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Aug 15, 2014

DealBook P.M. Edition August 15, 2014: Weekend Reading: Derivatives, Mortgages and Repo Markets in 2014 or 2008?

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Friday, August 15, 2014
Weekend Reading: Derivatives, Mortgages and Repo Markets in 2014 or 2008? A spotlight on derivatives, risky mortgages and repo markets - practices all linked to the 2008 financial crisis - gave DealBook a certain "Groundhog Day" quality this week.

See if you can identify if the following excerpts are from our 2014 coverage or from 2008.

Excerpt 1: "Financial regulators are pushing for an arcane but crucial modification to the contracts that stand behind the $700 trillion global market for derivatives."

Excerpt 2: "Today, the outstanding value of the [credit default] swaps stands at more than $45.5 trillion."

Excerpt 3: "Analysts estimate that there are still some $660 billion worth of delinquent mortgages in the United States."

Excerpt 4: Fannie Mae executives "said they intended to reduce the growth of the company's loan portfolio and stop buying riskier so-called Alt-A mortgages."

Excerpt 5: "Repos and similar types of borrowings accounted for 52 percent of broker-dealer obligations."

The results: excerpts 1, 3 and 5 are from this week. Excerpts 2 and 4 are from 2008.
For the latest updates, go to »

Wall Street at Close Report - August 15, 2014: Stocks trim Ukraine-inspired fall, post weekly gain Industrial production rises, but consumer sentiment dips.

NEW YORK (MarketWatch) Stocks ended mixed Friday, trimming or erasing losses after falling on news of a clash between Ukrainian and Russian military units on Ukraine soil. Major indexes posted weekly gains despite the late flight out of riskier assets into Treasurys. 

The S&P 500 SPX -0.01%  fell 0.12 point, or less than 0.1%, to end at 1,955.06 after trading as low as 1,941.40, leaving the index with a 1.2% weekly gain. The Dow Jones Industrial Average DJIA -0.30%  trimmed a triple-digit loss to end the day down 50.67 points, or 0.3%, at 16,662.91, making for a weekly rise of 0.7%. The Nasdaq Composite COMP +0.27%  returned to positive territory, rising 11.93 points, or 0.3%, to 4,464.93 and notching a 2.2% weekly advance.
Ukrainian forces destroyed part of a Russian military unit that was on Ukrainian soil, a Ukrainian military spokesperson said Friday, according to news reports. Separately, NATO’s secretary-general said the alliance observed a Russian “incursion” into Ukraine, denied by Russia, on Thursday night, according to the Associated Press.
“Markets are reacting this afternoon to the ongoing developments, but in the fog of war it makes little difference what the specific elements are in each event. Instead, what drives market valuations is the knowledge of applied costs. No matter how Ukraine, Russia, and the separatists sort themselves out, the costs continue to rise,” said David Kotok, chief investment officer at Cumberland Advisors, in a note.
The 10-year Treasury note yield 10_YEAR -0.09% fell more than 5 basis points to less than 2.35% as investors sought safety by buying Treasurys. Yields fall as Treasury prices decline.
Haven-related buying only provided a modicum of help for gold, however, which trimmed losses but still settled at its lowest level since Aug. 5. Friday’s losses on the main benchmarks put a cap on weekly gains. Stocks trimmed initial losses ahead of the closing bell.
John De Clue, chief investment officer at the Private Client Reserve of U.S. Bank, said he isn’t surprised that stocks have been so resilient in the face of geopolitical concerns.
“Second-quarter earnings have been better than many of us expected and the economy is growing. The fact that we are not seeing larger pullbacks mean that investors are not alarmed by the impact of geopolitical issues,” he said.
Still, the entanglement overshadowed more signs that the U.S. economy remains healthy and that company profits are increasing. Industrial production rose in July, thanks to a sizable jump in car output, the Federal Reserve said Friday.
Meanwhile, U.S. producer prices inched up in July, a second consecutive month of gains, led by services such as transportation and warehousing, the government reported Friday. That is one of several recent inflation gauges that show price growth isn’t running too hot for the Fed.
Investors shrugged off a preliminary August reading on the University of Michigan/Thomson Reuters consumer-sentiment index that showed it at the lowest level since November. 

The Economist | Insights - Weekly Digest - August 15, 2014: Never-ending strategies.

The Economist

The Economist

Weekly Digest
Issue #40
This week we bring you the 25 top social business leaders; we take a look at the leading contender for this year’s title of most overused word by business leaders; and we invite you to The World Water Summit.
Social business is about much more than social media. A social business is an organisation whose culture and practices encourage networks of people—employees, partners, customers and others—to create business value and, ultimately, increase revenue and profits. The Economist Intelligence Unit launched the 'Making Social Business Happen' programme, sponsored by IBM, to help organisations globally learn about social business from the leaders.

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Fraud report The future of business: Human resources
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report image FTAs: fantastic, fine or futile?
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report image The G20 e-Trade Readiness Index
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report image Ancient enemy, modern imperative
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logo Never-ending strategies
A commitment to being relentless is essentially a slippery way of avoiding any firm commitments. It makes a CEO sound strong, driven and steadfast while shirking the basic responsibility of any corporate strategy to set out a clear timetable for delivering on actual targets.

James Chambers, Senior Editor, The EIU
Read the full article>>
Local currency debt: laggard
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The telecoms sector and emerging markets
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report image Future-proofing family farming
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Effective strategic decision making
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The World In Series

Time to start acting? With agriculture, homes, factories and offices consuming water in ever greater quantities, U.N. Secretary-General Ban Ki-moon is warning that by 2030, nearly half the world's population could face a scarcity of water, with demand outstripping supply by 40%.

As water plays a crucial role in all segments of nature, society and economy, access to water will become a fundamental issue to individuals, governments, companies and ecosystems.

Join us to debate how to stop talking about the world water crisis and start acting.

Daniel Franklin Jan Eliasson
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Susilo Bambang Yudhoyono Izabella Teixeira
Minister for the Environment
Jim Richardson Vivian Balakrishnan
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European Markets at Close Report - August 15, 2014: Europe stocks swept lower as Ukraine tensions heat up BHP eyes portfolio makeover.

By Carla Mozee, MarketWatch 
LONDON (MarketWatch) European stocks dropped Friday, with German equities turning sharply lower, following reports of a flare-up in tensions between Ukraine and Russia. 

Ukrainian forces destroyed part of a Russian military unit that was on Ukrainian soil, according to a Ukrainian military spokesperson quoted by various news sources. The spokesperson said Russian vehicles entered Ukraine through a section of the border held by rebels, which prompted the engagement, according to Bloomberg. 

Ukraine President Petro Poroshenko’s website said most of the Russian military vehicles that crossed into the country Thursday night have been destroyed. 

Market reaction: The Stoxx Europe 600 index XX:SXXP -0.40% had been cruising higher, with intraday gains of roughly 1%, when news of the military confrontation came roughly 45 minutes before the end of trading. The pan-European index was then twisted lower, closing with a loss of 0.4% at 329.72.
The German DAX 30 index DX:DAX -1.44% was yanked down 1.4% to 9,092.60, but had up by as much as 1.1% before the turnaround. The German economy — the largest in Europe — has been considered among the most vulnerable in the region to the impact of the conflict between Russia and Ukraine. 

Investors also darted into so-called safe-haven assets, a move that pushed the yield on Germany’s 10-year bond BX:TMBMKDE-10Y -6.17%  to an all-time low of 0.965% late Friday.
Russia’s MICEX  held to higher ground, ending up 0.7% at 1,417.82. The euro EURUSD +0.14%  bought $1.3389 compared with $1.3395 before reports of the confrontation. The shared currency bought $1.3367 late Thursday. 

French stocks were hit, leaving the CAC 40 FR:PX1 -0.74%  down 0.7% at 4,174.36. The U.K.’s FTSE 100 UK:UKX +0.06%  narrowed its gain, ending up 0.1% at 6,689.08. Also read: BHP outperforms FTSE 100.
In the U.S., the S&P 500 index SPX -0.27%  and the Dow Jones Industrial Average DJIA -0.47% reversed gains. Read more about U.S. market action Friday

Here are some of the European companies whose shares were in focus Friday:
A.P. Moller-Maersk AS DK:MAERSKB +0.68%  rose 0.7% as the Danish conglomerate was upgraded to overweight from neutral at J.P. Morgan Cazenove.
BHP Billiton Ltd. UK:BLT +1.21%  shares climbed 1.2%, as the world’s largest mining company by market value said it favors spinning off a range of assets to focus more on commodities such as iron ore. Such a move could create a separately listed company valued at more than $8 billion.
Carillion PLC UK:CLLN -3.95%  fell 4% after Balfour Beatty PLC UK:BBY -0.08%  again rejected the takeover offer from its rival in the construction sector.
Hennes & Mauritz AB SE:HMB +0.66%  tacked on 0.7% following a 17% rise in total July sales at the Swedish fashion retailer, known for its H&M stores.
For the week, the Stoxx 600 index closed up 1.5%. 

Carla Mozee is a reporter for MarketWatch, based in London. Follow her on Twitter @MWMozee.

Bits | The Business of Technology - August 15, 2014: Morning Report: Online Agitators Winning as Incivility Mounts.

Morning Report
Online Agitators Winning as Incivility Mounts | The Internet may be losing the war against trolls. At the very least, it isn't winning. And unless social networks, media sites and governments come up with some innovative way of defeating online troublemakers, the digital world will never be free of the trolls' collective sway, Farhad Manjoo writes in his State of the Art column.
That's the dismal judgment of the handful of scholars who study the broad category of online incivility known as trolling, a problem whose scope is not clear, but whose victims keep mounting.
"As long as the Internet keeps operating according to a click-based economy, trolls will maybe not win, but they will always be present," said Whitney Phillips, a lecturer at Humboldt State University and the author of "This Is Why We Can't Have Nice Things," a forthcoming book about her years of studying bad behavior online. "The faster that the whole media system goes, the more trolls have a foothold to stand on. They are perfectly calibrated to exploit the way media is disseminated these days."
"Troll" is the fuzzy term for agitators who pop up, often anonymously, sometimes in mobs, in comment threads and on social networks like Facebook and Twitter, apparently intent on wreaking havoc. The term is vague precisely because trolls lurk in darkness; their aims are unclear, their intentions unknown, their affiliations mysterious. Read more »
Anonymous Hackers' Efforts to Identify Ferguson Police Officer Create Turmoil | Members of the activist collective known as Anonymous falsely named the police officer who shot an unarmed 18-year-old black man on Saturday. The botched identification triggered rancor in the network. 

More From The Times
SmartThings is a start-up that lets users connect appliances and other home items, using a network.
Samsung Acquires SmartThings, in Embrace of the Smart Home | The young company makes accessories that connect home appliances to the Internet and will help Samsung compete with Google and Apple.
A recent academic study looked at theater projects on Kickstarter, including one titled
Crowdfunding and Venture Funding: More Alike Than You Think | While a potato salad project made crowdfunding look whimsical, recent studies indicate the wisdom of the crowd and the venture capital community is often not that different.
Jason Hand wears a suit he bought using Bitcoin. Merchants that accept Bitcoin are trying to attract virtual currency enthusiasts like Mr. Hand.
For Merchants, Bitcoin Shows More Pop Than Potential | Merchants that accept Bitcoin are trying to attract virtual currency enthusiasts. And the number of merchants has been growing.
The goal of Spring's direct-to-consumer model, according to one founder, is to bypass large intermediary department stores that take a large cut out of a retailer's profit margin on items sold.
Spring, an E-Commerce Start-Up, Aims at Mobile Shopping | Spring has more than 100 major retailer partners participating, including brands like Nicole Miller, Michael Kors and Levi's.
Jack Ma, chairman of Alibaba Group.
Alibaba Discovers Suspicious Accounting at Film Unit | The disclosure may raise concerns that the e-commerce giant is biting off more than it can chew in a recent spree of acquisitions.
Taxi drivers in Berlin protested ride-sharing start-ups like Uber in June.
Uber to Fight Ban in Berlin | Uber said Thursday that it would challenge a ruling banning the smartphone-based car service in Berlin, calling it "not progressive."
A rat in Chelsea is a protest against Taconic Investment Partners for hiring nonunion workers.
Outside Google's New York Office, a Giant Rat Is All but Invisible | A large rat has appeared around the Chelsea building for several months. But the creature, a common sight at union protests, is not against the search engine.
Best of Scuttlebot  News from the Web, annotated by our staff
Plotting I.P. Theft on Post-It Notes | Valleywag
A lawsuit claims that Google wrote down its plan to steal video compression technology on Post-it notes. - Ashwin Seshagiri
For more Scuttlebot, follow @nytimesbits »

Reuters | Money: Selected News -August 15, 2014-.

Top U.S. hedge funds up Walgreen shares; lose some taste for Apple
(Reuters) - Top U.S. hedge fund managers did some shopping for shares of discount retailer Dollar General Corp and drug store operator Walgreen Co in the second quarter.

Exclusive - Wife defines stakes in Oklahoma divorce: $17 billion OKLAHOMA CITY (Reuters) - More than $17 billion of Oklahoma oilman Harold Hamm's fortune could be subject to division with his estranged wife, according to an economic analysis presented in their divorce trial, defining the stakes in one of the biggest battles ever over a marital estate.

ABC News Political News -August 15, 2014: Aloha Friday.

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Aloha Friday

August 15, 2014 08:41 AM
By MICHAEL FALCONE ( @michaelpfalcone )
  • A PRIMARY PROLONGED: It's likely the Democratic senate primary in Hawaii will finally get decided today and it's all up to less than 8,000 voters, ABC's SHUSHANNAH WALSHE notes. Incumbent Sen. Brian Schatz leads challenger Rep. Colleen Hanabusa by just over 1,700 votes and today two precincts on the Big Island who were unable to get to their voting locations last Saturday due to Hurricane Iselle will get an opportunity to cast their ballots. Hanabusa was trying to delay the vote filing a suit Thursday saying people are still trying to get the "basic necessities" of food, ice, water, and power so voting is the last thing on their mind. She was also concerned that without power voters may not even know about the rescheduled election. The campaign says the judge denied their request and the Chief Elections Officer Scott Nago says the show will go on today. In a statement he says the election will continue for those two Big Island precincts. The two precincts include about 8,000 voters, but about 1/5 voted early or by absentee. With those polls closing by midnight on the east coast, Hawaii officials say we should have an answer late tonight.
  • POST-ELECTION CHALLENGE? Colin Moore, a professor of political science at the University of Hawaii tells WALSHE it may be "technically possible" for Hanabusa to pull ahead, but "it's very unlikely." It's not just making up the votes, Moore points out but Schatz won in both other precincts in the Puna area of Hawaii Island. "That means she would have to convince the relatively small number of remaining voters to support her overwhelmingly," Moore said, adding he expects a "post-election challenge" from Hanabusa if she's not successful today.

CASSIDY TAKES A VICTORY LAP AROUND LANDRIEU. Rep. Bill Cassidy now has more cash on hand than Sen. Mary Landrieu in the Louisiana Senate race, according to pre-primary FEC filings. This is the first time the Republican challenger has managed to pull ahead of the Democrat incumbent with cash on hand, with Cassidy reporting $5.6 million compared to Landrieu's $5.5 million, ABC's JORDYN PHELPS reports. Cassidy campaign spokesman John Cummins said in a statement: "We are incredibly excited about the state of our campaign. Dr. Cassidy's message of common-sense conservative reform is resonating. That's why he has proven one of the most prolific fundraisers of this cycle and is the only Senate challenger in the country with more cash on hand than the incumbent." At the close of the second quarter, there was an indication that Cassidy might be catching up to Landrieu on fundraising. At that time, Landrieu reported having $6.2 million cash on hand compared to Cassidy's $5.8 cash on hand - a difference of only about $400 thousand.

HOW U.S. MILITARY TEAM SLIPPED ON AND OFF MT. SINJAR. Expecting the worst, a small team of U.S. special operations forces and relief workers sent to Mount Sinjar was surprised to find far fewer Yazidis trapped on the mountain than initially feared, leading the Obama administration to decide that a large-scale evacuation mission was not necessary, ABC's LUIS MARTINEZ reports. The 16 member team had been sent to Mount Sinjar to make a first-hand assessment that would help policy makers plan for what could have potentially been a risky and lengthy mission to get tens of thousands of Yazidi refugees off the mountain. Instead of finding tens of thousands of Yazidi refugees they found that only 4,000 to 5,000 Yazidis remained on the mountain, and half that number lived on the mountain and did not want to leave their homes. Their quick initial assessment was forwarded to the Pentagon where an interagency team determined that an evacuation mission was not warranted.
SECRET SERVICE 'AWARE' OF APPARENT ISIS FLAG PHOTO IN FRONT OF THE WHITE HOUSE. The Secret Service said it is "aware" of a photo that appeared to show an image of an ISIS flag in front of the White House, according to ABC's CHRIS GOOD. If authentic, the photo showed a hand holding up an image of an flag for ISIS (also known as ISIL or Islamic State), displayed on a smartphone, on Pennsylvania Avenue in front of the White House fence. That area, closed off to street traffic, is frequented by thousands of tourists every day. It was tweeted from an apparently pro-ISIS Twitter handle @sunna_rev on Aug. 9. "We have an intelligence division whose mission is to assess information that we receive every day for dangerousness or potential threat level," Secret Service spokesman Ed Donovan told ABC News. "We are aware of the image and will take the necessary and appropriate follow up steps." A senior U.S. intelligence official told ABC that use of Twitter is consistent with ISIS practices. The group has shown to be at the forefront of social media use among terrorist and militant groups, the official said.
OBAMA PROMISES OPEN PROBE INTO FERGUSON POLICE SHOOTING. President Obama offered appealed for calm in riot-wracked Ferguson, Missouri, Thursday and promised an open investigation into the police shooting of Michael Brown to ensure "justice is done," ABC's JONATHAN KARL reports. "Now is the time for healing. Now is the time for peace and calm on the streets of Ferguson," the president told reporters in Martha's Vineyard, where he is on vacation with his family. "Now is the time for an open and transparent process to see that justice is done." The president said he spoke Missouri Gov. Jay Nixon Thursday morning. "I expressed my concern over the violent turn that events have taken on the ground, and underscored that now's the time for all of us to reflect on what's happened and to find a way to come together going forward," the president said. This is the first time the president has spoken publicly about events in Ferguson since the Brown, 18, was shot by a still-unnamed police officer. Obama urged restraint by both law enforcement and protesters.
OBAMA: 'WE BROKE THE ISIL SIEGE OF MT. SINJAR'. President Obama said Thursday the military and humanitarian assistance to protect an Iraqi religious minority group under siege by a terrorist organization had been a success, but indicated that U.S. airstrikes would continue, reports ABC's ERIN DOOLEY. The airdrops delivered more than 114,000 meals and 35,000 gallons of fresh water to the Yadizis, Obama said while on vacation on Martha's Vineyard. The Yazidis faced "a terrible choice: starve on the mountain or be slaughtered on the ground. That's when America came to help," Obama said. "The bottom line is, is that the situation on the mountain has greatly improved and Americans should be very proud of our efforts," Obama said, adding "I could not be prouder of the men and women of our military who carried out this humanitarian operation almost flawlessly." Just before the president spoke, however, a spokesperson from the United Nations' emergency relief organization said the situation on Mount Sinjar remains "dire." "Several thousand Yazidis" are still stranded on the mountain, "putting a massive strain on everyone," said Kieran Dwyer, Chief of Communications for the UN Office for the Coordination of Humanitarian Affairs.

FROM TANNING TO SHOVELING DUNG: WHAT CONGRESS IS DOING ON ITS SUMMER VACATION. Forbes may have rated DC the coolest city in the nation - but lawmakers off for the August recess often find more to love in their home districts than in Washington. From Connecticut Senator Chris Murphy shoveling dung on a farm to Kentucky Senator Rand Paul preforming eye surgery, ABC's ERIN DOOLEY has the scoop with what your legislators are up to over the August recess.

Reuters | Deals Today - August 15, 2014-: BHP Billiton set to spin off unwanted assets.

BHP Billiton set to spin off unwanted assets
MELBOURNE (Reuters) - BHP Billiton declared its preference for a demerger of its unwanted aluminum, manganese and nickel assets on Friday, setting the stage for the formation of a separate company that one report said could be worth $14 billion.

Balfour reaffirms rejection of Carillion merger proposal
LONDON (Reuters) - British construction firm Balfour Beatty has reaffirmed its rejection of a second merger proposal from rival Carillion , publishing the detail of its doubts over the synergies achievable from any combination.

Exclusive: Arcapita Bank hires JPMorgan to float Irish energy firm Viridian - sources
LONDON (Reuters) - Bahrain-based Arcapita Bank has hired JPMorgan to lead a share listing for Irish energy firm Viridian Group, two sources familiar with the matter said on Thursday, in a deal that one said could give the firm a value, including debt, of nearly 1 billion pounds ($1.7 billion).

Coca-Cola pays $2.2 billion for major stake in Monster Beverage
NEW YORK (Reuters) - Coca-Cola Co said Thursday it is making a cash payment of $2.15 billion for a 16.7 percent stake in Monster Beverage Corp as the world's largest soda maker seeks to expand into faster-growing categories such as energy drinks.

Ebay in talks to take bitcoins at payments unit : WSJ
SAN FRANCISCO (Reuters) - Ebay Inc's PayPal is in talks with Coinbase Inc and other bitcoin transaction providers to integrate the virtual currency within its Braintree payments system, The Wall Street Journal reported on Thursday.

Samsung buys home-automation startup SmartThing
SAN FRANCISCO (Reuters) - Samsung Electronics Co Ltd will buy SmartThings, a startup backed by PayPal co-founder Max Levchin that helps connect household devices, one of its largest U.S.-startup acquisitions to date.

Gannett beats Carl Icahn to the punch with plans to split
NEW YORK (Reuters) - Activist investor Carl Icahn reported a 6.6 percent stake in Gannett Co Thursday and revealed that he planned to push the media company to split into separate print and broadcast firms before Gannett beat him to it, a regulatory filing s

Boeing wins $296 million initial deal for 12 more P-8 spy plane

WASHINGTON (Reuters) - Boeing Co has won an initial contract worth $296 million to buy parts needed for production of 12 more P-8A spy planes, including eight for the U.S. Navy and four for the government of Australia, the Pentagon announced Thursday.

Electrolux, others in talks to buy GE's appliances business
STOCKHOLM/NEW YORK (Reuters) - World number two home appliances maker Electrolux said it was in talks to buy General Electric's household appliances business, seeking to increase its foothold in North America which is growing faster than its other main markets in Europe.

Mexico's Televisa says buys rest of Cablecom for $654 million

MEXICO CITY (Reuters) - Mexico's Grupo Televisa said on Thursday it paid 8.55 billion pesos ($653.96 million) to acquire the remaining shares in Mexican cable company Cablecom it did not already own.