Ted Weschler’s first job after college was at chemical maker W.R. Grace & Co. In 2007, six years after the company filed for bankruptcy, his hedge fund held 15 percent of the shares. That’s when he called Joe Rice.
Once perceived as a fortress built on low leverage and strong cash flows, BP Plc seems to have managed its balance sheet much the way it ran exploration projects -- dangerously. Projections the company is feeding investors about how much cash it will have to pay claims are finally getting the skepticism they deserve.
Last month, the news broke that David Sokol , who was Warren Buffett ’s presumed heir apparent at Berkshire Hathaway Inc., made $3 million from Lubrizol Corp. stock purchases while he was pushing Buffett to buy the company.
How much should BP Plc pay in damages for the Deepwater Horizon catastrophe? The Gulf of Mexico could be as emulsified as vinaigrette by the end of summer. One model shows oil may have migrated up the East Coast by then. No one really knows how bad it will be, only that it keeps getting worse.
As a profit-making endeavor, managing other people’s money is hard to beat. The business requires very little invested capital. There are no worries about getting paid in full when the bill comes due, since fund managers control their customers’ money. And lackluster performance is no bar to hefty profits because fees, based on the dollar value of assets under management, are paid even when returns are abysmal.
I don’t work for Morgan Stanley anymore, but I do own its stock, and since 2010 have been able to sell now that it’s unrestricted. Too bad the shares trade at less than half the price at which I acquired most of them, meaning I face the question of whether to cut my losses or hope the firm gets its act together.