Tuesday, July 31, 2012

Headscratcher of the Day: J.P. Morgan Awarded ‘Best Trader’ For Second Quarter





J.P. Morgan had something of an eventful quarter, but for KBW it stood out for reasons one might not immediately expect.  Irony does not appear to be a part of the recognition.

“Yes, we are aware that JPM experienced an embarrassing trading loss topping $5 billion in its Chief Investment Office leading to investigations by regulators and a halting of its share repurchase program,” KBW wrote. “However, despite this loss and market concerns over JPM’s internal controls, we are awarding the best quarter to JPM. A factor behind our decision is the strong earnings power demonstrated in the quarter from its core businesses lines.”

The “best trader” award is for J.P. Morgan’s investment banking operations, where its fixed-income and equities trading had some of the smallest declines of its peers. Not exactly the stuff of champions, but also not at all tied to the disastrous trade in the Chief Investment Office.  Still, for a quarter that saw J.P. Morgan executive hit hard on one ugly mistake, the title might be a small consolation for the firm….


Grim News: Euro crisis forces Firm to axe 1,500 jobs


Deutsche Bank's new co-chief executive Anshu Jain is to cut 1,500 jobs at the group's investment bank, which he helped build, as part of a drive to save 3 billion euros ($3.69 billion) after a profit slump due to the euro zone crisis, Reuters says.  The cuts represent about 15 percent of staff at the investment banking division, which for years has generated the lion's share of profits. It also marks an about turn for the German bank, which in April said it saw no need for layoffs.

The plan to cut a total of 1,900 jobs mostly outside Germany comes as investment banks across the world are having to retrench to meet stricter bank capital rules. The cost-cutting forms part of a broader overhaul at Germany's biggest bank under new co-chief executives Jain and Juergen Fitschen who took the helm in June….

Wait...wait...there's more at http://www.reuters.com/article/2012/07/31/us-deutschebank-savings-jobs-idUSBRE86U0KL20120731

Will Facebook Save Us? (The Truth about Techno-Utopian Hype – Honest….)





Are you a technoptimist or a depressimist?

From Niall Ferguson: This is the question I have been pondering after a weekend hanging with some of the superstars of Silicon Valley.  I had never previously appreciated the immense gap that now exists between technological optimism, on the one hand, and economic pessimism, on the other. Silicon Valley sees a bright and beautiful future ahead. Wall Street and Washington see only storm clouds. The geeks think we’re on the verge of The Singularity. The wonks retort that we’re in the middle of a Depression.
Let’s start with the technoptimists. Last Saturday I listened with fascination as a panel of tech titans debated the question: “Will science and technology produce more dramatic changes in solving the world’s major problems over the next 25 years than have been produced over the last 25 years?”

They all thought so. We heard a description of what Google’s Project Glass, the Internet-enabled spectacles, can already do. (For example, the spectacles can be used to check if another speaker is lying.) Next up: a search engine inside the brain itself. We heard that within the next 25 years, it will be possible to take 1,000-mile journeys by being fired through tubes. We also heard that biotechnology will deliver genetic “photocopies” of human organs that need replacing. And we were promised genetically engineered bugs, capable of excreting clean fuel. The only note of pessimism came from an eminent neuroscientist, who conceded that a major breakthrough in the prevention brain degeneration was unlikely in the next quarter century….

Apple may be added to Dow Jones index


From Sfgate.com: Great Jobs' ghost! Apple shares climbed the most in two months after Sanford C. Bernstein & Co. said the company is considering a stock split, which could prompt it to be added to the Dow Jones industrial average.  Apple, the world's largest company by market value, rose 2.6 percent Tuesday to close at $610.76 per share. Shares of the Cupertino company were up 47 percent this year through Monday.

The company's decision in March to pay its first dividend in 17 years makes it more likely the stock could be added to the Dow index after a split, Toni Sacconaghi, an analyst at Bernstein who rates the shares outperform, said in a report. "We see the timing as ripe," Sacconaghi said. "Apple's initiation of a dividend brings the company in line with all other Dow components. We note that Apple is currently the only company above $215 billion in market cap that pays a dividend and is not included in the Dow..."

Find out more at http://www.sfgate.com/technology/article/Apple-may-be-added-to-Dow-Jones-index-3751580.php

Four Signs Your Awesome Investment May Actually Be A Ponzi Scheme



Ponzi schemes get a lot of attention when big ones go bust. Bernie Madoff, of course, got a ton of attention when his $20-billion con collapsed in late 2008. So did Allen Stanford, who was recently sentenced to 110 years in prison for scamming investors out of more than $7 billion over two decades.  But it turns out that the Ponzi industry is much broader and deeper than even the biggest blowups suggest. That's one lesson of a slim new book, The Ponzi Scheme Puzzle: A History and Analysis of Con Artists and Victims, from Boston University Law Professor Tamar Frankel.
Here are four warning signs Frankel details in her book:

1. High return! Low risk! It's a bedrock principle of investing that higher returns generally bring higher risk. If you're promised the opposite — a big payoff with little downside — be suspicious. A close corollary is Madoff's angle: Incredibly consistent returns whether the market goes up or down.

2. Where does the money come from? It's complicated. Con men often tell complex stories to explain their fantastic returns. Charles Ponzi's original scheme purportedly invested in international postal-reply coupons — a kind of international stamp that could be cashed out in multiple currencies. Other scams have claimed to involve synthetic rubies, windmills, hydroponic farms, latex gloves, ambulance retrofitting, Canadian telephone-number leases, carpet contracts and bus shelters…..


Facebook Drops To Record On Growth Concern




According to Bloomberg Facebook Inc. (FB) dropped as much as 6.7 percent to a record low, the third straight day of declines after the world’s largest social-networking service reported second-quarter results that showed slowing growth.

Shares slumped to as low as $21.61, the lowest intraday price since Facebook held an initial public offering on May 17. The company is trading at less than half the intraday high of $45 it reached on its first day of trading.

Facebook disappointed investors last week when it reported sales growth of 32 percent, down from 45 percent in the first quarter, and refrained from providing a sales or profit outlook for the year. The company also posted slower user growth and is grappling with concerns about how well it can boost advertising on mobile devices.

Some at Fed Are Urging Pre-emptive Stimulus


From the N.Y. Times: Some Federal Reserve officials are reviving an idea that rose and fell with Alan Greenspan, the former Fed chairman, as they seek to persuade colleagues to take new action to stimulate growth.

Former Fed chairman Alan Greenspan argued that the Fed should do more than its forecast suggested. His idea of "taking out insurance" is now being revived by Fed officials who are advocating for pre-emptive stimulus.  Central bankers generally set policy based on their judgment about the most likely path for the nation’s economy. But Mr. Greenspan argued that the Fed sometimes should do more than its forecast suggested, buttressing the economy against large, potential risks. He described such moves as “taking out insurance.”

On the eve of the Fed’s policy-making committee meeting on Tuesday and Wednesday, members who favor additional action argued that the likely path of the economy was itself sufficient reason for action. The committee predicted in June that without new measures unemployment would fall slightly, if at all, in the second half of the year.


A “robot” fund that makes trades based on superstitious beliefs?





Why not?  Mark Frauenfelder writes: Would you trust a superstitious robot with your money? Can technology operate with human characteristics, interpreting data and information with basic human behaviors.

The Superstitious Fund Project is an investment Fund that is run by a superstitious autonomous Algorithm. As a one year experiment it operates and trades purely on superstitious beliefs. Buying or Selling on Numerology and in accordance to Lunar Phases. For example it has the fear of the number 13 and a full moon. It also develops its own lucky ad unlucky values, just as we do all the time. We are hardwired to imagine patterns that give us the illusion of control. Win a tennis match, and we've got lucky socks. The Algorithm creates these patterns throughout the year, ranking and deranking superstitions. They are then used as a new logic in trading.

As a one year experiment, £4828.88 was invested from participants over 50 cities around the world. After the one year, the balance will be returned at either a profit or a loss. The project provides an alternate viewpoint on how technology can operate…

Don’t stop now.  Check out the whole story at http://boingboing.net/2012/07/29/an-investment-fund-that-makes.html

Wall Street Almost Certain Fed and ECB Will Act


Markets now overwhelmingly expect significant action from the U.S. and European central banks, according to the latest CNBC Fed Survey.

In the survey of market participants, 89 percent said they believe the European Central Bank will purchase more sovereign debt and 78 percent said they expect the Federal Reserve to undertake additional quantitative easing.

In June, just 58 percent of respondents expected the Fed to act. The results are similar to those from October, 2010, a month before the Fed launched QE2, when 93 percent of respondents predicted the QE2 program….

Layoff Watch '12: Top Firm To Axe 1900; Meredith Whitney Predicts 50K Total Wall Street Bloodbath



Deutsche Bank is laying off 1900 people. 1500 of them are in the investment bank.

From BusinessInsider: This news comes as Meredith Whitney's been chatting with Tom Keene on Bloomberg TV this morning, and just as she started explaining why she thought Wall Street's big banks would initiate massive layoffs (50,000, actually).

Deutsche Bank's stock is shooting up, according to Bloomberg.  That makes sense according to Whitney's thesis as she explained it to Maria Bartiromo last week— the market will reward banks that shrink their staff and their business…


Read more: http://www.businessinsider.com/deutsche-bank-layoffs-2012-7#ixzz22CnGu0xg

Defendant in Insider Case: Dude, I Was Just Doing My Job




The man's insider trader is another man's corporate crusader, according to the WSJ. Or at least that is what lawyers for Doug Whitman plan to argue before a federal jury.  Mr. Whitman, a former hedge-fund manager, doesn't deny that he probed public companies for nonpublic information. But his criminal-defense team plans to argue that its client was doing exactly what he was supposed to do when he persuaded employees of public companies to give him information that those companies' top brass didn't want getting out.

Mr. Whitman "was doing what every diligent, competent fund manager and analyst should do—checking up on companies' management to ...

Tiger Management Helps Next-Generation Funds

When a top hedge fund manager donated money to start a student-run portfolio at the University of Virginia in 1994, Richard Gerson was one of the few undergraduates to earn a spot managing the six-figure portfolio. As Dealbook tells it, that was the first connection of many that paved his way to the upper echelons of the hedge fund industry.

Mr. Gerson parlayed his college experience into an internship at Tiger Management, the vaunted hedge fund firm run by Julian Robertson. He then helped John Griffin, a top deputy of Mr. Robertson and the sponsor of the investment club, start Blue Ridge Capital.

 Now, Mr. Gerson, 37, is building a new firm.  Mr. Gerson and his business partner, Navroz D. Udwadia, have raised $1.2 billion for Falcon Edge Capital, according to people with knowledge of the matter. At a time when investors are reluctant to hand over money to unproven managers, Falcon Edge is the hedge fund equivalent of a high first-round draft pick….

Read all about it at http://dealbook.nytimes.com/2012/07/30/tiger-management-helps-next-generation-funds/?hpw

Ex-Wall Street Trader Cyanide Verdict -- Did he, or didn't he ?


According to the NY Post a former Wall Street trader who collapsed in court after being found guilty of arson and later died committed suicide by taking cyanide, according to an autopsy released Friday. The Maricopa County medical examiner's office toxicology tests showed that 53-year-old Michael Marin had the poison in his system. The report also noted an apparent suicide note emailed by Martin shortly before his death and cyanide found in his car afterward.

After he was found guilty of arson in June, Marin put his head in his hands and appeared to put something in his mouth. He then drank from a sports bottle.

It was a bizarre ending to a case that began in 2009 when he emerged from his burning Phoenix-area mansion in scuba gear.  Prosecutors said he torched his home when he couldn't keep up with the payments. Marin faced seven to 21 years in prison.

Prosecutors painted him as a desperate man who had $50 in his bank account in July 2009, down from $900,000 a year earlier. He also had a monthly mortgage payment on the mansion of $17,250 and an upcoming balloon payment of $2.3 million...

Read more: http://www.nypost.com/p/news/local/ex_wall_streeter_took_cyanide_after_qOWAABdPv1qxewdHIgtFcJ#ixzz22BRUOi6u

Bigwig to the gate: Top Kohlberg exec bails




There’s one less barbarian at the gate.  A top partner at Kohlberg & Co. is quitting the fray as the private-equity firm — which once shunned big buyouts in favor of smaller deals — looks to become a more aggressive player, The NY Post has learned.

Christopher Lacovara, one of two managing partners at the firm — founded by PE pioneer Jerome Kohlberg — gave up day-to-day duties last month after previously stepping down as co-head of the Mount Kisco, NY, firm.

His departure leaves Sam Frieder as the sole managing partner. Kohlberg’s son James is on the firm’s investment committee but isn’t involved in daily management.

Monday, July 30, 2012

New York Bank Sues 16 Others in Libor Lawsuit


In the latest sign of the potential legal vulnerability facing banks ensnared in the world-wide probe of interest-rate manipulation, a New York lender alleges in a lawsuit that it was cheated out of interest income because rates on loans tied to Libor were "artificially" depressed, the WSJ reports.

The lawsuit effectively argues that the alleged manipulation short-changed lenders by helping borrowers pay less for mortgages and other loans.

Berkshire Bank, with 11 branches in New York and New Jersey and about $881 million in assets, claims in a proposed class-action lawsuit in U.S. District Court in New York that "tens, if not hundreds, ...


New York Bank Sues 16 Other in Libor Lawsuit


In the latest sign of the potential legal vulnerability facing banks ensnared in the world-wide probe of interest-rate manipulation, a New York lender alleges in a lawsuit that it was cheated out of interest income because rates on loans tied to Libor were "artificially" depressed, the WSJ reports.

The lawsuit effectively argues that the alleged manipulation short-changed lenders by helping borrowers pay less for mortgages and other loans.

Berkshire Bank, with 11 branches in New York and New Jersey and about $881 million in assets, claims in a proposed class-action lawsuit in U.S. District Court in New York that "tens, if not hundreds, ...


News You Can Use (Hopefully Not): Chivalry On Sinking Ships Only A Myth




Attention Weird sailors – this is your captain speaking:  “Women and children first” was never the social norm on sinking ships, nor was the self- sacrificing captain who gives the order before going down with his vessel, a study of maritime disasters shows.

Seriously folks, according to the good people at Bloomberg crew members had the highest survival rates in shipwrecks, followed by captains and male passengers, according to the report today in the journal Proceedings of the National Academy of Sciences. The research found that women’s survival rate on 16 maritime disasters from 1852 to 2011 was half that of men’s, and children had the worst chance of getting off the boat alive.

Men in general have better survival prospects, unless they engage in self-sacrificing, helping behavior, the authors said. The exception is the sinking of the RMS Titanic, in which the survival rate of women and children was three times higher than men’s. In that instance, the captain ordered a women-and- children-first evacuation, and officers reportedly shot men who disobeyed, according to the study….

No need to stop reading just when it's getting good.  Go to http://www.bloomberg.com/news/2012-07-30/chivalry-on-sinking-ships-only-a-myth-researchers-find.html

Recession Economy Tests Harvard




From the WSJ: In 2009, as its endowment plunged by nearly 30%, Harvard University halted construction on a $1.2 billion science center across the Charles River, angering the neighborhood there by leaving behind a foundation and an idle construction site.

Harvard now says it will resume work on the project, but not until 2014 and even then at half the originally planned size, reflecting a newfound fiscal caution at the school. "The economic realities necessitate this," Kevin Casey, a Harvard spokesman, said in June at a community meeting.

Many universities face shaky finances because of declining state aid and weakened returns on endowments. At Harvard—and some of its Ivy League peers —the recession has lingered…

Wow! Private equity assets soar to record $3tn


According to the Financial Times the value of assets managed by the private equity industry globally continued to rise last year, hitting a record $3tn despite financial market turmoil and sluggish economic conditions. The results will provide a boost to the private equity industry which has been struggling with difficult conditions for raising new funds....., 

Bonus Watch ’12: JPMorgan




Li’l Dimons started receiving numbers today dealbreaker reports:

First year analysts (base 70k):
Bottom tier: 40k
Middle tier: 50k
Top tier: 55k

Second years (base 80k):
Middle tier: 65k
Top tier: 70k

More?  Go to http://dealbreaker.com/2012/07/bonus-watch-12-jpmorgan-3/

From Weird’s Would-You-Believe Dept.: Apple design chief: 'Our goal isn't to make money'




According to the Telegram: Apple might be the most valuable company in the world (market cap: $556bn) but its design chief insists it is not in it for the money. Sir Jonathan Ive, whose personal fortune stands at an estimated at $130m, said yesterday that Apple’s guiding principle was nothing to do with its balance sheet, and that it simply wanted to make “great products”.

“Our goal isn’t to make money. Our goal absolutely at Apple is not to make money. This may sound a little flippant but it’s the truth,” said the British designer, who is credited with shaping the iPad and iPhone.

Apple’s growth trajectory slowed in the last quarter, but the technology firm founded by Steve Jobs still delivered a 21pc increase in profits to $8.8bn…..

Read all about it at http://www.telegraph.co.uk/technology/apple/9438662/Apple-design-chief-Our-goal-isnt-to-make-money.html

Wall Street Already Betting On Who Wins in November



CNBC’s Jeff Cox writes: With just 100 days left until the U.S. presidential election, investors are beginning to make bigger bets on which candidate will carry the day.  One analysis concludes that last week's sharp three-day market surge can only mean that Wall Street is banking on a victory from Republican Mitt Romney.

That's the logical interpretation one can draw from a rally amid conditions that otherwise would demand a selloff, Morgan Stanley chief U.S. equity strategist Adam S. Parker said in an analysis that asserts there is no other reason now to like stocks than a Romney win.

"The problem is that it’s impossible to be bullish and right for the right reasons," Parker said in a note to clients in which he reiterated his 2012 price target for the Standard & Poor's 500 at 1,214, which would mark a 12 percent drop from the current level.

"Nearly every day someone expresses surprise that our base case is for the equity market to be down by 10-15 percent. Why is this so hard to believe? The market has had eight 10 percent down moves in the last 12 years," Parker said. "We think a better question is why more people don’t forecast that the next 10-15 percent move is down than up?"

Read all about it at http://www.cnbc.com/id/48400076

David Zervos: There Is A New Committee To Save The World, And Markets Are Going To Surge Like Crazy




From BusinessInsider: In a totally over-the-top new note, Jefferies' David Zervos declares that the world is seeing a repeat of the famous Committee To Save The World.  You remember that, right? That was the famous 1998 Time Magazine cover featuring Alan Greenspan, Larry Summers, and Robert Rubin, trumpeting their efforts to prevent the Asian financial meltdown (and everything else that year) from turning into a global rout.

Of course, all three of the men in the Committee To Save The World are now more associated with bubbles, busts, and dangerous deregulation. But whatever, at the time, they saved the world, and markets went on to boom for another two years.

So who's in this new C.T.S.T.W.?  Ben Bernanke, Mario Draghi, and a player to be named later. Thus  sayeth Zervos: We have to wait and see the final make up of the trio. But after last week, Mario has clearly been elevated to financial sainthood along with our current hero, St. Ben. With 2 sentences last Thursday, Mario rode Spanish and Italian 2yr yields nearly 200bps lower. It was like watching George Woolf ride Seabiscuit. Beautiful!!

Ex-Derivatives Trader: How I Messed With LIBOR (And Lived)


From Boston Review: “…The occasion of my transgression was a client’s request for an unusual (to my eyes) custom financial structure. “This trade has been around forever,” the client said about the proposal, a tax trade. “The government keeps shutting it down and people keep figuring out ways to make it work again.” And the client thought that it could be made to work yet again if we—Citigroup—could figure out how to structure the transaction to fulfill their litany of requirements.
Based on our discussions, I set about working on a presentation that I christened “Tax Transaction.” This draft was met with horror by my managing director since, he informed me, “Tax transactions are illegal.” So the presentation was rechristened “Alternative Financing Discussion,” the structure was given a purely economic justification, and taxes, when referenced, were discussed in a deliberately offhand manner signifying tertiary concern (e.g. “This method of financing is also more tax efficient than other methods of financing”).

In this alternative financing method, the client would effectively borrow money at a fixed rate. To justify using a fixed rate we needed to show it could be cheaper for the client than borrowing at a floating rate. This justification was part of the economic purpose we had given the deal. It did not matter that this transaction’s fixed rate was higher than the fixed rate the company could actually get on the open market (a loss the company didn’t care about since it would be dwarfed by the expected tax savings the deal would bring). The only thing that mattered was whether we could somehow create a scenario where borrowing at floating rates, i.e. rates pegged to LIBOR that reset every few months, would end up being more expensive than borrowing at the fixed rate built into our “Alternative Financing Transaction.”

So as I set about figuring out how the bank could structure the transaction in a way that satisfied both the client’s criteria and our internal bank policies, I also began making up future LIBORs. I say “making up,” rather than “forecasting,” because I was not really trying to forecast anything. Every few days or weeks I’d look at interest rates, figure out what the fixed rate in the transaction would end up being, and then see if, without being completely outlandish, I could come up with different combinations of future LIBORs …..

Thinking the Unthinkable: What Europe's Central Bank May Do to Save the Euro




According to Reuters the European Central Bank is thinking the unthinkable to save the euro, including resuming its controversial bond-buying program and possibly even pursuing quantitative easing — in effect printing money.  Bold action is probably at least five weeks away, insiders say, though some more clues may come when the ECB  reveals its latest interest rate decision on Thursday.

Several other pieces have to fall into place before the ECB will act decisively, insiders say. These include a request for assistance from Spain, which Madrid is still resisting, a decision by euro zone leaders to let their bailout fund buy bonds at auction, and a German court ruling on the legality of the euro zone's permanent rescue fund, due on Sept. 12.  Above all, ECB President Mario Draghi must overcome the resistance of Germany's powerful central bank, the guardian of monetary orthodoxy, glowering from the other side of Frankfurt.

Draghi raised expectations last Thursday that the ECB would resume buying sovereign bonds as Spanish and Italian borrowing costs vaulted towards levels that could force the euro zone's third and fourth largest economies out of the credit markets....

Sad Sign of the Times: Wal-Mart Surges as Economy Sputters





Remember that old bit about watching out for falling prices?  Well, according to Businessweek shares of Wal-Mart Stores hit an all-time high of $74.80 on July 27, having recently pierced levels they haven’t visited since 1999. The stock’s 25 percent year-to-date return is nearly triple that of the Standard & Poor’s 500 index. Over the past 13 years, the chain that put Bentonville, Ark., on the map went from earning $4.4 billion on $137 billion in revenue to now clearing $16 billion on sales of $446 billion. Unemployment has since more than doubled from its New Economy-charged days of 4 percent.  Wal-Mart’s high, which comes on its 50th anniversary, speaks volumes about the economy and market.

I first learned of the milestone in a rather terrifying note put out earlier in the week by Gluskin Sheff Chief Economist David Rosenberg. He wrote:

“This is looking more and more like a modern-day depression. After all, last month alone, 85,000 Americans signed on for Social Security disability cheques, which exceeded the 80,000 net new jobs that were created: and a record 46 million Americans or 14.8 percent of the population (also a record) are in the Food Stamp program (participation averaged 7.9 percent from 1970 to 2000, by way of contrast). … Increasingly, the U.S. is following in the footsteps of Europe of becoming a nation of dependents.”

Which immediately made me think of how, in September 2010, Wal-Mart’s U.S. chief admitted at a Goldman Sachs (GS) conference (of all places) that on the last day of every month, “it’s real interesting to watch. About 11 p.m., customers start to come in and shop, fill their grocery basket with basic items … and mill about the store until midnight. Our sales for those first few hours on the first of the month are substantially and significantly higher. If you really think about it, the only reason somebody gets out in the middle of the night and buys baby formula is that they need it, and they’ve been waiting for it….”


HSBC ready to cough up $2 billion for US investigation, mis-selling




HSBC's boss told Reuters on Monday revelations of lax anti-money laundering controls had been "shameful and embarrassing" for Europe's biggest bank, and may force it to pay out well over $2 billion for those flaws and in compensation for UK mis-selling.

HSBC set aside $700 million to cover fines and other costs for an anti-money laundering scandal, after a US Senate report criticized it this month for letting clients shift funds from dangerous and secretive countries, notably Mexico.

The ultimate cost could be "significantly higher", the bank's Chief Executive Stuart Gulliver said.
HSBC's chief executive apologized on Monday for shameful and embarrassing mistakes made on anti-money laundering controls as the bank set aside $2 billion to cover the cost of US investigations and compensate UK customers for mis-selling….

This Is The Devastating Public Austerity That People Now See Is Slamming The Economy




From BusinessInsider: Something must have happened this weekend, because both the Wall Street Journal and the conservative think tank the American Enterprise Institute have pieces today on how a pull-back in public spending is hurting the economy.

We've been harping on this since at least last month, when we told you about how the public sector has rarely shrunk more rapidly than under President Obama's first term.
With a couple of exceptions, fiscal spending at both the federal and state and local level continues to tick downward….

Big Banks Get Tough With Hedge-Fund Clients




Major banks face growing pressure to extract more money from, or even sever ties with, unprofitable hedge-fund clients as they cut costs in the face of tough trading conditions and try to refocus on the biggest managers, Reuters reports.

Industry insiders say prime brokers — which provide services such as stock lending and financing for hedge funds — are sifting through their client lists, in some cases demanding higher fees on trading or a greater share of a fund's business, and sometimes telling funds to look elsewhere.

The moves come as banks, faced with a tough economic environment, higher regulatory costs, and looming Basel III capital standards that are set to reduce returns on equity, look to cut costs across the board and focus on more profitable activities…..

What if Dr Doom is right?



Perennial doomsayer Nouriel Roubini (aka Dr Doom) has poured cold water on hopes of a faster US recovery, suggesting US growth is likely to remain, below-trend at best for many years to come.

Former Federal Reserve Chair Paul Volcker has also suggested that the individual states in the US cannot continue their current spending, taxation and budget practices, and the US federal government’s attempts to reduce its deficit could wreak havoc on the individual state budgets.

Getting back to Roubini — in an article published in the Australian Financial Review, he suggested that the US Federal Reserve will carry out more quantitative easing this year, but it will have little effect, as long term official interest rates are already low – lowering them further will not boost spending.

He also identified that weak demand is having an effect on US companies already, with lower revenues hurting margins and profitability. “A significant equity price correction could be the force that in 2013 tips the US economy into outright contraction”.  The consequences of the US going backwards has severe implications for the rest of the world….

Why Capitalism Has an Image Problem




WSJ’s Charles Murray writes: Mitt Romney's résumé at Bain should be a slam dunk. He has been a successful capitalist, and capitalism is the best thing that has ever happened to the material condition of the human race. From the dawn of history until the 18th century, every society in the world was impoverished, with only the thinnest film of wealth on top. Then came capitalism and the Industrial Revolution. Everywhere that capitalism subsequently took hold, national wealth began to increase and poverty began to fall. Everywhere that capitalism didn't take hold, people remained impoverished. Everywhere that capitalism has been rejected since then, poverty has increased.
Capitalism has lifted the world out of poverty because it gives people a chance to get rich by creating value and reaping the rewards. Who better to be president of the greatest of all capitalist nations than a man who got rich by being a brilliant capitalist?

Yet it hasn't worked out that way for Mr. Romney. "Capitalist" has become an accusation. The creative destruction that is at the heart of a growing economy is now seen as evil. Americans increasingly appear to accept the mind-set that kept the world in poverty for millennia: If you've gotten rich, it is because you made someone else poorer.

What happened to turn the mood of the country so far from our historic celebration of economic success…
Read more at http://online.wsj.com/article/SB10000872396390443931404577549223178294822.html?mod=WSJ_hp_mostpop_read

The Avalanche Begins: New York Lender Files Libor Lawsuit




From the WSJ: In the latest sign of the potential legal vulnerability facing banks ensnared in the world-wide probe of interest-rate manipulation, a New York lender alleges in a lawsuit that it was cheated out of interest income because rates on loans tied to Libor were "artificially" depressed.

The lawsuit effectively argues that the alleged manipulation short-changed lenders by helping borrowers pay less for mortgages and other loans.

Berkshire Bank, with 11 branches in New York and New Jersey and about $881 million in assets, claims in a proposed class-action lawsuit in U.S. District Court in New York that "tens, if not hundreds, ...

Apple, Samsung patent trial set to kick off in U.S., billions at stake






Jury selection is due to begin on Monday in the United States in a high stakes patent battle between Apple Inc and Samsung Electronics Co Ltd, the culmination of over a year of pretrial jousting with billions of dollars in the balance, Reuters reports.

Apple and Samsung, the world's largest consumer electronics corporations, are waging legal war around the world, accusing each other of patent violations as they vie for supremacy in a fast-growing market for mobile devices.  The fight began last year when Apple sued Samsung in a San Jose, California federal court, accusing the South Korean company of slavishly copying the iPhone and iPad. Samsung countersued.

The stakes are high, with Samsung facing potential U.S. sales bans of its Galaxy smartphones and tablet computers, and Apple in a pivotal test of its worldwide patent litigation strategy.  Apple will try to use Samsung documents to show its rival knowingly violated the iPhone maker's intellectual property rights, while Samsung argues Apple is trying to stifle competition to maintain "exorbitant" profit, according to court filings.  A 10-member jury, all of whom hail from Silicon Valley,will hear evidence over at least four weeks, and it must reach a unanimous decision for Apple or Samsung to prevail on any of their claims.


Read more at http://uk.reuters.com/article/2012/07/30/us-apple-samsung-trial-idUKBRE86Q16X20120730

China's Gift to U.S. Homeowners

Seriously folks.  According to Businessweek they are increasingly rich, hungry for the good things this country has to offer, buying high-end homes, and don’t mind paying huge amounts of cash upfront to get them without going into debt. If you don’t think this reads like a typical American story today, you’re right—these new homeowners are Chinese living in the U.S.


For a housing market just starting its recovery, foreign investment in U.S. residential real estate has been a bright spot, and there’s no sign of the trend letting up. According to data released last month by the National Association of Realtors, non-U.S. buyers accounted for $82.5 billion in residential property sales in the 12 months ended March 2012. Chinese purchasers made up 11 percent of this total, while Canadians continued to represent the largest swath at 24 percent. Perhaps even more striking is the fact that 27 percent of Realtors surveyed by the NAR reported working with international clients in the last year. Along with China and Canada, buyers from countries including Mexico, India, and the U.K. combined to make up 55 percent of purchases from abroad—mainly concentrated in Florida, Texas, Arizona, California, and New York. The fastest growth in recent years is among Chinese buyers.

The global interest is driven by several different factors, yet for the Chinese in particular, the chance to get their children into top universities is probably the largest motivation…..

Read all about it at http://www.businessweek.com/articles/2012-07-29/chinas-gift-to-u-dot-s-dot-homeowners

SEC Freezes Trader Assets In Probe Of Cnooc’s Nexen Purchase


Bloomberg’s Joshua Gallu and Jasmine Wang report that the U.S. Securities and Exchange Commission obtained a court order to freeze assets of traders who allegedly reaped more than $13 million by trading illegally ahead of Cnooc Ltd.’s announcement that it would buy Nexen Inc. (NXY)Hong Kong-based Well Advantage Limited, controlled by Zhang Zhi Rong, and other unidentified traders stockpiled shares of Nexen based on confidential information about the deal, the SEC said in a July 27 statement announcing a complaint filed at federal court in Manhattan. The court order froze about $38 million in assets, the SEC said.

Nexen Inc.’s stock rose more than 50 percent on July 23 after CNOOC Ltd., China’s largest offshore oil and gas explorer, said that it would pay $15.1 billion in cash to acquire the Calgary-based company in the biggest overseas takeover by a Chinese firm….

The Strange Story of Citibank's Missing Debt Collectors




The fugitive debt collectors were interrogating an Indonesian Citi customer at the time of his death.  Irzen Octa, an Indonesian businessman, died in a Citi office under mysterious circumstances last March, while debt collectors were questioning him about money he owed on a Citibank credit card. Now, two of the three collectors convicted in Octa's death are reportedly on the run from the law.

Arif Lukman and Henry Waslinton, who were each sentenced to five years in prison last month for their role in the March 2011 interrogation, have failed to answer a court summons for detention, according to the Jakarta Globe. On Wednesday, both men were declared fugitives.

Octa, who owed Citi more than $11,000 at the time of his death, met with third-party collectors on March 28, 2011, in an attempt to negotiate a settlement. He was found dead in the Citi office that afternoon…..

Sunday, July 29, 2012

Investors seek wine, art funds for hedging




Rising fears that traditional investing has become a lose-lose proposition have a growing number of wealthy folks seeing dollar signs in niche funds that invest in art, wine, musical instruments and even classic cars, the New York Post reports. They’re known as “collectible” funds or “treasure” funds, and while they come with plenty of skeptics and potential pitfalls, they’re also promising returns reminiscent of the days before the Great Recession.

Sergio Esposito, founder of Union Square’s wine shop Italian Wine Merchants, said the wine fund he helped start in 2010, The Bottled Asset Fund, has been doing so well he hopes to launch another next year.  After selling its first batches of wine this year, the $8.2 million fund is now seeing profits upward of 30 percent, he said.  Try getting that out of the S&P 500 or even smart-money hedge funds.

It’s not just wine funds that are promising mouthwatering returns….Last year, a group that included Pink Floyd’s drummer, Nick Mason, kicked off a fundraising campaign for a vehicle that would invest in classic cars. The goal for the fund, which has yet to launch: annual returns of 15 percent a year, according to Bloomberg…..

Read more: http://www.nypost.com/p/news/business/vintage_returns_M3VjPkRiMdc8S0BY37Wp7I#ixzz225LnaZ8p

This Week Is Going To Be Massive For The Global Economy




Gird your loins, fasten your seatbelt...According to BusinessInsider after a wildly volatile week in the markets last week, which saw huge gains on Thursday and Friday, the coming week promises to be a massive one for the entire global economy.
That's because there's going to be tons of economic data, and potential action from the world's most important central banks.

Tomorrow, Monday, is actually pretty quiet, but starting Tuesday it will be non-stop action all the way through Friday.

In the US on Tuesday are several important numbers: Personal Income, Consumer Sentiment, Chicago PMI, and the Case-Shiller home price report. Case-Shiller should be particularly interesting, given the growing belief that home prices are in the process of bottoming.
Then on Tuesday night we get the start of the monthly ritual of PMI day: When all the big economies around the world have their latest PMI readings unveiled on the first of the month. China and South Korea will kick things off, but the numbers will go all night, through Europe, and then of course into the US, when the ISM will be released at 10:00 AM ET on Wednesday…..


Meet The Bond Market’s $100 Million Leading Man





Recessions, crackups, bailouts — according to the NY Times these are profitable times for Mohamed A. El-Erian.  Mr. El-Erian is the crown prince of the multitrillion-dollar global bond market, the figurative heir of its long-reigning king, William H. Gross of the mighty Pacific Investment Management Company, known as Pimco….

Mr. Gross is the maestro behind the biggest of all, the $263 billion Pimco Total Return fund. But as the financial world has come unhinged — first in 2008, with the subprime fiascoes in the United States, and now in Europe, where the debt crisis flared anew last week — Mr. El-Erian has come into his own, stepping out of the long shadow of Mr. Gross, one of Pimco’s founders and his former boss.

On many mornings, you can spot Mr. El-Erian, who is also Pimco’s chief executive, on CNBC, BBC or Bloomberg, or somewhere in the financial pages, expounding on the financial crisis of the day…. Indeed, even by the standards of Wall Street, where many financial types pull down eye-popping paychecks, Mr. El-Erian and Mr. Gross make gobs of money. Mr. El-Erian, 53, was paid about $100 million last year, according to a person with knowledge of Pimco’s finances who spoke on condition of anonymity because the firm, a unit of Allianz, the big German financial company, doesn’t disclose compensation…

Nice work if you can get it, no?  Find out more at http://www.nytimes.com/2012/07/29/business/mohamed-el-erian-is-the-bond-markets-new-leading-man.html?_r=1

Saturday, July 28, 2012

Apple Bigs considering an investment in Twitter




Apple officials have talked with Twitter recently about potentially investing hundreds of millions of dollars in the social media site, The New York Times reports.

Such a move could make Twitter, which was valued at $8.4 billion last year, worth more than $10 billion, several unnamed sources told the paper.

Apple, which has incorporated Twitter into some of its products, has done little in the social media realm. The investment could help the company better understand how social media works and better integrate Twitter into some of its products…..

More?  Go to http://content.usatoday.com/communities/ondeadline/post/2012/07/report-apple-officials-considering-an-investment-in-twitter/1#.UBQQrrT2bhc

J.P. Morgan Hits Executive Reset Button




J.P. Morgan Chase & Co. shook up its top management, elevating two executives who mopped up the "London whale" trading mess and stripping power from the bank's top finance officer and investment-bank boss, the WSJ reports.

The moves on Friday constitute the third major J.P. Morgan executive suite reshuffling in little more than a year, narrowing the field of potential successors to 56-year-old Chief Executive James Dimon. Mr. Dimon is expected to stay in his role for several more years, and board members want to see how younger executives perform in larger roles as they assess their potential for future leadership of the ...

SEC Accuses Billionaire's Firm Of Insider Trading




From Forbes: A trading firm controlled by Hong Kong billionaire Zhang Zhirong reaped more millions in illegal profits by trading on inside information about the biggest energy deal in recent memory, U.S. regulators say.
In a complaint released Friday, the SEC alleges Well Advantage Limited and other unknown traders in Hong Kong and Singapore stockpiled shares of Canadian energy concern Nexen in the days before Chinese firm CNOOC announced a $15.1 billion acquisition of the company July 23.
The SEC froze the assets’ of the traders in question after Well Advantage moved to liquidate its entire position in Nexen after shares leaped on news of the CNOOC takeover. Zhang Zhi Rhong, the SEC’s Enforcement Division says controls another company that has a strategic agreement with CNOOC.

“Well Advantage and these other traders engaged in an all-too-familiar pattern of misusing inside information to place extremely timely trades and profit handsomely from their illegal acts,” said the SEC’s Sanjay Wadhwa…

Deep Thoughts: Is America Over? Mayberry R.I.P.and The Declinist panic.



Andy Griffith was a genial and gifted character actor, but when he died on Independence Day eve, you’d have thought we’d lost a Founding Father, not a television star whose last long-running series, the vanilla legal drama Matlock, expired in 1995, New York Magazine’s Frank Rich writes.  The public tributes to Griffith were over-the-top in a way his acting never was, spreading treacle from the evening newscasts to the front page of the New York Times.

It was as if the nation were mourning its own demise. To commentators in the liberal media, Griffith’s signature television role, Sheriff Andy Taylor of Mayberry, North Carolina, was “one of the last links to another, simpler time” (the Miami Herald) and a repository of “values which actually transcended the deep divides which tore the nation apart during the years the show aired from 1960 to 1968” (the Washington Post). On the right, the sermonizers quickly moved past an inconvenient fact (Griffith made a spot endorsing Obamacare in 2010) to deify Sheriff Taylor for embodying “a time when television was cleaner and simpler” and for giving “millions of Americans the feeling the country stood for all the right things” (National Review). Among those “right” things was the fictional Mayberry’s form of governance, which, in the ideological take of the Daily Caller, demonstrated that “common sense and local control work better than bureaucracy or top-down management.”

In reality, The Andy Griffith Show didn’t transcend the deep divides of its time. It merely ignored them… The wave of nostalgia for Andy Griffith’s Mayberry and for the vanished halcyon America it supposedly enshrined says more about the frazzled state of America in 2012 and our congenital historical amnesia than it does about the reality of America in 1960…..

World’s Richest Gain $15.2 Billion as Markets Rise





The richest people on the planet added $15.2 billion to their collective net worth this week as global markets rose on speculation that Europe will move to ease borrowing costs in Italy and Spain according to a report in Businessweek.

The week’s biggest gainer was Spanish retail tycoon Amancio Ortega, who added $3 billion to his fortune after Inditex, the world’s largest clothing retailer, announced plans to build a 753,000 square-foot logistics center in Spain’s Guadalajara province. Inditex shares were up 3.8 percent for the week.  Ortega’s gain came as Spain’s unemployment rate reached 24.6 percent, the highest on record. With a net worth of $43.5 billion, the 76-year-old is Europe’s richest man, and ranks fourth on the Bloomberg Billionaires Index.

“At the beginning of the week we had a flood of bad news, starting with Greece and culminating with Spain credit at all- time wides,” said Nelson Saiers, CIO of Alphabet Management LLC, a New York-based hedge fund with more than $500 million under management. “When Mario Draghi came out midweek and said the ECB would do whatever it takes to protect the euro, that hit the brakes on the bad news and the market ripped,” he said, referring to the European Central Bank president….

Read all about it at http://www.businessweek.com/news/2012-07-27/world-s-richest-gain-15-dot-2-billion-as-global-markets-rise#r=bloomberg

How much is Olympic gold worth?


According to CNBC contrary to what the name might suggest, there's actually not that much gold in a gold medal.  While the medal's design is different for every Olympics, it must adhere to guidelines set by the Olympic Charter.

One of those guidelines states that at least 6 grams of gold must be used in each gold medal.

This year's Olympic gold medal is comprised of 92.5 percent silver, just 1.34 percent gold, and the remainder 6.16 percent is made up of copper.   The gold and silver medals weigh 412 grams, while the bonze weighs 357 grams.  Each medal is 85mm in diameter, and 8-10mm thick.  These are the biggest and heaviest medals ever produced for the Summer Olympic Games….

Investigators Are Closing In On Two Other Banks Involved In LIBOR Rigging

From Reuters: New details from court documents and sources close to the Libor scandal investigation suggest that groups of traders working at three major European banks were heavily involved in rigging global benchmark interest rates. Some of those traders, including one who used to work at Barclays Plc in New York, still have senior positions on Wall Street trading desks.

Until now, most of the attention has involved traders at Barclays, which last month reached a $453 million settlement with U.S. and UK authorities for its role in the manipulation of rates. Now, it is becoming clear that traders from at least two other banks - UK-based Royal Bank of Scotland Group Plc and Switzerland's UBS AG - played a central role. Between them, the three banks employed more than a dozen traders who sought to influence rates in either dollar, euro or yen rates.

Read more: http://www.businessinsider.com/libor-barclays-ubs-rbs-2012-7s

Friday, July 27, 2012

Long-Term Investors Are Getting Screwed By High-Speed Traders


The WSJ reports: Some of the most heavily traded U.S. stocks might also be among the most expensive to trade, costing investors as much as $2.5 billion a year, according to a New York trading and research firm.

Stocks such as Bank of America Corp., Microsoft Corp., Cisco Systems Inc., and Ford Motor Co. are so popular with high-frequency trading firms that long-term investors often have trouble quickly buying and selling the stocks, according to a report by Pragma Securities LLC.

Investors trying to trade cost-effectively often find themselves standing in line behind the fleet-footed traders and are forced to wait to execute…

Layoff Watch 2012: Pentagon May Fire Thousands




According to Associated Press, tens of thousands of civilian employees in the Defense Department could receive warnings about potential layoffs four days before the November election if impending spending cuts aren’t averted, hitting presidential battleground states such as Virginia and Florida hard.

The alerts would come in addition to any that major defense contractors might send out at the same time to their workers under an often-overlooked law, a prospect that is unnerving the White House roughly three months before voters go to the polls.

Frederick Vollrath, a senior Pentagon official, outlined the timeline for notification of possibly 10 percent of the 800,000-strong civilian workforce in testimony Thursday before a House panel. He cautioned, however, that no decision has been made on job cuts as Washington grapples with the looming, $1.2 trillion automatic reductions in defense and domestic programs...

Weird’s Deep Thoughts (Friday Morning Edition): Innovation is Hard: Ballmer and The Real Story of Microsoft's Fall From Grace



Besides being a grade A schmuck there's a reason people in Ballmer's position tend to fail.  The basic issue facing Microsoft over the past ten years has been this—innovating is really hard.

The company reached a point where Office and Windows were so popular that wasn't much you could do to increase their popularity by improving the product. They continued to work on improving the product, and kept these divisions very healthy and profitable, but there simply wasn't an explosive growth opportunity left to be had because the previous successes had been so enormous. So you create a situation where the company as a whole is basically a venture capital firm. It has this huge stream of Office/Windows profits and needs to figure out how to invest those profits in exciting new products. But successful venture capitalists are really rare, and for all we know most of them are just getting lucky. The average financial returns from the venture capital sector as a whole are terrible. But Microsoft qua venture capitalist faces the additional burden that the top management of the company has to be good at running the giant existing Office/Windows businesses. It's as if you were trying to hire a tax attorney who could also perform open heart surgery.

One alternative strategy could have been to just give up. Pay huge dividends, keep focusing on incremental improvements to the core products, and basically don't worry if other firms dominate mobile and online services. But not only is that psychologically unappealing to managers, it'd be weirdly demoralizing to the staff. Windows and Office need to be able to hire talented engineers—the kind of people who are going to want to work for a company that aspires to be forever on the cutting edge, not a company that's resigned itself to operating as a boring dividend machine.

So what are you supposed to do?....

Goldman’s Robinson gets her close-up



Hello, Mrs. Robinson!  The NY Post writes that Goldman Sachs Treasurer Elizabeth “Liz” Beshel Robinson — considered a rising star within the Wall Street firm and a candidate to succeed her boss, Chief Financial Officer David Viniar — just held her first audition for the job.
Robinson, who until now has mostly operated behind the scenes of the storied investment bank, took center stage yesterday during a conference call to discuss the firm’s fiscal health, prompted by recent bank downgrades, Europe’s debt crisis and sweeping regulatory reform.

During the 35-minute call that kicked off at noon, Robinson, who along with Viniar fielded questions from analysts and investors, said the bank has significantly bolstered its balance sheet since 2008, and boasted around $170 billion in liquid assets at the end of the second quarter.

“I was impressed with her when I met her,” said Brad Hintz, a veteran bank analyst at Sanford Bernstein. “What I think [Goldman] now is giving her is more limelight.”
Although Viniar hasn’t announced his intention to leave the bank, it’s been an open secret in the firm for a while that the 56-year-old is keen to exit and is just waiting for Wall Street’s unprecedented roller-coaster ride to abate…

.

Investors demand hedge funds show clean hands on Libor


According to Reuters Investors are pushing some of the world's biggest hedge funds to show that their traders played no part in the interest rate rigging scandal plaguing major banks.  These hedge funds have responded with in-depth internal probes which they hope will assure investors that they did not collude with the banks, are completely clean and will not become embroiled in the affair, people familiar with the funds said.

Regulators across the globe are investigating whether banks tried to rig the London interbank offered rate, a benchmark used to set the price of trillions of dollars of financial products.  None has publicly confirmed they are looking into the activity of hedge funds or alleged any wrongdoing by them.  However, some investors are so concerned about the reputational damage and the difficult questions their own clients would pose if hedge funds they had invested in were to be implicated that they are demanding the managers show they have a clean record….


Sad, Sad, Sad: Former hedge fund boss dies in murder/suicide


From Moneyweb: a letter to investors in a scheme run by Herman Pretorius has confirmed the death of the former hedge fund boss. The unsigned communication has left unanswered questions over what Pretorius's clients are invested in. It lists three investments, only two of which were previously known to Moneyweb. It does little to disclose the nature of the investments or who is left to manage them in the wake of Pretorius's death.

On Thursday night, Pretorius allegedly shot his former business partner Julian Williams dead in his Cape Town offices, then turned the gun on himself.   Pretorius used to be involved with a hedge fund called the Abante Statistical Arbitrage. At the time of his death he ran an unregulated investment scheme called the Relative Value Arbritrage Fund (RVAF), which many investors believed to be a hedge fund.

Pretorius had been due to attend a meeting of investors in Moorreesburg on the evening of his death. Investors were informed that the event had been cancelled because Pretorius was in a meeting with Williams.

Read all about it at http://www.moneyweb.co.za/mw/content/en/moneyweb-special-investigations?oid=577372&sn=2009%20Detail

The New Goldman: Body By Jake



According to the NY Post he’s the man who’s beefing up gold-plated Goldman Sachs’ once-flabby p.r. muscles. Richard “Jake” Siewert — a former press secretary for President Bill Clinton in 2001 — is putting the once-guarded, 144-year-old partnership through its paces as he works to buff up the firm’s tattered image.

The game plan of the 48-year-old Siewert includes pushing Goldman CEO Lloyd Blankfein and other executives, testing his belief that Blankfein has the “Everyman” touch to click with Main Street. In his first 100-plus days, Siewert has convinced Blankfein to schedule more public interviews and pushed the bank honcho to display for the media more of what Siewert feels is an affability and wit usually displayed only when Blankfein is with his peers.

In the spring, with just several weeks at Goldman under his belt, Siewert’s strategy bore fruit.  Blankfein stunned Wall Street by sitting with CNBC and Bloomberg — his first extended public chats in some two years....

Crackdown City: Feds weigh retail sweep after Wal-Mart bribery scandal





Fasten your seatbelts, people.  U.S. authorities are considering launching a wide-ranging examination of the retail industry for violations of an anti-foreign bribery law, after Wal-Mart and other retailers have come forth with their own potential offenses, people familiar with the matter told Reuters.

Retailers have been reviewing their international operations in light of a bribery scandal at Wal-Mart Stores Inc's (WMT) operations in Mexico that is the subject of investigations by the Justice Department and the Securities and Exchange Commission.

The conduct was thrown into the public spotlight in April, when a New York Times report said that management at Wal-Mart de Mexico (WALMEXV.MX) orchestrated bribes of $24 million to help it grow quickly in the last decade and that Wal-Mart's top brass tried to cover it up. Other retail companies have also since reported to U.S. agencies suspicions of their own potential violations, which in turn has the Justice Department and SEC considering a sweep of the entire industry, said the sources, who are working with companies who have unearthed potential issues but declined to be identified….