Thursday, July 31, 2008

Ex-JPMorgan banker arrested

Former JPMorgan Chase & Co. banker Hernan Arbizu was arrested on Monday in Buenos Aires on charges that he stole nearly $5.4 million from the accounts of customers at UBS AG and JPMorgan Chase & Co., according to published reports.

Prosecutors at the U.S. District Court in New York said that Mr. Arbizu, a former vice president in the private banking division at JPMorgan, was charged with embezzlement by a bank officer, bank fraud, identity theft and 12 counts of wire fraud, according to Dow Jones Newswires.

Lawsuit filed against MFS

A class action has been filed against MFS Investment Management Inc. of Boston on behalf of investors who purchased Class A shares of certain MFS stock funds in the total amount of less than $50,000 from July 28, 2003 through July 28, 2008 and paid a load or commission.

The law firm of Barrack Rodos & Bacine of Philadelphia announced yesterday that it has filed the suit in the U.S. District Court for the Middle District of Pennsylvania.

Wednesday, July 30, 2008

When clients are knowledgeable

Do you know as much about retirement distribution planning as your clients and prospects? You'd better hope so. If not, you will lose those clients; maybe not now, but very soon.

Consumers are getting smarter. In recent seminars I've conducted, they have been asking me better and tougher questions about taking money out of their retirement plans and individual retirement accounts. They want advisers with answers.

That represents an opportunity, because if you can do the distribution planning your clients desperately need, you are in the best possible position to increase your business. The key is to begin providing these services before your clients move their retirement money to a more knowledgeable adviser.

Texas files action against UBS

The Texas State Securities Board in Austin submitted a filing yesterday that could partially suspend UBS AG from operating as a securities dealer in the Lone Star State until those who purchased auction rate securities from the firm are reimbursed.

The action comes amid other state investigations into auction rate securities sold by Zurich, Switzerland-based UBS after the market froze in February.

The securities are designed as long-term investments whose rates are reset periodically in weekly or monthly auctions.

Tuesday, July 29, 2008

United Healthcare hit with hefty fine

United Healthcare Insurance Co. and United Healthcare of North Carolina Inc. will pay a $786,655.87 fine as part of a settlement with the North Carolina insurance department.

Greensboro, N.C.-based United Healthcare of North Carolina Inc. and United Healthcare Insurance Co. of Hartford, Conn., had problems with settling and paying claims, thus violating state laws, according to the state insurance department.

This settlement wraps up a 2007 agreement between 40 insurance regulators and United Healthcare.

More write-downs seen for European banks

European banks will face another 17.6 billion euros ($27.7 billion) in write-downs stemming from leveraged loans and the subprime-mortgage crisis, according to JPMorgan Chase & Co. of New York.

The new estimate is an increase from the firm’s original estimate of 13 billion euros ($20.3 billion), Bloomberg News reported.

Deutsche Bank AG of Frankfurt, Germany, may write down another $7.7 billion, and UBS AG of Zurich, Switzerland, may mark down another $6.3 billion, JPMorgan said.

Monday, July 28, 2008

NYLI launches five-year fixed annuity

New York Life Insurance Co. has introduced a five-year fixed annuity with a five-year interest rate guarantee.

The Select 5 fixed-interest annuity is a single-premium product that is guaranteed for five years.

At the end of that period, clients get full access to their money.

Among the features of the new product, clients are permitted to make 10% withdrawals free of surrender charges during the first five years of the annuity.

Omnibus housing legislation poised for vote

A sweeping housing bill that would aid ailing mortgage giants Fannie Mae of Washington and Freddie Mac of McLean, Va., and help struggling mortgage holders is one step closer to becoming law today after the Senate voted 80-13 to limit debate on the legislation.

The Senate is now poised to approve the American Housing Rescue and Foreclosure Prevention Act and send it to President Bush, who has vowed to sign the bill into law.

Sunday, July 27, 2008

Top Citi executive steps down

Michael Klein, vice chairman of Citigroup Inc. and chairman of its institutional-clients group, is leaving to pursue other opportunities, ending his 23-year career with the company.

He had held both positions since March.

Prior to that, Mr. Klein was chairman and co-chief executive of markets and banking, responsible for global corporate and investment banking.

In a statement, Citigroup chief executive Vikram Pandit thanked him for making “invaluable contributions” to the company and for being instrumental in its “growth and success.”

Goldman exec drafted to fight credit crisis

One of Goldman Sachs Group Inc.’s key banking leaders, Ken Wilson, is leaving the securities firm on a temporary basis to serve as an adviser to Secretary of the Treasury Henry Paulson, The Wall Street Journal reported.

Mr. Wilson, who is chairman of New York-based Goldman Sachs’ financial institutions group, will work Mr. Paulson to come up with solutions on how to address the country’s credit crisis.

President Bush made a personal phone call to Mr. Wilson last week asking for his assistance, according to the Journal.

Saturday, July 26, 2008

Long term care issues addressed at hearing

Regulators and insurance executives yesterday addressed consumer protections for long term care insurance before the House Committee on Energy and Commerce.

Consumer protections and state partnership arrangements with insurance companies were among the topics at the hearing, which took place before the subcommittee on oversight and investigations.

An issue hampering the LTC industry is the matter of denied claims, noted Bonnie Burns, a training and policy specialist at California Health Advocates in Scott Valley, Calif.

Fido names institutional wealth exec

Fidelity Investments of Boston today named Joseph A. Giordano executive vice president of relationship management for its institutional wealth services business, which provides trading, custody and brokerage services to registered investment advisers, trust institutions and third-party administrators.

Previously, he worked for 12 years at JPMorgan Chase & Co. of New York, the past two years as managing director of global client services for the firm’s worldwide-securities-services business.

Friday, July 25, 2008

Congress passes sweeping housing bill

The House of Representatives overwhelmingly approved a bill late yesterday to provide $300 billion in funding to troubled homeowners and aid ailing mortgage giants Fannie Mae and Freddie Mac.

The legislation supporting the government-sponsored enterprises now heads to the Senate, where it is expected to pass by a narrow margin and could be signed into law by President Bush later this week, published reports said.

The bill, called the American Housing Rescue and Foreclosure Prevention Act, had faced a veto threat from President Bush because $3.9 billion was earmarked for neighborhoods hit hardest by foreclosures, but the White House dropped its opposition early yesterday.

Citigroup rebuffs calls for breakup

Citigroup Inc. of New York has brushed aside calls for the breakup of the bank, claiming that it has enough liquidity to avoid such a fate.

In a conference call yesterday, treasurer Zion Shohet said that Citigroup had increased its liquidity from $24 billion on Dec. 31 to $60 billion as of June 30.

Former Citigroup chief executive Sanford Weill and William Smith of SAM Advisors LLC of New York have called for the breakup of the bank.

Thursday, July 24, 2008

‘Decrepit decade’ may be worst ever

This decade looks to be one of the worst for stocks since the Great Depression.

On an annual-compounded-total-return basis, the Standard & Poor’s 500 stock index returned just 0.06% a year for the decade through June, according to Ibbotson Associates Inc. of Chicago.

That isn’t much better than the return the index produced during the 1930s, when investors lost an average 0.05% a year.

Adjusted for inflation, though, the S&P 500 is down 2.95% this decade — well below the 2.04% real advance during the 1930s when the economy experienced a 2% rate of deflation.

SIV still struggling after Goldman bailout

A structured investment vehicle formerly known as Cheyne Finance PLC that was bailed out a month ago by The Goldman Sachs Group Inc. is continuing to struggle with little interest shown in an auction of its assets held this week, according to published reports.

The $7 billion SIV Portfolio PLC of Dublin, Ireland, which was formerly managed by London-based Cheyne Capital Management (U.K.) LLP, only pay investors with claims in the securities 44% of face value.

Wednesday, July 23, 2008

Naked selling sharply curtailed by SEC

The Securities and Exchange Commission yesterday issued an emergency order against “naked” short selling of securities of mortgage lenders Fannie Mae of Washington, Freddie Mac of McLean, Va., as well as primary dealers at commercial and investment banks.

Naked short selling is the practice of selling a stock short and borrowing shares to cover the sale within the standard three-day settlement period, according to the SEC.

'Say on pay' fervor flags in firms

Support for a shareholder advisory vote on executive compensation is losing steam in the financial services sector, according to a report released today by The Corporate Library of Portland, Me.

While shareholder support for “say on pay” proposals is growing in general — to 42% this year from 41% in 2007 — the proposal lost support at eight banks and wirehouses that voted on such initiatives in both years.

Those firms are Capital One Financial Corp. of McLean, Va., Citigroup Inc. of New York, JPMorgan Chase & Co. of New York, Merrill Lynch & Co. Inc. of New York, Morgan Stanley of New York, U.S. Bancorp of Minneapolis, Wachovia Corp. of Charlotte, N.C., and Wells Fargo & Co. of San Francisco.

Tuesday, July 22, 2008

Wachovia outlook 'bleak,' analyst says

Meredith Whitney, an analyst at Oppenheimer & Co. of New York, said the earnings outlook for Wachovia Corp. has been “drastically diminished” and that prospects for shareholders of the bank are “bleak,” according to Bloomberg.

Ms. Whitney reduced her rating for the Charlotte, N.C.-based bank to “underperform” from “perform.”

Additionally, she predicted that the company will record a loss of $1.35 per share this year and 35 cents per share next year. She had previously estimated that the company would see a profit of $1.55 per share this year and $2.65 next year.

Citi beats Street, Merrill mauled

Citigroup lost $2.5 billion, or 54 cents per share, in the second quarter, compared with earnings of $6.23 billion, or $1.24 per share, in the year-ago period.

Steep as the loss was, however, it could have been worse: analysts surveyed by Thomson Reuters had expected the New York-based bank to lose 67 cents per share.

The loss was caused by $7.2 billion in write-downs of Citigroup's investments in mortgages, as well as other loans, and $745 million in asset revaluation costs in its consumer lending business.

Monday, July 21, 2008

FBI casts wide net for mortgage fraud

In the wake of a federal takeover of IndyMac Bancorp Inc., the Federal Bureau of Investigation is investigating 21 mortgage companies for possible mortgage lending fraud.

The Pasadena, Calif.-based lender was shut down Friday by the Office of Thrift Supervision and its assets seized by the Federal Deposit Insurance Corp. when the regulators doubted the bank could meet its depositors’ withdrawal demands.

IndyMac is one of the banks being investigated, according to law enforcement sources cited in published reports, though the FBI declined to name the companies.

First Allied to woo First Montauk reps

First Allied Securities Inc. has paid First Montauk Financial Corp. a $250,000 advance to pick up the latter’s affiliated registered representatives and advisers and persuade them to change firms, the companies said this morning in a statement.

This deal likely signals the end of First Montauk, said Victor Kurylak, the firm’s president and chief executive.

“I anticipate an orderly wind-down of the business,” he said. "The intent is for First Allied to take all the reps."

Sunday, July 20, 2008

Van Eck ETF ventures into African markets

Van Eck Global launched the Market Vectors-Africa Index exchange traded fund on the NYSE Arca Inc. today, allowing investors to invest in African equity markets directly.

The ETF, which is listed under the ticker symbol AFK, is designed to track the Dow Jones Africa Titans 50 Index.

The index measures the stock performance of 50 companies that generate a majority of their revenue in Africa and spans 11 countries, such as South Africa, Egypt, Morocco, Nigeria, Ghana and Zambia.

Wachovia office searched for ARS docs

Securities regulators from more than five states raided the St. Louis headquarters of Wachovia Securities LLC, seeking documents and records related to the company’s sale of auction rate securities.

The regulators, led by officials from the office of Missouri secretary of state Robin Carnahan, executed subpoenas seeking information concerning Wachovia Securities’ sales practices, internal evaluations of the auction rate securities market and marketing strategies, Ms. Carnahan said in a statement.

Saturday, July 19, 2008

Deutsche Asset unit renames, re-brands

DWS Scudder, Deutsche Asset Management's U.S. and worldwide retail-asset-management organization, has changed its name to DWS Investments.

The move is intended to align itself with Deutsche's worldwide retail-asset-management organization, the firm announced in a press conference yesterday.

As part of its re-branding strategy, the U.S. retail division of Deutsche Asset Management Inc. of New York has unveiled a new slogan and website to highlight the division's approach.

Tech survey, Scivantage and Windham

Adviser survey highlights technology pain

In a recent survey, 321 advisers were asked to identify their three biggest areas of difficulty out of 10 system areas.

Most problematic were document management, customer relationship management and portfolio management.

As part of the survey, advisers were also asked questions about custodial support.

“An interesting disconnect in the survey results comes from the fact that while custodian support is rated highly generally, respondents didn’t rate custodians as offering them support in these three most painful areas,” said Mike Slemmer, principal of The Collaborative of Minneapolis and co-founder of Advisors Trusted Advisor Seems like it’s in Mass.

Friday, July 18, 2008

Inflation rises at fastest pace in 17 years

The consumer price index, a key measure of inflation, zoomed up 1.1% in June as skyrocketing food and energy costs pulled more money out of consumers’ pockets, according to a report from the Department of Labor.

The index had risen 0.6% in May.

The increase marked the largest monthly jump since the index grew by 1.3% in September 2005.

The CPI has risen 5% since June 2007, marking the highest year-over-year increase since the 5.3% jump between February 1990 and February 1991.

Senator: Tax havens are ‘economic warfare’

Charging that the United States loses as much as $100 billion a year to “tax havens” like Switzerland and Liechtenstein, Senate Homeland Security and Governmental Affairs Committee Chairman Carl Levin, D-Mich., today called on Congress to enact legislation that would make it easier to tax U.S. citizens who transfer assets to such shelters.

A 114-page report was released today at a hearing held by the committee’s permanent subcommittee on investigations, the result of a six-month investigation into UBS AG of Zurich, Switzerland, and LGT Group, a private bank owned by the royal family of Liechtenstein and based in Vaduz.

Thursday, July 17, 2008

More write-downs loom at banks

It’s a foregone conclusion that Merrill Lynch & Co. and Citigroup Inc. will post enormous losses yet again when they report second-quarter results later this week.

Even JPMorgan Chase & Co., which has avoided the worst of the mortgage crisis, is expected to post a 60% drop in profits, according to Crain's New York Business.

As bruised and bloodied as these three banks are, more difficulties lie ahead.

“There is still tons of junk on banks' balance sheets, and no one knows just how bad it is,” said Graham Summers, chief executive of GPS Capital Research.

Senators seek to cap loans from 401(k)s

Legislation setting limits on the number of loans that can be taken from 401(k) plans as well as prohibitions on 401(k) debit cards is to be introduced today by Senate Special Committee on Aging Chairman Herbert Kohl, D-Wis., and Sen. Charles Schumer, D-N.Y.

Loans taken from 401(k) plans are increasing in number as well as size, according to a study released at a Senate hearing today.

The legislation “will protect people’s nest eggs from companies peddling debit cards that deplete their retirement savings with a simple swipe,” Mr. Schumer said in a statement.

Wednesday, July 16, 2008

Wachovia names Treasury honcho CEO

Wachovia Corp. has selected Robert K. Steel, undersecretary for domestic finance in the Department of the Treasury, as its new president and chief executive.

The hiring of Mr. Steel concludes a six-week search that started in June after the Charlotte, N.C.-based firm’s board of directors asked G. Kennedy Thomson to leave in the wake of write-downs, bad acquisitions and weak financial results.

Prior to his work for the government, Mr. Steel spent 28 years at Goldman Sachs Group Inc. of New York.

Bear Stearns alum starts up $1B hedge fund

A former Bear Stearns hedge fund manager has opened her own firm with nearly $1 billion in assets, according to published reports.

Melissa Ko, who generated annual returns of more than 25% while running the Emerging Markets Macro Fund at New York-based The Bear Stearns Cos. Inc. from 2005 to 2007, has formed hedge fund firm Covepoint Capital in New York.

She was part of the Bear Stearns Asset Management division that held

Tuesday, July 15, 2008

Fed to put brakes on dicey loans

As shaky housing data continues to roll in, the Federal Reserve will issue new lending rules next week to restrict the issuance of complex mortgages and high-cost loans for people with weak credit, said Federal Reserve Board Chairman Ben S. Bernanke.

Speaking before the Federal Deposit Insurance Corp.'s Forum on Mortgage Lending for Low and Moderate Income Households in Arlington, Va., Mr. Bernanke also suggested that the Fed may extend its lending program for investment banks into the next year.

Report: Feds probe alleged ARS con

David Hoffman

Federal prosecutors are investigating whether two former New York-based brokers with Credit Suisse Group of Zurich, Switzerland, lied to investors when they put their clients into auction rate preferred securities, according to a report in today’s Wall Street Journal.

Eric Butler and Julian Tzolov resigned from Credit Suisse on Sept. 7 amid accusations by clients that they were misled about the auction rate securities they bought, the paper said.

Monday, July 14, 2008

Study: Mutual fund proxy votes back management

Mutual funds voted in favor of management proposals more than 90% of the time in 2007, a study by the Investment Company Institute in Washington found.

The study, released today at a conference in Washington on mutual fund proxy voting sponsored by Washington think-tank American Enterprise Institute for Public Policy Research, showed that 83% of the proxy votes were cast in uncontested elections of corporate directors and ratification of audit firms.

Sunday, July 13, 2008

LSE reports strong first quarter

The London Stock Exchange reported today that revenue grew 8% to $352.3 million in the first quarter.

Average daily-order-book-cash-equities trading grew 17% to 936,000 trades.

The total number of initial public offerings dropped to 73, from 140 a year earlier, but the amount raised jumped 82% to $61.4 billion.

“The exchange has delivered a good performance, achieving growth despite weak market conditions in a changing

SEC cites 'shortcomings’ at ratings firms

After a 10-month examination of three major credit rating agencies, the Securities and Exchange Commission said today that it has uncovered major problems in the way they rated subprime-mortgage securities.

“We’ve uncovered serious shortcomings at these firms,” SEC chairman Christopher Cox said at a news conference at the commission’s headquarters in Washington.

The problems, outlined in a report released today by the SEC, include a lack of disclosure to investors and to the public when the firms deviated from their own procedures when rating structured products, insufficient policies to manage the ratings process, and lack of attention to conflicts of interest.

Student loan firm floats ARS

The trust company GCO Education Loan Funding Master Trust-II said today that it has commenced a tender offer to purchase certain outstanding senior auction rate student loan asset-backed notes.

Similar student loan products are struggling due to the credit crunch, and there is hope that this offer will bring some liquidity back into GCO’s securities, a spokesman said.

The securities available for purchase during the nearly one-month auction include Series 2006-2 and Series 2007-1 in the classes A-1AR, A-2AR, A-3AR, A-4AR, A-5AR, A-6AR and A-7AR for aggregate cash consideration not to exceed $40 million.

Saturday, July 12, 2008

T. Boone unveils ‘Pickens Plan’

You might expect the founder of the largest independent oil company in the country to be pleased about the high price oil is fetching in America.

But T. Boone Pickens, founder and manager of the hedge fund BP Capital of Dallas, today outlined a plan for the United States to end its dependence on foreign oil.

The Pickens Plan, as he’s dubbed it, calls for greater energy independence and emphasizes increased investment in solar and wind energy, according to published reports.

Trade gap narrows in May

The U.S. trade deficit contracted by 1.2% in May as the value of goods and services exported increased faster than those that were brought in, according to a report from the Department of Commerce.

The gap between imports and exports fell to $59.8 billion in May from a revised reading of $60.5 billion in April, which was smaller than the $60.9 billion that was previously estimated.

Exports increased 0.9% to $157.5 billion in May, while imports rose 0.3%.

Friday, July 11, 2008

Master limited partnerships

Master limited partnerships offer good income opportunities for retirees.

From a tax standpoint, however, the MLP structure is a bit complicated. It comprises a general partner who operates the business and limited partners who provide the capital. Limited partnership units can be purchased on major stock exchanges by investors.

MLPs are also referred to as publicly traded partnerships.

The Internal Revenue Code generally requires that MLPs produce at least 90% of their income from certain natural-resource-related activities. As a result, MLPs tend to operate in natural-resource industries, which can include the transportation, mining, exploration, storage and marketing of these resources.

Janus ups stake in Chicago asset manager

Janus Capital Group Inc. has announced plans to purchase an additional 50% ownership interest in Chicago-based Perkins Wolf McDonnell and Co. LLC for $90 million.

PWM has been the subadviser to the Janus Small Cap Value Fund (JSCVX) since its inception in 1987 and the Janus Mid Cap Value Fund (JMCVX) since its inception in 1998.

In 2003, Janus purchased a 30% ownership stake in PWM, so once the deal closes, Janus will own 80% of the firm.

Thursday, July 10, 2008

Cit helps billionaire buy hockey team

Despite the recent global credit turmoil that has caused four consecutive quarterly losses at Cit Group Inc., the commercial finance company is bullish on the future of the National Hockey League.

To that end, it has completed a $100 million loan agreement with Canadian billionaire Daryl Katz so that he may purchase the Edmonton Oilers.

The loan from New York-based Cit will allow Mr. Katz, owner of the Edmonton, Alberta-based pharmaceutical company Katz Group Canada Ltd., to complete his $200 million deal to buy the Oilers, which was first announced over the winter.

An evening of worldly wines and fashion

IN Practice appears on the web and in IN Daily every Monday. Comments and questions are welcome at IN Editor@InvestmentNews.

INPractice for July: Successful Events from Top Advisers

Week 1: An evening of worldly wines and fashion

Week 2: Gardening is golden (and nutritional)

Week 3: Retirement management simplified: health care options, rollover distribution reviews and assisted-living alternatives

Week 4: Spreading the cheer – a holiday charity event at a local children’s hospital

Wednesday, July 9, 2008

Mutual fund pioneer John Templeton dies

John Templeton, a pioneer in the mutual fund industry, as well as an investor and philanthropist, died today in the Bahamas at age 95, according to the John Templeton Foundation website.

Mr. Templeton, who was born in Winchester, Tenn., in 1912 and was a Rhodes Scholar at the University of Oxford in the United Kingdom, began his career on Wall Street in 1937 and went on to create several tremendously successful funds.

He sold his group of funds to Franklin Resources Inc. of San Mateo, Calif., in 1992 for $440 million.

NYSE trade volume jumps as markets swoon

NYSE Euronext Inc. reported strong transaction volume during the first half of 2008, compared with the year-ago period, highlighted by volatile markets and especially heavy trading in June.

The New York-based exchange operator's U.S. cash exchanges, the New York Stock Exchange and NYSE Arca, reported total volume increases of 8.5% in June 2008 and 16.1% year-to-date, compared with the comparable period in 2007.

NYSE Euronext's U.S. exchanges posted gains in trading volume across most product categories since the beginning of 2008, compared with the comparable period in 2007. The gains included a 7.8% increase in trading volume for NYSE-listed issues, 114.3% in NYSE Arca- and Amex-listed issues, 0.1% in Nasdaq-listed issues and 63.5% in ETFs.

Tuesday, July 8, 2008

Mayhew named SEC’s ass't chief economist

Stewart Mayhew, assistant chief economist of the Securities and Exchange Commission, has been promoted to deputy chief economist in its Office of Economic Analysis, the agency announced today.

He joined the SEC staff in 2002 as a visiting academic scholar and has been assistant chief economist since 2004, leading a group that does economic analysis and support for the SEC’s Division of Investment Management, Division of Trading and Markets, and Office of Compliance Inspections and Examinations.

Moody’s structured finance boss gets boot

Amid an internal investigation to determine the cause of a modeling error that affected ratings of around $1 billion in credit products, the head of Moody’s Investors Service’s global structured finance business, Noel Kirnon, has been fired.

The unit of New York-based Moody’s Corp. announced yesterday that Mr. Kirnon’s position as head of structured finance will be filled by chief credit officer Andrew Kimball until a permanent replacement is found.

Sunday, July 6, 2008

HandR Block gets bump from subprime offload

H&R Block Inc. posted its first quarterly earnings profit since 2006 in the fourth quarter that ended April 30.

Net income jumped to $543.6 million or $1.66 a share, compared with a loss of $85.6 million, or 26 cents, in the year-ago period.

The Kansas City, Mo.-based tax services provider credited the gain to its exit from the subprime-mortgage business, which had caused more than $1 billion in previous losses.

Earnings from continuing operations were up 21% to $691.1 million, or $2.11 per share, from the $591.2 million, or $1.81 per share, reported for the fourth quarter of 2007.

Charges against AIG Global exec dropped

Federal prosecutors have dropped charges against David B. Pinkerton, a former executive at AIG Global Investment Group Inc., in connection with a supposed scheme to bribe Azerbaijan officials over the privatization of the State Oil Company of the Azerbaijan Republic.

A clerk for Judge Shira A. Scheindlin of Federal District Court in New York confirmed that the judge had signed an order dismissing the charges against Mr. Pinkerton at the government's request, Dow Jones Newswires reported.

Saturday, July 5, 2008

Munis take soft hit despite ARS woes

Despite the deterioration of the auction rate securities market, sales of new long-term municipal bonds declined only slightly in the second quarter compared with the same period last year, according to a report issued yesterday by Thomson Reuters of New York.

Second-quarter volume totaled $226.3 billion, a 1.3% drop from $229.3 billion of the same period last year.

Year-to-date volume through June 30, however, represented

Structuring of beneficiary designations

IN Retirement appears on the web and in IN Daily every Thursday. Comments are welcome at IN Editor@InvestmentNews.

Smart advisers don’t rely on a client’s memory about beneficiary designations; they ask to see paperwork, and not just on retirement accounts.

People name beneficiaries on their non-retirement securities and bank accounts, called transfer on death accounts, and often with very unhappy consequences for their heirs.

Beneficiary designations override the instructions in a will. As a result, they can instantly undo a carefully crafted estate plan, said Andrea Wasser, associate counsel at The Vanguard Group Inc. of Malvern, Pa.

Friday, July 4, 2008

REITs can offer soft landings, analyst says

Nervous investors seeking safe havens from today’s economic turmoil might look at certain equity real estate investment trusts that are offering safe, attractive dividend yields for steady returns, according to a research note by a JPMorgan analyst today.

Michael Mueller, an analyst at New York-based JP Morgan Chase & Co., said REIT dividend yields offer stable income.

However, he cautioned, it’s important that investors choose REITs that are having no trouble generating the cash flow needed to cover the dividend payments.

Morgan's global commodity chief to retire

Morgan Stanley's global commodities head John Shapiro is retiring later this year, capping 24 years at the Wall Street giant, according to an internal memo.

The New York-based firm has been stung by recent commodities trading losses, which contributed to a 57% drop in second-quarter earnings (InvestmentNews June 18).

Simon Greenshields and Colin Bryce will succeed Mr. Shapiro, the memo said.

Mr. Greenshields is currently in charge of Morgan Stanley’s natural gas and power trading business while Mr. Bryce is head of the investment bank’s European commodities business.

Thursday, July 3, 2008

BofA concludes $2.5B Countrywide buy

Bank of America Corp. has completed its takeover of failed mortgage lender Countrywide Financial Corp. of Calabasas, Calif., nearly three months after agreeing to purchase the high-profile victim of the subprime-mortgage crisis.

The Charlotte, N.C.-based bank’s $2.5 billion acquisition of Countrywide will greatly expand its role in the mortgage business, making the bank the nation’s largest “mortgage lender and servicer,” according to a statement from the company.

Manufacturing sector shows some life

The national manufacturing sector grew in June for the first time since January, according to the Institute for Supply Management’s monthly report on factory activity, which is compiled from data provided by purchasing and supply executives.

The ISM factory index increased to a reading of 50.2 in June from 49.6 in May.

The production index increased to 51.5 in June from 51.2 in May while supplier deliveries jumped to a reading of 55.1 from 53.7 the previous month, according to the data issued by the Tempe, Ariz.-based ISM.

Wednesday, July 2, 2008

Manager turned sex offender gets jail time

Jeffrey Epstein, a billionaire money manager from New York, pleaded guilty Monday to soliciting prostitution and using the services of a prostitute under the age of 18, according to published reports.

In a plea agreement filed in West Palm Beach, Fla., he was sentenced to 18 months in jail followed by a year of house arrest.

Mr. Epstein was also designated a sex offender and may have no unsupervised contact with minors following his release.

CIT jettisons home lending unit

CIT Group Inc. shares surged 25% this morning after the commercial-finance company announced plans to sell its home lending business and manufactured-housing portfolio for $1.8 billion in cash and the assumption of debt.

The sales fulfill the company’s plan to exit the troubled residential-mortgage sector and focus solely on commercial finance.

New York-based CIT will sell its home lending business to Lone Star Funds of Dallas for $1.5 billion in cash and the assumption of $4.4 billion in debt and related liabilities.

Tuesday, July 1, 2008

New mutual fund to ape hedge performance

Hedge fund performance replication has come to the mutual fund industry in the form of the IQ Alpha Hedge Strategy Fund, which was launched yesterday.

The fund, which does not yet have a ticker symbol, is designed to mimic the performance of the IQ Alpha Hedge Fund Index, which was created in December and is based on several underlying strategies that were established in March 2007.

Interest in hedge funds has grown enormously over the past decade, however, the vast majority of investors have not had access to this important asset class,” said Adam Patti, chief executive of IndexIQ, the Rye Brook, N.Y.-based company that created the index and is managing the mutual fund.

Legg Mason rescues money markets

Legg Mason Inc. will contribute $240 million to bail out three money market funds of one of its subsidiaries hurt by exposure to risky asset-backed securities and weak markets in June.

The Baltimore-based money manager's capital support agreements with the Western Asset Management in Pasadena, Calif. will terminate in nine to 12 months.

As a result of the bailout, Legg expects to post a charge of $154.5 million, or $1.09 per share, for the quarter ended June 30.