Opening Bell

Opening Bell: 05.27.14

BofA Error Confirmed by a Devil in the Detail (WSJ)
A change in wording on Federal Reserve forms earlier this year helped Bank of America Corp. verify that it had made a $4 billion error in calculating its capital, according to a person familiar with the matter, jeopardizing its plans for a long-awaited stock buyback and dividend increase. The Charlotte, N.C.-based bank disclosed the mistake late last month. BofA staffers began to suspect the bank had been miscalculating its regulatory capital when they prepared the bank’s first-quarter Securities and Exchange Commission filing in April, the person said. After those suspicions arose, they learned of the Fed’s wording change—a revision to instructions on computing regulatory capital that clarified which kinds of losses on debt securities a bank shouldn’t exclude from its calculations. That change confirmed for BofA that it had inadvertently been reporting an inflated amount of capital to regulators, the person said. BofA isn’t blaming its error on the Fed’s wording, said the person, who added the wording change just helped confirm for the bank that it was in error.

Canada Offers Incentives to Lure Startups Across the Border (WSJ)
Adam Adelman, co-founder of Mighty Cast, a startup working on a new kind of wearable technology, recently told me the Canadian government is paying almost 80% of his developers’ salaries. And that’s not a tax credit. It’s a rebate, a check he gets from the government whether or not his startup makes money…So far, it’s mostly established U.S. companies taking advantage of these incentives. In 2013 Cisco signed an agreement with the government of Ontario pledging up to $4 billion in investment over the next 10 years in exchange for $220 million in incentives. Seven of the 10 largest tech companies in the world have outposts in Canada, including Google, Siemens and IBM, and startups like Square are setting up offices in the Waterloo region, where tech employers tend to concentrate. But if you’re a small startup looking to take full advantage of these incentives, there’s a catch: You have to become Canadian. You don’t have to give up your current citizenship to get all the benefits, but your company must be majority controlled by person(s) who are residents of Canada (a different status than full citizenship). Companies merely setting up a satellite in Canada can still get 50% of the salary reimbursement a fully “Canadian” company would.

Finance heavyweights checking out Sag Harbor restaurant (NYP)
It will likely be a masters of the universe, model magnet crowd in the Hamptons, where Notar has a license to stay open until 4 a.m. “Maybe one or two nights we’ll have a few parties. It’ll be good, but it will be civilized fun. It’s not spraying champagne on you and people falling into the ocean,” said Notar, who worked at Studio 54 in its heyday before launching his restaurant empire.

When Cannabis Goes Corporate (NYT)
Clinical, climate-controlled rooms with artificial sunlight house rows upon rows of plants at various stages of growth. In the “mother room,” horticulturalists use cuttings to start new plants. The “flowering rooms” are flooded with intense light 12 hours a day to nurture nearly grown plants in strains with vaguely aristocratic names like Argyle, Houndstooth and Twilling. The new owner of this factory, at 1 Hershey Drive, is Tweed Marijuana. It is one of about 20 companies officially licensed to grow medical marijuana in Canada. A court ordered the government to make marijuana available for medicinal purposes in 2000, but the first system for doing so created havoc. The government sold directly to approved consumers, but individuals were also permitted to grow for their own purposes or to turn over their growing to small operations. The free-for-all approach prompted a flood of complaints from police and local governments. So the Canadian government decided to create an extensive, heavily regulated system for growing and selling marijuana. The new rules allow users with prescriptions to buy only from one of the approved, large-scale, profit-seeking producers like Tweed, a move intended to shut down the thousands of informal growing operations scattered across the country. The requirements, which went into effect in April, are giving rise to what many are betting will be a lucrative new industry of legitimate producers.

Macaulay Culkin’s band storms off stage after being booed, covered in beer (NYDN)
The actor and his comedy cover band, Pizza Underground, performed at the Dot to Dot Festival Sunday, but instead of applause they were met with boos from the audience, who also threw beer at them, reports the Nottingham Post. “Why are you throwing those?” the “Home Alone” star asked when the band dodged pints of booze being thrown from the crowd after performing a cover of Lou Reed’s “Perfect Day,” which they called “It’s a Pizza Day.” “I’d rather drink them,” he said. Culkin, 33, and his New York City-based band, which remakes classic rock songs in order to celebrate pizza, tried to take it in stride and continued the performance. They reportedly got through three songs before calling it quits after being drenched with booze. “That’s the end of the show,” he said. “Goodnight.” Read more »

Opening Bell: 05.23.14

Wall Street Bets on Bond Revival in Trader Hiring Spree (Bloomberg)
Wall Street firms are starting to bet on an end to the profit-eroding boredom in credit markets by building out their trading desks. Nomura Holdings Inc. has added 10 to its U.S. corporate debt team this year, an increase of about 10 percent, and plans to expand further, according to Michael Guarnieri, the bank’s global head of credit products in New York. The latest hires are high-yield debt traders Daniel Frommer and James Incognito, who joined this month.

Cocaine Sales to Boost Italian GDP in Boon for Budget (Bloomberg)
Italy will include prostitution and illegal drug sales in the gross domestic product calculation this year, a boost for its chronically stagnant economy and Prime Minister Matteo Renzi’s effort to meet deficit targets. Drugs, prostitution and smuggling will be part of GDP as of 2014 and prior-year figures will be adjusted to reflect the change in methodology, the Istat national statistics office said today. The revision was made to comply with European Union rules, it said.

Colorado cracks down on edible pot products (CNBC)
The new regulations add to the long list of costs for retail marijuana sellers, said Jamie Lewis, COO of marijuana dispensary and edible pot company Good Chemistry. The fresh laws prohibit edible pot products from containing more than 10 milligrams of THC per serving, and they require packaging noticeably different from regular foods on such products. The new rules, however, bring in more business for CannLabs, a company that tests cannabis products in Denver. CannLabs CEO Genifer Murray told CNBC that revenue has skyrocketed at her testing lab, but that the company still gets rebuffed by waste removal companies and other labs for being involved in the marijuana industry. “Shame on them,” Murray said. “It’s going to be a billion-dollar industry.”

Is the Hard-Nosed Boss Obsolete? (WSJ)
When bosses simply have to get things done, yelling at subordinates or glaring at them can be OK, depending on the company culture, and is among the “array of techniques that you use as a manager,” Prof. Sutton says. Genuine jerks have been mostly culled from the ranks of corporations in recent years, in part because it is harder to get away with truly bad behavior, he says, adding, “the a—holes among us are getting more skilled, and the ones we are left with are being more subtle about it.” Some companies take formal stands against jerks. A slideshow presentation on corporate culture posted online by Netflix Chief Executive Reed Hastings declares that the company doesn’t need “brilliant jerks.” Though tolerated at some companies, he writes, Netflix believes their “cost to effective teamwork is too high.”

Rob Ford lets rehab friend use SUV, drunk driving happens (NYP)
The generous politician lent his black Cadillac Escalade to his rehab buddy LeeAnne McRobb, 36, and she wound up getting arrested Tuesday for alleged DWI in the SUV, the Toronto Sun reports. McRobb was a fellow resident at the GreenStone Muskoka treatment center, sources told the Sun. She refused to explain why she was driving the disgraced politician’s car when confronted by two reporters at the impound lot in Gravenhurst, Ontario. “It doesn’t matter. That’s for me to know,” she said in one of two videos posted on YouTube by MooseFM Wednesday. “You guys don’t need to know.” Read more »

Opening Bell: 05.22.14

BofA Scrapping Market-Making Unit Amid Trading Scrutiny (Bloomberg)
Bank of America Corp. is dismantling an electronic market-making unit created last year to serve the lender’s Merrill Lynch wealth-management division, said two people with knowledge of the decision. Increased regulatory scrutiny of U.S. equity markets and managers’ concerns for the potential perception of a conflict of interest killed the project, said the people. The desk advanced to a testing phase before being abandoned in recent weeks and two executives hired to run it, Jonathan Wang and Steven Sadoff, were told to seek new jobs within the firm, the people said, requesting anonymity because the matter is private.

Deutsche Bank to defend capital increase at annual meeting (Reuters)
Germany’s largest bank launched the capital increase in a surprise move only weeks after first hinting that it was unable to retain enough profit to fortify its finances ahead of a regulatory health check slated for later this year. Shareholder approval is not required but some investors will express anger with the issue and with the lack of progress on resolving a long list of investigations that has dogged the bank since the 2008-2009 financial crisis.

Wall Street Finds New Subprime With 125% Business Loans (Bloomberg)
Subprime business lending — the industry prefers to be called “alternative” — has swelled to more than $3 billion a year, estimates Marc Glazer, who has researched his competitors as head of Business Financial Services Inc., a lender in Coral Springs, Florida. That’s twice the volume of small loans guaranteed by the Small Business Administration.

Hedge Funds Are Betting The Roomba Will Short Circuit (BFB)
A new report from Spruce Point Capital Management issued Tuesday questions the accounting and corporate governance practices at iRobot, the company that manufactures the Roomba, the Scooba and other robotic home cleaning products. The report also claims competition from cheaper, comparable robotic cleaners means iRobot will face mounting financial obstacles to maintaining its growth.

How Old People and Pricey Shrimp Turned Red Lobster Into a Castoff (BusinessWeek)
Seafood sellers have been whacked over the past year by the surging cost of shrimp due to acute hepatopancreatic necrosis syndrome. Billions of young shrimp have died from the disease, which was first detected in farm-raised populations in Asia. Shrimp prices hit a 14-year high earlier this year. Adding insult to injury, Red Lobster was widely known for its $15.99 “Endless Shrimp” promotions designed to get people into the restaurant…Beyond the expenses of procuring shrimp, Red Lobster also attracts an oversize share of older diners who don’t eat out frequently, while younger and spendier patrons eat their fish at more upscale restaurants—places that can cover rising costs better.

Houston Str!pper Sued For Harry Potter DVDs (HP)
Wallace, a Houston-based software developer, thought he was in a “dating relationship” with exotic dancer Nomi Mims. He loaned her $2,000, a laptop and his precious collection of movies based on the J.K. Rowling books, KRIV-TV reports. When the alleged relationship ended May 3, Wallace hoped Mims would return the items. She hasn’t so now he says he’s suing her to get the money, laptop and Harry Potter DVDs. Fat chance, according to Mims. She says she never dated Wallace and that the items were gifts he gave to her. “I don’t believe in loans because I don’t want to pay anybody back,” she said, according to RawStory.com. “I’ve given him gifts too. You know, how do I get my b00ty and b00bs back?” Although Wallace claims the two were intimate and “building a life together,” Mims says they were never more than friends. She concedes that it is unfortunate that she may have given him the wrong impression, MyFoxPhilly.com reports. Read more »

Opening Bell: 05.20.14

EU Files Formal Charges Against Three Banks Over Interest-Rate Cartel (WSJ)
The move comes five months after EU authorities fined six banks €1.71 billion ($2.3 billion) for colluding to manipulate key benchmark interest rates, representing the EU’s largest ever penalty in a cartel case. Three banks— Crédit Agricole, HSBC, and JP Morgan —didn’t settle with regulators in December over a cartel to rig the pricing of interest rate derivatives denominated in euros. It is those banks that have now been sent a so-called statement of objections, which outlines the European Commission’s concerns. The EU in December settled with four other banks— Barclays, Deutsche Bank, RBS, and Société Générale —which admitted involvement in the cartel, and had their fines reduced by 10% for agreeing to settle.

Princeton’s Top Money Managers Get 46% Pay Raise in 2013 (Bloomberg)
Andrew Golden, the president of Princeton University Investment Co., the company known as Princo that manages the school’s $18.2 billion endowment, collected $3.9 million in total compensation last year. The 55-year-old’s remuneration included a 94 percent increase in retirement and deferred compensation and a 48 percent jump in bonus pay, according to the university’s latest tax return.

Ackman takes aim at Allergan CEO (NYP)
Activist investor Bill Ackman alleged in a letter Monday that Allergan Chairman and CEO David Pyott has been conducting “one-on-one” meetings with the Botox maker’s largest shareholders while refusing to allow independent directors to talk with them. Allergan last week rejected a hostile takeover bid valued at $50 billion by Valeant Pharmaceuticals, supported by Ackman, whose Pershing Square hedge fund holds a 9.7 percent stake in Allergan. The activist investor, in his letter, said Pyott has a “disabling conflict of interest” because he will likely lose his CEO position if the merger goes through. The letter was addressed to Michael Gallagher, Allergan’s lead independent director, who refused to have a private conversation with Ackman.

Swiss Face Conundrum as ECB Signals Further Stimulus (Bloomberg)
Swiss policy makers are under increasing pressure to come up with a contingency plan to curb gains in the franc that would likely result from a fresh round of stimulus from the European Central Bank next month. The Swiss National Bank already has a zero interest-rate policy, in part to keep the nation’s currency from rising beyond the 1.20 franc-per-euro cap in place since 2011. It would need to take steps to defend that level if the ECB cut rates or broadened asset purchases, according to 52 percent of respondents to a Bloomberg News survey this month.

Man Wearing “It’s All Fun & Games Until The Cops Show Up” T-Shirt Is Arrested When The Cops Show Up (TSG)
The 35-year-old bank robbery suspect was wearing a t-shirt declaring “It’s all fun & games until the cops show up” when police showed up yesterday morning and arrested him as he exited an Idaho motel. Fisher and Jennifer Balfe, 19, were collared in connection with Friday’s robbery of a U.S. Bank branch in Cottonwood (pop. 900). They were each jailed on robbery, burglary, and grand theft counts. Investigators reportedly got on Fisher’s tail after receiving an anonymous tip that a man matching the suspect’s description had been spending wads of cash at a local casino. Read more »

Opening Bell: 05.19.14

Deutsche Bank Plans to Raise $11 Billion (WSJ)
The German lender will issue a total of 360 million new shares, the person said. The Qatari royal family has agreed to buy 60 million of the shares, valued at €1.75 billion, via its investment vehicle Paramount Holdings. The remaining €6.25 billion will be sold to existing investors via a so-called rights offering, the person said.

Former SocGen Trader Returns to France to Face Jail (WSJ)
Former Société Générale trader Jérôme Kerviel ended a monthslong hike through Italy on Sunday by walking across the French border, where police immediately whisked him off to prison to serve a three-year sentence for making billions in unauthorized trades. The final leg of the former trader’s journey capped what he has described as a pilgrimage of “protest against the tyranny” of financial markets. Mr. Kerviel began the trip with a brief meeting with Pope Francis in Vatican City, drawing television cameras and journalists as he made his way up the Italian peninsula with a backpack slung over his shoulder. “I’m respecting the decision of my country,” Mr. Kerviel told a clutch of TV cameras moments before police placed him in an unmarked car and drove off.

Facebook working on video app to take on Snapchat (FT)
Facebook has been working for several months on the app, known internally as Slingshot, with a simple and speedy user interface, said people familiar with its plans. Mark Zuckerberg, Facebook’s chief, has been overseeing the top-secret project after failing to woo Snapchat’s creators Evan Spiegel and Bobby Murphy with a $3 billion takeover offer late last year.

Lesser role for Fannie, Freddie not opposed: Regulator (Reuters)
Watt said last week, in his first public speech since taking office, that he did not want to shrink Fannie and Freddie’s footprint, marking a sharp departure from his predecessor. “It’s not that I’m opposed to it and we will certainly allow it to happen,” he told C-SPAN’s “Newsmakers” program, when asked about the prospect of shrinking the lenders’ activities. “But if the private sector is not ready to step into the space, and you shrink what Fannie and Freddie are doing, you do damage to housing finance in this country and that does damage to the economy and that does damage to the possibility of affordable housing and home ownership.”

How Barry Rosenstein rose from Asher Edelman underling to activist leader (Barron’s)
Rosenstein’s operating style isn’t as in-your-face as some of his peers — at least not publicly. “If Carl Icahn is coming at it with a hammer, Barry has velvet gloves on,” says an executive at a fund-of-funds firm that invests in Jana. Says Rosenstein: “I always say to the CEO, ‘You could take our ideas and make them your own and be the change agent. The alternative is you could fight us, but you’re going to end up in the same place anyway.’ ”

Fed’s Rate-Change System Up for Revamp (WSJ)
The Fed’s old system for moving interest rates up or down looks increasingly unsuited for the postcrisis financial system, so officials are rewriting their strategy for replacing it. But first they need to resolve big questions with implications for $2.6 trillion that banks have parked at the Fed, trillions sitting in money-market mutual funds and trillions more at stake in derivatives contracts.

British man spends $16G to turn spare bedroom into a replica Boeing 737 cockpit (NYDN)
The homemade flight simulator allows Richard Hutchinson to “take-off” from any airport in the world and the middle-aged Brit regularly “visits” exotic locations. He told The Mirror: “The conditions are about 99% realistic. I have never flown a plane before but I think if I needed to, I could land a 737.” Read more »

Opening Bell: 05.16.14

Euro-Zone Economy Shows Weak Expansion (WSJ)
Euro-zone GDP has risen only 1% since the first quarter of 2013, the lowest point of the bloc’s six-year slump, and remains 2.5% below its peak in early 2008. Economists reckon output would have to rise at closer to 2% a year to make a meaningful dent in euro-zone unemployment, currently 11.8% of the workforce.

SAC’s Steinberg loses bid for insider trading acquittal (Reuters)
U.S. District Judge Richard Sullivan in Manhattan rejected various arguments by Steinberg’s lawyers, including that a jury could not have rationally found he knew corporate insiders were receiving benefits to provide illegal tips. “On the facts presented at trial, a rational jury could find that (Steinberg) knew or was willfully blind to the fact that the tippers breached duties of trust and confidence by disclosing material nonpublic information for their personal benefits,” Sullivan wrote.

SAC Fund Manager’s Backers Cite Charity Before Sentencing (Bloomberg)
From co-founding a group that’s donated more than $8.7 million for work such as providing clean water and medicine in Africa, to raising money for a friend’s organ transplant with a bake sale, Steinberg has shown he deserves leniency at his sentencing today in Manhattan federal court, his supporters told the judge.

At SALT Conference, Stocks Induce Anxiety (Dealbook)
“There seems to be a general unease that with central bank policy, the only thing it is impacting are financial markets,” said Jim Chanos, president of Kynikos Associates and a well-known short-seller. “It’s not transmitting to the economy, and I think that is a real, real growing concern.” “You sort of get a growing sense that this grand experiment may be quite inconclusive when it comes to monetary policy and financial markets,” Mr. Chanos added, speaking on the sidelines of the conference on Thursday.

Investors Reject Chipotle Chiefs’ Pay Plan (Dealbook)
Investors in Chipotle Mexican Grill voted overwhelmingly on Thursday against the company’s executive compensation plans, sending a strong rebuke to a company that had awarded more than $300 million to its co-chief executives in recent years. More than 75 percent of investors voted against Chipotle’s say-on-pay measure, which asked investors to ratify a compensation plan that would continue such payments to Steve Ells, Chipotle’s founder, and his co-chief, Montgomery F. Moran, over the next few years. That was the highest vote against any say-on-pay measure among the country’s largest 3,000 companies this year.

U.S. Takes a Shot at Latte Art Championship (WSJ)
Latte art has gained steam in recent years. The whimsical, swirly designs, like tulips and hearts, drawn with the steamed milk and foam that is poured over a shot of espresso to make a latte, have tens of thousands of online fans and enthusiasts. But the final stages of the contest are stripped of whimsy. Six finalists each received eight minutes to complete two “free pour” lattes, using just swirling milk and gravity to make four drinks: two lattes and two macchiatos, which are half the size of a latte and therefore considered the most difficult…Donald Morrison says he tries to take his latte art to the dark side. His signature drink featured a winged bat. “I wanted to do something that wasn’t so cute—a little more punk rock,” he said. But it was Mr. Bricker’s twin latte phoenix, whose tail-curls were sharpened with the tip of a golf tee, that earned him the top score at the U.S. competition. He will be up against the world’s best at the championship which ends Sunday. Read more »

Opening Bell: 05.15.14

Nervous Investors Pile Into Bonds (WSJ)
Global bond rates dropped to their lowest levels of the year Wednesday, as central bankers signaled their determination to jolt the world’s largest economies out of their malaise. Investors piled into U.S., German and British government bonds—used to price everything from mortgages to car loans—driving down their yields. The yield on the 10-year U.S. Treasury dropped to as low as 2.523%, its lowest level in more than six months. In Germany, 10-year bund yields fell to their lowest point in a year.

Porsche, Lamborghini, Bentley Bonds Have Investors Hitting the Gas (WSJ)
The worlds of high finance and high-end cars intersected Wednesday, as investors grabbed bonds backed by loans to buyers of Lamborghinis and Bentleys. Investors bought $488.3 million of the bonds sold by Porsche Financial Services GmbH, a unit of sports-car maker Porsche AG. The firm for the first time expanded its bond issuances to include loans tied to the two exotic car makers, in addition to its Porsche models. The market for bonds supported by all types of car loans is accelerating, with sales of $39 billion worth of securities this year, according to J.P. Morgan Chase & Co. Issuance is on pace to exceed last year’s $78.9 billion.

David Tepper on the market: ‘I think it’s nervous time’ (CNBC)
“I’m not saying go short, I’m just saying don’t be too fricking long right now,” the head of Appaloosa Management told a few thousand of his colleagues Wednesday at SkyBridge Capital’s SALT 2014 conference in Las Vegas.

Lunch with Ben Bernanke goes for $70K (TFT)
An anonymous bidder will pay $70,500 for lunch with Ben Bernanke, the former chairman of the Federal Reserve. Bernanke will choose the restaurant, according to the auction listing. The final bid to break bread with Bernanke topped an auction for a lunch for two in New York City with former Treasury Secretary Timothy Geithner, author of the new memoir Stress Test: Reflections on Financial Crisis. The Geithner auction drew a winning bid of $50,000.

Mozzarella arrests made after counterfeit cheese found in Italy (LA Times)
TThe discovery of alleged counterfeit buffalo mozzarella cheese at a factory in Italy has led to the arrests of 13 people, including two public health service veterinarians who allegedly warned the factory of future inspections, reported the Associated Press…The buffalo mozzarella at the factory, near Caserta in the Campania region of southern Italy, is traditionally made with local buffalo milk. Police concluded the buffalo milk was actually being cut with cheaper cow milk. Buffalo mozzarella made in Italy is certified by the European Union with a Denominazione d’Origine Protetta, or DOP seal. The cheese is most commonly used to make Caprese salad (tomato, cheese and basil) in Italy. Seven stores selling cheese from the factory were shut down Monday. Read more »