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Opening Bell: 8.14.20

Opening Bell: 8.14.20

So far not so good for SOFR; Hertz definitely didn’t need a CEO with creative ideas about accounting; short-seller sacks Chinese company again; and more!

AutoRentals / CC BY-SA (https://creativecommons.org/licenses/by-sa/4.0)

So far not so good for SOFR; Hertz definitely didn’t need a CEO with creative ideas about accounting; short-seller sacks Chinese company again; and more!

Capital-Gains Tax Rate Chasm Separates Trump, Biden [WSJ]
President Trump said Thursday that he was seeking a 15% rate, down from today’s 23.8%. Democratic rival Joe Biden would raise the top rate to 39.6% to match taxes on ordinary income…. “I don’t see any investors who have $1,000 on the sidelines if only the capital-gains rate can drop five points,” said Brian Riedl, senior fellow at the conservative Manhattan Institute. “It’s just the wrong tool for the economy right now. Capital-gains rates are not holding the economy back.”

Libor Pains Deepen as Deadline for Benchmark’s Demise Approaches [WSJ]
If the transition doesn’t go as planned, it could leave everyone worse off. Consumers could end up on the hook for increased payments on credit-card loans and other borrowings, while small businesses could face higher fixed rates for loans. About $190 trillion of interest-rate derivatives and $3.4 trillion of business loans are tied to the rate…. But efforts were put on ice for more than a month as financial institutions grappled with tumbling stocks, margin calls and clients racing for cash as the coronavirus sent markets into a tailspin prompting unprecedented action by the Fed.

Former Hertz CEO Charged With Aiding And Abetting Accounting Fraud [Forbes]
According to the SEC, Frissora in 2013 pressured subordinates to “find money” by re-analyzing reserve accounts when results fell short, which caused them to make changes to financial reports…. Frissora has agreed to repay Hertz nearly $2 million in incentive-based compensation and pay a $200,000 fine to settle the charges without admitting or denying the allegations.

Chinese Netflix-style service iQiyi tanks by 18% after U.S. regulators investigate fraud allegations [CNBC]
The SEC investigation was prompted by a report in April from Wolfpack Research…. Wolfpack Research alleged iQiyi inflated its 2019 revenue by approximately 8 billion yuan ($1.13 billion) to 13 billion yuan ($1.98 billion) — or between 27% to 44%. Wolfpack also claimed the streaming company overstated user numbers and expenses.

Hedge fund Two Sigma unveils new impact business [CityWire Selector]
The firm emphasised the workforce impact, stating that it is creating a framework that will develop human capital management tools that will contribute to better workplace environment.
Some of the sectors the new unit aims to explore are businesses focused on the jobs of tomorrow, healthcare areas where current capabilities are not sufficient to meet future demand, consumer services sectors resilient to economic cycles and B2B businesses supporting service-based economies.

White House Aide Picked for Seat on Commodities Regulator [WSJ]
Mr. Trump nominated Robert Benedict Bowes, a senior adviser on health and insurance in the White House Office of Personnel Management, to a five-year term at the CFTC. Mr. Bowes would replace outgoing Republican commissioner Brian D. Quintenz, who said earlier this year that he plans to step down by the end of October…. If Mr. Quintenz, whose statutory term ended in April, departs before a replacement is confirmed by the Senate, the commission would be split evenly between Republicans and Democrats.

Philippines confirms death of ex-Wirecard exec Bauer [Reuters]
[Christopher] Bauer died of natural causes in a hospital in the capital Manila on July 27 and was cremated, Justice Secretary Menardo Guevarra said in a statement citing official documents submitted to local investigators.
The German businessman was 44 years old and had a pre-existing condition, Gueverra said…. Bauer was part of an ongoing probe by the National Bureau of Investigation and the Anti-Money Laundering Council into the accounting scandal.

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UBS Unit Said to Be Close to Guilty Plea in Rate-Rigging Scandal (NYT) Federal prosecutors are close to securing a guilty plea from a UBS subsidiary at the center of a global investigation into interest rate manipulation, the first big bank to agree to criminal charges in more than a decade. UBS is in final negotiations with American, British and Swiss authorities to settle accusations that its employees reported false rates, a deal in which the bank's Japanese unit is expected to plead guilty to a criminal charge, according to people briefed on the matter who spoke of private discussions on the condition of anonymity. Along with the rare admission of criminal wrongdoing at the subsidiary, UBS could face about $1 billion in fines and regulatory sanctions, the people said. Meet Them In St. Louis: Bankers Move (WSJ) Smaller cities around the nation have emerged as unlikely hives of financial-services hiring, thanks to lower wages, municipal-tax incentives and the misfortunes of older hubs that are home to companies ravaged by the 2008-2009 financial crisis. The beneficiaries are spread across the U.S., according to an analysis of data by The Wall Street Journal. In St. Louis, the 19th-largest U.S. metropolitan area, securities-industry employment surged 85% between January 2007 and September 2012 to a recent 12,190, according to figures compiled by Moody's Analytics. New York lost 9% of its jobs in the securities, commodities, asset-management and fiduciary-trust areas over the same period, leaving it with 195,000. Counter-Terrorism Tools Used to Spot Staff Fraud (FT) JPMorgan Chase has turned to technology used for countering terrorism to spot fraud risk among its own employees and to tackle problems such as deciding how much to charge when selling property behind troubled mortgages. The technology involves crunching vast amounts of data to identify hard-to-detect patterns in markets or individual behavior that could reveal risks or openings to make money. Other banks are also turning to "big data", the name given to using large bodies of information, to identify potential rogue traders who might land them with massive losses, according to experts in the field...Guy Chiarello, JPMorgan's chief information officer, said the bank was mining massive bodies of data in "a couple of dozen projects" that promised to have a significant affect on its business, although he refused to give further details. According to three people familiar with its activities, JPMorgan has used Palantir Technologies, a Silicon Valley company whose technology was honed while working for the US intelligence services, for part of its effort. It first used the technology to spot fraudsters trying to hack into client accounts or ATMs, but has recently started to turn it on its own 250,000-strong staff. Obama Meets Boehner at White House for Budget Talks (Bloomberg) President Barack Obama and House Speaker John Boehner met for a third time at the White House to discuss averting spending cuts and tax increases before a year- end deadline. Boehner and Obama met for almost an hour yesterday, with no public announcement of progress. In January, more than $600 billion in spending cuts and tax increases, the so-called fiscal cliff, are scheduled to begin. “The president and speaker had a frank meeting in the Oval Office,” Boehner spokesman Brendan Buck said in an e-mailed statement, adding that the “lines of communication remain open.” Britain's Queen Quizzes Central Bank on Financial Crisis (CNBC) During a visit to the Bank of England on Thursday, the Queen was overheard asking whether a "lax" attitude to financial regulation had contributed to the financial crisis. After touring the vast vaults of gold bullion that lie beneath the central bank in London, Queen Elizabeth reportedly asked the central bank officials whether the Financial Services Authority (FSA) that was meant to regulate the banking system had not been aggressive enough - "did not have the teeth" - in its response to the crisis...The Queen was then told that officials in the room were charged with ensuring the crisis did not happen again. The Queen's husband, Prince Philip, then jokingly asked "There's not another one coming, is there?" before telling the officials present "Don't do it again." John McAfee Returns to US, Admits Playing 'Crazy Card' (ABC) After three weeks ducking authorities in Belize, by hiding in attics, in the jungle and in dingy hotels, he turned up in Guatemala Dec. 3. Barely a day later he was detained for entering the country illegally. As Guatemala officials grappled with how to handle his request for asylum and the Belize government's demand for his deportation, McAfee fell ill. The mysterious illness, described by his attorney alternately as a heart ailment or a nervous breakdown, led to a scene with reporters chasing his ambulance down the narrow streets of Guatemala City and right into the emergency room, where McAfee appeared unresponsive. He now says it was all a ruse: "It was a deception but who did it hurt? I look pretty healthy, don't I?" He says he faked the illness in order to buy some time for a judge to hear his case and stay his deportation to Belize, a government he believes wants him dead. When asked whether he believes Belize officials where inept, he didn't mince words. "I was on the run with a 20-year-old girl for three and a half weeks inside their borders and everyone was looking for me, and they did not catch me," he said. "I escaped, was captured and they tried to send me back. Now I'm sitting in Miami. There had to be some ineptness." [...] He denies any involvement in his neighbor's death but adds that he is not particularly concerned about clearing his name. He is focused on getting his 20-year-old and 17-year-old girlfriends out of Belize and says he has no idea what he'll do next, where he'll live or how he'll support himself. CNBC v. Buffett (NYP) The “Oracle of Omaha” sent a terse e-mail to editors at CNBC yesterday after a reporter for the cable news network railed against his recent repurchase of Berkshire Hathaway shares. Gary Kaminsky, CNBC’s capital markets editor, took Buffett to task for the $1.2 billion stock buyback, calling it “hypocritical to the maximum level.” Kaminsky claimed that Buffett’s purchase allowed the seller — described by Berkshire as the “estate of a long-time shareholder” — to avoid potentially higher capital gains taxes next year...In his rebuttal e-mail, Buffett said capital gains taxes don’t apply to estates. “Mr. Kaminsky also made the statement that the estate that was a seller was better off by selling in 2012 than 2013,” he wrote. “This, too, was incorrect.” He said capital gains are wiped out by stepped-up basis rules, with assets marked at their current fair-market value at the time of death. Buffett also blasted Kaminsky for saying his buyback was hypocritical on principal as Buffett is known to eschew buybacks. Buffett attached a copy of Berkshire’s 1984 annual report showing he has outlined conditions under which he would favor buybacks. CNBC anchor Melissa Lee read a correction late Tuesday that thanked the famed investor for “watching and setting us straight.” Fisher: Fed Risks 'Hotel California' Monetary Policy (CNBC) Dallas Fed President Richard Fisher told CNBC that he's worried the U.S. central bank is in a "Hotel California" type of monetary policy because of its "engorged balance sheet." Evoking lyrics from the famous song by The Eagles, he said he feared the Fed would be able to "check out anytime you like, but never leave." Fisher said on "Squawk Box" that he argued against revealing the new inflation and unemployment targets set by the Fed this week, saying he's worried that the markets will become "overly concerned" with the thresholds. Euro-Zone Downturn Eases (WSJ) Data company Markit said on Friday its preliminary purchasing managers' index, a gauge of activity among euro-zone factories and services companies, rose to 47.3 in December from 46.5 in November. A reading above 50.0 would signal an expansion. The national measure for Germany picked up to 50.5 from 49.2 in November, indicating that activity rose in the euro zone's largest member. "The euro-zone downturn showed further signs of easing in December, adding to hopes that the outlook for next year is brightening," said Chris Williamson, chief economist at Markit. Residents find neighbor at their door with machete (KS) A 38-year-old Bremerton man was arrested by police Monday night for allegedly confronting his neighbors with a machete in response to alleged vandalism at his residence, according to documents filed in Kitsap County District Court. Officers were called to a Nollwood Lane address shortly after 8 p.m. Monday. Two residents said when they answered a knock at their door, a man was standing in the doorway holding a machete. The man, a neighbor, reportedly said he was tired of vandalism to his home and blamed it on a family member of his neighbors, police said. The neighbors attempted to slam the door on the man, but he reportedly put his foot into the door holding it open, police said. The neighbors were ultimately able to close it, though the suspect denies he put his foot in the door. Police interviewed the man, 38, who admitted he'd retrieved the machete out of anger after another incident of vandalism.