Thursday, February 28, 2013

Most Small Businesses Fail In First 6 Hours Of Being On Fire

From The Onion: A new report from the U.S. Small Business Administration reveals that being consumed by flames poses an even greater risk to small companies than originally thought, typically causing ruinous insolvency within the first six hours of conflagration. “The data we’ve gathered reveals a consistent pattern of business failure shortly after the start of a fire, which can lead both to inventory problems and a difficulty attracting customers, who, quite frankly, do not wish to step into a retail location that is currently ablaze,” said SBA administrator Karen Mills, whose staff inspected dozens of flaming businesses in preparing the report.

 “For example, a small family-run electronics store in a downtown location with thick, choking smoke raging through its aisles is going to be hard-pressed to compete with the big box stores that have highly competitive prices and aren’t on fire.” The report noted that fires have less of an effect on Internet retailers, whose customers continue to shop online even as their houses burn down around them...

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Sinking: Company's Last Shot at Survival

From Yahooo finance: One year ago J.C. Penney CEO Ron Johnson laid out a plan to change the way the world thinks not just about Penney's but the entire department store model. New pricing, fully refreshed stores designed to be a destination "mall within a mall" and partnerships with fashion forward brands never before associated with the dowdy J.C. Penney.

"All it takes is courage" Johnson told a packed audience, "We can change a brand overnight."
Suffice it to say Johnson and J.C. Penney fell short of those lofty ambitions. Last night it concluded one of the worst years in corporate history with the announcement of their 4th Quarter results. 

How bad was it? Consider:
JCP lost just short of a billion dollars for the year with $551 million of that coming in the all important holiday period.
Total revenue fell 25%
The company sacked more than 30% of the employees at its Dallas HQ; more than 1,600 people
Internet sales dropped a stunning 34%. For perspective rival Macy's (M) grow its online business 48%...

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Apple takes bite out of famed hedge fund managers

Investors interested in the strategies of David Einhorn and David Tepper may want to note that their top holding, According to Apple is trading close to its 52-week low, and less than the average price either of the two managers paid for their shares.

 David Einhorn, famous for the performance of his Greenlight Capital hedge fund, began buying the company in the second quarter of 2010, reporting in his annual letter that he paid an average purchase price of $248.09 per share. At the time, Einhorn noted his interest in its $40 per share in cash, the fact that it had not penetrated its markets, and its potential, albeit slower, future growth.

After numerous purchases since, he reported owning a holding of 1,307,006 shares at the end of the fourth quarter. The size places it at the top of his holdings list, comprising 10.9% of his entire stock portfolio….

Supreme Court: SEC Must File Fraud Suits Sooner

The Securities and Exchange Commission must move more quickly in pressing some fraud lawsuits, the U.S. Supreme Court ruled in a decision that may affect agencies across the government, folks at Bloomberg tell us. 

The justices today unanimously ruled in favor of two Gabelli Funds LLC officials seeking to block SEC claims that they improperly let a client engage in market timing, a practice of making frequent, short-term trades at the expense of other investors. They contend the SEC missed the five-year deadline to file the lawsuit.

The case raised issues similar to those addressed by the Supreme Court in 2010, when it ruled that the two-year period for shareholder fraud suits doesn’t begin until investors have indications of intentional company wrongdoing. The new case concerned SEC enforcement actions, rather than private suits….

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Wall Street’s comeback kid

Two years after clearing his name, former hedge fund honcho Dan Zwirn is giving it another go. The 42-year-old founder of now defunct D.B. Zwirn — which collapsed in an accounting scandal — has hired two execs to help him rebuild his lending and investment empire.

Despite the difficulties of the last few years, Zwirn feels “compelled” because he loves deal-making and investing, said a person familiar with his plans.

Ideally, he would like to build an investment firm to rival the likes of Cerberus or Fortress, which ended up buying D.B. Zwirn’s assets after its demise, the person told the NY post.  People close to Zwirn told the Post that his plans were in the “very early stages.” He started meeting with potential business partners and investors around Labor Day…

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....And Another NY ‘insider,’ Goes to the Slammer

From the NY Post: Federal prosecutors charged a Long Island man with insider trading yesterday after he supposedly sold an advance earnings report to an undercover FBI agent for $7,000.  Damian Perna, 30, who works at Merrill Lynch, obtained draft earnings reports for several publicly traded firms before they were released, according to charges.

Perna, who lives in Oceanside NY,  joined forces with unidentified cohorts and used the illegal information to make a series of trades from June 2011 through last October, said US Attorney Loretta Lynch.  Officials emphasized that Perna’s alleged misconduct took place before he worked at Merrill Lynch...

Wednesday, February 27, 2013

The Mostly Fabulous Life Of The Hedge Fund Manager Who Made The Most Money In 2012

David Tepper, the founder of $12 billion-distressed-debt hedge fund Appaloosa Management, is one of the most successful hedge fund managers in the world.   The billionaire fund manager had a great year with his flagship fund finishing up about 30 percent, according to Forbes.
Last year, Tepper was the highest-earning hedge fund manager, taking home $2.2 billion, according to Forbes.

Tepper grew up a shy, math-whiz-kid who went from a class clown/ theater star to, ultimately, one of the biggest names on the Street……

What Could Go Wrong? Titanic II Sets Sail in 2016

From the Daily Beast: We all know what happened the last time someone tried this, right? A "sequel" to the doomed 1912 ship, the Titanic, was announced on Tuesday, with its designer claiming that the Titanic II will be the "most safe cruise ship in the world." That apparently translates into having "more than enough" lifeboats (whereas the original Titanic had only 16) and a hull made from steel composite. Australian mining billionaire Clive Palmer, who masterminded the project, wisely refused to call it "unsinkable," however. The new ship will take pains to recreate details from the original ship, including splitting passengers into three classes and barring them from moving between classes. Passengers will also be provided with early 20th century-style clothes and undergarments. …

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Here's Why Wall Streeters Are STILL Getting Axed

From Bloomberg: Goldman Sachs' annual layoffs will reportedly be worse than usual, JP Morgan announced that it's cutting 4,000 jobs, and already Morgan Stanley has let go 1,600 employees.  Barclays, Deutsche Bank, UBS ... people are still leaving Wall Street jobs in a line that seems never ending, and anyone that hoped the bleeding would stop in 2013 is sure to be disappointed.

The financial crisis hit five years ago, and while the U.S. has gotten to the point where it's adding jobs at a slow and steady pace, the global financial sector continues to add and shed jobs in fits and starts. According to the New York Office of the Comptroller, New York's securities industry lost 28,3000 jobs during the financial crisis, and has only gained back around 8,000.
Wall Street's problem is a business model problem…..

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Calpers to Boost Allocations to Event-Driven, Macro Funds

The California Public Employees’ Retirement System plans to boost its allocations to event-driven and global macro hedge funds to help reduce the impact of fluctuations in the stock market.
The biggest U.S. pension fund aims to invest 5 percent of its hedge-fund portfolio with event-driven managers, up from zero in its current weighting, and increase investments in global macro funds to 10 percent from 2 percent, according to a presentation posted on the system’s website.
Calpers, with $254.5 billion in assets, has about 2 percent, or $5 billion, in hedge funds, according to Ed Robertiello, senior portfolio manager of the fund’s Absolute Return Strategies Program...

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Connecticut hedge fund managers arrested on fraud charges

Three senior executives of New Stream Capital, a Connecticut hedge fund, were arrested and charged on Tuesday for allegedly lying about the fund's structure and financial condition in 2008 before it failed, Reuters reports.

A grand jury indicted Managing Partners David Bryson and Bart Gutekunst and Chief Financial Officer Richard Pereira on charges of conspiracy, securities fraud and wire fraud, the U.S. Justice Department said.  The executives pleaded not guilty and were released on bail, the department said.

The U.S. Securities and Exchange Commission filed related charges against the three executives and settled a related case against the fund's head of investor relations, Tara Bryson, who is David Bryson's sister...

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Tuesday, February 26, 2013

Bermuda: Hedge Fund Paradise Found

From Businessweek: Last year, about $450 million belonging to top executives at billionaire hedge fund manager John Paulson’s New York firm made a quick round trip to Bermuda. In April the executives sent the money to a reinsurance company called PaCRe they’d set up on the island. By June, PaCRe had sent all the cash back to New York, to be invested in Paulson & Co. funds. By recycling the funds through Bermuda, which doesn’t levy a corporate income tax, the Paulson executives are positioned to exploit a little-known loophole, reducing their personal income taxes and delaying paying the bill for years…..

Happy Days Are Here Again! Wall Street Cash Bonuses Climb 8% to $20 Billion

Wall Street’s cash bonus pool rose 8 percent to $20 billion in 2012, according to projections New York state Comptroller Thomas DiNapoli told Bloomberg.  Employees took home an average cash bonus of almost $121,900 last year, DiNapoli, a 59-year-old Democrat, said today in a conference call with reporters.

JPMorgan Chase & Co. (JPM) reported its third straight year of record profit for 2012, and Goldman Sachs Group Inc. (GS), the fifth- biggest U.S. bank by assets, said full-year net income rose 68 percent. Bank earnings have been buoyed by a surge in mortgage fees and gains in investments.

J.P. Morgan’s Investor Day: Off With Their Heads!!

It is investor day, when the nation’s biggest bank by assets and deposits will parade out its business heads to discuss the various strengths and plans they have, according to a WSJ report.

The day is scheduled to start with relatively new CFO Marianne Lake delivering a firm-wide update. In the slide presentation on the bank’s website, the bank says it is looking at expense reductions of plus or minus $1 billion for the year.

The bank says its overall headcount will decrease by somewhere around 4,000. The bank had 258,965 total employees at the end of 2012, down over 3,900 from July of that year….

Look Who’s Getting A Fresh Round Of Layoffs Now

Goldman Sachs is about to begin a fresh round of job cuts. They could begin as early as next week and will hit the equities business harder than fixed income.

Goldman usually cuts the fat from its firm around this time of year, but that number is usually at around 5%.  According to Reuters, this year's cuts are supposed to be bigger.....

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Monday, February 25, 2013

Nouriel Roubini: “The Mother of All Bubbles” Has Begun

From Yahoo: Two days of weakness in stocks after the Fed hinted it might “vary the pace of asset purchases” has some folks ready to declare the bull market over and done.

….Given this backdrop and with the economy facing myriad headwinds from the payroll tax hike, rising gasoline prices and the pending sequester it may come as a surprise that one notable guru is very bullish on financial assets, at least for the near term: Nouriel Roubini.

…Actually, Roubini predicts the coming (arguably ongoing) asset bubble is going to be “bigger than the one we had in 2003-06,” which is somewhat shocking given the massive excesses that occurred in that era, especially in housing and related finance.  Roubini’s rationale for “the mother of all asset bubbles,” is that Federal Reserve is going to be even more reluctant to pull back now vs. the prior cycle, when they executed a steady stream of 25 basis point rate hikes in 2004-2006.

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Fresh Front in Budget Battle

Congressional Leaders Discuss Deal to Avert Shutdown at Cost of Extending Cuts
According to the WSJ already looking past the current budget impasse gripping the capital, congressional leaders are quietly considering a deal to avert a government shutdown next month—but at the cost of prolonging across-the-board spending cuts.

Attention is beginning to shift from Friday, when the broad cuts known as the sequester kick in, to the next budget deadline: Congress must pass a so-called continuing resolution by the end of March to keep funding government operations.

Senior aides to House Speaker John Boehner (R., Ohio) and Senate Majority Leader Harry Reid (D., Nev.) have begun discussing a bill being prepared by House Republicans to fund ...

Apple: Why bad news just keeps on coming

From Marketwatch: For a test case of Wall Street analysts’ perverse incentives, look no further than Apple Inc. After rising to giddy heights, the stock has been unable to catch a break lately.

That is in no small part due to those incentives, which cause bad news to get incorporated into stock prices only gradually. One surprising consequence, according to researchers, is that unfavorable news tends to come in waves rather than being randomly interspersed with good news.

Apple’s  shares hit their all-time high of $705 on Sept. 21. At the time, the consensus forecast for Apple’s fiscal 2013 earnings — among the more than four dozen analysts tracked by FactSet — was $53.56 a share. That number has been revised downward numerous times: By the end of last year, for example, it stood at $49.08 — and currently is at $44.56...

Goldman managing director in insider trading probe exits

A Goldman Sachs salesman who has been under investigation for possibly passing confidential information about technology companies to hedge funds has left the bank, a spokesman told Reuters on Monday.

David Loeb, 42, who was a managing director based in New York, has never been charged with wrongdoing. But his name surfaced among a small group of Goldman bankers under scrutiny in connection with an insider trading probe conducted by the FBI.

During last year's trial of Rajat Gupta, a former Goldman board member who was convicted of passing nonpublic information about Goldman's financial state to hedge fund manager Raj Rajaratnam, defense lawyers said it was Loeb, not Gupta, who gave Rajaratnam the secret information...

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Final Clash: Argentina and ‘holdout hedge funds’ prepare

The long-awaited showdown in a US appeals court this week pits Argentina against a group of investors who refused to swap their debt after the country's historic 2002 default.
Argentina risks defaulting again, this time on 24 billion in restructured debt if it sticks to a vow never to comply with orders to pay so-called “holdouts” but still tries to pay the vast majority of investors who exchanged their bonds in 2005 and 2010.

Buenos Aires calls the holdouts vultures for buying the debt at a steep discount and then demanding full payment in the aftermath of the country's crippling economic crisis. The holdouts, led by NML Capital Ltd, an affiliate of hedge fund Elliott Management, and Aurelius Capital Management, counter that they're just trying to hold Argentina to its obligations and that the country has plenty of reserves to pay them….

Sunday, February 24, 2013

Dimon: Let’s put ‘London Whale’ on ice

Book a boat if you want to go Whale watching.  That’s the message Jamie Dimon hopes to deliver at JPMorgan Chase’s annual investor day in New York tomorrow, some nine months after the infamous “London Whale” blew a $6 billion hole in the bank’s balance sheet.

Dimon will stress that the nation’s biggest bank has been growing its business and taking market share in a bid to convince investors and analysts that there will be no further whale sightings.

JPMorgan, for instance, has boosted its private banker ranks to better cater to wealthy investors, adding some 650 bankers since 2008, people familiar with the matter told the Post….

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Buffett: Wake Up and Smell the Ketchup!

Reuters’ Martinne Geller writes: The $23 billion buyout of H.J. Heinz by Warren Buffett and private equity put food executives on notice: start showing better results or risk being left behind. The deal, and the ripples it creates in the sector, was the buzz of the consumer industry's annual get-together in Florida this week, sponsored by the Consumer Analyst Group of New York.

In private discussions overlooking a yacht-filled marina or in the hallway between the Nespresso table and the Coca-Cola Freestyle machine, the consensus among executives, analysts and investors was clear: gear up for a new era of belt-tightening, if not more acquisitions and divestitures, in the sector.

"This is the first large deal in years by a financial buyer that calls out the lackluster fundamentals in the U.S. packaged food space," said Robert Dickerson, an analyst with boutique firm Consumer Edge Research….

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Heinz Traders Stay in Hiding

According to the WSJ: The investors who turned a "highly suspicious" $90,000 investment in H.J. Heinz & Co. options into a $1.7 million profit after last week's announcement of the ketchup-maker's sale failed to show up at a key court hearing on Friday, clearing the way for a judge's order freezing the investors' assets to stand.

The four-minute hearing was the latest development in the Securities and Exchange Commission's pursuit of the traders, who conducted the big options bet through a Goldman Sachs Group Inc. GS +2.13% account in Zurich. A week after the SEC first took legal action against the traders, their identity remains unknown to the regulator. The defendants' table in the federal courtroom in Manhattan was vacant at Friday's hearing….

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Saturday, February 23, 2013

Apple Loses to Einhorn; Pressure for Investor Payout

U.S. District Judge Richard Sullivan in Manhattan yesterday granted Greenlight’s request to stop a Feb. 27 vote that would require shareholder approval before the company could issue a new class of preferred shares. Following the ruling, Apple told Bloomberg it would pull the proposal from its shareholder meeting.

Einhorn has used the lawsuit to drum up support among fellow investors to get Apple to return some of its $137.1 billion in cash and investments back to shareholders. The push comes as Apple’s stock has declined 36 percent from a record in September on concern that growth is slowing....

Friday, February 22, 2013

Weird's Deep Thoughts: The Shift From Apple To Google Is Part Of A Much Larger Economic Development

From BI:Google is the new Apple. Well, not necessarily, but while Apple's stock continues to grind lower, Google's stock is on a tear.  And now analysts are jumping over themselves to get more bullish on Google.  Just yesterday, two separate analysts put $1,000 price targets on the stock.

What gives? Well, of course people can make up all kinds of stories about the momentum of either company, and their products and so forth.  But there's a bigger macro-market story as well. Throughout recent years, Apple has basically been an asset class on its own: Gold, commodities, stocks, bonds, and Apple.  If you were in Apple, your portfolio did great. If you weren't, you almost certainly lagged the market. End of story.

At a time when people were uncertain about markets, Apple was a solid store of value. A company growing at abnormal speeds at a good price. Even if the economy were to slow, there was Apple, which you know would still be crushing it.  But things have shifted in recent months…..

Corzine Slips out of noose

Jon Corzine’s comeuppance will have to wait.  The NY post reports that the National Futures Association, the industry’s self-regulatory body, shelved a proposal to ban the ex-chief of MF Global from the multi-billion futures trading industry after a nearly four-hour board meeting yesterday.

A vote in favor of the proposal would have prompted the NFA to set up an independent panel to weigh the lifetime ban and give Corzine a chance to defend himself.  Instead, the NFA’s board tabled the proposal, citing “ongoing investigations concerning Mr. Corzine’s activities at MF Global,” according to a statement from Chairman Christopher Hehmeyer….

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Citi Overhauls Exec Pay

From Reuters: Citigroup Inc said on Thursday it has overhauled the executive pay plan that shareholders rejected last year as overly generous, revising it to tie bonus payments more closely to stock performance and profitability.

The company also said in a filing that it is paying new Chief Executive Mike Corbat $11.5 million for his work in 2012.

Under the plan, 30 percent of the bonus for top executives will be paid in cash based on how much the company earns on assets and on total shareholder return compared with peers over three years through 2015. Another 40 percent will be a simple cash bonus and the final 30 percent will be deferred stock….

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Buffett’s Ketchup Fancy Plies Heinz With Junk

Billionaire Warren Buffett’s love of ketchup and hash browns is transforming H.J. Heinz  into the most-leveraged food maker in America, Bloomberg tells.

Buffett’s Berkshire Hathaway Inc. (BRK/A) and 3G Capital Inc.’s $23 billion acquisition of Heinz may double the company’s total debt to five times earnings before interest, taxes, depreciation and amortization, according to Fitch Ratings, the highest of any comparable food company. The cost to protect Heinz’s debt from losses soared to a record after the announcement.

While Buffett has used takeovers to build Berkshire into a $249 billion company and burnish his reputation as the world’s most successful investor, financing the deal with $14.1 billion in debt threatens to strip Heinz of the investment-grade rating that it’s had for four decades. Fitch cut Heinz to junk on Feb. 15 and credit-default swaps imply a Ba1 rating, according to Moody’s Corp.’s capital markets research group. That’s two steps lower than its Baa2 rating from Moody’s Investors Service and three below its BBB+ grade from Standard & Poor’s…

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Thursday, February 21, 2013

Rogue Trader's Old Supervisor Got A Big Fat Promotion

Who said see no evil, hear no evil, speak no evil doesn’t pay?  The former supervisor of Kweku Adoboli, the UBS rogue trader who lost the firm $2.2 billion on the ETF desk in London, got a big promotion at his new firm.

From the Financial Times: John DiBacco, who was terminated by the Swiss bank for a failure to supervise after Adoboli’s crimes came to light in September 2011, was hired by Getco last March and has since been promoted to run its global equities business.

Mr DiBacco, now set to run global equities when the merger between the firms is completed, has said he disagreed with UBS’s assessment of his performance. He will be the Global Head of Equities Trading at Getco once it completes its merger with Knight Capital, according to a release...

…And Another Ex-bank exec goes to the slammer for fraud

An 82-year-old former bank executive has been sentenced to a year and a day in prison for failing to disclose personal interest in loans that resulted in more than $680,000 in losses to the bank.  U.S. District Judge Gary Feinerman sentenced James Regas of Oak Brook on Tuesday and ordered him to report to prison in 90 days.

Regas is former chairman of Western Springs National Bank & Trust, which was closed by federal regulators in April 2011.  He pleaded guilty last July to making false statements. Prosecutors say he admitted referring business associates to the bank for loans without telling the bank that he had financial interests in them….

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Dr. Doom: Don’t Underestimate the Economic and Financial Effects of the Sequester

Economist Nouriel Roubini of NYU’s Stern School of Business tells The Daily Ticker that In the fourth quarter, the major economies of the U.S., U.K, Japan and the Eurozone all contracted and they could slow even more because of spending cuts, says Roubini. “The core of the Eurozone has to do it, the U.S. has to do it…and when you have synchronized fiscal contraction the negative effects on economic growth are worse."

He’s forecasting 1.6% GDP growth in the U.S. this year, which would be the slowest pace in three years. On the positive side he sees growth in housing manufacturing and energy production, primarily the “shale gas revolution.” On the negative side: big government budget cuts.

Roubini says the market should not underestimate the impact of the sequester cuts. “It doesn’t look like there will be a last minute deal on the sequester ….the question will be how long the sequester will last.” If it continues to many months, says Roubini. “The fiscal drag will be another 0.7% or 0.8% of economy” which could lead to another shock in the financial markets and another rating agency downgrade….


What Mayor Bloomberg’s Start-Up Overture Is Missing

Mayor Bloomberg is out and about today, touting his office's new "We Are Made in NY" start-up outreach program, which helps fledgling tech companies navigate the challenges of opening up shop in New York City. The site is essentially a media campaign for the New York tech scene, accompanied by features like a job listings board and a consolidated list of start-up resources. The mayor went to BuzzFeed's downtown headquarters to launch the program, and they spun his appearance into a listicle called "11 Reasons to Start a Company in New York City."

Mayor Bloomberg is clearly aiming his overture at one particular kind of business: the small, new tech start-up, started in New York and with the vast majority of operations still located in the city. (To apply to the We Are Made in NY program, tech companies have to answer the question, "Does 75% of your technology development take place in New York City?"). ..

Credit-Trader Exodus Squeezes Wall Street Firm

Gleacher & Co. confirmed the departure of 20 people from its credit-trading group and said the moves would hurt near-term revenue.

Credit trading was Gleacher's biggest business last year, with $74.4 million in revenue, dwarfing the $27 million of 2012 revenue from investment banking and more than the $40.6 million in 2012 revenue from trading mortgage-backed and interest-rate products.

The people made up Gleacher's high-yield bond trading group, a person familiar with the group said. Some are joining Milwaukee-based brokerage Robert W. Baird & Co., this person told the WSJ….

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The New New Thing: California's Monterey Shale, the Next Oil Boom?

Thousands of feet below some of the nation's most fertile farm land could be 15.4 billion barrels of crude oil.  Billion, with a "B", at least according to the folksd at CNBC.

The federal government believes the Monterey Shale, which lies under more than 1,750 square miles of central and southern California, has far more shale oil than anywhere else in the lower 48 states — nearly four times the amount of the Bakken Shale in North Dakota.   But this is California. Nothing is easy. Accessing the oil will require hydraulic fracturing, better known as fracking, and even then it may be too expensive to be economical. Oil companies are quietly buying up mineral rights and drilling holes in the earth northwest of Bakersfield to see if they can get lucky….

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Giving Until It …..Pays: Huge Supreme Court Case Could Change Everything About Wall Street In Politics

From BI: The U.S. Supreme Court is going to hear a campaign finance case that could do away with the contribution limits that limit rich people's influence over politics. Currently, federal law only lets individuals give $2,600 to any one candidate during a single election. On top of that limit, people can only give $123,000 to candidates, political action committees, and parties over a two-year period.

Shaun McCutcheon, an Alabama Republican, is only challenging aggregate, two-year caps on direct donations to parties or candidates.  But this case could jeopardize all campaign finance limits – including the $2,600 cap on contributions to individual candidates, according to one election law expert....

The King must die! Jamie Dimon defends dual leadership roles as shareholders call for him to give up title

The reigning king of Wall Street wears two crowns — and according to the NY Post he plans to keep it that way.  JPMorgan Chase CEO Jamie Dimon has no intention of relinquishing his chairmanship, insiders say, despite renewed calls from a group of shareholders to split the roles at the nation’s biggest lender.

The American Federation of State, County and Municipal Employees, a granddaddy of public employee unions, as well as New York City and Connecticut pension funds, are pressuring the bank in the wake of its $6 billion “London Whale” trading blunder.

The shareholders, which hold about $1 billion worth of bank shares, say the move would help to avoid a repeat of last year’s debacle, which led the board to slash Dimon’s pay in half…

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Feds Split Over When To Close Cash Spigot

According to the WSJ: Minutes released Wednesday from the Fed’s January policy meeting show officials concerned that the current easy-money policies could lead to excessive risk-taking and instability in financial markets. The Fed is buying $85 billion in mortgage and U.S. Treasury securities a month to drive down long-term rates and has promised to keep short-term rates near zero until unemployment improves….

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Commodities Dive on Speculation Hedge Fund Selling Positions

Commodities fell, capping the biggest loss in more than two months, as metals and energy tumbled amid speculation that a hedge fund was selling, Bloomberg reports.. The Standard & Poor’s GSCI Spot Index of 24 raw materials declined 1.1 percent to settle at 668.28 at 3:49 p.m. New York time, the largest drop since Dec. 6. Silver futures led the losses, retreating as much as 4 percent. Crude oil fell the most since November, and gold slumped to $1,558.10 an ounce, the lowest since July.
“You have a sort of mini perfect storm hitting commodities today,” Dave Lutz, the head of exchange-traded fund trading and strategy at Stifel Nicolaus & Co. in Baltimore, said in a telephone interview. “There’s market chatter that a fund is blowing up, gold has fallen below $1,600, and oil storage tanks in Cushing are near all-time records.” Cushing, Oklahoma, is the delivery point for New York oil futures and the main U.S. stockpile site….

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Justice Department Probing JPMorgan

The U.S. Justice Department is investigating JPMorgan Chase & Co over allegations that Bear Stearns provided misleading information about its mortgage products during the lead-up to the financial crisis, according to people familiar with the matter.

JPMorgan acquired Bear Stearns in a 2008 fire sale encouraged by the government, and has pushed back against various government suits that have sought to hold JPMorgan accountable for the failed investment bank's alleged mortgage-related misconduct.

In this investigation, civil lawyers in the Justice Department are looking into whether Bear Stearns altered due diligence information that third parties provided about the quality of mortgage loans packaged into securities, said the people, who were not authorized to speak publicly about the probe....

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Wednesday, February 20, 2013

Cross Your Fingers, Cross Your Toes: Obama’s Forecast on Cuts Is Dire, Timing Is Disputed

President Obama on Tuesday painted a dire picture of federal government operations across the United States should automatic budget cuts hit on March 1: F.B.I. agents furloughed, criminals released, flights delayed, teachers and police officers laid off and parents frantic to find a place for children locked out of day care centers.

"Federal prosecutors will have to close cases and let criminals go," Mr. Obama said, flanked by law enforcement officers at the White House. "Tens of thousands of parents will have to scramble to find child care for their kids."

While the effects may ultimately be significant, many are unlikely to be felt immediately, officials said Tuesday after the president's remarks. Rather, they will ripple gradually across the federal government as agencies come to grips in the months ahead with across-the-board cuts to all their programs.  That’s if people don’t panic.  And there isn’t more bad news just around the corner...

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Volatility Falls Most Since 1930s as Stock Funds Gain

Price swings in U.S. stocks are narrowing the most since the Great Depression, a signal of reviving investor confidence that’s fueling the bull market poised to enter its fifth year.
Average daily price moves for the Standard & Poor’s 500 Index have fallen to 0.43 percent in 2013 from an average 1.08 percent the past five years, the steepest decline for any corresponding period since the 1930s, according to data compiled by Bloomberg. The last time the annual average was this low was 1995, when the S&P 500 surged 34 percent and doubled in the next four years. Stocks gain an average 17 percent during years when the gyrations are so small, the data going back to 1928 show.

The combination of declining volatility and the best start to a year since 1997 is prompting bears to warn that investors are growing complacent as the rally ages. Bulls cite smaller fluctuations as another reason to buy, on top of rising earnings forecasts, below-average valuations and the biggest deposits in equity mutual funds in nine years...

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Herbalife raises 2013 forecast, reveals SEC staff inquiry

From Bloomberg: Herbalife Ltd, the diet supplements company that has become a battleground for Wall Street titans William Ackman and Carl Icahn, raised its 2013 earnings forecast on Tuesday.  The company also revealed in a regulatory filing the staff of the Security and Exchange Commission's Division of Enforcement has been inquiring about the company's operations since December.

The company, which sells products through a network of independent distributors, has come under intense scrutiny from Pershing Capital Management's Ackman, one of the world's most closely watched hedge fund managers, who in December revealed a short position in the stock and called the business "a pyramid scheme."

Only in New York: Mom charged with child endangerment after hiring strippers to perform lap dances at her 16-year-old son’s birthday party

From the Daily News: Judy Viger, 33, hired the women from a company called Tops in Bottoms and arranged for them to perform in a private room at the Spare Time Bowling Center in South Glens Falls on Nov. 3. At the party, the women performed what police describe as “personal and intimate” dances with the party guests, some of whom were as young as 13. Approximately 80 people attended the party, including a 13-year-old and many adults who later said they were outraged at the sexually charged performances.

Police were alerted to the party activities after raunchy photos of the lap dances were posted online. The mother of a 15-year-old boy who attended the party saw some of the photos on her son’s Facebook page and alerted South Glens Falls authorities…The company providing the strippers said that the dancers were unaware that the kids at the party were underage, local CBS affiliate WRGB reported, and that the incident was being “blown out of proportion.”

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Apple Lawsuit: Einhorn’s odds are good

A Manhattan federal court judge said he likes hedge-fund honcho David Einhorn’s odds of winning a lawsuit against Apple over a governance proposal — but, according to the NY Post, he stopped short of saying he will block shareholders from voting on the proposed change.

“I do think the likelihood of success is in favor of Greenlight,” Judge Richard Sullivan said at a hearing yesterday, speaking of the merits of the entire case. 
Sullivan said he would rule before the Feb. 27 vote. The judge said he will decide the narrower issue of blocking the vote, in part, on whether or not Einhorn’s Greenlight Capital hedge fund would be irreparably harmed if the vote at Apple’s annual shareholder meeting were to take place.

Earlier this month, Einhorn sued Apple for “bundling” three shareholder proposals…

Look Who Was Wall Street’s Best Paid CEO (73 Percent Pay Increase in 2012)!

From CNBC: Bank of America Corp's CEO Brian Moynihan was awarded a 73 percent pay increase in 2012, when the institution resolved crisis-era lawsuits and its stock was one of the sector's top performers.

The $12.1 million pay package likely means that Moynihan was one of the best paid CEO's on Wall Street in 2012, thanks in part to compensation cuts for rivals. Moynihan's base salary for 2013 also is due to rise by more than 55 percent, a person familiar with the situation said..

Moynihan received 926,238 shares of stock in three types of grants, including restricted shares and performance-based shares, according to a regulatory filing on Tuesday.

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Tuesday, February 19, 2013

Yellow Alert: If Walmart Shoppers Are Broke, Then We're All In Trouble

Wal-Mart's leaked emails could be just the beginning of bad news for the retail industry.   The emails, leaked by Bloomberg, revealed that Walmart executives were freaking out because people weren't shopping as much.

But there's a fundamental problem that seems to be spreading throughout the discount industry as a whole: customers are broke.   Thanks to the recent payroll tax hike, the poorest are running out of money entirely,  reports Renee Dudley at Bloomberg..

Google's stock price cracks $800 for 1st time!

Google's stock price topped $800 for the first time Tuesday amid renewed confidence in the company's ability to reap steadily higher profits from its dominance of Internet search and prominence in the increasingly important mobile device market.

The milestone comes more than five years after Google's shares initially hit $700. Not long after breaking that barrier in October 2007, the economy collapsed into the worst recession since World War II and Google's stock tumbled into a prolonged malaise that eventually led to a change in leadership....

Paulson Leads Funds to Bermuda Tax Dodge

According to Bloomberg last year, about $450 million belonging to top executives at billionaire hedge fund manager John Paulson’s New York firm took a quick round trip to Bermuda.
In April, the executives sent the money to a reinsurance company that they’d set up on the island 650 miles off the North Carolina coast. By June, the Bermuda company, which has no employees and sells far less reinsurance than the industry norm, had sent all the cash back to New York, to be invested in Paulson & Co. funds.

By recycling the funds through Bermuda-based Pacre Ltd., the Paulson executives are positioned to legally exploit a little-known tax loophole, reduce their personal income taxes and delay paying the bill for years….

SAC’s Cohen May Face SEC Suit as Deposition Hurts Case

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., according to Bloomberg.

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.

Anyone in blogland surprised?  We thought not….

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Monday, February 18, 2013

Soros Is Going After The World’s Two Most Hated Currencies

The two most hated currencies in the world right now are: The Japanese Yen and The British Pound, BI reports.

In the case of the yen, the new Prime Minister Shinzo Abe has come into power with an aggressive easing agenda (both monetary and fiscal). The yen has been getting slaughtered since November.
In the case of the British pound (which has been getting hammered all year) the currency is weakening on a combination of weak economic prospects, a worsening balance of trade, and the expectation that newly incoming Bank of England chief Mark Carney will be inclined to ease policy further.

......And George Soros is apparently going after both currencies.

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Man Group All Shook Up!

Man Group Plc, the biggest publicly traded hedge fund manager, combined two computer-driven hedge fund units and made management changes in recent weeks before Emmanuel Roman takes over as CEO next week Bloomberg reports.

Luke Ellis, who has been head of the FRM fund of hedge funds unit, was named president of London-based Man Group, David Waller, a company spokesman, said today. Ellis has oversight of the investment operations of Man’s three main investment divisions -- FRM, GLG Partners and ALM, which runs the firm’s largest hedge fund, AHL.

AHL, which has underperformed its peers and lost assets to client withdrawals, is being combined with the Man Systematic Strategies group, Waller said. AHL’s assets under management fell to $16.3 billion in the third quarter of last year, from $16.7 billion three months earlier and from $19.5 billion as of March 31….

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A Final Fling for Treasurys?

The U.S. Treasury market's heyday of soaring prices is likely over, but some bond managers say there could be one more run, according to a WSJ report.

Treasury prices surged after the 2008 financial crisis, dragging yields to an all-time low of 1.4% at one point from more than 4%, as the Federal Reserve has bought trillions of dollars in Treasurys to help prop up the economy. But with the economy showing signs of life, a pullback in the central bank's bond purchases that could mark the end of the bull run is now a possibility.

Until the Fed stops purchasing, bond investors say, Treasurys have room for some short-term rallies. In the near term, an impending debate over U.S. government spending could be the trigger for gains.  U.S. Treasury prices fell last month as investors felt optimistic about the economy, pushing 10-year yields as high as 2.06%, from 1.75% at the start of the year. Bond yields rise when prices fall. The 10-year note yielded 2.009% late Friday….

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Guess Who's Getting a Multibillion Dollar Tax Break

Bloomberg writes that it hasn’t drawn much attention, but Facebook’s first annual earnings report contains an accounting gem: a multibillion-dollar tax deduction for the cost of executive stock options and share awards.

Even though Facebook (FB) reported $1.1 billion in pre-tax profits from U.S. operations in 2012, it will probably pay zero federal and state taxes—and even receive a federal tax refund of about $429 million—according to a Feb. 14 statement from Citizens for Tax Justice….

The Secret Trading Strategy From The 1930s That Hedge Funders Don't Want You To Know About

From BI: "The large operator does not, as a rule, go into a campaign unless he sees in prospect a movement of from 10 to 50 points. Livermore once told me he never touched anything unless there were at least 10 points in it according to his calculations."  So writes Richard Wyckoff, the legendary trader who in the 1930s wrote a manifesto that gained him a cult following on Wall Street.

His 1931 book, "The Richard D. Wyckoff Method of Trading and Investing in Stocks – A Course of Instruction in Stock Market Science and Technique," is out of print and somewhat difficult to find these days (not impossible), but even in 2013, hedge fund managers still swear by it....

Sunday, February 17, 2013

Bulls eyeing Dow 16K

It’s the running of the bulls — again.  The Dow Jones industrial index is having its biggest rip-roaring ascent in decades — an upside propelling it to record 2013 highs, market pros tell the NY Post

One vet on the New York Stock Exchange floor last week saw the Dow being catapulted well above its record close set in October 2007. It reached 14,164 back then.

By year-end the bulls will take the Dow past 15,000 and, hey, possibly to 16,000, says veteran Big Board floor trader Peter Doyle.  That view has gained plenty of currency lately. The Dow has had its best January in some two decades. And the bull run is gaining steam — despite warnings from bears on the sidelines. On Tuesday, for example, the Dow tantalizingly closed within 1 percent of its record 2007 high…


Dan Loeb Reportedly Scaling Back His Big Herbalife Bet

Hedge fund manager Daniel Loeb has sold part of his long position in the nutrition company Herbalife, a source told CNBC.  Loeb, who runs Third Point, started selling a few weeks ago and has continued to trade around the position, the source said, including this past Friday when shares surged.

Third Point maintains a position in Herbalife, the source said.
Loeb's initial investment placed him squarely against another hedge fund titan, William Ackman, whose billion dollar short bet and fiery battle with Carl Icahn has been the talk of Wall Street ever since the two men brawled on CNBC's "Halftime Report" on Jan. 25…

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Saturday, February 16, 2013

Apple Accused by Greenlight of Breaking Law

Apple Inc. is violating the law by packaging a measure to limit the offering of preferred shares with other matters up for a shareholder vote, Greenlight Capital Inc. told  Bloomberg.

David Einhorn’s investment firm said in a brief filed yesterday in federal court in Manhattan that Apple’s move would cause “an actual and imminent injury” to investors. The Feb. 27 vote should be stopped unless Apple unbundles the measures and allows each to be considered separately, Greenlight said in the filing.

Shareholders “will have been irrevocably stripped of their right to fair corporate suffrage -- the very right the unbundling rules were designed to vindicate,” Greenlight said in the filing, referring to U.S. Securities and Exchange Commission “unbundling” rules it alleges Apple is violating.

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