Opening Bell: 01.10.12

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RBS Bankers Prepare for ‘Nuclear Winter’ as Hester Undoes Goodwin Empire (Bloomberg, Dealbreaker)
By Thursday lunchtime in London, the 18,900 employees in Royal Bank of Scotland Group Plc’s investment banking division will know whether they still have jobs at Britain’s biggest government-owned lender. Chief Executive Officer Stephen Hester, 51, decided to make the announcement, originally planned for later this month, because uncertainty in the ranks about jobs was undermining productivity, said one senior executive who declined to be identified because he wasn’t authorized to speak publicly. Hester is reversing a decade of expansion led by former CEO Fred Goodwin that included $140 billion of acquisitions. The Edinburgh-based lender plans to close its equities and corporate finance units globally, cutting as many as 5,000 jobs, said two people familiar with the situation. The cash equities, equity research, corporate broking as well as mergers and acquisitions units may also be shut, the people said. Limiting cuts to the equities unit may not be enough to boost profitability, said Raul Sinha, an analyst at JPMorgan Cazenove in London.

BofA Prunes Senior Ranks in Asia Investment Banking (Reuters)
Bank of America-Merrill Lynch, the second-largest U.S. bank by assets, is cutting around a fifth of its managing directors across its Asia investment banking division, sources said on Monday, in a bid to cut costs as the outlook sours in a once-booming region...Headhunters interviewed by Reuters said the bank's reduction in its ranks of managing directors in Asia was a deeper-than-usual cull of senior bankers, but reflects the broad challenges the investment banking industry faces. "That sounds like carnage," said Richard Broadhurst, who runs Hong Kong-based Initiative Recruitment.

Greek Bailout In Peril (WSJ)
Greece's deteriorating economy is threatening the viability of a €130 billion ($165.2 billion) bailout for the country that European leaders agreed to in October. The bailout package, which followed an earlier aid deal for Athens that was agreed on in 2010, relies on Greece negotiating a 50% reduction in much of its outstanding bond debt. It also requires Greece's government to make fresh efforts to cut its budget deficit. "The second Greece program has to be implemented soon, otherwise it won't be possible to disburse the next tranche" of aid loans, Ms. Merkel told a joint news conference with Mr. Sarkozy after their meeting.

Credit Suisse Bankers Said to Bet Own $450 Million on Firm’s Risky Assets (Bloomberg)
Credit Suisse, selling riskier assets to free up capital, has found a ready buyer: its own employees. The same senior bankers who received part of their 2008 pay in illiquid loans and bonds contributed $450 million of their own money to buy more of the firm’s risky assets (CSGN), such as mortgage-backed securities, said two people with knowledge of the plan, who asked for anonymity because the deal is private. The bankers, some of whom have left since 2008, had been willing to put almost $500 million into the Expanded Partner Asset Facility, or EPAF, which closed Dec. 31, one of the people said. Banks are trying to divest illiquid loans and fixed-income securities because regulators would require the firms to hold more equity capital as a buffer against losses. Europe’s lenders have pledged to cut more than 950 billion euros ($1.2 trillion) of assets over the next two years to reduce the capital they would have to raise. “This is an advantage to the company, if priced correctly, in that it will reduce their capital charges and liquefy their balance sheet,” said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York. “The question is what goes into it, how is it being valued and are they using a third-party firm to value it? Because to do anything else is a transfer of value from the shareholders to the employees.”

Geithner In China To Discuss Yuan, Iran (Bloomberg)
Geithner is likely to encounter resistance in China, which disagrees with U.S. assertions that its currency is undervalued and is sparring with the Obama administration over trade in goods from chicken to steel. At the same time, he may seek to avert a public split at a time when a likely European slide to recession is already clouding the global economic outlook. “These are the world’s second- and third-largest economies and the two biggest holders of Treasury bills,” said Stephen Myrow, a U.S. Treasury official during the administration of George W. Bush and now managing director of ACG Analytics Inc., a Washington investment research firm. “These are relationships that need to be continually nurtured.”

Traffic Agent With Unpaid Tickets Is Arrested Over Tow (NYT)
A traffic agent who owed more than $450 in parking tickets was arrested Monday morning in Brooklyn, accused of trying to stop her S.U.V. from being towed, the authorities said. The agent, Olatakumbo Erinosho, 39, was charged with obstructing governmental administration, disorderly conduct and resisting arrest, the police said. City marshals went to Greene Avenue in Bedford-Stuyvesant before dawn on Monday to tow Ms. Erinosho’s 2007 Cadillac Escalade, the police said. But she “interfered with and resisted their lawful efforts to seize her personal vehicle” and “subsequently resisted efforts by police who were summoned by marshals to arrest her,” Paul J. Browne, the chief Police Department spokesman, said in a statement.

Fitch May Downgrade Italy, Not France This Year (Reuters)
Fitch Ratings does not expect to cut France's triple-A credit rating this year, while countries under review such as Italy or Spain could be downgraded by one or two notches, the agency's EMEA ratings head said on Tuesday. Fitch put Belgium, Spain, Slovenia, Italy, Ireland and Cyprus on negative watch late last year, with a conclusion expected by March. France has a negative rating outlook from Fitch, which normally means that it could be downgraded within two years. "On the basis of some current economic and fiscal trends in France... we wouldn't expect to downgrade France this year, unless there is a material deterioration in the euro zone," Ed Parker, head of EMEA sovereign ratings, told Reuters in an interview on the sidelines of a Fitch seminar.

Wife's Trades Sink Banker (WSJ)
Swiss National Bank Chairman Philipp Hildebrand resigned Monday after emails appeared to undercut his assertion that he knew nothing of a currency trade worth more than $500,000 by his wife last summer. Mr. Hildebrand, who denied any wrongdoing, resigned just days after declaring that he wouldn't step down in the wake of disclosures that his wife, who once worked at a New York hedge fund, exchanged Swiss francs for dollars Aug. 15, just weeks before the central bank made one of the boldest interventions in foreign-exchange markets in recent years to control the rise of the Swiss currency. The resignation brought an abrupt end to the two-year tenure of a central-bank chief who generated both controversy and plaudits from the international financial community. In a news conference, 48-year-old Mr. Hildebrand said he was resigning in part because it was impossible for him to prove that his wife, Kashya, acted alone in making the transaction last August. "My wife has a strong personality," Mr. Hildebrand had said last week in discussing the trade. "She worked in the financial business and has her own thoughts." Ms. Hildebrand worked at New York hedge fund Moore Capital Management between 1994 and 1999 in various roles, where she met her husband. She has managed an art gallery in Zurich since 2001.

Apple CEO Cook’s 2011 Package Worth $378M (Bloomberg)
The total includes $376.2 million in shares that will vest starting in five years, Cupertino, California-based Apple said yesterday in a proxy filing to shareholders. Cook’s base salary was $900,000 in 2011.

Romney tackles attacks on his business experience from GOP rivals (NYP)
There was no mention of "pink slips," but Mitt Romney on Monday was already trying to counteract the perception that he was out of touch when he said there were times he feared getting fired. On Sunday, Romney told a crowd in Rochester, NH, "I know what it's like to wonder whether you're going to get fired. A couple of times I wondered if I was going to get a pink slip." Speaking at a Nashua Chamber of Commerce breakfast Monday, Romney began by noting he did not always hold high-level positions. Rather, he said he started off "at the entry level." "I was able over the years to work my way up and learn some lessons along the way," Romney said.

Twinkies Maker Preparing For Chapter 11 Filing (WSJ)
Hostess Brands Inc. is preparing to file for Chapter 11 bankruptcy protection as soon as this week, said people familiar with the matter, a move that would mark the second significant court restructuring for the Twinkies and Wonder Bread baker in the past several years...Hostess also owes more than $50 million to vendors, which have been demanding payments on shortened time frames because of Hostess's financial condition, one of the people said. Most of those goods and services were provided to Hostess within the past three weeks or so.

Santorum Takes Credit for Sweater-Vest Sales Boom (Daily Intel)
Appearing on Hannity Monday night as GOP rival Newt Gingrich did earlier, the former Pennsylvania senator held up an official Santorum sweater-vest and told the host that "This is the attire of the campaign. We've heard from several retailers that sweater-vests sales have gone up since I started displaying the sweater-vests."

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Opening Bell: 01.07.13

Regulators Give Ground To Banks (WSJ) Global banking regulators watered down a key element of their plan for creating a safer financial system, giving ground to banks that argued the rules were unworkable and financially risky. The Basel Committee on Banking Supervision, a group of the world's top regulators and central bankers, said Sunday that it agreed to relax a rule designed to ensure that big banks are able to weather financial crises without running short of cash. Bowing to two years of intense pressure from the banking industry, the regulators made it easier for banks to meet the rule, known as the "liquidity coverage ratio," and delayed its full implementation until 2019. It is the latest instance of regulators chipping away at their landmark 2010 response to the global financial crisis. The regulators argue that the changes make banking rules much stronger than they were before the crisis. Herbalifers Stay Resolute (WSJ) When hedge-fund manager William Ackman unveiled his 334-slide presentation alleging that Herbalife is a pyramid scheme, it did nothing to shake Joanne Clare. The 38-year-old Staten Island mother of three has been selling the company's weight-loss products and supplements since 2004, when she says they helped her drop from 210 to 160 pounds in four months. She now sells as much as $3,500 a month of Herbalife products to her 30 clients and the two distributors in her "down line." "People have always said it's a pyramid scheme, but it's not," Ms. Clare said, adding that the bulk of her earnings come from sales to clients, not her cut of her recruits' take. Mr. Ackman's declaration that he had bet more than $1 billion against Herbalife caused many investors to flee, sending the stock down 38% in four days in late December. But some of the company's 3.1-million-strong army of distributors were unmoved. Eliot Spitzer Ends His Show On Current TV (NYT) The announcement comes a few days after Al Jazeera said it was acquiring Current TV. Later this year, the Qatar-owned broadcaster plans to turn the channel into an Americanized version of the international news channel Al Jazeera English. Mr. Spitzer said he had a “wonderful time” at Current, but emphasized that his relationship was with Al Gore and Joel Hyatt, Current’s co-founders, not with Al Jazeera. “Moving forward, their mission will be different,” he said — more international newscasts, less liberal talk about the news. Citi's Corbat builds bridges (Reuters) Citigroup Inc's Michael Corbat has been meeting with bank regulators in his first months as CEO, as he looks to bolster relationships and finalize the bank's plan to return capital to shareholders, sources familiar with the matter said. Corbat also expects to name his team of top managers within the next week or so, one of the sources said on Sunday. Corbat is expected to play it safe when Citigroup asks the U.S. Federal Reserve for permission for moves such as buying back shares or increasing dividends, analysts and investors said. His predecessor, Vikram Pandit, lost his job in October in part because the bank's request for returning capital was denied in March. The bank, which is due to submit its plan to the Fed on Monday, has not yet done so, the source said. The third-largest U.S. bank will only seek approval to buy back shares and not raise dividends, the Wall Street Journal reported on Friday. Last year, the bank wanted permission to return more than $8 billion to shareholders over two years, the paper said. For Newly Minted MBAs, A Small Paycheck (WSJ) For graduates with minimal experience—three years or less—median pay was $53,900 in 2012, down 4.6% from 2007-08, according to an analysis conducted for The Wall Street Journal by PayScale.com. Pay fell at 62% of the 186 schools examined. Even for more seasoned grads the trend is similar, says Katie Bardaro, lead economist for PayScale.com. "In general, it seems that M.B.A. pay is either stagnant or falling," she says...It is all a far cry from the late 1980s and early 1990s heyday for M.B.A.s, when some companies would hire 100 or more M.B.A.s. It wasn't uncommon to recruit first, and fill actual jobs later. DOJ pledges to respect Swiss law in tax probe (Reuters) Swiss chief finance diplomat Michael Ambuehl was given a verbal pledge from the U.S. Department of Justice to respect Swiss law when asking for bank client data of potential tax dodgers, a newspaper reported on Sunday. Switzerland is in negotiations with U.S. authorities to find a deal that would end tax probes into at least ten Swiss banks suspected of helping clients dodge taxes, including Credit Suisse and Julius Baer. The Alpine country is trying to preserve what is left of its cherished banking secrecy that suffered a severe blow in 2009 when UBS, the first Swiss bank that came under scrutiny in the U.S., was required to disclose client data. Brazilian prison gaurds catch cat that slipped through the gate with escape tools taped to its body (NYDN) Guards at a Brazilian prison nabbed a white cat that slipped through the gate with a cell phone, drills, small saws and other contraband taped to its body. Alagoas prison spokeswoman Cinthya Moreno says the cat was caught New Year’s Eve at the medium-security prison in the city of Arapiraca. The O Estado de S. Paulo newspaper reported Saturday that all of the prison’s 263 inmates are suspects in the smuggling attempt, though a spokesperson said, “It will be hard to discover who is responsible since the cat does not speak.” Loeb, Cooperman Stand Out in Horrid Year for Hedge Funds (CNBC) Third Point was the clear hedge fund standout in a horrible year for the industry as almost nine out of 10 managers underperformed the S&P 500. Omega Advisors' Leon Cooperman also scored big. Loeb — once better known for his acerbic letters to CEOs — used an activist position in Yahoo and the contrarian buying of Greek bonds to drive the firm's flagship fund to a 21 percent gain in 2012. The firm's more-leveraged Ultra fund posted an even bigger 34 percent return...Cooperman's fund had a net return of 26 percent in 2012. Banks Zero In On Foreclosure Pact (WSJ) Banks were closing in on a $10 billion foreclosure-abuse settlement with regulators that could be announced as soon as Monday, according to people familiar with the talks. The settlement was nearly complete Sunday afternoon, the people said, after the Federal Reserve backed down on a demand for more compensation for consumers and other changes to the pact. Bankers threatened to walk away from the deal if the Fed's demand for an additional $300 million was included, a person briefed on the talks said. Junk Bonds' Fire Is Poised to Fade (WSJ) Junk bonds started 2013 much like they finished 2012—on fire. In just three trading days this year, bonds of low-rated companies delivered returns of almost three-quarters of a percent, even as most other types of bonds lost value. And junk bonds continued to clock new milestones: Average prices soared to their highest since 2004 and average yields, which decline as prices rise, dropped below 6% for the first time ever, according to Barclays. But the rapid march is making fund managers and analysts wary. Prices are now so high—averaging more than 105 cents on the dollar—that there is little room for them to climb much further, some investors say. These are lofty prices for bonds that usually trade below 100 cents, reflecting the higher default risk for such companies. At the very least, returns will pale in comparison with the 15% achieved in 2012, analysts and investors say. NHL, Players Settle Labor Dispute (AP) On the 113th day of a management lockout and five days before the league's deadline for a deal, the bleary-eyed sides held a 6 a.m. news conference to announce there will be a season, after all. NHL Commissioner Gary Bettman and union head Donald Fehr both appeared drained, wearing sweaters and not neckties, when they stood side by side at the hotel and announced labor peace. "We have reached an agreement on the framework of a new collective bargaining agreement, the details of which need to be put to paper," Bettman said. "We've got to dot a lot of Is, cross a lot of Ts. There's still a lot of work to be done, but the basic framework of the deal has been agreed upon." Hostess in Talks to Sell Off Bread Brands (WSJ) Hostess could disclose Flowers, Grupo Bimbo or others as opening bidders in a looming bankruptcy-court auction for the assets as soon as this week, said people familiar with the matter. Hostess, whose bread brands include Wonder Bread, Nature's Pride, Home Pride, Merita and Butternut, is still determining how to split up assets and package them for buyers, one of the people said. Gérard Depardieu gives up French citizenship after bitter tax fight (GM) In a fit of pique, French movie star Gérard Depardieu announced during the weekend that he would give up his citizenship after politicians and the media took him to task for moving to Belgium and avoiding an impending tax hike for the rich. Mr. Depardieu is not France’s first fiscal refugee but his high-profile door-slamming so monopolized public debate that Prime Minister Jean-Marc Ayrault had on Monday to parse whether or not he had insulted the actor. “I did not call Mr. Depardieu a loser, I said that it was loser-like [to move to Belgium to avoid taxes],” Mr. Ayrault told reporters...The “loser” comment seemed to have been the jab that stung Mr. Depardieu the most. “Loser, did you say loser?” the 63-year–old actor began an open letter to Mr. Ayrault that appeared Sunday in Le Journal du dimanche. Mr. Depardieu wrote that he had paid a total of €145-million in income tax in the last four decades and kept 80 people employed. He added that he had been taxed at a marginal rate of 85 per cent this year. “I am giving you back my passport and my social insurance, which I had never used. We no longer have the same fatherland. I am a true European, a citizen of the world.”

Opening Bell: 11.08.12

On Wall Street, Time To Mend Fences With Obama (NYT) Few industries have made such a one-sided bet as Wall Street did in opposing President Obama and supporting his Republican rival. The top five sources of contributions to Mr. Romney, a former top private equity executive, were big banks like Goldman Sachs and JPMorgan Chase, according to the Center for Responsive Politics. Wealthy financiers — led by hedge fund investors — were the biggest group of givers to the main “super PAC” backing Mr. Romney, providing almost $33 million, and gave generously to outside groups in races around the country. On Wednesday, Dan Loeb, who had supported Mr. Obama in 2008, was sanguine. “You win some, you lose some,” he said in an interview. “We can all disagree. I have friends and we have spirited discussions. Sure, I am not getting invited to the White House anytime soon, but as citizens of the country we are all friendly.” [...] “Wall Street is now going to have to figure out how to make this relationship work,” said Glenn Schorr, an analyst who follows the big banks for the investment bank Nomura. “It’s not impossible, but it’s not the starting point they had hoped for.” Morgan Stanley Reassures Its Bankers (WSJ) The New York bank said Monday that investment-banking chief Paul Taubman would leave the firm at year-end. Mr. Taubman was passed over for a new job overseeing both the trading and investment-banking operations, people involved in the process said. The position went to Colm Kelleher, who has overseen sales and trading. To calm nerves and soothe egos among the firms' bankers, Morgan Stanley gathered its new team of investment-banking leaders in New York this week. Mr. Kelleher and one of his new banking lieutenants, Franck Petitgas, traveled from their London office, and Mr. Petitgas spent much of the week meeting with managers in the investment-banking division and senior bankers, people familiar with the discussions said. Top executives reassured senior bankers Monday that the investment-banking business was a priority for Morgan Stanley. In a memo to employees, Chief Executive James Gorman said Morgan Stanley would "continue to build on our leadership position in investment banking and capital markets." The messages came as some rank-and-file bankers at Morgan Stanley privately expressed surprise and dismay at the news from Mr. Taubman, who announced his departure to colleagues in an emotional meeting Monday with Messrs. Kelleher and Gorman in attendance. Some Morgan Stanley bankers said they worried that the new chiefs of investment banking didn't have the stature of Mr. Taubman, who spent a significant amount of time as a mergers banker and was known internally for his staunch support of the firm's investment-banking franchise. "People are upset," one senior person inside the company said. Wall Street Trades Foiled Romney Dreams For Bowles Hopes (Bloomberg) Wall Street executives who lost a bet that Republican Mitt Romney would defeat President Barack Obama are bracing for tougher regulation and hoping a deal can be struck with Congress to cut the deficit. Obama’s choice to succeed Treasury Secretary Timothy F. Geithner will be watched closely for signs about the administration’s approach to business and the deficit, industry executives said. Erskine Bowles, who served as chief of staff under former President Bill Clinton, would be a sign that Obama is willing to endorse a bipartisan debt-reduction plan supported by many business leaders, they said. “With the appointment of the Treasury secretary, Obama will be sending an important message to the public and to the foreign governments who own a lot of Treasuries,” Curtis Arledge, chief executive officer of Bank of New York Mellon Corp.’s investment-management arm, which oversees $1.4 trillion, told journalists in New York yesterday. “If he goes with somebody like Erskine Bowles, then the message will be that he cares about the deficit and is serious about cutting it.” Focus Shifts To Fiscal Cliff (WSJ) Barry Knapp, head of U.S. equity portfolio strategy at Barclays, turned more bearish after seeing the election results, arguing that the risk of fiscal-cliff disaster increased to more than half, from about 30% before. "When I look at what happened, I see a government that grew farther apart, which might be worse than the status quo," Mr. Knapp said. "The risk of going off the cliff has just gotten huge." Jobless Claims Fall (WSJ) Initial jobless claims, which are a measure of layoffs, decreased by 8,000 to a seasonally adjusted 355,000 in the week ended Nov. 3, the Labor Department said Thursday. Economists surveyed by Dow Jones Newswires expected 365,000 new applications for jobless benefits. Greek Jobless Rate Hits New High (WSJ) Elstat, the Greek statistical agency, Thursday said the seasonally adjusted rate of unemployment increased to 25.4% from 24.8% in July and 18.4% in August 2011. That was just below the 25.5% unemployment rate recorded by Spain in the same month, the highest in the European Union. Herd of elephants go on drunken rampage after mammoth booze up (Metro) The trunk and disorderly mammals ransacked a shop, three houses and ruined crops in the eastern village of Dumurkota, India. Police say the gang of over-the-limit tuskers downed more than 500litres of moonshine alcohol, managing to drink the place dry in a matter of minutes. The unruly mob demolished dozens of houses in their desperate hunt for more booze after hoovering up the hard stuff in record time. Local police officer Asish Samanat said the drunken elephants were more 'aggressive' than usual after their mammoth drinking session. 'Unfortunately these animals live in close proximity to man and they recognised the smell of the drink,' he explained. 'They were like any other drunk - aggressive and unreasonable but much, much bigger.' ECB Stands Ready to Buy Bonds as Economy Weakens (Bloomberg) “We are ready to undertake” Outright Monetary Transactions, “which will help to avoid extreme scenarios,” Draghi said today at a press conference in Frankfurt after policy makers left the benchmark interest rate at a historic low of 0.75 percent. “The risks surrounding the economic outlook remain on the downside” and underlying inflation pressures “should remain moderate,” he said. SocGen CEO Blames ‘Stupid’ Accounting for Profit Drop (CNBC) “Exceptional items are related in particular to this stupid accounting thing which means that when you have a credit that is improving, your CDS is going down and you have to recognise negative revenues,” Frederic Oudea told CNBC in Paris. SocGen’s third-quarter net profit was 85 million euros, down by 86 percent on the same period in 2011, after losses on asset sales. That was lower than analysts’ mean estimate of 139.1 million euros. Blackstone Leads Hedge Funds Attracting Bond-Rally Bears (Bloomberg) Funds that bet on both gains and losses in credit attracted $12.6 billion of deposits in the three months ended Sept. 30, the most since the period ended Dec. 31, 2007, according to HFR. Blackstone Group LP raised $4.05 billion during the period for its debt unit, which includes so-called long-short funds. Panning Capital Management, which was founded by Kieran Goodwin this year, started such a fund on Nov. 1 with $500 million. Two-Tier Global Housing Market Could Lead to Bubble: Goldman (CNBC) In a report titled: “Just don’t look down some house markets are flying again” Goldman argues easy money policies by the world’s major central banks has had a ripple effect on countries which have avoided the worst of the global financial crisis, boosting their house prices. According to Goldman, there now exist housing “high-flyers” - countries that have experienced real house price increases and “low-lyers” - countries where the housing market downturn appears to be more protracted. “High flyers” include Germany, Finland, Norway, France, Switzerland and Israel as well as Canada and Australia. The “low lyers” include the U.S., and the euro zone periphery of Spain, Greece, Italy and Ireland- but also those places where prices fell in the post-crisis period but have since stabilized such as the U.K., Japan and Denmark. Judge throws Dallas attorney back in jail after his Design District office trashed, vandalized with obscene drawings (DN) Attorney Tom Corea was charged earlier this year with four felonies alleging he stole from his clients. He was arrested, posted bond and was released. Weeks later, he was evicted for not paying rent for his upscale office in the 2000 block of Farrington Street near Interstate 35E and Market Center Boulevard, according to testimony before state District Judge Mike Snipes. Corea was ordered out by Oct. 31. When the president of the real estate company that represents the building, Doug Molny, showed up the next day to check out the property, he found “complete destruction,” including “penis graffiti on every single wall throughout the building,” Molny said. Written next to some of the penises was the name Doug. Molny said it appeared someone took a sledgehammer to granite counters. Additionally, doors, light fixtures, cabinets and appliances were destroyed or removed.