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Opening Bell: 12.09.13

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Deutsche Bank creates new post to tighten controls (Reuters)
Deutsche Bank on Monday named 43-year-old Thomas Poppensieker as head of a new effort to tighten controls at Germany's flagship lender, reporting directly to co-Chief Executives Juergen Fitschen and Anshu Jain. The move comes as Deutsche Bank pursues an ambitious cultural transformation plan led by Fitschen and Jain, and as it works through a long list of scandals, investigations and fines that came in the wake of the financial crisis.

Paulson Extends Comeback With Merger Bets as Stocks Rally (Bloomberg)
After wrong-way bets on the U.S. recovery, the euro crisis and gold had helped cut assets by about half from the 2011 peak, his main hedge funds are posting double-digit returns. The New York-based firm’s Advantage strategy, which suffered record losses in 2011, is up 30 percent this year through November, and the Recovery fund surged 55 percent, according to two people briefed on the returns, who asked not to be identified because the information is private.

Big Investors Change U.S. Trading (WSJ)
Some of the world's biggest investors are changing the way they trade in U.S. markets in response to what they say are rising risks for institutions of their size. The strategies include conducting more "upstairs trades," in which deals are executed among big institutions, bypassing the broader market, as well as other sophisticated order-routing techniques designed to avoid pitfalls that have become increasingly apparent to investment managers. Investors say such measures are increasingly necessary because the proliferation of algorithmic trading and other structural issues, including thefragmentation of the market, are hurting their ability to get the best prices and execute large trades quickly.

My Interview With Madoff (WSJ0
The 75-year-old, dressed in beige polyester pants and shirt with a matching canvas belt, showed no signs of stress. He told the occasional joke and said he was lucky to be in Butner, as it had a reputation of being "very laid back" and is kind of like a "camp." "This is as good as it gets," said Mr. Madoff.

Domestic Battery Rap Dropped In Water Pistol Case (TSG)
Giovanna Borge was busted in September following a confrontation with her beau in a Port St. Lucie apartment. Borge told officers that her boyfriend “said something to her that she did not like,” so she “took a water pistol and squirted him with water.” Following the pistol dripping, the pair tussled, with Borge claiming that her boyfriend struck her with a pillow and dumped a container of water on her head. But since Port St. Lucie Police Department officers decided that Borge was the “primary aggressor” during the September 27 incident, she was collared for “squirting water” on the victim to “antagonize and agitate him against his wishes.”

Circuit Court records show that Florida prosecutors opted not to pursue the misdemeanor charge against Borge, who had been ordered to not come closer than 50 feet to her boyfriend, whom she had dated for a year.
Budget Deal in U.S. Would Reduce Automatic Spending Cuts (Bloomberg)
U.S. budget negotiators are nearing a deal to trim automatic spending cuts that might break a three-year cycle of failed fiscal talks in Washington...The deal being crafted doesn’t slow the growth of the national debt and doesn’t rein in the corporate tax breaks Democrats targeted for elimination. The accord also wouldn’t fully replace the automatic spending cuts known as sequestration.

Hedge Funds May Rebound and Spoil Buffett's Bet (WSJ)
Six years ago, Warren Buffett, chairman of Berkshire Hathaway Inc., made a $1 million bet with hedge-fund manager Protégé Partners that a simple stock-index fund would beat their handpicked stable of five funds of hedge funds over a decade. Then 2008 happened and the funds, though they declined, lived up to their names and trounced the market. Having reached the halfway point at the end of 2012, though, Mr. Buffett had a substantial lead, with a total return of 8.69% to just 0.13% for the masters of the universe. That looks set to widen further in 2013: Through November, a weighted index maintained by Hedge Fund Research Inc. was up by just 8.31% compared with nearly 29% for the S&P 500...The upshot of all this is that the correlation pendulum eventually will swing back with a vengeance. Whereas today a rising tide of central-bank bond buying is lifting nearly all boats in the stock market, some of those vessels aren't particularly seaworthy. Index funds can't distinguish a rotten hull from a solid one. The Oracle of Omaha has a good lead, but hedge funds may yet give him a run for his money.

Watchdog warns of chaos in competing derivatives rules (Reuters)
Failure to thrash out a common supervision of the $640 trillion global financial derivatives industry will split markets and bump up costs for end users, a top regulator said on Monday. Banks who trade interest rate swaps, credit default swaps and other derivatives are looking to the United States and the European Union to harmonize their approach to new rules aimed at making markets more transparent. Banks worry that rule clashes and overlaps will create legal uncertainties and extra compliance costs. David Wright, secretary general of the International Organization of Securities Commissions (IOSCO), an umbrella group for regulators from across the world, warned it was a "recipe for chaos" that could get messy and anti-competitive.

Kirstie Alley rants against former Scientologist Leah Remini: 'You are my enemy' (NYDN)
Alley, 62, blasted Remini over the "King of Queens" actress' comments about Scientology. "First of all, I just want everyone to know I have hundreds of friends who have come into Scientology and left Scientology," Alley said on "The Howard Stern Show" Wednesday. "You're not shunned, you're not chased. All that stuff's bulls-t." "When you're generalizing and when your goal is to malign and to say things about an entire group…when you decide to blanket statement that Scientology is evil, you are my enemy," Alley continued. "I have blocked her on Twitter," Alley concluded.

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SAC’s Cohen May Face SEC Suit as Deposition Hurts Case (Bloomberg) U.S. investigators have subpoenaed a 2011 deposition of SAC Capital Advisors LP founder Steven Cohen, whose sworn statements on insider-trading compliance may hurt him as he tries to persuade regulators not to file a lawsuit with the potential to shut his $14 billion firm. The SEC told the hedge fund Nov. 20 that it planned to sue SAC for securities fraud and so-called control-person liability for failing to supervise employees. The same day, the agency accused an ex-SAC portfolio manager and his hedge-fund unit of insider trading for persuading Cohen, 56, to make $700 million in illegal trades. Prosecutors also indicted the manager. Cohen’s testimony, reviewed by Bloomberg News, establishes his personal control over the unit, CR Intrinsic, and records his unfamiliarity with his firm’s compliance and ethics policies on insider trading. “I’ve read the compliance manual, but I don’t remember exactly what it says,” Cohen said. Morgan Stanley Strives to Coordinate 2 Departments Often at Odds (Dealbook) Traditionally, traders and investment bankers think of themselves as the elite of Wall Street and look down on the retail business, seeing it as pedestrian...Yet since Morgan Stanley moved to acquire control of the Smith Barney brokerage business from Citigroup in 2009, the balance of power has shifted to wealth management, which now accounts for almost 52 percent of the company’s earnings, up from roughly 16 percent in 2006. Paulson Leads Funds to Bermuda Tax Dodge Aiding Billionaires (Bloomberg) A decade after the U.S. Internal Revenue Service threatened to crack down on what it said were abuses by hedge-fund backed reinsurers, more high-profile money managers are setting up shop in tax havens. Paulson, SAC Capital Advisors LP’s Steven A. Cohen and Third Point LLC’s Daniel Loeb have started Bermuda reinsurance companies since 2011, following a similar Cayman Islands venture by Greenlight Capital Inc.’s David Einhorn. Options Activity Questioned Again (WSJ) Over the past year, unusually large positions were established shortly in advance of news that moved shares of Nexen Inc., Youku Inc., Human Genome Sciences Inc., Constellation Brands Inc. and, most recently, CBS Corp. All turned profitable after the news. A spokeswoman for the SEC, which regulates stock and options trading, said the agency would neither confirm nor deny the existence of inquiries into trading tied to those companies. No charges have been filed in the Heinz case, which was linked to a Swiss trading account, but the move to freeze the assets is one of the fastest enforcement actions ever filed by the agency, according to officials. The SEC said Friday that the timing and size of the trades were highly suspicious given the account had no history of trading in Heinz securities in the last six months. Prosecutors, Shifting Strategy, Build New Wall Street Cases (Dealbook) Criticized for letting Wall Street off the hook after the financial crisis, the Justice Department is building a new model for prosecuting big banks. In a recent round of actions that shook the financial industry, the government pushed for guilty pleas, rather than just the usual fines and reforms. Prosecutors now aim to apply the approach broadly to financial fraud cases, according to officials involved in the investigations...The new strategy first materialized in recent settlements with UBS and the Royal Bank of Scotland, which were accused of manipulating interest rates to bolster profit. As part of a broader deal, the banks’ Japanese subsidiaries pleaded guilty to felony wire fraud. Russians Wade Into the Snow to Seek Treasure From the Sky (NYT) Ever since the meteor exploded somewhere over this impoverished Siberian town, Larisa V. Briyukova wondered what to do with the fist-size stone she found under a hole in the roof tiles of her woodshed. On Monday, a stranger knocked on her door, offering about $60, Ms. Briyukova said. After some haggling, they settled on a price of $230. A few hours later, another man pulled up, looked at the hole in the roof and offered $1,300. “Now I regret selling it,” said Ms. Briyukova, a 43-year-old homemaker. “But then, who knows? The police might have come and taken it away anyway.” On Friday, terror rained from the skies, blowing out windows and scaring people over an enormous swath of Siberia. But by Monday, for many people what fell from the sky had turned to pure gold, and it touched off a rush to retrieve the fragments, many buried in deep February snows. Many of those out prospecting looked a lot like Sasha Zarezina, 8, who happily plunged into a snowbank here in this village of a thousand, laughing, kicking and throwing up plumes of powdery snow. Then she stopped, bent over and started to dig. “I found one!” she yelled. A warm breath and a rub on her pants later, a small black pebble, oval like a river rock, charred and smooth, was freed of ice. While trade in material from meteorites is largely illegal, there is a flourishing global market, with fragments widely available for sale on the Internet, usually at modest prices. At least one from the recent meteor was available on eBay on Monday for $32, and there is a Web site called Star-bits.com devoted to the trade — much to the displeasure of scientists and the countries where the objects were found. UK's Lloyds fined $6.7 million for mis-sold insurance (Reuters) Britain's financial regulator on Tuesday fined Lloyds Banking Group 4.3 million pounds ($6.7 million) for failing to handle complaints relating to insurance sold on loans and mortgages properly. The Financial Services Authority (FSA) said failings in the bank's systems and controls resulted in up to 140,000 customers experiencing delays in receiving compensation for being mis-sold payment protection insurance (PPI). Horsemeat Scandal Draws in Nestlé (FT) Switzerland-based Nestle on Monday removed pasta meals from shelves in Italy and Spain and suspended deliveries of all processed products containing meat from German supplier, H.J. Schypke, after tests revealed traces of horse DNA above 1 per cent. Nestle said it had informed the authorities. Is Berlusconi Getting a Poll Bounce From Tax Evaders? (CNBC) The media mogul, who has been convicted of tax fraud, has promised to introduce a tax amnesty for evaders if elected and to abolish the real estate tax. Swelling U.S. Labor Force Keeps Fed at Ease (Bloomberg) In the short run, the larger labor force will have an unfortunate side effect: It will slow the fall in unemployment. Mellman sees the jobless rate dropping to 7.5 percent by year- end from 7.9 percent now. It fell 0.7 percentage point in 2012. In the longer run, a bigger supply of labor is good news because it swells the pool of Americans available and willing to work, enhancing the economy’s potential to grow, according to Julie Hotchkiss, a policy adviser at the Federal Reserve Bank of Atlanta. It also has a silver lining for investors. The gradual fall in unemployment will allow policy makers to keep monetary policy looser for longer without having to worry about igniting a wage- driven rise in inflation. Couple Getting Affectionate Drive Through Home (WO) "She told the investigating trooper that her and the boyfriend were getting a little amorous and the trooper suspects that's probably why she lost control of the vehicle," said Florida Highway Patrol spokeswoman Kim Montes. Walker lost control of the vehicle and slammed into an unoccupied home. The vehicle went all the way through the house. The impact was so dramatic, the pressure blew a window in another part of the house out. Florida Highway Patrol troopers said Walker was injured when debris fell inside the vehicle. She was taken to Halifax Medical Center to be checked out. Her boyfriend, Charles Phillips, was not hurt.

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