Football? Yep. Oscars? OK. The VIX? Really?

I was scoring up the Super Bowl (small loss) when Ocean called. Ocean is a good customer. He had a couple questions, and I told him fire away. First he wanted to know if we were doing the Oscars again this year. Of course we are. I'm not thrilled about it –I'm half paranoid about inside information bubbling on the Internet, but I'm learning to embrace the inside mis-information. Most importantly, we do it as a service, so the customers won't start betting online with bookies in Costa Rica. Ocean was pleased. For what it's worth, he likes The Artist at very short odds. He watches rom-coms. With his wife, he says. His favourite movie though is Love Story, and he cries shamelessly every time he watches it: he truly believes that love means never having to say you're sorry. I've never figured that out. I'm forever apologizing to my wife for doing boneheaded things and saying stupid shit. And apologizing is a necessity But whatever. A happy customer is a beautiful thing. And I thought the phone call was over. And then Ocean said it. “What do you have on the VIX for this summer?” I asked him what the hell he was talking about because I didn't compute what I was hearing. He then said how he had been watching CNBC. He went to his mutual fund guy determined to buy the VIX, and the salesman blew him off with “Oh, that's just gambling”. So, hey, I must surely book the VIX, right, because I take bets from gamblers? Well I totally had my pants down and started mumbling about monthly contracts and the need to be a sophisticated investor and how there were a few products out there and...he cut me off. He understood how “the 1% were trying to make this complicated” and he just wanted a near-even-money type bet that the VIX would be over 30 at the end of June, as per the top of the screen on CNBC. I gave him the bet. 30's a pretty big number, and I figure this'll make me learn about trading the VIX instruments so I can lay it off if I want to. (I've never done anything more sophisticated than buy a put spread when I was afraid of a downturn. Go ahead, laugh.) 30's a lot. So I let him have it at 6-to-5. He was only expecting even money or slightly worse, so he was pleased. Ten minutes later I was using this episode as an object lesson for my Faithful Assistant, a guy who is muddling through an MBA while living in his parents' basement. Garage loft, I stand corrected. Anyway, good customers need to be kept happy, good customers lose, and happy customers pay. The Hollywood-movie days of kneecapping customers who stiff you were over before I was born, if they ever even existed, and—and the phone rang again. Ocean again, wanting an over/under number on where Apple would be in a couple months' time. Oh, and Facebook. I told him I would have to call him back. I started throwing coffee cups and in between my screams my Faithful Assistant told me he'd just pretend I have Tourette's. He's cold. Then he asked me what was going on. And after I told him, he smiled, and tried to give his boss an object lesson of his own: “This is great. You trade the odd option. All my electives are Finance. We just set the over-under price, I mean you KNOW he's going 'over', high enough that we can buy calls a couple strikes below that number. We use his bet to buy the calls, if he wins we clean up, and we're covered.” And when I asked what would happen to Ocean's bankroll over time, the answer came back that we would sodomize it. I just shook my head. My young friend may well end up in a business career where the necessary m.o. is to grab-it-all and grab-it-now, but that's not how my business works. I actually want my customers to win 45-50% of their bets, lose fairly small amounts over time, and never lose so much in one fell swoop that they can't pay or that they decide to stop playing. There's a purpose behind all that languid ritual at the Baccarat table in the high-limit room at the casino: try to keep the House's earn slow-and-steady. It makes the news when a whale beats Vegas for $10 million, or drops $10 million, but the casinos tolerate those lumpy earnings—aside from a little ink, they don't really want them. The casinos want everybody playing dollar-slots, losing three cents a spin. His eyes kind of glazed over, so I thought, what would Suze Orman do to get her point across? I figured Suze, to make the young'uns understand, would probably Go Gangsta. So I said “Look, we make money by drawing blood from our customers.” His eyes lit up as I continued: “We're blood collectors. We need a nice orderly blood bank. What you're proposing, is a drive-by.” (Well, I actually said “drive-thru”, but we sorted it out after a little confusion.) So we've told Ocean that these bets are going to be for peanuts and we're going to have fun with them. He's on board, and he's all excited. Faithful Assistant is going to make the numbers and I told Ocean to give us some requests for stocks he thought would go lower. “Oh you mean I could bet 'under' too? Not just 'over'?” Yep, 'under' too. February's a shit month in the bookie biz—the regulars are there, but football's over and it's a ways before March Madness. Ocean's stockpicking is going to keep me interested.
Author:
Publish date:
Updated on

I was scoring up the Super Bowl (small loss) when Ocean called. Ocean is a good customer. He had a couple questions, and I told him fire away.

First he wanted to know if we were doing the Oscars again this year. Of course we are. I'm not thrilled about it –I'm half paranoid about inside information bubbling on the Internet, but I'm learning to embrace the inside mis-information. Most importantly, we do it as a service, so the customers won't start betting online with bookies in Costa Rica.

Ocean was pleased. For what it's worth, he likes The Artist at very short odds. He watches rom-coms. With his wife, he says. His favourite movie though is Love Story, and he cries shamelessly every time he watches it: he truly believes that love means never having to say you're sorry. I've never figured that out. I'm forever apologizing to my wife for doing boneheaded things and saying stupid shit. And apologizing is a necessity But whatever. A happy customer is a beautiful thing. And I thought the phone call was over. And then Ocean said it.

“What do you have on the VIX for this summer?”

I asked him what the hell he was talking about because I didn't compute what I was hearing. He then said how he had been watching CNBC. He went to his mutual fund guy determined to buy the VIX, and the salesman blew him off with “Oh, that's just gambling”. So, hey, I must surely book the VIX, right, because I take bets from gamblers?

Well I totally had my pants down and started mumbling about monthly contracts and the need to be a sophisticated investor and how there were a few products out there and...he cut me off. He understood how “the 1% were trying to make this complicated” and he just wanted a near-even-money type bet that the VIX would be over 30 at the end of June, as per the top of the screen on CNBC.

I gave him the bet. 30's a pretty big number, and I figure this'll make me learn about trading the VIX instruments so I can lay it off if I want to. (I've never done anything more sophisticated than buy a put spread when I was afraid of a downturn. Go ahead, laugh.) 30's a lot. So I let him have it at 6-to-5. He was only expecting even money or slightly worse, so he was pleased.

Ten minutes later I was using this episode as an object lesson for my Faithful Assistant, a guy who is muddling through an MBA while living in his parents' basement. Garage loft, I stand corrected. Anyway, good customers need to be kept happy, good customers lose, and happy customers pay. The Hollywood-movie days of kneecapping customers who stiff you were over before I was born, if they ever even existed, and—and the phone rang again.

Ocean again, wanting an over/under number on where Apple would be in a couple months' time. Oh, and Facebook. I told him I would have to call him back. I started throwing coffee cups and in between my screams my Faithful Assistant told me he'd just pretend I have Tourette's. He's cold. Then he asked me what was going on. And after I told him, he smiled, and tried to give his boss an object lesson of his own:

“This is great. You trade the odd option. All my electives are Finance. We just set the over-under price, I mean you KNOW he's going 'over', high enough that we can buy calls a couple strikes below that number. We use his bet to buy the calls, if he wins we clean up, and we're covered.”

And when I asked what would happen to Ocean's bankroll over time, the answer came back that we would sodomize it.

I just shook my head. My young friend may well end up in a business career where the necessary m.o. is to grab-it-all and grab-it-now, but that's not how my business works.

I actually want my customers to win 45-50% of their bets, lose fairly small amounts over time, and never lose so much in one fell swoop that they can't pay or that they decide to stop playing. There's a purpose behind all that languid ritual at the Baccarat table in the high-limit room at the casino: try to keep the House's earn slow-and-steady. It makes the news when a whale beats Vegas for $10 million, or drops $10 million, but the casinos tolerate those lumpy earnings—aside from a little ink, they don't really want them. The casinos want everybody playing dollar-slots, losing three cents a spin.

His eyes kind of glazed over, so I thought, what would Suze Orman do to get her point across? I figured Suze, to make the young'uns understand, would probably Go Gangsta. So I said “Look, we make money by drawing blood from our customers.” His eyes lit up as I continued: “We're blood collectors. We need a nice orderly blood bank. What you're proposing, is a drive-by.”

(Well, I actually said “drive-thru”, but we sorted it out after a little confusion.)

So we've told Ocean that these bets are going to be for peanuts and we're going to have fun with them. He's on board, and he's all excited. Faithful Assistant is going to make the numbers and I told Ocean to give us some requests for stocks he thought would go lower. “Oh you mean I could bet 'under' too? Not just 'over'?” Yep, 'under' too.

February's a shit month in the bookie biz—the regulars are there, but football's over and it's a ways before March Madness. Ocean's stockpicking is going to keep me interested.

Related

Bookie Confessional, Early Baseball Edition

Mike is my best baseball client. He bets three or four grand a night, spread out over the whole card. He can't possibly win over time. Sadly, such golden geese occasionally shit on the lawn. That's what Mike did Friday, when he called and asked me to give him another bookie's number. Nobody in particular—just anybody's. He wanted a second place to bet. Basically he was sitting at his regular table and asking the Maitre d' where ELSE he should go to dinner. I told him to call me back Saturday. Well, I fumed awhile, then it came to me. Mike had rarely talked to Faithful Assistant. I summoned Faithful Assistant and told him his dreams were about to come true: he was opening his own shop, with exactly one disposable cell phone, and exactly one very good customer. Turns out that wasn't Faithful Assistant's dream. His dream involves some newly single woman with expensive tastes: the weasel told me that if he was going to play this charade it was going to cost me a full 15% of Mike's losses on both phone numbers. I was outraged and we started negotiating and by the time we were done 15% had become 20%. After making a mental note never to negotiate with Faithful Assistant again, I picked up the phone to hire the new book's collection agent. Melody, a good customer's wife, asked me for a job a couple months back. I offered and she accepted this part-time gig as an audition. Mike had his new place to play, Faithful Assistant was angling for a raise to 30%, and I set up a Monday meeting with Melody to tell her how all this would go down. Melody was a quick study. Faithful Assistant was her boss-and-contact and she was supposed to pass by Mike's office every Tuesday afternoon to pay or collect. She wanted to know what to do if Mike didn't have the money. She was disappointed to learn she should do nothing, just call us. I don't think she wanted to break his legs, but I think she wanted to give him a serious telling off, preferably in front of people. Too bad—that's not the way it works. It's a non-issue anyway: Mike pays. Turns out the 20% I'm paying Faithful Assistant is money well spent: he quickly put together that Mike is betting the same teams with both our places. That might be the stupidest piece of betting I've ever laid my eyes on. He calls one number, bets the Yanks, then calls the second number and bets the Yanks again. His second price is almost always worse—how much worse, well, it depends on how greedy we feel. There is no logic to this—he ought to put his whole bet in at the first place he calls, or better yet call both joints for prices and put the bet in at the shop with the better price. (Faithful Assistant is routinely varying prices on the Mike Phone by a penny or two anyway.) The only way Mike's current plan would make sense is if Mike was putting in maximum sized bets and needed to get down two max bets whatever the cost – but that's not happening: Mike's just putting down a few hundred at each place. Aspiring MBA-er Faithful Assistant says that Mike is trying to spread out his “credit risk," so that if one shop goes bust owing him money, he still has the other. Our shenanigans aside, that helps Mike little: If you think your bookie can't pay, don't spread out your risk—just stop calling him and find someone else you're actually comfortable with. It's a bookie joint, not a bank. So we were a little surprised about this but the final shock was Melody's. Melody showed up on Tuesday at Mike's office to pick up $600. She won't have to bother going downtown anymore: She knows “Mike” well: their kids are best friends since they've been neighbors for nine years.

Thursday Night Football: The Quants' View (Week 5)

At numberFire.com, we use contextual, efficiency-based metrics and similarity algorithms to predict sports player and team performance. Just like you (or someone you know) spend your days digging for the real drivers of a stock or fixed income product so you can make the best investment decisions, we dig for the most descriptive player and team information in figuring out who to start in fantasy lineups and which bets to take. We provide that fantasy and handicapping advice to you at numberFire.com. Division... rivalry? Division battles are supposed to be close contests, right? I guess the Pony Express got lost between St. Louis and Phoenix. In their last 11 games against the Rams, dating back to December 2006, the Cardinals have won 10 times. That's not surprising; the Rams have had some horrendous teams (the starting QB for Rams in the week 16, 2009 game was Keith Null). What is surprising, though, is how the Cardinals have dominated the Spread. The Cardinals have won Against the Spread in 73% of those meetings, including both games last season. And two of the three times they didn't cover (Week 11, 2009 and Week 5, 2007), they won but missed the cover by one point. Under the Bridge Judging defensive effectiveness by Yards Allowed is as hopeless a pursuit as looking for love at 230 5th… You need to look at context: the caliber of an opponent is very important. In numberFire's opponent-adjusted defensive rankings, both the Cardinals (#2) and Rams (#9) have top ten defenses. Teams currently in the top ten have faced off six times this season, and, in those games, Vegas has horrendously miscalculated the totals line: the under has been the correct choice five times: Cleveland/Philadelphia (under 42.5), Atlanta/Denver (under 50.5), Chicago/St. Louis (under 42), Arizona/Philadelphia (under 41), and Atlanta/San Diego (under 47). Only Houston/Denver (43.5) went over. The QB Connection Are you one of those old-school folks who thinks QBs are overrated? Well, last week, the teams with more efficient QBs went 11-4. With that in mind, it becomes important to examine the Bradford-Kolb matchup. We’ll use numberFire's best friend, the Net Expected Points (NEP) formula, which lets us measure a skill player’s efficiency, to do so. Kolb has been surprisingly efficient this season, with a +19.51 NEP total, and +0.16 NEP/pass, meaning that he has added 19.51 total points and .16 points/pass to the Cardinals’ offense over what a league average QB would have added this year. Of the four games Sam “I was a #1 draft pick” Bradford has started this year, three saw barely positive NEP performances. The big indicator for our purposes came in week 3 against the Bears when Bradford posted a -24 NEP. You could see that as an outlier, but, again, context is key! That Bears game was the only time Sam Bradford faced a defense in numberFire's top 10. The Bears are #3. The Cardinals are #2.

Swamped

Summertime, and the livin' is easy. The NBA is through its first round of playoffs, there hasn't been a college board of a hundred games in over two months, and football is so far away that HBO still has a casting call out for Hard Knocks. Baseball's the main attraction, and baseball bettors are gentlemen and so old school the periodic table only has about 50 elements. How did we get here? It was one of those darkest-before-the-dawn moments, that moment that feels like it's darkest-before-it's-totally-black. I strolled in on the last day of the NBA regular season, a Thursday, fashionably late. He asked me where the hell I had been. I always show up late on summer Thursdays, and leave early. There's little baseball, and little else. But Faithful Assistant pointed to a screen and said “I'm fucking buried on the Wizards game”. The Washington Wizards are a bad basketball team. They were matched up against the Miami Heat, a very good basketball team. The Heat have LeBron James, Dwyane Wade, and that guy who Shaq said looks like Ru Paul. Except the market said the Heat didn't give a flying fuck about that game, and the Wizards were 8-point favorites. I asked him if maybe the Heat were the favorites. No, said Faithful Assistant, it was the Wizards. And our clients, all of whom fancy themselves smarter than the average bear, had bet $25K on the Wizards, -7.5, -8, -8.5, -9.5. So dump it, I said. We can lay off 50K with one phone call, usually more. “I can't. He's got jury duty.” What was this world coming to, bookmakers being summoned to sit on juries. So I told him to keep calling every half hour or so. In the meantime I'd handle any more Wizards bets myself. They kept calling for the Wizards. Over and over and over again. The market was -8, and I was dealing it -10 and getting buckets of abuse. “-10? Get outta here. ESPN says they're -8.” I quickly broke my clientele into two groups. The clients I didn't care about, I told them “OK, fine. Call up ESPN and give them your bet.” Some of them screamed. Several questioned my parentage. Most of them laid -10. My better clients got better treatment. I explained how the book was hopelessly one-sided and my layoff guy was “in court”. (I let them imagine he was the guy in the orange jumpsuit, not somebody who would be leaving by the front door.) I took their bet at -10, but told them that if and when my guy came through, I'd call them back and give them the -8. They thanked me like I was doing them a favor. Great. The first people who weren't angry all day. The pros called too. One nibbled on the Heat +8 at even money, but the rest passed. Court let out at 4:30. My guy didn't make the jury: something about his wife's job getting in the way. He took our bet for all we could eat at -7.5 and I started calling the clients back changing their -10 to not -8 but -7.5. People were thanking me as if I'd given them a kidney. Faithful Assistant's quick tally when the game tipped off saw him scream “We cannot lose!” I pointed out that while we would indeed win money, that wasn't the same as being invulnerable. For the sake of peace, love, and client happiness, we needed these lowly Wizards to win by a pile. Happy customers keep coming back, and there'd be no talk of conspiracies, fixed games off funny betting lines, and so on. The Wizards rolled. Up by 25 at half, they cruised to a 34-point win. The Heat played their B team all night. (The Tepid?) No LeBron, no Wade, no Ru Paul, no problem. The clients were ecstatic. One of them even sent us flash-frozen steaks. It's actually helped us change the summer baseball operation. Now when people call up looking for a team at such-and-such a price, if we don't have it and they're willing to leave the order open, we take the order and call them back when we fill it. A good client now calls us his “betting con-au-pairs”. I think he means “concierges”, but I don't speak French. Whatever. It's working out.

Maddeningly Bad Luck

March Madness has been a disaster: two of my best customers, who know each other, combined to go 2-for-39 on the first two weekends. Faithful Assistant has been laughing at their tought breaks, but I've been trying to soothe them. I need these guys to keep playing, losing, and paying. Their luck really has been atrocious. 18 of the losses have been by three points or less. One of them asked me if I'd ever heard anything worse. I guess there's Tsotomu Yamaguchi. Yamaguchi was on a business trip in Hiroshima when the A-bomb dropped. Wounded, he figured he'd better get out of Dodge ASAP, so he barrelled home the next day – to Nagasaki. I reminded the client that his bad luck paled in comparison to Yamaguchi's, and that Yamaguchi lived another 65 healthy years...plenty of time to make more bets. But now I'm dealing with more than bad luck. These guys have now declared that sports are rigged. This month's point-shaving scandal at Auburn hasn't helped, and it brings others of recent years to mind. The NBA has Tim Donaghy. Overseas, it looks like half the Turkish soccer league is going to jail, and half of Italy has already been. I actually believe that most of sports are on the level. Disagree if you want, that's OK. But what really gets my goat are the people who think the bookies want the games rigged. We don't. If people think the games are fixed, and thus become afraid to bet, I'm out of business. It's the same story for the guy running a poker game or the CEO of a retail brokerage. No faith, no business. There's a really simple reason somebody with the available cash or credit can get down a $500,000 bet on the NFL, but might not be able to easily bet $50 on Wrestlemania: the market can take the $500,000 football bet, adjust the price slightly, and bettors will come for the other side. There is no market for Wrestlemania, because nobody trusts it. So these clients are generally miffed, but also fixated on one game: Syracuse vs. Kansas State. The price started moving 20 minutes before tip when a K-State star was ruled ineligible. These guys took the new price on K-State thinking they got a deal, when it was just the market reacting to information. Well, Syracuse rolled and now it's allegedly a “fix”. Of course it's not a fix—it's just betting dumb with less info than everybody else. They should have checked why the spread was moving. Emotion trumps reason, though, and there was no reasoning with these guys. And maybe that's why these guys bet with me instead of going online somewhere—they're so Old School, the building probably only had one room. If you want to be a pro gambler these days, there's a ton of free information all over the Internet. I'm not saying it's easy to win over time—it's not. But there's a bucket of info out there on any game you want to study, and all sorts of arcane stats to help inform your decisions. And since everyone else is studying, you better too. When I worked in Chicago, we had a good customer who worked at O'Hare. He would bring us out-of-town sports sections that travellers left behind as they boarded planes. We got useful injury information from beat writers in other cities that the rest of the Chicago market just didn't have. That was 20 years ago, but when I tell that story to Faithful Assistant, he usually asks if Orville and Wilbur Wright were flying the planes. He's been on the Internet since middle school, and pretends he can't remember life without it. So I'm not sure what to do with these guys—they bet six times a day, but haven't called since Saturday. I think I'll give them a free bet equivalent to what they lost on Kansas State. I know I don't have to, but I'm not willing to risk losing the business. That's the worst part of all this—and the reason why I'm trying to get out of this racket. I don't just need the customers to lose, I need them to lose slowly and have fun doing it. I'm not a psychiatrist trained to actually convince people that betting really is a random thing for the vast majority of gamblers and losing streaks just happen. I wonder if I should join the Army. I'm not much for getting shot, but I hear the poker games are good. Baseball starts next week and the guys who just bet bases are much easier to deal with. They understand the nature of a game where the very best teams win 65% of their games and the absolute worst teams still win 35% of the time. I can't wait. Anybody know if Tim Tebow needs someone to take his action? He's on every channel, everywhere.

Credit Where Credit Is Due: Peregrine Financial Once Won The "Iowa Character Award"

You know those letters that go out from banks and brokerage firms a couple days after a financial disaster has hit the news? They usually begin with “Dear Valued Customer,” and they assure freaked-out investors that that sort of thing would never happen here. Like this one, published November 1, 2011, the day after MF Global filed for bankruptcy. “Dear PFGBEST customers,” it began. Those rogues at MF Global might have lost track of a billion dollars or so of their customers’ money, but PFG clients could count on “the absolute dedication of PFGBEST to protect you and your PFGBEST accounts.” The soothing dispatch was signed by Russell Wasendorf, Jr., president and chief operating officer and son of the CEO Russell Wasendorf, Sr. It pledged that PFG was “compliance-focused,” and said the principled firm was in communication with regulators “to assist in any way” after the purloining of MF Global’s clients. Well, you can’t argue that the senior Wasendorf didn’t assist his regulators. The CEO of PFG Best, aka Peregrine Financial Group, even sat on an advisory committee of the National Futures Association. On that “compliance-focused” part, though, the your-money-is safe-with-us vow didn’t turn out to be so reliable. Eight months after the “Dear customer” letter, PFG filed for liquidation under Chapter 7 of the U.S. Bankruptcy Code on July 10 -- a day after the NFA said the Cedar Falls, Iowa futures brokerage firm was short about $200 million in its customer accounts. That would be the same NFA whose board had on three occasions – in 2004, 2007 and 2009 -- voted to put Wasendorf, Sr. on its Futures Commission Merchant advisory committee that weighed in on new rules. NFA spokesman Larry Dyekman declined to comment. Russ Senior today is in the Linn County jail in Cedar Rapids, Iowa, having been charged with making false statements to regulators about the value of his customers’ accounts. His bail hearing is on Friday. Junior hasn’t been accused of wrongdoing and his lawyer told The Wall Street Journal that the younger Wasendorf is cooperating with regulators to track down assets. Neither man’s lawyers returned phone calls. The elder Wasendorf tried to commit suicide on July 9 and left a note saying he’d been stealing from customers for 20 years. “I had no access to additional capital and I was forced into a difficult decision,” he wrote. “Should I go out of business or cheat?” Well, we know the answer to that one. During the years he was dipping into customers’ funds, Wasendorf was honored with awards for his charity, his patriotism, and his devotion to green initiatives. The firm received accolades, too. Last year, it was among 13 winners of the “Iowa Character Award.” Spokeswoman Amy Smit of “Character Counts in Iowa” said in an email that PFG won for its “extensive community involvement,” including research for pediatric diseases and support to tornado victims. Futures magazine called it “one of the nation’s Top 50 Brokers” for 13 years in a row. Ginger Szala, group editorial director at Summit Business Media, which publishes Futures, said in an email that the list is based on “customer equity reports” that the magazine gets from the Commodity Futures Trading Commission. The CFTC gets those from the firms. “We rely on the regulator to confirm the amount as accurate, and of course, that now is under question,” she said. Oh yeah, that. We could take a little comfort if it had all come as a surprise – the cagey guy who’d never given the regulators a clue. No such luck. While he was picking up his trophies over the years, Wasendorf was running companies that waved red flags. He owned a securities firm, Peregrine Financials & Securities Inc., that first registered with Finra in 1998. That firm wound up terminating its registration in June of 2004, just two months after Finra fined it $251,000 for “unfair and excessive” commissions and for failing to keep proper records of emails. A year before that, in February of 2003, Finra said Peregrine had filed inaccurate reports and had failed to maintain the minimum required net capital. Peregrine also lost arbitrations with customers in 2001 (for breach of contract) and 2004 (for misrepresentation and “fraudulent activity.”) His separate futures trading company, PFG, had its own set of problems. In 2009, an administrative law judge said it had failed to investigate numerous questionable activities in the account of a 73-year-old retiree, adding that PFG had shown “a reckless disregard” for its duties. Ten years before, the Commodity Futures Trading Commission said the firm had failed on several occasions to report that it had fallen below minimum financial requirements, and that it had been showing receivables as current assets in its reports to the regulator. There is more, but you get the idea. Wasendorf thought regulators were kind of dumb, and while he may be a big-time liar, you can’t argue with him on that one. It was “relatively simple” to trick regulators, he said in his suicide letter. At a hearing of the House Committee on Agriculture Wednesday, amid talk about how to prevent future MF Global and Peregrine-style fiascos, witnesses from the financial industry made the familiar business lobby pitches that regulations can kill competition, stifle innovation, and lead to firms leaving the futures business altogether. The carrying on could almost have been scripted by Wasendorf himself. When the CFTC was proposing increased margin rules for foreign exchange traders in 2010, Wasendorf said in a press release that the changes would send thousands of U.S. jobs overseas. “Congress made it clear that the industry was to be policed, not abolished,” he said at the time. Even if this guy gets stuck doing a couple years in prison, there’s got to be a financial lobbying job in his future. Susan Antilla is a columnist for Bloomberg View.

Opening Bell: 04.13.12

JPMorgan Profit Slips (WSJ) J.P. Morgan reported a profit of $5.38 billion, down from $5.56 billion a year earlier. On a per-share basis, earnings were $1.31, up from $1.28 as the share count outstanding declined. The latest quarter included a net 8-cent per-share loss tied to litigation expenses and changes in the value of the bank's debt. Analysts polled by Thomson Reuters expected a per-share profit of $1.18, excluding debt-related charges. Revenue rose 6.3% to $27.42 billion. Analysts were looking for $24.68 billion. Wells Fargo reports higher first-quarter profit (Reuters) Wells Fargo, the nation's fourth-biggest U.S. bank, said net income was $4.25 billion, or 75 cents a share, in the quarter, compared with $3.76 billion, or 67 cents, a share in the same period a year earlier. The average estimate from analysts was 73 cents per share. JPMorgan Said to Transform Treasury to Prop Trading (Bloomberg) Achilles Macris, hired in 2006 as the CIO’s top executive in London, led an expansion into corporate and mortgage-debt investments with a mandate to generate profits for the New York- based bank, three of the former employees said. Dimon, 56, closely supervised the shift from the CIO’s previous focus on protecting JPMorgan from risks inherent in its banking business, such as interest-rate and currency movements, they said. Some of Macris’s bets are now so large that JPMorgan probably can’t unwind them without losing money or roiling financial markets, the former executives said, based on knowledge gleaned from people inside the bank and dealers at other firms. Bank Bonus That Tops Salary May Be Banned by EU Lawmakers (Bloomberg) Governments and lawmakers in the 27-nation EU are considering rules for lenders that would go far beyond international agreements approved by the Basel Committee on Banking Supervision. Denmark, which holds the rotating presidency of the EU, has proposed empowering nations to set surcharges of up to 3 percent across their banking systems. Karas yesterday suggested adding language to the legislation that would ban banker bonuses that exceed fixed pay, following calls from other lawmakers to rein in excessive compensation. IMF Lifts Growth Forecast, Cautiously (WSJ) Christine Lagarde, managing director of the International Monetary Fund, said the world economy is marked by "a high degree of instability" even though prospects for global growth are better than they were a few months ago. In an interview with The Wall Street Journal, Ms. Lagarde said the IMF, which marked down its 2012 forecast for global growth in January to 3.3%, has now marked it up to reflect improving conditions in the world economy. But she said the new forecast, to be released next week, remains more pessimistic than the one it made last September, which predicted 4% growth. Europe remains the biggest single risk to the global economy, the former French finance minister said. Hedge Fund Driver Guns DownArmed Robber (NYP) A retired NYPD lieutenant blew away a drugstore bandit yesterday as the suspect tried to gun down three police officers during a foot pursuit, sources said. Thomas Barnes, Barnes — a driver for hedge fund manager Philippe Laffont, was filling his tank at the BP station on East 119th Street and First Avenue at around 11 a.m. when he saw gunman Rudolph Wyatt running from the store, and sprang into action. He crouched behind his hedge-fund boss’ Mercedes SUV and squeezed off three shots, killing Wyatt, 23. The trigger-happy thug — wanted on warrants for two other shootings — lay dead in a pool of blood on the sidewalk wearing a black stocking mask with a wad of stolen cash spilling out of his pocket, witnesses said. “Part of the back of his head was missing. He had a large head wound and there was tons of blood,” said witness John Brecevich, 59, owner of the Original Patsy’s restaurant nearby. “It was a scene straight out of NYPD Blue.” Trustees Aim For MF Execs (NYP) The trustee tasked with clawing back money for burned customers of MF Global is training his sights on the brokerage firm’s executives — a list that likely includes former CEO Jon Corzine. In a statement yesterday, trustee James Giddens said he is considering pursuing claims against “certain responsible individuals” who worked for MF at the time customers’ trading accounts were improperly tapped. Kent Jarrell, a spokesman for Giddens, declined to name names but said the trustee is considering civil suits against “officers, directors or other employees” of both the brokerage firm and the holding company. Fed Officials Differ on Need to Keep Rates Low to 2014 (Bloomberg) William C. Dudley, president of the New York Fed, and Vice Chairman Janet Yellen said the 2014 time-frame is needed to lower unemployment from 8.2 percent. Minneapolis Fed President Narayana Kocherlakota said rising inflation may prompt an interest-rate increase as early as this year, while Philadelphia’s Charles Plosser said policy should hinge on economic performance, not a calendar commitment. Newark Mayor Cory Booker: Race into home fire was a "come to Jesus moment" (CBS) Booker arrived home last night to discover his next-door neighbor's house on fire, and rescued a young woman trapped upstairs by carrying here through the flames, suffering second-degree burns in the process. The mayor's security team discovered the fire and pounded on the door to alert residents, when an elderly woman said that her daughter was trapped upstairs. At first, Newark Police Detective Alex Rodriguez would not let Booker into the burning house. "He basically told me, 'This woman is going to die if we don't help her,' and what can I say to that?," Rodriguez said. "I let him go and without thinking twice, he just ran into the flames and rescued this young lady." Booker said that as he jumped through the kitchen on the second floor, "I actually wasn't thinking. When I got there and couldn't find her in all the smoke, looked behind me and saw the kitchen really erupting with flames all over the ceiling, that's when I had very clear thoughts that I'm not going to get out of this place alive and got ... very religious. He admitted he was "not gentle" with her - "I just sort of threw her over my shoulder and dragged her through the kitchen."

Opening Bell: 01.10.13

Deutsche Profits Big On Libor Bets (WSJ) Deutsche Bank made at least €500 million ($654 million) in profit in 2008 from trades pegged to the interest rates under investigation by regulators world-wide, internal bank documents show. The German bank's trading profits resulted from billions of euros in bets related to the London interbank offered rate, or Libor, and other global benchmark rates. ECB Stands Pat On Rates (WSJ) The ECB's Governing Council decided to keep Europe's most important interest rates at their lowest levels since the single currency was introduced in 1999, encouraged by a clear improvement in financial-market sentiment over the past month and by tentative signs of growing confidence in the euro-zone economy. Rivals Clash As Inquiry Into Herbalife Opens (WSJ) Daniel Loeb's hedge fund disclosed Wednesday it owns an 8.2% stake now valued at $350 million in nutrition-supplements company Herbalife Ltd. Mr. Ackman's Pershing Square Capital Management LP has bet more than $1 billion against the company by shorting its stock…The face-off between two high-profile, media-savvy hedge-fund managers highlights the arrival of a new wave of postcrisis financial stars. They tout their positions during television interviews and at conferences, in letters or securities filings and on customized Web pages, often convincing other investors to follow their lead. Their pronouncements move stocks, at times dramatically, and leave companies scrambling to respond. And when they take the opposite sides of the same trade the ensuing battle can captivate the financial world. "One of them is going to be very wrong," said Gregg Hymowitz, founder of the $8.2 billion EnTrust Capital, a longtime investor with both Mr. Ackman and Mr. Loeb's firms. "Ackman thinks it's a complete and utter fraud, and Dan thinks it's a completely legitimate business." Hedgie's Herbalife Bet Counters Ackman (NYP) [In addition to Loeb], Carl Icahn is also believed to have taken a long position in Herbalife, sources said. The possibility of Loeb and Icahn going up against Ackman’s Herbalife short sent investors into a tizzy. “It’s going to be an Ackman sandwich,” one hedge fund manager wailed. Lew Taking Over at Treasury Puts Perennial Aide at Head (Bloomberg) With his penchant for thinking several steps ahead, his organizational drive and his budget expertise, Lew, 57, has been Obama’s consummate aide. Now, he’s Obama’s choice for Treasury secretary, according to a person familiar with the process. Lew faces the prospect of becoming a leader at a critical juncture for the nation’s economic and fiscal future. “As chief of staff you are staff and as Treasury secretary, you are principal -- Jack has to make that transition,” said Ken Duberstein, a chief of staff to former President Ronald Reagan who first met Lew in the 1980s. “It’s not the invisible hand, it is the visible hand.” If confirmed, Lew may need to play that hand as soon as next month, when the administration squares off with Congress over the U.S. debt ceiling. Lew’s job will be all the more difficult because his relations with House Republicans soured during the 2011 battle over the government’s borrowing limit. Government's worst signature will be on America's dollar bills (NYP) Lew’s signature — which looks like a strand of hair gone though a curler treatment — might even be too peculiar to grace our greenbacks, political insiders said. “Whoa! That’s completely unintelligible,” said a Senate finance aide. “This doesn’t look like anyone’s name at all.” She concluded, “Oh my gosh — I’ve never seen a signature like that.” ome social-media users were also quick to poke fun, saying Lew should clean up his squiggle. “HE GOT A CRIZZAZY SIGNATURE!!!!” one Twitter user wrote. Another tweeter quipped, “Looooooo!” But just because his autograph looks it’s penned by a drunken 3-year-old doesn’t mean it isn’t lovable, others said. Some fans created a petition on the White House’s Web site called “Save the Lewpty-Lew!” “We demand Lew’s doodle on every dollar bill in circulation,” the petition read. It had garnered 10 signatures by late yesterday…Asked yesterday if Lew had been practicing to improve his signature, presidential press secretary Jay Carney, said, “Not that I’m aware of.” Cantor Growth Plan Sputters as 41% of Touted Hires Exit (Bloomberg) Chief Executive Officer Howard Lutnick’s drive to turn one of the largest independent U.S. brokerages into a rival to Wall Street’s investment banks has been pocked with dismissals and defections. Forty-one percent of the 158 traders and bankers whose hirings Cantor announced in news releases since 2009 have left, industry records show. In interviews, 19 current and former employees blamed Cantor’s reluctance to commit money to deals and pressure to turn immediate profits. Norfolk 911 calls for 'baby lion' turn up a coiffed dog (HR) The first caller was fairly calm. “I’d like to report a lion sighting,” he said. “Say that again?” a dispatcher responded. And thus began the drama over baby lion sightings in Norfolk on Tuesday. Police said Wednesday that they actually got three 911 calls about the “lion.” The first came at 10:19 a.m. The animal was running on Granby Street, a male voice said. Then a woman took the phone. She sounded anxious as she described the proximity to the zoo. “There was a lion that ran across the street. A baby lion. It was about the size of a Labrador retriever.” It was near Granby and 38th, she said. “It’s roaming loose in the neighborhood.” A second call came five minutes later. “I just saw an animal that looked like a small lion.” It had “the mange and everything,” a man said. He had seen it on Delaware Avenue near Llewellyn Avenue. “I don’t know if it got away from the zoo, or what,” he said. The dispatcher said they already had received a report. “I’m not sure if it actually is a lion or not, but I’ll update the information.” A third call came at 1:19 p.m. “I just saw a baby lion at Colley Avenue and 50th Street,” a man reported. “What kind of animal?” the dispatcher later asked him. “A lion. A baby lion, maybe.” The lion was going to nearby houses. “I don’t think it has caused any problem so far,” said the caller. “OK. You think it’s looking for food?” the dispatcher asked. “I don’t know.” By now, most folks know that the “baby lion” was actually Charles the Monarch, a Labrador-poodle mix owned by Daniel Painter, who lives in Riveriew and has a garden center on Colley Avenue. He has the dog groomed to look like the Old Dominion University mascot. Many people say they see Charles out a lot, especially on Colley. But to someone who hasn’t seen him, he sure doesn’t look like a dog at first. PE King Black Is Hungry For Hostess (NYP) Black’s Apollo Global Management has teamed with veteran food executive C. Dean Metropoulos on a potential bid for bankrupt Hostess Brands’ snacks business, which includes Twinkies, Ding Dongs and Ho Hos…Hostess is in the process of selling off its iconic brands and liquidating the company after a crippling strike by its bakers union forced it to shut down in November. The Irving, Texas-based company plans to hold separate auctions for its bread and snack businesses. Hostess is just a few days away from choosing a so-called stalking horse bidder for its bread brands, including Wonder Bread, Nature’s Pride and Butternut. The snack business will follow suit later. Mortgage Deals Came Just In Time (WSJ) Major banks pushed to complete an $8.5 billion legal settlement with federal regulators this past weekend so they could book the deal's costs in their fourth-quarter results and present a cleaner slate to investors in 2013, according to people familiar with the talks. The timing of the settlement of alleged foreclosure abuses, announced Monday, allowed banks including Bank of America, JPMorgan, Citigroup, and Wells Fargo to take advantage of so-called subsequent-events accounting. The same rules apply to Bank of America's $11.6 billion pact with Fannie Mae over buybacks of questionable mortgage loans. Monday's settlements are "almost the textbook example" of when subsequent-events accounting comes into play, said Robert Willens, an accounting and tax expert. Obama’s 81% New York City Support is Best in 114 Years (Bloomberg) President Barack Obama won more support from New York City in November’s election than any White House candidate in more than 100 years, according to a final tally of votes. Obama beat Republican challenger Mitt Romney by 81 percent to 18 percent in the nation’s largest city, according to a certified vote count released Dec. 31 by the state board of elections. Some New York ballots were counted late in part because of complications caused by Hurricane Sandy. Yum Brands Apologizes For Chicken Probe (WSJ) Yum Brands's China chief executive apologized to consumers after negative publicity surrounding an official probe into chicken purchased from local suppliers caused sales to tumble at the company's KFC chain. Yum failed to address problems quickly and had poor internal communications, Sam Su said in a statement posted on the company's official account on Sina Corp.'s Twitter-like Weibo microblog service. He said the company would strengthen its management and oversight of suppliers. "We feel regretful for all the problems," Mr. Su said in the statement. "I sincerely apologize to the public on behalf of the company." Swiss Banks Welcome Rejection of Germany Tax Accord, Study Shows (Bloomberg) Swiss banks welcome the collapse of an accord with Germany that would have imposed new taxes on German clients in a bid to end a dispute over tax evasion, Ernst & Young said. About 72 percent of 120 Swiss banks surveyed see the demise of the agreement as positive, Ernst & Young said in a report today. How Jawboning Works (WSJ) The clearest example comes from Europe. In July, Mario Draghi, president of the European Central Bank, defused an intensifying crisis of confidence in the euro with two sentences scribbled in the margins of an otherwise routine speech. "Within our mandate, the ECB is ready to do whatever it takes to preserve the euro," he said. "And believe me, it will be enough." That may prove to be the most successful central-bank verbal intervention in history. A few weeks later, the ECB pledged to buy bonds of governments shunned by markets if those governments made belt-tightening commitments accepted by fellow euro-zone countries. No government has sought that help so the ECB hasn't spent a single euro. Yet global anxiety about an imminent euro crisis has abated. Beautiful Existence, Seattle Woman, Plans To Eat Only Starbucks For One Year (HP) A Seattle woman, legally named Beautiful Existence, will eat only food from Starbucks this year. She'll also be only drinking beverages from Starbucks as well, but will include drinks from Tazo Tea and Evolution Fresh since both fall under the Starbucks brand. Beautiful Existence cites several reasons for this endeavor. She explains them on her blog: "So how can eating only one company’s products impact me, anybody? Well Mr. McDonald’s already proved that question years ago with his documentary and Mr. Subway did his take on the loosing weight portion of the food challenges too. But when I watched those guys doing their thing I asked myself “where are the WOMEN challenging themselves in the world?” “Where are the effects being shown on a woman’s culture? A woman’s family & children? A woman’s diet, weight, fashion, checkbook, community and world through challenges?” “Where is HER VOICE on how an international company is directly or indirectly impacting everything from her waistline to her bottom line and every other woman’s, man’s, child’s, societies and planets world with their presence?” So far, Existence has really liked the Turkey Rustico Panini and is trying hard not to eat any of the baked items.