Discretion pays for traders

Stocktake:If one is going to engage in dodgy behaviour, it’s best to be discreet about it.
 

Take RBS, fined £392 million last week for manipulating Libor rates. “It’s just amazing how Libor fixing can make you that much money,” one trader boasted via email. “The jpy Libor is a cartel now,” another scoffed.

“PRETTY PLEASE,” said a Swiss franc trader asking a submitter for a higher rate, promising he would “lvoe [sic] u forever”. Another joked there “might be a steak in it for ya” if a “small drop” could be arranged.

Meanwhile, SP is now being sued for $5 billion by the US government for giving high ratings to risky mortgage bonds prior to the global financial crisis. Their case isn’t helped by revealing emails such as the oft-quoted line that a deal “could be structured by cows and we would rate it”.

Another analyst borrowed from the Talking Heads song Burning Down the House, singing: “Subprime is boi-ling o-ver/Bringing down the house.” In a follow-up email, he added: “For obvious, professional reasons please do not forward this song. If you are interested, I can sing it in your cube ;-).”

Elan looks for life after Tysabri

Elan suffered its biggest fall in more than six months following last week’s $3.25 billion sale of blockbuster drug Tysabri.

Given the old cliche about how the market hates uncertainty, one can see why. Elan will continue to receive royalties on Tysabri sales but is otherwise almost a shell company, with lots of cash but no drugs.

Chief executive Kelly Martin is on the hunt for pharmaceutical assets but he’s not alone. “There are a lot of assets to buy but very few are interesting,” a UBS analyst told Martin. “What makes you believe that you may be better than them at finding little gems?”

Elan, he added, now resembles a publicly traded private equity fund.

Martin defends his 10-year tenure but it has been a rollercoaster.

Shares rocketed from below $3 in 2003 to $30 in 2004 before collapsing back to $3 in 2005. 2008 saw a high of $37 and a low of about $5. The stock hit $9.40 last week.

The company may “reinvent itself once more”, as Davy’s Jack Gorman hopes, but Deutsche Bank’s downgrade (“uncertainty over use of the proceeds”) is equally plausible. For now, it’s all a guessing game.

Wide spread on equity returns

Equities have beaten inflation, bonds and cash in every country since 1900, the yearbook finds, but returns vary hugely.