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.”

Related

Opening Bell: 03.12.12

Greek Bailout Payment Set to Be Approved by Euro Ministers After Debt Deal (Bloomberg) Ministers from the 17 nations that share the euro will gather in Brussels today to sign off on the 130 billion-euro ($170 billion) second package for Greece after bondholders agreed last week to take a loss on the country’s debt. They’ll also focus on Spain’s budget-cutting efforts and Portugal’s aid program, underscoring their desire to prevent contagion. MF Global Bonuses Under Fire (WSJ) In a letter to former Federal Bureau of Investigation Director Louis Freeh, Sen. Jon Tester (D., Mont.) said it would be "outrageous" to proceed with a proposal to a bankruptcy judge that could result in payouts of several hundred thousand dollars each for MF Global's chief operating officer, finance chief and general counsel. The size of the bonuses would depend on their job performance in helping Mr. Freeh maximize value for creditors of the company. Pandit Pay Climbs as Citigroup Revenue Slumps (Bloomberg) Pandit’s $15 million pay package for 2011 and a multi-year retention package announced in May could total $53 million, based on regulatory filings and an analyst’s estimate. The CEO also received $80 million last year from the New York-based firm’s purchase of his Old Lane Partners LP hedge fund in 2007. Latest Stress Tests Are Expected to Show Progress at Most Banks (NYT) In another milestone in the banking industry’s recovery from the financial crisis, the Federal Reserve this week will release the results of its latest stress tests, which are expected to show broadly improved balance sheets at most institutions...The examination is not merely an intellectual exercise. If institutions fall short, they could be required to raise billions in new capital, depressing their shares. If they pass, dividend increases and stock buybacks by the strongest institutions will follow as they did after the second round of tests a year ago, pleasing investors whose banks’ stocks still trade at levels far below where they where before the collapse of Lehman Brothers in September 2008. Mortgage Deal Is Built On Tradeoffs (WSJ) Banks agreed to cut loan balances, a step they had long resisted, but they won't only get credit against their shares of the $25 billion settlement for reducing balances of loans they own. In some cases, they can receive partial credit if investors shoulder the cost of writing down loans the banks service. The banks also will receive credit for some steps they are already taking, such as approving short sales, where a home is sold for less than the amount owed, according to draft settlement documents reviewed by The Wall Street Journal. The Unravelling Of A Casino Marriage (WSJ) Messrs. Wynn and Okada, both known for their big, demanding egos, were something of an odd couple. Mr. Wynn is famous for a Cheshire-cat grin and smooth, grandiose soliloquies. Mr. Okada, a former engineer who had specialized in vacuum tubes, was sometimes seen as sullen and withdrawn by company outsiders. Born the same year, 1942, Mr. Wynn and Mr. Okada became "completely and totally bonded," Mr. Wynn said after they were introduced by a mutual friend. Mr. Wynn was hunting for investors who would give him leeway to create resorts that might take years to design and build. Mr. Wynn came of age during an era when casino operators were emerging from the industry's mob-infested roots. He hobnobbed with such celebrities as Steven Spielberg and Clint Eastwood. Mr. Okada, though often ranked among the richest people in Japan, largely stayed out of the spotlight. Missing Hiker Cuddled With Cat (AP) Snuggling in a blue sleeping bag, Margaret Page and her cat survived 3 1/2 weeks in a rugged New Mexico national forest, even though temperatures dropped below freezing nearly every night...The area had seen average highs reach around 60 degrees with evening lows in the 20s. It didn’t see much rain or snow, but there were some high winds...Relying on a creek for drinking water, Page and her cat named Miya lived on just a handful of supplies, rescue workers said Friday. Wells Fargo Poised to Lead Payouts Higher (Bloomberg) Wells Fargo and Citigroup may join banks unleashing more than $9 billion in dividend increases and share buybacks if they get passing grades this week on the Federal Reserve’s annual stress test. Thirteen of the 19 largest U.S. lenders may say they’ll pay out $3.79 billion in extra dividends this year and buy $5.52 billion of additional shares, according to estimates of six analysts compiled by Bloomberg. That’s 30 percent more than they spent last year. San Francisco-based Wells Fargo probably will offer the biggest difference at a combined $4.16 billion, followed by Citigroup with $2.92 billion. SEC Probes Operators’ Use of Multiple Markets (FT) According to people familiar with the probe, SEC officials are focusing on whether operators use multiple exchanges to appease customers which provide large order flows. At Lunch, Bloomberg And Obama Discuss Future (NYT) Mr. Bloomberg’s precise response is unknown. But their meeting a few weeks ago, confirmed by aides to both leaders and previously undisclosed, was potentially significant for both men, as Mr. Obama seeks support for his presidential campaign and Mr. Bloomberg ponders his post-mayoral career. Soros-led hookup may save American Apparel (NYP) George Soros has found a new financial disaster from which to profit: American Apparel. The billionaire octogenarian — who, like American Apparel’s controversial CEO Dov Charney, has lately been entangled in lawsuits with young, beautiful women — is backing a firm that’s in talks to extend a credit line worth as much as $80 million to the cash-strapped clothing chain, The Post has learned. The credit facility from Crystal Financial, a Boston-based firm that boasts Soros’ hedge fund as its lead investor, will immediately replace and expand a $75 million revolving credit line from Bank of America that matures in July, sources said. How To Become A Skeeball Master (YG) Not all skeeball machines are created equal. Between the shape of the ramp, the geometry of the backboard, and the precise characteristics of the rolling surfaces, each skeeball machine plays slightly differently -- and those variations can throw you off your game. If you're getting settled into a serious practice session, stock up with plenty of tokens and don't step away from your chosen spot....many skeeball aficionados prefer to kneel down to play. Maybe the lower stance helps them line up their shot, or perhaps being closer to the action helps them judge their throwing power a little more accurately. Whatever the reason, it's a tried and true technique for expert skeeball players -- and it might work for you, too. If you're struggling to settle into a comfortable throw, give it a try.

Opening Bell: 02.19.13

SAC’s Cohen May Face SEC Suit as Deposition Hurts Case (Bloomberg) U.S. investigators have subpoenaed a 2011 deposition of SAC Capital Advisors LP founder Steven Cohen, whose sworn statements on insider-trading compliance may hurt him as he tries to persuade regulators not to file a lawsuit with the potential to shut his $14 billion firm. The SEC told the hedge fund Nov. 20 that it planned to sue SAC for securities fraud and so-called control-person liability for failing to supervise employees. The same day, the agency accused an ex-SAC portfolio manager and his hedge-fund unit of insider trading for persuading Cohen, 56, to make $700 million in illegal trades. Prosecutors also indicted the manager. Cohen’s testimony, reviewed by Bloomberg News, establishes his personal control over the unit, CR Intrinsic, and records his unfamiliarity with his firm’s compliance and ethics policies on insider trading. “I’ve read the compliance manual, but I don’t remember exactly what it says,” Cohen said. Morgan Stanley Strives to Coordinate 2 Departments Often at Odds (Dealbook) Traditionally, traders and investment bankers think of themselves as the elite of Wall Street and look down on the retail business, seeing it as pedestrian...Yet since Morgan Stanley moved to acquire control of the Smith Barney brokerage business from Citigroup in 2009, the balance of power has shifted to wealth management, which now accounts for almost 52 percent of the company’s earnings, up from roughly 16 percent in 2006. Paulson Leads Funds to Bermuda Tax Dodge Aiding Billionaires (Bloomberg) A decade after the U.S. Internal Revenue Service threatened to crack down on what it said were abuses by hedge-fund backed reinsurers, more high-profile money managers are setting up shop in tax havens. Paulson, SAC Capital Advisors LP’s Steven A. Cohen and Third Point LLC’s Daniel Loeb have started Bermuda reinsurance companies since 2011, following a similar Cayman Islands venture by Greenlight Capital Inc.’s David Einhorn. Options Activity Questioned Again (WSJ) Over the past year, unusually large positions were established shortly in advance of news that moved shares of Nexen Inc., Youku Inc., Human Genome Sciences Inc., Constellation Brands Inc. and, most recently, CBS Corp. All turned profitable after the news. A spokeswoman for the SEC, which regulates stock and options trading, said the agency would neither confirm nor deny the existence of inquiries into trading tied to those companies. No charges have been filed in the Heinz case, which was linked to a Swiss trading account, but the move to freeze the assets is one of the fastest enforcement actions ever filed by the agency, according to officials. The SEC said Friday that the timing and size of the trades were highly suspicious given the account had no history of trading in Heinz securities in the last six months. Prosecutors, Shifting Strategy, Build New Wall Street Cases (Dealbook) Criticized for letting Wall Street off the hook after the financial crisis, the Justice Department is building a new model for prosecuting big banks. In a recent round of actions that shook the financial industry, the government pushed for guilty pleas, rather than just the usual fines and reforms. Prosecutors now aim to apply the approach broadly to financial fraud cases, according to officials involved in the investigations...The new strategy first materialized in recent settlements with UBS and the Royal Bank of Scotland, which were accused of manipulating interest rates to bolster profit. As part of a broader deal, the banks’ Japanese subsidiaries pleaded guilty to felony wire fraud. Russians Wade Into the Snow to Seek Treasure From the Sky (NYT) Ever since the meteor exploded somewhere over this impoverished Siberian town, Larisa V. Briyukova wondered what to do with the fist-size stone she found under a hole in the roof tiles of her woodshed. On Monday, a stranger knocked on her door, offering about $60, Ms. Briyukova said. After some haggling, they settled on a price of $230. A few hours later, another man pulled up, looked at the hole in the roof and offered $1,300. “Now I regret selling it,” said Ms. Briyukova, a 43-year-old homemaker. “But then, who knows? The police might have come and taken it away anyway.” On Friday, terror rained from the skies, blowing out windows and scaring people over an enormous swath of Siberia. But by Monday, for many people what fell from the sky had turned to pure gold, and it touched off a rush to retrieve the fragments, many buried in deep February snows. Many of those out prospecting looked a lot like Sasha Zarezina, 8, who happily plunged into a snowbank here in this village of a thousand, laughing, kicking and throwing up plumes of powdery snow. Then she stopped, bent over and started to dig. “I found one!” she yelled. A warm breath and a rub on her pants later, a small black pebble, oval like a river rock, charred and smooth, was freed of ice. While trade in material from meteorites is largely illegal, there is a flourishing global market, with fragments widely available for sale on the Internet, usually at modest prices. At least one from the recent meteor was available on eBay on Monday for $32, and there is a Web site called Star-bits.com devoted to the trade — much to the displeasure of scientists and the countries where the objects were found. UK's Lloyds fined $6.7 million for mis-sold insurance (Reuters) Britain's financial regulator on Tuesday fined Lloyds Banking Group 4.3 million pounds ($6.7 million) for failing to handle complaints relating to insurance sold on loans and mortgages properly. The Financial Services Authority (FSA) said failings in the bank's systems and controls resulted in up to 140,000 customers experiencing delays in receiving compensation for being mis-sold payment protection insurance (PPI). Horsemeat Scandal Draws in Nestlé (FT) Switzerland-based Nestle on Monday removed pasta meals from shelves in Italy and Spain and suspended deliveries of all processed products containing meat from German supplier, H.J. Schypke, after tests revealed traces of horse DNA above 1 per cent. Nestle said it had informed the authorities. Is Berlusconi Getting a Poll Bounce From Tax Evaders? (CNBC) The media mogul, who has been convicted of tax fraud, has promised to introduce a tax amnesty for evaders if elected and to abolish the real estate tax. Swelling U.S. Labor Force Keeps Fed at Ease (Bloomberg) In the short run, the larger labor force will have an unfortunate side effect: It will slow the fall in unemployment. Mellman sees the jobless rate dropping to 7.5 percent by year- end from 7.9 percent now. It fell 0.7 percentage point in 2012. In the longer run, a bigger supply of labor is good news because it swells the pool of Americans available and willing to work, enhancing the economy’s potential to grow, according to Julie Hotchkiss, a policy adviser at the Federal Reserve Bank of Atlanta. It also has a silver lining for investors. The gradual fall in unemployment will allow policy makers to keep monetary policy looser for longer without having to worry about igniting a wage- driven rise in inflation. Couple Getting Affectionate Drive Through Home (WO) "She told the investigating trooper that her and the boyfriend were getting a little amorous and the trooper suspects that's probably why she lost control of the vehicle," said Florida Highway Patrol spokeswoman Kim Montes. Walker lost control of the vehicle and slammed into an unoccupied home. The vehicle went all the way through the house. The impact was so dramatic, the pressure blew a window in another part of the house out. Florida Highway Patrol troopers said Walker was injured when debris fell inside the vehicle. She was taken to Halifax Medical Center to be checked out. Her boyfriend, Charles Phillips, was not hurt.

Opening Bell: 01.08.13

Obama Said Close to Choosing Lew for Treasury Secretary (Bloomberg) President Barack Obama may choose White House Chief of Staff Jack Lew to replace Treasury Secretary Timothy F. Geithner as soon as this week, according to two people familiar with the matter. The selection of Lew would trigger a White House shuffle for Obama’s second term as he replaces his chief of staff and moves senior aides into new roles, said the people, who requested anonymity to discuss personnel matters. While Obama hasn’t made a final decision to pick Lew, the president’s staff has been instructed to prepare for his nomination, said one of the people. Rescued by a Bailout, AIG May Sue Its Savior (NYT) The board of A.I.G. will meet on Wednesday to consider joining a $25 billion shareholder lawsuit against the government, court records show. The lawsuit does not argue that government help was not needed. It contends that the onerous nature of the rescue — the taking of what became a 92 percent stake in the company, the deal's high interest rates and the funneling of billions to the insurer's Wall Street clients — deprived shareholders of tens of billions of dollars and violated the Fifth Amendment, which prohibits the taking of private property for "public use, without just compensation." Greenberg: 'Cadre' Hurt AIG (NYP) Maurice “Hank” Greenberg, former chief executive officer of American International Group, says in a soon-to-be-published book that the company was almost destroyed by overzealous overseers. The insurer was “ultimately taken over and run aground by a cadre of auditors, lawyers, outside directors, and government officials,” according to an excerpt of “The AIG Story” on Amazon.com’s website. JPMorgan’s Staley Quits to Join BlueMountain Hedge Fund (Bloomberg) ames E. Staley, the JPMorgan Chase executive who was once seen as a possible candidate to become chief executive officer, quit to join BlueMountain Capital Management LLC, a $12 billion hedge fund with close ties to the New York bank. Staley, who was at JPMorgan for more than 34 years, most recently as chairman of the corporate and investment bank, will become a managing partner and purchase a stake in BlueMountain, the New York-based firm said today in a statement. Proceeds from the stake sale will be invested in new infrastructure, technology and people, the firm said. “I’m very excited to be joining BlueMountain at a time when sea changes in the financial industry combined with the firm’s unique strengths open up enormous possibilities to deliver value to clients,” Staley, 56, said in the statement. HSBC N.J. Client Admits Conspiracy in Offshore Tax Case (Bloomberg) A New Jersey client of HSBC Holdings pleaded guilty to charges that he hid as much as $4.7 million through Swiss and Indian accounts not declared to the U.S. Internal Revenue Service. Sanjay Sethi, 52, who owns SanVision Technology Inc., conspired with HSBC bankers in New York, London and Geneva to hide assets from the IRS, he admitted yesterday in federal court in Newark, New Jersey. Sethi will pay a $2.37 million penalty for failing to file reports required for foreign accounts. “Sethi and his co-conspirators used nominee and shell companies formed in tax-haven jurisdictions and elsewhere to conceal the defendant’s ownership and control of assets and income from the IRS,” according to his charging document. Bill Ackman Says Just Getting Started Exposing Herbalife (Bloomberg) “We’re prepared to spend whatever it costs and do whatever is required to make sure that the world understands the facts about this company,” he said in a telephone interview. “We can’t imagine how the SEC or the Federal Trade Commission or any other relevant regulator will ignore what we have said.” Ackman said he would make all his information available to U.S. regulators. Chinese Tech Titans Eye Brazil (WSJ) The Chinese like emerging markets because, for a change, they don't have to start way behind established American companies. By moving into Brazil aggressively, Chinese PC maker Lenovo Group and Internet-search company Baidu hope to gain an edge over companies like Hewlett-Packard and Google In addition, some U.S. companies that are leaders at home and in Europe have a smaller footprint here because of Brazil's long history of protectionism and red tape and its high cost of labor, particularly compared with Asia. Oregon brewer Daniel Keeton creates nutritional, non-alcoholic brew for his dog (NYDN) Oregon man Daniel Keeton enjoys serving beer to customers at the brewery he works for, so why shouldn't he serve up some healthy brew for the dog he cares about? The dog brew is non-alcoholic of course, but it is a big hit with Keeton's canine Lola Jane. And now Keeton's special brew is available to anyone who wants it. After years of planning, Keeton launched his company Dawg Grog over the summer. Keeton, who works at Boneyard Brewery in Bend, says Dawg Grog is good for the dogs, and they can't seem to get enough of it. "Bend is a dog-loving community and a beer-loving community," Keeton told the Daily News on Monday. "I wanted to marry those two together in some way." Keeton spent years refining the ingredients to his special brew, which includes low-sodium vegetable broth, water and spent grain from Boneyard Brewery. "After a couple of years of trying recipes I came up with one that I am really happy with, and one that my dog is really happy with," he said. Secret Goldman Team Sidesteps Volcker After Blankfein Vow (Bloomberg) MSI wagers about $1 billion of the New York-based firm’s own funds on the stocks and bonds of companies, including a mortgage servicer and a cement producer, according to interviews with more than 20 people who worked for and with the group, some as recently as last year. The unit, headed by two 1999 Princeton University classmates, has no clients, the people said...The team of about a dozen people, based at the firm’s Manhattan headquarters, is headed by Daniel Oneglia and Geoff Adamson. Oneglia was treasurer of the Princeton eating club Tiger Inn, where his nicknames included “the Don” and “the Weasel,” according to the university’s website. Adamson was coxswain for men’s heavyweight varsity crew. A Boston Globe photo shows teammates flinging him into a Massachusetts lake after a victory. Carlyle Bags $4 Billion Profit From China Insurance Exit (Reuters) Private equity firm Carlyle Group sold its remaining stake in China's No.3 insurer CPIC in a deal valued at $793 million, exiting the business with its largest dollar profit on an investment. After several stake sales in the past two years, Carlyle will finish with a total profit of more than $4 billion, five times the $800 million it invested in CPIC between 2005 and 2007 for a 17 percent stake, Thomson Reuters calculations show. By private equity standards, where making two times cash paid and a few hundred million is considered a success, the CPIC exit is an historic deal for Carlyle. London Quantitative Hedge Funds Report Second Year of Losses (Bloomberg) The performance of the funds belies their popularity with investors, who’ve poured $108.2 billion into the pools since the end of 2008, according to Fairfield, Iowa-based BarclayHedge Ltd. While quants made money during the financial crisis when other hedge funds didn’t, they’ve since stumbled as market sentiment swung from optimism to pessimism following political announcements in Washington and Brussels, breaking up the trends they try to follow. That may force investors to withdraw money. Japan Executives Warn Yen May Get Too Weak (WSJ) The executives, who gathered at an annual New Year's reception held by Japan's three biggest corporate lobbies, praised Prime Minister Shinzo Abe's new government for its proposals to boost the economy and tame the strong yen, which erodes exporters' profits and makes it harder to sell Japan-made goods overseas. But they also cautioned that if the economy stays weak, or if the government doesn't take steps to get its bloated finances under control, investors could lose confidence in Japan and flee, sending the yen into free fall. KFC diner stumbles upon strange brain-like organ in his meal (TS) Disgusted Ibrahim Langoo was tucking into a Gladiator box meal when he spotted what he thought was a “wrinkled brain” inside a piece of chicken. KFC have apologised and, after having the photographs analysed, reckon the unsightly organ may in fact be a kidney. The 19-year-old took a photograph of the three-inch stomach-churning discovery on his mobile phone and complained to staff. Apologetic bosses at the fast-food chain – known for its Finger Lickin’ Good slogan – have now offered him vouchers for even more KFC meals.

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

Opening Bell: 12.06.12

Diamondback to Close Down as Investors Pull $520 Million (WSJ) Diamondback Capital Management LLC, among the hedge funds that was raided by the FBI about two years ago as part of the U.S. investigation of insider trading on Wall Street, is liquidating after clients pulled money. The Stamford, Connecticut-based fund received requests from investors to withdraw about $520 million, or 26 percent of its assets, co-founders Richard Schimel and Lawrence Sapanski, said today in a client letter. They said they plan to return the majority of the money next month. “We especially appreciate your patience and support during the last two difficult years during which we reached closure of the government’s investigation,” they said in the letter. SEC Probes Deutsche Bank (Bloomberg) U.S. securities regulators are investigating allegations that Deutsche Bank hid billions of dollars of paper losses during the financial crisis, according to people close to the investigation. The German bank said Wednesday that the allegations, by three former U.S.-based employees, were "wholly unfounded" and had been the subject of a "careful and thorough" review it had commissioned. The former employees have told the Securities and Exchange Commission that traders at Deutsche Bank overvalued a portfolio of derivatives to hide rapidly mounting losses when financial markets were collapsing in 2008, the people close to the investigation said. The details of the allegations were reported by the Financial Times on Wednesday. Wall Street Job Reductions Seen Persisting After Citigroup Cuts (WSJ) Wall Street’s cost cuts and dismissals, which have helped erase more than 300,000 financial- industry jobs in the past two years, are far from over. Citigroup's announcement yesterday of plans to eliminate 11,000 positions in units spanning equities trading to consumer banking is the latest sign of strain from a market slowdown, stiffer capital rules and weak economic growth. Lenders around the globe are likely to trim more jobs if revenue doesn’t rebound sharply next year, analysts and recruiters said. “The knives are sharpened and ready,” said Jason Kennedy, chief executive officer of London-based search firm Kennedy Group. “These institutions are too big for the business they are generating but they are still quite bullish that the market will return by mid-2013. Unless the markets picks up, there will be more cuts in the first half.” Broadening Tax Base and Raising Rates Key to 'Cliff' Deal: Summers (CNBC) The wiggle-room in the "fiscal cliff" negotiations comes down to a balanced approach on raising tax rates for wealthier Americans and broadening the tax base by closing loopholes and deductions, former Clinton Treasury Secretary Lawrence Summers told CNBC. "The president is not signing legislation — no way — that does not raise tax rates. The president has been clear as day," Summers said Thursday on "Squawk Box." Summers also pointed out that President Barack Obama isn't married to repealing the Bush tax cuts for the top 2 percent of wage earners all the way back to the Clinton-era tax rates of 39.6 percent. So rates might not go that high if there's sufficient revenue coming from the base-broadening side of the equation. Geithner: Ready to Go Over 'Cliff' If Taxes Don't Rise (CNBC) Treasury Secretary Timothy Geither told CNBC Wednesday that Republicans are "making a little bit of progress" in "fiscal cliff" talks but said the Obama administration was "absolutely" ready to go over the cliff if the GOP doesn't agree to raise tax rates on the wealthy. "I think they're making a little bit of progress," Geithner said. "They're clearly moving and figuring out how to try to move further." But Geithner said the White House would "absolutely" go over the fiscal cliff — triggering over $600 billion in automatic spending cuts and tax increases — unless tax rates increase on the top 2 percent of wage earners. Steinberg Is Eyed In SAC Trial (NYP) Prosecutors yesterday confirmed the worst-kept secret in the insider-trading trial unfolding in Manhattan federal court: They view former SAC Capital money manager Michael Steinberg as a co-conspirator in the case. Prosecutor Antonia Apps argued yesterday that Steinberg, a portfolio manager with SAC’s Sigma Alpha unit, should be officially labeled a co-conspirator in the case because he knew his former analyst, John Horvath, was receiving illegal tips on computer-maker Dell. The government has already alluded to Steinberg’s alleged role in earlier court documents, when it referred to four unnamed co-conspirators, including “the portfolio manager to whom Jon Horvath reported at his hedge fund.” That person is Steinberg. New Zealand Dogs Learn How to Drive (ABC) Who says you can’t teach an old dog new tricks? Not the New Zealand chapter of the Society for the Prevention of Cruelty to Animals (SPCA), which has launched a marketing campaign featuring dogs — real dogs — learning how to drive. Really. SPCA Auckland chose three abandoned dogs — Monty, Ginny and Porter — and put them behind the wheel of a car to show that rescue dogs are a first-rate choice for adoptions. “I think sometimes people think because they’re getting an animal that’s been abandoned that somehow it’s a second-class animal,” SPCA Auckland’s CEO, Christine Kalin, told the New Zealand Herald. “Driving a car actively demonstrates to potential rescue dog adopters that you can teach an old dog new tricks.” The trio of highway-ready rescue dogs was chosen by SPCA two months ago and then relocated to Animals on Q, a “premiere New Zealand animal talent agency,” according to its website, to begin their “doggy driver training process,” the Herald reported. The dogs have trained for the past eight weeks under the supervision of Animals on Q owner Mark Vette. Next week one of the dog’s skills will be put to the test in front of a live national TV audience. Porter, a 10-month-old Beardie Cross and the star among the three pups, will drive a Mini Countryman on the “Campbell Live” program on New Zealand’s 3 News, the station reported in a sneak peek that aired last night. The TV appearance will mark the first time that Porter, or any of the other pups, drives without human assistance. While training, Porter — along with Monty, an 18-month Giant Schnauzer, and, Ginny, a 1-year-old whippets cross — used a canine-modified Mini, but had human help in the form of steering wheel adjustments and verbal commands. Nasdaq drops ball on IPO — again (NYP) The electronic exchange run by CEO Robert Greifeld was forced yesterday to cancel orders on a planned $100 million initial public offering of WhiteHorse Finance due to “human error,” a Nasdaq spokesman said. A staffer in the exchange’s market-watch department “inadvertently” pressed a button to cancel trading rather than to delay the launch of the company. Standard Chartered to Pay Additional $330 Million in Iran Settlement (WSJ) Standard Chartered said Thursday it expects to pay an additional $330 million to settle with U.S. authorities over past transactions with Iranian clients that may have violated U.S. sanctions, putting its total bill at around $670 million. Madam Set To Name NFL Big (NYP) Notorious Upper East Side madam Anna Gristina is about to start naming names of high-power clients from her little black book — and an unlucky NFL executive will be the first bombshell name she lets fly, we’re told. “There is going to be a giant name dropped — actually, a couple of them,” Gristina told The Post’s Laura Italiano, speaking of her plans for an upcoming interview with TV host psychologist Dr. Phil. Asked if those names would be “giant” with a capital “G,” the Hockey Mom Madam gave a distinctly mischievous laugh that portends bad news for the bigwig client...“Everyone’s going to have to watch Dr. Phil,” she said. “I will tell you that one of the names is high-level [NFL] management. Then there’s an older [football] player who’s still very well known. Tune in to Dr. Phil!” Jobless Claims Fall (Reuters) Initial claims for state unemployment benefits dropped 25,000 to a seasonally adjusted 370,000, the Labor Department said on Thursday. The prior week's figure was revised to show 2,000 more applications than previously reported. EU Pushes Crackdown On Tax Havens (WSJ) The European Union's executive Thursday moved to step up efforts against tax havens, encouraging members to name and shame ultra-low-tax jurisdictions and crack down on cross-border tax avoidance within the 27-nation bloc. Guatemalan Police Arrest Software Guru McAfee (AP) Software company founder John McAfee was arrested by police in Guatemala on Wednesday for entering the country illegally, hours after he said he would seek asylum in the Central American country. The anti-virus guru was detained at a hotel in an upscale Guatemala City neighborhood with the help of Interpol agents and taken to an old, three-story building used to house migrants who enter the country illegally, said Interior Minister Mauricio Lopez Bonilla. It was the latest twist in a bizarre tale that has seen McAfee refuse to turn himself in to authorities in Belize, where he is a person of interest in the killing of a neighbor, then go on the lam, updating his progress on a blog and claiming to be hiding in plain sight, before secretly crossing the border into Guatemala. "He will be in danger if he is returned to Belize, where he has denounced authorities," said his lawyer in Guatemala, Telesforo Guerra. "His life is in danger." Guerra said he would ask that a judge look at McAfee's case as soon as possible. "From them moment he asked for asylum he has to have the protection of the Guatemalan government." Earlier Wednesday, McAfee said he had formally requested asylum in Guatemala after entering the country from Belize, where he says he fears for his safety because he has sensitive information about official corruption and refused to donate to local politicians. "Yes, we are presenting this, and I want it to be clear, because of the persecution, not because of the murder," he told the AP about his asylum bid.