Opening Bell: 06.03.13

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SAC Sees Investors Pulling Out $3.5 Billion (WSJ)
SAC Capital Advisors LP is bracing for investors to pull an estimated $3.5 billion from the firm, according to people briefed on the matter, as the hedge-fund giant continues to battle fallout from an intensifying insider-trading probe. The anticipated withdrawals, which the people described as preliminary estimates that were still in flux, come in response to a quarterly deadline Monday for SAC clients to ask for money back. The firm received withdrawal requests for $1.7 billion in the first quarter. If the estimates hold, the outflows would represent more than half of the firm's remaining outside capital and bring the total that investors have sought back this year to more than $5 billion.

Investors square off in battle over subprime mortgages (FT)
The New York state supreme court will hear arguments on whether to approve an $8.5bn settlement between investors in mortgage bonds and Countrywide, the mortgage originator bought by BofA in 2008. Investors who object to the deal, led by AIG, say BofA is paying too low a price for the defective loans underwritten by Countrywide and the real bill should be at least $20bn more.

Wells chief warns Fed over debt proposal (FT)
John Stumpf said the Fed was giving mixed messages on debt and his bank should not be punished for the fact that it is largely funded by deposits. “Sometimes they say ‘We want more debt,’ sometimes they say, ‘Geez, too much debt’s not great either’,” he told the Financial Times. Regulators are planning to impose a minimum level of long-term debt in an effort to improve the system for dealing with large financial groups on the brink of failure. Under a new “orderly liquidation authority”, unsecured debtholders would be forced to swap their debt for equity in a recapitalised group.

Emerging Market Dominoes to Fall as SocGen Sees Rout (Bloomberg)
The worst month in a year for emerging-market currencies will prove to be more than a momentary bout of weakness to strategists at firms from UBS AG to Societe Generale SA who see the Federal Reserve weaning investors off its extraordinary stimulus. South Africa’s rand led declines among the 24 developing-nation currencies tracked by Bloomberg last month, tumbling 11.3 percent. JPMorgan Chase & Co.’s Emerging Markets Currency Index fell 3.3 percent, the most since it slipped 7 percent in May 2012. Only China’s yuan gained, rising 0.51 percent. ... “The bull market is over” for developing-nation currencies, said Kit Juckes, a strategist at SocGen in London. The rand is “the first of what I suspect will be a series of dominoes to fall,” he said.

Bernanke at Princeton Offers Seniors Advice From Love to Money (Bloomberg)
Ben S. Bernanke gave Princeton University students advice on subjects from success to love, quoted St. Luke and Forrest Gump and urged graduating seniors to view money as a means, not an end, and to choose a life partner with care. ... In an often humorous speech yesterday, he had nothing to say about monetary policy, and little to offer about economics, except that it “is a highly sophisticated field of thought that is superb at explaining to policy makers precisely why the choices they made in the past were wrong. About the future, not so much.”

Mitt Romney Inc.: The White House That Never Was (Time)
"The White House staff is similar to a holding company with a large collection of offices, each of which has its own set of: Responsibilities; Constituents; Workflows."

Chinese Bid for U.S. Pork Had Links to Wall Street (NYT)
America’s biggest private equity firms already have a major presence in China, with TPG, the Carlyle Group and Blackstone seeking deals. Often they co-invest alongside Asia’s biggest investment firms. One of the best-known is CDH Investments, a private equity and venture capital firm that manages more than $7 billion in assets with operations in Beijing. Founded in 2002, the company has invested in big food makers, like Mengniu Dairy, the Yurun Food Group and Shuanghui. In 2006, CDH and Goldman Sachs led a consortium of investors who paid about $250 million to buy out the Chinese government’s stake in Shuanghui in the hopes of transforming the company into one of China’s biggest food companies.

Glencore, Blackstone Eye a Rio Tinto Ore Business (WSJ)
Commodities giant Glencore Xstrata PLC and private-equity firm Blackstone Group LP are among the suitors circling the Canadian iron ore operations that Rio Tinto PLC has put on the block, according to people familiar with the matter. The two firms and other potential buyers have been looking at Rio Tinto's 59% stake in Iron Ore Co. of Canada, which analysts at Bank of Montreal estimate is worth around $4 billion, valuing the entire business at around $7 billion. A first round of bids has been submitted for the stake, which Rio Tinto put up for sale earlier this year, according to some of the people.

ECB's Draghi says euro zone on track for "very gradual" recovery (Reuters)
The euro zone economy is on track for a recovery later this year driven by the European Central Bank's loose monetary policy and demand from abroad, the bank's President Mario Draghi said. The ECB cut interest rates to a new record low in May and said it would act again if necessary but its hand may in part be stayed this month and going forward by a rebound in inflation, which rose back to 1.4 percent in May from 1.2 percent in April. That is still way below the bank's roughly 2 percent target and unemployment in the euro zone reached a fresh high in April at 12.2 percent, fuelling further calls for policymakers to do more to help the economy.

Warning: ‘Prepare’ for Commodity Supercycle End (CNBC)
With multiple investment banks signposting the end of the commodity supercycle, a World Bank director has warned developing countries that have benefited from the surge to protect themselves against a price crash. Marcelo Giugale, the World Bank's director of economic policy and poverty reduction programs for Africa, told CNBC that states which have gained from the commodity boom should prepare for a slump. "We don't want another wasted opportunity," he said. "This time around, things should be done differently. The material bonanza has the potential to become a human bonanza – whereby the standard of living for many people across these developing countries can be raised."

‘Extreme Conservatives’ Driving Gold Lower: Roubini (CNBC)
Gold is likely to fall below $1,000 an ounce, nearly half the level it reached at its peak in 2011 according to Nouriel Roubini, the founder of Roubini Global Economics. And the man credited for calling the financial crisis believes one of the key factors that will drive prices lower is "extreme political conservatives, especially in the United States." Writing in an op-ed published by Project Syndicate, Roubini said the hyping of gold by political conservatives had become counterproductive. "For this far-right fringe, gold is the only hedge against the risk posed by the government's conspiracy to expropriate private wealth," he said.

Risk-Averse Culture Infects U.S. Workers, Entrepreneurs (WSJ)
"The U.S. has succeeded in part because of its dynamism, its high pace of job creation and destruction, and its high pace of churning of workers," said John Haltiwanger, a University of Maryland economist who has studied the decline in American entrepreneurship. "The pessimistic view is we've lost our mojo."

Cambridge University defends law exam paper containing descriptions of oral sex, male rape and naked torture (Daily Mail)
Around 200 students sitting the exam on Saturday morning were presented with a scenario involving a fictional college drinking society's initiation ceremony which went on to describe several indecent assaults. The question in the three-hour exam at the university's Faculty of Law began: 'Sandra is President of The Vizards, a College drinking society. She is organising the initiation of new members. 'After a great deal of alcohol has been drunk, the members of the society form a circle around Billy, Gilbert and Richard who are to be initiated.' The question then described three rituals in which a male student was blindfolded and given oral sex by another man, another was sexually assaulted with a bottle and a third had his pubic hair shaved off before dying from a subsequent infection. The students were asked to outline any offences which may have been committed during the scenario.

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By D J Shin (Own work) [CC BY-SA 3.0 or GFDL], via Wikimedia Commons

Opening Bell: 10.18.17

Rejoice, humans, quant funds are failing; buuuuut you're still getting replaced by robots; SEC says Rio Tinto lied to investors; "Master, please brand me, it would be an honor"; and more.

Opening Bell: 01.03.13

Fresh Budget Fights Brewing (WSJ) If Congress doesn't do more in the coming months, Moody's warned, the company could follow Standard & Poor's in downgrading U.S. debt. "Further measures that bring about a downward debt trajectory over the medium term are likely to be needed to support the AAA rating," Moody's said Wednesday. But the battles on how to do that are far from over. Republicans say any further deficit reduction or legislation to avoid across-the-board spending cuts should come from reducing spending. President Obama and many Democrats advocate a combination of tax increases and spending cuts. The most serious skirmish will arrive toward the end of February, when the U.S. Treasury is expected to be unable to pay all the government's bills unless Congress boosts the federal borrowing limit. Then on March 1, the across-the-board spending cuts of the fiscal cliff, deferred in this week's deal, are scheduled to begin slicing into military and domestic programs. And on March 27, a government shutdown looms unless Congress approves funding for government operations for the remainder of the fiscal year, which ends Sept. 30. CEOs Pan Fiscal Cliff Deal, Vow to Continue Debt Fight (Reuters) "I think this deal's a disaster," said Peter Huntsman, chief executive of chemical producer Huntsman Corp. "We're just living in a fantasy land. We're borrowing more and more money. This did absolutely nothing to address the fundamental issue of the debt cliff." Former Wells Fargo CEO Dick Kovacevich said the agreement confirms that Washington and both parties are totally out of control. "I think it's a joke," Kovacevich said of the deal. "It's stunning to me that after working on this for months and supposedly really getting to work in the last 30 days that this is what you come up with." Obama’s Warning to Boehner Started Road to Budget Plan (Bloomberg) President Barack Obama had a warning for John Boehner at a Dec. 13 White House meeting: Stop opposing higher tax rates for top earners, or the president would dedicate his second term to blaming Republicans for a global recession. The next day, the House speaker called the president and said he was open to a tax-rate increase on annual income of more than $1 million...While the budget deal Obama and Boehner were negotiating fell apart, the speaker’s concession on tax rates ultimately allowed Vice President Joe Biden and Senate Minority Leader Mitch McConnell, a Kentucky Republican, to craft the last-minute plan Congress passed Jan. 1. Nouriel Roubini: US Will Soon 'Get Messy' Again (CNBC) "It won't be long before there is another crisis. Two months, in fact." Pershing to Take 'Passive Shareholder' Role in General Growth (WSJ) Pershing Square Capital Management LP agreed to sell $271.9 million in General Growth Properties warrants to Brookfield Asset Management Inc., as part of a deal between the mall owner's two biggest shareholders that would resolve their recent disputes and see Pershing become a passive shareholder. Brookfield, in turn, offered to sell the warrants, which represent the right to acquire 18.4 million shares of General Growth stock, back to General Growth for the same purchase price. Pershing also agreed to limit its ownership stake in General Growth to no more than 9.9% and intends to become a passive shareholder. Brookfield agreed to limit its ownership in General Growth to 45%. Bank Of Canada won’t discuss melting plastic bills, says national security behind silence (NP) Disclosing details of behind-the-scenes discussions about tales of melting banknotes could endanger national security or international relations, says Canada’s central bank. In response to a formal request from The Canadian Press, the Bank Of Canada released 134 pages of internal records — almost completely blanked out — concerning allegations its new polymer bills melted in the scorching summer sun. The bank began issuing $100 polymer banknotes in late 2011, saying they were harder to counterfeit than paper notes and would last much longer. Unconfirmed reports of cooked currency emerged in July when a Kelowna, B.C., bank teller said she had heard of cases in which several bills had melted together inside a car. Soon after, Mona Billard of Cambridge, Ont., reported that she had returned eight plastic bills in January, after her son stashed his $800 Christmas bonus in a tin can and hid it near a baseboard heater. When he retrieved them the next day to make a deposit, the $100 banknotes had shriveled and melted. Ms. Billard exchanged clean bills for the shrunken, unusable ones. “The leather couch is up against the baseboard heater, it doesn’t melt,” she said. “The kids’ toys are back there, they don’t melt.” The Bank of Canada will reimburse damaged notes, but only if they clear an examination by an Ottawa laboratory. Paulson&Co Added To Abacus Suit Against Goldman (Bloomberg) Paulson & Co. was named as a defendant in a proposed revised lawsuit by ACA Financial Guaranty Corp. against Goldman Sachs over a collateralized debt obligation called Abacus. Paulson conspired with Goldman Sachs to deceive ACA Financial, which provided financial guaranty insurance for the deal, ACA Financial said in papers filed yesterday in Manhattan. Private Sector Added 215,000 Jobs Last Month (WSJ) Economists surveyed by Dow Jones Newswires expected ADP to report a gain of 150,000 private jobs. Preet Bharara and other financial heavyweights opposing Paul Singer's attempt to get Argentina to pay debt (NYP) US Attorney Preet Bharara and BlackRock CEO Larry Fink are among the latest bold-faced names to oppose Singer’s attempt to get Argentina to pay him and others $1.3 billion on defaulted debt. Singer, the hedge fund billionaire who runs Elliott Management, is among the 8 percent of Argentina debtholders who refused to accept a 70 percent haircut following a 2001 default by the embattled South American country. Singer inched closer to winning the epic legal showdown in November when a federal judge ruled Argentina could not pay Fink’s BlackRock or other holders of the reorganized debt without putting money in escrow for Singer’s band of investors. An appeals court slowed Singer’s victory parade but refused to set aside the judge’s order. Now, Bharara, Fink’s $3.67 trillion bond firm and others are urging the appeals court to throw the case out. Basel Becomes Babel as Conflicting Rules Undermine Safety (Bloomberg) While higher capital requirements, curbs on banks trading with their own money and other rules have reduced risk, they have magnified the complexity of supervision, according to two dozen regulators, bankers and analysts interviewed by Bloomberg News. Even if the new regulations can be enforced, they don’t go far enough to ensure safety, said Robert Jenkins, a member of the Bank of England’s financial policy committee. Cops: Woman, 50, Battered Boyfriend, 32, Because Six Came Before Nine (TSG) Jennie Scott, 50, was booked into the Manatee County lockup on a misdemeanor charge stemming from the 11 PM encounter in the Palmetto bedroom of Jilberto Deleon, 32. Scott has dated Deleon “for the last 5 years on and off,” according to a sheriff’s report. Deputies were summoned to Deleon’s home by a witness who heard the couple arguing and saw Scott atop Deleon “punching and scratching him.” She also allegedly struck Deleon with a stick and threatened to hit him with a wrench before the tool was taken from her hand by the witness. When questioned by a cop, Scott explained that she and Deleon “were giving each other oral pleasure in the bedroom” when Deleon “finished first and stopped pleasuring her.” Scott added that she “became upset and they began arguing.” A deputy noted that Scott said that she was also mad at Deleon because she had “heard [him] having sex with another woman over the phone earlier in the day.” Scott struggled with deputies before being placed in a police cruiser, where she kicked a window until being warned that she would be maced unless she stopped.

Opening Bell: 04.22.13

Bill Gross Attacks UK and Euro Zone Austerity (FT) Bill Gross, manager of the world's largest bond fund for Pimco, has launched a stinging attack on efforts by Britain and much of the euro zone to cut debt rapidly with severe austerity measures, warning that such action risks stifling recovery. "The U.K. and almost all of Europe have erred in terms of believing that austerity, fiscal austerity in the short term, is the way to produce real growth. It is not," Mr Gross told the Financial Times. "You've got to spend money." Argentina's New Debt Offer Rejected by Holdout Creditors (WSJ) Holdout creditors on Friday rejected Argentina's proposal to pay them about 20 cents on every U.S. dollar of bonds they own, leaving a U.S. appeals court to decide how to enforce a ruling that may push Argentina into a new default. "Not only are the details of Argentina's proposal unacceptable and unresponsive; Argentina fails even to provide this court with meaningful 'assurances' that it will actually comply with its own proposal," said Theodore Olson, a lawyer for the holdouts, in a brief filed Friday. Argentina's own math values the offer at $210 million, less than 15% of the $1.47 billion that holdouts were owed on their defaulted bonds as of March 1, according to the brief. Hedge Fund Stars Suit Up At Yankee Stadium To Attract Investors (NYP) Hedge-fund mogul Stevie Cohen will be pitching at Yankee Stadium tomorrow. No, the 56-year-old billionaire is not suiting up for the Bronx Bombers — but he will be hoping the magic of the House that Ruth Built will yield some investment cash. Cohen, whose SAC Capital faces a loss of $1.7 billion from investors who want out of his $15 billion hedge fund, is one of about 70 hedge fund managers who’ll be at the Stadium tomorrow making a pitch to prospective new investors at a day-long event sponsored by Goldman Sachs. Singapore Will Replace Switzerland As Wealth Capital (CNBC) Switzerland has $2.8 trillion in assets under management, with $2.1 trillion of that coming from offshore wealth. Switzerland accounts for 34 percent of the $8.15 trillion in total global wealth. Yet the report said Singapore could overtake Switzerland in offshore assets under management by 2020. It said Swiss offshore assets could fall below $2 trillion by 2016, while Singapore's assets could more than quadruple by then. Somali Banking Starts From Ground Up (WSJ) Abdusalam Omer is a central bank governor without much to govern. The Central Bank of Somalia doesn't hold reserves in the country's currency, the shilling. There are no functioning commercial banks in the strife-torn country for it to regulate. The 75-strong staff that still turns up for work after two decades of civil war is a motley crew of money men and handymen. "I don't know why the central bank employs painters," says the 58-year-old who was named the country's top banker in January. Eventbrite Funding Slows Its IPO Chase (WSJ) Eventbrite Inc., an event ticketing company, has raised $60 million from two investors, making it the latest example of a startup to raise significant private late-stage funding that puts off an initial public offering. San Francisco-based Eventbrite had sparked expectations of an imminent IPO when it said earlier this month that it hired a chief financial officer, Mark Rubash, who previously worked at Yahoo Inc. and eBay Inc. Instead, it joins a growing number of companies that have found plentiful funding in the private markets rather than going public at an early stage. The company has raised the new cash from mutual-fund firm T. Rowe Price Group Inc. and Tiger Global Management LLC, an investment-management firm, said Kevin Hartz, co-founder and chief executive. That brings its total private fundraising to some $135 million since its inception in 2006. "This gives us flexibility in setting the timeline for a later IPO, on our schedule," said Mr. Hartz. Deutsche Bank Margin Call on Vik Sparks $2.5 Billion Dispute (Bloomberg) Alexander Vik went to Deutsche Bank AG’s London office in October 2008 to meet account managers who congratulated the Norwegian entrepreneur on how well his Sebastian Holdings Inc. investment fund was doing. Within a month, as global markets tumbled into crisis, the same bankers demanded about $530 million against the fund’s currency bets and began to liquidate its positions. Vik, 58, will argue at a 12-week trial starting in London today that the bank’s actions resulted in losses and missed profits totaling about $2.5 billion. A judge will have to decide whether Sebastian’s calculation of lost trading gains is accurate, said John Day, a lawyer at London-based litigation firm DaySparkes. Zimbabwe Prepares Law to Seize Company Stakes Without Paying (Bloomberg) Zimbabwe’s government is preparing a law that would allow it to seize controlling stakes in companies without compensation, according to a draft of the legislation obtained by Bloomberg News. The law would be an amendment to a 2007 act that compels foreign and white-owned companies such as Rio Tinto Group, Sinosteel Corp. and Impala Platinum Holding Ltd. to sell or cede 51 percent of their shares to black nationalsor state-approved agencies.

Opening Bell: 04.25.12

Credit Suisse Sees Profit Drop (WSJ) Credit Suisse Wednesday reported a sharp drop in net profit for the first quarter, pressured by an accounting loss on its own debt and lower revenue at its investment bank, which shed risky assets to adapt to a tougher regulatory and market environment. Still, the bank managed a sharp turnaround from a dismal fourth quarter when it reported a loss, on improving market conditions. But Chief Financial Officer David Mathers warned that this may not necessarily be the trend going forward, as markets weren't as favorable in April as they were during the first quarter. Credit Suisse said net profit fell 96% to 44 million Swiss francs ($48.3 million) in the first quarter from 1.14 billion francs a year earlier. This was better than the net loss expected by analysts. Excluding a raft of one-off items, net profit would be 1.36 billion francs, Credit Suisse said. Net profit suffered from a 1.55 billion franc accounting loss on the bank's own credit. The bank also recorded costs of 534 million francs for 2011 bonuses. Moody's Hears It From Banks (WSJ) In the latest sign that U.S. banks are bridling at tighter oversight that began after the financial crisis, a handful of big lenders have been jawboning Moody's Investors Service ahead of potential downgrades expected this spring. Bank of America Corp. Chief Executive Brian Moynihan and Citigroup Inc. CEO Vikram Pandit have argued against downgrades in person, people familiar with the talks said. An executive at Goldman Sachs Group Inc. last week publicly questioned Moody's methods on a conference call with analysts and investors. Morgan Stanley CEO James Gorman, who has met with the ratings firm more often than usual in the past quarter, called Moody's decision to delay any potential downgrades by a month "constructive." Housing Declared Bottoming in U.S. After Six-Year Slump (Bloomberg) The U.S. housing market is showing more signs of stabilization as price declines ease and home demand improves, spurring several economists to call a bottom to the worst real estate collapse since the 1930s. “The crash is over,” Mark Zandi, chief economist for Moody’s Analytics Inc. in West Chester, Pennsylvania, said in a telephone interview yesterday. “Home sales -- both new and existing -- and housing starts are now off the bottom.” US taxpayers still on hook for $119B in TARP funds (MarketWatch) US taxpayers are still owed $119 billion in outstanding Troubled Asset Relief Program (TARP) funds, a watchdog for the government crisis program said Wednesday in a quarterly report to Congress. That number is down from $133 billion in TARP funds owed as of January, according to the author of the report, the Office of the Special Inspector General for the TARP. The government expects TARP to lose $60 billion. Surviving ’Taxmageddon’ Without Maiming Economy (Bloomberg) Peter Orszag: "At the end of this year, all the Bush tax cuts expire -- amounting to about $250 billion a year. The payroll-tax holiday, at more than $100 billion a year, ends too, as do expanded unemployment-insurance benefits. And we face other spending cuts of about $100 billion, from the sequester set up by the 2011 debt-limit deal. All told, this fiscal tightening adds up to about $500 billion -- or more than 3 percent of gross domestic product. The economy will be in no shape to handle that much of a squeeze. If we do nothing to reduce or stop it, the economy could be thrown back into a recession." Goose strike forces JetBlue flight into emergency landing at Westchester (NYP) Geese smacked into a JetBlue plane taking off from Westchester Airport last night, forcing the pilots to make an immediate emergency landing. “We got to come back. We hit two big geese,” a pilot aboard Flight 571 to West Palm Beach, Fla., radioed to controllers after the plane took off at 6:45 p.m. “We are declaring an emergency.” The pilots made it just six miles northwest of the airport before turning around. They were back on the ground seven minutes later. “JetBlue 571, nice to have you back,” a relieved controller radioed as the plane touched down at 6:52. The geese smashed into the jet’s windshield. “I was petrified,’’ said passenger Janice Hilbrink, of White Plains. “Seriously very frightened. “I heard the noise. It was very loud and the plane had a lot of turbulence. The pilot told us the windshield was cracked.’’ When she got off the plane, “the whole front of it was covered in bird.’’ Missing MF Global Funds Found (CNNM) Investigators probing the collapse of bankrupt brokerage MF Global said Tuesday that they have located the $1.6 billion in customer money that had gone missing from the firm. But just how much of those funds can be returned to the firm's clients, and who will be held responsible for their misappropriation, remains to be seen. James Giddens, the trustee overseeing the liquidation of MF Global Inc, told the Senate Banking Committee on Tuesday that his team's analysis of how the money went missing "is substantially concluded." "We can trace where the cash and securities in the firm went, and that we've done," Giddens said. Europe Struggles With Painful Deficit Cures (WSJ) The target, set in 2009, is still seen as an important signal that the budget rules won't be flouted as they were in the past. But meeting the 2013 goal, which for most countries was a deficit of 3% of gross domestic product, will entail more spending cuts or tax increases by governments across the EU. Soros And Roubini Take Aim At Euro Zone (CNBC) Nouriel Roubini, an economist and founder of RGE Monitor used a series of tweets on Tuesday evening to call for action on weakening the euro. “If domestic demand is going to be anemic and weak in this fiscal adjustment because of private and public sector deleveraging you need net exports to improve to restore growth,” wrote Roubini who believes much looser monetary policy is needed. “In order to have an improvement in net exports you need a weaker currency and a much more easy monetary policy to help induce that nominal and real depreciation that is not occurring right now in the euro zone,” said Roubini. “That’s one of the reasons why we’re getting a recession that’s even more severe,” he said. During a debate on Tuesday, billionaire Investor George Soros made it clear what side of the growth versus austerity debate he is on. “Europe is similar to the Soviet Union in the way that the euro crisis has the potential of destroying, undermining the European Union,” he said. “The euro is undermining the political cohesion of the European Union, and, if it continues like that, could even destroy the European Union,” said Soros. New Fashion Wrinkle: Stylishly Hiding the Gun (NYT, related) Woolrich, a 182-year-old clothing company, describes its new chino pants as an elegant and sturdy fashion statement, with a clean profile and fabric that provides comfort and flexibility. And they are great for hiding a handgun. The company has added a second pocket behind the traditional front pocket for a weapon. Or, for those who prefer to pack their gun in a holster, it can be tucked inside the stretchable waistband...The chinos, which cost $65, are not for commandos, but rather, the company says, for the fashion-aware gun owner.