Opening Bell

Opening Bell: 05.05.14

BofA Forgiven as Buffett Says ‘You Do the Best You Can’ (Bloomberg)
Warren Buffett, who invested $5 billion in Bank of America Corp., said he’s confident the lender will overcome an accounting mistake that forced the firm to suspend an increased payout to shareholders. “That error they made does not bother me,” Buffett said on May 3 at Berkshire’s annual meeting in Omaha, Nebraska. “You do the best you can.” Bank of America halted $4 billion of share repurchases and a boost to its common-stock dividend on April 28 after finding the mistake in a stress-test submission to the Federal Reserve. The Charlotte, North Carolina-based bank’s error, which had gone undetected since 2009, didn’t affect earnings. “It doesn’t change my feeling about Bank of America or its management,” said Buffett, 83.

Borrowing Cash to Buy Complex Assets Is In Vogue Again (WSJ)
Banks again are doling out money to hedge funds and other investors to finance purchases of complex debt securities, returning to a practice that helped fuel the debt boom ahead of the financial crisis. RBC Capital Markets, Société Générale and Wells Fargo & Co. are among the banks offering to let investors borrow money, also known as providing leverage, to buy collateralized loan obligations, say investors and bankers. CLOs are bonds typically backed by pools of low-rated corporate loans. Borrowing programs for such esoteric securities have been only selectively available in the years since the crisis. While banks have lent to a handful of investors, the practice picked up late last year when funding costs began to fall. Even now, the use of leverage is relatively nascent for these securities.

Fed’s Fisher Says Economy Strengthening as Payrolls Rise (Bloomberg)
“The private sector is beginning to hire,” said Fisher, a voting member of the central bank’s policy committee, said today on the Fox News program ’’Sunday Morning Futures.’’ “We’d like to see that continue and, in fact, increase.” Employers added 288,000 jobs in April, the biggest monthly gain in two years, the Labor Department reported May 2. At the same time, more than 800,000 people abandoned the labor force and the share of working-age Americans in a job or looking for one fell to a 36-year low.

Former Microsoft CEO Being Urged To Buy Clippers (NYP)
…former Microsoft CEO Steve Ballmer is being urged by associates to move from software to the hardcourt if the NBA is able to extricate the team from Sterling’s hands. Ballmer — now the No. 1 shareholder in Microsoft after founder Bill Gates sold shares — was spotted at a game last week during the barrage of media coverage about Sterling’s racist remarks to gal pal V. Stiviano, sparking suggestions he’s interested in forming a bid. It wouldn’t be out of the ordinary. Ballmer made a run at the Sacramento Kings last year and has long hoped to bring an NBA team back to Seattle (though reports suggest the NBA wouldn’t look favorably on a move).

Tax-Free Bonuses Disappoint as Middle East Bankers Plan Job Hunt (Bloomberg)
Banking and finance professionals in the Middle East plan to seek new jobs this year after bonuses failed to meet expectations, according to eFinancial Careers. Almost 60 percent of the region’s financial services employees plan to change position, with 45 percent saying they were disappointed with their bonus, eFinancial said in an e-mailed report. Bonuses rose for half of Middle East finance professionals, compared with 49 percent in the U.K., 47 percent in the U.S. and Hong Kong and 42 percent in Singapore.

Hedge fund manager buys most expensive house in U.S. (CNBC)
Barry Rosenstein, fund manager at Jana Partners, is set to pay $147 million for an 18-acre beachfront home in the Hamptons on New York’s Long Island…The previous record for a home sale was set just two weeks ago, when a house in Greenwich, Conn., sold for $120 million.

PayPal executive launches angry poorly-spelled late night Twitter rant against his colleagues after night in New Orleans (DM)
Rocky’s first victim was Christina Smedley, PayPal’s vice president of global communications. ‘Duck you Smedley you useless middle. manager,’ he tweeted. ‘Christina Smedley is a useless. Piece of s**t.’ He then incoherently called for the head of a previously unknown employee. ‘People who should be fire from paypal Don Christmas a pool a kick.’ The tech industry veteran then claimed he could make Foursquare a $50billion company. ‘I can turn foursquare into a $50 bill OK n company let’s chat,’ he tweeted…The outspoken executive then woke up in the morning and claimed to be thirsty. ‘Hydrate.’ He then quickly deleted the offending tweets and publicly apologized to PayPal president David Marcus and vice president of growth and global strategy Stan Chudnovsky. His mea culpa was followed by the following tweet. ‘Day one of my next adventure? I am so ducking tired.’ Rocky then claimed the messages were meant for a colleague and that he did not realize were tweets instead of direct messages – DMs are private. He also blamed his new Android phone, saying he did not know how to use it. ‘The twitter interface on android and gs5 is shockingly different from iPhone, said the first explanatory tweet. ‘Last night I was using a new phone that I bought because I wanted to test experiences on android. Those messages were meant for a colleague,’ said the second. Read more »

Opening Bell: 05.02.14

Criminal Charges Against Banks Risk Sparking Crisis (Bloomberg)
Stung by lawmakers’ criticism that multibillion-dollar settlements have done too little to punish Wall Street in the wake of the financial crisis, prosecutors are considering indictments in probes of Credit Suisse Group AG and BNP Paribas SA, a person familiar with the matter said. Even after talking with financial regulators about ways to mitigate damage — such as ensuring banks keep charters — prosecutors might not fully understand consequences for the market, according to industry lawyers and bankers who are following the case. Bank clients — including trustees, fiduciaries and pension funds — could be forced to cut ties with a financial institution labeled a criminal enterprise, the lawyers and bankers said, asking not to be named because they weren’t authorized to talk publicly. Counterparties also might think twice before entering into billion-dollar transactions with such firms. Damaging a bank’s business could lead to broader fallout across the financial industry, just as Lehman Brothers Holdings Inc.’s collapse in 2008 prompted investors to withdraw from other firms on concern its exit would set off a wave of losses.

U.S. Looks Into Wagers, Pro and Con, on Herbalife (Dealbook)
Three federal agencies and one billionaire hedge fund manager have placed Herbalife under the microscope, scrutinizing whether the diet-supplements company is a pyramid scheme. But Herbalife is not the only one under investigation. Some federal authorities are pursuing other inquiries that might expand the regulatory gaze from Herbalife to the traders who traffic in the company’s stock. The authorities have trained their focus on traders with contrasting views of Herbalife, according to people briefed on the matter who spoke only on condition of anonymity. As one group wagered that Herbalife was a pyramid scheme — William A. Ackman, the billionaire hedge fund manager, has staked a $1 billion bet on that belief — other investors expected the company to emerge unscathed. Neither side has been accused of wrongdoing. Still, a number of well-timed bets for and against Herbalife caught the eye of the Securities and Exchange Commission and the F.B.I., the people briefed on the matter said, raising questions about possible insider trading, disclosure violations and market manipulation.

Yellen’s Fed Resigned to Diminished Growth Expectations (Bloomberg)
Federal Reserve Chair Janet Yellen and her colleagues have lowered their sights on how fast the economy needs to expand to meet their goal of cutting unemployment. No longer are they saying growth must accelerate from the 2 percent to 2.5 percent pace it has generally averaged since the recession ended. Instead, they are stressing the importance of preventing the expansion from faltering. Exhibit number one: the Fed chief herself. Yellen said on April 16 that a key question facing the central bank is what “may be pushing the recovery off track.” Contrast that with her comments on March 4, 2013, of the importance of seeing “a convincing pickup in growth.”

EBay Settles No-Poaching Antitrust Case (NYT)
The deal, announced by the Justice Department on Thursday, follows the pattern of the department’s 2010 settlement against Google, Apple, Intuit and other Silicon Valley companies over similar accusations. Like those companies, eBay is prevented from entering into anticompetitive hiring agreements for five years. A related case against eBay filed by the California attorney general’s office was also settled. EBay agreed to pay $3.75 million to the state, a sum it said would cover civil penalties, lawyers’ fees, administration of the settlement and compensation to those who worked at eBay and Intuit. Secret deals not to hire a competitor’s employees were common in Silicon Valley in the latter part of the last decade, and Steve Jobs of Apple was a major instigator and enforcer of the agreements. EBay is not a competitor of Intuit, which develops tax preparation software, but both embraced a hands-off relationship.

Macquarie Group Profit Jumps 49% as Trading Revenue Climbs (Bloomberg)
Profit for the year ended March 31 rose to A$1.27 billion ($1.17 billion), the Sydney-based firm said in a statement today. That beat the gain of as much as 45 percent the firm forecast on March 24 and compared with profit of A$851 million a year earlier. The bank’s shares fell the most in two weeks as it forecast similar earnings for the year to March 2015.

T0pless Woman Dances With 12,000 Bees (HP)
The Portland, Oregon-based beekeeper describes her bee dances as “a duet among many.” “These 12,000 bees push with their powerful wings from each side of my body, I resist and then I let go and flow and move with them,” she writes on her website.” It is a deep meditation and I feel the hive mind surround me, hold me, and expand my body on a cellular level.” In order to attract the bees to her topless body, Mapelli anoints her body with a special pheromone oil that is equivalent to the scent of 100 queen bees. The bees usually stay on her body for about two hours at a time. Mapelli says she’s been stung more than 100 times since her first bee dance in 2001, but that doesn’t bother her. “I just want people to understand that they don’t need to fear nature,” she said. Read more »

Opening Bell: 05.01.14

Fed Cuts Bond Buys, Sees Growth Pickup (WSJ)
The Federal Reserve said Wednesday it would reduce its bond purchases to $45 billion a month and it was starting to see a growth pickup in recent weeks after a harsh winter that hit the U.S. economy. The Fed is effectively in watch, wait and plan mode. The $10 billion cut in monthly bond purchases, the fourth this year, was widely expected by investors and represents a continuation of the policy strategy laid out in the past few months by Fed Chairwoman Janet Yellen, who took over in February, and former Chairman Ben Bernanke.

U.S. Economy Starts Year With a Whimper (WSJ)
Gross domestic product, the broadest measure of goods and services produced across the economy, grew at a seasonally adjusted annual rate of 0.1% in the first quarter, the Commerce Department said Wednesday. It marked the second-worst quarterly performance since the recession ended in mid-2009…Harsh weather likely slowed first-quarter business investment and discretionary consumer spending. It could have even blocked exports—which notched their sharpest decline since the recovery began—from reaching ports.

Moguls Winfrey, Geffen, Ellison Weigh Bid for Clippers (Bloomberg)
Winfrey, the former talk-show host turned network owner, is discussing a joint bid for the Clippers with fellow billionaires David Geffen, the ex-music industry executive, and Oracle Corp. Chief Executive Officer Larry Ellison. Earvin “Magic” Johnson, the Hall of Fame basketball player and part owner of baseball’s Los Angeles Dodgers, said he was interested. “I will be owning an NBA team at some time,” Johnson said yesterday at the Milken Global Conference in Beverly Hills, California. “It has to be the right situation. Is the Clippers the right situation? Of course, it’s one of the premier franchises. Despite what we think of him, he’s done a good job with the business,” Johnson said of team owner Donald Sterling. “So we’ll just have to see.”

Buffett Pressures Coca-Cola Over Executive Pay (WSJ)
Coca-Cola likely will revise its executive-compensation plan before it goes into effect next year, bowing to pressure from billionaire investor Warren Buffett, according to people familiar with the matter. The potential changes come as a surprise after voting shareholders approved Coke’s plan last week—and Mr. Buffett declined to vote against it. Mr. Buffett aired his reservations about the plan privately in recent weeks to Coke Chief Executive Muhtar Kent in three conversations, including at a dinner in Mr. Buffett’s hometown of Omaha, Neb., according to some of the people familiar with the matter.

Accounting Group Taps Michael Bloomberg, Mary Schapiro (WSJ)
The Sustainability Accounting Standards Board, which sets voluntary accounting standards for publicly traded companies, is expected to announce the appointments Thursday. Mr. Bloomberg will serve as chair of its board and Ms. Schapiro as vice chair.

Mayor Rob Ford ‘ready to take a break’ (Toronto Sun)
Mayor Rob Ford says he’s “ready to take a break” from the mayoral election campaign to “go get help.” The decision to immediately step away from the campaign — while staying on the ballot — came after the Toronto Sun exclusively obtained a new raunchy audio recording of Ford ranting and swearing in an Etobicoke bar. The Globe and Mail also published a report that a new video surfaced of Toronto Mayor Rob Ford smoking what has been described as crack-cocaine early Saturday morning. Ford told the Sun columnist Joe Warmington that he realizes “it’s time” and that he “wants” to “deal with his issues.” He said he is being urged to not leave the mayoral race by people around him. The audio recording, covertly taped by a patron of Sullie Gorman’s Monday night, captures the mayor being unruly as he’s ordering booze at the Royal York Rd. bar, complaining about his wife Renata and making lewd comments about mayoral contender Karen Stintz. “I’d like to f—–g jam her (Stintz), but she doesn’t want … I can’t talk like this…I’m so sorry,” Ford is heard saying on the recording. “I forgot there’s a woman in the house.” According to one witness, Ford was seen buying shooters and tequila and trying to fight with patrons Monday. “He was really wasted,” said the witness. “And he was acting like a real ass.” [...] The mayor said he didn’t recall saying any of the things on the recording, but confirmed he was at Sullie Gorman’s that night. “I wouldn’t say that — I wouldn’t say the word, ‘jam,’ — that’s not my terminology,” he said in a phone interview with Warmington Wednesday afternoon. “I am appalled (at what I said). I’d like to verify this (audio) first. Of course, I’m just joking around. Clearly, that’s what I mean.” [...] Ford is heard using threatening language: “Give me a shot right now or I’ll f—–g break your legs. I want another one.” A few moments later, he says, “If you don’t give me a shot I’m going to knock your f—–g teeth out.” Read more »

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. Read more »

Opening Bell: 04.28.14

Ackman Documentary Stars Alleged Herbalife Victims (NYP)
In his quest to bring down Herbalife, activist investor Bill Ackman will publicly showcase a documentary about former Herbalife distributors who say they were defrauded by the company. Ackman, who has bet more than $1 billion that Herbalife’s stock will collapse, is offering the film as his latest evidence that the controversial nutrition products company is a pyramid scheme. He said his Pershing Square hedge fund commissioned the 15-minute documentary last year to get alleged victims before regulators and the public. Herbalife has denied it is a pyramid scheme. The documentary will be shown at an event Friday in New York City. Members of the press, government, community and consumer organizations are invited to attend the showing, which will be simultaneously webcast. The specific time and place is undisclosed to prevent any interference at the actual event, according to Ackman.

Treasuries Irresistible to America’s Banks Awash in Record Cash (Bloomberg)
After culling Treasuries and bonds issued by federal agencies last year for the first time since 2007, commercial lenders such as Bank of America Corp. (BAC) have boosted their holdings every month this year, Federal Reserve data compiled by Bloomberg show. Banks now own $1.85 trillion of the debt, within 2 percent of the record amount held at the end of 2012.

Finra investigating E*Trade for potentially rigged markets (NYP)
Finra opened the probe well before the latest public flare-up over high-frequency trading, or HFT, but the investigation hits many of the same hot buttons. Finra is determined to find out how E*Trade has priced and electronically routed customer orders to G1 Execution Services, a business it bought for a reported $173 million and sold this year to Susquehanna for about $75 million. “Finra notified E*Trade Securities LLC and G1 Execution Services LLC that it is conducting a probe of both firms’ routing practices,” E*Trade disclosed in a footnote in its latest 10-K annual regulatory filing.

Happy Birthday To Greenwich’s Richard ‘Dick’ Severin Fuld Jr. (GDV)
Fuld, who has owned a home in Greenwich, turn[ed] 68 on Saturday. The banker was born April 26, 1946, in New York City. His first career as an Air Force pilot came to an end when he got into a fistfight with a commanding officer. He then began his career with Lehman Brothers in 1969, as a commercial paper trader and rose rapidly.

Flight crews can’t stop taking mile-high selfies (NYP)
Sexy flight attendants across the world have started an underground network of mile-high selfies that they post on Instagram. In one photo, five beautiful Emirates Airlines attendants are seen in uniform draped over each other inside an aircraft in the style of a Vanity Fair spread. “Best crew ever #galley #cabincrew #airhostess #flightattendant #emiratescrew #emiratescabincrew #crewlife #flight” reads the picture’s tag line. Another selfie features an exotic-looking airline hostess posing in a crew locker room, wearing a pilot’s hat and with her lips puckered, with the tagline “#flywithme.” Some flight attendants say the photos create camaraderie and allow them to keep up with one another. “Aviation is a very close-knit community,” said flight attendant and “Rants of a Sassy Stew” blogger Shawn Kathleen, who doesn’t use her last name. “We get each other, because we’re living the same lifestyle.” Kathleen said she’s in the process of trademarking the phrase #crewlife. She’s already encouraged other flight attendants to vent their frustrations at passengers who behave badly by posting embarrassing photos of the fliers with the hashtag #passengershaming. Read more »

Opening Bell: 04.25.14

Alibaba Puts IPO Record in Sight (WSJ)
No final decision has been made, but the addition of new Alibaba shares could help push the IPO beyond $20 billion, potentially topping Agricultural Bank of China Ltd.’s record $22.1 billion offering in Shanghai and Hong Kong in 2010, according to Dealogic, which tracks IPO data. The largest IPO in the U.S. was Visa Inc.’s $19.7 billion offering in 2010.

Former KPMG Partner Scott London Gets 14 Months for Insider Trading (WSJ)
Federal prosecutors argued Mr. London’s actions weren’t purely to help a friend, but also for personal gain. The judge said the amount of that gain – about $70,000 — was “a drop in the bucket” relative to Mr. London’s $900,000 annual salary. But Assistant U.S. Attorney James Bowman emphasized what he said was the serious nature of the crime, saying “any time you’re a vice president of KPMG and you’re on a street corner accepting bags of cash you’re part of a corrupt arrangement.”

KKR and Nasdaq Plan Market to Trade Shares in Private-Equity Funds (WSJ)
KKR & Co. plans to allow its investors to sell portions of their stakes in buyout funds through a private market run by Nasdaq OMX Group Inc., thought to be the first time pieces of these exclusive vehicles have been traded this way in the U.S., said people familiar with the matter.

Tech giants settle wage-fixing allegations for a reported $324M (Reuters)
Four major tech companies including Apple and Google have agreed to pay a total of $324 million to settle a lawsuit accusing them of conspiring to hold down salaries in Silicon Valley, sources familiar with the deal said, just weeks before a high profile trial had been scheduled to begin. Tech workers filed a class action lawsuit against Apple Inc, Google Inc, Intel Inc and Adobe Systems Inc in 2011, alleging they conspired to refrain from soliciting one another’s employees in order to avert a salary war. They planned to ask for $3 billion in damages at trial, according to court filings. That could have tripled to $9 billion under antitrust law.

Woman Jailed In Altercation Over Corn Dogs (HP)
Workers at a Midland, Texas business said Charmelle Henry threw 75 cents at them and demanded a corn dog, according to News West 9. When the 45-year-old wasn’t happy with the corn dog she received, she threw that at them as well and demanded a dog that was not microwaved. After giving her a second corn dog, the workers noticed that Henry had a knife in her hand. She allegedly told the workers that she would “stab [them] in cold blood” unless she got another corn dog. She also began stabbing the counter with her pocketknife, according to an arrest report obtained by MRT.com. One employee called police, who subdued the “extremely agitated” woman with a K-9 unit after she refused to follow their orders. Read more »

Opening Bell: 04.24.14

‘Flash Boys’ Resonates as Survey Finds High-Frequency Concerns (Bloomberg)
More than two-thirds of financial industry participants, 70 percent, say the U.S. equity markets aren’t fair for all, according to a survey conducted by ConvergEx Group LLC, which provides brokerage and trading-related services. Just over half, 51 percent, also said high-frequency trading is harmful or very harmful.

Facebook CFO Ebersman to Step Down Two Years After IPO (Digits)
Mr. Ebersman is leaving June 1 and being replaced by David Wehner, who joined Facebook in 2012 from Zynga to become the company’s vice president of corporate finance and business planning. Mr. Ebersman joined Facebook in 2009, leading the company into its initial public offering in May 2012. The former Genentech finance chief says he is returning back to the healthcare industry, without disclosing where.

Ratings Firms Ride Bond Resurgence (WSJ)
Six years after getting a failing grade for their role in the financial crisis, credit-rating firms are at the top of the class. Riding a global bond boom, the two biggest U.S. firms, Standard & Poor’s Ratings Services and Moody’s Investors Service, this month are expected to post record first-quarter profits. Fitch Ratings said in its annual filing this month that 2013 was “one of its best years ever.”

Investors Embrace ‘Catastrophe Bonds’ (WSJ)
With the U.S. hurricane season about a month away, insurers are issuing “catastrophe bonds” at the fastest clip since before the financial crisis. Insurers sell the bonds to help cover potential claims from hurricanes, tornadoes, earthquakes and other major insured risks. While losses on so-called cat bonds have been rare over the years, investors can forfeit both interest payments and their principal if disaster costs exceed designated levels, which gives insurers the right to tap the funds. The bonds have floating interest rates and are usually paid off upon maturity in three or four years. Cat-bond issuance in the first quarter more than doubled from the year-earlier period, to $1.2 billion, and second-quarter issuance is expected to hit an all-time high above $3.5 billion, according to Willis Capital Markets & Advisory. More than $2 billion of deals have closed or been announced this quarter, Willis said.

America’s First Cat Café is Popping Up in NYC This Week (Eater)
Pet food brand Purina ONE is opening a pop-up cat café at 168 Bowery this Thursday. For those unfamiliar, a cat café is a coffee shop populated with cats for customers to play with. It’s all the rage in Japan and Europe, and enterprising cat-lovers in San Francisco, Oakland, Portland, LA, Vancouver, and Toronto are racing to open cafés of their own. But with this pop-up, New York will become the very first North American city to actually get a cat café. Read more »