Opening Bell: 08.13.13

Activist investor Ackman resigns from J.C. Penney board (Reuters)
Struggling department store operator J.C. Penney Co said activist investor William Ackman, who has been pressuring the company to oust its chairman and chief executive, has resigned from the board effective August 12. The company also said it has elected retail industry veteran Ronald Tysoe to its board.

Paulson makes rival offer for Steinway (FT)
US hedge fund manager John Paulson has entered into a bidding war for grand piano maker Steinway Musical Instruments, leaving private equity group Kohlberg & Co three days to sweeten its prior offer. It is rare for funds run by Mr Paulson, who is famous for betting against securities backed by US mortgages during the financial crisis, to seek to buyout a listed company. The cash offer on Monday of $38 a share, or $475m, tops the offer Kohlberg made on July 1 of $35 a share and represents a premium of almost 5 per cent to the stock’s Friday closing price.

Fed’s Yellen Says Stance on Banks Hardened (WSJ)
Janet Yellen, a top contender to lead the Federal Reserve, has evolved—in her own words—from a slightly “docile” regional bank regulator into a proponent of hard and clear rules designed to make banks less risky. The change was prompted by her six years as president of the Federal Reserve Bank of San Francisco during a torrid period in financial history. As part of that job, which she held through 2010, Ms. Yellen oversaw scores of banks, some of which failed as the housing market collapsed. An examination of her record suggests she pre-emptively warned colleagues about problems in the real-estate market but didn’t take aggressive action to address them.

Suit Accuses Online Lender of Violating New York Rate Caps (DealBook)
New York State’s top prosecutor filed suit on Monday against an online lender that offers short-term loans at interest rates of more than 300 percent, the latest warning shot in a sweeping battle by state authorities to enforce local interest rate caps. Eric T. Schneiderman, the New York State attorney general, sued Western Sky Financial and its affiliates, which claim connections to American Indian tribes — ties that the lenders have argued immunize them from federal and state laws.

Mooring madness devolves into porn accusation (Greenwich Time)
Days after First Selectman Peter Tesei endorsed Harbormaster Ian MacMillan’s order to remove the badly placed mooring of a former Greenwich cop, a notice of violation has been served and ignored, accusations of child pornography have materialized and the mooring in question continues to bob in the middle of a public channel. “What should be a very routine process of mooring removal has developed into a theatrical circus and there are many stars,” said Selectman Drew Marzullo. “It’s become `The Wild Wild West’ show on the waters of Greenwich. It’s `Pirates of the Caribbean’ on Windrose Way.” … On Sunday, MacMillan set out by boat to see whether Silbereisen had moved the mooring. He brought with him a camera. When he arrived at the site, MacMillan said Silbereisen and several other boaters were gathered around the mooring, though not tied up to it. He started snapping pictures. The boaters in Silbereisen’s group waved. Some snapped pictures of MacMillan with their cellphones. A man in pastel swim trunks flashed a hang loose sign. MacMillan said he was holding the camera to his eye when he heard Silbereisen’s voice requesting police assistance on the marine radio. “What he said was that I was taking pornographic pictures of small children swimming in the water,” MacMillan said. “He made a false report. The purpose of my photos was to document the illegal mooring and the vessels around it.” He added, “I have no interest in any kind of porn at all.”

Summer Lull Draws Investors to Riskier Debt (WSJ)
Subdued summer trading and signs that some of Europe’s fiscally frail countries are slowly emerging from recession are increasingly luring investors to riskier euro-zone debt, narrowing the gap in yields between Spanish and Italian bonds over German Bunds to its tightest in more than two years. … The 10-year yield spread between Spanish debt and Bunds—the extra yield demanded by investors to hold Spanish bonds over their ultrasafe German equivalents—stood at 2.72 percentage points Tuesday, according to Tradeweb. For Italian bonds, the 10-year spread is 2.41 percentage points—the tightest spread in just over two years for both countries.

Blackstone Said to Acquire GE Apartments for $2.7 Billion (Bloomberg)
Blackstone Group LP agreed to buy 80 apartment properties for about $2.7 billion in one of its largest forays into the U.S. multifamily market, a person with knowledge of the deal said. The biggest manager of private-equity real estate funds is acquiring the properties from General Electric Co.’s GE Capital unit, said the person, who asked not to be identified because the transaction isn’t public. GE has been paring its property holdings as part of a strategy to shrink its finance division.

London Whale Resurfaces in Potential U.S. JPMorgan Case (Bloomberg)
Bruno Iksil, the former JPMorgan Chase & Co. trader whose bets caused more than $6.2 billion in losses last year, is now central to any U.S. charges against his former colleagues. Iksil, the Frenchman who became known as the London Whale because of his trading book’s size, has been cooperating with the Federal Bureau of Investigation and the Manhattan U.S. Attorney’s Office for months in their probe of the New York-based bank’s biggest trading debacle ever, said three people with direct knowledge with the matter. Iksil won’t face charges as long as he cooperates and testifies, the people said.

Wall St. Debates Who Should Pay Legal Bills (DealBook)
In the case of Mr. Tourre, his lawyers reviewed the defense team’s plans with Goldman several times before the trial and Goldman sent a representative to watch the trial and take notes, these people said, though none said that Goldman sought to influence the strategy. Surprisingly, Goldman does not have a written contract with Mr. Tourre to support his defense, nor does the firm have insurance to pay such bills for its employees, these people said.

Revealed: Elon Musk Explains the Hyperloop, the Solar-Powered High-Speed Future of Inter-City Transportation (BW)
In Musk’s vision, the Hyperloop would transport people via aluminum pods enclosed inside of steel tubes. He describes the design as looking like a shotgun with the tubes running side by side for most of the journey and closing the loop at either end. These tubes would be mounted on columns 50 to 100 yards apart, and the pods inside would travel up to 800 miles per hour. Some of this Musk has hinted at before; he now adds that pods could ferry cars as well as people. “You just drive on, and the pod departs,” Musk told Bloomberg Businessweek in his first interview about the Hyperloop. … The critics of California’s high-speed rail may be dismayed to learn that Musk does not plan to commercialize the Hyperloop technology for the time being. He’s posting the plans and asking for feedback and contemplating building a prototype. “I’m just putting this out there as an open source design,” he says. “There are sure to be suggestions out there for making this better, correcting any mistakes, and refining the design.” Musk maintains that he has too much on his plate to deal with bringing the Hyperloop to fruition. “I wish I had not mentioned it,” he says. “I still have to run SpaceX and Tesla, and it’s fucking hard.”

Round Two of Spitzer vs. Stringer Was Just as Nasty (NYM)
The debate focused less on the comptroller’s duties, and more on character bashing (though their barbs still weren’t as nasty or personal as the Post’s average “Love Gov” cover). Stringer told the former governor he had to step down, “because you were under federal investigation, because you laundered money. And that’s the truth,” adding, “you just don’t know right from wrong.” “Mr. Stringer, you’re throwing terms around which you do not understand and where you misstate the facts, and I think you should be better than that,” Spitzer responded. “This campaign should be better than that.” … They split again when asked, “Is controller the most exciting job you think you’ll ever have?” Stringer gave an enthusiastic “Yes!” After a pause, Spitzer answered, “You know, I don’t think I can answer that question. It’s a very exciting job. I’ll leave it at that.”

Police: Man robbed bank after asking about negative balance (Bay News 9)
Police arrested a man they said robbed a Bank of America branch after asking the teller why he had a negative balance in his checking account. James Patrick Andrews, 43, entered the branch at 2335 34th Street North last Friday morning and tried to use his ATM card in the bank. When he learned there was no money in his account, police said, he approached a teller and asked her why. According to the arrest report, Andrews then passed a note to the teller demanding $1,000. He told her not to walk away from her window or press any alarm button or people in the lobby would be hurt. No weapon was implied or seen, police said. The teller complied, and Andrews left the bank with an undisclosed amount of money and got into a Hyundai Sonata driven by another man, the report said.

48 comments (hidden to protect delicate sensibilities)
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Comments (48)

  1. Posted by Wack Billman | August 13, 2013 at 8:13 AM

    My work here is done.

  2. Posted by David Guest | August 13, 2013 at 8:55 AM

    Paulson's an upright guy, but he lives in an ivory tower. Value and earnings are the keys no matter how he tries to spinet. To put it in black-and-white, this is not the time to be peddling luxury goods, and that will put a damper on his efforts.

  3. Posted by Guest | August 13, 2013 at 9:00 AM

    This weather blows. Where is my summer! I wants my summer!

  4. Posted by Guest | August 13, 2013 at 9:19 AM

    KKR Strategic Plan for Steinway & Sons

    1. Borrow money

    2. Pay dividend

    3. Borrow more money

    4. Pay another dividend

    5. Outsource production to Casio

    6. Sit down and try to figure out how a company that makes 2,500 pianos a year can justify a purchase price of nearly half a billion dollars

    7. Cross fingers and hope that markets go up so that the company can be unloaded onto the general public

    8. Find out another high quality, widely respected company that can be hollowed out (Allen Edmonds? Nordstrom?)

  5. Posted by Whoops | August 13, 2013 at 9:26 AM

    Now I have to pay $0.005 more per hyperloop trip thanks to Lloyd and his cronies!

  6. Posted by SMU Secure | August 13, 2013 at 9:33 AM

    Actually in NYC today and wouldn't you know it, it still smells like piss.

  7. Posted by Secure Yankee | August 13, 2013 at 9:43 AM

    Better than the repugnant smell of cow manure and broken dreams that permeates the air south of the Mason-Dixon Line.

  8. Posted by The Fixer | August 13, 2013 at 9:47 AM

    9. Profit

  9. Posted by Dr Snarf | August 13, 2013 at 9:49 AM

    No. Bad commenter. No!

  10. Posted by Guest | August 13, 2013 at 9:50 AM

    I note that if he wants to close the lid on this baby, he'll need to strike a chord with key board members, and that's really not his forte.

  11. Posted by Jon Corzine | August 13, 2013 at 9:54 AM

    Spitzer answered, “You know, I don’t think I can answer that question. It’s a very exciting job. I’ll leave it at that.”

    That's because the most exciting job he had was flogging escorts while being a Governor. I am sure most of us would take that job anyday.

  12. Posted by Im_a_Dude | August 13, 2013 at 9:59 AM

    that would be acid rain. piss is the stuff you're sitting in

  13. Posted by guest | August 13, 2013 at 10:20 AM

    Meet me at minettas…..tie yur steer to the parking meter so ill know yur there.

  14. Posted by Dustin O'hare | August 13, 2013 at 10:21 AM

    Oh gosh! So Sunday I heard Labella Bess was going to the beach so I went too. I thought maybe she digged surfers so I bought one and wanted to hang ten. Then I thought of a really bold idea. Get stung by a jellyfish and get Labella Bess to piss all over my leg. I know, I know this sounds gross, but I am desperate at this point for her love. So I get a jellyfish and it stings my leg, I cry for help, but I see Labella Bess is talking to two Associates from Jefferies. So this hippy chick comes running over and starts peeing on me. She pushes her pee so hard she queefs in my face. This causes her to blow a nervous fart in my face. The worst part is Labella Bess started watching after the nervous fart and all the attention the hippy was getting caused her to fire 8 more off in my face. I blacked out after that.

  15. Posted by Guest | August 13, 2013 at 10:25 AM

    I don't understand. What are you? Why would you call yourself a smu?

  16. Posted by Duke Snuke | August 13, 2013 at 10:31 AM

    Southern Methodist University is school in which every class has about a hand full of chicks whos dad are sitting on a fortune from oil. So dudes spend $60k a year to try and get with one when they have no chance of ever getting one on the old pontoon

  17. Posted by verts desk | August 13, 2013 at 10:33 AM

    It's the symbol for steinway music prefered 7.85% '18

    Some kinda mezz tranche bs…wouldn't fuck with it.

  18. Posted by Eliot | August 13, 2013 at 10:34 AM

    Maybe I should build a mid size investment bank out of an fcm.

  19. Posted by Glamour | August 13, 2013 at 10:38 AM

    Sounds like you got Labella Bess right where you want her Dusty

  20. Posted by impressed | August 13, 2013 at 10:41 AM

    *golf clap*

  21. Posted by guest | August 13, 2013 at 10:56 AM

    Mooring?… I think you mean mooping..

    – G. Costanza

  22. Posted by Guest | August 13, 2013 at 11:00 AM

    Why do you have a negative balance, Jimmy? Because you're broke. You're broke and you're doing drugs. That's why.

  23. Posted by Hobbes | August 13, 2013 at 11:19 AM

    American bank trades in Europe and makes money. European man trades for American bank and gets conviction.

    – Confucius Trader

  24. Posted by Guest | August 13, 2013 at 11:23 AM

    Serious question – how much are these pianos? Are they really $15,000 each?

  25. Posted by DaysOfYore | August 13, 2013 at 11:24 AM

    Please send back up. There's someone openly asking to acquire child pornography.

  26. Posted by Guest | August 13, 2013 at 11:27 AM

    Kohlberg & Co

  27. Posted by Dead_cat | August 13, 2013 at 11:30 AM

    Those 2,500 pianos are very expensive and very profitable. There are only a few manufacturers and really no-one to match Steinway at the top end for brand/quality. Also pianos wear out in <10 years, so the concert halls have to keep buying them.

    So it's a big cash cow. Possibly with built up demand if people have been holding off making that major outlay during the recession. And if you can boost margins by some nefarious PE tricks, you're laughing. (Outsourcing manufacture probably a bad idea: lose the quality/cache, lose the prestige, the margin and the share.)

    So actually I think these guys may be onto something.

  28. Posted by HotKarl | August 13, 2013 at 11:36 AM

    The name says Dustin O'hare but all I can think about is Buffalo Bill from Silence of the Lambs

  29. Posted by Guest | August 13, 2013 at 11:40 AM

    German guy walks into a bar and asks "what' a Steinway"
    Nobody can answer. He says, "it depends on the size of the stone"

  30. Posted by Dead_cat | August 13, 2013 at 11:45 AM

    A basic have-at-home Steinway grand is about $60,000-70,000. A concert grand is more like $180,000. And a piano is not like a violin that can last 200+ years. 10 years is really it.

    I'm guessing Paulson figured this was the only way of getting Steinway to make his fancy lady the pink diamante grand she insists on before he gets at the chocolate box.

  31. Posted by entry year CFA | August 13, 2013 at 12:06 PM

    $60k/year for .001% chance of a billion fortune – these guys are onto something…

  32. Posted by interested | August 13, 2013 at 12:11 PM

    Did you black out from the pain, the farts or from horrible storytelling?

  33. Posted by Laxbro | August 13, 2013 at 12:14 PM

    Those cocky trust fund slams won't talk to you unless you're in a top tier frat and push a '13 Tahoe LTZ or Ford F-150 Raptor.

  34. Posted by Guest | August 13, 2013 at 12:20 PM

    They had better be very expensive and very profitable. Would you pay a million dollars for a company that makes five pianos a year?

    I frankly don't trust genius business types around luxury brands. If they are interested in buying Steinway, they obviously have some "improvements" in mind, which will inevitably have a negative impact on quality, because there is no way a bunch of Ivy League grads understand producing quality pianos better than Steinway does. The best thing they can do to Steinway is leave it alone, but there isn't anything that works so well that a private equity firm doesn't think they can improve it.

    I can easily see Steinway going the direction of Polo Ralph Lauren under the control of its new visionaries: trying to hit multiple price points, but ending up losing the high end and having to fight with mass manufacturers over the low end.

  35. Posted by Laxbro | August 13, 2013 at 12:26 PM

    Not so subtle Vineyard Vines trolling. Please moderate.

  36. Posted by Guest | August 13, 2013 at 12:47 PM

    9. Capital gains

  37. Posted by Eliot | August 13, 2013 at 12:49 PM

    POLO. Hasn't exactly underperformed.

  38. Posted by Shazared | August 13, 2013 at 1:00 PM

    Similarly, the Paulson bid for Steinway confirms the timeless logic of Confucius: foolish man give wife grand piano. Wise man give wife upright organ.

  39. Posted by Laxbro | August 13, 2013 at 1:14 PM

    Polo was last wearable in like 8th grade. Poors took that shit over.

  40. Posted by guestie | August 13, 2013 at 1:17 PM

    I don't know where you're getting your info from, but pianos last a bit more than 10 years. Especially Steinways.

  41. Posted by Lloyd Christmas | August 13, 2013 at 2:03 PM

    So you're telling me there's a chance.

  42. Posted by Guest | August 13, 2013 at 2:10 PM

    Holy fuck. Noted for when I have kids.

  43. Posted by truth.org | August 13, 2013 at 3:07 PM

    Here's a tip: don't have kids.

    – guy with kids

  44. Posted by Confused | August 13, 2013 at 3:16 PM

    Let me get this straight: Jelly fish stings your leg. Hippy chick pees on your leg, but she's close enough to your face to "queef" and fart in your face? I gotta tell you, that was no queef. And that is no chick.

  45. Posted by The Sword | August 13, 2013 at 3:22 PM

    Continuing Paulson's stunning reversal of fortune, the world's musicians have, after centuries, abandoned the piano in droves in favor of other instruments. Steinway stock hits a new low of $4.50/share.

  46. Posted by NY Dep of Sanitation | August 13, 2013 at 4:04 PM

    stop bending over; it is not the city.

  47. Posted by Dead_cat | August 15, 2013 at 5:18 AM

    Well fair enough, not everyone replaces after that. But for professionally-played pianos it's about 10 years. For the big concert halls, probably less. You can keep them for longer, e.g. for personal use, they just lose quality past a point where maintenance can get it back.

    Of course you can buy a perfectly decent upright for $5-7k. Or a really good electric for less (not quite the same but better if you live in an apartment and have neighbours). You wouldn't buy your kids a Steinway to learn on any more than you'd buy them a Strad to learn violin.

  48. Posted by masini curse | March 11, 2014 at 3:07 PM

    Hyundai Motor Co wants to commence providing its own first battery-powered electric vehicle (EV) in 2016 when South Korea's champion of fuel-cell cars and trucks hedges its bets in next-generation green technology. Hyundai has leant toward engines which make hydrogen into electricity in response to stricter pollutants restrictions in areas like the Us. Analysis and development partner Kia Motors Corp has focused on rechargeable battery power. Nevertheless the sector of effort is blurring at the same time whenever the quantity of battery-powered EVs is increasing. BMW's i3 as well as Nissan Motor Co Ltd's Leaf are extensively required to attain Korea this season – as will certainly Kia's Soul EV. "There is little very clear route about which earth-friendly cars will certainly get. We have been dividing roles of Hyundai and Kia, with Hyundai starting energy cell cars and Kia working on electrical automobiles," Senior Vice Managing director Lee Ki-sang notified reporters on Tuesday.