Wednesday, February 29, 2012

Ouch! Rocks shatter bank windows before Occupy march!

Who dun it? According to a KATU report, businesses in Northeast and Southeast Portland were damaged overnight and the vandals explained their actions in e-mails, police said. The vandalism comes ahead of a planned Occupy Portland march and rally in Portland on Wednesday afternoon as part of the Shut Down the Corporations Day of Action. The event is also known as the F29 march and organizers said they will be focusing on corporations that are part of the American Legislative Exchange Council (ALEC).

Police said at about 10:20 p.m. Tuesday, a U.S. Bank branch near S.E. Cesar E. Chavez Boulevard and S.E. Main Street had windows broken out and the ATM was damaged. Police said rocks were found inside and outside the building.

About four hours later at around 2:15 a.m. Wednesday, police said they responded to reports of glass breaking at a Key Bank branch located at N.E. 38th and Broadway Street.….

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Goldman Sachs workers unionize!

The past year has been anything but business as usual for the financial industry. According to a Japantimes report, faced with a frosty economic climate, financial service companies have been busy chopping dead wood. Last year, 200,000 financial service jobs ended up on the cutting block worldwide. In Japan, that meant layoffs at famous firms including Morgan Stanley, Citigroup, HSBC Holdings, and Mizuho Financial Group.

At Goldman Sachs Japan, things became so unusual that some of its staff even took the remarkable step of unionizing after the firm's attempts to force workers to voluntarily resign — and thus sidestep the notoriously tough restrictions on layoffs under Japanese labor law — apparently backfired. Instead of quitting, the company's actions spurred some employees to heed the call for workers of the world to unite, and they formed what's believed to be Goldman Sachs' first-ever employee union….

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Buffett Watch: Catch the “Crazy Warren “ prices!

The management and staff at Borsheims jewelry store in Omaha, Neb., always look forward to the annual Berkshire Hathaway shareholders meeting. The weekend-long event is one of the strongest sales periods of the year for the retailer. Now there’s another reason to get excited as Warren Buffet, who heads the holding company, will once again be making the rounds as a jewelry salesman during the weekend.

Buffett made the announcement in his annual letter to Berkshire Hathaway shareholders, released Saturday. It will be the second consecutive year that the “Sage of Omaha” will be selling jewelry for the shareholders weekend—which attracts more than 30,000 Berkshire Hathaway shareholders, media members and other guests. Borsheims is a subsidiary of Berkshire Hathaway.

“On Sunday (May 6, 2012) around 2 p.m., I will be clerking at Borsheims, desperate to beat my sales figure from last year,” Buffett wrote. “So come take advantage of me. Ask me for my ‘Crazy Warren’ price.”

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Fed President: Five Largest Banks Should Be Broken Up

The five biggest banks in the United States are too powerful and should be broken up, Dallas Fed President Richard Fisher said on Wednesday according to CNBC. The financial crisis has left the five biggest banks even more powerful than before, he told an event in Mexico City.

"After the crisis, the five largest banks had a higher concentration of deposits than they did before the crisis," he said. "I am of the belief personally that the power of the five largest banks is too concentrated."

The U.S. Dodd-Frank reform and consumer protection act includes mechanisms for regulators to break up large financial companies, but imposes high hurdles for such action…

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Great Caesar’s Ghost! Economy in U.S. Grew at 3% Pace in 4th Qtr.

Companies took in more orders and stepped up production in February, a sign demand will sustain the U.S. expansion after a fourth-quarter pickup, the good folks at Bloomberg report..

The Institute for Supply Management-Chicago Inc. said today its business barometer climbed to a 10-month high of 64 from 60.2 in January. Readings above 50 signal expansion and the figure exceeded all forecasts in a Bloomberg News survey. The Commerce Department raised its growth estimate for the final three months of 2011, to 3 percent from 2.8 percent.

Income gains in the second half of 2011 were stronger than previously reported, which may bolster household purchases that make up 70 percent of the economy. Federal Reserve Chairman Ben S. Bernanke signaled today to Congress that recent signs of strength won’t change the central bank’s view that low rates are necessary through 2014….

Does this mean we'll have four more years of Obama? Just asking....

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And Now For Something Completely Different: One Out Of Every Ten Wall Street Employees Is A Total Psychopath!

HuffPo writes: One out of every 10 Wall Street employees is likely a clinical psychopath, writes journalist Sherree DeCovny in an upcoming issue of trade magazine CFA Magazine (subscription required). In the general population the rate is closer to one percent.

"A financial psychopath can present as a perfect well-rounded job candidate, CEO, manager, co-worker, and team member because their destructive characteristics are practically invisible," writes DeCovny, who pulls together research from several psychologists for her story, which helpfully suggests that financial firms carefully screen out extreme psychopaths in hiring.

To be sure, typical psychopathic behavior runs the gamut. At the extreme end is Bateman, portrayed by Christian Bale, in the 2000 movie "American Psycho," as an investment banker who actually kills people and exhibits no remorse. When health professionals talk about "psychopaths," they have a broader range of behavior in mind.

A clinical psychopath is bright, gregarious and charming, writes DeCovny. He lies easily and often, and may have trouble feeling empathy for other people. He's probably also more willing to take dangerous risks -- either because he doesn't understand the consequences, or because he simply doesn't care. An appetite for risk can seem like a positive business trait on Wall Street, where big gambles sometimes lead to big rewards. But…

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Guess How Much Blackstone’s Steve Schwartzman Made Last Year (Per Day)

Billionaire private equity tycoon Stephen Schwarzman raked in $148.5 million in pay and cash dividends last year, according to Bloomberg. That works out to be just over $406,849 per day (including weekends and holidays). It also works out to be slightly more than $16,952 an hour even while he's sleeping!

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Bonus Watch ’12: Nightmare On Wall Street

Dealbreaker’s Bess Levin writes: At Bloomberg today you will find a piece that is a bit hard to stomach if you’re the type of person whose heart goes out to the suffering. A bunch of financial services employees’ bonuses were slashed last year and, as a result, their lives have been turned upside down. Perhaps recalling how well their colleagues came off in Bloomberg’s first piece in a series about bankers who are down and out, these people thought it wise to turn to reporter Max Abelson to tell their tale.

First, there’s Andrew Schiff, director of marketing for Euro Pacific Capital. Schiff has almost too many woes to mention but they include having to scale back his Connecticut summer house rental from four months to one; facing the pressure of paying private school tuition for two kids; living in a “crammed” 1,200-square- foot Brooklyn duplex (Schiff and his wife were planning to buy a $1.5 million brownstone nearby but now, who knows); and traffic (“Schiff was sitting in a traffic jam in California this month after giving a speech at an investment conference about gold. He turned off the satellite radio, got out of the car and screamed a profanity. ‘I’m not Zen at all, and when I’m freaking out about the situation, where I’m stuck like a rat in a trap on a highway with no way to get out, it’s very hard,’ he said”).

A traumatic experience to be sure. And yet none come close to that of…

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Fund Manager in GOP Race

According to the NY Daily News Joseph Carvin, 57, a full time hedge fund manager, joins a GOP field that already includes Nassau County Comptroller George Maragos and attorney Wendy Long.

"I have decided to run for the office of U.S. Senate because I believe that our representatives in Washington have provided us with an economic framework that severely undermines our competitive position in the world today," said Carvin, an agricultural investor.

Carvin's new campaign bio gives his claim to fame as "working to eliminate his own job in an effort to streamline local government and lower property taxes."

A spokesperson for Gillibrand told our Alison Gendar, “Sen. Gillibrand looks forward to contrasting her vision for growing the economy and her strong record of fighting for New York values against whomever the Republicans ultimately choose to run against her.”

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Decline and Fall: A Horror Story of Doing Right

According to Bloomberg’s William D. Cohan on the lengthy list of things Dan Zwirn has lost, a few items jump out. There’s the $17 million condo on Central Park South, the summer place in Quogue, N.Y., and the $18 million Gulfstream IV jet. Then there’s D.B. Zwirn & Co., the hedge fund that once managed $12 billion in assets, employed 275 people in 14 global offices, and created the roughly $700 million in personal wealth that made so many of Zwirn’s spectacular purchases possible. Zwirn, 40, misses his money and the things it afforded him. But what he misses most, he said, is his “beautiful machine.”

That’s Zwirn’s term of endearment for his now-defunct hedge fund. The beautiful thing about it was its discipline. D.B. Zwirn abstained from the directional or leveraged bets that other hedge funds make. Instead the firm provided capital to about a thousand companies with few other financing options -- companies such as a small New York-based Spanish-language radio group and a company that leased slot machines to casinos on Indian reservations. The one and only strategy was to learn everything about the prospective borrowers, figure their odds of repayment, crank up the interest rate to the proper pain point, and grind out 1 percent a month in profits.

At 33, Dan Zwirn had a killer hedge fund and a $700 million personal fortune. At 40, he has his good name and a horror story about the cost of trying to do the right thing. For 49 straight months, Zwirn, who aspired to be the hedge fund world’s scrappy singles hitter, got paid like a home run champ. The D.B. Zwirn Special Opportunities Fund had gross returns of 21.8 percent in 2003, 21.6 percent in 2004, 18.9 percent in 2005, 24 percent in 2006, and 16 percent in 2007. As machines go, Zwirn’s was a Ferrari….

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Top firm readies millions in bonus pay

General Motors is likely to spend more than $500 million on employee bonuses and profit-sharing based on the company’s record profit in 2011. GM, which has a truck plant in Allen County and a foundry in Defiance, Ohio, will pay bonuses of at least $182 million to white-collar workers such as engineers, car designers and managers on Wednesday, according to a formula obtained by The Associated Press. That’s on top of $332.5 million in profit-sharing it agreed to pay factory workers.

In the past, such payments have drawn criticism from those who believe the government shouldn’t have bailed out GM and Chrysler. But GM, which made $7.6 billion last year, says the payments are needed to retain skilled employees. It’s also keeping fixed costs down by giving bonuses instead of annual pay raises.

The bonuses will go to most of the company’s 26,000 salaried employees, many of whom make more than $100,000 a year. The bonuses will range from 8 percent of base pay to 14 percent, according to the formula….

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Criminal Case Against MF Global in Doubt!

If we hadn’t seen this in Dealbook with our own eyes we wouldn’t have believed it. Investigators have not accused Jon S. Corzine, former CEO of MF Global, of wrongdoing in the firm’s collapse. Federal authorities are struggling to find evidence to support a criminal case stemming from the collapse of MF Global, even after a federal grand jury in Chicago has issued subpoenas.

Investigators, unable to find a smoking gun amid thousands of e-mails and documents, increasingly suspect that chaos and poor risk control systems prompted the disappearance of more than $1 billion in customer money, according to several people involved in the case.

When the money first went missing, prosecutors in New York and Chicago scrambled to stake a claim. Now, four months later, both Preet S. Bharara, the United States attorney in Manhattan, and Patrick J. Fitzgerald, his counterpart in Chicago, are shying away from leading the case, one of those people involved in the case said….

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Goldman Discloses Risk to Credit Derivatives Tied to European Debt

Goldman Sachs, the fifth- biggest U.S. bank by assets, disclosed for the first time the gross value of credit-default swaps the firm purchased and sold relating to Greece, Ireland, Italy, Portugal and Spain, the good people at Bloomberg tell us.

At the end of 2011, Goldman Sachs had sold $142.4 billion of single-name swaps, contracts that pay out in the event of a default, on the five countries, the firm said yesterday in an annual filing with the U.S. Securities and Exchange Commission. The company also had purchased contracts with a gross notional value of $147.3 billion on the nations’ debt, the filing shows.

Goldman also said that “legally enforceable netting agreements” would reduce the amount of credit-default swaps purchased on the five countries to $21.1 billion and the amount sold to $16.2 billion….

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Bank of America’s Newest Outrageous Fee

This year South Carolina income tax refunds will arrive on prepaid debit cards unless taxpayers specifically opt for a check or direct deposit HuffPo reports.

The change could potentially save South Carolina as much as $1 million in printing and mailing costs this year, state projections indicate. And for the nearly 200,000 South Carolina households that do not have bank accounts, a prepaid debit card offers an end run around check-cashing fees and protects against the risk of holding so much cash.

But the biggest winner could be Bank of America, which will issue the prepaid cards and stands to collect an untold amount in fees from card users and merchants who own the stores where the cards may be used. The arrangement allows the Charlotte, N.C. bank to charge some card users fees as high as $10 per transaction. And unlike ordinary debit cards linked to a bank account, there are no caps on the fees banks can charge merchants when customers use prepaid debit cards.

The South Carolina Department of Revenue’s decision is part of a larger movement inside government. In 41 states, unemployment benefits are issued via prepaid debit card. Nearly every state issues food stamp and cash welfare benefits on prepaid debit or similar cards. Even the federal government will stop issuing traditional social security checks early next year. Government agencies stand to save millions while banks stand to gain much more….

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Shocker! Fed Insider Probe Targets a Top Goldman Manager

Hot spit! Wall Street's most high-profile securities firm is being drawn further into the government's insider-trading investigation according to the Wall St Journal. Federal criminal authorities are investigating whether a top Goldman Sachs Group Inc. manager passed inside information about technology stocks to the firm's hedge-fund clients, people close to the situation said.

David Loeb, a Goldman managing director who acts as a middleman between the Wall Street firm and some of its most important hedge-fund clients, is the latest Goldman official to be investigated in the insider-trading probe. As a senior Goldman salesman, Mr. Loeb deals with many technology hedge-fund employees...

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Tuesday, February 28, 2012

JPMorgan aims to use size to lift profit by 25 percent

JPMorgan Chase plans to use size to its advantage, leveraging its various components to boost annual earnings more than 25 percent over time, bank executives told Reuters.

At the banking company's investor day, CFO Doug Braunstein said JPMorgan was targeting $24 billion in annual net income, up from the $19 billion it earned last year.

"I'll be damned if we don't have record profits at least for a while now," Chief Executive Officer Jamie Dimon said in closing remarks at the conference.

Even though JPMorgan fared better than many of its peers during the financial crisis, Dimon is still under pressure to show how the bank can grow revenue in a tepid economic environment and increased regulatory requirements for large banks….

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Banks Vie for $2 Billion in Secret Europe Equity Derivatives

Bloomberg reports that investment banks including Deutsche Bank AG and Morgan Stanley are vying for as much as $2 billion in annual fees in Europe arranging customized equity derivatives -- a secretive market that has defied the downturn.

The business, about as large as underwriting initial public offerings before the 2008 financial crisis, is now three times bigger and held steady last year, according to estimates from six bankers who asked not to be identified because the information is private. The contracts accounted for almost 10 percent of total investment-banking fees last year in Europe, the Middle East and Africa as revenue from dealmaking and trading sank…

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Dow recovers $9T, returns to pre-crash level

Forget about high unemployment, rising oil prices and Europe’s debt crisis.The Dow is back.

The NY Post reports that stocks hit recovery milestones across the board yesterday, showing that investors at last have reclaimed the over $9 trillion wiped out four years ago during the depths of the nation’s worst recession in decades.
Most investors with 401(k)s cheered a three-way victory as the Dow Jones industrial average broke through the psychologically important 13,000-point threshold to end at 13,005.12, up 23.61, for its highest closing price since May 19, 2008.
The two other exchanges — the Standard & Poor’s 500 index and the Nasdaq — had already crossed into recovery territory in recent sessions, leaving the Dow struggling for more than a week to catch up to the parade. The S&P, which had previously crossed into its 1,300-point comeback territory of 2008 about a month ago, ended at 1,372.18, up 4.59, a gain of 9.11 percent for the year. The Nasdaq ended just shy of a 10-year high, closing at 2,986.76, up 20.60. It’s up 14.65 percent for the year….

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Wanted: Portfolio Manager; Compensation: Astronomical!

Portfolio Manager – New York, NY
CompanyGQR Global Markets
LocationNew York, NY
Position TypePermanent
Employment typeFull time
UpdatedFeb 28, 2012

eFC Ref no922765

We are a dynamic and growing Global Asset Manager trading liquid instruments globally.


We are a dynamic and growing Global Asset Manager trading liquid instruments globally. We seek an experienced, intelligent, and ambitious individual to take a strategic role within our investments business. We are the next generating of investment professionals and successful applicants require proven experience in portfolio management, research, programming, and development. This represents an excellent opportunity to join an team of pioneering portfolio, research, risk and technology pros. Responsibilities included development and deployment of advanced trading models, strategies and execution systems, encompassing stewardship of the related business divisions. Ideal applicants will possess leading industry experience combined with an excellent technical education from a leading academic institution...


Look Who Earned Clients $13.8 Billion Last Year (While Paulson lost almost $10 billion)

Go figure. Bloomberg reports that Ray Dalio’s Pure Alpha hedge fund made $13.8 billion for its investors last year, while John Paulson lost clients almost $10 billion after an unsuccessful wager that the U.S. economy would recover, according to a report by LCH Investments NV.

Pure Alpha, part of Dalio’s Bridgewater Associates LP, has earned $35.8 billion for investors since its inception in 1975, said LCH, a firm overseen by the Edmond de Rothschild Group. Losses for New York-based Paulson & Co. last year cut gains the firm has made for clients since its 1994 founding to $22.6 billion, LCH estimated.
Dalio’s Pure Alpha II ran up a 23.5 percent gain in the first 10 months of the year. The manager, 62, had three of the industry’s 12 best-performing funds, Bloomberg Markets reported in its February issue. The firm charges 2 percent of assets as a management fee and gets 20 percent of profits...

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Apple Stock: $500 And Climbing?

Already the most valuable company in the world, Apple hit the $500 mark, just $40 billion shy from breaking the $500 billion market cap, according to Forbes. So what does this mean to investors and what does this mean to the public, now that Steve Jobs isn’t at the helm? There are pundits on both sides of the table arguing that it is overpriced, and others saying it still has room to move up. To determine this, many factors are in play and the question is what catalyst is left to drive the stock.

One way to look at it, investing $10,000 into Apple in 2000 would be worth about $966,667 today. Even since December 2010, just a little over a year ago, Apple has increased by $230 billion, almost 98%. Everyone has probably heard by now that Apple is larger than Google and Microsoft combined, or that the iPhone alone is a bigger business than Microsoft….

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OMG The $308B bank gift!

According to te NY Post the Obama administration will let some of the country’s largest banks protect about $308 billion in profitable second mortgages on their books by laying off some of the losses incurred in modifying mortgages onto the pension funds and mutual funds that own the homes’ first mortgages.

The tidy present from Washington — which could allow the banks to avoid additional billions of dollars in write-downs — runs against normal loan-restructuring procedures, which hold that second liens get wiped out before first liens feel any pain.

The banks — Bank of America, Well Fargo, JPMorgan Chase, Citigroup and Ally — will also, under the massive $25 billion foreclosure robo-signing settlement with federal and state authorities, be allowed to get credit toward the cash they promised to spend on the mortgage-modification problem.

“Why should [the banks] share losses at all anyway?” Scott Simon, a money manager at Pimco, which owns first-lien mortgage debt, told The Post. The protection provision is contained in the foreclosure settlement, which has been agreed to but not yet made public.

An Obama administration official told Bloomberg, which first reported on the protection, that the settlement may be made public this week...

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Welcome to the Future! 60% Of Trading In The US Is Now Filtered Through A High-Frequency Platform

According to Tony Greenberg of RampRate , speed thrills, especially near the speed of light. For Wall Street traders, speed creates new fortunes on the world’s fastest networks, for makers and users both.

But those technologies require lots of money and brainpower, creating questions about unfair advantages for privileged insiders with the fastest networks and best relationships, even as regulators ponder what to do.

Welcome to the future, where winners are determined by who arrives first with the most intelligence. Whether it’s making a killing with a million-dollar trade, snagging choice concert tickets, or sniping an eBay auction, technology’s next big leap is nearly here. Low-latency networks will reshape most industries, even if they never approach the speed of light. …

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Euopre’s Latest Cash Injection: What Markets Will Be Looking For

The European Central Bank’s first mass injection of cheap money into the European banking system last December was hailed as a success from almost all sides. The results of the second round of Europe’s answer to quantitative easing , to be announced Wednesday, will be watched even more closely according to CNBC.

The first time around, the market underestimated how popular the three-year long-term refinancing operation (LTRO) would be — and how positive its effects could be — until traders returned to their desks after the Christmas break. With the second round, there are a number of key questions to ask before deciding how to play it.

How Big Will It Be? Forget everything you saw (or didn’/t see) in the High School locker room; size matters. Analysts’ estimates for the second round have gradually been reduced, with most now believing that it will be similar to the first operation of 489 billion euros ($654 billion). If the sum taken out is below 400 billion euros, this may also be viewed as positive, according to Peter Schaffrik, head of European interest rate strategy at Royal Bank of Canada, as it could indicate that banks do not need the new source of funding….

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State Street Investigated by New York, U.S.

New York's attorney general and the U.S. Attorney's Office in Manhattan are probing foreign exchange services at State Street Corp. almost five months after suing Bank of New York Mellon Corp over the same issue Bloomberg reports.

The two offices "have made inquiries to us about our indirect foreign exchange execution methods," the Boston-based company said today in a filing with the Securities and Exchange Commission. State Street, the third-largest custody bank, has already been sued by California and Arkansas claiming the company overcharged public pension funds for some foreign exchange transactions...


The Warren Buffett Haters Club

BusinessWeek reports: After his manifesto in the New York Times last August titled “Stop Coddling the Super-Rich,” Berkshire Hathaway Chairman and Chief Executive Officer Warren Buffett—a man who had seemed universally admired in capitalist circles for both his business acumen and kindly Midwestern disposition—found himself under attack. In the article he’d questioned a tax code in favor of the “mega-rich,” and declared “it’s time for a shared sacrifice.” A Republican chorus called on him to simply open his checkbook if he felt his taxes were too low. Corporate titans such as former General Electric (GE) Chairman Jack Welch and former American Express (AXP) CEO Harvey Golub expressed their disappointment, as well. Now that the Obama administration hopes to make the “Buffett Rule” official policy (in his State of the Union speech in January, President Obama invoked it as a proposed 30 percent minimum tax on incomes over $1 million), Bloomberg Businessweek compiled some of the criticisms of Buffett and his namesake rule—and the instances when the Oracle of Omaha deigned to respond.

“He should just write a check and shut up. Really. And just contribute. OK? I mean, the fact of the matter is that I’m tired of hearing about it. If he wants to give the government more money, he has the ability to write a check. Go ahead and write it.” —New Jersey Governor Chris Christie, Feb. 22, 2012, regarding the Buffett Rule…

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Big Win For BofA, Pimco, BlackRock As $8.5 Bil Settlement Moved Back To NY Court

Bank Of America and some big time investors just scored a victory as a judge ruled that their massive $8.5 billion settlement should be moved back to state court from federal court, according a report in Forbes. The record settlement was agreed to in June but has hit plenty of roadblocks including a battle between two subgroups of plaintiffs in the case.

One group,which includes big names like Pimco and Blackrock, believed it should remain in state court while the other, led by a group dubbed Walnut Place, wanted to see the case played out in federal court.

In October, a federal judge sided with Walnut Place saying the case “implicates core federal interests in the integrity of nationally chartered banks.” But today’s ruling moved the case back to state court where it originated, and likely offers some relief to the likes of lawyer Kathy Patrick and her clients which include Blackrock and Pimco….

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Monday, February 27, 2012

Michael Douglas Tackles Greed for F.B.I.

NY Times' Dealbook reports: No, there’s not another big-budget Oliver Stone follow-up to “Wall Street” in the works. Instead, Michael Douglas, who played the financier in the 1987 movie and the sequel, is now starring in a straight-to-television video for the Federal Bureau of Investigation meant to root out insider trading — the same crime that brought down the high-flying Mr. Gekko.

A one-minute spot that points out that illicit trading is, in fact, illegal might not seem a priority. But the new video — now showing on CNBC and Bloomberg Television — is part of the government’s broader initiative aimed at drawing cooperating witnesses and tipsters from Wall Street.

For years, insider trading was not a top focus at the bureau, so would-be informants might not have known where to turn, the thinking went. Now that the crime is front-and-center for securities investigators, the video is part reminder, part plea for those who have seen something illegal to say something.
“The movie was fiction, but the problem is real,” Mr. Douglas, sans the slicked-back hair that his character sported, says in the announcement….

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Harvard Business Review: We Need A New Form Of Capitalism For The 21st Century

Harvard’s Holly LaBarre writes: While the global financial meltdown and its aftershocks have unleashed a flood of indignation, condemnation, and protest upon Wall Street, the crisis has exposed a deeper distrust and implacable resentment of capitalism itself.

Capitalism might be the greatest engine of prosperity and progress ever devised, but in recent years, individuals and communities have grown increasingly disgruntled with the implicit contract that governs the rights and responsibilities of business. The global economy and the Internet have heightened our sense of interconnectedness and sharpened our awareness that when a business focuses only on enriching investors, it implies that managers view the interests of customers, employees, communities and the fate of the planet as little more than cost trade-offs in a quarter-by-quarter game.

It's time to radically revise the deeply-etched beliefs about what business is for, whose interests it serves, and how it creates value. We need a new form of capitalism for the 21st century, one dedicated to the promotion of greater well-being rather than the single-minded pursuit of growth and profits; one that doesn't sacrifice the future for the near term; one with an appropriate regard for every stakeholder; and one that holds leaders accountable for all of the consequences of their actions. In other words, we need a capitalism that is profoundly principled, fundamentally patient, and……

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Should We Quit Subsidizing Corporate Debt?

John Carney of CNBC fame writes: The White House released its plan for reforming taxes on business last week. The 23-page document is long on diagnosing the problems with the way we currently tax business, but falls short when it comes to details about the administration’s proposed cures. The tax rate would be lowered and tax breaks would be eliminated—although which ones aren’t specified.

One tax break that is singled out by the report is the deduction for interest payments on the debt of businesses.

“The current corporate tax code encourages corporations to finance themselves with debt rather than with equity. Specifically, under the current tax code, corporate dividends are not deductible from corporate taxable income, but interest payments are. This disparity creates a sizable wedge in the effective tax rates applied to returns from investments financed with equity versus debt….”


Big Bankers Behaving Badly: Earth to Bloated Ego

From HuffPo: A banker left a 1% tip in defiance of 'the 99%' at a Newport Beach restaurant the other week, according to his dining companion and underling who snapped a photo of the receipt and posted it to his blog, Future Ex Banker. (Update: the blog is now offline.)

In posting the photo, the employee gave some background on his boss and the receipt:
Mention the “99%” in my boss’ presence and feel his wrath. So proudly does he wear his 1% badge of honor that he tips exactly 1% every time he feels the server doesn’t sufficiently bow down to his Holiness. Oh, and he always makes sure to include a “tip” of his own. The "tip" of his own in this case was to tell the server to "get a real job." Cute.

The whistleblower's Future Ex-Banker blog included additional background on his boss, and some insight into why he would out his gross behavior, likely resulting in an employment status of current ex-banker:

I work in the corporate office of a major bank for a boss who represents everything wrong with the financial industry: blatant disregard and outright contempt for everyone and everything he deems beneath him. On top of that, he’s a complete and utter tool. At the same time, I’m still cashing paychecks, an admittedly willing—albeit reluctant—cog in the wheel of this increasingly ugly industry, so I’ve created this blog as a confessional of sorts. It won’t entirely clear my conscience, but hopefully it’ll help. I’m sure I’ll get fired eventually. Until then, enjoy.

UPDATE: In a conversation with the Huffington Post, Mike Wilcox, the vice president of operations for True Food Kitchen, gave some insight into how the company was treating the incident since the receipt began receiving attention online. Wilcox said that the restaurant was "absolutely" treating the receipt as real, but to confirm its authenticity for certain, they were in the process of tracking down both the physical receipt at the restaurant and the computer-generated copy in their credit card system….

Why stop now. The rest of the story is at

PRESENTING: 12 Wall Street Interview Tips Straight From Goldman Sachs

Remember, BusinessInsider writes, the interview is meant to determine if you're a good fit for the company. The interview is used to determine if you have the necessary skills and experience for the job, to see if you are motivated to do the job, to figure out if you will thrive in the company's culture and if the company is a good fit for you.
The first thing you need to do before the actual interview is figure out why you want it. In preparation for the interview, Goldman Sachs suggests you answer these questions:
1. Which experiences and skills make you perfect for the job?
2. What are your strengths and weaknesses?
3. Do you have the necessary skills and commitment?
4. How do you know you want this job?

Once you've answered these questions about why you're the right candidate you should craft a story that will leave an impact on your interviewer.

Make sure you understand exactly what you're getting yourself into. According to Goldman, one of the biggest mistakes applicants make when interviewing is not really knowing the position they are interviewing for….

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Warren Watch: JPMorgan Gets The Buffett Seal Of Approval

Warren Buffett’s favorite bank stock may be Wells Fargo, but he has room in his heart for more than one U.S. financial powerhouse or so says Forbes.

The Oracle of Omaha told CNBC Monday morning that he owns shares of JPMorgan Chase for his personal account. Buffett’s investment portfolio at Berkshire Hathaway included a 7.6% stake in Wells Fargo as of the end of 2011, according to SEC filings, a position worth about $12 billion at recent prices.

The billionaire called San Franciso-based Wells Fargo his favorite bank stock, but along with the JPMorgan holding for his personal account he has a number of other financial investments. Berkshire owns stakes in American Express, Bank of New York Mellon, Buffalo-based M&T Bank, US Bancorp and Visa, as well as General Electric which still has a considerable financial business in GE Capital. Berkshire also pumped $5 billion into Bank of America in August for preferred shares and warrants granting the right to buy additional common stock….

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Two Years Ago Steve Jobs Called Warren Buffett And Asked For Investment Advice

From BusinessInsider: A great anecdote from Warren Buffett's appearance on CNBC this morning involved Steve Jobs.

Two years ago Steve Jobs called up Buffett and said "We've got all this cash. Warren, what should we do with it?" After discussing several options, Buffett recommended repurchasing Apple stock, which Jobs said he knew was undervalued.

Jobs didn't take his advice, deciding instead to sit on his cash. At the time Apple stock was trading around $200. Now it trades at $522….

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HSBC Posts Profit Jump

HSBC Holdings PLC Monday posted a 28% rise in net profit, boosted by a strong commercial banking performance that helped offset weaker investment banking returns, and it confirmed key earnings targets for 2013, according to a Wall St Journal report.

The bank reported a 2011 net profit of $16.8 billion, up from $13.16 billion in 2010. Pretax profit was $21.87 billion ($46.4 million), up 15% on 2010, when it made a $19.04 billion pretax profit.

Net interest income, the bank's main source of revenue, rose to $40.66 billion from $39.44 billion in the previous year.

The bank declared a fourth interim dividend of 14 cents a share..

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Paulson to Clients: Gold Fund Will Top Others

From Bloomberg: John Paulson, the hedge fund manager seeking to rebound from record losses in 2011, told investors his Gold Fund will outperform his other strategies over five years, according to a person with knowledge of the matter.

The billionaire, at a meeting yesterday at the Metropolitan Club in New York, said the metal is the best hedge against currency debasement as countries inject money into their economies, said the person, who attended the event and asked not to be named because the information is private. Paulson also cited gold as a hedge against the euro currency, as a breakup may occur, and an eventual increase in inflation.
The manager told clients his own money comprises 55 percent of the Gold Fund’s $1.2 billion in assets, the person said. The fund, which can buy derivatives and other gold-related securities, declined 11 percent last year after the metal slumped 14 percent in the final four months…..


Academy Awards: What’s an Oscar Really Worth?

Gold prices are up, but that’s not the only thing that makes Sunday’s Oscar wins more valuable than those in years past.

Smaller films = Big Box Office Boost The smaller the film, the bigger the impact of an Oscar on its box office and home video revenue. And this year’s best picture nominees haven’t had that much commercial success—bringing in less than half the box office success as last year’s crop. The nine best picture nominees have grossed $595 million through Monday. In contrast, last year’s ten best picture nominees grossed $1.294 billion through the Monday before the big event. That makes wins that much more important than ever to studios’ bottom line.

Oscar winners bring in 7.6 percent higher box office return on average than nominees that don’t win, according to IBIS world. On average, winners of Best Picture earned 57 percent of their total revenue before the nominees were announced, 27 percent once they were nominated and more than 15 percent after winning an Oscar. Nominees that didn’t bring home the gold earn just 5 percent of their total take after the awards show.

That means “The Artist” —the frontrunner for best picture — and “Extremely Loud and Incredibly Close,” which have grossed $28 and $31 million respectively are best positioned to benefit from Oscar wins….

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Sunday, February 26, 2012

How People With High IQs Invest

Robert Shiller has a new NYT column riffing on an academic paper from economists Mark Grinblatt (UCLA), Matti Keloharju (Aalto University), and Juhani T. Linnainmaa (University of Chicago) on the subject of IQ and investing. The gist: People with higher IQs follow better rules for investing.

Here's the abstract: Stock market participation is monotonically related to IQ, controlling for wealth, income, age, and other demographic and occupational information. The high correlation between IQ, measured early in adult life, and participation, exists even among the affluent. Supplemental data from siblings, studied with an instrumental variables approach and regressions that control for family effects, demonstrate that IQ’s influence on participation extends to females and does not arise from omitted familial and non-familial variables. High-IQ investors are more likely to hold mutual funds and larger numbers of stocks, experience lower risk, and earn higher Sharpe ratios. We discuss implications for policy and finance research.

What's cool -- as Shiller notes -- is how they did the study. Everyone in the Finnish military has to take an IQ test, and tax records are public, so they were able to get a detailed look at people's holdings, and compare them against IQ results…..

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UBS: The Plunging Unemployment Rate Is Going To Keep Surprising People This Year (And Next!)

According to the BusinessInsider, that's where UBS now expects unemployment to fall to in the by the end of this year and next.

In a fresh note out this week, UBS' economics team lead by Maury N. Harris offered a very sunny assessment for the labor situation in the US, with predictions of solid surprises for quite awhile to come. Key to their argument is a proprietary model of theirs which blends total loan volume, bank easing standards, and growth in loan demand.

All of these indicators are getting better, and therefore the job creation engine is going to continue to rev up, at a pass of 200K per month for 2012. (Need we mention whose re-election campaign will get a huge boost from this?)

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Size hedge funds

Seriously folks. The hedge fund industry is becoming increasingly concentrated as investors put larger sums of money into the sector and allocate to bigger funds, according to Deutsche Bank’s 10th annual alternative investment survey, according to the Financial Times.
Half of the investors surveyed had more than $1bn in hedge funds, double the number in 2004, while 44 per cent said they invested with hedge funds that had more than $1bn in assets…

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Saturday, February 25, 2012

Tokyo Madoff' Flagged

A small Japanese asset-management firm suspected of losing billions of dollars in investor money was flagged as a potential "Japanese Madoff" as early as 2009 by an industry newsletter, according to the Wall St Journal.

AIJ Investment Advisors Co.'s operations were halted Friday after regulators said the firm allegedly lost "most of'" the ¥183 billion ($2.3 billion) in pension assets it managed as of Dec. 31, 2010.

Japanese credit rater Rating & Investment Information Inc. warned in a 2009 newsletter to clients that AIJ had "unnaturally stable returns" despite a down market. Although AIJ wasn't named in the newsletter, the description given was enough to identify ...

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Weird’s Deep Thoughts (Weekend Edition): Banks Play the Liquidity Card to Kill Real Reform

According to Fiscal Times’ Suzanne McGee it has become clear in recent days that two much-debated Wall Street reforms – the Volcker Rule and restrictions on high frequency trading – may never occur, at least not in any truly effective way, all in the interest of preserving market liquidity.

In other words, they may be sacrificed for no good reason. Liquidity -- the extent to which banks, brokerages, trading firms and their clients have enough cash on hand to buy or sell a stock, bond or other security without driving the price higher or lower -- is a good thing. It makes markets function smoothly, encourages people to trade and enables companies to raise funds at lower costs. But what price are we willing to pay for liquidity? That’s the question that dominates the current debate over the much-criticized Volcker Rule, one of the solutions to rein in Wall Street’s excesses.

The new regulation was supposed to ban banks that rely on some kind of government guarantee from getting into the business of trading for their own accounts – proprietary or “prop” trading – as well as limiting their ability to invest in hedge funds and private equity partnerships. These approaches to making money are riskier and not core to the bank’s main purpose within the financial system. But when it came time to draft specific provisions and implement the rule.....

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Buffett admits he was 'dead wrong' on housing market

Billionaire investor Warren Buffett admits he was "dead wrong" with his prediction that the U.S. housing market would begin to recover by now, but he remains optimistic about the nation's economy, the Boston Globe reports.

In his annual letter to Berkshire Hathaway shareholders, Buffett says he's sure housing will recover eventually and help bring down the nation's unemployment rate. But he says he's not sure when. The admission Saturday was in keeping with Buffett's plainspoken manner.

Buffett also used his letter to praise key Berkshire managers at Geico, General Reinsurance, MidAmerican Energy and Burlington Northern Santa Fe railroad. Those companies are all Berkshire subsidiaries. They helped Berkshire generate $10.3 billion in net income last year, down from nearly $13 billion in 2010...

Bonus cuts hide bigger problem for investment banks

According to the Financial Times: Has investment banking pay finally reached its tipping point? In recent weeks, the leading US and European banks have deployed a raft of tactics to bring pay costs down as they grapple with plunging revenues and tougher regulation.

From reducing bonus pools, to capping the amount of cash paid out and clawing back past incentive awards, investment banks are taking what many analysts say is a long overdue look at how the sector’s high pay levels are impeding profit growth…..

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Low volume leaves traders with that empty feeling

According to the NY Post report despite a bubbly stock market, few on Wall Street are popping open the champagne.

For while the Standard & Poor’s 500 Index yesterday hit a four-year high, trading volume, the life blood of most financial firms, is off sharply in the first eight weeks of 2012 vs. last year — which itself marked one of the slowest years in memory.
In fact, through Feb. 22, trading volume is as anemic as it was in 2007, when the market started to show signs of serious mortgage problems.
January’s average daily volume is off 15 percent from the year-ago period, industry statistics show. February volume, through Wednesday, is off nearly 11 percent, according to research from the Tabb Group.

Activity is not much better in fixed-income trading.Trading in areas like funky derivatives tied to commodities and currencies is seeing volumes down 11.2 percent year-over-year, according to data from the Federal Reserve. Trading in interest-rate derivative products also is off by 25.9 percent.

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Friday, February 24, 2012

Corzine to Stay Out of the Slammer (Or Who Said There Are No Second/Third Chances in America?)

According to Dealbreaker’s own Bess Levin: The last several months have not been the best of times for Jon Stephen Corzine. His fund went down for the dirt nap. He was forced to shelve his dreams of becoming a count. He made the tearful decision to put his Hoboken hideaway on the market, probably to free up some cash should it become necessary to pay legal fees. And while some pissant MF Global clients have in fact served him with papers, today brings the joyous news that any sleepless nights spent worrying over doing time were all for naught.

“Sources tell the FOX Business Network the criminal case right now looks highly unlikely. The investigators are having a very difficult time proving criminal intent in the disclosure of the details leading up to the implosion of MF Global. They see a lot of sloppy bookwork. Sources say Jon Corzine’s firm wasn’t managed very well, but in terms of proving they intentionally misused that money, they are having a very tough time. They doubt a criminal case will result from this.”

Meanwhile the comeback continues, now ahead of schedule. Acccording to the Wall St Journal’s writeup congratulatory flowers and candy can be sent here....

Jon S. Corzine, who resigned as chief executive of MF Global Holdings Ltd. shortly after the securities firm collapsed in October, recently has been looking for office space in Manhattan, according to people familiar with the situation. One of the locations he seems interested in: brokerage firm John Carris Investments, at 40 Wall St., around the corner from the New York Stock Exchange, these people said. Employees at the small firm have been told that the former Goldman Sachs Group Inc. chairman and New Jersey governor might drop by, one person familiar with the situation said. Another person said Mr. Corzine is interested only in securing office space, not a job at John Carris. Mr. Corzine couldn’t be reached to comment….


Last but not least: Ben & Jerry's Just Released A Racist Jeremy Lin Ice Cream Flavor

Doesn't anybody learn? Ben & Jerry's just released a new ice cream flavor called Taste the Lin-Sanity that's only available at its location in Harvard Square, according to the Boston Globe.

The ice cream has lychee fruit and fortune cookie pieces in it.
This comes after the Asian American Journalists Association specifically said there is no reason to relate Jeremy Lin to such food items as 'fortune cookies, take out boxes, or other similar imagery.'

And as Deadspin points out, lychee is a fruit native to Southeast Asia, which is not even where Jeremy Lin's family is from.

We're sure Ben & Jerry's didn't purposefully try to be racist, and the flavor is only available near Lin’s alma mater but …

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Hedge funds eye big windfall

Commerzbank plan to swap debt into shares could be about to hand hedge funds one of their biggest windfalls of the year, after the German bank offered to buy back a slew of bonds at a far higher price than some managers paid for them according to a marketwatch report.

Commerzbank said on Thursday it is offering to swap previously unloved subordinated debt and lower-ranking securities into shares, in an effort to boost its capital by 1 billion euros (849 million pounds) ahead of the European Banking Authority's deadline requiring banks hold core capital of 9 percent. It is the latest of several banks rushing to boost capital by swapping debt for equity. BNP Paribas BNP.PA and Unicredit are among those to have already used cash to buy back their bonds from investors.

Hedge funds have exploited that rush by snapping up the bonds in the secondary market, according to several funds playing the strategy. The funds bet banks would decide to boost higher-ranking capital by buying back junior debt, and that a recovery of confidence in the sector would encourage them to pay a higher price than funds originally paid, giving these investors a profit.

The size of the gain to be made by hedge funds will vary according to the type of security they intend to exchange and the price at which they bought. Some bought Commerzbank bonds for less than 60 cents on the euro late last year, one hedge fund manager said….

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Expert Networker Kinnucan Can Be Freed on $5 Million Bond

A federal judge in Manhattan ruled that John Kinnucan, the Broadband Research LLC founder indicted for insider trading, can be freed on $5 million bond, rejecting prosecutors’ claims he engaged in a “campaign” of threats, Bloomberg gurus report. U.S. District Judge Deborah Batts agreed to release Kinnucan on the bond, ordering it be secured by $100,000 cash and property and signed by four financially-responsible people.

Batts said prosecutors had come “extremely close” to convincing her he should remain in custody before trial because he posed a danger to the community, prosecutors and agents.

“The vile, filthy, inflammatory, insulting language the defendant has used frequently with officers of the government, and even worse with potential witnesses against him, is mind- boggling,” she said in court. “However reading it, I cannot say there is direct threat, although he is certainly intimidating people or attempting to do so.”

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The Biggest U.S. City Bankruptcy May Be Just Days Away

The Stockton Calif. City Council on Tuesday is expected to take its first step toward filing for bankruptcy in a dramatic move to remedy Stockton's crippling finances. If bankruptcy ultimately happens, Stockton would be the nation's largest city to fall into Chapter 9 protection, according to recordnet.

While city administrators remained silent on any plans, it became an open secret Wednesday. The Downtown Stockton Alliance board of directors in a public meeting discussed the city's bankruptcy timetable.

Also Wednesday, the San Joaquin and Calaveras counties Central Labor Council distributed an email, alerting its members that Stockton plans to begin the process at next week's council meeting. The email also invites its members to a meeting Monday to map their strategy for opposing bankruptcy. They won't be alone. Councilman Dale Fritchen said he's ready to mount an outright opposition because, he said, bankruptcy would cost the city millions in legal fees, drive down property values and discourage new businesses…..

Apple 2.0: CEO Cook bending to investor gripes on board, cash

Investors are finding the red-hot tech giant a more open place in the post-Steve Jobs era. CEO Tim Cook yesterday said the company will begin electing directors to its board by a majority vote. Up to now, directors took their seats under the Jobs-enacted plurality system — the victor was the one who got the most votes.

Cook, headlining his first annual meeting since becoming chief executive last August upon Jobs’ death, also opened up to shareholder pressure concerning the massive $97.6 billion pile of cash on the company’s balance sheet. Cook said he was in “active discussions” with the board about what to do with the loot.

Investors want some of that money returned to them in the form of a dividend, an idea Jobs looked upon with disdain. He thought dividends were for the weak. Apple has more cash than it needs to run the company, Cook told investors. The Apple boss all but assured that some cash return was forthcoming. If Apple chose to use half its cash for a one-time dividend, it would amount to roughly $50 a share.
Cook did rule out a stock split for the company...

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Only in America: Cops Called To Florida Mall To Prevent Yet Another Riot Over Nike Shoes

According to SneakerNews: crazed consumers fairly foaming at the mouth over a new release from Nike which was timed to celebrate the NBA All-Star Game in Orlando, had to be subdued by cops in riot gear at one Florida mall Thursday night. This isn't the first time a shoe has stirred up such extreme reactions, of course, and we doubt it will be the last.

The glow-in-the-dark Nike Air Foamposite One Galaxy $220 limited edition shoe was so coveted, hundreds of people packed into a mall parking lot last night in advance of the shoe's sale at midnight. Deputy sheriffs arrived ready for action as the numbers swelled, says the Orlando Sentinel.

People on the scene told the paper that everyone was told to wait across the street from the mall. A great plan, until one intrepid shoe fanatic broke free of the crowd and raced toward the Foot Locker. Like lemmings off a cliff, hundreds of fellow shoppers followed.

"I saw hundreds of people running toward me. I thought I was going to get trampled," said one witness.

More cops showed up in riot gear, with some mounted on horses, on motorcycles or in patrol cars, and a helicopter flew over the scene. Deputies then formed a line with shields and pushed back the crowd, threatening to use pepper spray if they had to. Fortunately for those involved, they didn't have to use it and no one was injured or arrested….

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How low can you go? Here’s why Berkshire Hathaway Is At Its Cheapest Valuation In Decades

Despite having a relatively calm 2011 compared to many other funds, Warren Buffett's Berkshire Hathaway's stock price doesn't reflect the same sentiment. According to the Wall Street Journal, Berkshire is currently trading at about 1.1x book value—a low that hasn't been seen in decades. There are several reasons why:

Investors are unsure if Buffett's eventual successor will be able to replicate his successful investment choices.

The fund's large size—$160 billion AUM—means that returns l

Berkshire investor base is changing, while the company used to draw long-term investors, there are some who are unwilling to wait long for positive returns (what Berkshire is known for)….

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The curious case of the disappearing $2.3 billion

Now you see it – now you don’t. Japan's financial regulator said Friday it has halted operations of a little-known Tokyo money-management company after the firm allegedly lost billions of dollars in client money.

According to the Wall St Journal in one of the biggest cases of its kind in Japan, with Tokyo's reputation as a financial center still bruised by the billion-dollar Olympus Corp. accounting scandal, the regulator said investigators found that AIJ Investment Advisors Co. can't account for "most of" the 183 billion yen, or about $2.3 billion, in pension-fund assets under management.

The money belongs to a mostly unidentified range of Japanese companies. Microchip-testing-equipment maker Advantest Corp. and industrial-robot maker Yaskawa Electric Corp. have confirmed that they placed pension money with AIJ.

Underlining the gravity of the case, Financial Services Minister Shozaburo Jimi said at a news conference in the capital that the regulator, the Financial Services Agency, will now scrutinize operations at all 263 investment-management firms in Japan because of the AIJ investigation….

Lampert Gains $160 Million on Sears Shares

Edward Lampert, the hedge fund manager who controls Sears Holdings Corp. (SHLD), has more than $160 million in paper profits on shares of the retailer acquired last month from a long-standing client, the Ziff family, according to Bloomberg’s best.
The billionaire paid $130 million in early January to personally acquire Sears shares from ESL Investors LLC, a partnership he runs for the Ziffs that follows the same strategy as his hedge fund, according to court documents and regulatory filings. The retailer’s stock has more than doubled since then, rebounding from a three-year low and ranking as the best- performing member of the benchmark Standard & Poor’s 500 Index.

The Ziffs, heirs to a publishing fortune who backed hedge fund managers Jim Chanos and Bill Ackman early in their careers, provided Lampert with some of the capital he used to buy and then merge Kmart Corp. with Sears, Roebuck & Co. to create Sears Holdings. Lampert revamped his investment partnership with the Ziffs and bought back some of their Sears stock after the retailer faltered in 2011, regulatory filings show….

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Mets Owners to Learn Of Madoff Fraud Trial by March

The owners of the New York Mets baseball team will learn by March 5 whether they will have to go to trial on allegations they were "willfully blind" to a decades-long fraud by convicted Ponzi scheme operator Bernard Madoff. According to a Wall St Journal report.

Irving Picard, the court-appointed trustee seeking to recover money for Madoff victims, has alleged that Mets owners, Fred Wilpon andSaul Katz, and their business partners ignored red flags and other warning signs that Mr. Madoff was carrying out a fraud. Messers. Wilpon and Katz have asked that Mr. Picard's case be dismissed.

A federal judge said Thursday that he will decide by early next month whether the dispute will go to trial. Jury selection is expected to begin in the case on March 19. "I'll have a bottom line ruling by no later than March 5 determining what goes to trial," U.S. District Judge Jed S. Rakoff said.

Lawyers for Messers. Wilpon and Katz have argued that the Mets owners entrusted Mr. Madoff with their money and had no reason to suspect he was carrying out a massive Ponzi scheme. The Mets owners have said they were victims…

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Bankers Doing Everything They Can Not To Pay Those Fines

Reuters reports: Like many banks engulfed by the mortgage crisis, First National Bank of Nevada specialized in risky home loans that didn't require borrowers to prove their incomes. When the housing bubble burst, First National got crushed in 2008 under the weight of bad loans that it could no longer resell to investors.

Last year, the Federal Deposit Insurance Corporation sued two former senior executives of the defunct bank for alleged negligence and breach of fiduciary duty, hoping to recover nearly $200 million in losses that it tied directly to those executives' decisions. The two men denied wrongdoing and settled for $40 million. But they didn't pay a dime.

Instead, the federal agency - which is better known as a regulator that seizes control of failing banks and provides deposit insurance for consumers than for its prosecutorial endeavors - is still fighting in court to collect that money from Catlin Group Ltd., a Lloyd's insurance syndicate. Catlin provided an equivalent of malpractice insurance to First National's executives, but the insurer denied liability for the executives' alleged mistakes.

The case illustrates complex legal maneuvering as the FDIC steps up efforts to pick through the detritus of the financial crisis, and to recoup at least some of the nearly $87 billion costs to its deposit insurance fund from the collapse of about 400 federally insured banks between 2008 and late 2011. The First National Bank failure cost the fund $900 million.

….Of the lawsuits filed so far, none has gone to trial yet, and three have been settled. A look at the three deals suggests the FDIC is prepared to accept a fraction of the alleged damages as a settlement while some former executives deny wrongdoing and escape significant financial responsibility for bank failures….

Starting A Hedge Fund? Rule #1

Want to start a hedge fund? Here's a tip to get you started: Just buy shares of Apple, and you'll immediately be just like hundreds of your soon-to-be competitors.

Apple is the biggest public company in America -- so big that it distorts the profitability of the entire S&P 500 stock index, and so big that it makes up about 16 percent of the Nasdaq 100 index of the biggest tech stocks.

Given that, it's probably not surprising that Apple is also the stock hedge funds love to own the most, according to a new study by Goldman Sachs (helpfully presented to the world by Zero Hedge).

At the end of 2011, Apple was in the portfolios of a record 216 different hedge funds, the report finds. Apple's size and popularity mean that hedge funds, along with much of the rest of the stock market, depend heavily on the company's continued health.

"As Apple goes, so goes the entire hedge fund space," Zero Hedge writes. That may be a bit hyperbolic -- there are thousands of hedge funds out there -- but it's not much of an exaggeration either....

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Weird's Deep Thoughts (Friday Edition) Even The Tooth Fairy's On A Budget In This Lousy Economy

Apparently the recession runs so deep in America, it's now affecting figments of our imagination.

“Like many Americans, the Tooth Fairy needed to tighten her belt in 2011, but she's hopeful for a recovery this year,” said Chris Pyle, spokesperson for the Delta Dental Plans Association.

In a survey of more than 1,300 parents, the organization found the going rate for a lost tooth in American has plummeted 42 cents to a paltry $2.10 this year. That's the largest decline in Tooth Fairy financing since the original poll was conducted back in 1998.

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Hedge-Fund Managers And Doctors Are Now Pawning Fine Wine For Quick Cash

Some U.S. pawnbrokers are taking liquid assets - literally. According to BusinessInsider along with family jewels and fine art they will accept wines as collateral for loans to help ease cash shortages of businesses and people on all rungs of the economic ladder.

"You'd be amazed by how many wealthy individuals have terrible credit ratings," said Jordan Tabach-Bank, head of Beverly Loan Co. in Beverly Hills, California. "And besides, if you go to a bank, it can take weeks or months to get a loan. When we make a loan, it's usually the same day,"

The pawnshop for the prosperous lends to hedge-fund managers, bankers, lawyers, doctors and even Oscar winners. "Most people have a vision of pawn shops as sad sites. But that's not the case here," Tabach-Bank said. "I have a lot of people who come in who have a business opportunity and they need an infusion of cash for business purposes.", an online pawnbroker with an office in New York, will also accept fine wines, said spokesman Jose Caba, adding that the rich do not always have liquid assets to keep up with their expensive toys....

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Thursday, February 23, 2012

Bill Gross: Why The Giant Wave Of Aging Retirees Makes US Debt Even More Attractive

Doomsayers like to argue that the US faces fiscal Armageddon because of all the obligations to retirees that will come due in the coming years. So it's insane to buy US debt then, right? According to BusinessInsider actually this logic gets it 100% backwards.

In an interview on Bloomberg TV, Bill Gross got across a deep point: On why Ford is shifting billions of dollars a year from their equity portfolio into bonds:
"They're doing that because of the certainty, locking in their liabilities relative to their assets. Even at a low, 2-3% rate. Boomers, from the standpoint of individual investors, are the same way. They're beginning to get older and require more certainty. Do they find appeal in a Johnson and Johnson at 3.5% dividend yield with growth potential? Sure they do, but they also believe they want that money back, and if there is a 2008-2009 scenario, perhaps they won't. So there are demographic tradeoffs here that have to be considered."

It's a cliche you've heard a bunch of times, but for more and more people, their primary interest is return of capital, not return on capital. This is especially true after 2008-2009, and for people who are retiring this impulse is particularly strong….

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Apple's legal battle over iPad spreads to U.S.

The Asian firm trying to stop Apple Inc from using the iPad name in China has launched an attack on the consumer electronics giant's home turf, filing a lawsuit in California that accuses the iPhone-maker of employing deception when it bought the "iPad" trademark. According to a Reuters report.

A unit of Proview International Holdings Ltd, a major computer monitor maker that fell on hard times during the economic crisis, is already suing the U.S. company in multiple Chinese jurisdictions and requesting that sales of iPads be suspended across the country.

Last week, units Proview Electronics Co Ltd and Proview Technology Co filed a lawsuit in Santa Clara County that brings their legal dispute to Silicon Valley. Proview accuses Apple of creating a "special purpose" entity - IP Application Development Ltd, or IPAD - to buy the iPad name from it, concealing Apple's role in the matter.

In its filing, Proview alleged lawyers for IPAD repeatedly said it would not be competing with the Chinese firm, and refused to say why they needed the trademark.

Those representations were made "with the intent to defraud and induce the plaintiffs to enter into the agreement," Proview said in the filing dated February 17, requesting an unspecified amount of damages…

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'You Know You're Not Ready For Wall Street If...'

BusinessInsider wrties: Imagine the life of a Wall Street recruiter... Every day you speak to hopeful, bright-eyed, youths determined and confident that they will be leaders of the pack with a few years of hard work. But as a recruiter you know that many, most definitely, will not make it to The Street at all. We spoke to one recruiter, let's call him Derek Donner, who shared some of the tell-tale signs that someone won't be getting a job on Wall Street. These reasons are funny, yes, but they're also collected from years of experience, so take them seriously. Donner says he can tell if someone is Street bound within five minutes of them sitting in his office.

Introducing: 'You Know You're Not Ready For Wall Street If...'

a.Your only work experience was as an intern at your Dad's buddy's wealth management firm
b.You think Ben Bernanke is your neighborhood bagel guy
c.You don't use more than one hair product
d.Half of your resume describes your job as a lifeguard for three summers at your local country club
e.You think the "front office" refers to where one sits in relation to the entrance of your building
f.You think that because you've watched Boiler Room 47 times you are qualified to be an investment banker
g.If you're looking to move to the buy-side because you don't like the "sales " aspect of your job
h.You think KYC is a type of personal lubricant...

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“Worst bank crisis since 1929!”

Reuters reports that the scars of Greece's debt crisis were laid bare in heavy losses from a string of European banks on Thursday, and bosses warned the region's precarious finances would continue to threaten economic growth and earnings.

From France to Germany, Britain to Belgium, four of the region's biggest banks lined up to reveal they lost more than 8 billion euros (6.8 million pounds) last year from their Greek bonds holdings.

"We are in the worst economic crisis since 1929," Credit Agricole chief executive Jean-Paul Chifflet said. Credit Agricole reported a record quarterly net loss of 3.07 billion euros, performing worse than expected from the cost of shrinking its balance sheet and after a 220 million euro charge on its Greek debt. For 2011 as a whole, the bank took a hit of 1.3 billion euros on its Greek debt.

Europe's banks have already written down billions of euros from losses on Greek government bonds and loans, and a deal agreed this week with its creditors will inflict losses of 74 percent on bondholders.

"We can't say that the writedowns are over," said Franklin Pichard, director at Barclays France. "Even if some can say that the worst is over, we are only at a new stage in terms of provisioning and not necessarily at the end." That is because, despite the bond swap deal, bondholders could suffer further hits if Greece's economy fails to recover.

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NY Mets minority shares bought by hedge-fund honcho

The Mets have received commitments from billionaire hedge-fund investor Steve Cohen and six other investors to purchase $20 million minority shares in their embattled club, sources familiar with the deal told the Daily News.

The team expects to secure commitments for three remaining shares in the near future, and hopes to complete the offering soon, the sources said. The Daily News first reported last month that the Mets were close to finalizing at least five of the $20 million shares.

The stake in the Mets would not prevent Cohen, ranked 35th last year in Forbes' "400 Richest People in America," from purchasing the Dodgers, but he would have to sell his interest in the Mets if he completes the deal for the Los Angeles team. Cohen is one of eight bidders who have expressed interest in the Dodgers.

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Warren Watch: I'm ‘delighted’ about Buffett rule reports that billionnaire investor Warren Buffet said in a letter Wednesday that he was “delighted” to support legislation to implement the “Buffett Rule,” which would ensure that those making over $1 million annually pay at least a 30 percent effective tax rate.

“I’m delighted to be identified as a supporter of S. 2059,” Buffett wrote in a letter to Sen. Sheldon Whitehouse (D-R.I.), who introduced legislation to implement the rule.

“I have no problem endorsing any large step in the direction of greater fairness in the Tax Code. … Thanks for what you are doing for our country,” Buffett added, according to the senator’s office.

The “Buffett Rule” entered the national conversation when Buffett pointed out that he pays a lower effective tax rate than his own secretary, and argued that the rich should pay at least the same tax rate as middle-class workers. The suggested rule has been a flashpoint in the the debate over income inequality in the context of the Occupy Wall Street and 99 Percent movements, and has prompted criticism from the right.

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Feds Plan Safeguards to Prevent Another MF Global

Federal regulators are narrowing a list of possible new safeguards for customers at futures firms, a response to the collapse of MF Global and the disappearance of more than $1 billion in client cash.

The Commodity Futures Trading Commission will hold a public roundtable next week to discuss policy changes, including a plan that would allow customers to trade through futures brokerage firms without keeping their excess cash there, according to a copy of the agenda provided to The New York Times.

The plan, which would allow customers to keep their cash at clearinghouses rather than brokerage firms, is gaining support in pockets of the regulatory world. The commission is also circulating an internal list of more than 10 other ideas, including keeping customers updated on the whereabouts of their money and creating an insurance fund to backstop losses in customer accounts.

People close to the agency cautioned that the list was preliminary…

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…And two more fraudster execs bite the dust

From Reuters: U.S. securities regulators on Wednesday charged two China-based Puda Coal executives with fraud, saying they led investors to invest in an empty shell company instead of an actual coal business.
The Securities and Exchange Commission's civil suit, filed in a Manhattan federal court, alleges the company's Chairman Ming Zhao and former CEO Liping Zhu tried to "steal and sell" Puda Coal's coal mining company Shanxi Puda Coal Group, the company's only source of revenue. The complaint claims that Zhao transferred a controlling interest to himself, and then sold a substantial portion to a fund.

This marks the latest case by the SEC in its ongoing probe into accounting irregularities at Chinese-based companies that list on U.S. exchanges. Puda Coal was previously listed on NYSE Amex, which is owned by NYSE Euronext. The company was delisted last year. It gained access to the American capital markets through a backdoor process known as a reverse merger...

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IPad Trademark Battle Reveals Bank of China as Opponent

Apple’s legal fight for the iPad name in China doesn’t just pit the world’s most-valuable company against a failed Hong Kong display maker. Some of the nation’s biggest banks also are opposing the technology giant.

Apple is appealing a Chinese court ruling that the trademark belongs to a mainland unit of Proview International Holdings Ltd. (334) At the time Apple says it bought those rights, the Shenzhen subsidiary was controlled by creditors including Bank of China Ltd. (3988) and China Minsheng Banking Corp. (1988), according to Proview founder Rowell Yang.

Losing its Feb. 29 appeal would open Apple to lawsuits seeking damages and enable a nationwide ban on iPad sales in the Cupertino, California-based company’s biggest market outside the U.S. The dispute revolves on whether Proview’s Taiwan unit, to which Apple paid 35,000 British pounds ($55,163) to use the iPad name in China, had the right to sell it or whether that rested with the Shenzhen unit and its creditors.
“Right now, the most valuable asset of Proview Group is the iPad trademark registration in China,” said Eugene Low, a trademark lawyer at Mayer Brown JSM in Hong Kong. “Assuming the creditors have control of the affairs of Proview Shenzhen, it might be in their best interest to get a settlement as quickly as possible to monetize the Proview assets.”

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JPMorgan Places $72B Bet on Homeowners

JPMorgan Chase & Co. (JPM) has more than tripled its holdings of mortgage securities without U.S. government guarantees to $72 billion as the nation’s biggest bank bets on borrowers from outside the country it calls home, the gurus at Bloomberg report.
The investments swelled $8.4 billion in the fourth quarter, climbing from $52.8 billion at the end of 2010 and $19 billion the prior year, according to regulatory data released last week. The bank has primarily been adding debt from outside the U.S., including bonds tied to U.K. and Dutch mortgages, Securities and Exchange Commission filings by New York-based JPMorgan show.

“The bet is they can get a little more yield in areas where they think that they’re safe,” said Jim Leonard, an analyst at Morningstar Inc. in Chicago who covers the bank’s debt. While mortgage bonds carry a stigma after fueling the worst financial crisis since the 1930s, “that can be a little unfair” because many were repaid in full, he added….