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Opening Bell: 11.11.13

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Big Banks May Block Traders From Chat Rooms (WSJ)
JP Morgan and Credit Suisse are discussing internally whether to disable computerized chat rooms that electronically link traders across multiple banks and are used by tens of thousands of employees globally, according to people familiar with the discussions. Royal Bank of Scotland Group, Barclays, UBS, and Citigroup among others, also are reviewing chat-room use and standards for controlling and monitoring all electronic communications, according to people at those and other banks and firms that do business with them. Chat rooms have become integral to the way traders communicate with one another and clients. Trading desks around the world that buy and sell currencies, commodities, equities and fixed-income assets rely, at least in part, on so-called multidealer chat rooms, which link multiple banks and their clients primarily through their Bloomberg terminals. But a series of regulatory probes into interest-rate rigging and possible manipulation of other markets has turned a spotlight on the chat rooms. The potential for hefty fines and damage to their reputations has some banks considering what would amount to a radical overhaul of the way traders conduct their business.

SAC plea deal on ice as judge delays decision (NYP)
The hedge-fund giant pleaded guilty Friday to insider-trading charges and agreed to pay $900 million in criminal penalties to settle a long-running probe by the Justice Department. But in a surprise move before a packed courtroom, Manhattan federal judge Laura Swain said she would hold off until March on whether to approve the plea deal. Swain said she wanted to see pre-sentencing reports prepared by the probation department before allowing the landmark settlement to proceed...Swain set the sentencing for March 14 — after two more insider trading trials involving former SAC money managers. Michael Steinberg goes on trial Nov. 18, while Mathew Martoma’s case is set for January.

Regulators urged to probe metals markets abuse (FT)
Britain’s parliamentary financial watchdog has urged regulators to probe potential abuses in metals markets as deeply as they are investigating the ongoing scandals over foreign exchange and Libor benchmark interest rates.
Andrew Tyrie, chairman of the Treasury select committee, told the Financial Times that MPs were conscious of growing concerns that the manipulation of rates – already exposed in the Libor affair, and now under investigation in a mounting regulatory probe into potential forex abuses – may go well beyond those areas and into metals markets.

Twitter Puts Spotlight on How Firms Burnish Results (WSJ)
The strong interest in Twitter's initial public offering brought back to the fore the accounting methods that companies can use to burnish otherwise lackluster results. Twitter has recorded a loss of more than $130 million this year using traditional accounting measures. But after stripping out several costs, Twitter posted a nine-month profit of almost $31 million...Today, it is common for tech companies to exclude large stock payments to employees from preferred measurements. Some also remove other costs, such as restructuring or acquisition expenses. Some companies even tout nonfinancial measurements, such as an increase in the user base. The SEC is watching that practice. "Our staff's concern has been the impact on investors of the sheer magnitude of some of these metrics," SEC Chairman Mary Jo White said in a speech Wednesday. For investors "it can be hard not to think that these big numbers will inevitably translate into big profits for the company. But the connection may not necessarily be there." She didn't name any companies.

Edwin Tobergta, Sentenced To 11 Months For Sex With Pool Raft, Also Had Sex With Pumpkin (HP)
Edwin Tobergta of Hamilton, Ohio, is now famous as the man caught having sex with a pool raft. His sentencing hearing this week offered a little insight into his proclivities. One thing that stands out: He once pleasured himself with a pumpkin. Tobergta was sentenced this week to 11 months in prison for defiling the inflatable raft, according to WXIX. He committed the act in June, in front of children. At an earlier court session, Tobergta plead guilty to public indecency. This is the second time Tobergta has been caught in flagrante delicto with an inflatable pool toy. The same thing happened in 2011. But a less reported aspect of Tobergta's checkered history with the law occurred in 2002, when he was arrested for allegedly diddling an inflatable pumpkin that was part of a Halloween display...Tobergta apologized in court before being sentenced. "I do want to apologize for my actions, I'm sorry," he said. "I'm ready to get my life together and quit all this nonsense."

'Long-only' Funds Lose Their Edge (WSJ)
On the heels of a multiyear market rally, a slew of hedge-fund firms are launching "long-only" funds betting that at least some stocks have further to climb. The moves come amid a brutal stretch for short bets against companies, traditionally a key strategy for hedge funds. The new funds also represent a shift by hedge-fund managers—known for their sophisticated tactics and exclusivity—into the kind of old-fashioned stock picking more associated with Main Street mutual funds. But some wonder if the latest craze is merely a grab for fees, or perhaps even a sign of the top of the stock market. The new entrants to the field include several firms with ties to Julian Robertson's investment firm Tiger Management, including Tiger Global Management and Coatue Management. Tiger Management-backed Hound Partners is planning to launch one of its own next year, according to people familiar with the firm.

Founder: Some women can’t wear Lululemon yoga pants (NYP)
Wilson was on Bloomberg TV for a promotional interview on a new meditation initiative created by Wilson and his wife, former Lululemon head designer Shannon Wilson. Once the promo drifted toward the company and how it was faring over the sheer yoga-pants production problems, Chip Wilson spread himself a little thin.
Wilson first stuck to his knitting, saying, “There’s no doubt we made a mistake,” adding that it’s “almost impossible’ to “build quality control” to cover all situations. So far, so good. But, alas, he followed up with: “Quite frankly, some women’s bodies just don’t work for it. . . . It’s about rubbing through the thighs and how much pressure there is.” When the interviewer pressed, “Not every woman can wear a Lululemon pant?” Wilson said, “I think they can — it’s how you use it.”

German Savings Banks Flex Political Muscle (WSJ)
Germany's public savings banks have become the most powerful little lenders in the world, exploiting their political clout to punch loopholes into Europe's postcrisis banking laws. Untouched by the image problems that have beset big U.S. and European lenders, the banks, known as Sparkassen, can count on political ties reaching from local councils all the way to the federal government in Berlin and the European Parliament.

Pay Raises for Bank Risk Officers in Asia Trump New York (Bloomberg)
Salaries for banks’ risk and compliance officers in Singapore and Hong Kong rose at about twice the pace of pay for similar positions at New York and London firms amid a shortage of skilled staff members, a recruiter said. Pay excluding bonuses for people who changed jobs in the Asian cities rose as much as 20 percent this year, compared with 10 percent in the Western hubs, said Neil Owen, a director for Robert Half International Inc. in London. A senior official in Singapore is paid as much as S$250,000 ($201,000) annually, compared with Hong Kong’s HK$1.8 million ($232,000), London’s 175,750 pounds ($281,000) and New York’s $323,595, data compiled by the firm show.

Hedge Fund Invests In Argentina (WSJ)
As head of a hedge fund that specializes in distressed debt, David Martinez has had lots of practice trying to figure out when an asset's value has been beaten down so much that it is a buy. He has just made an unusual call: Invest in Argentina. Mr. Martinez's investment group, Fintech Advisory, plans to buy Telecom Argentina and related assets for $960 million from Telecom Italia, TIT.MI -5.56% which is selling its Argentine unit to pay down debt. Mr. Martinez confirmed the purchase Friday. Argentina has been a cautionary tale for many investors since its 2001 default on $100 billion in sovereign debt. Since then, a husband-and-wife team of populist politicians, the late Néstor Kirchner and his wife, President Cristina Kirchner, has used higher commodity prices and public spending to get the economy back on its feet. But it has come at the cost of high inflation, price controls and growing fiscal problems.

It's not easy to land a job as a balloon handler in the Macy's Thanksgiving Day Parade (NYDN)
“Email everyone you know who works for Macy’s!” suggests Jorge Lee, 44, who scored his first balloon assignment through a friend in 2004 — and has held on tight ever since, rising through the ranks to become captain of the Elf on the Shelf balloon for this year’s Nov. 28 parade...Getting in is tough, and it’s no picnic even after scoring a spot. “It is very physical,” warns Elvia Negron-Perez, 52, from the Bronx, who landed on Julius the Sock Monkey’s balloon last year after Lee vouched for her. “I thought it was going to be easy with so many people. How heavy is a helium balloon?” The pull from the balloon lift can be 300 to 500 pounds. Factor in the cold and the wind, and the 2½-mile parade feels like a marathon. That’s why handlers must be over 18, weigh at least 120 pounds and have strong backs and knees with no heart problems. Handlers attend balloon boot camps in September and October to learn the ropes. “I recommend doing pullups, pushups, bicep and tricep workouts to get ready, because you really put your body into holding that balloon down,” says Negron-Perez.

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Banks Must Cut Deeper to Help Stock Prices, McKinsey Says (Bloomberg) Banks must make deeper and more sweeping cost reductions if they want to restore profitability levels that are acceptable to investors, McKinsey & Co. said in an annual review of the industry. “It has to go a lot further,” Toos Daruvala, a director in the consulting firm’s North American banking practice and a co-author of the report, said yesterday in a phone interview. “Banks have done quite a lot on cost-cutting but frankly the environment has deteriorated over the last year” because of economic weakness, he said. Argentina rejects Singer’s $20M in ransom for ship’s release (NYP) At a court hearing today in Ghana, where hedge fund manager Paul Singer’s lawyers are holding the ARA Libertad hostage, a lawyer for Argentina argued that Singer had no right to detain the ship because it’s a military vessel and immune from seizure. Lawyer Larry Otoo called the seizure — a move by Singer to force Argentina to repay a $1.6 billion debt he says he’s owed — an embarrassment to Ghana and demanded the ship’s immediate return. The court is expected to rule Thursday on whether to release the ship. Singer, the head of hedge fund giant Elliot Management, is seeking to recoup some of the $600 million in bonds he purchased as Argentina was headed for default in 2001. Elliot bought the bonds at steep discounts, paying as little as 15 cents on the dollar in some cases, but has since won judgments of as much as $1.6 billion. Elliot’s NML Capital unit is pursuing Argentina’s assets all over the world in an effort to collect on its debt. In Gupta Sentencing, A Judgment Call (WSJ) Former Goldman Sachs Group Inc. director Rajat Gupta is the highest-profile of more than 70 defendants convicted of insider trading in New York federal court in the past three years. But this month he will likely receive a more lenient sentence than the 11-year-prison term given to Raj Rajaratnam, to whom Mr. Gupta provided his illegal leaks, legal experts say. The sentence may have reverberations beyond the 63-year-old Mr. Gupta, a former chief of consulting giant McKinsey & Co. It will be widely watched in executive suites nationwide because it will be among the first handed down to a major corporate figure in the recent insider-trading crackdown. Previous sentences have largely involved traders, lawyers, lower-rung corporate employees and others. Mr. Gupta, who was convicted in June of three counts of securities fraud relating to tips about Goldman and one count of conspiracy, didn't trade or profit directly from his illegal tips. Before the conviction, he had a long and stellar career in corporate America and philanthropy. All this will be balanced against the nature of the crimes and the need to discourage others from similar offenses when U.S. District Judge Jed Rakoff hands down his sentence, scheduled for Oct. 24. Judge Rakoff often imposes sentences further below federal sentencing guidelines than some other judges do, according to a Wall Street Journal analysis...Since 2010, Judge Rakoff has imposed an average sentence of 21 months on insider-trading defendants who didn't cooperate with prosecutors—about 38% below the guideline minimum, according to the Journal analysis. By comparison, U.S. District Judge Richard Sullivan issued seven sentences in that period averaging 6.3% below the guideline minimum. U.S. District Judge Paul Crotty issued three sentences at 20.3% less than the minimum. Goldman Pushes On Limits In Volcker Rule (WSJ) Some executives at the New York company believe they have found a way to extricate the credit funds from proposed limits on how much can be invested in hedge funds and private-equity funds, according to people briefed on the efforts. The Volcker rule caps a bank's total investments in hedge funds and private-equity funds at 3% of its so-called Tier-1 capital. It also prevents any single bank from accounting for more than 3% of a fund's investments. Those limits are among the biggest components of the rule, named after former Federal Reserve Chairman Paul Volcker and designed to curtail risk-taking among financial firms. The rule is the most contentious part of the Dodd-Frank financial-overhaul law of 2010 but, like much of the rest of the legislation, the details of its implementation are still being worked out. Credit funds lend to companies that might not otherwise get financing, such as companies backed by private-equity firms, and tend to hold their investments to maturity while using a limited amount of leverage. Goldman has argued in meetings with regulators and in letters to them that these funds function like banks, just with a different structure, according to public records and the people familiar with the efforts. Report: 20% of US Firms Cook the Books During Earnings (CNBC) ...a new report by finance professors at Emory and Duke University raises questions about the quality of earnings in general. In an anonymous survey of CFOs last year, the study found that at least 20% of companies are "managing" earnings and using aggressive accounting methods to legally alter the outcome of their earnings reports. Of the 20% of companies that manipulated their earnings to hit a target, Graham says, a surprising 40% did so to the downside, not the upside, to pad and improve future quarters' earnings. Banks Chasing Asian Millionaires Create Singapore’s Canary Wharf (Bloomberg) Singapore’s Marina Bay area is emerging as the city’s new financial hub, with banks including Standard Chartered Plc and Barclays taking bigger offices as they pursue Asia’s expanding ranks of millionaires. Corrections & Amplifications (WSJ via Lauren Tara LaCapra) "Annie Hubbard, the woman appearing alongside Goldman Sachs's chief financial officer, Harvey Schwartz, in a photograph with a page-one article about Goldman on Tuesday, was incorrectly identified as his wife. Mr. Schwartz isn't married." Hulk Hogan ‘devastated’ by leak of sex tape filmed six years ago with friend’s wife Heather Clem (NYDN) The wrestling star tried to explain the kinky love triangle to Howard Stern Tuesday using a thinly veiled euphemism. “Let’s say I’ve been doing laundry, brother, for this person forever, and all of a sudden this person hates the way I do laundry. And that person says, ‘You suck. I hate you. F-you every single day. I hate the way you do laundry. I’m going to find somebody else to do laundry. Somebody younger, faster, stronger,’” he said, clearly taking a jab at his ex-wife, who he was still married to at the time of the taping. “But my buddy, you know, him and his girl say, ‘Hey, you can do our laundry any time you want!’ Both of them are saying that,” he told Stern. “Finally after the person I was doing laundry with for millions and millions of years left, and all of a sudden there was nobody there to do laundry, I was depressed… I go to my buddy’s house and he says, ‘Hey man you can do this other person’s laundry that I’m partners with.’ I said, 'Sure.’” Official Warmth And Public Rage For A German Leader In Athens (NYT) ...even as Ms. Merkel said that she had come as a “good friend and a real partner,” not a “taskmaster or teacher to give grades,” the approximately 40,000 Greeks who took to the streets in protest (a rather modest number, by Greek standards) treated the visit as a provocation by the arch-nemesis in the euro crisis whose austerity medicine is obliterating the Greek middle class. Some banners read “Don’t cry for us Mrs. Merkel” and “Merkel, you are not welcome here.” A small group of protesters burned a flag bearing the Nazi swastika, while a handful of protesters dressed in Nazi-style uniforms drew cheers of approval as they rode a small vehicle past a police cordon. Variety Being Sold To Penske, Third Point (Reuters) Variety, the century-old entertainment trade newspaper once considered the bible of the movie industry, is being sold to online publisher Jay Penske and Third Point LLC for about $25 million, two sources with knowledge of the deal told Reuters. Penske and Third Point have struck a deal to buy the money-losing, 107-year-old newspaper from medical and technical publisher Reed Elsevier, which put it up for sale in March, the sources said. IMF warns eurozone on capital flight (FT) In its global financial stability report, the IMF concluded that capital flight from the eurozone’s periphery to the bloc’s core, driven by fears of a break-up of the currency union, had sparked “extreme fragmentation” of the euro area’s funding markets. The fund said this was causing renewed pressure for banks to shrink their balance sheets, particularly those in countries with fiscal woes. A Fat, Mustachioed Orphan Finds a Home (NYT) How do you transport a 234-pound baby to New York City? If he’s a 15-week-old walrus rescued from the open ocean off Alaska, the answer is a jumbo-size crate aboard a FedEx cargo jet, accompanied by a veterinarian and a handler. “If he’s calm and comfortable, no worries,” said Jon Forrest Dohlin, director of the New York Aquarium, which will receive the walrus calf, named Mitik, on Thursday. “But his needs and comfort come first. So he may very well travel with his head in our keeper’s lap.” Since late July, Mitik and a second orphaned walrus, Pakak, have been nursed to health with bottle feedings and exercise at the Alaska SeaLife Center, an aquarium in Seward that conducts research and responds to strandings of marine mammals. (Pakak, nicknamed Pak, will arrive at the Indianapolis Zoo on Thursday.) Mitik — or Mit, for short — was weak from illness and considerably smaller than Pakak when he was found by a hunting vessel several miles offshore. Mit initially suffered from bladder problems and could not take a bottle, requiring both a catheter and feeding tube. But he is now sucking assertively from a bottle and putting on a pound a day...With his multiple chins and doleful expression, Mit is also exhibiting an undeniable pluck that should serve him well in his new surroundings. Martha Hiatt, the aquarium’s behavioral husbandry supervisor, traveled to Alaska in September to help care for him. At first, she said, Pakak totally dominated him, but no longer. “If Mit is resting with his head on my lap, sucking my fingers, looking sweetly into my eyes, and Pak comes anywhere near us, he pops up, yells at Pak and tries to head-butt him,” she said. “Then he’ll turn to me and be all cuddly again. We say he is small, but scrappy — the perfect New Yorker.”

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