Opening Bell: 10.20.17

Meet "Paul in a Box"; WeWork runs on tequila and pixie dust; Goldman trading bitcoin would mean a stampede; bald eagle eats black cat in act of overt symbolism; and more.

Author:
Dealbreaker
Updated:
Jan 14, 2019
Original:
Oct 20, 2017

Wall Street’s Robots Still Have a Lot to Learn About Being a Human Trader (BBG)
Back in the 1990s, Paul Tudor Jones assigned a team of coders to a project dubbed “Paul in a Box.” The effort sought to break down the DNA of the hedge fund manager’s trading -- how he sizes up markets and generates ideas -- to train a computer to do the same. The code created then was upgraded many times and is still used at his firm, Tudor Investment Corp. But it never took over.

Jim Grant's Botched Bridgewater Takedown (II)
Industry gadflies had whispered it for years. Prime brokers had questioned over beers who they traded through. Bankers, perhaps grouchy that they were, finally, passé, claimed over lunch that their returns didn't add up. Journalists, hungry to make a name as the next Woodward, begged their recalcitrant editors – me included – to let them investigate. “If we publish that, you either win a Pulitzer or you bankrupt this company,” was my stock response. Jim Grant, on the other hand, just went out and did it.

Hedge fund king sues Barclays over £650m ‘rigging’ (Evening Standard)
Red Kite, one of the biggest metals traders in the world, claims Barclays told its own traders price-sensitive information about the funds’ positions in the copper market. Barclays bet against Red Kite, manipulating prices on the London Metal Exchange in the process, claims the hedge fund.

Lyft Is Said to Explore I.P.O. as It Raises $1 Billion Led by Alphabet (NYT)

Lyft has had talks with investment banks about an initial public offering next year, according to two people briefed on the discussions. To bolster itself ahead of any public offering, Lyft on Thursday said it had raised $1 billion in financing led by CapitalG, a venture investment arm of Google’s corporate parent, Alphabet. The funding values Lyft at $10 billion before the introduction of new capital — a significant jump from the company’s last valuation of $6.9 billion.

WeWork: A $20 Billion Startup Fueled by Silicon Valley Pixie Dust (WSJ)
Similar investor hopes surrounded IWG, the flexible workspace provider, which was called Regus when it went public in 2000. Demand plummeted in the dot-com bust, leaving it with high fixed lease costs and sinking rents from subtenants. Its U.S. business sought bankruptcy protection. IWG is valued at around $5,600 for each desk, compared with WeWork’s $135,000 per desk.

Paul Singer: Efficient Markets Need Guys Like Me (WSJ)
There is a fair debate to be had about the appropriate balance of power between public corporations and their shareholders. But the debate has been badly skewed by a false narrative. “Anti-activist” advisers have attempted to drive a wedge between activist investors and index funds by suggesting that activists are interested only in short-term gains at the expense of long-term value. This divisive framing is objectively false and has done harm to the goal of generating sustainable returns for all investors. SEE ALSO: Activist Investor Elliott Zeros In on BHP CEO

Poking Holes in the Market Bubble Hypothesis (CS Investing)
A less obvious factor that is producing higher P/E ratios today is how accounting practices penalize certain growth investments. When a company builds a new plant, GAAP accounting spreads that cost over its useful life—often 40 years—so the cost gets expensed through 40 years of depreciation as opposed to just flowing through the current income statement. But when Amazon hires engineers and programmers to help it prepare for sales that could double over the next four years, those costs get immediately charged to the income statement. When Alphabet invests in autonomous vehicles for rewards that are years and years away, the costs are expensed now and current earnings are reduced.

An Evening in Wonderland (Josh Brown)
The big rumor going around last night is that Goldman Sachs is going to launch market-making in crypto currency for their clients in the third quarter of 2018. I don’t know if that’s true or not, but multiple people who don’t know each other are saying it. And why wouldn’t they? If that’s what their customers are asking for (and they are), then of course they will. This is the institutionalization of something that right now is still on the fringes of finance.

Bald eagle spotted eating black cat on downtown Norfolk sidewalk (The Virginian-Pilot)
A black cat apparently crossed the wrong path Tuesday afternoon – and ended up as lunch for a bald eagle. Dozens of people crowded around as the eagle ate the cat on the sidewalk. Traffic stopped in front of Advance Auto Parts at 26th Street and Monticello Avenue as drivers took a closer look.

Opening Bell

Mike Mayo thinks Wells chief sucks but should stay on; Jack Ma’s finance biz may be worth more than Goldman Sachs; Bald eagles trained to snatch hostile drones; and more.

I'm sorry but I just don't recognize him. Source: Getty Images

Opening Bell

Bill Gross remains less than optimistic; Amazon wants to eat your lunch; Paul Singer is a “pain in the ass”; weed pizza; and more.

Opening Bell

Lynn Tilton sued over $1 billion; flash boys take over bitcoin; eat a golden shower burger; and more.

Opening Bell

Meet the mother of all cyber risks; quants are wracking their brains over bitcoin; Winklevii become billionaires; the curve flattening is pretty "meh" so far; buy a digital cat for $113,000; and more.

Opening Bell

Visium to shut funds amid probe; Gundlach fears Trump; Credit Suisse puts 5 on leave; Colorado company releases wine for cats; and more.

Opening Bell

Kerviel’s Refusal To Be SocGen Scapegoat May Harm Appeal Chances (Bloomberg) Jerome Kerviel began his fight today against a 2010 conviction for Societe Generale’s 4.9 billion- euro ($6.2 billion) trading loss, telling a Paris appeals court that the bank knew about his actions. His lawyers said they’ll show judges at the four-week appeal starting today that the bank knew before the 2008 trading loss that he was exceeding his mandate with risky bets and can’t claim to be an innocent victim. “I think that I’m not responsible for this loss,” Kerviel told judge Mireille Filippini at the start of the hearing today in response to a question about why he was appealing. “I always acted with the knowledge” of the bank. Germany Signals Crisis Shift (WSJ) Germany is sending strong signals that it would eventually be willing to lift its objections to ideas such as common euro-zone bonds or mutual support for European banks if other European governments were to agree to transfer further powers to Europe. China Making Contingency Plans for a Greek Exit (Reuters) The Chinese government has called on key agencies, including the central bank, to come up with plans to deal with the potential economic risks of a Greek withdrawal from the euro zone, three sources with knowledge of the matter told Reuters on Monday. The sources said the plans may include implementing measures to keep the yuan currency stable, increasing checks on cross-border capital flows, and stepping up policies to stabilize the domestic economy. Oversight Of JPMorgan Probed (WSJ) A federal agency that oversees J.P. Morgan Chase is taking heat over how much it knew about risk-taking in the part of the bank that suffered more than $2 billion in trading losses. Sen. Sherrod Brown (D., Ohio) asked Comptroller of the Currency Thomas Curry in a letter Friday for details about the regulator's supervision of trading operations at the largest U.S. bank by assets. Mr. Brown also wants more information about the Office of the Comptroller of the Currency's "process for reviewing trading operations" at J.P. Morgan and other big banks. The Senate Banking Committee, which includes Mr. Brown, is scheduled to hold a hearing Wednesday that will focus on the trading loss. JPMorgan Was Warned About Lax Risk Controls (NYT) A small group of shareholder advocates delivered an urgent message to top executives at JPMorgan Chase more than a year ago: the bank’s risk controls needed to be improved. JPMorgan officials dismissed the warning from the CtW Investment Group, the advocates, who also cautioned bank officials that the company had fallen behind the risk-management practices of its peers. Merrill Losses Were Withheld Before Bank of America Deal (NYT) What Bank of America’s top executives, including its chief executive then, Kenneth D. Lewis, knew about Merrill’s vast mortgage losses and when they knew it emerged in court documents filed Sunday evening in a shareholder lawsuit being heard in Federal District Court in Manhattan: Days before Bank of America shareholders approved the bank’s $50 billion purchase of Merrill Lynch in December 2008, top bank executives were advised that losses at the investment firm would most likely hammer the combined companies’ earnings in the years to come. But shareholders were not told about the looming losses, which would prompt a second taxpayer bailout of $20 billion, leaving them instead to rely on rosier projections from the bank that the deal would make money relatively soon after it was completed. Mets crasher out of jail, says he 'got caught up in the moment' (NYP) Mets fanatic Rafael Diaz said he got such an adrenaline rush from Johan Santana’s no-hitter at Citi Field that “he couldn’t help” himself from running on the field to celebrate. “I was overcome with emotion, just being a die-hard Mets fan,” Diaz said after his release from jail yesterday. “That’s all it was.” Diaz, 32, was charged with trespassing for taking part in the on-field celebration. He spent two nights behind bars before a Queens judge released him and pal John Ries, 25, on their own recognizance. Diaz returned to his Massapequa, LI, home, wearing the same Gary Carter No. 8 jersey he had on Friday night. He hit the showers and donned a fresh Santana jersey before explaining his stunt. After Santana retired the final St. Louis batter on Friday night, Diaz jumped over the railing on from his field-level perch on the first-base side of Citi Field. Moments later, Diaz was rubbing elbows with Santana, R.A. Dickey and Ike Davis in a joyous Mets mob. “I couldn’t help myself,” Diaz said. “I just wanted to be on the mound celebrating the no-hitter.” Diaz paid a stiff penalty, both at home and Citi Field. He missed his 1-year-old son’s birthday party Saturday, and the Mets have banned him for life from their home park. “That’s the bad part,” Diaz said of missing his son’s bash. Feds Eye MFGlobal's False Promise (Bloomberg) Three days before MF Global filed for bankruptcy-court protection, CME Group was assured by the New York company of a $200 million cushion in accounts that ensured customer funds were being kept separate from the firm's own money. But the customer accounts actually were in the red, and the deficit ballooned to more than $900 million on the night of Oct. 30. MF Global tumbled into Chapter 11 on Oct. 31. The bankruptcy trustee trying to recover money for the firm's U.S. customers has estimated that the shortfall now is roughly $1.6 billion. A large chunk of the money is stuck outside the U.S. IPO doubts plague Nasdaq’s Grief-eld (DJ) Companies in the early stages of going public are raising questions about whether they want to list with Nasdaq...The questions, coming two weeks after Bob Greifeld’s exchange botched the largest, most anticipated initial public offering in a generation – Facebook’s $16 billion coming-out party – are the first indication that Nasdaq’s headaches over the snafu are likely to linger. “There’s no question, this Facebook situation has put on the table the question of Nasdaq’s market structure and its market quality,” one exchange expert said. Madoff kin having trouble finding an apartment (NYP) Andrew Madoff and girlfriend Catherine Hooper have tried to cover up their connection to the Ponzi schemer by making appointments under Hooper’s name. She then shows up alone to view the $20,000-per-month pads, brokers said. Hooper speaks generally, saying the space is for her, her fiancé and their children, the sources said. But once the brokers explain who Hooper is to the landlord, the couple is immediately rejected, the sources added. “My owners would never, ever rent to him,” said a broker. “They will go through a lot of rejections.” China Muzzles Online Talk of Tiananmen Anniversary (WSJ) China's Internet monitors have unleashed a broad clampdown on online discussion of the 23rd anniversary of the Tiananmen Square crackdown, restricting even discussion of the nation's main stock market when it fell by a number that hinted at the sensitive date. Officials minding China's popular Twitter-like microblogging service Sina Weibo beginning this weekend began blocking a number of terms that could refer to the 1989 Tiananmen Square crackdown, an incident often referred to as June 4 or 64 in the Chinese-speaking world. Under the crackdown the government ordered troops to fire on unarmed demonstrators, likely killings hundreds. Dennis Gartman: 100% Chance Of Further Fed Easing (CNBC) Gartman believes a third round of quantitative easing could come as early as the Fed’s next meeting on June 19-20, or at the following meeting on July 31-Aug. 1. The central bank will want to ease as “far ahead” of the U.S. presidential election in November as possible, so it doesn't come off as being "politically amenable" to the current administration, he noted. Dutch artist turns dead cat into remote-controlled helicopter, dubbed ‘Orvillecopter’ (NYDN) A Dutch artist, upset over losing his beloved pet, Orville, had the animal stuffed and transformed its body into a remote-controlled helicopter. The “half cat, half machine” piece of art was dubbed the “Orvillecopter.” The cat, who was killed when it was hit by a car, was named after famed American aviator Orville Wright. “After a period of mourning, he received his propellers posthumously,” Jansen said. A video posted to YouTube shows the flying feline slowly hover several feet in the air in a park, it's body permanantely spread eagle with propellors on its front paws. Artist Bart Jansen teamed up with radio control helicopter expert Arjen Beltman after having a taxidermist preserve the pussy cat.