rayinsight

Pretty Girls from Occupy Wall Street

2011-10-23T13:03:00.001-07:00

Hot Chicks of Occupy Wall Street from Steven Greenstreet on Vimeo.

A lot of fantastic media has been created about the "Occupy" movement. I was watching one video in particular and commented to a friend, "Wow, seeing all those super smart hot chicks at the protest makes me want to be there." He replied, "Hmmm... Yeah, let's go with that."
We instantly went to Tumblr and made hotchicksofoccupywallstreet.tumblr.com. Our original ideas were admittedly sophomoric: Pics of hot chicks being all protesty, videos of hot chicks beating drums in slow-mo, etc. But when we arrived at Zuccotti Park in New York City, it evolved into something more.

There was a vibrant energy in the air, a warmth of community and family, and the voices we heard were so hopeful and passionate. Pretty faces were making signs, giving speeches, organizing crowds, handing out food, singing, dancing, debating, hugging and marching.

It made me want to pack my bags and pitch a tent on Wall Street. And it's in the light that we created this video.

And we hope it makes you want to be there too.
EDIT: Apparently a lot of controversy has erupted online from people passionately opining (among many things) that this is sexist, offensive, and dangerously objectifies women. It was not my intent to do that and I think the spirit of the video, and the voices within, are honorable and inspiring.

However, if you disagree with me, I encourage you to use that as an excuse to create constructive discussions about the issues you have. Because, to be honest, any excuse is a good excuse to bring up the topic of women’s rights.

CAMERA: Two Canon 7Ds.
LENS: 17-55mm, 70-200mm, 18-135mm
AUDIO: Rode Video Mic Pro
Shot in 60 fps
Music: Theme from "Fast, Cheap and Out of Control" by Caleb Sampson

Occupy Wall Street movement: a collective, vague effort Everyone’s in charge, no one’s in charge as demonstrations persist

2011-10-12T05:23:00.000-07:00

David Weidner/MarketWatch

Demonstrators in the Occupy Wall Street movement approach third week of daily protests.

LOS ANGELES (MarketWatch) — Standing amid 100 tents crammed on a small lawn on the Los Angeles City Hall grounds, Clark Davis is asked a simple question about the 200 or so people that have set up camp around him.

Are you the anti-tea party?

“I wouldn’t say that we’re the anti-tea party. I wouldn’t say we’re anti-anything. I would say we’re for things, we’re not anti-anything,” said Davis, the media director for OccupyLA, one of several protest movements around the country aimed at Wall Street and the wealthy. “We’re not really thinking about the tea party right now.”

Click to Play

Wall Street protests persist, spread

“Occupy Wall Street” protests, which show no sign of letting up and have spread from New York.

So what are OccupyLA, Occupy Wall Street and other movements like them? What do they think about? Where do they hope to get?

“Our message right now is very vague. It’s left vague, slightly intentionally,” Davis says as passing cars honk in support and news cameras lurk nearby. “What we’re trying to do is unify a voice.”

Such is life in New York, Los Angeles and other venues throughout the U.S. for those that have taken up this “vague” cause that seems to have put a bulls-eye on Wall Street’s back. Bands of mostly young adults are gathering in normally peaceful settings to generally express their outrage over the inequity between the haves and have-nots.

At New York City’s Zuccotti Park, talk among the Occupy Wall Street protesters repeated similar themes from the start of the effort last month: the gap between rich and poor in the U.S. and how the 2008 bailout of Wall Street didn’t really help Main Street, and the lack of jobs and opportunity afflicting the shrinking middle class.

What they want to do about it is unclear just yet. There is no specific agenda. There isn’t a hierarchy.

“There’s no leadership — it’s decentralized,” said Aaron Griffin, a 19-year-old from West Virginia, who joined the New York protest a week ago and has been sleeping nine hours a night in Zuccotti Park.

But the numbers getting involved in the movement seem to be growing. Protesters also claimed that similar actions are taking place in more than 200 cities around the U.S. and the world.

In some cases, political leaders seem perfectly willing to let it happen. Several Los Angeles City Council members professed support for the group earlier in the week, along with Mayor Antonio Villaraigosa. And OccupyLA seems resilient and willing to stay in it for the long haul, with the protesters planning to camp out at City Hall until they’re forced to leave.

“I live here now. I gave up my place,” said Liz Savage, a 32-year-old from New York who had been living in the L.A.’s San Fernando Valley for the past year.

Across the country, protests were mostly contained within the environs of Zuccotti Park on Friday during the day, but protesters dug in for an effort with no apparent end in sight.

Reuters

Occupy Wall Street protesters on Broadway in New York.

Approaching its third week just a few blocks from the World Trade Center, the protest seemed to go about its business on Friday at a low-key level.

No crowds or sign-holders were visible at the closest subway station on Fulton Street and at the New York Stock Exchange. And no marches or confrontations with authorities were taking place, although police completely blocked off Wall Street and Broad Street to pedestrians, kept strictly on a narrow strip of sidewalk.

Many protesters were of college age or in their 20s, but many other age groups were represented.

At the entrance to the park off Broadway and Liberty Street, David Heath, 51, of Syracuse, N.Y., held up a sign that said “Disabled Veterans Against Wall Street.”

September, leading President Barack Obama to call the demonstrators a 'movement'.

Never too old: One man, a war veteran, joins the protests in New York with the aid of a zimmer frame

Stand: About one thousand people gather and form a large "99%" in the middle of Freedom Plaza. The chant refers to the richest 1 per cent of Americans which the political right are trying to protect

Spread: Participants march with signs past the White House to the U.S. Chamber of Commerce during an "Occupation of Washington" protest in Washington

March: Protesters march in front of the Federal Reserve Building in Dallas today

There are no shortage of supporters in Los Angeles, and they sometimes can be pretty high-profile. Actress Rosanna Arquette reportedly stopped by to show her support during the week. On Friday, PBS talk-show host Tavis Smiley showed up alongside civil rights activist and Princeton Professor Cornel West to speak to the crowd.

“I’m not against anybody who’s rich. I’ve been poor and I’ve been rich. Trust me, rich is better,” Smiley said in an interview afterward. “At the same time, I think that these issues of poverty are not being addressed enough and so their effort just happens to dovetail with the effort that I’ve been on for most of the summer to raise the issue of poverty higher up on the American agenda.”

West, a prominent leftist philosopher, said the Occupy movement is indeed progressive-based while the tea party is conservative, but the two are divergent.

“I think the moment that the Tea Party emerged is very different than the moment right now,” West said, noting that the Tea Party has ties to big business. “Here, this is just spontaneous and leaderless.”

Click to Play

Is the U.S. a third-world nation?

Michael Lewis, author of the new book "Boomerang," says the U.S. and many European nations suffered a moral failure that led to economic collapse.

And serendipitous, it would seem. In L.A., a group calling itself Refund California got a fair amount of attention by staging protests in banks and at the stately homes of bank executives in tony suburbs such as Bel-air and San Marino while OccupyLA was encamped at City Hall. Representatives for both organizations say the two are unrelated, insisting the protests each has staged are coincidental.

A coalition of several activist groups, Refund California has been demanding that banks renegotiate home loans for those foreclosed upon. Some say they got the runaround after being late by only a few weeks on mortgage payments only to find a year or two later that their homes were being repossessed.

“The relationship [between the two groups] is that more and more people across the country realize Wall Street banks are to blame for the economic crisis,” said Amy Schur, state director of the Alliance of California’s for Community Empowerment. The group is one of several tied to Refund California; also involved are the Service Employees International Union and several community groups.

OccupyLA protesters say, however, that they’re accepting support from unions and other groups but they’re not letting anyone “hijack” their cause. There was some concern that one group had commandeered an OccupyLA Web page.

Not everyone is entirely supportive of the Occupy-ers. A group of construction workers stood at the end of Zuccotti Park in New York while they ate their lunch.

“Their methodology is questionable,” said one construction worker, who didn’t give his name. “They’re not a representation of Middle America.”

Meanwhile, the real estate firm that owns the park where protesters are camped is losing patience.

“Zuccotti Park is ... intended for the use and enjoyment of the general public for passive recreation,” Andrew Willis, a spokesman for Brookfield Asset Management BAM -0.34% , wrote in an email to MarketWatch. “We are extremely concerned with the conditions that have been created by those currently occupying the park and are actively working with the city of New York to address these conditions and restore the park to its intended purpose.”

Last week, Occupy Wall Street made headlines after 700 people were arrested in a march across the Brooklyn Bridge. Labor unions around the region have been lending supporting to the effort in recent days.

Food, clothing, books and blankets are plentiful at Zuccotti. Protesters play chess, work on computers powered by generators, and follow a routine of regular meetings.

Acoustic music rings out at times, but no loudspeakers are allowed. Instead, announcements are made verbally, not unlike town criers of yesteryear.

“We have vegan pizza...we have vegan pizza,” one announcement came at lunch time. “Eat it! Eat it!”

In Los Angeles, groggy protesters spend their day organizing the day’s events and staging live feeds online through computers donated by local unions.

Sleep is coming at a premium for many, and it’s less than comfortable. Protesters must move their tents and a considerable amount of electronic gear off the City Hall lawn at night so that sprinklers can irrigate the property. They end up sleeping on the surrounding sidewalks.

Though it’s somewhat unclear exactly what they’re fighting for, that doesn’t seem to deter those from joining. OccupyLA’s Davis says specific causes will form once the groups grow and unite.

“When we start making demands, when we start talking about the issues that we feel need to be addressed, the [hundreds] of cities across America are going to speak with one voice,” Davis said. “We’re going to let this movement mature a little bit before we start making demands.”

iPhone 4S hands-on!- iPhone 4S unveils

2011-10-04T19:34:00.000-07:00

By Darren Murph posted Oct 4th 2011 3:27PM

It's not an iPhone mini or anything, but it's the first iPhone with Siri. And that has to count for something, right? Right? While it's no iPhone 5 (not even close, really), the iPhone 4S is far from being "last year's iPhone," and the greatly enhanced camera, bolstered A5 dual-core processor and inbuilt voice command should provide plenty of reason for folks to upgrade if they're near the end of their contract. Furthermore, having the option on Sprint -- despite Apple almost announcing it as an afterthought -- is bound to make folks already entrenched on the Now Network think twice about what their next phone will be come upgrade time.

We were able to spend a few quality moments with the refreshed iPhone 4 here at Apple's campus, the Sprint flavor no less, and as you might expect... it's an iPhone 4. But S-ier. Much in the same way that the3GS improved the overall experience of the 3G, the 4S does likewise compared to the existing 4. The dual-core A5 chip is a laudatory improvement, and whisking about pages, loading the camera application and launching -- well, just about everything -- just feels zippier. As it should. The other major change, the antennas, weren't readily different at a glance, but as Mr. Cook stated, you'd have to be iFixit to notice (and we're sure they will).

The most impressive part was the demo of Siri, the new assistant that lets you do just about anything you can do on your phone -- but with your voice. We tried to psych it out with a bunch of random requests, including the history of Chester, Vermont (a lovely town) and the best Ramen places in San Francisco. Siri never faltered, never missed a beat. It worked as well as Scott's demo up on the stage. There's nothing better to say than that. We even sent ourselves a few text messages, which Siri transcribed to a T. Of course, the lady on the other end still sounds eerily robotic, but we're hoping for smoother responses from the alien within in a future update.

The 8 megapixel sensor doesn't look any different from the outside, but we're trusting that Apple's re-engineered the interior. We snapped a few photos in the demo room to test and not a one came out as great as the retina-bursting contrasty pictures of balloons and flowers we saw in the demo, but then again, we didn't have any balloons or flowers to capture.

As for weight and feel? Just like the old king. We'll be updating this post with our impressions live from Cupertino, and are working to get you some better pictures to look at. Hang tight -- they're coming!

Update: Sorry, guys, but this time around Apple isn't allowing anyone to take photos or videos of the new iPhone in the hands-on area at its event. But don't worry, we'll give you all that and more when we review it in the coming weeks!

Apple expected to up the ante with new iPhone

2011-10-02T15:24:00.000-07:00

SAN FRANCISCO (MarketWatch) —

While Apple Inc. may be keeping its latest product unveiling low-key, the iPhone event slated for Tuesday carries major implications for the company’s largest business.

More than 15 months after the launch of the iPhone 4, Apple’s

AAPL -2.37% smartphone business is still going strong. More than 55 million iPhones were shipped in the first nine months of the company’s current fiscal year, accounting for 45% of total company revenues for that time. While Apple doesn’t break down profitability per device, analysts estimate the iPhone delivers margins in the low-to-mid 50% range — making it by far the most profitable product in the company’s lineup.

Still, competition is growing stronger, especially from phones using Google’s GOOG -2.36% Android operating system. And Apple has taken longer than usual to update the iPhone this time around, a fact that kept the stock relatively flat in the first half of this year.

“To get the stock right over the next year, they have to get the iPhone right,” said Gene Munster of Piper Jaffray in an interview on Friday.

Apple sets iPhone event for Oct. 4

Apple invited reporters to an iPhone-related event Oct. 4, setting the stage for the widely anticipated launch of its latest smartphone. Stacey Delo has details from San Francisco on The News Hub.

Apple has scheduled an event for Tuesday morning at its headquarters in Cupertino, Calif. While the famously tight-lipped company promised to “talk iPhone” in the invitation, it has given no further details as to what is expected.

The stock has been on an upswing of late, adding more than 22% since mid-June. Much of the upside has come on anticipation of the up-coming iPhone refresh as well as the growing dominance of the company’s iPad in the burgeoning tablet market. But the shares have remained relatively range-bound since Apple reported results for its third fiscal quarter on July 19.

Munster said the stock’s mixed performance has come largely from predictions that Apple may launch a special, low-end iPhone to go after emerging markets and segments like pre-paid services in North America. Such a move could strain Apple’s already full production capacity as well as crimp overall margins — if a low-end phone were to cannibalize sales of the regularly priced product.

Apple

Apple’s media invite for the Oct. 4 event.

“Given their production constraints, I think it would be a bad idea,” Munster said of a low-end iPhone. He believes Apple instead will lower the price of its older phones when the new one hits, as it has done in the past.

Since the iPhone 4 has remained a big-seller even past its one-year mark, many believe Apple can address other parts of the market with a lower price on the device. The company has cut the price on its last models — the 3G and 3GS — once newer products have launched.

“We are upbeat about the next iPhone but we wouldn’t be surprised if we saw the iPhone 4 remain in the line-up at lower price points to fend off the competition,” wrote Ben Reitzes of Barclays Capital in a note to clients on Wednesday.

iPhone 5?

The new iPhone to be unveiled on Tuesday will be the fifth in the product’s history, though there is some disagreement as to how the product will be designated.

Several analysts believe — and leaked images on gadget blogs suggest — that the new device will have a few outer design tweaks compared to the iPhone 4, including a larger screen, thinner body and a possible new backplate made from aluminum.

Most also predict a new, faster processor, likely Apple’s own A5 chip that currently powers the iPad 2. Also, many believe Apple will ship the new device as a “world phone” that can use the differing wireless network standards. The company currently makes two different versions of the iPhone 4 for GSM network operators like AT&T T -1.11% as well as one for the CDMA networks operated by carriers like Verizon. VZ -0.94%

What few expect is for Apple to incorporate 4G technology like LTE into the new device, given the limited availability of those networks. The company is widely expected to launch an LTE version of the iPhone in 2012.

Chris Whitmore of Deutsche Bank believes a lower-priced iPhone 4 will also be significant for Apple as new countries are added to its market. A lower production cost on the device would allow Apple to maintain its margins while lowering the price for other parts of the wireless market.

“An aggressive push into the mid-range will essentially double Apple’s iPhone TAM [total addressable market] in the near term and position it for more share gains in the 700M-plus unit smartphone market by 2014,” he wrote in a note to clients.

AAPL 381.32, -9.25, -2.37%

Aside from the hardware, the new iPhone is expected to be optimized for the company’s iOS 5 operating system update that is also expected to launch this month. Apple previewed the new software at its developer’s conference in June, which included the new iCloud service that synchs files across multiple devices and stores backups in the company’s cloud servers. Read full report on iCloud introduction.

The June event was also the last public appearance of Apple co-founder Steve Jobs before he stepped down from the CEO role in late August for health reasons. New chief executive Tim Cook and other top-ranking Apple executives are expected to run the event on Tuesday.

Apple is currently slated to report results for its fourth fiscal quarter on Oct. 18. Analysts expect strong results for the period, though iPhone sales may show some effect of consumers holding off purchases until the launch of the new device.

That means the December quarter will likely feel the full effect of the new iPhone, with many analysts expecting unit shipments in the 25-30 million range for the quarter. The company shipped about 16.2 million iPhones in the same period last year.

“We expect Apple to sustain its current momentum as its most recent [third fiscal quarter] results illustrate its impressive success in penetrating the Asia Pacific market and the company is ramping up in key emerging markets as well,” wrote Jeff Fidacaro in a note to clients.

Dan Gallagher is MarketWatch's technology editor, based in San Francisco.

17 years later, ‘Lion King’ still roars

2011-09-18T10:40:00.000-07:00

Disney animated classic returns to win box-office weekend derby

By Russ Britt, MarketWatch

LOS ANGELES (MarketWatch) — Seventeen years after its initial theatrical release, Walt Disney Co.’s “The Lion King” returned in a new, 3-D format to beat all rivals over the weekend with nearly $30 million in box-office receipts.

Showing in 2,330 theaters, “Lion King” raked in an estimated $29.3 million, according to box-office tracker Hollywood.com. Disney’s DIS -0.09% take was nearly double what some prognosticators had predicted for the weekend.

Hollywood.com box-office president Paul Dergarabedian said the film’s performance was a “total shocker,” as the studio itself had predicted box office of roughly $12 million for the weekend.

“Nobody expected this. This was the most underestimated film opening,” Dergarabedian said. He pointed out “Lion King’s” Saturday gross was $12 million. “That’s what people thought the weekend would be.”

Disney took a chance by re-releasing the film in the 3-D format, since a number of films designed for the 3-D screen have floundered lately, Dergarabedian said.

“This is a good PR coup for the 3-D format,” he said.

“Lion King” also was far ahead of its nearest competitor, the pandemic thriller “Contagion” from Time Warner Inc.’s TWX +0.23% Warner Bros. unit. “Contagion” made an estimated $14.5 million in its second weekend in theaters.

Fourth place was occupied by another Disney entry, “The Help,” a drama that made $6.4 million in its sixth weekend. The drama, which has shown strong staying power, has made $147.4 million thus far.

“Lion King” is the story of a lion cub exiled from his African kingdom after his father dies who returns to assume his throne. It originally was released in June 1994. It represented the pinnacle of Disney’s revival of its animated unit under the leadership of Chairman and Chief Executive Michael Eisner and studio chief Jeffrey Katzenberg.

The film made $328 million in domestic receipts at the time, strong enough to land 24th on the all-time list. Worldwide, the film made $783 million, and is 35th on that all-time list.

“Lion King” is the strongest Disney performer of its pre-Pixar films. Only last year’s “Toy Story 3” and 2003’s “Finding Nemo” rank ahead of it in all-time worldwide receipts among Disney animated films.

UBS hit by $2 billion loss from rogue trader

2011-09-17T10:42:00.000-07:00

LONDON (MarketWatch) — Swiss bank UBS AG said Thursday that a rogue trader in its investment-banking division ran up $2 billion of losses, which could push the firm’s third-quarter results into the red.

Click to Play

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Nearly three years to the day since the collapse of Lehman Brothers, WSJ Marketplace Editor Dennis Berman stops by Mean Street to discuss who the winners and losers are.

The announcement followed the early-morning arrest of a 31-year-old man in London on suspicion of ”fraud by abuse of position,” according to a statement from City of London police. The suspect remains in custody.

A spokesman for UBS CH:UBSN +5.23% UBS +4.12% declined to name the trader, but The Wall Street Journal identified him as Kweku Adoboli, an employee in the firm’s exchange-traded funds unit.

The bank, which has battled a string of high-profile crises over the past couple of years, said it may now report a loss for the current quarter, but added that none of its clients were affected.

Shares in UBS dropped 9.9% in afternoon trading.

According to his profile on networking site LinkedIn, Adoboli is a director of ETF and Delta One — a class of derivatives that are intended to move in very close step with the underlying asset.

Delta One is also the division at Societe Generale SA FR:GLE +3.44% where Jerome Kerviel was a trader in 2008, when Kerviel’s unauthorized trades cost the French bank 4.9 billion euros ($6.7 billion).

In that case, Kerviel was accused of placing €50 billion of bets on stock-market futures — more than the entire market capitalization of SocGen at the time.

Latest crisis

The latest scandal for UBS comes on the back of several major setbacks in recent years.

The bank took some of the heftiest write-downs in Europe following the subprime crisis and was at the center of a recent high-profile tax-evasion scandal. It agreed to hand over the names of thousands of possible tax dodgers to U.S. authorities as part of a settlement.

UBSN 10.26, +0.51, +5.23% 2

The loss of confidence among clients led to a massive outflow of funds from the group’s private-banking operations, which it had only recently managed to stem.

Deutsche Bank analyst Matt Spick said a $2 billion loss would more than wipe out his current forecast for a third-quarter pretax profit of 1.5 billion francs ($1.7 billion).

On top of that, the announcement “may undo some of the reputational improvement in the private bank,” he added.

“Perhaps the silver lining is that this event could accelerate the decision-making progress at UBS on how to position and right-size the investment- banking operations within the group,” Spick said in a note to clients.

The investment-banking arm has struggled compared with rivals such as Credit Suisse Group AG CH:CSGN +4.75% CS +2.47% , leading the group to announce last month that it will cut around 3,500 jobs in the face of weaker earnings and slowing economic growth.

Where iPhone 5 might be lost in Silicon Valley

2011-09-17T10:35:00.000-07:00

By Therese Poletti, MarketWatch

WOODSIDE, Calif. (MarketWatch) — Martin Eberhard, a co-founder and former chief executive of Tesla Motors Inc., laughed when he heard the premise of this column: to feature some Silicon Valley watering holes and hangouts where we might be able to find the next lost iPhone.

By serendipitous coincidence, Eberhard — who was having lunch at the famous Buck’s in tony Woodside, Calif. — showed me his email signature on his iPhone, which reads: “Sent from my iPhone 5 prototype, which I found in a bar.” Just a little geek humor after the latest incident, I suppose.

No, Eberhard did not have that appended to outgoing messages after the news earlier this month that another Apple Inc. AAPL +1.92% iPhone prototype — this time an iPhone 5, apparently — was left at a drinking establishment (this time at a tequila bar in San Francisco). Read CNET story on iPhone 5 found in a Mission district bar.

Therese Poletti/MarketWatch

From left: Matthew Neher, CEO of start-up Greentech Mining; Kevin Kanning, VP and COO of Greentech; and Dennis Di Ricco, an investor who lists Buck's address as one of his offices on his business card. On the wall is a shrink-wrapped box of Microsoft Windows 1.0.

He’s had that email signature since the top-secret prototype of the iPhone 4 was lost in March last year at Gourmet Haus Staudt, a German bar and beer garden in Redwood City, Calif. “I am beginning to think this is a marketing strategy of Apple,” he said, only half joking. “It might be a new way to test-market a product.” Read more on the first lost iPhone saga.

Eberhard, who won’t talk about what he has been working on since he left Palo Alto, Calif.-based Tesla TSLA +3.95% , is not the lone voice of that theory. But others say that the secretive Apple would never purposely want an employee to leave another iPhone prototype anywhere in public.

“They certainly don’t need the publicity,” argues analyst Ashok Kumar of Rodman & Renshaw. Also, “working at Apple is like working at the CIA.”

Besides, he added, the company certainly would not want to tip off rivals in the smartphone business as to what it will do next: “These products have a really short shelf life.”

Still, hopeful and inquiring minds wanted to know where else in Silicon Valley the next top-secret lost iPhone will turn up. See a slide show of bars and hangouts where you might find the next iPhone.

“We have seen a lot of stuff that is stamped confidential, but confidential to one person is another person’s garbage,” quipped Jamis MacNiven, the owner of Buck's, who’s also written a book, “Tales from the Pancake Guy.”

Eberhard pointed out that it might be hard to spot such a device in the clutter of Buck’s, a favorite haunt for venture capitalists and entrepreneurs. Every bit of wall space is taken up with MacNiven’s collectibles — from Cracker Jack prizes of the 1920s and 1930s and a shrink-wrapped box of Microsoft Corp ‘s. MSFT +0.48% Windows 1.0 to a soapbox car, a relic from the Sand Hill Challenge derby of the dot-com boom.

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Cracking open the hotel minibar

The Minibar is a savior when guests need a Toblerone late at night and there's no room service. But hotels and guests say minibars are also problematic, and that's prompting change.

One could stay all day in Buck’s, but sadly it’s time to move on. Not far is Sand Hill Road, where the swish Rosewood Sand Hill resort has one of the most elegant bars seen on this Valley pub crawl, simply called the Bar. Power banker Frank Quattrone scurried away after a quick hi, avoiding annoying questions about lost gadgetry or deals he has in the works. After a divine $5 pomegranate mojito sans alcohol, it’s time to leave.

Next, Cupertino, Calif., seems like a good bet. The old Peppermill next door to Apple’s campus is now gone. It’s been replaced by BJ’s Restaurant and Brewhouse, where you can see the main One Infinite Loop building from the parking lot. One BJ’s worker admits he always looks at the phones Apple employees have to see if they are new, yet-to-be-released iPhones.

“Nothing top-secret has ever been left here,” said Treavor Morris, general manager of BJ’s Cupertino. “We’ve found a few iPads, but they come right over and pick them up.” Well, there’s always a first time.

Another likely candidate is a pub, the Duke of Edinburgh on North Wolfe Road, on the other side of the 280 freeway in Cupertino, where Apple’s new campus will be built. Hewlett-Packard Co. HPQ +1.12% still has some people working there and Apple occupies some buildings nearby. The Duke, as it is called, has a charming, and likely little-used, red London phone booth outside, and its interior is said to have been made in England.

“They talk about doing business at the Duke,” said J.C. Deacha, one of the owners of the Duke, of the H-P employees and previously Tandem workers. But no, “we haven’t found anything like that,” he said when asked about ever seeing any clandestine prototype devices.

Alas, the Mexican cantina Pedro’s in Santa Clara, Calif., hasn’t had any shenanigans with drunken engineers leaving confidential products behind either. “I found an iPhone in the bathroom,” reported Dora Garcia, the manager. Its sobered-up owner claimed it the next day.

But Pedro’s — known as a watering hole for Intel Corp. INTC +2.00% employees, as well as those of EMC Corp. EMC +0.31% and Qualcomm Inc. QCOM +0.45% — might be a place where a Johnny-come-lately in smartphones might want to “accidentally” leave a working device with chips (not of the tortilla variety) based on the microprocessor giant’s new partnership with Google Inc. GOOG +0.76% . Read more about Intel's deal with Google.

Heading north: So many bars, so little time. One stop is Fred’s Place on Old Middlefield Way in Mountain View, Calif., a local dive that’s something of an institution, having been a stone’s throw from the original Fairchild Semiconductor offices on Charleston Road. It’s not clear if Fred’s was also a big hangout of the early chip cowboys (like the now-demolished Wagon Wheel was, which stood at East Middlefield and Whisman Roads). But given Fred’s location and age, it’s pretty likely.

“Lots of companies have started here on a napkin,” said Paul Partti, who has co-owned the 51-year-old Fred’s for the last 11 years. He declined to be more specific, giving his bar a mysterious allure — visible by its magenta neon sign, complete with glowing martini glass and olive. The usual things have been forgotten, typically cell phones, but nothing top-secret or in development. “It’s funny that this happened to Apple twice,” he mused.

Torn between the chichi bar at the Four Seasons Hotel just off the 101 highway and downtown Palo Alto, I decided to continue exploring dives. “Most of the geeks I know go into bars on University Avenue or California in Palo Alto,” said Trip Chowdhry, a Global Equities Research analyst.

Antonio’s Nut House on California Avenue is a favorite of some Facebook Inc. and AOL Inc. AOL -2.91% employees as well as Stanford students. Disappointed only to find peanut shells covering the floor, and nary an iPhone prototype hidden among them, it was time to call it a night.

Therese Poletti is a senior columnist for MarketWatch in San Francisco.

Bank of America's 30000 Job Cuts Biggest in U.S. This Year

2011-09-14T05:07:00.000-07:00

Bank of America is delivering the U.S. its biggest job-cut blow of the year as the nation is battling unemployment woes.

The bank will eliminate about 30,000 jobs in an effort to restore investor confidence and turn a negative tide that has swelled after the recession and amid the slow-growth economy.

A Bank of America shareholder walks into the corporate headquarters prior to the start of the Bank of America annual shareholders meeting in Charlotte, North Carolina May 11, 2011. The company will slash as many as 30,000 jobs as part of a cost-savings plan announced Monday.

A Bank of America shareholder walks into the corporate headquarters prior to the start of the Bank of America annual shareholders meeting in Charlotte, North Carolina May 11, 2011. The company will slash as many as 30,000 jobs as part of a cost-savings plan announced Monday.
The jobs cut is the single largest job reduction by a U.S. company this year, and the most since the U.S. Postal Service said last year it wanted to cut an additional 30,000 jobs. Earlier this year Merck & Co. said it would cut 13,000 jobs, and Bank of America's is the largest since General Motors cut 47,000 jobs in 2009.
Bank of America is trying to cut costs as its Countrywide mortgage unit continues to suffer massive losses.
The cuts fall in line with massive job reductions at financial companies in the U.S. and abroad. However, as already this year the 50 largest global banks had announced nearly 60,000 job cuts, the fastest pace since the recession-plagued year of 2008. As the economy in the U.S. and Western Europe stagnates, banks have had to reduce costs to become or remain profitable.
Bank of America said the elimination of 30,000 jobs will help the company cut $5 billion annually in expenses by 2014.
"As the company implements the thousands of decisions from Project New BAC over time," BofA said in a statement, "it intends to become a more focused, leaner, and more efficient company, providing all of its customers and clients with the best financial services, generating strong revenues, carefully managing expenses and risks and delivering long-term value for shareholders."
The company already announced job cuts of 6,000 earlier this year, but the latest move is a significant downsizing effort for the bank, which employed 288,000 workers as of June 30. The company's shares have been clobbered this year amid struggles from its mortgage units and concerns over the need to raise more capital in the global economic turmoil, shedding 47 percent in 2011.
On Monday, Bank of America's shares traded up seven cents on news of the job cuts, to $7.05. The 52-week low for Bank of America is $6.01, but the company's shares have plummeted this year, down from a yearly high of $15.31.
The downsizing is part of the bank's first phase of a cost-cutting program -- "Project New BAC" -- that the company hopes will ultimately result in the full $5 billion in annual savings. The company issued a statement on the "new BAC" job cuts plan Monday at the Barclays Capital 2011 Global Financial Services Conference in New York.
"It's time to simplify the organization, streamline the organization and make sure our business processes are relevant when you have a smaller, more focused company. We just don't need to be the biggest," Bank of America CEO Brian Moynihan said in a Sept. 6 interview.
Bank of America said its goal isn't a "given number" of job cuts, but rather implementation of the New BAC decisions. The company said as those decisions are made, employment levels in certain areas under review are expected to be reduced.
Bank of America acquired Countrywide at the time the federal government was involved in TARP bailouts of many financial companies.
Among recent moves by Bank of America was taking a $5 billion investment from investor Warren Buffett, selling half of the company's China Construction Bank investment for $8.3 billion, and ousting consumer bank head Sallie Krawcheck.
In a meeting in New York on Monday with analysts, Moynihan also didn't close the door on other drastic moves, including a bankruptcy filing for Countrywide, which has cost Bank of America tens of billions in losses. When asked if he would consider putting Countrywide into bankruptcy Moynihan replied, "We look at all our options."

US:Record poverty last year as household income dips

2011-09-13T19:17:00.000-07:00

Median household income declines; families ‘doubled up’

By Ruth Mantell, MarketWatch

WASHINGTON (MarketWatch) — A record number of people were in poverty last year as households saw their income decrease, according to data from the Census Bureau Tuesday, demonstrating the weakness of the economy even after the official end of the recession.

The 46.2 million people in poverty in 2010 was the most for the 52 years that estimates have been published, and the number of people in poverty rose for the fourth consecutive year as the poverty rate climbed to 15.1% — the highest since 1993 — up from 14.3% in 2009.

Meanwhile, real median household income in 2010 was $49,445, down 2.3% from the prior year and below pre-recession levels.

“I would frame this report as giving us a look at whether the so-called recovery that started in June 2009 has had any widespread benefits for American families,” said Larry Katz, a labor economist at Harvard University.

Economists say the recession officially ended in 2009, but employment remained weak in 2010, with a national employment gain of only about 940,000 jobs — less than half the growth in the civilian population that’s outside prisons and the military. Also, the unemployment rate remained elevated, declining to 9.4% by the end of 2010 from a peak of 10.1% in 2009.

While the data released Tuesday paint a grim picture, the results could have been even worse without government benefits such as extended unemployment insurance that were “pretty good at plugging some holes in the safety net and preventing even more people from falling into poverty,” said Harry Holzer, a public-policy professor at Georgetown University.

Still, times are likely to be tough for a while, according to Edwin Park, vice president for health policy at the Center on Budget and Policy Priorities.

“Looking ahead, poverty seems unlikely to improve because of the way the economy is going,” he said. “State and local governments are retrenching, cutting spending, which will slow economic growth.”

The Census report also noted a gain in “doubled-up households” — those formed by combining households with other families or individuals to deal with the tough economic times. This year, about 5.9 million adults between 25 and 34 live in their parents’ households, up 25% from 4.7 million before the recession. Between spring 2007 and spring 2011, the number of doubled-up households rose 2 million to 21.8 million.

The data on poverty come as Congress debates a jobs package President Barack Obama introduced last week that includes payroll-tax reductions, and as Republican presidential candidates and congressional lawmakers debate the best way forward for the economy.

Details

For 2010, the poverty threshold for a four-person family, including two kids, was about $22,000. The official definition of poverty excludes certain benefits, such as food stamps and housing assistance.

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Recession + default = recovery

MarketWatch’s Brett Arends says one way for the United States trigger a recovery is to default and declare bankruptcy. (Joe Raedle/Getty Images)

Private insurance covered about 64% of people in 2010, down from about 64.5% in the prior year, with such coverage trending down since 2001. Those covered by employment-based insurance ticked down to 169.3 million from 170.8 million. Those covered by government insurance rose to 31% from 30.6%. In 2010, about 9.8% of children under 18 were not insured.

Real median income for family households fell 1.2% to $61,544 in 2010, while nonfamily households’ income dropped 3.9% to $29,730. By region, income in 2010 fell about 2.9% in the West, 2.5% in the Midwest, 1.9% in the South and 1.2% in the Northeast. By race, income fell 3.2% for black households and 1.7% for whites.

By sex, real median income fell 0.4% in 2010 for men who are full-time workers, compared with a gain of 0.1% for women. In 2010, women made about $36,931 — 77% of $47,715 for men.

Among children under 18, the poverty rate reached 22% in 2010, compared with 13.7% among those 18 to 64. In 2009, the poverty rate among kids was 20.7%, compared with 12.9% among those 18 to 64.

By race, the poverty rate among blacks was 27.4% in 2010, compared with 26.6% among Hispanics, 13% among whites and 12.1% among Asians. By region, the poverty rate was 16.9% in the South, 15.3% in the West, 13.9% in the Midwest and 12.8% in the Northeast.

U.S. said ready to sue big banks over mortgages

2011-09-02T06:19:00.000-07:00

WASHINGTON (MarketWatch) — A federal U.S. agency is ready to sue more than a dozen major banks, arguing that they misrepresented the quality of mortgage securities they put together and sold in the run-up to the bursting of the housing bubble, according to a published report.

The New York Times reported Friday that the Federal Housing Finance Agency, which oversees mortgage firms Fannie Mae and Freddie Mac, is expected to file the lawsuits in federal court Friday or Tuesday. The agency is expected to seek billions in compensation.

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Goldman Sachs view on global economy

WSJ Money & Investing Editor Colin Barr joins Michael Casey to discuss Goldman Sachs taking a negative view of the global economy. They also discuss conflict of interest issues that have faced the bank. Photo: Chris Hondros/Getty Images

The suits are aimed at Bank of America Corp. BAC -6.57% , Goldman Sachs Group Inc. GS -2.64% , J.P. Morgan Chase & Co. JPM -2.62% , Deutsche Bank AG DE:DBK -4.33% DB -3.60% and others, the report said, citing three unidentified individuals briefed on the matter.

Separately, Bank of America was asked by the Federal Reserve to show what measures it could take if conditions were to worsen for the bank, according to a report in The Wall Street Journal. The bank responded by saying it could issue tracking shares in Merrill Lynch, the brokerage giant it acquired during the height of the financial crisis.

Meanwhile, the FHFA will argue that the banks failed to meet their due-diligence duties under securities law and failed to spot evidence that borrowers’ incomes were overstated or falsified, the report said. The securities backed by the mortgages quickly lost value when many borrowers proved unable to meet payments.

The lawsuits aim to secure reimbursement for losses on securities held by Fannie and Freddie. Private investors have attempted to force banks to buy back mortgage-backed bonds.

The FHFA previously had said it was considering such lawsuits when it sued UBS over $4.5 billion in mortgages in July. See story on FHFA’s suit over $4.5 billion of mortgages.

The report sent Asian and European equity markets lower and was weighing on U.S. stock futures, though markets also were impacted by a report showing no new jobs were created in August. See indications.

“The U.S. banking sector has already suffered a massive loss of confidence and remains incredibly fragile,” said Kathleen Brooks, research director at Forex.com, in emailed comments. “This lawsuit and the massive sums involved may aggravate the problem and cause another leg lower in the financial sector.”

Spokespersons for Bank of America, Goldman Sachs and J.P. Morgan declined comment, the report said.

Spokespersons for the banks weren’t immediately available Friday to respond to requests for comment on the story.

A spokesman for Deutsche Bank told the newspaper that the bank “can’t comment on a suit that we haven’t seen and hasn’t been filed yet.”

The report noted that financial executives have privately argued that losses on mortgage-backed securities were the result of a broad downturn in the economy and the housing market rather than how the mortgage securities were structured.

William L. Watts is a reporter for MarketWatch in Frankfurt.

Bank of America climbs on plan to sell China stake

2011-08-29T09:21:00.000-07:00

SAN FRANCISCO (MarketWatch) — Bank of America said Monday it plans to sell 13.1 billion shares of China Construction Bank in another move to bolster capital on its balance sheet, an issue that’s been dogging the nation’s largest bank this summer.

The deal, slated to close in the third quarter, is expected to raise $8.3 billion in cash. Bank of America BAC +5.03% will retain a 5% stake in the Chinese bank CICHY +2.20% after the transaction.

“This sale of approximately half of our shares of CCB stock is expected to generate about $3.5 billion in additional Tier 1 common capital and reduce our risk-weighted assets by $7.3 billion under Basel I,” said Chief Financial Officer Bruce Thompson in a statement.

Bank of America shares surged 5% to $8.13 in mid-morning trades Monday, making it the top gainer among major U.S. bank stocks.

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Markets Rally after Hurricane Irene

There are thin trading volumes due to late summer vacations and people staying after hurricane Irene, but the markets opened with a rally. Steven Russolillo and Michael Casey explain the market moods on Markets Hub. (Photo: Reuters.)

Better yet, the Chinese bank stock sale, which many investors had figured would eventually happen, follows on the $5 billion investment Bank of America got from Warren Buffett’s Berkshire Hathaway BRK.A +3.00% BRK.B +3.02% on Thursday. Read about Buffett’s $5 billion investment in Bank of America.

This is calming jittery investors who had been selling Bank of America’s stock in droves from the end of July through mid-August. Shares of the Dow component have jumped more than 35% since Tuesday, when they hit a 52-week low of $6.01.

The three other financial stocks on the Dow Jones Industrial Average — J.P. Morgan Chase JPM +2.73% , American Express Co. AXP +0.39% , and Travelers Inc. TRV +4.85% — all traded higher.

On Monday morning, the financial sector was the top industry gainer on the S&P 500 SPX +2.09% . The Financial Select SPDR ETF XLF +3.21% , which tracks financial companies on the S&P, advanced 2.9% to $13.14. The KBW Bank Index BKX +3.17% , which consists of the nation’s 24 leading banks, moved up 2.9%.

Citigroup Inc. C +3.85% rose nearly 4%, Goldman Sachs Group Inc. GS +2.93% gained 2.9%, and Wells Fargo WFC +2.56% rose 2%.

Post-Irene insurer shares surge

After Hurricane Irene passed over the East Coast with less damage than anticipated, insurers turned out to be one of the strongest subsectors on the S&P 500. Hartford Financial Services Group Inc. HIG +10.44% led the charge with shares up more than 9%.

Shares of Allstate Corp. ALL +6.08% , XL Group PLC XL +6.59% , Lincoln National Corp. LNC +6.53% , Genworth Financial Inc. GNW +6.14% and MetLife Inc. MET +5.59% all traded 5% or higher.

Hurricane Irene NYC

2011-08-27T21:13:00.000-07:00

http://www.nyc.gov/html/oem/downloads/pdf/hurricane_map_english.pdf

Hurricane Irene NYC Worst Case Scenario: Bloomberg

Mayor Bloomberg outlines what would happen in the worst case scenario if the hurricane hits, but he cautions there's not enough information to activate any hurricane management plans just yet.

Hurricane_Irene_NYC_Worst_Case_Scenario__Bloomberg__Raw__New_York

NYC Mayor Bloomberg Latest Updates on YouTube

Notify NYC twitter feed with latest alerts

NYC Mayor’s Office twitter feed with latest alerts

National Hurricane Center

Ready.Gov Hurricane Preparedness

Maps and Resources related to Hurricane Irene

Wall Street Aristocracy Got $1.2 Trillion in Fed's Secret Loans

2011-08-21T17:23:00.000-07:00

Aug. 22 (Bloomberg) -- Citigroup Inc. and Bank of America Corp. were the reigning champions of finance in 2006 as home prices peaked, leading the 10 biggest U.S. banks and brokerage firms to their best year ever with $104 billion of profits.

By 2008, the housing market's collapse forced those companies to take more than six times as much, $669 billion, in emergency loans from the U.S. Federal Reserve. The loans dwarfed the $160 billion in public bailouts the top 10 got from the U.S. Treasury, yet until now the full amounts have remained secret.

Fed Chairman Ben S. Bernanke's unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley, got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.

"These are all whopping numbers," said Robert Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis. "You're talking about the aristocracy of American finance going down the tubes without the federal money."

Foreign Borrowers

It wasn't just American finance. Almost half of the Fed's top 30 borrowers, measured by peak balances, were European firms. They included Edinburgh-based Royal Bank of Scotland Plc, which took $84.5 billion, the most of any non-U.S. lender, and Zurich-based UBS AG, which got $77.2 billion. Germany's Hypo Real Estate Holding AG borrowed $28.7 billion, an average of $21 million for each of its 1,366 employees.

The largest borrowers also included Dexia SA, Belgium's biggest bank by assets, and Societe Generale SA, based in Paris, whose bond-insurance prices have surged in the past month as investors speculated that the spreading sovereign debt crisis in Europe might increase their chances of default.

The $1.2 trillion peak on Dec. 5, 2008 -- the combined outstanding balance under the seven programs tallied by Bloomberg -- was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg.

Peak Balance

The balance was more than 25 times the Fed's pre-crisis lending peak of $46 billion on Sept. 12, 2001, the day after terrorists attacked the World Trade Center in New York and the Pentagon. Denominated in $1 bills, the $1.2 trillion would fill 539 Olympic-size swimming pools.

The Fed has said it had "no credit losses" on any of the emergency programs, and a report by Federal Reserve Bank of New York staffers in February said the central bank netted $13 billion in interest and fee income from the programs from August 2007 through December 2009.

"We designed our broad-based emergency programs to both effectively stem the crisis and minimize the financial risks to the U.S. taxpayer," said James Clouse, deputy director of the Fed's division of monetary affairs in Washington. "Nearly all of our emergency-lending programs have been closed. We have incurred no losses and expect no losses."

While the 18-month U.S. recession that ended in June 2009 after a 5.1 percent contraction in gross domestic product was nowhere near the four-year, 27 percent decline between August 1929 and March 1933, banks and the economy remain stressed.

Odds of Recession

The odds of another recession have climbed during the past six months, according to five of nine economists on the Business Cycle Dating Committee of the National Bureau of Economic Research, an academic panel that dates recessions.

Bank of America's bond-insurance prices last week surged to a rate of $342,040 a year for coverage on $10 million of debt, above where Lehman Brothers Holdings Inc.'s bond insurance was priced at the start of the week before the firm collapsed. Citigroup's shares are trading below the split-adjusted price of $28 that they hit on the day the bank's Fed loans peaked in January 2009. The U.S. unemployment rate was at 9.1 percent in July, compared with 4.7 percent in November 2007, before the recession began.

Homeowners are more than 30 days past due on their mortgage payments on 4.38 million properties in the U.S., and 2.16 million more properties are in foreclosure, representing a combined $1.27 trillion of unpaid principal, estimates Jacksonville, Florida-based Lender Processing Services Inc.

Liquidity Requirements

"Why in hell does the Federal Reserve seem to be able to find the way to help these entities that are gigantic?" U.S. Representative Walter B. Jones, a Republican from North Carolina, said at a June 1 congressional hearing in Washington on Fed lending disclosure. "They get help when the average businessperson down in eastern North Carolina, and probably across America, they can't even go to a bank they've been banking with for 15 or 20 years and get a loan."

The sheer size of the Fed loans bolsters the case for minimum liquidity requirements that global regulators last year agreed to impose on banks for the first time, said Litan, now a vice president at the Kansas City, Missouri-based Kauffman Foundation, which supports entrepreneurship research. Liquidity refers to the daily funds a bank needs to operate, including cash to cover depositor withdrawals.

The rules, which mandate that banks keep enough cash and easily liquidated assets on hand to survive a 30-day crisis, don't take effect until 2015. Another proposed requirement for lenders to keep "stable funding" for a one-year horizon was postponed until at least 2018 after banks showed they'd have to raise as much as $6 trillion in new long-term debt to comply.

'Stark Illustration'

Regulators are "not going to go far enough to prevent this from happening again," said Kenneth Rogoff, a former chief economist at the International Monetary Fund and now an economics professor at Harvard University.

Reforms undertaken since the crisis might not insulate U.S. markets and financial institutions from the sovereign budget and debt crises facing Greece, Ireland and Portugal, according to the U.S. Financial Stability Oversight Council, a 10-member body created by the Dodd-Frank Act and led by Treasury Secretary Timothy Geithner.

"The recent financial crisis provides a stark illustration of how quickly confidence can erode and financial contagion can spread," the council said in its July 26 report.

Any new rescues by the U.S. central bank would be governed by transparency laws adopted in 2010 that require the Fed to disclose borrowers after two years.

21,000 Transactions

Fed officials argued for more than two years that releasing the identities of borrowers and the terms of their loans would stigmatize banks, damaging stock prices or leading to depositor runs. A group of the biggest commercial banks last year asked the U.S. Supreme Court to keep at least some Fed borrowings secret. In March, the high court declined to hear that appeal, and the central bank made an unprecedented release of records.

Data gleaned from 29,346 pages of documents obtained under the Freedom of Information Act and from other Fed databases of more than 21,000 transactions make clear for the first time how deeply the world's largest banks depended on the U.S. central bank to stave off cash shortfalls. Even as the firms asserted in news releases or earnings calls that they had ample cash, they drew Fed funding in secret, avoiding the stigma of weakness.

Morgan Stanley Borrowing

Two weeks after Lehman's bankruptcy in September 2008, Morgan Stanley countered concerns that it might be next to go by announcing it had "strong capital and liquidity positions." The statement, in a Sept. 29, 2008, press release about a $9 billion investment from Tokyo-based Mitsubishi UFJ Financial Group Inc., said nothing about Morgan Stanley's Fed loans.

That was the same day as the firm's $107.3 billion peak in borrowing from the central bank, which was the source of almost all of Morgan Stanley's available cash, according to the lending data and documents released more than two years later by the Financial Crisis Inquiry Commission. The amount was almost three times the company's total profits over the past decade, data compiled by Bloomberg show.

Mark Lake, a spokesman for New York-based Morgan Stanley, said the crisis caused the industry to "fundamentally re- evaluate" the way it manages its cash.

"We have taken the lessons we learned from that period and applied them to our liquidity-management program to protect both our franchise and our clients going forward," Lake said. He declined to say what changes the bank had made.

Acceptable Collateral

In most cases, the Fed demanded collateral for its loans -- Treasuries or corporate bonds and mortgage bonds that could be seized and sold if the money wasn't repaid. That meant the central bank's main risk was that collateral pledged by banks that collapsed would be worth less than the amount borrowed.

As the crisis deepened, the Fed relaxed its standards for acceptable collateral. Typically, the central bank accepts only bonds with the highest credit grades, such as U.S. Treasuries. By late 2008, it was accepting "junk" bonds, those rated below investment grade. It even took stocks, which are first to get wiped out in a liquidation.

Morgan Stanley borrowed $61.3 billion from one Fed program in September 2008, pledging a total of $66.5 billion of collateral, according to Fed documents. Securities pledged included $21.5 billion of stocks, $6.68 billion of bonds with a junk credit rating and $19.5 billion of assets with an "unknown rating," according to the documents. About 25 percent of the collateral was foreign-denominated.

'Willingness to Lend'

"What you're looking at is a willingness to lend against just about anything," said Robert Eisenbeis, a former research director at the Federal Reserve Bank of Atlanta and now chief monetary economist in Atlanta for Sarasota, Florida-based Cumberland Advisors Inc.

The lack of private-market alternatives for lending shows how skeptical trading partners and depositors were about the value of the banks' capital and collateral, Eisenbeis said.

"The markets were just plain shut," said Tanya Azarchs, former head of bank research at Standard & Poor's and now an independent consultant in Briarcliff Manor, New York. "If you needed liquidity, there was only one place to go."

Even banks that survived the crisis without government capital injections tapped the Fed through programs that promised confidentiality. London-based Barclays Plc borrowed $64.9 billion and Frankfurt-based Deutsche Bank AG got $66 billion. Sarah MacDonald, a spokeswoman for Barclays, and John Gallagher, a spokesman for Deutsche Bank, declined to comment.

Below-Market Rates

While the Fed's last-resort lending programs generally charge above-market interest rates to deter routine borrowing, that practice sometimes flipped during the crisis. On Oct. 20, 2008, for example, the central bank agreed to make $113.3 billion of 28-day loans through its Term Auction Facility at a rate of 1.1 percent, according to a press release at the time.

The rate was less than a third of the 3.8 percent that banks were charging each other to make one-month loans on that day. Bank of America and Wachovia Corp. each got $15 billion of the 1.1 percent TAF loans, followed by Royal Bank of Scotland's RBS Citizens NA unit with $10 billion, Fed data show.

JPMorgan Chase & Co., the New York-based lender that touted its "fortress balance sheet" at least 16 times in press releases and conference calls from October 2007 through February 2010, took as much as $48 billion in February 2009 from TAF. The facility, set up in December 2007, was a temporary alternative to the discount window, the central bank's 97-year-old primary lending program to help banks in a cash squeeze.

'Larger Than TARP'

Goldman Sachs Group Inc., which in 2007 was the most profitable securities firm in Wall Street history, borrowed $69 billion from the Fed on Dec. 31, 2008. Among the programs New York-based Goldman Sachs tapped after the Lehman bankruptcy was the Primary Dealer Credit Facility, or PDCF, designed to lend money to brokerage firms ineligible for the Fed's bank-lending programs.

Michael Duvally, a spokesman for Goldman Sachs, declined to comment.

The Fed's liquidity lifelines may increase the chances that banks engage in excessive risk-taking with borrowed money, Rogoff said. Such a phenomenon, known as moral hazard, occurs if banks assume the Fed will be there when they need it, he said. The size of bank borrowings "certainly shows the Fed bailout was in many ways much larger than TARP," Rogoff said.

TARP is the Treasury Department's Troubled Asset Relief Program, a $700 billion bank-bailout fund that provided capital injections of $45 billion each to Citigroup and Bank of America, and $10 billion to Morgan Stanley. Because most of the Treasury's investments were made in the form of preferred stock, they were considered riskier than the Fed's loans, a type of senior debt.

Dodd-Frank Requirement

In December, in response to the Dodd-Frank Act, the Fed released 18 databases detailing its temporary emergency-lending programs.

Congress required the disclosure after the Fed rejected requests in 2008 from the late Bloomberg News reporter Mark Pittman and other media companies that sought details of its loans under the Freedom of Information Act. After fighting to keep the data secret, the central bank released unprecedented information about its discount window and other programs under court order in March 2011.

Bloomberg News combined Fed databases made available in December and July with the discount-window records released in March to produce daily totals for banks across all the programs, including the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, Commercial Paper Funding Facility, discount window, PDCF, TAF, Term Securities Lending Facility and single-tranche open market operations. The programs supplied loans from August 2007 through April 2010.

Rolling Crisis

The result is a timeline illustrating how the credit crisis rolled from one bank to another as financial contagion spread.

Fed borrowings by Societe Generale, France's second-biggest bank, peaked at $17.4 billion in May 2008, four months after the Paris-based lender announced a record 4.9 billion-euro ($7.2 billion) loss on unauthorized stock-index futures bets by former trader Jerome Kerviel.

Morgan Stanley's top borrowing came four months later, after Lehman's bankruptcy. Citigroup crested in January 2009, as did 43 other banks, the largest number of peak borrowings for any month during the crisis. Bank of America's heaviest borrowings came two months after that.

Sixteen banks, including Plano, Texas-based Beal Financial Corp. and Jacksonville, Florida-based EverBank Financial Corp., didn't hit their peaks until February or March 2010.

"At no point was there a material risk to the Fed or the taxpayer, as the loan required collateralization," said Reshma Fernandes, a spokeswoman for EverBank, which borrowed as much as $250 million.

Using Subsidiaries

Banks maximized their borrowings by using subsidiaries to tap Fed programs at the same time. In March 2009, Charlotte, North Carolina-based Bank of America drew $78 billion from one facility through two banking units and $11.8 billion more from two other programs through its broker-dealer, Bank of America Securities LLC.

Banks also shifted balances among Fed programs. Many preferred the TAF because it carried less of the stigma associated with the discount window, often seen as the last resort for lenders in distress, according to a January 2011 paper by researchers at the New York Fed.

After the Lehman bankruptcy, hedge funds began pulling their cash out of Morgan Stanley, fearing it might be the next to collapse, the Financial Crisis Inquiry Commission said in a January report, citing interviews with former Chief Executive Officer John Mack and then-Treasurer David Wong.

Borrowings Surge

Morgan Stanley's borrowings from the PDCF surged to $61.3 billion on Sept. 29 from zero on Sept. 14. At the same time, its loans from the Term Securities Lending Facility, or TSLF, rose to $36 billion from $3.5 billion. Morgan Stanley treasury reports released by the FCIC show the firm had $99.8 billion of liquidity on Sept. 29, a figure that included Fed borrowings.

"The cash flow was all drying up," said Roger Lister, a former Fed economist who's now head of financial-institutions coverage at credit-rating firm DBRS Inc. in New York. "Did they have enough resources to cope with it? The answer would be yes, but they needed the Fed."

While Morgan Stanley's Fed demands were the most acute, Citigroup was the most chronic borrower among the largest U.S. banks. The New York-based company borrowed $10 million from the TAF on the program's first day in December 2007 and had more than $25 billion outstanding under all programs by May 2008, according to Bloomberg data. By Nov. 21, when Citigroup began talks with the government to get a $20 billion capital injection on top of the $25 billion received a month earlier, its Fed borrowings had doubled to about $50 billion.

Tapping Six Programs

Over the next two months the amount almost doubled again. On Jan. 20, as the stock sank below $3 for the first time in 16 years amid investor concerns that the lender's capital cushion might be inadequate, Citigroup was tapping six Fed programs at once. Its total borrowings amounted to more than twice the federal Department of Education's 2011 budget.

Citigroup was in debt to the Fed on seven out of every 10 days from August 2007 through April 2010, the most frequent U.S. borrower among the 100 biggest publicly traded firms by pre- crisis market valuation. On average, the bank had a daily balance at the Fed of almost $20 billion.

"Citibank basically was sustained by the Fed for a very long time," said Richard Herring, a finance professor at the University of Pennsylvania in Philadelphia who has studied financial crises.

Jon Diat, a Citigroup spokesman, said the bank made use of programs that "achieved the goal of instilling confidence in the markets."

'Help Motivate Others'

JPMorgan CEO Jamie Dimon said in a letter to shareholders last year that his bank avoided many government programs. It did use TAF, Dimon said in the letter, "but this was done at the request of the Federal Reserve to help motivate others to use the system."

The bank, the second-largest in the U.S. by assets, first tapped the TAF in May 2008, six months after the program debuted, and then zeroed out its borrowings in September 2008. The next month, it started using TAF again.

On Feb. 26, 2009, more than a year after TAF's creation, JPMorgan's borrowings under the program climbed to $48 billion. On that day, the overall TAF balance for all banks hit its peak, $493.2 billion. Two weeks later, the figure began declining.

"Our prior comment is accurate," said Howard Opinsky, a spokesman for JPMorgan.

'The Cheapest Source'

Herring, the University of Pennsylvania professor, said some banks may have used the program to maximize profits by borrowing "from the cheapest source, because this was supposed to be secret and never revealed."

Whether banks needed the Fed's money for survival or used it because it offered advantageous rates, the central bank's lender-of-last-resort role amounts to a free insurance policy for banks guaranteeing the arrival of funds in a disaster, Herring said.

An IMF report last October said regulators should consider charging banks for the right to access central bank funds.

"The extent of official intervention is clear evidence that systemic liquidity risks were under-recognized and mispriced by both the private and public sectors," the IMF said in a separate report in April.

Access to Fed backup support "leads you to subject yourself to greater risks," Herring said. "If it's not there, you're not going to take the risks that would put you in trouble and require you to have access to that kind of funding."

--With assistance from Dawn Kopecki and Michael J. Moore in New York. Editors: Robert Friedman, John Voskuhl

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/08/21/bloomberg1376-LP42CE1A74E901-335HMMUEDN1MA536OQSVRILON4.DTL&ao=all#ixzz1ViEwxzzx

BRIC Recession: Less Than 2% From Joining The Rest Of The World In A Fresh Bear Market

2011-08-21T06:54:00.000-07:00

The week is finally over, and the numbers are in: after narrowly avoiding the "bear market" two weeks ago when we dipped by 19.63%, or about two ticks away from the dreaded 20% correction, the subsequent dead cat bounce fabricated in no small part courtesy of Europe's unprecedented intervention in all markets, both bond and stock, has ended, and we are back to being under 2% away from reentering a Bear Market (and closing at the Lows of the Day). That however will not be the end of the world: as the chart below shows America will actually be the last major market to enter join the Bear party, so little shame there. As the second chart from Rosenberg today shows all the developed countries plus all the BRICs are already there. We expect an ongoing selloff into the last week of August (no need to remind what happens then), at which point the market may get a surprise or two. In the meantime, we depart with Rosie's words: "the US economy is slipping into recession, Europe is as well, and HP served up a reminder that this earnings season has not been the slam-dunk positive reporting period posted in the prior eight quarters. But disciplined investors who took our advice should not be feeling much pain at all." Who laughs last again?

Global bear market:

Charting The Upcoming Recession, And Is Goldman Really Predicting A 2012 Year End S&P Range Of 700 - 900?

2011-08-21T06:35:00.001-07:00

In his weekly chart packet, Goldman's high frequency strategist, David Kostin, who now changes his year end S&P targets almost as frequently as the firm's economic team changes its GDP forecast, once again gets decidedly fatalistic (very much like Citigroup did yesterday, and Morgan Stanley last week), and is now openly contemplating downside cases to his EPS forecast. And with 2012 EPS numbers thrown around like $91 based on what is certainly an upcoming (but for now still hypothetical) margin contraction, $82 based on a 2% drop (almost guaranteed) in GDP Y/Y, and $75 based on historical earnings plunges in a recession, it may be time to listen up, because apply a traditional contractionary multiple of about 9-10x, and you have yourself a tidy little range of 700 - 910 on the S&P in about a year, absent yet another round of fiscal and/or monetary stimulus.
Kostin on the sensitivity between GDP and EPS:

Every 50 bp shift in 2012 GDP growth rate translates into about $2 per share in 2012 EPS. For example, if the US economy stalls and registers no growth in 2012, then our EPS forecast would equal $94, about $8 below our current estimate and 2% below 2011. If US GDP contracts by 2% on a year/year basis then 2012 EPS would fall to $82 reflecting a 14% decline from 2011.

Many investors are surprised that the EPS sensitivity to GDP growth is not more sizeable. One explanation is that a meaningful portion of aggregate earnings is only modestly linked to GDP growth. Utilities, Telecom Services, Consumer Staples and Health Care will account for nearly 30% of 2012 EPS. We recognize that federal and state government austerity next year will likely have a negative impact on earnings for certain sub-sectors of Health Care. Information Technology, Energy, and Materials generate a large portion of their sales outside the US, in some cases more than 50%, and pricing for commodities reflects global supply and demand. These sectors account for 36% of our 2012 S&P 500 EPS.

For future gloating's sake, where is where Wall Street currently sees 2012 GDP:

One thing we can guarantee: the consensus will not be reality 16 months from now.
How about the predictive ability of margin contraction?

Every 50 bp swing in margins equates to $5 per share in S&P 500 EPS (assuming sales growth and Financials and Utilities EPS estimates are unchanged). If margins fall by 140 bp from current 8.9% then S&P 500 EPS would fall to $91, $11 or 11% below our existing 2012 EPS forecast of $102.

Note the assumptions which will never be realized if the bottom falls out.
But the bigggest bear argument is not based on predicting the future (never Goldman's strong suit, unless the firm is actually defining it courtesy of its DC based tentacles), but based on the past:

Six profit cycles since 1974 show peak-to-trough declines in S&P 500 EPS averaged 22%. Most downturns ranged from 10% to 22% although the 2009 drop hit 58% led by a 157% collapse in Financials EPS. Sector level average peak-to-trough declines ranged from 8% growth (Consumer Staples) to 56% decline (Financials). If next year S&P 500 experiences a profit cycle decline similar in magnitude to prior contractions then earnings would fall by 22% to roughly $75 in 2012. Prior downturns typically occurred over 18 months.

End result: $75 EPS x 10 Multiple = 750 for the S&P.
That distant runging noise is every Wall Street CEO calling Ben Bernanke at the same time.

$2 Million Bet That Bank Of America Will Be $4 By November

2011-08-19T04:49:00.000-07:00

Will BAC be at $4 by November? We don't know. But someone just made a $2 million bet that this is precisely what will happen. Minutes ago, 54k $4 BAC November Puts were purchased at $0.37. The total price: $2 million. Will this event occur? Like we said, we don't know, but it sure looks far more realistic than Paulson's bet that BAC will trade at $30 by the end of the year.

Why Gold Might Hit $5,000 Within Two Months

2011-08-18T17:17:00.000-07:00

My firm has written often over the past couple of months comparing historical price movements with current developments.

To show you a few:

To make the comparisons easier, I developed an indicator for the Prorealtime Charting software, which allows me to “go back in time”.

The first article showed us that it’s possible that gold could explode towards $5,000 over the next couple of months. Let’s have a look at the chart. (All charts created with Prorealtime.)

Click to enlarge
But since anything is possible, let's look at this further: What could cause gold to explode?

Think about a total loss of confidence in currencies, especially the US Dollar.

As the second graph (below) shows, the US dollar is headed for a crash against the JPY. We have already seen part of that crash, but then suddenly the Bank of Japan intervened and the price shot up. However, interventions don’t work (except for the very short term) in our opinion, and right now, the USDJPY is already back around its lows, despite the interventions.

Click to enlarge

So yes, gold could explode to $5,000. Especially if we would get a complete loss of confidence in the US dollar.

However, when you cross the street, you don’t just look at one side if a big truck is coming. The same goes for investing. One should always consider different views. Therefore, we compared the gold price today with the price movement of early 2006 to early 2008 in the chart below:

Click to enlarge

We all know what happened with gold in 2008. It dropped from as high as $1,033 to as low as $681, as all assets were liquidated in order to obtain cash. We were experiencing a really big credit crunch.

As gold and stocks sold off in 2008, gold stocks were hit even harder than gold. If the comparison of gold now vs. 2008 would hold, then what should we expect from gold stocks? Well, the chart below has the answer.

Click to enlarge

What would happen to silver? Exactly. The same as in 2008: a huge sell-off.

Click to enlarge

Now I can already hear you say, “Hey, what about stocks?”

Yes dear readers, stocks also follow a similar pattern, as shown by the price action of the German DAX index.

Click to enlarge

One last thought: Why is Mr. Paulson’s biggest holding the SPDR Gold ETF (GLD)? He doesn’t own that many gold stocks, but still, he is uberbullish about gold. If he really thinks gold will trade at $4,000, then why doesn’t he load up on gold mining stocks?

Maybe he thinks gold and gold stocks will completely disconnect, with gold going through the roof, while gold stocks tank just like the general markets? That trend might have already been developing over the last couple of months, as gold is at an all-time high, while gold stocks are still trading at levels where gold was trading about $500 lower.

Time to Bet on Bank of America

2011-08-18T04:55:00.000-07:00

Shares of the giant bank are down 46% this year, thanks to the housing mess and worries about a global slowdown. At their current level, that's all priced in and more.

Investors pulled their money out of Bank of America with both hands last week, driving the stock to its lowest level since March 2009, as concerns about a slowing economy rattled the banking industry, and lingering losses from loans it made during the housing bubble raised fears that the bank would need to raise additional capital.

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timates and they're worth $14.70.

The bank has made some progress in cleaning up after the housing meltdown. It has bolstered reserves on its $939 billion loan portfolio to $37 billion. If loan performance doesn't get worse—a big if in many investors' minds—the bank won't have to increase those reserves and a major drag on earnings over the past few years will disappear.
Bank of America (ticker: BAC) has also improved its liquidity and its capital, with $400 billion of cash and liquid assets on hand and $1 trillion in deposits. The bank's earnings power was apparent in its second quarter results. Outside the residential mortgage area, the bank's businesses generated roughly $6 billion of net income, and each enjoyed lower provisions for credit losses.

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Recent Price	$7.19
52-week change	-45%
Revenue 2011E (bil)	$90.2
EPS 2011E	-$0.25
EPS 2012E	$1.47
Tangible shareholder equity (bil)	$128
Tangible equity/share	$12.65
Current Yield	0.6%
E=Estimate. Source: Thomson Reuters

But the good news has been overshadowed by the bad: the European debt crisis, a chaotic stock market and fears about global growth, which pushed U.S. Treasury yields down. That's to say nothing of the heap of lawsuits stemming from the mortgage mess.
Low interest rates are hurting net interest income at all banks. And a faltering global economy could mean the industry underwrites fewer securities, trades less, makes fewer loans and facse higher-than-expected loan losses.
Matt O'Connor, an analyst at Deutsche Bank wrote in a note last week that his $1.35 earnings estimate for Bank of America in 2012 could fall by 47 cents and his $1.75 estimate for '13 could be too high by 96 cents. Betsy Graseck, Morgan Stanley's bank analyst, lowered her 2011 earnings estimate by six cents, to 76 cents a share and her 2012 estimate by 29 cents, to $1.53 a share. She lopped her bullish target price by $2, to $15.

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Dan Picasso for Barron's

Concerns also flared over a report last week that claimed the bank may have to lift its reserves dramatically to offset new problems with its residential mortgage portfolio. BofA's consumer real estate division racked up a $14.5 billion loss in the last quarter, hurt by a $12.8 billion increase in the representations and warranties provision. Reps and warranties basically promise investors in mortgages that the bank did its job in correctly underwriting the loan.

"At the end of the second quarter, Bank of America had approximately $18 billion to cover the recently announced $8.5 billion settlement with Bank of New York Mellon and other future representation and warranties repurchase liabilities," a spokesman wrote in an e-mail. Still, the firm has said it may have to boost provisions by up to $5 billion more.

Now for the Good News

Bank of America's businesses are growing smartly, but housing bubble loans are still dragging it down.

Business Segment	Net Income Q2 2011 (mil)	Chg From Q2 2010
Deposits	$430	-36%
Card Services	2,035	146
Wealth & Investing	506	54
Commercial Banking	1,381	69
Banking & Markets	1,558	73
Consumer Real-Estate Svcs.	-14,520	NA
Source: Company reports

SOME THINK THAT NUMBER could go a lot higher. Last week Compass Point Research & Trading published a report estimating that BofA would have to boost reserves by another $25.7 billion. That's the most extreme estimate so far, and Bank officials disputed it hotly.
Ironically, the shares may have already priced in Compass Point's worst case scenario, which has BAC boosting reserves by $44 billion. Once that reserve increase is adjusted for taxes and divided by the bank's huge share base of more than 10 billion shares, tangible book value would be reduced by roughly $2.50 a share. That would still leave $10 a share in tangible book, estimates John McDonald, a Sanford C. Bernstein Research analyst. He has a $13 price target on the stock.
The other thing weighing on shares is a lack of confidence in Bank of America's ability to meet an increase in regulatory capital requirements by 2019 through retained earnings and the sale of assets. Under Basel 3, the bank's tier 1 ratio needs to be 3.5% in 2013.

The Bottom Line

A slew of bad news hammered Bank of America's shares to their lowest level since March 2009. Under even the most bearish scenario, they look cheap. Why they could rise 35%.

The bank's goal is to have a ratio of 6.75% to 7% by 2013 and to exceed capital requirements in all periods without raising equity. But the market is acting as if it needs to raise equity now to meet the requirements and be competitive with rivals like JPMorgan (JPM).
CEO Brian Moynihan failed to convince investors on a conference call last week that the bank had turned things around. But with tons of bad news priced into the stock, a few quiescent quarters may be all it takes to lift the shares out of their funk.

Nifty hits 15-month low, ends below 5K on global turmoil

2011-08-18T04:52:00.001-07:00

After a few days of relative calm, Indian equity benchmarks closed with enormous cuts, with the NSE Nifty closing at below 5000 for the first-time since June 2010. It was a complete free-fall on Dalal Street on Wednesday, spooked by fears of stammering recovery in the European and US economies after debt crisis.
The 50-share NSE Nifty touched new 52-week intra-day low of 4,932.15, before closing down 112 points at 4,944. The 30-share BSE Sensex fell 371 points, to end at 16,469.79.
On the global front, European markets like France's CAC, Germany's DAX, Britain's FTSE were down 2-3.5%. The Dow Jones futures tumbled 173 points. Major Asian markets like Hang Seng, Shanghai and Nikkei closed down 1-1.6%.
Experts feel that one should learn to live with the pain as the bleeding is going to last long now. Stephen Roach, non-executive chairman of Morgan Stanley Asia said that Euro zone crisis is far from over and may see further adjustments in global equity markets.
Morgan Stanley has cut global GDP growth forecasts to 3.9% and 3.8% in 2011 and 2012 respectively. Roach further warned that both the US and Euro are hovering close to recession.
For India, Roach said, further rate hikes by RBI remains an overhang.
Likewise, Dipan Mehta, Member BSE & NSE too said the central problem with India was inflation and interest rates. He doesn't see any major change in the stance of the Reserve Bank.
"The market could see even lower levels, which cannot be ruled out," he added.
Meanwhile, Deven Choksey, MD of KR Choksey Shrs & Securities Pvt. Ltd said, "Most worried factor in the mind of investors and foreign investors is that this freedom from corruption, which is going to continue for longer period of time. That means the government's attention would be moving away from taking any policy reform decisions and that would significantly affect the progress of the economy going forward."
"The participation from retail investor is absolutely thin but the fund investors are also remaining cautious, generating cash in the portfolio," Choksey added.
Shares of technology, financial and metal companies saw sharp crack with the respective indices falling 2.5-4%.
Shares of technology, financial and metal companies saw major cracks with the respective indices falling 2.5-4%.
Banking majors ICICI Bank and Axis Bank lost 5% each. Largecaps like TCS, SBI, Infosys, Wipro, HDFC, Sterlite, Tata Motors, PNB and Hindalco were down 3-4.5%.
Reliance Infrastructure and HCL Tech were biggest losers on Nifty, falling over 6%. Reliance Industries, L&T and Bharti Airtel slipped 1-2%.
Beaten down infra major DLF, however, bucked the trend today rising 3% on short covering. Hero Motocorp, Reliance Communications, Jaiprakash Associates and ACC were other gainers.
Meanwhile, mid- and small-caps continued to take huge beating with respective BSE indices falling 2-2.6%.
Market breadth was pathetic; about 6 share slipped in red for every one share in green. Total traded turnover was more than Rs 1.6 lakh crore

SEC may have destroyed documents, senator says Grassley: Agency may have got rid of Goldman, Madoff documents

2011-08-17T19:50:00.001-07:00

“From what I’ve seen, it looks as if the SEC might have sanctioned some level of case-related document destruction,” said Sen. Chuck Grassley, Republican of Iowa, in a letter to the agency’s chairman, Mary Schapiro.

Sen. Chuck Grassley

“It doesn’t make sense that an agency responsible for investigations would want to get rid of potential evidence. If these charges are true, the agency needs to explain why it destroyed documents, how many documents it destroyed over what timeframe, and to what extent its actions were consistent with the law.”

Agency staff “destroyed over 9,000 files” related to preliminary agency investigations, according to a letter sent in July to Grassley, the top Republican on the Senate Judiciary Committee, and obtained by MarketWatch.

The allegations were made by SEC enforcement attorney, Darcy Flynn, in a letter to Grassley. Flynn is a current employee, and according to the letter, received a bonus for his past year’s work.

Flynn alleges the SEC destroyed files related to matters being examined in important cases such as Bernard Madoff and a $50 billion Ponzi scheme he operated as well as an investigation involving Goldman Sachs Group Inc. GS -0.04% trading in American International Group credit-default swaps in 2009.

Flynn also alleged that the agency destroyed documents and information collected for preliminary investigations at Wells Fargo & Co. WFC +1.34% , Bank of America Corp. BAC -0.27% , Citigroup C +0.03% , Credit Suisse CS +0.38% , Deutsche Bank DB +0.79% Morgan Stanley MS -0.12% and the now-bankrupt Lehman Brothers.

The letter goes into particular detail about Deutsche Bank, the former employer of current SEC enforcement chief Robert Khuzami as well as former enforcement chiefs Gary Lynch and Richard Walker.

The allegations that the SEC destroyed documents were first reported by the Rolling Stone magazine in a report Wednesday.

An SEC spokesman did not return a request for comment. However, according to the Rolling Stone article, the SEC told the National Archives and Records Administration that the commission “is not aware of any specific instances of the destruction of records from any other MUI.”

The SEC added that it “cannot say with certainty that no such documents have been destroyed over the past 17 years.” Read Grassley's letter to the SEC

Flynn’s lawyer, Gary Aguirre, was a former SEC attorney. Aguirre was fired in September 2005 as he was investigating allegations of insider trading at the major hedge fund Pequot Capital Management.

At the time, the SEC said Aguirre had personality conflicts with other staff attorneys, was reticent to be supervised and did not follow the agency’s chain of command.

Ronald D. Orol is a MarketWatch reporter, based in Washington.

German growth nearly grinds to a halt

2011-08-16T07:28:00.000-07:00

Germany’s economic growth nearly ground to a halt in the second quarter, highlighting fears that the so-called Wirtschaftswunder in Europe’s largest economy may be coming to an end.

Gross domestic product rose 0.1% in the April-June quarter from the preceding three months, the German statistics institute reported Tuesday, citing seasonally adjusted data. The figures mark a sharp slowdown after German GDP expanded 1.3% in the first quarter.

Click to Play

Euroview: SNB should think twice about franc peg

Pegging the franc against the euro might create more problems for the SNB than it solves.

“The German economy, accustomed to success, is unable to decouple from slowing global economic growth,” said Joerg Kraemer, chief economist at Commerzbank AG, in a note.

He lowered his forecast for German growth in 2011 to 3% from 3.4% previously.

Carsten Brzeski from ING Bank said the German performance “should not be considered a disappointment but rather a growth normalization“ after the stellar performance in the first quarter and given several external shocks such as the Japanese earthquake in March, the rise in oil prices and the U.S. economic slowdown.

“While German politicians are currently racking their brains on the pros and cons of common eurobonds, the luxury of having an economy running at `wonder’ speed is fading away,” Brzeski said in a note.

Reuters

German Chancellor Angela Merkel (right) welcomes France's President Nicolas Sarkozy before talks in Berlin in July.

The poor performance by Germany, combined with zero growth registered by France in the second quarter, contributed to a weak showing for the 17-nation euro zone.

The euro area’s GDP rose 0.2% in the second quarter from the preceding three months, after growing 0.8% in the first quarter, Eurostat said Tuesday. Growth in Spain and Italy was 0.2% and 0.3%, respectively.

Belgium

and Austria were among the very few euro-zone nations that displayed some economic strength in the second quarter, with their GDPs growing 0.7% and 1%, respectively.

Tuesday’s data come as German Chancellor Angela Merkel is due to meet French President Nicolas Sarkozy in Paris later to discuss the euro-zone debt crisis.

The euro slipped 0.4% to $1.4385 ahead of the meeting.

Coutesy :Polya Lesova is chief of MarketWatch’s London bureau. (MarketWatch Inc.)

Google to buy Motorola Mobility for $12.5 billion

2011-08-15T07:08:00.000-07:00

Google Inc.agreed to acquire Motorola Mobility Holdings Inc. for about $12.5 billion, a move that would make Google more competitive in the mobile-computing market.

The deal, which comes just eight months after the split of Motorola Inc., would give Google control of Motorola Mobility's attractive patent portfolio after the Internet giant recently missed out on a bid for Nortel Networks Corp.'s (NRTLQ) portfolio. Google, which owns the fast-growing Android operating system used in millions of mobile phones, has a thin portfolio of wireless and telecommunications patents.

Motorola Mobility shares soared 60% to $39.24 premarket, approaching the offer price of $40 a share, which is a 63% premium to Friday close. Google shares were down 3.2% to $546.50 premarket.

Google will run Motorola Mobility as a separate business that will remain a licensee of Android. Google also said Android will remain an open platform.

Google expects to complete the transaction by early 2012, and it's been approved by the boards of both companies.

Most of the Motorola's revenue comes from smartphones and the company has been working to diversify its customer base to defend against the potential loss of Deutsche Telekom AG's (DTEGY, DTE.XE) T-Mobile USA, a key customer.

Activist investor Carl Icahn, who is the company's largest shareholder, had urged Motorola Mobility to explore options for its patent portfolio in the wake of the Nortel deal that attracted multiple bidders.

Following that defeat, Google had preliminary discussions with InterDigital Inc. (IDCC) about a possible acquisition of the wireless technology developer and licenser.

The smartphone and set-top box company split with its sister Motorola Solutions Inc. (MSI), which is focused on business and networking operations, at the beginning of the year. The separation made Motorola Mobility nimbler and more focused on its core operations, but it faces a highly competitive smartphone market, including a persistent threat from Apple Inc.'s (AAPL) iPhone.

Last month, Motorola reported a 28% rise in second-quarter revenue, thanks to strong tablet sales, but the device maker provided weak guidance for the current quarter because of delays in launching speedier 4G devices.

Meanwhile, Google's second-quarter earnings rose 36% on record revenue as the Internet giant experienced strength in its core search business and gained traction with its newer operations.

Courtesy: Marketwatch Inc.

Morgan Stanley Gets Downright Apocalyptic

2011-08-14T10:25:00.000-07:00

Listening to David Greenlaw and/or Jim Caron as they strike out again, and again, and again, with delusions of economic grandure over US GDP and some historic 2s10s bull steepener which is never, ever coming, one would be left with the impression that Morgan Stanley has inherited the title of most permabullish sell side advisory from Deutsche Bank's economics department. Nothing could be further from the truth. Like any other bank, MS has perfectly hedged its rosy outlook by spoonfeeding its retail clients with the rosy view, while whispering the apocalypse case to its institutional clients (judging by last week's pummeling in MS stock, there is not that many of them left). Below we present the view of MS' equity strategy team under Adam Parker, who gives not only a distribution range for his year end S&P target (1004-1425), but a matrix specifying the probability outcome of either case. Bottom line, "while there is 18% upside to the year-end bull case and 16% downside to the year-end bear case, we assign a higher probability to our bear case than bull case, preventing us from becoming increasingly optimistic." When even Morgan Stanley tells you (or rather the whale clients who are now more than happy to sell into every low volume, retail driven rally) there is little to smile about, it is high time to look for the exits.

From Morgan Stanley:

One way to think about what is priced into the equity market today is to look at a range of forward EPS and price-to-forward earnings multiples (Exhibit 2). Forward earnings data have existed since 1976, and the historical median price-to-forward earnings multiple is 13.6x. If the bottom-up consensus estimate of $114 turns out to be achievable, and the median forward earnings estimate were applied to it, the market would trade at 1550. Our base case is 12x $103.2 in 2012 EPS, or 1238. We have boxed in a variety of scenarios close to what is being implied by today’s price, and what would be implied by our bear and bull cases. While it’s impossible to know for sure what combination of multiple and forward EPS is being digested, we do believe that the market is pricing in something close to 12x $100 dollars today.
We don’t think a recession is fully priced in, as market retrenchment is usually far more substantial in that case, recent jobs data did not imply a recession is imminent, and corporate profitability and estimates remain robust. We think management guidance and sell-side estimates must be reduced to believe a substantial buying opportunity is imminent. Secondly, we have always, and continue to assign a higher probability to the bear case than the bull case, and believe the recent price action increases the probability of the bear case. Poor price action, the S&P downgrade of US sovereign debt, and the exacerbation of recent problems in Europe likely decrease confidence and increase the probability of the bear case (Exhibit 3).
Said another way, while there is 18% upside to the year-end bull case and 16% downside to the year-end bear case, we assign a higher probability to our bear case than bull case, preventing us from becoming increasingly optimistic.

Currencies’ weekly carnival ride leaves dollar back at start

2011-08-12T18:13:00.001-07:00

That’s it? After all the currency market’s gyrations for the week – including a tussle over whether Europe or a downgraded U.S. would win the ugly contest; a flight out of risk that rallied the safe-havens; and then a rebound in the Swiss franc on veiled central bank threats to institute a euro peg — some of the major currency pairs ended not far from where they started.
The dollar index DXY traded at 74.599 late Friday, nearly flat with its week ago finish. It’s still down 5.6% in 2011.
The euro EURUSD is down 0.3% against the dollar for the week, but still up 6.3% for the year. The British pound GBPUSD has fallen 0.7% versus the greenback, cutting the year’s rise to 4.1%.
The yen was a stand out. The dollar this week has lost 2.1% against the yen USDJPY, the biggest drop since April. It’s lost 5.4% this year, keeping the yen near its all-time low.
For the week, the dollar is up a just 1.1% versus the Swiss franc USDCHF, and is still down about 17% for the year. Read MarketWatch’s currencies report.

Understanding the Financial Crisis - very well explanation!

2011-08-12T18:04:00.001-07:00

Understanding the Financial Crisis - very well explanation!