Infiniti Capital unveils new hedge fund ranking method

Hong Kong - 30 September 2009

Infiniti Capital believes it has found a better way to quantitatively rank the risk adjusted returns of hedge funds than that used by traditional methods. The new ranking method, called the Infiniti Single Fund Analysis (SFA) score, is included as a risk adjusted performance measure (RAPM) in Infiniti’s recently launched Infiniti Analytics Suite (IAS), a free trial of which can be downloaded.

Infiniti chief investment officer and IAS project originator Peter Urbani says, “We believe this method to be superior to most others in use. There is always general skepticism about new methods and a reluctance to adopt them due to corporate inertia. However, the proof of the pudding is always in the eating. “Infiniti Capital has been using this method for the past two years,” he says.

The effectiveness of any such method, based purely on historical data, is in how well today’s ranking predicts what happens tomorrow or at some future out-of-sample period. In statistical speak this is known as the predictive power of the method.

The one major advantage of any quantitative method is that users can test its performance against all other known methods quickly and easily. In a recent study, the IAS development team did exactly that, comparing the performance of a portfolio built using the SFA total score as the objective to maximize versus three other widely used RAPMs.

This study showed that by using the SFA total score as an objective function, annual returns of up to 500 basis points (5%) per year higher than those using other traditional methods were achievable.

The database used was a common set of 36 hedge funds. Significantly, the returns achieved in 2008 were much higher than those for both the equally weighted portfolio and actual hedge fund of funds which generated average returns of -19% last year.

The ratio of the absolute realised risk adjusted returns, denoted as the Compound Annual Growth Rate (CAGR) over the absolute value of the peak to trough drawdown (downside risk), was also the best for the SFA portfolio.

“The predictive power of the SFA score comes from its innovative construction, proprietary weighting and ability to identify some of the non-linear effects common to hedge funds,” Urbani says.

Unlike traditional performance measures, the SFA score is both conditional on the time period being used and relative to a large reference data set of other hedge funds. Where other methods typically standardize everything back to a normal or Gaussian distribution, the IAS uses the best fitting distributions throughout. This has the effect of calibrating the range of scores more closely to real-world data.

Urbani stresses that the method is not perfect. “The SFA scores will not provide the best returns over each and every single time period, however, over any meaningful length of time they will tend to out-perform.”

He says, “We do not force people to use the SFA scores. This is a key point of differentiation between the IAS and other software packages. Just because we have a good idea doesn’t mean everyone should use it. That’s why this is an option in the IAS along with the ability to use just about any other known RAPM for optimisation purposes or to build your own.”

Allen Stanford returns to jail after prison brawl

Businessman Allen Stanford, who is awaiting trial for an alleged $7 billion fraud, has returned to jail after being badly injured during a prison brawl last week.

Fifty-nine-year-old Stanford suffered a broken nose, two black eyes and mild concussion in the fight at the Joe Corley Detention Facility in Conroe, Texas.

He spent the weekend in hospital before being returned to his jail cell on Monday.

Mr Stanford had previously been taken to hospital in August 2009 for five days following heart problems.

The former chairman of the Stanford Financial Group, who saw his assets frozen following his arrest in February 2009, will stand trial on 21 separate criminal charges relating to a Ponzi scheme he is alleged to have run from his offshore bank in Antigua.

Mr Stanford is accused of targeting several sportsmen in the fraud, including baseball players Johnny Damon and J. D. Drew.

According to prosecutors, Mr Stanford used the proceeds to pay for an extravagant lifestyle of Caribbean homes and private jets.

SunGard’s New ETF Retirement Plan Solution Helps TPAs and Advisors Gain Efficiency and Reliability

CMC Interactive, Ingham Retirement Group, APA Benefits and KTRADE have selected SunGard’s new Exchange Traded Funds (ETF) solution, which SunGard launched in July 2009 to help advisors and third party administrators (TPAs) seamlessly incorporate iShares ETFs as standard options in retirement plans. All four firms use SunGard’s Reliusemployee benefitrecordkeeping and administrative solution and the SunGard Transaction Network (STN) to facilitate connectivity and trading with iShares.

Michael Calandra, co-founder and principal of CMC Interactive, said, “With SunGard’s ETF solution, we can add ETFs seamlessly to our existing trading operations. The process is similar to that of mutual funds, providing an easy set-up process while helping us gain the operational and cost efficiencies of offering ETFs and mutual funds within the same plan.”

In recent years, there has been an upsurge in popularity with ETFs among financial advisors and their clients. iShares ETFs offer investors reasonable and transparent fees, a flexible investment lineup and risk management through portfolio diversification. SunGard’s ETF solution provides a cost-effective, automated solution to help defined contribution plans add ETFs to their retirement plans using a single software provider for integrated trading, recordkeeping and custodial services.

Jared Hanks, vice president at APA Benefits, said, “SunGard’s ETF solution provides the capabilities we need to include ETFs in our 401(k) plans in an integrated environment. As a result, we are able to provide more diversified investment options and more transparent, differentiated offerings to our clients.”

Although SunGard’s ETF solution works in conjunction with many recordkeeping systems and TPAs, advisors using SunGard’s Omni and Relius benefit administration recordkeeping platforms are able to access and trade iShares ETFs through an integrated link to STN. STN helps streamline trading and data flows between iShares and recordkeeping and accounting systems. For custody and settlement services, SunGard is leveraging the ETFxChange platform provided by Mid-Atlantic Trust Company (MATC).

Kevin Rafferty, president of SunGard’s wealth management business, said, “ETFs continue to establish themselves as a key market differentiator for benefit administrators and advisors. SunGard’s ETF solution helps provide TPAs and advisors with an efficient and reliable platform for adding ETFs to plans using a familiar process, while helping them to deliver a broader set of investment options to help clients fund their retirement.”

SunGard is a leading provider of wealth management solutions that help banks, trust companies, brokerage firms, insurance firms, benefit administrators and independent advisors acquire, service and grow their client relationships.

Madoff family to be sued over Ponzi scheme

Several members of Bernard Madoff's family are set to be sued for $198 million, according to the trustee who is winding down Madoff's company.

Trustee Irving Picard told CBS News that Madoff's brother, his two sons and a niece all held executive positions within the firm and should have known about the 20-year Ponzi scheme.

Bernard Madoff is currently serving a 150-year prison sentence after he admitted to masterminding the multi-billion dollar fraud, which saw investors paid with the money of new clients.

Mr Picard said the lawsuits filed against the Madoff family members accused them of negligence, breach of fiduciary duty and profiting personally from the crime.

"Whether or not they have a criminal problem we will pursue them as far as we can pursue them," he said.

"And if that leads to bankrupting them - then that's what will happen."

He estimated that around $18 billion of investors' money remained unrecovered.

Victims of the Ponzi scheme included director Steven Spielberg and talk show host Larry King.

Madoff's wife Ruth has been named in one of the 13 other lawsuits that Mr Picard and his lawyers have launched in an attempt to recover around $15 billion of the stolen funds.

But only $1.5 billion of the stolen money has been recovered so far.

SEC charges former GunnAllen and Questar broker with fraud in $250M Ponzi scheme

Frank Bluestein ‘lured elderly investors into refinancing the mortgages on their homes,' regulator alleges

The Securities and Exchange Commission today charged Frank Bluestein with fraud for allegedly being the single largest salesperson in a $250 million Ponzi scheme that collapsed in August 2007.

According to the SEC's complaint, from 2002 to 2007 Mr. Bluestein was responsible for soliciting about 800 investors who invested $74 million into the scheme, which allegedly was operated by Edward May and his company, E-M Management Co. LLC.

In November 2007, the SEC charged Mr. May and his firm in connection with the scheme, which allegedly centered on phony Las Vegas casino and resort telecommunications deals.

Mr. Bluestein was affiliated with Questar Capital Corp. from 2000 to 2005, and then moved to GunnAllen, where he was an affiliated rep until October 2007, a few months after the Ponzi scheme collapsed, triggering a number of investors' arbitration complaints against GunnAllen and Questar.

The SEC complaint, however, mentions neither firm, saying that Mr. Bluestein “did not sell the E-M securities” through a broker-dealer, and that the offerings did not appear on client statements. However, the firms through which he worked “provided the E-M Offerings with an aura of legitimacy and engendered trust from potential investors.”

Mr. Bluestein “lured elderly investors into refinancing the mortgages on their homes,” the SEC alleged, and he conducted numerous seminars to find new investors. At the seminars, Mr. Bluestein would often ask attendees who already invested in the E-M offering if they had “received their Ed May checks?” or “How do you like those Ed Mays?”

The seminars were often held in California and Michigan, the SEC said. Mr. Bluestein was based near Detroit. Mr. Bluestein allegedly told investors that the investments were low-risk, and Mr. May coordinated contracts with hotels for the installation of equipment such as televisions and gaming consoles. Mr. Bluestein's due diligence for the deals was shoddy and incomplete, according to the SEC complaint.

Mr. Bluestein also misled investors about the compensation he received from the offerings, the SEC charged. On top of the $1.4 million in disclosed compensation, he allegedly received $2.4 million in commissions from Mr. May and E-M Management.

more at http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20090928/FREE/909289982/-1/RSS02&rssfeed=RSS02

Citigroup Will Pare Back To Six Major Metro Areas

Just a year ago, Citigroup Inc. was weighing acquisitions aimed at making it a retail-banking giant across the U.S. Now it is retreating.

Executives at the New York company plan to narrow the focus of Citigroup's U.S. branch network to six major metropolitan areas, according to people familiar with the situation. Citigroup also will limit its overall consumer lending in the U.S. primarily to credit cards and "jumbo" mortgages, while catering largely to affluent customers.

more at http://online.wsj.com/article/SB125374611642935649.html

Commentary: Evidence doesn't link bankers' pay to crisis

Group of 20 leaders are pondering restrictions on bankers' pay at their meeting in Pittsburgh, but there is, in fact, little evidence to cite compensation as one of the causes of the financial crisis, writes Jeffrey Friedman of the University of Texas at Austin. Bank CEOs actually owned about 10 times as much of their bank's stock as they were typically paid per year, according to a study by professors at Ohio State University. Additionally, a study by compensation consultant Watson Wyatt Worldwide shows that banks that richly rewarded performance were not more likely to go bankrupt than others.

more at http://online.wsj.com/article/SB10001424052970204488304574429293838639418.html

Citadel to formally launch credit business next month

Ken Griffin's Citadel Investment Group is expanding into the market for high-yield bonds and leveraged loans by opening a credit business in October. Peter Santoro, head of institutional market for the hedge fund's Citadel Securities division, said the group will be in New York. Citadel is establishing the trading platform as part of the company's broader investment-banking efforts.

more at http://www.bloomberg.com/apps/news?pid=20601087&sid=a0_SiO9cnQwA

EU proposes new bank 'super regulator'

The European Union (EU) is continuing with its plans to create a new 'super regulator' for banks and other financial institutions operating in Europe.

President of the EU Commission Jose Manuel Barroso announced the proposals - which include the formation of a new European Systemic Risk Board - yesterday (September 23rd).

The move came ahead of this week's meeting of G20 leaders in Pittsburgh and the EU said in a statement: "The European system can also inspire a global one and we will argue for that in Pittsburgh."

Employees from the European Central Bank would be used to staff the risk board and the EU has also suggested forming three new regulatory bodies to oversee exchanges, the insurance industry and banks.

Mr Barroso remarked that the aim is to ensure the "dark days of autumn 2008" do not happen again.

Last week, it emerged that the EU may force Lloyds Banking Group to sell its Halifax arm as compensation for the funding it was given by the UK government during the credit crunch.

JPMorgan Chase executive pay 'dwarfs that of Chinese banks'

There is a large pay gap between the executives at banks in China and the US, it has emerged.

Jamie Dimon, chief executive of JPMorgan Chase & Co - the world's fourth largest bank - receives an annual salary of $19.6 million, Reuters reports.

In contrast, the chairman of the world's biggest bank - the Industrial and Commercial Bank of China - Jiang Jianqing was paid $234,700 in 2008, having taken a ten per cent pay cut in the same year.

The figures were published in a recent study titled America's Bailout Barons and Sarah Anderson, co-author of the report, told the news source that executive remuneration in the US has "always dwarfed pay for companies elsewhere in the world".

US businesses "have claimed it is impossible to recruit people without paying such compensation", she remarked, but noted that the pay levels in Europe and many Asian countries show that it is possible to "find people who can run major global firms while making a fraction of what they make in the US".

The heads of three of China's biggest banks are all paid an average salary of $230,000, with salaries elsewhere in the world being higher than in China but substantially lower than those in the US.

Banco Santander paid its chief executive officer Alfredo Saenz $13.66 million last year, while Ralph Norris of Commonwealth Bank of Australia and Gordon Nixon of Royal Bank of Canada received $8 million and $9.5 million respectively.

Wall Street compensation consultant Alan Johnson said that the pay discrepancies highlight the differences between cultures, adding that they "undercut the main argument by the US financial industry lobby that they will lose top talent to competitors in Europe or Asia".

JP Morgan recently predicted that the widespread changes being made to financial regulation following the global economic crisis will mean that a number of US and European investment banks will have to cut staff bonuses.

Visa and MasterCard hit by Hungarian fine

Authorities in Hungary have fined Visa Europe, MasterCard and some of the country's biggest commercial banks after ruling that they formed an illegal bank card fee cartel.

According to Reuters, GVH - the competition authority - found the three parties guilty of limiting competition by creating and maintaining an interchange fee structure.

MasterCard and Visa were hit with a combined fine of $2.6 million, while the country's financial institutions were ordered to pay a total penalty of $5.25 million - of which $1.52 million was levied against OTB Bank, the largest institution of its kind in Hungary.

Chairman of the GVH ruling panel Tihamer Toth said at a news conference that "competition between the two card firms and the card-accepting banks was distorted and limited" as a result of the cartel.

However, all parties have denied any wrongdoing and Visa and MasterCard both stated that they plan to appeal.

The GVS was established in 1990 and aims to promote "fairness and freedom" in relation to competition in markets in Hungary.

Sector performance so far this year

Sector	3 Mo.	6 Mo.	1 Yr.
Conglomerates	+42.53%	+62.96%	-22.94%
Consumer Cyclical	+34.01%	+73.43%	-3.02%
Basic Materials	+30.24%	+57.86%	-6.41%
Transportation	+28.23%	+44.94%	-11.41%
Financial	+26.69%	+55.54%	-12.14%
Capital Goods	+25.36%	+45.69%	-8.88%
Services	+22.72%	+34.86%	-3.44%
Technology	+21.05%	+45.21%	+8.85%
Energy	+17.24%	+24.52%	-14.48%
Healthcare	+13.69%	+18.98%	-2.61%
Consumer/Non-Cyclical	+13.69%	+25.21%	-5.73%
Utilities	+10.39%	+21.56%	-9.22%
S&P 500	+17.75%	+30.35%	-10.54%

Yale's endowment lost 24.6%

Yale University's endowment is the second largest in the United States and it took a major hit in the last year. The interesting thing is that for years, Yale's chief investment officer, David Swensen, was widely respected as an investment guru. Unfortunately, the trendy touchstones of his investment strategy did not look so smart last year.

And it leaves open an unpleasant question: When you consider that the smart money -- people who run the biggest pools of money -- charges 2 percent of assets and 20 percent of the profits it earns for clients, is the smart money really smart? Or did it just get into the right clubs that all breathe the same rarefied air and follow the same investment strategies? And if the smart money is no smarter than the rest of us, what's the point of trying to predict the future and invest in it?

These questions come to mind when examining the details of Yale's recent performance. Its endowment fell 24.6 percent in the year ending June 2009 -- "beating" the 18 percent median decline of large university endowments. And the biggest hits came in the parts of its portfolio that had previously been seen as works of investment genius.

To wit, Yale's largest category of assets -- the ironically-dubbed "real asset" category -- which includes real estate, commodities and timber -- fell 33.9 percent -- more than all the others. Yale's energy investments lost 47 percent. Its leveraged buyout and venture capital investments lost 24 percent of their value. Meanwhile, Yale's more prosaic investments in stocks and bonds declined a mere 13 percent.

As part of a club, Yale is not alone in its Ivy League misery. Harvard's endowment fell 27 percent to $26 billion and it laid off 275 people. And Stanford's endowment, which tumbled 30 percent to $12 billion, prompted the loss of 472 jobs in sunny Palo Alto.

But fret not for Yale. Despite budget cuts, Yale plans no layoffs and it still has $16.3 billion left in its endowment -- down a mere $6.6 billion from where it stood the year before. Although I have to say that I am puzzled at how Yale arrived at the mere 24 percent decline in its private equity investments, since so many of those are likely not traded on public markets.

Lord Abbett exits bundled 401(k) biz, handing off $1.2B to the Hartford

Lord Abbett will no longer provide bundled 401(k) services to the retirement plan market, and instead will focus on just offering investments to defined contribution plans

Lord, Abbett & Co. LLC is exiting the business of offering bundled 401 (k) plans — and has agreed to transition its nearly $1.2 billion in 401(k) assets to The Hartford Financial Services Group Inc.

Officials for Lord Abbett today said that the asset management firm will now focus on offering investments alone to defined contribution plans, rather than packaged products that included other services, such as record-keeping, to the 401(k) section of the retirement market.

“The business got mature and a lot of advisers were asking for access to multiple managers for a plan,” said Frank Gregory, a partner and director of retirement platforms at Lord Abbett, who added that movement towards open architecture was a factor in making the strategic shift in the business.

“Advisers like the flexibility that they have access to more than one fund family,” said Mr. Gregory.
As a result of the shift in strategy, Lord Abbett will move its existing 8,000 plans — with 59,900 participants and more than $1.2 billion in 401(k) assets — over to Hartford Retirement Services LLC, a unit of The Hartford Financial Services Group Inc.

“We didn't want to be viewed as competition because we offered record keeping,” Mr. Gregory said. “We think there is an inherent conflict when you are selling a retirement plan and also trying to be a valid partner and participate in other retirement plans and potentially targeting the same plan sponsor.”
Lord Abbett had approximately $81 billion in assets under management as of Aug. 31.

US pair charged over ATM fraud

Authorities in the US have charged two men with running an $80 million Ponzi scheme.

Vance Moore II and Walter Netschi have been accused of orchestrating the fraud through the use of a number of automatic teller machines (ATMs) placed in shops and hotels around the country.

The pair are said to have attracted investors by telling them they would make money from the charges levied for use of the cash dispensers, but they instead used the cash to "further the fraudulent scheme and to enrich themselves" rather than purchase ATMs.

It is alleged that over the course of the scheme - which ran from 2005 until January 2008 - the pair told investors that collectively they had bought around 4,000 cash machines.

However, approximately 90% of these either did not exist or were not owned by Moore and Netschi.

Ex-Morgan Stanley banker sentenced to 7 years in prison in Hong Kong insider trading case

HONG KONG — An ex-Morgan Stanley banker was sentenced Friday to seven years in prison in Hong Kong's biggest insider trading case — an "unprecedented" scam a judge said undermined the integrity of this leading Asian financial center.

Du Jun, a former managing director of the Wall Street investment bank, also was fined about 23.3 million Hong Kong dollars (about $3 million).

The 41-year-old Beijing-native showed little emotion as a Hong Kong judge chastised him for his "greed" and "dishonesty and fraudulence." Du risked making the illegal trades even though he was earning well over $2 million a year at Morgan Stanley.

"The scale was unprecedented," Judge Andrew Chan said, referring to the millions Du used in his trades.

Du's lawyer Alexander King declined to say whether his client would appeal, only saying "use your common sense."

Du was convicted last week of nine counts of insider dealing for trading shares of Citic Resources Holdings Limited before the company's announcement of an acquisition in 2007. He was also found guilty of a tenth related charge for helping his wife to deal in the shares.

The case marks the 10th conviction of insider trading since it was made a criminal offense in 2003 — part of Hong Kong's effort to tighten regulation as it seeks to retain its status as a leading financial center.

It is also the longest and most heavily contested trial on insider dealing in the territory, according to Hong Kong regulators, who were quick to hold up the sentence as evidence of their stepped-up efforts against financial malfeasance. In years past, the city's regulators have been criticized as toothless and favoring the business elite's interests.

"This sentencing sends the strongest possible message to anyone tempted to commit insider dealing offense in the future," said Mark Steward, executive director of enforcement at the local security watchdog, the Securities and Futures Commission.

Du was also banned from being a director or managing director of any listed company for five years.

Du was accused of spending HK$86 million ($11.1 million) to buy 26.7 million shares in Citic Resources on nine occasions between February and April in 2007. During the period, he had access to confidential information as part of a Morgan Stanley team advising the listed company on a $1 billion purchase of an oil field in Kazakhstan and the issuing of bonds to finance the deal.

He sold part of the shares in July 2007, two months after the announcement of the acquisition, reaping a profit of HK$33.4 million ($4.3 million).

As a managing director at Morgan Stanley, Du earned a basic salary of HK$1.45 million ($187,000) plus a bonus of $2.3 million in 2006.

Morgan Stanley came in for intense criticism from the judge following the conviction. The bank had approved some of his purchases and handled some of the trades.

A bank spokesman declined to comment and referred to a statement issued last week that said the wrongdoing was "a violation of Morgan Stanley's values and policies."

Banks' profit likely to suffer under revamped financial rules

Leaders from the Group of 20 nations will meet in Pittsburgh this week to discuss overhauling financial regulations to prevent future crises. The rules, including increased capital requirements, likely would hinder banks' profit. "It may not be good news for shareholders, but it would be good news for the system as a whole," says Hyun Shin, a Princeton University economist.

more at http://online.wsj.com/article/SB125349166984426543.html

CFTC: CapitalStreet Financial ran a $1.3M Ponzi scheme

Charged with misappropriating $875,000 of customer funds

The Commodity Futures Trading Commission has charged CapitalStreet Financial LLC, a foreign exchange trading firm in Denver, N.C., with operating a Ponzi scheme in which at least 69 customers were allegedly bilked out of an estimated $1.3 million.

The company was charged along with Sean F. Mescall, also of Denver, with misappropriating approximately $875,000 of customer funds to pay purported profits to customers and for their personal use.
CapitalStreet and Mr. Mescall, who was identified as an “officer” of CapitalStreet in the CFTC complaint filed last week, provided customers with false monthly statements to conceal trading losses and misuse of customer funds, according to the CFTC. They also directed funds to “relief defendants” Gaincapital Inc. and Gerald Mescall, a relative of Sean Mescall, also of Denver, N.C.

more at http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20090914/REG/909149974

Changes to Roth IRAs in 2010

Starting Jan. 1, taxpayers with a modified-adjusted-gross income of more than $100,000 will be permitted to convert a traditional individual retirement account to a Roth.


Until now, IRA conversions have been available only to those who earn a modified-adjusted-gross income of less than $100,000; few advisers had clients who could take advantage of the accounts.

A provision in the Tax Increase Prevention and Reconciliation Act of 2005, however, removes the income restriction on Roth IRA conversion eligibility and offers a special tax incentive for those who choose to convert during 2010 — the option to include the taxable portion of any 2010 conversions in taxable income for 2011 and 2012.

Citigroup chief agrees $100m bonus was excessive

The chief executive of banking giant Citigroup has admitted that the $100 million bonus paid to one of its traders was too much for one year's work, particularly given the overall performance of the company.

Andrew Hall, who was born in the UK, helped to generate substantial returns for the finance organisation as head of its Phibro energy trading division, but Vikram Pandit told an audience in New York this week the payout was excessive in light of Citi's problems.

Last year, the bank was forced to turn to the US government for $45 billion of aid in order to survive after being hit hard by the global financial crisis.

The state does have powers to reduce the amount of money paid in compensation deals but it may not be able to take action in this case given that Mr Hall's contract was signed ahead of the February 11th cut-off date.

Earlier this month, it was announced that Mr Pandit has ceased using his corporate jet for private use.

FDIC to Consider Ways to Replenish Deposit Fund

WASHINGTON (Reuters) - U.S. bank regulators are considering tapping a line of credit with the U.S. Treasury Department and may explore other lesser-known options to replenish the dwindling fund that safeguards bank deposits.

Federal Deposit Insurance Corp Chairman Sheila Bair said on Friday that the agency would meet at the end of the month to discuss options to rebuild the fund, which has been significantly drained by a sharp increase in bank failures.

"We are carefully considering all our options, including borrowing from Treasury," Bair said, referring to the agency's $500-billion line of credit with the Treasury Department. She was speaking at a global finance conference in Washington.

But regulators are still reluctant to tap the line of credit because they want to avoid temporarily using taxpayer money to clean up the banking mess, she said.

So far this year, 92 U.S. banks have failed, compared with 25 during all of last year and only three in 2007. Those failures have whittled the balance of the insurance fund down to $10.4 billion from $45 billion a year ago. The FDIC is careful to note that it has $42 billion in reserves to handle failures over the next year.

more at http://www.nytimes.com/reuters/2009/09/18/business/business-us-financial-regulation-fdic.html?ref=business

Swiss Stock Exchange Probes UBS

ZURICH -- The Swiss exchange said Friday it has opened an investigation into UBS AG for possible breaches of disclosure beginning in 2007, when it started reporting massive write-downs, and on the corporate governance portion of bank's 2008 annual report.

The investigation, which UBS declined to comment on, will continue for an indefinite period, the SIX Swiss Exchange said. Findings will be made public at a later date, the bourse said.

more at

http://online.wsj.com/article/SB125325709093022311.html

SEC proposes prohibiting flash orders

The Securities and Exchange Commission voted 5-0 to propose a rule amendment that would prohibit flash-order trading. The SEC will seek public comment on the proposal for 60 days. Nasdaq OMX Group's Nasdaq Stock Market and privately held BATS Exchange recently ended the practice of flashing marketable orders.

more at http://online.wsj.com/article/SB125322159618320841.html

BlackRock chief questions Obama's housing programs

Larry Fink, chairman and CEO of BlackRock, said he is concerned about programs from the Obama administration that might curb foreclosures but also hurt the mortgage-market recovery. "I am just very worried," Fink said. "How do we get a vibrant securitization market back when we are doing these things in the short run that are good for the banking system and good for the homeowner but not as good as it should be?"

more at http://www.bloomberg.com/apps/news?pid=20601087&sid=alAm1oFsgoGc

Peter Schiff Announces Candidacy For CT Senate Seat

Money manager Peter Schiff, president of Euro Pacific Capital launched his much-anticipated bid to run for Connecticut’s senate seat challenging Christopher Dodd.

The announcement came as no great surprise. There have been multiple reports, it was teased on a twitter feed and a grassroots group of California liberatarians have been pushing for Schiff to run for months.

Schiff joins a crowded field for the Republican nomination, one that already includes State Sen. Sam Caligiuri of Waterbury, former U.S. ambassador Tom Foley, former World Wrestling Entertainment CEO Linda McMahon and former U.S. Rep. Rob Simmons.

more at http://www.cnbc.com/id/32900232/site/14081545

Panel to begin investigation of financial crisis

The Financial Crisis Inquiry Commission will hold its first meeting today as it looks for the root cause of the financial crisis. The investigation might be the White House's best opportunity to reinvigorate its regulatory revamp. Critics argued that the causes are already known and that going back through them is a waste of time. However, proponents pointed out that no single panel with the authority to subpoena has thoroughly examined the crisis.

more at http://www.cnbc.com/id/32889278

Barclays received profit from Lehman Brothers assets

Barclays Capital received an $8.2 billion windfall profit when it took control of excess Lehman Brothers assets a year ago, it has emerged.

Court papers submitted on Tuesday by Lehman Brothers Holdings argue that Barclays gained assets it was not supposed to receive during the deal, due to the fact that "critical changes" to the agreement were made between the sale order being signed and the transaction being concluded.

Lehman executives agreed to give Barclays a $5 billion discount on the book value of the securities that the bank was acquiring, the document said, with the rest of the money being handed over at a later date at Barclays's request

"The deal was actually structured to give Barclays an immediate and enormous profit windfall," Lehman stated.

Yesterday (September 15th) marked the anniversary of Lehman Brothers filing for bankruptcy, a move that contributed greatly to the global economic downturn.

Canadian police charge two over Ponzi scheme

Police in Canada have charged two men with allegedly running a Ponzi-style fraud worth over $193.5 million.

Milowe Brost and Gary Sorenson have been accused of convincing investors to place money into offshore shell companies they secretly ran by promising them high returns.

According to the country's Globe and Mail newspaper, as many as 3,000 victims across Canada and the US were involved and the amount accrued by the fraud could be as much as $374 million.

Police arrested Mr Brost but Mr Sorenson - who is believed to be in Honduras - has not yet been taken into custody.

The charges come following a three-and-a-half year investigation into the case and police have been criticized for not discovering and stopping the scheme sooner.

Record-Breaking August for ETFs

The August ETF numbers are in, and the industry continues to grow as new investors discover ETFs, old investors wade back into the markets and ETF providers continue to launch exciting new products.

Total assets in U.S.-listed exchange traded products surged to $678 billion, a 4% increase since previous highs in July. Year-to-date, assets are up 25%. Funds in fixed income, commodities and emerging markets are raking in the highest flows and garnering the most interest, explains Sam Mamudi for The Wall Street Journal.

The industry had 846 exchange-traded products from 36 providers at the end of August. The latest regulation may curb some of the buying interest for those investors seeking commodity exposure through ETFs, as regulators try to curb speculation they believe has led to volatility in the market.

Other than that, ETFs are touted for their flexibility to trade on an exchange like a single stocks with transparency and liquidity. The amount of exposure that an ETF yields is unsurpassed, and investors love the lower fees and tax efficiencies that come with most ETFs, as well.

This year has been especially challenging for the industry in general, but the growth the ETF business has seen is a good indicator that when markets see a more firm rebound, ETFs will become even more prolific and popular with investors of all types.

Assets under management have dropped substantially worldwide

A study has found that wealth has dropped 11.7 percent to $92.4 trillion over the period of the financial crisis.

The study by a Boston consulting group found wealth would not return to 2007 levels for another six years.

The United States, was the hardest hit region, primarily due to the decline in US equity investments in 2008.

Also hit hard were off-shore wealth centres, where many companies and individuals had gone to avoid tax.

In Switzerland and the Caribbean, assets declined to $6.7 trillion in 2008 from $7.3 trillion in 2007.

Millionaires who made risky investments during the economic boom were especially hard hit, with the number of millionaires worldwide shrinking 17.8 percent to 9 million.

Morgan Stanley closing Indian units

Morgan Stanley has indicated it will abandon back-office operations in India.

A sale of its back-office unit has been discussed by US management, who have been assessing the potential value of the transaction.

It is understood the entire Indian back-office operations for Morgan Stanley could be $150 million-$250 million.

The back-office work includes IT development, finance, accounting-related work, equity research, financial modelling and portfolio analysis.

BlackRock planning global trading platform

Asset manager BlackRock is to launch its own global trading platform, it has emerged.

According to the Financial Times, the company intends to utilize the system to rival those used by many firms on Wall Street.

The business will have around $3,000 billion in assets under management once it has completed its acquisition of Barclays Global Investors (BGI) in December and it has appointed Minder Cheng of BGI to oversee the launch of the platform.

BlackRock said in a leaked internal memo seen by the news source that the new offering will "fully realize the cost efficiencies and trading opportunities across all asset classes as we become one of the largest trading operations in the world".

Those familiar with the plan - which is said to still be in its early stages - explained that BlackRock will not be charging fees for the service due to the fact that it is being introduced in order to save clients money.

The company reached a deal worth around $13.5 billion for BGI in June.

Book : The Ascent of Money: A Financial History of the World

Niall Ferguson makes a strong, compelling case for the development of money and banking as a catalyst for the advancement of civilization. Yet while some critics praised his clear, comprehensible writing, punctuated with anecdotes and historical details, others were nonplussed by his explanations and narrative detours. Several critics also bemoaned the book's choppy and uneven structure—an echo of the episodic, six-part television series it was meant to accompany. So it seems the UK critics liked the book less because they had seen the show. Though perhaps best suited to readers with a fundamental understanding of financial terms and theories, Ferguson's latest work provides valuable insight into the inner workings of the global economy, past and present. For interested readers, it demonstrates how our current fiscal meltdown fits into the bigger historical picture and laments humanity's perennial inability to learn from this history.

SEC charges New York money manager Philip Barry

A New York-based money manager has been charged with running a $40 million Ponzi scheme by the Securities and Exchange Commission (SEC).

Philip Barry of Brooklyn is alleged to have orchestrated the fraud through three of his firms - Leverage Group, North American Financial Services and Leverage Option Management.

The SEC said he promised around 800 investors high returns from the sale of liquid investments, but instead used their money for private interests.

It also alleged that Mr Barry guaranteed returns of as much as 21 per cent per year through the use of a proven trading strategy and misrepresented that the investors' money would be used to trade in options and other securities.

Director of the SEC's regional office in New York George Canellos described him as being "unscrupulous and unregulated", adding that he "lured" his victims with "false promises" of profits and liquidity.

Last month, the regulatory body filed a charge against Las Vegas accountant Michael Moore, who is alleged to have conducted securities fraud by issuing false audit reports.

Tiber Prospect - Gulf Oil Well Discovery Is Deepest in World

250 MILES SOUTHEAST OF HOUSTON
BP taps into Tiber Prospect, estimated to have between 4 billion and 6 billion barrels of oil equivalent.

Nearly seven miles below the Gulf of Mexico, oil company BP has tapped into a vast pool of crude after digging the deepest oil well in the world.

The Tiber Prospect is expected to rank among the largest petroleum discoveries in the United States, potentially producing half as much crude in a day as Alaska's famous North Slope oil field.

The company's chief of exploration on Wednesday estimated that the Tiber deposit holds between 4 billion and 6 billion barrels of oil equivalent, which includes natural gas. That would be enough to satisfy U.S. demand for crude for nearly one year. But BP does not yet know how much it can extract.

"The Gulf of Mexico is proving to be a growing oil province, and a profitable one, if you can find the reserves," said Tyler Priest, professor and director of Global Studies at the Bauer College of Business at the University of Houston.

The Tiber well is about 250 miles southeast of Houston in U.S. waters. At 35,055 feet, it is deeper than Mount Everest is tall, not including more than 4,000 feet of water above it.

Drilling at those depths shows how far major oil producers will go to find new supplies as global reserves dwindle, and how technology has advanced, allowing them to reach once-unimaginable depths.

Deep-water operations are considered to be the last frontier for pristine oil deposits, and the entire petroleum industry is sweeping the ocean floor in search of more crude.

BP needs to invest years of work and millions of dollars before it draws the first drop of oil from Tiber. Such long waits are not uncommon. Three years after announcing a discovery at a site in the Gulf called Kaskida, BP has yet to begin producing oil there.

BP expects Tiber to be among the company's richest finds in the Gulf on par with its crown jewel, the Thunder Horse development. Thunder Horse produces about 300,000 barrels of oil equivalent per day, as much crude as half of Alaska's famous North Slope.

Even if Tiber produces that much, it would still be a trickle compared with the largest oil producers in the world - the Ghawar field in Saudi Arabia, which produces 5 million barrels per day.

But because it's close to home, Tiber would be especially attractive to refiners in America, where the government wants to cut down on oil imports from the Middle East.

"Early indications are that it's a significant positive discovery," said Matt Snyder, lead analyst with Wood MacKinzie's Gulf of Mexico research team.

Exploration companies recently have been pushing drilling operations farther from shore because of technological improvements that allow them to handle extreme depths and pressure, Snyder said.

It's an expensive process. A production platform costs more than $1 billion to build. Drilling a deep-water well can add another $100 million, and if crude is located, it could cost another $50 million to bring the oil to the surface.

"And when they finally get down there, it's very hot," said Leta Smith, a director with Cambridge Energy Research Associates' Global Oil Supply Group.

"It could be upwards of 250 degrees Fahrenheit. The pressures can be the most challenging aspect of it. These rocks are over-pressured, which means you need to have a lot of special equipment."

For an ambitious project like Tiber to pay off, experts say crude must cost at least $70 to $75 per barrel, though lower prices have never slowed the industry. When crude prices fell below $20 per barrel in the late 1990s, exploration and Thunder Horse never slowed.

"They're not swayed by daily price swings when it comes to planning deep-water exploration," Priest said.

BP's discovery is the latest in what's called the "lower tertiary" region, an ancient section of rock in the Gulf that is roughly 300 square miles and formed between 24 million and 65 million years ago.

Chevron Corp. drilled one of the first wells in the region in 2001, followed by more than a dozen others from companies such as Royal Dutch Shell, Australian oil company BHP Billiton, BP and Total SA, according to the U.S. Department of Interior's Minerals Management Service.

In 2006, Chevron estimated that the lower tertiary holds between 3 billion and 15 billion barrels. But it has taken years to develop wells for commercial use.

Smith said that the first drops of crude from the lower tertiary will arrive in 2010 with Shell's Perdido operation and Petrobras's Cascade and Chinook developments.

BoA stonewalling over government repayment

The Bank of America (BoA) is still in negotiation with US officials regarding a ringfencing agreement that was reached as part of the terms of its bailout earlier this year.

According to a letter released by the chairman of the Committee on Oversight and Government Reform Edolphus Towns, the bank is "stonewalling" over the deal, which saw the US administration offer insurance against further losses on $118 million in toxic assets.

Chief executive of the financial institution Ken Lewis said talks were underway over how much BoA owes, but Mr Towns called on the bank to agree to repay the money to taxpayers.

"It seems that the bank wants to have it both ways - all the benefits of government insurance without having to pay a dime for all of its benefits," he stated.

BoA was given $20 billion in fresh capital by the government in January of this year due to the losses that it acquired following its takeover of mortgage broker Merril Lynch.

This Day in Wall Street History 1789: First Treasury secretary is named

With the nation in need of a strong financial leader, President George Washington asked stalwart Federalist Alexander Hamilton to step in as the first secretary of the Treasury. The move came a week after the official founding of the Treasury Department.

Hamilton was Washington's aide-de-camp during the American Revolution, and was instrumental in the formation of the U.S. Constitution. During Washington's administration, Hamilton, with his support of strong federal government and conservative property rights, often came into conflict with Secretary of State Thomas Jefferson, a Democratic idealist who favored states' rights.

Source: History.com

Elliott wave: 'Time to exit'

"The stock market is poised to complete the bear market rally from March," says technical expert Steven Hochberg in The Elliott Wave Financial Forecast. Here's his bearish call.

"On April 2, we forecast a rally that would carry the Dow to 9,000-10,000 and the S&P 500 to 1000. These levels have now been met.

"We felt this price target would represent a respectable place to exit long positions. But we know from past experience that many will hold out for even higher prices.

"The most 'respectable' exit point is fast approaching, if not already at hand. Instead of angling for the exit ramp, however, investors are accelrating into the fast lane -- just in time for the big pile up.

"Besides achieving the price objectives originally forecast in April, the five-month push has generated optimistic extremes that exceed those that were recorded at the October 2007 all-time high.

"The worst seasonal month of the year historically -- September -- is at hand. Prices should decline at least as fast as they rebounded.

"The next phase of the ongoing bear market should be the strongest. Credit spreads narrowed to levels last seen in January 2008, also fulfilling our previous forecast. Spreads should deteriorate to record levels in conjunction with the next leg down in equities.

"Gold and silver both remain in downtrends that are far from complete. A key market for the still-unfolding deflation is the U.S. dollar.

"Against a backdrop of near-universal scorn, the dollar is forming a major bottom and the next multi-month move should be up."

Exelon signs deal to buy $1.2B of uranium

The country's sole provider of enriched uranium for nuclear power plants says Exelon Generation Co. has signed a contract valued at nearly $1.2 billion to buy separative work units from its American Centrifuge Plant.

Bethesda, Md.-based USEC has been building the plant on the site of a former gaseous diffusion plant about 80 miles east of Cincinnati.

The company says Exelon will buy the separative work units to fuel its reactors. Separative work units are a standard measure of processed uranium.

USEC Inc. says customers have committed to buying output from the plant valued at more than $3.4 billion.

Foreign-account holders may face double trouble

Not all are aware that non-bank offshore assets must be reported to Treasury as well as IRS

After the headlines about the IRS' going after secret Swiss bank accounts, investors are learning to their dismay that they could face fines and prosecution for failing to report other foreign assets, such life insurance, to both the IRS and the Treasury Department.

Numbered bank accounts used to shelter wealth from the Internal Revenue Service are in the spotlight in the wake of the recent UBS AG scandal, but clients who own other types of foreign assets may be unaware that those accounts also must be disclosed to the Department of the Treasury, said Melissa Gillespie, a New York-based international tax attorney.

In addition to reporting investment income and capital gains on their income tax returns, U.S. citizens and residents with a financial interest or signature authority over a foreign financial account that's worth more than $10,000 at any time of the year must report that account to the Treasury Department through a form called the Foreign Bank Account Report.

Along with foreign bank ac-counts, that treatment applies to foreign life insurance policies with a cash surrender value greater than $10,000, trusts with foreign financial accounts, investments in gold bullion and foreign-type individual retirement accounts, or pension plans that are in the client's control.

Foreign annuities with a balance that exceeded $10,000 any day during the year must also be reported to the Treasury

more at http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20090906/REG/309069972&ht

Morgan Stanley taps Gorman to succeed Mack as CEO

John Mack will step down as CEO of Morgan Stanley at the end of the year, but the former trader will remain chairman for at least two years, he said. "He was given a tough job. I think he handled it above average, and history will judge him a solid leader on Wall Street," said Matt McCormick, a banking industry analyst at Bahl & Gaynor. Co-President James Gorman, head of retail brokerage, will replace Mack as CEO.

more at

http://uk.reuters.com/article/idUKTRE58967B20090911

NYSE to add partners to bolster options-trading business

NYSE Euronext plans to sell stakes in its NYSE Amex division to major Wall Street firms, including Goldman Sachs Group, Bank of America and Citigroup. The goal is to give major options traders an incentive to trade on Amex, which has seen its market share plummet during the past 10 years. Under the plan, NYSE Euronext would remain the largest shareholder in Amex.

more at http://online.wsj.com/article/SB125245393221794181.html

Citadel to gain stake in NYSE Euronext unit

(Reuters) — NYSE Euronext said on Wednesday it plans to sell a significant stake in its NYSE Amex options unit to seven major Wall Street companies.

As part of the deal, the company has agreed in principle on a framework with BofA Merrill Lynch, Barclays PLC, Citadel Securities, Citigroup Inc., Goldman Sachs Group Inc., TD Ameritrade Holding Corp. and UBS AG, who will become partners in the Amex options unit.

"This partnership will further align our business interests with those of our customers, and makes NYSE Amex options an even more compelling trading venue within an increasingly competitive marketplace," Duncan Niederauer, CEO of NYSE Euronext, said in a statement.

NYSE Euronext said it would continue to manage the day-to-day operations of the unit, which would be operated under the supervision of a separate board and a chief executive officer.

NYSE Euronext said it would remain the largest shareholder in the entity. It expects the transaction to be completed by the end of 2009.

Shares of NYSE Euronext closed at $28.08 Tuesday on the New York Stock Exchange.

CME wants city subsidy for renovation of the Chicago Board of Trade Building

CME Group Inc. is seeking $15 million in city aid to help pay for a major renovation of the Chicago Board of Trade Building, which became the exchange’s headquarters after its 2007 buyout of the Board of Trade.

The CME has promised to create 900 jobs over the next 10 years, in addition to the 1,800 current employees, in exchange for the tax-increment financing grant, according to Alderman Robert Fioretti (2nd), whose ward includes the building at 141 W. Jackson Blvd.

The subsidy would cover about a quarter of the $61-million cost of rehabbing the landmark Art Deco property, the longtime anchor of the LaSalle Street financial district.

The CME’s request is likely to spark more questions about the city’s use of TIF money, which critics call corporate welfare but city officials defend as an important job-creation and development tool. Mr. Fioretti contends that the CME grant is money well spent, saying it would keep the company from moving its headquarters to another city.

The city offered the CME a generous aid package — totaling as much as $40 million — around the time the exchange was wrapping up its $12-billion acquisition of the Board of Trade in July 2007. But so far, the discussions between the city and CME have resulted only in the current $15-million TIF proposal.

The CME acquired the New York Mercantile Exchange last year, opening up the possibility of a move to New York, says a CME spokeswoman.

Companies occasionally threaten a headquarters move as a negotiating ploy, but Mr. Fioretti says it’s a real possibility in the CME’s case. A CME spokeswoman says the exchange is “committed to Chicago,” but relocating to New York is “always an option.”

The city and exchange are still negotiating the TIF proposal, which was to be considered Tuesday by the city Community Development Commission but was pulled off the meeting agenda last week. The commission may review the request at its October meeting, a spokeswoman for the panel says.

“We want to be a very viable and appealing option for them,” she says.

The City Council would need to approve a TIF grant.

The Board of Trade Building sits in one of more than 130 TIF districts created by the city to spur development. In a TIF district, a portion of property tax revenue that would normally go to school districts and other government bodies is set aside for projects that city officials believe wouldn’t happen without a subsidy.

The CME would use the TIF subsidy to help pay for the rehab project at the 79-year-old Board of Trade Building. The renovation, parts of which are already under way, includes the expansion of the exchange’s trading floors and mechanical upgrades.

“The building’s a landmark building and it needed some work to make it appealing to tenants,” the CME spokeswoman says.

The project would follow a $20-million renovation completed in 2006 to fix up the building’s interior and exterior public spaces. The 765,000-square-foot tower is 96% occupied.

In addition to being one of the Loop’s largest employers, the CME supports jobs at many nearby local businesses, including trading firms and restaurants, says Mr. Fioretti, the alderman. For every job at the CME, related businesses employ 2.74 people, he says.

“This is the type of project that benefits the city and the country,” he says.