Opening Bell: 03.21.14

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Icahn may add reps to Herbalife board but won’t add to stake (NYP)
The billionaire investor was approached by Herbalife after it learned it was the subject of a regulatory probe and asked him to add more of his people to the board, according to sources. While Herbalife said in a regulatory filing that talks between it and Icahn over an added board seat were ongoing, it was not known that the Los Angeles company had approached Icahn about the issue soon after it learned of the Federal Trade Commission probe. While Icahn, who has a 17 percent stake in the distributor of weight-loss shakes, has not made up his mind yet on whether he will name an added board member, he has determined he will not buy more Herbalife shares as part of that deal, sources said.

Regulators Fine Former Credit Suisse Trader (WSJ)
British authorities accused a former senior Credit Suisse AG trader of trying to sell the Bank of England more than £1 billion worth of government bonds whose price he had driven up during a spate of fervent buying, an affair the regulator described as a brazen, if unsuccessful, attempt to rip off taxpayers. The U.K.'s Financial Conduct Authority deemed the trading abusive and fined the trader, Mark Stevenson, £662,700 ($1.1 million). It is the first time it has imposed a penalty for manipulation in U.K. government-bond markets.

Airbnb Is in Advanced Talks to Raise Funds at a $10 Billion Valuation (WSJ)
Airbnb Inc., which once sold novelty cereal boxes to stay afloat before emerging as a threat to the hotel industry, is close to becoming one of the world's most valuable startups. The online service that lets people rent their homes to travelers is in advanced talks to raise capital that would value it at about $10 billion, according to people familiar with the matter. Private-equity firm TPG and boutique investment firm Dragoneer Investment Group are leading the funding round, which could total between $400 million and $500 million, these people said. Mutual funds including T. Rowe Price Group Inc. are expected to be part of the investment group, the people said. Fidelity Investments is also in discussions to join the group, the people said.

...despite orgy fiasco (NYP)
Earlier this week, Airbnb found itself in a hot mess when Ari Teman discovered that his apartment, which had he had listed on Airbnb, had hosted a wild sex party advertised on Twitter as a “XXX FREAK FEST.” Teman thought he was renting the pad to someone who was going to use it to host some wedding guests. Airbnb has since put Teman up in a hotel and banned the party planner from its website. It is also discussing reimbursing him for the damage to his home. “Airbnb has been responsive, and we are still in talks,” Teman told The Post about the bizarre episode, which he said left his furniture unusable and his clothes mysteriously damp.

$80 Million for 6 Weeks for Cable Chief (Dealbook)
Robert D. Marcus became chief executive of Time Warner Cable at the start of the year. Less than two months later, he agreed to sell the company to its largest rival, Comcast, for $45 billion. For that work, he will receive nearly $80 million if the deal closes, a severance payment that amounts to more than $1 million a day for the six weeks he ran the company before agreeing to sell. “It’s not unprecedented, but it is rare and troubling,” said Robert Jackson Jr., an associate professor at Columbia Law School. “There’s something stunning about such big paydays for such a small amount of work.”

McDonald's Patron Pointed Gun At Drive-Thru Worker Over Missing French Fries (Or Dipping Sauce) (TSG)
Oklahoma cops are searching for a McDonald’s patron who pointed a gun at a teenage drive-thru worker after discovering that his order was missing an item. A female cashier told police that a vehicle came through the drive-thru late Tuesday night and the driver picked up an order. But after discovering that the McDonald’s bag was short an item, a male passenger became upset, according to police in Chickasha, a city 40 miles southwest of Oklahoma City. At that point, the suspect, who was in the vehicle’s back seat, pointed a gun at the employee and warned, “Don’t make me use this” and “Don’t let it happen again.” Cops received conflicting accounts over what item was reportedly missing from the order. The cashier said that the customer complained that dipping sauce was not included in the order, while another witness said the dispute involved french fries.

Foreign Central Banks Boost U.S. Treasury Holdings (WSJ)
Treasury securities held in custody for foreign official and international accounts rose by $32 billion for the week that ended Wednesday to $2.888 trillion, according to the latest weekly data published by the Fed on Thursday afternoon. The rebound compounded the mystery surrounding the record drop of $105 billion in the prior week. The Fed doesn't disclose holdings of individual central banks, leaving bond traders and analysts to speculate about whether Russia was the main driver of the move.

China Beige Book Says Economy Slowing (Bloomberg)
China’s economy slowed this quarter, with industries including retail and mining showing weaker revenue growth while loans through non-traditional channels became more expensive, according to a private survey. Even with the moderation, the labor market and wage growth were little changed from the previous quarter, according to the China Beige Book survey, published by New York-based CBB International.

Starbucks to expand beer, wine sales throughout US (NYP)
The world’s biggest coffee chain plans to expand alcohol sales to thousands of cafes after testing a booze-fueled evening menu in several markets. Starbucks began offering beer and wine at a Seattle store in 2010. In 2012, it expanded the program to around dozen locations in Chicago, Atlanta and Southern California. “We’ve tested it long enough in enough markets — this is a program that works,” Chief Operating Officer Troy Alstead told Bloomberg News. “As we bring the evening program to stores, there’s a meaningful increase in sales during that time of the day.” The booze is part of an after-4 p.m. menu that includes savory snacks and small plates like truffle macaroni and cheese, bacon-wrapped dates and chocolate fondue.

Deutsche Bank fails to end four U.S. lawsuits over soured mortgages (Reuters)
The cases concern securitization trusts backed by roughly $2.9 billion of home loans, and are among six lawsuits in New York accusing the German bank's DB Structured Products Inc unit of reneging on its contractual duties to address problem loans, court papers show. In a 35-page decision, U.S. District Judge Alison Nathan in Manhattan on Thursday said HSBC USA NA, acting as trustee for the four trusts, was entitled to pursue damages claims, and to determine the extent to which Deutsche Bank knew of problems in the underlying loans at the time of the securitizations.

'Wheel of Fortune' player solves puzzle with scanty clues, wows Pat Sajak, Vanna White (NYDN)
Emil de Leon only had the vague hint that he was guessing a "thing" that started with "NE." The board looked like this: NE_ _ _ _ _ _ _ _ _ _. "This looks tough to me. It's a thing," Sajak told him. "You're a really good problem solver but I don't know. You have 10 seconds. Keep talking, maybe the right thing will pop out. Good luck." De Leon correctly guessed "New baby buggy" with his first attempt — prompting Pat to playfully pat-down the player. Vanna White, the studio audience and viewers at home could hardly believe his luck — and de Leon walked away with $45,000. "Tonight's 'Wheel of Fortune' features most amazing solve in my 30+ years on the show. No kidding," Sajak tweeted. But was everyone mistaking exceptional verbal ability for a bolt of lightning? Some linguistically minded folks think that attributing de Leon's win to near-divine luck takes away from the contestant's quick thinking. After all, with N and E on the board, the first word almost certainly had to be "New." As for the other words, cultural blogger Caitlin Dewey of The Washington Post points out that the show's contestants get to see a used letter board and that de Leon's would have read, "ABC FG IJK PQ UVWXYZ" because he already guessed H, M, D and O. And since Q, J, Z, X, V, K and W are essentially useless and appear in less than 1.5 percent of English words, de Leon needed to put together two words of four and five letters using A, B, C, F, G, I, P, U and Y. Dewey said de Leon could only have 53 possible five-letter words and that most of them — like fizzy or puffy — are not things.

Related

Opening Bell: 03.08.13

Stress Tests Show Banks On The Mend (WSJ) The central bank said 17 of the 18 largest U.S. banks have enough capital to keep lending in a hypothetical sharp economic downturn, a sign the financial system is better prepared to weather a shock without resorting to a large, 2008-style infusion of government support. But the "stress test" figures released Thursday also showed that the Fed is paying special attention to the capital strength of companies with large trading operations, a group that includes Goldman Sachs, Morgan Stanley, and JP Morgan. That scrutiny could make it harder for those firms to win regulatory approval to increase dividends and buybacks, and could bruise the companies' recovering reputations with investors. Shares of Goldman and J.P. Morgan have been trading at their highest levels in a year, but both companies dropped more than 1% in after-hours trading following the Fed release. Citi Bests Stress Tests, Discloses Buyback Plan (CNBC) Where stress tests are concerned, call Citigroup "most improved." The bank posted an 8.3 percent tier 1 common capital ratio - the highest of its peers - under the Federal Reserve's annual stress tests. Unemployment Falls To 7.7% (WSJ) U.S. job growth jumped ahead in February, a sign of a steadily improving labor market and stronger economic gains. Employers added 236,000 jobs last month, the Labor Department said Friday. The unemployment rate, obtained by a separate survey of U.S. households, fell two-tenths of a percentage point to 7.7%, the lowest level since the end of 2008. Economists surveyed by Dow Jones Newswires had forecast that nonfarm payrolls would rise by 160,000 and the unemployment rate would fall to 7.8%. Chanos Has Ackman's Back On Herbalife Bet (NYP) Famed short seller Jim Chanos yesterday voiced his support for Ackman’s short position — and revealed he made money from shorting the Los Angeles-based company last year. “I think Bill Ackman is correct in his analysis” of Herbalife, Chanos said in a TV interview. “I’m not crazy for this multi-level-marketing business,” Chanos added...Chanos said on CNBC yesterday morning that he had shorted Herbalife last year, when it was around $50 — but got out when the price fell by half after Ackman went public with his short bet. Firms Send Record Cash Back To Investors (WSJ) Companies in the S&P 500 index are expected to pay at least $300 billion in dividends in 2013, according to S&P Dow Jones Indices, which would top last year's $282 billion. Goldman Symbol Gets More Elusive (WSJ) Upending a closely watched ritual in place since 1996, the New York securities firm told employees Thursday it now plans to promote a new crop of managing directors every two years, instead of each year. The change will start with the group selected later this year. The coveted title, which comes with a base salary of $500,000, elevates the chosen few at Goldman one step closer to the even higher rank of partner. In the memo, Goldman Chairman and Chief Executive Lloyd C. Blankfein and President and Chief Operating Officer Gary D. Cohn said the move would help the firm devote more time to the selection process. "A biennial process will allow us to invest more in the managing director selection process so that it will continue to be a disciplined and rigorous exercise," they wrote. "This will help to ensure that the managing director title remains as aspirational as it should be for our top performers." Hooters Is Chasing Women — as Customers (CNBC) The chain's waitresses are as buxom as ever but its sales have "flattened out," said Darren Tristano, executive vice president at research firm Technomic. Revenue peaked in 2007 at nearly $1 billion but had fallen to around $850 million last year, he estimated. (The privately-held company doesn't release sales figures.) The brand recently announced an overhaul aimed at making Hooters more mainstream than man-cave, adding more salads to its menu, remodeling stores and rolling out a series of ads last week to tout the changes. Icahn Bid Rattles Dell Plan (WSJ) Activist investor Carl Icahn said he would push to replace Dell's board and pursue "years of litigation" if the computer maker refused to accept his demand for a refinancing that would pay a hefty dividend to shareholders. Prodding the company to reject a $24.4 billion buyout offer that it agreed to last month and endorse his alternative, Mr. Icahn disclosed he owns a "substantial" stake in Dell and unleashed his trademark attack on directors and on the management-backed offer. "We see no reason that the future value of Dell should not accrue to all the existing Dell shareholders," Mr. Icahn wrote to a Dell special board committee, insisting it agree to his conditions or hold a vote for a replacement board that would. Ferrari $1.3 Million Hybrid Hits Resurgent Luxury Market (Bloomberg) At the Geneva Motor Show this week, Ferrari showed a 1 million-euro ($1.3 million)hybrid called LaFerrari. Bentley exhibited a revamped four-door Continental Flying Spur. Jaguar debuted the XFR-S, its fastest sedan ever. Rolls-Royce is adding a 245,000-euro coupe called the Wraith to its lineup. Companies Expand Offshore Cash Hoard By $183 Billion (Bloomberg) Microsoft, Apple, And Google each added to their non-U.S. holdings by more than 34 percent as they reaped the benefits of past maneuvers to earn and park profits in low- tax countries. Combined, those three companies alone plan to keep $134.5 billion outside the U.S. government’s reach, more than double the $59.3 billion they held two years earlier. Broker who managed money for NFL players bootled from securities industry after big loss (NYP) A Florida broker who managed money for dozens of prominent National Football League players — includingSantana Moss and Plaxico Burress — has been banned from the securities industry after putting the group into a high-risk investment that lost them a total of $40 million. Jeff Rubin, 38, directed some 31 NFL players into an illegal gambling operation in Alabama — which went bust two years later, a Wall Street regulator said yesterday. One of the players, Samari Toure Rolle, a former cornerback with the Baltimore Ravens, lost $3.2 million, the bulk of his liquid assets, to Rubin, according to the Financial Industry Regulatory Authority, which imposed the ban.

Opening Bell: 01.07.13

Regulators Give Ground To Banks (WSJ) Global banking regulators watered down a key element of their plan for creating a safer financial system, giving ground to banks that argued the rules were unworkable and financially risky. The Basel Committee on Banking Supervision, a group of the world's top regulators and central bankers, said Sunday that it agreed to relax a rule designed to ensure that big banks are able to weather financial crises without running short of cash. Bowing to two years of intense pressure from the banking industry, the regulators made it easier for banks to meet the rule, known as the "liquidity coverage ratio," and delayed its full implementation until 2019. It is the latest instance of regulators chipping away at their landmark 2010 response to the global financial crisis. The regulators argue that the changes make banking rules much stronger than they were before the crisis. Herbalifers Stay Resolute (WSJ) When hedge-fund manager William Ackman unveiled his 334-slide presentation alleging that Herbalife is a pyramid scheme, it did nothing to shake Joanne Clare. The 38-year-old Staten Island mother of three has been selling the company's weight-loss products and supplements since 2004, when she says they helped her drop from 210 to 160 pounds in four months. She now sells as much as $3,500 a month of Herbalife products to her 30 clients and the two distributors in her "down line." "People have always said it's a pyramid scheme, but it's not," Ms. Clare said, adding that the bulk of her earnings come from sales to clients, not her cut of her recruits' take. Mr. Ackman's declaration that he had bet more than $1 billion against Herbalife caused many investors to flee, sending the stock down 38% in four days in late December. But some of the company's 3.1-million-strong army of distributors were unmoved. Eliot Spitzer Ends His Show On Current TV (NYT) The announcement comes a few days after Al Jazeera said it was acquiring Current TV. Later this year, the Qatar-owned broadcaster plans to turn the channel into an Americanized version of the international news channel Al Jazeera English. Mr. Spitzer said he had a “wonderful time” at Current, but emphasized that his relationship was with Al Gore and Joel Hyatt, Current’s co-founders, not with Al Jazeera. “Moving forward, their mission will be different,” he said — more international newscasts, less liberal talk about the news. Citi's Corbat builds bridges (Reuters) Citigroup Inc's Michael Corbat has been meeting with bank regulators in his first months as CEO, as he looks to bolster relationships and finalize the bank's plan to return capital to shareholders, sources familiar with the matter said. Corbat also expects to name his team of top managers within the next week or so, one of the sources said on Sunday. Corbat is expected to play it safe when Citigroup asks the U.S. Federal Reserve for permission for moves such as buying back shares or increasing dividends, analysts and investors said. His predecessor, Vikram Pandit, lost his job in October in part because the bank's request for returning capital was denied in March. The bank, which is due to submit its plan to the Fed on Monday, has not yet done so, the source said. The third-largest U.S. bank will only seek approval to buy back shares and not raise dividends, the Wall Street Journal reported on Friday. Last year, the bank wanted permission to return more than $8 billion to shareholders over two years, the paper said. For Newly Minted MBAs, A Small Paycheck (WSJ) For graduates with minimal experience—three years or less—median pay was $53,900 in 2012, down 4.6% from 2007-08, according to an analysis conducted for The Wall Street Journal by PayScale.com. Pay fell at 62% of the 186 schools examined. Even for more seasoned grads the trend is similar, says Katie Bardaro, lead economist for PayScale.com. "In general, it seems that M.B.A. pay is either stagnant or falling," she says...It is all a far cry from the late 1980s and early 1990s heyday for M.B.A.s, when some companies would hire 100 or more M.B.A.s. It wasn't uncommon to recruit first, and fill actual jobs later. DOJ pledges to respect Swiss law in tax probe (Reuters) Swiss chief finance diplomat Michael Ambuehl was given a verbal pledge from the U.S. Department of Justice to respect Swiss law when asking for bank client data of potential tax dodgers, a newspaper reported on Sunday. Switzerland is in negotiations with U.S. authorities to find a deal that would end tax probes into at least ten Swiss banks suspected of helping clients dodge taxes, including Credit Suisse and Julius Baer. The Alpine country is trying to preserve what is left of its cherished banking secrecy that suffered a severe blow in 2009 when UBS, the first Swiss bank that came under scrutiny in the U.S., was required to disclose client data. Brazilian prison gaurds catch cat that slipped through the gate with escape tools taped to its body (NYDN) Guards at a Brazilian prison nabbed a white cat that slipped through the gate with a cell phone, drills, small saws and other contraband taped to its body. Alagoas prison spokeswoman Cinthya Moreno says the cat was caught New Year’s Eve at the medium-security prison in the city of Arapiraca. The O Estado de S. Paulo newspaper reported Saturday that all of the prison’s 263 inmates are suspects in the smuggling attempt, though a spokesperson said, “It will be hard to discover who is responsible since the cat does not speak.” Loeb, Cooperman Stand Out in Horrid Year for Hedge Funds (CNBC) Third Point was the clear hedge fund standout in a horrible year for the industry as almost nine out of 10 managers underperformed the S&P 500. Omega Advisors' Leon Cooperman also scored big. Loeb — once better known for his acerbic letters to CEOs — used an activist position in Yahoo and the contrarian buying of Greek bonds to drive the firm's flagship fund to a 21 percent gain in 2012. The firm's more-leveraged Ultra fund posted an even bigger 34 percent return...Cooperman's fund had a net return of 26 percent in 2012. Banks Zero In On Foreclosure Pact (WSJ) Banks were closing in on a $10 billion foreclosure-abuse settlement with regulators that could be announced as soon as Monday, according to people familiar with the talks. The settlement was nearly complete Sunday afternoon, the people said, after the Federal Reserve backed down on a demand for more compensation for consumers and other changes to the pact. Bankers threatened to walk away from the deal if the Fed's demand for an additional $300 million was included, a person briefed on the talks said. Junk Bonds' Fire Is Poised to Fade (WSJ) Junk bonds started 2013 much like they finished 2012—on fire. In just three trading days this year, bonds of low-rated companies delivered returns of almost three-quarters of a percent, even as most other types of bonds lost value. And junk bonds continued to clock new milestones: Average prices soared to their highest since 2004 and average yields, which decline as prices rise, dropped below 6% for the first time ever, according to Barclays. But the rapid march is making fund managers and analysts wary. Prices are now so high—averaging more than 105 cents on the dollar—that there is little room for them to climb much further, some investors say. These are lofty prices for bonds that usually trade below 100 cents, reflecting the higher default risk for such companies. At the very least, returns will pale in comparison with the 15% achieved in 2012, analysts and investors say. NHL, Players Settle Labor Dispute (AP) On the 113th day of a management lockout and five days before the league's deadline for a deal, the bleary-eyed sides held a 6 a.m. news conference to announce there will be a season, after all. NHL Commissioner Gary Bettman and union head Donald Fehr both appeared drained, wearing sweaters and not neckties, when they stood side by side at the hotel and announced labor peace. "We have reached an agreement on the framework of a new collective bargaining agreement, the details of which need to be put to paper," Bettman said. "We've got to dot a lot of Is, cross a lot of Ts. There's still a lot of work to be done, but the basic framework of the deal has been agreed upon." Hostess in Talks to Sell Off Bread Brands (WSJ) Hostess could disclose Flowers, Grupo Bimbo or others as opening bidders in a looming bankruptcy-court auction for the assets as soon as this week, said people familiar with the matter. Hostess, whose bread brands include Wonder Bread, Nature's Pride, Home Pride, Merita and Butternut, is still determining how to split up assets and package them for buyers, one of the people said. Gérard Depardieu gives up French citizenship after bitter tax fight (GM) In a fit of pique, French movie star Gérard Depardieu announced during the weekend that he would give up his citizenship after politicians and the media took him to task for moving to Belgium and avoiding an impending tax hike for the rich. Mr. Depardieu is not France’s first fiscal refugee but his high-profile door-slamming so monopolized public debate that Prime Minister Jean-Marc Ayrault had on Monday to parse whether or not he had insulted the actor. “I did not call Mr. Depardieu a loser, I said that it was loser-like [to move to Belgium to avoid taxes],” Mr. Ayrault told reporters...The “loser” comment seemed to have been the jab that stung Mr. Depardieu the most. “Loser, did you say loser?” the 63-year–old actor began an open letter to Mr. Ayrault that appeared Sunday in Le Journal du dimanche. Mr. Depardieu wrote that he had paid a total of €145-million in income tax in the last four decades and kept 80 people employed. He added that he had been taxed at a marginal rate of 85 per cent this year. “I am giving you back my passport and my social insurance, which I had never used. We no longer have the same fatherland. I am a true European, a citizen of the world.”