Opening Bell: 12.22.10

Author:
Dealbreaker
Updated:
Jan 14, 2019
Original:
Dec 22, 2010

A Trader Hoards Copper In London (WSJ)
As commodity prices soar to new records, the ability of a few traders to hold huge swaths of the world's stockpiles is coming under scrutiny. The latest example is in the copper market, where a single trader has reported it owns 80% to 90% of the copper sitting in London Metal Exchange warehouses, equal to about half of the world's exchange-registered copper stockpile and worth about $3 billion.

Ernst Accused Of Lehman Whitewash (WSJ)
The lawsuit, led by New York Attorney General Andrew Cuomo, alleges that the firms engaged in practices to temporarily erase as much as $50 billion in Lehman assets. This often occurred near the end of a quarter, allegedly making the company look much healthier than it was. Ernst "directly facilitated" an accounting sleight of hand that burnished the securities firm's balance sheet, Mr. Cuomo claimed in the lawsuit. Ernst & Young said in a statement that there was "no factual or legal basis" to bring a claim against the firm, and that it would vigorously defend against the claims in Mr. Cuomo's lawsuit. Lehman's accounting was in accordance with generally accepted accounting principles, Ernst said, and Lehman's bankruptcy "was not caused by any accounting issues."

Bankers Worldwide Brace For 7% Drop In Bonuses (Reuters)
Although most banks have not yet informed staff of their actual bonuses for 2010, the dismal expectations reflect the fact that generally bankers, traders, and salespeople have been told to be ready for a low payout. "Flat is the new up," one U.S. banker said.

Deutsche Bank Tax Deal Opens Floodgates (Reuters)
Deutsche Bank's U.S. tax fraud settlement has heightened expectations of more deals being struck as American authorities target overseas banks in a crackdown on tax dodgers. U.S. prosecutors are pushing ahead with more probes, emboldened after top Swiss wealth manager UBS had to hand over the details of 4,450 clients. Leads from that case have helped investigators look at banks in Asia and the Middle East, while clients from HSBC have also been under scrutiny, lawyers have said.

Bank of Moscow in embezzlement probe (FT)
City mayor Mr Luzhkov was fired by the Kremlin in September amid allegations that he ran Moscow as a personal fiefdom. Yelena Baturina, his wife, rose to become Russia’s richest woman with a vast construction and property business. “A criminal investigation has been opened at Bank of Moscow in connection with an alleged embezzlement,” Viktor Biryukov, a Moscow interior ministry official, said on Tuesday. He declined to elaborate on details of the case. However, state news agencies linked the probe to a 2009 deal in which the Bank of Moscow lent Rbs12.76bn to a real estate company that then bought land at a price believed by market analysts to be over-priced from Ms Baturina, whose company, Inteko, was overburdened by debt.

Stopgap Bill Hamstrings Government Programs (NYT)
The Securities and Exchange Commission has stopped hiring and halted most travel by agency officials. Hundreds of millions of dollars in aid to nations like Pakistan is held up, as are American contributions to global health and emergency food programs. A systems upgrade by the Internal Revenue Service to improve electronic data-keeping and speed tax refunds could be delayed for years — all because the federal government is operating on a temporary measure largely at last year’s levels. Congress on Tuesday approved yet another temporary spending bill, this one running through March 4, the fourth such stopgap measure since the fiscal year ended Sept. 30.

Bank of America, Deutsche Bank Assets Seized in Italian Derivatives Probe (Bloomberg)
Police said they took 15 million euros from Bank of America, and 1.7 million euros each from Deutsche Bank AG and UBS AG, according to an e-mailed statement. The remainder was seized from Natixis SA, Dexia Crediop SpA and Banca Monte Paschi di Siena SpA. The amount represents the alleged illicit profit the banks made from selling derivatives to the city of Florence, the region of Tuscany and three other municipalities in the region, the police said. The local governments have lost about 123 million euros on the swaps that adjusted payments on 1.4 billion euros of debt, the police said.

DeNiro, Hoffman Slum In 'Ghastly' Fockers (Bloomberg)
Predictably, “Little Fockers” has a lot of silly double entendres involving the family name. Byrnes asks Greg if he wants to take over as patriarch and become the “Godfocker.” When Greg’s outrageous mother (Barbra Streisand) gets hugged by her twin grandchildren, she calls it a “Focker sandwich.” If the Focker jokes have grown stale, so have the contrasts between Greg’s hyper Jewish parents (Dustin Hoffman plays his touchy-feely dad) and his wife’s button-down WASP family (Blythe Danner is her sweetly oblivious mom). It’s pathetic to see great actors like Hoffman and De Niro slumming in such schlock, though their own pain was undoubtedly soothed by substantial paychecks.

Inflation Fears Rise Among Bank of England Policymakers (CNBC)
Adam Posen called for an extra 50 billion pounds more quantitative easing and Andrew Sentance urged interest rates to rise to 0.75 percent from 0.5 percent, while the other 7 MPC members voted for policy to stay unchanged. However, a growing number of policymakers were concerned about rising inflation risks, albeit not sufficiently to justify changing policy, especially given the risk of contagion from the euro zone's financial instability.

Hurt Wants Accuser's Letter Shielded (WSJ)
The eight-page letter, in which former H-P contractor Jodie Fisher accused Mr. Hurd of sexual harassment, is currently under seal in Delaware's Court of Chancery as part of a shareholder suit filed against H-P over the executive's exit.

Stranded Passengers' Hopes Raised (BBC)
Heathrow Airport plans to run two-thirds of flights, and Eurostar and the East Coast mainline from London to Scotland expect a near-normal service.

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Deutsche Profits Big On Libor Bets (WSJ) Deutsche Bank made at least €500 million ($654 million) in profit in 2008 from trades pegged to the interest rates under investigation by regulators world-wide, internal bank documents show. The German bank's trading profits resulted from billions of euros in bets related to the London interbank offered rate, or Libor, and other global benchmark rates. ECB Stands Pat On Rates (WSJ) The ECB's Governing Council decided to keep Europe's most important interest rates at their lowest levels since the single currency was introduced in 1999, encouraged by a clear improvement in financial-market sentiment over the past month and by tentative signs of growing confidence in the euro-zone economy. Rivals Clash As Inquiry Into Herbalife Opens (WSJ) Daniel Loeb's hedge fund disclosed Wednesday it owns an 8.2% stake now valued at $350 million in nutrition-supplements company Herbalife Ltd. Mr. Ackman's Pershing Square Capital Management LP has bet more than $1 billion against the company by shorting its stock…The face-off between two high-profile, media-savvy hedge-fund managers highlights the arrival of a new wave of postcrisis financial stars. They tout their positions during television interviews and at conferences, in letters or securities filings and on customized Web pages, often convincing other investors to follow their lead. Their pronouncements move stocks, at times dramatically, and leave companies scrambling to respond. And when they take the opposite sides of the same trade the ensuing battle can captivate the financial world. "One of them is going to be very wrong," said Gregg Hymowitz, founder of the $8.2 billion EnTrust Capital, a longtime investor with both Mr. Ackman and Mr. Loeb's firms. "Ackman thinks it's a complete and utter fraud, and Dan thinks it's a completely legitimate business." Hedgie's Herbalife Bet Counters Ackman (NYP) [In addition to Loeb], Carl Icahn is also believed to have taken a long position in Herbalife, sources said. The possibility of Loeb and Icahn going up against Ackman’s Herbalife short sent investors into a tizzy. “It’s going to be an Ackman sandwich,” one hedge fund manager wailed. Lew Taking Over at Treasury Puts Perennial Aide at Head (Bloomberg) With his penchant for thinking several steps ahead, his organizational drive and his budget expertise, Lew, 57, has been Obama’s consummate aide. Now, he’s Obama’s choice for Treasury secretary, according to a person familiar with the process. Lew faces the prospect of becoming a leader at a critical juncture for the nation’s economic and fiscal future. “As chief of staff you are staff and as Treasury secretary, you are principal -- Jack has to make that transition,” said Ken Duberstein, a chief of staff to former President Ronald Reagan who first met Lew in the 1980s. “It’s not the invisible hand, it is the visible hand.” If confirmed, Lew may need to play that hand as soon as next month, when the administration squares off with Congress over the U.S. debt ceiling. Lew’s job will be all the more difficult because his relations with House Republicans soured during the 2011 battle over the government’s borrowing limit. Government's worst signature will be on America's dollar bills (NYP) Lew’s signature — which looks like a strand of hair gone though a curler treatment — might even be too peculiar to grace our greenbacks, political insiders said. “Whoa! That’s completely unintelligible,” said a Senate finance aide. “This doesn’t look like anyone’s name at all.” She concluded, “Oh my gosh — I’ve never seen a signature like that.” ome social-media users were also quick to poke fun, saying Lew should clean up his squiggle. “HE GOT A CRIZZAZY SIGNATURE!!!!” one Twitter user wrote. Another tweeter quipped, “Looooooo!” But just because his autograph looks it’s penned by a drunken 3-year-old doesn’t mean it isn’t lovable, others said. Some fans created a petition on the White House’s Web site called “Save the Lewpty-Lew!” “We demand Lew’s doodle on every dollar bill in circulation,” the petition read. It had garnered 10 signatures by late yesterday…Asked yesterday if Lew had been practicing to improve his signature, presidential press secretary Jay Carney, said, “Not that I’m aware of.” Cantor Growth Plan Sputters as 41% of Touted Hires Exit (Bloomberg) Chief Executive Officer Howard Lutnick’s drive to turn one of the largest independent U.S. brokerages into a rival to Wall Street’s investment banks has been pocked with dismissals and defections. Forty-one percent of the 158 traders and bankers whose hirings Cantor announced in news releases since 2009 have left, industry records show. In interviews, 19 current and former employees blamed Cantor’s reluctance to commit money to deals and pressure to turn immediate profits. Norfolk 911 calls for 'baby lion' turn up a coiffed dog (HR) The first caller was fairly calm. “I’d like to report a lion sighting,” he said. “Say that again?” a dispatcher responded. And thus began the drama over baby lion sightings in Norfolk on Tuesday. Police said Wednesday that they actually got three 911 calls about the “lion.” The first came at 10:19 a.m. The animal was running on Granby Street, a male voice said. Then a woman took the phone. She sounded anxious as she described the proximity to the zoo. “There was a lion that ran across the street. A baby lion. It was about the size of a Labrador retriever.” It was near Granby and 38th, she said. “It’s roaming loose in the neighborhood.” A second call came five minutes later. “I just saw an animal that looked like a small lion.” It had “the mange and everything,” a man said. He had seen it on Delaware Avenue near Llewellyn Avenue. “I don’t know if it got away from the zoo, or what,” he said. The dispatcher said they already had received a report. “I’m not sure if it actually is a lion or not, but I’ll update the information.” A third call came at 1:19 p.m. “I just saw a baby lion at Colley Avenue and 50th Street,” a man reported. “What kind of animal?” the dispatcher later asked him. “A lion. A baby lion, maybe.” The lion was going to nearby houses. “I don’t think it has caused any problem so far,” said the caller. “OK. You think it’s looking for food?” the dispatcher asked. “I don’t know.” By now, most folks know that the “baby lion” was actually Charles the Monarch, a Labrador-poodle mix owned by Daniel Painter, who lives in Riveriew and has a garden center on Colley Avenue. He has the dog groomed to look like the Old Dominion University mascot. Many people say they see Charles out a lot, especially on Colley. But to someone who hasn’t seen him, he sure doesn’t look like a dog at first. PE King Black Is Hungry For Hostess (NYP) Black’s Apollo Global Management has teamed with veteran food executive C. Dean Metropoulos on a potential bid for bankrupt Hostess Brands’ snacks business, which includes Twinkies, Ding Dongs and Ho Hos…Hostess is in the process of selling off its iconic brands and liquidating the company after a crippling strike by its bakers union forced it to shut down in November. The Irving, Texas-based company plans to hold separate auctions for its bread and snack businesses. Hostess is just a few days away from choosing a so-called stalking horse bidder for its bread brands, including Wonder Bread, Nature’s Pride and Butternut. The snack business will follow suit later. Mortgage Deals Came Just In Time (WSJ) Major banks pushed to complete an $8.5 billion legal settlement with federal regulators this past weekend so they could book the deal's costs in their fourth-quarter results and present a cleaner slate to investors in 2013, according to people familiar with the talks. The timing of the settlement of alleged foreclosure abuses, announced Monday, allowed banks including Bank of America, JPMorgan, Citigroup, and Wells Fargo to take advantage of so-called subsequent-events accounting. The same rules apply to Bank of America's $11.6 billion pact with Fannie Mae over buybacks of questionable mortgage loans. Monday's settlements are "almost the textbook example" of when subsequent-events accounting comes into play, said Robert Willens, an accounting and tax expert. Obama’s 81% New York City Support is Best in 114 Years (Bloomberg) President Barack Obama won more support from New York City in November’s election than any White House candidate in more than 100 years, according to a final tally of votes. Obama beat Republican challenger Mitt Romney by 81 percent to 18 percent in the nation’s largest city, according to a certified vote count released Dec. 31 by the state board of elections. Some New York ballots were counted late in part because of complications caused by Hurricane Sandy. Yum Brands Apologizes For Chicken Probe (WSJ) Yum Brands's China chief executive apologized to consumers after negative publicity surrounding an official probe into chicken purchased from local suppliers caused sales to tumble at the company's KFC chain. Yum failed to address problems quickly and had poor internal communications, Sam Su said in a statement posted on the company's official account on Sina Corp.'s Twitter-like Weibo microblog service. He said the company would strengthen its management and oversight of suppliers. "We feel regretful for all the problems," Mr. Su said in the statement. "I sincerely apologize to the public on behalf of the company." Swiss Banks Welcome Rejection of Germany Tax Accord, Study Shows (Bloomberg) Swiss banks welcome the collapse of an accord with Germany that would have imposed new taxes on German clients in a bid to end a dispute over tax evasion, Ernst & Young said. About 72 percent of 120 Swiss banks surveyed see the demise of the agreement as positive, Ernst & Young said in a report today. How Jawboning Works (WSJ) The clearest example comes from Europe. In July, Mario Draghi, president of the European Central Bank, defused an intensifying crisis of confidence in the euro with two sentences scribbled in the margins of an otherwise routine speech. "Within our mandate, the ECB is ready to do whatever it takes to preserve the euro," he said. "And believe me, it will be enough." That may prove to be the most successful central-bank verbal intervention in history. A few weeks later, the ECB pledged to buy bonds of governments shunned by markets if those governments made belt-tightening commitments accepted by fellow euro-zone countries. No government has sought that help so the ECB hasn't spent a single euro. Yet global anxiety about an imminent euro crisis has abated. Beautiful Existence, Seattle Woman, Plans To Eat Only Starbucks For One Year (HP) A Seattle woman, legally named Beautiful Existence, will eat only food from Starbucks this year. She'll also be only drinking beverages from Starbucks as well, but will include drinks from Tazo Tea and Evolution Fresh since both fall under the Starbucks brand. Beautiful Existence cites several reasons for this endeavor. She explains them on her blog: "So how can eating only one company’s products impact me, anybody? Well Mr. McDonald’s already proved that question years ago with his documentary and Mr. Subway did his take on the loosing weight portion of the food challenges too. But when I watched those guys doing their thing I asked myself “where are the WOMEN challenging themselves in the world?” “Where are the effects being shown on a woman’s culture? A woman’s family & children? A woman’s diet, weight, fashion, checkbook, community and world through challenges?” “Where is HER VOICE on how an international company is directly or indirectly impacting everything from her waistline to her bottom line and every other woman’s, man’s, child’s, societies and planets world with their presence?” So far, Existence has really liked the Turkey Rustico Panini and is trying hard not to eat any of the baked items.

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