Opening Bell: 02.03.12

Author:
Dealbreaker
Updated:
Jan 14, 2019
Original:
Feb 3, 2012

Harbinger Lost 47% In 2011 (Bloomberg)
Phil Falcone’s Harbinger Capital Partners LLC lost 47 percent for investors in his main hedge fund last year as he was forced to slash the value of his troubled wireless venture by more than half, according to a person familiar with the results. Most of the decline in the Harbinger Capital Partners Offshore Fund I came from Falcone’s investment in LightSquared Inc. (SKYT), which plans to offer high-speed data service to as many as 260 million people...That the fund had to cut the value of its LightSquared stake by 59 percent illustrates the precarious nature of the investment on which Falcone, 49, is betting the future of his firm. Harbinger, which managed $5.7 billion at the end of last year, has put about $3 billion into LightSquared, and the investment accounted for 62 percent of the main fund at the end of May.

Greece Seeks Second Rescue, Fights for Euro (Bloomberg)
The rescue plan, which European officials and Greek creditors say may be wrapped up in coming days, includes a loss of more than 70 percent for bondholders in a voluntary debt exchange and loans likely to exceed the 130 billion euros ($171 billion) now on the table. That won’t stanch the bleeding, say economists including Holger Schmieding of Berenberg Bank in London. Greece will be saddled with too much debt, too little growth and too large a budget hole to do without even more money that euro nations led by Germany are increasingly reluctant to offer, they say. “Greece is in deep trouble,” Schmieding said in a Jan. 30 report. “The current Greek adjustment program is failing. Excessive austerity, a lack of supply-side reforms, administrative incompetence and political deadlock have pushed the Greek economy into an apparent death spiral. More of the same will not work.”

Wisconsin Woman Accused of Selling Fake Facebook Stock (Reuters)
In a criminal complaint on Thursday, prosecutors said Marianne Oleson told acquaintances she obtained $1 million in stock because her daughter was an acquaintance of Facebook's founder, and persuaded several people to buy fictitious Facebook stock over a four-month period. The Oshkosh woman was charged with 31 counts of theft, forgery and making misleading statements.

UBS, Credit Suisse in Swiss Rate-Fixing Probe (Bloomberg)
“Collusion between derivative traders might have influenced” Libor and its Japanese equivalent, Tibor, the Swiss competition watchdog, Comco, said in an e-mailed statement today. “Market conditions regarding derivative products based on these reference rates might have been manipulated too.”

Unemployment Drops to 8.3%; Payrolls in U.S. Jump 243,000 (Bloomberg)
The 243,000 increase in payrolls was the most since April and exceeded all forecasts in a Bloomberg News survey, Labor Department figures showed in Washington. The unemployment rate dropped to 8.3 percent, the lowest since February 2009.

The 21 Rules Of Surviving A Super Bowl Party (WSJ)
6. It is OK for a host to sell "premium seat upgrades"—a reservation on the couch, center of the room, complimentary soft drinks—for $35 each. Everyone's been on a plane recently. They'll grumble but understand.

MF Global Risk Chief Switch Stalled Euro Debt Cut by Six Months (Bloomberg)
In his first public testimony since MF Global filed for bankruptcy on Oct. 31, Roseman told lawmakers that the futures brokerage “would still be here” if it hadn’t made a $6.3 billion bet on European sovereign debt. The concerns he expressed about the firm’s exposure “certainly played a role” in his removal, he said.

Bernanke Sees Improvement in Economy (Bloomberg)
“Fortunately, over the past few months, indicators of spending, production, and job-market activity have shown some signs of improvement,” Bernanke said today in testimony to the House Budget Committee in Washington. “The outlook remains uncertain, however, and close monitoring of economic developments will remain necessary.”

Facebook's $100 Billion Question (WSJ)
Francis Gaskins, president of IPOdesktop.com, which analyzes IPOs for investors, says he doesn't believe Facebook is worth more than $50 billion—50 times its reported profits for 2011 of $1 billion, or more than triple the market's average price-to-earnings ratio. Google Inc.'s profits are 10 times that of Facebook, but its stock-market value is $190 billion, he notes. A $100 billion valuation "would have us believe that Facebook is worth 53% of Google, even though Google's sales and profits are 10 times that of Facebook," he said.

Geithner: Key Parts of Financial Reform Coming in 2012 (Reuters)
n an address at the Treasury in which he set out an agenda for reforms, Geithner said globalized financial markets mean that dangers to the U.S. economy can arise from anywhere and thus make a more level playing field vital. "This is particularly important in the reforms that toughen rules on capital, margin, liquidity and leverage, as well as in the global derivatives market," he said. "In these areas we are working to discourage other nations from applying softer rules to their institutions in order to try to attract financial activity away from the U.S. market and U.S. institutions," Geithner added.

S.E.C. Is Avoiding Tough Sanctions for Large Banks (NYT)
Even as the Securities and Exchange Commission has stepped up its investigations of Wall Street in the last decade, the agency has repeatedly allowed the biggest firms to avoid punishments specifically meant to apply to fraud cases. By granting exemptions to laws and regulations that act as a deterrent to securities fraud, the S.E.C. has let financial giants like JPMorganChase, Goldman Sachs and Bank of America continue to have advantages reserved for the most dependable companies, making it easier for them to raise money from investors, for example, and to avoid liability from lawsuits if their financial forecasts turn out to be wrong. An analysis by The New York Times of S.E.C. investigations over the last decade found nearly 350 instances where the agency has given big Wall Street institutions and other financial companies a pass on those or other sanctions. Those instances also include waivers permitting firms to underwrite certain stock and bond sales and manage mutual fund portfolios.

At Indianapolis strip club, the dancers have Big Blue fever (NYDN)
A Big Blue Super Bowl run was just the stimulus the exotic dancers of Indianapolis needed. "We were all rooting for the Giants to make it," said Kendra Gill, a dancer at Brad's Brass Flamingo. "No one knows how to party like New Yorkers. And everyone knows they are the best tippers." "Eli Manning is my favorite player. He's so cute. We’re hoping he stops by to say hi to us while he is in town," Gill added. The Giant-friendly club won't turn any one away, but Patriots fans shouldn't expect to find any sympathetic dancers. "We all hate the Patriots. Giants all the way," said Jessica Moody, 19, who was wearing a Victor Cruz jersey as she gyrated onstage.

Opening Bell

Barclays Chairman Resigns (WSJ) "Last week's events, evidencing as they do unacceptable standards of behaviour within the bank, have dealt a devastating blow to Barclays' reputation," Mr. Agius said in a statement Monday. "As chairman, I am the ultimate guardian of the bank's reputation. Accordingly, the buck stops with me and I must acknowledge responsibility by standing aside." Falcone To Argue That Taking Loan Was Best For Investors (NYP) Falcone had roughly $1 billion in personal assets in 2009, at the time of the loan, sources said. That included $790 million in a deferred compensation plan tied to his flagship Masters fund, and $228 million in Harbinger’s Special Situations fund, which he eventually tapped for the loan. He also had $11 million in cash — a nice chunk of change but far short of the $113 million he needed to satisfy Uncle Sam, said a person with knowledge of the case. If the case goes to trial, Falcone will likely say that he considered taking his money from the Master fund, which was allowing withdrawals at the time. But he didn’t after he was advised that doing so could hurt clients by triggering a sell-off, potentially at fire-sale prices. Global IPO Market Keeps Shrinking (WSJ) It was in the pool. Gilt Faces Disruption During Olympics (FT) The UK Treasury has called off its weekly gilt auctions for a four-week period between mid-July and mid-August, apparently because it is afraid that too many bond traders will be working from home – or not at all – during the Olympics. Facebook To Remain On Nasdaq (WSJ) Facebook executives have decided to keep the company's stock listing on the Nasdaq Stock Market, despite lingering frustration with the exchange's bungling of its widely anticipated initial public offering. They determined a move would further drain confidence in the company's battered shares. Facebook executives have quietly blamed Nasdaq OMX Group Inc. NDAQ +3.71% for the technical glitches that marred the stock's May 18 debut. While the company considered a switch in the days after the IPO, Facebook had decided by mid-June to stay put for now, according to people familiar with the company's plans. BNP Said To Mull Plan For $50 Billion Spain-Italy Funds Gap (Bloomberg) BNP Paribas is looking to address funding concerns in Spain and Italy, where the Paris-based bank’s loans outweighing deposits was among reasons cited by Moody’s Investors Service for downgrading its credit rating last month. Transfers of loans from elsewhere to Belgium might be capped at 20 billion euros ($25 billion) and at 10 billion Swiss francs ($10.4 billion) to Switzerland, according to one of the people. Bond Market Backs Obama With Record Demand For New Debt (Bloomberg) Investors are plowing cash into new U.S. Treasuries at a record pace, making economic growth rather than budget austerity a key issue as President Barack Obama and Mitt Romney face off in November’s presidential election. Bidders offered $3.16 for each dollar of the $1.075 trillion of notes and bonds auctioned by the Treasury Department this year as yields reached all-time lows, above the previous high of $3.04 in all of 2011, according to data compiled by Bloomberg. The so-called bid-to-cover ratio was 2.26 from 1998 to 2001 when the nation ran budget surpluses. China Big 4 Banks Took 29% of 2011 Global Profit (Reuters) Three Chinese banks topped the profit table, led by Industrial and Commercial Bank of China (ICBC) for the second successive year, with pretax earnings of $43.2 billion, according to The Banker. ICBC was followed by China Construction Bank, which delivered a $34.8 billion profit, and Bank of China, with earnings of $26.8 billion. JPMorgan was fourth with a profit of $26.7 billion, while HSBC was the most profitable European bank, with earnings of $21.9 billion. Lolong, a massive crocodile captured in the Philippines in 2011, is the largest croc in captivity in the world (NYDN) A huge crocodile blamed for deadly attacks in the southern Philippines is the largest in captivity in the world, Guinness World Records has declared. The giant reptile has brought fear, pride, tourism revenues and attention to the remote town where it was captured. The saltwater crocodile named Lolong, which was captured last September in Bunawan town in Agusan del Sur province, measures 20.24 feet and weighs more than a ton, Guinness spokeswoman Anne-Lise Rouse said in a statement Sunday. The reptile took the top spot from an Australian crocodile measuring more than 17 feet and weighing nearly a ton. Bunawan Mayor Edwin Cox Elorde said the news sparked celebrations in his farming town of 37,000, but also fostered concerns that more giant crocodiles might be lurking in a nearby marshland and creek where villagers fish. “There were mixed feelings,” Elorde said by telephone. “We’re really proud because it proves the rich biodiversity of our place, but at the same time, there are fears that Lolong may not be alone.” Lolong has become the star attraction of a new ecotourism park and research center in the outskirts of Bunawan, and has drawn thousands of tourists since news of its capture spread. Elorde said his town has earned $72,000 from the modest entrance fees at the park, with most of the money being used to feed and care for the crocodile and for park maintenance.

Opening Bell

White House Steps Up Push To Toughen Rules On Banks (WSJ) White House officials have intensified their talks with the Treasury Department in the days since J.P. Morgan's losses came to light, these people say—representing the first tangible political impact from a trading mess that has cost one of the nation's most prominent banks more than $2 billion...White House and Treasury officials are still determining whether the Volcker rule would have prevented the losses at J.P. Morgan, people familiar with the discussions said. Some of the president's political advisers are concerned that the J.P. Morgan trades, even if determined to violate the spirit of the rule, might slip through the regulatory net. From 'Caveman' To 'Whale' (WSJ) Even after Dynegy's holding company filed for bankruptcy protection on Nov. 7, the trade seemed like it still would be a loser for Mr. Iksil and J.P. Morgan. Only about six weeks remained until the trade was set to expire, and another company needed to default for J.P. Morgan to make money and the bullish hedge funds to lose out. Some traders took to calling Mr. Iksil a "caveman" for stubbornly pursing the trade. Mr. Iksil continued to bet against the index, however, and it soon weakened, causing a buzz among unhappy rivals, these traders say. "We called the trade the 'pain trade' and the 'widow maker'; it kept going down for no reason," said a trader at another firm, who called his broker and says he was told it was Mr. Iksil who was doing all the bearish trading. "It felt like Bruno was trying to wipe everyone out." Then on Nov. 29, in something of a shock, AMR Corp., American Airlines' parent company and one of the companies in the index, filed for bankruptcy protection. "People freaked out," recalls a hedge-fund trader. The index weakened significantly, allowing J.P. Morgan to rack up about $450 million in total profits from the trade, according to traders. Rival firms suffered similar-size losses. It capped a successful year for Mr. Iksil and his group, though the profits would be more than offset this year when they shifted to a more bullish tack on corporate credit, losing $2 billion-plus in the process. Goldman to Cash Out $1 Billion of Facebook Holding in IPO (Bloomberg) The investment bank and its funds will sell 28.7 million of the 65.9 million shares they own, more than twice the amount initially planned, Menlo Park, California-based Facebook said yesterday in a filing. The shares are being offered in a range of $34 to $38 apiece, meaning the stock being sold in this week’s IPO is valued between $975 million and $1.09 billion. SEC Probes Roles Of Hedge Fund In CDOs (WSJ) U.S. securities regulators are investigating hedge-fund firm Magnetar Capital LLC, which bet on several mortgage-bond deals that wound up imploding during the financial crisis, according to people familiar with the matter. While Magnetar has faced scrutiny over its role in various collateralized debt obligations, or CDOs, the Illinois firm itself now is a target of an investigation by the Securities and Exchange Commission, these people said. ECB Bars Access to Four Greek Banks (FT) The move raises the pressure on Greece to stick to its international bailout by highlighting the risk that eurozone central bankers could pull the plug on its financial system. It reflected ECB fears that a planned recapitalisation of Greece’s banks could be delayed. Greek Euro Exit Would Risk Asia Crisis-Style Rout, Zeti Says (Bloomberg) A Greek exit from the euro could cause contagion comparable to the Asian financial crisis, according to Malaysia’s central bank Governor Zeti Akhtar Aziz, who had first-hand experience of that turmoil. “The worst-case scenario is what we saw in Asia,” Zeti, 64, said in an interview with Bloomberg Television in Istanbul yesterday. “When one economy collapses, then the market usually moves on to focus on the next one, then there will be a contagion that will affect different countries that probably don’t deserve those kinds of consequences.” Strippers in Paris Go on Strike, Say Wages 'Miserable' (Reuters) The Crazy Horse, one of the most popular establishments of its kind in the world, said it was forced to cancel performances this week for the first time since the cabaret was created in 1951. The night club, which declined to give details on salary demands or current wages, said in a statement that it had always taken the wellbeing of its artists very seriously and that talks were continuing to resolve the dispute. "It's an exceptional place which has the specialty of presenting a fully naked show," Suzanne, one of the dancers, told RTL radio. "What's wrong is that we are asked to work 24 days per month for a pay that is worse than miserable," she said. JPMorgan’s Trading Loss Is Said to Rise at Least 50% (NYT) The trading losses suffered by JPMorgan Chase have surged in recent days, surpassing the bank’s initial $2 billion estimate by at least $1 billion, according to people with knowledge of the losses. When Jamie Dimon, JPMorgan’s chief executive, announced the losses last Thursday, he indicated they could double within the next few quarters. But that process has been compressed into four trading days as hedge funds and other investors take advantage of JPMorgan’s distress, fueling faster deterioration in the underlying credit market positions held by the bank. A spokeswoman for the bank declined to comment, although Mr. Dimon has said the total paper trading losses will be volatile depending on day-to-day market fluctuations. Several on FOMC Said Easing May Be Needed on Faltering (Bloomberg) The Federal Reserve signaled further monetary easing remains an option to protect the U.S. economy from the danger that lawmakers will fail to reach agreement on the budget or Europe’s debt woes worsen. Several members of the Federal Open Market Committee said new actions could be necessary if the economy loses momentum or “downside risks to the forecast became great enough,” according to minutes of the Federal Open Market Committee’s April meeting released yesterday in Washington. Judge Denies Gupta's Wiretap Motion (NYP) Ex-Goldman Sachs director Rajat Gupta lost his bid to get three key wiretaps tossed as evidence in his upcoming insider-trading trial. Manhattan federal judge Jed Rakoff gave tentative approval yesterday for the jury to hear the wiretaps, which are crucial to the government’s case against Gupta. A former head of McKinsey & Co., who also sat on Procter & Gamble’s board, Gupta is accused of feeding tips to ex-hedge funder Raj Rajaratnam, who began an 11-year prison term last October for insider trading. The taped conversations between Rajaratnam and his traders have him talking about tips from a unnamed leaker on Goldman’s board. Man protests restaurant's all-you-can-eat policy (TMJ4) A disturbance at a local restaurant when one man got upset that an all-you-can-eat fish fry didn't live up to its name. At 6'6" and 350 lbs, Bill Wisth admits he's a big guy who can pack it away more than most. And he wants one restaurant to make all-you-can-eat, all he can eat too. "It's false advertising," said Wisth to TODAY'S TMJ4. He was there Friday when the restaurant cut him off after he ate a dozen pieces. "Well, we asked for more fish and they refused to give us any more fish," recalled Wisth. The restaurant says it was running out of fish and patience; arguing Bill has been a problem customer before. They sent him on his way with another eight pieces, but that still wasn't enough. He was so fired up, he called the police. "I think that people have to stand up for consumers," said Wisth. Elizabeth Roeming is a waitress there and says they've tried to work with Bill over the years -- like letting him have a tab he still hasn't paid off. Bill isn't backing down, saying his fish fry fight isn't over. But in the end, even he had something nice to say. "They do have like some of the best pizza in town if you like deep dish pizza," said Wisth. He says he will picket every Sunday until the restaurant rethinks what happened.

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