Opening Bell: 10.24.11

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Nicolas Sarkozy tells David Cameron: shut up over the euro (Guardian)
The bust-up between Cameron and Sarkozy held up the conclusion of the EU-27 summit for almost two hours, with the French president expressing rage at the constant criticism and lectures from UK ministers. Sarkozy bluntly told Cameron: "You have lost a good opportunity to shut up." He added: "We are sick of you criticising us and telling us what to do. You say you hate the euro and now you want to interfere in our meetings."

Banks Squabble With EU Over Greek Debt Losses (Bloomberg)
The world’s biggest banks are squabbling with European leaders over the size of losses on their Greek bonds as they seek a deal to cut the country’s debt load, two people with knowledge of the discussions said. The financial companies, represented by the Institute of International Finance, proposed a loss of 40 percent on Greek debt, said one of the people, who declined to be identified because talks are confidential. The European Union is calling on investors to forfeit as much as 60 percent, making a compromise at 50 percent possible, the person said.

Swiss Banks May Pay Billions To US, Disclose Client Names (Bloomberg)
U.S. and Swiss officials are concluding negotiations on a civil settlement amid U.S. criminal probes of 11 financial institutions, including Credit Suisse Group AG, suspected of helping American clients hide money from the Internal Revenue Service...Switzerland, the biggest haven for offshore wealth, wants an end to new U.S. probes while preserving its decades-old tradition of bank secrecy, the people said. The U.S. seeks data on Americans who have dodged U.S. taxes and a pledge by Swiss banks to stop helping such clients, according to the people.

CIC May Co-Invest With Blackstone In Loan Portfolio (WSJ)
In another sign of China Investment Corp.'s interest in overseas real estate, the sovereign wealth fund is considering teaming up with Blackstone Group LP to buy a stake in a portfolio of distressed property loans from Royal Bank of Scotland Group PLC, people familiar with the matter say.

Jobs Admired Zuckerberg For 'Not Selling Out' (Bloomberg)
“We talk about social networks in the plural, but I don’t see anybody other than Facebook out there,” Jobs told biographer Walter Isaacson in excerpts of an interview released online by 60 Minutes. “Just Facebook, they’re dominating this. I admire Mark Zuckerberg,” Jobs said of Facebook’s chief executive officer on the recording. “I only know him a little bit, but I admire him for not selling out, for wanting to make a company. I admire that, a lot.”

Economists: 'Miserable' Euro PMI Heightens Recession Risk (CNBC)
Nouriel Roubini wrote on Twitter after the data came out that euro zone politicians were "hell-bent to commit growth harakiri" as "financial engineering without growth soon will lead to defaults and euro zone break-up."

Vatican Calls For 'Central World Bank' To Be Set Up (Reuters)
The Vatican called on Monday for the establishment of a "global public authority" and a "central world bank" to rule over financial institutions that have become outdated and often ineffective in dealing fairly with crises. The 18-page document, "Towards Reforming the International Financial and Monetary Systems in the Context of a Global Public Authority," was at times very specific, calling, for example, for taxation measures on financial transactions. "The economic and financial crisis which the world is going through calls everyone, individuals and peoples, to examine in depth the principles and the cultural and moral values at the basis of social coexistence," it said. It condemned what it called "the idolatry of the market" as well as a "neo-liberal thinking" that it said looked exclusively at technical solutions to economic problems...It called for the establishment of "a supranational authority" with worldwide scope and "universal jurisdiction" to guide economic policies and decisions.

Volcker Rule Moves From Simple To Complex (NYTimes)
In numerous interviews this week with people across the political spectrum, I couldn’t find anyone who actually supports this behemoth — including Mr. Volcker, whose name it bears. “I don’t like it, but there it is,” Mr. Volcker told me in his first public comments on the sprawling proposal. “I’d write a much simpler bill. I’d love to see a four-page bill that bans proprietary trading and makes the board and chief executive responsible for compliance. And I’d have strong regulators. If the banks didn’t comply with the spirit of the bill, they’d go after them.”

Hedge Funds Face Investor Pruning (WSJ)
An Oct. 12 survey of 150 hedge-fund investors by Barclays Capital showed that 35% of those sampled either had redeemed recently or planned to soon redeem from managers who had performed relatively poorly. Another 20% said they were still on the fence.

Banks Are Back In Takeovers (WSJ)
Commercial and industrial loans, which include leveraged loans such as the one used by Kinder, grew by 4% in September and by 35% in the third quarter over the prior-year period, according to the Federal Reserve. Commercial loans by J.P. Morgan, the largest U.S. bank by assets, rose 9% to $107.4 billion in the third quarter.

German satellite crashed in southeast Asia (Telegraph)
A defunct German research satellite crashed into the Earth somewhere in southeast Asia on Sunday, a US scientist said – but no one is still quite sure where. Most parts of the car-sized ROSAT research satellite were expected to burn up as they hit the atmosphere at speeds up to 280mph, but up to 30 fragments weighing a total of 1.87 tons, could have crashed, the German Aerospace Center said.

Rick Perry says his new economic plan will include flat tax (LA Times)
Rick Perry previewed the economic plan he will roll out on Tuesday, saying he would call for trashing the current tax code and replacing it with a flat tax, ending all earmarks, enacting a balanced budget amendment and reforming entitlements. "It's time to get Washington out of the way in order for us to preserve the American way," Perry said. "The American people may be bruised but they're not broken and they want a new president who can deliver the hope and change that this one that we have today promised." "You learn a lot growing up on a farm, it doesn't make a difference whether it's Wilton, Iowa, or Paint Creek, Texas," he said. "There's just lots you learn growing up on a farm, it's universal. It's the value of hard work, it's duty to family, to country … Those values you learn on the farm are pretty good values for the president of the United States as well."

Related

Opening Bell: 06.14.12

Geithner Seeks More Euro-Zone Measures (WSJ) Treasury Secretary Timothy Geithner called the bailout of Spain's banking system "a good, concrete signal" of the euro-zone commitment to financial integration, but said the currency union must act quickly with more measures to quell its crisis. "This is a very challenging crisis for them still," he said Wednesday in a discussion at the Council on Foreign Relations. "They recognize they're going to have to do a bunch more to…restore a bit of calm and to convince people they're going to do what's necessary to make this work." Spanish Crisis Deepens (WSJ) The financial crisis threatening the Spanish government deepened Thursday as Spain's borrowing costs surpassed their euro-zone record, touching levels that previously forced other euro-zone countries to seek sovereign debt bailouts. The move followed yet another sovereign credit downgrade and coincided with fresh evidence Thursday of economic and financial stress as the decline of Spanish housing prices accelerated to a 12.6% annual rate in the first quarter and Spanish banks increased their reliance on European Central Bank funding. Spain Credit Rating Slashed by Moody's, Egan-Jones (Reuters) Moody's Investors Service cut its rating on Spanish government debt by three notches on Wednesday From A-3 to to Baa-3, saying the newly approved euro zone plan to help the country's banks will increase the country's debt burden. Moody's, which said it could lower Spain's rating further, also cited the Spanish government's "very limited'' access to international debt markets and the weakness of the country's economy. Greek Banks Under Pressure (WSJ) In a sign of heightened nervousness within the country, depositors have been steadily increasing their withdrawals from Greek banks. The withdrawals, according to senior bankers in Athens, approach the level of deposit flight seen when government coalition talks collapsed after inconclusive elections on May 6, forcing the new vote. "Why I'm Betting Big On Europe" (Fortune) David Herro seems awfully relaxed for a man who has more than $1 billion invested in European banks. It's a sunny morning in late May, and I'm sitting across from the boyish 51-year-old fund manager in his downtown Chicago office. He's giving me his full attention, but I can't stop glancing at the headlines blinking on the Bloomberg terminal behind him. The euro is about to hit a two-year low. Greece is on the brink of disaster. Spain's real estate market is in shambles, and Italian sovereign debt is as fragile as stained glass. The global economy is roiling, and Herro is positively beatific. "Eventually they're going to get these problems solved," he says. "If you look at the economic history of the world, problems come and problems go. There are problems, and they do have to be dealt with. And our view is that all these problems are manageable." Large Institutions Discuss New Marketplace for Bonds (WSJ) In recent weeks, senior traders at investment managers and big Wall Street banks have been discussing how the financial industry can set up a centralized electronic market that would let all participants trade bonds freely with one another, according to people involved in the talks. BofA Beating JPMorgan As BNP Leads French Lenders Retreat (Bloomberg) Bank of America overtook JPMorgan Chase as the biggest lender to the commodities industry in the first five months as French lenders led by BNP Paribas retreated amid the debt crisis. Commodity loans arranged by Charlotte, North Carolina-based Bank of America totaled $14.71 billion, and New York-based JPMorgan’s $14.41 billion ranked it second, according to syndicated-loan data compiled by Bloomberg. Citigroup was the third biggest with $13.68 billion of financing, rising from fourth last year. BNP Paribas slipped to 17th from second. Lazard elects former Citigroup chairman Richard Parsons to board (NYP) Financial advisory and asset management firm Lazard Ltd. said Wednesday that it elected former Citigroup chairman Richard Parsons to its board, effective immediately. Parsons served as chairman of Citigroup Inc. from February 2009 until his retirement in April 2012. He had served as a director on its board since 1996. Before that, he was chairman and chief executive of the media and entertainment company Time Warner Inc. Montreal teacher suspended with pay for showing students ‘Canadian Cannibal’ Luke Magnotta murder video (NYDN) A Canadian teacher was fighting for his job after he was suspended for showing students a gory video allegedly showing Maple Leaf man-eater Luke Magnotta killing his Chinese lover. The Cavelier-De LaSalle High School 10th grade teacher appeared before a labor board on Wednesday to explain himself, and Montreal police were mulling whether to slap him with criminal charges, The Canadian Press reported. School officials said the teacher, who is in his 20s, polled students about whether they wanted to watch the grisly snuff video during class on June 4. The yays outweighed the nays, according to the Press. In the 11-minute video, Magnotta, a porn actor and sometime escort, allegedly tortured Jun Lin, 33 — beheading and dismembering his body, eating his flesh with a knife and fork and performing sex acts on the corpse.

Opening Bell: 05.29.12

Greece Pours $22.6 Billion Into Four Biggest Banks (Reuters) The long-awaited injection—via bonds from the European Financial Stability Facility rescue fund—will boost the nearly depleted capital base of National Bank, Alpha, Eurobank and Piraeus Bank. "The funds have been disbursed," an official at the Hellenic Financial Stability Facility, who declined to be named, told Reuters. The HFSF was set up to funnel funds from Greece's bailout programme to recapitalise its tottering banks. The HFSF allocated 6.9 billion euros to National Bank, 1.9 billion to Alpha, 4.2 billion to Eurobank and 5 billion to Piraeus. All four are scheduled to report first-quarter earnings this week. The news came as two government officials told Reuters that near-bankrupt Greece could access 3 billion euros, left from its first bailout programme, to cover basic state payments if efforts to revive falling tax revenue fail. U.S. Ready for Europe Fallout, Says Fed Official (WSJ) "There's absolutely no reason for people in the United States to get all in a dither," Federal Reserve Bank of Philadelphia President Charles Plosser said in an interview with The Wall Street Journal. Mr. Plosser said that in the short run, uncertainty in Europe might even work in the U.S. economy's favor, via lower U.S. interest rates and energy prices. Greece to Leave Euro Zone on June 18, Says Guy (CNBC) Greece will leave the euro zone on June 18 if the populist government wins the country’s elections on the 17 as the rest of the euro zone rounds on "cheaters," Nick Dewhirst, director at wealth management firm Integral Asset Management, told CNBC Monday. “The euro zone is a club but you get cheaters who get away with it until everyone finds out and at that point you need to remove them otherwise everyone will cheat. It’s better for Greece to leave,” Dewhirst said. He added that Greek society was built on cheating and scheming, saying “everyone does it” but that voters elsewhere in the euro zone were now calling Greece to account. “The basic question is that a German has to increase working from 65 to 67 and that is to pay for Greeks retiring at 50. The 17th of June is the perfect opportunity to say either 'we’ll behave' or 'we’ll carry on cheating,'" he said. Facebook Debacle Turns High Hopes Into Potentially Mood-Souring Skepticism (WSJ) It is impossible to measure the impact of Facebook's flubbed deal on overall investor confidence. But there is at least one sign of possible fallout: More than $3 billion was yanked from U.S. stock mutual funds by small investors in the week ended Wednesday, according to EPFR Global Inc. in Cambridge, Mass. That was the worst week for withdrawals since March. In the previous week, investors added $311 million to U.S. stock mutual funds. David Guthrie, a 30-year-old actor in Toronto, bought 15 shares of Facebook on its opening day. Before then, he had bought just one stock, yet saw the market as a place to make his savings rise in the long run. Now he feels burned. "If Facebook had made a lot of money, I'd try it again," Mr. Guthrie says. After the stock's disappointing slide, "I would never put big money into the stock market." Zoos' Bitter Choice: To Save Some Species, Letting Others Die (NYT) ...Ozzie, a lion-tailed macaque, will never father children. Lion-tails once flourished in the tops of rain forests in India, using their naturally dark coloring to disappear into the height of the jungle. Though there are only about 4,000 remaining in the wild, not one among Ozzie’s group here in St. Louis will be bred. American zoos are on the verge of giving up on trying to save them. As the number of species at risk of extinction soars, zoos are increasingly being called upon to rescue and sustain animals, and not just for marquee breeds like pandas and rhinos but also for all manner of mammals, frogs, birds and insects whose populations are suddenly crashing. To conserve animals effectively, however, zoo officials have concluded that they must winnow species in their care and devote more resources to a chosen few. The result is that zookeepers, usually animal lovers to the core, are increasingly being pressed into making cold calculations about which animals are the most crucial to save. Some days, the burden feels less like Noah building an ark and more like Schindler making a list. Icahn Takes Chesapeake Energy Stake (WSJ) Carl Icahn skewered Chesapeake Energy Corp.'s CHK board for corporate governance controversies and "irresponsible actions" while disclosing he acquired a sizeable new stake in the company. Euro Likely Worthless as Collector's Item (Bloomberg) FYI. JPMorgan Beefs Up China Unit With $400 Million Injection (Reuters) "The additional capital will better position the bank in the evolving regulatory environment and cement our commitment to clients in China," Zili Shao, Chairman and chief executive of J.P. Morgan China, said in a statement on Monday. "The capital will be used to expand the bank's branch network, develop products, increase corporate lending, and recruit employees," Shao added. Europe Turns To US For Loans (WSJ) In the latest symptom of Europe's financial turmoil, the region's riskier companies are bypassing banks and investors at home and turning to the U.S. for loans. European companies borrowed some €14.4 billion (about $18 billion at current rates) in the U.S. leveraged-loan market this year through Friday, more than double the €6.7 billion for all of 2011, according to data from S&P Capital IQ LCD. That is the highest amount since at least 2007, the height of the last boom in leveraged lending, when full-year loan volume was €12.2 billion, according to S&P. How Boaz Weinstein And Hedge Funds Outsmarted JPMorgan (NYT) By May, when fears over Europe’s debt crisis again came to the fore, the trade reversed. The London Whale was losing. And Mr. Weinstein began to make back all of his losses — and then some — in a matter of weeks. Other hedge funds were also big winners. Blue Mountain Capital and BlueCrest Capital, both created by former JPMorgan traders, were among those winners. Lucidus Capital Partners, CQS and a fund called III came out ahead, too. Inside the hedge fund world, some joked that Mr. Weinstein had been able to spot the London Whale because he himself had been a whale once, too. Drunk Brooklyn woman crashes car through Long Island home (NYDN) A drunken Brooklyn woman crashed her Mercedes into a Long Island home Monday, smashing through the house and landing in the backyard, cops said. Sophia Anderson, 21, failed to turn left or right when the road she was driving on in Huntington deadended at a T-intersection with another street, officials said. She left a train of wreckage as she smashed through the modest house on Southdown Rd., missing the 90-year-old homeowner and her caretaker. Anderson, treated and released at Huntington Hospital, was arrested and charged with driving while intoxicated, police said.

Opening Bell: 03.06.12

Goldman Secret Greece Loan Reveals Sinners (Bloomberg) On the day the 2001 deal was struck, the government owed the bank about 600 million euros ($793 million) more than the 2.8 billion euros it borrowed, said Spyros Papanicolaou, who took over the country’s debt-management agency in 2005. By then, the price of the transaction, a derivative that disguised the loan and that Goldman Sachs persuaded Greece not to test with competitors, had almost doubled to 5.1 billion euros, he said. Papanicolaou and his predecessor, Christoforos Sardelis, revealing details for the first time of a contract that helped Greece mask its growing sovereign debt to meet European Union requirements, said the country didn’t understand what it was buying and was ill-equipped to judge the risks or costs...“Like the municipalities, Greece is just another example of a poorly governed client that got taken apart,” Satyajit Das, a risk consultant and author of “Extreme Money: Masters of the Universe and the Cult of Risk,” said in a phone interview. “These trades are structured not to be unwound, and Goldman is ruthless about ensuring that its interests aren’t compromised -- it’s part of the DNA of that organization. Greece Pushes For Aid Tranche (WSJ) Greece's international creditors are considering whether to grant the country a small, tranche of the €130 billion ($171.8 billion) bailout agreed earlier this month in the weeks ahead as part of efforts to pump liquidity into the country's moribund economy. Speaking to the privately owned Mega television channel Tuesday, Deputy Finance Minister Philippos Sachinidis said the money would go to paying off some of the €6 billion in accumulated arrears that the Greek government owes private contractors. He added that the disbursement could come before Greece goes to elections that are widely expected to be held in late April. "There is a discussion that, likely before the elections, we will get a tranche that will allow us to pay some of, not the total, of the arrears," Mr. Sachinidis said. Bondholder Group Sees 1 Trillion Euro Greek Default Risk (Reuters) A disorderly Greek default would probably leave Italy and Spain needing outside help to stop contagion spreading and cause more than 1 trillion euros ($1.3 trillion) of damage to the euro zone, the group representing Athens' bondholders warned. Greek private creditors have until Thursday night to say whether they will take part in a bond swap that is part of a 130 billion euros bailout deal to put the country on a more stable footing and cut its debt by more than 100 billion euros. Paulson’s Advantage Plus Declines in February (Bloomberg) John Paulson lost 1.5 percent in February in one of his largest hedge funds, according to an investor update, paring this year’s gain and setting back efforts by the New York-based manager to recoup record losses in 2011. Paulson’s Advantage Plus Fund, which seeks to profit from corporate events such as takeovers and bankruptcies and uses leverage to amplify returns, gained 3.5 percent in the first two months of 2012, according to the update IBM’s Watson Gets Wall Street Job After ‘Jeopardy’ Win (Bloomberg) International Business Machines Corp’s Watson computer, which beat champions of the quiz show “Jeopardy!” a year ago, will soon be advising Wall Street on risks, portfolios and clients. Citigroup, the third-largest U.S. lender, is Watson’s first financial services client, IBM said yesterday. It will help analyze customer needs and process financial, economic and client data to advance and personalize digital banking. Ann Romney: ‘I Don’t Even Consider Myself Wealthy’ (ABC) Mitt Romney may have more money than any other presidential candidate in the race, but his wife said today that she does not consider herself wealthy. “We can be poor in spirit, and I don’t even consider myself wealthy, which is an interesting thing,” Ann Romney said in an interview on Fox News. “It can be here today and gone tomorrow.” Swiss Pass Proposal to Help Nab US Tax Evaders (Reuters) Specifically, the plan would allow Switzerland to hand over data on suspected tax evaders, even if U.S. tax authorities cannot identify alleged offenders by name or bank account. The big-spending businessman who ran up £203,948 bar bill was 23-year-old City whizkid (Mirror) The businessman who blew £203,948 on bubbly in a single night in Liverpool was 23-year-old Alex Hope...His biography reads: “Despite his tender years, Alex is a name to watch out for in the city. An expert in the UK economy, he works the currency markets, regularly trading millions.” Describing his rapid career rise from humble beginnings to working for trading company Zone Invest Group, it adds: “A talented, charismatic and thoroughly likeable man, Alex Hope exudes knowledge and you can’t help but respect and admire this self-taught and self-made young trader.” Banker Bonus Limits Sought by EU Lawmakers (Bloomberg) Members of the European Parliament’s Socialist and Green parties have proposed that a draft EU law to bolster bank capital should include new pay rules, as well as stricter curbs on risk taking, according to two members of the institution’s financial affairs committee. “Wrong incentives were part of the banking culture that caused the crisis,” said Udo Bullmann, a German lawmaker following the proposed law for the parliament’s Socialist group. “I expect there will be quite a lot of sympathy among different party groups” for further rules on pay. Judge throws heat at Picard’s claim vs. Mets (NYP) Picard’s best evidence may be from Noreen Harrington, a former chief investment officer for a hedge fund partially owned by the Mets’ owners, who is expected to say that she told Katz and another Sterling Equities executive that she thought Madoff’s reported returns were “fiction” and not “worth the paper they’re written on.” The Mets will argue they were bamboozled by Madoff, along with the nation’s top regulators and major banks. Bill Clinton Said to Agree to Join Obama at Campaign Fundraisers (Bloomberg) While Obama raised $5 million on his last fundraising trip to New York, including $2 million from a March 1 event with members of the financial services industry, he is collecting less money from Wall Street this year compared with four years ago, according to the Center for Responsive Politics. When Gaming Is Good For You (WSJ) People who played action-based video and computer games made decisions 25% faster than others without sacrificing accuracy, according to a study. Indeed, the most adept gamers can make choices and act on them up to six times a second—four times faster than most people, other researchers found. Moreover, practiced game players can pay attention to more than six things at once without getting confused, compared with the four that someone can normally keep in mind, said University of Rochester researchers. The studies were conducted independently of the companies that sell video and computer games.