Opening Bell: 08.06.12

Author:
Dealbreaker
Updated:
Jan 14, 2019
Original:
Aug 6, 2012

Knight Said To Get $400M Infusion In Sale Of Convertibles (Bloomberg)
Knight Capital stepping back from the brink of insolvency, secured a $400 million infusion through the sale of convertible preferred securities, according to a person with direct knowledge of the matter. The investors are Getco LLC, an automated trading firm that is backed by General Atlantic LLC; Blackstone Group LP; and brokerages Stifel Nicolaus & Co. and TD Ameritrade Holding Corp, according to the person, who asked not to be named because the agreements haven’t been made public. Knight, whose market-making unit executes about 10 percent of U.S. equity volume, has been fighting for survival since a computer breakdown spewed orders through the stock market Aug. 1 and spurred a $440 million trading loss.

SEC Nixed Knight's Plea For A Do-Over (WSJ)
Knight Capital Group officials raced over the weekend to negotiate a deal to save the crippled brokerage firm as new details emerged showing regulators rebuffed the company's pleas to be released from errant trades it had booked. Three hours after a software glitch unleashed a wave of erratic trades on Wednesday, leaving Knight holding at least $4.5 billion worth of securities it hadn't planned to buy, firm Chief Executive Thomas Joyce was on the phone with Mary Schapiro, chairman of the Securities and Exchange Commission. Mr. Joyce pressed the SEC chief to allow the firm to cancel many of the trades, according to people with knowledge of the discussions. The conversation helped seal Knight's immediate fate. From her vacation spot in Maine, Ms. Schapiro rejected Mr. Joyce's entreaties, setting in motion the firm's scramble. Knight was forced to unload the stock it had bought, incurring a $440 million loss that depleted the company's capital and leaving it facing a dire choice: seek a financial lifeline, a buyer, or file for bankruptcy.

Monti Warns Euro Crisis Threatens EU as a Whole (AP)
In case that was unclear.

As Libor Fault-Finding Grows, It Is Now Every Bank for Itself (Dealbook)
With billions of dollars and their reputations on the line, financial institutions have been spreading the blame in recent meetings with authorities, according to government and bank officials with knowledge of the matter. While acknowledging their own wrongdoing, institutions are pointing out actions at other banks that they believe are worse — and in some cases, extend to top executives. One official involved in the case said that banks are emphasizing that “we’re not as bad as the next guy.”

Vietnam To Ease Rules To Lure Stock Investors (Bloomberg)
Vietnam plans to ease rules on equity trading and accelerate initial public offerings of state-owned companies this year to attract investors to a market that’s valued almost 15 times less than Singapore’s. The State Securities Commission is preparing to cut the minimum holding period for stocks, Nguyen Doan Hung, vice chairman of the commission, said in an e-mailed response to questions from Bloomberg on Aug. 2. The regulator is also considering widening stock trading bands and starting an online auction system to boost volumes and speed up sales, he said, without specifying when the measures may be started.

Macro Funds Show Micro Returns (WSJ)
After many of these funds posted big gains during the financial crisis, money poured in. From the end of 2008 through the first quarter of this year, assets surged 66% to $462 billion, according to Hedge Fund Research Inc. Conditions last year, when markets were driven by uncertainty over Europe's debt crisis and broad policy decisions, seemed tailor-made for macro managers. But the funds lost an average of 4.2%, according to HFR, compared with the 2.1% gain by the Standard & Poor's 500-stock index, including dividends. In the first six months of 2012, such funds lost 0.5% on average compared with a 9.5% climb by the S&P 500. July appears to have been a better month, investors say, but not enough to brighten the broader picture much. Investors are showing signs of getting frustrated. They withdrew $3.5 billion from macro funds in the second quarter of this year, according to HFR.

Small Banks Are Blunt In Dislike Of New Rules (WSJ)
It was supposed to be a routine conference call where bankers could ask U.S. regulators about a proposed rule on capital levels. But then a man who identified himself as fourth-generation banker from central Minnesota started to complain about the possibility of having to set aside much more money when making nontraditional mortgage loans. As about 1,500 other bankers listened, the banker pressed officials at the Office of the Comptroller of the Currency to justify the proposed changes, saying he had made such loans for 40 years with almost no defaults. Then came an eight-letter barnyard epithet. OCC officials cut him off to take another question, but the next three bankers in line during the July 19 call said they agreed with him.

Guyana probes huge cocaine stash at airport — bound for NYC (AP)
Officials in Guyana say they plan to fire nearly a dozen baggage handlers and ramp attendants after police found 57 pounds of cocaine that was about to be loaded onto a flight headed for New York City. Airport Authority Chief Executive Ramesh Ghir said today that airport workers were clearly involved in yesterday's incident. Twelve employees were dismissed earlier this year after someone threw a bag with 50 pounds of cocaine over a perimeter fence at the South American country's international airport.

One Year Later, What US Downgrade? (WSJ)
One year ago, Standard & Poor's Ratings Services stripped the U.S. of its triple-A debt rating. Since then, demand for Treasury securities has only grown. Sunday marked the one-year anniversary of S&P's downgrade of long-term U.S. debt to double-A-plus, which came after Congress struggled to reach a deficit-reduction deal. The action sparked a flight into safe-haven assets, with U.S. debt still near the top of many investors' list of hiding spots. Another fiscal battle is brewing now, but investors aren't as worried about what this might mean for Treasurys. Even for investors worried about the long-term health of U.S. finances, last August's reaction showed that Treasurys have a stronghold on safe-haven seekers.

Romney wants 'something dramatic' to aid economy (AP)
Mitt Romney is calling for "something dramatic" to help the economy recover, but he's not saying exactly what. The Republican presidential candidate says he opposes another federal stimulus package and new government programs. He also says that if the Federal Reserve were to undertake another "massive" program of buying government bonds and mortgage-backed securities, with the goal of driving long-term interest rates even lower, it wouldn't help the recovery...Romney said repeatedly this past week that his economic policies would create 12 million jobs in his first term. Pushed to explain how, Romney said in the interview, "That's what happens in a normal process."

Las Vegas Sands Probed In Money Move (WSJ)
Federal authorities are investigating whether Las Vegas Sands Corp. and several of its executives violated money-laundering laws by failing to alert authorities to millions of dollars transferred to its casinos by two Las Vegas high rollers, according to lawyers and others involved in the matter. The U.S. attorney's office in Los Angeles is examining the casino company's handling of money received several years ago from a Mexican businessman later accused of drug trafficking and a former California executive subsequently convicted of taking illegal kickbacks, according to the people involved.

Snoop Dogg Heeds a Higher Calling As Snoop Lion (Speakeasy)
The new reggae album will be accompanied by a documentary also called “Reincarnated” in which Snoop explains his name change and his embrace of Jamaican music. “I’ve been on the top ever since I’ve been in it,” Snoop says in the trailer. “I’ve got rap songs that will never die. That ain’t with no disrespect but I’m tired of rapping.” In a clip from the coming movie, we see Snoop in the studio telling the folks around him, “F— Snoop Dogg. Don’t think of none of the sh– he rapped about, hustling and making money and drug dealing and shooting. All that sh– will be out of here.”

News

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.

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Tsipras is back; Moynihan thinks he's gonna be okay; Goldman giving ETFs a try; "Tourist Dies At The Taj Mahal After Falling While Taking A Selfie"; and more.

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