Opening Bell: 07.29.14

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Meet the SEC's 6,500 Whistleblowers (WSJ)
Retirees were the largest group with 365 tips. Investors were second with 290 complaints. Engineers came in third. But whistleblowers come from all walks of life. They include a diesel mechanic, an antiques dealer and a longshoreman; there's an agronomist, two people who listed themselves as "ex-wife" and a veterinarian. There are also a number of current and retired military servicemen and enough hospitality and service employees to suggest executives should watch what they say in restaurants, bars, hotels and taxis...Engineers, at first blush, might seem to be an odd profession for informants, but honesty, integrity and fixing errors are drilled into them during training, said Norman Fortenberry, executive director of the American Society for Engineering Education. "It's fundamental in our code of ethics," he said. The code states, among other virtues, that engineers "must be dedicated to the protection of public health, safety and welfare." "It is a matter of both personal and professional pride," Mr. Fortenberry said. The adult-entertainment industry, however, operates under an entirely different code. Among prostitutes, secrecy is sacrosanct, said Dennis Hof, proprietor of the Moonlight Bunny Ranch and other legal brothels in Nevada. "We have a sacred bond with our clients," he said. "Money can't take precedence." Mr. Hof said any of his employees would be fired and disavowed if they were to release privileged information about any of the brothels' clients. Air Force Amy, a popular Bunny Ranch mainstay whose real name is Deanne Salinger, said clients constantly reveal material, nonpublic information. At first she said she would approach Mr. Hof to see if they should invest based on any of the tips, but they agreed that it wouldn't be wise. "I dummy up a lot, I really do," she said. "I've been around a long time and you just don't talk."

BofA Deal With U.S. Is Hung Up Over Penalties Tied to Countrywide, Merrill (WSJ)
Bank of America has offered $13 billion to end the government's mortgage-securities probe, including a combination of fines and consumer assistance, which could include credit for measures such as writing down the values of mortgages for struggling homeowners. But the Justice Department is demanding billions more—and wants a bigger chunk in fines, these people said. Bank of America, which has already shelled out some $60 billion for crisis-era legal problems, has told the Justice Department it is willing to pay for the past misdeeds of Countrywide and Merrill Lynch—but not at levels it considers overly punitive, according to people familiar with the talks. Bank of America scooped up Countrywide and Merrill with the encouragement of regulators after housing troubles nearly sank both firms. It wants the penalty related to the firms' past misconduct to come in the form of consumer assistance or other so-called soft money that has a less severe impact on Bank of America's bottom line than a cash fine, these people say. The Justice Department has so far rejected Bank of America's proposal, and the U.S. could file a lawsuit within weeks if the two sides don't reach a deal, according to people familiar with the matter.

Former Goldman Options Trader Becomes Argentina Taxi King (Bloomberg)
After 23 years trading stock options at Goldman Sachs Group Inc., Merrill Lynch & Co. and his own hedge fund, Russell Abrams is piling into his most exotic gamble yet: as a Buenos Aires taxi impresario. Abrams, 48, plans to invest as much as $100 million of his own money to build a fleet of Buenos Aires cabs, undaunted by the prospects for Argentina’s second default in 13 years, the fallout from the peso’s devaluation in January, inflation of about 40 percent and the economy’s first quarterly contraction since 2012.

Startups Uber and Airbnb Court Business Travelers (WSJ)
The fast-growing technology startups this week each announced new versions of their apps geared toward booking business trips. Both companies also struck deals with Concur Technologies Inc., the expense-reporting software used by more than 20,000 companies. Appealing to corporate clients would give the young technology companies a toehold in the business travel industry, which is expected to generate $1.21 trillion in revenue world-wide this year, according to the Global Business Travel Association.

New Venture Fund Binary Capital Focuses on Mission, Not Just Metrics (Dealbook)
Binary Capital closed its first fund on July 17, raising $125 million — a hard cap — in just three and a half months. It turned away nearly half as many dollars. The goal of the fund is relatively straightforward: invest in 15 to 20 very early-stage consumer technology companies that have the potential to have a global impact. The partners plan to contribute to that impact by giving a portion of their carried interest to charitable organizations chosen by their entrepreneurs. Eventually, they also hope to team up with global nonprofit groups to use their technology and resources for causes in the developing world.

Marijuana Is a Welcome Wedding Guest in Colorado and Washington State (NYT)
Earlier this month, when Ellen Epstein arrived at the Devil’s Thumb Ranch in Tabernash, Colo., for the wedding of her friends Lauren Meisels and Bradley Melshenker, she, like the other guests, found a gift bag waiting for her in her hotel room. But rather than a guide to activities in the area or a jar of locally made honey, the canvas bag contained a rolled joint, a lighter and lip balm infused with mango butter and cannabis, along with this note: “We wanted to show you some of the things we love the best.” [...] All of the floral arrangements, including the bride’s bouquet, contained a variety of white flowers mixed with marijuana buds and leaves. Mr. Melshenker and his groomsmen wore boutonnieres crafted out of twine and marijuana buds, and Mr. Melshenker’s three dogs, who were also in attendance, wore collars made of cannabis buds, eucalyptus leaves and pink ribbons. Before going into dinner, the guests were given a baby marijuana plant in a ceramic pot with their name and table assignment written on a card in green ink, in the kind of stylish script you might find on a container of artisanal goat cheese. The tables were named after different strains of marijuana, like Blue Dream, Sour Diesel and Skywalker (the groom’s favorite strain). Ms. Epstein, who was seated at Skywalker, said that everyone at her table, where the ages ranged from 40 to 70, passed around a device similar to an electronic cigarette — except that it contained hash oil instead of nicotine. “It didn’t feel weird or bizarre,” she said. “It kind of becomes a new cocktail.”

Traders Bemoaning Losses Detect Volatility Reprieve (Bloomberg)
Currency traders are detecting the first signs of what they’ve been waiting for all year: a revival in volatility that may help trim their losses. Tensions in Ukraine and Gaza, together with interest-rate increases from New Zealand to South Africa (SARPRT), are helping push up a measure of price swings by the most since January. Volatility had flattened in recent months as policy makers continued to provide unprecedented amounts of cheap cash to spur growth. While rising volatility increases uncertainty and risk, it also creates opportunities for traders to profit on changes in exchange rates. Parker Global Strategies LLC’s index of currency returns rose 0.5 percent last week in its biggest gain since March.

Activists Peltz, Icahn Reap $556 Million on Dollar Stores (Bloomberg)
Peltz’s Trian Fund Management LP earned an estimated $368 million on its investment in Family Dollar Stores Inc. (FDO), which Dollar Tree Inc. of Chesapeake, Virginia, agreed to acquire for about $8.5 billion. Fellow activist Icahn will reap $188 million for two months of saber-rattling, regulatory filings show.

Los Angeles Clippers Sale to Ballmer May Proceed: Judge (Bloomberg)
The record $2 billion sale of the Los Angeles Clippers to former Microsoft Corp. Chief Executive Officer Steve Ballmer is headed toward completion without the consent of Donald Sterling, capping three months of controversy over the billionaire owner’s racist comments. California Superior Court Judge Michael Levanas in Los Angeles yesterday issued a tentative decision that Shelly Sterling has sole authority to sell the National Basketball Association franchise to Ballmer. She had removed her husband of 58 years from control of the family assets based on the findings of two doctors that he’s mentally incapacitated. The ruling brings Ballmer a step closer to taking ownership of what witnesses called a “trophy asset” at a three-week trial pitting the Sterlings against each other.

Citi to hire 100 bankers in Asia, eyes more business from smaller clients (Reuters)
Citigroup plans to hire as many as 100 bankers in a renewed push into Asia-Pacific commercial banking, following in rival HSBC's footsteps with a strategy that focuses on selling smaller corporate clients a wider range of products. Global banks like Citi and HSBC are now concentrating on small to medium-sized clients due to a dwindling number of $10 billion-plus IPOs from Chinese state-owned companies - deals which had sustained investment banks in the region over the last decade.

Pavlok Wristband Shocks You If You Don't Complete Fitness Goals (HP)
Need that extra motivation to get in shape? A fitness wristband due out in 2015 will zap you if you miss a workout. Pavlok's bracelet also has other kinds of negative reinforcement to get you off your duff, but it's the electric shock that's getting the buzz. "Sometimes crazy works," Pavlok CEO Maneesh Sethi says in a promotional video. For some, the gizmo might provide sticker shock as well. An alpha prototype , available now, costs $249.99. A unit on preorder for early 2015 costs $149.99.

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Opening Bell: 01.28.13

Davos Money Men Say World Emerges From Doldrums Fretting Relapse (Bloomberg) “Optimism, but with a sober tone,” was how Bank of America Chief Executive Officer Brian T. Moynihan characterized the mood pervading the World Economic Forum’s annual meeting, even as investors were lifting the Standard & Poor’s 500 Index above 1,500 for the first time since 2007. Fed To Keep Money Spigot Open (WSJ) Federal Reserve officials are likely to continue their easy-money policies when they gather this week to weigh a mixed economic outlook and a recent run of low inflation. The Fed has said it would maintain its $85 billion bond-buying programs, aimed at boosting the economy by lowering long-term interest rates, until it sees substantial progress in labor markets. It has also said it would keep short-term interest rates near zero until the jobless rate drops to at least 6.5%, as long as inflation remains steady. Beneath the Calm, SAC Works to Contain Fallout From Inquiry (NYT) "This has always been a stressful place to work," said an SAC employee who requested anonymity because he was unauthorized to speak publicly about the fund. "Now it's just more stressful." Mr. Cohen's fund was dealt a blow last week when a Citigroup unit that manages money for wealthy families disclosed that it was withdrawing its $187 million investment. The move by the bank was the most prominent client departure since November, when the multiyear investigation into SAC's trading practices entered a more serious phase. Citigroup's withdrawal represents a tiny percentage of SAC's $14 billion in assets under management. The fund has said it expects total investor redemptions for the first quarter of up to $1 billion, a number that an SAC spokesman has said will not adversely affect its business...Still, the Citigroup decision stung, say peopleclose to SAC's business, because of the longstanding and lucrative relationship between the bank and the fund. Another concern, said these people, is that the move could influence other large SAC investors currently weighing whether to keep their money at the fund. For Citigroup, its withdrawal of money from SAC carries substantial business risk. The bank has a vast relationship with SAC, earning revenue by providing the fund with financing and trading services. SAC could exact retribution on Citigroup by terminating, or at least scaling back, its broader relationship with the bank. An SAC spokesman declined to comment. Credit Suisse Could Owe $2 Billion Over Fraud (Reuters) Credit Suisse Group faces a potential $2 billion of exposure over fraud that occurred a decade ago at National Century Financial Enterprises, a result of a federal judge's determination on how to apportion responsibility. Friday's decision by U.S. District Judge James Graham could expose the Swiss bank to hundreds of millions of dollars of added liability over the activities of Lance Poulsen, who co-founded National Century in 1990 and was its chief executive. He is now serving a 30-year prison term and is presumed insolvent. Goldman Raising $1 Billion From ICBC Share Sale (WSJ) The Wall Street company is selling the Hong Kong-listed shares in a block trade at 5.77 Hong Kong dollars (US$0.74) each, the people said, without disclosing the number of shares. The price represents a 3.0% discount to ICBC's HK$5.95 closing price Monday. A person familiar with the situation said the sale reflects prudent risk management on Goldman's part to reduce the size of its ICBC investment. MBA's Salary Enhancing Power Slashed (FT) Students on the top US MBA programs in the mid-1990s saw their salaries triple in five years, but those who graduated from the same schools in 2008 and 2009 saw that increase halved, according to data collected for the FT's annual Global MBA rankings. At the same time, MBA fees have risen by 7 percent a year. MBA students who enrolled in 2012 paid 62 percent more in fees - up 44 percent in real terms - than those who began their programs in 2005, even though the increases in post-MBA salaries remained in line with inflation. Beyonce has yet to apologize to Chuck Schumer for lip-syncing at inauguration (NYP) The New York senator angrily admitted yesterday that the pop queen has not called him to say sorry after she turned last week’s inaugural bash into an unexpected Milli Vanilli concert by lip-syncing “The Star-Spangled Banner.” “I have not heard from her before, during or after,” a testy Schumer told The Post after he was asked if Beyoncé had called him to give a musical mea culpa. “She did not talk to me at all. I didn’t say any words to her, period.” Schumer has been credited with drawing the pop diva and her hubby Jay-Z to the inauguration, where many said they stole the show from the president and first lady walking hand-in-hand on the steps of Capitol Hill. Schumer was seen beaming with pride just steps behind Beyoncé while she appeared to be belting out the National Anthem. Obama administration insiders and inauguration planners were in the dark about Beyoncé’s decision to use a prerecorded tape of her singing with the Marine Band during the swearing in. They were later left fuming over the embarrassment, according to reports. Some on Capitol Hill have even placed the blame on Schumer for the Star-Spangled sham. There’s a Twinkie in the eye of Apollo (NYP) Hostess Brands is expected to name Leon Black’s Apollo Global Management as the preferred bidder for Twinkies and its other snack brands, The Post has learned. The announcement from the bankrupt baker could come as soon as today, sources said. The selection of Apollo would give Manhattan buyout billionaire Leon Black the inside track to buying one of the country’s most well-known consumer brands. Black’s Apollo and co-bidder C. Dean Metropoulos, a veteran food exec, were vying with Grupo Bimbo, the Mexico-based baker, for the right to be the preferred, or stalking horse, bidder for Twinkies, Ho Ho’s, Ding Dongs and other Hostess snacks. Bank of America Moves $50 Billion of Derivatives to UK (FT) Bank of America has begun moving more than $50bn of derivatives business out of its Dublin-based operation and into its UK subsidiary, according to people close to the operation. The move, part of the group's global drive to rationalize its operations, has been encouraged by regulators but will also allow BofA to benefit from tax breaks stemming from the accumulated losses in its UK business. Singer Backs Off Aggressive Stance In Dealings With Buenos Aires (NYP) After a decade of aggressively pursuing $1.44 billion he claims the country owes him and a group of bondholders, including successfully pressing Ghana to seize a locally docked Argentine naval vessel to help pay down the debt, the billionaire New York hedge fund mogul is sounding like Bobby McFerrin in “Don’t Worry, Be Happy.” Singer’s Elliott Management now feels Argentina will do the right thing, according to recent court filings. It’s quite a change from last fall’s legal arguments, in which Singer urged a federal judge to hurry up and force Buenos Aires to put some of the monies owed into escrow, citing the country’s president’s plot to avoid the debt payment. Italians Have a New Tool to Unearth Tax Cheats (NYT) Despite the government's best efforts, tax evasion remains something of a pastime in Italy, where, famously, more than a few of the Ferrari-driving set claim impoverishment when it comes to declaring their incomes. So this month, not without controversy, the National Revenue Agency decided to try a new tack. Rather than attempting to ferret out how much suspected tax cheats earn, the agency began trying to infer it from how much they spend. The new tool, known as the ''redditometro,'' or income measurer, aims to minimize the wiggle room for evasion by examining a taxpayer's expenditures in dozens of categories, like household costs, car ownership, vacations, gym subscriptions, cellphone usage and clothing. If the taxpayer's spending appears to be more than 20 percent greater than the income he or she has declared, the agency will ask for an explanation. Traders Make Peace With Computers (WSJ) On a recent day on Barclays PLC's stock-trading desk in Manhattan, an electronic platform posted a notice that Barclays was selling a large block of Pfizer shares. In recent years, a computer typically would have swiftly matched such an order with a buyer, sidestepping trading floors altogether. But soft trading volume has left many traders unable to move stock as quickly as they might like. That is one reason why Barclays connected its recently launched DirectEx platform to its trading floor. The move paid off when a client who was buying 150,000 shares on the electronic network decided, after chatting with a Barclays salesman, to take an additional 150,000 shares. Woman Found with 92 Pounds of Marijuana in N. Bellmore (Patch) According to detectives, around 6 p.m., an unmarked First Precinct police car observed Mizzie Artis, 27, of Bellport, operating a 1999 Hyundai eastbound on Columbus Avenue while talking on a cell phone and not wearing a seat belt. Police then observed Artis drive to Armand Street where she met with a male subject in a minivan. As officers drove by both vehicles to further observe, the male subject fled the scene in the van, police said. Artis drove away and failed to stop at a stop sign and did not signal when turning, police said. Officers stopped Artis and, upon approaching the car, observed two large cardboard boxes in the auto. Officers also detected an odor of marijuana emanating from the vehicle. K-9 officers responded to the scene and performed a narcotic search of the vehicle. The cardboard boxes in the front seat had a positive alert for narcotics, police said. Two additional boxes were recovered from the trunk containing marijuana, bringing the total approximate weight to 92 pounds.