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Opening Bell: 05.17.13

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To Buy Bonds or Not to Buy: Fed Hawks, Doves Air Views (WSJ)
The presidents of the Dallas, Richmond and Philadelphia Federal Reserve banks, long skeptics of the wisdom of the bond buying, said this week that they would like to see the purchases scaled back immediately. And San Francisco Fed President John Williams, who has been enthusiastic about the merits of the program, said Thursday that he is still prepared to reduce the size of the purchases "as early as this summer." The president of the Boston Fed, meanwhile, suggested that there is a case that the Fed should be doing even more to boost the economy.

Dell Profit Missing Estimates Boosts CEO’s Buyout Plan (Bloomberg)
Profit excluding some items fell to 21 cents a share for the period that ended May 3, from 43 cents a year earlier, Round Rock, Texas-based Dell said in a statement yesterday. Analysts on average had projected 35 cents, according to estimates compiled by Bloomberg. Revenue (DELL) declined 2.4 percent to $14.1 billion, beating analysts’ average $13.5 billion projection. The plunge in profit lends credence to a plan by Chief Executive Officer Michael Dell and Silver Lake Management LLC to take the company private in a $24.4 billion leveraged buyout. ... “The Icahn solution gets less attractive, and the bird in the hand looks better than the one in the bush,” said Chris Whitmore, an analyst at Deutsche Bank AG in San Francisco, who has a hold rating for the shares.

How Elliott and Hess Settled a Bitter Proxy Battle (DealBook)
[T]he company began announcing steps intended to raise its stock price, including selling its gas stations, raising its dividend and announcing a stock buyback. It also replaced the slate of directors up for re-election this year — including Mr. Kean and Mr. Nunn — with a group that includes John Krenicki Jr., a former vice chairman of General Electric. Later, the company agreed to separate the roles of chairman and chief executive, both currently held by Mr. Hess, the son of the founder. (The board on Thursday named Mark Williams, one of its new directors, as nonexecutive chairman.) And the Hess family agreed to support a proposal in which directors would be re-elected every year, rather than every three years.

Day Traders Steer Tesla Higher (WSJ)
The whipsaw trading can complicate longer-term investors' efforts to assess companies' prospects and create volatility that draws the ire of corporate managers. ... Such traders in recent years have targeted the shares issued by companies including Netflix, Green Mountain Coffee Roasters and Priceline.com. In 2010, Chipotle Mexican Grill hit the radar screen of day traders. Its share price quadrupled over the next two years while trading volume nearly doubled. At its peak, the stock was trading at 47 times projected future earnings, according to FactSet, more than double that of McDonald's Corp. and Taco Bell operator Yum Brands Inc.

Hedge Fund Billionaire William Ackman, Investor Group in Contract to Buy a New York Penthouse for Over $90 Million (WSJ)
Mr. Ackman does not plan to move in, a person familiar with the plans said, and the group views the penthouse as an investment.

For Sale: A Video of Toronto Mayor Rob Ford Smoking Crack Cocaine (Gawker)
Rob Ford, Toronto's conservative mayor, is a wild lunatic given to making bizarre racist pronouncements and randomly slapping refrigerator magnets on cars. One reason for this is that he smokes crack cocaine. I know this because I watched him do it, on a videotape. He was fucking hiiiiigh. It's for sale if you've got six figures.

US farmland prices rise despite weak grain market (FT)
Agricultural land values increased 15 per cent on last year during the first quarter in a district that includes Illinois, Indiana, Iowa, Michigan and Wisconsin, the Federal Reserve Bank of Chicago said on Thursday. The region’s farmland values have trebled in the past decade. Whether the market is overheating has become a feverishly discussed question among land shoppers from farmers to pension funds

Regulators Target Exchanges As They Ready Record Fine (WSJ)
In a sign of the more aggressive regulatory approach, the U.S. Securities and Exchange Commission has been putting the finishing touches on a settlement with Nasdaq OMX Group Inc. over the handling of the Facebook Inc. public offering, according to people involved in the private negotiations. Nasdaq is expected to pay a penalty of about $10 million, the people say. That would be the biggest fine levied by the SEC against an exchange, and just its second such fine ever.

Japan buys into US shale gas boom (FT)
In the latest step toward internationalising the US shale gas boom, the developer of a $10bn LNG export facility in Louisiana has agreed to sell half its stake in the project to a group of Japanese and French companies. Japan’s Mitsui & Co, Mitsubishi Corp and Nippon Yusen, together with GDF Suez of France, had previously signed on as buyers of the liquefied natural gas that is to be shipped from the planned Cameron LNG facility starting in 2017.

After Google, Amazon to be grilled on UK tax presence (Reuters)
Over the past six years, Amazon has paid around $9 million in income tax on over $23 billion of sales to British clients, because it says it operates a single European business out of Luxembourg, rather than a multinational structure of independent subsidiaries in different countries, and should therefore pay tax in Luxembourg. However, Reuters has uncovered evidence from the company's own statements, job advertisements, statements from three suppliers and five former employees, as well as the profiles of over 140 staff on networking website LinkedIn, which suggests the UK unit has a high degree of autonomy, with local managers deciding on many aspects of its business.

McDonald’s Seen Overhauling U.S. Menu From 145 Choices (Bloomberg)
“It’s gotten to the point where the operation has kind of broken down and that’s all a symptom of the complication of the menu,” said Richard Adams, a San Diego-based restaurant franchisee consultant and former McDonald’s store owner. “They can’t make the food fast enough.” In October, some McDonald’s franchisees received an e-mail from a regional representative proposing “core menu changes” based on information from customer complaints. Teams had been formed to address menu size and understand “what’s getting in the way of quality and service,” according to the e-mail. Seven menu items were identified for potential removal. So far Fruit & Walnut salads, Chicken Selects and Angus burgers have been eliminated.

Court rules NYPD should have cut circumcised cop (NYDN)
Owen Hopper had contended he shouldn’t have been fired from the NYPD because the woman who said he’d exposed himself and made “vulgar remarks” to her wasn’t credible. Hopper noted that she’d described her flasher’s penis as uncircumcised — and Hopper said he’s been circumcised since childhood.

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Stress Tests Show Banks On The Mend (WSJ) The central bank said 17 of the 18 largest U.S. banks have enough capital to keep lending in a hypothetical sharp economic downturn, a sign the financial system is better prepared to weather a shock without resorting to a large, 2008-style infusion of government support. But the "stress test" figures released Thursday also showed that the Fed is paying special attention to the capital strength of companies with large trading operations, a group that includes Goldman Sachs, Morgan Stanley, and JP Morgan. That scrutiny could make it harder for those firms to win regulatory approval to increase dividends and buybacks, and could bruise the companies' recovering reputations with investors. Shares of Goldman and J.P. Morgan have been trading at their highest levels in a year, but both companies dropped more than 1% in after-hours trading following the Fed release. Citi Bests Stress Tests, Discloses Buyback Plan (CNBC) Where stress tests are concerned, call Citigroup "most improved." The bank posted an 8.3 percent tier 1 common capital ratio - the highest of its peers - under the Federal Reserve's annual stress tests. Unemployment Falls To 7.7% (WSJ) U.S. job growth jumped ahead in February, a sign of a steadily improving labor market and stronger economic gains. Employers added 236,000 jobs last month, the Labor Department said Friday. The unemployment rate, obtained by a separate survey of U.S. households, fell two-tenths of a percentage point to 7.7%, the lowest level since the end of 2008. Economists surveyed by Dow Jones Newswires had forecast that nonfarm payrolls would rise by 160,000 and the unemployment rate would fall to 7.8%. Chanos Has Ackman's Back On Herbalife Bet (NYP) Famed short seller Jim Chanos yesterday voiced his support for Ackman’s short position — and revealed he made money from shorting the Los Angeles-based company last year. “I think Bill Ackman is correct in his analysis” of Herbalife, Chanos said in a TV interview. “I’m not crazy for this multi-level-marketing business,” Chanos added...Chanos said on CNBC yesterday morning that he had shorted Herbalife last year, when it was around $50 — but got out when the price fell by half after Ackman went public with his short bet. Firms Send Record Cash Back To Investors (WSJ) Companies in the S&P 500 index are expected to pay at least $300 billion in dividends in 2013, according to S&P Dow Jones Indices, which would top last year's $282 billion. Goldman Symbol Gets More Elusive (WSJ) Upending a closely watched ritual in place since 1996, the New York securities firm told employees Thursday it now plans to promote a new crop of managing directors every two years, instead of each year. The change will start with the group selected later this year. The coveted title, which comes with a base salary of $500,000, elevates the chosen few at Goldman one step closer to the even higher rank of partner. In the memo, Goldman Chairman and Chief Executive Lloyd C. Blankfein and President and Chief Operating Officer Gary D. Cohn said the move would help the firm devote more time to the selection process. "A biennial process will allow us to invest more in the managing director selection process so that it will continue to be a disciplined and rigorous exercise," they wrote. "This will help to ensure that the managing director title remains as aspirational as it should be for our top performers." Hooters Is Chasing Women — as Customers (CNBC) The chain's waitresses are as buxom as ever but its sales have "flattened out," said Darren Tristano, executive vice president at research firm Technomic. Revenue peaked in 2007 at nearly $1 billion but had fallen to around $850 million last year, he estimated. (The privately-held company doesn't release sales figures.) The brand recently announced an overhaul aimed at making Hooters more mainstream than man-cave, adding more salads to its menu, remodeling stores and rolling out a series of ads last week to tout the changes. Icahn Bid Rattles Dell Plan (WSJ) Activist investor Carl Icahn said he would push to replace Dell's board and pursue "years of litigation" if the computer maker refused to accept his demand for a refinancing that would pay a hefty dividend to shareholders. Prodding the company to reject a $24.4 billion buyout offer that it agreed to last month and endorse his alternative, Mr. Icahn disclosed he owns a "substantial" stake in Dell and unleashed his trademark attack on directors and on the management-backed offer. "We see no reason that the future value of Dell should not accrue to all the existing Dell shareholders," Mr. Icahn wrote to a Dell special board committee, insisting it agree to his conditions or hold a vote for a replacement board that would. Ferrari $1.3 Million Hybrid Hits Resurgent Luxury Market (Bloomberg) At the Geneva Motor Show this week, Ferrari showed a 1 million-euro ($1.3 million)hybrid called LaFerrari. Bentley exhibited a revamped four-door Continental Flying Spur. Jaguar debuted the XFR-S, its fastest sedan ever. Rolls-Royce is adding a 245,000-euro coupe called the Wraith to its lineup. Companies Expand Offshore Cash Hoard By $183 Billion (Bloomberg) Microsoft, Apple, And Google each added to their non-U.S. holdings by more than 34 percent as they reaped the benefits of past maneuvers to earn and park profits in low- tax countries. Combined, those three companies alone plan to keep $134.5 billion outside the U.S. government’s reach, more than double the $59.3 billion they held two years earlier. Broker who managed money for NFL players bootled from securities industry after big loss (NYP) A Florida broker who managed money for dozens of prominent National Football League players — includingSantana Moss and Plaxico Burress — has been banned from the securities industry after putting the group into a high-risk investment that lost them a total of $40 million. Jeff Rubin, 38, directed some 31 NFL players into an illegal gambling operation in Alabama — which went bust two years later, a Wall Street regulator said yesterday. One of the players, Samari Toure Rolle, a former cornerback with the Baltimore Ravens, lost $3.2 million, the bulk of his liquid assets, to Rubin, according to the Financial Industry Regulatory Authority, which imposed the ban.

Opening Bell

Opening Bell: 05.10.13

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Europe, Central Bank Spar Over Athens Aid (WSJ) Greece faces a key Treasury-bill repayment in less than two weeks, and the money isn't there unless governments provide additional aid or the ECB agrees to lend Greek banks the money to roll over the debt. It is a particularly sensitive issue for the ECB, which is trying to create a credible financial backstop to hold the euro together while governments overhaul their economies and finances. But with each step the ECB takes to help Greece and others, it inches ever closer to rules that prevent it from printing money to help governments out of their debt problems. The bank is already facing accusations in Germany that it is straying from its primary mandate to keep inflation low. Iceland Sees Mortgage Bubble Threat From Foreign Cash (Bloomberg) Iceland’s lawmakers are searching for ways to keep their economy from lurching into another asset bubble as offshore investors forced to keep their money in the country channel it into the housing market. Apartment prices have soared 17 percent since April 2010 and are now just 1.7 percent below the pre-crisis peak in March 2008, Statistics Iceland estimates. The boom stems from currency restrictions imposed in 2008 to prevent the collapse of the Krona after the country’s biggest banks defaulted on $85 billion of debt. While those controls helped cauterize a capital exodus and propel a recovery, it left about $8 billion in offshore kronur that can only flow into Icelandic assets, inflating demand for housing and mortgage bonds. The government is now seeking to correct the imbalances, which risk plunging the island into yet another boom-bust cycle just four years after the banking industry dragged the economy through its worst recession since World War II. FBI Probes Rochdale Securities (NYP) The Stamford, Conn., broker dealer is teetering on the brink of extinction, the result of an unauthorized $1 billion purchase of Apple shares on Oct. 25, sources said. The trade of 1.6 million Apple shares was made — instead of a client’s order of one-tenth that amount, or 160,000 shares — to perpetuate the alleged stock manipulation scam, people familiar with the matter said...The alleged stock manipulation scam was being worked with at least one other unidentified trader not affiliated with Rochdale, sources said. Multiple sources said the alleged scam had already pocketed the traders roughly $20 million, sources said. Drop In Financial Deals Spurs One (WSJ) New York investment bank KBW made it through the Sept. 11, 2001, terrorist attacks, but it couldn't outlast a drought in financial-services deal making. KBW, which struggled in recent years at the hands of a sharp slowdown in its core business—financial-industry merger advice—agreed be acquired by larger rival Stifel Financial for $575 million. Berkshire Cash Nears Record as Buffett Extends Deal Hunt (Bloomberg) Cash surged 17 percent to $47.8 billion in the three months ended Sept. 30, Omaha, Nebraska-based Berkshire said in its quarterly regulatory filing Nov. 2. That’s $115 million less than the record at the end of June 2011. “He’s elephant hunting,” said Jeff Matthews, author of “Secrets in Plain Sight: Business & Investing Secrets of Warren Buffett” and a Berkshire shareholder. “And there aren’t a lot of elephants around.” Did Wall Street Just Give Up On Romney? (NetNet) John Carney says yes: "On the eve of the election, many financial professionals on Wall Street believe that Mitt Romney has lost the election. In phone conversations, email and instant messaging exchanges, and text messages with over 20 people in different jobs on Wall Street today the message I picked up was almost universal: The president will be re-elected." Christie: Hug From Springsteen Made Me Weep (WaPo) New Jersey Gov. Chris Christie told reporters Monday that he had an unexpected — and moving — conversation earlier with his hero, Bruce Springsteen. He also got a hug from the rock legend on Friday, at a benefit concert for victims of Superstorm Sandy. He later cried, calling the moment a highlight in a tough week. “Bruce and I had an opportunity to chat for a while Friday night… we hugged and he told me, ‘it’s official, we’re friends,” Christie said at a news briefing. President Obama was on the phone with the Republican governor Monday, discussing storm damage, when he briefly handed the line over to Springsteen. The rock legend is traveling on Air Force One as he campaigns for the president. Before the storm Springsteen refused to acknowledge Christie, whose budget cuts he has criticized. But in the wake of the disaster, which hit the Jersey Shore particularly hard, he has started to embrace his ardent fan. HSBC Dirty Laundry Costs (Bloomberg) HSBC Holdings said it’s likely to face criminal charges from US anti-money-laundering probes, and the cost of a settlement may “significantly” exceed the $1.5 billion the bank has set aside. The lender has made an additional $800 million provision to cover a potential settlement, adding to the $700 million it had earmarked. A Senate committee said in July that failures in HSBC money-laundering controls allowed terrorists and drug cartels access to the US financial system. Bharara insider streak on line (NYP) With a 6-0 record in trial convictions against defendants caught in his insider-trading probe, Wall Street’s top cop Wednesday will kick off his final trial emanating from that investigation. Already the insider-trading probe has resulted in 68 convictions — including guilty pleas, the biggest Wall Street crackdown since the 1980s. Squaring off against Bharara in Manhattan federal court are two well-heeled hedge-fund defendants: Anthony Chiasson, founder of the $4 billion hedge fund Level Global, and Todd Newman, a former money manager with Diamondback Global. The beginning of jury selection was delayed more than a week because of Hurricane Sandy. Chiasson and Newman stand accused of reaping more than $60 million in profits from trading confidential tips about computer maker Dell and graphics firm Nvidia. 13 People Trying To Trade Gas For Sex On Craiglist (BuzzFeed) It was probably inevitable that the gas shortages in New York and New Jersey would lead to ads like "I've got gas from Hess and looking for any sexy woman who may not want to wait in those long lines for hours and hours only to find the station empty when it's their turn. So let me know, I'm sure we could work something out to get your tank filled and empty mine. Call or text."

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Blackstone Pulls Out of Dell Bid on Falling PC Sales (Bloomberg) In a letter to Dell’s board, Blackstone cited an “unprecedented” 14 percent market decline in PC volume in the first quarter, according to a statement today. The world’s biggest buyout firm made a non-binding offer to acquire Dell last month, rivaling a $24.4 billion joint bid by founder Michael Dell and Silver Lake Management LLC, the largest proposed leveraged buyout since the financial crisis. Fed Officials Back Higher Capital (WSJ) A pair of Federal Reserve officials suggested Wednesday that major financial institutions may need to hold even higher levels of capital, a sign of a growing concern over the efficacy of current regulatory efforts to address the risks posed by large, complex firms. AIG wins bid to transfer Bank of America mortgage lawsuit (Reuters) A federal appeals court ruled in favor of American International Group in concluding that the insurer's $10 billion lawsuit against Bank of America Corp over mortgage losses belongs in state court, not federal court. The 2nd U.S. Circuit Court of Appeals on Friday threw out a lower court order denying AIG's bid to move the case to a New York state court. AIG's lawsuit was filed in August 2011 but has been largely on hold because of the venue fight. German Banker Warns Crisis Far From Over (WSJ) Germany's top central banker warned that Europe's debt crisis would take as much as a decade to overcome, adding that a lasting solution would only come once politicians stopped relying on the European Central Bank and pushed through far-reaching structural overhauls. Frustrated by delay, Georgia cop allegedly pulled gun in McDonald’s drive-thru line (NYDN) Student Ryan Mash, 18, was waiting for his order at the drive-thru window of a Forsyth County McDonald's when he was taken by surprise — and it was not a Happy Meal toy. It was a gun allegedly brandished by Sgt. Scott Biumi, 48, a member of the DeKalb County Police Department for more than 20 years, authorities suspect. Biumi apparently grew frustrated that the fast food experience was not faster, so he stepped out of his car and yelled, "Stop holding up the drive-thru line," according to Mash. Mash claims Biumi thought his sincere apology was sarcastic. Then witnesses reported hearing Biumi scream, "You don't know who you are (messing) with!" "And that's when he pulled the gun on me," Mash said, "and kept on yelling at me for about 30 more seconds. And then walked off." European Fund Managers Seen Doubling Salaries on Bonus Caps (Bloomberg) About three-quarters of mutual fund managers’ total compensation is from bonuses and long-term incentives, meaning salary increases of 50 percent to 100 percent would be needed to negate the cap, said Jon Axcell, head of asset management at London-based Morgan McKinley. A European Parliament committee last month proposed to limit fund managers’ bonuses to no more than base salaries. Gorman Gains on Blankfein in Bet on Brokerage (Bloomberg) Morgan Stanley’s reputation as Wall Street’s weakest link is diminishing in debt markets as Chief Executive Officer James Gorman’s bet on a brokerage unit that has amassed $1.78 trillion in client assets starts to pay off. The cost of credit-default swaps protecting investors against losses on Morgan Stanley’s debt is about the lowest relative to the bank’s peers in almost two years, with the gap between it and its closest rival, Goldman Sachs, narrowing to 14 basis points from as wide as 111 last year, prices compiled by Bloomberg show. Private Equity Groups Renew Listing Plans (FT) More than a dozen offerings this year have rekindled private equity groups' hopes to list some of their largest assets bought during the bubble. The initial public offering of Intelsat on Thursday shows that it is feasible, but can also be painful. Drunk man tossed from hotel, accused of stealing shuttle (K11) Bloomington Police say a man tossed from a local hotel for being drunk early Wednesday morning made matters worse when he commandeered the hotel's shuttle van and crashed it into a stand of trees. Commander Kevin Herman says officers were called to the Quality Inn and Suites at 814 E. American Boulevard around 3 a.m. on reports of a drunk man causing a commotion. Staff members told officers they asked the man to leave about the time the hotel shuttle pulled up to the entrance. Witnesses say when the driver left the keys in the ignition and ran inside the drunk man ran out, jumped in the van and stole it.