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Opening Bell: 11.10.10

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GM Reports $2.16 Billion Profit Ahead of Share Sale (BW)
Earnings before interest and taxes rose to $2.28 billion from $2.03 billion during the previous three months of the year, the Detroit-based company said today in a statement. Revenue was $34.1 billion. Chief Executive Officer Dan Akerson, who took over from Ed Whitacre on Sept. 1, has said GM can make “significant” profit even amid a U.S. auto sales rate running about 30 percent slower than before the financial crisis.

Ireland's Fate Tied To Doomed Banks (WSJ)
With doubts swirling about the solvency of the Irish state in early September, Finance Minister Brian Lenihan summoned a dozen senior government and bank officials to a conference room nicknamed the "torture chamber," a nod to its history as a venue for painful meetings. For two years, Ireland had poured money on a raging banking crisis, to no avail. Each estimate of the rising price of rescuing Ireland's banks turned out too low. Mr. Lenihan needed to halt the drip-drip of bad news that was leading his country to ruin. "I want a final figure ASAP," he told the group. Two weeks later, the estimate came in: Up to €50 billion—nearly $50,000 for every household in the Emerald Isle. But now, investors are betting the bill could be higher still and could reignite Europe's sovereign-debt crisis...It wasn't supposed to be this way. In October 2008, Mr. Lenihan boasted that his government had devised "the cheapest bailout in the world so far." Ireland's financial regulator pronounced the banks "more than adequately capitalized."

Zoellick Sees 'Elephant,' Not Endorsing Gold Standard (CNBC)
What "the price of gold has been telling people is that there is a lack of confidence in some of the fundamentals growth policies," Robert Zoellick, president of the World Bank said. "The golden elephant in the room, whether people recognize it or not, is being used as an alternative monetary asset," he said.

Goldman Executive Fired Over Violations (FT)
Alexandre Harfouche, a London-based managing director and head of European block trading, was sacked for failing to make proper disclosures to the bank’s compliance department, according to people familiar with the matter. “Mr Harfouche no longer works for the firm, and I have no idea what his plans are,” a Goldman spokesman said, declining to comment further. Mr Harfouche could not be reached for comment. While Goldman did not specify the reasons for Mr Harfouche’s departure, people close to the situation stressed that no securities law had been violated and no client had been harmed by the events that led to his dismissal.

GeoSphere Capital Management: "Together with supply/demand factors globally, QE2 boosts the case for owning commodities and commodity-related equities." (PDF)
Third quarter letter.

Wall Street Collects $4 Billion From Taxpayers as Swaps Backfire (Bloomberg)
For more than a decade, banks and insurance companies convinced governments and nonprofits that financial engineering would lower interest rates on bonds sold for public projects such as roads, bridges and schools. That failed promise has cost more than $4 billion, according to data compiled by Bloomberg, as hundreds of borrowers from the Bay Area Toll Authority in Oakland, California, to Cornell University in Ithaca, New York, quietly paid Wall Street to end agreements since 2008.

Goldman's O'Neill Says China, U.S. in `Grand Bargain' on Yuan (Bloomberg)
“People forget, but the currency has risen by 3 percent since the summer and has risen nearly 25 percent over five years,” said O’Neill, chairman of Goldman Sachs Asset, in an interview on Bloomberg Television. It’s not a “fluke” that China is given a bigger share at the Washington-based IMF, and “that’s part of the grand bargain,” he said.

Google To Give All Staff 10% Raise (WSJ)
The pay hike comes as Google ramps up its battle with competitors, especially neighboring Facebook Inc., in a fight to secure talented staff. Roughly 10% of Facebook's employees are Google veterans and other Silicon Valley companies have aggressively poached employees from the Internet giant.

Baupost Group To Return Cash (BI)
Seth Klarman's Baupost Group will return 5% of its capital to investors at the end of the year, says a source who has viewed a November 8th letter from Klarman to Baupost's investors. Baupost has generated an monstrous $6.5 billion in net investment profits from January 1, 2009 to September 2010 ("net" of an estimated $2 billion of performance and management fees). This growth has propelled the firm to an enormous $23 billion in assets. Klarman considers this size too large for the current market environment, in which he finds opportunities scarce.

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JPMorgan CIO Risk Chief Said To Have Trading-Loss History (Bloomberg) Irvin Goldman, who oversaw risks in the JPMorgan Chase & Co. (JPM) unit that suffered more than $2 billion in trading losses, was fired by another Wall Street firm in 2007 for money-losing bets that prompted a regulatory sanction at the firm, Cantor Fitzgerald LP, three people with direct knowledge of the matter said. JPMorgan appointed Goldman in February as the top risk official in its chief investment office while the unit was managing trades that later spiraled into what Chief Executive Officer Jamie Dimon called “egregious,” self-inflicted mistakes. The bank knew when it picked Goldman that his earlier work at Cantor led regulators to penalize that company, according to a person briefed on the situation. Risk Manager's Past Scrutinized (WSJ) Mr. Goldman joined J.P. Morgan's CIO in January 2008 as a trader. The bank placed him on leave in September 2008 after it learned that NYSE Arca had opened a regulatory inquiry tied to his trading activities at Cantor Fitzgerald, people familiar with the matter said. After J.P. Morgan placed him on leave, Mr. Goldman founded a consulting firm based in New York called IJG Advisors LLC. He rejoined J.P. Morgan in September 2010 in the Chief Investment Office, this time focusing on strategy. Current J.P. Morgan Chase Chief Risk Officer John Hogan chose Mr. Goldman to serve as CRO of the office, a position that had been filled by Peter Weiland, who remains with J.P. Morgan's CIO. Mr. Hogan wasn't aware of the Cantor Fitzgerald incident or the earlier trading losses at J.P. Morgan Chase, said a person close to the bank. Eurobonds To Be Discussed At EU Summit (Reuters) Merkel has said she is not opposed to jointly underwritten euro area bonds per se, but believes it can only be discussed once the conditions are right, including much closer economic integration and coordination across the euro zone, including on fiscal matters. That remains a long way off. Will Greece Be Able to Print Drachma in a Rush? (Reuters) If or when policymakers finally decide Greece should leave the euro, the exit could happen so quickly that "new drachma" currency notes might not be printed in time. "It would be chaos," says Marios Efthymiopoulos, a visiting scholar at Johns Hopkins University Center for Advanced International Studies and president of Thessaloniki-based think tank Global Strategy. "The banks would collapse and you would have to nationalize them. You wouldn't be able to pay anyone except in coupons. There is only one (currency) printing press in Greece. It is in the museum in Athens and it doesn't work any more." Ryanair CEO: ‘No’ Campaigners in Irish Vote Are Crazy (CNBC) “I think Ireland will vote yes in the referendum and Ireland should vote yes. We have no alternative. People who are borrowing $15 billion a year to keep the lights turned on don’t have the wherewithal to vote no to the people that are lending them the money. There is no argument for voting no,” Michael O'Leary, CEO of budget airline Ryanair said. He described “no” campaigners as a “bunch of idiots and lunatics.” Barclays To Sell Entire BlackRock Stake (WSJ) Barclays said BlackRock agreed to repurchase $1 billion worth of the 19.6% stake that the bank holds in the asset-management company. The remainder of the stake will then be listed on a stock exchange. The decision to sell comes as the bank faces pressure from investors to boost its return on equity and prepares to mitigate the effects of regulation that will force the lender to hold a bigger capital buffer. Mark Zuckerberg Gets Married (AP) The couple met at Harvard and have been together for more than nine years, a guest who insisted on anonymity said. The ceremony took place in Zuckerberg's backyard before fewer than 100 guests, including Facebook's chief operating officer Sheryl Sandberg. The guests all thought they were coming to celebrate Chan's graduation but were told after they arrived that the event was in fact a wedding. "Everybody was shocked," the guest said. The two had been planning the marriage for months but were waiting until Chan had graduated from medical school to hold the wedding. The timing wasn't tied to the IPO, since the date the company planned to go public was a "moving target," the guest said. Zuckerberg designed the ring featuring "a very simple ruby." Hedge Funds Rebuild Euro Bear Bets On Greek Exit Banks Weigh (Bloomberg) Hedge funds and other large speculators, which pared trades that would profit from a drop in the euro to the lowest levels since November, rebuilt them to a record high last week, figures released May 18 by the Washington-based Commodity Futures Trading Commission showed. The premium for options that grant the right to sell the euro has more than doubled since March. Nasdaq CEO Blames Software Design For Delayed Facebook Trading (Bloomberg) Nasdaq OMX Group, under scrutiny after shares of Facebook Inc. were plagued by delays and mishandled orders on its first day of trading, blamed “poor design” in the software it uses for driving auctions in initial public offerings. Fed Proves More Bullish Than Wall Street Forecasting U.S. Growth (Bloomberg) Stephen Stanley, chief economist at Pierpont Securities LLC, has derided the Federal Reserve for downplaying improvement in the U.S. economy. Yet his 2.6 percent forecast for growth this year is below the midpoint in the central bank’s projection of 2.4 percent to 2.9 percent...“I’ve been banging my head against the wall,” said Stanley in Stamford, Connecticut, a former researcher at the Federal Reserve Bank of Richmond, who had predicted an interest- rate increase as early as last year and now says the Fed probably will tighten in the middle of next year. “They’re willing to let things run for longer and let inflation accelerate more than historically.” Judge mulls suit vs. woman sending messages to driving boyfriend (NYP) In a case believed to be the first of its kind in the country, a New Jersey college student could be held liable this week for texting her boyfriend — knowing he was behind the wheel — and allegedly causing him to crash into a couple riding a motorcycle. “She texts. Instantly, he texts back, and, bang, the accident occurs,” said Skippy Weinstein, attorney for motorcycle enthusiasts David and Linda Kubert, both 59, who lost their left legs in the horrific 2009 accident in Mine Hill. It’s now up to a Superior Court judge in Morristown, NJ, to decide whether Shannon Colonna can be added to the suit against driver Kyle Best.

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On Wall Street, Time To Mend Fences With Obama (NYT) Few industries have made such a one-sided bet as Wall Street did in opposing President Obama and supporting his Republican rival. The top five sources of contributions to Mr. Romney, a former top private equity executive, were big banks like Goldman Sachs and JPMorgan Chase, according to the Center for Responsive Politics. Wealthy financiers — led by hedge fund investors — were the biggest group of givers to the main “super PAC” backing Mr. Romney, providing almost $33 million, and gave generously to outside groups in races around the country. On Wednesday, Dan Loeb, who had supported Mr. Obama in 2008, was sanguine. “You win some, you lose some,” he said in an interview. “We can all disagree. I have friends and we have spirited discussions. Sure, I am not getting invited to the White House anytime soon, but as citizens of the country we are all friendly.” [...] “Wall Street is now going to have to figure out how to make this relationship work,” said Glenn Schorr, an analyst who follows the big banks for the investment bank Nomura. “It’s not impossible, but it’s not the starting point they had hoped for.” Morgan Stanley Reassures Its Bankers (WSJ) The New York bank said Monday that investment-banking chief Paul Taubman would leave the firm at year-end. Mr. Taubman was passed over for a new job overseeing both the trading and investment-banking operations, people involved in the process said. The position went to Colm Kelleher, who has overseen sales and trading. To calm nerves and soothe egos among the firms' bankers, Morgan Stanley gathered its new team of investment-banking leaders in New York this week. Mr. Kelleher and one of his new banking lieutenants, Franck Petitgas, traveled from their London office, and Mr. Petitgas spent much of the week meeting with managers in the investment-banking division and senior bankers, people familiar with the discussions said. Top executives reassured senior bankers Monday that the investment-banking business was a priority for Morgan Stanley. In a memo to employees, Chief Executive James Gorman said Morgan Stanley would "continue to build on our leadership position in investment banking and capital markets." The messages came as some rank-and-file bankers at Morgan Stanley privately expressed surprise and dismay at the news from Mr. Taubman, who announced his departure to colleagues in an emotional meeting Monday with Messrs. Kelleher and Gorman in attendance. Some Morgan Stanley bankers said they worried that the new chiefs of investment banking didn't have the stature of Mr. Taubman, who spent a significant amount of time as a mergers banker and was known internally for his staunch support of the firm's investment-banking franchise. "People are upset," one senior person inside the company said. Wall Street Trades Foiled Romney Dreams For Bowles Hopes (Bloomberg) Wall Street executives who lost a bet that Republican Mitt Romney would defeat President Barack Obama are bracing for tougher regulation and hoping a deal can be struck with Congress to cut the deficit. Obama’s choice to succeed Treasury Secretary Timothy F. Geithner will be watched closely for signs about the administration’s approach to business and the deficit, industry executives said. Erskine Bowles, who served as chief of staff under former President Bill Clinton, would be a sign that Obama is willing to endorse a bipartisan debt-reduction plan supported by many business leaders, they said. “With the appointment of the Treasury secretary, Obama will be sending an important message to the public and to the foreign governments who own a lot of Treasuries,” Curtis Arledge, chief executive officer of Bank of New York Mellon Corp.’s investment-management arm, which oversees $1.4 trillion, told journalists in New York yesterday. “If he goes with somebody like Erskine Bowles, then the message will be that he cares about the deficit and is serious about cutting it.” Focus Shifts To Fiscal Cliff (WSJ) Barry Knapp, head of U.S. equity portfolio strategy at Barclays, turned more bearish after seeing the election results, arguing that the risk of fiscal-cliff disaster increased to more than half, from about 30% before. "When I look at what happened, I see a government that grew farther apart, which might be worse than the status quo," Mr. Knapp said. "The risk of going off the cliff has just gotten huge." Jobless Claims Fall (WSJ) Initial jobless claims, which are a measure of layoffs, decreased by 8,000 to a seasonally adjusted 355,000 in the week ended Nov. 3, the Labor Department said Thursday. Economists surveyed by Dow Jones Newswires expected 365,000 new applications for jobless benefits. Greek Jobless Rate Hits New High (WSJ) Elstat, the Greek statistical agency, Thursday said the seasonally adjusted rate of unemployment increased to 25.4% from 24.8% in July and 18.4% in August 2011. That was just below the 25.5% unemployment rate recorded by Spain in the same month, the highest in the European Union. Herd of elephants go on drunken rampage after mammoth booze up (Metro) The trunk and disorderly mammals ransacked a shop, three houses and ruined crops in the eastern village of Dumurkota, India. Police say the gang of over-the-limit tuskers downed more than 500litres of moonshine alcohol, managing to drink the place dry in a matter of minutes. The unruly mob demolished dozens of houses in their desperate hunt for more booze after hoovering up the hard stuff in record time. Local police officer Asish Samanat said the drunken elephants were more 'aggressive' than usual after their mammoth drinking session. 'Unfortunately these animals live in close proximity to man and they recognised the smell of the drink,' he explained. 'They were like any other drunk - aggressive and unreasonable but much, much bigger.' ECB Stands Ready to Buy Bonds as Economy Weakens (Bloomberg) “We are ready to undertake” Outright Monetary Transactions, “which will help to avoid extreme scenarios,” Draghi said today at a press conference in Frankfurt after policy makers left the benchmark interest rate at a historic low of 0.75 percent. “The risks surrounding the economic outlook remain on the downside” and underlying inflation pressures “should remain moderate,” he said. SocGen CEO Blames ‘Stupid’ Accounting for Profit Drop (CNBC) “Exceptional items are related in particular to this stupid accounting thing which means that when you have a credit that is improving, your CDS is going down and you have to recognise negative revenues,” Frederic Oudea told CNBC in Paris. SocGen’s third-quarter net profit was 85 million euros, down by 86 percent on the same period in 2011, after losses on asset sales. That was lower than analysts’ mean estimate of 139.1 million euros. Blackstone Leads Hedge Funds Attracting Bond-Rally Bears (Bloomberg) Funds that bet on both gains and losses in credit attracted $12.6 billion of deposits in the three months ended Sept. 30, the most since the period ended Dec. 31, 2007, according to HFR. Blackstone Group LP raised $4.05 billion during the period for its debt unit, which includes so-called long-short funds. Panning Capital Management, which was founded by Kieran Goodwin this year, started such a fund on Nov. 1 with $500 million. Two-Tier Global Housing Market Could Lead to Bubble: Goldman (CNBC) In a report titled: “Just don’t look down some house markets are flying again” Goldman argues easy money policies by the world’s major central banks has had a ripple effect on countries which have avoided the worst of the global financial crisis, boosting their house prices. According to Goldman, there now exist housing “high-flyers” - countries that have experienced real house price increases and “low-lyers” - countries where the housing market downturn appears to be more protracted. “High flyers” include Germany, Finland, Norway, France, Switzerland and Israel as well as Canada and Australia. The “low lyers” include the U.S., and the euro zone periphery of Spain, Greece, Italy and Ireland- but also those places where prices fell in the post-crisis period but have since stabilized such as the U.K., Japan and Denmark. Judge throws Dallas attorney back in jail after his Design District office trashed, vandalized with obscene drawings (DN) Attorney Tom Corea was charged earlier this year with four felonies alleging he stole from his clients. He was arrested, posted bond and was released. Weeks later, he was evicted for not paying rent for his upscale office in the 2000 block of Farrington Street near Interstate 35E and Market Center Boulevard, according to testimony before state District Judge Mike Snipes. Corea was ordered out by Oct. 31. When the president of the real estate company that represents the building, Doug Molny, showed up the next day to check out the property, he found “complete destruction,” including “penis graffiti on every single wall throughout the building,” Molny said. Written next to some of the penises was the name Doug. Molny said it appeared someone took a sledgehammer to granite counters. Additionally, doors, light fixtures, cabinets and appliances were destroyed or removed.

Opening Bell

Opening Bell: 12.06.11