The Latest

Opening Bell: 05.23.13

Global Markets Roiled by Nikkei’s 7.3% Slide (AP)
Several reasons have been blamed for the 7.3 percent fall in the Nikkei index to 14,483.98, including a spike in Japanese government bond yields and unexpectedly weak Chinese manufacturing figures.

Euro-Zone Business Activity Falls Again (WSJ)
Markit Economics said its composite purchasing managers’ index for the euro zone—a measure of activity in the services and manufacturing sectors—rose to 47.7 from 46.9 in April, a stronger outcome than that forecast by economists but still below the level of 50 that separates growth from contraction. Speaking after the surveys were released, a member of the European Central Bank’s governing council said he didn’t expect the euro zone’s economy to pick up in the near future. “From my personal view, I don’t see at the moment any indication of a significant improvement in the economic situation for the immediate future,” said Ewald Nowotny, who is also governor of the Austrian central bank.

Wall Street Seeks Dodd-Frank Changes Through Trade Talks (Bloomberg)
U.S. bankers and insurers are trying to use trade deals, which can trump existing legislation, to weaken parts of the Dodd-Frank Act designed to prevent a repeat of the 2008 financial crisis. While the companies say they are seeking agreements that preserve strong regulations and encourage economic growth, their effort is drawing fire from groups who argue that Wall Street wants to make the trade negotiations a new front in its three-year campaign to stop or alter the law.

In a Plus for Electrics, Tesla Repays a Big Federal Loan Early (DealBook)
“Today’s repayment is the latest indication that the Energy Department’s portfolio of more than 30 loans is delivering big results for the American economy while costing far less than anticipated,” Ernest Moniz, the energy secretary, said in a statement. … The Energy Department on Wednesday said that losses on its loans were equivalent to 2 percent of its $34 billion portfolio.

Rating agencies under fire again (FT)
… for not upgrading RMBS fast enough.

For Philadelphia Bicyclist, a Cat Is His Co-Pilot (AP)
“People are thrilled to see the guy with the cat ride his bike down the street,” Saldia said. But online commenters have been less kind, questioning whether the unharnessed cat is safe. Saldia noted he is equally vulnerable while riding in the city and takes necessary precautions. “I’m very confident that the cat would be better off in an accident than I would be, so I’m not worried about taking her out,” he said.
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Write-Offs: 05.22.13

$$$ Bernanke Says Premature Tightening Would Endanger Recovery [Bloomberg]

$$$ Uneasy Peace After Dimon’s War

$$$ Apple Tax Grilling Becomes Cook’s Latest Testing Crisis [Bloomberg]

$$$ Morgan Stanley’s Head of Fixed Income to Retire [Dealbook]

$$$ Ty the tiger has surgery to remove giant, four-pound hairball [10News] Read more »

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After continued high-profile security breaches over the past year, Twitter Inc. on Wednesday announced it will bring increased security features to users, a way to further verify a user’s identity when logging in to his or her profile…The process is much like other two-factor authentication services across the Web. When a user tries to log in to his or her profile, they are asked to provide a cellphone number. Twitter sends an SMS message to that phone, and the user is asked to enter that code to continue the login. The new feature is optional, and must be turned on inside the settings menu…The new feature comes in the wake of a string of widely publicized hacks of visible Twitter accounts, including those owned by news outlets like the Financial Times, the Guardian and others. Most recently, when the Associated Press account was hacked, a single alarmist tweet was enough to send U.S. stock markets into a tailspin, plunging the Dow by upwards of 150 points in a matter of minutes. [WSJ, earlier]

As you may have heard, SAC Capital is facing some legal trouble at the moment. In addition to the nine current or former employees who have “been linked to insider trading while working at the firm, including four who have pleaded guilty to crimes,” it’s apparently not out of the realm of possibility that the feds will go after founder Steve Cohen on RICO charges. In light of all that, it’s not so shocking to hear that some clients are contemplating submitting redemption requests for the June 3 deadline, on top of the $1.7 billion investors requested to pull earlier in the year. Then you have Ed Butowsky, who is 1. Thinks now more than ever is the time to double down on the Big Guy and 2. Can’t wrap his mind around the notion that investors would look at SAC and see anything but a surefire win. Read more »

I feel like I’m on the “the too-big-to-fail subsidy is negative!” beat, even though I only kind of believe it, so in that spirit here is a fun paper from Goldman Sachs’ Global Markets Institute1 that finds that the too-big-to-fail subsidy is negative. That is, Goldman concludes, contrary to popular belief, that the biggest U.S. banks actually don’t have a funding advantage over smaller banks due to the possibility that they’ll be bailed out by the government. Here is the money picture:

If that’s hard to read: the bonds of the six biggest U.S. banks – the ones whom everyone thinks the government would rescue if they blew up, JPM-C-BAC-GS-MS-WFC – yielded on average 6bps more than the average non-TBTF-bank bond before the start of the crisis in 2007. They traded hundreds of basis points tighter during the crisis (TBTF subsidy!), but now are back to trading wider: Read more »

Would it surprise you to know that a boiler room operation that doesn’t let junior employees sit down would instruct its employees to cold call potential investors using lines from a script that include such “power phrases” as “This account will come back to you in spades” and “Give me just 1% of your trust and confidence and I will earn the other 99%”? That a place whose founder thought making cameos in Shia LaBeouf movies was a good idea would tell those same employees to say things like “If I am half right, we go out for a steak dinner on you…is that fair enough?”? That that same founder, who has been charged with fraud, in addition to intimidation and harrassment (because he threatened to run over a broker), would coach his staff to respond to someone saying they need to discuss a possible investment with their wife with the line “Let’s face it, if you go home and tell your wife that you want to invest with a broker whom you don’t know very well, chances are you will be hit with a frying pan and spend the night on the couch”? Probably not! And, yet, it is still an amazing thing to behold. John Thomas Financial’s full pitchbook of proprietary comebacks and “closers” can be found here. Our favorites: Read more »

5 Red Flags When Choosing a Financial Planner

You know what they say: You can’t choose your family, but you can choose your financial planner. Or something like that. One of the great things of being in charge of your money is choosing who (if anyone) will help you manage it. The choice isn’t always an easy one. How will you know that your planner is reputable and trustworthy? Read more »

  • 22 May 2013 at 2:04 PM

Phil Goldstein Not Exactly Mellowing With Age

Firsthand Technology Value Fund manager Kevin Landis must ache for his glory days, back during the dot-com boom, when everything he (or anyone else) touched turned to gold and he didn’t have to read letters like this one, from Bulldog Investors’ Phil Goldstein. Read more »