Opening Bell: 08.18.14

Credit Suisse Caught Up in Espírito Santo Mess (WSJ)
The Swiss bank was responsible for putting together securities that were issued by offshore investment vehicles and then sold to retail customers of Portugal’s Banco Espírito Santo SA. Many customers didn’t realize that these vehicles were loaded with debt issued by various Espírito Santo companies and apparently served as a mechanism to finance the family-controlled empire, according to corporate filings and people familiar with Portugal’s investigation into the Espírito Santo affair. It is unclear what, if any, direct role Credit Suisse had in selling the securities to bank customers. Now those investment products are at the center of an unfolding scandal. Banco Espírito Santo was bailed out and broken up this month. Other parts of the Espírito Santo group have filed for bankruptcy amid alleged fraud and accounting problems. In addition to sinking the Portuguese stock market, the episode has undermined confidence in the European banking sector, analysts say.

Citibank could lose Argentina banking license (NYP)
If the banking giant obeys a US judge’s order and doesn’t pay out on tens of million of dollars bonds issued in Argentina under the laws of that country, it risks losing its banking license there — and the $2 billion it has in local deposits. But if it follows Argentine law and pays out on the bonds, it risks violating a US federal court order. Citi finds itself in the precarious position on Monday after Manhattan federal court judge Thomas Griesa, who is overseeing the bitter battle between hedge fund mogul Paul Singer and Argentina over $3 billion due on bonds defaulted upon in 2001, ordered the bank not to pay out on some of the country’s locally-issued bonds. Griesa initially exempted Citi’s Argentine law bonds from his sweeping order stopping payouts to exchange bondholders unless Argentina also paid Singer and other holdout bondholders who won the right to receive full payment. But Griesa changed his mind about Citi last month after Singer’s lawyers pointed out that some of the bonds for which Citi is custodian were also exchange bonds. Argentina missed a July 30 deadline to pay the Singer group, throwing it into a technical default on $15 billion of debt. That money is being held by Bank of New York Mellon. Citi has until Sept. 30 to fall in line, and the bank’s appeal was fast-tracked last week. But Citi is feeling pressure from both sides of the legal spat, its lawyers argue.

Dollar General Makes $9.7 Billion Family Dollar Counterbid (Bloomberg)
Dollar General plans to pay $78.50 a share in cash, compared with Dollar Tree’s bid of $74.50 a share in cash and stock, according to a statement today. The deal will generate $550 million to $600 million in cost savings annually three years after its completion, Dollar General said.

Power napping is no sleepy business (NYP)
In the city that never sleeps, there’s big bucks in napping. YeloCab can help you while away the lazy days of August for a metered fare of $1 per minute. And for all those zzzzzs there’s roughly $1 million in revenue for the power nap, day spa company. YeloSpa, home of the YeloCab sleeping cabin, is located in the Columbus Circle area. Each cabin has computer-controlled ambient lighting to lull you into your power nap, and, after the maximum stay of 40 minutes, to gently and naturally wake you, leaving you refreshed and set to resume your activities with more energy.

Hedge funds lusting to cash out of MGM (NYP)
The hedge funds benefiting from the turnaround at Metro-Goldwyn-Mayer still like the movie business, but an increasing number of them like the idea of cashing out even more. “We are definitely in the seventh inning of this investment,” says Steven Azarbad, the Chief Investment Officer at New York based Maglan Capital. “I and many others would really like a transaction.” Odds are they’ll get it — and soon. For one thing, interest in content of the sort created and stockpiled by the legendary studio has never been greater. Upstarts like Netflix and Amazon raised demand for movies and TV shows several notches when their video streaming services took off a few years ago.

Man Loses License Over 33 Year-Old Ticket (KATU)
A Portland man is trying to figure out how he ended up with an invalid license over a ticket from 1981. Kevin Berry said he was pulled over in Milwaukie at the beginning of August for a possible speeding ticket. He said he did not get a ticket for speeding, but was surprised to hear the officer say his license was not valid as of July 17. He said he checked with the Department of Motor Vehicles and was told that his license had been suspended after a ticket in 1981. “I think it’s crazy,” said Berry, who said he has been renewing his license faithfully and legally for decades. Berry contacted KATU for help finding answers. “I don’t remember anything like that. If my license had been suspended, I definitely would have taken care of that,” said Berry. “Sometimes I can be a procrastinator, but I’ve never procrastinated for 33 years!” The Problem Solvers contacted the DMV. A DMV spokesperson researched the issue and said there was an error back in 1981 and a record was created under the name “Berdy,” not “Berry.” The “Berdy” record showed the 1981 ticket and a suspension.

Federal Reserve Bets Rate Rise Can Wait (WSJ)
The question looms as officials travel this week to their annual gathering in Jackson Hole, Wyo., where they and the world’s leading central bankers discuss economic issues. Fed Chairwoman Janet Yellen and academic papers presented at the meeting will focus on labor markets, which are improving rapidly even though U.S. economic growth has been sluggish and erratic. Ms. Yellen seems likely to acknowledge the improving job market, though she has argued for much of the year that slack and headwinds endure after the 2008-09 financial crisis. A growing number of economists believe slack in labor markets is diminishing, making the economy prone to inflation and financial markets prone to overshooting with short-term interest rates near zero. The unemployment rate fell to 6.2% in July from 7.3% a year ago, a decline far faster than Fed officials expected. “They are making me nervous,” Arun Raha, the chief global economist for Cleveland-based Eaton Corp., an industrial manufacturer, said of Fed officials. “Given the strength of the job market, manufacturing and nonresidential construction, it’s about time they got rid of their low-rates-for-an-extended-period viewpoint.”

Bundesbank Casts Doubt on German Economic Rebound in Second Half (Bloomberg)
“The economic outlook for the German economy has clouded over in the middle of the year in response to unfavorable international news,” the Frankfurt-based central bank said in its monthly report published today. “Expectations for a strengthening of economic momentum in the second half of 2014 underlying the spring projections are called into question by current data.”

Big Investors Snap Up Junk Bonds (WSJ)
Large institutions are snapping up U.S. junk bonds, taking advantage of a price slide triggered by an exodus of individual investors. Many big money managers say they remain bullish on these risky corporate bonds despite concerns that the market is overheated and worries that geopolitical unrest could fuel a rush to safer assets. Their interest stands in contrast to a wave of selling by retail investors, who sucked almost $13 billion out of junk-bond mutual funds and exchange-traded funds in the four weeks ended Aug. 6.

When companies flee U.S. tax system, investors often don’t reap big returns (Reuters)
Establishing a tax domicile abroad to avoid U.S. taxes is a hot strategy in corporate America, but many companies that have done such “inversion” deals have failed to produce above-average returns for investors, a Reuters analysis has found. Looking back three decades at 52 completed transactions, the review showed 19 of the companies have subsequently outperformed the Standard & Poor’s 500 index, while 19 have underperformed. Another 10 have been bought by rivals, three have gone out of business and one has reincorporated back in the United States.

A Former Top SAC Capital Trader Names New Hedge Fund (Dealbook)
Mr. Plotkin, 35, who is in the process of raising up to $1 billion for his fund, has settled upon the name Melvin Capital L.L.C. The name is a tribute to Mr. Plotkin’s grandfather, Melvin Plotkin, said a person briefed on the matter but not authorized to talk publicly about it. Mr. Plotkin’s grandfather, now deceased, was a small-business owner.

Pirate bartender is bringing Tiki back — one cocktail at a time (NYP)
Bartender Brian Miller calls himself a pirate, and he looks like one too, but he’s not sword-fighting for booty on a deserted island. For years, he’s been crusading for Tiki cocktails. It’s not an easy fight. In recent years, tropical cocktails fell out of fashion, with city Tiki bars like Lani Kai and Painkiller closing. Even Hawaiian mainstays like La Mariana in Oahu often seem to be on the brink of sinking. “Tiki has so many knives in its back,” says Miller, the head bartender at downtown’s exclusive, 12-seat ZZ’s Clam Bar and a fan of the tropical-drink tradition for years. “People say it’s all sweet, it’s all sugary, the drinks aren’t balanced, when actually it’s quite the opposite. These are really complex drinks; you can taste all of the ingredients. I’ve made Tiki drinks with gin, tequila, sake, Jagermeister and white whiskey.”

26 comments (hidden to protect delicate sensibilities)
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Comments (26)

  1. Posted by Outrage! | August 18, 2014 at 11:41 AM

    I'm shocked that Dealbreaker is engaging in a blockout out of the justifiable outrage over Michael Brown's death. The autopsy shows that this was murder. Yet Dealbreaker highlights a non story about a guy getting a speeding ticket.

  2. Posted by Guest | August 18, 2014 at 11:46 AM

    Shaz here clearly sleep at the wheel. Yelocab link is broken.

  3. Posted by Guest | August 18, 2014 at 11:57 AM

    shaznigga, nigga.

  4. Posted by guest | August 18, 2014 at 12:01 PM

    The autopsy didn't show that this was murder. I haven't actually read it, but it probably showed that death was the result of a gunshot wound, but the rest is up to investigators and the court to interpret, not the morgue people. And also you're at the wrong site for whatever it is that you're looking for. Gawker is probably more the type of venue in which you would excel.

  5. Posted by MoBonds | August 18, 2014 at 12:01 PM

    Why do the bankers care? City of Ferguson's muni bonds are A1. I'm sure Janet Yellen will be politley reminded to buy some bonds. http://www.municipalbonds.com/bonds/issue/315000B

  6. Posted by Guest | August 18, 2014 at 12:05 PM

    Dead wrong. For excel there is no better site than Bloomberg View.

  7. Posted by Guesy | August 18, 2014 at 12:05 PM

    Autopsy showed 6 gunshot wounds, 2 in the head. Those are the facts.

  8. Posted by Guest | August 18, 2014 at 12:09 PM

    I hate you. And every middle-aged, WaPo or Fox New spouting 'expert' on the story that I have to work with.

    - Guy who's concerned about the situation but doesn't want to hear about it as he updates v28 of his powerpoint

  9. Posted by MoBonds | August 18, 2014 at 12:10 PM

    Why are Rich White guys like you so afraid are hearing the truth. Michael Brown was murdered. We want justice. I'm not on Gawker because people on Gawker aren't trading billlions of dollars of bonds and deciding which communities suceed and which one fails. They aren't the shareholders that own the companies that make the tear gas and the pellet guns. Every day you guys bash the poor and now they are rebeling against your police state.

  10. Posted by Guest | August 18, 2014 at 12:21 PM

    I am sure the Pentagon has some spare drones in their inventory. Maybe they should liberate the batsh*t out of Ferguson.

  11. Posted by Guest | August 18, 2014 at 12:36 PM

    lol wut?

  12. Posted by Guest | August 18, 2014 at 1:00 PM

    Mr. MoBonds, have you thought about diversifying your personal portfolio of bonds?

    WT Financial

  13. Posted by Guest | August 18, 2014 at 1:02 PM

    I suspect those ratings are the result of affirmative action.

  14. Posted by Trader in the Know | August 18, 2014 at 1:05 PM

    Dude, it's 2014 and you don't have a Dealbreaker Gold Pass? Gold Pass members get all "blocked" stories plus unlimited access to all the Lynn Tilton, Jeff Gundlach, Dennis Kneale, "Nervous Jew", "Hotel Receipt Guy", "UBS Sucks!" guy, and "The Joke Briefer" comment archives.

  15. Posted by Narcissus Bellicose | August 18, 2014 at 1:06 PM

    Dollar General, Family Dollar, a Dollar a share……how's Maria supposed to keep all that straight?

  16. Posted by MoBonds | August 18, 2014 at 1:08 PM

    Yes. What do you suggest?

  17. Posted by Narcissus Bellicose | August 18, 2014 at 1:09 PM

    I've come up with a new algorithm that isolates the correlation of Molotov cocktails being tossed in Ferguson to block share trading in dark pools. From there, we've divided the correlation by the number of bullet holes in news helicopters in the area to come up with a buy trigger for Candletech: they make those offering candles you see at all the makeshift shrines.

  18. Posted by Bot | August 18, 2014 at 1:17 PM

    If I don't also get Geezer Oil Trader comments, it isn't worth it.

  19. Posted by investorcluzo | August 18, 2014 at 1:18 PM

    "sword-fighting for booty"

    go on…
    -J. Gundlach

  20. Posted by guest | August 18, 2014 at 1:19 PM

    seriously? why would db write about this story?

  21. Posted by el guesto | August 18, 2014 at 1:56 PM

    that comes with the platinum subscription, along with personalized business cards from handbridge capital

  22. Posted by Guest | August 18, 2014 at 2:03 PM

    Truly innovative financial engineering

  23. Posted by Guest | August 18, 2014 at 2:10 PM

    You must be new here.

  24. Posted by UBS Sucks Guy | August 18, 2014 at 5:46 PM

    I feel so honored! Thank you!

  25. Posted by My hood shoots back | August 19, 2014 at 8:36 AM

    "Why do the bankers care?"

    You see, there's a funny thing about banking. Bankers tend to do business with, and perhaps even rip off, people that actually have some money. From what I've seen of Ferguson's crowd, the bankers aren't in a rush to forge relationships.

  26. Posted by Guessed | August 19, 2014 at 9:36 AM

    What's this? Have we lost another aspiring rapper before his prime??!

    – Guy who only gets his news form the DB comments section.