Two key economic indicators, consumer spending and personal income growth, both slowed in April as signs of an economic slowdown continue to accumulate.
The Commerce Department’s Bureau of Economic Analysis released figures this morning that showed growth of personal income shrinking to 0.2% in April, from 0.4% in March, and consumer spending decreasing from a growth rate of 0.1% in March to no growth at all in April.
Bear Stearns plans to turn over documents to securities regulators showing that financial giants like Goldman Sachs, Citadel Investment Group and Paulson & Co cut their exposure to the securities firm before its collapse, the Wall Street Journal reported on Wednesday.
The Securities and Exchange Commission, as part of an inquiry into events surrounding the implosion of Bear Stearns in March, has sought and will examine these trading records, people familiar with the matter told the newspaper.
UBS AG warned that it may post losses on U.S. real estate in the second quarter as it seeks $16 billion from shareholders to fix an ailing balance sheet.
In a prospectus released on Monday, the Zurich, Switzerland-based bank said that market conditions were “volatile and challenging” in the second quarter.
The bank plans to sell $22 billion of U.S. residential-mortgage-backed securities to BlackRock Inc. of New York for $15 billion.
Despite record drops in home prices and mounting evidence of a recession, San Francisco Federal Reserve Bank President Janet L. Yellen called recent Fed efforts “sufficient to promote moderate growth.”
The remarks, made Tuesday morning to the Financial Planning Association of Northern California, a division of the Denver-based FPA, came just hours after the release of the Standard & Poor’s/Case-Shiller index of house prices showing a record drop of 14.1% in housing prices in the first quarter.
NYSE Euronext Inc. has selected Michael S. Geltzeiler to become the exchange operator’s chief financial officer and group executive vice president effective June 16.
He will be responsible for managing all aspects of the New York-based company’s finance, treasury and investor relations functions, and report to chief executive Duncan Niederauer.
Mr. Geltzeiler will replace chief financial officer Joost van der Does de Willebois, who will remain the head of the Amsterdam market and responsible for corporate communications.
New orders for durable goods fell by a lower-than-expected 0.5% last month, according to data from the Department of Commerce.
Analysts surveyed by MarketWatch were expecting a 2.8% drop, while analysts surveyed by The Wall Street Journal expected a 2% decline.
Durable goods, which are manufactured goods designed to last at least three years, have fallen for three of the past four months.
Last month’s decline followed a 0.3% decrease in March.
Mortgage applications dipped 4.6% for the week ended May 23, compared with the previous week, due to a drop in refinancing activity, according to data from the Washington-based Mortgage Bankers Association.
The decrease brought the Market Composite Index, which measures loan application volume, down to 593.3 on a seasonally adjusted basis, from 621.6 the previous week.
Refinance applications decreased 8.9% last week, compared with the week ended May 16, and were down 7.5% from the year-earlier period, the MBA report stated.
Apollo Management LP is launching a commodities business to be headed by former Morgan Stanley fixed-income executive Neal Shear.
The commodities-trading business will work in tandem with Apollo's private-equity and capital markets units.
Mr. Shear served as head of New York-based Morgan Stanley’s global-fixed-income division and commodities-trading business.
An Apollo spokesman would not detail his responsibilities.
House prices continued to plunge in the first quarter, with new data revealing record declines across the country. The Standard & Poor's/Case-Shiller home price index, which tracks single-family house prices, tumbled 14.1% in the first quarter, compared with the comparable quarter a year ago.
The decline is the largest in the 20-year history of the index, outstripping the declines of the 1990-91 housing slump by more than 10%.
The portfolio manager of Citigroup Inc.’s struggling Falcon Strategies and ASTA/MAT hedge funds, Reaz Islam, is leaving after 18 years at the company.
Falcon Strategies, a fixed-income hedge fund, lost more than 75% of its value, while the ASTA/MAT funds tumbled as much as 77% before staging a partial recovery this spring, according to a report in The Wall Street Journal.
The fixed-income funds were marketed largely to individual investors, who believed the vehicles were low risk and conservatively managed.
In its quest to serve the richest clients, Wall Street is abandoning Main Street investors, a top securities regulator said this morning.
"There's an evolution in the large firm space, away from assisting Main Street investors," said Karen Tyler, securities commissioner for North Dakota and president of the North American Securities Administrators Association of Washington.
"Main Street has become an abstract concept" for the large Wall Street investment houses, Ms. Tyler said.
Countrywide Financial Corp. chief executive and founder Angelo Mozilo’s response to a desperate homeowner’s e-mail resulted in the man’s California house’s being saved from foreclosure.
Mr. Mozilo accidentally hit “reply all” to an e-mail that was sent to him and about 20 other company executives by the borrower, Dan A. Bailey. Mr. Mozilo had meant to send his return e-mail just to the other executives and not to Mr. Bailey, who had asked in his e-mail that the terms of his loan be modified, according to published reports.
Despite rising energy costs, the Dow Jones Transportation Average has increased 19% since March, exceeding the 7.5% increase in the broader Dow Jones Industrial Average, according to published reports.
Railroads have led the pack, with CSX Corp. of Jacksonville, Fla., posting a gain of 35% and Union Pacific Corp. of Omaha, Neb., posting an increase of 24% during the past three months.
Rising energy costs as well as increased
UBS AG announced today that it will raise more than $15.5 billion of capital by issuing sharply discounted shares in an attempt to recover from mortgage-related losses suffered in the last year.
The capital campaign will be the second time that UBS has sought money from investors since the global mortgage crisis began last year.
In December, the Zurich, Switzerland-based bank received commitments for $11.5 billion from investors in the Middle East and Singapore in response to $10 billion in write-downs (
Former employees of Morgan Stanley and Janney Montgomery Scott LLC were among eight individuals indicted yesterday on charges involving kickbacks and fraud at several Wall Street brokerage firms.
In one indictment, Darin DeMizio, a former stock-loan supervisor at Morgan Stanley of New York and Robert Johnson, a purported stock-loan finder at Tyde Inc. of New York were charged with participating in a scheme to commit securities fraud and wire fraud at Morgan Stanley and JPMorgan Chase & Co. of New York.
A coding error at Moody's Investors Service of New York gave incorrect triple-A ratings to billions of dollars’ worth of debt products and wasn't immediately corrected after it was uncovered, according to the Financial Times.
Internal documents at Moody's show that some senior staff members within the credit-rating agency knew in 2007 that constant proportion debt obligations rated the previous year had received triple-A ratings that were several notches too high and had to be corrected, according to the story.
Despite the economic downturn, demand for small-business 401(k) plans remains strong, according to ShareBuilder Advisors LLC.
During the first quarter, sales of 401(k) plans for businesses that employ fewer than 100 people jumped 116% year-over-year, despite a slowing economy. Also more than half the plans were sold to one-person businesses, with the remainder sold to businesses with between 2 and 99 employees.
ShareBuilder
The Securities and Exchange Commission has warned Maurice Greenberg, the former chief executive of American International Group Inc. of New York, that he may face civil charges for his alleged role in the company’s attempt to inflate artificially its financial information, The Wall Street Journal reported.
A Wells notice was sent to Mr. Greenberg last Friday, the Journal said.
Although the notice means that the regulator plans to recommend enforcement proceedings, respondents have the opportunity to contact the SEC and make their case.
Benjamin “Tad” Edwards IV, son of former A.G. Edwards & Sons Inc. chief executive Ben Edwards III and once the heir apparent to run the firm, has resigned.
Mr. Edwards, 52, resigned yesterday, sources said.
He had been running the firm's Chesterfield, Mo., branch, which brokers say was one of Edwards' larger offices.
Edwards is now part of Wachovia Securities LLC, based in St. Louis.
A call to Mr. Edwards’ office at Wachovia was referred to a company spokesperson.
Ladenburg Thalmann & Co. analyst Richard Bove yesterday downgraded Goldman Sachs Group Inc., Lehman Brothers Holdings Inc. and Merrill Lynch and Co. Inc. to “sell” from “neutral,” saying that the banks will be hurt by the economic downturn, according to a research note.
The firms are based in New York.
Mr. Bove also cut his 2008 outlook on each of the banks and on New York-based Morgan Stanley, though he kept his “neutral” rating on the firm’s shares.
Smaller, newer hedge funds continue to outperform the big dogs, according to the latest research from PerTrac Financial Solutions LLC.
The New York-based developer of investment analysis software came to this finding through two studies of the hedge fund industry conducted in March and December of 2007.
In 2007, the average return of hedge funds with less than $100 million in assets was 11.74%, while funds with between $100 million and $500 million averaged 10.27% and funds with more than $500 million averaged 10.22%.
Raising taxes or scaling down Social Security and Medicare benefits are two ways to preserve those benefit programs for future retirees, said William F. Sharpe, Nobel laureate and professor of finance at Stanford University in Palo Alto, Calif., speaking at the Investment Management Consultants Association’s 2008 Spring Professional Development Conference in New Orleans.
Mr. Sharpe noted that Social Security currently costs Americans approximately $14 trillion per year, which is equivalent to the gross domestic product.
In a 7-to-2 decision, the U.S. Supreme Court today ruled that Kentucky can continue to tax out-of-state municipal bonds, while choosing not to tax in-state ones.
Kentucky was appealing a 2006 state appellate court ruling that exempting interest income of state municipal bonds from taxation, while taxing income from out-of-state bonds, violates the Commerce Clause.
The clause is a restriction that prohibits a state from passing legislation that improperly burdens or discriminates against interstate commerce.
IN Practice appears on the web and in IN Daily every Monday. Comments and questions are welcome at IN Editor@InvestmentNews.
INPractice for May: Branding your practice to include retirement
Week 1: Define your practice’s retirement market opportunity
Week 2: Create your retirement resource branding statement
Week 3: Identify your top five retirement services
Week 4: Create a communications follow-up that reinforces your brand
The Securities and Exchange Commission has filed securities fraud charges in connection with an $18 million real estate investment scheme targeting blacks in the Los Angeles area, Nevada and Georgia.
The complaint, which was filed in U.S. District Court in Los Angeles, charged Jeanetta M. Standefor and her Pasadena, Calif.-based company, Accelerated Funding Group, with operating a “foreclosure reinstatement” scheme that attracted more than 600 investors between 2005 and 2007.
JPMorgan Chase & Co. of New York will make room for about 40% of the 14,000 Bear Stearns employees whose jobs were put at risk by the merger between the two companies, according to published reports.
On Monday, James Dimon, chief executive at JPMorgan, stated that about three-fourths of hiring decisions have already been made.
JPMorgan will cut job positions to make room for talent coming in from Bear, making the net increase for JPMorgan approximately 3,000 hires.
French banking giant Société Générale earned €1.1 billion ($1.69 billion) in the first quarter, down 23% from €1.4 billion ($2.2 billion) in the year-ago period but beating analyst estimates.
In connection with an unauthorized trading scandal in January, the Paris-based company suffered a loss of €4.9 billion, which it accounted for in last year’s fourth quarter.
Fortis SA/NV reported a 31% decline in first-quarter net income to €808 million ($1.25 billion), or €0.37 a share ($0.57), from €1.17 billion, or €0.76 a share, in the year-ago period.
IN Retirement appears on the web and in IN Daily every Thursday. Comments are welcome at IN Editor@InvestmentNews.
If health is wealth, what would be the financial consequence if one of your clients lost his or her physical and/or mental independence?
That is difficult to assess, but getting a handle on future health care costs in retirement is of vital concern for financial advisers.
And those costs are substantial.
A recent study by Fidelity Investments of Boston suggested that individuals in retirement need a reserve of $225,000 to cover out-of-pocket medical costs, including prescriptions, deductibles and Medicare premiums.
The Financial Industry Regulatory Authority Inc. of Washington and New York issued proposals for consolidated regulations governing broker-dealer financial responsibility, supervision and books and records, as well as investor protection.
The proposals would merge rules of the former NASD of Washington and New York and the regulatory operations of the former New York Stock Exchange of New York, which merged in 2007 to form Finra.
U.S. industrial production fell 0.7% in April as the manufacturing sector recorded its worst drop in nearly three years.
The decline followed a revised 0.2% increase in industrial output in March.
Over the 12-month period through April, industrial production was 0.2% higher than the previous 12-month period.
Manufacturing output fell 0.8% in April, marking the largest decline since the index was off 1% in September 2005.
The National Association of Personal Financial Planners' board has elected Diahann Lassus as its new chairwoman.
The announcement was made today at NAPFA's national conference in Long Beach, Calif.
Ms. Lassus will replace Tom Orecchio, whose one-year term concludes on Sept. 1.
She is the chairwoman of the industry issues committee of NAPFA of Arlington Heights, Ill., and also serves as president of Lassus Wherley & Associates PC, an investment advisory firm in New Providence, N.J., that manages about $340 million in assets.
Fund managers were less pessimistic about global growth prospects over the past month but more concerned about inflation, according to Merrill Lynch’s Global Fund Managers Survey for May.
The survey of portfolio managers, CIOs and buy-side strategists showed only 18% of the 191 financial professionals said the world economy is already in recession, compared with 24% in April, while 29% said a recession was likely during the next 12 months, compared with 40% last month.
In September, the National Association of Personal Financial Advisors will take financial advice on the road.
The Arlington Heights, Ill-based organization for fee-only financial advisers will join forces with TD Ameritrade Holding Corp. of Omaha, Neb., to launch a year-long bus tour aimed at promoting financial literacy across the country.
From the bus, which intends to make stops in 150 to 200 cities, NAPFA advisers will offer free financial advice to consumers as well as educational workshops at local college campuses and exhibition halls.
Merrill Lynch & Co. has unveiled a new system for ratings stocks requiring that analysts assign “underperform” ratings to one out of every five stocks they cover as a way of increasing transparency for clients.
Under the new system, to be launched June 2, analysts for the New York-based brokerage firm cannot assign “buy” ratings to more than 70% of the stocks they cover, “neutral” to more than 30% and “underperform” to less than 20%.
JPMorgan Chase & Co. received a Wells notice, indicating that its JPMorgan Securities Inc. unit might face an enforcement action from the Securities and Exchange Commission.
The action would focus on “the bidding of various financial instruments associated with municipal securities,” according to an SEC filing.
Last month, the company was named along with five other commercial banks, investment banks, insurance companies and brokers as defendants in several class actions regarding the selling of derivatives and investment products to state and local governments that raise money in the municipal bond market.
Wachovia Corp. has confirmed that its Wachovia Securities LLC business and other affiliates have received inquiries from the SEC and state regulators regarding auction rate securities, according to a filing with the agency.
The Charlotte, N.C.-based bank said that regulators are looking for information related to the underwriting, sale and subsequent auction of municipal auction rate securities and auction rate preferred securities.
Wall Street giant Merrill Lynch & Co. Inc. has enough capital and cash to take care of some $50 billion in debt due in the next year, the firm’s chief financial officer, Nelson Chai, said today.
Merrill has $44 billion of equity capital available, he said at a presentation Monday morning at a conference sponsored by Zurich, Switzerland-based UBS AG.
The New York-based financial services firm has suffered over $14 billion in subprime-related write-downs and three straight quarterly losses as a result of the credit crunch (
Bank-owned life insurance hit $120.4 billion in assets in 2007, up 15.9% from the previous year, according to Michael White Associates LLC.
BOLI is a form of life insurance policy bought by banks on its directors or officers.
The bank is the beneficiary of the policy and all premiums are tax-free, as is the capital appreciation in the contract, allowing the banks to fund employee benefits on a tax free basis.
Large top-tier bank holding companies — those with more than $500 million in assets — reported holding $117.5 billion in BOLI assets, up 16.4% from the previous year’s figure of $101 billion.
Proposed legislation hammering the deferred compensation of many hedge fund managers is expected to be resurrected on Capitol Hill as soon as this week — and this time around some industry lobbyists are betting the measure will become law, according to Crain's Pensions & Investments.
The proposal, championed by House Ways and Means Committee Chairman Charles Rangel, D-N.Y., would shut a loophole allowing some hedge fund managers to defer taxes on billions of dollars of their compensation from offshore funds.
Merrill Lynch clients who hold auction rate securities should get their money back within a year, said John Thain, the chief executive of Merrill Lynch & Co. Inc.
Mr. Thain told reporters yesterday at a press conference in Mumbai, India, that about 23% of the ARS held by Merrill clients had already been refinanced, and that he expected over the “next 12 months or so, we will see the securities get [fully] refinanced by the issuers and the customers get their money back," he said, according to Dow Jones Newswires.
Confidence among millionaire investors fell in April, while the spirits of investors with between $500,000 and $1 million were up, according to a report by Spectrem Group.
The Spectrem Millionaire Investor Index fell one point in April to a reading of -14, bringing the index to a record low.
Since June, the millionaire index has registered a net decline of 34 points.
Meanwhile, the Spectrem Affluent Investor Index, which measures the investment outlook of households between $500,000 and $1 million in investible assets, rose 7 points in April to a reading of -13, following a 10-point decline in March.
Facing more than $37 billion in subprime-related write-downs, UBS AG announced today a preliminary deal with New York-based asset manager BlackRock Inc. to sell off some of its troubled assets.
As part of the deal, the Zurich, Switzerland-based bank would sell BlackRock a portfolio of subprime mortgages valued at just over $20 billion for a discounted price of $15 billion, according to the published reports.
The deal with BlackRock comes on the same day that Switzerland’s largest bank reported a first-quarter loss of $11 billion due in large part to $19 billion in write-downs tied to the struggling U.S. real estate market.
The dark pools of liquidity may be shallower than they seem, according to a Morgan Stanley trading executive.
Accounting processes and competition may have exaggerated the volume figures from more than 40 so-called dark-pool trading venues, Andrew Silverman, managing director of Morgan Stanley, warned at the Reuters Exchanges and Trading Summit in New York yesterday.
Dark pools are private trading networks that allow firms to match buy and sell orders anonymously through internal systems. Big investors favor dark pools because they allow them to keep their trading intentions hidden from the open market.
Merrill Lynch & Co Inc. chief executive John A. Thain thinks that the worst of the credit crisis is over and doesn’t see the need for the firm to raise more capital, he told The Business Times, a Singapore-based newspaper.
Recently, New York-based Merrill raised billions of dollars after it was hit with large subprime-mortgage related losses.
“We’re going to go through at least a couple of difficult quarters, more related to a slowdown driven by the consumer rather than the subprime-related problems,” Mr. Thain told the newspaper.
GunnAllen Financial Inc. said it had reached “closure” regarding a variety of compliance and regulatory issues with today’s announcement that Finra had fined the firm $750,000 for a number of violations, which dated from 2000 to 2005.
Finra of Washington and New York tagged the firm over six issues, including a trade allocation scheme by the firm’s former head trader, Alexis J. Rivera.
In 2002 and 2003, the Tampa, Fla.-based GunnAllen, acting through Mr. Rivera, engaged in a “cherry-picking” scheme in which Mr. Rivera allocated profitable stock trades to his wife’s personal account instead of to the accounts of the firm’s customers, Finra said in a statement. Finra barred Mr. Rivera from the industry.
Conseco Inc. was slapped with a $2.3 million fine after insurance regulators discovered lapses in the company’s long-term-care insurance claims and complaints processing.
The Carmel, Ind.-based carrier will also have to pay $30 million in claims-handling improvements and restitution.
A team of 40 insurance regulators, including Florida and Pennsylvania, investigated Bankers Life and Casualty Insurance Co. of Chicago and Conseco Senior Health Insurance Co. of Bensalem, Pa., both subsidiaries of Conseco.
A former broker at The Bear Stearns Cos. Inc. of New York was sentenced to three years of probation, including one year home confinement, after he pleaded guilty to playing a role in an insider-trading scheme.
The former broker, Ken Okada, was among 13 people criminally charged in 2007 in what authorities have called one of the most pervasive insider-trading rings since the 1980s, according to a Reuters report.
Judge Denny Chin of the United States District Court in New York also ordered him to pay a $300,000 fine and forfeit $7,375.
The Financial Planning Association of Denver and McLagan Partners Inc. are offering independent advisers a free FPA Practice Management Scorecard through an offer from Fidelity Investments of Boston.
FPA members who would prefer not to share practice data can purchase the FPA Scorecard for $195.
Participants in the scorecard who agree to share their practice data with Fidelity will have their fee waived.
The scorecard, which was created by McLagan Partners, a Stamford, Conn.-based consulting firm, allows advisers to establish practice financial goals and evaluate their progress compared with similar practices in the same market.
In keeping with gloomy expectations, U.S. payrolls continue to decline, though the damage is not as severe as some had feared.
The number of U.S. jobs dropped for the fourth consecutive month in April, with 20,000 job cuts after the loss of 81,000 jobs in March, according to the Department of Labor. Economists polled by MarketWatch projected a loss of 80,000 jobs in April.
The unemployment rate dipped to 5% in April, down from 5.1% in March.
Merrill Lynch & Co. Inc. is in talks with Peter Kraus, a former asset management chief of The Goldman Sachs Group Inc., to try to lure him to oversee the firm’s strategy, Bloomberg reported.
Mr. Kraus left Goldman Sachs in March after two decades at the New York-based securities firm; most recently, he was co-head of its asset management division.
Merrill Lynch’s chief executive, John Thain, who worked at Goldman Sachs for 25 years, is trying to recruit more staff members from his old firm in an effort to restore profitability after three straight quarterly earnings losses, according to Bloomberg.
JPMorgan Chase & Co. of New York has hired 30 senior managing directors formerly of The Bear Stearns Cos. Inc., according to Bloomberg News.
JPMorgan has also informed at least 50 people in Bear Stearns’ European-equities-and-sales division that they will not have a future with the company when the firms’ upcoming merger is completed.
That group comprised around 27 people from the London equity sales team of Bear, as well as one-third of research personnel.
OpINion/online appears on the web and in IN Daily every Wednesday. Comments are welcome at IN Editor@InvestmentNews.
How does that old Wall Street saying go?
Oh yes, “Fool me once, shame on me. Fool me twice, I’m taking you to arbitration.”
With the kind of hosing many customers have received from Wall Street’s biggest firms as a result of the auction-rate securities mess, I wouldn’t be surprised if the old adage gets a new twist: “No fooling me again, Wall Street, because after the lawsuit, I’m going away and not coming back.”
F-Squared Investments LLC today launched a new separately managed account, the Individually Managed Account, with an investment minimum of $15,000 and all-in fees to advisers of 0.55% a year.
The fee includes trading, custody, performance, reporting and transaction costs, according to the Wellesley, Mass.-based investment adviser firm.
The F-Squared account is being made available to registered investment advisors via the Foliofn trading and custody platform.
