Claymore became the first-mover in yet another industry space, with the launch of the Claymore/NYSE Arca Airline ETF (NYSE Arca: FAA) on Monday. FAA is the first airlines-specific ETF to launch in the U.S.
The Claymore ETF is a pure-play modified market-cap-weighted passenger airline ETF that will be rebalanced quarterly. FAA holds 25 global airline stocks, 70% domestic and 30% international. The top three stocks in each category will be weighted 15% in the case of domestic, and 4.5% in the case of international airlines. All holdings must derive at least 50% of their business from passenger airline activity.
Some 70.1% of FAA's holdings are in U.S. stocks, with another 4.7% in Germany. The remaining markets represented, in order, are: Singapore (4.3%); France (3.7%); Ireland (2.8%); Britain (2.3%); Japan (2.2%); Canada (1.6%); Brazil (1.4%) and Australia (1.4%).
Continental is its top name, at 14.8% of assets, followed by: Southwest (11.8%); AMR (11.1%); UAL (5.5%) and Deutsche Lufthansa (5%).
The airlines industry can be a bit volatile, but as it seems to be coming out of a deep crater, some traders are betting airlines as a whole will leap out of recession and become a leader once economic times start to improve.
FAA charges 0.65%.
Saturday, January 31, 2009
Lehman Brothers' Richard Fuld 'sold' mansion to wife for $100
Fuld deeded the house at 265 South Beach Road on Jupiter Island to his wife Kathleen on Nov. 10, according to records on the Web site of Martin County. Kathleen Fuld paid her husband $100 in the transaction, the minimum amount allowed to transfer a property.
The single-family home on 3.3 acres was assessed with a market value of $7,855,310 for the land and $5,459,840 for the house. The property is on the eastern side of the island, facing the Atlantic Ocean, records show.
"This is not a true sale," said Laurie Delong, a customer service representative in the Martin County assessor's office. "He more than likely quit-claimed this property over to her. That's an instrument used when there's no money involved."
The single-family home on 3.3 acres was assessed with a market value of $7,855,310 for the land and $5,459,840 for the house. The property is on the eastern side of the island, facing the Atlantic Ocean, records show.
"This is not a true sale," said Laurie Delong, a customer service representative in the Martin County assessor's office. "He more than likely quit-claimed this property over to her. That's an instrument used when there's no money involved."
Such transactions are typically done between family members for estate planning purposes or in the case of a divorce, she said.
Lehman spokeswoman Kimberly Macleod said Fuld would not comment on the transfer. Two Florida attorneys said Fuld may have made the move for estate planning purposes or to shelter assets from potential creditors under Florida's homestead act.
"Florida does have very strong homestead protection, which is designed to protect the principal family home from creditors — it's in the Florida Constitution," said Danaya Wright, a law professor at the University of Florida Levin College of Law.
If Kathleen Fuld makes the home her principal residence, it might be protected from any actions taken against her husband, Wright said.
Fuld also could have transferred the house to his wife to reduce her estate taxes, said Michael Lampert, a tax and estate planning lawyer. Fuld, 62, relinquished his posts as chairman and chief executive officer at Lehman on Dec. 31. He has stayed on as Lehman disperses assets to pay creditors after the fourth-largest investment bank filed the biggest U.S. bankruptcy with $613 billion in debt. He was paid $34.4 million in 2007.
Friday, January 30, 2009
Ex-AIG exec Christian Milton jailed over $500m fraud
A former vice-president of reinsurance at American International Group (AIG) has been jailed for four years for his part in a scheme that cost investors up to $597 million through a "sham transaction" that falsely inflated the company's share price and reserves.
Judge Christopher Droney also imposed a $200,000 fine on Christian Milton, who was convicted last year of conspiracy, mail fraud, securities fraud and making false statements to the Securities and Exchange Commission, the Associated Press reports.
The prosecution's case had argued that Mr Milton had taken part in a scheme whereby AIG secretly paid General Reinsurance to take out reinsurance policies with the company in 2000 and 2001.
Although Mr Milton did not directly benefit from the fraud, federal attorneys contested that he had a financial motive because his deferred compensation package was linked to the value of AIG's stock.
Judge Droney said: "He surely knew this was a scam from the very start. This was no momentary lapse in judgment."
Four former General Reinsurance executives have already been convicted for their role in the scheme. In December, ex-chief executive Ronald Ferguson was sentenced to two years in prison and a $200,000 fine for his part in the fraud.
This Day in Wall Street History 1934: Gold Reserve Act is passed
| The value of American currency ping-ponged up and down wildly throughout the Great Depression. However, on this day in 1934, the House looked to put a halt to the vacillation by passing the Gold Reserve Act. The adoption of the act gave President Franklin Roosevelt license to peg the value of the dollar within a range of 50 to 60 cents in terms of gold. Roosevelt took swift action: the next day he announced that the dollar would be worth 59.06 cents, while gold would be valued at $35 per ounce. The Gold Reserve Act also paved the way for the "nationalization" of gold: as per the legislation's mandate, the various Federal Reserve banks handed control of their gold supplies, including all coins, bullion and gold certificates, to the U.S. Treasury. The U.S. Treasury shuttled a good chunk of the gold to a well-protected spot in Fort Knox, Kentucky. Source: www.history.com |
Thursday, January 29, 2009
The CTA: The Long Forgotten, but Successful Model
One of the few bright spots in the fund management world in 2008 was managed futures and CTAs. Cozzene Asset Management is looking to take advantage, but not blow up to the level of John Henry or Keith Campbell.
One New York investment advisory firm is looking to capture some of the dizzying returns generated by managed futures funds last year with a commodity trading advisor fund of funds.
White Plains, N.Y.-based Cozzene Asset Management is prepping its Harmony Fund 1 for launch next month to invest in a stable of 10 under-the-radar CTAs who trade in the commodity markets. The fund will have exposure to stock indexes, fixed-income, metals, energy, currencies, softs, livestock and grains.
Lewis Gelbman, principal owner of Cozzene Advisors and the fund’s portfolio manager, said there is currently tremendous demand in the market for managed futures and commodities funds but few funds of funds specialize in the space. As a result, he said the firm wanted to give investors a one-stop shop product with exposure to the different categories of commodities “in a reasonable amount” of capital.
White Plains, N.Y.-based Cozzene Asset Management is prepping its Harmony Fund 1 for launch next month to invest in a stable of 10 under-the-radar CTAs who trade in the commodity markets. The fund will have exposure to stock indexes, fixed-income, metals, energy, currencies, softs, livestock and grains.
Lewis Gelbman, principal owner of Cozzene Advisors and the fund’s portfolio manager, said there is currently tremendous demand in the market for managed futures and commodities funds but few funds of funds specialize in the space. As a result, he said the firm wanted to give investors a one-stop shop product with exposure to the different categories of commodities “in a reasonable amount” of capital.
more at
Wednesday, January 28, 2009
Madoff Deceived Golfing Buddies Too
At the Interbourse golf tournament held last May at Cabo San Lucas on the tip of Mexico’s Baja California peninsula, some participants suspected something amiss with Bernard Madoff.
It was not that the traders and financiers present were worried about the feted New York broker’s 200-person market-making firm, which usually sponsored one of the dinners at the annual gathering. Equally, the decades of stellar returns produced by his money management arm drew envy rather than concern.
No, what bothered some participants about the former Nasdaq chairman was his golf handicap. They suspected he had understated his skill to boost his chances of winning a prize. “It makes a difference if your handicap is the right or wrong one. I always had the impression that he was playing off a 14 or a 15,” says one who took part. But Mr Madoff’s score on the Golf Handicap and Information Network was 9.8, leading the fellow player to infer that the broker was better at the game than he told the organisers.
“He wasn’t altogether straightforward,” the participant says.
No, what bothered some participants about the former Nasdaq chairman was his golf handicap. They suspected he had understated his skill to boost his chances of winning a prize. “It makes a difference if your handicap is the right or wrong one. I always had the impression that he was playing off a 14 or a 15,” says one who took part. But Mr Madoff’s score on the Golf Handicap and Information Network was 9.8, leading the fellow player to infer that the broker was better at the game than he told the organisers.
“He wasn’t altogether straightforward,” the participant says.
more at
Legg Mason loses $1.5B in 4Q
Baltimore's Legg Mason (NYSE: LM) lost a staggering $10.55 per share in the quarter ended Dec. 31, while analysts surveyed by Thomson Financial on average had expected a loss of $4.02 per share. In the same quarter a year ago, Legg earned $155 million, or $1.07 per share. Revenue slumped by 39 percent from a year ago to $720 billion.
more at
Arthur Nadel Surrenders to FBI
Fugitive financier Arthur G. Nadel surrendered Tuesday in Tampa to face federal charges that he stole millions of dollars through a Sarasota hedge fund operation. Nadel was charged with two counts of securities fraud and wire fraud, accused of launching a scheme at least five years ago that bilked up to 600 investors from here and across the nation. Nadel, 76, boasted of running hedge funds that were worth $342 million. But in fact, the funds were valued at less than $1 million when Nadel fled Sarasota on Jan. 14, unable to come up with $50 million investors had demanded.
Tuesday, January 27, 2009
Davos No-Shows
The biggest story emerging from the World Economic Forum's annual meeting, set to convene in Davos, Switzerland isn't about the financial crisis, the environment, or the wars raging on multiple fronts across the globe. It's about who's not showing up.
Portfolio.com has learned that Morgan Stanley CEO John Mack and Google's Sergey Brin, whose company hosts a hot-ticket Davos party every year, are among those who were initially listed among participants but aren't attending. Also on the no-show list: Chevron CEO David O'Reilly, who co-chaired at Davos last year.
They join a growing list of high-profile executives who have decided to stay away from the confab, which has long been the most prestigious business event for A-list financial and corporate leaders.
In the past few years, bankers, private equity investors, and hedge fund managers have been the stars of the meeting, enthralling lesser participants such as prime ministers and Hollywood celebrities. This year, many of them are staying away, including onetime hedge-fund wunderkind Ken Griffin of Citadel Investments, whose fund lost 47 percent in 2008.
They join a growing list of high-profile executives who have decided to stay away from the confab, which has long been the most prestigious business event for A-list financial and corporate leaders.
In the past few years, bankers, private equity investors, and hedge fund managers have been the stars of the meeting, enthralling lesser participants such as prime ministers and Hollywood celebrities. This year, many of them are staying away, including onetime hedge-fund wunderkind Ken Griffin of Citadel Investments, whose fund lost 47 percent in 2008.
more at
Daley nephew closing finance firm
(Crain’s) — A money management firm bought two years ago by Peter Thompson, a nephew of Mayor Richard M. Daley, is closing after Mr. Thompson left to become CEO of a much bigger Chicago-based money manager.
Perkins Investment Management LLC named Mr. Thompson, 40, to the post this month, two weeks after Denver-based Janus Capital Group Inc. acquired a majority stake in Perkins. His mother, Patricia, is Mr. Daley’s eldest sibling.
Mr. Thompson had worked at Ariel Investments LLC for 12 years and served as finance chief of Mr. Daley’s successful 2007 re-election campaign before Mr. Thompson bought Chicago Asset Management Company LLC and confronted a turnaround challenge as president and CEO.
The firm’s assets had shriveled to $577 million from more than $2 billion when its investment strategy of buying large-company value stocks fell out of favor.
Mr. Thompson, known for his relationship skills and access to public pension trustees, declined to comment.
Calls to Chicago Asset Management and retired founder Jon Holsteen were not returned.
A woman who answered the phone at Chicago Asset Management said, “The company is closing.”
Janus, the huge mutual fund company, paid $90 million in November to increase its stake in Perkins to 80% from 30%. Janus said Perkins will become a Chicago-based subsidiary. Like other publicly traded money managers, Janus stock has been battered by the bear market, hitting an all-time low this month.
Perkins’ two mid-cap value mutual funds have been relatively strong performers: One achieved a top 3% ranking by Morningstar Inc. for the decade ended in December. Perkins hasn’t been immune to the market meltdown — asset values fell to $9 billion at yearend from $11 billion on Sept. 30 — but investment flows were positive during the quarter, Janus said.
“It really just boils down to buying stocks cheap on a cash-flow basis and cheap relative to their peers,” said Morningstar Inc. senior mutual fund analyst Andrew Gogerty in Chicago.
Perkins steered away from hard-hit financial stocks and sold real estate investment trust holdings at mid-decade, missing out on two years of gains while escaping the recent crash in real estate values.
“They’d rather leave gains on the table than catch that last dollar,” Mr. Gogerty said.
Monday, January 26, 2009
Richard Fuld's $10 mansion?
Mr. Fuld's wife, Kathleen
Housing prices are falling around the country, but this one sounds hard to believe: A seaside mansion on Jupiter Island in Florida, bought for more than $13 million five years ago, was just sold for $10.
Richard S. Fuld Jr., the former chairman and chief executive of Lehman Brothers, testifying at a Congressional hearing last October.
That’s right, 10 bucks. But in this case, the transaction is likely to raise eyebrows for reasons other than the price.
The seller, according to county records, was Richard S. Fuld Jr., the former chairman and chief executive of Lehman Brothers. The buyer was his wife, Kathleen.
The motivation is unclear, but Mr. Fuld has been under intense scrutiny since Lehman declared bankruptcy in September.
The longtime leader of the brokerage firm is at the center of a federal investigation into whether Lehman executives misled investors about the state of the company. And he was grilled by lawmakers at a Congressional hearing in October.
Mr. Fuld said in sworn testimony before a Congressional panel last year that while he took full responsibility for the debacle, he believed that all his decisions “were both prudent and appropriate” given the information he had at the time.
Friday, January 23, 2009
SEC missed red flags on Madoff in 1992
The Securities and Exchange Commission missed "numerous red flags" about Bernard Madoff's possible involvement in a Ponzi scheme in 1992, when it investigated an accounting firm with long-standing ties to the broker, it has been claimed.
According to the New York Times, the SEC's probe found that Avellino & Bienes kept "almost no records".
One of its partners, Frank Avellino, told investigators that the $441 million it controlled was actually managed by Mr Madoff.
The newspaper said the lack of records and the fact that Avellino & Bienes promised returns on money it did not control should have raised "red flags".
However, the probe "petered out" with SEC officials apparently accepting Mr Avellino's explanations at face value. Mr Madoff was never questioned in connection with the case.
Speaking to the Wall Street Journal in December 1992, SEC administration Martin Kuperberg said: "There's nothing to indicate fraud."
Mr Avellino's lawyer declined to comment on his relationship with Mr Madoff.
The SEC had previously said it is investigating apparent failures to follow up on "credible and specific allegations" about Mr Madoff dating back to 1999.
According to the New York Times, the SEC's probe found that Avellino & Bienes kept "almost no records".
One of its partners, Frank Avellino, told investigators that the $441 million it controlled was actually managed by Mr Madoff.
The newspaper said the lack of records and the fact that Avellino & Bienes promised returns on money it did not control should have raised "red flags".
However, the probe "petered out" with SEC officials apparently accepting Mr Avellino's explanations at face value. Mr Madoff was never questioned in connection with the case.
Speaking to the Wall Street Journal in December 1992, SEC administration Martin Kuperberg said: "There's nothing to indicate fraud."
Mr Avellino's lawyer declined to comment on his relationship with Mr Madoff.
The SEC had previously said it is investigating apparent failures to follow up on "credible and specific allegations" about Mr Madoff dating back to 1999.
Thursday, January 22, 2009
Fund manager Forte facing criminal charges
Prosecutors in Philadelphia have filed criminal charges against John S Forte, the fund manager accused by the Securities and Exchange Commission (SEC) of running a $50 million investment fraud.
According to the Philadelphia Inquirer, Mr Forte faces up to 20 years in prison and a $250,000 penalty if convicted.
He is accused of sending falsified quarterly results to an accountant who used the figures to draw up investor reports. In September 2008, Mr Forte is alleged to have valued his fund, MF Global, at $154.7 million. The balance of its trading account at the time was $146,814.
At the same time, prosecutors say he solicited cash from investors but instead of trading on futures as promised, he used new investments to pay out returns.
Mr Forte is also accused of paying himself "millions" in fees in an attempt to "maintain the fund's illusion of profitability", an affidavit said.
The SEC filed civil charges against Mr Forte on January 8th.
According to the Philadelphia Inquirer, Mr Forte faces up to 20 years in prison and a $250,000 penalty if convicted.
He is accused of sending falsified quarterly results to an accountant who used the figures to draw up investor reports. In September 2008, Mr Forte is alleged to have valued his fund, MF Global, at $154.7 million. The balance of its trading account at the time was $146,814.
At the same time, prosecutors say he solicited cash from investors but instead of trading on futures as promised, he used new investments to pay out returns.
Mr Forte is also accused of paying himself "millions" in fees in an attempt to "maintain the fund's illusion of profitability", an affidavit said.
The SEC filed civil charges against Mr Forte on January 8th.
Merrill Reportedly Paid Bonuses Early as Merger Closed
The controversy over Bank of America’s acquisition of Merrill Lynchappeared to grow on Thursday with a report in the Financial Times that Merrill paid out billions of dollars in bonuses to its employees three days before the sale went through — and well before it has paid out bonuses in previous years.
The bonuses were approved just before Bank of America learned that Merrill’s fourth-quarter losses would be much larger than it had expected, the report said. The swelling losses forced Bank of America to seek a new round of federal aid as it moved to complete the deal.
Citing an undisclosed source, the Financial Times said Merrill paid out an estimated $3 billion to $4 billion in bonuses in late December. It normally pays bonuses in late January or early February.
more at
http://dealbook.blogs.nytimes.com/2009/01/22/merrill-reportedly-paid-bonuses-early-as-merger-closed/
JHL Capital Reports Gains of Up to 18%
Everyone thinks John Paulson and Jim Chanos are the only hedge fund managers that made money last year. Well, DealBook has uncovered a winner and posted the investor letter (though in fairness, Dealbreaker posts a lot more of those letters, albeit of the losing variety). Anyway… James Litinsky, formerly of Fortress, we salute you.
The Chicago-based JHL Capital Group, a small firm run by James H. Litinsky, chalked up gains of 17.1 percent to 18 percent net of fees last year despite the global stock market meltdown, according to a letter the firm sent to clients on Tuesday.
Mr. Litinsky, a former portfolio manager at the Fortress Investment Group, achieved steady returns throughout the year by betting mostly on undervalued but secured debt in companies unlikely to default in the near-term.
In the fourth quarter of last year, JHL Capital returned net gains of 2.5 percent to 2.6 percent, depending on the fund’s class.
Wednesday, January 21, 2009
Northern Trust 4Q profit up
Northern Trust Corp. on Wednesday reported a higher than expected fourth quarter profit, as revenues increased due to higher foreign exchange trading income and total fee income.
The results beat analyst estimates, and Northern Trust shares climbed 25 percent in morning trading.
The Chicago-based custody bank and asset manager posted earnings available to common shareholders of $330.3 million, or $1.47 per share, up from $125 million, or 55 cents a share, a year earlier. Revenue rose 18 percent to $1.15 billion from $972.8 million.
Analysts surveyed by Thomson Reuters expected a profit of 92 cents per share on revenue of $968.2 million.
more at
A Madoff Cookbook Has a Secret, Too
Wearing plain aprons and standing in front of a dishwasher, Ruth Madoff and her friend look like two homemakers ready for serious work in the kitchen.
But like so much to do with the Madoff family, all is not as it appears in the photo.
The picture comes from a 1996 cookbook called “The Great Chefs of America Cook Kosher: Over 175 Recipes From America’s Greatest Restaurants.” Mrs. Madoff and her friend, as co-authors, wrote in the book of a high-minded mission: exposing kosher palates to new sensations by collecting dishes from famous restaurant chefs that could be prepared in keeping with Jewish dietary restrictions.
For all the book’s talk of wanting to serve the interests of a “strictly Kosher” crowd, The Daily Mail in London recently reported that Ruth’s husband, Bernard, was quite fond of pork sausages, taboo under any definition of kosher cooking.
Karen MacNeil, a food and wine expert who was given the title of editor of the project, beneath the two executive editors — Mrs. Madoff and her friend Idee Schoenheimer — disclosed in an interview with The New York Times that she was paid to write the cookbook in its entirety. She said Mrs. Madoff “was interested in having her name on something that would allow for some sort of fun.”
“My understanding was that she entertained a lot in New York and kind of wanted to test some recipes just as a social thing to do with friends,” said Ms. MacNeil, a wine and food consultant in Saint Helena, Calif. “But in point of fact, I wrote the entire book.”
more at
Tuesday, January 20, 2009
Banks Hammered
from Larry Levin's Nightly Newsletter & Trading Signals
The market opened lower due to the European banking news, sliced-n-diced traders for four hours, and then fell to new lows late in the day. When the smoke cleared we had a new President, and a Dow that closed below 8,000. The market thought we would also have our first nationalized bank before the close, but apparently that's being saved for another day. Odds are the bank to be nationalized will be Shitibank.
The sell-off started in the UK. Yesterday we saw Allied Irish bank shares down 62%, the Bank of Ireland fell 49%, and mortgage and insurance specialist Irish Life & Permanent dropped 41%. These shares plummeted because investors feared these firms would be accepting government money soon, which will severely dilute, if not completely flatten, common shareholders.
Although these are important banks to the region, the shocking story came from RBS - the Royal Bank of Scotland. The carnage started at RBS when it announced the worst loss ever by a UK company. This led to the fear that the government would take instant control of the company, again potentially hammering common shareholders to zero. RBS dropped 67% in one day.
Speaking to reporters yesterday about the situation, Prime Minister Gordon Brown said - "I am angry at the Royal Bank of Scotland and what has happened." RBS took "irresponsible risks," in investing in U.S. subprime mortgages and ABN Amro, he said.
What is truly scary; however, were the calls from the Parliament to seize the ENTIRE banking industry and force these banks to lend. For now, that idea has been rejected.
Sadly, politicians across the globe are incapable of learning from history - even recent history. After all, one could squarely blame a HUGE portion of today's banking crisis on government - the US government to be specific. None of today's problems could have happened without the Fed's irresponsible micro-mismanagement of interest rates, and the US government's backing of Fannie Mae and Freddie Mac.
And why did the government, specifically Barney Frank and Chris Dodd, so steadfastly refute all calls to reign in FNM and FRE? There are surely many answers such as; perhaps they truly believed they were right, they were paid enormous sums of money in political contributions, they were buying votes, they wanted to legislate housing for all - as if it were a human right - even if people couldn't afford the home, they knew what was best, it will never get out of control (and if it did they'd just blame the banks). No doubt there are more reasons, but that should suffice for now.
So here we have calls from the UK Parliament, and calls from the same dopes that caused the problem (the US Congress), to FORCE banks to lend. But banks are lending, if one can clear the newer more responsible lending standards. Do politicians want banks to go back to the outrageously irresponsible lending standards of a few years ago? Furthermore, there is far less demand for money as I wrote in The Velocity of Money yesterday. Can politicians force you to borrow? Should politicians force banks to lend to corporations with a dodgy balance sheet? Do they not see a problem here? HOW STUPID ARE THESE PEOPLE?
Of course the answers are NO, but when did that matter to a thought-challenged politician on either side of the pond? And without going back to the irresponsible gorging on debt, little will change.
Before the politicians force banks to lend, other help is coming. The Independent recently reported that the US Treasury may support UK banks with up to 100-billion Pounds, which is about $138-billion.
It's quite odd how the US Treasury keeps spending money that it doesn't have, especially when it doesn't even have the authorization to make such arrangements. All spending bills must originate in the House of Representatives.
But wait, there's more! In an effort to spike inflation in the UK, our friends across the pond are about to follow the Fed's lead (again) by eliminating some record keeping so that it can print currency without having to report it. The US Fed did away with reporting M3 a few years ago. Praise the obfuscation!
From the Independent:
The sell-off started in the UK. Yesterday we saw Allied Irish bank shares down 62%, the Bank of Ireland fell 49%, and mortgage and insurance specialist Irish Life & Permanent dropped 41%. These shares plummeted because investors feared these firms would be accepting government money soon, which will severely dilute, if not completely flatten, common shareholders.
Although these are important banks to the region, the shocking story came from RBS - the Royal Bank of Scotland. The carnage started at RBS when it announced the worst loss ever by a UK company. This led to the fear that the government would take instant control of the company, again potentially hammering common shareholders to zero. RBS dropped 67% in one day.
Speaking to reporters yesterday about the situation, Prime Minister Gordon Brown said - "I am angry at the Royal Bank of Scotland and what has happened." RBS took "irresponsible risks," in investing in U.S. subprime mortgages and ABN Amro, he said.
What is truly scary; however, were the calls from the Parliament to seize the ENTIRE banking industry and force these banks to lend. For now, that idea has been rejected.
Sadly, politicians across the globe are incapable of learning from history - even recent history. After all, one could squarely blame a HUGE portion of today's banking crisis on government - the US government to be specific. None of today's problems could have happened without the Fed's irresponsible micro-mismanagement of interest rates, and the US government's backing of Fannie Mae and Freddie Mac.
And why did the government, specifically Barney Frank and Chris Dodd, so steadfastly refute all calls to reign in FNM and FRE? There are surely many answers such as; perhaps they truly believed they were right, they were paid enormous sums of money in political contributions, they were buying votes, they wanted to legislate housing for all - as if it were a human right - even if people couldn't afford the home, they knew what was best, it will never get out of control (and if it did they'd just blame the banks). No doubt there are more reasons, but that should suffice for now.
So here we have calls from the UK Parliament, and calls from the same dopes that caused the problem (the US Congress), to FORCE banks to lend. But banks are lending, if one can clear the newer more responsible lending standards. Do politicians want banks to go back to the outrageously irresponsible lending standards of a few years ago? Furthermore, there is far less demand for money as I wrote in The Velocity of Money yesterday. Can politicians force you to borrow? Should politicians force banks to lend to corporations with a dodgy balance sheet? Do they not see a problem here? HOW STUPID ARE THESE PEOPLE?
Of course the answers are NO, but when did that matter to a thought-challenged politician on either side of the pond? And without going back to the irresponsible gorging on debt, little will change.
Before the politicians force banks to lend, other help is coming. The Independent recently reported that the US Treasury may support UK banks with up to 100-billion Pounds, which is about $138-billion.
It's quite odd how the US Treasury keeps spending money that it doesn't have, especially when it doesn't even have the authorization to make such arrangements. All spending bills must originate in the House of Representatives.
But wait, there's more! In an effort to spike inflation in the UK, our friends across the pond are about to follow the Fed's lead (again) by eliminating some record keeping so that it can print currency without having to report it. The US Fed did away with reporting M3 a few years ago. Praise the obfuscation!
From the Independent:
The Bank of England will be able to print extra money without having legally to declare it under new plans which will heighten fears that the Government will secretly pump extra cash into the economy.
The Government is set to throw out the 165-year old law that obliges the Bank to publish a weekly account of its balance sheet - a move that will allow it theoretically to embark covertly on so-called quantitative easing. The Banking Bill, which is currently passing through Parliament, abolishes a key section of the law laid down by Robert Peel's Government in 1844 which originally granted the Bank the sole right to print UK money.
The ostensible reason for the reform, which means the Bank will not have to print details of its own accounts and the amount of notes and coins flowing through the UK economy, is to allow the Bank more power to overhaul troubled financial institutions in the future, under its Special Resolution Authority.
Back in the US, banks are still hemorrhaging cash. Shitibank traded below $3.00 today, and is certainly in need of more capital. It is about to sell its only asset that is making money, we taxpayers will be stuck with the rest. Today it announced that C is slashing the dividend to 1-cent. Umm, won't it cost Shitibank more money in overhead (employees & postage) to get this done than it will pay out at 1-cent/share? I nominate Shitibank for the first US bank to be nationalized.
But wait, there's more! Wells Fargo was down 23.8% today, as word spread that its cocky acquisition of bankrupt Wachovia aint digesting so well. Idiots! Even a high school dropout could have seen that Wachovia's $120-billion option ARM portfolio was as unstable as nitroglycerin. And now it's about to go boom. (Yeah, that experiment of giving huge failing banks money to buy other failing banks, which makes an even bigger failing bank, was a great success.)
But wait, there's more! Bank of America (BAC) was in the news again today, posting a 16.5% loss by the close. An analyst at Friedman, Billings, Ramsey says BAC will need at least ANOTHER $80-billion to stay solvent. Where will it get that kind of loot? Why the taxpayer of course.
In a nutshell, the US is backing foreign governments via loans from the Fed, possibly foreign banks via the Treasury, and certainly US banks. So the question today is: Who is backing the US? After all, we're dead broke.
The Government is set to throw out the 165-year old law that obliges the Bank to publish a weekly account of its balance sheet - a move that will allow it theoretically to embark covertly on so-called quantitative easing. The Banking Bill, which is currently passing through Parliament, abolishes a key section of the law laid down by Robert Peel's Government in 1844 which originally granted the Bank the sole right to print UK money.
The ostensible reason for the reform, which means the Bank will not have to print details of its own accounts and the amount of notes and coins flowing through the UK economy, is to allow the Bank more power to overhaul troubled financial institutions in the future, under its Special Resolution Authority.
Back in the US, banks are still hemorrhaging cash. Shitibank traded below $3.00 today, and is certainly in need of more capital. It is about to sell its only asset that is making money, we taxpayers will be stuck with the rest. Today it announced that C is slashing the dividend to 1-cent. Umm, won't it cost Shitibank more money in overhead (employees & postage) to get this done than it will pay out at 1-cent/share? I nominate Shitibank for the first US bank to be nationalized.
But wait, there's more! Wells Fargo was down 23.8% today, as word spread that its cocky acquisition of bankrupt Wachovia aint digesting so well. Idiots! Even a high school dropout could have seen that Wachovia's $120-billion option ARM portfolio was as unstable as nitroglycerin. And now it's about to go boom. (Yeah, that experiment of giving huge failing banks money to buy other failing banks, which makes an even bigger failing bank, was a great success.)
But wait, there's more! Bank of America (BAC) was in the news again today, posting a 16.5% loss by the close. An analyst at Friedman, Billings, Ramsey says BAC will need at least ANOTHER $80-billion to stay solvent. Where will it get that kind of loot? Why the taxpayer of course.
In a nutshell, the US is backing foreign governments via loans from the Fed, possibly foreign banks via the Treasury, and certainly US banks. So the question today is: Who is backing the US? After all, we're dead broke.
Banking crash 'raises possibility of nationalisation'
A sharp fall in the shares of some of the UK's leading banks yesterday represents a "vote of no confidence" in the government's latest bailout plan for the sector and raises the possibility of full nationalization, reports say.
The government announced that it will offer to insure banks against up to 90 per cent of potential losses linked to toxic assets.
Markets headed lower on the news, with shares falling across the banking sector. By early afternoon, Citywire reported that the newly-formed Lloyds Banking Group was down by 33.9 per cent, HSBC was down ten per cent and Barclays was 4.6 per cent lower.
Shares in the Royal Bank of Scotland (RBS), which also revealed that it expects its 2008 losses to be up to £28 billion ($39.3 billion), crashed by 63.4 per cent.
According to the Guardian, investors perceived a "lack of clarity" in the government's proposals. The true picture of the insurance scheme will not be seen for weeks because the Treasury will have to negotiate cover with individual banks, it said.
Neil Cumming of PSigma Asset Management told Citywire that there is a growing sense that banks are "sliding towards nationalization".
The government announced that it will offer to insure banks against up to 90 per cent of potential losses linked to toxic assets.
Markets headed lower on the news, with shares falling across the banking sector. By early afternoon, Citywire reported that the newly-formed Lloyds Banking Group was down by 33.9 per cent, HSBC was down ten per cent and Barclays was 4.6 per cent lower.
Shares in the Royal Bank of Scotland (RBS), which also revealed that it expects its 2008 losses to be up to £28 billion ($39.3 billion), crashed by 63.4 per cent.
According to the Guardian, investors perceived a "lack of clarity" in the government's proposals. The true picture of the insurance scheme will not be seen for weeks because the Treasury will have to negotiate cover with individual banks, it said.
Neil Cumming of PSigma Asset Management told Citywire that there is a growing sense that banks are "sliding towards nationalization".
Thomson Reuters launches additional news analytics for trading and risk management
Thomson Reuters today announced it has expanded its machine-readable news offering to include unique real-time analysis on key news events, which has the capacity to help predict market volatility and returns. NewsScope Event Indices (NEI) has been developed in conjunction with AlphaSimplex Group and will enable clients to more easily incorporate news into their trading and risk management strategies.
NewsScope Event Indices, which have been shown to predict returns and volatility in the major asset classes, are targeted at hedge funds and investment banks pursuing quantitative driven investment and trading strategies. The indices will be a key capability within the Thomson Reuters Quantitative and Event Driven Trading solution portfolio which offers the financial community comprehensive historical archive and real-time content sets together with analytical tools for quantitative investment strategies.
NEI works by creating real-time indices which measure when abnormally large amounts of news occur in various categories. When the level of news in these categories reaches a certain threshold, a signal is sent to a customer’s trading or risk management system alerting them to potential market movements. Clients will have access to detailed whitepapers which discuss the research methodology and historical data that test the applicability of the indices for their trading strategies and risk management systems.
Mike Powell, Global Head of Enterprise Information, Thomson Reuters, commented: "The launch of NewsScope Event Indices reflects our continued desire to look for opportunities to innovate around our core strength as a leading global news and financial data provider and help our customers extract greater value from our content. Our collaboration with AlphaSimplex enables us to deliver the actionable information that can help them more intelligently incorporate the impact of news and events into their trading and risk strategies.”
Andrew Lo, Chairman and Chief Scientific Officer of AlphaSimplex, said, "AlphaSimplex is excited to be working with Thomson Reuters in bringing the NewsScope Event Indices to market. By combining AlphaSimplex's experience in quantitative research with Thomson Reuters market data and news expertise, we are able to deliver a unique set of real-time news analytics that allow investors to seize market opportunities and manage event risk."
NewsScope Event Indices, which have been shown to predict returns and volatility in the major asset classes, are targeted at hedge funds and investment banks pursuing quantitative driven investment and trading strategies. The indices will be a key capability within the Thomson Reuters Quantitative and Event Driven Trading solution portfolio which offers the financial community comprehensive historical archive and real-time content sets together with analytical tools for quantitative investment strategies.
NEI works by creating real-time indices which measure when abnormally large amounts of news occur in various categories. When the level of news in these categories reaches a certain threshold, a signal is sent to a customer’s trading or risk management system alerting them to potential market movements. Clients will have access to detailed whitepapers which discuss the research methodology and historical data that test the applicability of the indices for their trading strategies and risk management systems.
Mike Powell, Global Head of Enterprise Information, Thomson Reuters, commented: "The launch of NewsScope Event Indices reflects our continued desire to look for opportunities to innovate around our core strength as a leading global news and financial data provider and help our customers extract greater value from our content. Our collaboration with AlphaSimplex enables us to deliver the actionable information that can help them more intelligently incorporate the impact of news and events into their trading and risk strategies.”
Andrew Lo, Chairman and Chief Scientific Officer of AlphaSimplex, said, "AlphaSimplex is excited to be working with Thomson Reuters in bringing the NewsScope Event Indices to market. By combining AlphaSimplex's experience in quantitative research with Thomson Reuters market data and news expertise, we are able to deliver a unique set of real-time news analytics that allow investors to seize market opportunities and manage event risk."
Grandson of Toyota Founder Will Lead
Toyota Motor on Tuesday named as its next president, Akio Toyoda, the grandson of the company’s founder, returning leadership to the founding family to steer the Japanese auto giant through its roughest downturn in more than 70 years.
The appointment of Mr. Toyoda, 52, was widely expected as part of a management reshuffling at the company, which faces its first full-year operating loss since his grandfather started the company in 1937. The last family member to lead the company was his uncle, Tatsuro Toyoda, who stepped down in 1995.
Mr. Toyoda will take over as the company vies with General Motors to become the world’s largest automaker but also as it struggles to overcome the sudden and steep drop in the global market. He must also convince skeptics that a member of the Toyoda family, which now owns less than 2 percent of the company, should even hold the post.
The younger Mr. Toyoda will succeed Katsuaki Watanabe, who will become vice chairman. Fujio Cho will remain as chairman.
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Monday, January 19, 2009
Madoff fund may never have traded
Bernard Madoff's investment fund may never have executed a single trade and detailed monthly statements of transactions sent to investors could have been an "elaborate mirage" to cover up his alleged $50 billion fraud, it has been claimed.
A spokesman for the Financial Industry Regulatory Authority told the Financial Post that its records show "no evidence" of Mr Madoff's brokerage firm placing trades or generating customer statements.
That means the broker either went through other investment firms - which analysts consider unlikely - or Mr Madoff, the man who once chaired the Nasdaq stock exchange, never actually used his fund to trade securities, the newspaper said.
Mr Madoff is currently charged with running a Ponzi fraud, where he allegedly used the money coming in from new investors to pay out the promised returns to existing ones.
Prior to his arrest on December 11th, the broker is alleged to have told his sons that the business was "one big lie".
Mr Madoff is currently under house arrest awaiting trial for securities fraud.
A spokesman for the Financial Industry Regulatory Authority told the Financial Post that its records show "no evidence" of Mr Madoff's brokerage firm placing trades or generating customer statements.
That means the broker either went through other investment firms - which analysts consider unlikely - or Mr Madoff, the man who once chaired the Nasdaq stock exchange, never actually used his fund to trade securities, the newspaper said.
Mr Madoff is currently charged with running a Ponzi fraud, where he allegedly used the money coming in from new investors to pay out the promised returns to existing ones.
Prior to his arrest on December 11th, the broker is alleged to have told his sons that the business was "one big lie".
Mr Madoff is currently under house arrest awaiting trial for securities fraud.
Arthur Nadel, Money Manager, Missing In Florida
The F.B.I. and securities regulators have joined the investigation of Arthur Nadel, a Florida hedge fund manager who disappeared four days ago, leaving clients concerned that they might have lost as much as $350 million.
The Federal Bureau of Investigation and the Securities and Exchange Commission are helping on the case, police Lt. Stanley Beishline of Sarasota, Fla., said in a telephone interview.
One of Mr. Nadel’s business partners, Neil Moody, said Mr. Nadel had spoken to his wife, Peg, since he was reported missing. Mr. Nadel, 76, is president of Scoop Management in Sarasota, which oversees funds that include Valhalla Investment Partners. Mr. Moody holds no position in Scoop Management and was a partner with Mr. Nadel only on the Vahalla fund and two Viking funds.
Scoop’s claim to have managed as much as $350 million “may be high because performance results were exaggerated,” Mr. Moody said in an interview. Mr. Moody said he did not know anything was wrong until Mr. Nadel was reported missing.
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KPMG, Deloitte to restate Satyam results
Scandal-hit IT outsourcing firm Satyam Computer Services has said KPMG and Deloitte will restate its results after the company's auditor, PricewaterhouseCoopers (PwC), admitted that its analysis may be "inaccurate and unreliable".
In a letter to Satyam's new board, PwC said it had relied on the previous regime's information, explanations and "controls over financial reporting" when auditing the company's accounts.
However, last week Satyam's founder and chairman, Ramalinga Raju, confessed to conducting a £1 billion accounting fraud that "wildly inflated" the firm's profitability and assets.
Mr Raju resigned and, along with his brother Rama and former Satyam chief financial officer Vadlamani Srinivas, is currently in jail awaiting trial for fraud.
One of the men appointed by the government to Satyam's board in the wake of the scandal, C Achutan, told Reuters that the new auditors would restate its results as soon as possible. However, the news agency noted, shareholders must first approve the formal appointment of the two firms.
Elsewhere, India's Serious Fraud Investigation Office has launched an investigation into possible insider trading of Satyam's shares after several institutional investors dumped the stock just days before Mr Raju's confession.
In a letter to Satyam's new board, PwC said it had relied on the previous regime's information, explanations and "controls over financial reporting" when auditing the company's accounts.
However, last week Satyam's founder and chairman, Ramalinga Raju, confessed to conducting a £1 billion accounting fraud that "wildly inflated" the firm's profitability and assets.
Mr Raju resigned and, along with his brother Rama and former Satyam chief financial officer Vadlamani Srinivas, is currently in jail awaiting trial for fraud.
One of the men appointed by the government to Satyam's board in the wake of the scandal, C Achutan, told Reuters that the new auditors would restate its results as soon as possible. However, the news agency noted, shareholders must first approve the formal appointment of the two firms.
Elsewhere, India's Serious Fraud Investigation Office has launched an investigation into possible insider trading of Satyam's shares after several institutional investors dumped the stock just days before Mr Raju's confession.
Sunday, January 18, 2009
UBS starts to pay Madoff-hit investors
Some investors in the Luxalpha fund affected by the $50bn fraud allegedly orchestrated by Bernard Madoff are being reimbursed by the Swiss bank.
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http://www.ft.com/cms/s/0/0b6da8ce-e406-11dd-8274-0000779fd2ac,dwp_uuid=b7a8d610-caaf-11dd-87d7-000077b07658.html
Madoff investigation underway in Spain
The office of Spain's anti-corruption prosecutor is in the "early stages" of an investigation into the Bernard Madoff scandal, making it the latest in a line of international regulators to launch their own inquiries, it has been reported.
An official at the office of prosecutor Antonio Salinas told the Associated Press that the probe into the alleged $50 billion fraud was launched at the end of last month.
Spanish daily El Pais said the case is currently focused on a Madrid-based partner in the investment firm Fairfield Greenwich, a US-based company that funneled investors to Mr Madoff's company, the news agency noted.
Authorities in Luxembourg, Germany, Austria, Ireland and France have so far launched inquiries in the Madoff affair, Bloomberg reports.
Britain's Serious Fraud Office is also conducting a probe into the scandal to determine if any crimes relating to the alleged fraud were committed in the UK.
Mr Madoff, who founded his investment firm in 1960, has been under investigation in the United States for securities fraud since his arrest on December 11th.
An official at the office of prosecutor Antonio Salinas told the Associated Press that the probe into the alleged $50 billion fraud was launched at the end of last month.
Spanish daily El Pais said the case is currently focused on a Madrid-based partner in the investment firm Fairfield Greenwich, a US-based company that funneled investors to Mr Madoff's company, the news agency noted.
Authorities in Luxembourg, Germany, Austria, Ireland and France have so far launched inquiries in the Madoff affair, Bloomberg reports.
Britain's Serious Fraud Office is also conducting a probe into the scandal to determine if any crimes relating to the alleged fraud were committed in the UK.
Mr Madoff, who founded his investment firm in 1960, has been under investigation in the United States for securities fraud since his arrest on December 11th.
Saturday, January 17, 2009
Chinese trader jailed in insider trading crackdown
Dong Zhengqing of Guangfa Securities, which is based in Guangzhou in southern China, was alleged to have tipped off his brother that the company would attempt to obtain a listing through the acquisition of a firm that already possessed one, the Financial Times reports.
The newspaper added that despite widespread perceptions of market manipulation in China, high-profile convictions for insider trading are rare and the case represents a step-change in the government's efforts to legitimize its markets.
It added that the country's regulator, the China Securities Regulatory Commission (CRSC), has assigned half its staff to investigating insider trading, market abuse and other breaches of trading rules.
One CRSC official recently told the publication: "China's market is an emerging and a transitional market and so it has more irregularities than a developed market."
The CRSC was formed in 1992 to act as China's centralized market regulator.
Bank of America might be looking for another injection
Amid reports that Bank of America needs another multibillion-dollar government injection, sources close to BofA say the bank wanted last month to call off its acquisition of Merrill Lynch after learning the depth of Merrill's fourth-quarter losses. Coupled with concerns about the financial health of Citigroup, the revelations about Bank of America indicate even greater woes within the U.S. banking sector.
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Friday, January 16, 2009
Vegas pair charged with fraud, money laundering
Two Montana men have been charged with money laundering, conspiracy and fraud for falsely representing their Las Vegas-based investment firm.
According to the Las Vegas Sun, William Willard and Richard Young convinced around 700 people to invest sums totalling $900,000 using false representations.
The pair, which operated Global One Group, Badie Inc and Malee Enterprises, claimed that investors in Global One could achieve a high rate of return on investment based on the sales of Global Trac, a software trading program.
However, the indictment alleges that the two men did not actually have the advertised software system and transferred the investor funds from Global One's accounts to Maelee Enterprises and Badie Inc for their own personal use.
The indictment also states that investors in Global One were charged an annual membership fee of $500 to access the firm's website, web-based seminars and conference calls, the newspaper reported.
According to Global One's website, the company specialises in foreign currency exchange trading programs.
It claims that individual investors, businesses and corporations are its main client base and clients are provided with market information on a daily basis.
According to the Las Vegas Sun, William Willard and Richard Young convinced around 700 people to invest sums totalling $900,000 using false representations.
The pair, which operated Global One Group, Badie Inc and Malee Enterprises, claimed that investors in Global One could achieve a high rate of return on investment based on the sales of Global Trac, a software trading program.
However, the indictment alleges that the two men did not actually have the advertised software system and transferred the investor funds from Global One's accounts to Maelee Enterprises and Badie Inc for their own personal use.
The indictment also states that investors in Global One were charged an annual membership fee of $500 to access the firm's website, web-based seminars and conference calls, the newspaper reported.
According to Global One's website, the company specialises in foreign currency exchange trading programs.
It claims that individual investors, businesses and corporations are its main client base and clients are provided with market information on a daily basis.
SEC charges CRE president over $25m Ponzi scheme
The Securities and Exchange Commission (SEC) has filed charges against the Atlanta-based investment firm CRE Capital and its president, James G Ossie, accusing them of running a Ponzi fraud that robbed investors of at least $25 million.
According to the SEC's complaint, Mr Ossie and his firm solicited the money from investors last year, offering them guaranteed returns of ten per cent - and in some cases 20 per cent - every 30 days through a currency trading program.
However, the regulator contests that in reality, CRE's trading did not return profits and returns were paid out using the principal and money obtained from new investors.
The SEC also alleges that CRE falsely claimed that it and its trading program had been externally audited and cleared of being a Ponzi scheme.
Furthermore, Mr Ossie and CRE face fraud charges of an offer to sell $100 million in CRE shares due to being in early 2009.
The SEC has secured an emergency court order freezing the assets of Mr Ossie and the company. It has also appointed a receiver for CRE.
Last week, the regulator charged investment manager Joseph S Forte of running a $50m Ponzi fraud.
According to the SEC's complaint, Mr Ossie and his firm solicited the money from investors last year, offering them guaranteed returns of ten per cent - and in some cases 20 per cent - every 30 days through a currency trading program.
However, the regulator contests that in reality, CRE's trading did not return profits and returns were paid out using the principal and money obtained from new investors.
The SEC also alleges that CRE falsely claimed that it and its trading program had been externally audited and cleared of being a Ponzi scheme.
Furthermore, Mr Ossie and CRE face fraud charges of an offer to sell $100 million in CRE shares due to being in early 2009.
The SEC has secured an emergency court order freezing the assets of Mr Ossie and the company. It has also appointed a receiver for CRE.
Last week, the regulator charged investment manager Joseph S Forte of running a $50m Ponzi fraud.
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Citigroup bids for survival with break-up plan
Citigroup is planning to splinter its operations in order to isolate riskier business units from its healthy operations and convince investors of the company's viability, according to reports.
The Financial Times claims sources at the firm - once the world's biggest bank - believe the move will see over $600 billion (£412 billion) in assets and divisions moved to a "non core unit".
This unit would report its results separately from the rest of the group and, once the market recovers, would either be sold off or spun out.
Citigroup's investment banking division would remain part of the core business, albeit with reduced operations and capital as the group looks to cut risk and stabilize earnings.
Sources at the firm said chief executive Vikram Pandit believes the company needs to move away from its "financial supermarket" model after it was left badly exposed to the collapse of the sub-prime mortgage market and in need of a $300 billion bailout from the US government.
In related news, Citigroup has confirmed that it will merge its Smith Barney brokerage with Morgan Stanley.
The Financial Times claims sources at the firm - once the world's biggest bank - believe the move will see over $600 billion (£412 billion) in assets and divisions moved to a "non core unit".
This unit would report its results separately from the rest of the group and, once the market recovers, would either be sold off or spun out.
Citigroup's investment banking division would remain part of the core business, albeit with reduced operations and capital as the group looks to cut risk and stabilize earnings.
Sources at the firm said chief executive Vikram Pandit believes the company needs to move away from its "financial supermarket" model after it was left badly exposed to the collapse of the sub-prime mortgage market and in need of a $300 billion bailout from the US government.
In related news, Citigroup has confirmed that it will merge its Smith Barney brokerage with Morgan Stanley.
Thursday, January 15, 2009
Madoff affair prompts discussions about regulatory changes
The SRO proposal's prospects are unclear, according to lobbyists. "It's too early to say if it will get traction and how far it will get," said Travis Larson, a spokesman for SIFMA. The SEC-CFTC merger, on the other hand, has the support of financial-industry groups. "We have called loudly and for some time for the merger of the SEC and CFTC," Larson said. "It makes regulatory sense."
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US Jobless Claims Rise 54K To 524K
The number of idled workers filing new claims for jobless benefits jumped last week as the recession forces companies to cut costs.
Initial claims for unemployment insurance benefits increased by 54,000 to 524,000, after seasonal adjustments, in the week that ended Jan. 10, the Labor Department said.
The increase was the first in three weeks. The four-week average of new claims last week fell to 518,500 from 526,500.
The number of new jobless claims filed nationwide was bigger than Wall Street had expected. Economists surveyed by Dow Jones was for claims to rise by 46,000 to 513,000 for the week ending Jan. 10.
PPI Decline Is Biggest Since 2001
U.S. producer prices fell for a fifth-straight month in December on steep declines in energy and food prices, suggesting that inflationary pressures continue to recede rapidly as the economic recession deepens.
Wholesale prices fell 0.9% for 2008 as a whole, the biggest calendar-year decline since 2001, capping a stunning reversal in which the PPI went from near double-digit annual rates to below zero in the space of only four months.
The producer price index for finished goods plunged 1.9% on a seasonally adjusted basis, the Labor Department said, in line with Wall street expectations.
The core PPI, which excludes food and energy, advanced 0.2% last month, slightly above expectations, according to a Dow Jones survey. That was up 4.3% from a year ago, the highest calendar-year increase since 1988.
And Yet Another Madoff Victim, Man Group
Man Group, the world's largest listed hedge fund, said today that it would take legal action over its exposure to the $50 billion (£34 billion) fraud allegedly perpetrated by Bernie Madoff. The British-based fund was one of the first businesses to admit exposure to the fraud, and Peter Clark, the chief executive of Man Group, said: "We will be suing the people involved. We will be looking for remedies on behalf of our investors."
Man Group's exposure of about $360 million means that it is estimated to be among the top 15 organisations worst hit by Mr Madoff’s activities.
It has also emerged that French investors said that they would undertake proceedings against banks, including UBS and HSBC, for allegedly helping to channel money to Mr Madoff.
It has also emerged that French investors said that they would undertake proceedings against banks, including UBS and HSBC, for allegedly helping to channel money to Mr Madoff.
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Madoff May Not Have Made Trades
A federal agency that regulates brokerage firms says there is no record of Madoff's investment funds placing trades through his brokerage operation. That leaves only two options - either he was placing trades only through other firms, which would be highly unusual, or he was not placing any trades.
"There was no evidence of the Madoff broker-dealer executing trades for the [Madoff] investment adviser," said Herb Perone, spokesman for the regulatory group, the Financial Industry Regulatory Authority. A broker-dealer is any firm that buys and sells securities.
FINRA and its predecessor, the National Association of Securities Dealers, has been examining the records of Madoff's broker-dealer operation, Bernard L. Madoff Investment Securities, every two years since the firm started in 1960. The last exam was in 2007, Perone said.
"There was no evidence of the Madoff broker-dealer executing trades for the [Madoff] investment adviser," said Herb Perone, spokesman for the regulatory group, the Financial Industry Regulatory Authority. A broker-dealer is any firm that buys and sells securities.
FINRA and its predecessor, the National Association of Securities Dealers, has been examining the records of Madoff's broker-dealer operation, Bernard L. Madoff Investment Securities, every two years since the firm started in 1960. The last exam was in 2007, Perone said.
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Wednesday, January 14, 2009
Madoff - Investor group to file legal action against HSBC, UBS
European investors' protection group Deminor is to launch a legal action against the investment banks HSBC and UBS on behalf of clients hit by the $50 billion Madoff scandal, according to reports.
The company's case is expected to argue that the banks have "neglected" victims of the alleged fraud, City AM reports.
UBS, which is Switzerland's biggest bank and a global player in asset management and investments, said it did not recommend investing in Mr Madoff's products, the site noted.
However, it did establish a fund in Luxembourg, Luxalpha, that did invest with the Wall Street broker, the bank said.
In December, London-based HSBC confirmed it had a number of custody clients who had money invested with Mr Madoff.
The bank, which has offices in 85 countries, also said it had provided financing to a "small number of institutional clients" who were exposed to the scandal.
In total, HSBC estimated its potential losses from the affair at $1 billion.
The company's case is expected to argue that the banks have "neglected" victims of the alleged fraud, City AM reports.
UBS, which is Switzerland's biggest bank and a global player in asset management and investments, said it did not recommend investing in Mr Madoff's products, the site noted.
However, it did establish a fund in Luxembourg, Luxalpha, that did invest with the Wall Street broker, the bank said.
In December, London-based HSBC confirmed it had a number of custody clients who had money invested with Mr Madoff.
The bank, which has offices in 85 countries, also said it had provided financing to a "small number of institutional clients" who were exposed to the scandal.
In total, HSBC estimated its potential losses from the affair at $1 billion.
Marcus Schrenker : Amateur Hour With Madoff Wannabe
An investment adviser who apparently staged an elaborate plot to escape allegations of financial fraud was in police custody Tuesday night in Florida. Marcus Schrenker, of McCordsville, Ind., may have sought to fake his own death to escape legal troubles, a plan that began with a solo flight from Indiana Sunday in a six-seater aircraft, investigators said.
"It looks like he wanted authorities to believe he died in a crash so that he could assume an alias and avoid the charges he faces in Indiana," said John Beeman, a deputy U.S. Marshal in the Southern District of Indiana, which had been spearheading the search.
Mr. Schrenker, 38 years old, placed a distress call to air-traffic controllers as he flew southwest of Birmingham, Ala., police said. He lost radio contact and two military jets were sent to intercept the aircraft, Pilots saw the aircraft flying unmanned, with the cockpit door ajar. The plane later crashed in the Florida Panhandle.
Mr. Schrenker showed up late Sunday at a house in Childersburg, Ala. He reportedly said he had been in a canoe accident. The resident gave him a ride into town, where he checked into a hotel. Local police had contact with Mr. Schrenker and confirmed his identity through his pilot's license. They were unaware he had gone missing.
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The Fall of the House of Weill
John S. Reed, Sanford I. Weill and Robert E. Rubin in 1999.
Citi was once the world’s first “financial supermarket.” No longer. Upon its joint venture spin-off with Morgan Stanley, it is dismantling the dream and vision of Sandy Weill. Two government bailouts plus a backstop often mean an institution cannot survive as is, however. The venture however does throw into the equation a very important detail… what about Citi/Taxpayer-Bailout Field, new home of the Mets. Might Morgan Stanley get their name on the stadium? Morgan Stanley always seemed like more of a Yankees fan…
After little more than a decade, the very model of the modern financial superpower is collapsing.
As Citigroup weighs a plan to break itself apart, it is essentially seeking to unwind the epochal 1998 deal that gave it life. And it means the unwinding of the dream of Sanford I. Weill to create a one-stop financial shop, which encompassed virtually every kind of banking and brokerage service under the sun.
Other banking giants still roam the American financial landscape, including JPMorgan Chase, Bank of America and the combined Wells Fargo-Wachovia. But none has been so closely identified with the universal banking model, one that analysts and investors seem increasingly willing to consign to the trash bin of history.
As Citigroup weighs a plan to break itself apart, it is essentially seeking to unwind the epochal 1998 deal that gave it life. And it means the unwinding of the dream of Sanford I. Weill to create a one-stop financial shop, which encompassed virtually every kind of banking and brokerage service under the sun.
Other banking giants still roam the American financial landscape, including JPMorgan Chase, Bank of America and the combined Wells Fargo-Wachovia. But none has been so closely identified with the universal banking model, one that analysts and investors seem increasingly willing to consign to the trash bin of history.
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Tuesday, January 13, 2009
SEC moves to halt alleged $23m Ponzi scheme
An emergency court order has been granted to the Securities and Exchange Commission (SEC) to halt an alleged Ponzi scheme and affinity fraud that has collected more than $23 million from Haitian-Americans through a series of "investment clubs".
The regulator's complaint contests that a consortium known as Creative Capital and its principal George L Theodule have been soliciting cash from thousands of investors from as early as November 2007.
It alleges that Mr Theodule promised his backers a 100 per cent return within 90 days based on his trading of stocks and options.
However, the SEC said he actually amassed trading losses of $18 million over the past year and Creative Capital was paying returns using new investors' money.
Mr Theodule is also accused of comingling investors' funds with his own and misappropriating around $3.8 million for his personal use.
Linda Chatman Thomsen, director of the SEC's Division of Enforcement said: "This alleged Ponzi scheme preyed upon unsuspecting members of a close-knit community, attempting to take advantage of the trust they had in each other."
According to estimates from the US Census Bureau, around 548,199 Haitian-Americans live in the United States.
The regulator's complaint contests that a consortium known as Creative Capital and its principal George L Theodule have been soliciting cash from thousands of investors from as early as November 2007.
It alleges that Mr Theodule promised his backers a 100 per cent return within 90 days based on his trading of stocks and options.
However, the SEC said he actually amassed trading losses of $18 million over the past year and Creative Capital was paying returns using new investors' money.
Mr Theodule is also accused of comingling investors' funds with his own and misappropriating around $3.8 million for his personal use.
Linda Chatman Thomsen, director of the SEC's Division of Enforcement said: "This alleged Ponzi scheme preyed upon unsuspecting members of a close-knit community, attempting to take advantage of the trust they had in each other."
According to estimates from the US Census Bureau, around 548,199 Haitian-Americans live in the United States.
ETFs edge mutual funds as investors minimize risk
Exchange-traded funds are gaining favor over risky stock strategies with investors. The funds had inflows of $138 billion for 2008 through November. During the same time period, mutual funds had outflows of $185 billion.
'Atlas Shrugged': From Fiction to Fact in 52 Years
Wall Street Journal economics editorialist Stephen Moore discusses the fallout of libertarian classic Atlas Shrugged on the bailout nation we’ve become, and how the government has insisted on taking future profits from successful corporations, leaving us all worse off. Perhaps the Journal is a “family” newspaper, but in mentioning all the industries that have lined up with their hands out to Congress following the TARP and auto bridge loans, he forgets to mention the adult entertainment industry, which asked for $5 billion last week. Something tells us that even Rand would have approved of that one.
Some years ago when I worked at the libertarian Cato Institute, we used to label any new hire who had not yet read "Atlas Shrugged" a "virgin." Being conversant in Ayn Rand's classic novel about the economic carnage caused by big government run amok was practically a job requirement. If only "Atlas" were required reading for every member of Congress and political appointee in the Obama administration. I'm confident that we'd get out of the current financial mess a lot faster.
Many of us who know Rand's work have noticed that with each passing week, and with each successive bailout plan and economic-stimulus scheme out of Washington, our current politicians are committing the very acts of economic lunacy that "Atlas Shrugged" parodied in 1957, when this 1,000-page novel was first published and became an instant hit.
Rand, who had come to America from Soviet Russia with striking insights into totalitarianism and the destructiveness of socialism, was already a celebrity. The left, naturally, hated her. But as recently as 1991, a survey by the Library of Congress and the Book of the Month Club found that readers rated "Atlas" as the second-most influential book in their lives, behind only the Bible.
Many of us who know Rand's work have noticed that with each passing week, and with each successive bailout plan and economic-stimulus scheme out of Washington, our current politicians are committing the very acts of economic lunacy that "Atlas Shrugged" parodied in 1957, when this 1,000-page novel was first published and became an instant hit.
Rand, who had come to America from Soviet Russia with striking insights into totalitarianism and the destructiveness of socialism, was already a celebrity. The left, naturally, hated her. But as recently as 1991, a survey by the Library of Congress and the Book of the Month Club found that readers rated "Atlas" as the second-most influential book in their lives, behind only the Bible.
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Monday, January 12, 2009
This Day in Wall Street History 1897: Gold standard system to be developed
| The dawn of 1897 was an auspicious time for financial planning: proponents of the gold standard had just scored a major, and lasting, victory over the silver movement, while prosperity and stability were slowly returning to the American economy. And, with these seemingly positive factors in mind, the National Monetary Conference convened in Indianapolis, Indiana, to chart the nation's fiscal course into the next century. The conference's main result was the establishment of a congressional committee charged with developing a financial system based on the burgeoning gold standard. Source: www.history.com |
Nasdaq index to track firms that receive government aid
Nasdaq OMX Group is planning to launch the Government Relief Index, the first of several planned products that will track firms getting government aid to weather the financial crisis. GRI will track 24 companies that have received at least $1 billion from the Troubled Asset Relief Program. Other planned products will track companies that have received state aid.
Citi Board Backs CEO as Outlook Worsens
Citigroup Inc. is expected to report fourth-quarter losses that are billions of dollars greater than previously anticipated, but its lead independent director said the banking giant's board isn't losing faith in Chief Executive Vikram Pandit."We have confidence in the current management and leadership of Vikram," Richard Parsons, a former CEO of Time Warner Inc., said in an interview Sunday. "There's no truth" to rumors that Mr. Pandit's job is in jeopardy barely a year after he took the reins, he added.
Madoff Apologizes to Neighbors for the Ultimate Co-op Crime
As the press ravages the front door and the lobby at 133 E. 64th Street, Bernie Madoff’s neighbors cannot be pleased with their new lives of being chased by the paparazzi. So Madoff decided to write a handwritten note to all his neighbors saying simply that he was sorry and thanks for the support. Whose support he might have is very unclear.
The world hasn’t yet heard from Bernard L. Madoff, but his neighbors have.
On Dec. 22, white envelopes, each marked with an individual apartment number on it in pencil, arrived in the foyers of his fellow co-op owners at 133 East 64th Street.
Mr. Madoff, whose alleged $50 billion Ponzi scheme has given him so much to regret, was apparently overcome by guilt — about the general media scrum surrounding the lobby.
On Monday morning, a federal magistrate is expected to rule on the prosecution’s request that Mr. Madoff be removed from the penthouse apartment in his building and jailed immediately, given that he violated the terms of his bail by sending out pricey jewelry to relatives. But since Dec. 18, Mr. Madoff has been living under house arrest, attracting television crews, tourists and probably a few crazed enemies to the discreet Federal-style building right off Lexington Avenue.
The letter, printed out on simple white paper, with letterhead formatted by word processor, read as follows:
Dear neighbors,
Please accept my profound apologies for the terrible inconvenience that I have caused over the past weeks. Ruth and I appreciate the support we have received.
Best regards,
Bernard Madoff
On Dec. 22, white envelopes, each marked with an individual apartment number on it in pencil, arrived in the foyers of his fellow co-op owners at 133 East 64th Street.
Mr. Madoff, whose alleged $50 billion Ponzi scheme has given him so much to regret, was apparently overcome by guilt — about the general media scrum surrounding the lobby.
On Monday morning, a federal magistrate is expected to rule on the prosecution’s request that Mr. Madoff be removed from the penthouse apartment in his building and jailed immediately, given that he violated the terms of his bail by sending out pricey jewelry to relatives. But since Dec. 18, Mr. Madoff has been living under house arrest, attracting television crews, tourists and probably a few crazed enemies to the discreet Federal-style building right off Lexington Avenue.
The letter, printed out on simple white paper, with letterhead formatted by word processor, read as follows:
Dear neighbors,
Please accept my profound apologies for the terrible inconvenience that I have caused over the past weeks. Ruth and I appreciate the support we have received.
Best regards,
Bernard Madoff
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Sunday, January 11, 2009
Major U.S. banks offer fixed home loans below 5%
JPMorgan Chase is offering 30-year mortgages at interest rates as low as 4.75% through its Web site, Wells Fargo is advertising 4.875% and Bank of America is offering 5%. The reduced interest rates came as the Federal Reserve started buying $500 billion worth of mortgage securities to aid the housing market. Analysts say the lower rates may prompt homeowners to refinance, but may not necessarily spur home buying. "I don't know if there is a magic number now that everyone is freaking out about the economy," said Paul Miller, a mortgage-industry analyst with Friedman Billings Ramsey. "The home buyer is scared out of the market."
Saturday, January 10, 2009
Madoff assets will not be disclosed
The Securities and Exchange Commission (SEC) is to withhold public access to a list of Bernard Madoff's assets filed earlier this week, according to reports.
The move will come as a "disappointment" to investors looking to recover their money through legal actions, the Telegraph said.
It comes as the list of high-profile victims of the Wall Street broker's alleged $50 billion Ponzi scheme continues to grow.
Among the latest to confirm losses are ex-hedge fund manager Michael Steinhardt, who told Bloomberg that he has lost around $2 million investing with the financier Erza Merkin, who funneled the money to Mr Madoff's brokerage firm.
"If [Mr Merkin] gave some of my money to Madoff and earned fees for doing so, it was not inconsistent with his agreement to manage my money in the best way he could," Mr Steinhardt said.
New York University has also filed a $24 million action against Mr Merkin and his funds for investing with Mr Madoff without performing due diligence.
Elsewhere, the Hollywood actor Kevin Bacon is said to have lost "millions" to the Madoff scandal, the Telegraph noted.
The move will come as a "disappointment" to investors looking to recover their money through legal actions, the Telegraph said.
It comes as the list of high-profile victims of the Wall Street broker's alleged $50 billion Ponzi scheme continues to grow.
Among the latest to confirm losses are ex-hedge fund manager Michael Steinhardt, who told Bloomberg that he has lost around $2 million investing with the financier Erza Merkin, who funneled the money to Mr Madoff's brokerage firm.
"If [Mr Merkin] gave some of my money to Madoff and earned fees for doing so, it was not inconsistent with his agreement to manage my money in the best way he could," Mr Steinhardt said.
New York University has also filed a $24 million action against Mr Merkin and his funds for investing with Mr Madoff without performing due diligence.
Elsewhere, the Hollywood actor Kevin Bacon is said to have lost "millions" to the Madoff scandal, the Telegraph noted.
Calamos Asset Management trimming staff by 12%
(Crain’s) — Calamos Asset Management Inc. announced on Friday that will eliminate more than 40 of its employees.
The Naperville-based mutual fund manager on Thursday notified 12% of its staff of the impending layoffs. A spokeswoman said jobs are being cut in all departments except investment. She declined to disclose when the reduction would take place.
“After evaluating the impact of the unprecedented deterioration in the global financial markets, these changes were made to help align the company’s cost structure with the current level of assets under management and revenues,” CEO John Calamos said in a statement.
This is the second time in recent months that Calamos has trimmed jobs. It eliminated 31 employees in its technology department in November.
Calamos’ earnings for the nine months ended Sept. 30 plummeted almost 92% to $1.5 million, compared with the same period in 2007. Total assets under Calamos’ management were down 29% to $33.3 million on Sept. 30, compared with the same quarter-end in 2007.
Calamos stock dropped about 8% on Friday, closing at $6.76 per share.
Friday, January 9, 2009
Madoff Had $173M Ready To Go Out The Door
At least the Feds stopped the last Ponzi-esque actions from taking place in the Madoff scandal, according to prosecutors. A good $173 million in checks was found in Bernie's office the day he was cuffed and booked. If his bail is revoked, one has to wonder, will the warden "cast him down with the sodomites" or will he get preferential treatment and have a "one-bunk Hilton" like Andy Dufresne in The Shawshank Redemption? Needless to say whichever warden receives him in the end could use a man of his intelligence to run his scams.
Mr Madoff has previously been accused of mailing more than $1 million in jewelry and other valuables to relatives to prevent them from being seized by investigators looking into his alleged $50 billion fraud.
He is also said to have planned to distribute more than $200 million in cash to close friends and family once the scheme, which Mr Madoff apparently described as "basically, a giant Ponzi scheme", eventually collapsed under its own weight.
He is also said to have planned to distribute more than $200 million in cash to close friends and family once the scheme, which Mr Madoff apparently described as "basically, a giant Ponzi scheme", eventually collapsed under its own weight.
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Thursday, January 8, 2009
Citadel's flagship fund lost half its value
Citadel Investment Group LLC’s flagship fund lost roughly half its value last year, a beating that echoed throughout the hedge fund industry.
The loss is a preliminary tally given to Reuters from an investor who asked not to be identified. The fund generated returns of around 30% in 2007, according to Reuters.
Citadel, a Chicago-based hedge-fund, in December halted redemptions on its two largest funds as part of an effort to boost its cash reserves.
Hedge funds suffered their worst year in 2008, losing an average 19.2% that was still less steep than the 38% drop for the average stock mutual fund, data released on Thursday showed.
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