Opening Bell: 01.27.14

Author:
Updated:
Original:

ICAP Poised to Lose Central Role in Helping Setting Benchmark Rate (WSJ)
Market officials plan as soon as Monday to alter the methodology used daily to calculate the benchmark, known as ISDAfix, cutting London-based ICAP out of its longtime role in helping calculate it, according to people familiar with the decision. The International Swaps and Derivatives Association, which oversees the ISDAfix benchmark, expects to implement the changes this week, the people said. The benchmark is used widely, in areas such as setting payout rates on pension funds, determining the cost of real-estate loans and valuing contracts settled between banks and institutional and wealthy investors. People familiar with ISDA's plans say banks will no longer submit information about bids and offers on U.S. dollar-based interest-rate swaps to ICAP to help calculate the benchmark. Nor will banks rely as heavily as they do now on ICAP-generated trading data as a reference point for their submissions, the people say. Banks will now determine submissions based on data sources that won't necessarily include trades executed through ICAP, such as trades executed with other banks. The banks will send interest-rate information directly to Thomson Reuters Corp., which currently calculates and publishes the ISDAfix benchmark.

Pot Stocks May Go Up In Smoke (NYP)
The sudden US investor interest in marijuana-related stocks — some having soared as much as 1,700 percent in value in recent weeks — may be growing as recreational and medical use of pot is legalized and debated nationwide. But stock pickers and regulators issue this sober warning — these mostly pink sheet and over-the-counter “pot” stocks, a total of about 35 listings, could go up in smoke. And some pot-stock promoters are scammers trying to go legit in a dodgy industry, critics say. “Most of these stocks are not good investments, but they are great for trading,” said Alan Brochstein, a widely followed “pot” stock expert who estimates their total market cap today at $5.5 billion based on converting all securities, like convertible notes or preferred stock, in the capital structure. “The demand is high and supply low, leaving ridiculous valuations,” Brochstein said.

Justice Department Inquiry Takes Aim at Banks’ Business With Payday Lenders (Dealbook)
The Justice Department is weighing civil and criminal actions against dozens of banks, sending out subpoenas to more than 50 payment processors and the banks that do business with them, according to government officials. In the new initiative, called “Operation Choke Point,” the agency is scrutinizing banks both big and small over whether they, in exchange for handsome fees, enable businesses to illegally siphon billions of dollars from consumers’ checking accounts, according to state and federal officials briefed on the investigation.

Securities Lawsuits Are On The Rise (WSJ)
Stockholders filed 234 federal securities class-action suits against U.S. companies last year, the most since 2008, according to a report by NERA Economic Consulting. Federal courts approved shareholder settlements valued at a combined $6.5 billion last year, nearly doubling 2012's total, NERA said. The average settlement hit a record $55 million last year, after excluding certain cases that can skew the total.

Growing beard popularity shaves P&G sales (AP)
The US consumer giant, fresh off a recent corner office shakeup and already facing a battle for market share in shampoo, said second-quarter earnings were marred by the growing preference of men for moustaches and beards, which hit sales in its "grooming" segment...Chief financial officer Jon Moeller characterized the latest round of results as on par with expectations. But he cited three areas in need of improvement: skin care, where P&G's Oil of Olay line has lagged hopes; shampoo, where several campaigns around the Pantene line have underperformed amid discounting by rival Unilever; and grooming. "Grooming is really a story about the market," said Moeller, who alluded to the mainstreaming of the three-day stubble "hipster" look in the US and other developed markets. The most recent quarter included the effects of "Movember," a health promotion in November that urges men to grow out their moustaches and beards to raise awarness of prostate cancer. The beard moving weighed on P&G's Gillette razors and shaving cream and Braun electric razors. But all is not lost for P&G in grooming, Moeller said. "While the incidence of facial shaving is somewhat down, the incidence of body shaving is up, and we can take advantage of that and plan to do that as well."

Elephant Preserve Planned in California for 'Near-Wild' Herd (WSJ)
Many elephants in U.S. zoos have the same problem as visitors who gawk at them: They are fat. "The general public are familiar with Disney and the tale of Dumbo," said Deborah Olson, executive director of the International Elephant Foundation, a conservation group. "They're drawn as round creatures, so the general public has this conception that they're round instead of what they truly look like in the wild." But now there is hope. In the rural, rolling hills of Northern California, plans are under way for a 4,900-acre preserve that would keep African elephants healthy, in shape and breeding. Part fat farm and part laboratory, the elephant preserve would start with three to five elephants and let them grow into a herd of 12 to 15 over two decades...The proposal highlights a trend in elephant husbandry of providing more space to captive animals. A recent study found that three-fourths of North American zoo elephants were overweight. The conclusion was drawn by researchers who made their determinations in part by studying the size and shape of the pachyderms' posteriors. They had too much junk in the trunk.

Yellen’s First Challenge: Coping With Too-Low Inflation (Bloomberg)
One of Janet Yellen’s first challenges as Federal Reserve chairman is generating enough inflation to meet the central bank’s target of 2 percent. Policy makers have failed to attain their goal for almost two years and now are paring the pace of their bond buying. Inflation rose at a 0.9 percent rate for the 12 months ending in November, according to the central bank’s preferred measure. The last time prices were climbing at or above 2 percent was in April 2012.

Lagarde Cautions Davos on Global Deflation Risk (Bloomberg)
Lagarde’s concern springs from her experience as an eyewitness to the spread of the U.S. mortgage meltdown to banks including France’s BNP Paribas SA and an understanding of how freely money traverses borders. As officials from the U.S. and Europe exuded optimism in Davos last week, Lagarde cautioned that progress is unbalanced, with still “massive unemployment” worldwide even as some markets look “hot.” “In case there was a shock, which is something we have to consider and imagine -- not that it is in the cards yet -- then we have the risk of deflation,” Lagarde said Jan. 23 at a forum in Davos. “What the crisis has taught us is that we need to be extremely vigilant and expect bubbles from places that we don’t anticipate.”

Bank of America's trading practices have been probed, filing shows (Reuters)
The U.S. Department of Justice and the Commodity Futures Trading Commission have both held investigations into whether Bank of America engaged in improper trading by doing its own futures trades ahead of executing large orders for clients, according to a regulatory filing...Reuters has since learned that Bank of America's trading practices regarding Fannie and Freddie are the subject of probes, and that the investigations are ongoing.

Boyfriend colludes with police for arresting wedding proposal to girlfriend (Metro)
Matt Van Vliet’s unsuspecting girlfriend Samantha Labo was in tears while he was apparently being handcuffed by police in Connecticut, United States, before discovering it was all a sneaky ruse. Officers pulled the couple over while they were travelling in New London and asked them to step out of their car. Mr Van Vliet was then taken to one side and as he appeared to be getting restrained his girlfriend started to cry. One of the officers then pulled a ring out of the future groom’s pocket, which was the cue for him to go and ask Ms Labo to marry him. ‘I went from being the most terrified I’ve ever been to probably the most ecstatic,’ she told Channel 9.

Related

Opening/Hurricane Bell: 10.29.12

Bracing for Storm, U.S. Stock Markets to Close (Dealbook) All United States stock and options markets will close on Monday as Hurricane Sandy approaches, reversing course as Wall Street braces for the storm to barrel through the heart of the country’s financial center. The decision, made late Sunday night, leaves the American stock markets closed for weather conditions for the first time in nearly three decades. The New York Stock Exchange had previously planned on closing only its physical trading floor, while allowing for trading on its Arca electronic exchange. It has now decided to halt all trading. The Nasdaq and BATS stock markets, which are built on electronic trading, also decided to close. The CME Group, which operates the Nymex commodities exchange, said earlier on Sunday that it would close its physical trading floor on Monday, though trading would continue on its electronic trading platforms. The Securities Industry and Financial Markets Association, or Sifma, said in an e-mailed statement that it was calling for bond trading, which is all done electronically, to close at noon Monday, though it left the final decision to member firms. The N.Y.S.E. last closed trading for weather reasons in 1985, when Hurricane Gloria lashed the metropolitan area. Markets Go Dark Ahead Of Storm (WSJ) Customers had complained to the exchanges and to the Securities and Exchange Commission that partial closures of the market would be too complicated, according to people with knowledge of the matter. US Stock Markets To Possibly Stay Closed Through Tuesday (Reuters) In a statement, the company said that "the dangerous conditions developing as a result of Hurricane Sandy will make it extremely difficult to ensure the safety of our people and communities, and safety must be our first priority." Citigroup, Goldman Sachs Shut Some NYC Offices for Storm (Bloomberg) Citigroup and and Goldman Sachs are among Wall Street firms planning to shift operations to other cities and have staff work from home as Hurricane Sandy’s arrival in New York forces evacuations. Employees at Citigroup, the third-biggest U.S. bank by assets, won’t be able to enter Lower Manhattan offices on Greenwich Street and Wall Street, which include the main trading floor, according to a memo sent to workers and confirmed by Shannon Bell, a spokeswoman. Goldman Sachs, whose corporate headquarters at 200 West St. is also located in an evacuation zone, told the staff in an internal memo that most of them will work from home...European-based firms including Deutsche Bank AG, Credit Suisse Group AG and UBS AG, which have offices outside of the mandatory evacuation zone, are making arrangements to provide transportation and hotels for workers. Christie: "Don't Be Stupid" (AP) A year after telling New Jersey residents to "Get the hell off the beach" as Hurricane Irene approached, Gov. Chris Christie has a new message for people on the coastline: "Don't be stupid — get out," Christie said Sunday afternoon at a news conference, where he updated residents on the status of the huge storm bearing down on the state. Stock Pickers Game The Fiscal Cliff (WSJ) A number of companies are seeking to get ahead of the tax increases by paying out big special dividends before Dec. 31. In the past two weeks, at least four Standard & Poor's 500 companies have announced special payouts, including a $750 million payout by casino operator Wynn Resorts Ltd., a $1.1 billion dividend from hospital operator HCA Holdings Inc. and a $1.6 billion dividend from LyondellBasell Industries NV, a New York-listed chemicals group. The game for investors is to figure out which companies could be next. Jay Wong, a Los Angeles-based portfolio manager for Payden & Rydel, a money manager with $75 billion under management, is on high alert for potential payouts. He increased his stake in Wynn earlier this month in anticipation of a special dividend and is looking for others. He declined to be specific, citing a desire to not give his trades away. Occupy Wall Street's Stacey Hessler Splits From Husband (NYP, earlier) The filing lists Curtiss’ occupation as banker and says he earns $65,000 a year. Her job is listed in court papers as “protester” and her employer as “Occupy Wall Street.” Annual salary: $0. Divorce papers cite “irreconcilable differences” for the split, saying the 19-year marriage “is irretrievably broken.” One OWS protester who knows her says that Stacey’s devotion to the movement caused the divorce but that she was unfazed by the breakup. “She didn’t seem sad about any of it,” the source said. “It was just so matter-of-fact.” As recently as last month, Stacey, 39, was sleeping in front of a Wells Fargo bank branch in the Financial District near Zuccotti Park, but it appears she scrambled back home to suburban DeLand to finalize the divorce. Wearing her professional-protester uniform — a bandana and patchwork clothes — she refused to say what her plans were or when she’d be leaving the house. But she did respond when a Post reporter asked about a YouTube video showing her making out with another protester during an Occupy “Kiss In” on Valentine’s Day. “I actually made out with four guys,” she said, laughing wildly. Governments to debate 50 billion euro cut to EU budget (Reuters) The cut will be proposed in the latest EU negotiating text on the bloc's spending plan for 2014-2020, but is unlikely to be deep enough to satisfy Britain, Germany, France and other net budget contributors. They want strict limits on EU spending to reflect the austerity imposed by national governments to reduce debt, and called for cuts of 100-200 billion euros to the total proposed by the EU's executive, the European Commission. The proposal is also likely to anger Poland and other former communist EU countries who are the major beneficiaries of EU funds, and oppose any cuts to the Commission's blueprint which they argue is vital for their future economic growth. "As I see it now, the reduction from the Commission proposal will be 50 billion euros plus. That will be the basis for negotiations," said the source, who spoke on condition of anonymity. Greek Journalist Held Over List of Swiss-Account Holders (Bloomberg) Kostas Vaxevanis, editor of the Greek magazine Hot Doc, was arrested in Athens today, according to a message posted on his Twitter account at 11 a.m. local time. An arrest warrant was issued yesterday after the magazine published what’s been dubbed the “Lagarde list,” an electronic file given to Greece in 2010 by then-French Finance Minister Christine Lagarde of about 2,000 Greeks with Swiss accounts. Insurers Prepare For Impact Of Hurricane Sandy (Reuters) Had Sandy hit in 2011, it may have been more of a problem for the insurance industry, which dealt with record-breaking losses around the world last year, mostly from U.S. tornadoes and Asia-Pacific earthquakes. But in 2012, most insurers' disaster losses are down substantially, leaving them with more capacity to absorb the billions of dollars in costs some expect from Hurricane Sandy. "In terms of losses, I certainly don't think it's going to be the largest loss of the last 100 years," Tom Larsen, senior vice president of Eqecat, said in an interview late Friday. "It's not an end-of-days scenario." SEC Weighs Bringing Back Fractions in Stock Prices (WSJ) The move would at least partly undo an 11-year-old rule that replaced fractions of a dollar in stock prices, like 1/8 and 1/16, with pennies. The idea of that change was to trim investors' trading costs: One-cent increments can lead to narrower gaps between the prices at which brokers buy and sell shares—potentially reducing their opportunity to shave off profits. Those championing the fraction's return say it would spur securities firms to buy and sell more shares of some companies by making it more profitable for them to do so. Opponents say fractions would increase trading costs for investors with little or no benefit to companies. UBS, RBS Traders Suspended as Rates Probe Goes Beyond Libor (Bloomberg) UBS and Royal Bank of Scotland suspended more than three traders in Singapore as regulators investigating Libor-rigging turn their attention to the rates used to set prices on foreign exchange derivatives. At least two foreign-exchange traders at UBS, Switzerland’s largest bank, have been put on leave as part of an internal probe into the manipulation of non-deliverable forwards, a derivative traders use to speculate on the movement of currencies that are subject to domestic foreign exchange restrictions, according to a person with direct knowledge of the operation. Edinburgh-based RBS also put Ken Choy, a director in its emerging markets foreign exchange trading unit, on leave, a person briefed on the matter said on Oct. 26. Women who knew 'cannibal cop' worried they were on his 'cook list' (NYP) “Freaked-out” female acquaintances of would-be cannibal cop Gilberto “Gil” Valle yesterday wondered whether they were on his alleged list of 100 ladies to kidnap, rape, torture, cook — and eat. “I was so shaken when I found out it was him,” said Beverly Seiger, who knew Valle, 28, from the Forest Hills, Queens, park he visited nightly with his wife and baby daughter. “I used to walk his dog. I’ve been to his house many times. He’s been to my house,” she said of Valle, whom federal prosecutors accuse of plotting with three fiendish pals to kidnap, cook and consume scores of females. “I don’t want to be on his list!” Seiger said. “I’m so thin, he would use me as toothpicks. “The women in this neighborhood now are freaked out,” she said. Another female resident asked a reporter, “Are we on this list? “I fit in an oven,” she said, referring to Valle’s alleged boasting online of having an oven “big enough to fit one of these girls if I folded their legs.”

Opening Bell: 11.25.15

"Hedge funds stalk battered corner of bond world"; Goldman bankers join Uber; Private equity goes after Premier League; Baby Cheesus; and more.