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Opening Bell: 09.30.14

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Trial in $40 Billion Lawsuit Against AIG Bailout Begins (WSJ)
A $40 billion lawsuit against the U.S. government for its crisis-era bailout of American International Group Inc. AIG -0.64% got under way in federal court Monday, with a lawyer for the insurer's shareholders accusing the government of unlawfully seizing a majority stake in the insurer. Litigator David Boies called the deal a "grab" of a 79.9% equity stake at an "extortion interest rate" in an unlawful attempt to punish AIG's shareholders. Government lawyer Kenneth Dintzer responded in his opening statement that American taxpayers had extended "an enormous benefit" to AIG shareholders in the ultimately successful effort to stabilize AIG, one they weren't automatically entitled to and which they apparently "do not appreciate."

Pimco staff 'frantic and sad' in wake of Bill Gross sudden exit (Reuters)
As executives worked at damage control and to promote the new faces behind investment decision-making at the $2 trillion asset manager, some employees were struggling to cope with the tsunami that swamped their world on Friday. "I couldn't believe it on Friday, and I still can't believe it now," one employee who was not authorized to speak publicly told Reuters. "We lost Mohamed El-Erian in January and now Bill Gross. It's been confusing, frantic and sad."

Pimco Is in a Race to Keep Investors After Bill Gross Exits (WSJ)
Pimco executives, among them Chief Executive Douglas Hodge and the firm's new portfolio-management team, hosted a string of calls with financial advisers at Wall Street firms, including Merrill Lynch and Morgan Stanley, to explain why the firm will thrive despite Mr. Gross's exit, according to people familiar with the matter. "We're energized, we're prepared and we're strong," Mr. Hodge said to a group of Morgan Stanley financial advisers Monday afternoon on a teleconference, according to a person familiar with the matter.

Bill Gross is NOT crazy (CNBC)
"Let me say flatly, Bill Gross is NOT crazy. There was a palace coup in which disgruntled underlings gave an ultimatum to Pimco's parent company, Allianz, complaining that the "Bond King" had become difficult to work with and erratic. Five managers said it was "us or him," and Gross reportedly quit the day before he was set to be fired. Some have said Gross's investment letters to shareholders were indicative of a delusional mind. Gross is well-known for his colorful, contemplative and, often, offbeat, market commentary. But so what? That does not make him a lunatic who deserves to be locked up, or a wild man, hell-bent on self-destruction. That is how you get your work to stand out from the pack when you're trying to make the bond market interesting to investors who might otherwise never read his missives. Was he a demanding boss? I suspect so. Was he dismissive of other's ideas? Perhaps — and it wouldn't be the first time that would be true of a highly driven and successful money manager. Legendary hedge-fund managers from Michael Steinhardt to Julian Robertson to Stan Druckenmiller to my old boss, Steve Cohen were, or are, reputed to be impossibly difficult to work with. I know all of them quite well. Michael Steinhardt, who is extraordinarily gracious in social setting, would admit that, in his day, his voice would thunder so loud that the walls shook when he berated an underling. Steve Cohen, who says he has mellowed in recent years, would also acknowledge rattling a few cages in his younger years, which, I suspect, would be a mild way of describing those interactions with SAC employees. Socially, almost all of these folks are amiable and surprisingly gentle outside the office. But like highly skilled athletes, they are animals when they get on the field."

PayPal co-founder rounds on European tech entrepreneurs and regulators (FT)
“If you’re a slacker with low expectations, those low expectations are likely to be met,” Peter Thiel said. “I don’t think optimism always works. There is a form of pessimism, such as in China where people work really hard because they are scared that they will be old while they are still poor. “Pessimism in China motivates hard work. Pessimism in Europe has a more demotivating effect. When you’re pessimistic and unmotivated, it has as self-fulfilling character.”

Nerds Want Muscles Too; Workouts For Comic-Con Goers (WSJ)
Fitness programs and gyms are popping up around the country, catering to people who have spent much of their lives on the sofa playing games, reading comic books or acting out fantasies of superhero stardom. These new fitness regimens use characters and storylines from those media to spur people to move their bodies in real life—not just as avatars. "They stumble across Nerd Fitness and they can truly be themselves," says Mr. Kamb, who attributes the interest in nerd-centric fitness to the rise of movies based on muscular Marvel Comics characters such as Captain America, and the expanding definition of a nerd. "They can talk about squats and deadlifts and vegetables, and Harry Potter and Lord of the Rings, and be accepted for it." [...] Earlier this month Nerd Fitness held its first large public gathering, a four-day summer camp for adults at a retreat center in Clayton, Ga. Michelle Grimaldi, 23, of Warminster, Pa. attended and met like-minded exercisers. She did "Game of Thrones" combat training with PVC-pipe swords and attended a lecture on making your kitchen and home healthier called "Building Your Batcave." Campers came from as far as Australia, did ropes courses, lifted weights and danced dressed as fictional characters such as the Mario Bros. of video-game fame.

As SEC Enforcement Cases Rise, Big Actions Are Sparse (WSJ)
Mary Jo White will end her first full fiscal year running the Securities and Exchange Commission able to claim an increase in its annual tally of cases, the first year-over-year rise since 2011, according to people close to the agency. It is an important benchmark for the SEC chairman, a former federal prosecutor who promised "aggressive and creative" enforcement soon after taking office last year. But some SEC watchers said the heightened activity masks a scarcity of the blockbuster actions that should be a feature of an effective Wall Street cop. "When the chairman testifies before Congress…she will have nice numbers to cite," said Thomas Gorman, a partner at law firm Dorsey & Whitney LLP. "But she's not going to have the really good cases that the SEC made its reputation on."

IPO Markets Don’t Need Alibaba for Best Third Quarter Since 2010 (Bloomberg)
Alibaba Group Holding Ltd. raised a record-breaking $25 billion in the U.S. this month. Leave it out of the total raised, though, and the three months through September were still the busiest for IPOs in four years. From German online retailer Zalando SE to WH Group Ltd. (288), the world’s largest pork producer, companies raised $41.8 billion through yesterday, data compiled by Bloomberg show. In the U.S., it was the busiest third quarter in more than a decade -- also without Alibaba included.

Caesars ‘loyalty’ ruling a win for Leon Black’s Apollo (NYP)
In one of the most heated battles in Atlantic City, Black’s Apollo Global Management won a major victory over David Tepper — getting the okay from state regulators to transfer control of the highly valued player loyalty rewards program from its money-losing Caesars Entertainment into a new sister company. The transfer, to Caesars Enterprise Services, takes it outside the reach of Tepper’s Appaloosa Management — a move Tepper fought long and hard to prevent. Appaloosa is a junior creditor of Caesars Entertainment, which owns Bally’s Atlantic City and Caesars Atlantic City, two down-on-their-heels casinos. If Apollo put Bally’s and Caesars into Chapter 11 reorganization, the loyalty program could have given Appaloosa and other junior creditors some leverage. Without it, the junior creditors are likely to get little return, sources close to the situation said. The decision by New Jersey gaming regulators to allow the transfer — released Sept. 26 — increases the likelihood of a bankruptcy filing by the two casinos, sources said.

BYU Students Protest School's Ban On Beards (AP)
About 50 students, some donning paper beards, biked, skateboarded or rollerbladed their way from the Provo City Library to campus during the "Bike for Beards" protest on Friday night. "I love BYU. I love being a student here," protest organizer Shane Pittson said. "But the rule on beards I find particularly outdated." The 23-year-old international studies major and other students have launched a petition drive to get the school to lift the ban. University spokeswoman Carri Jenkins said students agree to its grooming standards before their first day of class and the beard ban was set in place by students. "It's nothing against beards. It's just how we choose to represent ourselves at the university," she told The Salt Lake Tribune...The BYU Honor Code, created in the 1940s, states that "men are expected to be clean-shaven" and beards are not acceptable.

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