SAC has $1.68 billion in withdrawals as trading probe deepens

NEW YORK (Reuters) - Hedge fund billionaire Steven A. Cohen is feeling the pinch from the federal government's insider trading probe as outside investors in his SAC Capital Advisors submitted requests to withdraw a total of $1.68 billion from the firm by year's end.
The amount of the investor redemption notices exceeds the $1 billion figure Cohen had been telling the 900 employees at his $14 billion hedge fund to expect. The firm was bracing for withdrawals as the insider trading investigation increasingly focuses on the activities of former employees of Cohen's fund.
But the redemptions likely will not impede SAC Capital's operation in the near term, because they will be made in quarterly payments to the investors. And roughly 60 percent of the money managed by Cohen's firm is either his or his employees'.
Approximately $660 million in redemptions will be paid out on March 31, an amount that includes some prior redemptions received in 2012. The remaining roughly $1 billion of the new redemption request will be paid in out in the subsequent three quarters.
A representative for one of Cohen's outside investors said even if all of the roughly $6 billion in outside money was withdrawn from SAC Capital, the hedge fund would still be able to operate.
An employee of SAC Capital who did not want to be identified said, "SAC could handily cover all costs for operation," in the unlikely event all the outside money were withdrawn.
A person familiar with the firm said SAC's trading profits will help offset losses from the $1.68 billion investors are redeeming.
SAC's deadline for outside investors to request redemptions in the first quarter was Thursday night, even though the redemptions will be paid out quarterly over the course of this year.
SAC's biggest outside investor, Blackstone Group, is keeping most of its $550 million with the firm. The asset management arm of the private equity firm decided to stay with Cohen's firm after negotiating more flexible redemption terms on behalf of all of the firm's investors.
Cohen, after negotiating with Blackstone, decided to treat investors who wait to redeem until the second quarter no differently than those who redeem now - meaning those who redeem next quarter will also get all their money out by the end of 2013, instead of over four quarters.
Until now, Cohen's outside investors generally had stood by him as the government investigated allegations of insider trading at SAC Capital for at least six years.
One reason investors have stuck with Cohen is because he has delivered annualized average returns of about 25 percent since his firm was launched in 1992. SAC Capital's flagship fund gained 13 percent last year, when hedge funds on average only returned 6 percent.
In January, SAC Capital was up 2.5 percent, about in line with peers.
But following last November's arrest of former SAC portfolio manager Mathew Martoma, in what is alleged to be one of the most lucrative insider trading schemes on record, some investors are losing patience. Citi's private bank, for example, is withdrawing $187 million from SAC this quarter.
That said, many investors, which include high net worth individuals and firms that manage money for small groups of wealthy families, will not say what they are doing.
Wall Street investment bank Morgan Stanley, which is invested in SAC through a fund of funds unit, declined to comment on whether it was part of the group of investors pulling money from SAC in the first quarter. British-based HSBC, which also has an allocation to Cohen's fund, said in an email, "We do not comment on our positions in individual funds."
Some high net worth and family offices are said to have been reassured by Cohen's pledge that investors would not pay for any legal fees incurred by the firm in relation to the insider trading probe. Also, because SAC trades in highly liquid stocks, investors have said that if the firm were forced to unwind it could be done relatively quickly.
As for Cohen's staff, for the moment his senior managers are staying put, according to several headhunters who work in the hedge fund space. One recruiter acknowledged that there has been departures, but it is Cohen's most junior people heading for the doors.
(Reporting by Katya Wachtel and Jennifer Ablan, additional reporting by Svea Herbst-Bayliss; Editing by Matthew Goldstein, Lisa Von Ahn, Nick Zieminski and Leslie Adler)

Exclusive: News Corp, popular tech blog contemplate split-sources

By Peter Lauria and Nadia Damouni
(Reuters) - AllThingsD, the widely read technology blog run by Kara Swisher and Walt Mossberg, has begun discussions with owner News Corp about extending or ending their partnership, sources familiar with the situation told Reuters.
According to these sources, AllThingsD's contract with News Corp expires at the end of the year. One of the sources said Swisher and Mossberg have to deliver a business plan by next week to Robert Thomson, the former Wall Street Journal managing editor who will helm News Corp's publishing unit as CEO after it is spun off.
The fact that AllThingsD's contract is up this year is well known, and sources said the website is receiving a lot of "inbound interest" from potential buyers parallel to its talks with News Corp.
Among the names mentioned as having reached out to AllThingsD were Conde Nast, where Swisher recently signed to work as a contributing writer for Vanity Fair, and Hearst.
Sources also speculated that former Yahoo and News Corp executive Ross Levinsohn might be looking at the website given his new role as Chief Executive of Guggenheim Digital Media, which comes complete with "significant capital to acquire and invest in new media companies." The private equity shop already owns Billboard, Hollywood Reporter, and Adweek.
AllThingsD has reported that AOL expressed interest in acquiring it in the past, but said those talks "were preliminary at best."
Calls to AllThingsD were referred to a News Corp representative who declined comment. A Conde Nast representative declined comment. Calls to Hearst were not immediately returned. Calls and emails to Ross Levinsohn were not returned.
While AllThingsD is recognized as the brainchild of Swisher and Mossberg, News Corp actually owns the website and its name. However, according to provisions in their contract, Swisher and Mossberg have approval authority over any sale, the first source said.
Technically, News Corp could retain the AllThingsD name in the event of a sale, forcing Swisher and Mossberg to start a new venture under a different brand name. But historically in these types of situations a deal is usually worked out to allow the founders to take the company name with them as part of a settlement.
Sources described the website and conference business combined as profitable. It has grown into a technology industry must-read, and features a popular conference division known for snagging A-list corporate executives for intimate interview sessions. Apple's Steve Jobs, Facebook founder Mark Zuckerberg, Microsoft founder Bill Gates, and virtually every other major technology executive has spoken at the D Conference, as it is known.
Earlier this week, AllThingsD's well-regarded media writer, Peter Kafka, led a media-centric conference for the website that included panels with Intel's Erik Huggers, Live Nation CEO Michael Rapino, and Netflix's programming boss Ted Sarandos, among others.
The website has two more conferences on the docket for this year: a mobile one that was postponed until April due to Hurricane Sandy, and the main D Conference in May.
Sources described the relationship between News Corp and AllThingsD as amicable but stressed.
"Like all partnership, there could be more cooperation between the two," said one source. "There is tension between AllThingsD and the Wall Street Journal, for example."
As a result of management changes, over the last few years the website has reported to numerous News Corp executives, among them Gordon Crovitz, Les Hinton, and now Lex Fenwick and Robert Thomson.
Should the two sides reach a deal on a new contract, AllThingsD would be included as part of the publishing unit in the News Corp split.
(Additional reporting by Jennifer Saba; Editing by David Gregorio)
(This story corrects the 10th paragraph to show source said website is profitable in combination with conference business, instead of website is profitable. Corrects spelling of Erik Huggers name in paragraph 11 to Erik, from Eric)

SEC sues over Heinz option trading before buyout

(Reuters) - Securities regulators filed suit on Friday against unknown traders in the options of ketchup maker H.J. Heinz Co, alleging they traded on inside information before the company announced a deal to be acquired for $23 billion by Warren Buffett's Berkshire Hathaway Inc and Brazil's 3G Capital.
The suit marks the second time in six months that the SEC has taken legal action for alleged insider trading on a 3G deal.
The suit, in federal court in Manhattan, cites "highly suspicious trading" in Heinz call options just prior to the February 14 announcement of the deal. The regulator has frequently in past filed suit against unnamed individuals where it has evidence of wrongdoing, but is still trying to uncover the identities of those involved.
That trading, the suit said, caused the price of the particular call option they bought to soar 1,700 percent and generated unrealized profits of more than $1.7 million.
The regulator claims the traders are either in, or trading through accounts in, Zurich, Switzerland. The account had no history of trading in Heinz over the last six or so months.
It has also obtained an emergency order to freeze assets in the Swiss account linked to the trading. In the suit, the SEC refers to the account as the "GS Account" and in a statement Goldman Sachs Group Inc said it was cooperating with the regulator's investigation.
"Irregular and highly suspicious options trading immediately in front of a merger or acquisition announcement is a serious red flag that traders may be improperly acting on confidential nonpublic information," Daniel Hawke, chief of the SEC's Division of Enforcement's Market Abuse Unit said in a statement.
Representatives of Heinz and Berkshire Hathaway were unavailable for immediate comment. A 3G representative declined to comment. The founder of 3G, Jorge Paulo Lemann, is from Brazil, but has made a home in Switzerland since the 1990s. He has not been implicated in any wrongdoing related to the deal.
After the deal was revealed on Thursday, options market experts called Wednesday's trading "suspicious and incredibly well-timed."
The suit marks the second time in less than six months that the SEC has taken action over a 3G acquisition. In September 2012, the regulator got a court order to freeze the assets of a Wells Fargo & Co stockbroker who allegedly traded on inside information about 3G's 2010 acquisition of Burger King.
In that case, the SEC said the Brazilian stockbroker got the information from a client who had invested at least $50 million in one of 3G's funds.
The suit also marks the second time in two years that controversy has erupted over a Berkshire acquisition target.
In March 2011, Berkshire struck a deal to buy chemical company Lubrizol for $9 billion. Less than three weeks later, Berkshire said Buffett lieutenant David Sokol was resigning and disclosed he had been buying Lubrizol shares while pushing Buffett to acquire the company. The SEC dropped a probe into Sokol's trading earlier this year.
The suit is Securities and Exchange Commission v. Certain Unknown Traders in the Securities of H.J. Heinz Co, U.S. District Court, Southern District of New York, No. 13-1080.
(Reporting by Jonathan Stempel and Bernard Vaughan.; Writing by Ben Berkowitz.; Editing by Andre Grenon, Mary Milliken, Gary Hill)

After decent rally, perhaps time for a pause

NEW YORK (Reuters) - Stocks could struggle to extend their seven-week winning streak as the quarterly earnings period draws to a close and the market bumps into strong technical resistance.
Many analysts say the market could spend the next few weeks consolidating gains that have lifted the benchmark Standard & Poor's 500 (^GSPC) by 6.6 percent since the start of the year.
The S&P 500 ended up 0.1 percent for the week, recovering from a late sell-off on Friday after a Bloomberg report about slow February sales at Wal-Mart (WMT) triggered a slide in the retailer's shares. It was the index's seventh week of gains.
Odds of a pullback are increasing, with the market in slightly overbought territory, said Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston.
"I do suspect the closing of the earnings season will lead to at least a pause and possibly a pullback," Zaro said. The S&P 500 could shave 3 to 5 percent between now and early April, he said.
Fourth-quarter earnings have mostly beaten expectations. Year-over-year profit growth for S&P 500 companies is now estimated at 5.6 percent, up from a January 1 forecast for 2.9 percent growth, and 70 percent of companies are exceeding analyst profit expectations, above the 62 percent long-term average, according to Thomson Reuters data.
On Thursday, Wal-Mart, the world's largest retailer, is due to report results, unofficially closing out the earnings period. Investors will be keen to see its quarterly numbers, especially after the Friday's news report that rattled investors.
The S&P 500 has gained 4.3 percent since Alcoa (AA) kicked off the earnings season on January 8.
The approaching March 1 deadline for across-the-board federal budget cuts unless Congress reaches a compromise adds another reason for caution, especially with recent economic data indicating the recovery remains bumpy.
Manufacturing output fell 0.4 percent last month, the Federal Reserve said on Friday, but production in November and December was much stronger than previously thought.
TESTING RESISTANCE
The S&P 500 has been trading near five-year highs, and it notched its highest level since November 2007 this week. But the gains have pushed the benchmark index almost as far as it is likely to go in the near term, with strong resistance hovering around 1,525 and 1,540, one analyst said.
As a result, the index is set to move sideways, said Dave Chojnacki, market technician at Street One Financial in Huntington Valley, Pennsylvania. "We just don't have the volume or the catalyst right now" to go above those levels, he said.
At the same time, other analysts say, the market has not shown significant signs of slowing, including a break below 15- and 30-day moving averages.
Such moves would be needed to show that momentum is slowing or that the market is at risk of a correction, said Todd Salamone, director of research for Schaeffer's Investment Research in Cincinnati, Ohio. The S&P 500's 14-day moving average is at 1,511 while the 30-day is at 1,494. The index closed Friday at 1,519.
Recent M&A activity, including news this week of a merger between American Airlines and US Airways Group (LCC.N), helped provide some strength for the market this week and optimism that more deals may be on the way.
In the coming days, the market will focus on minutes from the latest Federal Reserve meeting, due to be released on Wednesday, which could provide support if they suggest the Fed will remain on its current course of aggressive monetary easing.
The Fed minutes released in January spooked markets a bit when they revealed that some Fed officials thought it would be appropriate to consider ending asset purchases later in 2013. U.S. Treasury yields rose on that news, though market worries about a near-term end to quantitative easing have since faded.
Among other companies expected to report earnings next week are Nordstrom (JWN), Hewlett-Packard (HPQ) and Marriott International (MAR)
(Reporting By Caroline Valetkevitch; Editing by Leslie Adler)

G20 defuses talk of "currency war"

MOSCOW (Reuters) - The Group of 20 nations declared on Saturday there would be no 'currency war' and deferred plans to set new debt-cutting targets in an indication of concern about the fragile state of the world economy.
Japan's expansive policies, which have driven down the yen, escaped criticism in a statement thrashed out in Moscow by financial policymakers from the G20, which groups developed and emerging markets and accounts for 90 percent of the world economy.
After late night talks, finance ministers and central bankers agreed on wording closer than expected to a joint statement issued last Tuesday by the Group of Seven rich nations backing market-determined exchange rates.
A draft communique seen by delegates on Friday had steered clear of the G7's call for economic policy not to be targeted at exchange rates. But the final version included a G20 commitment to refrain from competitive devaluations and stated monetary policy would be directed at price stability and growth.
"The language has been strengthened since our discussions last night," Canadian Finance Minister Jim Flaherty told reporters. "It's stronger than it was, but it was quite clear last night that everyone around the table wants to avoid any sort of currency disputes."
The communique did not single out Japan for aggressive monetary and fiscal policies that have seen the yen drop 20 percent, a trend that may now continue.
"The market will take the G20 statement as an approval for what it has been doing -- selling of the yen," said Neil Mellor, currency strategist at Bank of New York Mellon in London. "No censure of Japan means they will be off to the money printing presses."
The statement reflected a substantial, but not complete, endorsement of Tuesday's statement by the G7 nations - the United States, Japan, Britain, Canada, France, Germany and Italy.
"We all agreed on the fact that we refuse to enter any currency war," French Finance Minister Pierre Moscovici told reporters.
NO FISCAL TARGETS
The text also contained a commitment to credible medium-term fiscal strategy, but stopped short of setting specific goals.
A debt-cutting pact struck in Toronto in 2010 will expire this year if leaders fail to agree to extend it at a G20 summit of leaders in St Petersburg in September.
European Economic and Monetary Affairs Commissioner Olli Rehn said he expected concrete debt targets to be agreed at the September meeting.
"We have a common view on the need to have a credible medium-term plans for fiscal consolidation, which is also essential so we have foundation for sustainable growth," he told Reuters.
The United States says it is on track to meet its Toronto pledge but argues that the pace of future fiscal consolidation must not snuff out demand. Germany and others are pressing for another round of binding debt-cutting goals.
Backing in the communique for the use of domestic monetary policy to support economic recovery reflected the U.S. Federal Reserve's commitment to monetary stimulus through quantitative easing, or QE, to promote recovery and jobs.
QE entails large-scale bond buying -- $85 billion a month in the Fed's case -- that helps economic growth but creates money, much of which has leaked into emerging markets, threatening to destabilize them.
That was offset in the communique by a commitment to minimize "negative spillovers" of the resulting financial flows that emerging markets fear may pump up asset bubbles and ruin their export competitiveness.
"Major developed nations (should) pay attention to their monetary policy spillover," Vice Finance Minister Zhu Guangyao was quoted by state news agency Xinhua as saying in Moscow.
"Major developed countries' implementation of excessively relaxed currency policy has an influence on the world economy."
Russia, this year's chair of the G20, said the group had failed to reach agreement on medium-term budget deficit levels and also expressed concern about ultra-loose policies that it and other big emerging economies say could store up trouble for later.
Finance Minister Anton Siluanov said a rebalancing of global growth required more than an adjustment of exchange rates.
"Structural reforms in all countries, either with a positive or negative balance of payments, should play a bigger role," he said in an address to Saturday's talks.
The G20 put together a huge financial backstop to halt a market meltdown in 2009 but has failed to reach those heights since. At successive meetings, Germany has pressed the United States and others to do more to tackle their debts. Washington in turn has urged Berlin to do more to increase demand.
On currencies, the G20 text reiterated its commitment last November, "to move more rapidly toward mores market-determined exchange rate systems and exchange rate flexibility to reflect underlying fundamentals, and avoid persistent exchange rate misalignments".
It said disorderly exchange rate movements and excess volatility in financial flows could harm economic and financial stability.
(Additional reporting by Gernot Heller, Lesley Wroughton, Maya Dyakina, Tetsushi Kajimoto, Jan Strupczewski, Lidia Kelly, Katya Golubkova, Jason Bush, Anirban Nag and Michael Martina. Writing by Douglas Busvine. Editing by Timothy Heritage/Mike Peacock)

Icahn vs. Ackman: Stay Away From Stocks Manipulated by the 1%, Says Munson

Shares of Herbalife (HLF) are up 20% in early trading after it was revealed late yesterday that billionaire investor Carl Icahn filed a 13D disclosing that he'd taken a 13% stake in the company.
Those familiar with the story of Herbalife understand that Icahn's move was likely driven by his ongoing and very public spat with fellow billionaire, hedge fund manager Bill Ackman. Ackman has a large short position in Herbalife, leaving him vulnerable to a short squeeze. In an instant classic on-air argument last month on CNBC, Ichan suggested that HLF could become "the mother of all short squeezes."
Related: Who's Winning the Battle Over Herbalife?
The Icahn-Ackman brawl is the most public instance of what has become a recurring market theme: Hedge funds taking big positions then touting them on financial television. It makes for great theater but Lee Munson of Portfolio LLC and author of Rigged Money, says it's all part of a strange new world.
"Hedge funds back in the '80s and '90s used to be private, we used to be secretive. Nobody told anyone about their positions," Munson explains in the attached clip. "Nowadays you go on TV and you jack with the system."
Jacking with the system is trader-speak for causing wild swings in stock prices. He may think Icahn bought such a huge chunk of Herbalife just to artificially inflate the stock price, but Ackman's in no position to complain. Back in December it was Ackman himself who caused a sell-off in shares of HLF when he called the company a "pyramid scheme" on national television, causing the shares to drop more than 10% in a single day. This came after he disclosed a $1 billion short position on the stock.
Related: Is Herbalife a Pyramid Scheme?
Munson wants to know where the SEC is in all of this. They may not be profiting from their public jaw-boning (for his part Ackman says he hasn't booked any profits on HLF yet) but these titans are undeniably causing massive swings in share prices. The spats might make for good theater but individual investors are getting whipsawed at the whims of the super rich.
Related: Herbalife -Great Theater, Terrible Trade
Enforcement officials may or may not decide to put a stop to these shenanigans, but waiting for it to happen is a sucker's game. Munson says the only way for individuals to really protect themselves from getting trampled is to get out of the way.
"If your stock is in the news because of two big dudes getting in the big grass and trying to fight, you should leave the stock," Munson concludes.

California Cart Builders: Creating a different kind of mobile business

Last year, we brought you the story of Rodney and Elma Eaton the founders and owners of a family business from southern California. Their story is one of sacrifice and perseverance; one with humble roots that proves with the right idea and enough family support anything is possible. Their story was so compelling we checked in with them again recently to find out where the business is heading.
Related: Brothers buy house as teens, now real estate superstars
If you haven't heard their story it starts at the turn of the millennium. Rodney and Elma seemed to have it made. Rodney was making six figures as a pressman for a successful printing firm. They had a beautiful house in Corona, California with a pool and horses to keep their four kids busy and happy.
But Elma wanted something more. Specifically, she wanted vacations that did not include sleeping outdoors and cooking over a campfire. In order to get money to afford something a bit more luxurious, she decided to open a hot dog stand. Elma had worked in food services before and had a friend who'd made good money running a cart. But Elma had something her friend didn't: Rodney.
A super-handy guy with a flair for design, Rodney built Elma a hot dog cart that looked so sharp it drew a lot of customers and ultimately someone who wanted to buy it and the business. After repeating the same pattern a few more times, Rodney and Elma decided to forget selling hot dogs and focus on building and selling carts. They made plans to downsize their lives and build the business slowly. But Rodney also wanted something more: to work for himself.
"I wanted to be independent," he says. "I knew this could be successful deep down inside and I just couldn't wait." So in 2000, Rodney gave up a $125,000 salary -- and decided to go into business for himself. Telling his wife he'd just quit his great job at the printing shop was just the first of many hardships Rodney, and his family, would have to endure.
"When Rodney called me and told me he had just quit his job I panicked," Elma recalls. He made 125 thousand dollars a year…and then nothing." Having already sold their house in Corona, the Eatons suddenly found themselves without a home or any income. For the next three years, the family would live in what Rodney calls "a really junky 1970 trailer" with no running water. "It wasn't pretty," he recalls. "We lived in dirt." Times were tough -- really tough for the Eatons, who had to borrow water from a neighbor and haul away their waste, and tried (unsuccessfully) to get Food Stamps. But Rodney had a dream to build better food trucks far superior than anything he has ever created.
Eventually, the orders started trickling in. In the early days, Rodney and his oldest son Tony would work all hours and sleep in a garage. All the money they'd make from one truck would go toward buying newer and better tools to make the next one, everything from hammers to a metal grinder. Twelve years after a taking a huge leap into the unknown, the Eatons have a thriving business, California Cart Builder in Lake Elsinore, California. As the food industry changed, so did the business: The Eatons now specialize in custom-made food trucks, which have sparked a culinary revolution all over the world.
From less than 10 orders just a few years ago, California Cart Builder now has hundreds of clients from all over the world, including as far away as Dubai, Iceland and Australia. The company now has 13 employees, including three of the Eaton children: Tony, Rodney Jr. and Shay. The family has lunch together every day and seem to have all learned the same lesson from those tough days in their used trailer: You don't need material things to be happy. Hard work pays off.
Related: New Orleans oldest restaurant still attracts celebrities
The company continues to thrive in 2013. After a 12% increase in sales in 2012, California Cart Builders is on track for 30% year-over-year growth this year. If all goes well they could break $3 million in revenue this year. In fact, to keep up with demand the company is building a new manufacturing plant in Dallas, Texas. "We feel that that area is underserved," says Elma. "They don't have our quality of product there at this time."
Driving that growth is the company's innovation. The company continues to innovate not only in the food truck business. Thanks to their expertise in automotive customization, the Eatons are now moving into new businesses. "We're actually asking people why should food trucks have all the fun," says Elma. "We're expanding to other mobile businesses -- tattoo trailers, photo studios... you name it we can put it in a mobile business." They also have orders for mobile pet groomers and mobile nail salons.
"It's a long way from the dirt," says Rodney.