will be a long time before Treasury actually needs to exceed the debt ceiling.

The analyses I’ve read on the topic are nothing if not variable, but they all assume at some level an agreement by all parties on the basic necessity of raising the debt ceiling and the general wisdom of reducing the deficit. The President knows what needs to be done, the Congress knows and so does the electorate. Based on this shared understanding, it follows that those who act in the spirit of compromise will be rewarded and those who act to obstruct
progress will be punished.

Never mind the compelling absence of evidence that any such shared understanding exists; that’s just not how things work.

The President, and this President in particular, is not answerable to Congress. The President is answerable to history, to the voting public, to our allies, to business interests including bond markets and in relatively rare cases to a 2/3 majority in the Senate. When the executive branch and the legislative branch can’t work out their differences the Supreme Court acts as referree. If Congress failed to raise the debt ceiling, history would not be kind to a President who on their advice failed to honor our debts. The bond markets would not be kind, our allies would not be kind and consequentially neither would the voting public. But a President who stood up to a hostile, inexperienced Congress and continued to honor our debts would win support from all sides. There will have been sufficient turmoil and pain following Congressional failure to raise the debt ceiling that everyone on earth will understand who the heroes and villains are.

If Congress failed to raise the debt ceiling, the President could stand up to Congress on Constitutional grounds, in which case he could count on a fairly corporatist Supreme Court to eventually rule in his favor. He could stand up to Congress on National Security grounds, in which case he might even be able to secretly issue fresh debt. He could stand up to Congress on technical grounds for a very long time without provoking a Constitutional crisis or raising the debt ceiling simply by draining the Treasurys out of trust funds and replacing them with other assets. And if he had to break the law, as President, in order to stand up to Congress, then he could break the law on moral grounds, secure in the knowledge that if he is impeached, the Senate doesn’t have enough votes to convict.

What would the electorate think of a President who defies Congress on any or all of those grounds? The Democrats would rally behind him, the Republicans would still oppose him and the independents would admire him for acting independently.

Now alternatively he can compromise to avoid a direct conflict but what’s in it for him? He could give away everything his constituents like and it still wouldn’t be enough to balance the budget. By compromising he snatches defeat from the jaws of victory. Democrats will hate him. Republicans will (rightly) say that they won. Without any drama to overcome through courageous and decisive action, independents will conclude that he’s a weak leader who stands for nothing.

Politics is not about forethought, compromise and the public good. Politics is about personalities and political narratives and the balance of power. This narrative has yet to be written, but in the politics of the debt ceiling, President Obama has all the power and his opponents in Congress have none.

Article courtesy of Dealbreaker

Amidst rumors that Microsoft (MSFT) is making progress on the next version of its Windows operating system, which may be “Windows 8,” but which is being referred to at the moment as “Windows Next,” and which is expected to make changes to accommodate tablet computers, Citigroup’s Walter Pritchard this morning offers some thoughts on what to expect and what it means to Microsoft.

He sees a beta version by September 15th, he’s not sure if the software will have sufficient “eye candy,” and he thinks that it’s not too late for WIndows to become number two in tablet software behind Apple’s (AAPL) iOS.

Regarding the time frame, Pritchard bases his analysis on what seems to be publicly available commentary from the company, as well as his knowledge of Microsoft’s historical pattern of software releases:

Microsoft has announced “that the next version of Windows will support a new kind of hardware, system-on-a-Chip (SoC) architectures, that will power the next generation of devices” at CES 2011. […] We believe the product shown on stage employed working code and suggest to us that the Microsoft is farther along in the Windows “Next” development process than many expect. The company has repeatedly stated that “24-36 months” between releases is the appropriate timeframe to consider for the launch of the next Windows operating system. With Windows 7 having been released in October 2009, a strict mapping of the “24-36 month” timeline would suggest a release as early as October 2011 and as late as October 2012 release.

What’s more, Microsoft still has lots of “goodwill” among developers, so those coders may fall in line. The appeal for Microsoft’s enterprise customers would be stronger than for the consumer market, he thinks.

From a financial perspective, tablet prices are not so much the concern for Microsoft: “Are tablets a good business? Yes, but it all comes down to unit shipments. We don’t believe ASPs are the most important question.”

Pritchard is not sure the next Windows “will be a raving success,” as he puts it, but the stock is so cheap, the expectations so low, it’s worth a bet in his mind: he reiterates a Buy rating and a $35 price target.

Microsoft shares today are up 18 cents, or 0.7%, at $24.85.

Article courtesy of Tech Trader Daily

Have you been suspecting that your husband or wife may have involved him or herself in some insider trading? Are you worried that the Feds may know too? While there’s not much you can do short of getting out of town or finding a safe house and laying low, you can arm yourself with the knowledge of what’s in store and mentally prepare accordingly.

Today’s tips come from Arlene Drimal, wife of accused insider trader Craig Drimal. Craig, who segued from a job as a bouncer at The Roxy to a gig at Galleon several years back, pleaded guilty to securities fraud yesterday. The FBI used wiretaps to catch him in the act, and while they were there, couldn’t help but listen in on some “deeply personal and intimate discussion about [the Drimal's] marriage,” including “intimate aspects of the relationship.” So, that’s Number 1: Government officials will be listening when you discuss spicing things up with the furry dice.

Number 2: Rudeness and ‘tude:

The FBI officials told Mr. Drimal they “had recorded his conversations for a very long time, that they knew ‘everything’ about him and his family and friends and mentioned other personal factors leaving the distinct impression that our phones were currently tapped,” Ms. Drimal wrote. The agents asked him to cooperate in their investigation and threatened to arrest him if he didn’t, she wrote, adding that they said he could spend 25 years in prison. The couple “went up to our bedroom to discuss how to ensure privacy,” as they discussed how to find a lawyer, Ms. Drimal wrote. “Feeling trapped, I recommended that we go to CVS [a drugstore] in Westport to buy a prepaid phone,” Ms. Drimal wrote. “Immediately after I said that, FBI agent, David Makol, called and asked to speak to my husband. He warned him not to go out and get a prepaid phone,” she wrote. “That terrified us and we felt panicked.”

Number 3: Late night visits:

On Nov. 2, 2009, Mr. Drimal met with agents and prosecutors asking for his cooperation, she wrote, which he declined to give. Three days later, the couple—along with their 11-year-old son, who had crawled into their bed during the night—was awakened by the lights, bullhorn and pounding on the door, Ms. Drimal wrote. “I hurried down to the front door … on which they were impatiently banging as they hollered,” she wrote, holding back their German shepherd and Staffordshire terrier. “As soon as I opened the door, numerous agents filed into the house,” she wrote. “I noticed some of them touched their weapons, eyeing the Staffordshire in particular. I stood there crying silently, barely dressed and attempting to cover my chest with my arms and assured them the dogs were friendly,” she wrote.

Number 4: PTSD and paranoia:

Ms. Drimal wrote that she has been treated for post-traumatic stress disorder. She worries about her children, including a daughter who asked recently if her father’s legal troubles would affect her ability to get into law school or gain employment. “Just looking out my window in the morning when I wake up,” she wrote, “reminds me of that arrest and violations of my privacy every day.”

When The Feds Are Watching [WSJ]

Earlier: Federal Agents Couldn’t Help But Listen In On Weight Lifter Turned Accused Insider Trader Craig Drimal’s “Deeply Personal” Conversation With His Wife

Article courtesy of Dealbreaker

David Sokol has left the building. Here’s the note on the matter from WB. Apparently there’s a question about some buying and selling of Lubrizol on Sokol’s behalf, which Buffet says, to his knowledge, was in no way “unlawful.”

This press release will be unusual. First, I will write it almost as if it were a letter. Second, it will contain two sets of facts, both about Dave Sokol, Chairman of several Berkshire subsidiaries.

Late in the day on March 28, I received a letter of resignation from Dave, delivered by his assistant. His reasons were as follows:

“As I have mentioned to you in the past, it is my goal to utilize the time remaining in my career to invest my family’s resources in such a way as to create enduring equity value and hopefully an enterprise which will provide opportunity for my descendents and funding for my philanthropic interests. I have no more detailed plan than this because my obligations from Berkshire Hathaway have been my first and only business priority.”

I had not asked for his resignation, and it came as a surprise to me. Twice before, most recently two or so years ago, Dave had talked to me of resigning. In each case he had given me the same reasons that he laid out in his Monday letter. Both times, I and other Board members persuaded him to stay. Berkshire is far more valuable today because we were successful in those efforts.

Dave’s contributions have been extraordinary. At MidAmerican, he and Greg Abel have delivered the best performance of any managers in the public utility field. At NetJets, Dave resurrected an operation that was destined for bankruptcy, absent Berkshire’s deep pockets. He has been of enormous help in the operation of Johns Manville, where he installed new management some years ago and oversaw major change.

Finally, Dave brought the idea for purchasing Lubrizol to me on either January 14 or 15. Initially, I was unimpressed, but after his report of a January 25 talk with its CEO, James Hambrick, I quickly warmed to the idea. Though the offer to purchase was entirely my decision, supported by Berkshire’s Board on March 13, it would not have occurred without Dave’s early efforts.

That brings us to our second set of facts. In our first talk about Lubrizol, Dave mentioned that he owned stock in the company. It was a passing remark and I did not ask him about the date of his purchase or the extent of his holdings.

Shortly before I left for Asia on March 19, I learned that Dave first purchased 2,300 shares of Lubrizol on December 14, which he then sold on December 21. Subsequently, on January 5, 6 and 7, he bought 96,060 shares pursuant to a 100,000-share order he had placed with a $104 per share limit price.

Dave’s purchases were made before he had discussed Lubrizol with me and with no knowledge of how I might react to his idea. In addition, of course, he did not know what Lubrizol’s reaction would be if I developed an interest. Furthermore, he knew he would have no voice in Berkshire’s decision once he suggested the idea; it would be up to me and Charlie Munger, subject to ratification by the Berkshire Board of which Dave is not a member.

As late as January 24, I sent Dave a short note indicating my skepticism about making an offer for Lubrizol and my preference for another substantial acquisition for which MidAmerican had made a bid. Only after Dave reported on the January 25 dinner conversation with James Hambrick did I get interested in the acquisition of Lubrizol.

Neither Dave nor I feel his Lubrizol purchases were in any way unlawful. He has told me that they were not a factor in his decision to resign.

Dave’s letter was a total surprise to me, despite the two earlier resignation talks. I had spoken with him the previous day about various operating matters and received no hint of his intention to resign. This time, however, I did not attempt to talk him out of his decision and accepted his resignation.

Effective with Dave’s resignation, Greg Abel, presently President and CEO of MidAmerican Holding Company, will become its Chairman; Todd Raba, President and CEO of Johns Manville, will become its Chairman; and Jordan Hansell, President of NetJets, will become its Chairman and CEO.

I have held back nothing in this statement. Therefore, if questioned about this matter in the future, I will simply refer the questioner back to this release.

Berkshire Hathaway and its subsidiaries engage in diverse business activities including property and casualty insurance and reinsurance, utilities and energy, finance, manufacturing, retailing and services. Common stock of the company is listed on the New York Stock Exchange, trading symbols BRK.A and BRK.B.

[BusinessWire]

Article courtesy of Dealbreaker

Alexandra & James, the Lebenthal’s family wealth advisory business, continues to recommend that its clients buy munis. There are some cities and states which the firm avoids, but Lebenthal continues to recommend double-A and triple-A bonds. Investors should not sell, she added, regardless of Whitney’s warnings.”I don’t dispute her knowledge of the investment banks, but she is not a municipal bond expert,” Lebenthal said. “I would put any muni analyst in a room with her — on TV, outside in the school yard — and see who comes out ahead.” [Reuters via BI]

Article courtesy of Dealbreaker

Earlier this morning, CNBC’s Kate Kelly noted that one of the Feds’ cooperating witnesses is a New York-based hedge fund manager whose name has not yet been revealed. Obviously this means we have no choice but to wildly speculate about the identity of “CW-5″.

(We don’t have the vaguest idea but in what is probably entirely unrelated news, HFA reported yesterday that SAC alum Ian Goodman had closed his firm, GCore. After his time in Stamford, Goodman founded Stratix with Rich Grodin, who went on to start Quadrum Capital, which “abruptly closed” last year. Around the time of the Raj Rajaratnam arrest. Both Grodin and Goodman worked with another cooperating witness, Choo Beng Lee, at Stratix. HFA noted that “Goodman himself assumes it’s only a matter of time before investigators question him about his knowledge of SAC and related entities, according to an associate, in light of his connections.”)

On with the guessing.

Article courtesy of Dealbreaker

BofA May Pare Its BlackRock Stake (WSJ)
The bank has concluded that its 34% share of BlackRock Inc. isn’t a core asset and is weighing a possible reduction of its holdings in the asset manager, said people familiar with the situation. No talks have been held about when or how this might happen, and Bank of America still could decide to keep the 64.7 million common and preferred shares of BlackRock that it owns. But BlackRock executives expect the nation’s largest bank by assets to sell down its stake, said people close to the company.

Goldman Undercuts Rivals in GM IPO as It Loses Top Role (Bloomberg)
Wall Street banks led by JPMorgan and Morgan Stanley stand to make a combined $120 million on General Motors Co.’s initial public offering. If it weren’t for Goldman Sachs, they could have made four times as much. In a pitch to the U.S. Treasury in May, Goldman Sachs offered to accept a fee of 0.75 percent, according to people with direct knowledge of the matter. That’s a fraction of the 3 percent banks typically charge on the largest IPOs and well below the 2 percent offered by Bank of America and other banks that presented to Treasury, said the people, speaking anonymously because the matter is private.

Goldman CEO, Others Get Millions From Options (Reuters)
Blankfein exercised 90,681 stock options at a strike price of $82.875, and obtained a $6.09 million gross profit by selling the resulting shares on Wednesday at prices between $148.97 to $152.00. In similar options exercises and sales, President Gary Cohn exercised 73,653 options and had a $4.95 million profit, Chief Financial Officer David Viniar exercised 67,326 options and had a $4.52 million profit, and General Counsel Gregory Palm exercised 47,895 options and had a $3.22 million profit.

‘Cruz Missile’ Takes Off With New Fund (WSJ)
Cruz, who has been fund-raising for nine months, has raised $200 million in total for Voras, according to people close to the firm, and has established two separate funds. One of the funds, a global macro strategy, is run by Cruz herself, and the other, a credit opportunities fund, is managed by Ellen Brunsberg, who previously ran Morgan Stanley’s European securitised products group. The firm has set up offices in New York and Hong Kong, and is waiting for approval from the Financial Services Authority for a London office that Brunsberg will run. Voras Capital Management was incorporated in the U.K. in January this year. Voras–the Greek word for “north” –is the name of a mountainous area near the town in Greece where Cruz was born. Cruz has hired a number of former Morgan Stanley staff, including Philip Newcomb, who was co-head of interest rates and currencies. He is chief operating officer at Voras in New York.

HP Board Said to Turn Against Hurd After Surprise Settlement (Bloomberg)
Hurd surprised the board by settling a sexual-harassment claim before directors could learn more about the incident, a final breach of trust that contributed to his ouster as chief executive officer, two people familiar with the decision said.

Maxim Group Is Granting Wishes (NYP)
Financial services firm Maxim Group has money to give away and is scouting for applicants — not for jobs, but for charity. If you have a compelling story, the Lexington Ave. investment firm might fund your dream vacation or a reunion with an estranged relative. “Let’s say someone wants to go to England to meet their long-lost aunt,” said Ed Rose about the kinds of wishes Maxim might fulfill. Rose said interested applicants should e-mail him at erose@maximgrp.com or call him at 212-895-3689.

New Crime Trend Is Truly Below The Belt (WSJ)
A memo circulated to all members of the New York Police Department, and viewed by The Wall Street Journal, warns officers to be aware that “drug dealers are using underwear with secret pockets sold in stores from several different companies to hold drugs and small weapons.” Instead of the standard light pat-downs around suspects’ waistbands, the knowledge that this secret underwear exists is going to cause police to have to undertake more thorough searches of some suspects, said Capt. Vincent Patti.

Laid-Off Chinese Bank Workers Refuse To Go Quietly (NYT)
During the past two years, these unlikely agitators — conservatively attired but fiercely determined — have staged public protests in Beijing and provincial cities. They have stormed branch offices to mount sit-ins. A few of the more foolhardy have met at Tiananmen Square to distribute fliers before plainclothes police officers snatched them away. “They tossed us out like garbage,” Ms. Wu, 44, said before a recent protest, scanning fellow restaurant patrons for potential eavesdroppers. “All we’re asking for is justice and maybe to serve as a model for others who have been wronged.”

Lehman Creditors May Get $16 Million as Hirst, Freud Auctioned (Bloomberg)
About 1,000 lots from the collection of Lehman Brothers Holdings Inc, including works by Damien Hirst, Lucian Freud, Andreas Gursky and Gary Hume, will be auctioned by Sotheby’s in New York, Christie’s International in London and Freeman’s of Philadelphia in the fall. The lots also include a metal sign from outside Lehman’s U.K. Canary Wharf office, valued at as much as 3,000 pounds ($4,680), as well as boardroom cigar humidors and tea caddies starting at 600 pounds.

Bear cub stuck with head in a jar for 10 days is freed (NYDN)
“Although the story appears to have a happy ending,” the the Florida Fish and Wildlife Conservation Commission wrote, “it truly illustrates one of the worst things that can happen when wildlife gets into garbage.”

Article courtesy of Dealbreaker

The following post is by Dealbreaker reader and commenter Infinite Guest.

Laws go unenforced for any of several superficially distinct reasons, but ultimately because of political failure. Mostly a reiteration of desuetudinal laws, Dodd-Frank seems deliberately written so that it can’t be enforced. Dodd-Frank is a gigantic recipe for political failure.

Dodd-Frank definitely costs money. Some of the provisions of the statute, like the hedge fund regulation, will require a little finesse. Some provisions impose additional cost on the ultimate consumer. Some, like cutting states out of surplus lines and reinsurance, will reduce costs. The beauty of putting swaps and derivatives on an exchange is self-evident. But no one seems interested in the provisions that place the Executive Branch subordinate to Congress, provisions that conflict with each other, that promote regulatory capture, that rely upon Treasury Secretary Geithner to devise tough new rules, or that simply formalize the status quo. Yet the statute is primarily composed of just such provisions. Those provisions can be safely ignored.

I’ve always felt there’s something charming about trying to fix the problems in your plan by hiring new managers to execute your plan. The Financial Stability Oversight Council is something like that, although the voting members of the council (except for the insurance industry representative) aren’t new. A few obvious problems. The Council is tasked both with disabusing the industry of Too-Big-To-Fail expectations and with referring troubled institutions to the Orderly Liquidation Authority, i.e., the bailout group. The Council is headed by the Treasury Secretary. It’s set up to be exempt from just about all the restrictions that every other one of the, I don’t know, say thousands, of existing advisory committees out there, just to make sure that everyone else in Federal government is jealous and uncooperative from the get-go. And the Council members are obliged to periodically sign off to Congress on the health of the Financial System. Congress may assume that because President Obama signed the law his Council will feel compelled to report to them in some meaningful way, but I’m not so sure. Odds are good the Administration sees it’s Congressional reporting requirements as a chore, or at best, as a courtesy. Certainly not as any sort of binding warranty. Same for the Office of Financial Research – which, by the way, might not be such a bad place to work. Check it out.

I’m happy to say the Volcker Rule is completely gone, and leave it as an exercise to the reader to cogitate further. The countercyclical capital requirements bit could have been written by Jamie Dimon himself. I’m tempted to say it was.

New investor protections in Title IX are not actually new, and the new disclosure rules for retail investors are part of an ongoing discussion with the SEC. Then there’s the SEC’s funding to consider. The worst of both worlds, the SEC is self-funding except that it isn’t. They can’t afford to hurt industry too hard and they can’t afford to piss off anyone in Congress either. So it’s no better for them to rock the boat than it was before this statute. If they have any sense they’ll keep Congress in the dark and do their best to stay out of court.

The whole process around orderly liquidation is a great gift. In exchange for a small premium, Dodd-Frank has given large financial institutions a permission slip to drive each other to the brink of collapse, secure in the knowledge that a guilt-free LTCM-style bailout awaits any failing institutions, and protected from the wrath of taxpayers. The restriction imposed on the Orderly Liquidation Authority not to use taxpayer funds to finance future bailouts can be safely ignored, but it does look nice on paper.

Unfortunately the restrictions Congress wants to place on bailing out Greece is also a non-starter, but I doubt any of you people care about that.

It has often been said that in politics nothing succeeds like failure. The Dodd-Frank Wall Street Reform and Consumer Protection Act is by that measure a resounding success.

Article courtesy of Dealbreaker

Trada, a Boulder, Colo. startup allowing businesses to tap into a large pool of experts to manage their search advertising campaign, just announced that it has raised a $5.75 million funding round led by Google Ventures.

The idea behind Trada is that rather than trying to run a search advertising campaign yourself, or relying on a single consultant, businesses are able to used a crowdsourced approach, where a group of search advertising experts can contribute their knowledge. So a Trada customer creates a campaign, specifying things like the product being sold and the daily budget, then experts can decide to join the campaign. Each expert can generate their own ad groups, search keywords to advertise on, and ads. The advertiser only pays for clicks and conversions.

Since the public launch in March, Trada has grown dramatically, said founder and chief executive Niel Robertson. It’s now running more than 200 ad campaigns, with an average customer now spending about $5,000 a month. The number of experts in the system has doubled to 500. And some of those experts are starting to make some serious cash — Robertson said his goal is that the experts should be able to make a full-time income from Trada if they wanted to, and that at least one expert is already approaching that level.

Article courtesy of VentureBeat » Deals & More

Crowdcast, a startup that helps companies make better decisions by harnessing the knowledge and opinions of their employees, just announced $6 million in new funding from Menlo Ventures.

San Francisco-based Crowdcast provides what it calls “social business intelligence.” Instead of pulling its information from a company’s different applications and datasets like traditional business intelligence, Crowdcast is all finding the knowledge in your workforce. Managers can ask their employees to make forecasts about the company and its products — after all, those employees may have the best idea when things are going well, and when there are problems ahead.

One obvious example involves the date when a product will be ready to ship. Not only will Crowdcast give companies warnings when products are likely to miss their deadlines, it also gives them the date when team members really think the product will ship.

One problem with this approach is that each workers’ expertise differs from question to question. But Chief Scientist Leslie Fine said, “We let the market decide.” Users not only make predictions on what they think will happen, but they can indicate their level of certainty by how specific their prediction is, and by how much of the application’s virtual currency they’re willing to bet. And although individual predictions are anonymous, managers can see how they vary between departments and teams.

Companies can offer rewards to the Crowdcast participants who are the most valuable, namely those who make frequent, early, and accurate predictions.

There aren’t many direct competitors yet, according to founder and chief executive Mat Fogarty (pictured above). The closest is probably SAP from Streamwork. But there’s definitely a chance that more traditional enterprise software makers might try to add similar features, or that newer business collaboration companies might do the same. In fact, Fogarty said one of Crowdcast’s big goals is to start integrating with other social media and collaboration products.

“It can’t be standalone,” he said.

Alsop Louie Partners, which provided Crowdcast’s $2 million seed funding, also participated in the new round.

Companies: Alsop Louie Partners, Crowdcast, Menlo Ventures

People: Leslie Fine, Mat Fogarty

Article courtesy of VentureBeat » Deals & More