Opening Bell

Opening Bell: 04.02.14

JPMorgan Assailed by Russia as Bank Blocks Payment (Bloomberg)
The biggest U.S. bank thwarted a remittance from the Russian embassy in Astana, Kazakhstan, to Sogaz Insurance Group “under the pretext of anti-Russian sanctions imposed by the United States,” the ministry said yesterday in a statement on its website. Sogaz lists OAO Bank Rossiya, a St. Petersburg-based lender facing U.S. sanctions over the Ukrainian crisis, as a strategic partner on its website. Interfering with the transaction was an “absolutely unacceptable, illegal and absurd decision,” Alexander Lukashevich, a ministry spokesman, said in the statement.

Virtu Said to Delay IPO Amid Furor Spurred by Michael Lewis Book (Bloomberg)
Virtu Financial Inc., the high-frequency trader that announced plans last month to sell shares, has delayed the deal, two people with knowledge of the matter said. Virtu’s bankers won’t start marketing the initial public offering until after April 20, delaying the process from this week, according to the people, who asked not to be named because the decision is private. The delay comes amid unprecedented scrutiny of high-frequency traders. “Flash Boys,” the Michael Lewis book released yesterday, argues that high-speed traders, Wall Street brokerages and exchanges have rigged the $23 trillion U.S. stock market. New York Attorney General Eric Schneiderman is examining privileges such as enhanced data feeds marketed to high-speed firms, while the Federal Bureau of Investigation is looking into whether those traders are breaking U.S. laws by acting on nonpublic information.

SEC Investigations Into High-Frequency Trading Under Way (WSJ)
U.S. securities regulators are examining whether some rapid-fire trading firms are engaged in unlawful trading practices, Securities and Exchange Commission Chairman Mary Jo White said Tuesday. Ms. White, testifying before a House Appropriations subcommittee, said the SEC currently has “a number” of ongoing investigations regarding “market integrity and structure issues, including high-frequency traders.” She declined to provide specifics about the investigations, but said they have been under way for “quite some time.” “We’re very much focused on any abuses in that space,” she said.

High-Frequency Hyperbole, By Cliff Asness (WSJ)
A few nights ago, CBS’s “60 Minutes” provided a forum for author Michael Lewis to announce that Wall Street is “rigged” and for the sponsors of a new trading venue called IEX to promise to unrig it. The focus of the TV segment was high-frequency trading, or HFT, an innovation now over 20 years old. The stock market isn’t rigged and IEX hasn’t yet generated a lot of interest. In our profession, what we saw on “60 Minutes” is called “talking your book”—in Mr. Lewis’s case, literally.

Bitcoins aren’t cash, so Silk Road creator’s clean: lawyer (NYP)
In papers seeking to dismiss the feds’ case against Ross Ulbricht, lawyer Joshua Dratel said the IRS recently ruled Bitcoin is property – and not a “monetary instrument” – so the money laundering charges against his client should be tossed. “Bitcoins, the exclusive means of payment on Silk Road, do not qualify as ‘monetary instruments,’ and therefore cannot serve as the basis for a money laundering violation,” Dratel wrote.

French artist starts fortnight inside bear (BBC)
Abraham Poincheval first performed Dans La Peau de l’Ours – Inside the Skin of the Bear – at the CAIRN Centre for Contemporary Art in Digne last year. He is now reprising the piece at the Hunting and Wildlife Museum in Paris, where he will remain until 13 April. Poincheval previously spent a week in an underground hole beneath a bookshop in Marseilles in October 2012. According to the Musee de la Chasse et de la Nature, Poincheval is a performance artist “familiar with extreme situations”. The performance piece will see him eat, drink, sleep and relieve himself inside the sterilised carcass of a bear while being filmed by two cameras. Read more »

Opening Bell: 04.01.14

Facebook CEO Zuckerberg’s Base Salary Falls to $1 (Bloomberg)
Zuckerberg, who is Facebook Inc. (FB)’s chief executive officer and also the 22nd richest person in the world as ranked by the Bloomberg Billionaires Index, was paid $1 in salary for 2013, according to a regulatory filing with the U.S. Securities and Exchange Commission today. That’s down from a base salary of $503,205 in 2012, the year that Facebook went public…Zuckerberg, whose wealth totals around $27 billion, owns Facebook shares that give him 61.6 percent of voting power in the Menlo Park, California-based social network, according to the filing. He saw his net worth balloon last year as Facebook’s stock more than doubled in value.

Drug Company Seeks to Be Repaid Legal Fees in SAC Capital Inquiry (Dealbook)
Elan Pharmaceuticals is seeking to recoup the more than $1.5 million in legal fees it paid to comply with document requests by the federal government in its insider trading investigation of the hedge fund SAC Capital Advisors. The drug company is asking the federal judge presiding over the hearing in April on the guilty plea and penalty for Steven A. Cohen’s hedge fund to consider it as a victim under the Mandatory Victims Restitution Act. Elan submitted a letter to Judge Laura T. Swain of federal District Court saying it incurred the legal fees from its outside law firm Shearman & Sterling in connection with the SAC inquiry.

FBI Investigates High-Frequency Traders for Abuse of Information (Bloomberg)
The FBI joins a roster of authorities examining high-frequency trading, in which firms typically use super-fast computers to post and cancel orders at rates measured in thousandths or even millionths of a second to capture price discrepancies. New York Attorney General Eric Schneiderman opened a broad investigation into whether U.S. stock exchanges and alternative venues give such traders improper advantages.

Makers of Bitcoin A.T.M.s See a Not-Quite-Cashless Future (Dealbook)
In addition to the Glocks and Remingtons that have long been available at Central Texas Gun Works, customers can now buy something new: Bitcoin. A bulky blue machine in the lobby of the gun store in Austin, Tex., is one of the first in the country to allow users to buy and sell Bitcoin for cash. “I drove about 20 miles to come use the A.T.M.,” said Mitch Frink, who took $160 out of the machine in its first week in operation. “I wanted to be able say, ‘Yeah, I sold Bitcoin for straight cash and could get it within 30 minutes.’ ” The machine, built by the Las Vegas company Robocoin, is a somewhat odd creation. If Bitcoin is aimed at moving the world toward a cashless future, how long will a cash-dispensing machine for the virtual currency last, particularly when it is more awkward to use than a traditional bank A.T.M.? Just to create an account, Robocoin users have to provide state-issued identification and a palm scan.

Va. couple wins lottery three times in same month (USAT)
Lightning struck again for a Portsmouth, Va., couple who won the Powerball drawing earlier this month. Calvin and Zatera Spencer first won $1 million on March 12. Then, on March 26, Calvin Spencer won $50,000 with 10 winning tickets in the Virginia Lottery’s Pick 4 game. But it doesn’t stop there. The next day, shortly after dropping his wife off for an appointment, Calvin Spencer bought a Virginia Lottery Scratcher ticket, $100 Million Cash Extravaganza, and won the $1 million prize. “Baby, we did it again!” he told her. Read more »

Opening Bell: 03.31.14

Swiss Antitrust Regulator Probes Eight Banks Over Alleged FX-Rigging (Bloomberg)
The authorities are examining whether firms colluded to fix foreign-exchange rates, the Bern-based watchdog, also known as Weko, said in a statement today. JPMorgan Chase & Co., Citigroup Inc., Barclays Plc and Royal Bank of Scotland Group Plc are among the other firms being probed, along with Zuercher Kantonalbank and Julius Baer Group Ltd., Weko said. More banks and brokers may have been involved, the regulator added.

Yellen Says Job Market Is Far From Normal (WSJ)
“The U.S. economy is still considerably short of the two goals assigned to the Federal Reserve by the Congress” of low and stable inflation and maximum sustainable employment, Ms. Yellen told a conference on community investment.

IMF still sees advantage for ‘too important to fail’ banks (Reuters)
Top banks in the euro zone benefited from an implicit taxpayer subsidy of $90 billion to $300 billion in 2012 due to ongoing state support which makes them “too important to fail,” the International Monetary Fund said in a report on Monday. Subsidies in the United Kingdom and Japan may have been as high as $110 billion in the period of 2011-12, while they ranged from $20 billion to $70 billion in the United States, the IMF said in a chapter of its twice-yearly “Global Financial Stability Report.”

Hong Kong Regulator Probes Departed J.P. Morgan Executive (WSJ)
It isn’t known why Mr. Fang decided to leave the bank after a long period as a key deal maker in China or why exactly the ICAC visited his offices. The memo from March 24 said Mr. Fang planned to retire and people familiar with the matter said he wants to spend more time with his family and pursue new opportunities.

Columbia track star chases down alleged ticket scammer (NYP)
A Columbia University track star who was duped into buying two bogus tickets ran after the alleged scammer peddling the fake ducats — and caught him after nearly 20 blocks. The Ivy Leaguer, a 20-year-old finance major, probably should have known that the Craigslist ad offering two tickets for $210 each to the hottest sporting event in the city was too good to be true…But the Ivy League victim met up with the phony salesman outside the arena anyway, trading his cash for two inkjet printouts of tickets that were worth about as much as a pair of takeout menus. “I have never been to Madison Square Garden,” said the student, who didn’t want his name used for fear of reprisal. “So I was really looking forward to it.” But when the guy and his friend presented the printouts to an MSG ticket taker before game time, they were told they were fake. The pals then immediately concocted a plan to catch the crook. They still had the hustler’s number, so the friend called the seller and pretended that he wanted more tickets. When the alleged crook arrived at a meeting place, the track star confronted him and demanded his money back. “He just thought I was some other random customer at first, and he didn’t even recognize me,” the student said. “Then, I pulled out the tickets he scammed me with.” The seller reached into his pocket as if he was retrieving the man’s money but then turned and fled. “I was running after him screaming, ‘Help! Help!’ ” the student recalled. “He was much bigger than me. But I got him.” A pedestrian helped the fleet-footed student subdue the alleged scam artist along West 50th Street, about 17 blocks from the arena, until police arrived. Read more »

Opening Bell: 03.27.14

S&P wants to split up $5 billion U.S. ratings lawsuit (Reuters)
Standard & Poor’s asked a federal judge to split up the U.S. government’s $5 billion civil fraud lawsuit accusing it of lying about its credit ratings, saying it would be unfair to have to defend against a case of such “unmanageable scope” all at once. In a court filing on Tuesday, the McGraw Hill Financial Inc unit proposed holding a trial in two phases, with the first focusing on just the 17 securities where Citigroup Inc is alleged to have suffered losses. S&P said this would cover over 30 percent of alleged losses suffered by financial institutions on the 158 securities in the February 2013 lawsuit, and limit the risk of juror confusion. In contrast, a single trial would force jurors to balance government claims that S&P’s ratings lacked “independence” and “objectivity” against “an overwhelming amount of information regarding the actual securities at issue and the detailed process by which S&P determined its ratings,” S&P said.

Activist Investors Often Leak Their Plans to a Favored Few (WSJ)
Shares of Rino International Corp. sank 28% in the two days after investment firm Muddy Waters LLC put out a report attacking the Chinese company’s accounting. Three investment firms were ready for the news. The firms had been tipped beforehand by Muddy Waters about the scathing November 2010 report, according to a person close to the matter, who said one of them made a bet against Rino stock that produced a $1 million-plus profit. “We sold advance copies of our report,” said Muddy Waters’s founder, Carson Block, adding that since then he has tried to limit advance knowledge of his firm’s research. For a new breed of “activist” investors, tipping other investors is part of the playbook. Activists, who push for broad changes at companies or try to move prices with their arguments, sometimes provide word of their campaigns to a favored few fellow investors days or weeks before they announce a big trade, which typically jolts the stock higher or lower. In doing so, they build alliances for their planned campaigns at the target companies. Those tipped—now able to position their portfolios for price moves that often follow activist investors’ disclosures—benefit in a way that ordinary stockholders who are still in the dark don’t.

Citigroup’s Mexico situation ‘a horror show’: Dick Bove (CNBC)
“The situation in Mexico is, in my view, a horror show because basically, at this stage, seven years after the big crisis which almost—which did make them bankrupt—this company finds that it doesn’t have controls in Mexico and lets $400 million walk out the door,” he said. “This company is not a ‘buy.’ I don’t care what the price to tangible book is. It is not a ‘buy.’ ”

White House’s Sell Russian Stocks Recommendation Flopping (Bloomberg)
White House press secretary Jay Carney’s debut as a short-selling tout is off to a rough start. Since Carney said March 18 that the only investments worth making in Russian equities are wagers the market will decline, short sellers have been pulling out as the Micex gauge rebounded 1 percent. The percentage of borrowed shares in the biggest U.S. ETF tracking Russia’s market — a barometer of short selling — has fallen to 14 percent of the total stock, from 17 percent the day Carney spoke and a record 21 percent on March 3, according to financial data provider Markit.

Ergen says LightSquared could be worth $8.9 billion (Reuters)
LightSquared, owned by Phil Falcone’s Harbinger Capital Partners, went bankrupt in 2012, when the Federal Communications Commission revoked its license to operate spectrum out of concern it could interfere with GPS systems. Ergen then acquired about $1 billion of the company’s senior loan debt, giving him a controlling stake in LightSquared’s capital structure.

North Korean men must get Kim Jong Un’s haircut (NYDN)
Supreme Leader Kim Jong-Un, in a bizarre bit of tonsorial tyranny, decreed that his 12 million countrymen adopt his decidedly retro high-and-tight ’do. The diminutive despot delivered his “fashion guideline” about two weeks ago, likely ensuring that Dennis Rodman and his multi-hued mop will never return to the nation. The “Un and only” haircut, once popularized by ’90s boy bands, was unimaginatively dubbed “The Dear Leader Kim Jong-Un” — more of a mouthful than “a little off the sides.” The 31-year-old’s look is simple: Short and slicked back on top, buzzed to the skin above both ears. North Korea’s citizens were not too keen on the government-ordered grooming, griping that it’s not the right look for everyone. “Our leader’s haircut is very particular, if you will,” one source told the Korea Times. “It doesn’t always go with everyone since everyone has different face and head shapes.” Read more »

Opening Bell: 03.26.14

King Raises $500 Million in ‘Candy Crush’ Maker’s U.S. Offering (Bloomberg)
King and shareholders Apax Partners LLP and Index Ventures sold 22.2 million shares for $22.50 each, according to data compiled by Bloomberg, after offering them for $21 to $24. The IPO price values King at $7.09 billion.

ECB Mulls Bolder Moves to Guard Against Low Inflation (WSJ)
European Central Bank officials sent strong signals Tuesday that they are willing to consider dramatic steps to guard against dangerously low inflation, suggesting the bank is prepared to shed some of its traditionally cautious approach. The possible tools, cited by some top policy makers from different parts of the euro zone, include effective negative interest rates—meaning rates so low that commercial banks would essentially pay the ECB to park their extra cash overnight. They also include purchases of government or private-sector debt to hold down long-term rates and spur lending.

Facebook to Buy Virtual Reality Firm Oculus for $2 Billion (WSJ)
Facebook made its second blockbuster acquisition of the year, agreeing Tuesday to acquire Oculus VR Inc., a 20-month-old maker of virtual-reality goggles, for $2 billion in cash and stock. Like Facebook’s $19 billion purchase last month of text-messaging service WhatsApp, the deal is part of the social-networking company’s vast ambition to connect people across all kinds of devices and modes of communication. The deal also highlights the intense competition among big technology companies for promising startups, even when those startups, like Oculus and WhatsApp, have little revenue. Oculus’s headset, called Rift, today is a visual device for playing videogames. But Facebook Chief Executive Officer Mark Zuckerberg said on Tuesday that the social network has bigger plans for it. “We’re going to make Oculus a platform for many other experiences,” Mr. Zuckerberg said in a statement.

BlackRock’s Fink Sounds the Alert (WSJ)
In a shot across the bow of activist investors, BlackRock Inc. BLK +1.66% Chief Executive Laurence Fink has privately warned big companies that dividends and buybacks that activists favor may create quick returns at the expense of long-term investment. In so doing, the head of the world’s largest money manager by assets lent his voice to a popular criticism of activist investors, even as his firm sometimes aligns with and may benefit from their efforts. “Many commentators lament the short-term demands of the capital markets,” Mr. Fink wrote in the letter reviewed by The Wall Street Journal, sent to the CEO of every S&P 500 company in recent days, according to BlackRock. “We share those concerns, and believe it is part of our collective role as actors in the global capital markets to challenge that trend.”

Former Co-op bank boss recounts ‘hellish’ months after drugs revelation (Guardian)
Paul Flowers, the former Co-operative Bank chair and methodist minister exposed last year for allegedly taking drugs and booking male prostitutes, has spoken publicly for the first time about his addiction – revealing he spent a month in a rehab clinic, and describing the storm around his private and professional life in recent months as “hellish”. Flowers said he spent 28 days before Christmas at a well-known hospital tackling his drug habit, and he was still making weekly visits for treatment. He said that while still chairman of the bank, he had come under “considerable pressure” from ministers to conclude the Co-operative’s much-publicised agreement to buy 600 branches from Lloyds.

Ukrainian women launch sex boycott against Russian men (NYP)
The sex boycott is called “Don’t Give It to a Russian,” and organizers are calling on Ukraine’s “female heroes [to] fight the enemy by whatever means.” The campaign was named after a line from a poem by Ukrainian national hero Taras Shevchenko called “Kateryna” that reads “Fall in love, O dark-browed maidens, but not with the Moskaly [Russians].” Katerina Venzhik, an editor of the Russian news Web site Delo.UA who lives in Kiev, said the no-sex pledge was deadly serious. “We’ve used this campaign to draw attention to the chaos done by the Russians in Crimea: kidnapping, limiting the rights of people, preventing journalists from doing their work. And yes, Ukrainian women prefer Ukrainian men,” she told The Independent. Read more »

Opening Bell: 03.25.14

Loneliness of Kiev Bond Trader Shows Market Was Wiped Out (Bloomberg)
Not long ago, Ukraine was one of the hottest spots in emerging markets, posting returns of 24 percent on its dollar-denominated notes in 2012 and luring foreign firms led by Franklin Resources Inc. Those returns turned negative last year as the tug of war between Russian President Vladimir Putin and the West for control of Ukraine began to take shape amid the protests. The value of stocks traded on the Ukrainian Exchange has dropped 27 percent this year to 970 million hryvnia ($91 million), according to data on the bourse’s website. The benchmark equity gauge is up 9.3 percent over the past year after tumbling 69 percent the previous two years.

Morgan Stanley investors await Fed’s buyback blessing (Reuters)
Morgan Stanley shareholders will find out this week whether the U.S. Federal Reserve will allow the bank to start returning capital to shareholders in a meaningful way for the first time since the financial crisis. But even if the Wall Street bank gets the Fed’s blessing to buy back more shares and potentially raise its dividend, it is unlikely to hit a shareholder return target Chief Executive James Gorman set out for this year, analysts and investors said.

S&P Downgrades Brazil Credit Rating, Citing Weak Growth (WSJ)
The downgrade marks a turnaround from 2008, when Brazil’s bonds were awarded investment-grade status amid the global financial crisis. The South American nation seemed to shrug off much of the global downturn, spurring an investor frenzy for Brazilian securities. Brazil soared to 7.5% growth in 2010.

SEC Is Probing Dealings by Banks and Companies in Loan Securities (WSJ)
The Securities and Exchange Commission is investigating whether a Wall Street boom in complicated bond deals is creating new avenues for fraud, according to people close to the probes. SEC investigators are looking at whether banks and companies are using the bond deals to hide certain risks illegally, said the people close to the probes. A number of likely cases in that area are in the pipeline, one of the people said. Separately, the government has expanded an inquiry into how Wall Street banks sell the deals, the people added. The securities being examined aren’t traded on any exchanges or open platforms, and their prices are negotiated privately between buyers and sellers.

For Power Suits in Executive Suites, the Latest Accessory Is Rainbow Loom (WSJ)
Until his grandchildren got Rainbow Loom kits, Ralph Fatigate had never owned a bracelet. Now he has nine, all made of tiny colored rubber bands. He wears them to meetings with bankers around the world. Still, enough is enough. “I will wear no more than four at a time,” said Mr. Fatigate, a former New York state banking regulator. Rainbow Loom bracelets are all the rage among the tween set, and now they are gaining favor among businessmen who can’t say no to a handmade gift from their kids—or their grandchildren…Attorney Greg Keating has an even larger bracelet collection, with about 20 pieces he can choose from when getting dressed for work. Mr. Keating represents companies in employment litigation as a shareholder at law firm Littler Mendelson PC in Boston. His 11-year-old daughter Caroline started working with a looming kit last August. Now Mr. Keating said “she’s probably approaching a black belt in Rainbow Loom” and recently made her dad a bracelet of glow-in-the-dark bands. Now he’s noticing that other men in the workplace are wearing these bracelets, too: He’s spotted them in his office elevator, at business meetings and even in the courtroom…During trials, lawyer Donald Migliori, a member at firm Motley Rice, wears two Rainbow Loom bracelets made by his children. He said he is reluctant to wear other kinds of jewelry that might distract jurors, but the loom bracelets are a welcome reminder of his kids during the more than half of the year he spends on the road for work. His 7-year-old daughter, Gloria, made him a purple, yellow and red Rainbow Loom ring recently. That’s where Mr. Migliori, who has been involved in major litigation involving terrorism and tobacco, had to draw the line. The rubber accessories “are beautiful and meaningful,” Mr. Migliori said. “But the ring is so thick that I can’t even close my hand with it on.” Still, he added, “it makes a nice little keychain.” Read more »

Opening Bell: 03.24.14

Ackman’s Pershing Near Break Even on Losing Herbalife Bet (Bloomberg)
Bill Ackman is close to breaking even on his wager against Herbalife Ltd. (HLF), a trade by his Pershing Square Capital Management LP that he last month called its biggest loser, after the stock plunged following disclosure of a U.S. Federal Trade Commission investigation. Herbalife fell to a eight-month low of $49.54 on March 21, approaching the level when Ackman first put on his trade. The hedge-fund manager started what would become a $1 billion bet against the stock in May 2012, he has said, before disclosing it on Dec. 19 of that year. During that period the stock was trading at an average price of $48.58. Ackman has since restructured his Herbalife wager using long-term put options, making an exact determination of his break-even point difficult.

Tremors in the Palace of the Bond-Fund King (NYT)
William Powers, a senior executive at Pimco until 2010 and now a private equity investor, said Mr. Gross was “an autocrat” who brooked little dissent. “Those who disagree do so at their peril,” Mr. Powers said on Bloomberg TV. He added that Mr. El-Erian had improved the atmosphere at the company by establishing a more collaborative management structure, so there is reason to hope that “this sets up a very healthy future.” Laird R. Landmann, co-director of fixed-income at TCW, has worked at Pimco and has many friends there. “Bill Gross is a genius, the best there is at bond trading,” Mr. Landmann said. He added, however, that anyone who has ever worked at Pimco “will tell you that Bill is authoritarian, that there are times when you just know that you can’t talk to him.”

Macquarie Sees 2014 Net Income Climbing to Six-Year High (Bloomberg)
Macquarie Group Ltd. (MQG), Australia’s biggest investment bank, expects its full-year earnings to rise as much as 45 percent to the highest since 2008 as the outlook for its fixed-income, currencies and commodities unit improved.

Top J.P. Morgan Executive in China Expected to Resign (WSJ)
One of J.P. Morgan Chase JPM & Co.’s top China executives is expected to resign amid a continuing probe of the U.S. bank’s Asian hiring practices, according to people familiar with the situation. It isn’t known why Fang Fang, who is chief executive for China investment banking and vice chairman of investment banking in Asia, decided to leave the largest U.S. bank after more than a decade of deal-making. He recently told the bank he wanted to retire, one of these people said.

Report: Germans seize cocaine on its way to Vatican (AP)
The drug haul was unremarkable, but the destination raised eyebrows. German weekly Bild am Sonntag reported Sunday that customs officials intercepted a cocaine shipment destined for the Vatican in January. Officers at Leipzig airport found 12 ounces of the drug packed into 14 condoms inside a shipment of cushions coming from South America. The paper says the package was simply addressed to the Vatican postal office, meaning any of the Catholic mini-state’s 800 residents could have picked it up…Neither German customs nor the Vatican could be immediately reached for comment. Read more »