Opening Bell: 01.23.12

Lagarde Says Europe Must Boost Firewall (WSJ)
The global economy faces a depression-era collapse in demand if Europe doesn’t quickly act to dramatically boost the size of its debt-crisis firewall, implement pro-growth policies and further integrate the euro zone, the head of the International Monetary Fund warned Monday. “It is about avoiding a 1930s moment, in which inaction, insularity, and rigid ideology combine to cause a collapse in global demand,” IMF Managing Director Christine Lagarde said in prepared remarks before the German Council of Foreign Affairs in Berlin. “A moment, ultimately, leading to a downward spiral that could engulf the entire world,” she said.

A Sears Wager Stings At Goldman (WSJ)
Clients of Goldman invested about $3.5 billion in Eddie Lampert’s hedge fund through a special deal more than four years ago. Goldman invested about $75 million of its own money as part of the arrangement. At the beginning of this year, that investment was down several hundred million dollars, in large part due to a 57% plunge in Sears stock in 2011. Sears is one of the largest investments of Mr. Lampert’s fund, ESL Investments Inc., according to the most recent securities filings. A sudden rebound in Sears this year has put Goldman and its clients in the black on the deal, although ESL still trails the average return of rival hedge funds since the Goldman money was invested. Goldman and its investors need to see the Sears rally continue. The reason: They can’t withdraw their money until the end of this year, according to terms of the investments. And some analysts are skeptical about whether the recent gains will last.

Former Minister: Greece Won’t Abandon Euro (CNBC)
FYI.

Wall Street Pay Gets Even Trickier To Figure (WSJ)
Since the financial crisis, banks have lessened short-term incentives. Base salaries have risen, while bonuses have fallen. And a bigger portion of incentive compensation is now paid in stock that typically vests over three years. While positive for investors, it poses new risks. Higher base salaries mean firms have less flexibility on pay. And by deferring more bonus pay, usually with restricted stock units that are charged over several years as they vest, firms may be locking in compensation expense that isn’t matched by future performance. That is a worry since Wall Street is in a state of flux and revenues have been falling. If that continues, expenses from deferred compensation could limit banks’ room to maneuver. Firms are paying out an ever-larger share of compensation in deferred-stock—Morgan Stanley in 2010 changed the percentage from 40% of bonuses to about 60%. For 2011, it capped the cash portion of bonuses at $125,000.

French front-runner pledges to cut his pay by 30 per cent as he aims to become next president (Telegraph)
“I like people while others are fascinated by money … I will be the president of the end of privileges,” Francois Hollande said, accusing Mr Sarkozy of presiding over the “degradation” of France just days after the country lost its coveted triple A credit rating for government loans. “My real adversary has no name, no face, no party … it’s the world of finance.”

Buffett Sings for China, With A Year’s Delay (China Real Time Report)
Warren Buffett sang after all on the online version of China’s annual Spring Festival gala — though the audience wasn’t the one he originally intended. Earlier this month, the gala’s organizers said Mr. Buffett, would sing as part of a new year’s greeting to China’s fast-growing Internet community. On Sunday, the gala’s website featured a video of Mr. Buffett, wearing a dark sweatshirt and sitting in front of what looked like a model train set, playing his ukulele and singing the American folk song “I’ve Been Working on the Railroad.” But Mr. Buffett didn’t originally record the song for the gala. Instead, he recorded it for a charity event from a year ago, said Wu Zheng, a Chinese media executive and friend of Mr. Buffett. Originally — as Mr. Wu told China Real Time earlier this month — Mr. Buffett objected to repurposing the video for the new year’s audience. Mr. Buffett appears to have changed his mind: Mr. Wu said Sunday that Mr. Buffett later gave his assent to use the video in the gala.

Bull with flaming balls of wax attached to head fatally gores man in eastern Spain (AP)
A flaming-horned bull trampled and fatally gored a man early Saturday during a festival in eastern Spain, an official said. Large balls of flaming wax are traditionally affixed to the beasts’ heads before they are let loose to rampage through squares and narrow streets in such festivals…Many towns in east and northeastern Spain celebrate feasts with “toros embolados,” or “flaming bulls,” which feature the animals racing around and shaking their heads as a reaction to flames or fireworks attached to or close to their horns. At these regional festivals, flaming-horned bulls are taunted and teased by rowdy crowds in bullrings, town squares or down streets.

EU to Ban Iran Oil Imports Over Nuclear Program (Bloomberg)
European Union foreign ministers agreed to ban oil imports from Iran starting July 1 as part of measures to ratchet up the pressure on the Persian Gulf nation’s nuclear program, the 27-nation bloc said in a statement. The EU will freeze assets of the Iranian central bank in Europe as well as of eight other entities and ban the trade in gold, precious metals, diamonds and petrochemical products from Iran, the EU said.

RIM CEOs Give Up Top Posts In Shuffle (WSJ)
RIM announced that Mr. Lazaridis, who in 1984 co-founded the company using a loan from his parents, and Mr. Balsillie, who joined him in 1992, had stepped down as executives and had relinquished their roles as co-chairmen. The board named Thorsten Heins, previously one of two chief operating officers, to be chief executive, the company said.

Goldman’s O’Neill Sees Investors Adopting His Bullish US Stance (CNBC)
“I spent most of this past week in New York, and to my slight surprise, there appears to be some shift in the mood about the state of life,” wrote O’Neill in his ‘Viewpoints’ letter to clients. “Whether this is because it is the start of the year, asset prices have been perkier or there is some recognition that the U.S. economy and other parts of the world are not as bleak as the second half of 2010 is not so clear. It was certainly quite nice to hear and, in my judgement, is more reflective of what is going on.”

Obama Paying Bush Interest Limits Debt Debate (Bloomberg)
The U.S. bond market is neutralizing budget deficits as an election-year campaign weapon. Interest payments will cost the government 3.1 percent of gross domestic product this year, according to Office of Management and Budget and International Monetary Fund data compiled by Bloomberg. That’s down from 4.8 percent in 1991, the highest in the past 50 years, during George H.W. Bush’s presidency. Since 1980, the only incumbent with a lower ratio than Barack Obama was George W. Bush in 2004.

Carnival offers survivors of doomed cruise Costa Concordia 30% off future cruise (NYDN)
Survivors of the Costa Concordia wreck are being offered 30% off future cruises with the company — a sales pitch that was not received with much gratitude Sunday. “It is a ridiculous and insulting offer,” survivor Brian Page, a retired British accountant, told The Telegraph of London, which first reported the discount offer. “The company is not only going to refund everybody, but they will offer a 30% discount on future cruises if they want to stay loyal to the company,” said a spokesman for Costa Cruises, a subsidiary of industry leader Carnival Cruise Lines. But survivors want considerably more than a third off another cruise. They plan to file a class-action suit Wednesday in Miami, where Carnival is based, seeking $160,000 a passenger — or almost $513 million if all 3,206 passengers were to be paid. The cruise line blames hapless Capt. Francesco Schettino for running the luxury liner on to rocks off the Tuscan coast on Jan. 13, holding him fully responsible for killing at least 30 people. But Schettino told a judge last week that his bosses not only knew he was going to sail perilously close to the island of Giglio — they told him to do it as a form of “advertising” for the cruise line.

Comments (32)

  1. Posted by pazzo83 | January 23, 2012 at 9:51 AM

    In addition, Carnival is offering 50% off any future cruises for non-survivors, stating, "(W)e think that this more than generous offer will keep those customers coming back for years to come."

  2. Posted by Guest | January 23, 2012 at 9:59 AM

    Was anybody else molested by Steven Tyler yesterday?

  3. Posted by George Papandreou | January 23, 2012 at 10:05 AM

    We will also not abandon our lousy work ethic, our demand for porsches, and our unrivaled love for souvlaki.

  4. Posted by Whoops | January 23, 2012 at 10:11 AM

    Who could imagine we'd lose money on a levered commercial real estate play in this climate?!

    -ESL Partners LP

  5. Posted by Guest | January 23, 2012 at 10:14 AM

    OPA! Now take a break.

  6. Posted by Guest | January 23, 2012 at 10:15 AM

    Can't reply. My eyes and eardrums are still not speaking to me.

  7. Posted by Im_a_Dude | January 23, 2012 at 10:18 AM

    I have no idea.

    Richard S. Fuld Jr.

  8. Posted by Bandersnatch | January 23, 2012 at 10:29 AM

    Clumsy drunk and stupid is no way to get through "toros embolados", son.
    - Dean Wormer

  9. Posted by Notorious DSK | January 23, 2012 at 10:32 AM

    I'd like to bust her 'firewall.'

  10. Posted by Prophet for Profit | January 23, 2012 at 10:32 AM

    Iran are our new overlords.

  11. Posted by Alt_EST | January 23, 2012 at 10:39 AM

    I, for one, welcome our new Iranian overlords.

    -K. Brockman

  12. Posted by Now I've It All | January 23, 2012 at 10:45 AM

    A Cornhusker playing the Texas fight song on Chinese TV? Blasphemy!

  13. Posted by W. Buffett | January 23, 2012 at 11:05 AM

    It's a lot catchier than "I've been working in the sweatshop" though.

  14. Posted by HungryIntern | January 23, 2012 at 11:02 AM

    Am I the only person who thinks that singing, “I’ve been working on the railroad” on CCTV a little fucked up?

    ~ California History Major

  15. Posted by Eli Coughlin | January 23, 2012 at 11:13 AM

    I for one love Cruzing.

  16. Posted by Im_a_Dude | January 23, 2012 at 11:39 AM

    I think he's just practicing to entertain fellow residents in the nursing home.

  17. Posted by Guest | January 23, 2012 at 11:48 AM

    Agreed.

    - Walter Sobcheck

  18. Posted by PermaGuestII | January 23, 2012 at 11:48 AM

    I see nothing wrong with this.

    -Leland Stanford

  19. Posted by Guest | January 23, 2012 at 11:50 AM

    Never invest with GPs who show up to pitches intoxicated/not fully-clothed or guys named Eddie.

  20. Posted by Keith Eric George | January 23, 2012 at 12:09 PM

    Okay, we give up. WB played the leads on 'layla' and 'while my guitar gntle sleeps' too. He also slayed the groupies.

  21. Posted by lucas | January 23, 2012 at 12:25 PM

    Agreed.
    - C. Darwin

  22. Posted by Warren in Omaha | January 23, 2012 at 12:32 PM

    Call me when you get half way to your first billion. I'm about 50 of them ahead of you.

  23. Posted by JJ Cale | January 23, 2012 at 12:45 PM

    A little credit please.

  24. Posted by Tyler Gas Trader | January 23, 2012 at 12:47 PM

    My daddy always tole me that natural gas markets is self correctin'…..

  25. Posted by Descartes | January 23, 2012 at 12:57 PM

    Gas will always find a way to get out of the hole.

  26. Posted by Guest | January 23, 2012 at 1:06 PM

    To: Dealbreaker
    From: Jones Day
    Re: Cease and Desist

    Madam, the phrase "Flaming Bull" has been copyrighted by our client, Ping Capital, as the title of a new fund to be marketed circa Q3 2012. It may not be used in any other context.

  27. Posted by guest | January 23, 2012 at 1:17 PM

    He was worse than Roseanne Barr.

  28. Posted by Counsel | January 23, 2012 at 1:32 PM

    ya but you don't remember much these days…

  29. Posted by PermaGuestII | January 23, 2012 at 1:48 PM

    I would be able to jog my memory if Crocker hadn't lost the books in that unfortunate fire.

  30. Posted by Keyser Söze | January 23, 2012 at 2:39 PM

    "The greatest thing the devil ever did was convince the world he wasn't Warren Buffet"

    -Verbal

  31. Posted by Alex Blood | January 23, 2012 at 4:56 PM

    Thanks for the spam

  32. Posted by graphic design | April 18, 2012 at 9:31 AM

    YGTc2X Fantastic blog.Really thank you! Cool.