Opening Bell: 02.27.14

Bitcoin Foundation Aided Prosecutor’s Probe of Mt. Gox (Bloomberg)
The Bitcoin Foundation, an advocacy group for the nascent digital currency, provided information to federal prosecutors this week that aided a probe into Mt. Gox, a shuttered exchange in Tokyo. “The Bitcoin Foundation proactively reached out to the Southern District of New York to offer assistance,” the Seattle-based organization said in an e-mailed statement yesterday. “We are continuing to help them and we are cooperating fully with their investigation.” Shortly after Mt. Gox’s chief executive officer, Mark Karpeles, resigned from the foundation’s board on Feb. 24, the organization briefed the Manhattan U.S. Attorney’s office with information about the possible theft of as much as $400 million from the Bitcoin exchange, according to two people familiar with the effort. They requested anonymity because the talks were private.

Some Companies Alter the Bonus Playbook (WSJ)
U.S. companies increasingly are using unconventional earnings measures in determining bonuses, making it easier for them to appear more profitable when they reward executives with big paydays. Last year, 542 companies said they determine compensation using financial measurements that differ from U.S. accounting standards, according to an analysis performed by consultant Audit Analytics for The Wall Street Journal. That is more than double the 249 companies that did so in 2009. The practice can be controversial because it strips out various costs—from employee stock payments to asset write-downs—that can depress profits. Such moves are on the rise at a time when the Securities and Exchange Commission has said it is scrutinizing nonstandard earnings measures. The commission declined to comment on their use in executive-pay decisions. “Everything you can think of to manipulate this has been done,” said Gary Hewitt, head of research at GMI Ratings, a corporate-governance research firm.

Is Wall Street Pay Hampering U.S. Innovation? (BusinessWeek)
…venture capitalist Andrew Yang is here with yet another critique of the fact that a disproportionate number of college graduates are squandering their hard-earned educations on Wall Street careers. “A friend told me about a young Princeton graduate she knew named Cole. Cole studied mathematics and went to work for a hedge fund directly out of school. He’s now making well into six figures at the age of 24. That’s his whole story to date,” Yang writes in an excerpt from his book, Smart People Should Build Things. “That’s success and the American way. And yet how excited are you about Cole’s trajectory?” Yang argues that our idea of achievement has become far too narrow and materialistic. It is hurting the economy by taking math, science, and liberal arts graduates away from fields where they might invent and build and hire people at new companies they found and concentrating them in the financial sector, where they aren’t likely to contribute to future economic growth. He asserts that many of the most highly educated young people are also some of the most risk-averse, overly concerned about predictable career advancement and impressing their parents and friends.

Corporate Economists Are Hot Again (WSJ)
Many companies had corporate economists on staff in the volatile 1970s and ’80s, but dropped them when the U.S. economy was steady and strong. Information from government agencies, such as industrial output from the Federal Reserve, was plentiful, along with research from private consultants, including Macroeconomic Advisers LLC in St. Louis and IHS Global Insight of Englewood, Colo. “The reaction in the corporate world was: ‘I can get my average GDP forecasts from anybody. Why do I need an economist in my shop?’ ” said Ellen Hughes-Cromwick, chief economist for Ford Motor Co. The key to the revival of in-house economists, companies and economists say, is the need to digest huge amounts of data—from production volumes in overseas markets to laptop usage in urban areas—to determine opportunities and risks for companies’ business units, not just in the U.S. but around the world…Richard DeKaser, a vice president and corporate economist at Wells Fargo, leads a team of eight people, including six economists, who standardize the models and data used to measure risk in different business units, such as mortgage lending and credit cards. Previously, one unit might base unemployment figures on payroll data, while another would use household surveys. Doing so undermined the accuracy of tests to measure risks for losses and contributed to mistakes in business planning. “The great recession laid bare a lot of fundamental mistakes that an economist can be useful in preventing,” said Mr. DeKaser, who was previously chief economist for National City Bank.

Suspect: I didn’t know cocaine is illegal (KIN)
A Key West man was jailed Sunday for alleging trying to ditch a bag of cocaine in a planter at the Pier House Resort at 1 Duval St. in Key West. Guy Lanchester, 46, reportedly told Officer Darnell Sealy he didn’t know why he was being arrested: “I don’t understand. I thought cocaine wasn’t illegal in Florida.” Sealy arrested Lanchester about 2 a.m. following a call from a Pier House security guard who saw Lanchester and two others walk onto the property, then heard a scream. In addition to cocaine possession, Lanchester is charged with felony tampering with evidence. Sealy describes the second charge: “I asked Lanchester what he had in his hand and Lanchester quickly shoved his hands into the flower pot and yanked them back out.”

Funds underperform, but hedge fund kings rake in $24.3 billion (NYP)
George Soros, the 83-year-old retired hedgie superstar whose fund has been around for 40 years, and who is now managing his family’s wealth, earned $4 billion — matching the record-high earnings that David Tepper, of Appaloosa Management, took home in 2009. And speaking of Tepper, the 56-year-old investor earned $3.5 billion in 2013, which comes out to roughly $1.5 million an hour based on a 50-hour workweek and four weeks of vacation. Since Soros is retired, he makes money just breathing — about $457,000 every hour he is alive.

The Fraud Behind a $14 Million Whistleblower Award (WSJ)
The case that led to the $14 million-plus payment centers on allegations last year that about 250 investors, mostly Chinese, were “duped” by 30-year-old Anshoo R. Sethi and his two Chicago, Ill.-based companies into paying a total of more than $155 million for a supposed plan to build a hotel and conference center, said the people familiar with the matter. The SEC said the investors were led to believe they were boosting their chances of green cards, because the scheme was designed to qualify for an immigration program that offers U.S. residency for job-creating investments. In fact, the agency alleged, Mr. Sethi and his companies lacked the necessary building permits, their claims to have the support of major hotel chains were false and the documentation they gave to the immigration authorities was “phony.” A lawyer representing Mr. Sethi and his companies declined to comment, and an SEC spokesman declined to comment on the award…The award is by far the biggest arising from a 2010 law designed in part to encourage tipsters to come forward with information about financial fraud. The SEC announced the payment in October without naming the whistleblower or the case, as the law gives tipsters the option to remain anonymous.

JPMorgan Chase Moves to Brooklyn (BusinessWeek)
..the country’s largest bank by assets is planning to relocate employees from its 60-story Manhattan tower 1 Chase Manhattan Plaza to Brooklyn’s MetroTech Center, after reviewing its real estate portfolio with an eye toward cutting expenses.

Bank of America disputes $2.1 billion claim in U.S. fraud suit (Reuters)
Bank of America said it does not owe the U.S. government the $2.1 billion it is seeking in penalties after a jury found the bank liable for fraud over defective mortgages sold by its Countrywide unit, according to a court filing made on Wednesday. Lawyers for the bank said the government’s request “contradicts every pertinent legal principle” and called it a “dramatic departure from reality,” the filing stated. Bank of America said in the filing that it should only have to pay the amount it made in profit from selling the loans, which it contended was zero.

Sean Avery joining ‘Dancing With the Stars’ (NYP)
The former Rangers star has been spotted working out in preparation for the show at the New York studio of Gwyneth Paltrow’s trainer Tracy Anderson. The move will be Avery’s latest career change after working at high-fashion ad agency Lipman, which ran out of cash and closed last year. Sources said the former NHL stud recently posted a video of himself online showing off some Anderson-inspired dance moves to Katy Perry’s “Dark Horse,” but the video was taken down.

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Comments (60)

  1. Posted by Quant me maybe... | February 27, 2014 at 7:26 AM

    Sean Avery joining ‘Dancing With the Stars’…..

    >The only way anyone who reads this blog will care about this is if the Sports Illustrated swimsuit models were to dance naked. With each other. While kissing. And maybe a pole is involved.

  2. Posted by Guest | February 27, 2014 at 7:52 AM

    Matt didn't have this in the opening bell.

  3. Posted by Guest | February 27, 2014 at 8:29 AM

    $1,500,000 /hour… $416 every one Mississippi.

  4. Posted by KingCo | February 27, 2014 at 8:35 AM

    Yang argues that our idea of achievement has become far too narrow and materialistic. It is hurting the economy by taking math, science, and liberal arts graduates away from fields where they might invent and build and hire people at new companies they found and concentrating them in the financial sector, where they aren’t likely to contribute to future economic growth.

    Translation: They should become insufferable Silicon Valley douches like me.

  5. Posted by guest | February 27, 2014 at 8:50 AM

    what it really boils down to is:

    engineer douches vs. excel douches

  6. Posted by Just sayin' | February 27, 2014 at 8:56 AM

    He does have a point though.

  7. Posted by Guest | February 27, 2014 at 9:10 AM

    Let's not lump in actual engineers with code monkeys.

    – Engineering graduate, has never engineered anything

  8. Posted by Guest | February 27, 2014 at 9:12 AM

    Not exactly the biggest fan of Leveraged Sellout but thought this was spot on
    http://www.leveragedsellout.com/2014/02/the-book-

    - Former WSO commentator who didn't understand the concept of parody as an undergrad

  9. Posted by Bored Guest | February 27, 2014 at 9:19 AM

    Are you accounting for coffee and bathroom breaks?

  10. Posted by Short, But Long | February 27, 2014 at 9:30 AM

    Not exactly the biggest fan of following links people post in comments, but I have to agree. Thanks for the article… and FUYC, stop screwing up my friends lives.

  11. Posted by Guester | February 27, 2014 at 9:32 AM

    That must be how Gerorge can afford that fancy blush he wears around his eyes.

  12. Posted by I'm not funny. | February 27, 2014 at 9:32 AM

    So on this whole bottomless brunch thing, will il Bastardo now be going out of business? That place is great for bottomless brunch! Techno beats, and dancing on your seats!

  13. Posted by Guest | February 27, 2014 at 9:47 AM

    There's a face only fist could love.

    -A.Ferreyr

  14. Posted by Quant me maybe ... | February 27, 2014 at 9:48 AM

    One could actually argue that Silicon Valley is the greatest factor in the decimation of the middle class and concentration of wealth in the history of the Republic. They are the ones that automate that which was done by actual people. From robots that weld cars together to computers that replaced your secretary, travel agent, dj at your local radio station, floor trader and on and on and on….

    >Guy who spent quite a few years out there and thinks perhaps there is more than a little selective blindness going on.

  15. Posted by guest | February 27, 2014 at 10:08 AM

    Last time I saw a mouth like that it had a hook in it.

    -chazzy dangerino

  16. Posted by Common Fucking Sense | February 27, 2014 at 10:12 AM

    Why does every twat in finance think that some stereotypical Silicon Valley chotchikie peddler is the only thing out there working "innovation"?

  17. Posted by Anyone with a brain | February 27, 2014 at 10:18 AM

    It's a part of the problem but I'm thinking that adherance to trickle down economics is a far bigger factor. Maximizing shareholder value =/= good corporate governance. Given there's no USSR around to use as propoganda leverage, maybe the middle class will strap a sack on and argue for their share of the profits they help to create. The argument goes something like this:

    "FUCK YOU, PAY ME"

  18. Posted by Guest | February 27, 2014 at 10:19 AM

    1. It's only the smug Silicon Valley douches out there whining about this.
    Other "innovators" simply get on with it.

    2. It's spelled tchotchke. You can go back to your pastrami on white now.

  19. Posted by DC Pimpin | February 27, 2014 at 10:23 AM

    That's probably racist if I can spin it right.

    - H1B Lobbyist

  20. Posted by Immigration lobby | February 27, 2014 at 10:25 AM

    We'll just flood the zone.

  21. Posted by The Rackets | February 27, 2014 at 10:27 AM

    *Note* Hedge funds are not finance. Brokerage and Sales Trading are not finance.

  22. Posted by Downvoted | February 27, 2014 at 10:37 AM

    There are entirely too many rational and level-minded posts in this comments section. Needs more slams and rants about horizontal-striped shirts.

  23. Posted by Guest | February 27, 2014 at 10:47 AM

    u yellen at us?

  24. Posted by 00's | February 27, 2014 at 10:47 AM

    What ever happened to the striped shirt guys untucked ?

  25. Posted by Single in FiDi | February 27, 2014 at 10:49 AM

    "Let's put a smile on that face!" – Soros pic

  26. Posted by Pant Bugle | February 27, 2014 at 10:51 AM

    I'm not Bill O'Reilly!! You start and SMART TALK with ME, and I will END IT!! I didn't go to your hasty pudding, "Let's all dress up like girls" school! I grew up on the streets of SYDNEY!! And no matter where I am in the studio-o-o-o.. I'm never more than fi-i-ve seconds away from a gu-u-unn!

  27. Posted by Danny Werfel | February 27, 2014 at 11:02 AM

    Step it up guys. Step it up. You can do better. I know you can. I have seen it.

  28. Posted by Woodruff | February 27, 2014 at 11:11 AM

    …" You gotta purty mouth aintcha "

  29. Posted by Guest | February 27, 2014 at 11:19 AM

    “The great recession laid bare a lot of fundamental mistakes that an economist can be useful in preventing”

    Word.

    - Former Lehman Chief Economist

  30. Posted by Alan Greenspan | February 27, 2014 at 11:23 AM

    Heard that.

  31. Posted by Hobbes | February 27, 2014 at 11:26 AM

    Isn't a VC moaning about Wall Street types the same as the pot calling the kettle black?

  32. Posted by Rebecca M. | February 27, 2014 at 11:32 AM

    Yes, it's such a new revelation that the best and brightest go to work on WS. We all know getting paid $50k out of college is far more rewarding than $350k.

  33. Posted by Rebecca M. | February 27, 2014 at 11:37 AM

    Rebuttal: Hey look! Sean Avery is on Dancing with the Stars!

  34. Posted by Rebecca M. | February 27, 2014 at 11:38 AM

    Photo Caption: It's the girth that makes her feel feel like she's giving birth.

  35. Posted by Guest | February 27, 2014 at 11:39 AM

    As if Silicon Valley is the only alternative; what about scientists, engineers, doctors, professors, etc?

    The bottom line is that these other professions pay shit and all the talent is going to Wall Street to make bank. Do you want some nerd going to Wall Street to make his first million, get laid and develop a coke habit or do you want him to invent the cure for cancer?

  36. Posted by Guest | February 27, 2014 at 11:58 AM

    He's just fed up

  37. Posted by Quant me maybe... | February 27, 2014 at 12:13 PM

    You really think said nerd can get laid in NYC?

    >Because the women, all old fat and mean, in Fairfield County have standards that just $1MM aren't going to overcome.

  38. Posted by Quant me maybe... | February 27, 2014 at 12:16 PM

    Isn't finance a bunch of monkeys calculating net present value on projects that management doesn't want to fund?

    >Guy whose only exposure people who call themselves finance guys is precisely that.

  39. Posted by Guest | February 27, 2014 at 12:28 PM

    Ya because $$$ in Wall Street magically appears, it's not like they have to earn that money from businesses that use their services and can afford those fees.

  40. Posted by truthdotorg | February 27, 2014 at 12:29 PM

    I love towns and cities that want to become "tech hubs." They do realize successful tech companies = hyper-lean staffs and eight and nine-figure valuations, right?

  41. Posted by Single in FiDi | February 27, 2014 at 12:30 PM

    You forgot pin-striped deal team shirts, suspenders, and cigars

  42. Posted by Guest | February 27, 2014 at 12:53 PM

    Clearly you have not (yet) seen one of your peers/classmates who pursued tech/engineering land an 8 figure payday on stock options. (On which he or she paid 20% in capital gains taxes, not 50% in combined fed/state/NYC income taxes).

  43. Posted by P. Gibbons | February 27, 2014 at 12:58 PM

    Whatever. As long as it isn't Flingers.

  44. Posted by St. Copious | February 27, 2014 at 1:00 PM

    Who's the idiot – me or the NYPost? George Soros "made" $4 billion managing his own money? Who paid him?

  45. Posted by gues | February 27, 2014 at 1:12 PM

    Huh?

    IRC section 83(b)

  46. Posted by Quant me maybe... | February 27, 2014 at 1:26 PM

    I have experience with this stuff and am feeling like sharing but this never goes well….

    Engineers are a bunch of retards when it comes to money. That's why they have to make so much on and IPO — they don't know what or how to deal with it so they misplace alot. Let me explain:

    Many many moons ago i graduated from college and went to the promised land of the left coast to do software and to do circuits and many of my startup buddies has done this before. Get someone to babysit your money they said. I forgot to tell my buddy.

    My best friend went to Boston to do software. Now the company he went to work at was called Broadvision and it did the ipo thing in like '94 or '95 — just before the dot com craze really hit. In short order the stock went from something like $8 to about $100. It did a x3 split, then another x3 split and finally another — so he and most of the early devs were sitting on about a gazillion options at around $120/share with a basis price of next to nothing. Because of the odd tie-up on options they vested over a 3 year period starting something like 3 years after the hire date.

    One of the rocket scientists figured out that he could exercise his options, somehow not pay taxes right away and get physical shares. After all they were going up at a rate of about 10% per month so why diversify?

    He shared this with his little fucktard coding buddies in around '99 and they all followed suit. Now, when Broadvision went down, it went down fast — like $120 to $4 in 3 months. Sooo… Actual gain of something like $10MM to $15MM per engineer. Each holding stock worth less than $1MM and no taxes paid. Uncle Sam then came to collect and bankruptcy doesn't wipe out the tax bill. The typical early stage hire owed the IRS something like $3MM to $4MM and was unemployed.

    To the best of my knowledge, they are still paying that tab.

  47. Posted by Guest | February 27, 2014 at 1:29 PM

    What's worse, Silicon Valley douche or Wall Street douche?

    Looking for an objective point of view here. SMU Secure, GOT, thoughts?

  48. Posted by Quant me maybe ... | February 27, 2014 at 1:46 PM

    Counterparties?

  49. Posted by Rebecca M. | February 27, 2014 at 2:12 PM

    I bet his CEO paid him!

    -M. Waters

  50. Posted by M Bloomberg | February 27, 2014 at 2:15 PM

    No.

  51. Posted by Quant me maybe ... | February 27, 2014 at 2:18 PM

    Having worked in both places I can say definitively that the Silicon Valley douche is in a class of douchebaggery that no Wall Streeter ever even knows how to aspire to.

    1. The Silicon Valley douce thinks he's making the world better. The Wall Street douche knows he's just making his bonus better.

    2. The Silicon Valley douche is surprised by and doesn't know how to handle the knife fight that occurs when the startup takes off and the principals fight for control. The Wall Street douche knows this is how it is done.

    3. The Silicon Valley douche goes to Vietnam for vietnamese food. The Wall Street douche just goes down the street.

    4. The Silicon Valley douche funds his buddies at $20k to $30k a pop doing some inane startup thing. The wall street douche spends that a month on hookers, or if he's married, his wife's shoe collection.

    5. The Silicon Valley douche takes drugs so he (and it's pretty much always he), never has to sleep because coding is his life. The Wall Street douche takes drugs to forget that he hasn't slept in 3 days because power point/ excel is his life.

  52. Posted by Guest | February 27, 2014 at 2:18 PM

    I know this cat who was one of the first employees at a tech company around the same time, had a ton of options and made a shitload on paper. Didn't cash or hedge a cent of it and ended up losing pretty much all of it. Not bankruptcy bad, but still a pretty terrible story.

  53. Posted by Guest | February 27, 2014 at 2:23 PM

    His investors paid him

  54. Posted by Douche bigalow | February 27, 2014 at 2:23 PM

    You apparently haven't spent any amount of time on wallstreetoasis, or as I like to call it "prestige whoring central"

  55. Posted by Guest | February 27, 2014 at 2:23 PM

    Or creating

  56. Posted by wolf of YOUR MOM | February 27, 2014 at 2:25 PM

    Suck my balls

  57. Posted by Guestrophic | February 27, 2014 at 2:34 PM

    What an extremely idiosyncratic example to demonstrate such a broad point.

  58. Posted by Rebecca M. | February 27, 2014 at 2:40 PM

    BB Banks:Pimps::Buisnesses:Hookers

  59. Posted by WSO | February 27, 2014 at 2:44 PM

    Bro, so hilarious. Any more blog-sourced cliches you wanna share from your Mom's couch?

  60. Posted by SausageOfDoom | February 27, 2014 at 7:17 PM

    Sergey Brin and Larry Page have a slightly different story to tell.