Opening Bell: 09.20.11

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SEC Probes Trades Ahead Of S&P Cut To US Rating (WSJ)
The SEC could face an uphill battle proving that anyone profited from the downgrade by using inside information. While the SEC has asked Finra officials to scrutinize trading in securities that track major indexes like the S&P 500 and Russell 2000, there are lots of other reasons why investors have bet against the stock market recently, including Europe's woes and the struggling economy.

Roubini: Greece Should Default And Quit The Euro (CNBC)
"Via nominal and real depreciation, the exit path will restore growth right away, avoiding a decade-long depression," said Roubini who warns that contagion for countries such as Italy and Spain is already a reality, and requires liquidity support from the European Central Bank or the European Financial Stability Fund. "Like a broken marriage that requires a break-up, it is better to have rules that make separation less costly to both sides" said Roubini.

Obama Tax Plan Swaps Conciliation For Confrontation (Bloomberg)
Both sides have pulled back from compromise offers Obama and Boehner made during unsuccessful negotiations in July seeking a broad deficit-reduction agreement. In announcing his proposal, Obama stressed the benefit cuts the middle class would sustain unless Republicans permit tax increases on the wealthy, saying he wouldn’t allow “any plan that puts all the burden for closing our deficit on ordinary Americans.” “This is not class warfare; it’s math,” Obama said at the White House yesterday. “The money’s going to have to come from someplace.”

UBS Loss Reveals Gaps (WSJ)
One avenue of the bank's inquiry, entering its seventh day, is examining whether the trader had knowledge of rules regarding how exchange-traded funds are settled in Europe, according to people familiar with the matter. A gap in trade reporting likely contributed to a breakdown in a paper or electronic trail that typically would reconcile cash and trading flows at UBS, people familiar with the situation said.

Charlie Sheen Offered $25 Million Settlement (MSNBC)
Warner Bros. is gearing up to pay Sheen roughly $25 million to get him to drop his wrongful-termination suit against the studio and "Men" cocreator Chuck Lorre. That sure sounds better than having one's body explode "like a balloon full of meat," like the fate that befell Sheen's killed-off character on tonight's season premiere of "Two and a Half Men."

Bank of China Halts Forex Swaps With UBS, BNP (WSJ)
State-run Bank of China Ltd. has told UBS AG and BNP Paribas SA that it won't trade with them in China's local derivatives markets, amid broader investor concerns over Europe's debt woes...Bank of China told UBS and BNP Paribas that they reached the limits of their trading credit lines with the bank, according to one person familiar with the matter. It wasn't clear Tuesday how large the credit lines were. The lender notified the banks about its decision last week, while the halt began Monday, the person said.

S&P Cuts Italy Rating on Weak Growth Outlook (Bloomberg)
S&P lowered its rating last night to A from A+, saying weak economic growth, a “fragile” government and rising borrowing costs would make it difficult to reduce Europe’s second-biggest debt.

Debit Or Credit? Citi Places Its Bets (WSJ)
Citi mailed an estimated 346 million card offers to North American customers in the third quarter...That is more than one for every man, woman and child in the U.S.

Netflix CEO Unbowed (WSJ)
If the CEO of Netflix Inc. were in a movie, the townspeople would be chasing him with torches and pitchforks.

For Stranded Chinese IPOs, Private Equity to the Rescue (Reuters)
An $80 million investment in a Chinese baby diaper producer normally wouldn't generate much buzz. But last week's deal for AAB China was interesting for a few reasons, among them the involvement of Richard Ong's new $2.3 billion private equity fund. The deal shows that private equity firms, like Ong's RRJ Capital, are stepping into China where hedge funds once roamed, pursuing deals that look more like short term financing than long term growth bets.

Old Ketchup Packet Heads For Trash
(WSJ)
Some people rip off the corner of the packet with their teeth. Others, while driving, squirt the ketchup directly into their mouth, then add fries. Some forgo fries at the drive-through all together to keep from creating a mess in the car. After observing these and other "compensating behaviors," H. J. Heinz Co. says it spent three years developing a better ketchup packet. Heinz says the new "Dip and Squeeze" packets will begin replacing the traditional rectangular ketchup packets later this year at Wendy's Co. restaurants. As the name promises, "Dip and Squeeze" ketchup can be squeezed out through one end or the lid can be peeled back for dipping. The red, bottle-shaped packets hold three times the ketchup as traditional packets. The new containers are more expensive than the old sleeves, but Heinz hopes customers learn not to grab more than one or two. To develop the new packet, Heinz staffers sat behind one-way, mirrored glass, watching consumers in 20 fake minivan interiors putting ketchup on fries, burgers, and chicken nuggets.

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Wall Street Damps Pay Expectations After 2011 Bonus Shock (Bloomberg) Almost 20 percent of employees won’t get year-end bonuses, according to Options Group, an executive-search company that advises banks on pay. Those collecting awards may see payouts unchanged from last year or boosted by as much as 10 percent, compensation consultant Johnson Associates Inc. estimates. Decisions are being made as banks cut costs and firms including UBS AG (UBSN) and Nomura Holdings Inc. (8604) fire investment-bank staff. Some employees were surprised as companies chopped average 2011 bonuses by as much as 30 percent and capped how much could be paid in cash. That experience, along with public statements from top executives, low trading volumes in the first half and a dearth of hiring has employees bracing for another lackluster year, consultants and recruiters said. “A lot of senior managers won’t have to pay up because they’re saying, ‘Where are these guys going to go?’” said Michael Karp, chief executive officer of New York-based Options Group. “We’re in an environment where a lot of people are just happy to have a job. Expectations have been managed so low that people will be happy with what they get.” Goldman Pares Back Partner Picks (WSJ) The New York company is expected to announce this week the promotion of about 70 employees to partner, said people familiar with the situation. The likely total is roughly one-third smaller than the 110 employees named partner by Goldman in 2010...As of Monday, the Goldman partnership committee hadn't finished the list of new partners, said people familiar with the matter. Greece Avoids Defaults (WSJ) Cash-strapped Greece on Tuesday raised the money it needs to avoid default when a Treasury bill matures later this week, but investor nerves are unlikely to be calmed as negotiations for the next slice of much-needed aid continue. The rift among Greece's official lenders over how to pare the country's growing debt pile spilled into the open late Monday, complicating efforts for an agreement that will free up a long-delayed aid payment to the country. The European Central Bank's reluctance to provide additional money to Greek banks poses a risk to the government, which in order to keep afloat has depended on support from local banks to sell its debt. Greece Needs Another 80 Billion Euros: Goldman Sachs (CNBC) The authors of the report, economists Themistoklis Fiotakis, Lasse Holboell Nielsen and Antoine Demongeot, note that the IMF’s target is “unlikely” without such a “drastic debt stock reduction.” “To increase the likelihood that the Greek debt-to-GDP ratio approaches its 120 percent by 2020 target under realistic assumptions, a much more drastic debt stock reduction (possibly north of 80 billion euros in total) will be required,” the report states. Japan Lawmakers Agree To Avert 'Fiscal Cliff' (Reuters) Japan's ruling and opposition parties agreed on Tuesday to quickly pass a deficit funding bill in parliament, in a move that will keep the country from falling off its version of a 'fiscal cliff' as the prime minister eyes elections as early as next month. The bill is needed to borrow some $480 billion and fund roughly 40 percent of this fiscal year's budget. Without it, the government could run out of money by the end of this month and would have to stop debt auctions next month, just as the economy teeters on the brink of a recession. Marc Faber: Prepare For A Massive Market Meltdown (CNBC) “I don’t think markets are going down because of Greece, I don’t think markets are going down because of the “fiscal cliff” – because there won’t be a “fiscal cliff,” Faber told CNBC’s “Squawk Box.” “The market is going down because corporate profits will begin to disappoint, the global economy will hardly grow next year or even contract, and that is the reason why stocks, from the highs of September of 1,470 on the S&P, will drop at least 20 percent, in my view.” FBI Agent in Petraeus Case Under Scrutiny (WSJ) A federal agent who launched the investigation that ultimately led to the resignation of Central Intelligence Agency chief David Petraeus was barred from taking part in the case over the summer due to superiors' concerns that he was personally involved in the case, according to officials familiar with the probe. After being blocked from the case, the agent continued to press the matter, relaying his concerns to a member of Congress, the officials said. New details about how the Federal Bureau of Investigation handled the case suggest that even as the bureau delved into Mr. Petraeus's personal life, the agency had to address conduct by its own agent—who allegedly sent shirtless photos of himself to a woman involved in the case prior to the investigation. Trial to Open in $68 Million Insider Trading Case (Dealbook) On Tuesday, Mr. Chiasson, 39, a co-founder of the now-defunct Level Global Investors, and Mr. Newman, 47, a former portfolio manager at Diamondback Capital Management, are set to stand trial in Federal District Court in Manhattan. Prosecutors say they were part of a conspiracy that made about $68 million illegally trading the computer company Dell and the chip maker Nvidia. MF Report Coming (Reuters) A US House of Representatives panel will release a long-awaited report that will dissect the collapse of failed commodities brokerage MF Global. The House Financial Services Committee said its Subcommittee on Oversight and Investigations will post the report online Thursday. A Dose of Realism for the Chief of J.C. Penney (NYT) Andrew Ross Sorkin: "You should know you have a problem when sales at your stores fall 26.1 percent in one quarter. That was the surprising decline J.C. Penney reported last week, when it disclosed that it had lost $123 million in the previous three months...Here's the good news: In the stores that have been transformed, J.C. Penney is making $269 in sales a square foot, versus $134 in sales a square foot in the older stores. So the model itself is working. And Mr. Johnson has the support of the company's largest shareholder, Pershing Square's Bill Ackman, who personally recruited Mr. Johnson. If Mr. Johnson were starting with a blank slate, it might be a great business." China Banker Sees Lower Bar for Yuan Globalization (WSJ) "Renminbi internationalization can be realized based on a partial opening of the capital-account and partial convertibility of the currency," said Mr. Li, a delegate to the 18th Communist Party Congress and longtime advocate of a greater global role for the yuan. The Eximbank is a major arm of the Chinese government for financing trade and investment overseas. Finally, a Place in Brazil Where Dogs Can Go for Discreet Sex (NYT) Heart-shaped ceiling mirror: check. Curtains drawn against the bright day: check. Red mattress: check. The establishment that opened here this year has features that demanding clients naturally expect from a love motel. Brazil, after all, is a world leader in these short-stay pleasure palaces, which beckon couples for trysts away from prying eyes with names like Swing, Absinthe and Alibi, and design motifs like medieval castles or of the American Wild West. But Belo Horizonte’s newest love motel stands apart from the crowd in one crucial aspect. It is for dogs. “I adore the romantic feel of this place,” said Andreia Kfoury, 43, a manager at a technology company who peeked inside the Motel Pet one recent morning while she and her husband were on a clothes-buying spree for their Yorkshire terrier, Harley. The couple, who are motorcycle enthusiasts, bought about $500 worth of imported Harley-Davidson brand items for their dog. “I’m definitely bringing Harley back here when it’s time for him to breed,” a smiling Ms. Kfoury said. “He is very macho, and would be a hit in this place.” Whether dogs like Harley actually need a romantic curtained-off suite to breed seems beside the point. Some dog owners simply like the concept of a love motel for their amorous pets and are willing to pay about $50 for each session, which Animalle will happily arrange.