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Opening Bell: 08.21.13

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Goldman faces losses on erroneous trades (FT)
A computer glitch at Goldman Sachs could cost the investment bank $100m or more after it inadvertently made a large number of erroneous options trades on Tuesday that disrupted trading across multiple US exchanges, market participants told the Financial Times. A trading system that normally tracks how Goldman would price options on behalf of its clients malfunctioned and sent expressions of interest as orders to exchanges operated by NYSE Euronext, Nasdaq OMX and CBOE in the opening minutes of the US trading day, a person familiar with the bank’s trading said. Some of those orders were sent with default prices that differed dramatically from market prices for options linked to stocks and exchange-traded funds including JPMorgan Chase and Kellogg. The bank’s losses from the mishap are expected to become clearer in coming days as the exchanges review each transaction. The problem sparked heated discussions between Goldman, the exchanges and trading firms that took the other side of the trades, people familiar with the situation said.

Justice Department Plans New Crisis-Related Cases (WSJ)
Attorney General Eric Holder said the Justice Department is nearing decisions on a number of probes involving large financial firms and that he plans to announce new cases stemming from the economic meltdown in the coming months. "My message is, anybody who's inflicted damage on our financial markets should not be of the belief that they are out of the woods because of the passage of time. If any individual or if any institution is banking on waiting things out, they have to think again," Mr. Holder said in an interview Tuesday with The Wall Street Journal.

Investment banks' hiring points to uptick in recruitment (FT)
Investment banks including Nomura, Citigroup and Bank of America have started hiring dealmakers and traders in Europe in a sign that recruitment is picking up following a two-year cull that saw thousands of bankers lose their jobs. Recruiters say they are at their busiest since 2010 as banks add new staff in revenue-generating positions including M&A advice to equities trading. ... "I think it's fair to say that there's been a pent-up desire to hire and all of the recent positive data are making it much easier for them to pull the trigger," said Joseph Leung, founder of Aubreck Leung, the executive search group. It comes as the rate of job losses in the global investment banking sector has fallen to its slowest pace in two years.

S.E.C. Charges Former Oppenheimer Manager With Misleading Investors (DealBook)
Federal securities regulators accused a former portfolio manager at Oppenheimer & Company on Tuesday of misleading investors about the performance of a fund, a rare enforcement action involving the private equity industry. The Securities and Exchange Commission contends that Brian Williamson issued quarterly reports and marketing materials that inflated the performance results of an Oppenheimer private equity fund.

Volkan the Intruder: Man in Underpants Partied in Merkel's Jet (Spiegel)
On the night of July 25, a 24-year-old man clutching a bag full of marijuana and ecstasy pills managed with relative ease to get on board an empty government jet used frequently by Chancellor Angela Merkel, while it was parked at a closed military section of the Cologne airport. The man, a bodybuilder of Turkish descent named as Volkan T., proceeded to stage a raucous, one-man party. Reports said he stripped down to his underpants, sprayed fire extinguisher foam around the elegant cream and beige interior, pushed buttons in the cockpit, released an inflatable emergency slide and danced on the wing of the Airbus 319.

SEC Deals With Turnover at the Top (WSJ)
Mary Jo White is the Securities and Exchange Commission's third boss in nine months. And it is even harder to keep up with the rest of the turnover near the top of the nation's securities-law enforcer. In barely the past year, four of the agency's five divisional chiefs have stepped down, including the top SEC officials for trading and markets, corporation finance and enforcement, along with four of the 11 regional directors in offices scattered across the U.S.

ECB in Athens as third-bailout talk heats up (Reuters)
The European Central Bank was checking up on how well Greece is meeting its international bailout obligations on Wednesday, a day after Germany's finance minister said a third aid program would be needed to keep Athens afloat. Joerg Asmussen, a member of the ECB's executive board, was to meet Greece' prime minister, finance minister and central bank governor, and to have talks with Greek business leaders. His immediate concern is with the next tranche of aid from Greece's second international bailout, due in October. But his visit was announced the same day that German Finance Minister Wolfgang Schaeuble told an election campaign audience that Greece will need a third bailout on top of rescue loans worth about 240 billion euros already obtained for 2010-2014.

Banks start courting Twitter to land rich IPO biz (NYP)
Bankers have met with Twitter’s management in recent weeks for preliminary talks ahead of a more formal selection process to pick underwriters to lead the IPO, sources tell The Post. JPMorgan Chase, Goldman Sachs, Morgan Stanley, Citigroup, Bank of America, Credit Suisse and others will be jockeying to score a role in the much-anticipated offering. These early discussions are intended for the banks to get an early feel for what Twitter is aiming to accomplish in its IPO so they can better craft sales pitches, sources said. Twitter’s executive suite — comprising CEO Dick Costolo, operations chief Ali Rowghani and newly appointed finance chief Mike Gupta — have shared a few concerns with the bankers. Among them, the 7-year-old San Francisco tech company wants an offering that’s “low profile,” one source said. The concern seemed to reference Facebook’s $15 billion botched offering as something Costolo’s crew wanted to avoid, sources said.

Re/Max Holdings Real Estate Brokerage Files for U.S. IPO (Bloomberg)
Re/Max Holdings Inc., a franchiser of real estate brokerages, filed for a U.S. initial public offering as the nation’s property market rebounds and shares of housing-services companies surge. Re/Max, a Denver-based company that has more than 92,000 real estate agents globally, filed to raise as much as $100 million, according to a regulatory filing today. The amount is a placeholder that will probably change. The number of shares and price range haven’t been determined, Re/Max said. The U.S. housing market’s recovery from the worst crash since the 1930s is bolstering shares of companies that make money from home sales and searches. Realogy Holdings Corp. (RLGY), the Madison, New Jersey-based owner of the Century 21 and Coldwell Banker brands, raised $1.08 billion in an October IPO. The shares have climbed about 60 percent since they started trading.

Intern death leads to calls for shake-up of City bank culture (FT)
Banks in the City of London are facing calls to overhaul the working culture for younger staff following the death of a 21-year-old intern at Bank of America. Moritz Erhardt, an intern at Bank of America Merrill Lynch in London, was found dead last week in the shower of his temporary residence in east London, it emerged yesterday. ... Bankers said working hours for interns were tough and often stretched beyond midnight but that it would be unusual for an intern to do two or even three all-nighters. “Analysts and associates have to work like dogs. But interns would not be trusted to do such long working hours as they are seen as too inexperienced,” one banker said.

Caffeine Spray, Brought to You by Peter Thiel’s College Dropout Challenge (BBW)
A few years ago, when Peter Thiel started giving teenagers $100,000 grants to skip college for two years to pursue world-changing projects, plenty of howling ensued. The libertarian billionaire, who earned degrees from Stanford University, countered that his fellowship program isn’t for everyone: It’s meant for elite tinkerers trying to better themselves and society through entrepreneurship. “The world’s hardest problems aren’t going to solve themselves,” Thiel noted in a press release last year. “If you have a great idea, the right time to work on it isn’t four years off—it’s now.” So far, more than 60 would-be visionaries have received fellowships, and the application period for the fourth crop opens in October. Among the alums is Ben Yu, who took a leave after one semester as an undergrad at Harvard University to become a Thiel fellow in 2011. The 21-year-old and his partner, 33-year-old former venture capitalist Deven Soni, recently kicked off a crowdfunding campaign to raise $15,000 for Sprayable Energy, which plans to sell topical caffeine spray. Yup—topical caffeine spray. Meaning you spray it not in your mouth but on your skin (ideally your neck, Yu says) as if it were perfume.

Samurai sword-wielding, knife-throwing man lost it over missing can of shrimp, report says (Orlando Sentinel)
A Samurai sword-wielding, knife-throwing Volusia County man attacked his mother's boyfriend over a missing can of shrimp Saturday morning, an arrest report said. Jayson Laughman, 34, of Deltona used a sword to break down a door and threw kitchen knives at family members after his mother's boyfriend accused him of taking a can of shrimp, according to the Volusia County Sheriff's Office. Laughman told deputies he didn't remember everything that happened during the fight because he "went into code red and lost his temper," the report said.

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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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Obama Address to Focus on Economy, Social Issues (WSJ) President Obama's chief spokesman, Jay Carney, said Monday the core emphasis in the president's big speeches remains the same: "The need to make the economy work for the middle class, because the middle class is the engine that drives this country forward and which will, if it's given the right tools and the right opportunities, will drive us forward in the 21st century." Republicans welcome the president's expected focus on the economy, but also say he hasn't done enough. "The White House says they're talking about jobs and the economy. I welcome that engagement," House Majority Leader Eric Cantor (R., Va.) said in an interview Sunday. "It seems as if the president is constantly trying to pivot back to jobs and the economy. The reason you see that happening is he's never pursued it." Mr. Obama will also address a series of automatic spending cuts set to kick in March 1—the so-called sequester—which could threaten economic growth, national—security preparation and the jobs of thousands of federal employees. Mr. Obama has called on Congress to pass a temporary measure of spending reductions and new taxes to replace the across-the-board cuts. Barclays to Cut 3,700 Jobs After Full-Year Loss (Bloomberg) Barclays Plc will cut 3,700 jobs to reduce annual costs by 1.7 billion pounds ($2.6 billion) as Chief Executive Officer Antony Jenkins revamps the lender following its first full-year loss in two decades. About 1,800 positions will go this year at the firm’s investment bank and 1,900 in its loss-making European consumer and business banking unit, Jenkins said in a statement today. The lender posted a net loss of 1.04 billion pounds for 2012, wider than the 307 million-pound estimate of nine analysts surveyed by Bloomberg, as it set aside an additional 1 billion pounds in the fourth quarter for compensating clients wrongly sold interest-rate swaps and loan-repayment insurance. BNY Mellon loses U.S. tax case, to take $850 million profit hit (Reuters) BNY Mellon Corp said on Monday it will take an $850 million charge against first-quarter profit after losing a high-stakes tax case to the U.S. Internal Revenue Service, a move that will also erode some of its capital. The BNY Mellon case was the first to go to trial since the IRS accused several U.S. banks of generating artificial foreign tax credits through loans with London-based Barclays. The IRS challenged a $900 million tax benefit claimed by BNY Mellon that stemmed from a $1.5 billion loan from Barclays. The funding was so cheap that at one point Barclays actually paid BNY Mellon to take Barclays' money, according to court papers. Nasdaq Steps Up Pursuit Of A Partner (WSJ) Nasdaq, long on the hunt for a partner, has ramped up its conversations about strategic options ranging from joint ventures to a sale, according to people familiar with the talks, as rival NYSE Euronext moves ahead with a merger that will form an even-bigger competitor. Twinkie Brand Heads For Sale (WSJ) Judge Robert Drain of the U.S. Bankruptcy Court in White Plains, N.Y., cleared Hostess on Monday to proceed with several of the sale processes it has unveiled during the past several weeks. Private-equity firms Apollo Global Management LLC and Metropoulos & Co. are now officially set to kick off the contest for most of the Hostess cakes business, with a $410 million offer for brands such as Twinkie, Dolly Madison, Ho Hos and Ding Dongs. That so-called "stalking horse," or lead, bid also covers five bakeries and certain equipment. McKee Foods Corp., the maker of Little Debbie snack cakes, is the stalking-horse bidder for Hostess's Drake's brand. The $27.5 million offer from McKee, based in Collegedale, Tenn., doesn't include the Drake's plant in New Jersey. Tesla CEO Clashes With New York Times Over Model S Review (Bloomberg) Elon Musk, the billionaire chief executive officer of Tesla Motors Inc. said a range test of the Model S electric sedan by the New York Times was “fake” as the reporter didn’t disclose all the details of his drive. “NYTimes article about Tesla range in cold is fake,” Musk said in a Twitter post yesterday. “Vehicle logs tell true story that he didn’t actually charge to max & took a long detour.” The Times on Feb. 8 published a story by John M. Broder on its website detailing how the Model S he drove failed to meet the electric sedan’s 300-mile (483-kilometer) range “under ideal conditions” while driving in temperatures as low as 10 degrees Fahrenheit (minus-12 Celsius). The Times also published a blog post by Broder about the test-drive on the same day, detailing his plan to use Tesla’s new “supercharger” stations. Broder followed instructions he was given in “multiple conversations with Tesla personnel,” Eileen Murphy, a spokeswoman for the Times, said in an e-mail message. The story was “completely factual, describing the trip in detail exactly as it occurred,” Murphy said. “Any suggestion that the account was ‘fake’ is, of course, flatly untrue.” Dispute over mashed potatoes turns dangerous (TBN) A disagreement over mashed potatoes turned dangerous over the weekend when a victim said tempers escalated and a woman came at her with box cutters. Shaquina S. Hill, 23, of Fourth Street was charged with second-degree menacing and second-degree harassment as a result, city police said. An 18-year-old woman told police she and Hill argued about mashed potatoes just before 9 p.m. Sunday at a Fourth Street address, and things escalated from there. The younger woman told police Hill grabbed box cutters and waved them at her, then dropped the knife and started throwing things at her, including a heavy ceramic vase and coffee table. She told police Hill also punched her in the chest. U.K. Regulator to Investigate Autonomy (WSJ) The Financial Reporting Council, the regulator tasked with promoting good corporate governance and financial reporting in the U.K., announced the investigation Monday on its website. It said the probe will look at Autonomy accounts published between Jan. 1, 2009, and June 30, 2011. New York fund manager arrested on Ponzi scheme charges (Reuters) Federal prosecutors charged Jason Konior, 39, with defrauding investors by promising to match their investments in his fund, Absolute Fund LP, many times over. Prosecutors said he used $2 million of the money he collected from three hedge funds to pay his own expenses and cover redemption requests from prior investors, according to the criminal complaint dated February 7. Treasury’s Brainard Says G-20 Must Refrain From Devaluation (Bloomberg) “The G-20 needs to deliver on the commitment to move to market-determined exchange rates and refrain from competitive devaluation,” Lael Brainard, the Treasury’s undersecretary for international affairs, said at a news conference in Washington today. Brainard said “global growth is weak and vulnerable to the downside,” and strengthening demand must be a top priority for G-20 finance ministers and central bankers meeting in Moscow Feb. 15-16. Ex-Fund Manager Avoids Jail Time (WSJ) The cooperation of Ali Far, co-founder of Spherix Capital LLC, led to the convictions of at least five people, including Galleon Group founder Raj Rajaratnam, prosecutors said. Mr. Rajaratnam, who was convicted on conspiracy and securities-fraud charges, is serving an 11-year prison sentence, one of the longest terms ever imposed for insider trading. Mr. Far secretly agreed to cooperate with the government's probe shortly after he was approached by federal agents in April 2009, prosecutors said. Mr. Far, a former Galleon employee, recorded about 244 calls, including calls with Mr. Rajaratnam, prosecutors said. He also was prepared to testify at Mr. Rajaratnam's trial as a government witness in 2011 but was never called, they said. "I am truly sorry for my mistakes and I am ashamed," Mr. Far said at a hearing in Manhattan federal court Monday. U.S. District Judge Robert Patterson sentenced Mr. Far to one year's probation. He also imposed a $100,000 fine. The Perils of Being A Dog Show Judge (WSJ) Cindy Vogels had a litter of options for Best in Show at last year's Westminster Kennel Club Dog Show. As the final judge, she could have chosen a German Shepherd, a Doberman pinscher or even a Dalmatian. Instead she picked a Pekingese named Malachy—and everyone else judged her. One person, Vogels said, called the Pekingese "that awful dog." Vogels recalled another saying: "Why would you give Best in Show to the dog that couldn't walk?" "The American public was horrified," Vogels said. "The public has no appreciation for a Pekingese." It is the ultimate honor for a show judge to name the Best in Show winner at Westminster, the year's glitziest dog show, which concludes Tuesday at Madison Square Garden. But it also can bring out the worst in people. The math behind this logic is basic: There are 187 breeds, only seven will win their groups and just one will win the opinion of Michael Dougherty, the Best in Show judge on Tuesday. "You go in there alone," said Elliott Weiss, the 2010 Best in Show judge, "and you come out alone."