Economists Wary as Fed's Next Forecast Looms (WSJ)
At the conclusion of its two-day policy meeting on Wednesday, the Fed will release its updated projections of growth, inflation and unemployment. The evolution of these forecasts is a critical issue. Fed officials are unlikely at this meeting to change their $85-billion-per-month bond-buying program—launched to boost growth by pushing down long-term interest rates and pushing up asset prices, and spurring spending, hiring and investment. But what they say about the economy will send important signals about what they expect to do in the future. If they maintain confidence in their economic forecasts, it could signal they think they're on track to begin pulling back the program later this year.
SNB Threat of Negative Rates Seen Unlikely on House Boom (Bloomberg)
Swiss National Bank President President Thomas Jordan is unlikely to make good on his threat of negative interest rates for now so as not to fuel the booming housing market, economists said. Jordan said last month a shift in its ceiling on the franc or a negative rate on commercial banks’ excess deposits was in the SNB’s toolkit. That comment, made the same month that European Central Bank President Mario Draghi dangled a similar threat, prompted the franc to drop to below 1.26 per euro, the lowest in two years. ... “You’ve got the problem that the real estate market is tending towards overheating,” said Daniel Hartmann, an economist at Bantleon Bank AG in Zug. “If you did something more expansive -- like shifting the cap or using negative rates -- the fear would be you’d be making it worse.”
Brazil hanging on for record IPO boom (FT)
Capital raised this year from new listings on Brazil’s stock market is set to top $10.6bn this week – the highest January to June total in the country’s history. But it all depends whether bankers can bring the world’s second-biggest initial public offering this year to market. Brazil’s largest cement producer, Votorantim Cimentos, is scheduled to raise as much as R$10.3bn ($4.9bn) on Wednesday in an IPO that will be nervously watched worldwide as a key gauge of investor sentiment towards emerging markets.
Smithfield Pressed to Carve Itself Up (WSJ)
In a letter to the Smithfield board, expected to be delivered by Monday, activist investment fund Starboard Value LP says it has taken a 5.7% stake in the world's largest hog farmer and pork processor and urges the company to consider splitting up. ... Virginia-based Smithfield agreed last month to a $4.7 billion offer from Shuanghui International Holdings Ltd. in a deal that would mark the biggest Chinese takeover of a U.S. company. In the letter, Starboard argues that Smithfield would be worth more if it were broken up into three parts—U.S. pork production, hog farming and international sales of fresh and packaged meats—and then sold. Starboard says a broken-up Smithfield could be worth $44 to $55 per share, compared with the $34-per-share price offered by Shuanghui. The offer, including debt, values Smithfield at $7.1 billion.
One shark is dead, another is wounded at new Applebee’s aquarium in Coney Island (NYP)
The new Applebee’s restaurant in Coney Island celebrates its grand opening Monday — and death is on the menu. A Blacktip shark named Zane had to be removed Friday from the restaurant’s 5,000-gallon aquarium after devouring three Lookdown fish in a shocking killing spree. That very same day, a Whitetip shark died after colliding with a three-foot Wonder Wheel replica in the tank, leaving employees shaken by the mayhem.
Co-operative Bank Turns to Bondholders to Fill Capital Shortfall (DealBook)
The British lender Co-operative Bank announced plans on Monday to raise an additional £1.5 billion ($2.4 billion) to replenish a capital shortfall. Under the terms of the deal, junior bondholders will be asked to swap their debt securities for shares in the Co-operative Bank. The agreement represents the first time that a so-called “bail in” of bondholders has been used to recapitalize a British bank since the financial crisis began. ... The Co-operative Bank said on Monday that it planned to raise £1 billion this year through the bondholder swap, and increase its reserves by an additional £500 million next year.
Telefonica denies report of $93 billion offer from AT&T (Reuters)
Telefonica said on Monday it had not received any indication of interest from AT&T, following a Spanish newspaper report that the government had halted a 70 billion-euro ($93 billion) offer from the U.S. company. An AT&T representative told the government about the company's plans to buy Telefonica and take on its 52 billion euros of debt, leading the state to stop the sale, El Mundo said on Monday, citing sources with knowledge of the deal. "Telefonica has not received any approach or spoken or written indication of interest," a spokesman for Telefonica told Reuters.
Bid to relaunch synthetic CDO unravels (FT)
JPMorgan and Morgan Stanley had been tentatively sounding out investors about a “full capital structure” synthetic CDO, according to people familiar with the talks. The deal would have included a range of tranches: a “senior piece” considered less risky than the “mezzanine”, or middle, piece, and the lowest-ranking “equity” tranche. Investors, though, balked at buying the top slice of the floated deal, according to people familiar with the talks. Finding the appropriate prices for these senior tranches has proved difficult since CDOs were created.
Banks Balk at New Rules for Small Loans (WSJ)
Large banks are pushing back against regulators' plans to toughen rules on short-term, high-interest consumer loans. Wells Fargo & Co., the largest bank to offer "deposit-advance loans," has told regulators that it will discontinue the loans if plans for tougher rules are completed, according to comments filed last month with the Office of the Comptroller of the Currency. The proposal "will force Wells Fargo to discontinue the Direct Deposit Advance Service, leaving many customers only more expensive alternatives," Wells wrote in a comment letter submitted to the OCC on May 30.
U.K. Bank Fines on Risk Management Failures Rose Sevenfold (Bloomberg)
The U.K. markets watchdog increased fines for risk management failings by more than seven times last year, according to a report by the Chartered Institute of Internal Auditors. The Financial Services Authority, which was replaced in April by the Financial Conduct Authority, levied 292 million pounds ($458 million) in fines against firms that didn’t have adequate risk management and controls in place in 2012, up from 38 million pounds in 2011, the group said in an e-mailed survey.
Bad Karma: How Fisker burned through $1.4 billion on a 'green' car (Reuters)
An examination of the company's rise and fall reveals Fisker's finances started to unravel as early as June 2011, when the U.S. Department of Energy cut off access to taxpayer-funded loans — a fact that wasn't publicly acknowledged by Fisker for nine months. That and other troubling information remained unknown by many of Fisker's private-sector investors, who put $525 million into the company from May 2011 through August 2012, attracted by rosy sales forecasts and assurances the company valued itself at nearly $2 billion.
In-Q-Tel: A Glimpse Inside the CIA’s Venture-Capital Arm (FBN)
Founded in 1999 as a way for the U.S. to keep up with the rapid innovation in science and technology, In-Q-Tel has been an early backer of start-ups later acquired by Google, Oracle, IBM and Lockheed Martin. “If you want to keep up with Silicon Valley, you need to become part of Silicon Valley. The best way to do that is have a budget because when you have a checkbook, everyone comes to you,” said Jim Rickards, an adviser to the U.S. intelligence community who is familiar with the activities of Arlington, Va.-based IQT. ... IQT was officially chartered in February 1999 by a group of private citizens at the behest of then-CIA Director George Tenet and with the support of Congress. The firm was envisioned as a way to “bridge the gap between the technology needs of the U.S. intelligence community and new advances in commercial technology,” according to IQT’s website. In a nod to its spy gadget origins, In-Q-Tel is said to be named in part after Agent Q, the fictional MI6 agent responsible for providing James Bond with all the latest wizardry.
Pope Blesses Hundreds of Harley-Davidsons (AP)
Thundering Harley engines nearly drowned out the Latin recitation of the "Our Father" prayer that accompanied Francis as he greeted the crowd before Mass. Standing in his open-top jeep, Francis drove up the main boulevard leading to St. Peter's Square, blessing the thousands of people in what was a giant Harley parking lot. Once the service got under way, bikers in their trademark leather Harley vests sat in the square alongside nuns and tens of thousands of faithful Catholics taking part in an unrelated, two-day pro-life rally.
Kraft: Putin stole Bowl ring (NYP)
New England Patriots owner Robert Kraft revealed the real story behind a 2005 meeting with Vladimir Putin, during which the Russian president pocketed his Super Bowl ring, worth more than $25,000. Kraft, at the time, claimed the diamond-encrusted bauble was a gift, but he now admits Putin stole it, and the White House intervened when he demanded it back. Kraft explained the incident happened while Sandy Weill and other business execs were in St. Petersburg. “I took out the ring and showed it to [Putin], and he put it on and he goes, ‘I can kill someone with this ring,’ ” Kraft told the crowd at Carnegie Hall’s Medal of Excellence gala at the Waldorf-Astoria.“I put my hand out and he put it in his pocket, and three KGB guys got around him and walked out.”