Opening Bell: 10.18.17

Rejoice, humans, quant funds are failing; buuuuut you're still getting replaced by robots; SEC says Rio Tinto lied to investors; "Master, please brand me, it would be an honor"; and more.
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By D J Shin (Own work) [CC BY-SA 3.0 or GFDL], via Wikimedia Commons

By D J Shin (Own work) [CC BY-SA 3.0 or GFDL], via Wikimedia Commons

Hedge Funds Wrong-Footed by Prospect of Interest-Rate Rises (WSJ)
The losses are the latest setback in a tough year for many quantitative hedge funds. They’ve received tens of billions of inflows from investors in recent years, even as funds run by humans have suffered large outflows, as investors hunt for other ways of making money in markets driven by central bank stimulus. However, many quant funds have recently failed to live up to expectations, with many of the market trends they like to track proving short-lived. HFR’s index of quant funds that bet on market patterns is down 3% through September, with most of that loss coming last month. Hedge funds overall are on average up 5.7%.

SEC Alleges Rio Tinto Misled Investors Over Value of Coal Assets (WSJ)
Rio Tinto continued to value the mining assets in Mozambique at more than $3 billion despite an internal assessment that they were worth negative $680 million, according to a lawsuit filed in Manhattan federal court. The SEC's lawsuit alleges that former Chief Executive Thomas Albanese and former Chief Financial Officer Guy Elliott knew about the project’s rapidly declining value but didn’t disclose it to investors and misled their board of directors about the scope of the problems.

Wall Street found a parasite growing in the US economy that could spur the next recession (BI)
The bet here is simple: America, one way or another, will be forced to confront the parasite that is its healthcare system, and the companies that are using the sleaziest tactics will be picked off first — by prosecutors, lawmakers, insurance companies, or the press — leaving sick customers in the lurch. Short sellers are talking about this thesis at conferences and sending it around in their email newsletters. They're learning about scams and picking off weak companies to bet against. They see rising costs as a bubble that will be either gently deflated through federal-government intervention or violently popped by the merciless hand of the market — with a savvy investor making money either way.

Mnuchin: US stocks to face ‘significant’ fall without tax reforms (FT)
Steven Mnuchin said in a Politico podcast that there is “no question that the rally in the stock market has baked into it reasonably high expectations of us getting tax cuts and tax reform done”. He added that the spectre of regulatory relief has also been priced into stocks. He reckons equities will “go up higher” if the tax plans, which include a reduction in the statutory corporate tax rate, are passed.

Robots Are Coming for These Wall Street Jobs (BBG)
This map of trading automation is based on interviews with about a dozen senior banking and investing executives on Wall Street, many of whom focus on adopting new tech. It offers a sense of their projects -- some of them just starting -- that will affect traders within big firms.

Brexit Talks Are Failing. Somebody Needs to Care. (BBG)
The U.K. government can't compromise because that would reveal as fiction the underlying Brexit claim that Britain doesn't need Europe. The EU side can't compromise because its main motivation is to deter other would-be rebels. Because the EU holds the better cards, it's likely to win the staring contest. But there's every possibility that the U.K. government — in this sense not unlike the Catalan one now facing an ultimatum from Madrid — would prefer to go down in a blaze of Brexit glory than humbly seek to get the best it can for its people.

Bitcoin and the Yuan (CFR)
Bitcoin is no longer a China story, and hasn’t been since early this year. The yuan’s swift appreciation beginning in late May of this year laid this fact very bare. The “Chinese-outflows-are-driving-the-price-of-bitcoin” narrative would predict that sustained appreciation in the yuan would depress the price of bitcoin as more Chinese would be willing to hold on to their yuan. Instead bitcoin soared: gaining some 90 percent over the same period that the yuan appreciated almost 6 percent against the dollar.

This Is What A 21st-Century Police State Really Looks Like (BuzzFeed)
Armed police, paramilitary forces, and volunteer brigades stand on every street in Kashgar, stopping pedestrians at random to check their identifications, and sometimes their cell phones, for banned apps like WhatsApp as well as VPNs and messages with religious or political content. Other equipment, like high-resolution cameras and facial recognition technology, is ubiquitous. In some parts of the region, Uighurs have been made to download an app to their phones that monitors their messages. Called Jingwang, or “web cleansing,” the app works to monitor “illegal religious” content and “harmful information.”

Inside a Secretive Group Where Women Are Branded (NYT)
Each woman was told to undress and lie on a massage table, while three others restrained her legs and shoulders. According to one of them, their “master” instructed them to say: “Master, please brand me, it would be an honor.” A female doctor proceeded to use a cauterizing device to sear a two-inch-square symbol below each woman’s hip, a procedure that took 20 to 30 minutes. For hours, muffled screams and the smell of burning tissue filled the room. “I wept the whole time,” Ms. Edmondson recalled. “I disassociated out of my body.”

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By D J Shin (Own work) [CC BY-SA 3.0 or GFDL], via Wikimedia Commons

Opening Bell: 9.27.17

Man Group is taking the man out of Man Group; why you should go buy a bunch of crypto derivatives; guess which stocks finance professor Lily Fang likes; and more.

Opening Bell: 02.12.13

Obama Address to Focus on Economy, Social Issues (WSJ) President Obama's chief spokesman, Jay Carney, said Monday the core emphasis in the president's big speeches remains the same: "The need to make the economy work for the middle class, because the middle class is the engine that drives this country forward and which will, if it's given the right tools and the right opportunities, will drive us forward in the 21st century." Republicans welcome the president's expected focus on the economy, but also say he hasn't done enough. "The White House says they're talking about jobs and the economy. I welcome that engagement," House Majority Leader Eric Cantor (R., Va.) said in an interview Sunday. "It seems as if the president is constantly trying to pivot back to jobs and the economy. The reason you see that happening is he's never pursued it." Mr. Obama will also address a series of automatic spending cuts set to kick in March 1—the so-called sequester—which could threaten economic growth, national—security preparation and the jobs of thousands of federal employees. Mr. Obama has called on Congress to pass a temporary measure of spending reductions and new taxes to replace the across-the-board cuts. Barclays to Cut 3,700 Jobs After Full-Year Loss (Bloomberg) Barclays Plc will cut 3,700 jobs to reduce annual costs by 1.7 billion pounds ($2.6 billion) as Chief Executive Officer Antony Jenkins revamps the lender following its first full-year loss in two decades. About 1,800 positions will go this year at the firm’s investment bank and 1,900 in its loss-making European consumer and business banking unit, Jenkins said in a statement today. The lender posted a net loss of 1.04 billion pounds for 2012, wider than the 307 million-pound estimate of nine analysts surveyed by Bloomberg, as it set aside an additional 1 billion pounds in the fourth quarter for compensating clients wrongly sold interest-rate swaps and loan-repayment insurance. BNY Mellon loses U.S. tax case, to take $850 million profit hit (Reuters) BNY Mellon Corp said on Monday it will take an $850 million charge against first-quarter profit after losing a high-stakes tax case to the U.S. Internal Revenue Service, a move that will also erode some of its capital. The BNY Mellon case was the first to go to trial since the IRS accused several U.S. banks of generating artificial foreign tax credits through loans with London-based Barclays. The IRS challenged a $900 million tax benefit claimed by BNY Mellon that stemmed from a $1.5 billion loan from Barclays. The funding was so cheap that at one point Barclays actually paid BNY Mellon to take Barclays' money, according to court papers. Nasdaq Steps Up Pursuit Of A Partner (WSJ) Nasdaq, long on the hunt for a partner, has ramped up its conversations about strategic options ranging from joint ventures to a sale, according to people familiar with the talks, as rival NYSE Euronext moves ahead with a merger that will form an even-bigger competitor. Twinkie Brand Heads For Sale (WSJ) Judge Robert Drain of the U.S. Bankruptcy Court in White Plains, N.Y., cleared Hostess on Monday to proceed with several of the sale processes it has unveiled during the past several weeks. Private-equity firms Apollo Global Management LLC and Metropoulos & Co. are now officially set to kick off the contest for most of the Hostess cakes business, with a $410 million offer for brands such as Twinkie, Dolly Madison, Ho Hos and Ding Dongs. That so-called "stalking horse," or lead, bid also covers five bakeries and certain equipment. McKee Foods Corp., the maker of Little Debbie snack cakes, is the stalking-horse bidder for Hostess's Drake's brand. The $27.5 million offer from McKee, based in Collegedale, Tenn., doesn't include the Drake's plant in New Jersey. Tesla CEO Clashes With New York Times Over Model S Review (Bloomberg) Elon Musk, the billionaire chief executive officer of Tesla Motors Inc. said a range test of the Model S electric sedan by the New York Times was “fake” as the reporter didn’t disclose all the details of his drive. “NYTimes article about Tesla range in cold is fake,” Musk said in a Twitter post yesterday. “Vehicle logs tell true story that he didn’t actually charge to max & took a long detour.” The Times on Feb. 8 published a story by John M. Broder on its website detailing how the Model S he drove failed to meet the electric sedan’s 300-mile (483-kilometer) range “under ideal conditions” while driving in temperatures as low as 10 degrees Fahrenheit (minus-12 Celsius). The Times also published a blog post by Broder about the test-drive on the same day, detailing his plan to use Tesla’s new “supercharger” stations. Broder followed instructions he was given in “multiple conversations with Tesla personnel,” Eileen Murphy, a spokeswoman for the Times, said in an e-mail message. The story was “completely factual, describing the trip in detail exactly as it occurred,” Murphy said. “Any suggestion that the account was ‘fake’ is, of course, flatly untrue.” Dispute over mashed potatoes turns dangerous (TBN) A disagreement over mashed potatoes turned dangerous over the weekend when a victim said tempers escalated and a woman came at her with box cutters. Shaquina S. Hill, 23, of Fourth Street was charged with second-degree menacing and second-degree harassment as a result, city police said. An 18-year-old woman told police she and Hill argued about mashed potatoes just before 9 p.m. Sunday at a Fourth Street address, and things escalated from there. The younger woman told police Hill grabbed box cutters and waved them at her, then dropped the knife and started throwing things at her, including a heavy ceramic vase and coffee table. She told police Hill also punched her in the chest. U.K. Regulator to Investigate Autonomy (WSJ) The Financial Reporting Council, the regulator tasked with promoting good corporate governance and financial reporting in the U.K., announced the investigation Monday on its website. It said the probe will look at Autonomy accounts published between Jan. 1, 2009, and June 30, 2011. New York fund manager arrested on Ponzi scheme charges (Reuters) Federal prosecutors charged Jason Konior, 39, with defrauding investors by promising to match their investments in his fund, Absolute Fund LP, many times over. Prosecutors said he used $2 million of the money he collected from three hedge funds to pay his own expenses and cover redemption requests from prior investors, according to the criminal complaint dated February 7. Treasury’s Brainard Says G-20 Must Refrain From Devaluation (Bloomberg) “The G-20 needs to deliver on the commitment to move to market-determined exchange rates and refrain from competitive devaluation,” Lael Brainard, the Treasury’s undersecretary for international affairs, said at a news conference in Washington today. Brainard said “global growth is weak and vulnerable to the downside,” and strengthening demand must be a top priority for G-20 finance ministers and central bankers meeting in Moscow Feb. 15-16. Ex-Fund Manager Avoids Jail Time (WSJ) The cooperation of Ali Far, co-founder of Spherix Capital LLC, led to the convictions of at least five people, including Galleon Group founder Raj Rajaratnam, prosecutors said. Mr. Rajaratnam, who was convicted on conspiracy and securities-fraud charges, is serving an 11-year prison sentence, one of the longest terms ever imposed for insider trading. Mr. Far secretly agreed to cooperate with the government's probe shortly after he was approached by federal agents in April 2009, prosecutors said. Mr. Far, a former Galleon employee, recorded about 244 calls, including calls with Mr. Rajaratnam, prosecutors said. He also was prepared to testify at Mr. Rajaratnam's trial as a government witness in 2011 but was never called, they said. "I am truly sorry for my mistakes and I am ashamed," Mr. Far said at a hearing in Manhattan federal court Monday. U.S. District Judge Robert Patterson sentenced Mr. Far to one year's probation. He also imposed a $100,000 fine. The Perils of Being A Dog Show Judge (WSJ) Cindy Vogels had a litter of options for Best in Show at last year's Westminster Kennel Club Dog Show. As the final judge, she could have chosen a German Shepherd, a Doberman pinscher or even a Dalmatian. Instead she picked a Pekingese named Malachy—and everyone else judged her. One person, Vogels said, called the Pekingese "that awful dog." Vogels recalled another saying: "Why would you give Best in Show to the dog that couldn't walk?" "The American public was horrified," Vogels said. "The public has no appreciation for a Pekingese." It is the ultimate honor for a show judge to name the Best in Show winner at Westminster, the year's glitziest dog show, which concludes Tuesday at Madison Square Garden. But it also can bring out the worst in people. The math behind this logic is basic: There are 187 breeds, only seven will win their groups and just one will win the opinion of Michael Dougherty, the Best in Show judge on Tuesday. "You go in there alone," said Elliott Weiss, the 2010 Best in Show judge, "and you come out alone."

Opening Bell: 04.22.13

Bill Gross Attacks UK and Euro Zone Austerity (FT) Bill Gross, manager of the world's largest bond fund for Pimco, has launched a stinging attack on efforts by Britain and much of the euro zone to cut debt rapidly with severe austerity measures, warning that such action risks stifling recovery. "The U.K. and almost all of Europe have erred in terms of believing that austerity, fiscal austerity in the short term, is the way to produce real growth. It is not," Mr Gross told the Financial Times. "You've got to spend money." Argentina's New Debt Offer Rejected by Holdout Creditors (WSJ) Holdout creditors on Friday rejected Argentina's proposal to pay them about 20 cents on every U.S. dollar of bonds they own, leaving a U.S. appeals court to decide how to enforce a ruling that may push Argentina into a new default. "Not only are the details of Argentina's proposal unacceptable and unresponsive; Argentina fails even to provide this court with meaningful 'assurances' that it will actually comply with its own proposal," said Theodore Olson, a lawyer for the holdouts, in a brief filed Friday. Argentina's own math values the offer at $210 million, less than 15% of the $1.47 billion that holdouts were owed on their defaulted bonds as of March 1, according to the brief. Hedge Fund Stars Suit Up At Yankee Stadium To Attract Investors (NYP) Hedge-fund mogul Stevie Cohen will be pitching at Yankee Stadium tomorrow. No, the 56-year-old billionaire is not suiting up for the Bronx Bombers — but he will be hoping the magic of the House that Ruth Built will yield some investment cash. Cohen, whose SAC Capital faces a loss of $1.7 billion from investors who want out of his $15 billion hedge fund, is one of about 70 hedge fund managers who’ll be at the Stadium tomorrow making a pitch to prospective new investors at a day-long event sponsored by Goldman Sachs. Singapore Will Replace Switzerland As Wealth Capital (CNBC) Switzerland has $2.8 trillion in assets under management, with $2.1 trillion of that coming from offshore wealth. Switzerland accounts for 34 percent of the $8.15 trillion in total global wealth. Yet the report said Singapore could overtake Switzerland in offshore assets under management by 2020. It said Swiss offshore assets could fall below $2 trillion by 2016, while Singapore's assets could more than quadruple by then. Somali Banking Starts From Ground Up (WSJ) Abdusalam Omer is a central bank governor without much to govern. The Central Bank of Somalia doesn't hold reserves in the country's currency, the shilling. There are no functioning commercial banks in the strife-torn country for it to regulate. The 75-strong staff that still turns up for work after two decades of civil war is a motley crew of money men and handymen. "I don't know why the central bank employs painters," says the 58-year-old who was named the country's top banker in January. Eventbrite Funding Slows Its IPO Chase (WSJ) Eventbrite Inc., an event ticketing company, has raised $60 million from two investors, making it the latest example of a startup to raise significant private late-stage funding that puts off an initial public offering. San Francisco-based Eventbrite had sparked expectations of an imminent IPO when it said earlier this month that it hired a chief financial officer, Mark Rubash, who previously worked at Yahoo Inc. and eBay Inc. Instead, it joins a growing number of companies that have found plentiful funding in the private markets rather than going public at an early stage. The company has raised the new cash from mutual-fund firm T. Rowe Price Group Inc. and Tiger Global Management LLC, an investment-management firm, said Kevin Hartz, co-founder and chief executive. That brings its total private fundraising to some $135 million since its inception in 2006. "This gives us flexibility in setting the timeline for a later IPO, on our schedule," said Mr. Hartz. Deutsche Bank Margin Call on Vik Sparks $2.5 Billion Dispute (Bloomberg) Alexander Vik went to Deutsche Bank AG’s London office in October 2008 to meet account managers who congratulated the Norwegian entrepreneur on how well his Sebastian Holdings Inc. investment fund was doing. Within a month, as global markets tumbled into crisis, the same bankers demanded about $530 million against the fund’s currency bets and began to liquidate its positions. Vik, 58, will argue at a 12-week trial starting in London today that the bank’s actions resulted in losses and missed profits totaling about $2.5 billion. A judge will have to decide whether Sebastian’s calculation of lost trading gains is accurate, said John Day, a lawyer at London-based litigation firm DaySparkes. Zimbabwe Prepares Law to Seize Company Stakes Without Paying (Bloomberg) Zimbabwe’s government is preparing a law that would allow it to seize controlling stakes in companies without compensation, according to a draft of the legislation obtained by Bloomberg News. The law would be an amendment to a 2007 act that compels foreign and white-owned companies such as Rio Tinto Group, Sinosteel Corp. and Impala Platinum Holding Ltd. to sell or cede 51 percent of their shares to black nationalsor state-approved agencies.

Opening Bell: 10.1.15

2015 annus f*cking horriblus for investors; PJT Partners will go public; Glencore is junk; "City worker facing second 'robotic voice' suspension in New York"; and more

GaryCohnHamlet

Opening Bell: 8.25.17

Gary Cohn talks tax reform, Nazis; millennial quants want to drink your milkshake; Estonia wants to launch a sovereign bitcoin; the world champion in Excel; and more.