Opening Bell: 04.29.14

Deutsche Bank Profit Slides 34% on Debt Trading Slump (Bloomberg)
Net income dropped 34 percent to 1.08 billion euros ($1.5 billion) in the three months through March from a year earlier, the Frankfurt-based company said in a statement on its website today. That compared with the 1.01 billion-euro average of 10 analyst estimates compiled by Bloomberg. Revenue from trading fixed income, currencies and commodities fell 10 percent to 2.43 billion euros, beating the 2.12 billion euros average of nine estimates.

Herbalife plays hardball with buybacks (NYP)
Herbalife, the controversial nutritional supplements company, is pulling out all the stops to buy back its shares as the cost of its battle with activist Bill Ackman and multiple regulators continues to mount. While reporting record quarterly “adjusted” earnings on Monday, the company said it has abolished its $1.20 a share annual dividend and will instead plow that cash into a stock buyback plan. The plan allows it to more aggressively repurchase stock even in the face of civil and criminal investigations regarding allegations it is a pyramid scheme…The implementation of a special trading plan allows the Los Angeles company to buy back stock under a pre-arranged program even if it is in the possession of material nonpublic information and would normally be prohibited from trading. Herbalife has been aggressively buying back stock under the plan, spending $255 million in April, it said. Another $60 million will be spent in the next two days. Herbalife spent $685.8 million of a $1.1 billion convert offering in February to buy back shares, boosting its long-term debt to $1.85 billion.

Disney Considered Buying BuzzFeed, but Balked at $1 Billion Price (Dealbook)
As part of a routine effort to identify acquisition targets, Disney last year zeroed in on BuzzFeed, the fast-growing digital media company, but Disney’s interest quickly dissipated when BuzzFeed valued itself at nearly $1 billion, according to a person with direct knowledge of the talks.

Bitcoin traders settle class actions over failed Mt Gox exchange (Reuters)
The class action plaintiffs agreed to support a plan by Sunlot Holdings to buy the shuttered exchange and accept their share of bitcoins still held by Mt. Gox, according to a statement and court filings. Mt. Gox filed for bankruptcy in Japan and the United States earlier this year after saying it lost some 850,000 bitcoins – worth more than $400 million – in a hacking attack. It subsequently said it found 200,000 bit coins.

Man Who Allegedly Robbed Store With Potato Apprehended By Cops (HP)
…34-year-old Gary Deming of Cranston was arrested on robbery charges. Authorities say he pretended he had a gun when he demanded money from a convenience store and dry cleaner April 21. The convenience store manager chased him off with a baseball bat. A dry cleaner employee gave him a fake $20 from a decoy register. The station reports Deming is also accused of breaking into his sister’s home on the same day as the alleged potato incidents. She told police he took a purse, debit card and $100 in cash.

How Bank of America Botched Some Basic Accounting (BusinessWeek)
The mistake was buried in a complicated jumble of financial machinery that the bank inherited when it bought Merrill Lynch in 2009. The glitch involved structured notes, hybrid products in which an underlying debt obligation fluctuates based on something entirely separate. Imagine a loan whose payout rests on whether Facebook (FB) shares fall by 20 percent. What’s interesting is that Bank of America did not appear to have fouled up its accounting on esoteric bets that were in play—so-called “unrealized” notes—in an error that might have been somewhat understandable. It appears the bank just overlooked a batch of these products that had run their course and ended up as a loss.

Buy a stake in your favorite football player (CNBC)
Fantex, a brokerage based in San Francisco, offered 421,000 shares of San Francisco 49ers’ star tight end Vernon Davis to the public Monday, making him the first-ever publicly traded athlete. Davis’ “initial public offering” was priced at $10 per share, and at mid-afternoon was up 10% on volume of 101 shares. In exchange for $4 million upfront, Davis agreed to sign over 10 percent of his future earnings to Fantex. As those earnings grow from contracts, endorsements and other “brand” income sources, investors receive dividends, the brokerage’s co-founder and CEO, Buck French, told CNBC on Monday…Houston Texans running back Arian Foster also signed with Fantex and had an IPO scheduled for last year, before his season-ending back surgery postponed the offering. French said Buffalo Bills quarterback EJ Manuel also agreed to sell shares of his future earnings on Fantex’s exchange.

Hedge Funds Get Aussie Bets Wrong Second Time (Bloomberg)
Commodity Futures Trading Commission data show the most-bullish six-week change to Aussie positions in more than 1 1/2 years over the period to April 22, just in time to catch a slump that made the local dollar the past week’s worst performer among 10 currencies tracked by Bloomberg Correlation Weighted Indexes. Earlier this year, futures traders were forced to abandon near record bets on declines when the Aussie rallied from the 3 1/2-year low reached on Jan. 24.

Supreme Court to decide if law forbidding destruction of financial records applies to fish (WaPo)
The court accepted the case of John L. Yates, who was convicted under the Sarbanes-Oxley law passed by Congress in response to a series of financial and accounting scandals at Enron and other major corporations. The law in part prohibits destruction of “any document, record or tangible object” meant to impede a federal investigation, and the government said the diminutive red grouper that Yates disposed of met the definition of “tangible object.” The National Association of Criminal Defense Lawyers was among the groups urging the justices to examine Yates’s case as an example of what the group calls “overcriminalization” of petty offenses. “Application of an ­anti-shredding statute to three rotten fish is an unconstitutional expansion of the law and a violation of statutory construction,” the association said in an amicus brief. Yates was a commercial captain operating out of Cortez, Fla., in 2007 when a Florida fish and wildlife officer boarded his boat, the Miss Katie, in federal waters. Officer John Jones suspected some of the 3,000 fish in Yates’s catch were smaller than the 20-inch minimum required at the time for red grouper. Jones found 72 that he said were too small — there’s a dispute about whether they should have been measured with mouths open or closed, but that doesn’t matter to the Supreme Court case. Jones issued Yates a citation and told him to set the fish aside as evidence when he returned to port. But four days later, there were only 69 fish in the crate. Jones suspected that he was looking at different fish. A crew member later testified that some of the fish were thrown overboard and replaced with fish closer to the required size. A jury convicted Yates of destroying evidence, and the U.S. Court of Appeals for the 11th Circuit upheld the conviction.

8 comments (hidden to protect delicate sensibilities)
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Comments (8)

  1. Posted by Captain Oblivious | April 29, 2014 at 8:53 AM

    In other news, DB will close said group as we come closer to having no fixed income or commodity trading anywhere except GS

  2. Posted by D. Sterling | April 29, 2014 at 9:43 AM

    Wait, you mean I'm allowed to sell my players?

  3. Posted by Jeff Mackerel | April 29, 2014 at 9:56 AM

    It's not the size of the fish but the motion of the ocean that spoils a barrel.

  4. Posted by HotKarl | April 29, 2014 at 10:16 AM

    Not since Elena Kagan forgot to wear underwear under her black robe during the Citizens United hearing has the topic of 'fish' come up during Supreme Court oral arguments.

  5. Posted by Guest | April 29, 2014 at 10:47 AM

    *Rotten fish.

  6. Posted by Guest | April 29, 2014 at 11:02 AM

    "It appears the bank just overlooked a batch of these products that had run their course and ended up as a loss."

    So this is a mea culpa as opposed to outright fraud? Got to hand it to BoA for getting away with it. Whatever happened to 3 sources of prices?

  7. Posted by James Gorman | April 29, 2014 at 12:50 PM

    Hey!

  8. Posted by Guest | April 30, 2014 at 1:43 AM

    That's a Shazar comment on a Levine topic. Go read Matt's post on this topic at Bloomberg, then take a fucking lap, then see if you understand this one a little better. Sources of prices aren't applicable at all here, the underlying screw-up is a mistake in bridging from GAAP accounting to regulatory capital accounting.