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Aug 16, 2013

DealBook P.M. Edition August 16, 2013: Week in Review: Failed Trades in London Add to Inquiry in New York

Week in Review: Failed Trades in London Add to Inquiry in New York Criminal cases against two former JPMorgan Chase traders who worked in an office building near the Thames River spotlighted federal authorities' inquiry of bank executives on Park Avenue. And the Justice Department filed a lawsuit to block the creation of the world's largest airline.

A look back on our reporting of the past week's highs and lows in finance.
Friday, Aug. 16
Carl Icahn is seeking a seat on Dell's board.
Judge Rules Against Icahn's Efforts to Reschedule Dell Meeting Chancellor Leo Strine of Delaware's Court of Chancery also defended the work by a special committee of Dell's board, saying that its actions benefited shareholders.
Thursday, Aug. 15
B. Ramalinga Raju, the chairman of Satyam Computer Services, confessed to fraud in 2009 in a scandal known as India's Enron.
India Seeks to Overhaul a Corporate World Rife With Fraud Sweeping legislation in India aims at auditing reform, with stiffer penalties for fraud and more government oversight of businesses.
Wednesday, Aug. 14
Preet Bharara, center, the U.S. attorney for the Southern District of New York, was joined by officials from the F.B.I and the S.E.C. to unseal the charges.
Government Charges Two Former JPMorgan Chase Employees Federal authorities announced criminal charges against Javier Martin-Artajo and Julien Grout, who are accused of disguising losses on a trade.
News Analysis: Unreliable Guesswork in Valuing Murky Trades There is enough material to conclude that JPMorgan employees embarked on a foolhardy quest to trade their way out of trouble, and left the bank with $6 billion of losses.
To His Collection of Steinways, Hedge Fund Titan Adds Their Maker Paulson & Company has agreed to buy Steinway Musical Instruments for about $512 million. That means that Kohlberg & Company, which previously agreed to buy Steinway, will be watching from the orchestra seats.
As Brazil's economic growth has slowed, Eike Batista has watched his fortune evaporate.
Once a Symbol of Brazil's Might, Billionaire Sells Controlling Stake in a Company Eike Batista has taken further steps toward dismantling his once high-flying empire of energy, logistics and mining companies by selling a controlling stake in the LLX logistics firm.
América Móvil's $9.5 Billion Offer for KPN Under Scrutiny A Dutch foundation with the power to block the proposed $9.5 billion bid by the Latin American telecommunications giant América Móvil for the Dutch company KPN has expressed concern about the deal.
Tuesday, Aug. 13
American Airlines and US Airways agreed in February to merge, paving the way for the creation of the nation's largest airline.
Justice Dept. Files Antitrust Suit to Block Airline Merger The complaint said the proposed deal between American Airlines and US Airways, which would create the nation's biggest airline, would threaten competition and drive up ticket costs.
William A. Ackman is the chief executive of Pershing Square Capital management.
The Loudest Voice Fails William A. Ackman's embarrassing retreat from J. C. Penney's board may highlight not only the flaws of the hedge fund titan's approach and his force of personality but also the limits of what shareholder activists can achieve.
Herbalife, the nutritional supplement company, is the focus of a spat between two hedge fund magnates.
Herbalife Safety Issue Draws Scrutiny Herbalife is at the heart of a Wall Street brawl. Now the company's response to its handling of a product safety issue in 2011 is drawing scrutiny.
A London office of JPMorgan Chase.
U.S. Faces Obstacles in Bid to Arrest 2 in Big Trading Loss at JPMorgan Federal authorities, seeking to bring criminal charges against two former JPMorgan Chase employees at the center of the bank's massive trading loss in London, are facing logistical hurdles in planning their arrests.
Benjamin M. Lawsky, New York's top banking regulator, sent subpoenas to 22 companies that have had some involvement with bitcoin.
New York and U.S. Begin Investigations Into Bitcoins The Senate's committee on homeland security and New York State's top financial regulator are investigating gaps in the oversight of upstart virtual currencies like bitcoin.
Deal Professor: Thriving Financial Product, Despite a Record of Failure Silver Eagle's I.P.O. is the largest in the past seven years for a SPAC, but Steven M. Davidoff says the outcome is not so clear for its investors.
Monday, Aug. 12
A salesperson displays a BlackBerry Z10 smartphone.
Blackberry Sends a Message The abrupt decline of BlackBerry illustrates how consumers and investors demand almost instant change these days, especially from tech companies. And the window for redemption for a tech company that misses a step can be tiny indeed
The government is using a civil asset forfeiture case to try to take more money from SAC Capital Advisors, the bulk of which would come from Steven A. Cohen because he has about $8 billion of his own invested in the firm.
SAC Capital Closes a Trading Unit as It Starts to Retrench The closure is the latest setback for SAC Capital, the once-powerful hedge fund run by the billionaire Steven A. Cohen that has been hobbled by a criminal indictment.
Wendy Fillmore says that the market value of her Las Vegas home is about half the combined value of her two mortgages.
In One Bundle of Mortgages, the Subprime Crisis Reverberates A Goldman Sachs bond has wide-ranging impact, on the bankers who sold the deal, the struggling homeowners, and taxpayers who helped pick up the bill.
Wall St. Debates Who Should Pay Legal Bills
DealBook Column: Wall St. Debates Who Should Pay Legal Bills "In this era, positions on Wall Street are fraught with all sorts of perils," a partner at Marino, Tortorella & Boyle tells Andrew Ross Sorkin.
Suit Accuses Online Lender of Violating New York Rate Caps The New York attorney general sued Western Sky Financial and its affiliates, which claim ties to American Indian tribes that exempt them from state restrictions on interest rates.
Sunday, Aug. 11
In April 2002, Attorney General Eliot Spitzer of New York discussed court-ordered changes at Merrill Lynch next to a display of analyst comments.
With I.P.O.'s on the Rise, Analysts Get New Scrutiny For years, financial industry rules have barred research analysts from pitching initial public offering business, but some say Wall Street is returning to its old ways.
Prosecutors could force JPMorgan Chase to bolster internal controls that failed to thwart the
Prosecutors and F.B.I. Examine JPMorgan Over Losses People briefed on the matter say an investigation could yield a fine and a reprimand of the bank over the trading blowup known as the "London Whale."
DEALBOOK » | DealBook: For S.E.C., Any JPMorgan Settlement Could Serve as a Template

Brazilian Fund, Under Fire, Has a Defender An investor in GP Investments, one of Latin America's largest private equity funds, has attacked its compensation policies, but another says that criticism is misguided.
UBS Repays Loan It Received During Bailout The move clears the way for UBS to buy back a portfolio of distressed assets that were moved off the UBS books during the financial crisis.
Marissa Mayer, the chief of Yahoo, shows her glamorous side in the new issue of Vogue.
Mayer, Yahoo's C.E.O., Goes Chic A Marissa Mayer profile in the September issue of Vogue, titled "Mogul, Mother, Lightning Rod," draws attention to her fashion choices.
Week in Verse
'Learn to Fly' In a merger that was unopposed by the Justice Department, the Foo Fighters and Tenacious D parodied the movie "Airplane!"

Egypt's Blood, America's Complicity: NYT | Opinion Today August 16, 2013

August 16, 2013

Opinion Today

Op-Ed Contributor

Egypt's Blood, America's Complicity

Until the legitimate government of President Mohamed Morsi is restored, American rhetoric about democracy will ring hollow.
Under the Dome

Under the Dome

Presidents should vacation outside their political comfort zones.
Op-Ed Contributor

What Really Ails Detroit

Detroit's collapse is indicative of a broader nationwide problem: United States manufacturing has been in trouble since its heyday in the 1950s.
Should Creationism Be Controversial?
Room for Debate

Should Creationism Be Controversial?

Why are some people drawn to origin narratives like in Genesis, and others to the scientific story?
The Tarzans of Vietnam

The Tarzans of Vietnam

The discovery of two men who have lived in the wild for 40 years exposes the trappings of modern life in Vietnam.
Across the Cumberlands

Across the Cumberlands

In August 1863, the Union began to pierce through the Cumberland Plateau and into the Confederate heartland.

No Banker Left Behind

The Detroit bankruptcy case provides another example of how Wall Street wins.

Insider Influence in the Commonwealth

Voters in Virginia face a governor's election muddled by ethical issues.

Wolves Under Review

A scientific evaluation of the delisting plan for gray wolves has gotten tangled up in politics.

Is It Really Gluten Free?

An overdue standard from the Food and Drug Administration is good news for consumers with food allergies.

The Opinion Pages

Read the full opinion report, including editorials, columns, op-eds and Opinionator. Go to the Section »
Tea Party to Lamar Alexander: Stop Compromising
Taking Note

Tea Party to Lamar Alexander: Stop Compromising

Right-wing groups sent a letter to the Republican senator encouraging him to retire, or else face a primary challenge.
Banks and the Monetary Base (Wonkish)
The Conscience of a Liberal

Banks and the Monetary Base (Wonkish)

It doesn't matter whether the banks hold reserves.
Dot Earth Blog

'Liberated Carbon, It'll Turn Your Night to Day'

Andy Revkin performs his song about humanity's love affair with fossil fuels for a room full of climate scientists and communicators.

Wall Street at Close Report August 16, 2013: Stocks fall Friday; Dow sees worst week of year.

Stocks fall Friday; Dow sees worst week of year

By Kate Gibson and Victor Reklaitis, MarketWatch 

NEW YORK (MarketWatch)U.S. stocks declined on Friday, handing the Dow Jones Industrial Average its worst week this year, with investors on uncertain footing as longer-term Treasury yields rose to two-year highs. 

The Dow DJIA -0.20%  slid 30.72 points, or 0.2%, to finish at 15,081.47, while the S&P 500 index SPX -0.33%   fell 5.49 points, or 0.3%, to close at 1,655.83.
The Nasdaq Composite COMP -0.09%   shed 3.34 points, or 0.1%, to end at 3,602.78. 

Reuters Enlarge Image
Apple shares gained more than 10% this week.
For the week, the Dow lost 344 points, or 2.2%, suffering its biggest weekly percentage drop and point loss of 2013. It was the blue-chip index’s worst weekly percentage slide since May 2012, and its largest point decline since June 2012.
The S&P 500 slumped nearly 36 points, or 2.10%, for the week, suffering its biggest weekly point drop of the year, but not its biggest percentage decline. The tech-heavy Nasdaq was down just 1.6% for the week, as Apple’s AAPL +0.89%   10.5% weekly gain provided a boost.
All three main stock indexes lost ground for the second week in a row. 

“Stocks are taking their lead from the bond market. Higher yields are not good news for stocks, but if higher yields come because the economy is getting stronger,” the latter would be positive for equities, said Kate Warne, investment strategist at Edward Jones.
While stock indexes traded in a limited range on Friday, longer-term Treasury yields resumed their rapid climb, with the 10-year 10_YEAR -0.07% rising 5 basis points to 2.83%.

Europe week ahead: FOMC minutes
With forward guidance failing to have the desired impact in the U.S., the euro zone and the U.K., financial markets will be looking to the latest FOMC minutes and Chinese activity data to drive risk sentiment. 

“Around lunchtime, the 10-year note got hit and the yield moved above yesterday’s high. If the yield would back off below 2.8%, stock buyers would be a bit encouraged,” Elliot Spar, market strategist at Stifel Nicolaus & Co., emailed in afternoon commentary.
Jerry Villella, a J.P. Morgan Private Bank investment specialist based in Dallas, said that “real yields are moving up, and that’s a reflection of a healing economy. Steep yield curves do not precede recessions.”
He believes the recent and violent move in yields will moderate, with the 10-year yield moving between 2.5% and 3% through the end of the year. Villella also noted that stocks still are showing sizable gains for 2013 to date.
“Even after a pullback from the last couple of days, we’re still up year to date, and just like 2012, it coincides with a weakly growing economy. Two percent economic growth gave us 16% equity appreciation last year,” said Villella. The S&P 500 has gained 16% so far this year. 

Dell posts drop in profit
Brendan Conway profiles key stocks to watch on Friday, including Dell, which posted a 72% profit decline for Q2. Photo: Getty Images. 

 “Earnings-per-share growth is what counts,” said Villella, adding that 3% of that growth is coming from top-line, or sales growth, none stems from margin expansion and 1% comes from a shrinkage in shares outstanding due to corporate share repurchases.

Gold prices rose $10.10, or 0.7%, to $1,371 an ounce, extending a two-day rally in which it gained $40.40, or 3.1%. Up for six of its past five sessions, the metal is up 4.5% for the week, 4.1% for the month and down 19% for the year.
Oil prices rose slightly, finishing 1.4% higher for the week, and the dollar edged higher against the currencies of major U.S. trading partners.
Economic reports on Friday drew little reaction for Wall Street.
The Commerce Department reported housing starts climbed at an annual rate of 896,000, less than the 915,000 estimated.
“They were a bit weaker than expected, but I still think it’s overall good news, as they approached 900,000. I was disappointed about single-family starts, which actually declined, and it is a bit surprising. Based on recent permit data, I was hoping to see more of an uptick on the single-family side,” said Elizabeth Ptacek, a senior credit real-estate analyst at KeyBank.
But Ptacek believes that difficulty in getting financing is more of an issue for housing than higher interest rates: “Credit remains very tight. It’s easing, but not quickly enough for first-time home buyers.”
The Labor Department reported productivity rose at a slightly better-than-estimated 0.9% annual rate in the second quarter. The initial read of the University of Michigan/Thomson Reuters consumer sentiment fell to 80.0 this month, down from 85.1 in July, according to published reports. 

Nordstrom Inc. JWN -4.89% shares fell 4.9% a day after the high-end retailer reported lower-than-expected sales and cut its full-year forecast. 
Aspen Technology Inc. AZPN +7.86% shares jumped 7.9% after the maker of software for process manufacturing posted higher-than-expected sales and earnings for the fiscal fourth quarter.
Dell Inc. DELL +0.84% posted adjusted earnings of 25 cents per share — a penny higher than analysts had predicted. Shares of the personal-computer maker gained 0.8%.
Upbeat jobless-claims data on Thursday helped cement the view that tapering of the Federal Reserve’s bond-buying program will happen in September. U.S. stocks sank for a second day, driven by tapering fears, downbeat corporate news and a spike in Treasury yields to 2011 highs.

Kate Gibson is a reporter for MarketWatch, based in New York. Follow her on Twitter @MWKateGibson. Victor Reklaitis is a New York-based markets writer for MarketWatch. Follow him on Twitter @VicRek.

Wall Street at Close Report by CNBC: August 16, 2013: Stocks log 3-day losing streak, Dow posts worst week in 2013

Stocks log 3-day losing streak, Dow posts worst week in 2013

Stocks finished slightly lower in lackluster trading Friday, extending their losses for a third-straight session. Major indexes posted their first back-to-back weekly losses since late June.
The Dow posted its biggest weekly decline this year.
"We've seen a brief correction of 3 to 5 percent off the recent highs and I would suspect the market to be choppy and sideways from here going into the next Fed meeting," said Matt Kaufler, portfolio manager of the Federated Clover Fund. "We're trying to add to more cyclically oriented sectors during this pullback."
(Read more: Best ideas in a'stock picker' market: Pros)

U.S. Major Index Performance

Last Today's % Change 1 Week % Change MTD % Change YTD % Change
Dow 15,081.47 -0.20% -2.23% -2.70% 15.09%
S&P 500 1655.83 -0.33% -2.10% -1.77% 16.10%
NASDAQ 3602.78 -0.09% -1.57% -0.65% 19.32%
Russell 2000 1024.3 -0.32% -2.30% -2.01% 20.60%
CBOE VIX 14.38 -2.38% 7.23% 6.91% -20.20%

The Dow Jones Industrial Average fell 30.72 points to close at 15,081.47, dragged by Verizon and Pfizer. The blue-chip index broke below its 50-day moving average on Thursday.
The S&P 500 slid 5.49 points to finish at 1,655.83, breaking below its 50-day moving average. The Nasdaq dipped 3.34 points to end at 3,602.78. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, ended below 15.

The Dow and S&P 500 have slumped more than 3 percent from their all-time highs hit on Aug. 2.
Among key S&P sectors, defensive areas such as utilities and telecoms led the laggards on the heels of rising interest rates. The 10-year Treasury note yield rose to 2.86 percent, touching a fresh two-year high.
For the week, the Dow declined 2.23 percent, the S&P 500 slumped 2.10 percent and the Nasdaq dropped 1.57 percent. 
(Read more: Pimco: 'Great rotation' to stocks won't happen)
August Market Sell Off
The markets had the biggest sell-offs since June this week after reaching record highs. Is this a correction or a case of the summer swoon? Barclays Head of US Equity Portfolio Strategy Barry Knapp and River Twice Research President Zachary Karabell weigh in on the sluggish markets, the Federal Reserve's taper plans, and activist investors' impact on Wall Street. 
On the economic front, the consumer sentiment index slipped to 80 in August from 85.1 in July, according to the Thomson Reuters/University of Michigan's preliminary reading on the overall index. Housing starts rose 5.9 percent to a seasonally adjusted annual rate of 896,000 units in July, according to the Commerce Department, which was less than the expected 900,000 unit rate expected by economists polled by Reuters. June's starts were revised up to show a 846,000-unit pace instead of the previously reported 836,000 units. "The housing numbers were reasonably healthy—they're not as robust as they were earlier in the year but there's been some concern about rates being notably higher and whether that's going to choke off the recovery in housing," said Kaufler. "And the consumer sentiment reading—even when it was a disappointing number—was already telegraphed by the recent weak reports from retailers." Most homebuilders including Pulte and DR Horton gained following the report. Kaufler said he is bullish on the homebuilders. "By historic norms, even if rates tick up a little from here, I don't think it undercuts the rebound in housing," he explained. And nonfarm productivity rose in the second quarter at a 0.9 percent annual rate as output increased more than hours worked, according to the Labor Department. Economists polled by Reuters had expected productivity to gain at a 0.6 percent rate. Among earnings, Dell topped quarterly expectations, but profits were 72 percent below year-ago levels amid falling PC sales.
Applied Materials missed quarterly expectations forecast current-quarter earnings below analyst estimates. Separately, the company appointed president Gary Dickerson as its new CEO. Still, shares finished higher, reversing earlier losses. Nordstrom edged past earnings expectations but cut full-year earnings and revenue outlook amid sliding same-store sales, sending shares lower. In Asia, China's benchmark index pared gains on Friday after a sudden burst of buying that saw the index spike 5.6 percent on stimulus rumors and futures expiration. The rest of Asia was broadly lower in response to Shanghai's volatile trade and Wall Street's overnight fall. (Read more: China stocks pare gains in volatile trade after spiking over 5%) Meanwhile, violent clashes continued in Egypt. The Muslim Brotherhood party, protesting the ousting of President Mohamed Morsi, called for a nationwide "millions' march of anger" to protest against the military crackdown. More than 600 people have been killed in the unrest, according to the Egyptian ministry of health, although higher figures are being reported.
—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter:

Jeffrey Lewis: When silver shortages reach the mainstream: GATA | THE GATA DISPATCH AUGUST 16, 2013.

Jeffrey Lewis: When silver shortages reach the mainstream

3:10p ET Friday, August 16, 2013

Gold and silver aren't the only metals facing a short squeeze. Tin foil is too, judging from the latest commentary by Jeffrey Lewis of the Silver Coin Investor Internet site, who writes today that the volume of paper silver is many times the volume of real metal because of a short scheme run by investment banks acting as agents for the U.S. government. Lewis' commentary is headlined "When Silver Shortages Reach the Mainstream" and it's posted at Silver Coin Investor here:

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

The End Times begin: Hathaway gets real and CNBC broadcasts him: GATA | THE GATA DISPATCH AUGUST 16, 2013.

The End Times begin: Hathaway gets real and CNBC broadcasts him

2:04p Friday, August 16, 2013

The End Times began at 12:20 p.m. Eastern today.
The Tocqueville Gold Fund's John Hathaway, a thoroughly respectable member of the financial establishment who only in recent weeks has begun to acknowledge the manipulation of the gold market by Western central banks, went on CNBC's "Fast Money" program, declared that a short squeeze is under way in gold because the paper gold market is leveraged at 100 to 1, and was not cut off.

Of course the CNBC "analysts" who commented following Hathaway's remarks completely missed the substance of what he said. Real financial journalism has not descended upon the West quite yet. But if reality about gold can come frankly out of Hathaway's mouth and be spread throughout the world by CNBC, are even Reuters, Bloomberg News, The Wall Street Journal, The New York Times, and the Financial Times still safe for the Federal Reserve and Wall Street and their scheme of gold price suppression and currency market rigging?

Thanks to the Got Gold Report's Gene Arensberg for calling attention to this earthquake with a preface on top of the CNBC video of Hathaway here:

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

CMI Spot Prices as of close of trading in New York August 16, 2013.

Spot Prices as of close of trading in New York
Friday, August 16, 2013

Updated 8/16/2013 Today Change Week Ago Month Ago Year Ago
GOLD $1,372.85 +$11.30 $1,313.85 $1,291.60 $1,618.30
SILVER $23.38 +$0.35 $20.48 $20.04 $28.32
PLATINUM $1,529.90 -$5.40 $1,503.40 $1,427.70 $1,438.20
PALLADIUM $766.00 +$5.00 $744.00 $738.40 $586.50