Opening Bell: 09.17.14 - Dealbreaker

Opening Bell: 09.17.14

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Barclays Hid Traders’ Role After Questions: Schneiderman (Bloomberg)
Barclays hid the role of high-frequency traders in its dark pool even after the bank said it had shut off clients who engaged in suspect activity, New York Attorney General Eric Schneiderman said. Schneiderman sued Barclays in New York State Supreme Court in Manhattan in June, accusing Britain’s second-largest bank of bilking its own customers in order to expand its dark pool. The bank in July asked the court to dismiss the case, saying that the suit is based on factual errors and fails to show any investors were harmed.

Credit Suisse Loans Draw Fed Scrutiny (WSJ)
Credit Suisse is under fire from U.S. regulators over concerns the bank isn't heeding warnings to stop making loans regulators see as risky, according to a person familiar with the matter. The Swiss bank in recent weeks received a letter from the Federal Reserve demanding the bank immediately address problems with its underwriting and sale of leveraged loans, or high-interest-rate loans used by private-equity firms and others to finance purchases of companies, among other uses. The letter to Credit Suisse, known as a Matters Requiring Immediate Attention, found problems with the bank's adherence to guidance issued last year, warning banks to avoid deals that included too much debt or too few protections for the lenders in case of a default, according to the person familiar with the matter.

With Calpers Quitting Hedge Funds, Other Investors Reflect (Dealbook)
For the $2.8 trillion hedge fund industry, the size of the Calpers investment is minuscule. But losing it is important because Calpers has long been a trendsetter among public pension plans, and the reasons for its decision resonate with many public workers, retirees and the plans’ trustees: Hedge funds can just seem too complicated and costly. “A lot of the employees’ labor unions will applaud this,” said Christopher J. Ailman, chief investment officer of California’s big pension fund for teachers. He said organized labor tended to be wary of Wall Street in general; big fees for hedge fund managers are seen as siphoning away money from public workers. His crosstown rival, Ted Eliopoulos, chief investment officer at Calpers, indicated that he expected the decision to have a ripple effect. “We certainly had a very thoughtful and deep conversation with our peers in the institutional investor network, as well as a wide variety of talented active external managers, and so we considered those opinions in forming our own conclusion,” Mr. Eliopoulos said.

Goldman Sachs’s Oryza Asia Hedge Fund Said to Top $1 Billion (Bloomberg)
Goldman Sachs Investment Partners, set up to allow clients to invest with some of the bank’s top proprietary traders, raised about $1 billion for its first Asia hedge fund, said two people with knowledge of the matter. The fund, named Oryza Capital LP, informed investors in June that it would stop taking additional money after capital committed had reached its capacity, said the people, who asked not to be identified because the information is private. The Asia-focused equity long-short fund started in September 2013 with an initial capital of $80 million, according to a document sent to potential investors.

German Court Lifts Ban on Uber Ride Service (NYT)
A court in Frankfurt overturned a nationwide ban against the company’s car-sharing service in Germany, lifting, for now, one of the most severe legal restrictions that Uber had faced anywhere in the world since it was founded in 2009. The temporary injunction on the service, which allows drivers to connect with potential passengers through a smartphone application, had been imposed by the court at the end of last month before a hearing could be held. After the hearing on Tuesday, judges announced that Uber, a start-up company based in San Francisco, could now operate in Germany. The judges were sympathetic to the arguments of Taxi Deutschland, a trade body that had brought the initial case against Uber, claiming that the service competed unfairly with local taxis, said Arne Hasse, a spokesman for the Frankfurt court. But he said that while the association was right in bringing the case and requesting the injunction, the group had waited too long to file the case, and therefore the injunction had to be lifted.

Papa Murphy's Employee Admits Rubbing Scrotum On Pizza Was 'Stupid' (HP)
A Texas teen employed at a Papa Murphy's pizza franchise faces criminal charges after a customer caught him in the act of rubbing his scrotum on an uncooked stuffed-crust Hawaiian pizza that he'd ordered, according to the Austin American-Statesman. When the customer asked Austin Symonds how old he was, he replied that he was 18, KEYE reports. "So you are old enough to know better than to put your balls on someone's pizza," the customer said, according to the station. "Yes," Symonds replied. "Man, I am really sorry, that was stupid." Symonds was apparently upset that an order had come in just before closing time. He allegedly admitted to police that he'd probably have fulfilled the order with the tainted pizza if he hadn't been caught. Symonds is charged with tampering with a consumer product. He was released on $10,000 bail.

Fed Dims Emerging Markets' Allure (WSJ)
Fears of higher U.S. interest rates are prompting fund managers to cut back on investments in emerging markets. For now, investors still are moving into developing markets, though the pace has moderated. Emerging-market stocks and bonds received $9 billion from investors in August, compared with an average $38 billion a month between May and July, according to the latest data from the Institute of International Finance. But after months of heavy buying in such places as Brazil and India, lured by the prospect of higher returns than in the Western world, investors are taking a more cautious stance. Chief among these money managers' concerns: that the recent rally in emerging-market stocks, bonds and currencies could be derailed as the U.S. Federal Reserve gets closer to raising interest rates. The Fed is expected to give more clarity on the timing of a rate increase on Wednesday, and many investors anticipate such a move will occur in mid-2015.

BofA’s Uglum, Horlick Said to Leave Bank Amid Cuts (Bloomberg, earlier)
Bank of America Corp. managing directors John Uglum and Doug Horlick have left the firm as it cuts jobs in the interest-rates and currency-trading businesses, said people briefed on the moves. Sowen Ng, a Hong Kong-based managing director in sales, also departed, said the people, who asked not to be identified discussing personnel matters. Uglum was an interest-rate derivatives trader and Horlick ran institutional foreign-exchange sales for the Americas.

S&P Downgrades Venezuela on Worsening Economy (WSJ)
Standard & Poor's Ratings Services on Tuesday cut Venezuela's credit rating further into junk territory, citing President Nicolás Maduro's failure to take steps to combat rising inflation and a deepening economic crisis. S&P downgraded Venezuela's rating from B-minus to triple-C-plus. The new rating indicates that there is a one-in-two chance that the South American country defaults on its sovereign debt in the next two years, S&P said. Though boasting the world's largest proven crude oil reserves, Venezuela's economy has been mired with the highest inflation rates in the Americas and chronic shortages of food, medicine and car parts as the government withholds dollars from importers, who are subject to restrictive currency controls.

Soda makers headed down same road as tobacco: analyst (NYP)
Soda makers, which have seen sales in the US fall for nine straight years, appear more like this generation’s cigarette sector, one Wall Street report contends. Both sectors are under attack for health reasons and both have seen a years-long decline in sales, the reportfrom Cowen and Co. explains. More recently, soda makers are “taking a page out of the tobacco playbook by focusing in styles, flavors and price/mix to manage volume declines,” Cowen analyst Vivien Azer writes. “Youth consumption [of soda] is falling notably, which is unhelpful in terms of driving future volumes,” Azer writes. “What is more, both categories have an outsized exposure to an economically challenged core consumer.” Azer, in her report, “ Is Soda the New Cigarette?,” acknowledges differences between the products — but gives cigarettes an economic edge for “being dangerous but addictive.”

CD-Loving Japan Resists Move to Online Music (NYT)
Japan may be one of the world’s perennial early adopters of new technologies, but its continuing attachment to the CD puts it sharply at odds with the rest of the global music industry. While CD sales are falling worldwide, including in Japan, they still account for about 85 percent of sales here, compared with as little as 20 percent in some countries, like Sweden, where online streaming is dominant.

Easthampton woman charged with assault with lit cigarette and spatula (MassLive)
An Easthampton woman was charged with assault and battery Tuesday for allegedly burning a Westfield woman’s right buttock with a lit cigarette and striking her left buttock with a spatula. The 18-year-old was arrested by Westfield police Monday and arraigned Tuesday. She was released on her own recognizance after posting $100 bail. The woman was charged with two counts of assault and battery on a person older than 14, as well as assault and battery with a dangerous weapon.

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