Opening Bell: 7.18.17

Goldman, BofA beat; crypto investors spend $200 million on coin without “any uses, purpose, attributes, functionalities or features”; Hamptons investor punches kid; and more.
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Bank of America beats on earnings after record quarters in global banking and wealth management (BI)
"Against modest economic growth of 2 percent, we had one of the strongest quarters in our history. All of our businesses delivered strong results, with several setting new records," Bank of America CEO Brian Moynihan said. "The investments we made to transform how we serve clients produced 500 basis points of operating leverage in the quarter."

moynihan

Goldman Sachs Reports Surprise Profit Increase (WSJ)
The Wall Street firm reported earnings of $3.95 a share. Analysts had expected $3.39, on average, down from $3.72 a year ago. Revenue of $7.89 billion fell from $7.93 billion in the second quarter of last year, and beat analyst expectations of $7.52 billion. BUT ALSO: Goldman quarterly trading revenues dive 40%

Robotic Hogwash! Artificial Intelligence Will Not Take Over Wall Street (WSJ)
High-frequency systems may get enough examples of changing trading regimes to run on their own, but can’t deploy much capital. Applying machine learning to longer-term investment is tricky when many of the new data sets being deployed only go back a decade or two. Computers with no knowledge of history are doomed to repeat its mistakes.

Citigroup is staffing up for a new center that will unleash robotics throughout the bank (BI)
Citigroup is staffing up for the robotic revolution. The New York-based financial services giant has plastered online jobs boards advertising roles at a new automation center that will deploy new robotic technology throughout the bank.

KKR’s succession plan puts pressure on rivals to follow suit (FT)
KKR thus has become the first among the big listed private equity groups to map out an implicit succession plan, though Jon Gray, the rainmaker of Blackstone’s real estate arm, will clearly follow Steve Schwarzman as head of that company in the future. By contrast, Apollo has yet to figure out a succession plan for the trio at the top there. At Carlyle, the politics are still intense when it comes to replacing Bill Conway who is in charge of that group’s investments, (even though the face of Carlyle is co-founder David Rubenstein).

In the crypto world, you can get something for nothing (FT Alphaville)
Block.one’s initial coin offering is different. There’s a token, but it can’t actually be used for anything. This is from the FAQs: “The EOS Tokens do not have any rights, uses, purpose, attributes, functionalities or features, express or implied, including, without limitation, any uses, purpose, attributes, functionalities or features on the EOS Platform.” You might want to read that over a couple of times, keeping in mind that investors have spent over $200m buying these “EOS Tokens”.

Can Anyone Bury Bloomberg? (II)
Large-scale shifts in banking and money management – including compressed margins and, correspondingly, shrinking information-service budgets – are causing a mature Bloomberg more pain than copycats ever did. Its terminal count has barely risen over the last five years. And last year, for only the second time in the company's 25-year history, the terminal total shrank.

Please Don’t Text Your Employees at 9 p.m. (NYMag)
In an otherwise fairly innocuous interview with the New York Times last week, Barstool Sports CEO Erika Nardini revealed that she perpetuates one of the many terrible manager behaviors that drive workers to feeling undervalued and overworked. When asked about her hiring process, Nardini said this: “Here’s something I do: If you’re in the process of interviewing with us, I’ll text you about something at 9 p.m. or 11 a.m. on a Sunday just to see how fast you’ll respond.”

Wall Street Profits by Putting Investors in the Slow Lane (David Swensen, NYT op-ed)
Institutional brokers are legally obliged to execute trades on the exchange that offers the most favorable terms for their clients, including the best price and likelihood of executing the trade. The 12 exchanges are supposed to compete to offer the best opportunities. But that’s not what is happening. Instead, brokers routinely take kickbacks, euphemistically referred to as “rebates,” for routing orders to a particular exchange. As a result, the brokers produce worse outcomes for their institutional investor clients.

Investor punched out 18-year-old at ritzy Hamptons bash (PageSix)
The private-equity investor who owns the Southampton mansion featured in the Showtime TV show “Billions” broke a kid’s nose there during a charity fund-raiser for special-needs children, The Post has learned. Michael Loeb, 62, punched out 18-year-old Avery Arjang in a rage after a friend of the teen got drunk and passed out in Loeb’s garage, Arjang claims. “Michael was furious because this kind of ruined his event,” he said.

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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.

Courtesy Federal Reserve.
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