Opening Bell: 9.20.17

Guggenheim is in hot water; bitcoin's split could split again; quit your hedge fund and run for governor; a "Mad Pooper" is terrorizing Colorado; and more.
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Upheaval at the Top of Guggenheim, as SEC Scrutinizes Investment Powerhouse (WSJ)
Earlier this year, the U.S. Securities and Exchange Commission began looking at Guggenheim’s operations, certain investments and disclosures, according to people familiar with the situation. The regulator has since requested from Guggenheim information on several deals, including one involving the firm’s investment in an entity founded by former Barclays PLC chief executive Bob Diamond, the people said.

guggenheim

Bitcoin Is Likely to Split Again in November, Say Major Players (BBG)
Already, key players are warning investors to brace for more turmoil. Core developers including Peter Todd say the fork this time could be much more tumultuous, and could incur more user confusion of what version can be dubbed the actual “bitcoin.” “In a sense, a split is 100-percent guaranteed,” said Todd, a key coding contributor to bitcoin. “The split is likely to be more disruptive.”

Harvard Endowment Reports ‘Disappointing’ 8.1 Percent Return (NYT)
Perhaps out of an awareness that the returns this year were disappointing, Mr. Narvekar pointed out in his statement that he had run another “successful” endowment for 14 years. He was alluding to his tenure as head of Columbia University’s endowment. He wrote that he was convinced that at Harvard, a talented and successful team would overcome “legacy issues” as it shifted gears.

David Stemerman Shuts His Hedge Fund to Explore Run for Connecticut Governor (BBG)
“As Conatus approaches the end of its tenth year, I have decided to pursue an opportunity in public service and will be winding down the firm in December,” he wrote in a letter to investors. “As I begin to evaluate the opportunity to serve as Connecticut’s next governor, I expect to form a candidate committee that will prepare to launch a campaign in 2018.”

‘Buyback trade’ fizzles as stock repurchases slow (FT)
This year the S&P 500 Buyback index — which consists of 100 large US companies repurchasing the greatest proportion of their shares — has returned 9.6 per cent including dividends, while the broader stock market index has returned 13.3 per That is a reversal of relative fortune. Between the start of 2009 and the end of 2016, the buyback index gained 266 per cent, compared to the broader market’s 145 per cent gain.

Toys R Us buckled under private equity ownership (FT)
The blame is perhaps to be placed most squarely on its private equity ownership. Toys R Us has spent more than $250m a year servicing $5bn in long term debt, which was “not a sustainable situation,” one investor said, as the company faced increasingly crushing competition from Amazon and Walmart.

Buffett calls pessimists about United States 'out of their mind' (Reuters)
“When I hear talking about making it to 100, I get excited,” he said. “I‘m 87.” Buffett said he recently determined that of the 53,364 people in the United States who were at least 100 years old, the ratio of women to men was nearly 5-to-1. “We should start thinking about a sex change,” Buffett said, prompting laughter.

Wells Fargo's lone outsider aims to clean up bank's reputation (Reuters)
Since he took the job in March, Parker has been trying to improve Wells Fargo’s standing with regulators, answering questions from authorities and working through a raft of lawsuits over the bank’s improper sales practices. But Parker says his most challenging assignment is counseling top management as it seeks to replace a hard-charging sales culture with one focused on customer service. “I want to make the legal department of Wells Fargo a beacon for other departments in ethics,” Parker told Reuters.

America Wasn’t Built for Humans (NYMag)
The project of American democracy — to live beyond such tribal identities, to construct a society based on the individual, to see ourselves as citizens of a people’s republic, to place religion off-limits, and even in recent years to embrace a multiracial and post-religious society — was always an extremely precarious endeavor. It rested on an 18th-century hope that deep divides can be bridged by a culture of compromise, and that emotion can be defeated by reason. It failed once, spectacularly, in the most brutal civil war any Western democracy has experienced in modern times. And here we are, in an equally tribal era, with a deeply divisive president who is suddenly scrambling Washington’s political alignments, about to find out if we can prevent it from failing again.

Police Search For ‘Mad Pooper’ Who Dumps And Runs (CBS Denver)
Cathy Budde says her kids saw the woman mid-squat and came running back in the house to tell her. “They are like, ‘There’s a lady taking a poop!’ So I come outside, and I’m like … ‘are you serious?'” Budde said to the runner. “‘Are you really taking a poop right here in front of my kids?!’ She’s like, ‘Yeah, sorry!'” Budde says the runner is doing it in her neighborhood at least once a week for the last seven weeks, so they nicknamed her “The Mad Pooper.”

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IMF Says Recovery Remains Fragile (WSJ) "An uneasy calm remains," IMF chief economist Olivier Blanchard said. "One has the feeling that any moment, things could well get very bad again." Worst Yet to Come as Crisis Rescue Cash Ebbs, Deutsche Bank Says (Bloomberg) The worst may be yet to come in the global financial crisis as the central bank spending that kept defaults low runs out, according to Deutsche Bank AG. Credit-default swap prices imply that four or more European nations may suffer so-called credit events such as having to restructure their debt, strategists led by Jim Reid and Nick Burns said in a note. The Markit iTraxx SovX Western Europe Index of contracts on 15 governments including Spain and Italy jumped 26 percent in the past month as the region’s crisis flared up. “If these implied defaults come vaguely close to being realised then the next five years of corporate and financial defaults could easily be worse than the last five relatively calm years,” the analysts in London said. “Much may eventually depend on how much money-printing can be tolerated as we are very close to being maxed out fiscally.” BNY Mellon Profit Falls as Record-Low Rates Cut Returns (Bloomberg) Net income fell to $619 million, or 52 cents a share, from $625 million or 50 cents, a year earlier, BNY Mellon said today in a statement. Analysts (BK) had expected the New York-based company to report a profit of 51 cents a share, according to the average of 15 estimates in a Bloomberg survey. Flat BlackRock Profit Tops Forecasts (WSJ) BlackRock reported a profit of $572 million, or $3.14 a share, compared with a year-earlier profit of $568 million, or $2.89 a share. Stripping out one-time items, per-share earnings rose to $3.16 from $2.96 a year ago. Revenue slipped 1.4% to $2.25 billion. Analysts expected earnings of $3.04 a share on $2.23 billion in revenue, according to a poll conducted by Thomson Reuters. Paulson Goes Short on German Bunds (FT) Paulson told investors in a call on Monday that he was betting against the creditworthiness of Germany, regarded in markets as among the safest sovereign borrowers, because he saw the problems affecting the euro zone deteriorating severely, said a person familiar with his strategy. Guy With Spreadsheet of Match.com ‘Prospects’ Says He Was Just Trying to Be Organized (Jezebel, earlier) "I work with spreadsheets a lot," he said. "It's a great additional tool. I work long days, go to the gym, go out on a couple of midweek dates or what not, get home late...how am I going to remember them? I'm not. So I made the spreadsheets. My comments aren't malicious or mean. This was an honest attempt to stay organized." He said he sent the spreadsheet to his date because "she works with spreadsheets a lot too" and she "seemed like a very sweet girl." Italy Puts Back Balanced Budget Goal by a Year (Reuters) Italy will delay by a year its plan to balance the budget in 2013 due to a weakening economic outlook, according to a draft document due to be approved by the cabinet of Prime Minister Mario Monti on Wednesday. The draft Economic and Financial document (DEF), which has been obtained by Reuters, raises the budget deficit forecasts for 2012-2014 and slashes this year's economic growth outlook. Bank of America Faces Bad Home-Equity Loans: Mortgages (Bloomberg) Bank of America, whose home- equity mortgage portfolio exceeds its stock market value, probably will say about $2 billion of junior loans are bad assets tomorrow even as some borrowers are still paying on time. That’s what Barclays Capital estimates the bank will report in its first-quarter results, following decisions by JPMorgan Chase, Wells Fargo and Citigroup to reclassify $4.1 billion of junior liens as nonperforming. In Facebook Deal For Instagram, Board Was Little Involved (WSJ) On the morning of Sunday, April 8, Facebook Inc.'s youthful chief executive, Mark Zuckerberg, alerted his board of directors that he intended to buy Instagram, the hot photo-sharing service. It was the first the board heard of what, later that day, would become Facebook's largest acquisition ever, according to several people familiar with the matter. Mr. Zuckerberg and his counterpart at Instagram, Kevin Systrom, had already been talking over the deal for three days, these people said. Negotiating mostly on his own, Mr. Zuckerberg had fielded Mr. Systrom's opening number, $2 billion, and whittled it down over several meetings at Mr. Zuckerberg's $7 million five-bedroom home in Palo Alto. Later that Sunday, the two 20-somethings would agree on a sale valued at $1 billion.

(Getty Images)

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