Opening Bell: 02.07.14

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Ackman naming names in new attack on Herbalife (NYP)
The hedge-fund activist called out a second high-level Herbalife distributor on Thursday for alleged actions he claims create the company’s pyramid scheme. The distributor, Doran Andry, a 22-year Herbalife distributor and member of the Chairman’s Club, “victimized thousands of recruits,” Ackman’s hedge fund, Pershing Square, claimed in a statement...Andry, who Ackman claims was the No. 1 Herbalife distributor in recent years, runs a so-called lead-generation business named Financial Success System (FSS). Andry created FSS after a similar business was sued for fraud in 2002, along with Herbalife and Andry, Pershing Square said. The case was settled for $6 million, according to the statement...Ackman’s profile on Andry is the second in a series. On Feb. 3, the hedgie profiled Shawn Dahl, another high-level distributor.

Ex-SAC Trader Found Guilty (WSJ)
New details emerged during the trial about SAC's inner workings. Several SAC employees testified that Mr. Cohen had ultimate control over trades in firmwide accounts but kept the advice he was receiving close to the vest. Some of the testimony could prove useful to the SEC in its case, with regulators getting an advance look at what SAC employees could say if they are put on the stand, legal observers said. The SEC's civil lawsuit targets Mr. Cohen directly and seeks to bar him for life from the securities industry, according to people familiar with the case. The SEC case isn't expected to resume until next month at the earliest, after a federal judge decides whether to accept SAC's guilty plea in the criminal case. Once the SEC case resumes, Mr. Cohen's administrative hearing could happen within months. Such SEC actions usually operate on much faster deadlines than do federal court cases.

Speed Traders Get An Edge (WSJ)
The traders are getting news releases from Business Wire, which distributes corporate-earnings releases and economic reports such as the Philadelphia Federal Reserve's monthly manufacturing survey, and from Marketwired, a Toronto company that distributes earnings releases and the ADP monthly employment report. Such direct access isn't illegal. By paying for direct feeds from the distributors and using high-speed algorithms to crunch data and enter orders, traders can get a fleeting—but lucrative—edge over other investors, according to traders and people familiar with the practice. The reason: tiny lags between the time the distributors release the news and when media outlets send them out to the public, including other investors.

Investors Shift Record Amounts From U.S. Stocks to Bonds (Bloomberg)
U.S. equity funds had $24 billion of outflows in the week to Feb. 5, according to a report today from the research unit of the third-largest U.S. bank. Withdrawals from stock funds worldwide totaled $28.3 billion, the report said, citing data from EPFR Global, a fund research company in Cambridge, Massachusetts. Money managers plowed $13 billion into U.S. bond funds, accounting for most of the $14.8 billion that flowed into debt worldwide. All the figures for the period are record highs.

Biden says NY airport like a 'third-world country' (AP)
Biden says if he blindfolded someone and took him to LaGuardia Airport he'd think he was in "some third-world country." Biden made the LaGuardia comment as part of a comparison with the Hong Kong airport. He says Hong Kong has the type of modern facility travelers would expect to see in the United States. His remarks came during an event Thursday in Philadelphia in which he stressed the need for infrastructure improvement. Biden focused mainly on Amtrak, which just unveiled its new Cities Sprinter electric locomotive. But he says the nation's ports and airports also need to be upgraded. The Port Authority of New York and New Jersey operates LaGuardia. It hasn't responded to a request for comment.

No Mercy: Nuns Feel Spanish Bank's Cutbacks (WSJ)
Spain's financial distress has trickled down to a secluded back office of one of its largest banks—the convent where Sister Mariuca Mesones sorts and labels the lender's outgoing mail. After Mass most mornings, she and 10 other cloistered members of the Order of St. Clare file into an L-shaped office of the Roman Catholic retreat and become bank employees. They enter data into the bank's computer network on flat-screen terminals, store documents or process refunds on unused airline tickets bought with the bank's credit cards. Their clerical jobs are part of an unusual, little-known pairing of Spanish institutions. Banco Popular Español SA, the country's fifth-largest bank by assets, has long relied on the Convent of San Juan of Penitencia, home of the St. Clare order's nuns, and about 20 other Spanish nunneries to handle routine administrative tasks. Both partners in that relationship are hurting these days. Six years after Spain's real-estate bust shredded their loan portfolios, Banco Popular and some other lenders are still shuttering offices and shedding employees. That means less pay-by-the-hour work for the nuns, according to Banco Popular and nuns at some of the convents.

Hedge funds bet on US gas shortage as cold boosts demand (FT)
An unexpected fear haunts the land of the shale bonanza story: running low on natural gas. Furnaces, utilities and power plants have guzzled trillions of cubic feet of the fuel as the U.S. slogs through what may be recorded as the coldest winter since the invention of gas futures in 1990. Hedge funds are now betting the country will face a critical shortage before spring. The wager comes with long odds but a huge possible payout. "It's been a relentless cold," says Eric Bass, managing partner at Velite Benchmark Capital Management, a Houston gas hedge fund. "This market has slowly started to realize there could potentially be an inventory problem."

Legal Troubles Barely Subdue a Bitcoin Evangelist’s Sermons (Dealbook)
These days, though, Mr. Shrem’s exploits in Bitcoin have him restricted to his parents’ home in Brooklyn, where he awaits trial on federal charges that he smoothed the way for drug transactions online. Mr. Shrem was also accused of buying marijuana himself. He has pleaded not guilty..."Given the opportunity, I will get back on the speaking circuit and be an evangelizer for Bitcoin,” he said on Thursday. “At the same time, the more high-profile you are, the more careful you have to be. It’s scary.”

Toronto Mayor Rob Ford launching YouTube show (AP)
Ford and his brother, a city councilor, are launching a YouTube series called ‘‘Ford Nation’’ that will debut Feb. 10. The mayor of Canada’s largest city asks people to ‘‘please judge me on my record, not my personal life’’ in a preview posted Thursday. Ford last year made international headlines when he admitted to having smoked crack cocaine while in a drunken stupor. He continues to draw attention for erratic behavior, but he has resisted pressure to step down and is seeking re-election. A news release from the mayor’s office promises ‘‘unfiltered’’ talk and asks viewers to submit questions to an email address. Last November the tabloid Sun News Network cancelled a ‘‘Ford Nation’’ television show after only one episode after complaining it took five hours to shoot and over 10 hours to edit. A ‘‘Ford Nation’’ radio show was also canceled. The promotion clip for the new ‘‘Ford Nation’’ show starts off with Rob asking his brother about his favorite food. ‘‘What do you eat? You've got a big belly on you. You must be eating something. What’s your favorite food?’’ Rob asks Doug.

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Opening Bell: 02.04.13

UK Regulators Could Split Banks (WSJ) U.K. Treasury chief George Osborne on Monday will announce new powers for regulators to split up banks that flout rules designed to ring-fence retail banking from riskier investment-banking activity. In a wide-ranging speech on banking in Bournemouth, England, Mr. Osborne is expected to say the new powers are needed so that taxpayers will never again be on the hook when banks fail, as they were during the financial crisis. "We're not going to repeat the mistakes of the past. In America and elsewhere, banks found ways to undermine and get around the rules," Mr. Osborne will say, according to the extracts of his speech. "We could see that again—so we are going to arm ourselves in advance. In the jargon, we will "electrify the ring fence." New Details Suggest a Defense in SAC Case (NYT) In bringing its charges, the government said that SAC not only sold out of its position, but also bet against — or shorted — the drug companies' stocks before the public announcement of the bad news. The SAC short position, according to prosecutors, allowed it to earn big profits after shares of the companies, Elan and Wyeth, plummeted. "The fund didn't merely avoid losses, it greedily schemed to profit further by shorting Elan and Wyeth stock," said April Brooks, a senior F.B.I. official in New York, during a press conference on Nov. 20, the day Mr. Martoma was arrested. Internal SAC trading records, according to people directly involved in the case, indicate that the hedge fund did not have a negative bet in place in advance of the announcement of the drug trial's disappointing results. Instead, the records indicated that SAC, through a series of trades, including a complex transaction known as an equity swap, had virtually no exposure — neither long nor short — heading into the disclosure of the drug data. Blackstone To Become Investment Bank? (FT) Blackstone, one of the world's largest alternative asset managers, has quietly secured a securities underwriting licence as its expanding capital markets operation strays into investment banking territory. The licence marks the latest stage in the transformation of big listed private equity groups as they become more broadly based alternative asset managers. Apollo and KKR , two of Blackstone's biggest rivals, also have securities underwriting licences. The move highlights the pressure listed private equity groups are under to generate new sources of fee income to satisfy their public shareholders. "The private equity business is lousy for shareholders," says the head of capital markets for one buyout firm that is not listed. Obama: more tax revenue needed to address deficit (Reuters) President Barack Obama said on Sunday more tax revenue would be needed to reduce the U.S. deficit and signaled he would push hard to get rid of loopholes such as the "carried interest" tax break enjoyed by private equity and hedge fund managers. Herbalife Is The Subject Of 'Pending' Probe (NYP) The Los Angeles-based distributor of nutritional products is the subject of a law enforcement investigation, The Post has learned. The existence of the probe emerged after the Federal Trade Commission, responding to a Freedom of Information Law request by The Post, released 192 complaints filed against Herbalife over the past seven years. New Orleans Braces From Fallout From Blackout (AP) The outage, blamed on an unspecified "abnormality" in the Superdome's power system, was an embarrassment for New Orleans, which was hosting its first Super Bowl since 2002 and was eager to show off how it has been rebuilt since Hurricane Katrina. Mayor Mitch Landrieu called Sunday night's outage "an unfortunate moment in what has been an otherwise shining Super Bowl week for the city of New Orleans." He said he expected to receive "a full after-action report from all parties involved" in the coming days...For 34 minutes, the players tried to stay loose, the fans milled about in darkened corridors, and stadium officials scrambled to figure out what went wrong. The Ravens barely hung on for a 34-31 victory over the San Francisco 49ers, needing a goal-line stand in the closing minutes to preserve the championship. "It really hurt us," Baltimore fullback Vonta Leach said. "We had lot of momentum." There is sure to be some fallout for the city and the Superdome — especially since New Orleans plans to bid for the title game in 2018, in conjunction with the 300th anniversary of its founding. Escalators stopped working and credit-card machines shut down, though auxiliary power kept the playing field and concourses from going totally dark. "We sincerely apologize for the incident," Superdome spokesman Eric Eagan said. Most fans seemed to take the outage in stride, even starting up the wave to pass the time. "So we had to spend 30 minutes in the dark? That was just more time for fans to refill their drinks," said Amanda Black of Columbus, Miss. Question of Aiding Cyprus Places Germany in a Bind (NYT) In recent days, Germany has signaled that it is reluctantly edging toward a bailout for Cyprus, a haven for Russian cash, after lifelines have been extended to Greece, Ireland and Portugal to prevent potentially calamitous defaults. While Cyprus makes up just a sliver of the euro zone economy, it is proving to be a first-rate political headache. "I don't think that Germany has ever in the history of the euro zone crisis left itself so little wiggle room," said Nicholas Spiro, the managing director of Spiro Sovereign Strategy in London. "But Germany wants the euro to succeed and survive, and they are saying we can't afford a Cyprus bankruptcy." BlackRock Sued by Funds Over Securities Lending Fees (Bloomberg) BlackRock is accused in a lawsuit by two pension funds of reaping “grossly excessive” compensation from securities- lending returns associated with iShares Inc. “Defendants have systematically violated their fiduciary duties, setting up an excessive fee structure designed to loot securities lending returns properly due to iShares investors,” the funds, which invest in iShares, said in a complaint in federal court in Nashville, Tennessee. Two Top Barclays Executives Resign (WSJ) Barclays, whose chairman, chief executive and chief operating officer all resigned last summer in the wake of a series of controversies, said Sunday evening that finance chief Chris Lucas and Mark Harding, its general counsel, will both be retiring in coming months...Messrs. Lucas and Harding were longtime Barclays veterans who worked closely with former CEO Robert Diamond, who resigned last summer after the bank admitted that it had tried to rig benchmark interest rates and paid a roughly $450 million penalty. Youngest American Woman Billionaire Found With In-N-Out (Bloomberg) Lunchtime at the flagship In-N-Out Burger restaurant in Baldwin Park, California, is a study in efficiency. As the order line swells, smiling workers swoop in to operate empty cash registers. Another staffer cleans tables, asking customers if they’re enjoying their hamburger. Outside, a woman armed with a hand-held ordering machine speeds up the drive-through line. Such service has helped In-N-Out create a rabid fan base -- and make Lynsi Torres, the chain’s 30-year-old owner and president, one of the youngest female billionaires on Earth. New store openings often resemble product releases from Apple, with customers lined up hours in advance. City officials plead with the Irvine, California-based company to open restaurants in their municipalities. “They have done a fantastic job of building and maintaining a kind of cult following,” said Bob Goldin, executive vice president of Chicago-based food industry research firm Technomic Inc. “Someone would love to buy them.” That someone includes billionaire investor Warren Buffett, who told a group of visiting business students in 2005 that he’d like to own the chain, according to an account of the meeting on the UCLA Anderson School of Management website. Mint officially ends distribution of Canadian penny (CP) The phasing-out of the penny will lurch ahead today with the Royal Canadian Mint officially ending its distribution of one-cent coins to Canada's financial institutions. The move comes nearly a year after Finance Minister Jim Flaherty announced the demise of the penny, whose production cost came to exceed its monetary value. But as it faces extinction in the pockets and tills of most Canadians, the humble penny is still in demand in some artistic circles where it retains significant value. Renee Gruszecki, a Halifax-based academic and archivist, has spent the past year making a living through a jewelry business devoted primarily to preserving the country's stray cents. About 30,000 strategically sorted pennies fill Gruszecki's home and eventually find their way into the accessories produced at Coin Coin Designs and Co. Gruszecki, a long-time collector of lucky pennies, believes her pieces will help preserve a symbol that is both an object of superstition and a Canadian icon. "The maple leaf is synonymous with everything Canadian. We all identify with it," she said in a telephone interview. "Now it's just no longer going to be present among us, so I'm saddened by that." The Bank of Canada's Currency Museum has already taken steps to preserve the penny's place in Canadian culture. A mural consisting of nearly 16,000 one-cent pieces has been assembled at the museum to commemorate the coin's history, said assistant curator Raewyn Passmore. The mosaic, which depicts a giant penny measuring about two square metres, is comprised of coins ranging from the lustrous to the tarnished.