Friday, December 30, 2011

What Me Worry? Bank CEOs Earn Big Bucks Even as Stocks Get Hammered

While the nation's biggest financial institutions saw their market capitalization drop by an average of 11.1 percent, bank CEO compensation averaged $7.74 million, according to calculations by Rochdale Securities analyst Dick Bove.

According to CNBC that means the banking heads earned 50 to 100 times the average worker and did much better than their shareholders, who saw bank stocks as a group plunge about 26 percent this year.

Take JPMorgan Chase [JPM 33.20 -0.22 (-0.66%) ]. The Wall Street titan's CEO, Jamie Dimon, will earn just shy of $42 million this year for a bank that lost nearly a quarter of its market cap—or 23 percent—during the year, according to Bove's numbers.

There's also Bank of America [BAC 5.483 0.023 (+0.42%) ] head Brian T. Moynihan, who will earn a comparatively small $2.26 million this year while his bank's market value dropped 60 percent — the worst in Rochdale's study.

Goldman Sachs [GS 90.89 -0.12 (-0.13%) ] head Lloyd Blankfein's compensation was $21.7 million, while the investment bank he runs lost 46.4 percent of its market cap….

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Soros: Gold Prices on Brink of Bear Market

Gold is poised to complete its 11th consecutive annual gain, the longest winning streak in at least nine decades, on the brink of a bear market, according to the good people at Bloomberg.

George Soros, the billionaire who two years ago called it the “ultimate asset bubble,” cut 99 percent of his holdings in the first quarter, Securities and Exchange Commission data show. Hedge fund managers John Paulson, Paul Touradji and Eric Mindich also sold bullion this year. While speculators in New York futures are the least bullish in 31 months, the median estimate in a Bloomberg survey of 44 traders and analysts is for prices to rally as much as 39 percent to $2,140 an ounce in 2012…

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Diamond Foods gains on rumors of Einhorn investment

Reuters reports that shares of Diamond Foods, currently the target of a regulatory probe, rose as much as 14 percent, after CNBC reported rumors that high-profile investor David Einhorn may have invested in the company.

When contacted, Einhorn, who runs hedge fund Greenlight Capital Inc, declined to comment. Diamond Foods also declined to

"For people who are long (on) Diamond stock, it would be a good thing... If someone takes a large stake who is a well regarded investor, others tend to follow like lemmings," said an investor, who did not want to be identified.

The rumors come at a time when the U.S. Securities and Exchange Commission is probing the snack maker's accounting of payments to walnut growers.

Diamond's stock has lost more than half its value since it first announced an internal probe into the matter. It fell to its lowest level in two years after the SEC announced its probe earlier this month….

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How low can you go? BofA Posts Worst Showing in Dow Average

Bank of America Corp. is on track to be this year’s worst performer in the Dow Jones Industrial Average as concern about mounting mortgage losses and a global economic slowdown weighed on the second-biggest U.S. lender, Bloomberg writes.

The 59 percent decline through yesterday erased almost $80 billion of shareholder value at Charlotte, North Carolina- based Bank of America. It’s the firm’s largest drop since a 66 percent plunge in 2008, when a U.S. bailout staved off a collapse. The bank probably will also end 2011 last in the Standard & Poor’s 500 Financials Index and the KBW Bank Index.

Big swinging d*ck and CEO Brian T. Moynihan, 52, told his staff in a year-end progress report last week that his effort to boost the company’s value “is not yet translating into returns for our shareholders.” Moynihan said he has prepared for turmoil ahead by selling assets, reducing mortgage and credit- card loans and pledging to lower annual costs by $5 billion, including about 30,000 job cuts...


Hedging your bets on the next Dodgers owner

Forecasting how this might ultimately play out is a risky endeavor, which is something Steven Cohen is at least historically familiar. According to the LA Times report Cohen is the East Coast hedge fund titan identified by The Times’ Bill Shaikin as bidding on the Dodgers. A hedge fund is a somewhat murky concept to most people, but then it’s not intended for most people, at least not directly. It’s intended for pension funds and foundations and that infamous 1%. The kind of people who want to call and speak to the fund manager directly.

Cohen, 55, has proved so adept at this financial wizardry that Forbes has estimated his net worth at $8.3 billion. That makes him the 35th richest man in America, or four spots ahead of Phil Anschutz.

Which immediately would give him one huge advantage over the current non-local owner, Frank McCourt. Cohen is stupid rich.

He also has the backing of two local billionaires, who just happen to share his passion as an art collector and for their obscene prices: David Geffen and Eli Broad. Geffen reportedly has sold three art pieces to Cohen valued at more than $250 million. Feels like an uncomfortably elitist, almost incestuous club.

The backing also makes it sound like Broad won’t be joining Peter O’Malley or anyone else’s ownership bid, which would be disappointing to many.

Cohen refused to comment for Shaikin’s article, but then if he were to become the Dodgers’ new owner, that’s something we might have to become familiar with. When he gave an interview to Vanity Fair last year, the magazine boasted it was only the second interview of his 33 years on Wall Street. Almost makes the secretive Anschutz sound loquacious.

But it’s not that he made his fortune investing other people’s money, or that he lives in Connecticut, or has no baseball background or never speaks publicly that could prove to be his largest obstacle in getting approved by Major League Baseball. It’s the constant rumors of insider trading that have circled Cohen and the company he founded, SAC Capitol Advisors, which controls $14 billion in assets….


Heart Line: Hedge Fund Manager Renews Pledge To Help Family Of Torched Brooklyn Woman

NY1 reports that a Manhattan hedge fund manager assured the family of a Brooklyn woman who was torched in her building's elevator that he will help them pay for a Friday memorial service, saying that a "glitch" delayed his donation. Brooklyn Councilwoman Letitia James said that hedge fund manager Darren Weingrow assured her that he would pay for the service for Deloris Gillespie, seen above.

Gillespie's memorial service will be at noon Friday at the First African Methodist Episcopal Zion Church at 54 MacDonough Street in Brooklyn. Harlem's Unity Chapel Funeral is handling the ceremony.

This came hours after Gillespie's family members addressed reporters to say that they feared they could not afford a service.


Top Banks Fight For Facebook Gold

This year has been lackluster for Wall Street bankers. But next year, there's Facebook Inc. Up for grabs is the lead investment-banking role in the social-networking site's initial public offering, and long-time rivals Goldman Sachs Group Inc. and Morgan Stanley are considered front-runners, bankers and venture capitalists say.

The Menlo Park, Calif., company plans to file its offering documents in early 2012, a person familiar with the matter has said, meaning that a decision on bankers could be soon. Some bankers have been waiting by the phone over the holidays for the call that they will be participating in the company's IPO in some way, another person said.

The deal will be one of the most hotly contested offerings of the decade, with hundreds of millions of dollars in potential fees and bragging rights on the line...

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Ex-JP Morgan Chase Hedge Exec: You're better off with Treasuries

If the tailor who whipped up the emperor's new clothes were around today, there's a good chance he'd be a hedge fund manager. In what other job could an ambitious person with average abilities make so much money and produce so little?

According to Investment News it's not that the fund managers are overtly out to trick anyone, and many are quite talented, says Simon Lack, a former hedge fund executive at JPMorgan Chase & Co. and author of the just-published “Hedge Fund Mirage” (John Wiley & Sons, 2012). But Mr. Lack's research finds that investors would have done twice as well with boring Treasuries over the past decade than being in the high-status, hard-to-research investments they find so captivating.

In fact, Mr. Lack, who now runs SL Advisors in Westfield, N.J., says the reason for hedge fund managers' exalted, albeit unwarranted, status in the investment pantheon lies more with investors — swooning high-net-worth individuals as well as supposedly sophisticated pension funds and other “smart-money” institutions — than with the managers….


Thursday, December 29, 2011

Cutting Buffett Helps Sequoia Fund

Sequoia Fund Inc., recommended by Warren Buffett when it opened, beat the U.S. stock market over the past four decades, in part because a large piece of the fund was invested in his company, Berkshire Hathaway Inc., reports Bloomberg. Heeding Buffett’s warning that Berkshire wouldn’t grow as fast as it once did, the managers of the $4.7 billion fund cut their reliance on the stock almost in half in 2010, and Sequoia is beating other value stock funds again this year, gaining 14 percent through Dec. 27, according to data compiled by Bloomberg.

Heeding Buffett’s warning that Berkshire wouldn’t grow as fast as it once did, the managers of the $4.7 billion fund cut their reliance on the stock almost in half in 2010 and put the cash into companies such as Valeant Pharmaceuticals International Inc. (VRX), a drug distributor. Sequoia is beating the pack again this year, gaining 14 percent through Dec. 27, better than 99 percent of value stock funds, according to data.

“They have the kind of portfolio Buffett might have if he ran a mutual fund,” Steven Roge, a portfolio manager with Bohemia, New York-based R.W. Roge & Co., said in a telephone interview. His firm, which oversees $200 million, holds shares in Sequoia.
Like Buffett, the managers of Sequoia look for high-quality companies with competitive advantages that the fund can hang onto for long periods….


Jim Rogers: Little Reason for Optimism in Anything but Agriculture

World markets may be riddled with uncertainty, but CNBC reports, billionaire investor Jim Rogers anticipates gains in one sector for years to come. Rogers anticipates gains in ag stocks for 10 years or more.

“If I were buying anything I’d be buying agricultural commodities,” he says. “Going forward we’re going to have huge shortages of everything – including farmers – I think ag will be a great place for the next 10-20 years,” he says.

But don’t take that to mean that ag stocks are a buy – that’s not what he means.

“Yale did a study recently showing that investors made 300% more by putting money in commodities themselves rather than commodity stocks – that is unless you’re a great stock picker.”

In other words, he’d play his thesis with commodities futures or ETFs that track them….

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Madoff kid must face suit

Bernie Madoff’s son Andrew must submit to a bankruptcy judge’s decision to permit a $198 million lawsuit to go forward because he sought that court’s protection when he filed a claim against his father’s estate, a federal judge said.

US District Judge William Pauley in Manhattan last week declined to hear an appeal of the September decision in favor of Irving Picard, the trustee liquidating Bernard L. Madoff Investment Securities, in his claim against Madoff family members, including Andrew Madoff and the estate of Mark Madoff, who committed suicide in December 2010. Pauley’s written opinion was filed yesterday in US Bankruptcy Court in Manhattan.

“Because Mark and Andrew invoked the aid of the bankruptcy court by offering a proof of claim and demanding its allowance, they must abide by the consequences of that procedure,” Pauley said in his Dec. 22 decision, citing a US Supreme Court ruling that also described limits to the power of bankruptcy judges. “There is no basis for them to insist that the issue be resolved” by a higher court, Pauley said

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The End Of The Euro And The End Of The Investor?

The Automatic Earth writes: Oh, sure, don't get me wrong, there may still be a Euro a year from now. And there’ll certainly be some investors left.

But the Euro, if it manages to survive, will have to do so in what can only be characterized as a radically different form and shape. At the same time, small mom and pop stock investors will be few and far between; there's no money in the "traditional" stock markets, as they've found out - once more - in 2011. Many will also need what money they still have in stocks to pay down various kinds of other obligations....

….No, I don't know what the euro will look like next Christmas, but it won't be what it looks like today. It could be the return of the drachma and lira, or the return of the mark and guilder, or all of the above. But not a 17-country Eurozone

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Wednesday, December 28, 2011

Big money is starting to bet on housing.

Hedge funds run by Caxton Associates LP, SAC Capital Advisors LP, Avenue Capital and Blackstone Group LP have been buying housing-related investments, betting on a rebound. And the Wall St Journal reports that formerly bearish research firm Zelman & Associates now predicts a housing pickup, as does Goldman Sachs Group Inc.

Other investors seem to be making the same bet. Shares of home builders are up 30% since the end of the third quarter, as measured by the Dow Jones index tracking those shares, topping a nearly 10.5% gain for the Standard & Poor's 500…..


Swiss Bank Tax Evasion: U.S. Using New Tactic For Finding Suspected Tax Cheats

HuffPo reports that U.S. authorities hunting in Swiss banks for suspected tax cheats have a new weapon in their arsenal: an arcane but aggressive legal maneuver more commonly used against drug smugglers, money launderers and Imelda Marcos, widow of the Philippine dictator.

Backed by court judges, federal prosecutors are issuing subpoenas -- official papers which compel the recipients to provide potentially damning evidence -- to United States taxpayers suspected of holding hidden accounts at Swiss and other offshore banks, according to criminal defense lawyers whose clients have received the papers.

The grand jury subpoenas are unusual in that they ask bank clients -- not the banks themselves -- to turn over to the authorities their bank account details since 2003,….

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Where Greece Is Right and Germany Is Wrong

According to BusinessWeek’s Peter Coy, Merkel's hard line on fiscal responsibility is a growth inhibitor. Spending will help prevent a European recession
The patient, E.Z., is in failing health, and the European surgeons are arguing bitterly at the operating table. The Greek doctors call for a feeding tube, oxygen, antibiotics, the works. Nonsense, say the Germans. Get the patient up on his feet and slap him around a little. What he really needs is to lose some weight.

Never mind that each is acting in accordance with his own self-interest. It’s the profligate Greeks, whose screw-ups helped drag Europe into its deepest crisis since World War II, who are mostly right in this argument—and the disciplined, hard-working Germans who are mostly wrong. Europe’s economy is already so weak that Teutonic belt-tightening, however meritorious in ordinary times, threatens to push the Continent into a deep and long-lasting recession.

The European stimulus-vs.-austerity debate that raged throughout 2011 is a replay of the one from the Great Depression…..


Get ready for DSK: the movie

Director Abel Ferrara is working on a film inspired by Dominique Strauss-Kahn, with French actor Gerard Depardieu playing the former International Monetary Fund chief who was embroiled in a sex scandal, reports.

The “Bad Lieutenant’’ filmmaker and a screenwriter are working on the project, which could also co-star Isabelle Adjani as DSK’s wife, Anne Sinclair.
“Today, the only reality is that they are writing something inspired by Strauss-Kahn that will focus on addiction and politicians. It’s more that than the Strauss-Kahn scandal itself,’’ producer Vincent Moraval said.

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Oops! Assets of major public pension funds slid 8.5% in Q3

According to the LA Times the stock market's summer slide took a toll on public pension funds, with the assets of the 100 largest ones down 8.5% in the third quarter of 2011, the Census Bureau reported Wednesday.

The quarterly decline was the first since early 2010, and the steepest since the fourth quarter of 2008, when the asset total plummeted 13.5% at the height of the global financial crisis.

The latest drop brought the value of investments and cash held by the biggest pension funds -- including the California Public Employees' Retirement System, the California State Teachers' Retirement System and the Los Angeles City Employees' Retirement System -- to $2.5 trillion on Sept. 30, down $236.6 billion from June 30.

Driving the third-quarter decline was a 14.9% slide in the funds' corporate stock holdings, which at last count represented 30.4% of the funds' total assets….

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News You Can Use: How to Ace a Google Interview

Brain teasers like the ones used for hiring by the Internet giant are spreading to other picky employers, the Wall St Journal notes.

Imagine a man named Jim. He's applying for a job at Google. Jim knows that the odds are stacked against him. Google receives a million job applications a year. It's estimated that only about 1 in 130 applications results in a job. By comparison, about 1 in 14 high-school students applying to Harvard gets accepted.

Jim's first interviewer is late and sweaty: He's biked to work. He starts with some polite questions about Jim's work history. Jim eagerly explains his short career. The interviewer doesn't look at him. He's tapping away at his laptop, taking notes. "The next question I'm going to ask," he says, "is a little unusual."

You are shrunk to the height of a nickel and thrown into a blender. Your mass is reduced so that your density is the same as usual. The blades start moving in 60 seconds. What do you do? The interviewer looks up from his laptop, grinning like a maniac with a new toy.

"I would take the change in my pocket and throw it into the blender motor to jam it," Jim says….

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Never Let Them See You Sweat: BNY Mellon Documents Show Total Panic

According to Wall St Jornal reports an informant in a state fraud case against Bank of New York Mellon Corp. has provided prosecutors a rare inside peek into how the bank allegedly scrambled to contain the fallout from a fast-growing government investigation, according to hundreds of pages of confidential documents.

As investigators sought to determine whether the bank overcharged clients to execute their currency trades, a senior BNY Mellon executive nicknamed "Rambo" urged traders not to tell clients how much money they made on trading, according to the informant. Bank officials worried clients would switch to negotiating their own foreign-exchange trades, where the bank's profit margin was far lower, an internal bank memo states. The bank also altered its website, changing the wording of its trading practices.
And when a veteran bank official heard about the government investigation, she said: “It’s over, it’s all over,” according to the informant…

Billionaire Hedge-fund exec bidding for the Dodgers

Sources told the LA Times that Steven Cohen, a billionaire eight times over, is bidding for the Dodgers in a process tilted toward the high bidder.

However, the East Coast hedge-fund executive is not content to let his wealth speak for itself. He has engaged one of America's notable sports architecture firms to propose renovations to Dodger Stadium, allied himself with one of baseball's power brokers, secured the support of at least two prominent Angelenos and met with several major league owners. He was joined in those meetings by Arn Tellem, an influential sports agent who could run the Dodgers if Cohen were to buy the team.

The developments were confirmed by several people familiar with the Dodgers sale process, each of whom said he could not comment publicly. Jonathan Gasthalter, a spokesman for Cohen, declined to comment.

Cohen is among the first bidders submitted to Major League Baseball for approval, according to a person familiar with the process but not authorized to discuss it. Initial bids for the Dodgers are due Jan. 13….

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Madoff Trustee Recovered 60% of The Victims' Money (For Big Bucks)

Forbes writes that everything about Bernie Madoff was an exaggeration. Even as he was being led away to jail three years ago for 150 years, he wanted us to think he stole far more than he did; that he was by far the biggest and the best Ponzi schemer of all time; that he was in a class by himself. I wrote at the time about “How to Start A Ponzi Scheme.” Initially we were told his scam totaled $65 billion. In the end, the number was only $17 billion. That’s not to say the scheme hasn’t been hugely disruptive to the many families he cheated. For sure people have lost their homes and many older people have lost everything and had to move in with their children. Foundations have been shuttered because their money has been lost…


Gold Left Some Investors in the Dust

Gold has been among the best investments in 2011. The Wall St Journal reports that shares of gold miners? Among the worst.

Gold is up 12% this year but shares of gold miners have fallen almost 16%. Smaller gold miners are down almost 40%, based on the returns of leading exchange-traded funds tracking those stocks.

The surprising gulf has caused pain for some of the biggest names on Wall Street—including John Paulson, George Soros, David Einhorn, Seth Klarman and Thomas Kaplan—many of whom piled into gold shares over the past year, sometimes by shifting away from gold itself….

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SEC Seeks Emergency Hold On Citi Suit

The Securities and Exchange Commission on Tuesday asked a federal appeals court to place an emergency hold on the agency’s lawsuit against Citigroup Inc. while the court weighs an appeal of the SEC’s proposed $285 million settlement with the bank.
Earlier this month the SEC appealed U.S. District Court Judge Jed Rakoff’s rejection of the proposed settlement with the same appeals court. On Tuesday, the SEC also asked the court to take up the Rakoff ruling on an “expedited” basis.

In November, Judge Rakoff denounced the $285 million settlement as too small, and he criticized the SEC for allowing Citigroup to neither admit nor deny wrongdoing, which is common language in most SEC settlements with companies. Mr. Rakoff ordered a trial against Citigroup that is scheduled to begin in July.

But on Tuesday, the SEC warned allowing that lawsuit to proceed would cause the agency “irreparable harm.” The agency asked the court to block the lawsuit in time to avoid a Jan. 3 deadline for Citigroup to respond to the SEC’s lawsuit, which was filed at the same time as the proposed settlement. Because Judge Rakoff rejected the settlement, the underlying lawsuit against Citigroup was allowed to proceed.

The SEC explained if Citi were to respond to the lawsuit by the Jan. 3 deadline, it could undermine the proposed settlement by disrupting a “central negotiated provision” in which the bank agreed neither to confirm or deny the allegations….

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The SEC Has Figured Out What All Crooked Hedge Funds Have In Common

Outstanding returns.

Fraudulent funds might outperform their benchmarks significantly or post steady returns during volatile periods, reports The Wall Street Journal's Jean Eaglesham and Steve Eder.

At least outstanding returns are what the crooked funds often report to their clients, at least. (Don't forget, Bernie Madoff wasn't really posting those steady annually gains he boasted about).

In any event, the SEC's finally on to this, and it's using computers to spot likely swindlers….

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Layoff Watch: More Than One-Third Of Layoffs At One Big Bank May Hit NYC

More than one-third of job cuts at Morgan Stanley will likely hit workers in New York City.

Nearly 600 of the 1,600 job cuts that Morgan Stanley announced last month will probably come from New York City, according to a regulatory filing cited by Bloomberg. The Morgan Stanley layoffs are just one part of a wider trend; Wall Street firms have said they will eliminate more than 200,000 jobs around the world this year. Thomas DiNapoli, the New York State Comptroller estimated earlier this year that 10,000 New York-based employees of the securities industry will lose their jobs by 2012, according to The New York Times…

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Liking little hedges

Small and obscure hedge funds are the new black. After a decade of favoring hedge fund behemoths — funds with $5 billion in assets and larger — deep-pocketed investors in growing numbers appear ready to put their cash to work with smaller firms, some with assets of less than $1 billion, a recent Ny Post report has found.

The seismic investment change comes as US stock markets continue to muddle along and some large hedge fund players blow up.

A whopping 79 percent of investors in the study plan to up their allocations to smaller hedge funds, or those with less than $1 billion in assets, next year, according to the 30-page report based on a survey and interviews with 165 investors representing $4 trillion in assets, including $500 billion in hedge-fund assets.
By contrast, a mere 26 percent of those surveyed said they plan to increase the amount they will give to big funds, or those with more than $5 billion in assets.
What’s more, 16 percent said they plan to decrease their allocations to big hedge funds next year, compared to just 2 percent who said the same for small funds.

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BofA May Move Its $8.5 Billion Settlement Back To Court

Reuters writes that an appeals court on Tuesday granted an appeal of a controversial ruling that moved consideration of Bank of America Corp's $8.5 billion settlement over mortgage debt to federal court.

The 2nd U.S. Circuit Court of Appeals in New York said it plans to rule within a 60-day period on whether U.S. District Judge William Pauley in Manhattan correctly took the case from a New York state court. It asked the parties to address several issues, including whether the settlement qualified as a "mass action" allowing federal court review. The settlement announced in June was intended to resolve claims by investors in 530 mortgage securitization trusts with $174 billion of unpaid principal that the home loans underlying their investments were toxic or underwritten poorly….


Sears woebucks

Shares plunge 27% as retailer’s slide accelerates...

If you think Sears and Kmart stores look depressing, check out the stock price of the company that owns them, the NY Post reports.

Shares of Sears Holdings plunged 27 percent yesterday after the run-down retail giant revealed a steep drop in holiday sales and announced it will close up to 120 stores.
That was the biggest one-day decline for Sears Holdings shares since the company was formed in 2005, when hedge-fund billionaire Eddie Lampert merged Sears with Kmart.
The drop caps a steady, two-month tumble that left the shares at $33.38 yesterday, erasing 60 percent of their market value....

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Tuesday, December 27, 2011

What Recession? Downturn Takes a Detour at Capitol Hill

The NY Times reports that largely insulated from the country’s economic downturn since 2008, members of Congress — many of them among the “1 percenters” denounced by Occupy Wall Street protesters — have gotten much richer even as most of the country has become much poorer in the last six years, according to an analysis by The New York Times based on data from the Center for Responsive Politics, a nonprofit research group.

Congress has never been a place for paupers. From plantation owners in the pre-Civil War era to industrialists in the early 1900s to ex-Wall Street financiers and Internet executives today, it has long been populated with the rich, including scions of families like the Guggenheims, Hearsts, Kennedys and Rockefellers. But rarely has the divide appeared so wide, or the public contrast so stark, between lawmakers and those they represent…

There is broad debate about just why the wealth gap appears to be growing. For starters, the prohibitive costs of political campaigning may discourage the less affluent from even considering a candidacy. Beyond that, loose ethics controls, shrewd stock picks, profitable land deals, favorable tax laws, inheritances and even marriages to wealthy spouses are all cited as possible explanations for the rising fortunes on Capitol Hill. What is clear is that members of Congress are getting richer compared not only with the average American worker, but also with other very rich Americans….

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US Senators Are Now Urging Federal Agents To Use 'Every Legal Resource Available' In The MF Global Case

According to BusinessInsider last week, 17 U.S. senators signed off on a letter sent to U.S. Attorney General Eric Holder calling for more immediate and extensive action into the MF Global investigation, including "criminal prosecution" if illegal action is uncovered. [via]

The letter comes in the wake of a flurry of high-profile congressional hearings on the MF Global bankruptcy and revealing media reports into e-mails concerning client money transfers in the brokerage firm's last days.

The MF Global bankruptcy has drawn increasing scrutiny from Capitol Hill as the $1.2 billion shortfall in segregated customer account funds remains missing. Currently, regulators are looking into the legality of fund transfers from client accounts and whether they were done intentionally.

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GE jumps into retail banking with MetLife deal

According to Reuters General Electric Co jumped into the retail deposits business on Tuesday, buying the online bank from life insurer MetLife Inc in a deal that will let GE's capital arm expand its funding base and lessen reliance on wholesale markets.

The speed of the move took some analysts by surprise, as it has only been three weeks since GE said it wanted to start taking bank deposits from consumers. In the wake of the financial crisis, during which GE had to seek a lifeline from Warren Buffett, GE Capital has been trying to diversify its funding base so that it is not so dependent on commercial paper and bond sales.

"This acquisition gets GE Capital halfway to the stated (funding) goal, much faster than consensus expectations," Sterne Agee analyst Ben Elias said in a research note.

GE Capital is taking on about $7.5 billion in deposits -- just enough to put it in the top 100 banks nationwide, roughly. It tipped its hand clearly earlier this month, when a top executive said the company needed a U.S. retail channel next year….


When Ivy Grads Pick Teaching Over Wall Street

According to Bloomberg’s William D Cohan We are witnessing the decline and fall of the investment-banking profession as we have known it for the past 40 years.
The evidence is everywhere. The increasing regulations on Wall Street -- as required by the Dodd-Frank law and still being written by the Federal Reserve, the Securities and Exchange Commission, the Commodities Futures Trading Commission and others agencies in the U.S. and Europe -- will require the remaining companies to increase their capital, curb their risk- taking and reduce their principal investing.

“….The most reliable leading indicator of Wall Street’s future prospects is the way recent graduates of Harvard, Princeton and Yale -- supposedly our best and brightest -- choose to spend their time after graduating. For years, hordes of graduates from those schools beat a fast path to Wall Street. Now the road is far more difficult to travel. For those who choose to make the journey, there is the prospect of incurring the wrath and scorn of fellow students who make up the various Occupy Wall Street movements -- a fact not likely to deter many -- and then there are dimmer prospects for a job on Wall Street generally, what with the slowdown in business.
According to a Dec. 21 article in New York Times, whereas in 2006 some 46 percent of Princeton graduates who had jobs lined up after graduation went to Wall Street, four years later that number had fallen to 36 percent. At Harvard, in 2006, a quarter of the class got jobs in finance; by 2011, that number had fallen to 17 percent. At Yale, in 2006, 24 percent of the graduates had jobs in finance and on Wall Street, while in 2010, the number of graduates going to Wall Street had fallen to 14 percent.
The word around Goldman Sachs, I’m told, is that even those offered a still highly coveted entry-level job at the firm are having second thoughts about taking it. More and more, banks are losing talent to Teach for America, a fact that may turn out to be one of the most heartening consequences of the financial crisis….


S&P 500 Falling Below 600? This Will Even Make The Bears Shudder

The Wall Street Journal writes: "United-ICAP senior technical analyst Walter Zimmerman says the S&P 500 could rally a little further into January before beginning a “traumatic decline” for the rest of 2012, dragged down by weakness in Europe. How traumatic? You might want to sit down for this one.

He thinks the index will reach its 2012 peak in the 1293-1311 zone, then start a “sharp and sustained drop” until December. His downside target is around 579.57.

579.57! The index would have to wipe out the March 2009 lows and fall by more than 50% current levels to reach that target. And the last time the S&P 500 traded below 600 was in the mid 1990s, when the Backstreet Boys burst on the scene and bell-bottom jeans were making a comeback.

Zimmerman’s reasoning is Europe is in an even worse shape now than it was at the beginning of the year. “If the history of debt tells us anything it is that one cannot solve a debt crisis by lending more money to the bankrupt and the insolvent,” Zimmerman says....

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Apple Fined $1.2 Million

Italy's Antitrust Authority said Tuesday it fined Apple Inc.'s Italian retail organizations a total of €900,000 ($1.2 million) for not providing clear information to customers on product assistance according to the Wall St Journal..

Apple Sales International, Apple Italia Srl and Apple Retail Italia were fined after the Antitrust Authority received complaints from consumer groups about "unfair commercial practices," said the regulator.

The company received a €400,000 fine for not giving customers adequate information about the length of product guarantees, the regulator said.

It received a €500,000 fine for not providing complete information about the AppleCare Protection Plan.

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Feds Crack Down On Rogue Firms

It is the Securities and Exchange Commission's new "most-wanted" list: a chart covered with handwritten notes, yellow highlighter and the names of about 100 hedge funds.

The hedge funds have one thing in common: Their performance seems too good to be true, with some trouncing the overall market and others churning out modest results without ever suffering a down month. Some funds on the list stumble but still always outperform rival hedge funds.

"There is serious fraud in this space, and we have been attacking it," said Bruce Karpati, co-chief of the SEC's asset-management enforcement unit. The hedge-fund chart dominates a corner of his lower Manhattan office.

The list is the low-tech product of a high-tech effort by the SEC to crack down on fraud at hedge funds and other investment firms. After the agency failed to detect the $17.3 billion Ponzi scheme by Bernard L. Madoff, who wowed investors with steady returns over several decades, SEC officials decided they needed a way to trawl through performance data and look for red flags that might signal a possible fraud….

Top Firm Fined $1.75 Million for Violations

According to Financial News Online, FINRA has fined Credit Suisse Securities (NYSE:CS) LLC $1.75 million for violating Regulation SHO and failing to properly supervise short sales of securities and marking of sale orders.

As a result of these violations, Credit Suisse entered millions of short sale orders without reasonable grounds to believe that the securities could be borrowed and delivered and mismarked thousands of sales orders. In concluding this settlement, Credit Suisse neither admitted nor denied the charges, but consented to the entry of FINRA's findings.


Sears to Generate Cash by Closing Some Stores

According to the Wall St Journal Sears Holdings Corp. said it expects to close 100 to 120 underperforming stores in pare costs as the struggling retailer reported fewer sales during the all-important holiday season, again raising questions about the company's ability to turn itself around.

The retailer's stock sank 20% on the news Tuesday morning, to about $36.61. The stock is down more than 45%% over the past 12 months.

Sears's sales have drifted lower as its namesake department stores and the Kmart discount chain lose market share to rivals like Wal-Mart Stores Inc. and Target Corp. On Tuesday, Sears said same-store sales are down 5.2% ...

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Bogle: Stock Returns of 1 or 2 Percent More Realistic

The AP writes: "People ought to be very conscious of the mathematics of investing," Bogle, who now runs Vanguard's Bogle Financial Markets Research Center, said in a recent interview. "But they so often ignore it."

He acknowledges that his 1 percent to 2 percent return calculation isn't a hard rule, because it's based on many of the variables affecting market performance. But it's instructive for understanding why an investor's net returns pale in comparison to market returns.

Here's a look at Bogle's math: Stocks have averaged 9 percent to 10 percent gains, but Bogle figures 7 percent is more realistic over the next several years. He cites the current muted forecast for economic growth, as the nation slowly recovers from the recession and struggles to get government deficits under control.

Subtract at least 2 percent for inflation, and the annual gain shrinks to 5 percent. Historically, inflation has averaged 2 to 3 percent. That's in line with current inflation — the rate fell to zero during the recession.

Bogle says most investors should subtract an additional 2 percent, to cover expenses for professionals who manage money, advise investors, and handle trades. The investor's return is then shaved to 3 percent….

Wall Street Outlaw: A Old (Illegal) Haunt Comes To Life

“..when people venture into the unsuspecting pizzeria and stumble through the back door, they'll find a quiet bar with old hip-hop jams humming from the Jukebox. That is, unless they know when the reunion nights are.

Recently, the old Financial District haunt was jam-packed as patrons filled the bar for a reunion one weekday afternoon. It wasn't so much a suited-up crowd though.
The Latina women, in scantily clad Santa bikinis, put on quite a show commemorating the birthday of the place. One of the women behind the bar lit birthday candles on her sizable breasts for a man to blow out, while other middle-aged men in the bar hooted and hollered. A different dancer plopped down in a man's lap at the end of the bar, while another a few stools down counted a massive stack of one dollar bills.

Meanwhile, one of the ladies was rubbing odorous Neutrogena massage oil all over a guy's bare back at a nearby table. Then, another dancer in knee-high boots stepped up on the bar and danced her way down flashing the crowd as patrons stuffed dollar bills in her velvety red g-string.

The whole scene lasted for about an hour. Around 6 p.m. it was over and the bar emptied out.

"It's nothing like it used to be," one Wall Streeter said.

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Sunday, December 25, 2011

Curious Sign of the Times: Major Museums And Organizations Collect Materials Produced By Occupy Wall Street

The AP reports: Occupy Wall Street may still be working to shake the notion it represents a passing outburst of rage, but some establishment institutions have already decided the movement's artifacts are worthy of historic preservation. More than a half-dozen major museums and organizations from the Smithsonian Institution to the New-York Historical Society have been avidly collecting materials produced by the Occupy movement.

Staffers have been sent to occupied parks to rummage for buttons, signs, posters and documents. Websites and tweets have been archived for digital eternity. And museums have approached individual protesters directly to obtain posters and other ephemera.

The Museum of the City of New York is planning an exhibition on Occupy for next month.

To keep established institutions from shaping the movement's short history, protesters have formed their own archive group, stashing away hundreds of cardboard signs, posters, fliers, buttons, periodicals, documents and banners in temporary storage while they seek a permanent home for the materials.

"We want to make sure we collect it from our perspective so that it can be represented as best as possible," said Amy Roberts, a library and information studies graduate student at Queens College who helped create the archives working group.

The archives group has been approached by institutions seeking to borrow or acquire Occupy materials. Roberts said they were discussing donating the entire collection to the Tamiment Library and Robert F. Wagner Labor Archives at New York University. Tamiment declined to comment….

Banks’ Withdrawal pains

That’s at least what some bank titans are winching about this Christmas as the CEOs of hobbled financial firms confront the prospects of another profit-zapping year ahead, according to the NY Post report.

Buffeted by a raft of new financial reforms under Dodd-Frank regulations; Basel III, the European fiscal rules; and a shaky global economy, banks have been fending off their most significant head winds in a generation.

Indeed, harder-hitting regulation has torched banks’ profits and stock prices since Dodd-Frank was signed by President Obama on July 22, 2010. Since that time financials like Bank of America run by Brian Moynihan are down double-digits, while the broader indices are up 20 percent, resulting in blistering investor losses.
And the outlook for 2012 appears on its face to be grim.

Bank of America’s raft of looming mortgage lawsuits after purchasing mortgage giant Countrywide Financial in 2008 have made the firm the poster child for the bevy of problems banks will have to overcome. But it’s not just BofA that’s sailing on choppy seas….

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Friday, December 23, 2011

That’s it for us today, people. Here's hoping everyone has a great break, celebrating the birth of Christ, airing your grievances at all the people you’ve got problems with, or however you’ll be spending your time. Very abbreviated schedule next week. In the meantime we’ll be handing over the reins of this blog to our associate Zelda Kitschaber. Her instructions: run whatever news items catch her fancy. Whatever….

Happy Festivus! Fake holiday introduced on ‘Seinfeld’ celebrated

More than 13 years after “Seinfeld” stopped filming new episodes, the made-up holiday Festivus introduced to the American public on the sitcom is apparently still celebrated every Dec. 23. The holiday peaked Friday as the top trend on Twitter, as tweeters regaled each other with missives to enjoy a “Happy Festivus.”

In the episode “The Strike,” which first aired on Dec. 18, 1997, Frank Costanza (Jerry Stiller) explains how he created Festivus as a holiday alternative to Christmas.

It had been born long ago, Frank explained, out of his frustration after trying to buy a doll for his son George (Jason Alexander) and fighting with another man over the last one. “Out of that a new holiday was born: a Festivus for the rest of us!” Frank declared.

A dinner back at the Costanza house in Queens showed the characters eating meatloaf. But another meal was served at the real Festivus, invented by “Seinfeld” screenwriter Daniel O’Keefe’s dad Dan. In his book “The Real Festivus,” Daniel details the O’Keefe family Festivus dinner. Turkey or ham was served, and then a Pepperidge Farm cake topped with M&M’s. Other staples of the fictional holiday include erecting an aluminum Festivus pole instead of a Christmas tree and the airing of grievances to family members....


The guy who is killing it at SAC Capital

Move over Steve Cohen. The trader who is killing it at Cohen’s $14 billion SAC Capital Advisors this year is Gabriel Plotkin. The portfolio manager, who specializes in consumer products and the gaming and lodging industry, is one of the top producers this year at Cohen’s hedge fund, say several people familiar with the Stamford, Conn. hedge fund. Plotkin, who joined SAC Capital in late 2006 from North Sound Capital, is emerging as on Cohen’s most reliable money men.

At SAC Capital, where most portfolio managers run books that range from as little as $250 million to $500 million, Plotkin manages one of the largest. His team of half-dozen traders and analysts manages about $1.2 billion of the firm’s money, say sources. And this year, Plotkin has delivered, producing a return of about $150 million from his trades….

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GE Coughs Up $70MM for Securities Fraud

MarketWatch reports that the Securities and Exchange Commission on Friday charged GE Funding Capital Market Services with securities fraud for participation in what it called "a wide-ranging scheme involving the reinvestment of proceeds from the sale of municipal securities."

In order to settle the case, the unit of General Electric will pay about $25 million to be returned to the victims and another $45.35 million as part of a deal with the Department of Justice, the Internal Revenue Service and a coalition of 25 state attorneys general. "Our in-depth investigations have uncovered pervasive corrupt practices in the municipal securities reinvestment market, and we are requiring financial firms one by one to step up and pay the price for their misconduct," said Robert Khuzami, director of the SEC's Division of Enforcement, in the announcement. "More than $743 million has been recovered from financial institutions in these settlements, much of which has been returned to municipalities that have been harmed."

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It's Always Sunny in Silicon Valley

The Valley's techies live in a bubble of prosperity. Optimism has its advantages, but some worry the region may lose touch with the rest of the world, BusinessWeek writes.

In Silicon Valley, all the Sturm und Drang of 2011 seemed as relevant as the Cricket World Cup. High unemployment? Crippling debt? Not in Silicon Valley, where the fog burns off by noon and it’s an article of faith that talented, hard-working techies can change the world and reap unimaginable wealth in the process. “We live in a bubble, and I don’t mean a tech bubble or a valuation bubble. I mean a bubble as in our own little world,” says Google (GOOG) Chairman Eric Schmidt. “And what a world it is: Companies can’t hire people fast enough. Young people can work hard and make a fortune. Homes hold their value. Occupy Wall Street isn’t really something that comes up in daily discussion, because their issues are not our daily reality.”

It was never clearer than in 2011 that Silicon Valley exists in an alternate reality—a bubble of prosperity. Restaurants are booked, freeways are packed, and companies are flush with cash. The prosperity bubble isn’t just a state of mind: Times are as good as they’ve been in recent memory. The region gets 40 percent of the country’s venture capital haul, up from 31 percent a decade ago, according to the National Venture Capital Assn. And the U.S. Bureau of Labor Statistics recently reported that growth of the area’s job market led the nation, jumping 3.2 percent, triple the national rate. Even real estate, a cesspool of despair in the rest of the country, is humming along. It’s next to impossible to get a table on a weekend night at the Rosewood in Menlo Park, a watering hole for Sand Hill Road’s technology financiers where the olive-oil-poached steelhead goes for $36. The closest we got to “Occupy: Cupertino” was the line outside Apple stores in October for the iPhone 4S....

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When D-I-Y Bonuses Crash

Helen Kapoutsos, a 28-year-old West Hartford woman, was arraigned Thursday, charged with embezzling nearly $170,000 worth of checks and credit cards charges used to pay for a lavish lifestyle of shopping sprees, romantic getaways to Nantucket and a trip to Aspen, CO…

According to the Stamford Advocate account Kapoutsos’ employer went to New Canaan police in September to complain that his personal assistant had written scores of checks and made many more credit card purchases without his permission, her arrest warrant affidavit states. Kapoutsos said her employer met her at a Manhattan strip club and hired her in April 2010. He would pay her $2,600 per month for 20 hours of work per week. Her job was to purchase day-to-day household requirements as well as taking care of the family and other daily tasks associated with being an assistant, the affidavit said.

When pressed by police about the huge amounts of checks — up to $4,200 — made payable to her, Kapoutsos said she would write herself checks for her “services and time,” with the permission of her employer, the affidavit said…In April 2011, she paid herself $16,000 for “extra time,” the affidavit said. Kapoutsos said she would have sex regularly with her employer and his fiancee. When police brought the sexual allegation to the employer’s attention, the man admitted he and his fiancee did have sex with her a handful of times, but many fewer than Kapoutsos alleged. He said he did not tell police of the sex because he was embarrassed, but he was willing to go forward with the complaint even if further embarrassment would result….

Wall Street’s vultures swoop in to buy MF’s brokerage customers bankruptcy claims

A slew of hedge funds, banks and other financial firms, including Longacre Fund Management, Elliott Management, Triax Capital Advisors and Contrarian Capital, have started contacting MF customers with offers to buy their claims for cash — but at a discount to their face value, The NY Post has learned. Commonly referred to as “vulture investors” because they seek to profit off distressed situations like bankruptcies, these shops are seeking to buy the rights to money owed to MF customers in the aftermath of the firm’s Halloween bankruptcy.

MF’s brokerage customers saw more than $5 billion in assets frozen after it emerged that a whopping $1.2 billion was missing from customers’ accounts.

The bulk of the offers coming in are for between 80 cents to 85 cents on the dollar, sources said. Those offers suggest savvy investors are anticipating returns of 90 cents on the dollar or higher. But MF’s customers also appear pretty confident that they’re going to be made close to whole, if not completely whole, prompting them to shoo the vultures away.

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Hedge Fund Chief Falcone Nixes Settlement

Prominent hedge-fund manager Philip Falcone has rejected a Securities and Exchange Commission settlement offer that would have banned him from the securities industry and essentially ended his career, people familiar with the matter tgold the Wall St Journal.

The move by SEC officials to reach a settlement came before an affiliate of Mr. Falcone's firm, Harbinger Capital Partners LLC, disclosed in a securities filing Dec. 9 that he and two senior executives have been warned by the SEC they could face civil-fraud charges.

An SEC spokesman declined to comment.....

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The Irresistable Lure of the Hedge Fund (Despite Rotten Performance)

The improbable must-have holding of 2012 will be hedge funds. The typical fund has lost 4 percent this year through November, according to Hedge Fund Research. But that poor performance is not deterring institutional investors.

Eleven months into 2011, even the Standard & Poor’s 500-stock index has managed a small gain when dividends are factored in. A bond index tracked by HFR returned nearly 8 percent. The average hedge fund is a loser by comparison.

One problem is that the superior analysis that hedge funds claim to offer has turned out to be almost useless. Government actions — from Europe’s inconclusive summit meetings to Washington’s brinkmanship — and knee-jerk reactions by investors have overwhelmed the fundamentals focused on by pickers of stocks and other assets. Ingrained habits, like selling losing positions, have proved disastrous. Some hedge funds have been smart or lucky. Others, including big names like John A. Paulson, just got the year badly wrong.

More than the usual number of pension fund managers and the like are disappointed with hedge fund performance, according to a survey by Preqin, a data provider for the industry. But the number intending to hand over still more money for hedge funds to manage far outweighs those planning to withdraw cash. It’s a bit of a paradox. The rationale is that they desire yearly returns of, say, 8 percent….

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NIce: Fund Manager To Foot Bill For Murder Victim's Funeral

Who says hedge funders are all greedy scrooges? A New York hedge fund manager has offered to pay the funeral costs for a woman killed in a horrific attack over the weekend.

According to finalternatives, Darren Weingrow never met Delores Gillespie, who was doused in gasoline and burned to death in the elevator of her Brooklyn, N.Y., apartment building on Saturday, allegedly by a handyman she had fired. But he was moved by reports that Gillespie's family was having difficult paying for funeral and travel costs.

"I'm not a philanthropist," Weingrow, who owns Choice Investments, told the Prospect Heights Patch. "I'm an investment guy. But this was devastating. The last thing you should have to worry about is where you're going to stay or funeral expenses."
The ghastly crime was caught on two security cameras, which allegedly show the suspect, Jerome Isaac, dressed as an exterminator, dousing a cowering Gillespie, 73, with the accelerant and then igniting her with a Molotov cocktail.


Financier in Fraud Case Is Declared Fit for Trial

Now that a judge has ruled accused Ponzi mastermind R. Allen Stanford competent to stand trial, his defense team has moved on to plan "B": a bid to delay the trial by three months.

Stanford's lead court-appointed attorney, Ali Fazel, told CNBC he thought his side had put on a convincing case that Stanford was unable to assist in his own defense, but U.S. District Judge David Hittner disagreed following a two-and-a-half day hearing in Houston.

The defense called four doctors to say Stanford had suffered traumatic brain injuries in a 2009 jailhouse assault, and suffered amnesia. The evidence included video taken immediately after the assault that showed Stanford could not even remember his own name. Prosecutors claimed Stanford recovered from his injuries, and a prison psychologist testified Stanford was faking amnesia.

But even before the hearing began on Tuesday, the defense team was ready with a fallback plan: a motion filed this week to delay the trial until late April if Stanford was found to be competent….

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Thursday, December 22, 2011

John Paulson’s Got Some Good News… And Some Bad News

There will be no holiday cheer for hedge fund manager John Paulson this month, as his dismal performance in 2011 is capped off by another miserable performance so far in December.

The Paulson & Co.'s Advantage Plus fund, which has been the firm's worst performer all year, is down another 9 percent through December 16, sending yearly losses to about 52 percent, according to a person familiar with the numbers.

The Paulson Advantage fund, the firm's largest portfolio, is also hurting again this month, declining about 6 percent. The fund is down about 36 percent year-to-date.

For Paulson, one of the $2 trillion dollar hedge fund industry's biggest stars, 2011 has been a year in which nothing has seemed to work. His funds have suffered badly from big bets on Bank of America , Hewlett Packard and Hartford Financial Services and Sino-Forest .

However, if somehow Paulson turned this whole thing around, you could say you witnessed a Christmas Miracle, and how great would that be? Six trading days to go. Don’t count him out yet.

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Endgame: FrontPoint

It’s lights out for FrontPoint Partners. The hedge fund giant, which has been slowly collapsing under the weight of an insider-trading scandal, is losing its last money maker, Stephen Czech, The NY Post has learned.

Czech plans to set up his own shop, Czech Asset Management, next month, just to the north of FrontPoint’s current digs, sources said. Expected to go with him are about a dozen employees and the $1.1 billion direct-lending fund he helped FrontPoint launch earlier this year.

That would leave FrontPoint, which managed $6.5 billion last year, with no assets and just a handful of employees, sources said.

Hedge fund FrontPoint Partners is on the verge of closing up shop after an insider-trading scandal triggered an exodus of clients and employees, including high-profile hedgie Steve Eisman in June.

Things are so dire the firm has been auctioning off the furniture, said a person with knowledge of the situation. Dan Waters, FrontPoint’s co-CEO, didn’t return a request for comment.

Czech’s departure caps off a long line of fund managers to jump ship,…

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Goldman Sachs Disagrees With Goldman Sachs

According to the Wall St Journal rock-bashing company Vulcan Materials today recommended shareholders refuse an unwanted, nearly $5 billion offer from rival Martin Marietta to buy shares directly from existing stockholders. Backing up Vulcan’s rejection is Goldman Sachs, which was advising the company’s board.

The Goldman bankers crunched numbers on Martin Marietta’s offer and came up with the answer from on high: Nope, this offer is too cheap. (Based on current share prices, the Martin Marietta offer values Vulcan at $38.32 a share.)

On the other side of the Chinese wall is Goldman’s equity-research arm. And those Goldman-ites don’t agree with their brethren. In a recent stock-research note, Goldman downgraded its recommendation on Vulcan shares to a “sell” — a rare rating for grade-inflation Wall Street….


Bernanke Prods Savers to Become Consumers

Fed Reserve Chairman Ben S. Bernanke finally may be catching a break: His easy-money policies are showing signs of speeding up the economic rebound three years after he cut interest rates to zero, Businessweek reports.

Housing may be nearing a bottom as record-low mortgage rates tempt more buyers into the market and confidence among homebuilders climbs to the highest since May 2010. Autos, another part of the economy sensitive to interest rates, are reviving, with carmakers reporting in November their highest sales pace in more than two years.

Banks also are starting to put more of their money to work, expanding commercial and industrial loans last quarter by the most since Lehman Brothers Holdings Inc. went bankrupt in September 2008.

“When the Fed sprinkles happy dust on the economy, we always respond,….”


…And Another Hedge Fund Fraudster Pleads Guilty

A Utah hedge fund manager has admitted to defrauding investors of more than $30 million.

Thomas Repke pleaded guilty to conspiracy two weeks before his trial was to begin in Atlanta federal court. Repke and his co-conspirator, James Jeffery, were charged last December; Jeffery pleaded guilty in April finalternatives reports.
Repke’s and Jeffery’s Coadum Capital ripped off more than 100 investors, prosecutors said. The two allegedly promised 5% month return, but actually stole more than $20 million of the money raised, transferring it to accounts in Switzerland and Malta, rather than investing it in hedge funds allegedly run by a Malta-based trader. According to prosecutors, only a fraction of the almost $40 million raised by Coadum was left by the end of 2007...

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Tipster Avoids Prison In Insider-Trading Case

According to finalternatives the French doctor whose confidential tips helped sink FrontPoint Partners won’t spend another day in jail for his crimes.

Yves Benhamou was sentenced yesterday to time served. The nephrologist pleaded guilty in April to passing tips to Joseph Skowron, the chief healthcare hedge fund manager at FrontPoint. Benhamou was an adviser to Human Genome Sciences, and gave Skowron advanced information about a hepatitis C drug test.

Benhamou, who cooperated with the investigation, spent 24 days in jail after his arrest last November. Skowron was sentenced to five years in prison last month.
Benhamou’s tips helped Skowron’s FrontPoint funds avoid a $30 million loss. FrontPoint shuttered those funds shortly after Benhamou’s arrest, a move which failed to assuage investors. Clients pulled billions from the embattled firm, which announced earlier this year that it would close, spin-off or sell almost all of its hedge funds….


Five Things Investors Have to Worry About in 2012

According to Market Insider they are:

1.Conflict with Iran: The U.S. and other Western countries are moving to put economic sanctions on Iran for its nuclear weapons program. Tensions are rising and analysts worry about scenarios where Israel could take action against Iran, or that it could take some action to reduce the flow of world oil through the Straits of Hormuz, a key shipping channel between Iran and Oman. Either way, the worst case scenario drives oil prices higher, hurting the global economy and financial markets.

2.North Korea’s New Kim: Kim Jong-un, the youngest son of Kim Jong-il, took over after his father died last Saturday. There is little known about the 28-year-old leader, but he now heads a secretive and closed off country with an advanced nuclear weapons program. There are reports he will head a ruling group that includes his uncle and the military.

3.Iraq Civil War?: Just a day after the U.S. pulled out of Iraq, the country’s Shiite dominated government ordered the arrest of Sunni vice president Tariq al-Hashimi, accusing him of running death squads and assassinating public officials. The fragile coalition government is at risk of dissolving, creating more instability in the Middle East and an unknown for oil supplies.

4.Pakistan-U.S. alliance weakens: The bristly relationship between the U.S. and Pakistan worsened after U.S. and NATO troops accidentally killed Pakistani soldiers on the Afghanistan border. The relationship is critical to the U.S. efforts in the war on terror and in keeping balance in its relationship with neighboring India, a U.S. ally. Recent rumors of a coup were quashed when President Zardari returned from medical treatment in Dubai.

5.Russian Election Uncertainty: Prime Minister Vladimir Putin’s coalition lost its majority in parliamentary elections that were criticized for fraud. The question is does the Russian populace want the strong armed leader to return to his position as president in the March 4 election. A shift in the center of power in Russia, viewed as unlikely as of now, could have impact on its dealings with the rest of the world, and has implications for energy, as Russia is the world’s largest oil producer..

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Wednesday, December 21, 2011

More Funds Dying for Fresh Blood

They are the walking dead of the booming exchange-traded fund industry: zombie-like ETFs that get scant investor interest and barely trade, the Wall St Journal writes.

Often designed as vehicles for narrow investment niches—from dividend-paying stocks in the Middle East to fishing-industry shares—these ETFs are learning the hard way that they sliced the market a little too thinly.

Ron Rowland, president of Capital Cities Asset Management, says the number of funds on his "ETF Deathwatch" list is at a record 242. All the funds on his list have limped along for at least three months with less than $5 million in assets…

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Fortress CEO Mudd Takes Leave After Lawsuit

According to Bloomberg Daniel Mudd will take a leave of absence as chief executive officer of Fortress Investment Group LLC after he was sued by the U.S. Securities and Exchange Commission over his role as former CEO of Fannie Mae.

Fortress co-founder Randal A. Nardone will take over as interim CEO effective immediately, the New York-based manager of buyout and hedge funds said today in a statement.

"I have requested a leave of absence from my position as chief executive officer to ensure that any time or attention I need to focus on matters outside of Fortress will not affect the business or operations of the company," Mudd said in the statement.

Mudd and former Freddie Mac CEO Richard Syron were sued Dec. 16 for understating by hundreds of billions of dollars the subprime loans held by the firms. Fannie Mae, the government- sponsored enterprise that issues almost half of all mortgage- backed securities, and Freddie Mac, the McLean, Virginia-based mortgage company, had "agreed to accept responsibility" for their conduct, the SEC said.

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The Triumph of Blackstone on Wall Street

“…To hear Blackstone’s Steve Schwarzman tell it, the firm's footprint is the secret of its success. With a long-established presence in four asset classes vs. only one or two for rivals, Blackstone gets daily feeds of information that give the company a competitive edge. "We're not smarter than anyone else," Schwarzman says. "We just see more."

“Schwarzman is so detail-oriented that this explanation stretches over 20 minutes, a not uncommon duration when he digs into an interview question. Another query, about Occupy Wall Street, sparks its own 18-minute dissection of a decade's worth of economic history, only to conclude with the bland observation that the protests are an understandable response to the economic slowdown….


BofA to cough up $335 million to settle fair-lending claims

The nation's largest residential fair-lending settlement will resolve government allegations that Bank of America's Countrywide Financial unit discriminated against minority home buyers during the frenzied days of the mortgage boom.

Bank of America Corp. agreed to pay a record $335 million to resolve a government claim that its Countrywide Financial unit discriminated against minority home buyers during the frenzied days of the mortgage boom.

The Justice Department alleged that Countrywide charged higher interest rates and fees to African American and Latino home buyers than to white applicants with similar income levels and credit scores. It marks the largest residential fair-lending settlement in history….,0,5971910.story?track=rss&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+latimes%2Fmostviewed+%28L.A.+Times+-+Most+Viewed+Stories%29

Goldman Preps for New Age of Regulation

“In the end, Goldman Sachs is still going to be Goldman Sachs,” Lloyd Blankfein recently remarked during a wide-ranging dinner conversation with Larry Fink, CEO of money management outfit Blackrock, according to people with direct knowledge of the matter.

Fink, seated next to Blankfein at a tony New York City eatery, didn’t disagree, but some in the firm that Blankfein runs are now taking issue with that statement.
That’s because Goldman (GS: 92.00, +1.02, +1.12%) is looking to alter its business model that for the past decade produced huge earnings by making massive trading bets in various markets across the globe, according to people with knowledge of the matter. Exactly what that new business model Goldman will adopt is still unclear, these people say.

But some clues are emerging, according to people at the firm. The firm has told analysts that it will expand its asset management business -- even possibly buying one -- the FOX Business Network has learned.

Regulators are also pressuring the firm to scale back on its business of taking trading risk, the driver of Goldman’s strong profits over the past decade. The Dodd- Frank financial reform law prevents firms from engaging in so-called proprietary trading where it risks its own capital to take market bets, but regulators are also forcing Goldman to scale back on other trading activities, including those that involve buying and selling securities on behalf of clients.

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Ready for Apocalypse? It's Only One Year From Today!

Seriously folks. Only 52 weeks are left before Dec. 21, 2012, when some believe the Maya predicted the end of the world.

Unlike enthusiasts of other doomsday theories who suggest putting together survival kits, southeastern Mexico, the heart of Maya territory, plans a yearlong celebration.

Mexico's tourism agency expects to draw 52 million visitors by next year only to the regions of Chiapas, Yucatan, Quintana Roo, Tabasco and Campeche. All of Mexico usually lures about 22 million foreigners in a year.

It's selling the date, the Winter Solstice in the coming year, as a time of renewal. Many archeologists argue that the 2012 reference on a 1,300-year-old stone tablet only marks the end of a cycle in the Mayan calendar.

"The world will not end. It is an era," said Yeanet Zaldo, a tourism spokeswoman for the Caribbean state of Quintana Roo, home to Cancun. "For us, it is a message of hope."

Hope? Not unless you call the shift from Western dominance hopeful.

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Feds recommend up to 6 months in the slammer for insider trader

It's a mere slap on the wrist. According to the Denver Post Drew "Bo" Brownstein should receive a sentence of up to six months in jail, home confinement and community service for illegal insider trading, federal probation officials say.
Federal probation officials recommended a sentence of up to six months in jail and other penalties for former Denver hedge- fund manager Drew "Bo" Brownstein, who pleaded guilty to illegal insider trading, his attorneys said in a court filing.

Brownstein's sentencing in federal district court in New York was scheduled for Tuesday but was pushed back to Jan. 4.

"While the offense is certainly serious and warrants punishment, overall, we do not believe that a lengthy term of imprisonment is required in this case to satisfy the interests of justice," probation officials wrote in a presentencing report, Brownstein attorneys Gary Naftalis and David Frankel said in a sentencing memorandum filed last week.

The presentencing report noted that Brownstein expressed regret, has agreed to return his illegally gained profits and is supported by family, friends and community members, "all of whom believe justice may be better served by a non-imprisonment sentence."

The maximum jail sentence for securities fraud is 20 years....

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NYC pensions demand tougher Wall Street clawbacks

New York City's pension funds want three big Wall Street banks to impose tougher compensation-clawback rules for top execs, according to Reuters.

NYC Pension Funds and City Comptroller John Liu called on the boards of Goldman Sachs Group Inc, Morgan Stanley and JPMorgan Chase & Co to strengthen language in top executives' compensation agreements. The funds held $483.3 million worth of stock in the three banks as of Monday.

In shareholder proposals, released on Wednesday, the pension funds proposed that the banks remove the word "material" from language in compensation contracts that require a "material" loss or reputational harm to have occurred before executives' pay can be reclaimed.

They also proposed that the banks be able to claw back supervisors' pay for the bad behavior of employees they manage, and that all clawback actions be disclosed to shareholders.

"No one should profit or be rewarded with bonuses when engaged in improper or unethical behavior," said Liu. "These tougher clawback provisions will not only recover money that shouldn't have been paid in the first place, but also set the tone for a stronger standard of conduct for company executives as well as their bosses…."

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Splat! Greek debt talks hit a wall as hedge fund walks out

Reuters reports that talks over restructuring part of Greece's massive public debt ran into trouble on Tuesday as one fund walked away from negotiations, fuelling growing doubts about whether a deal that is crucial to a new bailout agreement can be reached this year.

Vega Asset Management, a Madrid-based fund, resigned from the steering committee representing private creditors negotiating a voluntary restructuring of Greek government bonds, two sources familiar with the situation said.

They said the disagreement stemmed from differences over how to proceed with a voluntary bond swap, although there were no more precise details. Vega, the only fund represented on the steering committee, declined to comment.

Greek Finance Minister Evangelos Venizelos put a brave face on the tense discussions, saying he was confident that negotiators were close to an agreement, but there was much less optimism from bankers who have been following the talks.

"I can't see any deal this year," said one senior banker with knowledge of the discussions.


UBS Trader Fraud Case Delayed After Legal Switch

A former UBS trader accused of carrying out a $2.3 billion "rogue trading" fraud that rocked the Swiss bank was given more time Tuesday to consider his plea after changing his legal team, according to an CNBC report..

Lawyers for Kweku Adoboli, 31, who worked as a director of exchange traded funds, said he was unable to enter a "proper and meaningful" plea because he was unhappy with the guidance he had received from a defence team that he dropped last week.

Adoboli was sent back to spend Christmas in jail before another hearing on January 30 when he must enter a plea over two charges of fraud and two of false accounting.

"I am certainly not satisfied that he has received adequate legal advice," new defence lawyer Paul Garlick told the court, adding that Adoboli would plead not guilty, if pressed by the court to make an early decision.

Judge Alistair McCreath adjourned the case to January 30 and said he would not accept any further delays. "This is it. The case will go ahead on that day whatever (happens)."


Call Him 1% king of the M&A field

The Ny Post writes: As of yesterday, Blankfein’s Goldman was the No. 1 global mergers and acquisition adviser, tallying $653 billion in completed M&A transactions and a total of 368 deals, according to data from research firm Dealogic.

Morgan Stanley, which was in first place at the end of the third quarter, came in second with 352 deals worth $594 billion. JPMorgan Chase rounded out the top three, ringing up $535 billion in total value from 320 deals, according to Dealogic. In the US, Goldman also ranked first in M&A volume and fees with $367 billion in deals, racking up $861 million of revenues....

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Tuesday, December 20, 2011

Google tablet coming in months

Google is bringing its own tablet computer to market within months. The Toronto Star reports that’s the word from Google chair Eric Schmidt, according to a feature interview published Monday in Italy’s Corriere della sera newspaper.

Before announcing that Google will release a competitor to the iPad, Schmidt paid homage to the late Steve Jobs, calling him “the Michelangelo of our age.” This could have been a way of addressing the Apple founder’s dislike of Google’s Android operating system, which he considered an act of piracy.

“Steve understood the revolutionary potential of the tablet, and created an extraordinary product like the iPad,” Schmidt continued.

The Google chair did not divulge any details about the upcoming tablet, saying that the company’s policy is to not comment about future products....


What Layoffs? Wall Street's 2011 Pay On Track To Break Records

While many Americans will be squeezing as much as they can out of falling incomes to provide gifts this holiday season, some on Wall Street may be getting a nice little holiday present this year -- a boost in pay. Seven big banks' compensation data for the first three quarters of 2011 indicates that Wall Street pay is on track to exceed 2010 levels, according to an analysis from the Public Accountability Initiative. The report found that big bank compensation, which includes salaries, benefits and bonuses, will likely total $156 billion -- a 3.7 percent boost from 2010 -- and a record breaking number.

Six out of the seven banks studied set aside more for compensation in the first three quarters of 2011 than in 2010. Bank of America set aside 7 percent more for compensation, despite having a dismal year that included a debit card fee debacle and its shares dropping below $5 for the first time in years.

Goldman, which in October recorded its second loss ever as a public company, set aside less in compensation the first three quarters of this year. Still, Goldman employees will take home $362,862 in compensation on average, compared with the U.S. median income of $26,364.

The findings come as the Occupy movement, politicians and others continue to use high pay on Wall Street to highlight growing levels of income inequality. Many firms have cancelled or moved in house formerly lavish holiday parties in part because of rising criticism from Main Street, The New York Times reports…..