Opening Bell: 08.03.11

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Moody's Affirms US Rating, Warns Of Downgrade (Bloomberg)
The outlook for the U.S. grade is now negative, Moody’s said in a statement yesterday...The compromise “is a positive step toward reducing the future path of the deficit and the debt levels,” Steven Hess, senior credit officer at Moody’s in New York, said in a telephone interview yesterday. “We do think more needs to be done to ensure a reduction in the debt to GDP ratio, for example, going forward.” A decision on the rating may be made within two years, or “considerably sooner,” according to Hess. Fitch’s David Riley said that while the rating may be cut in the medium term, its risks in the near-term “are not high.” The company expects to complete the ratings review by this month. “Although the agreement is a good first step in adjusting the fiscal challenges that the U.S. faces, it is just a first step,” Riley, Fitch’s London-based head of sovereign ratings, said in a telephone interview yesterday.

China Ratings Agency Downgrades US Debt (CNBC)
China's Dagong Global has cut the credit rating on U.S. sovereign debt to A from A+, Chen Jialin, general manager of the international department at the firm told CNBC on Wednesday. The agency has also put the U.S. on negative outlook.

New Waves Of Layoffs Suggests Jobs Report May Disappoint (CNBC)
Economists expect about 85,000 non farm payrolls and a 9.2 percent unemployment rate, when the monthly employment report is released Friday. But some traders see that number as too high, and there are whispers the number could be flat. RBS economist Michelle Girard said she expects 75,000 jobs were added, but she concedes that number could be too high. Just 18,000 non farm payrolls were added in June, and 25,000 were added in May. "I just think there was very little reason for people to be hiring in July, if they weren't hiring in May or June. I don't think they'd be inspired to hire in July. The degree of uncertainty seemed greater," said Girard.

West Reading police sergeant charged in stun-gun incidents (ReadingEagle)
A West Reading police sergeant was charged Tuesday with using a stun gun on three people, including shooting his father with the nonlethal weapon and posting a video of the incident on YouTube...Beighley shot his father, James Beighley, with a Taser he had taken home against department rules. Beighley, who is married with two children, was living at his father's house in Topton between July and October 2010. Beighley was on the phone with his brother, Daniel Beighley of California, when he heard his father coming up the steps. He hung up the phone and shot his father with the stun gun as his father opened the bedroom door. Matt Beighley said he videotaped the act with his Blackberry and emailed a copy to his brother, then posted it to YouTube.

Berlusconi to speak as Italy market worries mount (Reuters)
Prime Minister Silvio Berlusconi speaks to parliament on Wednesday to try to calm fears over escalating market turmoil that has brought Italy to the edge of a Greek-style financial crisis. Italy's Economy Minister Giulio Tremonti met the chairman of euro zone finance ministers, Jean-Claude Juncker, for emergency talks as the yields on Italian and Spanish 10-year bonds flirted with new 14-year highs and banking shares tumbled.

BofA In Talks For Foreclosure Settlement (Reuters)
Bank of America has told state and federal officials that it wants protection against future litigation relating to mortgage servicing and in exchange is willing to reduce the amount owed by some of its troubled borrowers, the Wall Street Journal said, citing people familiar with the talks. As per the discussions, BofA wants the principal amount to be $1 million or less in certain geographic areas, a person told the Journal. A reduction would apply to the bank's own mortgages and those its services for private investors, the paper said.

Mormons Duck Political Duel (WSJ)
The Mormon Church is preparing for the 2012 elections with a campaign message of its own: It has nothing to do with orchestrating or promoting the presidential candidacies of Mitt Romney and Jon Huntsman Jr., both Mormons.

Risk Aversion Pushes Gold Higher (WSJ)
"Longer-term, gold is likely to be supported by uncertainty in the U.S. fiscal plan—agreeing a sizeable deficit reduction is looking an increasingly remote prospect—and the ongoing debt crisis in the euro zone marked by the widening spreads on peripheral bonds," said Credit Argicole analyst Robin Bhar. Given that there is little reason for sentiment towards the financial markets to turn positive, gold's ascent looks assured for some time to come. Although U.S. President Barack Obama on Tuesday signed into law a bill raising the nation's debt ceiling, it still faces downgrade risks, growth risks, and the looming prospect of a third round of quantitative easing.

Blackberry Readies iPhone Challenge (WSJ)
Early Wednesday, RIM was expected to roll out five new smartphones, including its first all-touch screen phone. RIM executives said the phones will be available in stores world-wide within weeks, offered by more than 200 carriers. But it's unclear the new devices will be able to deliver the sort of buzz—and sales—that will help BlackBerry catch up quickly to offerings by Apple Inc. and Google Inc. RIM, which once dominated the sector, has taken more than a year to release a new model and is now a distant third place in North America. The Canadian company's stock has fallen 68% year-to-date and on Tuesday closed at $24.15—near its 52-week low.

Bwahahahaha, Newt Edition (NYT)
Paul Krugman: "The former Speaker says, "This is a Paul Krugman presidency,” Gingrich told Bill O’Reilly. “[Obama] believes that stuff. He actually believes in left-wing economic ideas. The only problem with them is that they don’t work.” Yes, I’m secretly giving Barack marching orders, and only pretending to be deeply frustrated by his actions and rhetoric. Incidentally, those “left-wing economic ideas” are Economics 101; and try stacking up my economic predictions over the past few years against any of Gingrich’s favorites."

Man pleads guilty in puffer fish toxin case (Daily Herald)
A Lake in the Hills man pleaded guilty Tuesday to charges that he acquired lethal puffer fish toxin in what authorities said was a scheme to kill his wife. Edward Bachner, 38, of the 5700 block of McKenzie Drive, also pleaded guilty to wire fraud related to purchasing a $20 million life insurance policy on his wife, Rebecca, and to filing a fraudulent $111,000 federal tax return for 2005...After the hearing ended, Bachner turned and smiled to relatives in the audience. Outside the courtroom, defense attorney Michael Gillespie said Bachner’s wife, as well as parents, his brother and his sister, were in the audience. “They were there in support,” he said.

Opening Bell

Credit Suisse Profit Rises (WSJ) Zurich-based Credit Suisse said its bottom line was flattered by a favorable comparison with last year's result, when an accounting charge weighed on performance. Revenue at the bank rose 19% following several quarters of reported declines. The report from Switzerland's second-largest bank comes amid a cost-cutting program started in 2011 that has it eliminating thousands of jobs. The program has resulted in 2.5 billion Swiss francs ($2.6 billion) in savings, and is on track to cut costs by 4.4 billion francs by the end of 2015, the bank said. Credit Suisse said its number of full-time employees fell to 46,900 in the first quarter, from 48,700 in the same period last year. Barclays Profit Buoyed By Investment Banking Unit (WSJ) Investment banking, headed by departing executive Rich Ricci, accounted for 74% of Barclays' pretax profit, or £1.32 billion of the £1.79 billion total. The high proportion of profits in part reflected weakness in other areas, such as retail banking in Europe and Africa, but was underpinned by a strong quarter for underwriting stock offerings and servicing hedge fund clients...The bank as a whole posted a £839 million net profit, compared with a £598 million net loss in the first quarter of 2012. Both figures are distorted by accounting charges that reflect the market cost of Barclays' own debt. The £1.79 billion pretax profit was down 25% from £2.4 billion in first-quarter 2012 and slightly lower than analysts had expected. Citigroup Says Debt Beats Peers in Advance of ‘Bail-In’ Rule (Bloomberg) Citigroup, the bank that took the most U.S. aid during the credit crisis, said it’s better- prepared than some rivals to withstand the impact of new anti- bailout rules that could force lenders to sell more debt. Citigroup’s so-called bail-in plan -- a rescue that makes debt investors and stockholders absorb losses instead of taxpayers -- shows the bank already has issued more long-term debt than some of its largest rivals, Treasurer Eric Aboaf said during an April 22 investor presentation. That leaves the New York-based bank in a better position as regulators decide how much more debt lenders should add to their buffers, Aboaf said. Wall Street Jobs Plunge As Profit Soars (Bloomberg) “The desire is to drive the cost of executing a trade to its lowest point -- this means automating the system and getting rid of the traders,” Richard Bove, a bank analyst with Rafferty Capital Markets LLC, said in a telephone interview. “All they do today is hit buttons on computer screens. Twenty-five years ago they would be calling their buddies at different firms. It was a highly labor intensive effort.” New York’s “inhospitable” climate for commercial banks, along with falling demand for financial services and increasing automation is driving the decline in jobs, Bove said. Woman could face death penalty for killing man by crushing testicles (NYDN) A 42-year-old woman is on trial for allegedly grabbing a man's genitals after he told her not to park her electric bike in front of his store. He later died from shock, according to reports. "I'll squeeze it to death, you'll never have children again," witnesses reported her as saying as she called on her brother and husband for back-up. The woman, who could face the death penalty if convicted, got into the row - in the Meilan District of Haikou City, Hainan - more than a year ago on April 19, 2012. IBTimes reports that her 41-year-old victim went into a state of shock and died before paramedics could treat him. The final outcome of the trial, it adds, depends largely on the interpretation of the woman's statement of "squeeze it to death." Dr Irwin Goldstein, urologist and director of San Diego Sexual Medicine, has previously told Gizmodo it is "quite plausible" the squeeze had killed the man. "Yes, the testicles are exquisitely sensitive to touch and there is a huge release of adrenalin when there is excessive force applied to these organs," he told the site. He added that it could have brought on a heart attack. Hazy Future for S.E.C.’s Blossoming Whistle-Blower Effort (NYT) Already, a whistle-blower program has bolstered an investigation into a trading blowup that nearly toppled Knight Capital, the largest stock trading firm on Wall Street, according to lawyers briefed on the case. With help from another whistle-blower, the lawyers said, the government discovered that Oppenheimer & Company had overstated the performance of a private equity fund. And after pursuing a Texas Ponzi scheme for more than a year, a cold trail heated up in 2010 when a tipster emerged. The breakthroughs—previously undisclosed—show the promise of the agency's 20-month-old whistle-blower program. Yet, the program faces challenges on many fronts. Some Wall Street firms are urging employees to report wrongdoing internally before running to the government, and one hedge fund, Paradigm Capital Management, was accused in a lawsuit of punishing an employee who had cooperated with the S.E.C., according to court and internal documents. Another financial firm, the documents show, pressured an employee to forfeit potential "bounties or awards"—a possible violation of S.E.C. rules. Apple’s $145 Billion in Cash Fails to Win AAA Debt Rating (Bloomberg) Apple, which has $145 billion of cash, said yesterday it plans to use debt to help finance a $100 billion capital reward for shareholders after a 42 percent stock plunge. Moody’s Investors Service and Standard & Poor’s responded by ranking the company a level below their top grades, with Gerald Granovsky of Moody’s citing “shifting consumer preferences” in a statement as a risk to Cupertino, California-based Apple’s business. ECB Rate Cut Could Bring Big Disappointment (CNBC) Expectations are rising that the European Central Bank will announce a rate cut when it meets next week. But according to analysts the move is likely to have a limited impact and could in fact end up being a disappointment.

Opening Bell

Three Major Banks Prepare for Possible Credit Downgrades (NYT) Moody’s Investors Service has said it will decide in mid-May whether to lower its ratings for 17 global financial companies. Morgan Stanley, which was hit hard in the financial crisis, appears to be the most vulnerable. Moody’s is threatening to cut the bank’s ratings by three notches, to a level that would be well below the rating of a rival like JPMorgan Chase. Eurozone Lifts Firewall (WSJ) Euro-zone finance ministers on Friday agreed on a temporary boost of the bloc's bailout lending limit to €700 billion ($931 billion), opting for a less ambitious plan that some fear won't be enough to prevent a re-awakening of euro zone financial turmoil. Dalio Earns $3.9bn to Top Hedge Fund Pay List (FT) Ray Dalio, head of Bridgewater, the world’s largest hedge fund, personally made $3.9 billion in a year that his $70 billion Pure Alpha fund produced $13.8 billion of investment profits for its investors, according to industry rankings. He tops a list published Friday by Absolute Return magazine of the richest 25 hedge fund managers. The select group took home $14.4 billion in pay and paper profits on their own investments last year, down from $22 billion in 2010 in a sign of the industry’s struggle to deliver returns for its clients in 2011. Goldman Bets on Property Rebound With New Fund: Mortgages (Bloomberg) The U.S. Housing Recovery Fund is expected to finish its first round of capital raising and open April 1, according to a marketing document obtained by Bloomberg News. It will focus on senior-ranked securities without government backing, many of which now carry junk credit grades. BATS Weighs Cooling Its Listing Push (WSJ) BATS Global Markets Inc. is considering suspending its efforts to recruit corporate listings after a software glitch last Friday derailed the exchange operator's IPO, people familiar with the matter said. Concerns about BATS's bungled initial public offering could disrupt its efforts to draw other companies to list their stocks on its electronic exchange, forestalling ambitions by the electronic-markets operator to become a full-service exchange company. Such a move could entail notifying the Securities and Exchange Commission, which last year approved BATS's plan to list shares and exchange-traded products. Canada Eliminates Penny Costing Penny-and-a-Half to Make (Bloomberg) Canada will withdraw the penny from circulation this year, saving taxpayers about C$11 million ($11 million) annually and forcing retailers to round prices to the nearest nickel, the government announced in its budget today. Grand Central nabs tell-all by ex-Goldman exec Smith (NYP) Greg Smith, the former Goldman Sachs executive who became an instant sensation when he ripped the Wall Street investment bank with a resignation letter published as an Op-Ed piece in the New York Times, has scored a $1.5 million advance to write a memoir of his experiences. Oil Rally Fails to Lift Commodity Hedge Funds' Returns (FT) Many multibillion managers have been wary of potential political shocks in the Middle East and a repeat of last year’s May oil sell-off. They have shunned risk over the past three months or lost out by betting that oil markets would become more choppy. Many of the sector’s leading names have underperformed broader hedge fund peers, which have enjoyed one of their best quarters on the back of rising global equity markets. Billions Lost In Tax Refund Scam (WSJ) The perpetrators of the scheme, authorities say, swipe the Social Security numbers of Puerto Rican citizens, who don't have to pay federal income tax—and are less likely to be on the IRS radar—and use their information to file fake returns. In some cases, they enlist U.S. mail carriers to intercept the refund checks that are disbursed. The plot, which includes participants from around the U.S. and Latin America, has been around for at least five years. Prosecutors have obtained multiple convictions but none involving those believed to be among the top players in the operation, according to several people briefed on investigations into the fraud. BlackBerry Maker In Turmoil (WSJ) The overhaul comes just two months after Thorsten Heins took the reins at RIM and confidently proclaimed there was no need for "seismic" change. But with the company's sales tumbling 25% in the latest quarter, new BlackBerrys piling up unsold and a crucial lineup of new devices still not expected to arrive until later this year, Mr. Heins is taking more drastic actions. RIM will back out of its high-profile attempt to win business among consumers to focus on its core corporate customers. Queen Creek couple accused in dog-sex plan plead not guilty (AZC) A Queen Creek couple have pleaded not guilty to charges of planning to have sex with a dog. The case prompted Sheriff Joe Arpaio to ask the website Craigslist to better monitor its personal ads. Shane Walker, 33, and his wife Sarah Walker, 39, posted a Craigslist ad on Feb. 7 titled, "Wife looking for K9," according to Maricopa County Superior Court records.

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