Opening Bell: 07.19.13

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JPMorgan Executive May Escape Penalty (DealBook)
Blythe Masters, a seminal Wall Street figure who is known for developing exotic financial instruments, emerged this spring at the center of an investigation by the Federal Energy Regulatory Commission into accusations of illegal trading in the California and Michigan electricity markets. ... Months earlier, investigators planned to recommend that the regulator find Ms. Masters, who holds a powerful position within JPMorgan as the head of its commodities business, “individually liable.” But as the investigation progressed, these people said, top energy regulatory officials have been leaning toward not pursuing any civil charges against Ms. Masters.

Morgan Stanley stock traders rebuild burned bridges (Reuters)
Institutional clients now rank Morgan Stanley as the No. 2 stock trading firm in the United States they like to do business with, behind JPMorgan Chase & Co, according to a survey by the research firm Greenwich Associates. That's up from a year ago when it was ranked No. 5, behind JPMorgan, Credit Suisse Group AG, Bank of America Corp and Goldman Sachs Group Inc. Morgan Stanley Chief Financial Officer Ruth Porat said the bank has doubled market share over the past three years by making sure it has services for cash equities trading clients, who want to trade over the phone with people or by using algorithms. ... Chanos, the short seller, returned to Morgan Stanley's prime brokerage business in 2010, the same year Gorman took over as CEO, and has been happy with the relationship since then, a source familiar with the matter said. Another hedge fund manager, who trades with Morgan Stanley but declined to be identified, said that the bank was doing a good job of rebuilding bridges with the industry. The manager, who launched his fund after the financial crisis and focuses largely on technology stocks, said Morgan Stanley has well-connected specialty salespeople who are crucial to keep hedge funds' trading revenue.

Residents wary as Detroit faces uncertain future in bankruptcy (Reuters)
"It was like putting a thumb in a dam," said Jodie Holmes, 55, as he leaned against an abandoned restaurant marked with graffiti, waiting for a bus to take him to his temporary job. "I don't know if bankruptcy will help us or drop us to our knees," he added.

Dell Races to Sway Voters, Save Deal (WSJ)
The stakes are such that even small holders like Randolf Katz, a corporate lawyer in California who purchased 1,482 shares in February, said he has received five appeals for his vote. "No matter how many or few shares you own, your vote is essential," read one mailing Mr. Katz received from Dell dated July 8. Mr. Katz said he voted for the buyout. ... One challenge in getting out these voters: Some, such as hedge funds, may already have sold their position since June 3, the date they became eligible voters as stockholders of record. Investors in this position have no economic incentive to vote and so might not bother, said one investor in that position.

Rich parents hire play-date consultants to help kids play better for private-school admissions (NYP)
Some kids need a little bit more work” at learning how to play, said Suzanne Rheault, the CEO of one of the firms that organize play dates, called Aristotle Circle. “Sometimes [parents] hear from our experts that there are some areas to improve.” ... Experts said that kids may need the play-date tutoring because their young lives have become so regimented, with classes in subjects like Mandarin and violin, that they don’t know how to play with others. “These children have five classes a week but they don't know the simplest thing — how to be at ease and play spontaneously with a child,” said Wednesday Martin, who documents Manhattan motherhood in her upcoming book, “Primates of Park Avenue.”

Bernanke doesn’t understand gold, should we? (CNBC)
"Nobody really understands gold prices and I don't pretend to understand them either," Federal Reserve chief Ben Bernanke told the Senate Banking Committee on Thursday in response to a question on why gold prices have been volatile.

Investors pour huge sums into US equity funds (FT)
Investors have poured more money into US equity funds this week than at any time since the 2008 financial crisis, with the value of the benchmark S&P 500 index soaring to a record $15tn. ... Some $19.7bn was invested in global equity funds in the past week, the most for six months, while $700m was pulled from bond funds, according to Bank of America Merrill Lynch citing EPFR figures. The amount put in US equity funds was the most since June 2008, the bank said.

China, U.S. companies' great hope, now a drag (Reuters)
As the world's second-largest economy - and still growing - China is seen as a primary source of revenue growth by the largest U.S. companies. But a country that once boasted double-digit growth is now growing at a more modest 7.5 percent rate, its credit markets are overheated and fears of a housing bubble remain. The slowing has occurred as major U.S. names garner more revenue from Asia. Among 18 S&P companies with large exposure to China, 12 of them were underperforming the broader S&P 500 index year-to-date, including Yum Brands Inc and Intel, which noted the slower growth in China as a headwind.

G-20 to Back Corporate Tax Reform (WSJ)
The Group of 20 largest economies is set to back a major reform of international taxation designed to eliminate loopholes that enable many companies to keep their tax bills low. ... The action plan aims to plug the gaps created by a complex web of bilateral tax treaties that has expanded since the 1920s, and which now allow for "aggressive" tax planning, where companies adopt legal structures designed to shift their profits to the lowest tax jurisdictions, regardless of where those profits are earned.

U.K. Hires JPMorgan to Provide Bank-Privatization Advice (Bloomberg)
The U.K. hired JPMorgan Chase & Co., whose senior advisers include former Prime Minister Tony Blair, as it accelerates efforts to reduce its stakes in Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc. “JPMorgan Cazenove will provide ad hoc input which will complement UKFI’s expertise in devising strategies for realizing value for the government’s shareholdings in the banks,” U.K. Financial Investments Ltd., the body that oversees the government’s stakes in the lenders, said in a statement today. “This appointment does not involve any commitment in relation to other roles at any other time and UKFI intends to review this appointment on a periodic basis.”

Apache to Sell Gulf of Mexico Shelf Unit for $3.75 Billion (DealBook)
The Apache Corporation agreed to sell its business in the Gulf of Mexico’s shelf to a portfolio company owned by the private equity firm Riverstone Holdings for about $3.75 billion. The buyer, Riverstone’s Fieldwood Energy, is buying a business with 239 millions of barrels of oil equivalent in reserves at the end of last year, more than half of which is oil and 75 percent of which is already developed.

Chateau Latour 2003 Bordeaux Rebounds in London (Bloomberg)
A case of 2003 Chateau Latour, a Bordeaux first-growth wine estate, sold for 7,350 pounds ($11,190) on Liv-ex, marking a 5 percent gain from this year’s February low while remaining within its 2013 trading range. Yesterday’s deal compared with the 7,165 pounds paid for a similar case the previous day, and left the vintage still trading 29 percent below the 10,300 pound record it reached in July 2011, when demand for top Bordeaux was peaking.

Stephen Colbert Grills Eliot Spitzer, Declares 'This Ain't Charlie Rose, Motherf**ker' (HuffPo)
[Spitzer] was asked by Stephen Colbert if forgiving voters signal the "slow decay of our moral values." As Spitzer laughed the question off, Colbert declared, "This ain't Charlie Rose, motherf**ker!" "Shouldn't the job of comptroller go to someone who has shown a modicum of self-comptrol?" The comedy host asked Spitzer. "Why should the people trust you?"

Related

Opening Bell: 2.10.16

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Opening Bell: 04.11.12

Profit Drop at U.S. Banks Imperils Rally (Bloomberg) The six largest U.S. lenders, including JPMorgan Chase and Wells Fargo, may post an 11 percent drop in first-quarter profit, threatening a rally that has pushed bank stocks 19 percent higher this year. The banks will post $15.3 billion in net income when adjusted for one-time items, down from $17.3 billion in last year’s first quarter, according to a Bloomberg survey of analysts. Trading revenue at the biggest lenders is projected to fall 23 percent to $18.3 billion, according to Morgan Stanley analysts, who didn’t include their firm or Wells Fargo. Making Waves Against 'Whale' (WSJ) Dozens of hedge funds are believed to have placed bets in the derivatives markets that pit them against positions taken by Bruno Iksil, the French-born trader who works for the bank's Chief Investment Office in London, according to people familiar with the matter. Funds that traded against Mr. Iksil earlier this year recorded big paper losses as his trades helped push down one credit index. The losses made Mr. Iksil a target for some hedge funds, who felt they could capitalize on his outsize position, these people say. The funds' wagers against Mr. Iksil's positions have become increasingly profitable in recent weeks as prices in the credit-derivatives index that was at the center of one of Mr. Iksil's trades rose after his trades ceased. "I view the entire market as a chess match playing against this guy," said a person who is familiar with Mr. Iksil's positions and is trading against him. Carlyle nears road show for $8B IPO (NYP) A road show will start as early as next week for the initial public offering (IPO) of Carlyle Group that will value the private-equity firm at between $7.5 billion and $8 billion, according to a person familiar with the matter. Carlyle filed documents to the Securities and Exchange Commission earlier this month to sell a 10 percent stake. The offering is likely to generate as much as $800 million in proceeds, according to the person familiar with the matter. Germany Pays Record Low Yield (WSJ) "The modest demand is due to the historical low yields, where investors are very reluctant to buy long-dated German bonds at these low levels despite the fiscal slippage we see in Spain and the ongoing crisis in the periphery," said Jens Peter Sorensen, chief analyst at Danske Markets. But RBS analysts said poor bund auctions at these yield levels have never been a good predictor for future demand, and thus it recommended not to "overly" focus on the sale to gauge demand for bunds. Weighing SEC's Crackdown on Fraud (WSJ) SEC enforcement chief Robert Khuzami said the current total of 101 cases shows the agency is "highly effective in tackling financial-crisis wrongdoing." Of the 74 cases filed against individuals so far, the SEC went after 55 chief executives, finance chiefs or other top officers. In an interview, Mr. Khuzami said the number is "significant" and "sends a strong deterrent message." Meredith Whitney Muni Call Was 100% Wrong: Bond Pro (CNBC) High-grade municipal bonds remain a solid investment despite their sometimes-battered public image, according to fixed income expert Alexandra Lebenthal. "I have come up with a new measure of risk, which is knowledge risk," said the president and CEO of Lebenthal and Co. "Is the person who is talking about municipal bonds, corporate bonds, equities, what have you, knowledgeable and should people be listening to them?" "Yes, I have an axe to grind," continued Lebenthal, whose father, James, is one of the more prominent names in the bond business. "I am in the municipal bond business, I'm also in the wealth management business and trying to do the best for clients. But I do know what I'm talking about because I have spent over 20 years in this business and another 20 growing up listening to it." Facebook deal ‘surprised’ bankers (NYP) “People are wondering if [Facebook] couldn’t have waited until after the IPO [to purchase Instagram],” said one source, who declined to be identified. Although Facebook is still awaiting IPO clearance from regulators, underwriters led by Morgan Stanley are hoping to launch the company’s share sale next month, possibly the week of May 14. Bankers plan to start the investor marketing campaign, known as a “road show,” about two weeks prior its launch. Zuckerberg held discrete talks with Instagram’s founders and managed to keep underwriters in the dark about the sale until late in the process, sources said. Critics of the controversial deal say Facebook’s timing for the acquisition is questionable, while supporters argue that the Instagram purchase enhances Facebook’s platform and stymies rivals. Investors run scared of Spain's battered banks (Reuters) "Most are currently on liquidity life support from the ECB but asset quality continues to deteriorate as house prices keep falling and unemployment is still rising," said Georg Grodzki, head of credit research at Legal & General Investment Management. "Their funding remains constrained and competition for deposits intense," he told Reuters. Economy Minister Luis De Guindos told Reuters last week that all Spanish banks had met capital requirements set by the European Banking Authority under a 115-billion-euro recapitalization plan decided by European Union leaders in December. But fund managers remain skeptical due to the slow-burning property crash. They include Mark Glazener, head of global equities at Dutch asset manager Robeco, who sold off his exposure to Spain at the end of last year. "Given the scale of over-building over all these years, the present provisioning that the banks have made does not appear to be enough," he said. Zuckerberg Threatened to Disable Ceglia Site Amid Dispute (Bloomberg) Facebook cofounder Mark Zuckerberg threatened in 2004 to disable part of the website he was working on for Paul Ceglia, the New York man now suing him for part-ownership of the multibillion-dollar company, according to copies of e-mails filed by Facebook in federal court...“I must receive $5,000 by next Saturday at midnight, or the scroll search functionality will be removed from the site,” Zuckerberg wrote in a message to Ceglia on Feb. 21, 2004, about two weeks after he put “Thefacebook.com” online. Zuckerberg told Ceglia he owed him $10,500 of the $19,500 he’d been promised, according to the e-mails, filed by Facebook as part of the lawsuit in Buffalo, New York. Facebook last month asked the judge to throw out the lawsuit.

Opening Bell: 05.23.12

Merkel Heads For Debt Showdown With Hollande At EU Summit (Bloomberg) German Chancellor Angela Merkel said she won’t shy away from disagreeing with French President Francois Hollande at the summit in Brussels over dinner at 7 p.m., the next major appointment of leaders seeking to allay concerns that Greece may quit the euro, putting Spain and Italy at risk as well. Good cooperation “doesn’t exclude differing positions,” Merkel told reporters yesterday in Chicago during a meeting of the North Atlantic Treaty Organization. “These may very well arise in the context of the European discussions.” Morgan Stanley Says It Played By Rules In Facebook’s IPO (Bloomberg) “Morgan Stanley followed the same procedures for the Facebook offering that it follows for all IPOs,” Pen Pendleton, a spokesman for the New York-based investment bank, said yesterday in an e-mailed statement. “These procedures are in compliance with all applicable regulations.” Inside Facebook's Fumbled Offering (WSJ) Interviews with more than a dozen people involved in the IPO reveal that Facebook approached its deal differently than companies typically do. Facebook CFO Ebersman kept a close grip on every important decision on the stock offering, not deferring to his bankers the way many companies do, according to the people familiar with planning...Mr. Ebersman had asked Facebook's early shareholders to fill out a form indicating how many shares they would like to sell in the IPO and at what price, and to indicate whether they would be willing to sell more if the share count was increased, the person said. When Mr. Ebersman learned from Mr. Grimes that there was outsize investor demand, he went back to those forms and reached out to early shareholders to cash out more stock, the person said. Gupta On Rajaratnam's VIP List (NYP) Jailed hedge fund manager Raj Rajaratnam deemed only a handful of people — including ex-Goldman Sachs director Rajat Gupta — important enough to disturb his trading day, Rajaratnam’s former assistant testified yesterday in Manhattan federal court. Carlyn Eisenberg, the government’s first witness in the trial of Gupta on insider-trading charges, said his name was on a “special list” of those whose calls she was to put through to her then-boss. She said it was one of those calls in September 2008 that triggered a flurry of trading activity at Rajaratnam’s Galleon Group, shortly before Goldman Sachs announced it had landed a $5 billion investment from famed investor Warren Buffett...Eisenberg recalled getting a call several years ago from a man whose voice she recognized as being on the list at the time, although she said she couldn’t identify it now as belonging to Gupta. The call, which phone records later showed came from Gupta’s McKinsey & Co. office, arrived minutes before the close of markets on Sept. 23, 2008, according to Eisenberg. The caller “said it was urgent and he needed to speak to Raj,” she told jurors. After Rajaratnam took the call, he immediately brought Galleon co-founder Gary Rosenbach into his office. When Rosenbach emerged, he began making calls, saying, “buy Goldman Sachs,” Eisenberg testified. More Finance Chiefs Willing To Pay Bribes, Global Survey Finds (Bloomberg) Fifteen percent of chief financial officers around the world are willing to make cash payments to win or retain business, according to a survey of executives interviewed by the accounting firm Ernst & Young LLP. The firm’s annual “global fraud survey” of 400 finance chiefs, interviewed from November to February, found a greater tolerance of bribery compared with the previous year, when 9 percent said they would make cash payments. Five percent of CFOs said they would misstate financial performance, while 3 percent said that the year before, according to the survey. Troubleshooter In Running To Succeed Dimon (FT) For relaxation, Matt Zames shoots things. Mostly birds. But the 41-year-old JPMorgan Chase executive does not have much free time for hunting now. He is busy mopping up his bank’s biggest mess since the financial crisis. Last week Mr Zames was appointed to replace Ina Drew as head of the bank’s chief investment office, whose London-based trading unit has wiped $30bn off its parent’s market capitalisation. “When you’re in a difficult spot you find out who you want to be in a foxhole with,” says Jamie Dimon, chief executive of JPMorgan. “Matt puts his hand up.” Barclays To Sell Entire BlackRock Stake For $5.5 Billion (Bloomberg) The lender sold about 26.2 million shares to money managers for $160 each, London-based Barclays said in a statement yesterday. Underwriters have the option to purchase an additional 2.6 million. New York-based BlackRock will buy back a further 6.38 million shares at $156.80 per share, about 8.8 percent less than the stock’s $171.91 close on May 18, the last trading day before the deal was announced. Tall Tales About Private Equity, By Steve Rattner (NYT) To be sure, some of Bain’s large leveraged buyouts — notably, Domino’s Pizza — added jobs. But Mr. Romney left Bain Capital two months after the Domino’s investment (7,900 new jobs claimed) was finalized. Aware of private equity’s reputation, Mr. Romney still trots around the country erroneously calling himself a “venture capitalist.” And in a further effort to deflect attention from the Bain Capital debate, Mr. Romney last week argued that President Obama was responsible for the loss of 100,000 jobs in the auto industry over the past three years. That’s both ridiculously false (auto industry and dealership jobs have increased by about 50,000 since January 2009) and a remarkable comment from a man who said that the companies should have been allowed to go bankrupt and that the industry would have been better off without President Obama’s involvement. Adding jobs was never Mitt Romney’s private sector agenda, and it’s appropriate to question his ability to do so. Stryker CEO Sought Nod For Romance (WSJ) Mr. MacMillan, 48 years old, was forced out partly because certain board members became bothered by his handling of a relationship with a former flight attendant for the company's corporate jets while his wife pursued a divorce, according to people familiar with the matter. What distinguishes his story from others in this well-worn genre is that, according to a person familiar with Mr. MacMillan's version of events, the CEO approached Mr. Parfet and Louise Francesconi, head of the board's governance and nominating committee, in late September seeking their approval to date the employee, Jennifer Koch. Facebook Analysts Who Shunned Herd Now Look Like Heroes (Bloomberg) The social networking site lost 19 percent through yesterday to $34.03 after opening at $42 on May 18. That’s consistent with warnings from Richard Greenfield of BTIG LLC and Brian Wieser of Pivotal Research Group LLC, who says the stock will slip as low as $30. It left five firms with bullish calls predicting an average rally of 36 percent and one, Tom Forte of Telsey Advisory Group, saying shares may rise 47 percent to $50.

Opening Bell: 05.21.12

JPMorgan CIO Risk Chief Said To Have Trading-Loss History (Bloomberg) Irvin Goldman, who oversaw risks in the JPMorgan Chase & Co. (JPM) unit that suffered more than $2 billion in trading losses, was fired by another Wall Street firm in 2007 for money-losing bets that prompted a regulatory sanction at the firm, Cantor Fitzgerald LP, three people with direct knowledge of the matter said. JPMorgan appointed Goldman in February as the top risk official in its chief investment office while the unit was managing trades that later spiraled into what Chief Executive Officer Jamie Dimon called “egregious,” self-inflicted mistakes. The bank knew when it picked Goldman that his earlier work at Cantor led regulators to penalize that company, according to a person briefed on the situation. Risk Manager's Past Scrutinized (WSJ) Mr. Goldman joined J.P. Morgan's CIO in January 2008 as a trader. The bank placed him on leave in September 2008 after it learned that NYSE Arca had opened a regulatory inquiry tied to his trading activities at Cantor Fitzgerald, people familiar with the matter said. After J.P. Morgan placed him on leave, Mr. Goldman founded a consulting firm based in New York called IJG Advisors LLC. He rejoined J.P. Morgan in September 2010 in the Chief Investment Office, this time focusing on strategy. Current J.P. Morgan Chase Chief Risk Officer John Hogan chose Mr. Goldman to serve as CRO of the office, a position that had been filled by Peter Weiland, who remains with J.P. Morgan's CIO. Mr. Hogan wasn't aware of the Cantor Fitzgerald incident or the earlier trading losses at J.P. Morgan Chase, said a person close to the bank. Eurobonds To Be Discussed At EU Summit (Reuters) Merkel has said she is not opposed to jointly underwritten euro area bonds per se, but believes it can only be discussed once the conditions are right, including much closer economic integration and coordination across the euro zone, including on fiscal matters. That remains a long way off. Will Greece Be Able to Print Drachma in a Rush? (Reuters) If or when policymakers finally decide Greece should leave the euro, the exit could happen so quickly that "new drachma" currency notes might not be printed in time. "It would be chaos," says Marios Efthymiopoulos, a visiting scholar at Johns Hopkins University Center for Advanced International Studies and president of Thessaloniki-based think tank Global Strategy. "The banks would collapse and you would have to nationalize them. You wouldn't be able to pay anyone except in coupons. There is only one (currency) printing press in Greece. It is in the museum in Athens and it doesn't work any more." Ryanair CEO: ‘No’ Campaigners in Irish Vote Are Crazy (CNBC) “I think Ireland will vote yes in the referendum and Ireland should vote yes. We have no alternative. People who are borrowing $15 billion a year to keep the lights turned on don’t have the wherewithal to vote no to the people that are lending them the money. There is no argument for voting no,” Michael O'Leary, CEO of budget airline Ryanair said. He described “no” campaigners as a “bunch of idiots and lunatics.” Barclays To Sell Entire BlackRock Stake (WSJ) Barclays said BlackRock agreed to repurchase $1 billion worth of the 19.6% stake that the bank holds in the asset-management company. The remainder of the stake will then be listed on a stock exchange. The decision to sell comes as the bank faces pressure from investors to boost its return on equity and prepares to mitigate the effects of regulation that will force the lender to hold a bigger capital buffer. Mark Zuckerberg Gets Married (AP) The couple met at Harvard and have been together for more than nine years, a guest who insisted on anonymity said. The ceremony took place in Zuckerberg's backyard before fewer than 100 guests, including Facebook's chief operating officer Sheryl Sandberg. The guests all thought they were coming to celebrate Chan's graduation but were told after they arrived that the event was in fact a wedding. "Everybody was shocked," the guest said. The two had been planning the marriage for months but were waiting until Chan had graduated from medical school to hold the wedding. The timing wasn't tied to the IPO, since the date the company planned to go public was a "moving target," the guest said. Zuckerberg designed the ring featuring "a very simple ruby." Hedge Funds Rebuild Euro Bear Bets On Greek Exit Banks Weigh (Bloomberg) Hedge funds and other large speculators, which pared trades that would profit from a drop in the euro to the lowest levels since November, rebuilt them to a record high last week, figures released May 18 by the Washington-based Commodity Futures Trading Commission showed. The premium for options that grant the right to sell the euro has more than doubled since March. Nasdaq CEO Blames Software Design For Delayed Facebook Trading (Bloomberg) Nasdaq OMX Group, under scrutiny after shares of Facebook Inc. were plagued by delays and mishandled orders on its first day of trading, blamed “poor design” in the software it uses for driving auctions in initial public offerings. Fed Proves More Bullish Than Wall Street Forecasting U.S. Growth (Bloomberg) Stephen Stanley, chief economist at Pierpont Securities LLC, has derided the Federal Reserve for downplaying improvement in the U.S. economy. Yet his 2.6 percent forecast for growth this year is below the midpoint in the central bank’s projection of 2.4 percent to 2.9 percent...“I’ve been banging my head against the wall,” said Stanley in Stamford, Connecticut, a former researcher at the Federal Reserve Bank of Richmond, who had predicted an interest- rate increase as early as last year and now says the Fed probably will tighten in the middle of next year. “They’re willing to let things run for longer and let inflation accelerate more than historically.” Judge mulls suit vs. woman sending messages to driving boyfriend (NYP) In a case believed to be the first of its kind in the country, a New Jersey college student could be held liable this week for texting her boyfriend — knowing he was behind the wheel — and allegedly causing him to crash into a couple riding a motorcycle. “She texts. Instantly, he texts back, and, bang, the accident occurs,” said Skippy Weinstein, attorney for motorcycle enthusiasts David and Linda Kubert, both 59, who lost their left legs in the horrific 2009 accident in Mine Hill. It’s now up to a Superior Court judge in Morristown, NJ, to decide whether Shannon Colonna can be added to the suit against driver Kyle Best.