Opening Bell

Opening Bell: 01.17.13

Charges Weigh On Bank Of America’s Profit (WSJ)
Overall, Bank of America reported a profit of $732 million versus a profit of $1.99 billion a year earlier. On a per-share basis, which includes the payment of preferred dividends, the bank reported earnings of three cents versus 15 cents a year earlier. The most recent period included a per-share impact of 16 cents from the Fannie Mae settlement, a six cent impact from the foreclosure review and litigation expense of five cents a share, among other items. Revenue dropped 25% to $18.66 billion as noninterest income fell 41%. Excluding $700 million of debit valuation and fair value option adjustments, and $3 billion for the cost of $3 billion, revenue was $22.6 billion.

Citigroup Earnings Miss Analysts’ Estimates on Litigation (Bloomberg)
Net income climbed 25 percent to $1.2 billion in the fourth quarter, or 38 cents a share, from $956 million, or 31 cents, a year earlier, the New York-based lender said today in a statement. Earnings adjusted for one-time items including restructuring costs were 69 cents a share. Twenty-one analysts surveyed by Bloomberg estimated 96 cents on average, with some items Citigroup didn’t include. Chief Executive Officer Michael Corbat, 52, took over in October and last month announced plans to eliminate about 11,000 employees and pull back from some emerging markets, undoing part of the expansion strategy of his predecessor, Vikram Pandit. Litigation costs included $305 million from a settlement between U.S. banks and federal regulators, who were probing claims that lenders improperly seized homes.

Goldman Profits By Going On Offensive (WSJ)
The value of Goldman Sachs’s investment portfolio doubled last year. Bond underwriting hit a five-year high. The firm’s workforce shrank and remaining employees were paid a smaller chunk of overall revenue. Those were just some of the ingredients in a bigger-than-expected profit jump by the New York company, which said net income almost tripled to $2.83 billion in the fourth quarter from $1.01 billion a year earlier. Wednesday’s results were packed with evidence of Goldman’s discipline in cutting costs, taking less risk with its own money and riding out financial crises in the U.S. and then Europe.

Goldman Agonized Over Pay Cuts as Profits Suffered (Reuters)
Top executives at Goldman Sachs have been considering deep cuts to staffing levels and pay for at least two years, but feared too many layoffs would leave the firm unprepared for an eventual pickup in business, people familiar with the bank said. They instead chipped away at staff levels and focused on non-personnel expenses that are less painful to cut. But investors pressured the bank to cut costs further, the sources said, and on Wednesday, Goldman gave in. The largest standalone investment bank said in the fourth quarter it cut the percentage of revenues it pays to employees in half to 21 percent. That brings the ratio for the entire year to its second-lowest level since the bank went public in 1999.

Fed Concerned About Overheated Markets Amid Record Bond-Buying (Bloomberg)
Now, as central bankers boost their stimulus with additional bond purchases, policy makers from Chairman Ben S. Bernanke to Kansas City Fed President Esther George are on the lookout for financial distortions that may reverse abruptly when the Fed stops adding to its portfolio and eventually shrinks it. “Prices of assets such as bonds, agricultural land, and high-yield and leveraged loans are at historically high levels,” George said in a speech last week. “We must not ignore the possibility that the low-interest rate policy may be creating incentives that lead to future financial imbalances.”

Estonian president’s Twitter fight with Paul Krugman becomes an opera (RS)
A Twitter feud in June between the Estonian president and New York Times columnist Paul Krugman who questioned the impact of Estonia’s austerity measures, is being turned into an opera, US composer Eugene Birman told AFP on Wednesday. “Our short opera will be first performed by Iris Oja and the Tallinn Chamber Orchestra conducted by Risto Joost during Tallinn Music Week on April 7,” Birman, who moved from Riga to the US at age of six, told AFP. The piece, in two movements, uses two voices, those of Krugman and Estonian President Toomas Hendrik Ilves, reflecting their exchanges on the Twitter social network…The bow-tie loving Ilves went on a tweet-rant after Krugman, the winner of the 2008 Nobel Prize for Economics, argued in a short article entitled “Estonian Rhapsody” that while Estonia had been globally praised for its austerity measures, its recovery was in fact lukewarm. “Let’s write about something we know nothing about & be smug, overbearing & patronizing…Guess a Nobel in trade means you can pontificate on fiscal matters & declare my country a ‘wasteland,’” Ilves responded on his page on the on the micro-blogging site Twitter. “But yes, what do we know? We’re just dumb and silly East Europeans,” he added, before writing in his final tweet, “Let’s sh*t on East Europeans.”

Deutsche Bank Derivative Helped Monte Paschi Mask Losses (Bloomberg)
Deutsche Bank designed a derivative for Banca Monte dei Paschi di Siena SpA at the height of the financial crisis that obscured losses at the world’s oldest lender before it sought a taxpayer bailout. Germany’s largest bank loaned Monte Paschi about 1.5 billion euros ($2 billion) in December 2008 through the transaction, dubbed Project Santorini, according to more than 70 pages of documents outlining the deal and obtained by Bloomberg News. The trade helped Monte Paschi mitigate a 367 million-euro loss from an older derivative contract with Deutsche Bank. As part of the arrangement, the Italian lender made a losing bet on the value of the country’s government bonds, said six derivatives specialists who reviewed the files.

BlackRock Net Jumps 24% (WSJ)
The company said net inflows in long-term products totaled $47 billion at the year’s end, reflecting equity, fixed income and multiasset class product net inflows of $31.2 billion, $12.4 billion and $4.1 billion, respectively. The net inflows were partially offset by alternatives net outflows of $700 million. Total assets under management were $3.792 trillion as of the end of the fourth quarter, versus $3.513 trillion a year earlier and $3.673 trillion in the third quarter.

Jobless Claims Drop To 5-Year Low (Reuters)
Initial claims for state unemployment benefits fell 37,000 to a seasonally adjusted 335,000, the lowest level since January 2008, the Labor Department said on Thursday. It was the largest weekly drop since February 2010.

Khuzami defends corp. settlements (NYP)
Robert Khuzami, the Securities and Exchange Commission’s enforcement chief, is on his way out the door — but he says in an interview with The Post that the agency’s much-maligned practice of settling cases is here to stay. Khuzami, 56, defended the SEC’s policy of allowing targets to settle cases — usually without an admission of wrongdoing — despite recent criticism. “There are certain myths about SEC practices, including how ‘neither admit nor deny’ works and why we use it,” said Khuzami, who is leaving his post after heading the agency’s crackdown on big banks following the financial crisis. “I speak out against these myths in the hope of reducing the level of cynicism felt by the public, which are often fueled by mischaracterizations or misunderstandings of how we operate.”

Commissioners approve regulations governing sexy coffee stands (Kitsap Sun)
Owners of adult-themed coffee stands in unincorporated Kitsap County will have to post signs warning would-be customers about their scantily-clad baristas, and they’ll have to do more to protect passers-by from seeing into their businesses. That’s according to an ordinance passed Monday in a unanimous vote of the Kitsap County commissioners. The stands have 60 days to comply with the changes, which include a site visit by county planning staff to check the signs are posted and additional screening is added…The ordinance requires adult espresso stands — the three existing stands and any new ones — to install an 8-foot-high fence or landscape buffer, approved by the county Department of Community Development, in front of windows that face the street or other businesses, blocking views by the public. Businesses also must receive a one-time certification from DCD to guarantee the regulations are met. A boiling point was hit more than a year ago when five stands — three of them within a half-mile stretch of Highway 303 — advertised employees in pasties and lingerie. Unhappy parents demanded commissioners regulate the businesses. The health department doesn’t require clothing, instead it looks at whether employees have food handler permits, said Department of Community Development associate planner Heather Adams. The state Department of Labor and Industries also has no rules dictating required clothing at coffee stands, Adams said.

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53 Responses to “Opening Bell: 01.17.13”

  1. Hmmmmmmph!!! says:

    That picture could be a Dulcolax ad.

  2. L.Tilton says:

    Does my bush count as a landscape buffer?

  3. City of America says:

    I won't be partying like it's 1999.

  4. Juan Valdez's Burro says:

    What sort of perks do those baristas get? Does the county have grounds on which to regulate such businesses? Mister, coffee is a mainstay of this country! To bean those coffee shops with filtered innuendo and regulation shows that the county is run by a bunch people whose intellectual capital flows at the speed of a drip. I say to them, "as for being pricks, fold yours in your cup and go home!"

  5. AIG Quant says:

    Why did they name Kitsap County after a tomato product used with french fries?

  6. guest says:

    I wish Twitter would never had existed!!!

    – Manti T'eo

  7. Magnetar / J.P. says:

    "History doesn't always repeat itself, but it sure does tend to rhyme."

    So you're telling me that a forced zero interest rate environment is causing investors to look for yield by buying high yield bonds? And that the demand is so great for these that spread compression is forcing lenders to lend "farther down the credit curve" in order to generate yield? And that the bond buyers are aware of this?

    Here's what I'm going to do. I'm going to start a CLO shop – but I can't call it that. I'll call mine High Yield Moderately Enhanced Notes. I'll lend to the crappiest companies I can find, and charge them above market rates. The bonds will sing. I'll buy all of the equity and find someone to write me a CDS on the whole structure. The equity yield will pay for the CDS, with a little left over for me. If the HYMEN stays intact, I have a nice, boring, risk-free cash flow stream. If the HYMEN busts, I score bigtime.

  8. @smfullman says:

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    "Not very long ago I would have said a man would wear a beaded bracelet in only a casual way, but now with so many on offer, they seem to be available for every occasion," he adds. "The same applies to leather."

  9. NYC Subway Talk says:

    Speaking of Monte Carlo, I have never tried a Monte Cristo sandwich. Come to think of it I never thought much of the Chevy Monte Carlo either. Give me a grilled cheese on rye.

  10. Puck It says:

    You may shit on me, but it's gonna cost an extra $250.

    —Svetlana Pussymaxovna

  11. VonSloneker says:

    Just what opera needs in order to shed its boring stuffy image…more Paul Krugman.

    – The Ghost of Giacomo Puccini

  12. Gozer says:

    Everyone is itching to make a clever reference/joke about Te'o.


  13. Iknowaguest says:

    “We must not ignore the possibility that the low-interest rate policy may be creating incentives that lead to future financial imbalances.”

    I believe that when that day comes, you simply blame Wall Street. Rinse, Repeat.

  14. PermaGuestII says:

    It's perfectly fine for a small boy to play obscenely violent video games and watch movies in which a multitude of random people get killed in sadistic ways. But letting them see someone get served a cup of coffee by a naked woman? That's an assault on decent society!

    -guy who sometimes questions what's going on here

  15. Danker_Banker says:

    I've been to Kitsap. The girls in the coffee stands are not naked but even if they were, they're generally, at best, Kitsap-hot (and some are decidedly less than Kitsap-hot). They should post a warning about that.

  16. Guest says:

    Dear Ms. Adams,

    What are the requisites for one to obtain a food handling permit?

    Thanks in Advance,

    J. Gundlach

  17. Bored says:

    Where's Laxbro?

  18. starfocks says:

    guess i'll have to flick my coffee bean at home now…

  19. Joe Hazelwood says:

    There's one thing I wish I would've missed.

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