WSJ : Cohen Wanted Trades Hidden From SAC Employees

Cohen Wanted Trades Hidden From SAC Employees
Trader Testifies He Was Directed to Limit Visibility of Trades in Pharmaceutical Companies

When SAC Capital Advisors LP began unloading a massive position in two pharmaceutical companies in July 2008, Steven A. Cohen didn't want anyone to know, including his own employees, the firm's top trader told jurors Tuesday.

The trader, Phillipp Villhauer, testified that SAC's billionaire founder directed him to limit the "visibility" of the trading as much as possible. Mr. Villhauer said he followed his boss's instructions to the letter, shielding a set of trades now at the heart of the insider-trading trial of former SAC portfolio manager Mathew Martoma from investors inside and outside the hedge fund.

The effort to hide trades isn't illegal. In fact, it is common among institutional investors. But prosecutors say some of the methods used were "abnormal," and help support their allegations that Mr. Martoma's intentions were not "purely benign."

"[S]imply because the means used to hide the sales of Elan internally were lawful and could serve valid ends…does not mean that such techniques could not simultaneously serve more nefarious ends, such as minimizing the risk that SAC Capital's trading would be flagged by a counterparty as suspicious," prosecutors wrote in a court filing last month.

On cross-examination by Mr. Martoma's lawyers, Mr. Villhauer testified that SAC frequently obscured its positions from other investors to avoid any "slippage"--that is, preventing other entities from learning that SAC was selling large volumes, thereby causing prices to drop.

Mr. Martoma, 39 years old, is accused of using inside information to make trades on Elan Corp., now part of Perrigo Co. PRGO +2.43% , and Wyeth Pharmaceuticals, now part of Pfizer Inc., PFE +2.56% that netted SAC $276 million in profits and avoided losses. He has pleaded not guilty.

Prosecutors allege the cause of the massive selloff in July 2008 was inside information Mr. Martoma obtained from two doctors, who told him the undisclosed results of a clinical trial of an Alzheimer's drug being developed by Elan and Wyeth.

Mr. Cohen hasn't been accused of any criminal wrongdoing. A spokesman for Mr. Cohen and SAC didn't have an immediate comment.

On Tuesday, prosecutors questioned Mr. Villhauer about two trading accounts that only a handful of SAC employees could access. Mr. Villhauer said that after he got his directive from Mr. Cohen, he called the firm's operations offices and asked them to find accounts that didn't have "many eyes" on them.

"[O]bviously no one knows except you me and Steve," Mr. Villhauer wrote to Mr. Martoma on July 21, 2008, as he began selling off SAC's position, according to an email shown by the prosecution to jurors on Tuesday.

Over the next week, Mr. Villhauer sold off over 10.5 million shares of Elan them from a handful of "visible" accounts, including the personal accounts of Messrs. Cohen and Martoma. But he booked the new positions, which were now short, or a bet the stock would decline, into the two "limited visibility" accounts.

Of the roughly 900 employees at SAC in 2008, Mr. Villhauer estimated only 10 to 15 people were aware of the trades.

"This was executed quickly and efficiently over a four-day period through algos and dark pools and booking into two firm accounts that have very limited viewing access," Mr. Villhauer wrote to Mr. Cohen at the end of July.

Mr. Martoma's trial is in its fourth week, and prosecutors closed their case Tuesday afternoon. Mr. Martoma's lawyers have attacked the credibility of the two doctors who allegedly tipped Mr. Martoma, both of whom testified against him, and have argued the trades weren't the result of Mr. Martoma's tips. They are expected to put on a short defense case, and called SAC's general counsel, Peter Nussbaum, to testify Tuesday.

SAC pleaded guilty to insider trading last year, agreeing to pay $1.2 billion in fines. Seven current and former SAC employees have pleaded guilty to, or been convicted of, insider trading.

WSJ : Turkey Raises Overnight Lending Rate to 12%

Turkey Raises Overnight Lending Rate to 12%
Lira Had Been in Long Slide Against Dollar

ISTANBUL—Turkey's central bank Tuesday aggressively increased overnight lending rate/interest rates to shore up the lira at an extraordinary policy meeting billed as a test case for under-pressure emerging markets.

The central bank raised its overnight lending rate to 12% from 7.75%, raised its one-week repo rate to 10% from 4.5% and raised its overnight borrowing rate to 8% from 3.5%. The central bank raised overnight lending in the late liquidity window to 15% from 10.25%—the highest rate charged to Turkish banks if they need to borrow just before local markets close.

The central bank also announced that it will increase the frequency of additional tightening to xx days in a week.

Eight economists polled by The Wall Street Journal unanimously forecast that the bank would raise its overnight lending rate by between two and three percentage points from the current level of 7.75% to tighten liquidity and help strengthen the lira.

The Turkish lira had plummeted more than 11% against the dollar since the beginning of January before rebounding some 5% ahead of an expected rate rise on Tuesday. The central bank last week held all its rates steady in its regularly scheduled meeting, sending the currency to record lows against the dollar. On Thursday, the central bank intervened directly in the currency markets to stem the lira's decline, but the central bank's efforts remained ineffective.

Turkish markets have been hit hard by the U.S. Federal Reserve's tapering plans and by local political tensions. A corruption probe launched Dec. 17 has targeted Prime Minister Recep Tayyip Erdogan's allies, forced a cabinet shuffle, further fueled the lira selloff and sent borrowing costs surging.

In October 2011, when the currency sank 20% against the dollar to a then-record low, inflation hit double digits for the first time in three years, the central bank sharply raised overnight lending rate by 350 basis points to 12.5%. In June 2006, the central bank raised its policy rate by 225 basis points.

>>> US Notable After Hours Movers

Notable after hours earnings movers: EZPW +16.3%, RFMD +0.4%, VMW -5.8% YHOO -4%, CRUS -4.1%

Companies trading higher after hours following earnings/guidance:

EZPW +16.3%, RFMD +0.2%

Companies trading lower after hours following earnings/guidance:

VMW -5.8%, YHOO -4%, CRUS -4.1%, KTCC -3.3%, EA -2.5%, T -1.6%

>>> Blue Coat could be shopped by Thoma Bravo; IBM, Hewlett Pack

Blue Coat could be shopped by Thoma Bravo; IBM, Hewlett Packard, Oracle seen as potential suitors; Goldman Sachs possible adviser 

Blue Coat Systems, the network security business, could be sold by Thoma Bravo, which might hire Goldman Sachs Group Inc to head the sale effort, according to a newswire report that cited unnamed sources.

Reuters cited three people as saying the sale is being explored. The article reported that the sale process hasn't kicked off officially, but that Blue Coat has begun to attract private equity interest, as well as interest from big tech vendors. One source said potential suitors might include IBM, Hewlett Packard and Oracle, the article reported.

Blue Coat, which was purchased by Thoma Bravo for USD 1.3bn in February 2012, has gone from USD 75m in EBITDA at that time to USD 200m EBITDA today, Reuters reported, citing one of the sources. Another source told the newswire it could lure a sale price of at least USD 2bn, the article reported.

Since it went private, Blue Coat has made several acquisitions.

Newswire Round-up

>>> Preview: Turkey Central Bank (CBRT)

Preview: Turkey Central Bank (CBRT) emergency meeting decision expected around 17:00ET

Summary of Potential Decision
- The majority of analysts are expecting Turkey to raise the upper end of its interest rate corridor between around 225-250bps. Other note the hike could be even more aggressive 
- Thus Turkey is expected to increase the Overnight Lending Rate while keeping other key rates steady 
- The 'odd' time of the rate decision today prompted speculation that the central bank could impose capital controls (**later dismessed by the gov Basci) 
- Turkey did note that it would discuss moving to one single rate at meeting tonight but costs were important 

Details: 
- Majority of analysts are expecting Overnight Lending Rate to be raise by 225bps to 10.00% 
- Expected to leave Benchmark Repurchase Rate unchanged at 4.50% 
- Expected to leave Overnight Borrowing Rate unchanged at 3.50%

>>> US Close Dow+0,57% S&P+0,61% Nasdaq+0,35%

Closing Market Summary: S&P 500 Snaps Three-Day Skid

The stock market halted its three-day slide on Tuesday as the S&P 500 gained 0.6%. The tech-heavy Nasdaq (+0.4%) also finished in the green, but couldn't keep pace with the S&P 500 as Apple (AAPL 506.50, -44.00) weighed following its quarterly report.

Although the largest tech company beat on earnings and revenue, investors were not pleased by below-consensus iPhone sales. In addition, disappointing guidance for the second quarter also factored into the stock's 8.0% loss.

The remainder of the technology sector (-0.7%) was a bit more mixed as large-cap names like Google (GOOG 1123.01, +21.78), Oracle (ORCL 37.10, +0.61), and Intel (INTC 24.90, +0.18) posted solid gains while Seagate (STX 51.52, -6.53) tumbled 11.3% after missing earnings estimates.

Outside of technology, most other cyclical groups finished ahead of the broader market. Financials (+1.3%) ended in the lead while the materials (+0.5%) sector was the only cyclical underperformer. U.S. Steel (X 25.34, -0.11) lost 0.4% after reporting mixed earnings.

Elsewhere, the discretionary sector advanced 0.8% with help from homebuilders after DR Horton (DHI 23.00, +2.06) reported better-than-expected results. The stock surged 9.8% while the broader iShares Dow Jones US Home Construction ETF (ITB 24.52, +0.90) jumped 3.8%.

Also of note, the industrial sector (+0.9%) rallied as transports provided support. The Dow Jones Transportation Average gained 1.1%, finishing just above its 50-day moving average.

On the countercyclical side, consumer staples (+0.7%) and health care (+1.3%) took part in the broad rally while telecom services (UNCH) and utilities (+0.4%) lagged.

Treasuries ended little changed despite showing early losses. The benchmark 10-yr yield settled at 2.75%.

Participation was well below average as only 609 million shares changed hands at the NYSE. So far in January, only six sessions have generated above-average volume with five taking place on days when the market ended lower.

Today's economic data included three reports.
Durable goods orders fell 4.3% in December after increasing a downwardly revised 2.6% (from 3.4%). The consensus expected durable goods orders to increase 2.1%. Boeing (BA 137.09, -0.27) reported solid aircraft orders in December, and that was expected to carry overall durable goods orders higher for the month. Yet, the official Census data showed aircraft orders, defense and nondefense, down 16.7%. A large portion of the decline was due to seasonal adjustments that naturally occur in December. Excluding transportation, durable goods orders fell 1.6% which was well below the 0.6% gain expected by the consensus. These orders were revised down from an originally reported 1.2% gain in November to a 0.1% increase.
The November Case-Shiller 20-city Home Price Index rose 13.6% while a 13.8% increase had been expected by the consensus. This followed the previous month's increase of 13.6%.
The January Conference Board's Consumer Confidence Index increased to 80.7 from a downwardly revised 77.5 (from 78.1) in December. The consensus pegged the Consumer Confidence Index at 77.5. The strengthening in consumer confidence stands in contrast to what the preliminary reading for the January University of Michigan Consumer Sentiment Index showed. That index dropped on weakness in the labor market, increased volatility in equity prices, and higher gasoline prices.
Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET while the FOMC will release its latest policy directive at 14:00 ET.

Nasdaq Composite -1.9% YTD
Russell 2000 -2.1% YTD
S&P 500 -3.0% YTD
Dow Jones Industrial Average -3.9% YTD

>>> AT&T beats by $0.03, reports revs in-line; guides FY14 revs above consensus

AT&T beats by $0.03, reports revs in-line; guides FY14 revs above consensus 

Reports Q4 (Dec) earnings of $0.53 per share, excluding non-recurring items, $0.03 better than the Capital IQ Consensus Estimate of $0.50; revenues rose 1.8% year/year to $33.16 bln vs the $33.09 bln consensus.
Co issues upside guidance for FY14, sees FY14 revs of +2-3% rev growth calc to ~$131.3-132.6 bln vs. $131.09 bln Capital IQ Consensus Estimate.
Total wireless revenues, which include equipment sales, were up 4.5 percent year over year to $18.4 billion. Wireless service revenues increased 4.8 percent in the fourth quarter to $15.7 billion. Wireless data revenues increased 16.8 percent from the year-earlier quarter to $5.7 billion.
AT&T posted a net increase in total wireless subscribers of 809,000 in the fourth quarter. Subscriber additions for the quarter included postpaid net adds of 566,000. Postpaid net adds include 299,000 smartphones. Total branded smartphone net adds (both postpaid and prepaid) were 529,000. Total branded tablet net adds were 440,000.
AT&T added 1.2 million postpaid smartphones in the fourth quarter. At the end of the quarter, 77 percent, or 51.9 million, of AT&T's postpaid phone subscribers had smartphones, up from 70 percent, or 47.1 million, a year earlier.
Total U-verse subscribers (TV and high speed Internet) reached 10.7 million in the fourth quarter. U-verse TV had the lowest-ever churn in its history.
AT&T's fourth-quarter wireless operating income margin was 21.4 percent versus 14.5 percent in the year-earlier quarter.
Outlook: AT&T is on track to deliver the financial targets laid out with Project VIP. It expects solid revenue and earnings per share growth with stable margins while returning substantial value to shareowners. In 2014, AT&T expects continued consolidated revenue growth in the 2 to 3 percent range, including strength in wireless service and wireline consumer revenues. The company also expects stable consolidated margins with continued improvement in wireless margins helping offset Project VIP pressure in wireline. Adjusted earnings per share growth is expected to be in the mid-single digit range excluding any impact from future share buybacks. AT&T expects capital expenditures in the $21 billion range. Free cash flow is expected to be in the $11 billion range.

>>> Yahoo! beats by $0.08, reports revs in-line --> -5% After Hours

Yahoo! beats by $0.08, reports revs in-line

Reports Q4 (Dec) earnings of $0.46 per share, $0.08 better than the Capital IQ Consensus Estimate of $0.38; revenues fell 1.7% year/year to $1.2 bln vs the $1.2 bln consensus.

Display:
GAAP display revenue was $553 million for the fourth quarter of 2013, a 6 percent decrease compared to $591 million for the fourth quarter of 2012. Display revenue ex-TAC was $491 million for the fourth quarter of 2013, a 6 percent decrease compared to $520 million for the fourth quarter of 2012.
The Number of Ads Sold (excluding Korea) increased approximately 3 percent compared to the fourth quarter of 2012.
Price-per-Ad (excluding Korea) decreased approximately 7 percent compared to the fourth quarter of 2012.
Search:
GAAP search revenue was $464 million for the fourth quarter of 2013, a 4 percent decrease compared to $482 million for the fourth quarter of 2012. Search revenue ex-TAC was $461 million for the fourth quarter of 2013, an 8 percent increase compared to $427 million for the fourth quarter of 2012.
Paid Clicks (excluding Korea) increased approximately 17 percent compared to the fourth quarter of 2012.
Price-per-Click (excluding Korea) decreased approximately 3 percent compared to the fourth quarter of 2012.
Cash, cash equivalents, and investments in marketable securities were $5 billion as of December 31, 2013 compared to $6 billion as of December 31, 2012, a decrease of $1 billion. During the fourth quarter of 2013, Yahoo repurchased 6 million shares for $231 million and used a net $60 million for acquisitions. During the year ended December 31, 2013, Yahoo repurchased 129 million shares for $3.3 billion and used a net $1.2 billion for acquisitions. During the fourth quarter of 2013, Yahoo received net proceeds of $1.3 billion, which is net of the call spread, from the issuance of 0.00% Convertible Senior Notes due 2018 and net proceeds of $295 million from the settlement of derivative hedge contracts.