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Opening Bell: 2.11.16

Kyle Bass v China; Wall Street's nightmare candidates leading race; Man Blames 10th Drunk Driving Charge On Beer-Battered Fish; and more.
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Kyle Bass Steps Up Attack on China’s Currency (WSJ)
Investor Kyle Bass said Wednesday that China’s liquid foreign reserves are “already below a critical level,” intensifying a debate over China’s ability to keep its currency from falling. Mr. Bass, whose Hayman Capital Management LP has a multibillion-dollar bet that the yuan and the Hong Kong dollar will fall, told clients in a letter Wednesday that his firm estimates that China’s liquid foreign reserves are $2.2 trillion at most. That is roughly $1 trillion less than the $3.23 trillion reported by the People’s Bank of China for the end of January.

As Economy Suffers, Economic Theory Flourishes (WSJ)
Like Mr. Piketty, Mr. Gordon uses exhaustive historic data to buttress his thesis: Americans’ standard of living advanced impressively during the “special century” of 1870 to 1970, thanks to a series of revolutionary innovations—from indoor plumbing, the internal-combustion engine and electricity to municipal water systems and antibiotics—that, once complete, could never be repeated...Mr. Gordon also credits government for nurturing labor unions and the eight-hour workday, which spurred rapid growth in wages and productivity after the 1930s. He attributes rising inequality not to the inexorable workings of capitalism but societal shifts: the growing wage premium for skills, single parenthood and incarceration that prevent poor children from acquiring jobs and skills, and declining unions.

Wall Street's nightmare candidates leading race (CNBC)
t's early days, but the victories in New Hampshire's primary by Donald Trump and Bernie Sanders puts two of the candidates most likely to spook Wall Street in the lead. Trump has been unnerving Wall Streeters with his unpredicatability and off-the-cuff remarks, but analysts say the financial community — and markets — would ultimately back a Trump run, particularly if it is against Bernie Sanders. The Vermont U.S. senator is a self-proclaimed socialist who wants to create new social programs by taxing banks, financial transactions and wealthier Americans. Sanders took 60 percent of the vote in New Hampshire Tuesday over Hillary Clinton, who barely won Iowa last week but is still viewed as the front-runner nationally.

Lagarde Set for Second IMF Term as No Challengers Emerge (Bloomberg)
IMF governors and executive directors had until 11:59 p.m. New York time Wednesday to nominate candidates to replace Lagarde, whose five-year term expires July 5. The fund’s executive board, which represents the institution’s 188 member nations, plans to complete the selection process as soon as possible.

SocGen Signals It May Miss Profitability Targets, Shares Plunge (Bloomberg)
France’s second-largest bank, led by Chief Executive Officer Frederic Oudea, indicated the bank may have difficulty reaching its profitability target in 2016, citing “headwinds” including regulatory pressures, record-low interest rates and volatile markets. While the lender announced a series of cost-cutting measures last year, it has stopped short from deeper investment-banking reductions like those underway at Deutsche Bank AG and Credit Suisse Group AG.

Europe’s Battered Banks Are Far From Crisis (WSJ)
Bewilderingly, the world is once again asking whether the European banking system is on the brink of meltdown, heading for a repeat of 2008 or 2011. Yet the truth is that no one knows for sure what lies behind the falls, which began in earnest between Christmas and New Year on the back of no obvious news. Initially, it was assumed the market was reacting to concerns over a possible hard-landing in China and emerging markets, although these fears had been well-flagged and have so far proved wide of the mark.

Man Blames 10th Drunk Driving Charge On Beer-Battered Fish (HP)
A Wisconsin man convicted on Monday for his 10th Operating a Vehicle While Intoxicated charge (OWI) blamed his high BAC on beer-battered fish, according to the Milwaukee Journal-Sentinel. John Przybyla, 76, was arrested in October 2014, after a deputy noticed his truck cross the center line of a state highway. The deputy said Przbyla’s breath smelled like alcohol and administered a field sobriety test that the suspect failed, according to local news station WISC. Przybyla denied drinking alcohol, but said he had eaten beer-battered fish earlier in the evening. He made the same statements in court on Monday.

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Barclays Chairman Resigns (WSJ) "Last week's events, evidencing as they do unacceptable standards of behaviour within the bank, have dealt a devastating blow to Barclays' reputation," Mr. Agius said in a statement Monday. "As chairman, I am the ultimate guardian of the bank's reputation. Accordingly, the buck stops with me and I must acknowledge responsibility by standing aside." Falcone To Argue That Taking Loan Was Best For Investors (NYP) Falcone had roughly $1 billion in personal assets in 2009, at the time of the loan, sources said. That included $790 million in a deferred compensation plan tied to his flagship Masters fund, and $228 million in Harbinger’s Special Situations fund, which he eventually tapped for the loan. He also had $11 million in cash — a nice chunk of change but far short of the $113 million he needed to satisfy Uncle Sam, said a person with knowledge of the case. If the case goes to trial, Falcone will likely say that he considered taking his money from the Master fund, which was allowing withdrawals at the time. But he didn’t after he was advised that doing so could hurt clients by triggering a sell-off, potentially at fire-sale prices. Global IPO Market Keeps Shrinking (WSJ) It was in the pool. Gilt Faces Disruption During Olympics (FT) The UK Treasury has called off its weekly gilt auctions for a four-week period between mid-July and mid-August, apparently because it is afraid that too many bond traders will be working from home – or not at all – during the Olympics. Facebook To Remain On Nasdaq (WSJ) Facebook executives have decided to keep the company's stock listing on the Nasdaq Stock Market, despite lingering frustration with the exchange's bungling of its widely anticipated initial public offering. They determined a move would further drain confidence in the company's battered shares. Facebook executives have quietly blamed Nasdaq OMX Group Inc. NDAQ +3.71% for the technical glitches that marred the stock's May 18 debut. While the company considered a switch in the days after the IPO, Facebook had decided by mid-June to stay put for now, according to people familiar with the company's plans. BNP Said To Mull Plan For $50 Billion Spain-Italy Funds Gap (Bloomberg) BNP Paribas is looking to address funding concerns in Spain and Italy, where the Paris-based bank’s loans outweighing deposits was among reasons cited by Moody’s Investors Service for downgrading its credit rating last month. Transfers of loans from elsewhere to Belgium might be capped at 20 billion euros ($25 billion) and at 10 billion Swiss francs ($10.4 billion) to Switzerland, according to one of the people. Bond Market Backs Obama With Record Demand For New Debt (Bloomberg) Investors are plowing cash into new U.S. Treasuries at a record pace, making economic growth rather than budget austerity a key issue as President Barack Obama and Mitt Romney face off in November’s presidential election. Bidders offered $3.16 for each dollar of the $1.075 trillion of notes and bonds auctioned by the Treasury Department this year as yields reached all-time lows, above the previous high of $3.04 in all of 2011, according to data compiled by Bloomberg. The so-called bid-to-cover ratio was 2.26 from 1998 to 2001 when the nation ran budget surpluses. China Big 4 Banks Took 29% of 2011 Global Profit (Reuters) Three Chinese banks topped the profit table, led by Industrial and Commercial Bank of China (ICBC) for the second successive year, with pretax earnings of $43.2 billion, according to The Banker. ICBC was followed by China Construction Bank, which delivered a $34.8 billion profit, and Bank of China, with earnings of $26.8 billion. JPMorgan was fourth with a profit of $26.7 billion, while HSBC was the most profitable European bank, with earnings of $21.9 billion. Lolong, a massive crocodile captured in the Philippines in 2011, is the largest croc in captivity in the world (NYDN) A huge crocodile blamed for deadly attacks in the southern Philippines is the largest in captivity in the world, Guinness World Records has declared. The giant reptile has brought fear, pride, tourism revenues and attention to the remote town where it was captured. The saltwater crocodile named Lolong, which was captured last September in Bunawan town in Agusan del Sur province, measures 20.24 feet and weighs more than a ton, Guinness spokeswoman Anne-Lise Rouse said in a statement Sunday. The reptile took the top spot from an Australian crocodile measuring more than 17 feet and weighing nearly a ton. 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Morgan Stanley Funds In Big Facebook Bet (WSJ) U.S. mutual funds run by Morgan Stanley, the lead underwriter in Facebook Inc.'s $16 billion initial public offering, have disproportionately high investments in the social-media company, leaving fund shareholders exposed to the stock's big drop since its May 18 IPO. New data show that eight of the top nine U.S. mutual funds with Facebook shares as a percentage of total assets are run by Morgan Stanley's asset-management arm, according to fund tracker Morningstar Inc. Don't Be Fooled By Short-Selling Bans (FT) ...the conclusions from the research are clear; these economists do not think short selling bans work. For there is precious little evidence that the ban in US markets truly halted share price declines; on the contrary, the impact was (at best) neutral, they claim. However, the ban hurt market mechanisms, as liquidity dried up. HSBC In Settlement Talks With U.S. Over Money Laundering (Bloomberg) HSBC, which is under investigation by U.S. regulators for laundering funds of sanctioned nations including Iran and Sudan, is in talks to settle the matter, two people with knowledge of the case said. The bank, Europe’s largest by market value, made a $700 million provision in July for any U.S. fines after a Senate Committee found it had given terrorists and drug cartels access to the U.S. financial system. That sum might increase, Chief Executive Officer Stuart Gulliver has said. Night of drinking, sexting and a well-placed bullet leads to prison for Oregon City man (OL) The couple drank at home and at two Oregon City area bars before their late night stop at the KC's Midway, a neighborhood watering hole where Lisa Nunes played video poker and enjoyed her 10th beer -- by her count -- of the day. Lisa Nunes spoke with a man she described as a friend, who left the bar but soon began bombarding her phone with text messages and pictures of his genitals. "I'm 54 years old. I have a relationship with my husband that's non-existent," Lisa Nunes testified. Flirting with a younger man "was exciting, she said. "I was just sexting a guy. It was no big deal," she said. Thomas Nunes, 61, said he was stunned when he saw a few of the messages and a photo. He left briefly then returned, grabbed the phone and went home. He read the all text messages and combed his wife's Facebook account looking for proof of infidelity. "I couldn't believe she was doing it right in front of my face," Nunes said. "I felt betrayed." Shaken, he said he smoked marijuana and talked to his cats for about 20 minutes to calm himself and "reason out a plan." 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