October 20, 2021
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Opening Bell: 10.21.14

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Misery Widespread At Hedge Funds (WSJ)
This month’s turmoil in financial markets has been a “bloodbath” for hedge funds, inflicting large losses at an array of multibillion-dollar firms in the industry’s worst stretch since late 2011. It isn’t unusual for one segment of the $2.8 trillion hedge-fund world to find itself caught in a downdraft. But in October, the pain has been widespread. There were casualties among funds that make bets based on their fundamental analysis of companies, events like takeovers and broad economic trends. The losses came amid sharp volatility in stocks, bonds, currencies and commodities. Top firms including Jana Partners LLC, Discovery Capital Management LLC and Paulson & Co. have posted losses ranging from 5% to 11% for the month, according to investors...One hedge-fund manager told clients Monday that market activity reminded him of a “familiar plotline” from the “Jaws” movies. “An idyllic investment environment amid an improving economy…and then cue the music…dun-dun…dun-dun…dun-dun,” Paul Westhead, chief executive of $4 billion fund Rimrock Capital Management LLC, wrote in a letter to investors.

Fed to Banks: Shape Up or Risk Breakup (WSJ)
Federal Reserve officials sent a warning shot across Wall Street on Monday, telling bank executives they must do more to curb excessive risk-taking and improve employee behavior at their firms or face stiff repercussions, including being broken into smaller pieces. Federal Reserve Gov. Daniel Tarullo and Federal Reserve Bank of New York President William Dudley , in closed-door speeches Monday to bank executives gathered at the New York Fed, said Wall Street must clean up its behavior and image, according to copies of their remarks provided by the Fed. The regulators made it clear they aren’t satisfied with bank’s efforts in the six years since the financial crisis shattered public trust in big banks, citing ongoing probes of banks for currency-market and interest-rate manipulation, tax evasion and efforts to skirt international sanctions. Mr. Dudley raised the specter of breaking up big banks, saying if firms don’t prove they can comply with the law, “the inevitable conclusion will be reached that your firms are too big and complex to manage effectively. In that case, financial-stability concerns would dictate that your firms need to be dramatically downsized and simplified so they can be managed effectively.”

Private Equity Titans Open Cloistered World to Smaller Investors (Dealbook)
Carlyle, the Washington-based giant that Mr. Rubenstein co-founded in 1987, is at the forefront of an effort to open the cloistered and risky world of private equity to doctors, lawyers, well-heeled entrepreneurs and others with a brokerage account or, one day, a robust 401(k). The firm is close to establishing a new way to give individual investors direct access to a selection of Carlyle’s private equity funds, according to people briefed on the matter who were not authorized to speak publicly about the private fund-raising campaign in progress. Not just anyone can jump in. Investors — who must be so-called qualified purchasers, or those who own at least $5 million in investible assets — are required to commit a minimum of $250,000, which is divided evenly across four of Carlyle’s current funds. But the structure sharply lowers the bar on a per-fund basis for direct investment with Carlyle.

Heroin blamed in Google prostitute murder case (AP)
Defense attorneys for a high-priced prostitute accused of giving a Google executive a fatal dose of heroin on his yacht say their client had also injected herself, clouding her judgment...Gerald Christensen, Tichelman's second attorney, says the death was an accident and not malicious. Police say surveillance video shows Tichelman gather her belongings, casually step over the body of 51-year-old Forrest Hayes to finish a glass of wine, clean up a counter, then lower a blind before leaving the yacht on Nov. 23.

Microsoft CEO Nadella Received Pay Package of $84 Million (Bloomberg)
Microsoft Chief Executive Officer Satya Nadella was given a compensation package worth as much as $84.3 million for the software maker’s latest fiscal year, about 11 times his pay from the previous year. Nadella was named CEO about five months before the end of the year, which ended in June. He was granted share awards potentially worth $59.2 million in connection with his promotion to CEO, according to a filing today. He also received a one-time retention award worth $13.5 million. The disclosure of Nadella’s compensation follows a gaffe about raises he made earlier this month at a women’s conference. He said he was advised early in his career to stop bucking for a promotion and that those who take the long view will eventually be rewarded. He later apologized for those statements, saying that they didn’t help to close the gender gap in pay.

Cops: Losers Of Beer Pong Match Opened Fire On Fellow Texas Partygoers (TSG)
The 1:20 AM shooting Sunday took place at a residence in Ames, a city 45 miles from Houston. According to the Liberty County Sherriff's Office, investigators are searching for two men who allegedly shot up the party after losing at the beer pong table. Deputies identified the suspects as Decoris “Red” Rucker, 24, and Chris “Crazy Chris” Hackett. Rucker and Hackett were among a group of five men who became upset after losing a backyard beer pong game. The men, witnesses said, ran from the home while firing wildly at partygoers. An 18-year-old woman was shot in the thigh during the gunfire. Rucker, Hackett, and the other men fled in a 2006 Buick.

SEC Is Steering More Trials to Judges It Appoints (WSJ)
The Securities and Exchange Commission is increasingly steering cases to hearings in front of the agency’s appointed administrative judges, who found in its favor in every verdict for the 12 months through September, rather than taking them to federal court. The winning streak comes amid a marked shift at the agency toward trying cases that are more complex before its administrative law judges. Historically, the SEC had more often turned to these judges for relatively straightforward legal actions, such as barring stockbrokers who had been convicted of criminal fraud. Thanks in part to enhanced powers granted in the 2010 Dodd-Frank financial-reform bill, the SEC lately has been using the administrative judges for complicated cases, including several involving insider trading.

Apple Projects Another IPhone-Fueled Record for Holidays (Bloomberg)
Cook has increasingly honed all of the elements for a strong holiday quarter, stacking them in Apple’s favor. He has moved most of the company’s product debuts toward the end of the year, shifting away from some gadget introductions that used to happen in the spring. Starting with the iPhone 4s and the iPad mini in 2011 and 2012, Apple began introducing products before the shopping season. This year, he unveiled the iPhone 6 and 6 Plus, as well as Apple Pay, in September, followed by an event this month to show off new iPads and Macintosh computers.

Warren Buffett just lost about $1 billion on this (CNBC)
The plunge in IBM shares Monday after its weak earnings results cost the Oracle of Omaha dearly. The stock fell $13.06, and Buffett held about 70.2 million shares as of June 30, according to the most recent SEC filings. That means the sharp decline cost him $916.5 million—a drop in the Berkshire Hathaway bucket, to be sure, but still noteworthy. (At IBM's lows of the day, he was down as much as $1.08 billion). In April, after a prior weak earnings report, Buffett told CNBC he had not "soured" on IBM, that he had bought more stock this year and that he had not sold a share.

Father of the bride: daughter of ex-Barclays exec marries in south of France (NYDN, earlier)
Nell Diamond, a former Deutsche Bank analyst, married Deutsche managing director Ted Wasserman at the Hotel du Cap-Eden-Roc in Antibes, France.

Alleged drunk driver thought jail was a bar (UPI)
Police in Michigan said an alleged drunk driver pulled into the county jail parking lot and thought she had arrived at another bar. The Van Buren County Sheriff's Office said the 39-year-old Hartford woman, whose name was not released, pulled into the county jail parking lot just after 2 a.m. Sunday and was seen trying to convince her boyfriend to get back into her vehicle. Deputies said the woman smelled heavily of alcohol and a breathalyzer test indicated her blood alcohol content was more than twice the legal limit of .08. Police said the woman admitted to investigators she had been out drinking at a bar and she had believed the parking lot was for another bar.

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RBS May Be Bigger Libor Culprit Than Barclays, Says MP (Guardian) John Mann, a Labour MP on the Treasury select committee, said "City insiders" had suggested RBS's involvement may be "noticeably worse" than Barclays.' [...] Mann's comments came as a former RBS trader claimed that the bank's internal checks were so lax that anyone could change Libor rates. Court documents filed in Singapore show that Tan Chi Min, who is suing RBS for wrongful dismissal, claimed that in 2008 a trader for the bank, Will Hall, changed the Libor submission even though he was part of the Japanese yen swap desk in London. The papers show that Tan, who worked for RBS in Singapore, raised the issue at his disciplinary meeting last September, saying the bank's internal procedure in London seemed to be that "anyone can change Libor". Spain Expects to Tap About $75 Billion in Rescue Financing for Its Banks (NYT) Spain expects to use about 60 billion euros, or $75 billion, of the 100 billion euros of bank rescue financing offered by European finance ministers in June, according to the Spanish economy minister, Luis de Guindos. UK Investment Bankers Prefer Singapore (FT) The southeast-Asian city state has become the most favored location for investment bankers who are based in London, research by financial services recruitment firm Astbury Marsden shows. Of the 462 investment bankers that were asked, 31 percent said they would most like to work in Singapore. By comparison, only a fifth preferred New York and only 19 percent opted in favor of London. In the year before, 22 percent named London as their preferred location, underlining how the British capital has lost some appeal among investment bankers amid tighter regulation and a clampdown on bonuses. “A fast growing, low tax and bank friendly environment like Singapore stands as a perfect antidote to the comparatively high tax and anti-banker sentiment of London and New York,” said Mark Cameron, chief operating officer at Astbury Marsden. “Far more London-based bankers are now more willing and able to relocate the 6,700 miles to Singapore.” Another Madoff Name Nix (NYP) The second of Ponzi-schemer Bernie Madoff’s daughters-in-law is asking a court for permission to shed her now notorious married name. Deborah West Madoff, who started divorce proceedings against Bernie’s son Andrew back in 2008, has sought permission in Manhattan Supreme Court to revert to her maiden name. The couple have two children. She’s not the first in the family to do so: in 2010, her sister-in-law made a similar court application. Suits Mount In Rate Scandal (WSJ) It won't be easy for the plaintiffs to win in court even though financial institutions are likely to reach settlements with regulators in coming months totaling billions of dollars, according to people close to the Libor investigation. The plaintiffs must prove that banks successfully manipulated interest-rate benchmarks such as the London interbank offered rate, or Libor, and caused the plaintiffs to suffer a loss. Still, some investors and analysts are forecasting huge damages despite the legal hurdles. In a July report, Macquarie Research estimated that banks face potential legal liability of about $176 billion, based on the assumption that Libor was "understated" by 0.4 percentage points in 2008 and 2009. Carlyle Group marketed $25 million deal without license: Kuwaiti firm (AP) A Kuwaiti company suing the Carlyle Group over a $25 million investment that went bad is now accusing the private equity firm of marketing the deal without a license as it seeks to have its case heard in Kuwaiti courts. The latest claim by Kuwait's National Industries Group adds a new twist to its more than two-and-a-half year legal challenge to Carlyle, and could complicate the American company's relationships with other wealthy Mideast investors. NIG's lawsuit focuses on a Carlyle investment fund that was one of the earliest casualties of the financial crisis when it collapsed in 2008. The fund has been the subject of multiple lawsuits against Washington-based Carlyle. Couple in court for disturbing the peace for 'screaming, moaning and swearing during seven-hour sex romps five nights a week' (DM) Jessica Angel and Colin MacKenzie had been issued with an order requiring them to prevent ‘screaming, loud moaning, swearing and raised voices’ after police were called to their flat 20 times in just four months. However, following further complaints from neighbours, the couple were charged under the Environmental Protection Act. They face a £3,000 fine if convicted...Mr MacKenzie, 45, from Sturt, South Australia, said: ‘How can you live in a place where you can’t have sex? It’s ridiculous. Anyway, it’s mostly Jessie. The sex goes from four to seven hours, five nights a week. I’ll probably die of a heart attack – she’s almost killing me.’ German Official Opposes European Debt Purchases (NYT) The president of the German central bank said in an interview published Sunday that he remained staunchly opposed to government bond purchases by the European Central Bank, a position that could make it more difficult to deploy a weapon many economists believe is essential to saving the euro. But in a sign that the mood in Germany could be shifting, Chancellor Angela Merkel adopted a more dovish tone during a separate interview. She told members of her governing coalition to stop talking about Greece leaving the euro. “We are in a decisive phase in the battle against the euro zone debt crisis,” Ms. Merkel told ARD television. “Everyone should weigh their words very carefully.” Fed mulls open season on bond buys to help economy (Reuters) The Federal Reserve is considering a new approach to unconventional monetary policy that would give it more leeway to tailor the scale of its stimulus to changing economic winds. While fresh measures are not assured and the timing of any potential moves are still in question, some officials have said any new bond buying, or quantitative easing, could be open-ended, meaning it would not be bound by a fixed amount or time frame. "I am inclined to think that if the Fed decides on more QE it would be of the open-ended variety," said Michael Feroli, chief U.S. economist at JPMorgan and a former Fed economist. BlackRock Bullish On Thai Bonds, Region’s Worst (Bloomberg) BlackRock is bullish on Thai bonds, Asia’s worst-performing in 2012, saying the central bank has room to ease monetary policy as a global slump cools demand for exports from Southeast Asia’s second-largest economy. Former SC Gov. Mark Sanford to wed ex-mistress Maria Belen Chapur (NYDN) "Yes, we are engaged, and I'm both happy and excited for what that means," Sanford said in a statement obtained by CNN. "I have long expressed my feelings for her, she's a wonderful person. My closest friends have met and love her, and I look forward to introducing her to still many more that have yet to do so." The conservative Republican's political aspirations were dashed in 2009 when he disappeared from South Carolina for five days under the pretense that he was hiking the Appalachian Trail. The father of four, who was once thought to be a potential 2012 presidential contender, later admitted that he was actually visiting Chapur, who he professed to be his "soul mate." "I've been unfaithful to my wife," Sanford said at the time. "I developed a relationship with what started as a dear, dear friend from Argentina."