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Friday 16 January 2009
How to Stop Men Smoking
But at the expense of more women smokers.
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Downturn raises odds at Singapore casinos
By Muhammad Cohen Jan 15, 2009
SINGAPORE - When the Sands Macao opened in 2004, Asia's first Las Vegas-style casino prompted an extraordinary boom for Macau and casino owner Las Vegas Sands (LVS). Thereafter, Singapore's Prime Minister Lee Hsien Loong reversed decades of ruling party opposition to approve two casino resorts, hoping to emulate Macau's and LVS's success.
Macau and LVS are now both reeling as the world's economies take a turn for the worse, and some analysts forecast Singapore's integrated resorts (IRs), the first due to open at the end of this year, may be following in those footsteps. Conceived in prosperity to win a competitive bidding process that attracted the world's top gaming operators and contracted during a regional construction wave, Singapore's IRs will be the world's most expensive casino resorts constructed, costing up to US$6 billion. The global economic downturn, and falling revenue at Macau's casinos, now cast dark shadows over those heady plans.
A further shadow was cast by Taiwan's parliament this week when it voted to legalize gambling on offshore islands, paving the way for an alternative destination for gamblers in the region. AMZ Holdings, a United Kingdom-listed property development company, is poised to build the island's first casino, and hopes to agree with an international gaming group a joint venture to develop on a site it owns, the Financial Times reported.
Taiwan officials have indicated that two or three gaming licenses will be issued once subsidiary legislation is passed, and two state-owned sites have been set aside for potential development, the report said. The first casino is expected to open its doors for business in 2013.
The Singapore resorts will need to produce annual earnings before interest, taxes, depreciation and amortization (EBITDA) of $1 billion, according to a source with knowledge of the industry and specifics of the two projects, who asked not to be named. That's nearly double the EBITDA at the world's most successful casino, the source contends.
Prosperous 8
"The number [of visitors needed] for keeping the integrated resorts afloat is 8 million," Gillian Koh, senior research fellow at Singapore's public-private Institute for Policy Studies (IPS) think-tank, says. Last year's total of 10.1 million tourism-related arrivals means each visitor would need to visit one IR and more than half would need to visit both.
Singapore expects the IRs will boost visitor numbers, but that's not guaranteed. Last year, despite the successful debut of the Singapore Grand Prix, arrivals fell 2% from 2007, according to the Singapore Tourism Board (STB). The STB has forecast 2009 as a "challenging" year. The greatest challenge, of course, is the global economy, which began cutting into Singapore's business and leisure arrivals during the second half of last year.
Singapore conceived casino legalization as part of a plan to boost visitor arrivals to 17 million, double the island state's 2004 level. The premise behind the IRs was simple: licensing a 15,000 square meter (161,000 square foot) casino at each IR would ensure enormous profits to subsidize world class, non-gaming attractions drawing more visitors.
"Singapore wanted two tourist facilities from the IRs: a MICE [meetings, incentives, conventions, exhibitions] oriented hotel on the bay and a theme park," Singapore International Chamber of Commerce executive director Phil Overmyer says. STB offered bidders two IR sites, in Marina Bay near downtown and on Sentosa, an island off Singapore's south shore, and Singapore got what it wanted in spades.
LVS won the Marina Bay bid by promising Asia's largest convention center at 120,000 million square meters to leverage its MICE expertise. Under chairman Sheldon Adelson, LVS transformed Las Vegas into a convention destination, and Singapore hopes for similar magic in Marina Bay. Beyond the convention and gaming floors, Marina Bay Sands features include a museum, shopping mall, two Broadway style theaters, and 2,600 hotel rooms. LVS promised in its bid to open the entire complex by the end of 2009.
Even though the three hotel towers are currently barely a third of their planned 53 stories, LVS still says it will open Marina Bay Sands this year, and STB still lists the IR's debut as a highlight for 2009. As predicted on this site, (see Singapore, Sands stand by their bets, November 13, 2008), in November, Singapore authorities have granted permission for a phased opening, with the first phase likely to include little more than the gaming floor and some token amenities. The government also approved raising the casino's table count from 600 to 1,000.
Million bucks an hour
Singapore took those steps in response to LVS's brush with insolvency late last year, marking the end of an incredible chapter of wealth creation dating to the Sands Macao opening. LVS chairman Adelson earned $1 million an hour for two years, as tallied by The New York Times, after taking LVS public in late 2004.
LVS committed $10 billion to expansion on Macau's Cotai landfill linking its outer islands with the $2.3 billion Venetian Macao, an update of its Las Vegas flagship resort, as the centerpiece. Fueled by China loosening travel restrictions and the opening of the Venetian, Macau overtook Las Vegas at the top of the global gaming revenue charts in 2007. When LVS sold its Grand Canal Shoppes mall in Las Vegas for $766 million, chief operating officer William Weidner said the company's motivation was "to take all that money and dump it over in Cotai".
That's turned out to be a regrettable turn of phrase. Troubles for LVS began in Las Vegas in the middle of last year, with high gas prices and the deteriorating US economy cutting revenue at its Venetian and Palazzo resorts. Then China tightened travel restrictions and Macau's gaming revenue growth slowed. In September, revenues began falling year-on-year for the first time since 2004.
Heavily leveraged to support its edifice complex, lower income brought LVS to the brink of violating its loan covenants, threatening to throw the company into technical default. Its share price fell from a high of above $160 to below $5. Since September, Adelson has put $1 billion of his own money back into LVS. Overall, the company has raised more than $2.5 billion in new capital and suspended new developments in Macau, opting to complete Marina Bay Sands instead.
"Adelson would be better off to take Marina Bay than what he has in Las Vegas," Devin Kimble, managing director of Singapore restaurant and catering group Menu, said. LVS has talked with Kimble about putting a microbrewery in Marina Bay. "I've certainly rethought it" after seeing what's happened at Venetian Macao, Kimble said.
Some analysts believe LVS and Macau fell prey to particular circumstances that won't impact Singapore's casinos. "China did not restrict money and travel out of China," IPS researcher Koh notes. That's true, but Koh and her colleagues are also investigating whether that analysis misses the point. When China limited visits to Macau, the Chinese leadership sent a message that it was unhappy with the exodus of money from the mainland to Macau's casino tables. Slowing growth at home won't make China more receptive to money heading even further overseas to Singapore.
Fish story
Genting International won the Sentosa site, promising not one but two theme parks. Its 49-hectare Resorts World at Sentosa includes the only Universal Studios theme park in Southeast Asia and the world's largest oceanarium. Genting's Highlands resort near Kuala Lumpur is Malaysia's only legal casino and popular with tourists from Singapore, so the company may have gone overboard to protect its home turf. According to one insider, when Genting learned that its main rival was proposing a 175,000 fish oceanarium, it upped the ante to 400,000 fish.
The Resorts World complex also includes a maritime museum, a resident performance spectacle, outdoor sound and light shows by the creator of the Fremont Street Experience in Las Vegas, six hotels with 1,800 rooms ranging from hardcore luxury to Hard Rock, and meeting space for up to 35,000. Building world-class destinations carries world-class price tags.
Marina Bay Sands was initially budgeted at $3.85 billion, already making it the world's more expensive casino resort, and Resorts World was budgeted at just over $3 billion. Both IRs broke ground during a building boom, locally and across much of Asia. Higher material prices, driven by rising global commodity prices, produced cost overruns. LVS currently estimates Marina Bay Sands' completion cost at $4.5 billion, and Genting says Resorts World will cost $4 billion, including $53 million to widen a bridge to improve access to the island. Some analysts contend those budgets reflect phased openings and that the final bill for each completed resort could top $6 billion, a challenge to profitably in any economy.
"Marina Bay Sands will be a magnet for tourists and business people to come to the region," University of Nevada-Las Vegas Singapore campus dean Andy Nazarechuk says. "Resorts World is going to be more impacted by the global financial situation. Families are trying to watch their budgets, and a big vacation is something you forego in tough times."
But Singapore Management University president Howard Hunter sees it differently. "The Genting project is so different, it has a good chance of success in the near term," Hunter says. "Over 15-20 years, Marina Bay Sands will be all right, too, but the economic climate will not be good for the next two to three years."
"Bad economic times are always good for gambling," contends Aaron Brown, author of The Poker Face of Wall Street. "But depression gamblers want inexpensive, no-frills action close to home. They don't travel far for fancy casinos. With business conventions and extravagant splurges dead, and capital costs sky-high, it's going to be tough for Singapore and Macau casinos."
Taking a global view, Brown says, "Relative to other casinos, Singapore has advantages and disadvantages. Asia has been less affected by the bad times than other parts of the world, and the casinos are still under construction. If financing problems can be overcome, the recession might push costs down and allow the projects to be ready just when things swing up again.
"In the worst case, the projects will collapse, or will bleed money for years, then seem rundown and out-of-date when things recover, the Atlantic City story," Brown concludes. "In the best case, the projects will get completed under budget and kick off the recovery, at least an Asian recovery, in high style."
When LVS opened its Sands Macao casino in 2004, it set a record by recouping its cost in less than a year. Building Sands Macao, then the world's largest casino, cost $265 million. Each Singapore IR will cost at least 15 times as much, and be far more to operate than Sands Macao, which had no facilities beyond the gaming floor and a handful of restaurants. In any economic climate, Singapore's IRs will be hard-pressed to generate 15 times more profit.
Hedge Funds Lost $350 Billion in 2008 Amid Global Market Rout
By Tomoko Yamazaki
Jan. 13 (Bloomberg) -- Hedge funds lost $350 billion globally in 2008, the most on record, as the biggest financial crisis since the Great Depression crippled returns and caused investors to pull money out, according to an industry report.
About 90 percent of the money was lost in the three months to the end of November, according to a preliminary report published today by Singapore-based data provider Eurekahedge Pte. Funds that invested in North America declined the most, posting a drop of $183 billion for the year, the report said.
The hedge-fund industry shrank by about a fifth to $1.5 trillion at the end of the year from a peak of $1.9 trillion, Eurekahedge said. Funds including Citadel Investment Group LLC suffered investment losses and client withdrawals. Some funds were forced to sell assets at fire-sale prices as the credit crisis forced banks that lent money to hedge funds to withdraw their loans.
“A coordinated slowdown everywhere has led the hedge-fund industry to shrink,” said Peter Douglas, principal of hedge- fund consulting firm GFIA Pte in Singapore. “Everyone has been caught in a liquidity trap.”
Eurekahedge’s figures are estimates based on the 39 percent of the funds that have so far disclosed performance figures to the research firm.
Hedge funds posted a 12.3 percent loss over the year, based on the Eurekahedge Hedge Fund Index, which tracks more than 2,000 funds worldwide. That compares with a 13 percent gain in 2007 and is the first decline since Eurekahedge began publishing the figures in 2000.
December Gains
Hedge funds added 1 percent on average in December, the first increase in seven months. The funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.
Decisions by hedge-fund managers including Kenneth Griffin’s Citadel Investment Group LLC and Paul Tudor Jones’s Tudor Investment Corp. to limit redemptions spread to smaller funds in Asia as investors unable to raise cash elsewhere sought to sell out of the funds.
The collapse of U.S. investment bank Lehman Brothers Holdings Inc. in September fueled a rout that halved the value of equity markets worldwide to about $30 trillion in 2008. The MSCI World Index, which tracks shares in 23 developed nations, tumbled a record 42 percent last year as credit-related losses at financial firms topped $1 trillion.
Lehman’s Demise, Madoff
Lehman’s demise rocked hedge funds that relied on investment banks’ prime-brokerage units to make loans, clear trades and handle administrative tasks, forcing more than 80 managers to liquidate hedge funds, segregate assets and limit withdrawals.
The industry also suffered when U.S. authorities charged Bernard Madoff with securities fraud for directing an alleged $50 billion Ponzi scheme.
“The Madoff scandal has led to investors becoming more suspicious about hedge funds,” said Mitsushige Akino, who oversees about $430 million as chief investment officer at Tokyo-based Ichiyoshi Investment Management Co. “The redemption-spree is going to last for quite some time.”
Managers that trade futures, so-called CTAs, and macro-fund managers, who wager on trends in stocks, bonds and currencies, were the best performers, gaining 17 percent and 1.9 percent respectively, according to Eurekahedge. Those investing in distressed debt were the worst performers, declining 27 percent.
HSBC, UBS May Be Liable on Madoff as Fund Custodians
By Alan Katz, Jon Menon and Vernon Silver
Jan. 15 (Bloomberg) -- HSBC Holdings Plc and UBS AG may be liable for as much as $3.2 billion of losses linked to Bernard Madoff in a dispute over the duties of financial custodians at funds in Luxembourg and Ireland.
At stake is the image of the European fund industry, French Finance Minister Christine Lagarde wrote in a Jan. 12 letter to the European Commission and Luxembourg Prime Minister Jean-Claude Juncker. European funds’ assets increased 59 percent to 6.8 trillion euros ($9 trillion) over the past six years, partly because rules protecting investors made them attractive.
“If they aren’t required to pay the money, then investor protection doesn’t mean anything and people might as well just invest in offshore funds,” said Isabelle Wekstein-Steg, a lawyer at Wan Avocats in Paris who is representing 10 French retail investors and two institutions that face Madoff-related losses at Luxembourg funds. “UBS didn’t do its job of knowing at all times where the assets were, and the same with HSBC.”
Custodians are charged with oversight of funds, and they manage cash inflows and payments to investors. Those looking to recoup money would have to prove the banks failed to fulfill their duties, according to nine lawyers surveyed by Bloomberg News. HSBC has said it isn’t liable and UBS declined to comment on the issue.
HSBC and UBS’s custodian roles for the Luxembourg funds are limited because they were set up by investors specifically looking to place money with Madoff, said Paul Mousel, co-head of the financial services practice at law firm Arendt & Medernach in Luxembourg. He’s representing both banks.
‘Very Small Role’
“The arrangements that were put in place from the beginning are arrangements that gave to the custodian a very, very, very small role to play, especially regarding the safekeeping of the securities, which allegedly would have been purchased by the investors’ moneys,” Mousel said.
Wekstein-Steg sent a letter on Jan. 9 to Luxembourg’s financial regulator on behalf of her clients requesting that custodians reimburse their investments.
It’s impossible to say whether the custodian has any exposure without seeing the contracts of each fund, according to Julian Randall, a lawyer at Barlow Lyde & Gilbert LLP in London.
“What is clear is that there is unlikely to be any point to suing Madoff himself, and those who have lost money will be looking very hard at anyone, like HSBC, who was close to the action and also has assets,” he said.
Thema International Fund Plc and AA (Alternative Advantage) Plc filed a lawsuit against HSBC on Dec. 19 in Dublin’s High Court, according to court records. The suit charges that HSBC wasn’t able to confirm that assets in the funds were safe.
‘Potential Exposure’
London-based HSBC has $1 billion of “potential exposure” after making loans to institutional clients who invested with Madoff, it has said. Madoff’s firm collapsed last month after he told his sons it was a $50 billion Ponzi scheme, according to a complaint filed by the U.S. Federal Bureau of Investigation.
HSBC spokesman Patrick McGuinness declined to comment beyond the company’s Dec. 15 statement that it “does not believe its custodial arrangement should be a source of exposure to the group.”
UBS, based in Zurich, has said it doesn’t have material exposure to Madoff’s firm and declined to comment on the liability issue.
What Investors Wanted
“Bernard L. Madoff Investment Securities LLC and Madoff’s collective investment vehicles were not on the UBS Wealth Management recommended list as direct investment options,” spokeswoman Tatiana Togni wrote in a Jan. 12 e-mail in response to questions. At the $1.4 billion LuxAlpha Sicav-American Selection fund in Luxembourg, for which UBS is a custodian, “UBS has supported wealthy individuals by establishing a fund structure at their request.”
In a separate custodial issue, a Luxembourg court today ruled that UBS’s local unit must give a French money manager the 30 million euros ($39 million) the bank is holding on its behalf. Oddo & Cie. sold shares of LuxAlpha in November. UBS didn’t send the funds after Madoff’s Dec. 11 arrest because, as custodian, it needed to ensure that any action it took was in the interest of all investors, Mousel said on Jan. 12.
If investors do pry money from the custodians, it would add to the combined $81.7 billion in writedowns and credit losses UBS and HSBC have reported since the start of the global financial crisis in 2007.
UBS rose 1.5 percent to 13.81 Swiss francs ($12.30) at 2:24 p.m. in Zurich. HSBC was down 4.8 percent at 560.5 pence ($8.19) in London.
EU Review
Funds sold in the European Union to retail customers must follow rules on how money can be invested, called the Undertaking for Collective Investment in Transferable Securities, or UCITS. The rules also set out the responsibilities of custodian banks. Liability is determined under national laws in each member state.
The EU said yesterday that it’s reviewing how rules that require EU-regulated mutual funds to safeguard clients’ assets are enforced around the 27-country bloc.
France’s Lagarde said in her letter that not all member states impose the strict obligation for custodians to reimburse investors for assets that were entrusted to them, as France does.
Luxembourg Budget Minister Luc Frieden said French criticism of investor protection rules in the country is unjustified. The laws for custodian banks in Luxembourg are “identical” to those in France, he said.
Ireland, Luxembourg
Luxembourg and Ireland have worked to become distribution centers for investment funds, said Bernard Delbecque, director of economics and research at the European Fund and Asset Management Association. Luxembourg accounted for 30 percent of the overall 5.2 trillion euros of assets in UCITS funds in Europe at the end of September, he said. Ireland ranked third with 11 percent, behind France.
This month, financial regulators in both countries said in separate statements that custodians retain responsibility for monitoring and supervising funds, even if assets are placed with a third party.
Luxembourg’s rules specify that the custodian’s role should be seen as supervisory, “which implies that the depositary must have knowledge at any time of how the assets of the UCI have been invested and where and how these assets are available,” according to a document by the country’s central bank.
UBS is the custodian for LuxAlpha and the $419 million Luxembourg Investment Fund-U.S. Equity Plus, both of which are covered by UCITS. HSBC is the custodian for the $226 million Herald LUX-US Absolute Return Fund and Dublin-based $1.1 billion Thema International Fund Plc. The net asset values are the most recent provided by each fund, according to Bloomberg data.
Redemptions Suspended
The Thema and Herald funds are managed by Bank Medici AG, the Austrian bank founded by Sonja Kohn, whose clients invested $3.2 billion in Madoff funds. The Luxembourg Investment Fund is managed by UBS, and LuxAlpha by Access International Advisors, whose chief executive offer, Thierry Magon de la Villehuchet, was found dead Dec. 23 at his office in New York.
All four funds have suspended redemptions.
Two investors in the Thema fund said they invested in European funds to benefit from the added protection that brought.
Bernd Greisinger, a money manager in Liechtenstein who runs the BG Umbrella Fund for LRI Invest SA, said he chose Thema because it was a European-regulated fund that had to be deposited through a bank. Greisinger put in an order at the end of November to sell Thema shares for $2 million to $3 million. He hasn’t received the funds, he said.
Glenn Gramolini, a Geneva-based manager of Themis MN Fund PLC, which invested in Thema six years ago, said he bought the fund because the money was in the custody of a respected bank.
“Nowhere in the prospectus was it written that the funds would be handed to Madoff,” he said. “He would have been managing the funds. I would never invest in the funds when a manager is a custodian.”
TORONTO (Reuters) - Nortel Networks Corp, North America's biggest telephone equipment maker, filed for bankruptcy on Wednesday, hoping to save a once highflying business whose decade-long decline has accelerated with the global economic crisis.
The filing marks a crucial stage in the slow deterioration of one of Canada's most prominent companies. Nortel, a stock market darling before the tech bubble burst and still one of the country's largest employers, has struggled for years in an industry that has changed radically since Nortel's heyday in the late 1990s.
Analysts said Nortel will have to shed assets -- likely at rock-bottom prices -- in its fight for survival. The company will likely cease to exist in its current form, they said.
A sharp slowdown in many of Nortel's major markets, especially the United States, has exacerbated its long-standing problems competing with low-cost rivals. The company warned last month that its business was under increased pressure, and its cash position and liquidity were deteriorating.
"It's obviously a remarkable transformation from where it was as the largest company in Canada worth about 35 percent of the (Toronto Stock Exchange) in 2000," said Gavin Graham, director of investments at BMO Asset Management in Toronto.
"But this is a reflection of the way that the telecommunications industry has changed."
Telecom companies have slashed spending on the equipment that Nortel makes as the global economy has cooled. But for years the company has faced intense competition from North American and European rivals such as Alcatel-Lucent and Ericsson, as well as Asian vendors such as Huawei Technologies.
The shares have tumbled along with the company's fortunes, sinking into penny-stock territory in recent months. In mid-2000, at the zenith of the company's success, they were worth more than C$1,100 each, adjusted for a stock consolidation that took place in late 2006.
On Wednesday they plunged more than 60 percent to 15 Canadian cents on the Toronto Stock Exchange. The exchange said it was reviewing the stock for possible delisting.
"AVOIDING SLOW DEATH"
Before the stock market opened on Wednesday, Nortel said it and a number of its affiliates filed for Chapter 11 bankruptcy protection in the United States, giving it time to reorganize. It also filed for protection in Canada, and some of its European subsidiaries are expected to make similar filings.
"They're avoiding a slow death by doing this," UBS analyst Nikos Theodosopoulos. "The company is going to have to sell assets and change its focus. It's not going to be the same company."
The filing came a day before the Toronto-based company was due to make an interest payment of about $107 million.
"Based on this filing, the board of directors must believe that not only is the fourth quarter bad, but that the first quarter is going to be just as bad or worse," said Duncan Stewart, an analyst at DSAM Consulting in Toronto.
"Although they have cash in the short term, even the medium-term outlook is not enough to make the company viable as a going concern."
As it stands, Nortel is still a big part of Corporate Canada, with 32,000 employees and major operations in Ottawa, considered the country's high-tech hub. But its payroll has reflected its fortunes, shrinking from 90,000 in 2000.
The Canadian government pledged to help Nortel emerge from bankruptcy protection, and a government agency agreed to provide up to C$30 million in short-term financing.
According to its court filing in U.S. bankruptcy court for the district of Delaware, the Bank of New York Mellon, in its role as trustee, is Nortel's largest unsecured creditor, with claims valued at nearly $4 billion. Flextronics, a key supplier, is also named as a major creditor.
NARROWER FOCUS
Nortel said it expects to operate without interruption while in Chapter 11 and that it will still serve its customers worldwide. It said it has about $2.4 billion in cash.
"This process will allow Nortel to deal decisively with its cost and debt burden, to effectively restructure its operations and to narrow its strategic focus in an effective and timely manner," the company said in a statement.
Asked whether Nortel faces the possibility of having to liquidate its assets, CEO Mike Zafirovski told Reuters that Nortel is working to exit bankruptcy protection as "a nimbler, more focused and successful company."
He declined to discuss asset sales or possible layoffs that may take place in wake of the filing.
In November, it reported a $3.4 billion third-quarter loss, cut its 2008 outlook and announced 1,300 layoffs, or about 5 percent of its workforce. It also said it would freeze salary increases, cut back on consultants and review its real estate portfolio.
Nortel's 10.75 percent notes due in 2016 plummeted almost 10 cents on Wednesday to 15 cents on the dollar as its yield rose to more than 75 percent, versus 50 percent on Tuesday, according to MarketAxess data. The notes traded as high as 28.25 cents on January 6.
Science - Finger length may predict financial success
Randolph E Schmid 13 Jan 2009
WASHINGTON (AP) – The length of a man's ring finger may predict his success as a financial trader. Researchers at the University of Cambridge in England report that men with longer ring fingers, compared to their index fingers, tended to be more successful in the frantic high-frequency trading in the London financial district.
Indeed, the impact of biology on success was about equal to years of experience at the job, the team led by physiologist John M. Coates reports in Monday's edition of Proceedings of the National Academy of Sciences.
The same ring-to-index finger ratio has previously been associated with success in competitive sports such as soccer and basketball, the researchers noted.
The length ratio between those two fingers is determined during the development of the fetus and the relatively longer ring finger indicates greater exposure to the male hormone androgen, the researchers noted.
Previous studies have found that such exposure can lead to increased confidence, risk preferences, search persistence, heightened vigilance and quickened reaction times.
In a separate study last year, Coates and colleagues reported that the hormone that drives male aggression and sexual interest also seemed able to boost short term success at finance.
They studied male financial traders in London, taking saliva samples in the morning and evening. They found that those with higher levels of testosterone in the morning were more likely to make an unusually big profit that day. Testosterone, best known as the male sex hormone, affects aggression, confidence and risk-taking.
In the new study, the researchers measured the right hands of 44 male stock traders who were engaged in a type of trade that involved rapid decision-making and quick physical reactions.
Over 20 months those with longer ring fingers compared to their index fingers made 11 times more money than those with the shortest ring fingers. Over the same time the most experienced traders made about 9 times more than the least experienced ones.
Looking only at experienced traders, the long-ring-finger folks earned 5 times more than those with short ring fingers.
While the finger ratio, showing fetal exposure to male hormones, appears to signal likely success in high-actively trading that calls for risk-taking and quick reactions, it may not indicate people who would do well at other sorts of financial activities, the researchers said.
Some traders require additional skills on dealing with clients and sales workers.
And the advantage may even reverse for some, Coates team said, such as traders taking a more analytical and long-term approach to the markets.
One study, which looked at average finger ratios in university departments found that faculty from math, science and engineering exhibited longer index finger ratio, rather than ring finger, they noted.
1. The US has made a new weapon that destroys people but keeps the building standing; it's called the stock market. - Jay Leno
2. Do you have any idea how cheap stocks are? Wall Street is now being called Wal Mart Street. - Jay Leno
3. The difference between a pigeon and a London investment banker. The pigeon can still make a deposit on a BMW.
4. What's the difference between a guy who lost everything in Las Vegas and an investment banker? A tie.
5. The problem with investment bank balance sheet is that on the left side nothing's right and on the right side nothing's left.
6. I want to warn people from Nigeria who might be watching our show, if you get any e-mails from Washington asking for money, it's a scam. Don't fall for it. - Jay Leno
7. Bush was asked about the credit crunch. He said it was his favourite candy bar. - Jay Leno
8. The rescue bill was about 450 pages. President Bush's copy is even thicker. They had to include pictures. - Jay Leno
9. President Bush's response was to meet some small business owners in San Antonio last week. The small business owners are General Motors, General Electric and Century 21. - Jay Leno
10. What worries me most about the credit crunch, is that, if one of my cheques is returned stamped 'insufficient funds'. I won't know whether that refers to mine or the bank's.
NEW STOCK MARKET TERMS
CEO --Chief Embezzlement Officer.
CFO -- Corporate Fraud Officer.
BULL MARKET -- A random market movement causing an investor to mistake himself for a financial genius.
BEAR MARKET -- A 6 to 18 month period when the kids get no allowance, the wife gets no jewelry.
VALUE INVESTING -- The art of buying low and selling lower.
BROKER -- What my broker has made me.
STANDARD & POOR -- Your life in a nutshell.
STOCK ANALYST -- Idiot who just downgraded your stock.
STOCK SPLIT -- When your ex-wife and her lawyer split your assets equally between themselves.
FINANCIAL PLANNER -- A guy whose phone has been disconnected.
MARKET CORRECTION -- The day after you buy stocks.
CASH FLOW-- The movement your money makes as it disappears down the toilet.
YAHOO -- What you yell after selling it to some poor sucker for $240 per share.
WINDOWS -- What you jump out of when you're the sucker who bought Yahoo @ $240 per share.
INSTITUTIONAL INVESTOR -- Past year investor who's now locked up in a nuthouse.
London, Jan 14 (ANI): Ladies who have extra-marital affairs can blame it on their hormones, claims a new study, which found that women with high levels of estrogen not only look and feel pretty but are also more prone to hop from man to man.
Estrogen, the so-called female hormone, affects fertility and makes women dress more provocatively.
Dr. Kristina Durante of The University of Texas at Austin and colleagues found that young women felt more attractive when they had high levels of an estrogen known as estradiol, and they acted on those feelings, reports New Scientist.
"These women are willing to trade up when the opportunity arises and continue to extract these lucrative resources from men when they can," says Kristina Durante, an evolutionary psychologist at the University of Texas in Austin, who led the study.
She thinks the behaviour could be an adaptation to the high costs of giving birth. "For women it’s all about the resources that we need. If you’re going to be getting knocked up there’s a significant cost," she says.
To reach the conclusion, Durante’s team tested 52 female undergraduates aged 17 to 30 who were not taking hormone contraceptives. They took two estradiol samples from each, as hormone levels fluctuate from week to week.
They had the women rate their own attractiveness and showed their photographs to others to rate, as well. As independent confirmation, a panel of two men and seven women also judged them the prettiest.
High oestradiol women reported that they had dated more men and were more willing to cheat, from innocent flirts to serious affairs. These women, however, proved no more interested in one-night stands than women with lower levels of oestradiol.
The study has been published in the journal Biology Letters. (ANI)
FUND VIEW-Investors can wait for 20-30 pct drop in stocks-Citi
By Saeed Azhar
SINGAPORE, Jan 16 (Reuters) - Investors could wait for another 20-30 percent decline in global stocks before buying shares as there will be more pain in store for the world economy and markets, a Citigroup private bank strategist said on Friday.
"We think that, for example, a 20-30 percent decline in markets would give us a good opportunity to find lower entry points for people looking for broad-based entry into the market," Norman Villamin, head of research and strategy at Citi Private Bank, told Reuters in an interview.
"We think we will see better entry points as we move towards mid-year. There is still some economic pain to come, there is still some pain in the markets to come."
Villamin, who joined Citi in 2007 from HSBC and advises affluent and super rich clients on investments, said global stocks are trading at 1.5-1.6 times price-to-book value, or the top-end of a 1-1.6 times level they had traditionally traded in during a pre-bubble period.
"If you look at the Japanese experience, what you had was a period of very stable valuations pre-1985. From 1985 to 1989 you had a very large bubble in valuations and then the bubble popped and Japanese valuations collapsed over the next decade to pre-bubble levels."
He said corporate earnings are not going to improve in the near-term therefore valuations should be lower.
For long-term investors, Villamin recommends being overweight on stocks and investment-grade bonds and underweight government debt and cash as returns are diminishing.
Citi also recommends being overweight on U.S. and emerging market stocks and being underweight on Europe, which he said, will lag the United States in recovery.
"For long-term buy and hold investors who are looking at 3-5 years, we think equities look quite attractive, we think U.S. investment-grade bonds look quite attractive," he said.
BOTTOM
Villamin said the global economy could hit a bottom by the third quarter of this year, helped by fiscal stimuli that will help revive sagging consumer demand as well as capital injections and asset sales that would repair balance-sheets of global banks.
"The new capital that comes in needs to outpace these writedowns. We think that was not the case in 2008," he said.
Citi expects the global economy to grow at 0.5 percent in 2009 and a below-trend 2.5 percent in 2010.
Citi, once the world's largest bank and now No. 3 in the United States, said on Tuesday it would combine its Smith Barney brokerage and other units with Morgan Stanley's (MS.N) wealth management unit.
For a FACTBOX on U.S. banks' market capitalisation please click [ID:N15483876]
Villamin said unlike the United States, Asia is suffering from a cyclical downturn in the global economy and should start to benefit when economies start recovering.
Citi's key global theme for investors is to look at infrastructure as an asset class, focusing on the energy sector.
"Even as oil prices are bottoming here, we think that the needs in the energy infrastructure space are dramatic."
LONDON (Reuters) - Societe Generale said on Thursday that the United States' economy looks likely to enter a depression and China's could implode.
In a highly bearish note, veteran cross asset strategist Albert Edwards said investors should now cut equity exposure after a turn-of-the-year rally and prepare for a rout.
He predicted that the S&P 500 index of U.S. stocks could be set for a fall of around 40 percent from recent levels.
Edwards also raised the danger of a global trade war with China.
"While economic data in developed economies increasingly reflects depression rather than a deep recession, the real surprise in 2009 may lie elsewhere," Edwards wrote.
"It is becoming clear that the Chinese economy is imploding and this raises the possibility of regime change. To prevent this, the authorities would likely devalue the yuan. A subsequent trade war could see a re-run of the Great Depression."
Edwards has long been one of the most bearish analysts in London, first with Dresdner Kleinwort and then with SocGen.
But he called in October for clients to increase their exposure to equities, which he said were due a rebound.
"We believe that the market is (now) set to quickly slide sharply toward our 500 target for the S&P," he said.
The S&P 500 .SPX stock index is currently at 842, up about 14 percent since hitting a low in November.
Jan. 16 (Bloomberg) -- The U.S. government agreed to invest $20 billion more in Bank of America Corp. and guarantee $118 billion of its assets to help the lender absorb Merrill Lynch & Co. and prevent the financial crisis from deepening.
The government agreed to the rescue “as part of its commitment to support financial-market stability,” the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. said in a joint statement shortly after midnight in Washington.
Today’s emergency action shows officials so far have failed to quell concerns about the viability of some of the biggest banks even after deploying $350 billion of a financial-rescue fund and a doubling of the Fed’s balance sheet. The announcement came after a day in which Bank of America and Citigroup Inc. shares both tumbled amid concern of rising credit losses.
“This is more short-term fire-fighting tactics,” said Ed Rogers, chief executive officer at Tokyo-based hedge-fund adviser Rogers Investment Advisors Y.K. “Once again, the U.S. government does not seem to be thinking in terms of final solutions to the problem.”
The U.S. already had injected $15 billion into Bank of America, the country’s biggest lender, and another $10 billion to Merrill to bolster the combined company against the global credit crunch.
Citigroup Model
The plan mirrors the government’s emergency actions with Citigroup in November, which explicitly insured the bank against losses on toxic assets with taxpayers footing the bill. The U.S. backed up a $306 billion portfolio of Citigroup real-estate loans and securities, sharing losses beyond $29 billion on what were likely to be some of the bank’s worst holdings.
With today’s Bank of America deal, the government will protect a $118 billion pool of assets that a U.S. official said includes residential and commercial real-estate holdings and credit-default swaps. The official spoke to reporters on a conference call on condition of anonymity.
The $20 billion purchase of preferred shares, which carry an 8 percent dividend, will be made today. The funds come from the first half of the Treasury’s Troubled Asset Relief Program. Yesterday, the U.S. Senate voted to allow the release of the next $350 billion of the program.
Two-Week Negotiation
Talks between the government and Bank of America have been held for the past couple of weeks, an official said. The Charlotte, North Carolina-based bank told regulators in December it might abandon the takeover because of Merrill’s worse-than- expected results, three people familiar with the matter said before the announcement.
The government insisted the Merrill deal proceed because its collapse would renew turmoil in the financial system, according to the people, who declined to be identified because talks were private.
Bank of America will absorb the first $10 billion of losses in the pool of assets, of which the “large majority” were assumed with the Merrill purchase, the statement said. The company will absorb 10 percent of any additional losses, with the government on the hook for the remainder.
The Fed will backstop assets with a loan, after the government’s first $10 billion in losses, shared by the Treasury and the FDIC.
Future Losses
The asset pool includes cash assets with a current book value of as much as $37 billion and derivatives with maximum potential future losses of as much as $81 billion, according to the term sheet provided by the government.
Separately, the FDIC said today it plans to propose changing its bond-guarantee program for banks to cover debt as long as 10 years, from the current three-year maturity. The FDIC will soon propose rule changes to the Temporary Liquidity Guarantee Program, today’s statement said.
“The U.S. government will continue to use all of our resources to preserve the strength of our banking institutions and promote the process of repair and recovery and to manage risks,” the joint statement said.
Shares of Bank of America plunged 18 percent yesterday, sliding to $1.88 to $8.32 in New York Stock Exchange composite trading after hitting $7.35, its lowest level since February 1991. The bank moved up its fourth-quarter report to today at 7 a.m. New York time.
Earnings Announcement
“The motivation is to try and basically get information to the market sooner rather than later because of all the anxiety that’s out there,” said Bert Ely, chief executive officer of Ely & Co., a bank consulting firm in Alexandria, Virginia. It’s a “very tense situation now,” he said.
Federal Reserve Chairman Ben S. Bernanke earlier this week said troubled assets remain a “continuing barrier to private investment” in financial institutions and recommended that they be extracted with government help. He urged a “comprehensive plan,” with one possibility being to erect a so-called bad bank to purchase and administer the troubled loans and securities.
Bank of America’s Chief Executive Officer Kenneth D. Lewis has spent $129 billion on acquisitions, including regional lenders FleetBoston Financial Corp. and LaSalle Bank, credit-card issuer MBNA and investment manager U.S. Trust Co.
Lewis overreached by rescuing two money-losing companies in six months, including New York-based Merrill Lynch and Calabasas, California-based Countrywide, said analysts including Paul Miller of Friedman Billings Ramsey Group Inc.
“This thing is unraveling so fast that he may know his job is lost,” Miller said.
Bank of America spokesman Robert Stickler said, “We don’t comment on uninformed gossip.”
Merrill Deal
Bank of America on Sept. 15 agreed to buy Merrill Lynch, the world’s largest securities firm, after a weekend of negotiations between Lewis and Merrill CEO John Thain. The $19.4 billion transaction came as Lehman Brothers Holdings Inc. sank into bankruptcy, crippled by the frozen credit markets.
“Bank of America has all kinds of problems with its acquisitions,” said Gary Townsend, president of Hill-Townsend Capital LLC in Chevy Chase, Maryland. “They’ve been so acquisitive, they find themselves with very little in tangible equity.”
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Downturn raises odds at Singapore casinos
By Muhammad Cohen
Jan 15, 2009
SINGAPORE - When the Sands Macao opened in 2004, Asia's first Las Vegas-style casino prompted an extraordinary boom for Macau and casino owner Las Vegas Sands (LVS). Thereafter, Singapore's Prime Minister Lee Hsien Loong reversed decades of ruling party opposition to approve two casino resorts, hoping to emulate Macau's and LVS's success.
Macau and LVS are now both reeling as the world's economies take a turn for the worse, and some analysts forecast Singapore's integrated resorts (IRs), the first due to open at the end of this year, may be following in those footsteps. Conceived in prosperity to win a competitive bidding process that attracted the world's top gaming operators and contracted during a regional construction wave, Singapore's IRs will be the world's most expensive casino resorts constructed, costing up to US$6 billion. The global economic downturn, and falling revenue at Macau's casinos, now cast dark shadows over those heady plans.
A further shadow was cast by Taiwan's parliament this week when it voted to legalize gambling on offshore islands, paving the way for an alternative destination for gamblers in the region. AMZ Holdings, a United Kingdom-listed property development company, is poised to build the island's first casino, and hopes to agree with an international gaming group a joint venture to develop on a site it owns, the Financial Times reported.
Taiwan officials have indicated that two or three gaming licenses will be issued once subsidiary legislation is passed, and two state-owned sites have been set aside for potential development, the report said. The first casino is expected to open its doors for business in 2013.
The Singapore resorts will need to produce annual earnings before interest, taxes, depreciation and amortization (EBITDA) of $1 billion, according to a source with knowledge of the industry and specifics of the two projects, who asked not to be named. That's nearly double the EBITDA at the world's most successful casino, the source contends.
Prosperous 8
"The number [of visitors needed] for keeping the integrated resorts afloat is 8 million," Gillian Koh, senior research fellow at Singapore's public-private Institute for Policy Studies (IPS) think-tank, says. Last year's total of 10.1 million tourism-related arrivals means each visitor would need to visit one IR and more than half would need to visit both.
Singapore expects the IRs will boost visitor numbers, but that's not guaranteed. Last year, despite the successful debut of the Singapore Grand Prix, arrivals fell 2% from 2007, according to the Singapore Tourism Board (STB). The STB has forecast 2009 as a "challenging" year. The greatest challenge, of course, is the global economy, which began cutting into Singapore's business and leisure arrivals during the second half of last year.
Singapore conceived casino legalization as part of a plan to boost visitor arrivals to 17 million, double the island state's 2004 level. The premise behind the IRs was simple: licensing a 15,000 square meter (161,000 square foot) casino at each IR would ensure enormous profits to subsidize world class, non-gaming attractions drawing more visitors.
"Singapore wanted two tourist facilities from the IRs: a MICE [meetings, incentives, conventions, exhibitions] oriented hotel on the bay and a theme park," Singapore International Chamber of Commerce executive director Phil Overmyer says. STB offered bidders two IR sites, in Marina Bay near downtown and on Sentosa, an island off Singapore's south shore, and Singapore got what it wanted in spades.
LVS won the Marina Bay bid by promising Asia's largest convention center at 120,000 million square meters to leverage its MICE expertise. Under chairman Sheldon Adelson, LVS transformed Las Vegas into a convention destination, and Singapore hopes for similar magic in Marina Bay. Beyond the convention and gaming floors, Marina Bay Sands features include a museum, shopping mall, two Broadway style theaters, and 2,600 hotel rooms. LVS promised in its bid to open the entire complex by the end of 2009.
Even though the three hotel towers are currently barely a third of their planned 53 stories, LVS still says it will open Marina Bay Sands this year, and STB still lists the IR's debut as a highlight for 2009. As predicted on this site, (see Singapore, Sands stand by their bets, November 13, 2008), in November, Singapore authorities have granted permission for a phased opening, with the first phase likely to include little more than the gaming floor and some token amenities. The government also approved raising the casino's table count from 600 to 1,000.
Million bucks an hour
Singapore took those steps in response to LVS's brush with insolvency late last year, marking the end of an incredible chapter of wealth creation dating to the Sands Macao opening. LVS chairman Adelson earned $1 million an hour for two years, as tallied by The New York Times, after taking LVS public in late 2004.
LVS committed $10 billion to expansion on Macau's Cotai landfill linking its outer islands with the $2.3 billion Venetian Macao, an update of its Las Vegas flagship resort, as the centerpiece. Fueled by China loosening travel restrictions and the opening of the Venetian, Macau overtook Las Vegas at the top of the global gaming revenue charts in 2007. When LVS sold its Grand Canal Shoppes mall in Las Vegas for $766 million, chief operating officer William Weidner said the company's motivation was "to take all that money and dump it over in Cotai".
That's turned out to be a regrettable turn of phrase. Troubles for LVS began in Las Vegas in the middle of last year, with high gas prices and the deteriorating US economy cutting revenue at its Venetian and Palazzo resorts. Then China tightened travel restrictions and Macau's gaming revenue growth slowed. In September, revenues began falling year-on-year for the first time since 2004.
Heavily leveraged to support its edifice complex, lower income brought LVS to the brink of violating its loan covenants, threatening to throw the company into technical default. Its share price fell from a high of above $160 to below $5. Since September, Adelson has put $1 billion of his own money back into LVS. Overall, the company has raised more than $2.5 billion in new capital and suspended new developments in Macau, opting to complete Marina Bay Sands instead.
"Adelson would be better off to take Marina Bay than what he has in Las Vegas," Devin Kimble, managing director of Singapore restaurant and catering group Menu, said. LVS has talked with Kimble about putting a microbrewery in Marina Bay. "I've certainly rethought it" after seeing what's happened at Venetian Macao, Kimble said.
Some analysts believe LVS and Macau fell prey to particular circumstances that won't impact Singapore's casinos. "China did not restrict money and travel out of China," IPS researcher Koh notes. That's true, but Koh and her colleagues are also investigating whether that analysis misses the point. When China limited visits to Macau, the Chinese leadership sent a message that it was unhappy with the exodus of money from the mainland to Macau's casino tables. Slowing growth at home won't make China more receptive to money heading even further overseas to Singapore.
Fish story
Genting International won the Sentosa site, promising not one but two theme parks. Its 49-hectare Resorts World at Sentosa includes the only Universal Studios theme park in Southeast Asia and the world's largest oceanarium. Genting's Highlands resort near Kuala Lumpur is Malaysia's only legal casino and popular with tourists from Singapore, so the company may have gone overboard to protect its home turf. According to one insider, when Genting learned that its main rival was proposing a 175,000 fish oceanarium, it upped the ante to 400,000 fish.
The Resorts World complex also includes a maritime museum, a resident performance spectacle, outdoor sound and light shows by the creator of the Fremont Street Experience in Las Vegas, six hotels with 1,800 rooms ranging from hardcore luxury to Hard Rock, and meeting space for up to 35,000. Building world-class destinations carries world-class price tags.
Marina Bay Sands was initially budgeted at $3.85 billion, already making it the world's more expensive casino resort, and Resorts World was budgeted at just over $3 billion. Both IRs broke ground during a building boom, locally and across much of Asia. Higher material prices, driven by rising global commodity prices, produced cost overruns. LVS currently estimates Marina Bay Sands' completion cost at $4.5 billion, and Genting says Resorts World will cost $4 billion, including $53 million to widen a bridge to improve access to the island. Some analysts contend those budgets reflect phased openings and that the final bill for each completed resort could top $6 billion, a challenge to profitably in any economy.
"Marina Bay Sands will be a magnet for tourists and business people to come to the region," University of Nevada-Las Vegas Singapore campus dean Andy Nazarechuk says. "Resorts World is going to be more impacted by the global financial situation. Families are trying to watch their budgets, and a big vacation is something you forego in tough times."
But Singapore Management University president Howard Hunter sees it differently. "The Genting project is so different, it has a good chance of success in the near term," Hunter says. "Over 15-20 years, Marina Bay Sands will be all right, too, but the economic climate will not be good for the next two to three years."
"Bad economic times are always good for gambling," contends Aaron Brown, author of The Poker Face of Wall Street. "But depression gamblers want inexpensive, no-frills action close to home. They don't travel far for fancy casinos. With business conventions and extravagant splurges dead, and capital costs sky-high, it's going to be tough for Singapore and Macau casinos."
Taking a global view, Brown says, "Relative to other casinos, Singapore has advantages and disadvantages. Asia has been less affected by the bad times than other parts of the world, and the casinos are still under construction. If financing problems can be overcome, the recession might push costs down and allow the projects to be ready just when things swing up again.
"In the worst case, the projects will collapse, or will bleed money for years, then seem rundown and out-of-date when things recover, the Atlantic City story," Brown concludes. "In the best case, the projects will get completed under budget and kick off the recovery, at least an Asian recovery, in high style."
When LVS opened its Sands Macao casino in 2004, it set a record by recouping its cost in less than a year. Building Sands Macao, then the world's largest casino, cost $265 million. Each Singapore IR will cost at least 15 times as much, and be far more to operate than Sands Macao, which had no facilities beyond the gaming floor and a handful of restaurants. In any economic climate, Singapore's IRs will be hard-pressed to generate 15 times more profit.
Hedge Funds Lost $350 Billion in 2008 Amid Global Market Rout
By Tomoko Yamazaki
Jan. 13 (Bloomberg) -- Hedge funds lost $350 billion globally in 2008, the most on record, as the biggest financial crisis since the Great Depression crippled returns and caused investors to pull money out, according to an industry report.
About 90 percent of the money was lost in the three months to the end of November, according to a preliminary report published today by Singapore-based data provider Eurekahedge Pte. Funds that invested in North America declined the most, posting a drop of $183 billion for the year, the report said.
The hedge-fund industry shrank by about a fifth to $1.5 trillion at the end of the year from a peak of $1.9 trillion, Eurekahedge said. Funds including Citadel Investment Group LLC suffered investment losses and client withdrawals. Some funds were forced to sell assets at fire-sale prices as the credit crisis forced banks that lent money to hedge funds to withdraw their loans.
“A coordinated slowdown everywhere has led the hedge-fund industry to shrink,” said Peter Douglas, principal of hedge- fund consulting firm GFIA Pte in Singapore. “Everyone has been caught in a liquidity trap.”
Eurekahedge’s figures are estimates based on the 39 percent of the funds that have so far disclosed performance figures to the research firm.
Hedge funds posted a 12.3 percent loss over the year, based on the Eurekahedge Hedge Fund Index, which tracks more than 2,000 funds worldwide. That compares with a 13 percent gain in 2007 and is the first decline since Eurekahedge began publishing the figures in 2000.
December Gains
Hedge funds added 1 percent on average in December, the first increase in seven months. The funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.
Decisions by hedge-fund managers including Kenneth Griffin’s Citadel Investment Group LLC and Paul Tudor Jones’s Tudor Investment Corp. to limit redemptions spread to smaller funds in Asia as investors unable to raise cash elsewhere sought to sell out of the funds.
The collapse of U.S. investment bank Lehman Brothers Holdings Inc. in September fueled a rout that halved the value of equity markets worldwide to about $30 trillion in 2008. The MSCI World Index, which tracks shares in 23 developed nations, tumbled a record 42 percent last year as credit-related losses at financial firms topped $1 trillion.
Lehman’s Demise, Madoff
Lehman’s demise rocked hedge funds that relied on investment banks’ prime-brokerage units to make loans, clear trades and handle administrative tasks, forcing more than 80 managers to liquidate hedge funds, segregate assets and limit withdrawals.
The industry also suffered when U.S. authorities charged Bernard Madoff with securities fraud for directing an alleged $50 billion Ponzi scheme.
“The Madoff scandal has led to investors becoming more suspicious about hedge funds,” said Mitsushige Akino, who oversees about $430 million as chief investment officer at Tokyo-based Ichiyoshi Investment Management Co. “The redemption-spree is going to last for quite some time.”
Managers that trade futures, so-called CTAs, and macro-fund managers, who wager on trends in stocks, bonds and currencies, were the best performers, gaining 17 percent and 1.9 percent respectively, according to Eurekahedge. Those investing in distressed debt were the worst performers, declining 27 percent.
HSBC, UBS May Be Liable on Madoff as Fund Custodians
By Alan Katz, Jon Menon and Vernon Silver
Jan. 15 (Bloomberg) -- HSBC Holdings Plc and UBS AG may be liable for as much as $3.2 billion of losses linked to Bernard Madoff in a dispute over the duties of financial custodians at funds in Luxembourg and Ireland.
At stake is the image of the European fund industry, French Finance Minister Christine Lagarde wrote in a Jan. 12 letter to the European Commission and Luxembourg Prime Minister Jean-Claude Juncker. European funds’ assets increased 59 percent to 6.8 trillion euros ($9 trillion) over the past six years, partly because rules protecting investors made them attractive.
“If they aren’t required to pay the money, then investor protection doesn’t mean anything and people might as well just invest in offshore funds,” said Isabelle Wekstein-Steg, a lawyer at Wan Avocats in Paris who is representing 10 French retail investors and two institutions that face Madoff-related losses at Luxembourg funds. “UBS didn’t do its job of knowing at all times where the assets were, and the same with HSBC.”
Custodians are charged with oversight of funds, and they manage cash inflows and payments to investors. Those looking to recoup money would have to prove the banks failed to fulfill their duties, according to nine lawyers surveyed by Bloomberg News. HSBC has said it isn’t liable and UBS declined to comment on the issue.
HSBC and UBS’s custodian roles for the Luxembourg funds are limited because they were set up by investors specifically looking to place money with Madoff, said Paul Mousel, co-head of the financial services practice at law firm Arendt & Medernach in Luxembourg. He’s representing both banks.
‘Very Small Role’
“The arrangements that were put in place from the beginning are arrangements that gave to the custodian a very, very, very small role to play, especially regarding the safekeeping of the securities, which allegedly would have been purchased by the investors’ moneys,” Mousel said.
Wekstein-Steg sent a letter on Jan. 9 to Luxembourg’s financial regulator on behalf of her clients requesting that custodians reimburse their investments.
It’s impossible to say whether the custodian has any exposure without seeing the contracts of each fund, according to Julian Randall, a lawyer at Barlow Lyde & Gilbert LLP in London.
“What is clear is that there is unlikely to be any point to suing Madoff himself, and those who have lost money will be looking very hard at anyone, like HSBC, who was close to the action and also has assets,” he said.
Thema International Fund Plc and AA (Alternative Advantage) Plc filed a lawsuit against HSBC on Dec. 19 in Dublin’s High Court, according to court records. The suit charges that HSBC wasn’t able to confirm that assets in the funds were safe.
‘Potential Exposure’
London-based HSBC has $1 billion of “potential exposure” after making loans to institutional clients who invested with Madoff, it has said. Madoff’s firm collapsed last month after he told his sons it was a $50 billion Ponzi scheme, according to a complaint filed by the U.S. Federal Bureau of Investigation.
HSBC spokesman Patrick McGuinness declined to comment beyond the company’s Dec. 15 statement that it “does not believe its custodial arrangement should be a source of exposure to the group.”
UBS, based in Zurich, has said it doesn’t have material exposure to Madoff’s firm and declined to comment on the liability issue.
What Investors Wanted
“Bernard L. Madoff Investment Securities LLC and Madoff’s collective investment vehicles were not on the UBS Wealth Management recommended list as direct investment options,” spokeswoman Tatiana Togni wrote in a Jan. 12 e-mail in response to questions. At the $1.4 billion LuxAlpha Sicav-American Selection fund in Luxembourg, for which UBS is a custodian, “UBS has supported wealthy individuals by establishing a fund structure at their request.”
In a separate custodial issue, a Luxembourg court today ruled that UBS’s local unit must give a French money manager the 30 million euros ($39 million) the bank is holding on its behalf. Oddo & Cie. sold shares of LuxAlpha in November. UBS didn’t send the funds after Madoff’s Dec. 11 arrest because, as custodian, it needed to ensure that any action it took was in the interest of all investors, Mousel said on Jan. 12.
If investors do pry money from the custodians, it would add to the combined $81.7 billion in writedowns and credit losses UBS and HSBC have reported since the start of the global financial crisis in 2007.
UBS rose 1.5 percent to 13.81 Swiss francs ($12.30) at 2:24 p.m. in Zurich. HSBC was down 4.8 percent at 560.5 pence ($8.19) in London.
EU Review
Funds sold in the European Union to retail customers must follow rules on how money can be invested, called the Undertaking for Collective Investment in Transferable Securities, or UCITS. The rules also set out the responsibilities of custodian banks. Liability is determined under national laws in each member state.
The EU said yesterday that it’s reviewing how rules that require EU-regulated mutual funds to safeguard clients’ assets are enforced around the 27-country bloc.
France’s Lagarde said in her letter that not all member states impose the strict obligation for custodians to reimburse investors for assets that were entrusted to them, as France does.
Luxembourg Budget Minister Luc Frieden said French criticism of investor protection rules in the country is unjustified. The laws for custodian banks in Luxembourg are “identical” to those in France, he said.
Ireland, Luxembourg
Luxembourg and Ireland have worked to become distribution centers for investment funds, said Bernard Delbecque, director of economics and research at the European Fund and Asset Management Association. Luxembourg accounted for 30 percent of the overall 5.2 trillion euros of assets in UCITS funds in Europe at the end of September, he said. Ireland ranked third with 11 percent, behind France.
This month, financial regulators in both countries said in separate statements that custodians retain responsibility for monitoring and supervising funds, even if assets are placed with a third party.
Luxembourg’s rules specify that the custodian’s role should be seen as supervisory, “which implies that the depositary must have knowledge at any time of how the assets of the UCI have been invested and where and how these assets are available,” according to a document by the country’s central bank.
UBS is the custodian for LuxAlpha and the $419 million Luxembourg Investment Fund-U.S. Equity Plus, both of which are covered by UCITS. HSBC is the custodian for the $226 million Herald LUX-US Absolute Return Fund and Dublin-based $1.1 billion Thema International Fund Plc. The net asset values are the most recent provided by each fund, according to Bloomberg data.
Redemptions Suspended
The Thema and Herald funds are managed by Bank Medici AG, the Austrian bank founded by Sonja Kohn, whose clients invested $3.2 billion in Madoff funds. The Luxembourg Investment Fund is managed by UBS, and LuxAlpha by Access International Advisors, whose chief executive offer, Thierry Magon de la Villehuchet, was found dead Dec. 23 at his office in New York.
All four funds have suspended redemptions.
Two investors in the Thema fund said they invested in European funds to benefit from the added protection that brought.
Bernd Greisinger, a money manager in Liechtenstein who runs the BG Umbrella Fund for LRI Invest SA, said he chose Thema because it was a European-regulated fund that had to be deposited through a bank. Greisinger put in an order at the end of November to sell Thema shares for $2 million to $3 million. He hasn’t received the funds, he said.
Glenn Gramolini, a Geneva-based manager of Themis MN Fund PLC, which invested in Thema six years ago, said he bought the fund because the money was in the custody of a respected bank.
“Nowhere in the prospectus was it written that the funds would be handed to Madoff,” he said. “He would have been managing the funds. I would never invest in the funds when a manager is a custodian.”
Nortel files for bankruptcy, shares plunge
By Wojtek Dabrowski
January 14, 2009
TORONTO (Reuters) - Nortel Networks Corp, North America's biggest telephone equipment maker, filed for bankruptcy on Wednesday, hoping to save a once highflying business whose decade-long decline has accelerated with the global economic crisis.
The filing marks a crucial stage in the slow deterioration of one of Canada's most prominent companies. Nortel, a stock market darling before the tech bubble burst and still one of the country's largest employers, has struggled for years in an industry that has changed radically since Nortel's heyday in the late 1990s.
Analysts said Nortel will have to shed assets -- likely at rock-bottom prices -- in its fight for survival. The company will likely cease to exist in its current form, they said.
A sharp slowdown in many of Nortel's major markets, especially the United States, has exacerbated its long-standing problems competing with low-cost rivals. The company warned last month that its business was under increased pressure, and its cash position and liquidity were deteriorating.
"It's obviously a remarkable transformation from where it was as the largest company in Canada worth about 35 percent of the (Toronto Stock Exchange) in 2000," said Gavin Graham, director of investments at BMO Asset Management in Toronto.
"But this is a reflection of the way that the telecommunications industry has changed."
Telecom companies have slashed spending on the equipment that Nortel makes as the global economy has cooled. But for years the company has faced intense competition from North American and European rivals such as Alcatel-Lucent and Ericsson, as well as Asian vendors such as Huawei Technologies.
The shares have tumbled along with the company's fortunes, sinking into penny-stock territory in recent months. In mid-2000, at the zenith of the company's success, they were worth more than C$1,100 each, adjusted for a stock consolidation that took place in late 2006.
On Wednesday they plunged more than 60 percent to 15 Canadian cents on the Toronto Stock Exchange. The exchange said it was reviewing the stock for possible delisting.
"AVOIDING SLOW DEATH"
Before the stock market opened on Wednesday, Nortel said it and a number of its affiliates filed for Chapter 11 bankruptcy protection in the United States, giving it time to reorganize. It also filed for protection in Canada, and some of its European subsidiaries are expected to make similar filings.
"They're avoiding a slow death by doing this," UBS analyst Nikos Theodosopoulos. "The company is going to have to sell assets and change its focus. It's not going to be the same company."
The filing came a day before the Toronto-based company was due to make an interest payment of about $107 million.
"Based on this filing, the board of directors must believe that not only is the fourth quarter bad, but that the first quarter is going to be just as bad or worse," said Duncan Stewart, an analyst at DSAM Consulting in Toronto.
"Although they have cash in the short term, even the medium-term outlook is not enough to make the company viable as a going concern."
As it stands, Nortel is still a big part of Corporate Canada, with 32,000 employees and major operations in Ottawa, considered the country's high-tech hub. But its payroll has reflected its fortunes, shrinking from 90,000 in 2000.
The Canadian government pledged to help Nortel emerge from bankruptcy protection, and a government agency agreed to provide up to C$30 million in short-term financing.
According to its court filing in U.S. bankruptcy court for the district of Delaware, the Bank of New York Mellon, in its role as trustee, is Nortel's largest unsecured creditor, with claims valued at nearly $4 billion. Flextronics, a key supplier, is also named as a major creditor.
NARROWER FOCUS
Nortel said it expects to operate without interruption while in Chapter 11 and that it will still serve its customers worldwide. It said it has about $2.4 billion in cash.
"This process will allow Nortel to deal decisively with its cost and debt burden, to effectively restructure its operations and to narrow its strategic focus in an effective and timely manner," the company said in a statement.
Asked whether Nortel faces the possibility of having to liquidate its assets, CEO Mike Zafirovski told Reuters that Nortel is working to exit bankruptcy protection as "a nimbler, more focused and successful company."
He declined to discuss asset sales or possible layoffs that may take place in wake of the filing.
In November, it reported a $3.4 billion third-quarter loss, cut its 2008 outlook and announced 1,300 layoffs, or about 5 percent of its workforce. It also said it would freeze salary increases, cut back on consultants and review its real estate portfolio.
Nortel's 10.75 percent notes due in 2016 plummeted almost 10 cents on Wednesday to 15 cents on the dollar as its yield rose to more than 75 percent, versus 50 percent on Tuesday, according to MarketAxess data. The notes traded as high as 28.25 cents on January 6.
Science - Finger length may predict financial success
Randolph E Schmid
13 Jan 2009
WASHINGTON (AP) – The length of a man's ring finger may predict his success as a financial trader. Researchers at the University of Cambridge in England report that men with longer ring fingers, compared to their index fingers, tended to be more successful in the frantic high-frequency trading in the London financial district.
Indeed, the impact of biology on success was about equal to years of experience at the job, the team led by physiologist John M. Coates reports in Monday's edition of Proceedings of the National Academy of Sciences.
The same ring-to-index finger ratio has previously been associated with success in competitive sports such as soccer and basketball, the researchers noted.
The length ratio between those two fingers is determined during the development of the fetus and the relatively longer ring finger indicates greater exposure to the male hormone androgen, the researchers noted.
Previous studies have found that such exposure can lead to increased confidence, risk preferences, search persistence, heightened vigilance and quickened reaction times.
In a separate study last year, Coates and colleagues reported that the hormone that drives male aggression and sexual interest also seemed able to boost short term success at finance.
They studied male financial traders in London, taking saliva samples in the morning and evening. They found that those with higher levels of testosterone in the morning were more likely to make an unusually big profit that day. Testosterone, best known as the male sex hormone, affects aggression, confidence and risk-taking.
In the new study, the researchers measured the right hands of 44 male stock traders who were engaged in a type of trade that involved rapid decision-making and quick physical reactions.
Over 20 months those with longer ring fingers compared to their index fingers made 11 times more money than those with the shortest ring fingers. Over the same time the most experienced traders made about 9 times more than the least experienced ones.
Looking only at experienced traders, the long-ring-finger folks earned 5 times more than those with short ring fingers.
While the finger ratio, showing fetal exposure to male hormones, appears to signal likely success in high-actively trading that calls for risk-taking and quick reactions, it may not indicate people who would do well at other sorts of financial activities, the researchers said.
Some traders require additional skills on dealing with clients and sales workers.
And the advantage may even reverse for some, Coates team said, such as traders taking a more analytical and long-term approach to the markets.
One study, which looked at average finger ratios in university departments found that faculty from math, science and engineering exhibited longer index finger ratio, rather than ring finger, they noted.
Understanding the New Economy
1. The US has made a new weapon that destroys people but keeps the building standing; it's called the stock market. - Jay Leno
2. Do you have any idea how cheap stocks are? Wall Street is now being called Wal Mart Street. - Jay Leno
3. The difference between a pigeon and a London investment banker. The pigeon can still make a deposit on a BMW.
4. What's the difference between a guy who lost everything in Las Vegas and an investment banker? A tie.
5. The problem with investment bank balance sheet is that on the left side nothing's right and on the right side nothing's left.
6. I want to warn people from Nigeria who might be watching our show, if you get any e-mails from Washington asking for money, it's a scam. Don't fall for it. - Jay Leno
7. Bush was asked about the credit crunch. He said it was his favourite candy bar. - Jay Leno
8. The rescue bill was about 450 pages. President Bush's copy is even thicker. They had to include pictures. - Jay Leno
9. President Bush's response was to meet some small business owners in San Antonio last week. The small business owners are General Motors, General Electric and Century 21. - Jay Leno
10. What worries me most about the credit crunch, is that, if one of my cheques is returned stamped 'insufficient funds'. I won't know whether that refers to mine or the bank's.
NEW STOCK MARKET TERMS
CEO --Chief Embezzlement Officer.
CFO -- Corporate Fraud Officer.
BULL MARKET -- A random market movement causing an investor to mistake himself for a financial genius.
BEAR MARKET -- A 6 to 18 month period when the kids get no allowance, the wife gets no jewelry.
VALUE INVESTING -- The art of buying low and selling lower.
BROKER -- What my broker has made me.
STANDARD & POOR -- Your life in a nutshell.
STOCK ANALYST -- Idiot who just downgraded your stock.
STOCK SPLIT -- When your ex-wife and her lawyer split your assets equally between themselves.
FINANCIAL PLANNER -- A guy whose phone has been disconnected.
MARKET CORRECTION -- The day after you buy stocks.
CASH FLOW-- The movement your money makes as it disappears down the toilet.
YAHOO -- What you yell after selling it to some poor sucker for $240 per share.
WINDOWS -- What you jump out of when you're the sucker who bought Yahoo @ $240 per share.
INSTITUTIONAL INVESTOR -- Past year investor who's now locked up in a nuthouse.
PROFIT -- An archaic word no longer in use.
High sex hormone 'make women unfaithful'
15 Jan 2009
London, Jan 14 (ANI): Ladies who have extra-marital affairs can blame it on their hormones, claims a new study, which found that women with high levels of estrogen not only look and feel pretty but are also more prone to hop from man to man.
Estrogen, the so-called female hormone, affects fertility and makes women dress more provocatively.
Dr. Kristina Durante of The University of Texas at Austin and colleagues found that young women felt more attractive when they had high levels of an estrogen known as estradiol, and they acted on those feelings, reports New Scientist.
"These women are willing to trade up when the opportunity arises and continue to extract these lucrative resources from men when they can," says Kristina Durante, an evolutionary psychologist at the University of Texas in Austin, who led the study.
She thinks the behaviour could be an adaptation to the high costs of giving birth. "For women it’s all about the resources that we need. If you’re going to be getting knocked up there’s a significant cost," she says.
To reach the conclusion, Durante’s team tested 52 female undergraduates aged 17 to 30 who were not taking hormone contraceptives. They took two estradiol samples from each, as hormone levels fluctuate from week to week.
They had the women rate their own attractiveness and showed their photographs to others to rate, as well. As independent confirmation, a panel of two men and seven women also judged them the prettiest.
High oestradiol women reported that they had dated more men and were more willing to cheat, from innocent flirts to serious affairs. These women, however, proved no more interested in one-night stands than women with lower levels of oestradiol.
The study has been published in the journal Biology Letters. (ANI)
FUND VIEW-Investors can wait for 20-30 pct drop in stocks-Citi
By Saeed Azhar
SINGAPORE, Jan 16 (Reuters) - Investors could wait for another 20-30 percent decline in global stocks before buying shares as there will be more pain in store for the world economy and markets, a Citigroup private bank strategist said on Friday.
"We think that, for example, a 20-30 percent decline in markets would give us a good opportunity to find lower entry points for people looking for broad-based entry into the market," Norman Villamin, head of research and strategy at Citi Private Bank, told Reuters in an interview.
"We think we will see better entry points as we move towards mid-year. There is still some economic pain to come, there is still some pain in the markets to come."
Villamin, who joined Citi in 2007 from HSBC and advises affluent and super rich clients on investments, said global stocks are trading at 1.5-1.6 times price-to-book value, or the top-end of a 1-1.6 times level they had traditionally traded in during a pre-bubble period.
"If you look at the Japanese experience, what you had was a period of very stable valuations pre-1985. From 1985 to 1989 you had a very large bubble in valuations and then the bubble popped and Japanese valuations collapsed over the next decade to pre-bubble levels."
He said corporate earnings are not going to improve in the near-term therefore valuations should be lower.
For long-term investors, Villamin recommends being overweight on stocks and investment-grade bonds and underweight government debt and cash as returns are diminishing.
Citi also recommends being overweight on U.S. and emerging market stocks and being underweight on Europe, which he said, will lag the United States in recovery.
"For long-term buy and hold investors who are looking at 3-5 years, we think equities look quite attractive, we think U.S. investment-grade bonds look quite attractive," he said.
BOTTOM
Villamin said the global economy could hit a bottom by the third quarter of this year, helped by fiscal stimuli that will help revive sagging consumer demand as well as capital injections and asset sales that would repair balance-sheets of global banks.
"The new capital that comes in needs to outpace these writedowns. We think that was not the case in 2008," he said.
Citi expects the global economy to grow at 0.5 percent in 2009 and a below-trend 2.5 percent in 2010.
Citi, once the world's largest bank and now No. 3 in the United States, said on Tuesday it would combine its Smith Barney brokerage and other units with Morgan Stanley's (MS.N) wealth management unit.
For a FACTBOX on U.S. banks' market capitalisation please click [ID:N15483876]
Villamin said unlike the United States, Asia is suffering from a cyclical downturn in the global economy and should start to benefit when economies start recovering.
Citi's key global theme for investors is to look at infrastructure as an asset class, focusing on the energy sector.
"Even as oil prices are bottoming here, we think that the needs in the energy infrastructure space are dramatic."
Depression ahead, prepare for stock rout: SocGen
Jan 15, 2009
LONDON (Reuters) - Societe Generale said on Thursday that the United States' economy looks likely to enter a depression and China's could implode.
In a highly bearish note, veteran cross asset strategist Albert Edwards said investors should now cut equity exposure after a turn-of-the-year rally and prepare for a rout.
He predicted that the S&P 500 index of U.S. stocks could be set for a fall of around 40 percent from recent levels.
Edwards also raised the danger of a global trade war with China.
"While economic data in developed economies increasingly reflects depression rather than a deep recession, the real surprise in 2009 may lie elsewhere," Edwards wrote.
"It is becoming clear that the Chinese economy is imploding and this raises the possibility of regime change. To prevent this, the authorities would likely devalue the yuan. A subsequent trade war could see a re-run of the Great Depression."
Edwards has long been one of the most bearish analysts in London, first with Dresdner Kleinwort and then with SocGen.
But he called in October for clients to increase their exposure to equities, which he said were due a rebound.
"We believe that the market is (now) set to quickly slide sharply toward our 500 target for the S&P," he said.
The S&P 500 .SPX stock index is currently at 842, up about 14 percent since hitting a low in November.
U.S. Gives Bank of America $138 Billion Lifeline
By Scott Lanman and Craig Torres
Jan. 16 (Bloomberg) -- The U.S. government agreed to invest $20 billion more in Bank of America Corp. and guarantee $118 billion of its assets to help the lender absorb Merrill Lynch & Co. and prevent the financial crisis from deepening.
The government agreed to the rescue “as part of its commitment to support financial-market stability,” the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. said in a joint statement shortly after midnight in Washington.
Today’s emergency action shows officials so far have failed to quell concerns about the viability of some of the biggest banks even after deploying $350 billion of a financial-rescue fund and a doubling of the Fed’s balance sheet. The announcement came after a day in which Bank of America and Citigroup Inc. shares both tumbled amid concern of rising credit losses.
“This is more short-term fire-fighting tactics,” said Ed Rogers, chief executive officer at Tokyo-based hedge-fund adviser Rogers Investment Advisors Y.K. “Once again, the U.S. government does not seem to be thinking in terms of final solutions to the problem.”
The U.S. already had injected $15 billion into Bank of America, the country’s biggest lender, and another $10 billion to Merrill to bolster the combined company against the global credit crunch.
Citigroup Model
The plan mirrors the government’s emergency actions with Citigroup in November, which explicitly insured the bank against losses on toxic assets with taxpayers footing the bill. The U.S. backed up a $306 billion portfolio of Citigroup real-estate loans and securities, sharing losses beyond $29 billion on what were likely to be some of the bank’s worst holdings.
With today’s Bank of America deal, the government will protect a $118 billion pool of assets that a U.S. official said includes residential and commercial real-estate holdings and credit-default swaps. The official spoke to reporters on a conference call on condition of anonymity.
The $20 billion purchase of preferred shares, which carry an 8 percent dividend, will be made today. The funds come from the first half of the Treasury’s Troubled Asset Relief Program. Yesterday, the U.S. Senate voted to allow the release of the next $350 billion of the program.
Two-Week Negotiation
Talks between the government and Bank of America have been held for the past couple of weeks, an official said. The Charlotte, North Carolina-based bank told regulators in December it might abandon the takeover because of Merrill’s worse-than- expected results, three people familiar with the matter said before the announcement.
The government insisted the Merrill deal proceed because its collapse would renew turmoil in the financial system, according to the people, who declined to be identified because talks were private.
Bank of America will absorb the first $10 billion of losses in the pool of assets, of which the “large majority” were assumed with the Merrill purchase, the statement said. The company will absorb 10 percent of any additional losses, with the government on the hook for the remainder.
The Fed will backstop assets with a loan, after the government’s first $10 billion in losses, shared by the Treasury and the FDIC.
Future Losses
The asset pool includes cash assets with a current book value of as much as $37 billion and derivatives with maximum potential future losses of as much as $81 billion, according to the term sheet provided by the government.
Separately, the FDIC said today it plans to propose changing its bond-guarantee program for banks to cover debt as long as 10 years, from the current three-year maturity. The FDIC will soon propose rule changes to the Temporary Liquidity Guarantee Program, today’s statement said.
“The U.S. government will continue to use all of our resources to preserve the strength of our banking institutions and promote the process of repair and recovery and to manage risks,” the joint statement said.
Shares of Bank of America plunged 18 percent yesterday, sliding to $1.88 to $8.32 in New York Stock Exchange composite trading after hitting $7.35, its lowest level since February 1991. The bank moved up its fourth-quarter report to today at 7 a.m. New York time.
Earnings Announcement
“The motivation is to try and basically get information to the market sooner rather than later because of all the anxiety that’s out there,” said Bert Ely, chief executive officer of Ely & Co., a bank consulting firm in Alexandria, Virginia. It’s a “very tense situation now,” he said.
Federal Reserve Chairman Ben S. Bernanke earlier this week said troubled assets remain a “continuing barrier to private investment” in financial institutions and recommended that they be extracted with government help. He urged a “comprehensive plan,” with one possibility being to erect a so-called bad bank to purchase and administer the troubled loans and securities.
Bank of America’s Chief Executive Officer Kenneth D. Lewis has spent $129 billion on acquisitions, including regional lenders FleetBoston Financial Corp. and LaSalle Bank, credit-card issuer MBNA and investment manager U.S. Trust Co.
Lewis overreached by rescuing two money-losing companies in six months, including New York-based Merrill Lynch and Calabasas, California-based Countrywide, said analysts including Paul Miller of Friedman Billings Ramsey Group Inc.
“This thing is unraveling so fast that he may know his job is lost,” Miller said.
Bank of America spokesman Robert Stickler said, “We don’t comment on uninformed gossip.”
Merrill Deal
Bank of America on Sept. 15 agreed to buy Merrill Lynch, the world’s largest securities firm, after a weekend of negotiations between Lewis and Merrill CEO John Thain. The $19.4 billion transaction came as Lehman Brothers Holdings Inc. sank into bankruptcy, crippled by the frozen credit markets.
“Bank of America has all kinds of problems with its acquisitions,” said Gary Townsend, president of Hill-Townsend Capital LLC in Chevy Chase, Maryland. “They’ve been so acquisitive, they find themselves with very little in tangible equity.”
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