FT : Ex-SAC manager ‘broke law’, court told

Ex-SAC manager ‘broke law’, court told

US prosecutors told a jury that Michael Steinberg, a former SAC Capital portfolio manager, "broke the law" by trading on secret business information obtained by his research analyst’s "circle of friends" as the government’s latest insider trading trial began Wednesday. Lawyers for Mr Steinberg painted a different picture saying their client was betrayed by his former research analyst, Jon Horvath – a key government witness – who chose on the eve of his own criminal trial his "self interest over the truth" and claimed that Mr Steinberg was involved in the criminal scheme. Barry Berke, Mr Steinberg’s attorney, told the jury Mr Horvath was "rewriting history" and twisting innocent words in emails into nefarious meanings. He said Mr Steinberg did not know and had no communication with analysts and company insiders who provided Mr Horvath with confidential information. Mr Horvath has pleaded guilty and is expected to testify for the government to support allegations that Mr Steinberg traded Dell stock after learning the computer maker would miss quarterly earnings estimates in August 2008. Earlier this month, ending nearly a decade-long investigation, SAC pleaded guilty to insider trading in connection to the Dell trade and others, and agreed to wind down its operations and pay more than $1.8bn in fines. Six former SAC analysts or portfolio managers have pleaded guilty to insider trading while at the hedge fund. The government has stressed that its investigation is continuing. SAC founder Steve Cohen has not been charged with any criminal wrongdoing. The stakes are high for the US attorney’s office in Manhattan, which has not lost an insider trading case since its widespread crackdown started in 2009. Prosecutor Antonia Apps told the jury of nine women and three men that Mr Horvath was close to being fired in 2007 and after one big trading loss, Mr Steinberg told him he needed an edge, or "proprietary inside information the defendant could make money off of". The next summer Mr Horvath called Mr Steinberg from his vacation in Mexico to relay he learnt from his source about Dell’s disappointing earnings, Ms Apps said. One minute after the men spoke, Mr Steinberg allegedly sold Dell shares short, in effect betting the price would drop. When Dell announced earnings a few days later its shares fell 14 per cent, the biggest drop in nearly eight years, and Mr Steinberg made more than $1m in profits, Ms Apps said. "Secret company information can be a valuable thing," Ms Apps said. Mr Steinberg "got an illegal edge over ordinary investors who played by the rules . . . he broke the law", she said. Mr Horvath would also tell the jury that Mr Steinberg knew it was illegal and asked him what he would say to the Federal Bureau of Investigation if asked about Dell, the prosecutor said. The courtroom in lower Manhattan was packed with rows of supporters, both friends and family, seated behind Mr Steinberg at the defence table. Mr Berke, his lawyer, sought to appeal to the jury that Mr Steinberg, a University of Wisconsin graduate who studied history and philosophy and married his college sweetheart, was not a traditional hedge fund manager. Mr Steinberg joined SAC after college and rose through the ranks to manage more than $100m. He never attended business school and relied on his analysts more than others. Mr Horvath "manipulated the information so Mr Steinberg wouldn’t know it was from an illegal source," Mr Berke said.

>>> US After Hours

After Hours Summary: WSM +5.6%, GMCR +4.6%, SGOC -18.3%, BV -11.6%, VVTV -8.6%, LTD -3.4% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings: DATE +6.4%, WSM +5.6%, GMCR +4.6%, JACK +3.9%, DL +1.4%, KONG +0.5%

Companies trading higher in after hours in reaction to news: AZC +90.5% (arranged $26 mln increase to Red Kite loan facility; commented on Save the Scenic Santa Rita's 'inaccurate' press release), GMCR +4.6% (announced an additional $1 billion buyback; declared quarterly cash dividend of $0.25 per share; co also reported earnings), PETX +4.4% (announced 'positive' top-line results from AT-001 dose-ranging field study in client-owned dogs with osteoarthritis), JCI +4.2% (announced three-year $3.65 billion share repurchase program; increases quarterly dividend by 16 percent to $0.22 from $0.19 per share)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings: SGOC -18.3%, BV -11.6%, VVTV -8.6%, LTD -3.4%, NMIH -0.5%, PLNR -0.1%

Companies trading lower in after hours in reaction to news: QLTI -9.7% (announced it is close to finalizing a pivotal trial protocol for QLT091001 for the treatment of inherited retinal disease; co has undertaken a broad review of strategic options with Credit Suisse), ATTU -6.7% (announced proposed public offering of ordinary shares), AL -4.5% (announced announces secondary public offering of ~10.14 mln shares of common stock), WBMD -3.7% (announced $300 mln offering of convertible notes due 2020), TWGP -1.9% (received Nasdaq notice regarding listing requirements), GCAP -1.2% (to offer $65 mln of convertible senior notes),

>>> US Close Dow -0,41% S&P -0,36% Nasdaq -0,32%

Closing Market Summary: Stocks Slump as Taper Talk Returns

The major averages ended on their lows after early gains turned into afternoon losses. The late decline occurred in reaction to the October FOMC minutes, which mentioned the possibility of tapering in the ‘coming months.' It should be noted that despite today's 0.4% decline, the S&P 500 remains higher by 7.5% since October 9. Stocks held modest gains through the bulk of the session after a better-than-expected October retail sales report set the stage for an upbeat open. The report pointed to an increase of 0.4% while the consensus expected a more modest uptick of 0.1%. More importantly, the report indicated the government shutdown had essentially no effect on consumer spending. The above-consensus data helped retailers outperform the broader market as the SPDR S&P Retail ETF (XRT 86.87, +0.03) ended flat. Among individual names of note, J.C. Penney (JCP 9.44, +0.73) surged 8.4% after its upbeat-sounding guidance overshadowed its bottom-line miss. As the opening hour drew to its close, stocks spiked amid reports the European Central Bank will weigh implementing negative deposit rates if more easing is needed. The euro weakened on the news, falling below 1.3500 against the dollar. It is worth mentioning that negative rates have been discussed in recent weeks. In fact, just yesterday, ECB Executive Board member Joerg Asmussen said the central bank could implement negative deposit rates if the 2.0% inflation target remains elusive. However, Mr. Asmussen added he would be ‘very, very careful' with regards to deploying the policy tool.

Equity indices then returned to their earlier levels after St. Louis Fed President James Bullard said that a strong November jobs report would increase the chances of tapering in December. Taper talk resurfaced this afternoon when the minutes from the October FOMC meeting indicated tapering is ‘likely in the coming months.' The rest of the statement struck a familiar tone as the FOMC said the economy is expanding at a moderate pace while some downside risks remain. The market's reaction was consistent with what transpired after previous mentions of tapering by the Fed. Equities, Treasuries (10-yr yield +8 bps to 2.79%), and gold futures (-2.3% to $1245.50/ozt) sold off while the Dollar Index (+0.4% to 81.02) rallied. Even though the market received tapering hints from Mr. Bullard and the October minutes, it should be noted the labor situation represents just one half of the picture. The Federal Reserve has also committed to maintaining annual inflation close to 2.0%, but has struggled in achieving this target. Today's CPI report spoke to that point as October prices slipped 0.1% while the consensus expected no change. Core prices increased 0.1%, below the 0.2% expected by the consensus. On an annualized basis, CPI came in at 1.0% while core CPI was reported at 1.7%.

When the dust settled, the health care sector (+0.3%) was the only group left in positive territory while the other sectors ended with losses between 0.3% and 1.2%. Rate-sensitive utilities (-1.1%) and telecom services (-0.8%) ended at the bottom of the leaderboard as elevated rates weighed.

Participation was on the light side as only 622 million shares changed hands on the floor of the New York Stock Exchange.

Looking back at today's remaining economic data, business inventories rose 0.6% in September after increasing 0.4% in August. The consensus expected inventory levels to increase 0.4%.

Separately, existing home sales fell 3.2% to 5.12 million in October from an unrevised 5.29 million in September. The consensus expected home sales to fall to 5.20 million. Surprisingly, the National Association of Realtors did not blame the government shutdown for the drop in sales. The shutdown left many banks unable to verify income through the IRS before closing. That was one of the main reasons why mortgage purchase applications fell during the month. We expected the delays in the mortgage approval process to push a number of home purchases that would have occurred in October into November. Tomorrow, weekly initial claims and October PPI will be reported at 8:30 ET while the November Philadelphia Fed survey will be released at 10:00 ET.

o Nasdaq +29.9% YTD o Russell 2000 +29.5% YTD o S&P 500 +24.9% YTD o DJIA +21.3% YTD

(BSW) This Market Is Going Higher, Warns Jeremy Grantham

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This Market Is Going Higher, Warns Jeremy Grantham 2013-11-20 16:26:49.644 GMT

Then, after a further 20 percent to 30 percent rise, another bust

By Roben Farzad Nov. 20 (Bloomberg Businessweek) -- An open letter to Jeremy Grantham, manager of $112 billion, bubble soothsayer, Wall Street historian, and wordsmith: Herewith, belated props for a prediction you made 11 years ago. There we were, in the bowels of Manhattan’s 21 Club. Me: a cub business reporter thinking I was a budding J.J. Hunsecker in Sweet Smell of Success . You: a rapier-witted former oil company economist who—thanks anyway, Terence Stamp—would totally play himself in the Jeremy Grantham movie. Austere. Sober. Dire. No ums or buts, but a menacing look that could kill a goat. The stock market crash and ordeal of 2001 had transpired and shares were marking a bottom. But you were already warning that there would be a huge bill to pay soon enough, now that the Greenspan Federal Reserve had cut interest rates 12 times, most of them in extra-stimulative half-point increments. You exhorted my readers to invest in emerging markets and, if I can recall (I was, alas, in my cups), Carpathian timber, as the world was entering a commodities super cycle. Crude oil was then in the $20s and China had just joined the World Trade Organization. My takeaway: Pffft. This guy with the great accent and spread collar was such the alarmist. After all, who were we to fight the Fed and a tax-cutting Bush administration that had just won a huge midterm mandate? Plus, the country was bubble-chastened and not about to go there again any time soon. Then, well, 2008—after a torrid stretch for emerging markets and raw materials, oil went as high as $145. You called it and then some: The U.S. melted down and completed its worst stock market decade since the days of Herbert Hoover. Then, ever so fleetingly at the March 2009 low, in “Reinvesting When Terrified,” you urged investors to hurry up and get back in while the getting was good. I’ve since read every word of your prophecies. Now, with the Dow, Standard & Poor’s 500, and other indexes regularly setting all-time highs, you proffer good news that is actually bad news: The market is headed potentially much higher … but en route to its third calamity in just over a decade. “One of the more painful lessons in investing is that the prudent investor (or ‘value investor’ if you prefer) almost invariably must forego plenty of fun at the top end of markets,” you write in Grantham, Mayo, Van Otterloo (GMO) & Co.’s latest quarterly letter (PDF), “Breaking News! U.S. Equity Market Overvalued!” “This market,” you add, “is already no exception, but speculation can hurt prudence much more and probably will. Ah, that’s life.” Your “personal guess” is now that the U.S. market, especially riskier shares, could ascend another 20 percent to 30 percent in the next year or two, with the rest of the world, including emerging-market shares, making up some of the ground they’ve lately lost to the States. Great, right? But “then,” you predict, “we will have the third in the series of serious market busts since 1999 and presumably Greenspan, Bernanke, Yellen, et al. will rest happy, for surely they must expect something like this outcome given their experience. And we the people, of course, will get what we deserve.” “Be prudent,” you say, “and you’ll probably forego gains. Be risky and you’ll probably make some more money, but you may be bushwhacked and, if you are, your excuses will look thin. Your call. We of course are making our call.” Which is that U.S. shares are now significantly overvalued. GMO estimates that the S&P 500 would have to fall almost 40 percent (it lost 37 percent in 2008) to hit fair value. Looking ahead, then, the market’s expected rate of return for the next seven years is a negative 1.3 percent per annum, adjusted for inflation. Grantham’s asset allocation deputy Ben Inker does note that all this need not necessarily be preordained, especially if the country enters a “golden age” of corporate investment and economic growth. “This would,” he writes, “solve lots of problems, including the federal deficit and unemployment … but there is sadly no evidence whatsoever that it is occurring.” Square that with what Grantham said earlier this year on Charlie Rose : “I think Bernanke is whipping this donkey—this economy—that can only grow at 1 percent, because he thinks it’s a racehorse that should be growing at 3 percent. … This donkey can’t run.” Rose: “Until it either drops dead or turns into a racehorse.” Grantham: “Yeah, right.” Rose: “And you are betting on dead.” Grantham: “And I’m betting on dead …” Excuse me, then, while I go bet on a fifth of Chivas.

-0- Nov/20/2013 16:26 GMT

>>> Fed's Bullard (dovish, FOMC voter): A strong November jobs reports could inc

Fed's Bullard (dovish, FOMC voter): A strong November jobs reports could increase the odds of a December taper - US economic data is looking somewhat better, GDP has been revised up somewhat - Economy has seen cumulative progress in creating jobs since September 2012, the question is whether this can be sustained. - This cumulative progress is the strongest argument for tapering. - If the Fed can taper due to strong data, everything will be fine, should not see another 'taper tantrum' in markets. - Fed is trying to push people to invest in riskier assets.