Opening Bell: 7.17.17

Nelson Peltz wants a seat at P&G; France isn't being very laissez-faire about Brexit; Ayn Rand might not be the best management guru; and more.
Author:
Updated:
Original:
Getty Imates

(Getty Images)

The Man Behind Activist Investors’ Biggest Bets (WSJ)
When an activist pitches a new idea, Mr. Hymowitz doesn’t grill him on valuations or specifics, managers said. He leaves the detailed vetting to others at the firm and focuses on the manager and the idea. “He’s there to smell you,” one activist said. Also see: Trian Launches Proxy Fight Against Procter &Gamble

France is actively seeking to punish the City of London during Brexit, according to a leaked memo (BI)
"The meeting with the French Central Bank was the worst I have had anywhere in the EU. They are in favour of the hardest Brexit. They want disruption. They actively seek disaggregation of financial services provision... The clear messages emanating from Paris are not just the musings of a rogue senior official in the French government or central bank. France could not be clearer about their intentions. They see Britain and the City of London as adversaries, not partners."

From $2 Billion to Zero: A Private-Equity Fund Goes Bust in the Oil Patch (WSJ)
EnerVest Ltd., a Houston private-equity firm, manages the fund. The firm raised and started investing money in 2013, when oil was trading at more than double the current price. But the fund added $1.3 billion of borrowed money to boost its buying power. That later caused it trouble when oil prices tumbled. Now the fund’s lenders, led by Wells Fargo, are negotiating to take control of the fund’s assets to satisfy its debt, according to people familiar with the matter. “We are not proud of the result,” John Walker, EnerVest’s co-founder and chief executive, wrote in an email to The Wall Street Journal.

New U.S. Subprime Boom, Same Old Sins: Auto Defaults Are Soaring (BBG)
It’s classic subprime: hasty loans, rapid defaults, and, at times, outright fraud. Only this isn’t the U.S. housing market circa 2007. It’s the U.S. auto industry circa 2017. A decade after the mortgage debacle, the financial industry has embraced another type of subprime debt: auto loans. And, like last time, the risks are spreading as they’re bundled into securities for investors worldwide.

A Fanatic is One Who Can't Change his Mind and Won't Change the Subject (AQR)
It goes without saying that I may indeed be wrong. But, if so, Rob [Arnott] and team should demonstrate it. Frankly, he should either retract his oft made assertions or support them. But, at this point I’ve been beaten down and would settle for something much weaker than those two alternatives: just stop repeating the falsehood anew! That has yet to happen.

What does a crypto startup do with $230m? (FT)

  • “Sponsor a leading computer science department with endowed professorships and extensive grants to graduate students in the field of formal verification”
  • “Acquire mainstream print and TV media outlets to promote and defend the use of cryptographic ledger in society”
  • “Negotiate with a small nation-state the recognition of Tezos as one of their official state currencies, which would immediately give Tezos favorable treatment in terms of financial regulation. Attempt negotiations to purchase or lease sovereign land”

What tally sticks tell us about how money works (BBC)
Tallies were a way of recording debts with a system that was sublimely simple and effective. The stick would contain a record of the debt, for example: "£9 4s 4d from Fulk Basset for the farm of Wycombe". Fulk Basset was a Bishop of London in the 13th Century. He owed his debt to King Henry III. The stick would be split in half, down its length from one end to the other. The debtor would retain half, called the "foil". The creditor would retain the other half, called the "stock" - even today, British bankers use the word "stocks" to refer to debts of the British government. Because willow has a natural and distinctive grain, the two halves would match only each other.

As a Guru, Ayn Rand May Have Limits. Ask Travis Kalanick. (NYT)
“Rand’s entrepreneur is the Promethean hero of capitalism,” said Lawrence E. Cahoone, professor of philosophy at the College of the Holy Cross. “But she never really explores how a dynamic entrepreneur actually runs a business...She was a script and fiction writer. She was motivated by an intense hatred of communism, and she put those things together very effectively. She can be very inspirational, especially to entrepreneurs. But she was by no means an economist. I don’t think her work can be used as a business manual.”

Related

Getty Imates

Opening Bell: 11.16.17

Nelson Peltz wins recount (maybe); Wilbur Ross sued by former partners; Stephen Feinberg is gunning for Deutsche Bank; hot cop-on-cop action in Detroit; and more.

(Getty Images)

Opening Bell: 12.20.16

Uber still losing money; Dalio recommends reading Ayn Rand; Naked Cowboy is deeply problematic; and more.

Opening Bell: 08.23.12

Fed Moving Closer To Action (WSJ) The Federal Reserve sent its strongest signal yet that it is preparing new steps to bolster the economic recovery, saying measures would be needed fairly soon unless growth substantially and convincingly picks up. Minutes released Wednesday from the Fed's July 31-Aug. 1 policy meeting suggested that a new round of bond buying, known as quantitative easing, was high on its list of options. Jobless Claims In U.S. Climb For Second Week To One-Month High (Bloomberg) Jobless claims rose by 4,000 for a second week to reach 372,000 in the period ended Aug. 18, Labor Department figures showed today in Washington. The median forecast of 41 economists surveyed by Bloomberg called for 365,000. The four-week moving average, a less volatile measure, increased to 368,000. SAC Takes New Activist Role (NYP) The move is being spearheaded by SAC portfolio manager David Rosen, who has been butting heads with Spokane, Wash.-based Clearwater Paper Corp. since May, sources said. In May, Rosen penned a letter to Clearwater Chairman and CEO Gordon Jones calling the stock “deeply undervalued.” Last week, SAC, which has a 7.1 percent stake in the papermaker, proposed to Clearwater’s board that the company split itself in two and consider selling one or both parts. “We continue to carefully analyze their ideas, and we look forward to continuing a dialogue,” a Clearwater spokesman said. People familiar with Rosen’s plans say Clearwater won’t be the last, and that Rosen and SAC analyst Shoney Katz are scouting out more opportunities to make money through corporate cage-rattling. “My understanding is that Rosen’s portfolio has expanded its mandate to include activism,” said Ken Squire of activist research firm 13D Monitor. Citigroup Slams Nasdaq's Facebook Compensation Plan (Reuters) Citigroup slammed Nasdaq OMX Group's plan to compensate firms harmed by Facebook's botched market debut to the tune of $62 million, saying in a regulatory filing the exchange should be liable for hundreds of millions more, according to a letter seen by Reuters. Citi said Nasdaq's actions in the May 18 initial public offering amounted to "gross negligence," in the letter to the U.S. Securities and Exchange Commission, which had not yet been made public. Facebook Director’s Quick $1 Billion Share Sale Lacks Precedent (Bloomberg) While venture capitalists commonly sell their stakes after helping startups reach the public markets, they usually whittle their holdings over a period of quarters or even years. That’s to avoid flooding the market with too much new stock, which can drive down the shares, and to show continuing support for the company. Thiel’s timing was particularly precarious, because Facebook was already down about 50 percent from the IPO. “With the benefit of hindsight, you could say that the underwriters probably regret agreeing to an early release of the shares,” said Ted Hollifield, a partner at Alston & Bird LLP in Menlo Park, California, and an expert in venture capital. “The stock still seems to be searching for an actual trading range and you would ideally like to see that take place before there’s additional selling pressure.” The Morning After: A Wedding Album With A Different Spin (NYDN) Wedding photographers are being invited to an unusual kind of afterparty. Brides and grooms — who already often obsessively document their first kiss, first cake slice and first dance — are adding yet another first to their wedding photographer’s list: the morning after. Sexy shoots featuring rumpled beds and steamy showers are a hot new trend within the wedding business. As the seating charts and floral arrangements fade into memory, these intimate photo shoots take place in newlyweds’ bedrooms or even the hotels where they’ve spent their first night as husband and wife. “We do it very sexy and implied,” said New Jersey-based photographer Michelle Jonné, 34, who charges about $650 for the service...Past happy clients include Inna Shamis. “The minute she told me, I thought ‘that is brilliant,’” Shamis said. “When you get married, you’re in the best shape of your life and why not have these memories.” The New Jersey PR exec, 38, only hesitated for a few seconds when Jonné asked her and husband to jump in the shower, she said. “As the day progressed, we established this fantastic chemistry with her," said Shamis, who later posted the racy photos on Facebook and intends to someday share them with her kids. Greek Crisis Evasion To Fore As Merkel Hosts Hollande (Bloomberg) With the leaders of Europe’s two biggest economies still at the confidence-building stage, Merkel and Hollande are seeking common ground on Greece and the wider euro-area debt crisis almost three years after its inception. France sees the program targets set for Greece as too harsh given the state of its economy, a French government official said yesterday on condition of anonymity because the talks are private. Merkel and Hollande are due to give statements at 7 p.m. in Berlin. “On balance we still take the view that they’ll keep Greece ticking over,” David Owen, chief European financial economist at Jefferies International Ltd. in London, said by phone. “If that does require giving it more time, so be it.” Whale Of A Tale (NYP) Boaz Weinstein may have harpooned the London Whale, but his main fund barely has its head above water. Weinstein’s Saba Capital Master Fund is up only 0.62 percent for the year through July 31, according to an investor letter. SEC's Schapiro Cancels Vote on Money-Fund Curbs (WSJ) Securities and Exchange Commission Chairman Mary Schapiro called off a highly anticipated vote on rules for the money-market mutual-fund industry after losing a swing vote she needed to push through the rules. The newly announced position of Luis Aguilar, a Democrat and former mutual-fund executive, marks a defeat for Ms. Schapiro and a setback for the Obama administration and top federal regulators, who see money funds as a source of systemic risk left over from the last financial crisis. LL Cool J breaks burglar's jaw in 'knock-down, drag-out' fight (LA Times) The burglar who broke into the Studio City home of actor-rapper LL Cool J suffered a broken nose and jaw in what police sources described as a "knock-down, drag-out" fight. Los Angeles police were called to the star's home in the 12000 block of Blairwood Drive around 1 a.m. Wednesday, officials said. LL Cool J was holding the suspect when officers arrived, officials said...LL Cool J was upstairs in his home when he heard noise coming from the kitchen area. When he went down to see what was happening, the unidentified suspect came at him, leading to the fight. LL Cool J, born James Todd Smith, rose to fame with musical hits such as "Mama Said Knock You Out."

Opening Bell: 03.14.13

US Probes Gold Pricing (WSJ) The Commodity Futures Trading Commission is examining the setting of prices in London, in which a handful of banks meet twice daily and set the spot price for a troy ounce of physical gold, the people said. The CFTC is looking at issues including whether the setting of prices for gold—and the smaller silver market—is transparent. No formal investigation has been opened, the people said. US And UK Tussle Over Trader (WSJ) Officials in the U.S. Justice Department and the U.K. Serious Fraud Office clashed late last year in their mutual pursuit of Tom Hayes, the former UBS trader who is viewed by prosecutors in both countries as a ringleader of banks' attempts to rig the London interbank offered rate, or Libor, these people said. While jurisdictional disputes among law enforcement agencies aren't unusual, some U.S. officials worry that the friction on this case will jeopardize trans-Atlantic cooperation on future financial-fraud investigations. The spat revolves around a sequence of events that played out in rapid succession last December. The trouble began, the people said, when the U.K. government unexpectedly blocked a Justice Department request to interview Mr. Hayes, who is British and lives outside London. Then, without notifying the U.S., British fraud prosecutors on Dec. 11 arrested Mr. Hayes and two others in connection with their own probe—infuriating American officials, according to people familiar with the U.S. investigation. The U.S. prosecutors punched back the next day by filing sealed criminal fraud charges against Mr. Hayes. Banks Bow To New York On Clawbacks (WSJ) Three more top banks, including Citigroup, will broaden their clawback policies to cover more executives, increase disclosures or add potential triggers. The moves increase to six the number of leading financial companies that have bowed to pressure from the New York City's Comptroller's Office. Lehman Judge Allows 'London Whale' Subpoena in JP Morgan Fight (Dow Jones) A judge on Wednesday said Lehman Brothers Holdings Inc. creditors can subpoena Bruno Iksil in its lawsuit against J.P. Morgan, ensuring the phrase "London Whale" will stay in the lexicon for at least a bit longer. Judge James Peck of U.S. Bankruptcy Court in Manhattan said Mr. Iksil, who is in France, can be questioned over the alleged mismarking of $273.3 million in derivatives when he worked at J.P. Morgan in the days leading up to Lehman's bankruptcy. "I consider it inappropriate except for in a clear case of abuse to cut off discovery of a witness that has fingerprints all over a transaction," Judge Peck said. "And in this case, Mr. Iksil's fingerprints are on the $273.3 million transaction that took on some significance in the case." Lehman U.K. Wins $1 Billion Appeal on Hedging Contracts (Bloomberg) The ruling may result in London-based Lehman Brothers International Europe and its administrators PricewaterhouseCoopers LLP receiving an extra $1 billion, according to a written decision handed down this morning by Judge Mary Arden in the U.K. Court of Appeals. Jobless Claims Unexpectedly Fall as Labor Market Improves (Bloomberg) First-time jobless claims fell by 10,000 to 332,000 in the week ended March 9, the fewest since mid January, according to data today from the Labor Department in Washington. The median forecast of 49 economists surveyed by Bloomberg called for an increase to 350,000. The four-week average declined to a five- year low. JPMorgan exec sued over 'bullying' behavior (NYP) Plaintiff Walter Suarez, a former financial adviser, was banished to the company’s Delancey Street outpost when he complained about colleague Michael Quach, and the move cost Suarez an $80 million client list, $20 million of which was taken by JPMorgan, his lawyers claim. According to Suarez, Quach was a bully who resorted to physical violence to intimidate colleagues. Suarez, who is Hispanic, says Quach, an Asian-American, got away with the behavior because bosses preferred Asian employees. “Eventually, it got to the point of being ridiculous. This isn’t the corner bodega,” Suarez told The Post. “We’re investment people. This is a professional setting. That’s when I spoke up. “He just wasn’t a very professional person from the get-go, and I don’t think that I was the only person who felt that way.” Suarez told superiors that Quach had manhandled several staffers, including one woman who was “physically assaulted during working hours on the banking floor,” according to the lawsuit filed in Manhattan Supreme Court by attorneys Matthew Blit and Amanda Gudis. Suarez said Quach even threatened to punch him out in front of clients. 'Canada's Warren Buffett' Interested in Greece's Top Bank (Reuters) Greece's biggest lender, National Bank (NBG), said on Wednesday that Canadian investment fund Fairfax Holdings was interested in acquiring a stake in it by taking part in a planned recapitalization. Under the terms of cash-strapped Greece's international bailout, its top four lenders must issue new shares by the end of April to replenish their capital after the losses they suffered in the debt crisis from bad loans and bond writedowns. The European Union and the International Monetary Fund have set aside 27.5 billion euros ($37 billion) in bailout funds to invest in the new bank shares. But private investors must buy at least 10 percent of them or the lenders will be nationalized. NBG said in a bourse filing that Fairfax was among other investors who had expressed an interest, without giving details. Fairfax is controlled by investment guru Prem Watsa, known as the "Warren Buffett of Canada." SandRidge Gives In, Settling Proxy Fight (WSJ) SandRidge Energy agreed to fire its chief executive or give control of its board to an activist shareholder, settling a closely watched proxy battle amid an outbreak of investor unrest in the oil patch. SandRidge, an oil-and-gas producer with a stock-market value of about $3 billion, immediately appointed four directors to its board who were nominated by hedge fund TPG-Axon Capital LP, which owns 7.3% of its shares. Bofa Battles Credit Suisse for 50% Markups on State Loans (Bloomberg) The firms are among at least five lenders in talks to loan five states at least $6.5 billion this year -- more than double last year’s total -- as local governments seek to chop debt costs by replacing loans from a 1997 federal bailout that average 14.4 percent in reais. Credit Suisse is lending Mato Grosso, an agricultural state in western Brazil, $1 billion for 15 years. The loan, with a rate equal to 11.2 percent in reais and guaranteed by Brazil if Mato Grosso defaults, compares with 7.35 percent for yields of similar-maturity government debt. Private Equity Could Trigger Another Crisis: Bank of England (CNBC) The amount of leverage in the U.K. corporate sector poses a risk to the stability of the financial system and could produce the next big financial crisis over the coming years, the U.K.'s central bank has warned. White Rock woman holds 'Lying Cheating Sale' to sell all her husband's stuff while he's 'gone with his floozie' (The Province) A scorned White Rock woman held a yard sale on the weekend to get rid of her husband's stuff while he was "gone with his floozie," according to a Craigslist ad. "Husband left us for a piece of trash, selling everything while he is gone this weekend with his floozie," read the text of the ad, which was posted early Friday afternoon to the free classifieds site. The Province dropped by the yard sale on Saturday and, sure enough, bargain-hunters were sifting through the goods which included office chairs, camping gear and other offerings. The lady in charge of the sale declined to speak on the record. Her colourful Craigslist ad, however, said she was selling everything and moving after 10 years of marriage. The featured items included his favourite red leather reclining theatre-seating sofas, and "lots of tools which he didn't have a clue how to use." "I want the house empty on Monday when he returns because that will be a shock for him to see. So come pick out what you would like Saturday and Sunday at 8 a.m. "Don't come too early (like he did) because I will be thoroughly enjoying some wine with my girlfriends this evening as we clean out all this stuff and likely be nursing hangovers in the morning. So please speak softly to the ladies wearing the sunglasses." The ad discouraged clothes-buyers, "as we will have already burned those in the driveway," but it did offer to let visitors see the pile of ashes.

Photo: Getty Images

Opening Bell: 6.23.16

Brexit, Brexit, Brexit; Chanos thinks SolarCity deal stinks; Mac ’n Cheetos; NASA engineer builds world’s largest nerf gun; and more.

By M.Minderhoud (Own work) [GFDL or CC-BY-SA-3.0], via Wikimedia Commons

Opening Bell: 6.22.16

Puerto Rico vs bondholders; Brexit, Brexit, Brexit; Man creates smoothie made of McDonald's burgers; and more.

Opening Bell: 09.12.12

German court seen okaying EU bailout fund, strings attached (Reuters) Germany's Constitutional Court is expected to give its approval on Wednesday to the euro zone's new bailout fund while insisting on guarantees to safeguard German parliamentary sovereignty and limit Berlin's financial exposure. Exchanges Plot Fixes For Their Glitches (WSJ) One proposal under discussion involves implementing so-called "kill switches" between brokers and exchanges, according to people involved in the discussions. Kill switches, which are common in futures trading but not in the U.S. stock market, allow exchanges to automatically shut off customers from trading once they hit a preset limit, such as one based on the total dollar amount of the firm's trades in a set time frame. Moody's Warns On US Rating (WSJ) Moody's Investors Service, in the latest reminder of the tense fiscal negotiations looming for Congress and the White House, said it could downgrade the U.S. government's credit rating next year if steps aren't taken to tackle the rising debt. Specifically, it said if Congress repeals looming spending cuts and tax increases set to begin next year and doesn't replace them with large-scale deficit-reduction measures, the government would lose its top-notch rating. Deutsche Bank Overhaul Leaves Firm Trailing Peers on Capital (Bloomberg) Deutsche Bank plans to boost core tier 1 capital to at least 8 percent of assets weighted by risk under Basel III rules by the end of March 2013, and to more than 10 percent two years later, co-CEOs Anshu Jain and Juergen Fitschen said in Frankfurt yesterday. Its biggest competitors will reach similar levels months or years sooner, based on forecasts from the banks. Deutsche Bank is winding down assets deemed among its riskiest under rules devised to prevent a repeat of the bank rescues that followed the 2008 collapse of Lehman Brothers Holdings Inc. Jain said yesterday that while capital concerns have had an effect on the stock, tapping shareholders would be “irresponsible” without pursuing other options first. Pittsburgh professor who invented emoticons hates the little yellow icons they have become (Independent via BB) To some, an email isn't complete without the inclusion of :-) or :-(. To others, the very idea of using "emoticons" – communicative graphics – makes the blood boil and represents all that has gone wrong with the English language. Regardless of your view, as emoticons celebrate their 30th anniversary this month, it is accepted that they are here stay. Their birth can be traced to the precise minute: 11:44am on 19 September 1982. At that moment, Professor Scott Fahlman, of Carnegie Mellon University in Pittsburgh, sent an email on an online electronic bulletin board that included the first use of the sideways smiley face: "I propose the following character sequence for joke markers: :-) Read it sideways." This weekend, the professor, a computer science researcher who still works at the university, says he is amazed his smiley face took off: "This was a little bit of silliness that I tossed into a discussion about physics," he says. "It was ten minutes of my life. I expected my note might amuse a few of my friends, and that would be the end of it." But once his initial email had been sent, it wasn't long before it spread to other universities and research labs via the primitive computer networks of the day. Within months, it had gone global. Nowadays dozens of variations are available, mainly as little yellow, computer graphics. There are emoticons that wear sunglasses; some cry, while others don Santa hats. But Professor Fahlman isn't a fan. "I think they are ugly, and they ruin the challenge of trying to come up with a clever way to express emotions using standard keyboard characters. But perhaps that's just because I invented the other kind." Peregrine CEO Enters Plea Deal (WSJ) Under the agreement, Russell Wasendorf Sr. would plead guilty to charges of embezzlement and mail fraud alongside two counts of lying to government regulators, assistant U.S. attorneys said in a Cedar Rapids, Iowa, court Tuesday. The development comes more than two months after Mr. Wasendorf, founder of Peregrine and a business leader in his adopted hometown of Cedar Falls, attempted suicide outside his firm's headquarters, leaving behind what authorities called a confession detailing a yearslong scheme to defraud his investors. Facebook Taking Steps to Address Mistakes in Mobile Products (Bloomberg) “Now we are a mobile company,” Zuckerberg said in an on- stage interview at the TechCrunch Disrupt conference in San Francisco today. “Over the next three to five years I think the biggest question that is on everyone’s minds, that will determine our performance over that period, is really how well we do with mobile.” Zuckerberg, who appeared at ease while trading laughs with his interviewer, for the first time elaborated on technical struggles that have impeded Facebook from creating a user- and advertiser-friendly mobile application. The company spent too long trying to build mobile products using a programming language known as HTML5, Zuckerberg said. Navistar vs. Icahn gets ugly in Illinois (NYP) Embattled truck and diesel engine maker Navistar International yesterday poured gasoline on the fire ignited Sunday when billionaire investor Carl Icahn called the company’s board a “poster child for abysmal business decisions and poor corporate governance.” Less than a day after the billionaire investor blasted the Warrenville, Ill., company for not consulting shareholders on its new CEO hire, Navistar dismissed his complaints as “unproductive tactics of threats, attacks and disruption.” Legg Mason CEO To Step Down (WSJ) Facing pressure from activist investor Nelson Peltz's Trian Fund Management LP and battling investor outflows, Legg Mason Inc. said Chairman and Chief Executive Mark Fetting will step down Oct. 1. The Baltimore-based money manager faces a Nov. 30 deadline after which Trian, Legg Mason's largest shareholder, will be free to raise its 10.5% stake in the firm, potentially giving Mr. Peltz more influence. Man Shot Uncle To Death Over Pork Steaks (STLT) The shooting stemmed from an argument between Lowe and Cunningham over whether the cuts of meat they were planning to cook were pork steaks or pork chops, police say. Cunningham said they were pork steaks, police said. Lowe disagreed. After the argument became physical about 1 a.m. Monday, the two had to be separated by someone else in the home, police say. Cunningham went to another part of the home, grabbed a shotgun and shot Lowe, police said. Lowe died later at Barnes-Jewish Hospital. Cunningham, who was correct about the meat, was taken into custody.

By Rlevente [CC BY-SA 4.0], via Wikimedia Commons

Opening Bell: 6.27.16

EU leaders hope Brits will reconsider; London bets screwed bookies; Goldman predicts UK recession; Sarah Palin compares Brexit to Declaration of Independence; and more.