Opening Bell: 11.26.14 - Dealbreaker

Opening Bell: 11.26.14

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Jefferies Bumps Up Against Big Rivals as It Looks to Expand (WSJ)
As Jefferies evolves from its roots as a trading firm to a midtier investment bank, it is knocking up against far larger financial firms vying for business, often from companies Jefferies helped to expand. Jefferies has often worked with smaller firms on transactions that bigger rivals may not pursue. As these customers get larger, the competition intensifies as they are courted by bigger financial firms. In 2014, Jefferies has been a lead underwriter on 25 U.S.-listed initial public offerings of health-care-related companies, topping all other investment banks, according to data provider Dealogic. But Jefferies ranks just eighth in net revenue generated by U.S. health-care banking overall—which includes stock and bond offerings, loans and merger advice—generating $196 million in revenue, trailing No. 1 J.P. Morgan Chase & Co.’s $639 million. “Investment banking has always been highly competitive,” Jefferies Chief Executive Richard Handler said in an interview at his office, just off the trading floor. The firm isn’t attached to a bank holding company and therefore has more flexibility in how it structures deals and compensates employees. This entrepreneurial structure was part of the allure when Mr. Lorello moved to Jefferies in 2009 with more than 30 health-care bankers, according to people familiar with the firm. Jefferies is a unit of Leucadia National Corp. and has net revenue topping $3 billion. “Our competitive advantage has never been stronger in the 25 years I have been at Jefferies,” Mr. Handler said.

Steven Cohen’s Ex-Wife Gets Outside Financing for Lawsuit (Dealbook, related)
Helping to fuel the long-running legal battle is Asta Funding, a financial backer of a Beverly Hills, Calif., firm that has provided litigation financing to Ms. Cohen, according to court documents and people briefed on the matter. Asta and the firm that is financing Ms. Cohen’s lawsuit — Balance Point Divorce Funding — have an agreement to share in the proceeds of legal recoveries by clients. All of this would appear to give investors in Asta, a publicly traded company based in Englewood Cliffs, N.J., a reason to cheer on Ms. Cohen, whose lawyers are scheduled to take a deposition from Mr. Cohen on Dec. 10. Balance Point, founded in 2009 by Stacey Napp after her own acrimonious divorce, signed a deal with Ms. Cohen in the summer of 2013 to provide Ms. Cohen with about $1.2 million to continue her litigation, said people briefed on the matter but not authorized to speak about a private transaction. While the specific terms of Balance Point’s arrangement with Ms. Cohen could not be determined, court filings in an unrelated lawsuit reveal it is common for Balance Point to get up to 25 percent of any legal recovery by a client in return for the financing provided. Balance Point is part of a niche business that provides financing in drawn-out matrimonial cases to litigants with wealthy spouses. Only a handful of companies provide such financing in the United States.

Uber Said Close to Raising Funding at Up to $40B Value (Bloomberg)
T. Rowe Price Group Inc. is in discussions to be a new investor, said the people, who asked not to be identified because the details are private. Existing investor Fidelity Investments is also set to participate in the funding, they said. Uber is raising at least $1 billion, the people said.

Shorting Chickens Becomes Hot Trade After Prices Surge (Bloomberg)
Short sellers have found a new asset to bet against: chickens. With no futures market to speculate on chicken-price movements, they’re turning to the equity market, borrowing record amounts of shares of two U.S. poultry producers that they in turn sell in anticipation of declines. The percentage of outstanding shares of Pilgrim’s Pride Corp. (PPC), the second-biggest U.S. chicken producer, that were sold short by investors has soared more than six-fold since Sept. 30, while the ratio for Sanderson Farms Inc. (SAFM) has almost doubled. The success, or failure, of the trade comes down largely on whether the eight-month surge in chicken, which has fattened producers’ profit margins, is over or not.

U.K. Banks Seen Facing Decades to Tackle `Toxic Culture' (Bloomberg)
U.K. banks will need at least two decades to clean up a “toxic culture” that has cost them more than 38.5 billion pounds ($60 billion) in fines and compensation, Cass Business School said in a report. Banks were forced to make provisions of at least 27 billion pounds to compensate customers for improperly sold insurance products from 2010 to 2014, according to the report commissioned by New City Agenda. The mis-selling of interest-rate hedging products has cost lenders 4.1 billion pounds. “It has become clear that having an aggressive sales culture, which ripped-off customers, has cost banks dearly,” David Davis, a Conservative member of Parliament, said in the statement. “A toxic culture which was decades in the making will take a generation to turn around.”

Siberian police consider deputizing reindeer (AP)
Officials in northwest Siberia said police could soon be deputizing reindeer to help chase down criminals in the region. Irina Pimkina of the Yamalo-Nenets region's Interior Ministry said police in the area, which is located in Russia's Arctic tundra, often find themselves at a disadvantage when chasing down local criminals, who often employ reindeer as getaway rides. "Of course we have snowmobiles in service, but one should understand that a machine is a machine," Pimkina told the Izvestia newspaper. "A snowmobile can break down or get stuck in the tundra, but the deer will run at all times." The deer would join the animal ranks of about 150 donkeys and mules employed by the Russian Defense Ministry to serve in mountain brigades. The legislation governing the animals also allows for reindeer to be used for law-enforcement purposes.

JPMorgan Data Breach Shows Need for Global Crackdown, ASIC Says (Bloomberg)
Markets regulators across the world must work together to counter cyber crime as the attack on JPMorgan (JPM) Chase & Co. exposes the risks posed by hackers, according to the head of Australia’s financial markets watchdog. “Cyber crime is a global problem that requires a global solution,” Greg Medcraft, chairman of the Australian Securities and Investments Commission, said in the text of a speech at Bloomberg’s Sydney office today. “The links between market players and infrastructure mean that the impact of a cyber attack can spread quickly and has the potential to dangerously affect the integrity and efficiency of global markets.”

Carl Icahn raises stake in car rental company Hertz (Reuters)
Activist investor Carl Icahn raised his stake in U.S. car rental company Hertz Global Holdings Inc to 10.77 percent from 8.48 percent. The billionaire was already Hertz's largest shareholder and in the past few months had successfully pushed for management changes and won board seats on the company.

In Moscow, a Financial District in Name Only (NYT)
In the coveted corner office, a bearded man in sweatpants scrambled eggs at a kitchenette, all the while taking in the serene beauty of the city lights twinkling far below. In the conference room, or as the company prefers to call it, the “common area,” two other men lounged about playing video games on an Xbox. In place of cubicles, there are bunk beds. High Level Hostel, one of the newest tenants in the financial district here known as Moscow City, sits on prime real estate on the 43rd floor of a multimillion-dollar glass-and-steel tower. It is not a youth-hostel-themed work space, but an actual youth hostel — dirty socks and all. “We thought, ‘why not open a hostel in a skyscraper?’ ” said Roman Drozdenko, the 25-year-old owner. “Nobody’s done that before.” The tower, with its marble veneer foyer, banks of elevators and breathtaking views, was clearly built for lawyers, accountants or stock traders. But “there were no questions regarding our guests” from the building management when he opened in September, Mr. Drozdenko said. “In fact, there were no questions at all.”

Joey Fatone helps break pillow fighting record (UPI)
The Guinness World Record for largest pillow fight was broken at South Dakota State University with 4,201 people, including NSYNC's Joey Fatone, organizers said. Motel chain Super 8, which sponsored the attempt Saturday to celebrate its 40th anniversary, said the number of participants topped the previous record, set only a few months ago, by just one person. The attempt took place Saturday at Coughlin-Alumni Stadium during a game against rivals University of South Dakota. Fatone gave a countdown on the stadium's screen and the pillow fight then lasted for the Guinness-mandated 60 seconds. "Super 8 came to me with the whole idea as far as coming here and kind of kicking it off," Fatone told KSFY-TV. "I think due to the fact that with me, what you see is what you get. I'm always energetic, always have fun, so they said, 'we'd love to have Joey Fatone and start off the fun.' I said, 'Hey, I'm all for it, so let's do it.'"

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Opening Bell: 03.28.12

Top MF Global Witness Talks Deal With Justice (WSJ) The star witness in a congressional hearing about MF Global Holdings Ltd.'s collapse has told Justice Department representatives through her lawyers details about transactions that ended up dipping into customer funds, people familiar with the matter said. But Edith O'Brien, the assistant treasurer at MF Global, isn't expected to reveal those details when she appears at Wednesday's hearing of the House Financial Services Committee's oversight and investigations subcommittee. Ms. O'Brien plans to invoke her constitutional right against self-incrimination and to decline to answer questions, people familiar with the matter said. J.P. Morgan Was 'Assured' on MF GlobalTransfers (WSJ) MF Global Holdings Ltd. Chairman and Chief Executive Jon S. Corzine was in direct contact with J.P. Morgan Chase officials about a large transfer of customer funds to the bank shortly before the securities firm collapsed, according to prepared testimony from a J.P. Morgan lawyer for a House subcommittee hearing Wednesday. The testimony by Diane Genova, deputy general counsel for J.P. Morgan, provides additional details about a transfer of $175 million in MF Global customer funds to a J.P. Morgan account on Oct. 28. That move is the subject of scrutiny as investigators hunt for clues about how MF Global firm lost about $1.6 billion in customer funds. Magic Johnson Group to Buy L.A. Dodgers for $2 Billion (Bloomberg) The group was chosen yesterday by Dodgers owner Frank McCourt over billionaire Steve Cohen, who runs hedge fund manager SAC Capital Advisors LP, and Stan Kroenke, who owns the National Football League’s St. Louis Rams and Arsenal of English soccer’s Premier League. [WHO DOES STEVE COHEN HAVE TO SCREW AROUND HERE TO BUY A BASEBALL TEAM???] BATS Chairman Will Give Up Post (WSJ) BATS Global Markets Inc.'s directors voted to remove Joe Ratterman as chairman Tuesday, while expressing unanimous support for him to stay on as the company's chief executive. The vote came after Friday's collapse of the exchange operator's initial public offering, which raised questions about BATS's technology and put Mr. Ratterman on the defensive...BATS has launched a search for a new chairman, according to a spokesman. Face time with Facebook CEO stirs concerns on Wall Street (Reuters) Two people who attended Facebook's March 19 meeting remarked on the young CEO's absence and privately said they expected at least a cursory appearance. One analyst asked how involved Zuckerberg would be in future. In response, the company said expectations should be set pretty low, according to one of the two who was at the meeting. "Investors are crazy to want to get in bed with a company where the guy who controls it doesn't even pretend to care about the rest of the shareholders," said Greg Taxin of activist investment firm Spotlight Advisors, who will not buy shares. "That seems like a recipe for disaster." Texas journalist Sarah Tressler outed for leading a double life (NYDN) By day, she’s a reporter who strips through the veneer of Houston’s high society. By night, she’s a reporter who strips off her clothes. And Sarah Tressler, a 2008 graduate of NYU’s School of Journalism, is not ashamed. In fact, until recently, the 29-year-old brunette blogged about her after-hours gig and posted pictures of herself in scanty outfits on a Facebook page entitled “Diary of an Angry Stripper.” Since the outcry, that — and her titillating Twitter account — have been moved to a protected site. Before Tressler went underground, one of her juicier postings was about an alleged and “somewhat disappointing” sexual encounter with “Entourage” star Jeremy Piven. Europeans Sees Crisis Near End (Bloomberg) The euro area’s woes are “almost over” after a slow initial response by policy makers, Italian Prime Minister Mario Monti said in Tokyo today. German Chancellor Angela Merkel said yesterday that the crisis is ebbing and her country’s borrowing costs will probably rise as its status as a haven wanes. Jefferies CEO Handler’s Pay Drops 7.9% for 2011 After Stock Rout (Bloomberg) Handler, 50, was awarded $14 million for the fiscal year ended Nov. 30, compared with $15.2 million for the 11 months through November 2010, New York-based Jefferies said today in a filing. The package included $1 million in salary and $13 million in restricted-stock units that were granted in 2010. Handler elected to not receive a bonus for 2011. Goldman Bows To Pressure (WSJ) Goldman Sachs agreed to change its board structure in order to persuade a union pension fund to drop a shareholder proposal that could have cost Chief Executive Lloyd C. Blankfein his job as chairman. The deal between the New York securities firm and the American Federation of State, County and Municipal Employees means Goldman will appoint a "lead" director, but shareholders won't get a chance to vote at the firm's annual meeting in May on the proposal to replace Mr. Blankfein with an independent chairman. Ben Bernanke: The World Needs More Nerds (OS) In an exclusive interview with ABC’s Diane Sawyer, Federal Reserve Chairman Ben Bernanke said it’s important not to be complacent about the improving economy...[he also said] he takes no offense that Time magazine, in naming him Person of the Year for 2009, described him as “the most powerful nerd on the planet.” “I am very proud of my nerd-dom,” he told Sawyer. “In fact, the world needs more nerds. Nerds, you know, create more jobs and advance science, and I hope make good economic policy, but that remains to be seen.”

Opening Bell: 02.19.13

SAC’s Cohen May Face SEC Suit as Deposition Hurts Case (Bloomberg) U.S. investigators have subpoenaed a 2011 deposition of SAC Capital Advisors LP founder Steven Cohen, whose sworn statements on insider-trading compliance may hurt him as he tries to persuade regulators not to file a lawsuit with the potential to shut his $14 billion firm. The SEC told the hedge fund Nov. 20 that it planned to sue SAC for securities fraud and so-called control-person liability for failing to supervise employees. The same day, the agency accused an ex-SAC portfolio manager and his hedge-fund unit of insider trading for persuading Cohen, 56, to make $700 million in illegal trades. Prosecutors also indicted the manager. Cohen’s testimony, reviewed by Bloomberg News, establishes his personal control over the unit, CR Intrinsic, and records his unfamiliarity with his firm’s compliance and ethics policies on insider trading. “I’ve read the compliance manual, but I don’t remember exactly what it says,” Cohen said. Morgan Stanley Strives to Coordinate 2 Departments Often at Odds (Dealbook) Traditionally, traders and investment bankers think of themselves as the elite of Wall Street and look down on the retail business, seeing it as pedestrian...Yet since Morgan Stanley moved to acquire control of the Smith Barney brokerage business from Citigroup in 2009, the balance of power has shifted to wealth management, which now accounts for almost 52 percent of the company’s earnings, up from roughly 16 percent in 2006. Paulson Leads Funds to Bermuda Tax Dodge Aiding Billionaires (Bloomberg) A decade after the U.S. Internal Revenue Service threatened to crack down on what it said were abuses by hedge-fund backed reinsurers, more high-profile money managers are setting up shop in tax havens. Paulson, SAC Capital Advisors LP’s Steven A. Cohen and Third Point LLC’s Daniel Loeb have started Bermuda reinsurance companies since 2011, following a similar Cayman Islands venture by Greenlight Capital Inc.’s David Einhorn. Options Activity Questioned Again (WSJ) Over the past year, unusually large positions were established shortly in advance of news that moved shares of Nexen Inc., Youku Inc., Human Genome Sciences Inc., Constellation Brands Inc. and, most recently, CBS Corp. All turned profitable after the news. A spokeswoman for the SEC, which regulates stock and options trading, said the agency would neither confirm nor deny the existence of inquiries into trading tied to those companies. No charges have been filed in the Heinz case, which was linked to a Swiss trading account, but the move to freeze the assets is one of the fastest enforcement actions ever filed by the agency, according to officials. The SEC said Friday that the timing and size of the trades were highly suspicious given the account had no history of trading in Heinz securities in the last six months. Prosecutors, Shifting Strategy, Build New Wall Street Cases (Dealbook) Criticized for letting Wall Street off the hook after the financial crisis, the Justice Department is building a new model for prosecuting big banks. In a recent round of actions that shook the financial industry, the government pushed for guilty pleas, rather than just the usual fines and reforms. Prosecutors now aim to apply the approach broadly to financial fraud cases, according to officials involved in the investigations...The new strategy first materialized in recent settlements with UBS and the Royal Bank of Scotland, which were accused of manipulating interest rates to bolster profit. As part of a broader deal, the banks’ Japanese subsidiaries pleaded guilty to felony wire fraud. Russians Wade Into the Snow to Seek Treasure From the Sky (NYT) Ever since the meteor exploded somewhere over this impoverished Siberian town, Larisa V. Briyukova wondered what to do with the fist-size stone she found under a hole in the roof tiles of her woodshed. On Monday, a stranger knocked on her door, offering about $60, Ms. Briyukova said. After some haggling, they settled on a price of $230. A few hours later, another man pulled up, looked at the hole in the roof and offered $1,300. “Now I regret selling it,” said Ms. Briyukova, a 43-year-old homemaker. “But then, who knows? The police might have come and taken it away anyway.” On Friday, terror rained from the skies, blowing out windows and scaring people over an enormous swath of Siberia. But by Monday, for many people what fell from the sky had turned to pure gold, and it touched off a rush to retrieve the fragments, many buried in deep February snows. Many of those out prospecting looked a lot like Sasha Zarezina, 8, who happily plunged into a snowbank here in this village of a thousand, laughing, kicking and throwing up plumes of powdery snow. Then she stopped, bent over and started to dig. “I found one!” she yelled. A warm breath and a rub on her pants later, a small black pebble, oval like a river rock, charred and smooth, was freed of ice. While trade in material from meteorites is largely illegal, there is a flourishing global market, with fragments widely available for sale on the Internet, usually at modest prices. At least one from the recent meteor was available on eBay on Monday for $32, and there is a Web site called Star-bits.com devoted to the trade — much to the displeasure of scientists and the countries where the objects were found. UK's Lloyds fined $6.7 million for mis-sold insurance (Reuters) Britain's financial regulator on Tuesday fined Lloyds Banking Group 4.3 million pounds ($6.7 million) for failing to handle complaints relating to insurance sold on loans and mortgages properly. The Financial Services Authority (FSA) said failings in the bank's systems and controls resulted in up to 140,000 customers experiencing delays in receiving compensation for being mis-sold payment protection insurance (PPI). Horsemeat Scandal Draws in Nestlé (FT) Switzerland-based Nestle on Monday removed pasta meals from shelves in Italy and Spain and suspended deliveries of all processed products containing meat from German supplier, H.J. Schypke, after tests revealed traces of horse DNA above 1 per cent. Nestle said it had informed the authorities. Is Berlusconi Getting a Poll Bounce From Tax Evaders? (CNBC) The media mogul, who has been convicted of tax fraud, has promised to introduce a tax amnesty for evaders if elected and to abolish the real estate tax. Swelling U.S. Labor Force Keeps Fed at Ease (Bloomberg) In the short run, the larger labor force will have an unfortunate side effect: It will slow the fall in unemployment. Mellman sees the jobless rate dropping to 7.5 percent by year- end from 7.9 percent now. It fell 0.7 percentage point in 2012. In the longer run, a bigger supply of labor is good news because it swells the pool of Americans available and willing to work, enhancing the economy’s potential to grow, according to Julie Hotchkiss, a policy adviser at the Federal Reserve Bank of Atlanta. It also has a silver lining for investors. The gradual fall in unemployment will allow policy makers to keep monetary policy looser for longer without having to worry about igniting a wage- driven rise in inflation. Couple Getting Affectionate Drive Through Home (WO) "She told the investigating trooper that her and the boyfriend were getting a little amorous and the trooper suspects that's probably why she lost control of the vehicle," said Florida Highway Patrol spokeswoman Kim Montes. Walker lost control of the vehicle and slammed into an unoccupied home. The vehicle went all the way through the house. The impact was so dramatic, the pressure blew a window in another part of the house out. Florida Highway Patrol troopers said Walker was injured when debris fell inside the vehicle. She was taken to Halifax Medical Center to be checked out. Her boyfriend, Charles Phillips, was not hurt.

Opening Bell: 01.06.16

North Korea RSVPs yes to World Economic Forum; Sanders tells Wall Street, Clinton to f*ck off; Hoodie with inflatable pillow funded on Kickstarter; and more.