SEC plans for U.S. firms to switch to global accounting rules

As U.S. companies are gearing up to use international accounting standards, the Securities and Exchange Commission is seeking comments on its plan for managing the migration. Under the SEC's "road map," most companies will adopt the International Financial Reporting Standards in 2014, although some may be allowed to do so sooner.

More at http://www.ft.com/cms/s/0/93d5193c-746b-11dd-bc91-0000779fd18c.html

New accounting standards predicted to have wide effects: The Securities and Exchange Commission has set up a timeline for U.S. companies to change over to international accounting standards, but industry insiders say the change is much more far-reaching than many probably realize. "It's about so much more than an accounting exercise -- I have to say that over and over again," said Danita Ostling, an audit partner at Ernst & Young.

read more at http://www.ft.com/cms/s/0/2ec2bf54-7461-11dd-bc91-0000779fd18c.html

US credit card reforms slammed by banks

An upcoming Congress bill aimed at preventing providers from introducing sudden fees and rate increases from credit card firms might prove counterproductive, according to US bankers.

Under the terms of the bill, the hikes must only take effect after 45 days of notice has been given, and credit card contracts cannot be changed for any reason.

Penalties can take the form of interest rate increases on balances for offences such as stopping a check payment, Bloomberg reports.

However, if these are prevented, general charges could go up across the board, the American Bankers Association ha s said.

Speaking to the news agency, the body's senior vice president Ken Clayton commented: "The tough charges introduced by US credit card firms are causing consumer outrage."

However, representative Carolyn Maloney - who is sponsoring the bill through Congress - said that the new legislation was necessary in order to protect consumers.

"Now more than ever, we need to end unfair and deceptive credit-card lending practices that make it difficult for consumers to control their credit and manage their debt," she said.

Once hot ETF "fad" faces a backlash

There are mounting signs of a backlash against exchange-traded funds, Ben Steverman writes for BusinessWeek. The reason, he says, is that "the ETF craze has led to a whole industry whose entire goal is apparently to just think up new ETFs. With ETFs chasing the latest hot investment idea, you end up with a fad (the ETF concept) chasing more fads."

read more at http://www.businessweek.com/investing/insights/blog/archives/2008/08/signs_of_an_etf.html

Nobel Prize economists say recovery at least a year away

At the annual meeting of Laureates on Lake Constance, the consensus among Nobel Prize-winning economists is that a recovery of the global financial system may not start for at least a year. "There is a tremendous amount of deleveraging still necessary in the United States and Europe," said Myron Scholes, co-founder of Long-Term Capital Management. "I'm not exactly sure when it's going to end. There are many financial institutions that need to add capital or sell assets, but it's getting more difficult."

more at http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/08/22/cnnoble122.xml

US Mint enjoys 'new gold rush' on popular coin

Strong consumer demand has force the US Mint to introduce a new allocation method for its American Eagle bullion coins.

The Mint began taking orders for the coins again yesterday, triggering an "overwhelming" response, CNBC reports.

Sales of the American Eagles had previously been suspended last week due to the high demand, resulting in the bottleneck.

Under the new system, half of the new bullion coins produced will be allocated equally among dealers - while the remainder will be given out depending on how many each dealer has previously sold.

In a memo to dealers, the Mint said: "The unprecedented demand for American Eagle gold one-ounce bullion coins necessitates our allocating these coins among the authorized purchasers on a weekly basis until we are able to meet demand."

The bullion coins were originally introduced by the Mint in 1986.

They are popular with investors as well as collectors, as they offer an easy way of investing in the gold market.

1862: Treasury releases fractional currency

As the economy took a beating from the Civil War, the Treasury Department sprung into action by releasing fractional currency, alternately known as postage currency. The new 5, 10, 25, and 50-cent notes hit the streets on this day.
-source: www.history.com

Abu Dhabi SWF charts global expansion

The Abu Dhabi Investment Council, a sovereign-wealth fund in the United Arab Emirates worth between $200 billion and $300 billion, plans to expand its investments outside the Middle East and North Africa for the first time. It plans to include Japan, the U.S. and Europe in its investment mandate. According to a media report, the fund is likely to focus on investments in equity, real estate, bonds and seed money for Japanese startups.

1819:Allan Pinkerton is born

Fabled crime fighter Allan Pinkerton, who was involved in one of the bloodiest incidents in economic history, was born on this day in Glasgow, Scotland. Pinkerton founded a detective agency in Chicago that originally gained fame for solving a series of train robberies and later became known for helping management break strikes by the new labor unions. During the summer of 1892, his distaste for unions led Pinkerton to lend a hand to a fellow Scot, Andrew Carnegie. Tired of working in extreme heat for long hours and little pay, the workers at Carnegie's Homestead plant in Pennsylvania had threatened to strike. In response, Carnegie's partner slashed wages and erected a wall around the plant, effectively forcing a walk-off. Replacement workers were hired and Pinkerton's detectives were enlisted to ensure the workers safe passage to the plant. However, the appearance of Pinkerton's men led to violence, as the strikers and detectives clashed. Nine detectives died and nineteen of the striking workers were eventually hanged for crimes related to the incident.
-source: www.history.com

SEC plans to broaden short-selling rule

The Securities and Exchange Commission aims to propose a new short-selling rule in the coming weeks, broadening an emergency order -- covering 19 financial stocks -- that ended last week. SEC Chairman Christopher Cox said the proposal "will focus on marketwide solutions" and possibly require more transparency in disclosing to the public significant short positions in stocks.

More at http://www.reuters.com/article/ousiv/idUSN1929265720080819

Brazilian economy 'stable', central bank claims

Latin America's largest economy is to continue to enjoy strong growth, the president of the Brazilian Central Bank has said.

Henrique Meirelles said that the real-term GDP rise of 6.4 per cent marked in Brazil across the second quarter would be matched over months to come.

The comments were made during a speech to the Brazilian-American Chamber of Commerce in New York.

Mr Meirelles commented: "In June 2008, the Brazilian economy created almost 1.9 million new formal jobs per year, the basis of the kind of growth pattern that Brazil has embarked into in the last few years. The unemployment rate is also coming down."

He added: "The business community in Brazil is betting that domestic demand will stay during the next years, with ups, downs and cycles, yet without the kinds of stops-and-goes that Brazil has seen in the past."

The comments come as the central bank issues its new inflation forecast - predicting that the rate will hit five per cent by the end of 2009.

This will mean that the rate will moderate from a projected 6.44 per cent at the end of 2008, according to figures posted on the bank's web site.

The prediction was derived from a survey of 100 economists.

CBOT, CBOE agree on ownership rights

The Chicago Board Options Exchange said on Wednesday it has reached a definitive deal with CME Group Inc.'s Chicago Board of Trade over who is entitled to participate in a lucrative legal settlement that was agreed to earlier this year.

The deal defines which CBOT full members qualify for an ownership stake in the largest U.S. options market, which needs a settlement in order to complete its restructuring into a for-profit company.

Once this happens, it would clear the way for the options market to eventually float shares to the public. Analysts widely expect CBOE to be an attractive acquisition prospect for larger world exchanges.

The deal was delayed the last couple weeks so that both parties could work out the terms of the tentative settlement announced on June 2, which calls for certain CBOT members to receive $300 million in cash and an 18 percent equity interest in CBOE.

The valuation of the settlement remains unchanged. But it now defines which CBOT class member is eligible to receive the CBOE equity portion or just the cash part of the agreement.

The proposal still requires approval from a simple majority of the 931 seats held by CBOE members and the Delaware Court of Chancery. A CBOE membership vote is slated for Sept. 17.

The agreement would end CBOE's protracted legal dispute with certain members of the CBOT, now part of CME, the world's largest derivatives exchange.

Sources close to the negotiations told Reuters the definitive deal was delayed as those in charge of a class-action lawsuit tried to define the class of members who would be eligible to participate in the settlement.

The CBOT and some of its members sued the CBOE in 2006 in a Delaware court to retain so-called exercise rights at the options exchange. Those exercise rights would cease to exist upon approval of the settlement.

The trading rights date back to when the options exchange was spun off by the Chicago Board of Trade in 1973 and eligible CBOT members were allowed to trade options at the exchange without having to buy a membership.

The CBOE contends those rights were extinguished when CME Group bought CBOT last year.

Christer Gardell - 'Icahn Of Sweden’ Elaborates

The investor whom Swedish newspapers call ``the butcher'' and former Prime Minister Goran Persson says is destroying the fabric of his nation's capitalism works out of an 1881 stone townhouse in a tree-lined street in Stockholm.

Cevian Capital AB co-founder Christer Gardell, whose office overlooks Humlegarden Park, where kings once grew their hops for beer, says he's a long-term investor trying to increase the value of companies.

Like activist investors in the U.S. and U.K., he buys enough shares of a company to gain seats on the board and then pushes for changes, such as firing directors, shedding assets and installing new managers. Gardell, 47, says his location far north in Europe gives him an edge.

``The advantage we have in Stockholm is that we've been away from the London noise, where all these investors and hedge funds are talking and end up with the same ideas and the same portfolios,'' says Gardell, wearing a single-breasted blazer, spectacles and beige slacks. ``In Stockholm, there is no one to talk to.''

To Russia (Without Love)

Maybe Mother Russia is still gloating over the Georgia affair, but its show of military might was not so tactical for its economy, where the smart money is leaving in droves (read: at a rate rivaling the 1998 ruble crisis). Is this only the beginning, or is the worst mostly over? (Note: don’t miss the “million-headed hydra of the bourgeoisie” quote in the story after the jump. So necessary.)

Investors pulled their money out of Russia in the wake of the Georgia conflict at the fastest rate since the 1998 rouble crisis, new figures showed on Thursday.
Russian debt and equity markets have also suffered sharp falls since the conflict began on August 8, with yields on domestic rouble bonds increasing by up to 150 basis points in the last month.

The moves come as President Dmitry Medvedev faces pressure from business leaders concerned that the impact of the global credit crisis is starting to be felt in Russia.

Credit conditions are to be discussed at next month’s “summit of oligarchs”, the Russian Union of Industrialists and Entrepreneurs meeting that former President Vladimir Putin held annually to discuss economic issues.

Vladimir Potanin, head of Interros, one of Russia’s largest industrial groups, has complained about the shortage of long-term credit to Mr Medvedev, the financial newspaper Vedomisti reported on Thursday.

More at http://www.ft.com/cms/s/0/60abb0d4-6fb1-11dd-986f-0000779fd18c.html

World’s Biggest Derivatives Exchange Is Born

With the approval of the Nymex-CME merger, the Chicago Mercantile Exchange has now realized its dream of becoming the most sprawling derivatives market...ever! 

This transaction not only gives it control of the dominant venue for global oil- and metals-futures trading, but also adds emissions trading, freight derivatives and even a laggard Middle East exchange. Oh, and did we mention that this deal puts it in charge of clearing roughly 98% of U.S. exchange-listed futures? Yeah, that too. Plus, by the look of it, this is only the first stage in its plan for eventual world takeover.

CME Group Inc. secured victory in its 12-month pursuit of Nymex Holdings Inc. when members of the New York Mercantile Exchange voted overwhelmingly in favor of the proposed deal.

The takeover gives the CME control over the dominant venue for global oil- and metals-futures trading at a time when some of its core product lines are suffering slowing growth. CME also will gain entry in emissions trading, freight derivatives and the Middle East exchange market.

Nymex won backing from "around 650" of the 816 members, more than the 75% necessary, Nymex Chairman Richard Schaeffer said on a call with reporters.

Shareholders in both companies also approved a combination that will extend its lead as the world's largest futures platform by revenue, adding a suite of energy and metals contracts and other potential sources of growth.

The future of the exchange combination had hung in the balance after dissident Nymex members threatened to block the transaction amid discontent over its terms.

1841: First bankruptcy laws established

The first set of standard bankruptcy laws hit the books throughout the nation. And, while the laws were repealed a few years later, they proved popular during their brief tenure, with 33,737 people utilizing the newfound right to voluntarily declare for bankruptcy.
-Source: www.history.com

1862: Eight-hour workday is born

Today marks a birthday of sorts for the eight-hour workday. In the mid-1800s most people worked ten- or twelve-hour days, prompting the newly formed National Labor Union (NLU) to call on Congress to officially trim the workday. While Congress didn't heed the NLU's pleas, the union's efforts pushed the issue onto the national stage. The public picked up the call for shorter hours, as did some legislators: Federal employees were the first to enjoy truncated days when Congress passed appropriate legislation in 1863. However, after a few fruitful decades, the drive for the eight-hour day hit a snag in 1886, when a strike by workers at the McCormick Reaper Manufacturing Company turned bloody. Though the workers, who had hit the picket line to protest for shorter hours, were victims of violence, the ugly affair, along with the ensuing Haymarket Riot, branded the push for the eight-hour day as a radical movement. But, in 1923, the movement received support from an unlikely ally, as the Carnegie Steel Corporation granted shorter work hours to its employees. Eventually, President Franklin Roosevelt made the eight-hour workday an official part of his New Deal legislation.
-source: www.history.com

The Dollar Rallies

The biggest economic story of the last week has been the continuing rally in the U.S. dollar. After flirting with record lows against the euro as recently as July 15, the dollar hit a six-month high against the euro and a two-year peak against the U.K. pound sterling as growth in the world's developed economies girded to a halt. Even long-time bears such as George Soros and Jim Rogers admitted that they had covered their short positions in the greenback.

After spending the last half decade in the doghouse of currency traders, the dollar is emerging as the world's favorite currency. Why the sudden change? It turns out that the popular "decoupling theory" -- the belief that the rest of the world's economies can continue to thrive while the U.S. economy slows -- is bunk. Much to the chagrin of market Cassandras, it is other developed economies, and not the United States, that are flirting with recession.

Data released last week shows that the 13-nation eurozone economy contracted 0.2% in the second quarter. That's the first decline since before the euro's introduction in 1999, with the economies of Germany, France, and Italy all contracting. And because inflation in the eurozone is running at almost double the European Central Bank's (ECB) target rate, it's unlikely that the ECB will cut interest rates before 2009. As a result, both European economies and the euro are likely to stagnate during the foreseeable future.

Is my money safe with my broker?

My brokerage accounts are at Merrill Lynch. I own mostly stocks, plus open and closed mutual funds, and have between $1 and $2 million at three different accounts. Are they safe or will Merrill Lynch also go belly-up? If so, do I risk losing everything?

There are no safety ratings for brokers. But we're ready to present today the facts we do have.

All brokers currently doing business must meet the SEC's minimum capital requirements. But the minimum capital requirements are merely a bare bones minimum — not nearly enough, especially given the uncertainty regarding the valuation of certain new securities like mortgage-backed securities and derivatives.

So when we look at a broker, we look for a capital cushion that is much larger than the minimum capital requirements. The question we ask is: For every dollar of capital that they're required to have, how many dollars in net capital do they actually have?

The brokers listed at the top have the highest capital multiples. The brokers listed at the bottom have the lowest capital multiples. Bear in mind that there are other factors which can contribute to the strength or weakness of the firm. So this capital multiple alone is not enough to pan a particular firm. But it does give you something solid to hang your hat on.

If your brokerage firm runs out of its own capital, if regulators cannot find a buyer, and if the Fed doesn't bail it out, your account could be frozen. You will still have your stocks, bonds and ETFs. They're not going away. But you may not be able to sell your securities when you want to.

Banks re-evaluate business stability in Russia

While most large investment banks do not plan to pull out of their investments in Russia, the country's military conflict with Georgia makes them increasingly nervous. Some banks halted new stock and debt offerings after comments by Russian Prime Minister Vladimir Putin about Mechel, a Russian mining company. Putin's criticism of the firm's CEO sent shares of Mechel plummeting.
More at http://www.iht.com/articles/2008/08/15/business/15ruble.php

Most firms pay no income taxes - Congress

Study finds that the majority of domestic and foreign corporations in the United States avoid paying federal income taxes.

Nearly two-thirds of U.S. companies and 68% of foreign corporations do not pay federal income taxes, according to a congressional report released Tuesday.

The Government Accountability Office (GAO) examined samples of corporate tax returns filed between 1998 and 2005. In that time period, an annual average of 1.3 million U.S. companies and 39,000 foreign companies doing business in the United States paid no income taxes - despite having a combined $2.5 trillion in revenue.

The study showed that 28% of foreign companies and 25% of U.S. corporations with more than $250 million in assets or $50 million in sales paid no federal income taxes in 2005. Those companies totaled a combined $372 billion in sales for the largest foreign companies and $1.1 trillion in revenue for the biggest U.S. companies.

The GAO report, which did not name any specific companies, said that some corporations reported zero income before deducting expenses while others said they had zero net income after deducting expenses. Either way, those companies reported no tax liability, the GAO said.

But many of the companies the report found had paid no tax were likely small businesses that pay other taxes. Generally, many small firms, because they do not have shareholders, are able to shift corporate income to individual income.

"Small businesses that are going to be liable for a lot of income tax are likely to use other tax forms so they only pay individual income taxes," said Eric Toder, a senior fellow at the Tax Policy Center.

The study was requested by Sens. Byron Dorgan, D-N.D, and Carl Levin, D-Mich., in an attempt to determine if corporations are abusing so-called transfer prices.

Transfer prices are charges on transactions between subsidiary companies within a larger corporate group. Companies may try to lessen their U.S. tax hit by improperly transferring income to foreign subsidiaries in countries with lower rates.

The GAO study did not attempt to determine if companies were abusing transfer prices, but it said that potential abuse of transfers could reduce the amount of taxes companies pay in the United States.

"The tax system that allows this wholesale tax avoidance is an embarrassment and unfair to hardworking Americans who pay their fair share of taxes," Dorgan said in a statement.

U.S. politicians disagree about how much income tax the government should levy on corporations. Currently the rate is 35%, but most foreign governments have set their rates below the U.S. level.

"The U.S. corporate tax rate stayed the same while foreign countries have drifted down, which increases the incentive for companies to report income in other countries," said Toder. "If the U.S. drops the rate to 30% but closes other tax loopholes, that may ultimately generate more tax revenue for the government."

CME-Nymex merger shaken by late details of payout

Just days before decisive merger votes, members of Nymex Holdings' New York Mercantile Exchange have been surprised to find their after-tax payment from purchaser CME Group is much less than they expected. Chicago Mercantile Exchange parent CME had offered to buy out the 816 members of its New York rival by paying each $750,000. Those members now find that CME plans to treat the payments as "ordinary income" for tax purposes. That cuts the value of the payouts to $472,000 each, assuming Nymex members are taxed at the highest federal level.

Liquidnet trading system targets $500 million from IPO

Liquidnet Holdings has filed with the SEC its intention to go public by selling as much as $500 million in shares with its IPO. Liquidnet offers a "dark pool" of trading that allows institutional investors to trade large blocks of equities anonymously. Average daily U.S. trading volume increased 32% in 2007 and 41% in the first quarter of this year. Liquidnet's risks include that it might draw regulatory oversight and that trading volumes could decline and cut into transaction fees.

Wall Street moves finance jobs, people overseas

While the credit crisis has cost some Wall Street workers their jobs, others are getting transferred overseas. Relocating workers keeps talented people in-house as record revenue flows in from increasingly important financial centers in Asia, the Middle East, Europe and Latin America.

Read more at http://www.nytimes.com/2008/08/12/business/12transfer.html

This Day in Wall Street History 1919: Andrew Carnegie dies

Burn a dollar bill in mourning, because August 11, 1919, marks the passing of Andrew Carnegie, the man alternately known as the king of steel, architect of the second Industrial Revolution, friend of capitalism, and scourge of workers. CarnegieÝs life story is a classic bit of American mythology: born in Scotland, he immigrated to America at age thirteen and started his career as a bobbin boy in a cotton factory. Thanks to a ferocious competitive streak, and a bit of luck--one of his farms was perched atop an oilfield--Carnegie soon left the factory floor for the boardroom. An early proponent of consolidation and vertical integration, Carnegie racked up his fortune--and effectively monopolized the steel industry--by controlling everything from raw materials to the means of production. Though he was raking in millions of dollars, Carnegie eventually heeded the urge to return to Scotland, where he embarked upon a plan to die penniless. Before contracting a fatal bout of bronchial pneumonia, Carnegie had successfully burned through a good bit of his riches, some of which he used to finance various schools and institutes.
-Source: www.history.com

Ex-Refco owner gets decade in prison

A New York judge has given a 10-year prison sentence to the former owner of one of the world's biggest commodities brokerages for fraud that cost investors more than $2 billion.

Tone N. Grant of Chicago was sentenced Thursday in Manhattan federal court. He was convicted of five counts on April 17 in connection with a scheme to defraud investors at Refco Inc.rporated.
Prosecutors say Grant conspired with others to transfer debts to accounts that made it seem as if they were debts owed to Refco.

Citi to be charged over miss-selling securities

Citigroup employees illegally destroyed subpoenaed documents relating to its Global Markets and Citi Smith Barney units, the office of the New York general attorney has claimed.

Andrew Cuomo's office also believes that Citi miss-sold auction-rate securities by wrongly telling customers they were risk-free - and will soon file charges against the bank as a result.

The comments follow a similar against UBS last week, another bank which has come under the spotlight for its auction-rate securities sales.

On Friday, the Securities and Exchange Commission also announced that it would be investigating Wall Street firms on their selling of the financial instruments.

In an emailed statement, Citi indicated that it often recycled tapes as part of company policy, and did not intentionally destroy evidence which the attorney could have used in its investigation.

"[T]here is simply no basis for claims to the contrary [that we acted in clients' best interests]," it continued.

The auction-rate securities sector is worth around $330 billion per year.

Citi : Klein to leave with more than $42m

Citigroup will pay Michael Klein more than $42m in cash and stock after the high-profile banker decided to leave the financial services group and pledged not to work for a rival until October of next year.

Mr Klein’s package, which Citi detailed on Friday, is one of the largest sums paid to a departing banker who was not a chief executive since the beginning of the credit crunch. It is more than that received by his former boss, Chuck Prince.

Read more at http://www.ft.com/cms/s/0/f1adab8e-5a97-11dd-bf96-000077b07658,dwp_uuid=eddfd4e0-4bc3-11da-997b-0000779e2340.html

NYSE tech initiatives aim to boost algorithmic-trading capabilities

The New York Stock Exchange has introduced a couple of technology initiatives in response to the boom in algorithmic trading. The initiatives are designed to help floor brokers, whose role is being threatened by electronic trading's substantial growth, trade algorithmically and help them match large orders more easily.

Algorithmic trading uses mathematical models as a means of trading large blocks of shares quickly. Tabb Group, the US consultancy, predicts that by 2010 algorithmic trading will account for half of all US equity trading.

Read more at http://www.ft.com/cms/s/0/0ba8eb66-5ce1-11dd-8d38-000077b07658.html

Paulson takes on crucial role in directing economy

Treasury Secretary Henry Paulson has emerged as having the biggest role in determining the fate of the U.S. economy. While Paulson shares responsibility with President George W. Bush, Federal Reserve Chairman Ben S. Bernanke and Congress, it has been the Treasury chief who has had the highest profile in dictating policy direction. Most recently, Paulson was given unprecedented authority in overseeing the rescue of Fannie Mae and Freddie Mac.

more at http://www.time.com/time/nation/article/0,8599,1828092,00.html