Opening Bell: 08.08.13


Wall Street banks see dollar signs in forex business (Reuters)
A surge in currency trading earlier this year and favourable regulatory treatment of the foreign exchange business have unleashed an intense fight on Wall Street, with banks battling one another for a larger share of an increasingly fractured market. ... Competition is particularly intense among banks because the foreign exchange sector is under fewer new regulations than other areas of trading, like derivatives or corporate bonds. That means banks can fund currency trading with less capital than they need for other businesses.

Banks Struggle With Proprietary Bond-Trading Networks (WSJ)
Morgan Stanley hasn't held a scheduled bond-trading session on its "Bond Pool" network for a few weeks, said people familiar with the platform. The firm typically ran two bond auctions per week, after launching the service last summer. Goldman Sachs Group Inc. has slowed the number of sessions on its "GSessions" platform to a trickle, having typically run several each week since its launch last June, these people said. ... Some investors said they were reluctant to use the bank-owned networks because, while innovative, they appeared designed to benefit banks.

JPMorgan Faces Criminal Probe as Bank Says U.S. Faults MBS Sales (Bloomberg)
JPMorgan Chase & Co., the biggest U.S. bank, said it’s under federal criminal investigation for practices tied to sales of mortgage-backed bonds that the Justice Department has already concluded broke civil laws. The department’s civil division told the bank in May of its preliminary finding after examining securities tied to subprime and Alt-A loans, which were sold to investors from 2005 through 2007, JPMorgan said yesterday. The office of U.S. Attorney Benjamin Wagner in Sacramento, California, has been conducting civil and criminal inquiries, the bank said. “It would be a major decision for them to indict a major U.S. bank, and frankly I would not predict it,” said John Coffee, a professor at Columbia Law School in New York. “You can often bring dual investigations, civil and criminal, in order to maximize pressure for a global civil resolution.”

Bond Wars (Pimco / Bill Gross)
The Germans, it seems, had burrowed themselves for weeks, 50–100 feet underground, surviving the mortars relatively intact. And their generals were well-versed in British tactics – always charging at the break of dawn, always blowing loud shrieking whistles, always advancing three feet apart with horses and bayonets of a bygone era. But the Germans believed in machine guns, not horses. Within the first few minutes there were 30,000 dead and wounded. By the end of the day there was not a single British soldier alive that had penetrated German barbed wire. Machine guns cut them down like scythes harvesting wheat. The few that reached German trenches were incinerated by German flamethrowers, another 20th century technological invention. ... PIMCO will not go down at the Somme.

NYC comptroller candidate arrested for illegal drug sales (Reuters)
A former Manhattan madam who is running for New York City comptroller was arrested and charged with selling prescription pills for cash, the FBI said on Tuesday. In the latest twist to the city's scandal-hit campaign season, Kristin Davis, 38, allegedly sold prescription pills to a federal informant four times in four months this year, the FBI said. Davis is running for the post of comptroller - in effect the city's chief financial officer - also being sought by former Democratic New York Governor Eliot Spitzer. Spitzer is attempting a political comeback after resigning as governor in 2008 amid a prostitution scandal. Davis has said Spitzer was one of her customers and that she provided him with prostitutes.

China trade shows signs of recovery (FT)
China’s exports and imports grew strongly in July, a sign that the economy may be stabilising after a shaky first half of the year. Exports rose 5.1 per cent year on year, rebounding from a 3.1 per cent drop in June. Imports increased 10.9 per cent year on year, up from a 0.7 per cent fall in June. Both figures were much stronger than analysts had forecast, pointing to a steadying of the country’s growth outlook after a sharp slowdown in exports and imports over the previous few months. The big jump in imports was especially notable as it is an indication that Chinese domestic demand is holding up well.

Pimco, BlackRock Seek to Bar California Mortgage Seizures (Bloomberg)
Pacific Investment Management Co. and BlackRock Inc. are among bond investors seeking a court order blocking Richmond, California, and Mortgage Resolution Partners LLC from seizing mortgages through eminent domain, saying the initiative would hurt savers and retirees. The city’s plan is unconstitutional, according to a complaint filed yesterday by mortgage-bond trustees in federal court in San Francisco. The trustees, Wells Fargo & Co. and Deutsche Bank AG, were directed to take the action by investors in the debt that also include Jeffrey Gundlach’s DoubleLine Capital LP, said John Ertman, a partner at Ropes & Gray LLP. “Mortgage Resolution Partners is threatening to seriously harm average Americans, including public pension members, other retirees and individual savers through a brazen scheme to abuse government powers for its own profit,” Ertman said in an e-mailed statement on behalf of investors.

Commerzbank Sees Signs of Growth (WSJ)
Commerzbank AG said Thursday parts of its business were growing again even as it set aside more money for souring loans and lowered the value of its investments, moves which had threatened to overshadow improvements in the German lender's restructuring efforts. Commerzbank has said that 2013 will be a year of transition in its four-year restructuring plan to strengthen its four main business units by 2016, while shedding other assets that were transferred to an internal "bad bank" a year ago. ... "The early signs indicate that we are in fact on the right path, although there is certainly still a long way to go up to 2016," said Chief Executive Martin Blessing.

Hilton Said to Plan Debt Restructuring Before Offering (Bloomberg)
Hilton Worldwide Inc., the hotel operator owned by Blackstone Group LP, hired four banks for a $13 billion debt refinancing later this year in anticipation of going public in early 2014, according to a person with knowledge of the matter. The hotelier, based in McLean, Virginia, hired Deutsche Bank AG, Goldman Sachs Group Inc., Bank of America Corp. and Morgan Stanley for the refinancing as well as the initial public offering, said the person, who asked not to be identified because the information is private. The refinancing would encompass bank debt, commercial mortgage-backed securities, high-yield bonds and time-share financing, the person said.

Why European junk debt’s US sales are hitting record highs (CNBC)
Sales of European non-investment grade debt to the U.S. have hit a record high this year, despite the continued issues in the euro zone. U.S. investors have snapped up $106.6 billion of European corporate debt in 2013 so far, 11 percent higher than the same time in 2012.This has been driven by a 67 percent rise in sales of high-yield junk debt, to $28.8 billion for the year so far, according to figures from Dealogic.

Covert war in the workplace... over the holiday rota: Staff deliberately book time off to scupper colleagues' holiday plans (DM)
Online office experts asked around 500 office workers about their holiday booking habits in June this year. The anonymous poll found that as many as one in 20 people had strategically booked their holidays to annoy a fellow worker. Another 13 per cent said they never revealed their holiday intentions for fear of co-workers booking the same time, while around 7 per cent admitted lying about their holiday plans in order to ‘double bluff’ colleagues.

Suspect: Alleged victims 'haters' mad about his 'way with the ladies' (UPI)
Fort Piece police said officers responded July 27 to a report of a man with a knife threatening customers at the Cobb's Landing restaurant in Fort Pierce, reported Wednesday. "He then began saying he didn`t do anything wrong, the people who were complaining on him were just haters because he had a way with the ladies and they should be arrested, not him," the police report states. "Then he stated he would use the Zimmerman defense because he was streetwise and he knew how to work the system."


Opening Bell: 07.18.12

BofA Swings To Profit, Topping Analysts' Estimates (WSJ) Bank of America reported a profit of $2.46 billion, compared with a year-earlier loss of $8.83 billion. On a per-share basis, which reflect the payment of preferred dividends, earnings came in at 19 cents from a loss of 90 cents a year earlier. The year-ago quarter's results included a charge of $1.23 a share in mortgage-related and other adjustments. Total revenue surged 66% to $21.97 billion. Analysts polled by Thomson Reuters expected earnings of 14 cents a share on $22.87 billion in revenue. The bank's profit was helped by reduced provisions for loan losses as credit quality continued to improve. Credit-loss provisions totaled $1.77 billion compared with $3.26 billion a year ago and $2.42 billion in the first quarter. HSBC Probe Brings Promises Regulator, Bank Will Clean Up Act (Bloomberg) HSBC executives apologized for opening their U.S. affiliate to a river of Mexican drug lords’ cash, and the U.S. regulator that failed to stem the flow vowed to prevent a repeat. “I deeply regret we did not act sooner and more decisively,” Comptroller of the Currency Thomas Curry said at a day-long hearing yesterday of the Senate Permanent Subcommittee on Investigations. He said his agency, which regulates HSBC’s U.S. arm, is partially responsible for letting Europe’s largest bank give terrorists, drug cartels and criminals access to the U.S. financial system and will take “a much more aggressive posture.” Opinion: Investing In America Produces The Best Returns, By Lloyd Blankfein (Politico) The question I’m most often asked these days is, “Where should I invest?” In recent years, we all know, there has been an unusually high degree of uncertainty. It falls into two broad categories: cyclical concerns that focus on the outlook for near-term economic growth and structural concerns that center on the viability of existing political or economic systems — for example, the European Union. The cyclical and structural challenges are considerable, and in some cases, even daunting. But when I meet with chief executive officers and institutional investors and they ask me where to invest, my response is that the United States remains as attractive as ever. And it would be even more attractive if it can make some short-term progress in a few key areas. Hugh Hendry: ‘Bad Things are Going to Happen’ (FT) Hendry believes that financial markets are single-digit years away from a crash that will present investors with opportunities of a lifetime. “Bad things are going to happen and I still think the closest analogy is the 1930s.” For Yahoo CEO, Two New Roles (WSJ) Just hours after Yahoo named Marissa Mayer as its new chief, the real conversation kicked in: how she will juggle pregnancy and being the CEO charged with saving a foundering Internet giant. The 37 year-old former Google executive is expecting her first child, a son, in early October. On Tuesday, she started her new job at Yahoo, which reported another quarter of lackluster sales growth...No Yahoo directors expressed concern about her pregnancy, according to Ms. Mayer, who told the board in late June, about a week after Yahoo's recruiter contacted her. She says she plans to work during her maternity leave, which will last several weeks...Ms. Mayer's husband, Zachary Bogue, a former attorney, is co-managing partner at Data Collective, an early-stage venture capital fund specializing in tech start-ups. JFK jet in laser scare (NYP) A lunatic aimed a powerful laser beam at an airliner flying over Long Island on its way into JFK — sending the pilot to the hospital and endangering the lives of the 84 people aboard. The first officer on JetBlue Flight 657 from Syracuse was treated for injuries to both eyes after the blinding flash of light lit up the cockpit Sunday night — as the FBI and Suffolk cops hunted for the person responsible, who could face federal prison time. The Embraer E190 jet landed safely, and the injured pilot — identified by sources as First Officer Robert Pemberton, 52 — was met at the gate and taken to Jamaica Hospital. Authorities believe the beam came from around West Islip, Babylon or Lindenhurst. “You wouldn’t think a pen laser would go that far of a distance,” said shocked West Babylon resident Cindy Konik, 50...A startled co-pilot, who was not identified, immediately took over the controls from his temporarily blinded colleague. “We just got lasered up here — two green flashes into the cockpit,” the captain radioed controllers at Ronkonkoma. Credit Suisse Sets Capital Plan (WSJ) moved Wednesday to stanch recent concerns about its financial strength, saying it is raising capital through the sale of convertible bonds, more divestments and the launch of another cost-savings program. It is a surprise twist in a spat with the country's central bank, which recently warned that Switzerland's number two bank wasn't strong enough to withstand a major crisis. Credit Suisse initially rejected the central bank's criticism, saying it was among the world's best-capitalized banks. This didn't impress investors, who offloaded their shares, wiping out 2 billion Swiss francs ($2.05 billion) in market value. At one point last month the bank even felt compelled to reassure investors that it was profitable in the second quarter, even though profitability over the period was never in doubt. Strong Possibility Of Further Fed Easing By September: Goldman (CNBC) In a testimony before the Senate Banking Committee on Tuesday, Federal Reserve Chairman Ben Bernanke offered no new hints that the central bank is planning more easing, but repeated a pledge that the Fed “is prepared to take further action as appropriate to promote stronger economic recovery.” “While we think that a modest easing step is a strong possibility at the August or September meeting, we suspect that a large move is more likely to come after the election or in early 2013, barring rapid further deterioration in the already-cautious near term Fed economic outlook,” Goldman Sachs conomist Andrew Tilton said in a report. BlackRock's Net Slips 11% (WSJ) BlackRock reported a profit of $554 million, or $3.08 a share, compared with a year-earlier profit of $619 million, or $3.21 a share. Stripping out one-time items, per-share earnings rose to $3.10 from $3. Revenue slipped 5% to $2.23 billion. Analysts expected earnings of $3.01 a share on $2.26 billion in revenue, according to a poll conducted by Thomson Reuters. BNY Mellon profit falls 37 percent on litigation charge (Reuters) Bank of New York Mellon Corp said on Wednesday that second-quarter net income had fallen 37 percent on lower foreign exchange revenue and after it paid $212 million to settle an investor lawsuit. The world's largest custody bank reported net income of $466 million, or 39 cents a share, compared with $735 million, or 59 cents a share, a year earlier. As announced earlier this month, the results included an after-tax charge of $212 million to settle an investor lawsuit accusing the bank of imprudently investing their cash in a risky debt vehicle that collapsed in 2008. Quarterly revenue fell to $3.62 billion from $3.85 billion. Residents warned: 6-foot lizard loose in Colorado (AP) A sheriff has warned residents in a tourist town northwest of Colorado Springs that a strong, aggressive 6-foot lizard that eats small animals — including dogs and cats — is on the loose in the area. Teller County Sheriff Mike Ensinger said Tuesday that a 25-pound pet Nile monitor lizard has gone missing after breaking a mesh leash and crawling away. Ensinger said about 400 homes in the Woodland Park area were warned. He added that the animal, which escaped Monday and is known as Dino, has not bitten any humans — yet. "We have a 6-foot reptile out and about," Ensinger said. "If it gets hungry enough, we don't know what it will do." Ensinger said officers may use a tracking dog if Dino isn't located by Tuesday afternoon. "I'm not going after it," Ensinger said. "I don't do reptiles."