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Opening Bell: 11.10.14

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Bonus Season Brings More Pain for Traders (WSJ)
Investment bankers, including those who advise companies on mergers and underwrite stock offerings, and private-equity employees should see bonuses rise as much as 15% from a year ago, according to an analysis by Johnson Associates, a New York compensation-consulting firm. Bonuses paid to fixed-income and stock traders may decline by as much as 10%, Johnson Associates said. Hedge-fund payouts should range from an increase of 5% to a decrease of 10%, the firm said. The study echoes many of the same themes sounded by each of the biggest banks during their quarterly results. A stock-market rally and mounting confidence in the economy’s direction have emboldened corporate chiefs to pursue acquisitions.

Janus Attracted More Than $1 Billion After Gross Joined (Bloomberg)
The Janus Global Unconstrained Bond Fund (JUCIX), which Gross started managing last month, drew an estimated $364 million in client deposits in its first full month with the bond legend at the helm, bringing assets to $442.9 million through Oct. 31, according to data compiled by Bloomberg. Janus Flexible Bond Fund (JAFIX), a core bond strategy, saw $821 million of deposits in the month, pushing assets to $8.4 billion.

Pimco to Spend $280 Million on Staff Retention (MoneyBeat)
In a bid to stave off further departures during a year of management changes and heavy outflows, the bond giant unveiled a new “enhanced compensation program”. The initiative, implemented in the wake of co-founder Bill Gross’s abrupt departure in September, will cost about €225 million ($279.45) through mid-2017, parent insurer Allianz SE said Friday. Under the new plan, Pimco will make so-called “special performance awards” in addition to normal 2014 year-end compensation. The bonuses will be awarded to staff members that are senior, but below managing director level, and will be paid out over 12 to 30 months.

Paulson Event-Driven Fund Said to Plunge 14% in October (Bloomberg)
Billionaire John Paulson posted a 14 percent loss in his firm’s event-driven hedge fund during October, adding to declines this year, two people with knowledge of the matter said. The monthly drop left the Paulson Advantage fund down about 25 percent in 2014, said the people, who asked not to be identified because the information is private. Paulson Credit Opportunities lost 6.8 percent in October, leaving it down 3.4 percent in 2014.

Bond Swings Draw Scrutiny (WSJ)
The day’s trading was just hitting its stride in New York on the morning of Oct. 15 when bond investors, traders and strategists were stunned by an unusual move in the $12 trillion U.S. Treasury market playing out on their computer screens. The yield on the 10-year Treasury note took a sharp dive below 2% within minutes, and few could understand exactly why. Some dealers immediately pulled the plug on automated trading systems that provided price quotes to customers. Fund managers rushed to convene meetings. Many investors scrambled to pinpoint the reason behind the accelerating decline. “It starts moving faster and faster, and you can’t point to anything,” recalled Mark Cernicky, managing director at Principal Global Investors , which oversees $78 billion. Now, investors and regulators are burrowing into the causes of the plunge in yields to try to understand whether electronic trading and new regulations are fueling sudden price swings in a market that acts as a key benchmark for interest rates, investments and U.S. home loans.

Meth suspect wore 'I [heart] Crystal Meth' T-shirt (UPI)
The Laurel County Sheriff's Office said Deborah Asher, 37, was wearing the T-shirt when she was arrested alongside Richard Rice, 57, as part of a drug investigation Tuesday. Police said the suspects were in possession of 3.37 grams of crystal meth as well as a set of digital scales.

CFTC Turns Toward Administrative Judges (WSJ)
The Commodity Futures Trading Commission plans to start steering some of its cases against trading firms, brokers and others to administrative law judges appointed by federal agencies, instead of trials in federal court, according to a top official. The move comes as defense lawyers criticize the escalating use of administrative law judges by regulators pursuing financial wrongdoing, saying it eliminates an independent jury from the process. Securities and Exchange Commission officials have said previously they intend to more often use administrative proceedings for insider-trading and other complicated cases.

The money man who helped the GOP win (NetNet)
Better known as "Bob," Mercer is co-head of Renaissance Technologies, a secretive hedge fund firm that manages $25 billion using fast-trading computer programs from its headquarters in a quiet hamlet on Long Island. Thanks both to looser campaign finance rules and his promotion to help lead one of the largest hedge funds in the world, Mercer has quietly become a major player in politics since 2010. He donated more than $8 million this election cycle alone, putting him behind only Singer as the second-largest Republican booster. And Mercer was fourth overall regardless of party after hedge fund manager-turned environmentalist Tom Steyer and former New York City mayor Michael Bloomberg, according to data compiled by the Center for Responsive Politics.

Pregnant, unmarried, and fired, woman sues firm (NYP)
Ben Lorello, one of Wall Street’s most powerful investment bankers, humiliated and isolated a top female banker — a colleague at Jefferies & Co. — last year after she told the firm she was trying to get pregnant, according to charges in a wrongful-termination lawsuit filed by the woman. Amy Corinne Smith, an investment banker and co-head of Jefferies’ cleantech sector at the time — and the only female group boss at the firm — was subject to a hostile work environment created in part by Lorello and was eventually let go by the firm, it is alleged. During a business dinner in March 2013, after the unmarried Smith alerted Lorello and others at Jefferies that she was undergoing fertility treatments, he prodded her with personal questions in front of male colleagues during a work dinner, according to the complaint, filed in May 2013 but received little media attention.

BNP Paribas bankers frustrated by rejected expenses (NYP)
Top bankers at BNP Paribas are frustrated by compliance execs who are getting down to the nitty- gritty, analyzing every expense — even rejecting bankers’ lunches if they don’t recognize the venue. The French bank feels pressure after pleading guilty to money laundering for regimes in Iran and Cuba, paying nearly $9 billion in fines.

Ventriloquist Fights Gag Order Against His Puppet (AP)
A South African ventriloquist said Monday that he will challenge a gag order against his puppet. The ventriloquist, Conrad Koch, said he strongly denies allegations that tweets criticizing the singer Steve Hofmeyr amounted to hate speech. The singer said the tweets, which came from the Twitter account of the puppet, accused him of racism. He said he had obtained a court order barring the ventriloquist and his puppet, Chester Missing, from making any statements about him in public or on social media.



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Photo: Getty Images.

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Opening Bell: 04.11.12

Profit Drop at U.S. Banks Imperils Rally (Bloomberg) The six largest U.S. lenders, including JPMorgan Chase and Wells Fargo, may post an 11 percent drop in first-quarter profit, threatening a rally that has pushed bank stocks 19 percent higher this year. The banks will post $15.3 billion in net income when adjusted for one-time items, down from $17.3 billion in last year’s first quarter, according to a Bloomberg survey of analysts. Trading revenue at the biggest lenders is projected to fall 23 percent to $18.3 billion, according to Morgan Stanley analysts, who didn’t include their firm or Wells Fargo. Making Waves Against 'Whale' (WSJ) Dozens of hedge funds are believed to have placed bets in the derivatives markets that pit them against positions taken by Bruno Iksil, the French-born trader who works for the bank's Chief Investment Office in London, according to people familiar with the matter. Funds that traded against Mr. Iksil earlier this year recorded big paper losses as his trades helped push down one credit index. The losses made Mr. Iksil a target for some hedge funds, who felt they could capitalize on his outsize position, these people say. The funds' wagers against Mr. Iksil's positions have become increasingly profitable in recent weeks as prices in the credit-derivatives index that was at the center of one of Mr. Iksil's trades rose after his trades ceased. "I view the entire market as a chess match playing against this guy," said a person who is familiar with Mr. Iksil's positions and is trading against him. Carlyle nears road show for $8B IPO (NYP) A road show will start as early as next week for the initial public offering (IPO) of Carlyle Group that will value the private-equity firm at between $7.5 billion and $8 billion, according to a person familiar with the matter. Carlyle filed documents to the Securities and Exchange Commission earlier this month to sell a 10 percent stake. The offering is likely to generate as much as $800 million in proceeds, according to the person familiar with the matter. Germany Pays Record Low Yield (WSJ) "The modest demand is due to the historical low yields, where investors are very reluctant to buy long-dated German bonds at these low levels despite the fiscal slippage we see in Spain and the ongoing crisis in the periphery," said Jens Peter Sorensen, chief analyst at Danske Markets. But RBS analysts said poor bund auctions at these yield levels have never been a good predictor for future demand, and thus it recommended not to "overly" focus on the sale to gauge demand for bunds. Weighing SEC's Crackdown on Fraud (WSJ) SEC enforcement chief Robert Khuzami said the current total of 101 cases shows the agency is "highly effective in tackling financial-crisis wrongdoing." Of the 74 cases filed against individuals so far, the SEC went after 55 chief executives, finance chiefs or other top officers. In an interview, Mr. Khuzami said the number is "significant" and "sends a strong deterrent message." Meredith Whitney Muni Call Was 100% Wrong: Bond Pro (CNBC) High-grade municipal bonds remain a solid investment despite their sometimes-battered public image, according to fixed income expert Alexandra Lebenthal. "I have come up with a new measure of risk, which is knowledge risk," said the president and CEO of Lebenthal and Co. "Is the person who is talking about municipal bonds, corporate bonds, equities, what have you, knowledgeable and should people be listening to them?" "Yes, I have an axe to grind," continued Lebenthal, whose father, James, is one of the more prominent names in the bond business. "I am in the municipal bond business, I'm also in the wealth management business and trying to do the best for clients. But I do know what I'm talking about because I have spent over 20 years in this business and another 20 growing up listening to it." Facebook deal ‘surprised’ bankers (NYP) “People are wondering if [Facebook] couldn’t have waited until after the IPO [to purchase Instagram],” said one source, who declined to be identified. Although Facebook is still awaiting IPO clearance from regulators, underwriters led by Morgan Stanley are hoping to launch the company’s share sale next month, possibly the week of May 14. Bankers plan to start the investor marketing campaign, known as a “road show,” about two weeks prior its launch. Zuckerberg held discrete talks with Instagram’s founders and managed to keep underwriters in the dark about the sale until late in the process, sources said. Critics of the controversial deal say Facebook’s timing for the acquisition is questionable, while supporters argue that the Instagram purchase enhances Facebook’s platform and stymies rivals. Investors run scared of Spain's battered banks (Reuters) "Most are currently on liquidity life support from the ECB but asset quality continues to deteriorate as house prices keep falling and unemployment is still rising," said Georg Grodzki, head of credit research at Legal & General Investment Management. "Their funding remains constrained and competition for deposits intense," he told Reuters. Economy Minister Luis De Guindos told Reuters last week that all Spanish banks had met capital requirements set by the European Banking Authority under a 115-billion-euro recapitalization plan decided by European Union leaders in December. But fund managers remain skeptical due to the slow-burning property crash. They include Mark Glazener, head of global equities at Dutch asset manager Robeco, who sold off his exposure to Spain at the end of last year. "Given the scale of over-building over all these years, the present provisioning that the banks have made does not appear to be enough," he said. Zuckerberg Threatened to Disable Ceglia Site Amid Dispute (Bloomberg) Facebook cofounder Mark Zuckerberg threatened in 2004 to disable part of the website he was working on for Paul Ceglia, the New York man now suing him for part-ownership of the multibillion-dollar company, according to copies of e-mails filed by Facebook in federal court...“I must receive $5,000 by next Saturday at midnight, or the scroll search functionality will be removed from the site,” Zuckerberg wrote in a message to Ceglia on Feb. 21, 2004, about two weeks after he put “” online. Zuckerberg told Ceglia he owed him $10,500 of the $19,500 he’d been promised, according to the e-mails, filed by Facebook as part of the lawsuit in Buffalo, New York. Facebook last month asked the judge to throw out the lawsuit.