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STELARA(R) Demonstrates Sustained High Level Efficacy in Japanese Psoriasis Patients Over 12 Months

by on May 30, 2011

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STELARA(R) Demonstrates Sustained High Level Efficacy in Japanese Psoriasis Patients Over 12 Months

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STELARA(R) Demonstrates Sustained High Level Efficacy in Japanese Psoriasis Patients Over 12 Months

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GBPUSD: Rally Threatens Key 1.64 Level

by on May 27, 2011

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GBPUSD: Rally Threatens Key 1.64 Level

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GBPUSD: Rally Threatens Key 1.64 Level

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Michael Pento: Interest Rates Are On The Launching Pad

March 16, 2011

When the chorus of recovery cheerleaders reached their peak voice not too long ago, they used statistics like expanding consumer credit and surging U.S. trade deficits as their evidence for an economic rebound. In doing so, they denied the very nucleus of this past crisis; namely one engendered by onerous debt levels and inflation induced asset bubbles. Once one recognizes the problem, the only viable long-term solution seems obvious. Put simply, we must deleverage as a nation while boosting the value of our currency. However, instead of allowing markets to function freely the Federal Reserve, in full cooperation with the government, has now fully succeeded in putting us back on a path of destruction. Last week’s release of the Flow of Funds report issued from the Federal Reserve clearly underlines the fact that as a country, not only haven’t we deleveraged, but to the contrary, debt accumulation is still increasing. As of the end of Q4, total non-financial debt (household, business, state, local and federal debt) reached an all time record high $36.2 trillion. More importantly, not only is the nominal level of debt at a record but also if stated as a percentage of GDP. In Q4 2007 total non-financial debt registered 222% of GDP. In 2007, 2008 and 2009 it was 222%, 238% and 243% respectively. As of Q4 2010 that figure was 244% of GDP. To put those numbers into perspective, back in the year 2000 the level of total debt to GDP was 182%. That’s still bad but far below where it is today. The above numbers clearly illustrate that the over-leveraged condition that brought the economy down in 2008 still exists today; but only worse. All that we have accomplished is to transfer private debt onto the Treasury’s balance sheet. Now that the Fed is (hopefully) just months away from ending their manipulation of interest rates, the paramount question is how interest rates will climb. The Fed has been able to temporarily send yields lower. The ironic part here is that they accomplish this by creating inflation. However, the process of creating inflation to keep interest rates lower cannot last very long. This can only be achieved by convincing the majority of investors that deflation is a very credible threat. But the Fed and Administration’s epoch for pulling off that ruse has come to an end. The unrelenting growth of the Fed’s balance sheet, increasing monetary aggregates, surging gold and commodity prices, $100 barrel oil, soaring food prices and the projected trillions of dollars of new debt that must be printed in the future have served to vanquish the deflationists. Any vestiges of those once prominent voices can barely be heard today. In fact, those who still dare to mention deflation today are quickly and quite appropriately derided. So therein lies the problem for the Fed. Any further debt monetization by the central bank now becomes counterproductive. That’s because as inflation rates climb bond investors demand higher interest rates. The lower real interest rates become the less participation there will be in the bond market from private sources. If you don’t believe me ask Bill Gross. The Fed is now in the position of damned if you do and damned if you don’t. Interest rates have been artificially suppressed for such a long time that no matter what Bernanke does come June, interest rates will rise. If they extend QE2 into continued iterations of Treasury monetization, the Fed may find themselves the only players in the bond market at that price. Of course, the Fed could potentially buy all of the auctioned Treasury debt if it wanted to in order to keep rates low–as uncomfortable a position as that may be–but all other interest rates from bank loans to municipal debt would skyrocket. Unless…, the Fed decided to buy all that debt too;–hello Zimbabwe! But as unlikely as that scenario may be, the truth is that only a central banker could afford to own bonds that are yielding rates well below inflation, and growing even more so. Then again, if Bernanke stops buying at the appointed termination of QE2, yields will rise to at least the level in which they provide a real return after inflation. How much higher will rates go you ask? Well Mr. Gross has some thoughts on that: “What I would point out is that Treasury yields are perhaps 150 basis points or 1½% too low when viewed on a historical context and when compared with expected nominal GDP growth of 5%. This conclusion can be validated with numerous examples: (1) 10-year Treasury yields, while volatile, typically mimic nominal GDP growth and by that standard are 150 basis points too low, (2) real 5-year Treasury interest rates over a century’s time have averaged 1½% and now rest at a negative 0.15%! (3) Fed funds policy rates for the past 40 years have averaged 75 basis points less than nominal GDP and now rest at 475 basis points under that historical waterline.” To the above I say; not bad for a start Mr. Gross. But these aren’t exactly average times. We have never had a Fed balance sheet anywhere near the $2.6 trillion that it is today. In addition, the nation has never faced the prospect of $1 trillion deficits as far as the eye can see. Nor have we ever had our total debt as a percentage of GDP reach 244%. Now, Japan has not only been taken offline from buying our Treasuries, they may even be forced to sell a significant portion of their $882 billion dollars worth of U.S. debt. The bottom line is that a massive increase in the supply of debt coupled with rising rates of inflation will always place upward pressure on interest rates. Once the Fed steps aside from buying 70% of the Treasury’s current auctioned output they will leave a gaping hole. And for those Pollyannas who claim we are in an economic recovery, I would ask them the following questions. Who will supplant the Fed’s purchases of Treasuries at current yields? Since the level of debt in the economy has grown since the recession began, why will rising rates not place us back into an economic funk? Can the Fed unwind its balance sheet before inflation further ravages the country? And if the Fed isn’t able to raise rates significantly, what will stop the dollar from falling apart. Then again, I guess it all comes down to one simple question; do you believe the laws of supply and demand apply to U.S. Treasuries. If you do, then watch out for soaring yields. Michael Pento is the Senior Economist for Euro Pacific Capital

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Forex: Dollar – Will we See the Same Level of Market Reaction to the NFPs as we Did the ECB Decision?

March 4, 2011

Forex: Dollar – Will we See the Same Level of Market Reaction to the NFPs as we Did the ECB Decision?

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Euro Poised for Break Above 1.3860; But Will the Rally Hold Above the Level

March 1, 2011

Euro Poised for Break Above 1.3860; But Will the Rally Hold Above the Level

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Marshall Goldsmith: Managing Up: Getting Your Higher-Ups To Pay Attention To You

January 30, 2011

Peter Drucker once said, “Great wisdom not applied to action and behavior is meaningless data.” How true this is! As a knowledge worker, if you haven’t got the attention of the higher ups, your greatest ideas probably won’t ever see the light of day. First, what is a knowledge worker? Knowledge workers are people who know more about what they are doing than their boss does. My guess is that you, like most of my readers, are a knowledge worker. Many knowledge workers (especially those with technical backgrounds) have years of education and experience that enable them to come up with great ideas. Yet this same group has almost no training in how to “influence up” and ensure that their great ideas actually get accepted. Great ideas that are never implemented don’t make much of an impact on the organization. Now, as a knowledge worker, how do you improve the odds of your boss taking your suggestions? The guidelines listed below are intended to help you do a better job of influencing your upper management. They won’t always ensure your success, but they will definitely improve your odds! Take responsibility. Think like a salesperson–not a technician. In many ways, influencing up is similar to selling products or services to external customers. They don’t have to buy — you have to sell! Any good salesperson takes responsibility for achieving results. No one is impressed with salespeople who blame their customers for not buying their products. When making your pitch, treat upper managers like great salespeople treat their customers. While the importance of taking responsibility may seem obvious in external sales, an amazing number of people in large corporations spend countless hours blaming management for not buying their ideas, as opposed to blaming themselves for not selling those ideas. If more time were spent on developing our ability to present ideas and less on blaming management, a lot more might get accomplished. Focus on the big picture — not just what’s in it for you. An effective salesperson would never say to a customer, “You need to buy this product, because if you don’t, I won’t achieve my objectives!” Effective salespeople relate to the needs of the buyers. They don’t expect buyers to relate to their needs. In the same way, effective “upward influencers” relate to the larger needs of the organization, not just to the needs of their unit or team. When influencing up, focus on the impact of the decision on the overall corporation. In most cases, the needs of the unit and the needs of the corporation are directly connected. In some cases, this connection isn’t so obvious. Don’t assume that executives will automatically make the connection between the benefit to your unit and significant, positive impact for the larger corporation. Strive to win the big battles. Don’t waste your energy and psychological capital on trivial points. An executive’s time is very limited. Do a thorough analysis of your ideas before challenging the system. Don’t waste time on issues that will only have negligible results. Focus on issues that will make a real difference. Be willing to lose on small points. Be especially sensitive to the need to win trivial, nonbusiness arguments on things like restaurants, sports teams or cars. People become more annoyed with us for having to be “right” on trivia than our need to be right on important business points. You are paid to do what makes a difference and to win on important issues. You are not paid to win arguments on the relative quality of athletic teams. Present a realistic cost-benefit analysis of your ideas. Don’t just sell benefits. Every organization has limited resources, time and energy. The acceptance of your idea may well mean the rejection of another idea that someone else believes is wonderful. Be prepared to have a realistic discussion of the costs of your idea. Acknowledge the fact that someone else’s cause may have to be sacrificed in order to have your plan implemented. By getting ready for a realistic discussion of costs, you can prepare for objections to your idea before they occur. You can acknowledge the sacrifice that someone else may have to make and point out how the benefits of your plan outweigh the costs. Realize that your upper managers are just as “human” as you are. Don’t say, “I am amazed that someone at this level…” It is realistic to expect upper managers to be competent; it is unrealistic to expect them to be better than normal humans. Is there anything in the history of the human species indicating that when people achieve high levels of status, power and money they become instantly wise and logical (or even sane)? How many times have we thought: “I would assume someone at this level…” followed by “should know what is happening,” “should be more logical,” “wouldn’t make that kind of mistake,” or “would never engage in such inappropriate behavior”? Even the best of leaders are human. We all make mistakes. When your managers make mistakes, focus more on helping them than on judging them. Make a positive difference. Don’t just try to “win” or “be right.” We can easily become more focused on what others are doing wrong than on how we can make things better. An important guideline in influencing up is to always remember your goal — to make a positive difference for the organization. Corporations are different from academic institutions. In a university the goal may be sharing ideas, not having an impact on the world. In faculty meetings, hours of acrimonious debate on obscure topics can be perfectly normal. In a corporation, sharing ideas without having an impact is worse than useless. It is a waste of the stockholders’ money and a distraction from serving customers. When I was interviewed in the Harvard Business Review , I was asked, “What is the most common area for improvement for the leaders that you meet?” My answer was “winning too much.” Focus on making a difference. The more other people can “be right” or “win” with your idea, the more likely your idea is to be successfully executed. In summary, think of the years that you have spent perfecting your craft. Think of all of the knowledge that you have accumulated. Think about how your knowledge can potentially benefit your organization. How much energy have you invested in acquiring all of this knowledge? How much energy have you invested in learning to present this knowledge so that you can make a real difference? My hope is that by making a small investment in learning how to influence up, you can make a large, positive difference for the future of your organization — and the future of your career. For greater detail see, “Effectively Influencing Up” in Leading Organizational Learning , Goldsmith, Morgan and Ogg eds., Jossey-Bass, 2004.

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Dow Jones Industrial Average Pushes Towards the 12,000 Level

January 25, 2011

Dow Jones Industrial Average Pushes Towards the 12,000 Level

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Living Earth Crafts(R), EarthLite(R) Announce New Creative Director and Director of Marketing and Public Relations

January 3, 2011

Addition of Two Experienced Marketing Professionals Promises to Take Top Manufacturer in Massage and Spa to an Even Higher Level of Brand Identity and Scope

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Social Security Judges Face Violent Threats

November 14, 2010

WASHINGTON — Judges who hear Social Security disability cases are facing a growing number of violent threats from claimants angry over being denied benefits or frustrated at lengthy delays in processing claims. There were at least 80 threats to kill or harm administrative law judges or staff over the past year – an 18 percent increase over the previous reporting period, according to data collected by the agency. The data was released to the Association of Administrative Law Judges and made available to The Associated Press. One claimant in Albuquerque, N.M., called his congressman’s office to say he was going to “take his guns and shoot employees” in the Social Security hearing office. In Eugene, Ore., a man who was denied benefits said he is “ready to join the Taliban and hurt some people.” Another claimant denied benefits told a judge in Greenville, S.C., that he was a sniper in the military and “would go take care of the problem.” “I’m not sure the number is as significant as the kind of threats being made,” said Randall Frye, a judge based in Charlotte, N.C., and the president of the judges’ union. “There seem to be more threats of serious bodily harm, not only to the judge but to the judge’s family.” Fifty of the incidents came between March and August, including that of a Pittsburgh claimant who threatened to kill herself outside the hearing office or fly a plane into the building like a disgruntled tax protester did earlier this year at the Internal Revenue Service building in Austin, Texas. A Senate subcommittee is expected to hear testimony on Monday at a field hearing in Akron, Ohio, about the rising number of threats, as well as the status of the massive backlog in applications for disability benefits, which are available to people who can’t work because of medical problems. Nearly 2 million people are waiting to find out if they qualify for benefits, with many having to wait more than two years to see their first payment. Judges say some claimants become desperate after years of fighting for money to help make ends meet. “To many of them, we’re their last best hope for getting relief in the form of income and medical benefits,” said Judge Mark Brown, a vice president of the judge’s union and an administrative law judge hearing cases in St. Louis. While no judges were harmed this year, there have been past incidents: A judge in Los Angeles was hit over the head with a chair during a hearing and a judge in Newburgh, N.Y., was punched by a claimant when he showed up for work. In January, a gunman possibly upset about a reduction in his Social Security benefits killed a security guard during a furious gunbattle at a Nevada federal courthouse. About 1,400 administrative law judges handle appeals of Social Security disability claims at about 150 offices across the country. Many are in leased office space rather than government buildings. Brown said the agency provides a single private security guard for each office building that houses judges. Frye said he has sought more security and a review of the policy that keeps guards out of hearing rooms. He said Social Security Commissioner Michael J. Astrue has promised to look into it. Social Security Administration spokeswoman Trish Nicasio said the agency continually evaluates the level and effectiveness of office security and makes changes as needed. “We are taking appropriate steps to protect our employees and visitors while still providing the level of face-to-face service the public expects and deserves,” Nicasio said. Visitors and their belongings are screened before entering hearing offices and hearings room, she said, and reception desks are equipped with duress alarms to notify the guard immediately of any disturbance. ___ Online: Social Security disability program: http://tinyurl.com/23mb78r

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Survey: Recession Weakens ‘NIMBY’ Resistance to New Development Projects

August 24, 2010

Even as the level of new development and construction has fallen to historic lows nationally, a recent study suggests that recession-stung Americans appear to be more willing to support new commercial projects in their communities. That would be a rare…

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Video: Garcia Pascual Sees `Surprise’ in EU Bank Capital Needed

July 23, 2010

July 23 (Bloomberg) — Antonio Garcia Pascual, chief southern European economist at Barclays Capital, talks about the level of capital that may be required by European banks following the stress tests that are due to be published today. Garcia Pascual speaks with Maryam Nemazee on Bloomberg Television’s “Countdown.”

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Dollar Clears a Critical Support Level but how Far Can Sentiment Drag the Currency Lower?

June 14, 2010

Dollar Clears a Critical Support Level but how Far Can Sentiment Drag the Currency Lower?

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AUD/USD: Prices Recover, Stall at Fib Level

June 4, 2010

AUD/USD: Prices Recover, Stall at Fib Level

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Fufeng Group (HKG:0546) Releases A Research Report – Average Selling Price Sustains Well At High Level

May 13, 2010

Fufeng Group (HKG:0546) Releases A Research Report – Average Selling Price Sustains Well At High Level

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Video: Sapienza Says Survey Shows Declining Trust for Banks: Video

April 30, 2010

April 30 (Bloomberg) — Paola Sapienza, a professor at Northwestern University’s Kellogg School of Management, talks with Bloomberg’s Lori Rothman and Mark Crumpton about the Chicago Booth/Kellogg School Financial Trust Index, which measures the level of trust Americans have in financial institutions. (Source: Bloomberg)

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Dividend Slump Ending as Record Cash Lifts Payouts for S&P 500 Companies

April 28, 2010

By Whitney Kisling April 28 (Bloomberg) — The fastest profit growth in 16 years means no companies in the Standard & Poor’s 500 Index are likely to lower their dividends this quarter, the first time that’s happened since 2004. Of 245 companies in the index yet to announce payouts, 218 will probably keep their level and 27 may increase, according to forecasts based on data compiled by Bloomberg. The projections come from criteria such as options prices, comparisons with competitors and statements from management. S&P 500 dividends were slashed by a record $52 billion in 2009, S&P data show. “Dividends show what companies are really saying, how they feel about the economy and their prospects,” said Tom Wirth , senior investment officer at Chemung Canal Trust Co., which manages $1.6 billion in Elmira, New York. “When no companies are cutting, that is a signal that the economy is doing well, and it certainly helps the stock market .” Earnings in the S&P 500 rose 176 percent in the fourth quarter and probably climbed 44 percent in the first three months of 2010, giving companies a record stockpile of cash, estimates compiled by Bloomberg show. That helped spur Starbucks Corp. , the world’s largest chain of coffee shops, to offer its first-ever dividend, while Safeway Inc., Exxon Mobil Corp. and Chevron Corp. may boost theirs, the data show. International Business Machines Corp., the world’s biggest computer-services provider, increased its payout by 18 percent yesterday, more than forecast by Bloomberg. IBM is based in Armonk, New York. Not Since 2004 The last time all dividend-paying companies in the S&P 500 maintained or increased their rates was the second quarter of 2004, S&P data show. That was during the first half of the rally between 2002 and 2007 that drove the index up 101 percent. In the energy industry, 23 percent of companies are forecast to increase payouts through the end of the quarter, the most among 10 groups in the S&P 500. Consumer companies such as carmakers and entertainment companies are next, with 14 percent expected to raise their rates, according to the data. Safeway , the Pleasanton, California-based grocery-store chain, may push its dividend up 20 percent to 12 cents this month. Pharmaceutical distributor McKesson Corp. in San Francisco may increase its payout 25 percent to 15 cents. Irving, Texas-based Exxon and Chevron in San Ramon, California, could boost theirs by 4.8 percent and 5.9 percent, respectively, the data indicate. 85% Success Rate Bloomberg’s analysis had an 85 percent success rate identifying companies that started dividends or raised them in 2009. Starbucks announced on March 24 its first quarterly dividend since going public in 1992. Nine hours earlier, Bloomberg News said expanding cash levels would prompt the Seattle-based company to boost its rate. Higher payouts may help increase the S&P 500’s dividend yield from 1.80 percent, which is near the five-year low of 1.75 reached on April 23. The measure has slipped from 4.67 percent in November 2008, the highest level in at least 15 years, as a 75 percent rally in the index pushed up prices relative to the cash companies paid shareholders. “Balance-sheet management has been stellar over the past two years,” Jonathan Golub , the U.S. equities strategist for Zurich-based UBS AG, wrote in a note to clients on March 29. “We continue to like high dividend yielding stocks as alternatives to money-market and short-duration bond funds.” More than 800 dividend decreases were announced in 2009, a year after the S&P 500 plunged 38 percent for its worst annual performance since the 1930s. The January-to-March period in 2009 was the worst quarter ever for S&P 500 dividends with $38.7 billion in reductions, according to S&P. The stock index sank to a 12-year low on March 9, 2009. Billions in Cash As the economy rebounded, cash balances rose to a record $831.2 billion at the end of the fourth quarter, according to S&P data. One company cut its dividend and another suspended it during the first three months of 2010, the fewest since 2006, according to S&P. “Dividends are emblematic of corporate strength,” Jack Ablin , chief investment officer at Chicago-based Harris Private Bank, who oversees $55 million, said in a Bloomberg Television interview. “It is remarkable to me the level of cash on corporate balance sheets. It’s certainly a strong vote of confidence for corporate America right now.” To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net .

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Goldman Sachs Buyout Firm Acquires Stake in Ganek’s $4 Billion Hedge Fund

April 2, 2010

By Katherine Burton April 2 (Bloomberg) — A Goldman Sachs Group Inc. buyout firm bought a minority stake in David Ganek ’s $4 billion Level Global Investors LP, adding a hedge fund that can bet on rising as well as falling stock prices globally. Goldman Sachs’s Petershill Fund Offshore LP, a $1 billion fund set up to buy minority stakes in hedge funds, won’t get any management or investment decision-making role with the acquisition, according to a letter Ganek sent to clients yesterday. New York-based Level Global said it will use the proceeds from the sale to help attract and retain top talent. “We believe this investment by Petershill is an important milestone in the continued development of Level Global’s investment management platform as an institutional quality business,” Ganek and managing partner Anthony Chiasson said in the letter, a copy of which was obtained by Bloomberg News. Ganek, an alumnus of Steven A. Cohen ’s Stamford, Connecticut-based SAC Capital Advisors LLC, founded Level Global in 2003. The firm has 64 employees, of which 25 are investment professionals. Petershill has interests in three London-based funds, Capula Investment Management LLP, Winton Capital Management Ltd. and Trafalgar Asset Managers Ltd., as well as in Greenwich, Connecticut-based Shumway Capital Partners LLC. Andy Merrill, a spokesman for Level Global, and Melissa Daly , a spokeswoman for New York-based Goldman Sachs, declined to comment. Hedge funds are loosely regulated private partnerships that can bet on rising or falling prices of any securities. For Related News and Information: Today’s top fund stories: TOP FUND Hedge-fund rankings: WHF Hedge-fund flows: TNI HEDGE FLOWS Most-read hedge fund news: MNI HEDGE Hedge Fund Home Page: HFND Hedge Fund Holdings: FLNG

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Zurvita, Inc. Taps Leaders in Network Marketing to Drive Growth in Multi-Billion Dollar Markets

February 25, 2010

Marketing Veterans Aligning Their Expertise to Take Zurvita to the Next Level

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Hedge Funds Lure More Cash From Pensions Seeking to Fix Benefit Shortfall

February 24, 2010

By Saijel Kishan and Katherine Burton Feb. 25 (Bloomberg) — Florida’s state pension system , manager of $112 billion for a million firefighters, teachers and garbage collectors, is set to decide next week on the size of its first investment in hedge funds. Executives of the fourth-largest state retirement program in the U.S., who have considered putting money into the private pools of capital since 2007, will make the move amid a 7 percent shortfall in its ability to pay future benefits, the first in 13 years. Wisconsin’s pension also plans its initial allocation this year, while Boeing Co. ’s probably will raise its holdings. Public and private pensions are increasing hedge-fund commitments after slowing the flow of cash at the end of 2008. About 15 percent of U.S. institutions plan to boost their allocations, and 80 percent will keep them steady, according to a survey by SEI Investments Co. The investors are seeking to accelerate returns after losses during the financial crisis. “In 2008, everyone stopped allocating,” said David McMillan , director of hedge funds at Hammond Associates Inc. , a St. Louis, Missouri-based consultant that advises pension funds with $23 billion in assets. “I expect to see the pace of investing pick up.” Pension managers with hedge-fund holdings oversee about $3.2 trillion, according to Casey, Quirk & Associates LLC , a consulting firm based in Darien, Connecticut. While no estimates are available for how much money these funds might allocate in 2010, a 1 percent increase would translate to about $32 billion in inflows for the $1.6 trillion industry. Below Targets Corporate pensions are about half a percentage point below their average hedge-fund target of 10.2 percent of assets, while public systems are 1.4 percentage points below their 7.8 percent goal, according to SEI , an Oaks, Pennsylvania-based investment manager and consultant. Both groups raised their targets in 2009, setting the stage for new investments this year. U.S. states face a gap of more than $1 trillion between what they have saved and what they have promised to retired workers in pension and health-care benefits, according to a report released this month by the Pew Center on the States, a Washington-based research and advocacy group. The 100 largest corporate pension funds had a $324 billion shortfall as of January, according to a statement by Seattle-based consultant Milliman Inc. Equities Not Enough “Pension funds want to reduce the volatility of returns, and they don’t think equities will get them to their return targets,” said John Haugh , head of U.S. pensions and endowments research at Bank of America Merrill Lynch Global Research in New York. U.S. stocks, as measured by the Russell 3000 Index , are about 20 percent below their level in 2000. With interest rates just above record lows, returns on government bonds, a staple of pension-fund holdings, have declined. Public pensions rose an average of 3.7 percent annually in the past 10 years, while corporate plans gained 3.6 percent, Haugh said. Both have a target of 8 percent. Haugh said pensions also will invest in commodities, real estate, Treasury Inflation Protected Securities and natural resources such as timberland to counter their expectations of rising inflation. Hedge funds gained an average of 6.6 percent a year in the past decade through Jan. 31, according to the Credit Suisse Tremont Index. That compares with an average annual loss of about 1 percent by the Standard & Poor’s 500 Index and a 6.6 percent return by U.S. bonds, based on the Barclays Capital U.S. Aggregate Index. Redemptions End Investors pulled $298 billion out of hedge funds from Oct. 1, 2008, through June 30, 2009, according to Hedge Fund Research Inc. A net $15 billion flowed back in during the second half of last year, data from the Chicago-based research firm show. Funds attracted $140 million in inflows in January, Eurekahedge Pte, a Singapore-based research firm, said yesterday. “The majority of dollars coming into hedge funds in the next 12 months will primarily come from pension plans,” said David Harmston , head of the client group at London-based Albourne Partners Ltd., which advises 36 pension plans with $40 billion invested in the funds. The biggest funds, with extensive infrastructure and risk- management systems, are benefiting the most. Steven Cohen’s SAC Capital Advisors LP pulled in $1.3 billion between June and December, and Tudor Investment Corp.’s BVI Global Fund Ltd. raised the same amount between March and July before closing to new cash. SAC is based in Stamford, Connecticut, while Tudor is run by Paul Tudor Jones in Greenwich, Connecticut. Florida, Wisconsin Pension funds and endowments invested $7.67 billion in hedge funds last year, a decline of 47 percent from 2007, according to Eager, Davis & Holmes LLC, a consultant based in Louisville, Kentucky, that tracks money-management hiring. In Florida, the retirement system designated $1.75 billion during the year ending in June for assets that include timberland and infrastructure, Dennis MacKee , a spokesman for the State Board of Administration in Tallahassee, said in a telephone interview. Its investment advisory council will discuss how much of that money to steer into hedge funds when it meets March 3. Wisconsin Retirement System , which oversees $72 billion and was 88 percent funded at the end of 2009, is planning to invest in hedge funds for the first time this year, according to Vicky Hearing , a spokeswoman for the Madison, Wisconsin-based plan. “We are looking to diversify to reduce volatility in our overall portfolio,” she said in a telephone interview. The pension fund plans to initially invest in 15 managers and increase that number to 25, according to a December report. More Direct Investments In 2009, about 80 percent of the money invested in hedge funds went through middlemen known as funds of funds, according to Eager Davis. Some pensions are looking to deal directly with fund managers. Boeing, the second-largest U.S. defense contractor, expects to add about $400 million this year to the $1.3 billion it has with hedge funds, according to Todd Blecher , a spokesman for the Chicago-based company. Hedge-fund holdings of the plan, which oversees $46 billion, are done through middlemen, though the company may begin making direct investments, he said. Universities Superannuation Scheme , which oversees 30 billion pounds ($46 billion) for U.K. university employees, is one of the pension managers that first invested directly when it started allocating to hedge funds last year. “We want to have control, transparency and responsibility over picking managers,” Mike Powell , who oversees the organization’s alternative assets out of London, said in a telephone interview. “While fund of funds may add value on a gross basis, the fee drag means that the net returns are not enough to justify the risk.” Adding Fund Managers The pension plan has about 300 million pounds in hedge funds and expects to increase that to 1.5 billion pounds by investing on average as much as 75 million pounds in one manager a month, Powell said. Hedge-fund managers bet on falling and rising assets prices and take a cut of profits. They charge investors fees of about 2 percent of assets and 20 percent of investment gains. Funds of funds charge 1 percent of assets and 10 percent of profits on top of those fees. In the Netherlands, PGGM , a nonprofit that manages funds for Pensioenfonds Zorg en Welzijn, plans to move away from funds of funds and invest the 1.7 billion euros ($2.3 billion) it has in directly, according to an e-mail from Diana Abrahams, a spokeswoman. Zeist, Netherlands-based PGGM manages 87 billion euros. Skeptics Remain As of September 2009, public funds had about 52 percent in stocks, 29.5 percent in bonds, 16.8 percent in alternatives and 1.5 percent in cash, according to Bank of America Merrill. Corporate funds had 45.1 percent in stocks, 36.9 percent in bonds, 15.9 percent in alternatives and 2.1 percent in cash. Most pension managers include hedge funds in the alternative category. Not all retirement plans are convinced that the funds are for them. “We’re a conservative investor and hedge funds are too risky and flashy for our portfolio,” Ricardo Duran , a spokesman for the $134 billion California State Teachers’ Retirement System in West Sacramento, California, said in a telephone interview. Calsters is the second-largest state retirement program after the $200 billion California Public Employees’ Retirement System. Seeking Comfort Level Among the reasons why pension funds are hesitant to put money with hedge funds is that they lack an understanding of what they are invested in, said Daniel Celeghin , a partner at Casey Quirk. “Some of the investment strategies that hedge-fund managers use are so esoteric that board members are saying, ‘I don’t understand this 100 percent, so let’s go slowly,’ ” he said. Among those still reviewing the level of hedge-fund holdings is the School Employees Retirement System of Ohio , which invests about 3.3 percent of the $9 billion it manages in the private partnerships. “Hedge funds are new to us and so we’re still trying to get comfortable with them,” said Tim Babour , a spokesman for the Columbus-based plan, which made its first investment in hedge funds in 2008. To contact the reporters on this story: Saijel Kishan in New York at skishan@bloomberg.net ; Katherine Burton in New York at kburton@bloomberg.net

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Video: Brill Says Press+ Software Lets Publishers Levy Web Fees: Video

February 8, 2010

Feb. 8 (Bloomberg) — Steven Brill, co-founder of Press+, talks with Bloomberg’s Margaret Brennan about the company’s software which offers an online payment model to newspaper publishers allowing them to charge users for access to content. Brill also discusses the projected implications for the newspaper industry and the level of control by individual publishers. (Source: Bloomberg)

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Wells Fargo Hedges Misbehave at Just Right Time: Jonathan Weil

January 28, 2010

Commentary by Jonathan Weil Jan. 28 (Bloomberg) — A strange thing happened last quarter at Wells Fargo & Co. A bunch of derivatives that were supposed to act as hedges on other assets seemed to go berserk. The good news for Wells shareholders is that the oddly behaving derivatives boosted the bank’s fourth-quarter earnings. There’s more to the story, though. The windfall might be a sign that Wells executives aren’t so great at judging some of the company’s risks, meaning there may be more risk than they think. The combined gains on the derivatives — which Wells calls “economic hedges” — and the assets they purportedly were hedging accounted for almost half of Wells’s $4 billion of pretax profit last quarter. That’s a lot of low-quality earnings. About $1.1 billion came from writing up the value of mortgage-servicing rights through changes to inputs in the mathematical models Wells uses to estimate their worth. Another $830 million came from gains on the derivatives that supposedly were hedging this portion of the servicing rights’ value. That’s right: The hedges and hedged items both went up. This scenario should have been as likely as both sides of a see- saw rising at the same time. Nothing quite like this had happened before at Wells, at least not to this magnitude. Indeed, while Wells may refer to the derivatives as hedges, they don’t qualify for hedge accounting under the Financial Accounting Standards Board’s rules, which is why Wells has to use the weasel word “economic” in the label. Airy Assets Mortgage-servicing rights are intangible assets that consist of rights to receive fees from third parties in exchange for doing things like collecting and forwarding monthly payments from homeowners. Unlike other intangibles, such as goodwill or trademarks, companies have the option under the accounting rules of marking them at their fair market values on a quarterly basis, and then running the changes in value through their earnings. Wells’s latest balance sheet showed $16 billion of mortgage-servicing rights that the company was carrying at fair value as of Dec. 31. The tricky part is that such assets are notoriously difficult to value. In accounting parlance, the gains on the mortgage-servicing rights were of the Level 3 variety. In layman’s terms, that means they can be pretty much whatever management wants them to be. Under the FASB’s rules , Level 1 means the value for a given asset comes from quoted prices in actively traded markets, known as mark-to-market. Level 2, or mark-to-model, means the value is measured using “observable inputs,” such as recent transaction prices for similar items where market quotes aren’t available. Make Believe Then there’s Level 3. This means a company measures the fair value of an asset using one or more “unobservable inputs,” or, as I call it, mark-to-make-believe. Companies can’t actually see the changes in value. Yet they get to book them through earnings anyway, based on management’s own subjective assumptions. The last time I took a close look at this subject for a column on Wells was in August 2007, after the company reported quarterly earnings that got a huge boost from Level 3 gains on its servicing rights. Back then Wells had reported a $2 billion gain, or more than half its pretax profits, from changes to inputs in its servicing rights’ valuation models. However, the company said I would be wrong to make comparisons between the size of its Level 3 gains and its overall profits. Up and Down Its argument: Doing so would ignore the effect that rising interest rates at the time had on the values of both the servicing rights (which went up) and the corresponding derivatives Wells said it was using as economic hedges (which went down). The derivatives, which generally fall into the Level 1 and Level 2 camps, had declined by about $2.2 billion. I wrote the column anyway, expressing skepticism that these derivatives were hedges in any real sense. It turns out I probably wasn’t skeptical enough. Wells’s spin on the latest results is that its hedges worked. On the company’s Jan. 20 earnings call, Wells’s chief financial officer, Howard Atkins , explained the gains by saying “hedging results in the mortgage business were strong” and “could remain relatively high as long as short-term rates remain low and the hedge performs effectively.” He added that Wells manages its mortgage business “very holistically” and that “actual hedge results in any quarter of course will reflect how much of the servicing asset we hedge and the effectiveness of the particular instruments we use to hedge.” Not Telling Similarly, in its earnings release, Wells said the $1.9 billion of gains largely reflected “the continuation of strong carry income and effective hedge performance.” What’s carry income? Actually, it doesn’t really matter, because Wells declined to disclose how much it was. And “effective” hedge performance? Give me a break. Remember, the gains on the derivatives were almost as large as the gains on the items they were supposed to be hedging. For all we know, there could come a time when Wells’s derivatives misbehave at the same time the market values of the mortgage-servicing rights plunge. That would mean a double hit to earnings, rather than a windfall. Oh, but what are the odds of that happening, since Wells seems to have it all figured out? Meantime, one step in the right direction would be for Wells to stop calling these things hedges, economic or otherwise. This bank’s derivatives seem to have a mind of their own. ( Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Jonathan Weil in New York at

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Greenspan Says S&P 500 Rally Cuts Stimulus Needs as Household Wealth Rises

December 17, 2009

By Jeff Kearns Dec. 17 (Bloomberg) — The biggest stock market advance in seven decades is reducing the need for additional government stimulus measures, according to former Federal Reserve Chairman Alan Greenspan . The Standard & Poor’s 500 Index ’s 64 percent jump since March made Americans richer by restoring $5.4 trillion to U.S. equities and helped spur a 1.3 percent increase in retail sales last month, data compiled by Bloomberg and the Commerce Department show. “The stimulus is only a third spent, and its order of magnitude is not large enough to compare with the strength and power of the remarkable global equity increase that’s occurred since early March,” Greenspan, 83, said in a telephone interview yesterday from Washington. “Capital gains have proved a far greater stimulus than one can attribute to the $787 billion program that has been only partially spent.” Increasing spending beyond the $11.6 trillion already pledged may also be unnecessary because higher stocks will help boost profits and make loans easier to come by, Greenspan said. Earnings among S&P 500 companies are forecast to rise 65 percent in the fourth quarter, ending the longest series of declines since World War II, data compiled by Bloomberg show. “When stock prices go up, the market value of common stock or of equity in banks and other financial institutions rises,” he said. “And the market value of liabilities is importantly affected by the size of the equity market value cushion on banks’ balance sheets.” Wealth Effect Futures on the S&P 500 expiring in March fell 0.4 percent to 1,101.10 as of 5:01 a.m. in New York today. Net worth for U.S. households increased to $53.4 trillion in the third quarter, up $2.7 trillion from the prior period, helped by share gains, according to a Fed report released on Dec. 10. Assets in so-called defined contribution plans such as 401(k) retirement accounts and IRAs climbed 35 percent to $1.93 trillion from the first quarter to the third, the data show. Retail spending rose in November at more than twice the 0.6 percent median estimate in a Bloomberg survey, Commerce Department data showed. The Reuters/University of Michigan index of consumer sentiment for December increased to 73.4 from 67.4 the month before. Adding Liquidity “All of the statistical evidence indicates that the level of household wealth is a major factor in consumer expenditures and indeed apparently finances directly and indirectly about 15 percent of consumer outlays,” Greenspan said. “The impact on consumption expenditures is significant, largely because the amount of wealth is five times the level of income.” Greenspan ran the central bank from 1987 to 2006, a period in which the S&P 500 climbed more than sixfold, including dividends, according to data compiled by Bloomberg. He reduced interest rates to a half-century low of 1 percent in 2003 and didn’t raise them for a year, helping spur a 16 percent gain in home prices in 2004 and setting the stage for a housing-market collapse that led to more than $1.7 trillion in global bank losses and writedowns. Fed policy makers pledged yesterday to keep their target rate for overnight loans between banks “exceptionally low” for an extended period after a two-day meeting in Washington. U.S. stocks erased most of their increase and 10-year Treasury yields rose on concern Chairman Ben S. Bernanke is preparing investors for higher interest rates next year after holding them near zero since December. Mutual Funds “Financial market conditions have become more supportive of economic growth,” policy makers wrote. Along with government actions, “market forces will contribute to a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability,” they said. U.S. mutual funds are poised for their biggest gain since 2003, according to Morningstar Inc. data. Funds that invest in stocks returned an average 31 percent this year, according to the Chicago-based provider of investment research, after losing 39 percent last year. “There’s no need for a second stimulus,” said Philip Orlando , who helps manage $392.3 billion as chief equity market strategist at Federated Investors Inc. in New York. “People feel better about themselves. They’ve had some of their lost money restored, and now they’re going to go out and spend some of it.” Jobless Rate Employers in the U.S. cut the fewest jobs in November since the recession began, and the unemployment rate unexpectedly fell, the Labor Department said on Dec. 4. Payrolls decreased by 11,000, compared with the median forecast for a 125,000 decline in a Bloomberg survey of economists, while the jobless rate dropped to 10 percent. Ratings cuts by S&P on U.S. issuers have declined each quarter this year, falling to 145 downgrades in the current three-month period from 282 in the third quarter, 554 in the second and 756 in the first, Bloomberg data show. Three-hundred forty-two companies have been upgraded in the second half of the year, compared with 204 ratings increases in the first six months of 2009. “Equity is there to cushion liabilities,” Greenspan said. “The greater the market value of equities, the greater the support for the liabilities, which means bond prices and their ratings go up.” To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net .

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The Benchmark For A Jobs Recovery: 300k New Jobs Per Month

December 10, 2009

Here we are, having suffered huge job losses, and needing to make up the lost ground — and a report showing that we’re still losing jobs, but not as fast, is grounds for celebration? Anyway, I thought it might be useful to create a sort of benchmark for the level of job growth that would really count as good news.

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Les Leopold: Geithner Advocates Permanent Billionaire Bailout Society?

October 30, 2009

Everyone realizes that we have to do something about “too big to fail.” But there are two fundamentally different paths: one threatens the very existence of the billionaire bailout society and the other makes it permanent. The obvious way to end “too big to fail” is to break up large financial institutions so that they are “small enough to fail.” Paul Volker, not a radical by any means, argues for this. Even Alan Greenspan — the very personification of the financial establishment — agrees. But to do so threatens the elite status of insiders at giant institutions like Goldman Sachs, JP Morgan Chase and Morgan Stanley. They make their billions from the combination of government welfare and their enormous, market-distorting size. Right this moment we are still bailing them out through a series of subsidies that go well beyond TARP. Also, there are far fewer large financial institutions left in the marketplace which means that the remaining giants have near-monopoly pricing power. But most importantly everyone knows that we won’t let them fail. That gives them access to cheaper capital — they don’t have to pay the risk premium other borrowers have to pay because you and I, through Uncle Sam, are implicit cosigners on the downside of the deal. And of course, they have excessive political muscle. For those of you that believe financial institutions have the very best talent and therefore deserve the very best pay, take a look at Why Do Bankers Make So Much Money?” ” by Rick Bookstaber. Here’s one memorable passage: “But I don’t buy the notion that there are so many who have the level of talent that justifies tens and even hundreds of millions in compensation. I think this level of compensation, and the notion of talent behind it, is the result of the inherent uncertainty in the financial enterprise, one that makes it very difficult to assess talent. Indeed, I think the invocations of talent for money producers in finance are akin to those that, in times past, were set aside for the mystical powers of saints and witches.” Treasury Secretary Geithner doesn’t want a radical departure from that witches’ brew. He argues that it’s possible to prevent the next meltdown by setting up a new watchdog council of regulators and by increased regulations on the large institutions that are designated (in secret, mind you) as too big to fail. He hopes that the next meltdown can be avoided by monitoring them closely, requiring more capital reserves, and by prohibiting excessive leverage. And if they go under Geithner wants the large institutions to be assessed to pay for the bailouts, after the fact. (Why not before the fact? Geithner thinks they would view it as insurance and gamble even more.) Sadly, this would make bailouts a permanent feature of our financial system. It would guarantee the perpetuation of our billionaire bailout society for generations to come. (See “Breaking out of the Billionaire Bailout Society” on

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Greenspan: No Second Stimulus, We’re "Getting Close" To End Of Job Losses (VIDEO)

October 4, 2009

Former Fed Chairman Alan Greenspan said on Sunday that the U.S. economy was “getting close” to the point where it would stop losing jobs. But during his appearance on ABC’s This Week with George Stephanopoulos, Greenspan also predicted that the level of unemployment would “penetrate the ten percent barrier” and stay at the level for some time before going down. Despite it all, he stressed, the administration shouldn’t push for a second stimulus package to spur job growth. Speaking days after it was announced that 263,000 jobs had been lost in September — vaulting the unemployment rate to a 26-year high of 9.8 percent — Greenspan was able to muster a bit of cautious optimism about the economy. He predicted that economic growth in the third quarter of this year would end up greater than his previously predicted 2.5 percent. “The numbers are coming in higher than that,” he said. On the job market front, however, there were not many rays of sunshine. Asked whether a second stimulus package was needed to kick-start additional growth, Greenspan was skeptical, saying at one point that “in trying to do too much you can actually become counterproductive.” “We are in a recovery and I think it would be a mistake to say the September numbers alter that significantly,” he said. “It is true the last couple of weeks some of the numbers coming in have been a little bit soft. But this is what a recovery looks like.” There should be “no new stimulus for two reasons,” he concluded. “One is only 40 percent of the first stimulus has been in place,” said Greenspan. “And there is a considerable debate going on in the economics profession about how effective this stimulus package is. And so, mainly because of the fact that as broad as it is and as effective as it will turn out to be you still have 60 percent left to go. In my judgment it is far better to wait and see how this momentum that has already begun to develop in the economy carries forward.” Get HuffPost Politics On Facebook and Twitter!

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Crisis-driven legislation could mark end of an era for private equity

September 27, 2009

The private equity industry nervously awaits forthcoming European legislation that could see a substantially increased regulatory burden, restrictions on marketing between EU and non-EU groups, and potential checks on the level of

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Mortgage-Bond Rally Fueled by Erroneous Investor Assumptions, Amherst Says

August 12, 2009

By Jody Shenn Aug. 12 (Bloomberg) — The rally among home-loan bonds without government backing is being fueled by errors made by “most market participants” in translating current prices to potential returns, Amherst Securities Group LP analysts said. Investors are overestimating potential yields in part because they are failing to consider how many loans are becoming delinquent for the first time and in part because they are arriving at incorrect conclusions on how long it will take to liquidate seized homes, the New York-based analysts led by Laurie Goodman wrote in a report yesterday. Those issues can influence both the size of foreclosure losses and how quickly bonds get paid down . “Do your homework, and sell securities which are being evaluated incorrectly by the marketplace,” the analysts wrote. Non-agency home-loan bonds have soared from record lows or near-nadirs in March amid speculation that Treasury Secretary Timothy Geithner’s Public-Private Investment Program, or PPIP, will add as much as $40 billion of demand to the market, and that the longest U.S. recession and worst housing slump since the Great Depression are easing. For example, the most-senior classes of 2006 and 2007 securities backed by prime-jumbo mortgages have rallied to more than 80 cents on the dollar, from as low as 55 cents, according to Amherst. So-called super-senior bonds backed by “option” adjustable-rate mortgages have jumped to about 48 cents, from the “low 30s,” the analysts wrote. Investors also have been doing too little analysis of the differences, such as the level of home equity, among borrowers with currently non-delinquent mortgages backing non-agency bonds, which lack guarantees from government-supported Fannie Mae and Freddie Mac or U.S. agency Ginnie Mae, they said. Looking at Countrywide After correcting two of the three common mistakes by investors, the potential yield on a Countrywide Financial Corp.- issued option ARM bond now trading at 48 cents on the dollar would fall to 6.49 percent, from 12.67 percent, assuming the London interbank offered rate remains unchanged, Amherst said. Adjusting for all three reduces the yield on a Wells Fargo & Co. jumbo-mortgage note bought at 85 cents to 7.15 percent, from 11.52 percent, the analysts wrote. That is “much lower than most market participants believe they are receiving on the security,” they said. “Moreover, the yield must be evaluated in conjunction with the level of uncertainty about our assumptions” around whether borrowers will continue to refinance at the “fast” pace of recent months and how many borrowers with “negative equity” will default. Top-Ranked Team Goodman is the former head of fixed-income research at UBS Securities LLC whose team there was top-ranked for non-agency mortgage debt in a 2008 poll of investors by Institutional Investor magazine. Amherst is a securities firm specializing in trading and advising investors on home-loan debt. The U.S. government announced July 8 that the PPIP would begin with nine managers raising as much as $10 billion, and receiving as much as $30 billion in taxpayer capital and loans to buy mortgage bonds originally rated AAA. Jumbo mortgages are larger than Fannie Mae or Freddie Mac can finance, currently $417,000 in most areas to as much as $729,500. Option ARMs allow borrowers to pay less than the interest they owe, tacking on the difference to their debt and creating the potential for bills to spike. A Markit ABX index of credit-default swaps tied to a type of subprime-mortgage bond rated AAA when issued in the first half of 2007 climbed to 29 yesterday, up 18 percent from a June low, according to Markit Group Ltd.’s Web site . The swaps offer protection if the securities aren’t repaid as expected, in return for regular insurance-like premiums. Subprime mortgages went to borrowers with poor or limited credit or high debt. To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net or

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Mortgage-Bond Rally Fueled by Erroneous Investor Assumptions, Amherst Says

August 12, 2009

By Jody Shenn Aug. 12 (Bloomberg) — The rally among home-loan bonds without government backing is being fueled by errors made by “most market participants” in translating current prices to potential returns, Amherst Securities Group LP analysts said. Investors are overestimating potential yields in part because they are failing to consider how many loans are becoming delinquent for the first time and in part because they are arriving at incorrect conclusions on how long it will take to liquidate seized homes, the New York-based analysts led by Laurie Goodman wrote in a report yesterday. Those issues can influence both the size of foreclosure losses and how quickly bonds get paid down . “Do your homework, and sell securities which are being evaluated incorrectly by the marketplace,” the analysts wrote. Non-agency home-loan bonds have soared from record lows or near-nadirs in March amid speculation that Treasury Secretary Timothy Geithner’s Public-Private Investment Program, or PPIP, will add as much as $40 billion of demand to the market, and that the longest U.S. recession and worst housing slump since the Great Depression are easing. For example, the most-senior classes of 2006 and 2007 securities backed by prime-jumbo mortgages have rallied to more than 80 cents on the dollar, from as low as 55 cents, according to Amherst. So-called super-senior bonds backed by “option” adjustable-rate mortgages have jumped to about 48 cents, from the “low 30s,” the analysts wrote. Investors also have been doing too little analysis of the differences, such as the level of home equity, among borrowers with currently non-delinquent mortgages backing non-agency bonds, which lack guarantees from government-supported Fannie Mae and Freddie Mac or U.S. agency Ginnie Mae, they said. Looking at Countrywide After correcting two of the three common mistakes by investors, the potential yield on a Countrywide Financial Corp.- issued option ARM bond now trading at 48 cents on the dollar would fall to 6.49 percent, from 12.67 percent, assuming the London interbank offered rate remains unchanged, Amherst said. Adjusting for all three reduces the yield on a Wells Fargo & Co. jumbo-mortgage note bought at 85 cents to 7.15 percent, from 11.52 percent, the analysts wrote. That is “much lower than most market participants believe they are receiving on the security,” they said. “Moreover, the yield must be evaluated in conjunction with the level of uncertainty about our assumptions” around whether borrowers will continue to refinance at the “fast” pace of recent months and how many borrowers with “negative equity” will default. Top-Ranked Team Goodman is the former head of fixed-income research at UBS Securities LLC whose team there was top-ranked for non-agency mortgage debt in a 2008 poll of investors by Institutional Investor magazine. Amherst is a securities firm specializing in trading and advising investors on home-loan debt. The U.S. government announced July 8 that the PPIP would begin with nine managers raising as much as $10 billion, and receiving as much as $30 billion in taxpayer capital and loans to buy mortgage bonds originally rated AAA. Jumbo mortgages are larger than Fannie Mae or Freddie Mac can finance, currently $417,000 in most areas to as much as $729,500. Option ARMs allow borrowers to pay less than the interest they owe, tacking on the difference to their debt and creating the potential for bills to spike. A Markit ABX index of credit-default swaps tied to a type of subprime-mortgage bond rated AAA when issued in the first half of 2007 climbed to 29 yesterday, up 18 percent from a June low, according to Markit Group Ltd.’s Web site . The swaps offer protection if the securities aren’t repaid as expected, in return for regular insurance-like premiums. Subprime mortgages went to borrowers with poor or limited credit or high debt. To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net or

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CIT Bondholder Pact Proves Life After Death as Government Lets Market Work

July 21, 2009

By Bryan Keogh July 21 (Bloomberg) — For CIT Group Inc. , the emergence of a $3 billion loan agreement with bondholders preventing bankruptcy shows there is life after death in the credit markets. While CIT, the 101-year-old commercial finance company, may not pose the level of systemic risk to the financial system of Lehman Brothers Holdings Inc., Bear Stearns Cos

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