Opening Bell: 05.07.13

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HSBC Profit Rises as It Cuts Costs (WSJ)
Chief Executive Stuart Gulliver said the bank has cut 46,000 jobs since 2011, far more than he envisioned when he presented a three-year strategy that year. Then he said he’d shave around 10% from a 300,000-strong workforce. Mr. Gulliver said the bank has had to react to tough economic conditions in many markets, although he said he now sees the banking industry moving “into calmer waters” as the euro-zone crisis appears to have settled down. … The bank, Europe’s largest by assets, reported a sharp rise in first-quarter net profit, to $6.35 billion from $2.58 billion. After stripping out the fluctuating value of HSBC’s own debt and sold businesses, underlying pretax profit rose 34% to $7.59 billion from $5.65 billion in the first three months of 2012. Underlying revenue was up 5%, to $17.56 billion from $16.8 billion.

Societe Generale Announces New Cuts as Profit Falls 50% (DealBook)
The bank said first-quarter net income fell 50 percent, to 364 million euros ($476 million), from the period a year earlier. That was well below the 674.6 million euro profit expected by analysts surveyed by Reuters. Société Générale, the second-largest French lender, said it planned 900 million euros of cost reductions through 2015, adding to the 550 million euros of cuts last year. Severin Cabannes, the bank’s deputy chief executive, told CNBC television that the bank was in talks with its unions about eliminating 600 to 700 jobs at its headquarters, but added that there would be “no forced layoffs.”

German finance minister softens stance on EU banking union (Reuters)
German Finance Minister Wolfgang Schaeuble signaled a softening of his stance on a European banking union on Tuesday, saying the euro zone should press ahead on the basis of current law without waiting for a controversial overhaul of the EU’s Lisbon treaty. … Just last month, Schaeuble appeared to slam on the brakes by saying the European Union needed to consider treaty change before proceeding, due to the “doubtful legal basis” on which the project rested. Those comments sparked a backlash from EU officials and German partners like France.

Portugal’s Notes Rise as Nation Sells 10-Year Debt; Bunds Slide (Bloomberg)
“Portugal’s sale is important because it marks another step in the exit from the crisis,” said Luca Cazzulani, a senior rates strategist at UniCredit SpA (UCG) in Milan. “In the current market environment, there will probably be demand. Investors are rushing into anything that grants you a good yield and when you look at the Portuguese curve the 10-year is around 5.5 percent and so I think the sale will find demand.”

Soros Rumor Underpins Turning Tide Against Aussie (CNBC)
Rumors that George Soros was planning to short the Australia dollar has taken the wind out of the robust currency, fueling expectations that the tide is turning for the Aussie dollar. The Aussie fell 0.6 percent against the U.S. dollar late Monday on a report in the Sydney Morning Herald that bets against the currency totaling $1 billion were placed via Hong Kong and Singapore, believed to be by Soros Fund Management.

Christie reveals secret stomach surgery to lose weight (NYP)
New Jersey Gov. Chris Christie secretly underwent lap-band stomach surgery to aggressively slim down for the sake of his wife and kids, he revealed to The Post last night. … “A week or two ago, I went to a steakhouse and ordered a steak and ate about a third of it and I was full,” he said of his newly tamed appetite. He declined to say how much he lost, but sources said he has already shed nearly 40 pounds. … Sources said Christie didn’t make the decision lightly — he even had private conversations about the operation with once-rotund Jet coach Rex Ryan.
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Write-Offs: 05.06.13

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$$$ SEC and Harrisburg Settle Securities Fraud Charges [Reuters]

$$$ Buffett Ignores Gross’s New Normal, Pities Bond Investors [Bloomberg]

$$$ Elliott Fund Turns Attention to Compuware [WSJ]

$$$ Wall Street Pipeline Trinity Sees President Quit Amid Frat Fight [Bloomberg]

$$$ California Cities Can Ban Pot Shops, Court Rules [AP]

$$$ Wall Street Journal Kindly Requests Its Journalists Stop Looking So Ugly On-Camera [DI] Read more »

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  • 06 May 2013 at 6:11 PM

The ‘Wall Street Journal’ Guide To Evading Taxes And Getting Away With It

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  1. Get rich.
  2. Stow your money abroad and don’t tell Uncle Sam.
  3. Be a 79-year-old widow.

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  • 06 May 2013 at 5:51 PM

BofA And MBIA Can’t Get Enough Of Each Other

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The best and worst part of the long-running feud between MBIA and Bank of America is how it intricately intertwines many strands of lawsuits and stratagems and insurance disputes and market sniping into a single complex tapestry of orneriness. BofA and MBIA are suing each other about everything everywhere, and each case is not really about the thing it’s about – it’s about getting some leverage in some other case that is in turn itself probably about something else. As far as I can tell, though, the core is mostly:

  • MBIA insured some pre-crisis RMBS securitizations issued by Countrywide (now owned by BofA), and MBIA thinks those were pretty fraudy, which is a pretty widespread view, and so is suing Countrywide/BofA for a $3+ billion dollars in rep and warranty damages;1 and
  • MBIA also wrote Merrill Lynch (now also Bank of America!) some $6 billion in credit insurance/CDS on CMBS, which seems not to have been fraudy, but which MBIA wanted to get out of anyway because the exposures here were weighing down its otherwise potentially viable municipal bond insurance business;2 so
  • MBIA tried to essentially get rid of that CDS exposure by restructuring it into a subsidiary and casting that subsidiary into the fires of Mount Doom.

But that core expands out everywhere, since the only way out of this mess seems to have been deeper in. For instance, Bank of America decided to mitigate the credit risk on that CDS by getting long more MBIA credit, in the form of buying $136mm of MBIA bonds (at par!) and trying to block the restructuring of MBIA. This had the effect of strengthening the credit underlying its CDS contracts and also, one imagines, being annoying and thus scoring some points on the other, technically irrelevant, dispute. There was some suing about that too.3 Also probably some other suing, who can keep track. Lotta suing.

All that ended today, though, with a big-bang, wrap-up-everything-at-once settlement between MBIA and BofA.4 Here’s BofA’s version: Read more »

  • 06 May 2013 at 5:47 PM

Vinik Now Pretty Sure He Doesn’t Want To Be A Hedge Fund Manager Anymore

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Last month, Jeff Vinik was telling clients that planned to raise more money and was more focused than ever on running his eponymous hedge fund. Last week, he wrote them to say, “Eh, not so much.” Read more »

  • 06 May 2013 at 5:37 PM

California Jeweler Is Sorry He Traded A Rolex, Unmarked Envelopes Of Cash For Inside Information Re: Herbalife, Skechers

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Won’t happen again. Read more »

  • 06 May 2013 at 11:20 AM
  • Banks

Former Credit Suisse VP Who Spent Her Vacation At The Office Past Midnight Will Fit Right In At Goldman Sachs

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We don’t have her side of the story yet but from what her enemies say about her I like Agostina Pechi’s style. Pechi is the former Credit Suisse emerging markets sales VP who quit to go to Goldman and whom CS is now suing because she (allegedly) took a bunch of secret stuff with her when she left. Also because she (allegedly) did this:

[B]eginning in February 2013, Pechi represented to her manager as well as other senior group management that [a certain] client’s interest in this and other private transactions was flagging. Credit Suisse scheduled in-person meetings with the client in an effort to revive interest in the deals.

Pechi was deliberately evasive with management regarding the status of those meetings and whether high-level decision-makers on behalf of the client would attend. Based upon Pechi’s representations, senior Credit Suisse employees did not meet with the client.

However, as Credit Suisse later discovered, Pechi attended two meetings with representatives of the client, at least one of which was attended by high-level decision-makers on behalf of the client, as part of the above-referenced private transactions.

Upon information and belief, Pechi held these in-person meetings in an effort to shore up her relationship with the client in preparation for her departure and to explicitly discuss moving its business to Pechi’s new firm.

Except for those last two paragraphs, that sounds like something I would do!1 Speaking of misplaced diligence here’s how Pechi spent her last vacation at CS: Read more »

Opening Bell: 05.06.13

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Berkshire Hathaway’s 2013 Shareholder Meeting (DealBook)
Ms. Loomis of Fortune asks a question on behalf of a shareholder in the audience: How would you explain Berkshire and its value premise to the investor’s 13-year-old daughter? Mr. Munger takes first crack as Mr. Buffett helps himself to some See’s Candy fudge: “We like to stay sane while others go crazy. That’s a competitive advantage.”

JPMorgan Investors Urged to Split Chairman Role, Oust Directors (Bloomberg)
Stockholders should vote in favor of a proposal to split the roles of chairman and chief executive officer, both currently held by Jamie Dimon, at New York-based JPMorgan’s annual meeting May 21, Institutional Shareholder Services said in a report. ISS, which advises investors on proxy voting and corporate governance, cited “failures of stewardship” in opposing the re-election of three risk-committee directors. … ISS recommended that shareholders oppose the re-election of Risk Policy Committee members David Cote, Ellen Futter and panel Chairman James Crown. Former KPMG International Chairman Timothy Flynn, who was appointed to the committee after the loss disclosure last year, should be re-elected, ISS said. “The CIO losses revealed multiple points of failure in the risk oversight process, and certain members of the RPC lack relevant industry expertise,” ISS wrote.

As Companies Step Up Buybacks, Executives Benefit, Too (WSJ)
As corporations step up stock repurchases to return cash to shareholders, compensation targets tied to per-share earnings—a common factor in executive-pay calculations—are helping to increase many executives’ pay. The link worries some investors and compensation advisers because they fear the figure is too easily manipulated. The debate is a tricky one, though, because buybacks are generally seen as a plus for shareholders and thus something to be encouraged.

In Commerce Pick’s ’08 Answers on Finances, Possible Hints at Road Ahead (NYT)
Republican senators are likely to be interested in the Pritzker family’s reputation as innovators in the use of offshore trusts and foreign bank secrecy laws to shelter their wealth from income, capital gains and inheritance taxes. Even after tax code loopholes were closed, the family’s trusts were grandfathered in and it kept benefiting from them. Indeed, Senator Charles E. Grassley, Republican of Iowa, has called for scrutiny of her family’s trusts, saying she was “associated with the kind of tax avoidance activity that the president dismisses as fat cat shenanigans for others. It’s hypocritical to overlook tax avoidance when it’s convenient.”

Warren Buffett: Stocks Will Go ‘Far Higher’ Over Time (CNBC)
Even as stock indexes hit all-time highs, Warren Buffett predicts they’ll go “far higher” in the long run. … Acknowledging that milestones like Dow 15,000 can draw attention to stocks, Buffett said people should pay more attention when indexes cross those milestones on the way down because that’s when stocks are “cheaper” and more attractive to buy. There could be a pullback for stocks at any time, Buffett said, advising against attempts to time the market. “People pay way too much attention to the short term.”

Harvard’s Niall Ferguson Apologizes for ‘Stupid’ Keynes Remarks (CNBC)
Asked about Keynes’ observation that “in the long run we are all dead,” Ferguson said that Keynes had been indifferent to the long run because he had no children, and that he had no children because he was gay. … On Saturday, Niall Ferguson posted an apology on Twitter: “I apologize deeply and unreservedly for stupid and tactless remarks about Keynesthat I made. I should not have suggested—in an off-the-cuff response that was not part of my presentation—that Keynes was indifferent to the long run because he had no children, nor that he had no children because he was gay. This was doubly stupid,” Ferguson wrote on his blog. “First, it is obvious that people who do not have children also care about future generations,” he wrote. “Second, I had forgotten that Keynes’s wife Lydia miscarried.”
Read more »

Write-Offs: 05.03.13

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$$$ Vinik to Shut Hedge-Fund Business to Focus on Hockey Team [Bloomberg]

$$$ JP Morgan Under Regulatory Fire [WSJ]

$$$ Buffett Investors Arrive In Good Spirits [WSJ]

$$$ Glencore CEO’s: Expect Layoffs [WSJ]

$$$ Man accused of shoplifting from Finders Keepers says store name misleading [Yahoo] Read more »

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  • 03 May 2013 at 5:58 PM

Ringleader Of Insider-Trading “Fight Club” Didn’t Want Any Sarcastic Comments With His Inside Information

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I suppose in like 1985 there were people who worked on Wall Street and un-self-consciously ate cheeseburgers for breakfast, got shoeshines at their desks, went to strip clubs every night, and slammed down their phones hard enough to break them, but my assumption is that in 2013 any remaining “stereotypical Wall Street behavior” is mediated through popular culture. Some people go into finance with the goal of having a memoir that reads exactly like Liar’s Poker,1 and no one wears contrast-collar shirts because they look good. You wear them – if you do (do you?) – because you saw them in that movie.

Former Diamondback Capital analyst and insider trader Jesse Tortora actually wrote this:

In 2009, Tortora e-mailed a group that included Abbasi and Adondakis: “Rule number one about email list, there is no email list, fight club reference. Rule number two, only data points can be sent, no sarcastic comments. Enjoy. Your performance will now go up by 100 percent in 09 and your boss will love you. Game theory, look it up.”

Look it up, yo. That’s also from Bryan Burrough and Bethany McLean’s amazing Vanity Fair article on the endless pursuit of Steve Cohen, and while the fact that Tortora and his crew of cheeseballs called themselves “Fight Club” has been reported before, the fact that Tortora had to remind them of it BY SAYING “FIGHT CLUB REFERENCE” AFTER HIS FIGHT CLUB REFERENCES is new to me and makes me ashamed to be a human.

Why did these tools insider trade? Read more »

  • 03 May 2013 at 5:50 PM

Bankers Remind Berkshire Hathaway Vice-Chairman Charlie Munger A Lot Of Your Typical Junkie

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In an interview on CNBC, He said that Cyprus demonstrates, “an old truth, you can’t trust bankers to govern themselves. A banker who’s allowed to borrow money at X and loan it out at X plus Y will just go crazy and do too much of it, if the civilization doesn’t have rules that prevent it.” Warren Buffett’s right-hand man added, “What happened in Cyprus was very similar to what happened in Iceland, it was stark raving mad in both cases. And the bankers, they’d be doing even more if the thing hadn’t blown up. I do not think you can trust bankers to control themselves. They’re like heroin addicts.” [SFG]

  • 03 May 2013 at 5:37 PM

What If We Told You You Could See A So-So Stage Version Of American Psycho Or You Could See One With Live Music And Actors Who Know Their Lines?

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Would the latter sound like something you’d be interested in? If so, would you like to be able to say you helped make it happen? Then today’s your lucky day: the producers of the London musical have launched a kickstarter campaign and your donation will go toward “an extended seven-week rehearsal period” and the hiring of live musicians who’ll perform music by Duncan Sheik; plus you’ll get an AS tee-shirt, so that’s nice. [Kickstarter]