September 17, 2021

Opening Bell: 09.16.11

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Goldman To Close Global Alpha (WSJ)
The hedge fund, which used computer-driven models to invest, had about $1 billion in assets under management but had suffered losses of about 12% so far this year, according to a person familiar with the situation. Goldman decided to close Global Alpha because several investors were redeeming money held by the fund, this person said. "We have begun liquidating the assets of the Fund," Goldman wrote in the letter to clients. Goldman said it would distribute 85% to 90% of the hedge fund's assets to investors, while keeping some cash for possible legal costs tied to a claim by Lehman Brothers Holdings Inc. Global Alpha was created in 1997 by Goldman and initially led by Goldman trader Cliff Asness.

UBS $2 Billion Loss To Trigger Investment Bank Retreat (Reuters)
UBS is expected to shrink its investment bank business—source of a $2 billion rogue trading loss—and could fire senior executives as it tries to retain worried private clients and avert a ratings downgrade. Analysts said the massive loss, announced on Thursday, was the final nail in the coffin for UBS' investment bank which has struggled, like others in the industry, against falling markets and tough new regulation as well as the soaring Swiss franc...Late on Thursday, Moody's said it had placed the bank's long-term debt and deposit ratings on review for a possible downgrade, a further blow to the bank. "The losses call into question the group's ability to successfully complete the rebuilding of its investment banking operations," it said.

BofA Said To Keep Countrywide Bankruptcy As Option (Bloomberg)
Bank of America would consider putting the unit into bankruptcy if litigation losses threaten to cripple the parent, said four people with knowledge of the firm’s strategy...The threat of a Countrywide bankruptcy is a “nuclear” option that Chief Executive Officer Brian T. Moynihan could use as leverage against plaintiffs seeking refunds on bad mortgages, said analyst Mike Mayo.

Polish FinMin: Euro Collapse Could Lead To War (CNBC)
"If the euro zone were to fall apart then it's hard to exclude the possibility of EU falling apart as well," Polish finance minister Jacek Rostowski said in an interview. "The EU has been one of the two great pillars of European peace and security of the past 60 years," he said. "Therefore the danger in a longer-time horizon, in 10-20 years, in the absence of one of the key elements of our security system and one of the key elements of our political system, which ensures we deal with problems in this peaceful, democratic way we've developed, the risk of all sorts of authoritarian political movements, and therefore even war, in the long horizon, rises,” he said.

The Biggest IPO You Haven't Heard Of (WSJ)
The company, Beijing Jingdong Century Trading Co., runs 360buy.com, a fast-growing online-shopping site that sells a broad range of goods, mostly direct to consumers, much like Amazon.com Inc. This business-to-consumer part of China's online shopping market is expected to expand more than fivefold to 650 billion yuan ($100 billion) over the next three years, according to Beijing-based research firm Analysys International. Jingdong hopes to raise as much as $4 billion to $5 billion from an initial public offering in the first half of 2012, people familiar with the situation said last week. If it succeeds, it would overtake Google Inc., whose $1.9 billion IPO in 2004 makes it the current record holder for Internet companies.

Toe-Sucking Assailant Creeps Out Arkansas Town (MSNBC)
Last Saturday, Ruth Harris, an 83-year-old Conway woman, told police that she was sitting in a chair in front of her apartment. A man approached her and said he liked her feet. According to a police report, the man took off one of her shoes and began sucking on her toe. "The man then asked if he could kiss her and she had told him no and told him he was crazy," the report stated. The man left quickly after people walked into the apartment complex's courtyard. On Tuesday, police received another call from a woman who said that on Saturday she was shopping at a local department store when she noticed a man staring at her. He approached her and "told her he loved her toes, and they were so long and beautiful," the report said. The man then told the woman that he had a foot fetish and that "her toes are so long and succulent" and he wanted to suck them. When the woman's cell phone rang, the man retreated. "This is on the police department's radar, and they are concerned," said LaTresha Woodruff, police spokeswoman in Conway, about 30 miles from Little Rock. "They are taking information and trying to figure out who is doing it ... we want him off the streets."

Geithner Presses EU To Act Decisively (Reuters)
"What is very damaging (in Europe) from the outside is not the divisiveness about the broader debate, about strategy, but about the ongoing conflict between governments and the central bank, and you need both to work together to do what is essential to the resolution of any crisis," he said. "Governments and central banks have to take out the catastrophic risks from markets ... (and avoid) loose talk about dismantling the institutions of the euro."

Silver Lake Is Said To Weigh Buying Yahoo (Bloomberg)
As part of a deal, Silver Lake would sell off Yahoo’s Asian assets and then attempt to turn around the main operations or find a buyer for that business.

Economists Say US Recession Looks More Likely (WSJ)
Economists see a one in three chance the U.S. will slip into recession over the next twelve months and doubt any steps the Federal Reserve might take at its meeting next week can change that.

KKR Gathers $1 Billion For Mezzanine Fund (Bloomberg)
KKR Mezzanine Partners I aims to finance private-equity investments and corporate acquisitions, the firm said today in a statement. The mezzanine business will finance mostly third- party transactions.

McDonald's Death Now Attributed To Soda Fountain Gas Leak (AP)
Carbon dioxide piped through gas lines to a soda fountain leaked in a McDonald's in Georgia and sickened 10 people, including a woman who later died after being found unconscious in a restroom, police said Wednesday. Investigators determined a leaky gas line between the walls caused the gas, used to pump carbonation into sodas, to build up a week ago to the point where people inside were unable to breathe. "It caused what is normally a harmless gas to be pumped into the wall cavity and leak into the women's restroom," said Pooler Police Chief Mark Revenew. "At a high level of concentration, it displaces oxygen." The restaurant's franchisees, John and Monique Palmaccio, said in a statement they "are committed to running safe, welcoming restaurants."

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Citigroup Profit Beats Analysts’ Estimates On Investment Bank (Bloomberg) Citi reported a 12 percent drop in second-quarter profit that beat analysts’ estimates on revenue from advising on mergers and underwriting stocks and bonds. Net income declined to $2.95 billion, or 95 cents a share, from $3.34 billion, or $1.09, a year earlier, the New York-based bank said today in a statement. Excluding accounting adjustments and a loss from the sale of a stake in a Turkish bank, earnings were $1 a share, compared with the average estimate of 89 cents in a Bloomberg survey of 18 analysts. HSBC Seeks To Evict Occupiers In Hong Kong (WSJ) HSBC said Monday it is seeking the right to evict an encampment of protesters that has been occupying the ground floor of the bank's Hong Kong headquarters since October, drawing inspiration from the Occupy Wall Street protests in New York last year. Libor Flaws Allowed Banks To Rig Rates Without Conspiracy (Bloomberg) FYI: “It is far easier to manipulate Libor than it may appear,” Andrew Verstein, a lecturer at Yale Law School, said in a paper to be published in the Winter 2013 issue of the Yale Journal on Regulation. “No conspiracy is required.” States Join Libor Probe (WSJ) Prosecutors in New York and Connecticut are investigating whether their states incurred losses as a result of interest-rate manipulation by banks, a probe that could lead to a wider multistate enforcement action, according to New York officials. The joint probe by New York Attorney General Eric Schneiderman and Connecticut Attorney General George Jepsen could lead to civil enforcement action, including possible breaches of antitrust and fraud laws, the officials said. Libor Probe May Yield Criminal Charges By September (Bloomberg) Barclays traders involved in allegedly manipulating Libor rates between 2005 and 2007 may be charged by U.S. prosecutors before the Labor Day holiday on Sept. 3, said a person familiar with the Justice Department investigation in Washington. Zuckerberg’s Loan Gives New Meaning To The 1% (Bloomberg) The Facebook founder refinanced a $5.95 million mortgage on his Palo Alto, California, home with a 30-year adjustable-rate loan starting at 1.05 percent, according to public records for the property. Missteps Doomed Barclays Leaders (WSJ) Mr. Diamond's downfall may have been hastened because the U.S.-born investment banker, who became chief executive at the start of 2011, had never won acceptance by Britain's political and financial establishment. When the rate-fixing scandal erupted, Mr. Diamond had few allies. It wasn't for lack of trying. Mr. Diamond enthusiastically embraced British culture and tried to overcome his reputation as a brash American. Mr. Diamond, a native of Concord, Mass., supported the Chelsea Football Club, handing out trophies himself when the team won England's premier soccer league in 2010. A month before the Libor settlement, Mr. Diamond hosted British aristocrats and Barclays' clients at the annual Chelsea Flower Show, providing Champagne and canapés as his guests inspected elaborate gardens and floral arrangements...But Mr. Diamond, age 60, was criticized for his lofty pay packages, as well as perceived risks in the investment-banking business he built. He sometimes appeared tone deaf in a country still angry about the role of banks in the financial crisis. "There was a period of remorse and apology," he told Parliament last year. "That period needs to be over." Activists Go After Big Game (WSJ) William Ackman's $2 billion bet that he can boost the value of consumer-products giant Procter & Gamble Co. reflects a new era of activist investing, in which no company is too big a target and restless institutional investors are more willing to rock the boat. Mr. Ackman's Pershing Square Capital Management LP owns a little more than 1% of P&G's shares. A few years ago, that would have been considered too small a stake in too big a company to exert much influence on management, the board or other investors. Tax Cuts Perpetuate Inequality, Should End: Summers (CNBC) The United States should not extend Bush-era tax cuts for the wealthiest Americans even as the so-called ‘fiscal cliff’ looms because it will perpetuate income inequality, says Larry Summers, former U.S. Treasury Secretary. Instead, these revenues should go towards strengthening public education and ensuring that low-income students are presented with equal opportunities as their wealthy counterparts so that they can participate in the economy. Tax breaks for the wealthy cannot continue to exist because it leads to a “perpetuation of privilege”, Summers said in the editorial in the Financial Times on Sunday. Unless steps were taken to “responsibly” increase the burden on those with high income and redistribute the proceeds, the trend toward inequality will continue, he said. Devils On The (B)rink (NYP) New Jersey Devils owner Jeff Vanderbeek is talking to private-equity firms and hedge funds about buying into his financially strapped team, according to sources close to the situation Vanderbeek is looking to sell a majority stake, but keep operating control, sources said. The talks, coming three weeks after the 55-year old former Wall Street executive seemed close to inking a deal with an investor to save the team, are leading some in the financial world to believe the deal has fallen apart. If that’s so, it would be a terrible break for Vanderbeek, who is facing an Aug. 14 deadline to get the Devils’ financing in order...Creditors are owed $80 million. Downgrade Anniversary Shows Investors Gained Buying U.S. (Bloomberg) When Standard & Poor’s downgraded the U.S. government’s credit rating in August, predictions of serious fallout soon followed. Republican presidential candidate Mitt Romney described it as a “meltdown” reminiscent of the economic crises of Jimmy Carter’s presidency. He warned of higher long-term interest rates and damage to foreign investors’ confidence in the U.S. U.S. House Budget Committee Chairman Paul Ryan said the government’s loss of its AAA rating would raise the cost of mortgages and car loans. Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., said over time the standing of the dollar and U.S. financial markets would erode and credit costs rise “for virtually all American borrowers.” They were wrong. Almost a year later, mortgage rates have dropped to record lows, the government’s borrowing costs have eased, the dollar and the benchmark S&P stock index are up, and global investors’ enthusiasm for Treasury debt has strengthened. Woman tells police man sucked her toe at Grovetown Walmart (AC) The 18-year-old said she was shopping when a man, who looked to be in his late 30s or early 40s, walked up and asked if her toenails were painted, according to a Columbia County Sheriff’s Office incident report. After replying yes and questioning why he wanted to know, the woman was asked if she’d watched America’s Funniest Home Videos. The man told her he was with the TV show and if she complied with his requests, everything she purchased that day would be free. She said she reluctantly agreed to let him take a photo of her foot. He asked if he could kiss her foot as part of the prank and she agreed. The man guided her to an area behind a clothing rack, dropped to the floor, grabbed her ankle and told her, “Don’t worry. I don’t bite.” He then started sucking on her big toe. The woman said she screamed at him to stop. Before the man ran from the store, he told her, “It tasted so good, though.”

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Global Finance Chiefs At Odds (WSJ) At the annual meetings here of the International Monetary Fund and World Bank, European officials bickered about the damage caused by austerity; this week they head into a major euro-zone summit with no clear rescue plan for Greece. A territorial row between China and Japan, the world's second- and third-largest economies, bled into the conference with no sign of resolution, highlighting a new risk to growth. And many top finance officials pointed fingers at the U.S. for casting a new cloud over global markets by failing to make progress on the budget mess in the world's largest economy. Thousands March In Spain To Protest Austerity (Reuters) Several thousand anti-austerity protesters in Spain marched down a major street in the capital banging pots and pans Saturday. Many protesters also blew whistles as they blocked part of the Castellana boulevard Saturday carrying placards saying "We don't owe, we won't pay." "None of us pushed the banks to lend huge sums of money to greedy property speculators, yet we are being asked to pay for other's mistakes," 34-year-old civil servant Maria Costa, who was banging an old pot along with her two children, said. Bernanke Defends Fed From Claims It Is Being Selfish (NYT) Critics say the Fed’s unorthodox policies weaken the dollar and bolster the currencies of developing countries, hurting their ability to export. “It is not at all clear that accommodative policies in advanced economies impose net costs on emerging market economies,” Mr. Bernanke said at an event sponsored by the Bank of Japan and the International Monetary Fund. The Fed last month announced a program of open-ended bond purchases that will be continued until there is substantial improvement in labor market conditions, barring a sustained and unexpected spike in inflation. To start off, the central bank will buy $40 billion in mortgage-backed securities each month. “This policy not only helps strengthen the U.S. economic recovery, but by boosting U.S. spending and growth, it has the effect of helping support the global economy as well,” Mr. Bernanke said. Fischer Backs Fed QE3 as World ‘Awfully Close’ to Recession (Bloomberg) While there has been “a lot of progress made” to improve the global economy, its impact hasn’t materialized, Fischer said in an interview in Tokyo with Bloomberg Television airing Sunday. He signaled that by deciding not to set an end date or total amount to its third program of bond buying, the Fed is easing worries it will run out of ammunition before achieving its goals. Can Morgan Stanley's Gorman Save Wall Street? (BV) Gorman’s strategic moves are enough to convince one natural born skeptic, Mike Mayo, a financial-industry research analyst at Credit Agricole SA (ACA), to recommend Morgan Stanley’s stock for the first time in years. “The stock is valued as if it is a Greek or Spanish bank but its risk is far less,” he wrote in an e-mail to me. For Morgan Stanley to return to its glory days, he said, margins need to be improved in asset management, fixed-income trading needs to be further slimmed down and the core investment-banking franchise needs to be maintained and reinvigorated. Good advice. A firm built around lower risk-taking and lower overall pay while still providing clients with the advice and capital they need to innovate and expand is what we need on Wall Street. It’s the vision of one man taking seriously his responsibility to make the capital markets safe and productive for economies all over the world, instead of just some casino gone haywire where the house absorbs the losses and the profits go to the gamblers. The question is whether other leaders on Wall Street will follow Gorman’s example. Sex Life Was ‘Out of Step,’ Strauss-Kahn Says, but Not Illegal (NYT) More than a year after resigning in disgrace as the managing director of the International Monetary Fund, Dominique Strauss-Kahn is seeking redemption with a new consulting company, the lecture circuit and a uniquely French legal defense to settle a criminal inquiry that exposed his hidden life as a libertine...In France, “Libertinage” has a long history in the culture, dating from a 16th-century religious sect of libertines. But the most perplexing question in the Strauss-Kahn affair is how a career politician with ambition to lead one of Europe’s most powerful nations was blinded to the possibility that his zest for sex parties could present a liability, or risk blackmail. The exclusive orgies called “parties fines” — lavish Champagne affairs costing around $13,000 each — were organized as a roving international circuit from Paris to Washington by businessmen seeking to ingratiate themselves with Mr. Strauss-Kahn. Some of that money, according to a lawyer for the main host, ultimately paid for prostitutes because of a shortage of women at the mixed soirees orchestrated largely for the benefit of Mr. Strauss-Kahn, who sometimes sought sex with three or four women. German finance chief Wolfgang Schaeuble says Greece won't default or exit (Telegraph) "Greece has to take a lot of very serious reforms" and "everyone is trusting that the Greek government is doing what is necessary", he said at a meeting with business leaders in Singapore on Sunday. Mr Schaeuble said an increasing majority of Greeks understand that being in the euro "is in the best interest of Greece" and said did not think there would be a ‘staatsbankrott’ - or state bankruptcy. He said he did not see “any sense to speculate on Greece leaving the euro” because it would be very damaging for both the country and the region. High-Speed Trading No Longer Hurtling Forward (NYT) Profits from high-speed trading in American stocks are on track to be, at most, $1.25 billion this year, down 35 percent from last year and 74 percent lower than the peak of about $4.9 billion in 2009, according to estimates from the brokerage firm Rosenblatt Securities. By comparison, Wells Fargo and JPMorgan Chase each earned more in the last quarter than the high-speed trading industry will earn this year. Titanic Tycoon Plans Stake Sale Talks for $8 Billion Gas Project (Bloomberg) Australian mining magnate Clive Palmer, who’s planning to build a modern replica of the Titanic, aims to start talks next year to sell stakes in a potential $8 billion natural gas project in Papua New Guinea. “We’ve had interest from major petrochemical companies who want to joint venture” including Exxon Mobil Corp. and Chinese companies, Palmer said in an interview. “We will talk to them at the appropriate time,” likely mid-2013 when field work is scheduled to be completed, he said. Occupy Supporters Stage Protest in London (AP) Several supporters of the anti-corporate Occupy movement chained themselves to the pulpit of St. Paul’s Cathedral during a service on Sunday in an action for the anniversary of its now-dismantled protest camp outside the London landmark. 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Fitch Downgrades Greece (WSJ) Fitch Ratings downgraded Greece's credit rating to C from triple-C Wednesday after confirmation of the country's second bailout package, which includes a debt exchange that will force bondholders to take a loss on their holdings of Greek debt. "The rating action is in line with Fitch's statement on 6 June 2011, which outlined its rating approach to a sovereign-debt exchange," the ratings company said. Fitch said it will lower its rating on the country's sovereign bonds to "restricted default" upon the completion of the debt exchange aimed at reducing the country's debt burden.

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