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The real measure of your wealth is how much you will be worth if you lost all your money
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Bank of America’s Bernstein Says Sell Bank Stocks After Rally
Tuesday March 24, 2009 By Eric Martin March 23 (Bloomberg) -- Investors should sell bank stocks after they rallied 12 percent today because the Treasury Department’s plan to buy toxic assets won’t stop profits from dropping, Bank of America Corp.’s Richard Bernsteinsaid. Removing devalued loans and securities from banks’ balance sheets is a short-term solution that will delay the problem’s ultimate solution, which is bank takeovers, Bernstein said. The government won’t be able to inflate the prices banks receive for selling bad assets indefinitely, he added. “The history of bubbles shows quite well that financial sector consolidation is inevitable,” Bernstein, Bank of America’s chief investment strategist, wrote in a research note. “Financial stocks will be attractive when the government tries to speed up that inevitable process. However, to the contrary, the government continues to attempt to stymie that inevitable consolidation.” The Standard & Poor’s 500 Financials Index has climbed 51 percent since March 6 after Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. said they’ve become profitable. The measure surged 12 percent as of 3:10 p.m. today in New York. Bernstein compared the U.S. plan to Japan’s response in the 1990s, when the government, faced with public opposition to its bailouts of banks, waited before trying to fix its financial system. That resulted in the “Lost Decade,” in which economic growth averaged less than 1 percent a year and the unemployment rate more than doubled. The Obama administration unveiled its plan to remove toxic assets from the books of the nation’s banks earlier, betting that it can revive the U.S. financial system without resorting to outright nationalization. The plan is aimed at financing as much as $1 trillion in purchases of illiquid real-estate assets, using $75 billion to $100 billion of the Treasury’s remaining bank-rescue funds. The Public-Private Investment Program will also rely on Federal Reserve financing and Federal Deposit Insurance Corp. debt guarantees, the Treasury said in a statement in Washington. To contact the reporter on this story: Eric Martin in New York atemartin21@bloomberg.net. Last Updated: March 23, 2009 15:20 EDT
A Visual Guide to the Financial Crisis
Tuesday January 27, 2009 Almost overnight, the talking heads went from perpetuating the euphoria of investors to rushing to pronounce the economy dead. Last year, when lenders started dropping like flies as foreclosures rose and margins were called, the problems of Wall Street became more and more apparent, and lending guidelines were tightened to the point that many individuals were stuck in their time-bomb loans, and thus began a vicious cycle. But what led to this? Here is a visual guide to help you understand the events leading up to the bailout.
Madoff alleged $50 billion fraud hits other investors
Friday December 12, 2008
Madoff alleged $50 billion fraud hits other investorsFriday December 12, 2008, 1:20 pm ESTYahoo! Buzz Print
By Jon Stempel and Christian Plumb The building where Bernard L. Madoff Investment Securities LLC offices are located is seen in New York December 12, 2008. All equity trades involving market-making firm Bernard L. Madoff Investment Securities LLC, which was founded by Bernard Madoff -- the broker arrested for an alleged $50 billion fraud -- will be processed as usual, the Depository Trust Clearing Corp told Reuters on Friday. REUTERS/Shannon Stapleton NEW YORK (Reuters) - Investors scrambled on Friday to assess potential losses from the $50 billion fraud allegedly perpetrated by Bernard Madoff, a day after the arrest of the prominent Wall Street trader. Prosecutors and regulators accused the 70-year-old former chairman of the Nasdaq Stock Market of masterminding a Ponzi scheme of epic proportions through a hedge fund he ran. Investors entrusted him with billions of dollars. Federal agents arrested Madoff at his apartment on Thursday after prosecutors said he told senior employees that his money management operations were "all just one big lie" and "basically, a giant Ponzi scheme." Madoff is the founder of Bernard L. Madoff Investment Securities LLC, a market-making firm he launched in 1960. His separate investment advisory business had $17.1 billion of assets under management. Many investors may have had indirect exposure by investing through the firm's clients. The two most prominent hedge funds that invested with Madoff were the $7.3 billion Fairfield Sentry Ltd, run by Walter Noel's Fairfield Greenwich Group, and the $2.8 billion Kingate Global Fund Ltd, run by Kingate Management Ltd. About a dozen angry investors gathered on Friday in the lobby of the Lipstick Building in midtown Manhattan, where the market-making firm and advisory fund are both headquartered, demanding to know the fate of their money. One woman who declined to give her name said that when she called the firm's offices on Thursday she was told it was "business as usual." Another investor groused, "Business as usual? Of course it's business as usual. We're getting screwed left and right." Police later evicted the small group from the building. Fairfield Sentry and Kingate Global were among a small group of hedge funds to report positive returns for 2008; the average hedge fund was down 18 percent, according to data from Hedge Fund Research. In a Ponzi scheme, the swindler uses money from new investors, who are lured with the promise of high or consistent returns, to pay off earlier investors. Prior to Madoff's arrest, investors had wondered how he was able to generate annual returns in the low double digits in a variety of market environments. "Many of us questioned how that strategy could generate those kinds of returns so consistently," said Jon Najarian, an options trader who knows Madoff and is a co-founder of optionmonster.com. U.S. stocks tumbled Friday after talks in Congress on a rescue for the nation's auto industry broke down, but some investors also cited unease about the Madoff collapse. "It raises the question is this a one-off deal, or in the kind of market environment we have, is the SEC going to uncover more shady investments?" said Fred Dickson, market strategist, director of retail research, D.A. Davidson & Co. in Lake Oswego, Oregon. Benedict Hentsch, a Swiss private bank, said it had 56 million Swiss francs ($47 million) of exposure to Madoff's investment advisory business. UniCredit SpA's fund management unit, Pioneer Investments, has exposure through its Primeo Select hedge fund, two people familiar with the matter said. Madoff said "there is no innocent explanation" for his activities, and that he "paid investors with money that wasn't there," according to the federal complaint. Prosecutors also alleged that Madoff wanted to distribute as much as $300 million to employees, family members and friends before turning himself in. Charged with one count of securities fraud, he faces up to 20 years in prison and a $5 million fine. The U.S. Securities and Exchange Commission filed separate civil charges. A U.S. federal judge is expected later Friday to hold a hearing on whether to put assets under Madoff's control into a receivership. Madoff's lawyer, Dan Horwitz, said on Thursday, "We will fight to get through this unfortunate set of events." His client was released on $10 million bond. Madoff is a member of Nasdaq OMX Group Inc's nominating committee. His firm has said it is a market-maker for about 350 Nasdaq stocks. He is also chairman of London-based Madoff Securities International Ltd, whose chief executive, Stephen Raven, said the firm was "not in any way part of" the New York-based market-maker. "Our business activities are not involved in any way with the U.S. asset management company with which the reported allegations appear to be concerned," Raven said. (Reporting by Jennifer Ablan, Edith Honan, Aarthi Sivaraman and Leah Schnurr and Dan Wilchins in New York; Svea Herbst-Bayliss in Boston and Lisa Jucca in Zurich; editing by Jeffrey Benkoe and John Wallace) |
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