Opening Bell: 09.09.13

Author:
Updated:
Original:

China's Credit Levels Echo U.S. Crisis (WSJ)
"The similarities to the U.S. are wanton use of the credit system to substitute for better sources of economic growth with a background of rising income inequality," says George Magnus, a senior independent economic adviser to Swiss bank UBS AG, who has written extensively on financial crises. "These are all telltale signs of a country at a relatively advanced stage of financial instability." One key difference: "In the Western case, the official response was denial or complete ignorance," says Mr. Magnus. In China, where the central government controls the economy and policy makers witnessed the U.S. bust, Beijing "will be able to respond in ways we [in the West] weren't capable of. But it doesn't mean it won't be painless," he says.

Hedge Funds Cut Fees (WSJ)
Today, the average hedge fund charges an annual management fee of about 1.6% of assets, while claiming around 18% of investment gains, according to industry surveys and interviews with industry executives. Investors willing to lock their money up for several years, write a big check or bet on a new fund can get even lower fees and other concessions, investors say...The pressure to cut fees is felt most acutely by managers focusing on stocks and commodities, rather than bonds, because equity and commodity funds generally haven't posted outsize returns recently. Some debt strategies are more complex and expensive to implement, which tends to keep those fees higher. New funds that trade stocks generally charge management fees of 1.5%, while funds that can have higher overhead still charge fees closer to 2%, said Steven Nadel, an attorney at Seward & Kissel LLP, which does an annual study of new funds. Another reason fees are coming down: Investors increasingly choose to place money with large hedge funds, making midsize and smaller funds more eager to trim fees to attract money.

Sam Adams Creator Becomes Billionaire as Craft Beer Rises (Bloomberg)
Consumers have flocked to Boston Beer’s 70-plus offerings, including its most popular seller, Boston Lager, to small batch specialty brews, such as Norse Legend, a Finnish-style sahti that Vikings drank. The demand has sent Boston Beer shares up ten-fold since mid-2009, propelling Koch’s net worth above $1 billion, according to the Bloomberg Billionaires Index. He has never appeared on an international wealth ranking. “Having watched my stock price go up and down and up, it seems almost whimsical,” Koch, 64, said in a telephone interview. “I remind people getting rich is life’s great booby prize. Any normal person would much rather be happy than rich.”

Exclusive: Japan regulator probing Deutsche Bank entertainment of pension clients (Reuters)
The Securities and Exchange Surveillance Commission (SESC) found evidence of potential infractions during a regular audit of Deutsche Securities Inc, the German bank's investment banking arm in Tokyo, said the sources, who spoke on condition they not be identified because the investigation is ongoing. The employees had booked large expenses for entertainment involving pension fund executives, they said. This raised red flags for the regulators because the pension fund executives involved are legally considered public employees, subject to anti-bribery statutes, since they handle part of the national pension scheme.

Fed Critics Demand Change With Bernanke Exit (NYP)
...many point to former Fed Chairman Alan Greenspan’s easy­money policy as the trigger of the subprime crisis that precipitated the cratering of the economy in 2007. “It’s been an unmitigated disaster. The history of the Fed is the history of the decline of the United States,” says Peter Schiff, chief executive of Euro Pacific Capital. “I am not going to blame it all on the Fed; there are other factors. But the Fed had an integral role in the gradual decline of American civilization.” Schiff cites the devaluation of the dollar as evidence of the Fed’s duplicitous actions. “If you look at the value of the dollar today to where it was 100 years ago, the dollar has lost 98 percent of its purchasing power since the Federal Reserve was put in charge,” Schiff asserts. “And if you look at the dollar’s purchasing power 100 years prior to the Fed, the dollar gained — maybe doubled. The dollar was more valuable in 1913 than it was 1813.” “If you say the goal of the Fed was to prevent calamities, then you have to say that it has been a failure,” says William A. Fleckenstein, a hedge-fund manager and the author of “Greenspan’s Bubbles.”

Drunk and boarish: swigging pig hogs 18 beers at campsite (Guardian)
A rampage by a feral pig that consumed 18 beers has prompted warnings for people at campsites to properly secure their food and alcohol. The pig struck at the DeGrey River rest area, east of the remote Western Australian town of Port Hedland in the Pilbara, according to the ABC. The animal was seen stealing three six-packs of beer from campers before ransacking rubbish bags for food. One camper reported seeing the pig guzzling the beer before getting involved in an altercation with a cow. "In the middle of the night these people camping opposite us heard a noise, so they got their torch out and shone it on the pig and there he was, scrunching away at their cans," said the visitor, who estimated that the pig had consumed 18 beers. "Then he went and raided all the rubbish bags. There were some other people camped right on the river and they saw him being chased around their vehicle by a cow." The pig was reportedly last seen resting under a tree, possibly nursing a hangover.

Red Flags Over Madrid a Sign Spanish Crisis Easing (Bloomberg)
In the upmarket Madrid neighborhood of Arroyo del Fresno, red flags bearing the insignia of Banco Santander SA flutter atop a building site nestled between a medical center and a metro station. Instead of caution, they may signal that Spain’s six-year property crisis is receding....Lenders including Santander and Banco Sabadell SA, which is also developing 59 plots, are looking to accelerate efforts to sell real estate that piled up on their balance sheets during Spain’s crash. It demonstrates the country’s slump may be easing in some areas as banks press on with the task of finding buyers for their property, said Ricardo Wehrhahn, a Madrid-based partner at Roland Berger Strategy Consultants, which carried out stress tests on Spanish banks last year.

Loan Size To Be Cut For Fannie, Freddie (WSJ)
The proposed move is designed to wean the mortgage market off government support and allow the market for non-government-guaranteed mortgages to take a bigger role. But critics argue that any such move will shrink the pool of eligible home buyers, stunting the nation's housing recovery.

KPN Finance Chief Resigns (WSJ)
Dutch telecom firm Royal KPN NV said Monday that its finance chief would leave the company with immediate effect because of personal circumstances, while uncertainty over the proposed takeover offer from America Movil persists.

Facebook co-founder Moskowitz gushes over Winklevoss twins (NYP)
Moskowitz is a frequent attendee of Burning Man, a yearly orgiastic — often drug-fueled — desert festival. The Facebook billionaire chronicled his emotions after this year’s event in a blog post that recalled his first encounter with Tyler and CameronWinklevoss, who were there also. “I happened to run into Tyler and Cameron Winklevoss near the Temple crew camp on Esplanade. In spite of our tangled history, I had never actually met them; we only communicated through lawyers,” Moskowitz wrote. “These guys are among the only people on earth I might describe as real antagonists in my life or even enemies, but on playa my first instinct was that I quite obviously needed to introduce myself and start with hugs.” Moskowitz is now even Facebook buds with the twins. “Almost immediately when I got back, I had a friend request from Tyler, and we started a thread extolling the virtues of the festival,” he wrote. “In no uncertain terms, he described a spiritual experience.”

Related

Opening Bell: 05.02.12

UBS Earnings Helped By Wealth-Management Focus, Risk-Cutting (WSJ) UBS's first-quarter earnings showed that the Swiss bank's strategy of shifting its focus to managing assets for wealthy clients and reducing risk is starting to pay off, demonstrating that it is putting behind it a troubled past marked by huge investment bank losses during the financial crisis, a bruising battle with U.S. tax authorities and a trading scandal last year. Worries about the global economy are likely to prevent clients from investing much in the second quarter, but "we believe our wealth-management businesses as a whole will continue to attract net new money, as our clients recognize our efforts and continue to entrust us with their assets... We have the utmost confidence in our firm's future," UBS said in a statement. The bank's wealth-management units recorded a rise in pretax profit during the quarter and attracted CHF10.9 billion ($12.1 billion) in new assets from clients. UBS also managed to shed more risky assets during the quarter, raised new capital and is on track to meet its target of saving CHF2 billion in costs annually...Reported results for the bank as a whole were less pleasing because an accounting loss on UBS's own debt led to a 54% drop in net profit. Excluding this charge, which was higher than forecast, earnings beat analysts' estimates and contributed to the rise in UBS's shares. The Zurich-based bank said net profit fell to 827 million Swiss francs in the quarter ended March 31 from CHF1.81 billion a year earlier. Revenue fell 22% to CHF6.53 billion from CHF8.34 billion, while operating expenses declined 15% to CHF5.22 billion. Wealthy Americans Queue To Give Up Their Passports (Bloomberg) Rich Americans renouncing U.S. citizenship rose sevenfold since UBS AG (UBSN) whistle-blower Bradley Birkenfeld triggered a crackdown on tax evasion four years ago. About 1,780 expatriates gave up their nationality at U.S. embassies last year, up from 235 in 2008, according to Andy Sundberg, secretary of Geneva’s Overseas American Academy, citing figures from the government’s Federal Register. The embassy in Bern, the Swiss capital, redeployed staff to clear a backlog as Americans queued to relinquish their passports. The Big Doubt Over Facebook's IPO (WSJ) "The question with Facebook and many of the social media sites is, 'What are we getting for our dollars?'" said Michael Sprague, vice president of marketing at Kia Motors Corp.'s North American division. The automaker has advertised on Facebook since 2009 and plans to increase its ad spending on the site. While building brand awareness on a site with 900 million users is valuable, Mr. Sprague said he's unclear if "a consumer sees my ad, and does that ultimately lead to a new vehicle sale?" The concerns from Kia and other advertisers underscore the difficulties of measuring results of nascent-forms of social-media advertising. Madness In Spain Lingers As Ireland Chases Recovery (Bloomberg) “Ireland faced up to its problems faster than others and we expect growth there rather soon,” said Cinzia Alcidi, an analyst at the Centre for European Policy Studies in Brussels. “In Spain, there was kind of a denial of the scale of the problem and it may be faced with many years of significant challenges before full recovery takes place.” Euro-Zone Economic Woes Deepen (WSJ) The euro-zone economy contracted by 0.3% in the fourth quarter of last year, and most recent data suggest it did so again in the first quarter of this year. Many economists regard two quarters of contraction as indicating an economy is in recession. Carlyle's big-name IPO may not generate big gains (NYP) Like debt asset manager Oaktree Capital Group, which declined on its first day of trading earlier this month, Carlyle warns that its first priority is to the interests of its fund investors, and it could make decisions that would reduce revenue in the short-term, such as limiting the assets under management that it oversees or reducing management fees. Did May Day Save Occupy Wall Street? (TDB) For some protesters, the lack of one or two key demands and a stronger organizational structure made the day less effective than it could have been. “I think they have to state their demands along with their actions,” said Anton Alen, a student at Hunter College, adding that he thinks Occupy Wall Street has been clear on many things it would like to see changed. Alen said that the idea of trying to occupy another space Tuesday night was in the right spirit but needed to be thought out better. “I don’t think it can be so spontaneous and still be effective,” Alen said. Sofia Gallisa of Fort Greene, Brooklyn, disagreed. “This isn’t about specific demands,” she said. “It’s never been about specific demands.” Occupy Wall Street has changed the kind of discussions Americans are having about inequality, she said, particularly around issues of class. Peter Schiff: US Treasurys Are ‘Junk,’ Dollar Headed for Collapse (CNBC) “As far as I am concerned, U.S. Treasurys are junk bonds,” Schiff said on CNBC Asia’s “Squawk Box.” “And the only reason that the U.S. government can pay the interest on the debt, and I say ‘pay’ in quotes because we never pay our bills. We borrow the money so we pretend to pay, but the only reason we can do it is because the Fed has got interest rates so artificially low.” Greenspan Says U.S. Stocks ‘Very Cheap,’ Likely to Rise (Bloomberg) “There is no place for earnings to grow except into stock prices,” Greenspan said yesterday. Treasury: No Decision On Floating-Rate Notes (WSJ) "Treasury is in the process of analyzing the feedback, and we continue to study the benefits and optimal terms of a Treasury [floating rate note]," Under Secretary for Domestic Finance Mary Miller said in a statement. Mr. Met is rated number 1 in Major League Baseball (NYDN) The longtime Flushing favorite was chosen as the nation’s No. 1 sports mascot based on his likeability, familiarity and several other factors. Even better, in a reversal of recent on-field fortunes, Mr. Met landed the top spot over NL East rival the Phillie Phanatic.

yellen-tommy-gun

Opening Bell: 2.1.18

J-Yellz says farewell by keeping it real; Facebook results are existential; Elon sold out of flamethrowers; Villanova student becomes millionaire by selling beer shelves in mens rooms; and more!

Jay Powell

Opening Bell: 10.30.17

It's (probably) gonna be Powell; this week is going to be nuts; whatever happens, buy the dip; how to survive getting locked in a beer cooler; and much more.

Opening Bell: 08.24.12

New York Fed Profits On AIG Bonds (WSJ) The Federal Reserve Bank of New York on Thursday sold the last toxic assets it acquired from the bailout of American International Group Inc., closing the book on its most controversial intervention during the financial crisis with a large gain to taxpayers. The regional Fed bank said it reaped $6.6 billion in profits from selling complex mortgage securities that it took on in late 2008 to stem AIG's cash bleed. Merkel Reiterates Greek Stance (WSJ) "The euro is more than a currency, it's an idea, and that's why it's so important," Ms. Merkel said at a news conference in Berlin, where she earlier met with Greek Prime Minister Antonis Samaras. "I want Greece to remain a part of the euro zone and that's what I am working on." Morgan Stanley Funds In Big Facebook Bet (WSJ) U.S. mutual funds run by Morgan Stanley, the lead underwriter in Facebook Inc.'s $16 billion initial public offering, have disproportionately high investments in the social-media company, leaving fund shareholders exposed to the stock's big drop since its May 18 IPO. New data show that eight of the top nine U.S. mutual funds with Facebook shares as a percentage of total assets are run by Morgan Stanley's asset-management arm, according to fund tracker Morningstar Inc. Don't Be Fooled By Short-Selling Bans (FT) ...the conclusions from the research are clear; these economists do not think short selling bans work. For there is precious little evidence that the ban in US markets truly halted share price declines; on the contrary, the impact was (at best) neutral, they claim. However, the ban hurt market mechanisms, as liquidity dried up. HSBC In Settlement Talks With U.S. Over Money Laundering (Bloomberg) HSBC, which is under investigation by U.S. regulators for laundering funds of sanctioned nations including Iran and Sudan, is in talks to settle the matter, two people with knowledge of the case said. The bank, Europe’s largest by market value, made a $700 million provision in July for any U.S. fines after a Senate Committee found it had given terrorists and drug cartels access to the U.S. financial system. That sum might increase, Chief Executive Officer Stuart Gulliver has said. Night of drinking, sexting and a well-placed bullet leads to prison for Oregon City man (OL) The couple drank at home and at two Oregon City area bars before their late night stop at the KC's Midway, a neighborhood watering hole where Lisa Nunes played video poker and enjoyed her 10th beer -- by her count -- of the day. Lisa Nunes spoke with a man she described as a friend, who left the bar but soon began bombarding her phone with text messages and pictures of his genitals. "I'm 54 years old. I have a relationship with my husband that's non-existent," Lisa Nunes testified. Flirting with a younger man "was exciting, she said. "I was just sexting a guy. It was no big deal," she said. Thomas Nunes, 61, said he was stunned when he saw a few of the messages and a photo. He left briefly then returned, grabbed the phone and went home. He read the all text messages and combed his wife's Facebook account looking for proof of infidelity. "I couldn't believe she was doing it right in front of my face," Nunes said. "I felt betrayed." Shaken, he said he smoked marijuana and talked to his cats for about 20 minutes to calm himself and "reason out a plan." Mitt: I’d give Fed boss the heave-ho (NewsCorp) Republican presidential candidate Mitt Romney said yesterday that if elected, he would select a new Federal Reserve chairman, replacing Ben Bernanke, countering advice Tuesday from top economic adviser Glenn Hubbard that Bernanke should be considered for a third term. Return to Gold Standard Is Seen By Some as 'Ludicrous' (CNBC) The Financial Times reported on Friday that the Republican Party plans to set up a commission to look into re-establishing the link between the dollar and gold as part of its platform to be unveiled at the party convention in Tampa Bay, Fla., next week. But analysts told CNBC that the idea would not work. “I think it’s absolutely nonsensical,” Moorad Choudhry, head of treasury at the corporate banking division of the Royal Bank of Scotland told CNBC Friday. “There’s a very good reason they unhooked it in 1971, because their deficit didn’t enable them to maintain it with the supply of gold. In fact, is there enough gold in the world to back the U.S. debt?” Money Funds Test Geithner, Bernanke As Schapiro Defeated (Bloomberg) Money-market mutual funds, an alternative to bank accounts for individuals and companies, will test the resolve of the U.S. Federal Reserve and Treasury Department to prevent another financial crisis after the $2.6 trillion industry successfully lobbied against more regulation by the Securities and Exchange Commission. Fed Governor Daniel Tarullo has said the central bank could tighten rules on banks’ borrowing from money-market funds, and Boston Fed President Eric Rosengren has said officials have the option to force banks to back their money funds with capital. The Fed and the Treasury could also work through the Financial Stability Oversight Council, a new regulatory panel formed under the Dodd-Frank Act, to seize oversight of money funds from the SEC and grant that power to the Fed. Ryan Lochte Discusses Racing Prince Harry (NBC) Lochte had never met the prince until the royal's entourage approached him that night. "His people came over to my table and said, 'Prince Harry wants to meet you,'" he said. "I was like, 'Lets meet him.' I went over there. I was fully clothed, and he says, 'You want to race me in the pool?' I took off my shirt, jumped in and we started racing." Only hours later, all of the prince’s clothes came off in a now-infamous strip-billiards incident that took place in a hotel suite. Lochte did not get the invite to play strip billiards with the prince and his friends. “He never said anything like that,’’ Lochte said. “After our race and everything, we went our separate ways. I’m kind of happy. I don’t need that.’’

Opening Bell: 02.29.12

David Loeb, a Goldman managing director who acts as a middleman between the Wall Street firm and some of its most important hedge-fund clients, is the latest Goldman official to be investigated in the insider-trading probe. As a senior Goldman salesman, Mr. Loeb deals with many technology hedge-fund employees...Known at Goldman and among clients as self-deprecating and colorful, Mr. Loeb sometimes signs his emails "cbf," for "chunky but funky."