Opening Bell: 09.18.12

Author:
Publish date:

Europe Banks Fail to Cut as Draghi Loans Defer Deleverage (Bloomberg)
European banks pledged last year to cut more than $1.2 trillion of assets to help them weather the sovereign-debt crisis. Since then they’ve grown only fatter. Lenders in the euro area increased assets by 7 percent to 34.4 trillion euros ($45 trillion) in the year ended July 31, according to data compiled by the European Central Bank. ... “Thanks to Draghi, the massive shrinkage that was looming six months ago across Europe isn’t happening -- at least not yet,” said Nikolaos Panigirtzoglou, an analyst at JPMorgan Chase & Co. in London. “That’s what the economy needed on the short term.”

Crude Oil's Quick Fall Leaves Trail of Queries (WSJ)
Oil prices dropped more than $3 in less than a minute late in the trading day on Monday, just as trading volume spiked. The move also dragged down prices of gold, copper and even the euro. ... The move sparked talk of an erroneous trade—called a "fat-finger" error in industry parlance—or a computer algorithm gone awry.

Morgan Stanley infrastructure fund hit by Volcker rule (Reuters)
A U.S. regulation that limits how much of its own capital a bank can put at risk is causing headaches for Morgan Stanley as it prepares to raise a new multi-billion-dollar global infrastructure fund, people familiar with the situation said. The regulation, called the Volcker rule, puts a cap on the amount of capital that Morgan Stanley can pledge to the new fund. That means senior executives at Morgan Stanley Infrastructure Partners will have to make do with a smaller share of the fund's profits, the sources said. While the majority of the executives have so far accepted the new reality and Morgan Stanley is in talks to increase the fund managers' share of profits, a few have left the bank.

A Mighty Wind: Sizing Up Fund Manager's Sway (WSJ)
The Wall Street Journal reviewed the performance of 22 stocks after they were mentioned by [David] Einhorn in television interviews, investor conferences, other public events and letters to Greenlight investors. The nine companies where analysts and investors saw his comments as negative fell by a median of 4.9% on the same day, the analysis shows. Thirty days later, the median decline was 13%. ... "It's a pathetic indication of how shallow the stock market is right now, how uninvested people are," says Tim Ramey, an analyst at D.A. Davidson & Co.

Romney Tells Millionaire Donors What He REALLY Thinks of Obama Voters (MoJo)
During a private fundraiser earlier this year, Republican presidential candidate Mitt Romney told a small group of wealthy contributors what he truly thinks of all the voters who support President Barack Obama. He dismissed these Americans as freeloaders who pay no taxes, who don't assume responsibility for their lives, and who think government should take care of them. Romney went on: "[M]y job is is not to worry about those people. I'll never convince them they should take personal responsibility and care for their lives."

Bigamist busted: first wife discovers second wife when Facebook suggests her as possible friend (NYDN)
A Washington man pleaded guilty to bigamy after his wife learned he was married to a second woman by looking at Facebook's "people you may know" notification. The second woman's profile picture showed her with the first bride’s husband standing near a wedding cake.

Spain Sells Debt Amid Questions Over Bailout (NYT)
The Spanish Treasury sold 4.6 billion euros, or $6 billion, of short-term debt, and while borrowing costs were slightly lower than in the previous sale, they remained at a high level. Average yields fell to 2.835 percent on the 12-month bill from 3.070 percent in August, with 3.6 billion euros of the paper sold, Reuters reported. Borrowing costs on 18-month debt were also slightly lower.

ECB’s Coene Says Widening Spreads May Force Spain to Ask for Aid (Bloomberg)
European Central Bank Governing Council member Luc Coene said rising bond yields may force Spain into asking for aid and submitting to the ECB’s conditions for granting it. If “markets see that Spain will not” ask for assistance, “then it will not last long before spreads will rise again, and then Spain will be somewhat forced to come back on its decision and submit to the conditionality program,” Coene said at a panel discussion in London yesterday.

Pimco’s Gross: Central Banks ‘Where Bad Bonds Go to Die’ (CNBC)
Bill Gross, the co-Chief Investment Officer of Pimco, and manager of the world’s largest bond funds, has weighed in on recent central bank action with a scathing tweet. He said via Pimco’s Twitter account Monday night: “Central banks are where bad bonds go to die. Sell bad bonds, buy good ones. Investing sometimes can be very simple.”

US inflation fears rise after QE3 (FT)
Market expectations for US inflation over the next 10 years rose as high as 2.73 per cent on Monday, based on the difference or the so-called “break-even rate” between nominal and inflation-protected Treasury debt. That represents the highest intraday break-even rate since May 2006 and near the all-time closing peak of 2.78 per cent from March 2005.

Defense Merger Faces Political Hurdles (WSJ)
Even before executives negotiating the megamerger of Airbus parent European Aeronautic Defence & Space Co. and Britain's BAE Systems PLC try to win over wary investors, they face the delicate challenge of pleasing five governments in four languages with dozens of conflicting interests. ... In a sign of the deal's political sensitivity, German Chancellor Angela Merkel and French Finance Minister Pierre Moscovici said in separate news conferences on Monday that their governments are examining the proposal closely but declined to offer opinions of it.

French court to magazine: Hand over Kate topless photos, stop publishing (CBS)
The publisher of the gossip magazine that published topless photos of Catherine, the Duchess of Cambridge, has been ordered by a French court to give up all digital copies of the photos and stop further publication of the images. ... Closer, the French celebrity and gossip glossy and Chi, its Italian counterpart - also owned by former Italian Prime Minister Silvio Berlesconi - have tried to justify the decision to publish the pictures on the grounds that they're harmless, that they were taken from a public road, even if the couple were on private property, and - the greatest justification of all - that the public wants to see them.

Related

Opening Bell: 10.01.12

British Banks Face Heat From On High (WSJ) The Right Reverend Justin Welby, Bishop of Durham, is grilling top bankers as part of a new parliamentary inquiry into "banking standards" that represents the U.K. government's latest attempt to shake up the industry. The inquiry was established in July on the heels of news that several banks allegedly sought to rig interest rates such as the London interbank lending rate, known as Libor. Bishop Welby, a former oil executive who sits in Britain's House of Lords, has joined nine other lawmakers in assembling a report that will consider new rules on everything from corporate governance to conflicts of interest. The inquiry also involves a series of public hearings already under way. Sitting in a castle in his diocese in northern England, Bishop Welby said the inquiry isn't about digging into the details of banks' alleged failings in the Libor scandal and other matters. Rather, it is an attempt to determine more broadly the future role of the industry. "It's an existential question," he said. "It's about why the bankingindustry is here." Spain To Borrow $267 Billion Of Debt Amid Rescue Pressure (Bloomberg) Spain’s debt will widen to 90.5 percent of gross domestic product in 2013 as the state absorbs the cost of bailing out its banks, the power system and euro-region partners Greece, Ireland and Portugal. This year’s budget deficit will be 7.4 percent of economic output, Budget Minister Cristobal Montoro said at a press conference. Spain’s 6.3 percent target will be met because it can exclude the cost of the bank rescue, he said. Euro Leaders Face October of Unrest After ECB’s September Rally (Bloomberg) With the first of three summit meetings that European Union President Herman Van Rompuy has called “crucial” taking place in Brussels on Oct. 18-19, investor sentiment toward the euro area that surged in September is on the wane. “People are beginning to look at this in a more sober way” after the ECB bond-buying plan and a German high-court decision releasing bailout financing spurred optimism over the past month, Clemens Fuest, an economist at Oxford University’s Said Business School, said in an interview yesterday. October, which marks the third anniversary of the debt crisis, will showcase euro-area leaders fighting out their differences. The discord underscores the inadequacy so far of ECB President Mario Draghi’s bid to calm the crisis through a pledge on sovereign-debt purchases. Graduates Turn Away From Wall Street (FT) MBA statistics show a steady decline in the number of graduates taking jobs at investment banks. The Wharton school at the University of Pennsylvania, which bankers consider the “conveyor belt of Wall Street”, sent 16.6 percent of its class to investment banks in 2011 compared with more than one in four in 2008. The pattern is similar at other large business schools. “The number of students going into financial services has remained steady but what’s changed has been the types of roles,” said Maryellen Lamb, director of MBA career management at Wharton. “We’ve seen more opportunity for students in private equity and hedge fund roles.” Yield hunt pushes funds into CLOs, CDOs (Reuters) Fund managers are increasingly eyeing riskier exotic assets, some of which haven't been in fashion since the financial crisis, as yields on traditional investments get close to rock bottom. Returns from investments in "junk" bonds, government guaranteed mortgage securities and even some battered euro-zone debt are plunging in the wake of global central bank policies intended to suppress borrowing costs. In particular, the Federal Reserve's latest move to juice the U.S. economy by purchasing $40 billion of agency mortgage-backed securities every month is forcing some money managers who had previously been feasting on those securities to get more creative. The only problem is they may be getting out of their comfort zones and taking on too much risk. "I would not be surprised if some managers are reaching outside of their expertise for a few extra basis points," said Bonnie Baha, a portfolio manager for DoubleLine's Global Developed Credit strategy. Arnold Schwarzenegger 60 minutes interview video: admits habit of keeping secrets, affairs (CNN) While he did not specify how many affairs he'd had before Shriver filed for divorce in July 2011, Schwarzenegger admits two women he was involved with include "Red Sonja" co-star Brigitte Nielsen (while he and Shriver were dating, according to Schwarzenegger) and his family's longtime housekeeper, Mildred Patricia Baena. Nine months after Schwarzenegger and Baena had their affair, she gave birth to a son -- less than a week after he and Shriver's fourth child, Christopher, was born. Baena remained the family's housekeeper for years, with her son sometimes around the house as well. But Schwarzenegger said in the "60 Minutes" interview that he didn't have any suspicions he was the father until the boy was 7 or 8 years old and he began to notice "that he started looking like me." "It was never discussed, but I put things together," said Schwarzenegger, whose autobiography "Total Recall" hits bookshelves Monday. After that realization, he said he began sending Baena extra money for her and her son, without talking about his being the boy's father. Schwarzenegger also denied to Shriver that he'd had an affair and that Baena's child was his son -- until Shriver confronted him during a marriage counseling session a few months before their break-up. "She said, 'Am I off on this or am I not?' And I said, 'You are absolutely correct.'" More Wall Street Layoffs Coming (NYP) Nomura analyst Glenn Schorr said in a recent report warns that many banks, which are still overstaffed, need a more liberal wielding of the ax to squeeze out more profits in the coming years, amid a global market that continues to look sluggish. “While overcapacity is weighing on returns under the current environment, most bank managements have been in the camp that the industry is currently experiencing a cyclical rather than secular downturn,” Schorr writes. “So they’ve been slow to do too much on the head-count front,” the bank analyst said regarding layoffs. According to Schorr’s research, big banks like JPMorgan, Credit Suisse, UBS and Barclays have actually added jobs over the past three years. Goldman Sachs and Morgan Stanley have only slashed about 1 and 2 percent of their work forces, respectively. Orange Juice Gets Squeezed (WSJ) Since the start of the current hurricane season, futures prices have climbed as high as $1.4095 a pound. Traders and analysts said the possibility of storm damage fueled much of the rise. But since no such storm has materialized, investors are taking profits or cutting their losses, they added. Vikram's Housing Woes (NYP) Pandit is on track to lose money on the sale of his Greenwich, Conn. home, which he bought in June 2001 for $4.1 million. Pandit, 55, put the two-story Colonial on the market for $4.3 million in April. Now he has lowered the price to $3.9 million, according to Trulia.com. South Florida Man Inherits 13,000 Clown Items (SS) Richard Levine is now trying to wrap his head around the unusual pickle he inherited when his father-in-law and business partner died two years ago and left him essentially a warehouse full of curated items of buffoonery. There are clown dolls with faces of joy and sorrow. Clown paintings, some more colorful than others. Clown figurines and clown puppets, some tiny, some huge, some very disturbing. There are clown photographs, clown books and clown costumes...Levine, who runs the same Waterboy Sprinklers business his father-in-law started in the 1970s, said he barely has had the time to go through all of the items. He hopes to inventory all of it, sell most of it, keep some of it and donate the rest to a local charity group. "I am slowly starting to like them and getting enthusiastic about them. I can see how Jack was into them," Levine said. "I don't go for the sad clowns much though, but I really enjoy the happy ones."

Opening Bell: 10.15.12

Global Finance Chiefs At Odds (WSJ) At the annual meetings here of the International Monetary Fund and World Bank, European officials bickered about the damage caused by austerity; this week they head into a major euro-zone summit with no clear rescue plan for Greece. A territorial row between China and Japan, the world's second- and third-largest economies, bled into the conference with no sign of resolution, highlighting a new risk to growth. And many top finance officials pointed fingers at the U.S. for casting a new cloud over global markets by failing to make progress on the budget mess in the world's largest economy. Thousands March In Spain To Protest Austerity (Reuters) Several thousand anti-austerity protesters in Spain marched down a major street in the capital banging pots and pans Saturday. Many protesters also blew whistles as they blocked part of the Castellana boulevard Saturday carrying placards saying "We don't owe, we won't pay." "None of us pushed the banks to lend huge sums of money to greedy property speculators, yet we are being asked to pay for other's mistakes," 34-year-old civil servant Maria Costa, who was banging an old pot along with her two children, said. Bernanke Defends Fed From Claims It Is Being Selfish (NYT) Critics say the Fed’s unorthodox policies weaken the dollar and bolster the currencies of developing countries, hurting their ability to export. “It is not at all clear that accommodative policies in advanced economies impose net costs on emerging market economies,” Mr. Bernanke said at an event sponsored by the Bank of Japan and the International Monetary Fund. The Fed last month announced a program of open-ended bond purchases that will be continued until there is substantial improvement in labor market conditions, barring a sustained and unexpected spike in inflation. To start off, the central bank will buy $40 billion in mortgage-backed securities each month. “This policy not only helps strengthen the U.S. economic recovery, but by boosting U.S. spending and growth, it has the effect of helping support the global economy as well,” Mr. Bernanke said. Fischer Backs Fed QE3 as World ‘Awfully Close’ to Recession (Bloomberg) While there has been “a lot of progress made” to improve the global economy, its impact hasn’t materialized, Fischer said in an interview in Tokyo with Bloomberg Television airing Sunday. He signaled that by deciding not to set an end date or total amount to its third program of bond buying, the Fed is easing worries it will run out of ammunition before achieving its goals. Can Morgan Stanley's Gorman Save Wall Street? (BV) Gorman’s strategic moves are enough to convince one natural born skeptic, Mike Mayo, a financial-industry research analyst at Credit Agricole SA (ACA), to recommend Morgan Stanley’s stock for the first time in years. “The stock is valued as if it is a Greek or Spanish bank but its risk is far less,” he wrote in an e-mail to me. For Morgan Stanley to return to its glory days, he said, margins need to be improved in asset management, fixed-income trading needs to be further slimmed down and the core investment-banking franchise needs to be maintained and reinvigorated. Good advice. A firm built around lower risk-taking and lower overall pay while still providing clients with the advice and capital they need to innovate and expand is what we need on Wall Street. It’s the vision of one man taking seriously his responsibility to make the capital markets safe and productive for economies all over the world, instead of just some casino gone haywire where the house absorbs the losses and the profits go to the gamblers. The question is whether other leaders on Wall Street will follow Gorman’s example. Sex Life Was ‘Out of Step,’ Strauss-Kahn Says, but Not Illegal (NYT) More than a year after resigning in disgrace as the managing director of the International Monetary Fund, Dominique Strauss-Kahn is seeking redemption with a new consulting company, the lecture circuit and a uniquely French legal defense to settle a criminal inquiry that exposed his hidden life as a libertine...In France, “Libertinage” has a long history in the culture, dating from a 16th-century religious sect of libertines. But the most perplexing question in the Strauss-Kahn affair is how a career politician with ambition to lead one of Europe’s most powerful nations was blinded to the possibility that his zest for sex parties could present a liability, or risk blackmail. The exclusive orgies called “parties fines” — lavish Champagne affairs costing around $13,000 each — were organized as a roving international circuit from Paris to Washington by businessmen seeking to ingratiate themselves with Mr. Strauss-Kahn. Some of that money, according to a lawyer for the main host, ultimately paid for prostitutes because of a shortage of women at the mixed soirees orchestrated largely for the benefit of Mr. Strauss-Kahn, who sometimes sought sex with three or four women. German finance chief Wolfgang Schaeuble says Greece won't default or exit (Telegraph) "Greece has to take a lot of very serious reforms" and "everyone is trusting that the Greek government is doing what is necessary", he said at a meeting with business leaders in Singapore on Sunday. Mr Schaeuble said an increasing majority of Greeks understand that being in the euro "is in the best interest of Greece" and said did not think there would be a ‘staatsbankrott’ - or state bankruptcy. He said he did not see “any sense to speculate on Greece leaving the euro” because it would be very damaging for both the country and the region. High-Speed Trading No Longer Hurtling Forward (NYT) Profits from high-speed trading in American stocks are on track to be, at most, $1.25 billion this year, down 35 percent from last year and 74 percent lower than the peak of about $4.9 billion in 2009, according to estimates from the brokerage firm Rosenblatt Securities. By comparison, Wells Fargo and JPMorgan Chase each earned more in the last quarter than the high-speed trading industry will earn this year. Titanic Tycoon Plans Stake Sale Talks for $8 Billion Gas Project (Bloomberg) Australian mining magnate Clive Palmer, who’s planning to build a modern replica of the Titanic, aims to start talks next year to sell stakes in a potential $8 billion natural gas project in Papua New Guinea. “We’ve had interest from major petrochemical companies who want to joint venture” including Exxon Mobil Corp. and Chinese companies, Palmer said in an interview. “We will talk to them at the appropriate time,” likely mid-2013 when field work is scheduled to be completed, he said. Occupy Supporters Stage Protest in London (AP) Several supporters of the anti-corporate Occupy movement chained themselves to the pulpit of St. Paul’s Cathedral during a service on Sunday in an action for the anniversary of its now-dismantled protest camp outside the London landmark. The dean of St. Paul’s, David Ison, said he was conducting an evening prayer service when “four young women dressed in white” chained themselves to the structure. Dutch make massive cocaine bust in fruit shipment headed for zoo, arrest five (AP) A major cocaine seizure in Europe turned out to be good news for the animals at Rotterdam’s zoo. The drugs were hidden among boxes of bananas, and the fruit went to the monkeys and other creatures at the Blijdorp zoo. Dutch prosecutors said Friday more than eight tons of cocaine was hidden among the bananas on a ship from Ecuador. The drugs were seized Monday in the Belgian port of Antwerp, while the bananas were allowed to continue on to Rotterdam – the shipment’s final destination. Dutch police arrested a Belgian truck driver and four Dutch men on Tuesday.

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.

Opening Bell: 02.07.13

Credit Suisse Returns To Profit (WSJ) In the fourth quarter, Credit Suisse's net profit was 397 million francs, compared with a net loss of 637 million francs a year earlier when restructuring charges weighed on earnings. Revenue, which includes interest income, fees and trading proceeds, rose 29% to 5.8 billion francs. Analysts had expected a profit of 563 million francs and revenue of 6.14 billion francs. State Lawsuits Could Add To S&P Exposure (WSJ) On Tuesday, the Justice Department sued S&P for allegedly causing some banks and credit unions to lose $5 billion after relying on the company's ratings of mortgage-linked securities. However, the $5 billion claim, which S&P has dismissed as "meritless," is only part of the legal battle being fought by the world's largest credit-ratings firm by number of deals rated. Thirteen states and the District of Columbia have followed in the Justice Department's footsteps, filing separate lawsuits against S&P on Tuesday. The California attorney general alone is suing S&P for about $4 billion to recover funds for two of the country's largest public pension funds, according to its lawsuit. Other states, such as Colorado and Arkansas, are demanding S&P give back the revenue it earned on precrisis ratings of hundreds of securities. State prosecutors allege S&P presented its ratings as based on objective and independent analysis but actually were inflated to cater to the banks that helped arrange and sell the securities. S&P Hires Top Defense Attorney for $5 Billion Lawsuit (Reuters) Standard and Poor's has hired John Keker, one of the country's top white-collar defense attorneys, to help fight the $5 billion lawsuit brought by the U.S. government this week. Keker, who is based in San Francisco and has represented everyone from cyclist Lance Armstrong to Enron's Andrew Fastow, was hired at the recommendation of Floyd Abrams, a prominent New York attorney who also represents the ratings firm. RBS Settles Rate Charges (WSJ) CFTC enforcement chief David Meister said Wednesday that the trading floor was "laden with conflicts of interest," where RBS traders "seized the opportunity to ask colleagues sitting in the next chair for false rate submissions." From mid-2006 to the end of 2010, traders at RBS tried hundreds of times to rig the London interbank offered rate, or Libor, sometimes succeeding, said U.S. and U.K. regulators as they announced a $612 million settlement with the British bank. ‘Historic Winter Storm’ Moving Toward U.S. Northeast (Bloomberg) A “potential historic winter storm” and blizzard may dump 2 feet of snow on Boston and eastern Massachusetts, potentially causing power outages and leaving 10 inches in New York City. Eighteen to 24 inches (46 to 61 centimeters) of snow may fall in Boston, and the city has an 85 percent chance of receiving at least 12 inches from the storm that is expected to arrive in two days, according to the latest forecast from National Weather Service in Taunton, Massachusetts, published at at 4:25 a.m. Eastern Standard Time. “Heavy snow and gusty winds will bring the potential for blizzard conditions. The worst of the storm will be Friday night into the morning,” the weather service said. The storm arrives on almost the 35th anniversary of the Blizzard of 1978, which killed 99 people, destroyed 2,000 homes, drove 10,000 residents into shelters and paralyzed eastern Massachusetts and northern Rhode Island for a week, according to the weather service. Ireland Moves Toward Debt Deal (WSJ) Under Ireland's new proposal, the government will provide a long-term bond to the Irish central bank that replaces the note, the Irish finance ministry said. IBRC will be liquidated and its remaining commercial property assets will be dispatched to Ireland's so-called bad bank, the National Asset Management Agency. Mr. Noonan told lawmakers early Thursday that there was still "no deal," but he needed to announce new powers to liquidate IBRC—the first step toward potentially striking such a debt agreement—to protect the country from unspecified legal challenges. Man Claims IRS Agent Coerced Him Into Sex (CBS) An Oregon man is suing the U.S. Government and a female IRS agent he alleges pressured him into sex, by threatening a tax penalty. Vincent Burroughs, of Fall Creek, Ore., says the harassing relationship began in August of 2011 when Dora Abrahamson, an agent with the Internal Revenue Service, called him and said he would be audited, CBS affiliate KVAL reports. Burroughs says he didn't know Abrahamson, and that he hadn't met her before those calls - nor had he heard that he was being audited by the IRS. "She was sending me texts that she wanted to come out, give me massages because she needed to help me relax," Burroughs said in a phone interview with KVAL News. Over the next two months, Burroughs alleges that Abrahamson sent him several flirtatious text messages - offering to give massages, asking to meet him, and sending racy photos of herself to his cell phone. "She said she knew more than my mother knew about me," said Burroughs. In the lawsuit, Burroughs says in September 2011 Abrahamson came to his home wearing provocative attire. "Next thing I know, she's at my gate, honking...so I opened my gate, she came into my property dressed exactly like [when] she texted me," Burroughs said. The lawsuit states: "She said that she could impose no penalty, or a 40% penalty, and that if he would give her what she wanted, she would give him what she needed." E-Mails Imply JPMorgan Knew Some Mortgage Deals Were Bad (NYT) When an outside analysis uncovered serious flaws with thousands of home loans, JPMorgan Chase executives found an easy fix. Rather than disclosing the full extent of problems like fraudulent home appraisals and overextended borrowers, the bank adjusted the critical reviews,according to documents filed early Tuesday in federal court in Manhattan. As a result, the mortgages, which JPMorgan bundled into complex securities, appeared healthier, making the deals more appealing to investors. The trove of internal e-mails and employee interviews, filed as part of a lawsuit by one of the investors in the securities, offers a fresh glimpse into Wall Street's mortgage machine, which churned out billions of dollars of securities that later imploded. The documents reveal that JPMorgan, as well as two firms the bank acquired during the credit crisis, Washington Mutual and Bear Stearns, flouted quality controls and ignored problems, sometimes hiding them entirely, in a quest for profit. Harvard’s Gopinath Helps France Beat Euro Straitjacket (Bloomberg) When French President Francois Hollande unveiled a plan in November for a business tax credit and higher sales taxes as a way to revive the economy, he was implementing an idea championed by economist Gita Gopinath. Gopinath, 41, a professor at Harvard University in Cambridge, Massachusetts, has pushed for tax intervention as a way forward for euro-area countries that cannot devalue their exchange rates. “Fiscal devaluation” is helping France turn the corner during a period of extreme budget constraints, former Airbus SAS chief Louis Gallois said in a business- competitiveness report Hollande commissioned. Gopinath’s support for the theory took shape through her years teaching at Harvard and the University of Chicago and particularly as a Ph.D. student at Princeton University under the guidance of Kenneth Rogoff, Pierre-Olivier Gourinchas and Ben Bernanke, now chairman of the Federal Reserve. While her earlier work on current accounts and balance of payments garnered praise, it is her recent focus on the 17 euro nations that has national leaders paying action. John Thomas Financial Said To Draw Regulatory Probe (NYP) Wall Street brokerage firm John Thomas Financial, owned by flamboyant founder and CEO Tommy Belesis — who gained more than 15 minutes of fame from his role in Oliver Stone’s “Wall Street: Money Never Sleeps” — is being probed by the brokerage industry, the Securities and Exchange Commission and the FBI, The Post has learned. Agents from the FBI’s New York office have been knocking on doors of people associated with the firm, asking questions about JTF’s business practices, including cold calling by brokers and Belesis’ overseas accounts, sources told The Post. Fewer Workers Filed Claims for U.S. Jobless Benefits Last Week (Bloomberg) Applications for jobless benefits dropped 5,000 to 366,000 in the week ended Feb. 2, Labor Department figures showed today. Economists forecast 360,000 claims, according to the median of 53 estimates in a Bloomberg survey. Big Mac Prices Show Which Euro Zone States Best at Belt-Tightening (Reuter) Economist Guntram Wolff took the data and found that the price rise in Greece, Portugal and Spain has been less than the euro zone average, while in Ireland the price actually fell. These are the main countries undergoing deep economic reform due to the debt crisis. This contrasts with price rises above the euro zone burger average in Germany. Wolff concludes from this that economic adjustment is working. For example, In Ireland, which has made spending cuts after receiving international aid, the burger price has fallen from 3.80 euros to less than 3.50 euros. There is one notable exception, however. Heavily-indebted Italy is the most expensive country in the euro area to buy a Big Mac - 3.85 euros - while it costs just 3.64 euros in Germany. PETA: Naked chicken corpses aren't sexy (CM) The American founder of People for the Ethical Treatment of Animals, president Ingrid Newkirk, criticised a newspaper for running a picture of a raw chicken. "We don't want to see any chickens on display, but instead want them to live natural, happy lives with their families. Sexily displaying the corpse of a chicken who has been bred to grow so big, so quickly, that many collapse under their own weight, is just additionally offensive."

Opening Bell: 04.03.13

Barclays High-Pay Culture Brought Disrepute: Report (WSJ) Barclays PLC suffered from "a lack of self-awareness" in recent years as a culture of high pay and short-term incentives brought the bank into disrepute, according to an independent report by lawyer and investment banker Anthony Salz. The Salz Review, which was commissioned by Barclays' former chairman after the bank admitted to trying to rig interbank interest rates last summer, describes how in about 10 years the lender expanded to become a disparate set of businesses, each with its own culture. "The result of this growth was that Barclays became complex to manage," the report published Wednesday said. "Despite some attempts to establish group-wide values, the culture that emerged tended to favor transactions over relationships, the short term over sustainability, and financial over other business purposes." The 235-page report—which cost Barclays about £17 million ($25.7 million) to have produced—recommended a series of reforms aimed at trying to foster a common sense of purpose across the bank. To this end, Barclays' board must play a more active role in overseeing the business and Barclays' human resources department must be given more power to stand up on issues such as pay, the report said. Ex-Goldman Sachs Trader Taylor Said to Surrender to FBI (Bloomberg) Former Goldman Sachs Group Inc. traderMatthew Taylor planned to surrender today to the Federal Bureau of Investigation, a person familiar with the matter said. Taylor was accused Nov. 8 by the U.S. Commodity Futures Trading Commission of concealing an $8.3 billion position in 2007 that caused New York-based Goldman Sachs to lose $118 million. Morgan Stanley hired Taylor in March 2008, less than three months after Goldman Sachs disclosed in a public filing that he had been fired for building an “inappropriately large” proprietary trading position. Cyprus Bailout Details Emerge After IMF Deal (WSJ) The IMF statement set out the tough terms the tiny nation of 800,000 has to meet to get the bailout, calling the task ahead "challenging." Cyprus, an economy of roughly €17 billion in annual output, needs to push through cuts and savings worth 4.5% of gross domestic product by 2018 to hit a primary-surplus target of 4% of GDP outlined in the bailout deal, the IMF statement said. These cuts will come on top of savings worth 5% of GDP the government is already implementing through to 2015. An extra 2% of GDP in extra revenue will come from an increase in the country's corporate tax from 10% to 12.5% and an increase in the tax on interest income from 15% to 30%. The country's corporate-tax rate will remain among the lowest in Europe, on an equal footing with Ireland's, and will allow Cyprus to continue to use its tax regime to attract businesses, but the increase in withholding tax will make it substantially less attractive as a place for individuals to leave their savings. Cyprus Leader Invites Family Firm Probe (FT) Cyprus president Nicos Anastasiades has urged judges investigating the country's banking disaster to examine transactions handled by his family law firm as "a priority" in a bid to defuse public anger over last-minute transfers by well-connected Cypriots, Russians and Ukrainians who thereby avoided a "haircut" on their uninsured deposits. The move followed questions over whether a company managed by the president's son-in-law made use of inside information to transfer more than 20 million euros out of Laiki Bank days before its collapse. Marc Lasry In French Follies (NYP) Lasry, the CEO and co-founder of Avenue Capital, is on his way to getting a plum assignment as the US ambassador to France as a reward for his many years as a big Democratic fundraiser. But the Moroccan-born, French-speaking American could encounter some uncomfortable moments when he lands in Paris, given his views on the land of fine wine, crusty baguettes — and European socialism. “We don’t invest in France,” he said at a New York hedge-fund conference sponsored by French bank BNP in June 2010, even apologizing to his hosts as he made the comment. Lasry, who is a bankruptcy lawyer by training, loves to chide other countries for their creditor-unfriendly ways. His $11.7 billion distressed debt fund buys up beaten-down credits of companies headed towards bankruptcy, with the payout determined by their ranking in the process. That can be dicey in countries like France, he explained at the BNP conference, as “the legal system is very much tilted towards helping unions and workers.” As a result, he said, “you might find your claim disallowed.” 1,000 pot plants seized in Queens in warehouse raid (NYDN) A massive drug operation went up in smoke Tuesday when law enforcement officials raided an indoor marijuana farm in Queens. Authorities seized more than 1,000 pot plants - along with grow lights and other gear - from the 44th Rd. warehouse in Long Island City just after 3 p.m. , police sources said. Officials from the NYPD, state police and the federal Drug Enforcement Agency also rounded up five suspects in the sweep. New York-for-Buenos Aires Swap Theory Spreads: Argentina Credit (Bloomberg) Argentina’s refusal to improve its offer to holders of defaulted debt suing for full payment in the U.S. is deepening speculation that the nation will sever ties with the overseas bond market. The proposal submitted on March 29 mimics the terms of Argentina’s 2005 and 2010 debt exchanges, a move that could lead to a default on the restructured notes unless the country removes them from U.S. jurisdiction. BofA Chief Moynihan Said to Summon Managers for Revenue Push (Bloomberg) Bank of America Corp. Chief Executive Officer Brian T. Moynihan has summoned more than 100 of his regional leaders to a private meeting today where they’ll be pushed to boost the lender’s flagging revenue, said two people with direct knowledge of the project. Managers at the two-day event in Chicago will be judged on how much progress they’ve made in helping to sell more products to the 53 million customers of the second-biggest U.S. lender, said the people, who asked for anonymity because Moynihan’s plan hasn’t been made public. Revenue has dropped every year of Moynihan’s three-year tenure as he sold assets, repaired the firm’s balance sheet and settled more than $40 billion in claims tied to defective mortgages. Private Sector Adds 158,000 Jobs (WSJ) Economists surveyed by Dow Jones Newswires expected ADP to report a gain of 192,000 private jobs. However, the February job gain was revised up to 237,000 from 198,000 reported a month ago. SEC Embraces Social Media (WSJ) In a ruling that portends changes to how companies communicate with investors, the Securities and Exchange Commission said Tuesday that postings on sites such as Facebook and Twitter are just as good as news releases and company websites as long as the companies have told investors which outlets they intend to use. Gray seal pup saved from death on Montauk beach now recovering (NYDN) The three-month-old seal, underweight at 40 pounds, is now resting in one of the foundation's rehabilitation tanks at the Atlantic Marine World aquarium in Riverhead. "She feels very sassy in her tank and doesn't appreciate anything we are doing for her," laughed Kimberly Durham, director of the rescue program, "which is a good sign. A nasty seal is a good sign that she is getting better because they are wild animals.