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Opening Bell: 1.2.17

Deutsche Bank flew too close to the sun; Trump financial regulation pick knows DC; Sumner Redstone's mile high club; and more.
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By Nordenfan (Own work) [CC BY-SA 4.0], via Wikimedia Commons

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Deutsche Bank Flew and Fell. Some Paid a High Price. (NYT)

Analysts calculate that of the 20 billion euros in profits that Deutsche’s trading and banking unit accumulated since 1995, as much as 15 billion euros will ultimately be returned to regulators via fines and penalties.

How Trump’s Regulation Skeptic Helps Wall Street Navigate the Rules (WSJ)

The appointment of Paul Atkins would mark a shift for Mr. Trump, who so far has stocked his executive branch largely with people who have run big companies but lack any government experience. Mr. Atkins, on the other hand, built a business around navigating Washington’s nooks and crannies.

Swiss Banking Secrecy Nears End Following New Tax Rules (CNBC)

Switzerland's reputation as a secretive tax haven looks set to end following the introduction of rules over sharing bank account data. The convention states that financial information on Swiss bank accounts held by citizens of certain countries will in future be shared annually and on an automatic basis. In the past, Switzerland would only provide banking information if requested by a limited number of countries and even then, full co-operation was not guaranteed.

Wells Fargo’s Overdraft Income Surges Ahead Of Rivals (FT)

Wells Fargo increased income from overdraft charges at more than five times the rate of its US bank peers in the third quarter — a finding that is likely to concern the consumer banking regulator as it prepares a crackdown on the $12bn-a-year corner of the financial services industry.

Markets Outlook: The Big Issues Facing Investors In 2017 (FT)

“Wall Street tends to get ahead of itself at times, and this appears to be one of those,” says Jenny Jones, head of US small and mid-cap equities at Schroders. “We do believe [Trump] will achieve many of his goals, but they seem to be close to fully priced now and they could take nine-18 months to accomplish. That leaves a lot of room for disappointment.”

The Economy Isn’t Going To Do What Trump Wants, Banks Say (NYP)

While President-elect Donald Trump is promising to increase US gross domestic profit to 5 percent to 6 percent from its current 2 percent level, Wall Street banks are forecasting that, at least in its first year, a Trump White House will fall short of its goal. JPMorgan Chase is predicting a 1.9 growth rate next year. Others are a bit more bullish: Wells Fargo predicts 2.1 percent growth and Goldman Sachs says it will grow at about 2.25 percent.

Potential new banking crises are a concern in Europe: Analyst (CNBC)

"This process in Europe is taking years because of refusal to face reality and I am just worried that there's going to be more of this over the next year or two, not just in Italy but in other places across Europe."

‘You Have To Straddle Me’: Sumner Redstone’s Weird In-Flight Demands (NYP)

Betsy Dwyer Loomis thought she’d seen it all. The former flight attendant had worked corporate jets for years and had flown around the world with demanding billionaires — but nothing, she said, could prepare her for Viacom boss Sumner Redstone. The mogul’s weird habits while in flight included asking a flight attendant to not only undo his seat belt when he had to go to the restroom — but also unzip his fly, said Loomis, who worked on Viacom’s Paramount Pictures corporate jet in 2002.

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By Nordenfan (Own work) [CC BY-SA 4.0], via Wikimedia Commons
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By Nordenfan (Own work) [CC BY-SA 4.0], via Wikimedia Commons
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By Nordenfan (Own work) [CC BY-SA 4.0], via Wikimedia Commons
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Stress For Banks As Tests, Loom (WSJ) U.S. banks and the Federal Reserve are battling over a new round of "stress tests" even before the annual exams get going later this fall. The clash centers on the math regulators are using to produce the results. Bankers want more detail on how the calculations are made, and the Fed thus far has resisted disclosing more than it has already. A senior Fed supervision official, Timothy Clark, irked some bankers last month when he said at a private conference they wouldn't get additional information about the methodology, according to people who attended the event in Boston. Wells Fargo Treasurer Paul Ackerman said at the same conference that he still doesn't understand why the Fed's estimates are so different from Wells's. His remarks drew applause from bankers in the audience, said the people who attended. Bonus Round Is Over (NYP) Wall Street traders, among the best paid in financial circles, are facing another meager bonus season this year — at least by Street standards — after a rough 2011 saw bonuses slashed by as much as 30 percent. Although some groups will fare better than others, equity traders could see their prized bonuses shredded again in 2012 — by as much as 35 percent, according to recruiters and others. In addition to lower bonuses, Wall Streeters are likely to see less of the payout in cash and more in stock — with the stock facing longer deferral periods, one recruiter, Michael Karp, co-founder of Options Group, said. Deutsche Bank has already moved from three-year deferral periods to stricter five-year deferrals and it’s expected that other banks will follow suit. IMF Sees ‘Alarmingly High’ Risk of Deeper Global Slump (Bloomberg) The world economy will grow 3.3 percent this year, the slowest since the 2009 recession, and 3.6 percent next year, the IMF said today, compared with July predictions of 3.5 percent in 2012 and 3.9 percent in 2013. The Washington-based lender now sees “alarmingly high” risks of a steeper slowdown, with a one-in-six chance of growth slipping below 2 percent. Depositors Turn Up Heat On Ailing Spanish Banks (WSJ) Eugenio Nuñez Cobás stormed into a bank branch in this coastal town one morning in August with three dozen fellow customers yelling "Thieves! Thieves! Thieves!" Then they returned to the street and pelted the facade with eggs, forcing the branch to close for the day. Athens Preparing for Anti-Austerity Protests Aimed at Merkel (Bloomberg) Greece’s capital will grind to a halt today for German Chancellor Angela Merkel’s first visit since the financial crisis began, with 7,000 officers deployed around Athens to prevent violence at planned protests. Authorities have declared entire sections of downtown off- limits, notably Prime Minister Antonis Samaras’s office, where the two leaders, will meet and the German embassy. Merkel is due to arrive at 1:30 p.m., around the same time as three separate protest marches gather in front of Parliament. Can Marissa Mayer Really Have It All? (NYM) When faced with a difficult decision, Mayer likes to create a spreadsheet. She went to Stanford as an undergrad, switching from pre-med to an esoteric major called “symbolic systems,” which is a mixture of philosophy, brain science, and artificial intelligence (anybody anywhere can do pre-med, she thought), and then continued on, getting an advanced degree in computer science. She entered the job market in the spring of 1999, at the height of the dot-com boom, and got more than a dozen offers—from several dot-coms, including Google (she interviewed with Page and Sergey Brin at a Ping-Pong table), and one from McKinsey & Co. “I like to do matrices,” she told NPR. “One option per line, different facets for each column. Salary, location, happiness index, failure index, and all that.” That spring, her matrix pointed her toward Google. “To my credit, I actually gave Google a hundred times more likely chance of succeeding than any of the other start-ups [from which she got offers], because I gave them a 2 percent chance of success. I gave all the other start-ups a .02 percent chance of success.” A Beacon For DC, By Ben Bernanke (WSJ) People decry the absence of leadership in Washington these days. My response: Look no further than the home-team dugout at Nationals Park. Under Manager Davey Johnson's confident, laid-back leadership, the Washington Nationals, defying all preseason conventional wisdom, have claimed the 2012 championship of the National League Eastern Division and the best regular-season record in Major League Baseball...Davey, who earned a degree in mathematics from Trinity University, is the epitome of the head-and-heart consensus. He was an early proponent of the use of statistical analysis in baseball decision-making, and it is clear in his tactical management of games that he is very conversant with sabermetric principles. He well understands, for instance, how to use statistics in determining lineups and pitcher-hitter matchups. At the same time, Davey is also really good at identifying and nurturing talent. Most strikingly, he has shown himself willing to sacrifice short-term tactical advantage for the long-term benefit of bolstering the confidence of a player in whom he sees great potential. He lets players play through slumps and gives pitchers who have gotten behind a chance to dig themselves out. His reasoning: Giving a promising player the opportunity the prove himself will often do more for the team in the long run than making an ostensibly better tactical decision in the short run—even if it costs the team a game or two. McKinsey casts gloomy eye on world banking (Reuters) Banks worldwide remain scarred by the 2007-2009 financial crisis and are years away from developing new business models that will produce sustainable profits, according to a new study. Despite progress in meeting regulators' requirements to build capital, revenue growth is slow, costs are rising and new competitors exploiting digital technologies are emerging, McKinsey & Co said in a report released on Monday evening. Obama's Next Fed Chief: Who Gets The Job If Obama Wins Second Term? (WaPo) The top contenders are: Ben Bernanke, Larry Summers, Janet Yellen, Roger Ferguson, Bill Dudley, Tim Geithner, and Don Kohn. Man Dies After Live Roach-Eating Contest In Florida (AP) The winner of a roach-eating contest in South Florida died shortly after downing dozens of the live bugs as well as worms, authorities said Monday. About 30 contestants ate the insects during Friday night's contest at Ben Siegel Reptile Store in Deerfield Beach about 40 miles north of Miami. The grand prize was a python. Edward Archbold, 32, of West Palm Beach became ill shortly after the contest ended and collapsed in front of the store, according to a Broward Sheriff's Office statement released Monday. He was taken to the hospital where he was pronounced dead. Authorities were waiting for results of an autopsy to determine a cause of death...None of the other contestants became ill, the sheriff's office said. There was no updated phone number listed for Archbold in West Palm Beach. "We feel terribly awful," said store owner Ben Siegel, who added that Archbold did not appear to be sick before the contest. "He looked like he just wanted to show off and was very nice," Siegel said, adding that Archbold was "the life of the party."

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Wall Street Sputters Back To Life (WSJ) It wasn't until Mayor Michael Bloomberg and NYSE Euronext Chief Executive Officer Duncan Niederauer rang the opening bell that traders knew for sure that the systems would work. "Out of this postapocalyptic world that we're all looking at, that's a ray of good news, that they're actually able to get the exchange open," said Keith Bliss, senior vice president at Cuttone & Co., a brokerage with operations on the NYSE floor. Barclays Faces $435 Million Fine, Another Probe (WSJ) Barclays aced a double-barreled assault from U.S. authorities, as the federal energy-market regulator sought a record $435 million in penalties for the bank's alleged manipulation of U.S. electricity markets, and the lender also disclosed that it was facing a U.S. anticorruption investigation. The corruption investigation focuses on potential violations during the bank's efforts to raise money from Middle Eastern investors in the early days of the financial crisis. The probe, being conducted by the Justice Department and the Securities and Exchange Commission, is at an early stage. Wells Expands Into Investment Banking As Others Retreat (Reuters) The growth worries some investors who want the notoriously conservative bank to stick to its knitting, but Wells Fargo believes that now is a good time to hire. "Our eyes are wide open," said John Shrewsberry, head of the bank's investment banking and capital markets operations, known as Wells Fargo Securities. "There are a lot of very talented people at different stages of availability," he added in an interview this week. The fourth-largest U.S. bank says it can earn solid returns in investment banking while taking little risk for itself. It is focusing on services that its corporate lending customers need, such as stock and bond underwriting and merger advice. For investors, it is looking at areas like processing futures and swaps trades. The bank shies away from riskier undertakings like trading for its own account. The Wells Fargo Securities unit is relatively small now. It's biggest hub is in Charlotte, North Carolina, far from the storm that has hobbled Wall Street this week. In a few years, the unit could account for twice as much of the firm's revenue as it does now - an estimated 10 percent compared to its current five, Deutsche Bank analyst Matt O'Connor wrote in a report. Sandy's Economic Cost: Up To $50 Billion And Counting (CNBC) By contrast, the two costliest hurricanes in U.S. history to date were Katrina, with estimated losses of $146 billion, and Andrew, with loses estimated at $44 billion. But there are offsets and Moody's Mark Zandi and other economists note that there will be considerable rebuilding that will accompany the storm. Because the storm hit early in the quarter, Zandi points out that if $20 billion is spent cleaning up and rebuilding, the actual measured impact on gross domestic product could be zero. IHS Global Insight U.S. Economists Gregory Daco and Nigel Gault are doubtful. They note that the rebuilding often takes the place of investment elsewhere and often not everything is rebuilt. “The effect on growth for the fourth quarter will not be catastrophic but might still be noticeable, especially in an economy with little momentum anyway,” IHS wrote. The debate begs the question of whether such natural disasters can ultimately stimulate an economy. Eric Strobl, of the Ecole Polytechnique in Paris, who has studied the impact of hurricanes for more than a decade, found that hurricanes at the local level are usually negative for growth. NYC Struggles to Come Back to Life as Storm Chaos Lingers (Bloomberg) New York City struggled to return to normal life after superstorm Sandy, managing a partial resumption of mass transit amid a landscape of miles-long traffic jams, widespread blackouts and swarms of marooned residents. Limited service on the Metro-North and Long Island Rail Road commuter trains began today, and service on 14 of 23 subway lines will resume tomorrow, Governor Andrew Cuomo said at a news briefing in Manhattan. Still, power losses kept thousands of people and businesses in the dark and prevented trains from running below 34th Street in Manhattan. Basements and homes were waterlogged or submerged, and 6,300 remained in shelters...The lack of transit options is unprecedented, said Bernie Wagenblast, who has monitored metro traffic for more than 30 years, including stints as a radio reporter on WABC and WINS. “It reminds me a little of back in the ’70s when we had the gas crisis and cars were lined up for long, long distances trying to get gasoline,” Wagenblast said. “Now you’ve got cars in addition to people with their gas cans waiting on line who are trying to get fuel.” In Manhattan, an unofficial line divided the haves with power from the have-nots. South of about 34th Street, far fewer shops or restaurants than usual were open. Traffic lights were inoperable, though an unspoken etiquette emerged as many drivers took turns letting one another pass through intersections. Work was stopped at the Ground Zero construction site, which is still flooded. LaGuardia Airport, the only one of the three major New York-area airports that remains closed, can’t resume flights until floodwaters are drained and ground lights and equipment are checked. Labor Dept. Report on Jobs to Appear Friday as Planned (NYT) The hurricane had shut down government offices on Monday and Tuesday, and threatened to delay the release of the monthly jobs numbers. That led to hand-wringing in the presidential campaigns and even some accusations that the Obama administration might delay the numbers for its political benefit. But a Labor Department spokesman said Wednesday in an e-mail message that the report would come out as planned, at 8:30 a.m. E.S.T. on Friday. The Philadelphia 76ers unveil the world’s largest T-shirt cannon (YS) On opening night, the Sixers [unveiled] Big Bella, the world's largest T-shirt launcher that fires 100 tees in just 60 seconds. Big Bella weighs 600 pounds and, when firing T-shirts into the upper reaches of the Wells Fargo Center, can be up to 10 feet high. The team commissioned the creation of Big Bella from FX in Motion, an entertainment elements company out of New Berlin, Wisc. The team will also drop T-shirts, free game tickets and other promotional items from the rafters of the Wells Fargo Center down to fans below in a new themed "Sixers Parachute Drop." Australia Targets China’s Rich With “Millionaire” Visa (Deal Journal) Got 5 million Australian dollars (US$5.2 million) spare and need a residency visa? Australia’s doors will soon be open. From Nov. 24, Australia will accept applications under a new program, known as the Significant Investor Visa scheme, aimed at attracting the world’s wealthy to make the move and park their money Down Under. The only catch is that the A$5 million must be invested in state and territory Australian government debt, privately-owned Australian companies and managed funds that invest in Australian assets regulated by the Australian Securities & Investment Commission for four years. The new visa has already got financial advisers throughout Australia devising investment solutions for applicants. Consultants expect no shortage of takers especially from China, which is seeing an increasing flow of wealthy citizens sending money overseas, investing in assets as diverse as condos in Cyprus, or education for children overseas. A Wall Street Journal analysis of these flows suggests that in the 12 months through September, about US$225 billion headed out of China, equivalent to about 3% of the nation’s economic output last year. Harvard Business School Survey: HBS Students Favor Obama (Harbus) Surveys completed by 668 members of the HBS student body last week revealed that President Barack Obama had the support of 65% of the student community. Challenger Mitt Romney captured 32% of the vote while the remainder said they supported a third-party candidate, were unsure, or did not plan to vote. A Year After MF Global's Collapse, Brokerage Firms Feel Less Pressure For Change (Dealbook) For their part, many MF Global employees remain chastened by their firm’s collapse. Lawmakers hauled Mr. Corzine, a former senator from New Jersey, to Washington three times to testify before Congressional committees. Some MF Global employees remain unemployed while others took major pay cuts to work for the trustee unwinding the firm’s assets. Several MF Global employees planned to gather on Thursday for drinks at a Midtown Manhattan bar, just blocks from their old firm, to commiserate on their trying year. They canceled the event after another disaster, Hurricane Sandy, left some people stranded without power. Hawaii Tourist Saved By Taekwondo Skills (ABC) A 12-foot-long tiger shark messed with the wrong person. Mariko Haugen, a taekwando black belt, was enjoying a swim in Maui, Hawaii, when she was confronted by the creature. “She saw it a few seconds before it hit – and she gave it her best Tae Kwon Do black belt punch in the nose,” Don Haugen, Mariko’s husband, wrote on Facebook. Haugen’s husband and another man saw the attack and helped carry her to safety. She received more than 100 stitches to close wounds on her right hand and thigh.