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Opening Bell: 07.15.13

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Investors, Bank Near Pact in Madoff Cases (WSJ)
The tentative settlement, reached just as the two sides were about to deliver closing arguments, may return a fraction of the $60 million that the investors said they lost. But any sums could be a blow for the bank, Connecticut Community Bank and its branch, Westport National Bank, which are controlled by William R. Berkley, chairman of a large insurance company. The bank, which has reported losses for the last four years, also faces a $28 million lawsuit from the trustee overseeing the liquidation of Mr. Madoff's securities firm and it is operating under a formal order from the Office of the Comptroller of the Currency demanding operational improvements as a result of what the regulator said were "unsafe and unsound" practices and violations of the law, according to a notice on the comptroller's website.

SEC takes Goldman's 'Fabulous Fab' to trial in civil fraud case (Reuters)
The U.S. Securities and Exchange Commission heads to trial Monday against a former Goldman Sachs bond trader in a case it says highlights what went wrong on Wall Street in the financial crisis. Jury selection begins in federal court in New York in the civil fraud case against Fabrice Tourre, 34, who the SEC says misled investors in an ill-fated mortgage securities investment called Abacus 2007-AC1.

Greenberg Sues Spitzer for Alleged Defamatory Remarks (FBN)
Former American International Group (AIG) chief executive Hank Greenberg sued former New York Governor Eliot Spitzer late Friday for what he alleges are defamatory remarks against his character. The lawsuit, which was filed in New York Supreme Court in Putnam County, said Spitzer embarked on a “long-standing malicious campaign … to discredit Mr. Greenberg, and damage Mr. Greenberg’s reputation and career, while attempting to bolster Mr. Spitzer’s career and reputation.”

Great rotation still a 'long way' off (CNBC)
The "Great Rotation" out of bonds and into equities has been a hot topic this year, but recent research has found although investor cash is fast leaving the bond market, it is not going in the direction of equities yet. According to U.S.-based Trim Tabs Investment Research, which tracks stock market liquidity, money coming out of bonds is now going into savings deposits or money market funds. "We think we are a long way away from the 'Great Rotation' that so many market strategists are anticipating. Far more of the money coming out of bonds seems to be making its way under the mattress than into equities," said Trim Tabs in a report.

University Apologizes for Hitler Banner (AP)
Thailand's premier university has apologized for displaying a billboard that showed Adolf Hitler alongside Superman and other superheroes, saying Monday it was painted by ignorant students who didn't realize Hitler's image would offend anyone. The huge billboard was placed outside the art faculty of Chulalongkorn University as part of a tribute to this year's graduating class. It said "Congratulations" in bold white letters and showed Hitler with his arm raised in a Nazi salute next to Batman, Captain America, the Incredible Hulk and Iron Man.

Hedge Funds Bought Gold in Biggest Rally Since 2011 (Bloomberg)
Speculators increased their net-long position by 4.1 percent to 35,691 futures and options, U.S. Commodity Futures Trading Commission data for July 9 show. Net holdings expanded even as speculators increased short bets to a record. Net-bullish wagers across 18 U.S.-traded commodities retreated 3.4 percent as investors became the most bearish ever on corn. They were more bullish on silver and palladium. ... “Bernanke’s comments put some positive feeling back into gold and into all commodities,” said Dan Denbow, a fund manager at the $1 billion USAA Precious Metals & Minerals Fund in San Antonio. “The Fed has been working hard to show that taking back a little bit of bond buying isn’t removing accommodation, and Bernanke was very firm on that. There was a bit of a sentiment shift.”

Loblaw to Buy Shoppers Drug Mart in Canada (DealBook)
The Loblaw Companies, Canada’s largest food retailer, announced on Monday that it would acquire Shoppers Drug Mart, the country’s biggest pharmacy chain, for $11.9 billion in cash and stock. The total offer of 61.54 Canadian dollars ($59.05) represents a premium of 27 percent to Shoppers Drug Mart’s closing stock price on Friday on the Toronto Stock Exchange. Loblaw agreed to pay 33.18 Canadian dollars in cash plus 0.5965 Loblaw share for each share of Shoppers Drug Mart.

Restoration Hardware's Renovation Is Private-Equity Boon (WSJ)
Five years ago, as the housing crash crimped the company's profits, a group led by Connecticut private-equity firms Catterton Partners and Tower Three Partners LLC and the retailer's chief executive took the company private for about $177 million. Restoration still doesn't turn out consistent profits. But today the retailer, which returned to public ownership in a November initial public offering, has a stock-market value of about $2.7 billion. At one point last week, shares traded at more than three times their IPO price of $24. The surge has prompted the company's owners to cash in. Late Thursday, the buyout group and executives sold some $560 million of stock.

GSK accused of being ‘ringleader’ in China probe (FT)
Chinese police have accused GlaxoSmithKline of being the “ringleader” in a bribery scandal involving 700 companies and deals worth as much as half a billion dollars. In a rare briefing to foreign media, Gao Feng, the lead Chinese investigator on a probe into the UK drugs group, said police were examining Rmb3bn in deals from as far back as 2007. He said Chinese police believe that GSK used travel agencies and consultancies as a conduit to bribe doctors and lawyers in order to boost sales and profits.

Greeks Wait Tables and Hope for Economic Dawn (Bloomberg)
“Greece has the holy trinity of crises,” said Andreas Koutras, an adviser at the Lucerne, Switzerland-based investment company SteppenWolf Capital LLC, an investment fund that holds Greek debt. “It has a public debt crisis, a bank crisis and a cultural-political crisis. These are self-feeding. Greece has become the lighthouse of Europe: Steer well clear of that area.” While wage and pension cuts have slimmed the country’s deficit, a slump in consumer confidence, a failure to tackle tax collection and a 2013 debt burden the International Monetary Fund says will hit 175 percent of GDP are keeping up the pressure.

A $439 million camp adds to Boy Scouts money crunch (Reuters)
In the misty, oak-filled woods of West Virginia, the Boy Scouts of America are building their answer to Disney World. Known as The Summit Bechtel Family National Scout Reserve, the 10,600-acre park opens Monday, when 30,000 scouts are expected to visit for the quadrennial National Jamboree. The Summit will have more than five miles of zip lines, a whitewater-rafting circuit, a 120-foot tree house and a stadium for 85,000 people.

Brazilian Man Killed in His Bed By Falling Cow (Gawker)
45-year-old Joao Maria de Souza was lying beside his wife in bed in the Brazilian town of Caratinga when a one-ton cow walked from an adjacent hill onto the roof of Mr. Souza's home. The roof, unfortunately, was not strong enough for the weight of the cow. ... Surprisingly, this was third recent incident of cows crashing through roofs in the area.

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Fed Moving Closer To Action (WSJ) The Federal Reserve sent its strongest signal yet that it is preparing new steps to bolster the economic recovery, saying measures would be needed fairly soon unless growth substantially and convincingly picks up. Minutes released Wednesday from the Fed's July 31-Aug. 1 policy meeting suggested that a new round of bond buying, known as quantitative easing, was high on its list of options. Jobless Claims In U.S. Climb For Second Week To One-Month High (Bloomberg) Jobless claims rose by 4,000 for a second week to reach 372,000 in the period ended Aug. 18, Labor Department figures showed today in Washington. The median forecast of 41 economists surveyed by Bloomberg called for 365,000. The four-week moving average, a less volatile measure, increased to 368,000. SAC Takes New Activist Role (NYP) The move is being spearheaded by SAC portfolio manager David Rosen, who has been butting heads with Spokane, Wash.-based Clearwater Paper Corp. since May, sources said. In May, Rosen penned a letter to Clearwater Chairman and CEO Gordon Jones calling the stock “deeply undervalued.” Last week, SAC, which has a 7.1 percent stake in the papermaker, proposed to Clearwater’s board that the company split itself in two and consider selling one or both parts. “We continue to carefully analyze their ideas, and we look forward to continuing a dialogue,” a Clearwater spokesman said. People familiar with Rosen’s plans say Clearwater won’t be the last, and that Rosen and SAC analyst Shoney Katz are scouting out more opportunities to make money through corporate cage-rattling. “My understanding is that Rosen’s portfolio has expanded its mandate to include activism,” said Ken Squire of activist research firm 13D Monitor. Citigroup Slams Nasdaq's Facebook Compensation Plan (Reuters) Citigroup slammed Nasdaq OMX Group's plan to compensate firms harmed by Facebook's botched market debut to the tune of $62 million, saying in a regulatory filing the exchange should be liable for hundreds of millions more, according to a letter seen by Reuters. Citi said Nasdaq's actions in the May 18 initial public offering amounted to "gross negligence," in the letter to the U.S. Securities and Exchange Commission, which had not yet been made public. Facebook Director’s Quick $1 Billion Share Sale Lacks Precedent (Bloomberg) While venture capitalists commonly sell their stakes after helping startups reach the public markets, they usually whittle their holdings over a period of quarters or even years. That’s to avoid flooding the market with too much new stock, which can drive down the shares, and to show continuing support for the company. Thiel’s timing was particularly precarious, because Facebook was already down about 50 percent from the IPO. “With the benefit of hindsight, you could say that the underwriters probably regret agreeing to an early release of the shares,” said Ted Hollifield, a partner at Alston & Bird LLP in Menlo Park, California, and an expert in venture capital. “The stock still seems to be searching for an actual trading range and you would ideally like to see that take place before there’s additional selling pressure.” The Morning After: A Wedding Album With A Different Spin (NYDN) Wedding photographers are being invited to an unusual kind of afterparty. Brides and grooms — who already often obsessively document their first kiss, first cake slice and first dance — are adding yet another first to their wedding photographer’s list: the morning after. Sexy shoots featuring rumpled beds and steamy showers are a hot new trend within the wedding business. As the seating charts and floral arrangements fade into memory, these intimate photo shoots take place in newlyweds’ bedrooms or even the hotels where they’ve spent their first night as husband and wife. “We do it very sexy and implied,” said New Jersey-based photographer Michelle Jonné, 34, who charges about $650 for the service...Past happy clients include Inna Shamis. “The minute she told me, I thought ‘that is brilliant,’” Shamis said. “When you get married, you’re in the best shape of your life and why not have these memories.” The New Jersey PR exec, 38, only hesitated for a few seconds when Jonné asked her and husband to jump in the shower, she said. “As the day progressed, we established this fantastic chemistry with her," said Shamis, who later posted the racy photos on Facebook and intends to someday share them with her kids. Greek Crisis Evasion To Fore As Merkel Hosts Hollande (Bloomberg) With the leaders of Europe’s two biggest economies still at the confidence-building stage, Merkel and Hollande are seeking common ground on Greece and the wider euro-area debt crisis almost three years after its inception. France sees the program targets set for Greece as too harsh given the state of its economy, a French government official said yesterday on condition of anonymity because the talks are private. Merkel and Hollande are due to give statements at 7 p.m. in Berlin. “On balance we still take the view that they’ll keep Greece ticking over,” David Owen, chief European financial economist at Jefferies International Ltd. in London, said by phone. “If that does require giving it more time, so be it.” Whale Of A Tale (NYP) Boaz Weinstein may have harpooned the London Whale, but his main fund barely has its head above water. Weinstein’s Saba Capital Master Fund is up only 0.62 percent for the year through July 31, according to an investor letter. SEC's Schapiro Cancels Vote on Money-Fund Curbs (WSJ) Securities and Exchange Commission Chairman Mary Schapiro called off a highly anticipated vote on rules for the money-market mutual-fund industry after losing a swing vote she needed to push through the rules. The newly announced position of Luis Aguilar, a Democrat and former mutual-fund executive, marks a defeat for Ms. Schapiro and a setback for the Obama administration and top federal regulators, who see money funds as a source of systemic risk left over from the last financial crisis. LL Cool J breaks burglar's jaw in 'knock-down, drag-out' fight (LA Times) The burglar who broke into the Studio City home of actor-rapper LL Cool J suffered a broken nose and jaw in what police sources described as a "knock-down, drag-out" fight. Los Angeles police were called to the star's home in the 12000 block of Blairwood Drive around 1 a.m. Wednesday, officials said. LL Cool J was holding the suspect when officers arrived, officials said...LL Cool J was upstairs in his home when he heard noise coming from the kitchen area. When he went down to see what was happening, the unidentified suspect came at him, leading to the fight. LL Cool J, born James Todd Smith, rose to fame with musical hits such as "Mama Said Knock You Out."

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Blackstone seen sticking with SAC despite insider trading probe (Reuters / Matthew Goldstein) Three sources said the asset management arm of Blackstone, which has $550 million invested with SAC Capital, is in no rush to redeem money from the Stamford, Connecticut-based hedge fund. Blackstone has had at least three discussions with the $14 billion hedge fund's executives about the insider trading investigation and talked to its own investors, which include state pension funds, endowments and wealthy individuals. Hitler parody leaves French bank BNP red-faced (IN24) French banking giant BNP was left red-faced this week after it emerged managers were shown a motivational video featuring a parody of a famous scene from the film "Downfall" in which Adolf Hitler is portrayed as the boss of Germany's Deutsche Bank. It’s a scene that has been parodied thousands of times before to comic effect. But it appears not many people have seen the funny side of one particular version made by executives of French bank BNP Paribas...In the video, which was shown to around 100 managers from around the world at a seminar in Amsterdam last year, Hitler is turned into a fuming boss of Germany’s Deutsche Bank reacting furiously to news that BNP has gained an edge in the foreign exchange market. But far from being motivated, many of the managers who saw the video were outraged. “We could not believe the bank had actually dared to do that – make an analogy between our competitors and the Nazi regime. It took us a few minutes to take it in,” one BNP employee told French daily Liberation, who revealed the story this week. “We were shocked. Nobody knew how to react. Some Jewish employees from the United States did not find it funny at all,” another employee told the paper. “If this video had been shown by an American bank it would have been a major scandal,” an angry BNP source added. Rather surprisingly the video is believed to have been uploaded to the bank’s internal Intranet site before the management realised it might prove embarrassing and quickly removed it. A spokeswoman for BNP told FRANCE 24 on Friday that the bank’s senior management were totally unaware the video had been made until they were contacted by Libération this week. The spokeswoman said BNP’s CEO Jean Laurent Bonnafé had called his counterpart at Deutsche Bank Jürgen Fitschen to personally apologise for the stunt. In a statement in Libération the bank added that the message in the video was “contrary to the values of BNP." Obama Summons Congress Leaders as Budget Deadline Nears (Bloomberg) Obama, who had been negotiating one-on-one with House Speaker John Boehner, will meet today with Republicans Boehner and Senate Minority Leader Mitch McConnell, and Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi, both Democrats. Cliff Talks Down To The Wire (WSJ) It is still possible the two sides can reach a deal, especially with the leaders meeting Friday. Any resolution would be a scaled-back version of the package Mr. Obama and congressional leaders had anticipated passing after the November election. The White House is pressing for the Senate to extend current tax rates for income up to $250,000, extend unemployment benefits, keep the alternative minimum tax from hitting millions of additional taxpayers and delay spending cuts set to take effect in January. The 11th-hour strategy carries enormous risk because it leaves no margin for error in Congress's balky legislative machinery. Senate Majority Leader Harry Reid (D., Nev.) said the prospects for passage of a bill before the last day of the year are fading rapidly. "I have to be very honest," he said. "I don't know time-wise how it can happen now." Spain's PM does not rule out asking for European aid (Reuters) Spanish Prime Minister Mariano Rajoy said on Friday he did not rule out tapping the European Central Bank's bond-buying program for troubled euro zone governments but said Spain did not expect to have to ask for aid for now. "We are not thinking of asking the European Central Bank to intervene and buy bonds in the secondary market," he said at a news conference in Madrid. "But we can't rule it out in the future." Banks pay $4.5M for muni charges (NYP) Citigroup and Bank of America’s Merrill Lynch are among five firms that will pay $4.48 million to settle regulatory claims they used funds from municipal and state bond deals to pay lobbyists. Local authorities were unfairly asked to reimburse payments that the firms made over five years to the California Public Securities Association, a lobbying group, to help influence the state, the Financial Industry Regulatory Authority, which oversees securities firms, said yesterday. The firms inadequately described the fees, wrapping them into bond-underwriting expenses, Finra said...The banks, also including Goldman Sachs, JPMorgan and Morgan Stanley, agreed to pay $3.35 million in fines and reimburse certain California bond issuers $1.13 million. Porsche Wins Dismissal of US Hedge Fund Lawsuit Over VW (Reuters) A five-justice panel of the New York State appeals court in Manhattan unanimously found that Porsche had met its "heavy burden" to establish that the state was the wrong place in which to bring the lawsuit. That panel reversed an Aug. 6 ruling by New York State Supreme Court Justice Charles Ramos that let the case by hedge funds including Glenhill Capital LP, David Einhorn's Greenlight Capital LP and Chase Coleman's Tiger Global LP proceed. The funds accused Porsche of engineering a "massive short squeeze" in October 2008 by quietly buying nearly all freely traded ordinary VW shares in a bid to take over the company, despite publicly stating it had no plans to take a 75 percent stake. IPOs Slump To Lowest Levels Since Financial Crisis (Bloomberg) IPOs have raised $112 billion worldwide this year, the least since 2008, according to data compiled by Bloomberg. Initial sales in western Europe dropped to one-third of last year’s level, while concern about China’s economy helped cut proceeds in Asia by almost half. U.S. offerings raised $41 billion, little changed from last year, as Facebook’s IPO spurred a monthlong drought in U.S. deals. Avery Johnson Jr. vents on Twitter after dad, Avery Johnson, is fired by Brooklyn Nets (NYDN, RELATED) The ex-Nets coach’s teenage son took to Twitter to vent after news broke that his dad had been given a pink slip by billionaire Mikhail Prokhorov and the Nets. “This is a f------ Outrage. My dad is a great coach, he just got coach of the month and they Fire him. #Smh. Completely new team he had,” Johnson Jr. wrote on Twitter. “The expectations were way to high for this team. We didn’t even have a losing record.... Didn’t even give my dad a full season. #OUTRAGE,” Johnson Jr. continued. Johnson was fired a day after the new-look Nets fell to .500 following a listless road loss to the Bucks. The canning comes on the heels of Deron Williams saying he’s never been comfortable playing in Johnson’s offense. Williams, who did not play in Wednesday night’s loss, is mired in a season-long shooting slump with field goal and 3-point percentages at career-worst levels. “I’m sorry (our) best players couldn’t make open shots. Yeah that’s my dad’s fault totally,” Johnson Jr. tweeted. 'Whale' Capsized Banks' Rule Effort (WSJ) Wall Street banks entered 2012 confident they could stall a wave of rules that they feared would hurt profits. But they are ending the year largely resigned that their activities will be constrained and monitored more closely by the government. One big reason for the change: J.P. Morgan Chase JPM -0.76% & Co.'s "London whale" losses. The bad trades, ultimately resulting in about $6 billion in losses, disrupted the banks' campaign against the Dodd-Frank financial overhaul, according to regulators, lawmakers and close observers of policy debates in Washington. The trades damaged the reputation of J.P. Morgan, which suffered less than other banks from the financial crisis, and its chief executive, James Dimon, during a crucial period of policy debate in Washington, putting critics of Dodd-Frank on the defensive. Before news of the whale losses emerged, banks were arguing, with some success, that too-tight regulations were crimping lending during a time of slow growth. Michael Greenberger, a finance professor at the University of Maryland and an advocate of regulations aimed at reining in bank trading, said that in early 2012 his allies' "backs were against the wall." "Then the London whale blew all of that out of the water," he said. Mortgages Fueled Hedge Funds To 13.9 Percent Gain (NYP) Hedge funds that invest in mortgage-backed securities gained 13.9 percent through November to make them the industry’s best-performing strategy, according to the Absolute Return index. Top players that did even better included Metacapital Management, Pine River, Axonic Capital, and Greg Lippman's LibreMax Capital. High-Speed Traders Race to Fend Off Regulators (WSJ) Defenders say high-frequency trading keeps markets lubricated with a constant supply of buy and sell orders that enables all participants to trade more efficiently and get better pricing. High-speed traders, supporters add, have helped foster competition among exchanges and other trading venues, lowering commission-based fees for small investors and helping bring down overall costs for mutual-fund managers. Another benefit some cite: Technology innovations spurred by high-speed traders serve to connect more investors to more trading venues, broadening their options in the markets. Critics, for their part, worry that the traders' order torrent makes markets more opaque, less stable and ultimately less fair. Will 'Fiscal Clif' Accelerate Millionaire Deaths? (NetNet) John Carney: "...it at least seems likely that some deaths that might otherwise have occurred shortly after January 1 will occur shortly before." Man gets DUI after driving on AA co-founder's lawn (AP) Vermont State Police say a man faces a drunken driving charge after driving onto the lawn of a historic home once owned by the co-founder of Alcoholics Anonymous. Police say 55-year-old Donald Blood III of Marlborough, Mass., was ordered to appear in court in Bennington on Jan. 14. Police say Blood thought he was driving into a parking lot, but actually it was the lawn of the Wilson House, built in 1852 in Dorset, the birthplace of AA co-founder Bill Wilson. The Wilson House's website describes it as a "place of sanctuary where people can come to give thanks to God for their new lives." It still hosts several AA meetings each week. Programming Note< : We’re on an abbreviated, vacation-esque schedule this week (opening news roundups and limited updates whenever the urge to reach out and touch you moves us). We still want to hear from you, though, so if anything happens that you think might tickle our fancy, do not hesitate to let us know.

Opening Bell

Opening Bell: 09.09.13