Opening Bell: 09.24.14


Pimco ETF Draws Probe by SEC (WSJ)
The Securities and Exchange Commission is investigating whether bond giant Pacific Investment Management Co. artificially boosted the returns of a popular fund aimed at small investors, according to people familiar with the matter, the latest challenge for the firm run by investor Bill Gross. A probe into pricing issues at Pimco has been under way for some months, the people familiar with the matter said. Mr. Gross has been interviewed by SEC investigators, the people said. Mr. Gross declined to comment for this article. The issues being scrutinized by the SEC include the way a flagship exchange-traded fund, managed by Mr. Gross, purchased and valued certain bonds. Investigators from the SEC's enforcement division are examining whether the $3.6 billion Pimco Total Return ETF BOND +0.08% bought investments at discounted prices but relied on higher valuations for the investments when the fund calculated the value of its holdings shortly thereafter. Such a maneuver could make it seem as though the ETF had scored quick gains when it was in fact taking advantage of variations in the way some investments are valued in the bond market.

Harvard Endowment Earns 15.4% Return for Fiscal 2014 (WSJ)
Those returns exceeded internal goals and boosted the endowment's assets to $36.4 billion as of June 30. Harvard also deepened its commitment to alternative investments in hedge funds, private equity and assets such as real estate. The nonprofit agency that manages Harvard's money said it had received approval to increase allocations to private equity and hedge funds during fiscal 2015 to 34% of assets, up from 31%, according to a letter issued by Harvard endowment chief Jane Mendillo.

Oracle Cuts Ellison’s Stock Awards, Adds CEOs’ Incentives (Bloomberg)
Ellison’s performance-based stock award was cut by 187,500 shares, or $7.28 million based on Oracle’s closing price today, and his stock-option award for fiscal 2015 was reduced by 750,000 shares, according to a filing with the U.S. Securities and Exchange Commission. Ellison’s total compensation last year was $67.3 million, down from $79.6 million the prior year. Mark Hurd and Safra Catz were both named CEOs of the software maker on Sept. 18, while Ellison became chairman and took on the title of chief technology officer. Hurd will run sales, marketing and strategy, while Catz will remain chief financial officer and oversee legal and manufacturing operations. Each received a one-time grant of 500,000 stock options and a performance-based stock award of 125,000 shares in connection with their promotions, according to the filing.

Apple's Tim Cook: 'Get on board' with climate change (CNBC)
Apple CEO Tim Cook took on the hot-button issue of climate change on Monday during the Climate Week NYC 2014 conference. Speaking during the opening day of the high-profile climate change event, Cook said people shouldn't accept a trade-off when it comes to business and the environment. "What are the root causes?" he said. "And you are not accepting that there is a trade-off between the economy and the environment. Too many people believe you can do this or that. What we found is that both are doable. If you innovate and you set the bar high, you will find a way to do both." Cook added: "When you realize it and you see the urgency, it is time to act now. Everyone that hasn't been on board, that's OK, but now is the time to get on board."

Looking to cuddle? There’s an app for that (NYP)
The app launched on Sept. 11 allows users to set their hug preferences, including whether they like to be the big or little spoon to ensure they are matched with nearby huggers of similar tastes. Cuddlr founder Charlie Williams told The Daily Mirror newspaper that the app was only designed for a “little cuddle,” but users could take the relationship further if they pleased. “On Cuddlr, you get together straightaway, have a little cuddle, and then part ways,” he said. “If you want to hang out again, you can exchange information then and there — but you already know what kind of cuddles they give.”

Fed Said to Warn Banks on Capital Charges on Leveraged Loans (Bloomberg)
Federal Reserve officials are warning banks that rising levels of high-risk, high-yield loans on their balance sheets may require more capital held against them, according to a person familiar with the conversations. Regulators have beefed up scrutiny of the market after guidance issued in 2013 by the Fed, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. didn’t slow deal volume or declining credit standards. Banks have arranged about $411 billion of leveraged loans sold to investors such as mutual funds this year, compared with a record $696 billion in all of 2013, according to data compiled by Bloomberg. “Covenant-lite” loans, which lack requirements that can help protect lenders, are on pace to exceed 70 percent of total issuance this year, according to a Barclays Plc research report dated Sept. 5. “It appears that many banks have not fully implemented standards set forth in the interagency guidance,” Todd Vermilyea, senior associate director for banking supervision and regulation at the Fed Board, said in May.

New Tax Rules Will Slow, Not Halt, Inversion Deals (WSJ)
In 2004, after a previous wave of inversions, Congress prohibited the most overt ones, in which a company simply moved on paper to a Caribbean tax haven. But at the same time, lawmakers basically agreed to allow inversions that occur through a real merger. That has tied Treasury's hands in shutting down the new deals altogether, and helped lead to the new spate of inversions. The Obama administration, as well as many Democratic lawmakers, wants Congress to tighten the rules further, and essentially prohibit inversions through merger, unless the U.S. company accounts for half or less of the combined firm. There is little prospect that will happen soon, however, given Republican concerns. The administration still has at least one more regulatory card to play—it could limit still more of the benefits of inverting. The biggest benefit left untouched by Monday's action allows inverted firms to "strip" domestic profits out of the U.S. in the form of untaxed interest payments to their new overseas parent. Administration officials say they are still studying that one.

Wall St. Bankrolls Ex-Executive as He Sues Over A.I.G. Bailout (Dealbook)
Maurice R. Greenberg, 89, the former A.I.G. chief executive who still holds a large stake in the insurance company, filed the lawsuit on behalf of fellow shareholders. He has now raised several million dollars from three Wall Street companions to help cover the cost of the case. The investors, who are entitled to a cut of any damages Mr. Greenberg collects from the government, contributed about 15 percent of the tens of millions of dollars in legal costs, according to people with knowledge of the arrangement. Six years after the government saved Wall Street from the brink of collapse, the lawsuit is coming to trial, reopening one of the ugliest chapters in modern financial history. The trial, which begins next week in Washington, will most likely hinge on testimony from the policy makers who orchestrated A.I.G.’s rescue, including former Federal Reserve Chairman Ben S. Bernanke and former Treasury Secretary Timothy F. Geithner. With the legal bills mounting in the three-year case, Mr. Greenberg sought support from a certain breed of investor — those who have misgivings about the government. Kenneth G. Langone, the former director of the New York Stock Exchange who spent years fending off accusations from the New York attorney general’s office, contributed to Mr. Greenberg’s legal fund, the people said. Steven A. Cohen, whose hedge fund was indicted on charges of insider trading last year, considered investing, too, but ultimately declined.

10 colleges with the most billionaire alumni (Fortune)
Fifty-two living billionaires hold a degree from [Harvard], almost twice as many as those who graduated from second-place University of Pennsylvania, with 28 billionaire alumni. The other universities in the top 10, in descending order: Stanford, NYU, Columbia, MIT, Cornell, USC, and Yale. The U.K.’s Cambridge University is the only school outside the U.S. to make the list. Eleven of its recent grads are worth $1 billion or more. Didn’t go to any of those schools? Cheer up. The ranking is part of a detailed new study of the world’s billionaires, by WealthX, a market research firm that helps businesses reach ultra-rich consumers, and UBS, whose wealth management arm handles a big chunk of their money. The report points out that, although 68% of billionaires hold at least a four-year degree, a sheepskin “is not a prerequisite to then go on and amass a billion-dollar fortune,” since one in three billionaires either never went to college at all or didn’t stick around to finish.

Queen Elizabeth ‘purred’ in joy after being told Scotland rejected independence (NYDN)
U.K. Prime Minister David Cameron was caught on camera by Sky News telling former New York Mayor Michael Bloomberg about Queen Elizabeth's jovial reaction the news that Scotland would remain part of the U.K. “The definition of relief is being the Prime Minister of the United Kingdom and ringing the Queen and saying 'It's alright, it's okay'. That was something,” Cameron said Tuesday, according to Sky News, which captured his statement on camera. "She purred down the line."



Opening Bell: 4.25.17

Marissa Mayer will not be going hungry; Bernanke thinks we're all crazy; of course Elon's new celeb relationship is bullish for Tesla; and more.

Opening Bell: 04.27.12

LightSquared Lenders Pressure Falcone (WSJ) If Mr. Falcone doesn't agree to eventually leave LightSquared's board and make way for new executives and directors at the wireless communications firm, lenders are likely to balk and the company could end up filing for bankruptcy protection, they said. Shareholders Rebuke Barclays, Credit Suisse on Pay (Reuters) More than a quarter of Barclays shareholders look set to vote against the British bank's controversial pay plan for bosses and Credit Suisse is also facing a backlash as investors seek a greater share of profits. Stormy annual shareholder meetings at both banks got underway on Friday with many attendees complaining executives are getting too big a slice of bank income at their expense...Barclays Chairman Marcus Agius apologized for badly communicating the bank's pay strategy and promised to "materially" increase the dividend shareholders receive, helping to lift the bank's shares more than 4 percent. But he was heckled during his speech to a packed hall of about 2,000 shareholders and his comments about pay were greeted with laughter in some quarters. Renowned short-seller bets against Fortescue (SMH) Hedge fund short-seller Jim Chanos has singled out Fortescue Metals as a "value trap" stock, telling a New York conference that shares in billionaire Andrew Forrest's company will fall "materially." In a presentation this month to Grant's Spring Conference, a private investment forum, Mr Chanos, the boss of Kynikos Associates, told investors he feared iron ore miner Fortescue has "a somewhat promotional management team." Goldman Banker Probed For Alleged Leaks To Galleon (WSJ) U.S. prosecutors and securities regulators are investigating whether a senior Goldman investment banker gave Galleon hedge-fund traders advance word of pending health-care deals, according to people familiar with the matter. The banker, whom the people identified as Matthew Korenberg, is a San Francisco-based managing director for Goldman, a senior post. Among the merger deals being scrutinized by Los Angeles federal prosecutors and the Securities and Exchange Commission is the 2009 acquisition by Abbott Laboratories of Advanced Medical Optics, a Santa Ana, Calif., medical-device maker—a deal in which Mr. Korenberg advised Advanced Medical Optics, the people say. Another is the acquisition of APP Pharmaceuticals Inc. by Fresenius, announced in July 2008, in which Goldman advised APP, they say. Unlikely Allies (NYP) Billionaire hedge-fund mogul and Republican stalwart Paul Singer is in an odd position of late — asking the Obama administration for help to keep troubled mortgage lender ResCap out of bankruptcy. Singer, whose Elliott Associates owns debt in the mortgage lender, a unit of Ally Financial, asked Treasury Secretary Tim Geithner in recent weeks to use the government’s 74-percent stake in Ally to press for an alternative financial cure. An out-of-bankruptcy solution would help Elliott, to be sure, but would also assist the White House by keeping a unit of one of its high-profit bailouts from outright failure. But Singer, so far, hasn’t gotten any satisfaction. Geithner, insiders said, doesn’t want to use Treasury’s muscle to stop the likely Chapter 11 filing because it could be interpreted as the government overstepping its bounds. Spain Urges Focus On Reforms After Downgrade (WSJ) The government has embarked on a plan of far-reaching reforms to overhaul the economy, including new labor laws and a cleanup of the banking sector. Mr. Jiménez Latorre said these reforms will pay dividends in the medium- to long-term. The S&P ratings action "just focuses on the immediate effects," which won't be positive, Mr. Jiménez Latorre said. Dream Stenographer / Lucid Dreaming Partner (Craigslist) "I possess the wonderful gift of regularly occuring and incredibly vivid lucid dreams. In these dreams I have written Pulitzer Prize winning novels, bioengineered the cure for HIV, and brokered a lasting Israeli-Palestinian peace agreement. I have also composed Grammy winning albums. The only problem is humanity hasn't and can't benefit from my accomplishments because I forget how I achieved them shortly after waking. As a modern Renaissance man and philosopher scientist, my conscience cannot be at peace knowing I'm not doing everything possible to save my fellow human beings. Therefore I would like to a hire a dream stenographer to write down my ideas so that I may share them with the world. You, the dream stenographer, will sleep within arm's reach of me on selected nights when I feel my mind is operating at its peak performance level. Sleeping is mandatory as I'm not able to reach my optimum dream state when someone is watching me sleep. Remaining within arm's reach at all times is also mandatory so that I may wake you as quickly as possible to begin recording my stream of consciousness.Qualified applicants will be excellent note takers with unrivaled penmanship." KKR Earnings Beat Expectations (WSJ) Economic net income, a measure of private-equity firms' profitability that analysts follow because it includes both realized and unrealized investment gains, was $727.2 million, or 99 cents a share, compared to $742.5 million, or 96 cents a share, in the year-earlier period. The earnings came in at the top end of analysts' estimates, with a consensus economic net income of $486.6 million, or 74 cents a share, according to Thompson Reuters. NYSE CEO 'very disappointed' to lose out on Facebook listing (DJ) Just so you know. Wells Fargo to Buy Merlin Securities Prime Brokerage (Bloomberg) The purchase is Wells Fargo’s first foray into prime brokerage services and the bank will use the business as a foundation to expand, said Christopher Bartlett, head of equity sales and trading at the San Francisco-based lender. Prime- brokerage includes services such as lending, clearing trades and record-keeping that help hedge fund managers run their firms. Bartlett wouldn’t say how much Wells Fargo paid and a statement set to be released later today didn’t disclose the terms. Bo Xilai's Son Ticketed in Porsche (WSJ) Disputing a notion common in China that he lives a lavish lifestyle, Mr. Bo wrote to the Harvard Crimson on Tuesday saying he wished to address "rumors and allegations about myself." Among other things, "I have never driven a Ferrari," he wrote. The Wall Street Journal reported in November, based on people familiar with the episode, that Mr. Bo, the grandson of an illustrious Communist leader of the Mao era, arrived at the U.S. ambassador's residence in Beijing in a red Ferrari last year to pick up the daughter of the then-ambassador...Massachusetts Department of Transportation records show Mr. Bo was stopped by police for allegedly running stop signs in December 2010 and May 2011, one of them at 2:20 a.m., and for speeding in February 2011. The license plate of the car, which the Journal learned from someone familiar with the matter, showed it was a black 2011 Porsche Panamera registered to someone at his address.