September 23, 2021

Opening Bell: 01.06.12

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Job Growth Accelerates (WSJ)
U.S. job growth accelerated and the unemployment rate ticked lower in December, signs of strength for the labor market amid broad economic uncertainty for the new year. Nonfarm payrolls rose by 200,000 last month, the U.S. Labor Department reported Friday in its monthly survey of employers. Private companies added 212,000 jobs, while the public sector—federal, state and local governments—shrank by 12,000. The unemployment rate, obtained by a separate survey of U.S. households, sank to 8.5% in December, its lowest level since February 2009. November's rate was revised up to 8.7%. Economists surveyed by Dow Jones Newswires had forecast a gain of 155,000 in payrolls and a jobless rate of 8.7%.

The Economy Might Save Obama After All (NYMag)
Defeating an incumbent president, historically, seems to require either a major scandal, a failed war, or a terrible economy. We have a terrible economy. But the direction seems to matter more than the level — Ronald Reagan famously cruised to reelection with a high unemployment rate because the economy bounced back from the deep but quick 1982 recession. Mitt Romney has made the state of the economy his central theme against Obama. The entire premise of his campaign is that the economy is bad because Obama's economic program has failed. If voters think the economy is improving, Romney has no ammunition left. That is still the smart play for Romney, because if the economy feels strong, he probably can't win anyway, so he needs to plan for the scenario that gives him a chance to win. A few months ago, that scenario was looking almost certain. Now it's looking far less likely.

Fitch Cuts Hungary to 'Junk' on 'Unorthodox' Policies (CNBC)
Fitch became the third ratings agency to downgrade Hungary's debt to "junk" status on Friday, invoking further deterioration in the country's fiscal and external financing and growth outlook and the government's "unorthodox" economic policies.

Soros Says EU Break-Up Would Be 'Catastrophic' (Reuters)
FYI.

Germany Biggest Obstacle to Bailout-Fund Boost, Dutch Central Banker Says (Bloomberg)
European Central Bank Governing Council member Klaas Knot said Germany should support raising the European emergency fund to help end the region’s debt crisis. “The most important obstacle lies in Germany, not in the Netherlands,” Knot said in an interview on Dutch public television last night. “I think that more money is needed and we will use the time to convince our German colleagues.” German Chancellor Angela Merkel has resisted calls to ratchet up bailout funding amid warnings that the current amount isn’t enough to safeguard nations such as Italy and Spain. Germany has instead focused on budget discipline as the best means to stem the crisis now in its third year.

IRS Contacts 1 in 8 Millionaires for Extra Taxes (AP)
The IRS audited one in eight millionaires who filed taxes last year while only auditing 1 in 100 individuals earning less than $200,000 in an effort to "assure that there's equity in the system."

Grandpa the 'psychic' monkey's toughest challenge yet will be to predict GOP winner in New Hampshire primary (NYDN)
His keepers have been testing his supposedly psychic powers by having him pick the winners of tennis matches and pigskin tilts. But the Daily News is giving Grandpa his toughest challenge yet — choosing which candidate in the crowded GOP field will claim victory in the New Hampshire primary. On Monday, the day before the showdown in the Granite State, The News will have Grandpa pick a banana from a bunch. Each banana will have written on it the name of a GOP candidate — and pity all who are not the chosen banana. In the past, Grandpa has shown himself to be an ace at beating odds in sporting matches that break down to a simple flip of a coin, like his triumph in picking the Green Bay Packers to win the Super Bowl last year.

Report Says Romney Tax Plan Would Balloon US Deficit (Reuters)
U.S. presidential hopeful Mitt Romney's tax plan would cut revenues and increase the government's budget deficit, while benefiting wealthy taxpayers more than others, said a report from a non-partisan think tank released on Thursday...The new report from the Tax Policy Center scored Romney's plan on its cost and effect on taxpayers at different income levels. It estimated the plan would cut federal tax revenue by $600 billion, or 16 percent, in 2015. This estimate assumes the Bush tax cuts are allowed to expire at the end of this year, as presently planned. If the Bush tax cuts do not expire, Romney's plan would cut revenues by $180 billion in 2015, the center said. "A Romney administration's revenue agenda would look a lot like President George W. Bush's, just more so," said Howard Gleckman, resident fellow at the center, which also has analyzed the tax plans of other Republican presidential contenders, including Newt Gingrich, Rick Perry and Herman Cain.

Private Equity Firms Forced To Evolve (WSJ)
Firms are doing fewer big deals in recent years and lately are running into difficulties selling companies they already own. With debt less available than before the financial crisis and prices for acquisitions up, returns on investments are down. As a result, private-equity bosses are focusing on midsize deals, growing existing businesses and expanding into real estate and other areas, rather than piling on debt for megadeals. The shift is crucial for investors because endowments, pension plans and other institutions have hundreds of billions of dollars tied up with private-equity funds. They are counting on scoring outsize returns, in some cases to meet substantial obligations, for example to retired workers. "It's a new era," says James Coulter, a co-founder of TPG Holdings, one of the industry's largest companies. "Fixing a company, improving operations and driving growth are more important than financial engineering."

MF Trustee Tussles With Regulators (WSJ)
Louis Freeh, the former Federal Bureau of Investigation director who was appointed bankruptcy trustee of MF Global Holdings Ltd., has declined to turn over some documents to investigators trying to determine what happened to an estimated $1.2 billion in missing customer funds...The conflict is among several that have erupted among various investigators looking into the collapse of MF Global. The disputes are complicating efforts to learn how the firm lost the customer funds and to return the money to its owners, say people familiar with the investigation, which has entered its third month.

When Zuckerberg Met Graham: A Facebook Love Story (WSJ)
Donald Graham spends long stretches on Facebook, sharing with 4,888 friends his interest in tattoo removal, a love of the Washington Redskins and his favorite Muppets song, "Mahna Mahna." The 66-year-old chief executive of Washington Post Co. also shares a lot more with one of those friends: Facebook Inc. founder Mark Zuckerberg. The two men—separated by 39 years—have formed an unlikely relationship bridging two vastly different media worlds. Introduced through a college friend of Mr. Zuckerberg in 2005, each now serves as a mentor to the other. Mr. Zuckerberg's views on social media and news-sharing have begun to have broad influence inside the Post Co., which has a $2.9 billion market value....In 2007, as Facebook expanded, Mr. Graham recalled getting an email from Mr. Zuckerberg: "I'm a CEO now," the young tech mogul wrote, "and would like to shadow you and see what you do."

Book by ‘most lethal sniper’ in U.S. history claims 160 kills in Iraq (The Star)
Some days, Chris Kyle writes, the U.S. military credits him with killing 160 people in Iraq. Other days, it credits him with killing a bunch more people. Not that the tally matters. “The number is not important to me. I only wish I had killed more,” Kyle, a former Navy SEAL, writes in his new memoir, American Sniper: The Autobiography of the Most Lethal Sniper in U.S. Military History...“I’m not trying to glorify myself, and if you read the book, you’ll find out that I give all the credit to all my guys. I’m not the best sniper, I’m not the best SEAL, I almost failed out of sniper school."

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Goldman Earnings Beat Expectations (WSJ) For the first quarter, the firm's revenue from fixed income, currency and commodity trading totaled $3.46 billion, down 20% from a year earlier although more than double what the firm booked in the fourth quarter. Investment-banking revenue came in at $1.15 billion, down 9.1% from a year, yet up 35% from a fourth quarter that was bleak across Wall Street. Goldman posted a profit of $2.11 billion, compared with a year-earlier profit of $2.74 billion. Earnings per share—reflecting the payment of preferred dividends—rose to $3.92 from $1.56 a year earlier, topping the $3.55 per-share profit expected by analysts polled by Thomson Reuters. Paulson Said to Short Europe Bonds Amid Spain Concern (Bloomberg) John Paulson, the billionaire hedge-fund manager seeking to reverse record losses in 2011, told investors he is shorting European sovereign bonds, according to a person familiar with the matter. Paulson, 56, said during a call with investors that he is also buying credit-default swaps on European debt, or protection against the chance of default, said the person, who asked not to be identified because the information is private. Spanish banks are of particular concern as their holdings of the country’s debt and client withdrawals make them overly dependent on European Central Bank financing, Paulson told investors. No Double-Dip Deja Vu Seen for U.S. Economy (Bloomberg) “It feels eerily similar to last year, but fundamentally it’s quite different,” said Joseph LaVorgna, chief U.S. economist for Deutsche Bank Securities in New York. He sees the economy growing 3 percent in the fourth quarter from a year earlier, compared with 1.6 percent in 2011. Ainslie's Maverick Makes First Start-Up Seeding In Sycamore Lane (WSJ) Maverick Capital Management LP, the $9 billion investment firm run by Lee Ainslie, has made its first seeding investment in a start-up hedge fund, according to marketing materials sent to investors. According to the materials sent by Sycamore Lane Partners to investors, Maverick provided it with start-up capital, allowing the long/short value-driven equity fund to begin investing April 2. The amount of Maverick's investment isn't outlined, but is described as "significant capital contributions with extended lock through 2015." Alabama Bond Fight Begins New Round (WSJ) Wall Street has sparred with Jefferson County for years over the local government's crippling debt. Now the battle has moved underground, and the two sides are arguing over the condition of 3,200 miles of sewage pipes below Alabama's largest metropolitan area. A federal judge is weighing whether officials of the bankrupt county can divert money that would have gone to pay J.P. Morgan Chase and other debtholders in order to upgrade its leaky sewer system. The case could have far-reaching implications for the $3.7 trillion municipal-bond market. A ruling in the county's favor could upend the notion that holders of debt backed by revenues from utilities such as sewer systems should continue to be paid in full when a municipality files for bankruptcy protection. Toms River Couple Sues Landlord Over Alleged Paranormal Activity (CBS) Jose Chinchilla and his fiancée Michele Callan say they hear eerie noises, that lights flicker, doors slam and a spectral presence tugs on their bed sheets. Chinchilla and Callan are suing the landlord for their $2,250security deposit claiming the paranormal activity forced them out of the home only a week after moving in. For Two Economists, the ‘Buffett Rule’ Is Just a Start (NYT) As much as Mr. Piketty’s and Mr. Saez’s work has informed the national debate over earnings and fairness, their proposed corrective remains far outside the bounds of polite political conversation: much, much higher top marginal tax rates on the rich, up to 50 percent, or 70 percent or even 90 percent, from the current top rate of 35 percent. The two economists argue that even Democrats’ boldest plan to increase taxes on the wealthy — the “Buffett Rule,” a 30 percent minimum tax on earnings over $1 million — would do little to reverse the rich’s gains. Many of the Republican tax proposals on the table might increase income inequality, at least in the short term, according to William G. Gale of the Tax Policy Center and many other left-leaning and centrist economists. Romney Not Too Rich To Relate (Bloomberg) Presumptive Republican presidential nominee Mitt Romney said he isn’t too rich to relate to average Americans and President Barack Obama should “start packing” for a White House departure in 2013. Romney made the remarks in an ABC News interview aired yesterday as Democrats accused him of running a secretive campaign and called on him to release more tax records....Periodically while campaigning this year Romney has made comments drawing attention to his wealth -- and earning scorn from opponents -- including saying he has friends who are NASCAR owners and that his wife, Ann, owns a “couple” of Cadillacs. Brazil’s Unpredictable Central Banker Tombini Confounds Critics (Bloomberg) No central banker in the world’s top 10 economies has surprised analysts as frequently as Brazil’s Alexandre Tombini. Since taking office 15 months ago, Tombini set interest rates lower than economists expected in three out of 10 policy meetings, including an August reduction that all 62 analysts surveyed by Bloomberg failed to anticipate. Russia’s central bank, the second most unpredictable, defied economists in three out of 14 rate decisions in the same period. So far, Tombini has been vindicated. Inflation in Brazil, at 5.24 percent in March, is easing at a pace faster than analysts forecast. While investors have speculated that Tombini may be yielding to political pressure to lower rates, his gloomy assessment of the world economy and risk-taking may prove correct, according to Citigroup Inc.’s Dirk Willer. Husband watching porn online finds film starring his wife (Emirates) An Egyptian man who went online to watch a porno film for the first time got the shock of his life when he found that the woman in the film was his own wife. The man, identified as Ramadan, instantly collapsed in disbelief on the floor at an internet shop before coming round and rushing home to face his unfaithful wife. The woman first denied his allegations and started to swear at him, prompting her husband to face her with the film...“I found 11 films showing my wife in indecent scenes with her lover….it was the first time I watched a porno film and I did this just out of curiosity,” Ramadan told Egyptian newspapers at his house in the northeastern province of Dakhalia...Ramadan said he had been happy during his marriage life until he logged on to that website.

Opening Bell

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Leucadia Agrees to Buy Jefferies for About $2.76 Billion (Bloomberg) Leucadia National Corp agreed to buy the the portion of Jefferies Group it doesn’t already own for about $2.76 billion. Investors will receive 0.81 Leucadia share for each Jefferies share they own, the companies said today in a statement. The deal values the entire company at about $3.59 billion, based on data from the company’s most recent 10-Q regulatory filing. Jefferies management will run the firm, according to the report. Leucadia already holds about 28.6 percent of New York-based Jefferies. Jefferies Chief Executive Officer Richard Handler will become CEO of New York-based Leucadia after the transaction is completed, which the companies said they expected in the first quarter. Handler will remain CEO of Jefferies as well. “This transaction represents the realization of a personal dream for me,” Handler, 51, said in the statement. Greece Passes 2013 Austerity Budget (WSJ) Greece passed on Monday a 2013 austerity budget needed to unlock further funding for the cash-strapped country, although international creditors have indicated the disbursement may be weeks away as they squabble over how to resolve the nation's debt problems. Euro-zone finance ministers will meet Monday in Brussels, where they had been expected to approve Greece's next aid payment of €31.5 billion ($40 billion), but no decision is now expected until they are assured the country's overhauls are on track. The budget, approved by a 167-128 vote, foresees Greece taking €9.4 billion of budget cuts next year, dealing a fresh blow to an economy seen contracting 4.5% next year, its sixth year of recession. Spain Needs A Bailout Urgently: Former ECB Member (CNBC) Bini Smaghi told CNBC that Spain must not waste any more time and that it needed to apply for help from Europe's bailout fund. "They need to revitalize the economy and they need lower interest rates [and] the only way to do that [is] to request a program," he said, adding that Spain should have done so "yesterday." White House Plans Public Appeal On Deficit (WSJ) Mr. Obama has planned the meetings as policy makers start work to craft a package of deficit-reduction measures that could come in place of the so-called fiscal cliff, the mandatory spending cuts and tax increases scheduled to begin in January. His meetings with labor and business leaders come before he meets with congressional leaders Friday, evidence the White House believes Mr. Obama can use momentum from his re-election to marshal outside support and heighten pressure on Republicans to agree to tax increases on upper-income earners. The strategy comes as many Republicans appear to have softened their antitax rhetoric in the wake of the election, with many openly acknowledging that higher taxes will likely be part of any plan to reduce the deficit. Boehner Tells House GOP to Fall in Line (NYT) On a conference call with House Republicans a day after the party’s electoral battering last week, Speaker John A. Boehner dished out some bitter medicine, and for the first time in the 112th Congress, most members took their dose. Their party lost, badly, Mr. Boehner said, and while Republicans would still control the House and would continue to staunchly oppose tax rate increases as Congress grapples with the impending fiscal battle, they had to avoid the nasty showdowns that marked so much of the last two years. Members on the call, subdued and dark, murmured words of support — even a few who had been a thorn in the speaker’s side for much of this Congress. It was a striking contrast to a similar call last year, when Mr. Boehner tried to persuade members to compromise with Democrats on a deal to extend a temporary cut in payroll taxes, only to have them loudly revolt. No Increase Of Banker Bonuses This Year (NYP) That’s the dour view of executive-compensation firm Johnson Associates, which says investment-banking business is so slow that after the sector’s workers bore the brunt of most of the 7,000 job losses on the Street this year, they will find the bonus pie smaller as well. “It’s a tremendous drop from five years ago. If you were getting an average bonus of $400,000 back in 2007, then this year it will probably be around $200,000 or $250,000,” says Alan Johnson, managing director of Johnson Associates...However, fixed-income executives, who sell bonds, should see bonuses rise this year by something between 10 percent and 20 percent. Deputies: Man impersonated federal officer to get into Epcot for free (Orlando Sentinel) A 74-year-old Miami man who was trying to avoid paying nearly $100 to get into Epcot, was arrested after he impersonated a Federal officer. Emerito Pujol flashed a fake badge at an Epcot employee as he passed through the turnstiles at the park around noon on Saturday. The employee challenged him and asked to see the badge again. He claimed he was an undercover officer who was looking for someone, according to an arrest report. When a security guard approached him, Pujol again claimed he was "in service" and was "guarding someone important," the report states...Pujol was arrested and charged with unlawful use of a police badge, falsely impersonating an officer and petty theft. No Individual Charges In Probe Of JPMorgan (WSJ) The top U.S. securities regulator doesn't intend to charge any individuals in its planned enforcement action against J.P. Morgan for the allegedly fraudulent sale of mortgage bonds, according to people close to the investigation. The largest U.S. bank by assets will pay a significant financial penalty under the proposed deal, which has been approved by Securities and Exchange Commission staff but not by the agency's five commissioners, said the people close to the probe. Nomura Launches Private Equity Index (FT) The Japanese bank will look to match the returns of private equity funds – which take over companies, restructure them, and then seek to sell them at a profit – by investing in publicly traded companies in sectors that are attracting attention from buy-out groups. Morgan Stanley Sues Ex-FrontPoint Manager Over Insider Trading (Reuters) In a complaint filed in Manhattan federal court on October 31, Morgan Stanley sued ex-FrontPoint Partners hedge fund manager Joseph "Chip" Skowron over the funds the bank paid to the U.S. Securities and Exchange Commission. The lawsuit also called for unspecified compensatory and punitive damages. Doctor-turned-stock picker Skowron pleaded guilty in August to trading stock of Human Genome Sciences Inc in 2008 based on non-public information he admitted to having received from a consultant for the biotech company, who also pleaded guilty to insider trading charges. Skowron was sentenced to five years in prison and ordered to forfeit $5 million. "Beyond the harm attendant to having one of its managing directors plead guilty to serious criminal conduct, the firm expended its own reputational capital by defending Skowron during the years it believed, based entirely on his misrepresentation, that he had not violated the law," the complaint said. So, maybe that Romney face tattoo wasn’t such a good idea... (Politico) With the election over, supporters of Mitt Romney have to pack up their campaign signs and paraphernalia and get on with their lives. But what if you can’t get rid of that stuff? Literally. Eric Hartsburg caught some attention in the weeks leading up to the election for having the Romney campaign’s logo tattooed on his face. Suffice to say, he’s not happy with Tuesday’s results. “Totally disappointed, man,” Hartsburg told POLITICO. “I’m the guy who has egg all over his face, but instead of egg, it’s a big Romney/Ryan tattoo. It’s there for life.” Hartsburg’s tattoo covers a 5-by-2 inch space on the side of his face, and he did it after raising $5,000 on eBay for the effort. He didn’t even tell his wife he planned to get the tattoo until about an hour before. “Right away, she was taken aback,” Hartsburg said, adding that his wife is also a Romney/Ryan supporter. “My 15-year-old son, however, he was all about it.”

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