Opening Bell: 09.08.14


Alibaba Takes IPO Sales Pitch on the Road (WSJ)
Alibaba Group Holding Ltd. and its bankers have been talking with investors about the Chinese e-commerce giant's potentially $24 billion initial public offering for over a year. But this week, as they begin the formal sales pitch, they will seek to resolve a crucial question: How much stock do investors want to own, and what will they pay for it? After setting a price range Friday that values the company around $155 billion at the midpoint, Alibaba on Monday is set to start a two-week roadshow to pitch its stock to investors. Some portfolio managers and analysts at asset-management firms said worked through the weekend to prepare for the meetings. They viewed an online video pitch to investors and weighed their estimates for Alibaba's valuation against those of peers such as Tencent Holdings Ltd., Baidu Inc.. and Inc. Alibaba has attracted global attention for its market dominance in China, its impressive profitability and the potentially historic nature of its IPO; the deal could prove to be the biggest ever. Yet selling more than $20 billion in stock isn't expected to be easy, people familiar with the process have said. It isn't enough for the company merely to find interested investors: It wants to identify fund-management companies and pension funds who will buy more than $1 billion worth of shares, the people said.

Method in the madness of the Alibaba cult (FT)
The Chinese company’s 22,000 employees, known as Aliren or Ali fellows, appear to be fuelled by adrenalin and inspired by Kung Fu novels. Alibaba employees are encouraged to take Kung Fu nicknames. “When they ran out of names from Kung fu novels, they made up their own,” said Zhang Yi, chief of iMedia, a China based ecommerce consultancy. Mr Ma created Alibaba 15 years ago with friends in his apartment. Since then, his quirky personality has created headlines and fosters what one former employee calls a “slightly crazy” atmosphere at the company. Mr Ma practices Kung Fu and dresses in outlandish costumes for the company’s annual Chinese new year festival – one year he was a punk rocker with a silver mohawk, another year he was Snow White, wearing a dress and bonnet. Last October, he sent an internal message to employees exhorting them to “invade Antarctica” in order to “kill penguins” in their duel with rival internet giant Tencent – whose mascot is a Penguin. “Alibaba is not a group of civilised gentlemen, or men who nicely play by the rules,” said Mr Li. “They are reckless with ambition, they are radical and aggressive. Everyone walks out of a meeting room beet red from shouting, that’s how we held meetings – with our voices raised. Its very intense,” he said.

ECB's Draghi Takes a Gamble on QE-lite (WSJ)
Although the ECB will buy only asset-backed securities and covered bonds for now, the market understood that a taboo had been broken. Mr. Draghi's statement that the ECB's aim was to restore its balance sheet to its size in early 2012, signaling a possible €1 trillion ($1.29 trillion) expansion, showed that the bank has shifted its focus to money-printing. The euro tumbled, bond yields fell and stocks rallied on the news.

Paris court sets date for Airbus insider trading case: Der Spiegel (Reuters)
More than half a dozen current and former managers at European plane maker Airbus will face a criminal court hearing in Paris next month in a long-running insider trading case, Der Spiegel magazine reported. The managers are alleged to have known about delays to the A380 superjumbo project when they sold shares in former Airbus parent EADS in early 2006. The announcement of delays prompted a sharp fall in the EADS stock price. All the accused parties have denied wrongdoing. The Paris court is due to begin hearing the case on Oct. 3, Der Spiegel said.

John Paulson Bids Good Riddance to Summer (Dealbook)
...this summer has not been kind to Mr. Paulson. In July, his $23 billion Paulson & Company suffered across-the-board losses. August was marginally better, according to the latest numbers, disclosed in a monthly update letter sent to investors on Friday. Mr. Paulson’s Advantage and Advantage Plus funds were down 1.5 percent and 1.2 percent during August, bringing losses to 4.8 percent and 3.9 percent so far this year, according to the update. Among the worst-hit sectors for the firm were hotels, telecommunications and energy. Meanwhile, his Recovery fund, which made nearly $1 billion through its stake in OneWest Bank after the CIT Group bought it in July, managed to claw back marginally from a 4.9 percent loss in July to bring its losses to 1.6 percent this year. Mr. Paulson’s largest fund, called the Credit fund, gained 0.5 percent in August. The Enhanced fund was flat but still remains up 8.9 percent so far this year.

Insider Martoma's Sentencing Highlights White-Collar Crime Debate (WSJ)
When Mathew Martoma faces a federal judge on Monday to be sentenced for insider trading, a punishment that could reach 20 years in prison, he will become a flash point in the debate over the severity of white-collar sentences. The former manager at hedge fund SAC Capital Advisors LP was found guilty in February of making illicit trades in pharmaceutical stocks, generating some $275 million in profit and avoided losses for the firm. Under federal guidelines, that number figures prominently into sentencing recommendations. It led the probation department, an office within the Manhattan federal courthouse that prepares pre-sentence reports, to recommend up to two decades in prison for Mr. Martoma. But defense lawyers and some judges are increasingly questioning the big role of profits at sentencing. Last month the U.S. Sentencing Commission, which sets the federal guidelines, announced it was considering changes to its policies on white-collar sentences, specifically addressing the issue of profit and considering whether "there are ways the economic crime guidelines could work better." U.S. District Judge Paul Gardephe will be the final arbiter and will consider the guidelines, which aren't binding, along with several other factors, including recommendations by prosecutors and Mr. Martoma's lawyers, as well as sentences in similar cases.

Drunk woman on trampoline curses at neighbors (WYFF4)
Deputies say a 55-year-old woman is facing charges after she got on a neighbor’s trampoline and shouted obscenities and refused to stop even after officers told her to. Deputies were called to a home on Taylor Colquitt Road about a disturbance. A woman said her neighbor, Debbie Robinson, had been knocking on her door and was in her yard laying on her trampoline yelling obscenities. Deputies said that Robinson was continuing to shout obscenities at neighbors who were on their front porches. The deputies said Robinson told them she had been drinking. They said they encouraged her to get off the trampoline and to go to her home next door and go to bed, but she refused and continued to yell. Eventually, two deputies dragged Robinson off the trampoline and arrested her for public disorderly conduct.

Venezuelan Default Suggested by Harvard Economist (Bloomberg)
As Venezuela racks up billions of dollars of arrears with importers that are fueling the worst shortages on record, one of the nation’s top economists is questioning the government’s decision to keep servicing its foreign bonds. A “massive default on the country’s import chain” is part of what has allowed the nation to keep paying its foreign bonds, Ricardo Hausmann, a former Venezuelan planning minister who is now director of the Center for International Development at Harvard University in Cambridge, Massachusetts, said by phone from Boston. “I find the moral choice odd. Normally governments declare that they have an inability to pay way before this point.”

Overpaid Bank Chief in China Means 2% of What Dimon Gets (Bloomberg)
Jiang Jianqing, chairman of Industrial & Commercial Bank of China Ltd., earned less than 2 percent of Jamie Dimon’s compensation last year while reporting twice the profit of JPMorgan Chase & Co. Instead of a reward, Jiang is poised for a pay cut. China’s government said last month it will reduce salaries for executives at state-owned companies because “unreasonably high” incomes have become a source of public discontent. The biggest banks have pledged to implement the plans, part of President Xi Jinping’s campaign to bolster support by tackling government waste and corruption.

Hawks owner Levenson to sell after 'offensive' email (CNBC)
When the Donald Sterling racist debacle went public with the TMZ released audio recording, Atlanta Hawks owner Bruce Levenson released a statement advocating a zero tolerance policy on such comments. The problem is Levenson himself made some questionable comments, something he admitted in a statement released Sunday. "In trying to address (Hawks attendance) issues, I wrote an e-mail two years ago that was inappropriate and offensive. I trivialized our fans by making clichéd assumptions about their interests (i.e. hip hop vs. country, white vs. black cheerleaders, etc.) and by stereotyping their perceptions of one another (i.e. that white fans might be afraid of our black fans). By focusing on race, I also sent the unintentional and hurtful message that our white fans are more valuable than our black fans. "If you're angry about what I wrote, you should be. I'm angry at myself, too. It was inflammatory nonsense. We all may have subtle biases and preconceptions when it comes to race, but my role as a leader is to challenge them, not to validate or accommodate those who might hold them." In the wake of those comments — which Levenson self-reported to the NBA — he has agreed to sell the team, something confirmed by NBA Commissioner Adam Silver in a statement.

Yale Fund Takes Aim at Climate Change (NYT)
As pressure grows from students who want to see their schools use financial clout to address environmental issues, Yale University’s investment office wrote to its money managers asking them to assess how investments could affect climate change and suggesting they avoid companies that do not take sensible “steps to reduce greenhouse gas emissions.” The letter, from David F. Swensen, Yale’s chief investment officer, stopped short of asking managers to sell shares in companies with a “large greenhouse footprint.” Instead, Yale asked them to “discuss with company managements the financial risks of climate change and the financial implications of current and prospective government policies to reduce greenhouse gas emissions.”

Bank robber caught with cash down his pants: police (NYDN)
Shawn Canfield, 25, was caught by Merced Police officers while stuffing the loot down his pants only a few blocks away from the targeted Chase Bank on Saturday afternoon. As detectives led the neck-tattooed Canfield back to the Merced police station for questioning, they learned just how much money he had stolen. KFSN-TV reports a total of $2,414 fell out of Canfield’s pant legs as he walked up the stairs and then another $334 later fell out when the detectives asked him to stand up.


Opening Bell: 10.02.12

JPMorgan Sued On Mortgage Bonds (WSJ) New York's top prosecutor opened a new front in efforts to hold banks accountable for the financial crisis by filing a civil lawsuit against J.P. Morgan Chase, alleging widespread fraud by the company's Bear Stearns unit in the sale of mortgage-backed securities. The case is the first to be brought under the aegis of a group of federal and state prosecutors and regulators formed by President Barack Obama in January. If successful, the lawsuit could point the way to significantly more financial pain for the big banks, which face threatened government actions and numerous investor lawsuits tied to mortgage securities that soured in the crisis. Greece's Creditors Look Askance At Cutbacks (WSJ) Greece's international lenders cast doubt on parts of Athens' plans to save billions of euros through new cutbacks and tax measures, throwing a potential wrench in the government's efforts to reach a quick deal to unlock new aid for the country. The troika of Greece's international inspectors—the European Commission, the International Monetary Fund and the European Central Bank—rejected as much as €2 billion ($2.57 billion) of austerity measures, a senior finance ministry official said. Spain Adds $32 Billion Power-System Bailout to Bank Rescue (Bloomberg) After Spain’s rescue of its banks and cash-strapped regions, the 2013 budget reveals a bailout of the power industry to cover 25 billion euros ($32 billion) of debt accumulated by the electricity system. The spending blueprint released two days ago adds 100 billion euros to the nation’s debt from the rescue packages by the end of 2012, driving its ratio to gross domestic product up 16.8 percentage points to 85.3 percent of total output. Fed Chief Takes On Critics (WSJ) Some Republican lawmakers and foreign government officials say the Fed's policies, by lowering the U.S. government's borrowing costs, take pressure off the White House and Congress to restrain the growing deficit. "I find this argument unpersuasive," Mr. Bernanke said in a speech to the Economic Club of Indiana. "The responsibility for fiscal policy lies squarely with the administration and the Congress." Moreover, he said, "using monetary policy to try to influence the political debate on the budget would be highly inappropriate." Woman who chomped off boyfriend's testicles back in court for breaching non-contact order after he took her (NYDN) Martin Douglas required emergency surgery and 19 stitches to re-attach his scrotum after the drunken assault by his then-girlfriend Maria Topp. But after rekindling their unlikely romance Topp says she was 'stabbed in the back' by Mr Douglas after he reported her to police for breaching her restraining order. Topp, 45, admitted unlawfully and maliciously inflicting grievous bodily harm as her trial at Newcastle Crown Court was about to start last October. The mother-of-four was handed a 12-month sentence, suspended for 18 months, plus a restraining order which banned her from contacting Mr Douglas. However, after a ‘chance’ encounter in Newcastle in March this year, the pair got back together again. Topp, 45, had a ‘friendly chat’ with her ex-flame when they bumped into each other in Yates’ wine bar in the city centre. She then sent Mr Douglas a text asking ‘Do you still love me?’ Topp and Mr Douglas resumed their old relationship, which fizzled out again in June this year at which point Mr Douglas reported Topp’s breach of her restraining order. Merrill Plots Raid On Vulnerable Rival (WSJ) In a raid that stands out even in Wall Street's aggressive recruiting culture, Merrill Lynch is arming some managers with lists of top Morgan Stanley Wealth Management brokers who are considered ripe for defection, according to people familiar with the firm's recruiting. The so-called "mapping" of Morgan Stanley brokers shows the Bank of America Corp. unit is pushing to capitalize on technological and reputational blows at Morgan Stanley, according to these people. Morgan Stanley is coming off a tumultuous computer system conversion and Facebook's botched initial public offering, which has left investors nursing billions of dollars in losses. Merrill Lynch has enlisted some of its 11 market executives—regional managers who report to brokerage head John Thiel—to call top-grossing Morgan Stanley brokers. Those calls typically are made by lower-ranking workers such as branch managers, these people said. Yahoo CEO Marissa Mayer has baby boy, becomes first-time mom (NYP) CEO Marissa Mayer is a mom after giving birth last night, her husband, Zachary Bogue, posted on Twitter. “Baby boy Bogue born last night. Mom (@marissamayer) and baby are doing great — we couldn’t be more excited!” Bogue tweeted this morning...Mayer has said she is taking a few weeks of “working” maternity leave and is expected to bring her son to work. Ex-Madoff Workers Face More Charges in Fraud Indictment (Bloomberg) Five longtime employees of Bernard Madoff’s former investment firm face more charges related to the jailed con man’s Ponzi scheme, which the government claims got its start in the 1970s. U.S. Attorney Preet Bharara in Manhattan yesterday released a revised indictment expanding the charges against former Madoff employees Daniel Bonventre, Annette Bongiorno, Joann Crupi, Jerome O’Hara and George Perez. The indictment adds to the 17 criminal counts filed against the former employees in November 2010, for a total of 33 counts. Bacon Shortage Is ‘Overblown,’ Economists Say (ABC) If you started stocking your freezer with bacon to prepare for the upcoming pork shortage, you can start cooking some of it. Economists are telling consumers to expect a slight rise in price but not the “overblown” price increase in recent news reports. “It seems alarmist,” said Purdue University economist Christ Hurt, in response to the prediction that pork prices would double by the end of next year. While Hurt says pork prices might increase only 4 or 5 percent, though he notes that the drought has caused feed prices to go up sharply. “The one thing we don’t want to do is scare consumers,” he says, suggesting people try other types of meat if they are trying to save money.