Tuesday, January 31, 2012

Wall St. 4 to be ’cuffed

Former Credit Suisse employees will be charged with intentionally mismarking the prices of collateralized debt obligations and other securities, a person familiar with the matter told the NY Post. The US Securities and Exchange Commission was also involved in the probe, said the person, who didn’t want to be named because the investigation isn’t public. Less than five people will be charged and Credit Suisse isn’t being prosecuted, the person said.
Jerika Richardson, a spokeswoman for Manhattan US Attorney Preet Bharara, declined to comment on whether any charges would be filed. John Nester, an SEC spokesman, and Victoria Harmon, a Credit Suisse spokeswoman, also declined to comment.

On Feb. 19, 2008, Switzerland’s second-largest bank made a surprise announcement that it would take writedowns on asset- backed securities after finding “mismarkings” by a group of traders. The bank said a month later it would write down $2.65 billion after an internal review found the pricing errors on residential mortgage-backed bonds and CDOs were made intentionally “by a small number” of traders who were then fired or suspended.

At the time the pricing errors were found, the Swiss bank hadn’t disclosed the names of the traders responsible...

Read more: http://www.nypost.com/p/news/business/report_wall_st_to_be_cuffed_q7ouAe0U2NozCRLdkgDnyI

Pretty Damning Evidence: Gupta Joined Goldman Board Call From Raj’s Office

Rajat Gupta, the former Goldman Sachs director accused of giving inside information to fund manager Raj Rajaratnam, faces new allegations he passed tips about earnings of Goldman Sachs in 2007 and Procter & Gamble Co. in 2009, accprding to Bloomberg.
In a superseding indictment filed yesterday in federal court in Manhattan, the U.S. broadened its description of the insider-trading scheme, saying it began in March 2007 not in 2008 as alleged in October. Prosecutors also said Gupta tipped Galleon Group LLC co-founder Rajaratnam about Goldman Sachs’s first quarter 2007 earnings and, while at Galleon’s offices, listened to a Goldman Sachs board meeting where earnings were disclosed.

“During that call, the audit committee discussed the company’s quarterly earnings announcement that would be made the following day,” assistant U.S. attorneys Reed Brodsky and Richard Tarlowe said in the indictment. “Gupta participated in the audit committee call from the premises of Galleon.”

Read all about it at http://www.bloomberg.com/news/2012-01-31/u-s-prosecutors-file-new-indictment-against-rajat-gupta.html

From the U.S. Dept of Cultural Confusion: British Tourists Detained, Deported For Tweeting 'Destroy America'

Your tax dollars at work. According to a NY Post and HuffPo report, Two 20-somethings arriving from the U.K. learned a harsh lesson about the American government's sense of humor on Monday, Jan. 23, when they were detained and then forced to return home due to comments they made on Twitter.
According to the Daily Mail, Leigh Van Bryan, 26, and Emily Bunting, 24, were going through Customs when they were detained.

The two spent the next 12 hours locked up in a cell and being grilled by Homeland Security officials. Bryan was charged with intending to come to the U.S. to commit crimes, while Bunting was charged for traveling with him.

Paperwork for the incident indicates that Bryan's name was on a "One Day Lookout" list maintained by Homeland Security. According to the New York Post and World News Daily, this refers to an auto-generated temporary list of inbound travelers that are already in the official terror watch list database. The paperwork also referred to Bryan's tweets, incorrectly stating they came from his account on "Tweeter."


The Biggest Company You’ve Never Heard Of

Lululemon Athletica inc. (LLL-T63.13-0.17-0.27%) stock jumped 15 per cent Tuesday after the fashion company announced this quarter's sales are turning out to be even stronger than expected, the Glove and Mail reports.

The yoga-inspired retailer now expects between $358-million (U.S.) and $363-million of revenue for the quarter ending Jan. 29, about $30-million higher than its previous guidance and analyst estimates. It also expects diluted earnings will be about seven cents per share higher than previously estimated, in a range of 47 cents to 49 cents per share. The increase will raise the projected profit by about $7-million to between $47.5-million and $49.6-million, based on about 101 million shares outstanding.

Lululemon shares gained $8.34 (Canadian) to trade at $63.03 on the Toronto Stock Exchange shortly after the market opened Tuesday….

Read all about it at http://www.theglobeandmail.com/globe-investor/lululemon-shares-jump-as-it-boosts-outlook/article2297305/

News You Can Use: Hot Tips For Beating The Resume-Reading Robots Of Doom

Many job seekers have long suspected their online employment applications disappear into a black hole, never to be seen again. According to the Wall St Journal their fears may not be far off the mark, as more companies rely on technology to winnow out less-qualified candidates. Recruiters and hiring managers are overwhelmed by the volume of résumés pouring in, thanks to the weak job market and new tools that let applicants apply for a job with as little as one mouse click. The professional networking website LinkedIn recently introduced an "apply now" button on its job postings that sends the data in a job seeker's profile directly to a potential employer.

To cut through the clutter, many large and midsize companies have turned to applicant-tracking systems to search résumés for the right skills and experience. The systems, which can cost from $5,000 to millions of dollars, are efficient, but not foolproof.

Although they originally evolved to help employers scan paper résumés into a database, do basic screening and trace an applicant's path through the interview and hiring process, today's tracking systems are programmed to scan for keywords, former employers, years of experience and schools attended to identify candidates of likely interest. Then, they rank the applicants. Those with low scores generally don't make it to the next round.

The screening systems are one way companies are seeking to cut the costs of hiring a new employee, which now averages $3,479, according to human-resources consulting firm Bersin & Associates. Big companies, many of which cut their human-resources staffs during the recession, now spend about 7% of their external recruitment budgets on applicant-tracking systems, the firm says….

Find out more at http://online.wsj.com/article/SB10001424052970204624204577178941034941330.html

This Could Get Interesting: Private Equity Is Jumping Into The Distressed Housing Market

PE firms are jumping into distressed housing as the U.S. government plans to market 200,000 foreclosed homes as rentals to speed up the economic recovery, the good people at Bloomberg report.

GTIS Partners will spend $1 billion by 2016 acquiring single-family homes to manage as rentals, Thomas Shapiro, the fund’s founder said. That followed announcements this month that GI Partners, a Menlo Park private equity fund, expects to invest $1 billion, and Los Angeles-based Oaktree Capital Management LP will spend $450 million on similar housing.

“It’s a massive market,” Shapiro said in a telephone interview from New York. “We’re starting to see this as a billion dollar opportunity to buy rental housing.”

Creating more single-family rental properties is one of a series of programs introduced by President Barack Obama’s administration aimed at reviving the housing market. An S&P/Case-Shiller index (SPX) of property values in 20 cities has dropped 33 percent from its peak in July 2006 and 12 percent of homeowners with a mortgage are either delinquent or in foreclosure. Last week, the administration revised its Home Affordable Modification Program, offering government incentives for mortgage investors Fannie Mae and Freddie Mac (FMCC) when they forgive debt on homes that lost value as a way of preventing delinquent borrowers from losing their houses….

Wait, wait…there’s more at http://www.bloomberg.com/news/2012-01-31/foreclosures-draw-private-equity-as-u-s-selling-200-000-homes-mortgages.html

Fund Manager Warns: Stocks May Be About To Collapse

BusinessInsider writes: Now that the Europe crisis is solved and volatility has disappeared and stocks just climb higher every day despite high valuations and mediocre economic data, it's worth considering that this state of affairs may not last forever.

Fund manager John Hussman, for one, is freaked out enough by the current mix of conditions that he has gone so far as to issue a "warning" that stocks may be about to collapse.

Now, John Hussman would be the first to admit that timing such crashes precisely is basically impossible, so don't guffaw at him if stock prices are higher a month from now, but…..

Read more: http://www.businessinsider.com/warning-stocks-may-be-about-to-collapse-2012-1

EU Nears Greek Confrontation Amid Fiscal Pact

European governments moved toward a confrontation over a second rescue package for Greece, just as a dimming fiscal outlook in Portugal opened a new front in the debt crisis, Bloomberg reports.

Bargaining with Greece over a debt writedown and its economic management came as European Union leaders signed off on key planks of the strategy to end the financial crisis. They agreed to accelerate the setup of a full-time 500 billion-euro ($659 billion) rescue fund and endorsed a German-inspired deficit-control treaty. Stocks and the euro rose.

Euro leaders left a Brussels summit late yesterday with no accord over how to plug Greece’s widening budget hole and German Chancellor Angela Merkel voicing frustration with the Athens government’s failure to carry out an economic makeover.
“Greece’s debt sustainability is especially bad,” Merkel told reporters. “You have to find a way through more action by the Greek government, more contributions by private creditors, for example, in order to close this gap.”

Read all about it at http://www.bloomberg.com/news/2012-01-30/eu-nears-confrontation-over-greek-rescue-as-portugal-poses-looming-threat.html

'Occupy DC' to camping ban: No Way!

Defiant anti-Wall Street protesters in Washington vowed to remain peacefully entrenched in two parks near the White House on Monday despite a police order to stop camping on federal land, raising the specter of possible confrontation.

The U.S. National Park Service, in its first challenge to the demonstrators, said last week it would start enforcing a ban at noon on Monday against camping in McPherson Square and Freedom Plaza, where protesters have camped out since October.

It ordered bedding and cooking equipment removed but said tents could remain as a protest symbol if flaps stayed open. While many protesters told Reuters they would comply with the order, blankets were still visible in some tents.

After a cursory inspection of the McPherson Square camp, police remained on the outskirts and no arrests had been reported by late afternoon. Protesters said police appeared hesitant to move in while television crews thronged the area...

More? Check out http://www.reuters.com/article/2012/01/31/us-usa-protests-washington-idUSTRE80T0XW20120131

Downer: U.S. stocks slash gains on confidence fall

U.S. stocks fell Tuesday, with the Dow Jones Industrial Average still poised for its biggest January-point jump on record, as investors weighed domestic and European issues, according to Marketwatch reports.

“There are those market participants suffering from a bit of vertigo after a strong start to the year, pointing to cracks in the economic data stream,” such as data on Monday that showed personal spending stalled in December and Tuesday’s indicator pointing to a decline in consumer confidence, said Art Hogan, equity strategist at Lazard Capital Markets

”In both cases we’re looking at lagging indicators,” said Hogan, who attributed the recent action as “the market is taking a bit of a pause after having a terrific start to the year.”

The Dow Jones Industrial Average DJIA -0.55% fell 70.57 points to 12,583.15, a level that leaves it up 365.59 points for the month and year….

Find out more at http://www.marketwatch.com/story/us-stocks-erase-gains-on-confidence-fall-2012-01-31

Convicted Florida Ponzi King Tells All

Businessweek reports: Rothstein says dozens of people helped him with his fraud, and now he’s naming them.

“All Ponzi schemes do the same thing: They explode at the end,” says convicted con man Scott Rothstein. While his $1.2 billion Ponzi scheme blew up in 2009, the debris is still falling to earth. In an attempt to get his 50-year sentence reduced, Rothstein is naming accomplices and detailing exactly how his scheme worked.

The now-disbarred South Florida lawyer is in protective custody while he cooperates with government investigators. And he’s testifying in civil lawsuits, brought by investors and the court-appointed trustee of his bankrupt law firm, to recover money from banks and hedge funds that allegedly aided the fraud. Over two weeks of depositions in December, Rothstein implicated lawyers, hedge funds managers, bankers, police officers, and his uncle. “His testimony fills in the blanks and ties everything together into a nice, neat package,” says attorney Charles H. Lichtman of Berger Singerman, who represents the trustee. Richard A. Sharpstein, a veteran criminal defense lawyer and former Florida state prosecutor, calls the case “the greatest show on earth. It has just everything—sex, drugs, rock ’n’ roll, bribery, greed at the highest levels.”

In a related trial where Rothstein didn’t testify, an investor group sued Toronto-Dominion Bank (TD), saying it led Rothstein victims to believe their money was safe as he depleted accounts. On Jan. 18 a jury ordered the bank to pay the group $67 million. The bank is disappointed with the verdict, says a spokeswoman, Rebecca Acevedo, “and is considering all of its options.”

Read more at http://www.businessweek.com/magazine/convicted-con-man-scott-rothstein-tells-all-01262012.html

Rogue Trader Pleads Not Guilty

Kweku Adoboli, the UBS AG trader accused of making unauthorized transactions that cost the lender as much as $2.3 billion, pleaded not guilty in London to fraud and false accounting, clearing the way for an autumn trial that could prove embarrassing for Switzerland's largest bank according to the Wall St Journal

Last September, UBS disclosed that a trader on its London-based equities desk had conducted unauthorized trades that caused the bank $2.3 billion in losses. U.K. authorities arrested Mr. Adoboli and charged him with two counts each of fraud and false accounting, but the former trader entered a plea only on Monday…

Don't stop now. Go to http://online.wsj.com/article/SB10001424052970204740904577192451928383794.html?mod=WSJ_hp_LEFTWhatsNewsCollection

How Facebook could be the next Yahoo

The entire tech world is waiting with baited breath for the filing of Facebook's IPO next week. I'm excited – the company is an absolute monster and has completely transformed the web.

But, as I've reflected on Facebook this past weekend, I can't help shake a nagging feeling that the company's success feels somehow…fleeting. In some weird ways, Facebook makes me think a bit of Yahoo. Not the Yahoo of today, but the Yahoo of the past. And I wonder if Facebook will see a similar decline over the next 10 years.
1. Network fragmentation. Facebook's success is largely based on its ability to aggregate the biggest audience on the Internet and understand and monetize that audience. Social networks should be incredibly robust because of network effects. But I really have a hard time believing that Facebook will continue to dominate the pageviews 10 years from now. I think we are already seeing that while Facebook serves as a great repository of one's identity and relationships, deep engagement is starting to happen in more targeted, fragmented communities. Photo sharing is done best on Instagram. Social curation of products on Pinterest. Self-expression on platforms like Tumblr. Sure, Facebook participates in this activity somewhat and could copy these companies, but Swiss Army knives almost never win long term.

2. Not natively mobile…

3. Advertising effectiveness….

Find out the major vulnerabilities at http://finance.fortune.cnn.com/2012/01/30/will-facebook-be-the-next-yahoo/?iid=SF_F_River

Topless Protest At Davos Forum Broken Up

According to HuffPo three topless Ukrainian protesters were detained Saturday while trying to break into an invitation-only gathering of international CEOs and political leaders to call attention to the needs of the world's poor. Separately, demonstrators from the Occupy movement marched to the edge of the gathering.

After a complicated journey to reach the heavily guarded Swiss resort town of Davos, the Ukrainians arrived at the entrance to the complex where the World Economic Forum takes place every year.

With temperatures around freezing in the snow-filled town, they took off their tops and tried to climb a fence before being detained. "Crisis! Made in Davos," read one message painted across a protester's torso, while others held banners that said "Poor, because of you" and "Gangsters party in Davos."

Read all about it at http://www.huffingtonpost.com/2012/01/28/topless-protesters-at-davos_n_1238955.html?ref=mostpopular

U.S. Banks Tally Their Exposure to Europe’s Debt Maelstrom

NY Times' Dealbook reports that…with the European financial crisis still threatening a trail of defaults, United States banks are betting that their insurance is going to pay out.

Five large American banks, including JPMorgan Chase and Goldman Sachs, have more than $80 billion of exposure to Italy, Spain, Portugal, Ireland and Greece, the most economically stressed nations in the euro currency zone, according to a New York Times analysis of the banks’ financial disclosures. But these banks have made extensive use of a type of financial insurance, the credit-default swap, to help them offset any losses that might occur if defaults swamped the five troubled nations.

Using these swaps, along with other measures, the five banks have cut their theoretical exposure to the troubled countries by $30 billion, to $50 billion. The analysis also shows that Citigroup has the greatest percentage of its exposure potentially protected, at 47 percent, while Bank of America has bought the least protection, at 12 percent…

Find out more at http://dealbook.nytimes.com/2012/01/29/u-s-banks-tally-their-exposure-to-europes-debt-maelstrom/?pagemode=print

Monday, January 30, 2012

The Wall Street Diet

Sometimes even $400 zillion trillion* in taxpayer bailouts isn’t enough to keep your industry out of the ditch. Times are hard right now for big banks, which are not just cutting bonuses and staff but also vigorously nickel-and-diming their junior masters of the universe.

I. Cutting Perks: Belt-tightenings in order of soul-crushing-ness.
Coffee-Cup Size
Goldman Sachs Was: 12 oz; Now: 10 oz.

Cafeteria Transactions
Goldman Sachs Were: Cash or charge Now: Charge only

Late-Night Amenities
Barclays (London office) Were: Food paid for after 8 p.m., cars after 9 p.m. Now: Food after 9 p.m., cars after 10 p.m.

Offsite Bonding
Bank of America municipal-bond department Was: Country club + sports + kegs Now: Doesn't happen

Deutsche Bank Were: Business class everywhere Now: Economy on trips less than six hours

Offsite Greenery
Goldman Sachs (London office), Morgan Stanley
Was: Verdant and welcoming Now: Gradually disappearing

Estimated Savings: About $2,000 a year for every floor plants are completely removed from, per the manager of Plant Shed New York Flowers

Bank of America Was: Accomplished by e-mailing documents to an offsite copy centerNow: "We have a small printer that will take half an hour to print out 100-page documents," says one analyst

II. Cutting People:
Firing sprees, in bankspeak:

“Removing unnecessary complexity and eliminating duplication” Wells Fargo
“Substantial reengineering” HSBC
“[Making] difficult people changes” RBS
“Organize smartly, de-layer and simplify” Bank of America
“Align our resources fully behind our customer-driven strategy” Bank of America


Weird, Weird's Deep Thoughts: Everything You Know About Peak Oil Is Wrong

Yes folks, according to Businessweek we’re not running out of resources. Quite the contrary. And in our abundance lies a paradox

At some point in the coming months, the confrontation between the West and Iran over the Islamic republic’s nuclear program may reach a breaking point. Even assuming the two sides manage to avoid full-fledged military conflict, the crisis could still cause significant disruption to the world economy. An embargo against Iranian oil exports, or a move by Iran’s leaders to close the Straits of Hormuz—or both—could send the price of oil soaring and jeopardize the re-election hopes of leaders from Paris to Washington. And as happens with every oil crisis, pundits will insist that the pain we’re feeling is nothing compared to what it will be like when the world finally runs out of black gold.

We’ve been warned before. Four decades ago this year, five scientists from the Massachusetts Institute of Technology published an influential set of predictions regarding the sustainability of human progress. Titled Limits to Growth, their report suggested the world was heading toward economic collapse as it exhausted the natural resources, such as oil and copper, required for economic production. The report forecast that the world would run out of new gold in 2001 and petroleum by 2022, at the latest.

Over the intervening years, the threat of “peak oil” has stayed with us—the date when global petroleum production was to reach its supposed maximum, afterward and evermore to decline as dwindling reserves were tapped out. And the exhaustion of the world’s oil reserves was just the start. A host of other critical natural resources, from phosphorus to uranium, have been declared peaking or already peaked.

Forty years later, however, rereading Limits to Growth invokes a growing sense of irony. Far from being depleted, worldwide reserves of minerals continue to climb….

Wait…wait….there’s more at http://www.businessweek.com/magazine/everything-you-know-about-peak-oil-is-wrong-01262012.html

300 arrested in Occupy Oakland protests

Dozens of police maintained a late-night guard around City Hall following daylong protests that resulted in 300 arrests. Occupy Oakland demonstrators broke into the historic building and burned a U.S. flag, as officers earlier fired tear gas to disperse people throwing rocks and tearing down fencing at a convention center.
Saturday's protests — the most turbulent since Oakland police forcefully dismantled an Occupy encampment in November — came just days after the group said it planned to use a vacant building as a social center and political hub and threatened to try to shut down the port, occupy the airport and take over City Hall….

Protesters clashed with police throughout the day, at times throwing rocks, bottles and other objects at officers. And police responded by deploying smoke, tear gas and bean bag rounds, City Administrator Deanna Santanta said…

Read all about it at http://www.cbsnews.com/8301-201_162-57367945/300-arrested-in-occupy-oakland-protests/

U.S. Banks Ready For Europe’s Debt Maelstrom…

Five large American banks, including JPMorgan Chase and Goldman Sachs, have more than $80 billion of exposure to Italy, Spain, Portugal, Ireland and Greece, the most economically stressed nations in the euro currency zone, according to a New York Times analysis of the banks’ financial disclosures.

But these banks have made extensive use of a type of financial insurance, called credit-default swaps, to help them offset any losses that might occur if defaults swamped the five troubled nations. Using these swaps, along with other measures, the five banks have cut their theoretical exposure to the troubled countries by $30 billion, to $50 billion. The analysis also shows that Citigroup has the greatest percentage of its exposure potentially protected at 47 percent, while Bank of America has bought the least protection at 12 percent….

Read more at http://dealbook.nytimes.com/2012/01/29/u-s-banks-tally-their-exposure-to-europes-debt-maelstrom/?smid=tw-nytimes&seid=auto

Stranger Than Fiction: Money From MF Global Just Vanished!

Nearly three months after MF Global Holdings Ltd. collapsed, officials hunting for an estimated $1.2 billion in missing customer money increasingly believe that much of it might never be recovered, according to people familiar with the investigation.

As the sprawling probe that includes regulators, criminal and congressional investigators, and court-appointed trustees grinds on, the findings so far suggest that a "significant amount" of the money could have "vaporized" as a result of chaotic trading at MF Global during the week before the company's Oct. 31 bankruptcy filing, said a person close to the investigation….

Find out more at http://online.wsj.com/article/SB10001424052970203920204577191014034430488.html?mod=WSJ_hp_LEFTTopStories

“Did you get your ticket yet?” People Across China Are Preparing For The Apocalypse

According to the Wall St Journal preparations for Dec. 21, 2012—the day the world is supposed to end according to ancient Mayan predictions—are well underway in China.

According to the Journal's Laurie Burkitt, people across the nation are getting ready for the coming Armageddon by reserving tickets on a modern version of Noah's Ark.

The escape from Earth is based off the movie "2012," a 2009 science fiction disaster film in which international leaders build an ark—in China—to save humanity from a cataclysmic ending.

Read more: http://blogs.wsj.com/chinarealtime/2012/01/25/have-you-bought-your-ticket-china-embraces-2012-apocalypse/

Saturday, January 28, 2012

Warren Watch: Buffett Defends His Secretary From 'Ridiculous' Attacks

According to a CNBC report Warren Buffett says criticism of his secretary, Debbie Bosanek, over her supposed high salary and purchase of a second home, is 'ridiculous' and misses the point he's trying to make on tax rates for the very rich.

During his State of the Union address this week, President Obama said it isn't fair that Buffett pays a lower tax rate than his secretary does, arguing for a "Buffett Rule" that would impose a minimum 30 percent tax rate on those making a million dollars or more per year. Bosanek had been invited to sit in Michelle Obama's box to watch the speech.

Buffett tells the Omaha World-Herald, "They can't attack the facts, so they attack the person. It's ridiculous." His point: "I'm saying she is being treated unfairly in the tax code, as are tens of millions of others, compared to me. They shouldn't change the rates on all the other people. They should change mine."

Read all about it at http://www.cnbc.com/id/46163945

A $9 Billion Jackpot for Facebook Investor

Facebook Inc. is set to unleash massive paydays in the venture-capital industry—including a potential record-breaking $9 billion jackpot for one venture firm, the Wall St Journal reports.

Facebook is expected to file to go public soon, raising as much as $10 billion at a valuation of $75 billion to $100 billion in what would be one of the biggest-ever U.S. public debuts, people familiar with the matter have said.

At those values, the venture-capital firms that funded the social network in its early days in 2005 and 2006 are poised to see their investments of around $12 million each in Facebook balloon into multi-billion dollar ...

Find out more at http://online.wsj.com/article/SB10001424052970204573704577186813800414598.html?mod=WSJ_Markets_LEFTTopStories

Another Financial Industry Psychopath: Banker Burns Down Ex-Girlfriend's Parents' House After Getting Dumped

HuffPo writes: Remember the investment manager who sent a creepy email that landed on reddit? What about the insane investment banker who broke into his ex-girlfriend's apartment and pretended to be an Israeli secret agent?

Still, none of these quite top the most recent report of one banker in the U.K. who armed himself with a slew of weapons, including two crossbows and a rifle, and allegedly burned down his ex-girlfriend's parents house, reports the Mirror.

A Canadian citizen, 42-year-old Al Amin Dhalla allegedly began his four month terror campaign after Alison Hewitt, a 35-year old trainee doctor living in Brighton, ended their relationship in December of 2010, notes the Daily Mail. The pair met through a dating agency and, after a few months, the pair moved in together in Hewitt's home.

But Hewitt's parents became suspicious of the man after he expressed wishes to quickly wed their daughter and later discovered a hidden criminal record….

Wait, wait...there's more at http://www.huffingtonpost.com/2012/01/27/uk-banker-gets-dumped_n_1237197.html?ref=business

Citi to Slash Bonuses in Investment Bank About 30%

Citigroup Inc. (C), the third-biggest U.S. lender by assets, cut 2011 bonuses in its investment banking division by about 30 percent on average amid slumping revenue, according to Bloomberg.

Some businesses within the securities and banking unit had bonuses reduced by as much as 70 percent compared with the previous year, said the person, who asked to remain anonymous because the decisions aren’t public. The unit, led by James “Jamie” Forese, includes bond and stock trading as well as debt and equity underwriting.

CEO Vikram Pandit, 55, is firing workers and shrinking costs in the unit as he grapples with declining revenue. The bank said this month that it will cut about 1,200 workers from the division to save $600 million this year and more reductions may follow. The unit’s revenue slipped 21 percent since 2009, while compensation and other operating costs climbed 15 percent...

Read all about it at http://www.bloomberg.com/news/2012-01-27/citi-to-cut-bonuses-in-investment-bank-about-30-.html

Friday, January 27, 2012

Citi's Pox On Prop Trading

Citigroup Inc. (C), the third-biggest U.S. lender, will close a proprietary-trading desk that makes bets with the firm’s own money and most of the unit’s staff will leave before rules banning the practice take effect, Bloomberg reports.

Citigroup is shutting the Equity Principal Strategies business and most staff will leave the bank after Feb. 6, according to a memo by Derek Bandeen, head of equities for the New York-based bank, and obtained by Bloomberg News. Danielle Romero-Apsilos, a spokeswoman for Citigroup, confirmed the memo’s contents.

Citigroup CEO Vikram Pandit is closing the unit as regulators draft the so-called Volcker rule, which seeks to restrict banks that accept deposits from trading with shareholders’ money. The Citigroup team, led by former Morgan Stanley (MS) executive Sutesh Sharma, was partly responsible for equities-trading revenue plunging by $1.3 billion in 2011 compared with the prior year, the bank said last week….

More? Check out http://www.bloomberg.com/news/2012-01-27/citigroup-says-most-proprietary-trading-employees-to-leave-as-desk-closed.html

Low volume, commissions smothers more Wall St firms

The collapse of two U.S. equity trading firms this month suggests difficult market conditions are likely to keep claiming small shops, jeopardizing the jobs of scores of stock analysts, traders and the salespeople who hawk stock research.

Ticonderoga Securities, which last year purchased stock research firm Soleil Securities Corp, is closing its doors on Friday, confirmed Richard Sgueglia, head of global equity sales and trading at Ticonderoga. The company has 74 employees, including 14 analysts, according to its website. That's down from 21 analysts when the purchase was announced in May.

WJB Capital Group, started by New York Stock Exchange floor brokers in 1993, shut its doors early this month after recently beefing up its analyst force.

Both companies are agency brokers, meaning they execute stock trades for hedge funds, mutual funds and other institutional investors but do not put up their own money to complete the trades.

It's always been a business with razor-thin profits, but the model has been pummeled in the last two years by falling trading volume, rising competition from all-electronic trading venues and direct access to brokers on exchange floors and continually falling commissions.

To differentiate themselves to their hedge fund and mutual fund clients, agency equities firms have been adding ancillary services such as research, advice on the most efficient trade execution, fixed-income trading and even investment banking services such as privately raising money for public companies.

"Very few businesses make it on execution-only anymore,…."

Read more at http://in.reuters.com/article/2012/01/27/ticonderoga-death-idINDEE80Q01O20120127

Are Hedge Funds Going Public?

According to Stephen Bornstein hedge funds may soon be competing with mutual funds for ad space on radio and TV.

The 30-year-old SEC regulation banning private companies - including hedge funds -- from engaging in "general solicitation" or "advertising" is apparently now in play.
Earlier this month, an SEC Advisory Committee recommended eliminating the federal ban on general solicitation in private securities offerings on the ground that they are directed solely at 'accredited investors.' Such investors are deemed to be able to fend for themselves and not need protection against public promotions. Since hedge funds can only be marketed to 'accredited investors,' they could take advantage of the relaxed rule, especially funds seeking more than 100 investors which can only be sold to substantial institutions and ultra-high-net-worth individuals.

Managed Funds Association, the hedge fund trade group, immediately threw its support behind the initiative arguing that revocation of the ban on general solicitation would increase the transparency of hedge funds in the investment marketplace for which regulators have been clamoring.

Because of the advertising ban, hedge fund managers currently have to tread a fine line between self-promotion and fund promotion in their dealings with the press. In media interviews, managers are constrained to limit their remarks to market commentary and general statements about themselves, their firms and their investment strategies. No mention can be made of their funds….

Wait…wait…there’s more at http://www.newyorkcityassetmanagementlawblog.com/2012/01/are-hedge-funds-going-public.shtml

Mets Owners Seek Dismissal of Madoff Suit

According to a report in the Wall St Journal the owners of the New York Mets baseball team asked a federal judge late Thursday to dismiss a lawsuit by the court-appointed trustee seeking to recover money for victims of convicted Ponzi-scheme-operator Bernard Madoff.

Lawyers for the Mets owners, Fred Wilpon and Saul Katz, argued that the Madoff trustee, Irving Picard, failed to prove they were "willfully blind" to Mr. Madoff's fraud, which came to light more than three years ago.

"They worked hard for many years and became very successful. They entrusted Madoff with an enormous amount of their money, giving him discretion over their accounts. Their families, close friends, charities, and businesses did the same," said Karen E. Wagner, a lawyer for Messrs. Wilpon and Katz. "Why would they have risked it all if they had believed that there was any possibility that Madoff was engaged in a Ponzi scheme? They would not and didn't."

Read all about it at http://online.wsj.com/article/SB10001424052970204661604577185671587680372.html

Can the Germans stop being German?

According to the Daily Telegraph “…For every exporter, there has to be an importer, and since the euro was created, the default importer of choice has increasingly been the European periphery. To fund these imports, the periphery has been borrowing on subsidised terms from the Germans, which in turn has created the problem of massive external indebtedness which lies at the heart of today’s crisis.

For all countries to be in current account surplus with everyone else isn’t mathematically possible. Not everyone in the eurozone can play this game. What’s more, for the eurozone periphery to export to Germany on the scale necessary to support renewed growth is going to require not just massive gains in competitiveness by the periphery, but radical change in Germany, too.

Germany would need to transform itself from a surplus to a deficit nation. Germans would need to stop saving and start spending – or, in other words, become less German. That’s not going to happen in our lifetimes. And yet Mrs Merkel thinks that if everyone behaves like Germany, things will get better. No, they won’t; in fact, the reverse will occur. Europe is condemning itself to a vicious downward spiral in demand....

Don't stop now. Find out more at http://www.telegraph.co.uk/finance/financetopics/davos/9041788/Davos-2012-Can-the-Germans-stop-being-German.html

Texas Fund ‘Eaten Alive’ by Hedge Fees!

Texas (STOTX1)’s Permanent School Fund may hire in-house money managers to oversee its $25 billion in assets because returns are being “eaten alive” by hedge-fund fees, CIO Holland Timmins told Bloomberg gurus.

Returns were less than 1 percent for the 44 months through November on assets managed by the five companies that bundle multiple hedge funds into single investment vehicles, Timmins said Jan. 25 at a State Education Board meeting. After fees, the return was negative, he said.

“The sector that should have enhanced our funding for schools actually detracted from it,” Timmins said. “We had a positive return in the asset class, modestly, but it got eaten alive by the fees.”

Hedge-fund expenses have reached about $72.7 million since 2008, according to a document Timmins distributed among board members. The reserve backs school-district debt and distributes $1 billion annually to support public education in the second- biggest U.S. state by population. The board is set to vote on the issue at a meeting today.

Find out more at http://www.bloomberg.com/news/2012-01-27/texas-fund-eaten-alive-by-hedge-fees-may-curb-costs-by-hiring-in-house.html

Bonus grinches at Bloomberg

Bloomberg LP employees are riled that the financial data giant is doling out lower-than-expected pay for 2011 despite a 10.5 percent jump in overall revenue, sources told the NY Post.

The company, founded by Mayor Mike Bloomberg, said revenue rose $720 million, or 10.5 percent, to $7.59 billion during a tough year for its biggest Wall Street clients, according to an internal memo obtained by The Post.
The company, known for its ubiquitous financial terminals on trading floors, said it fell short of its own internal sales targets, to which employee pay is tied.

According to the employee memo from Chairman Peter Grauer and CEO Dan Doctoroff, employee pay based on terminal sales, known as “certs,” will be below expectations because of the terminal shortfall.
“Although we fell short of our targets, all of us can be proud of our strong year-over-year performance and the progress we were able to make across our businesses — especially considering the difficult environment for our largest terminal customers,” the memo said.

Read more: http://www.nypost.com/p/news/business/bonus_grinches_at_bloomberg_QMznF5kOi48JJjeDhtEaUI

You've Gotta Be Kidding....The CEO Bankruptcy Bonus

On the way to bankruptcy court, Lear Corp., a car-parts supplier, closed 28 factories, cut more than 20,000 jobs and wiped out shareholders. Still, the Wall St Journal reports, Lear sought $20.6 million in bonuses for key executives and other employees, including an eventual payout of more than $5.4 million for then-Chief Executive Robert Rossiter.

The Justice Department objected, arguing that the package violated a federal law intended to rein in pay for executives at companies that harmed investors and cut jobs before and during the bankruptcy process.

But a judge approved the payouts, accepting the company's arguments that the executives would deserve them if….

Read more at http://online.wsj.com/article/SB10001424053111903703604576584480750545602.html?mod=WSJ_business_LeadStoryCollection

Thursday, January 26, 2012

In Punishing Year for Hedge Funds, Guess Who Thrived, Thrived, Thrived!

The world’s biggest hedge fund is also one of the best performers. Acccording to Dealbook Bridgewater Associates, which manages nearly $120 billion, posted returns of 23 percent in 2011 — a year when the average hedge fund portfolio lost 5 percent.

Against the backdrop of fear over European debt and stagnant global growth, the hedge fund, led by one of Wall Street’s more enigmatic titans, Ray Dalio, sidestepped the mess. The fund did it with bets on United States Treasuries, German bonds and the Japanese yen, according to people familiar with the firm’s investment strategy, who spoke on condition of anonymity because the information is private.

Such performance adds up. Over the last 20 years, Bridgewater had annualized returns of 14.7 percent, amounting to $50 billion of gains for investors. Over the same period, the Standard & Poor’s index of 500 stocks returned about 8.7 percent a year.
A big chunk of Bridgewater’s gains came in recent years, a volatile period that felled many funds. As the financial crisis wreaked havoc, Bridgewater notched positive, albeit modest, returns in 2008 and 2009. The next year, the firm had gains of 45 percent versus about 10 percent for the average hedge fund…

Find out more at http://dealbook.nytimes.com/2012/01/26/in-punishing-year-for-hedge-funds-biggest-one-thrived/?smid=tw-nytimesdealbook&seid=auto

NYSE, Nasdaq battle for Facebook listing

Talk about a face-off.

Bitter rivals Duncan Niederauer’s New York Stock Exchange and Robert Greifeld’s Nasdaq are locked in a heated battle for Facebook’s listing when the privately held social-networking giant attempts to raise an eye-popping $10 billion in stock in the coming weeks, The Post has learned.
The prospect of a Street-fueled mega billion dollar IPO is taking Mark Zuckerberg’s Facebook to even greater heights.

For either exchange platform, winning a Facebook listing — the most anticipated tech IPO since Google went public in 2004 by selling $1.7 billion in stock — could jump- start an equity market that has been hamstrung by the European fiscal crisis.
Equity-trading volumes this month are down 16 percent from last January with an average 6.8 billion shares changing hands daily — the lowest volume since 2008, according the data from the Tabb Group.
But more importantly, a Facebook listing could add much-needed panache to one of the exchanges — both of which have been struggling to beef up their Street cred.

Read more: http://www.nypost.com/p/news/business/not_so_friendly_ChdwVK0UaV1krE1J3k0Fo

The Fed Is Worried -- And You Should Be Too

The Fed is worried, and you should be too. That is the major take-away from yesterday's FOMC statement, combined with its release of updated projections and Bernanke's press conference. Despite the market's cheering of the promise of a near-zero fed funds rate until late 2014 and the prospect of QE3, the Fed is fighting a lonely battle against severe economic headwinds----and they know it. In answering a reporter's question, Bernanke made it crystal-clear that he does not believe that the recently optimistic economic releases are sustainable. He has good reason to think so.

The FOMC reduced its current central tendency 2012 GDP growth projection from 2.5%- 2.9% to 2.2%-2.7% and its 2013 number from 3.0%-3.5% to 2.8%-3.2%. The previous projections were made in November. Although they reduced their unemployment projection slightly, they are still projecting unemployment rates as high as 8.2% to 8.5% for 2012 and 7.4% to 8.1% in 2013.

It's significant that these reductions were made despite better than expected economic releases in the last few months in jobs, production and consumption. Although some may wonder what the Fed knows that others don't, the reasons for their caution are no mystery to anyone familiar with the numbers. Disposable income is growing very slowly, and even this tepid pace is a largely a result of temporary tax cuts and transfer payments, while real wages are flat…..

Read more: http://www.businessinsider.com/the-fed-is-worried-and-you-should-be-too-2012-1

JIM ROGERS: Watch Out For 2013

In an interview with ET Now, Jim Rogers, Chairman, Rogers Holdings, shares his outlook for commodities, gold and metals with a special reference to Indian markets. Excerpts:

ET Now: Are you a bit surprised with the US economic data? If I look at the tone of US economic data, of late things are looking upbeat for the US economy?
Jim Rogers: You have to remember two things -- election in America in November, so you are going to see a lot of good news. Of course you have the American government spending staggering amounts of money right now, printing a lot of money and getting ready for the election. It happens every four years in America. They do their best to get the economy juiced up so they can win the election.

ET Now: We have got the ECB president come out and say the debt crisis strategy working as ECB postpones Armageddon. What does this mean for commodity prices which were in a downtrend as the euro crisis loomed all of last year?

Jim Rogers: Commodities prices may have been in a short term down, but on long term commodity prices are still in the major uptrend and that is going to continue. They have postponed Armageddon, I am glad you put it that way. We discussed before here that 2013 and 2014 are what I am most worried about because this year everybody is trying to just get through the next election. There are 40 elections in 2012. Everybody is going to do their best to get us through the election. Watch out for 2013.

ET Now: So for 2012, do you expect that since there are 40 elections, central bankers will continue to print money and they will print more money and they will print more money that will automatically spike commodity prices up?

Jim Rogers: Yes, also as we discussed before, I told you that if the world economy gets better, then obviously commodity prices will do well because of the shortages. If the world economy does not get better, they are going to print a lot of money and you need to own real assets when they print money and yes there are 40 elections this year and yes they are going to print more money….

Don’t stop now…read the rest at http://articles.economictimes.indiatimes.com/2012-01-13/news/30623900_1_rogers-holdings-commodity-prices-jim-rogers

Nightmare on Capital Hill, Part 2: Debt Ceiling Debate Set to Make a Monstrous Return

According to a repott in yahoo Finance, you can pick almost any horror film and chances are, somewhere in it a character that was presumed dead makes a dramatic, surprise return looking to hurt anyone in its path. Even though being scared is exactly what we paid for, we still scream and squirm in our seats. Fun stuff if you're into that sort of thing.

Well guess what, movie fans? The sequel to last summer's debt ceiling showdown in Congress is coming to theaters everywhere this fall, and the early reviews say it will be even bloodier than the first.
"If there is another big debt ceiling showdown before the election it is going to have a big impact," says David Chalian, Washington Bureau Chief at Yahoo! News in the attached clip.
While it is still too early to pinpoint the precise day that the Treasury's checking account runs dry, everyone in Washington knows the monster is lurking and is likely to show itself in November. Even President Obama eluded to the need to avoid putting the nation through the same ordeal that ultimately cost us our AAA-rating.
Chalian points out a few issues that make the exact timing of our money drought hard to predict.

First, the pace of federal spending and tax receipts can be jiggered a bit, but to put off until at least November could be tough. And as much as he notes that the whole culture of last year's singular focus on debt and deficits has changed, he says there is now complete recognition from everyone that they don't want to have another showdown debate.

"I will predict that a lot of people on both sides of the aisle are trying to figure out the accounting in such a way that perhaps that discussion and vote doesn't take place til after the election," says Chalian….

Read all about it at http://finance.yahoo.com/blogs/breakout/not-again-debt-ceiling-debate-set-monstrous-return-142254224.html

Why One Hedge Fund Dumped Equities Yesterday

According to CNBC.com: as the world bought risk assets like gold and equities on the Fed news Wednesday, Hedgeye’s Keith McCullough was going the other way. McCullough, a CNBC contributor and founder of Hedgeye Risk Management, said he took the Fed decision and comments, along with the ensuing price action, and sold all his U.S. equities.

According to McCullough, he's 91-percent cash right now. As the market added to Wednesdays gains, I asked him if he regretted the decision.

The short answer is no. "Tops are processes, not points," he said. "My decision to start selling everything yesterday was the first move ... These are booked gains and no one ever went broke taking them."

There are many factors involved in his logic, but one is that policy stances from the Federal Reserve and Federal government likely will inhibit growth.
"My expectation is we start making lower long-term highs toward 1,363 (on the S&P 500) as people come to realize this is a policy to inflate , which will, in turn, slow the economic growth I was getting bullish about."

More? Checck out http://www.cnbc.com/id/46148444

Did Somebody Say Bonus? Credit Suisse Senior Bankers' Compensation Said to Drop by 30%

Bloomberg reports that Credit Suisse Group AG, the second- biggest bank in Switzerland, told senior investment bankers that compensation for 2011 will be 30 percent lower on average than the previous year, four people briefed on the discussions said.

For some bankers, including a number in Asia, total pay will only drop by about 20 percent, said one of the people who declined to be identified because they weren't authorized to speak publicly.

Securities firms are curbing remuneration for investment bankers as the European sovereign debt crisis erodes revenue from dealmaking, and greater regulation limits the profitability of fixed-income trading. Morgan Stanley is also cutting pay for senior investment bankers and traders by about 20 percent to 30 percent...

Read all about it at http://news.businessweek.com/article.asp?documentKey=1377-a3hfHndkw.h8-5P8JBV65841RHRNI2AO0I7J28V

Dimon: Impact of Greek Default on US Banks Almost Zilch

The impact of a Greek default on American banks would be negligible, JP Morgan Chase CEO Jamie Dimon told CNBC on Thursday, and while there are chances of a bad outcome in Europe, he is not concerned about unpleasant surprises in the region.

"The direct impact of a Greek default is almost zero," Dimon said. "The effect it has on the global economy will obviously filter down to the American banks too,” he added, but although “there may be a surprise somewhere”, he expressed little concern over such a development.

“There’s a teeny chance of a catastrophic outcome, which is why the muddle-through is the only good strategy. There is no other good strategy,” the JP Morgan Chase CEO said…

Find out more at http://www.cnbc.com/id/46144727

Apple Investors Await Dividend as Cook Ponders $100 Billion Cash Hoard

Apple Inc. has Wall Street’s full attention after hinting at plans for the company’s $100 billion cash pile that may lead to stockholders receiving a dividend, those good folks at Bloomberg tell us. Apple is “actively discussing” uses for its cash, including a dividend, buyback, acquisitions and supply-chain investments, Chief Financial Officer Peter Oppenheimer told analysts and investors Jan. 24 in an earnings conference call.

The comments were a welcome sign for investors who have called for a dividend as Cupertino, California-based Apple has added to its balance sheet. Apple’s $97.6 billion in cash and investments is larger than the market value of all but 26 companies in the Standard & Poor’s 500 index. The total could reach $150 billion by year-end if the company doesn’t give money back to shareholders, said David Rolfe, chief investment officer of Wedgewood Partners Inc.

“They have turned into the First National Bank of Cupertino,” said Rolfe, whose firm manages $1.3 billion in assets, including Apple shares. “Common sense dictates that they don’t need a cash hoard of $150 billion….”

Read all about it at http://www.bloomberg.com/news/2012-01-25/apple-investors-await-dividend-gusher-as-cook-ponders-cash-hoard.html

Morgan Stanley Exec Takes James Gorman's Advice And 'Just Leaves'

NetNet's John Carney reports that Morgan Stanley's head of emerging markets and foreign exchange, Stephen Mettler, is leaving the firm.

The departure just one day after CEO James Gorman had these harsh words for employees concerned about low pay: "I say listen, you're naive, read the newspaper, number one. Number two, if you put your compensation in a one year context to define your overall level of happiness, you've got a problem which is much bigger than the job. Three, if you're really unhappy, just leave. I mean, life's too short."

Read more: http://www.businessinsider.com/morgan-stanley-executive-follows-james-gormans-advice-and-just-leaves-2012-1#ixzz1kaOE7miR

News You Can Use: Lose the resume

According to the Wall St Journal, Union Square Ventures recently posted an opening for an investment analyst. Instead of asking for résumés, the New York venture-capital firm—which has invested in Twitter, Foursquare, Zynga and other technology companies—asked applicants to send links representing their "Web presence," such as a Twitter account or Tumblr blog. Applicants also had to submit short videos demonstrating their interest in the position.

Union Square says its process nets better-quality candidates —especially for a venture-capital operation that invests heavily in the Internet and social-media—and the firm plans to use it going forward to fill analyst positions and other jobs.
Companies are increasingly relying on social networks such as LinkedIn, video profiles and online quizzes to gauge candidates' suitability for a job. While most still request a résumé as part of the application package, some are bypassing the staid requirement altogether.

A résumé doesn't provide much depth about a candidate, says Christina Cacioppo, an associate at Union Square Ventures who blogs about the hiring process on the company's website and was herself hired after she compiled a profile comprising her personal blog, Twitter feed, LinkedIn profile, and links to social-media sites Delicious and Dopplr, which showed places where she had traveled.
"We are most interested in what people are like, what they are like to work with, how they think," she says. John Fischer, founder and owner of StickerGiant.com, a Hygiene, Colo., company that makes bumper and marketing stickers, says a résumé isn't the best way to determine whether a potential employee will be a good social fit for the company. Instead, his firm uses an online survey to help screen applicants…

Read more at http://online.wsj.com/article/SB10001424052970203750404577173031991814896.html?mod=WSJ_hp_mostpop_read

Headscratcher of the Day: WaMu judge may cancel ruling that allows creditors to claim insider trading by hedge funds

According to the Washington Post a Delaware bankruptcy judge on Wednesday granted Washington Mutual Inc.’s request that she consider throwing out portions of a September ruling that gave some creditors permission to pursue claims of insider trading by several hedge funds, who are also WaMu creditors.

WaMu and supporting creditors argued that an agreement on its latest reorganization plan depends on Judge Mary Walrath removing language regarding the insider trading allegations from the September ruling, in which she rejected Washington Mutual’s proposed reorganization plan for a second time.

Walrath said that in granting WaMu’s motion, she was not canceling her earlier ruling or saying she was inclined to do so, but only that she would consider it.

Washington Mutual announced last month that it was submitting a new plan to distribute about $7 billion to creditors after reaching an agreement with major creditors, including those who had made the insider trading allegations against the hedge funds.


No, Hedge Funds Can't Foreclose On The Acropolis

Greece is broke. But there's no blueprint for a country to declare bankruptcy, so Greece's creditors are sort of making things up as they go along, according to an NPR report.

"You're taking some sort of loss," Hans Humes of Greylock Capital Management told me. "But it's like, how much of a loss do you take? There's this thing called sovereign immunity. You can't go in and take the Acropolis." Greylock Capital Management is a hedge fund that holds Greek bonds. So Humes is sitting across the table from Greece. There are lots of other creditors — people sitting alongside Humes — and they all want different things.

And the European Central Bank wants all of its money back, so far, and doesn't want to take a loss at all. All of these people are on the same side of the table, but they have vastly different motivations. The Greek side is just as diverse….

Read more at http://www.npr.org/blogs/money/2012/01/26/145868170/no-hedge-funds-cant-foreclose-on-the-acropolis

S&P Sued Over Ratings, Fraud

Standard & Poor's has been sued by Illinois' attorney general, who accused it of fueling the nation's housing and financial crises by assigning inflated credit ratings to risky mortgage-backed securities, according to a HuffPo report.

Attorney General Lisa Madigan said the McGraw-Hill Cos Inc unit, in a drive to boost market share, committed fraud and compromised its independence by issuing tainted, often "AAA" ratings to curry favor with Wall Street banks that created the securities.

"S&P was making hundreds of millions of dollars a year rating these deals," Madigan said in a telephone interview. "Without the rating agencies as enablers, none of these securities would have been able to be purchased by many investors."

The lawsuit accuses McGraw-Hill and S&P of violating state consumer fraud and deceptive trade practices laws. It seeks to recover profits derived from alleged inflated ratings, plus a $50,000 civil fine for each violation.

Read all about it at http://www.huffingtonpost.com/2012/01/25/illinois-sues-sp-over-ra_n_1231421.html?ref=chicago

Buffett Defends Proposed Tax Rate Change

Increasing taxes on the wealthy would bring fairness to U.S. taxpayers across the board, billionaire investor Warren Buffett said on Wednesday, backing the tax reform that President Barack Obama proposed in his State of the Union address, according to CNBC

On Tuesday, Obama proposed a minimum effective tax rate of 30 percent on those who earn a million dollars or more, reviving his call for the so-called "Buffett rule," designed to prevent millionaires from paying a smaller share of income taxes than middle-class taxpayers.

Buffett published an editorial in August stating that his own 17.4 percent effective tax rate was lower than that paid by wage earners in his office. He also said wealthy people should pay more taxes.

Read more at http://www.cnbc.com/id/46143410

Hedges Scramble to Dump Greek Debt

New York Times' Dealbook writes that hedge funds that loaded up on Greek bonds in the last month — betting on a quick gain — are now scrambling to sell those holdings, fearful that European policy makers will force them to take a deep and binding haircut on the debt.

But walking away from the trade may not be that easy. While the money managers had little problem snapping up the bonds from European banks eager to sell, the pool of potential buyers is drying up.

Hedge funds have few options. Although talks between Greece and its bondholders have stalled, European officials are pressing for a deal by the end of this month. Under the proposed debt restructuring plan, hedge funds and other private sector creditors would have to incur losses of 50 percent or more — whether or not the bondholders agreed….

Find out more at http://dealbook.nytimes.com/2012/01/25/hedge-funds-scramble-to-unload-greek-debt/?ref=business

Buffett's Poor Overtaxed Secretary? She Likely Makes Between $200,000 And $500,000/Year

According to Forbes, Warren Buffet’s secretary, Debbie Bosanek, served as a stage prop for President Obama’s State of the Union speech. She was the President’s chief display of the alleged unfairness of our tax system – a little person paying a higher tax rate than her billionaire boss. Bosanek’s prominent role in Obama’s “fairness” campaign piqued my curiosity, and I imagine the curiosity of others. How much does her boss pay this downtrodden woman? So far, no one has volunteered this information.

We can get an approximate answer by consulting IRS data on tax rates by adjusted gross income, which would approximate her salary, assuming she does not have significant dividend, interest or capital-gains income (like her boss). I assume Buffet keeps her too busy for her to hold a second job. I also do not know if she is married and filing jointly. If so, it is deceptive for Obama to use her as an example. The higher rate may be due to her husband’s income. So I assume the tax rate Obama refers to is from her own earnings.

The IRS publishes detailed tax tables by income level. The latest results are for 2009. They show that taxpayers earning an adjusted gross income between $100,000 and $200,000 pay an average rate of twelve percent. This is below Buffet’s rate; so she must earn more than that. Taxpayers earning adjusted gross incomes of $200,000 to $500,000, pay an average tax rate of nineteen percent. Therefore Buffet must pay Debbie Bosanke a salary above two hundred thousand….

Find out more at http://www.forbes.com/sites/paulroderickgregory/2012/01/25/warren-buffetts-secretary-likely-makes-between-200000-and-500000year/

Wednesday, January 25, 2012

James Gorman To Morgan Stanley Employees: STFU Or GTFO

Dealbreaker’s Dame Bess Levin writes: As you may have heard, bonuses were announced at Morgan Stanley last week and while some employees here and there did okay for themselves, for the most part, people were not pleased with the fact that pay was down, on average by 20-30 percent. In fact, many were downright distraught, particularly among those who received zeros. As these things tend to go, a bunch of people have suggested they’ll be taking their talents elsewhere, where they’ll be appreciated and, at the very least, have made a point of sighing audibly around the office to express their disappointment.

By now, though, hopefully everyone’s gotten everything out of their systems because one person who’s no longer interested in hearing it? James Gorman. The Morgan Stanley CEO appeared on Bloomberg TV this afternoon to get a few things off his chest and among them: 1) Those complaining should consider waking the f**k up 2) If you let money define your happiness, he feels sorry for you and 3) “If you are really unhappy, just leave.” Seriously, get the hell out here.

Morgan Stanley Chairman and CEO James Gorman said employees understand why the firm had to cut pay, and those who don’t need to adjust their attitude. “You’re naive, read the newspaper, No. 1,” Gorman said he would tell miffed employees, speaking in an interview on Bloomberg Television. “No. 2, if you put your compensation in a one-year context to define your overall level of happiness, you have a problem which is much bigger than the job. And No. 3, if you’re really unhappy, just leave. I mean, life’s too short.”

Any other questions? No? Good! ‘Cause there’s a new James Gorman in town and he doesn’t give a…


“Let Them Eat Austerity”: Merkel Dismisses Euro Crisis

HuffPo’s Peter Goodman writes: do they hand out Nobel prizes for advances in delusional thinking? If so, I hereby nominate Germany's chancellor, Angela Merkel, for her address this afternoon before the assembled participants at the World Economic Forum here in this lavish ski resort in the Swiss Alps.

Merkel has contributed mightily to the cause of undermining confidence in the Euro while choking the continent in job-killing, future-crushing austerity. She has staked a decent claim to the title of world's worst advertisement for democracy (though congressional Republicans remain safely in command) through her pandering to German taxpayers, blocking efforts to make the European Central Bank the lender of last resort. Yet here she was on Wednesday afternoon, taking a victory lap for supposedly helping avert crisis via collective action….

Read more at http://www.huffingtonpost.com/peter-s-goodman/merkel-euro-crisis-davos_b_1231476.html?ref=business

Bill Gates' Next Target: Revolutionize Farming

Forbes reports that while still focusing on eradicating polio as his eponymous foundation’s “top priority,” Bill Gates says in his annual letter that he is increasingly troubled by the lack of investment into new research in agriculture.

The Bill & Melinda Gates Foundation has already been Gates says his foundation has devoted $2 billion to help poor farmers boost their productivity. But the annual letter is a public way to set the priorities for the Bill & Melinda Gates Foundation, the world’s largest charitable foundation with a $36 billion endowment. Most of the $25 billion the foundation has given away so far has been devoted to public health, with $6 billion focused on vaccines, including the polio effort.

America’s richest man says that it is a terrible irony that most of the billion people, 15% of the world population, who live in extreme poverty and must worry about where they will get their next meal are suffering on farms. He says that the world needs to repeat the “Green Revolution” of the 1960s and 1970s, when new farming technologies, including new seed varieties of rice, wheat, and corn, increased the amount of food available and decreased its price.

“The world faces a clear choice,” he writes. “If we invest relatively modest amounts, many more poor farmers will be able to feed their families. If we don’t, one in seven people will continue living needlessly on the edge of starvation.”

That’s staggering considering that only $3 billion is spent on agricultural research on the seven most important crops, Gates says, including $1.5 billion from countries, $1.2 billion from private companies such as Monsanto and Syngenta, and $300 million by an agency called the Consultative Group on International Agricultural Research….

Read more at http://www.forbes.com/sites/matthewherper/2012/01/24/bill-gates-next-target-revolutionize-farming/

Dr Doom: Europe Needs 'Massive Monetary Easing'

Europe needs "massive monetary easing" to get out of its debt crisis, otherwise Greece will likely abandon the euro in a year and a half, famous economist Nouriel Roubini told CNBC on Wednesday.

Private creditors who lent Greece money, such as banks and investment funds, are meeting in Paris after talks on a debt swap that would change shorter maturity Greek bonds for longer maturity ones to give the country more chances to reduce its debt were inconclusive last week and earlier this week.

"Greece is going to be the first country to restructure its debt, I don't think it's going to be the last one," Roubini told CNBC in an interview at the World Economic Forum in Davos.

Without swift measures, Greece may be the first country to leave the euro zone, the economist, who has the reputation of correctly predicting the financial crisis that hit in 2007, said. The European Central Bank needs to act swiftly with "massive monetary easing" to prevent the crisis from deepening and austerity measures must be reined in, according to Roubini, in whose opinion the euro needs to be 20 percent or even 30 percent weaker to help the euro zone economies….

More? Check out http://www.cnbc.com/id/46127687

Déjà vu all over again: HSBC being investigated for money laundering

According to Reuters HSBC Holdings PLC is under investigation by a U.S. Senate panel in a money-laundering inquiry, the latest step in a long-running U.S. effort to halt shadowy money flows through global banks, according to people familiar with the situation and a company securities filing.

The inquiry being conducted by the Senate Permanent Subcommittee on Investigations could yield a report and congressional hearing later this spring, these people said. The subcommittee has a history of conducting high-profile hearings that have proved embarrassing for the world's biggest banks.

The intensifying scrutiny of HSBC is the latest in a series of investigations by U.S. officials into how global banks have processed -- and in some cases, intentionally hidden -- financial transactions on behalf of countries which allegedly support terrorism, corrupt foreign officials, drug gangs and criminals. Since 2008, European and U.S. banks have signed deferred prosecution agreements and paid more than $1.2 billion in penalties for alleged violations of anti-money laundering regulations. The specific focus of the Senate probe of HSBC isn't known. ..

Wait..wait..there's more at http://www.reuters.com/article/2012/01/25/us-hsbc-probe-idUSTRE80O1FH20120125

BofA, Rivals Look to Horn In on Groupon's Game

Big banks, looking to drive cardholder use and scrounge up new revenue sources, are moving to out-Groupon Groupon by turning to deals services paid for by merchants and tailored based on customer activity, the Wall St Journal reports.

The latest entrant into the merchant-deals game is Bank of America Corp., which is testing a service with employees in North Carolina, South Carolina and Nevada that delivers merchant offers directly to users within their online bank accounts.

The big differences: The deals are pegged to card activity and, instead of printing a coupon or downloading a bar code on a mobile phone ….

Read all about it at http://online.wsj.com/article/SB10001424052970203718504577182802542245404.html?mod=WSJ_hp_LEFTTopStories

The Next 17 Big Companies That Are At Risk Of Bankruptcy

BusinessInsider writes: Lots of iconic brands have filed for bankruptcy recently. Some blamed weak consumer demand, others pointed to rising commodity costs and pension demands. In any case, you can count on many more companies to follow suit. GovernanceMetric's International provided us with a list of companies with the greatest probability of financial distress.

In any case we picked out some of our favs...…

Caesars Entertainment
Financial distress probability: 7.28%; Total assets: $28.9 billion; Founded: 1937. Caesars Entertainment is the world's largest casino entertainment company.

Clearwire (CLWR)
Financial distress probability: 9.54%; Total assets: $8.8 billion; Founded: 2003
Clearwire, a wireless internet service provider, has seen its stock gain 40% since October when investors feared that the company would default on its debt, reported Reuters. In December, Sprint provided the company with a lifeline by agreeing to pay $1.6 billion to Clearwire in the next four years. .

Republic Airway Holdings (RJET)
Financial distress probability: 11.12%; Total assets: $4.2 billion; Founded: 1973
Republic Airways Holdings is an Indiana company that owns Chautauqua Airlines, Frontier Airlines, Republic Airlines and Shuttle America. At the moment, Republic Airways is trying to sell off its troubled asset Frontier, reported Reuters.

Tennessee Valley Authority
Financial distress probability: 11.82%; Total assets: $46.39 billion; Founded: 1933
Tennessee Valley Authority, which provides electricity to nine million people in the southeast, needs funds for future projects but cannot afford to take on more dept as its debt ceiling is controlled by the congress. In order to raise funds, TVA has leased the John Sevier Combined Cycle Plant to a group of investors for 30 years at a price of $1 billion, reported Electric Co-op Today…

Office Depot (ODP)
Financial distress probability: 11.90%; Total assets: $4.2 billion; Founded: 1986
Office Depot is a global supplier of office products and services.

Barnes & Noble (BKS)
Financial distress probability: 12.05%; Total assets: $4.1 billion; Founded: 1873
Barnes and Noble saw a drop in its stock earlier this month when the company lowered guidance and announced that the company is considering spinning out the Nook business. The simple reason why Barnes and Noble made it while Borders went belly up is the company's investment in Nook and online sales. But can Nook compete with Amazon's Kindle?

Find out the rest at http://www.businessinsider.com/the-next-17-big-companies-that-are-at-risk-of-bankruptcy-2012-1

Hedge Fund CEO Bails After SEC Lawsuit

Some folks just can’t take the heat. Bloomberg reports Fortress Investment Group said Daniel Mudd resigned as CEO and a director of the New York-based hedge fund and private-equity firm after a leave of absence to respond to a government lawsuit.

“I do not want the uncertainty associated with a leave of absence, on my part, to become a distraction for either Fortress or its investors, and thus, I have decided to resign,” Mudd said yesterday in a statement.

Randal Nardone, Fortress principal and co-founder, will continue to serve as interim CEO, according to the statement.

Mudd, formerly CEO of Fannie Mae (FNM), took a leave from Fortress on Dec. 21 to respond to allegations by the Securities and Exchange Commission. He and former Freddie Mac CEO Richard Syron were sued for understating by hundreds of billions of dollars the subprime loans held by the government-owned mortgage finance companies. Mudd denied the claim, saying the U.S. government and investors were aware of “every piece of material data about loans held by Fannie Mae….”

Learn more at http://www.bloomberg.com/news/2012-01-25/fortress-chief-executive-officer-daniel-mudd-resigns-amid-fannie-mae-probe.html

Facebook Trades Halted for Three Days

According to Bloomberg shareholders of Facebook Inc., the social-networking site preparing an initial public offering, are facing a three-day suspension of trading on secondary markets this week, people with knowledge of the matter said. While buy and sell orders can be made, transactions won’t be processed by Facebook’s attorneys at Fenwick & West LLC from today until Jan. 27, said the people, who declined to be named because details on secondary transactions are kept private. The halt pertains to trading of Facebook shares only, one of the people said.

Facebook, the world’s largest social network, is considering raising about $10 billion in an IPO that would value the company at more than $100 billion, a person with knowledge of the situation said in November. Private companies sometimes halt trading to ascertain how many shareholders they have, said Barry Silbert, chief executive officer of SecondMarket Inc., an exchange where Facebook shares are traded.
Speaking at the World Economic Forum in Davos, Switzerland, he declined to comment on Facebook in particular...


How Goldman Makes Money for the Romneys

After a long, controversial wait, Mitt Romney released details of his federal tax returns on Tuesday, inciting a flurry of wide-eyed analysis from those curious to see exactly how Mr. Romney’s personal finances stack up. DealBook perked up when it saw that many of the assets described in Mr. Romney’s returns were held in blind trusts managed by Goldman Sachs.

As beneficiaries of a blind trust, Mr. Romney and his wife, Ann, would not have picked the individual stocks contained in their trusts’ portfolios. But by examining the trusts’ 2010 returns, a picture emerges of how the Romneys have benefited from – and been hurt by – Goldman’s investment decisions.

In that year, two Romney trusts – the Ann and Mitt Romney 1995 Family Trust and the W. Mitt Romney Blind Trust – made nearly $2.8 million in combined capital gains from their Goldman investments, according to the trusts’ filings. Almost all of those gains, nearly $2.7 million, were long-term gains made by selling securities that the trusts had owned for more than a year….

There’s more good stuff at http://dealbook.nytimes.com/2012/01/24/goldman-makes-money-for-the-romneys/

Hedge funds prepare legal battle with Greece

Reuters reports that hedge funds are combing through the small print of Greece's planned rescue deal with private creditors, readying a wave of potential litigation to squeeze a better payout from the country.

Most bondholders face an uphill battle in wringing a payment from Athens through the courts, but shrewd funds picking up specific bond issues with investor-friendly smallprint have a much better chance of succeeding.

This is so worrying those negotiating Greece's private sector deal that many are trying to keep the final structure of a rescue package under wraps until it is done to prevent the funds from finding a legal edge, sources close to the talks say.

Challenging countries through the courts is a well-worn hedge fund strategy - some are still battling Argentina for payouts more than 10 years after its record-breaking default.

The closer Greece edges to a disorderly default where it imposes losses, rather than a managed one in which it agrees a deal with a majority of bondholders, the more creditors are likely to go down the legal route….

Find out more at http://www.reuters.com/article/2012/01/24/greece-hedge-funds-idUSL5E8CN0OR20120124

Only in America: U.S. Subculture prepares for civilization's collapse

When Patty Tegeler looks out the window of her home overlooking the Appalachian Mountains in southwestern Virginia, she sees trouble on the horizon. "In an instant, anything can happen," she told Reuters. "And I firmly believe that you have to be prepared."

Tegeler is among a growing subculture of Americans who refer to themselves informally as "preppers." Some are driven by a fear of imminent societal collapse, others are worried about terrorism, and many have a vague concern that an escalating series of natural disasters is leading to some type of environmental cataclysm.

They are following in the footsteps of hippies in the 1960s who set up communes to separate themselves from what they saw as a materialistic society, and the survivalists in the 1990s who were hoping to escape the dictates of what they perceived as an increasingly secular and oppressive government. Preppers, though are, worried about no government.

Tegeler, 57, has turned her home in rural Virginia into a "survival center," complete with a large generator, portable heaters, water tanks, and a two-year supply of freeze-dried food that her sister recently gave her as a birthday present. She says that in case of emergency, she could survive indefinitely in her home. And she thinks that emergency could come soon. "I think this economy is about to fall apart," she said....

Wait, wait...there's more. Check out http://www.reuters.com/article/2012/01/21/us-usa-civilization-collapse-idUSTRE80K0LA20120121

Stanford Ponzi Case gets to a rip(off)-roaring start

Disgraced financier R. Allen Stanford shattered “children’s college educations” and “loved ones’ comfortable retirements” through a sham business empire that served as his personal piggy bank, prosecutors told the NY Post.

Assistant US Attorney Gregg Costa told a federal jury in Houston that Stanford, who faces up to 20 years in prison, siphoned off cash through his dealings in an offshore bank where he sold certificates of deposit as safe investments, but then failed to put those investments into the hands of money managers.

“It was just a façade,” said Costa of Stanford International Bank, adding that the institution only served to underwrite Stanford’s ambitions.

Stanford, 61, is charged in a 14-count federal indictment accusing him of bilking some 30,000 investors from more than 100 countries through bogus investments with Antigua-based Stanford International Bank.

Read more: http://www.nypost.com/p/news/business/stanford_fraud_trial_gets_to_rip_TZmZLdNbHBn0gGJbnEuaRN#ixzz1kSQXxl5y

Citi Considers Further Cuts

Citigroup Inc. the third-biggest U.S. bank, will consider further spending cuts at its securities unit after an investment of almost $1 billion in the business last year failed to boost revenue, Bloomberg reports.

The lender, which last week announced 1,200 job reductions to save $600 million this year at the Securities and Banking division, will “further restructure” if revenue doesn’t rebound in 2012, Chief Financial Officer John Gerspach said on a conference call yesterday. Profit at the unit fell 24 percent last year to $4.9 billion as Europe’s sovereign-debt crisis rattled world markets, New York-based Citigroup said last week.

“We are not oblivious to the fact that our cost structure cannot be justified by our current revenue,” Gerspach said. “While much of the current difficulty reflects market conditions, we equally have some management and execution challenges.”

Find out more at http://www.bloomberg.com/news/2012-01-24/citigroup-to-weigh-more-cuts-in-securities-unit-if-revenue-doesn-t-rebound.html

Obama’s New Group To Go After Fraud That Caused The Financial Crisis

HuffPo reports: During his State of the Union address, President Obama announced the creation of a special unit to investigate misconduct and illegalities that contributed to both the financial collapse and the mortgage crisis. The office, part of a new Unit on Mortgage Origination and Securitization Abuses, will be chaired by Eric Schneiderman, the New York attorney general.

"The goal of this joint investigation will be threefold: to hold accountable any institutions that violated the law; to compensate victims and help provide relief for homeowners struggling from the collapse of the housing market, caused in part by this wrongdoing; and to help us finally turn the page on this destructive period in our nation’s history," reads a White House document outlining the objectives.

The unit will not supersede the efforts already underway by the Department of Justice. Instead, it will operate as part of the president's Financial Fraud Enforcement Task Force. In addition to Schneiderman, the unit will be co-chaired by Lanny Breuer, assistant attorney general at the Criminal Division of the Department of Justice, Robert Khuzami, director of enforcement at the SEC; John Walsh, a U.S. attorney in Colorado, and Tony West, assistant attorney general in the Civil Division at DOJ…...

Read more at http://www.huffingtonpost.com/2012/01/24/obama-housing-crisis-unit_n_1229617.html?1327453577

Tuesday, January 24, 2012

Occupy Protesters Build Igloos in Switzerland to Protest Economic Summit

The eviction of Occupy Wall Street from Zuccotti Park in November left protesters without the physical birthplace of the movement around which to rally, and put something of a chill on the endeavor. In Switzerland, protesters of the World Economic Forum have made the movement even chillier.

In preparation for the economic summit of world leaders, which begins on Wednesday in Davos-Klosters, Switzerland — where daytime temperatures have hovered around 23 degrees Fahrenheit and dipped to around 10 degrees at night with a dusting of snow — protesters are carving out igloos from the packed powder.

The plan to build a small igloo village near the Congress Center building, where nearly 3,000 representatives from more than 100 countries are expected, launched on Saturday….

Read more at http://thelede.blogs.nytimes.com/2012/01/24/occupy-protesters-build-igloos-in-switzerland-to-protest-economic-summit/