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Lorrie Febus: Bank of China — An Option to the Devaluing Dollar

February 18, 2011

At a time when the U.S. economy is struggling to recover, and there is concern of dollar devaluation, could the Bank of China be offering a new option? For the first time, U.S. citizens will be allowed to deposit U.S. dollars and hold them in Chinese Yuan within the United States. On Jan. 12, 2011, The Wall Street Journal reported : China has launched trading in its currency in the U.S. for the first time, an explicit endorsement by Beijing of the fast-growing market in the yuan and a significant step in the country’s plan to foster global trading in its currency. The state-controlled Bank of China Ltd. is allowing customers to trade the yuan, also known as the renminbi, in the U.S Despite personal political views, this could possibly be a hedge against dollar devaluation caused by the Federal Reserve’s monetary easing. Most believe now the yuan is being kept artificially low to keep a favorable trade balance with the US. With China currently experiencing an inflationary economy, many believe this will force the value of the yuan higher. The changes to the IRS policy, including additional reporting for overseas bank accounts makes holding currency in foreign banks more cumbersome. This development with the Bank of China is an interesting hybrid. Holding foreign currency within the US banking system, including FDIC insurance is an interesting option. It seems this may be a good option for holding cash. A few months ago, I wrote an a blog about people in Russia holding their savings in US dollars or Euros to hedge the risk of their own currency. This is the same concept with holding yuan in the US, and just the fact we are able to do so, may be an indication the ‘torch’ as the world’s great economic power, is being passed from the U.S. to China right before our eyes. Currently, the Bank of China has two offices in New York and one in Los Angeles, and anyone interested in opening an account must do so in person. The banks website BOCUSA.com states, The Bank of China limits the amount of yuan that can be converted by a U.S.-based individual customer to up to $4,000 a day, with an annual limit of $20,000. The restriction is designed to fend off speculation in the currency, bank officials say. But there is no limit, at least for now, on the amount that can be converted by businesses, so long as they are engaged in international trading. The bank has no restrictions on the ability by U.S.-based customers to convert the yuan back into dollars. In addition, accounts opened in the New York branches are FDIC insured.

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Kathleen E. Christensen: The False Choice: A Flexible Job or a Good Job?

February 13, 2011

Workplace flexibility: eighty percent of American employees say they want it, nearly half of job seekers rate it as a higher priority than salary, and thousands of companies have embraced it as an efficient way to keep employees happy and boost business productivity. But despite all this, there is still a widespread misconception that workplace flexibility is only appropriate to a certain type of job. A simple job, the thinking goes, can be accomplished by someone working off-site, or working non-traditional hours, or sharing a job with another part-time employee; but “serious jobs” still require rigid, traditional work schedules and set-ups. This line of thinking is epitomized by the dilemma facing a worker who wrote into The Wall Street Journal ‘s Ask The Juggle this week: The reader, a working mother, has an opportunity to step into a new job with her current employer that would allow her to work from home one or two days a week. The new job would give her flexibility to spend more time with her two young children….The problem is, the job isn’t that exciting, and she is overqualified for it. Taking it also wouldn’t help her resume much in any future job search… It’s not just working moms, but employees of all stripes who face this quandary: to take the flexible job or the good job? But it raises a more important question: why is this employee–clearly talented enough to hold a challenging position–only offered flexibility if she takes a worse job? Instead, why can’t she and her employer work together to find a way to make the job she has more flexible? The answer, of course, is that making a challenging job flexible is, well…challenging. But it’s not impossible. The pioneering employers who have won Alfred P. Sloan Awards for Business Excellence in Workplace Flexibility have shown that there are many different routes to workplace flexibility . Innovation in other countries has shown that even doctors, lawyers and business leaders stand to benefit from increased flexibility . As Sue Shellenbarger said in her thoughtful response to this reader, “most jobs require some sacrifices. Trade-offs like this are what make the juggle such a nonstop challenge. The right answer is different for everyone.” Perhaps working form home twice a week isn’t possible with this woman’s job. But maybe it is possible to shift when the work is done so that a spouse or other family member can be home when this mother is at work. Maybe it’s possible to let her share the job with another talented employee. Or maybe this mother and her employee need to come up with a completely new way to match this job with her life. The point is that every job, no matter how demanding or challenging, can be tweaked to make it more flexible. And, a wide array of research has shown that workers across the spectrum are more efficient when they have flexibility over how, when and where their work gets done. Perhaps the biggest misconception about workplace flexibility is that it means working less. It doesn’t. I have seen many examples of employees who get more work done when given flexibility in when, where and how they do their work. This isn’t about decreasing the number of hours someone works or giving them fewer responsibilities. It’s about customizing a job so that it fits with a life. Oftentimes this even means the employee works more. Almost always it means that they work better, are more engaged with their job, and less likely to leave the company. We need to move past this outdated image of a good worker as someone who has no life or family issues distracting them from work. A good worker is someone who figures out how to fit their job with their life and family responsibilities so that they are not distracted from either. Because of the many benefits it offers to both employees and employers, workplace flexibility is now included in the Department of Labor’s definition of a “good job.” Every business should make it possible for each employee to sit down with their manager and figure out how to make their job fit with their life. If they take the time to do this, they’ll end up with more productive employees and more efficient businesses. No talented employee should have to answer the question, “do I want a good job or do I want a flexible job?” Instead, each of us should be asking, “how do I make my good job a flexible job?”

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Pandora Tunes Up For IPO

February 12, 2011

SAN FRANCISCO — Popular Internet radio service Pandora is tuning up for an IPO later this year. In documents filed Friday, Pandora indicated it would raise $100 million with an initial public offering stock. That figure will likely change as bankers gauge the demand to invest in or an 11-year-old company that has helped change the way people listen to music. A target price for the shares won’t be set until the IPO is closer to happening. The offering probably won’t happen for at least three months. Pandora’s decision to go public is the latest sign that Internet companies sense the time is ripe to mine the markets for money amid growing excitement about digital media and online networking. Demand Media Inc., an online service that hires freelance writers to go write stories about frequently searched topics, made a big splash with its IPO last month and professional networking service LinkedIn Corp. filed its IPO papers last week. In the past few days, AOL Inc. agreed to buy online news and opinion service Huffington Post for $315 million and The Wall Street Journal reported that online messaging service Twitter may now be worth $8 billion to $10 billion. Online coupon service Groupon Inc. is expected to go public later this year and Facebook – the most prized of all privately held Internet companies with a market value recently pegged at $50 billion – may file its IPO papers next year. Given the growing fervor for widely used Internet services, it makes sense for Pandora to make the IPO leap now, said Inside Digital Media analyst Phil Leigh. “It’s kind of like nuclear fission; we’re seeing a chain reaction of these things,” he said. Pandora Media Inc. started out in 2000 as a music recommendation service called Savage Beast Technologies. It changed its name in 2005 when it launched an Internet radio service that allows people to stream music over the Web – enabling users to tailor playlists suited to their tastes to listen whenever they want, wherever they want to be. The idea came from Pandora founder Tim Westergren, an avid musician who also has worked as a record producer. Westergren, 45, is now the company’s chief strategy officer and one of its largest stockholders with 3.6 million shares. Joseph Kennedy, a former salesman for automaker Saturn Corp. and executive for online banker E-Loan, has been Pandora’s CEO since 2005. He owns 4.2 million Pandora shares. Other major shareholders in line for a potential windfall are venture capitalists Crosslink Capital, Walden Venture Capital and Greylock Partners. Those three firms collectively own about 85 million shares. Hearst Corp., a major newspaper and magazine publisher, also is a major stockholder with 8.7 million shares. Pandora lets users create “stations” by typing in the name of an artist or song on its site: The site’s software uses that information to create a personalized stream of music that may include the artist or song you indicated plus other similar music. If you like a song, you can give it a thumbs-up. Songs you don’t enjoy can be skipped, but you can only skip a limited number of songs. Pandora users have created more than 1.4 billion stations thus far. In addition to its website, Pandora.com, Pandora also offers several apps that enable its use on smart phones like the iPhone and phones that run Google Inc.’s Android operating software. The basic Pandora service is free, with most of its revenue coming from advertising, just like traditional radio stations. Users can pay more to get rid of the ads, enable unlimited listening time and more “skips” and receive higher-quality songs. Most people apparently are willing tolerate the ads. The IPO documents said 86 percent of Pandora’s revenue came from advertising in its fiscal year just completed Jan. 31. The company has lost $83.9 million since its inception and remains unprofitable, according to Friday’s filing. In the first nine months of its last fiscal year, Pandora suffered a $328,000 loss on revenue of $90.1 million. The filing said its independent auditor determined there was “material weakness” in Pandora’s financial reporting practices. The company said it’s trying to fix the problems. .

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Freddie Mac Loses COO

February 11, 2011

Bruce Witherell has left as coo of Freddie Mac according to a filing with the US Securities and Exchange Commission reports The Wall Street Journal

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Insider Trading Accusations Describe Network Of Hedge Fund Corruption

February 8, 2011

In the latest charges to be brought against Wall Street financiers, Federal authorities depict insider trading in dramatic detail. Two hedge fund managers — Samir Barai and Donald Longueuil — were arrested Tuesday morning on charges of insider trading, Bloomberg reports. Two others — portfolio manager Noah Freeman and analyst Jason Pflaum — pleaded guilty. The charges are the latest example of a Federal crackdown on insider trading that the Wall Street Journal detailed in November. In a pair of documents, the Securities and Exchange Commission and the Federal Bureau of Investigation describe an illegal exchange of information, which allegedly allowed hedge funds to reap $30 million in profits. According to the Federal complaints, employees at publicly traded technology companies sold secret information about those companies to workers at hedge funds, which then used that information to make big trades in the companies’ stock. The information was enormously profitable for the firms that received it, according to the court documents. Many of the allegations involve Winifred Jiau, who, the documents say, was employed by various technology companies and, at the same time, by Primary Global Research LLC, as a “private expert.” PGR would allegedly receive information from Jiau and then pass it on to clients, including Freeman and Barai. In May 2008, for instance, Jiau allegedly gave Freeman and Barai early information about the earnings of Marvell Technology Group. According to the SEC, Barai’s hedge fund subsequently reversed its short position on Marvell’s stock, and reaped close to $1 million in profits and avoided losses. In another case, Freeman earned about $9.7 million for his hedge fund, after learning secret information, the SEC says. The FBI documents add more color to the accusations. In November last year, after he read about the probe into insider trading, Barai allegedly wrote to Pflaum from his BlackBerry: – This scope is said to focus on the use of so-called expert network firms – Concern for years that some experts may be passing out confi [meaning, confidential] info about to go public cos [meaning, companies] to traders…. – [The Firm] was only one named!!!! – F*****ck The next morning he said, according to the FBI: – Didn’t sleep much either. – I dunno – I think we ok tho – I think U just go into office – Shred as much as u can He also said, according to the FBI: – Let’s not worry…. – No evidence we got exact info – So it doesn’t matter…. – Forget the past – No proof – So ur fine During a conversation between Freeman and Longueuil, which they recorded, they describe how to destroy electronic evidence, the FBI says. From the document: Freeman then remarked, “I don’t see how you get rid of this sh*t,” to which LONGUEUIL explained, “Oh, it’s easy. You take two pairs of pliers, and then you rip it open … and then, it’s just a piece of NAND. … So I just f*cking ripped it apart right there. … I had two external drives that had like wafer numbers on ‘em. F*ckin’ pulled the external drives apart. Destroyed the platter. … Put ‘em into four separate little baggies, and then at 2a.m. … 2a.m. on a Friday night, I put this stuff inside my black North Face [u/i] jacket, … and leave the apartment and I go on like a twenty block walk around the city … and try to find a, a garbage truck … and threw the sh*t in the back of like random garbage trucks, different garbage trucks.” Longueuil and Freeman have been accused of insider trading while they were employees of SAC Capital Advisors, the $12 billion hedge fund run by Steven A. Cohen. The company released a statement saying it is “outraged by the alleged actions of two former employees, which required active circumvention of our compliance policies and are egregious violations of our ethical standards.” Cohen, who is worth more than $6 billion , and who owns artist Damien Hirst’s embalmed tiger shark, “The Physical Impossibility of Death in the Mind of Someone Living,” has been sued repeatedly by his ex-wife, Patricia Cohen. In the latest version of the suit, she alleges that Cohen himself participated in insider trading. From the suit : Such privileged information was provided to Steven as part of his relationship with Mr. Newberg and as part of an effort to “take care of one another.” They sometimes referred to their group of Wharton friends as “the Wharton mafia.” READ the complaints below, from the SEC and the FBI: comp-pr2011-40 CNBC_Barai_et_al_Complaint

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Wall Street Compensation Lawyer: ‘I Have Friends Who Blame Me For The Crisis’

February 6, 2011

Don’t blame record levels of Wall Street pay for the financial crisis, one high-powered lawyer tells the Wall Street Journal . In an interview with the WSJ Steve Eckhaus, a New York City lawyer who has brokered pay packages for some of the Street’s most well-known execs, says pay just wasn’t the cause of the financial crisis. Most of his clients are as “pure as driven snow,” he tells the WSJ , and the crisis was caused by a “confluence of economic, political and historical factors.” Here’s more from the WSJ : “I hate to say it, but I have friends who blame me for the financial crisis,” says Mr. Eckhaus, who estimates he has negotiated well over in $5 billion in banker pay over the years, including several $100 million pay deals. Eckhaus, who has worked on deals for execs like former Lehman Brothers CFO Erin Callan and former Goldman exec Tom Montag (now of Bank of America), leaves out ample evidence that compensation did play a significant role in the financial crisis — and may, in fact, hurt long-term corporate performance. In a highly-anticipated report released last month the FInancial Crisis Inquiry Commission, a government panel charged with investigating the causes of the meltdown, pointed to compensation as a key factor. “Compensation systems–designed in an environment of cheap money, intense competition, and light regulation–too often rewarded the quick deal, the short-term gain–without proper consideration of long-term consequences,” the report reads. The FDIC is reportedly weighing a proposal to force the nation’s largest banks — including Bank of America, Goldman Sachs and Wells Fargo — to defer at least half of all bonuses compensation to top execs for at least three years. Under the Dodd-Frank financial reform bill passed last year, regulators may prohibit compensation practices that compel execs to take “inappropriate risks .” Since the crisis, the EU, for its part, has pushed to establish limits on financial industry compensation. Aligning pay with long-term shareholder interests is also one of the top concerns surrounding the international bank accords known as Basel III . A report released last year by the Council of Institutional Investors, a group of public and privete pension funds, found that Wall Street pay practices had not sufficiently changed after the financial crisis.

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Jonathan Tasini: Wall Street Pay ‘Vaults to Record Altitude’

February 2, 2011

Sometimes, I wonder whether we all live in a grand farce. But, actually, it’s a real-life story about a robbery of the people that continues every day — and today is no different. The robbers grow richer. From the Wall Street Journal , a story headlined: “On Street, Pay Vaults to Record Altitude”: When it comes to paychecks, Wall Street’s law of gravity is back in full force: What goes down must come back up. In 2010, total compensation and benefits at publicly traded Wall Street banks and securities firms hit a record of $135 billion, according to an analysis by The Wall Street Journal. The total is up 5.7% from $128 billion in combined compensation and benefits by the same companies in 2009 . The increase was fueled by a revenue rebound as the financial crisis recedes in the rearview mirror … “Things are shifting back to where they were before,” said J. Robert Brown, a law professor at the University of Denver who studies compensation and corporate-governance issues.[emphasis added] And: Bank of America Chief Executive Brian Moynihan got a 67% bump in his total compensation for 2010, the company said Monday. Goldman Sachs Group Inc. tripled the salary of Chairman and CEO Lloyd C. Blankfein and increased his stock-based bonus 40% to $12.6 million. In some respects, this is reaffirming news — reaffirming in that, for those of us who have argued that nothing much has changed, this is concrete evidence. Let me make three points here. First, the notion that the “financial crisis” has receded is a perspective that millions of Americans do not share, and do not live. Those people are still coping with joblessness and homelessness and bankruptcy precisely because of the crisis caused by many of the people who are now being rewarded. Rather than jailing a lot of these folks, or at least firing them, the financial “community” rewards them. Second, the escalating pay serves notice that we are back to business as usual. The next bubble is just over the horizon. Third, and maybe most important, any “reforms,” particularly those in the Dodd-Frank bill, are honestly toothless for this reason: we have not truly made an effort to SHRINK the size of Wall Street and its influence on our economy. Remember, in the “good days” of Wall Street, when the Street said “cut your labor costs”, CEOs, always attentive to the level of their share price (which effected the stock options CEOs held), would go ahead and slash thousands of jobs — not because it necessarily helped the company’s overall performance but because the stock price might improve because well, Wall Street would be happy. Much of the financial sector’s money was tied up in leveraged buy-outs and corporate takeovers — this is precisely the kind of behavior, along with foolish so-called “free trade” deals and union busting, that has undercut the middle-class and set us on a course of a declining standard of living. None of that mindset has changed as we embark on that mission to “win the future.” That is the more dangerous message from the pay hikes: NOTHING HAS CHANGED . Seems to me that the next Tahrir Square should be around the Wall Street bull on lower Broadway in Manhattan.

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Pamela Rosenau: Winter of Content?

February 2, 2011

Although we are in the middle of winter, I am already seeing signs of the first thaw… in equity markets that is. I believe that we are headed for a melt-up in the US stock market through 2011. The ‘Winter of Discontent’ in England in 1978-79 was characterized by widespread strikes over the government’s attempt to curb inflation via pay freezes. Today the US is experiencing the opposite inflation scenario. Fed Chairman Bernanke is charging full steam ahead with quantitative easing policies because of the belief that inflation is “below optimal levels.” Could this lead to the ‘Winter of Content’ for US equity investors? A loose monetary policy environment is always a good backdrop for a rally in equities. But even though we have already seen major moves up, I think there is more to come. The market has been very fickle over the last year, which has led to under-performance by professional managers across the board. About 75% of managers underperformed their benchmarks in 2010, with close to 90% of core managers under-performing. Even some of the top dogs have been struggling, with the Wall Street Journal pointing out that there are more than a dozen mutual funds that have been in the top 20% of their Morningstar category over the last 5-10 years that were in the bottom 10% of peers for 2010. This means that a lot of people are going to be chasing alpha this year. Considering how under-invested the typical retail or high net worth individual is, I think there is the potential for the market to extend 2010′s rally in 2011. In 1999 and 2000, investors poured over $400bn into domestic equity mutual funds. In contrast, in 2009 and 2010, we saw over $100bn of domestic equity outflows. How exactly does that translate into an overbought market today? Data from Swiss private banks has confirmed that investors are still sitting on record high cash levels. Even if the typical investor is showing up late to the equity party, isn’t it likely that they are going to bring enough booze (ie investable cash) to keep things going for another while? There are some attractive fundamentals in the US to support a continued move higher. The S&P is trading at 15x earnings vs a historic average multiple of around 16.4x. People say that a low growth environment is not conducive to multiple expansion. However, GDP growth and stock returns are typically not correlated. Equity performance depends more on earnings growth, which is a function of margins and the cost of/return on capital. In the current low inflation/high unemployment environment employees have lost their negotiating power, so corporates will benefit from stable labor costs. (Incidentally, this is not the case in emerging markets where the combination of rising inflation and labor shortages means costs are likely to be on the rise, making investing in those markets less attractive than investing domestically). One sector that looks poised to generate earnings upside and impressive market returns is energy. While people seem to be underweight domestic equities in general, this is even more apparent in energy. The short interest (number of people who are betting on prices going down) is at a one-year-high. The sector currently comprises about 12% of the total S&P market cap, whereas it has reached almost 30% at its peak. At the same time, fundamentals look positive. We are seeing signs of increasing demand for energy, evidenced by the oil market recently moving into “backwardation” — where current oil contracts are priced higher than future ones. This means that current demand is outstripping current supply to such an extent that people are willing to pay a premium to secure the oil now. Take note of this structure, because I think it could translate into the equity market as a whole. As money comes off the sidelines, people are going to start paying up for exposure. Rosenau/Paul is a team of investment professionals registered with HighTower Securities, LLC, member FINRA, MSRB and SIPC & HighTower Advisors, LLC, a registered investment adviser with the SEC. All securities are offered through HighTower Securities, LLC and advisory services are offered through HighTower Advisors, LLC. This document was created for informational purposes only; the opinions expressed are solely those of the author, and do not represent those of HighTower Advisors, LLC or any of its affiliates. In preparing these materials, we have relied upon and assumed without independent verifications, the accuracy and completeness of all information available from public and internal sources. HighTower shall not in any way be liable for claims and make no expressed or implied representations or warranties as to their accuracy or completeness or for statements or errors contained in or omissions from them. This is not an offer to buy or sell securities. No investment process is free of risk and there is no guarantee that the investment process described herein will be profitable. Investors may lose all of their investments. Past performance is not indicative of current or future performance and is not a guarantee. Carefully consider investment objectives, risk factors and charges and expenses before investing.

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11 Companies That Are Hoarding The Most Cash

January 30, 2011

Instead of building plants or hiring workers, corporate America is clinging to its cash. Companies are sitting on $1.93 trillion in cash and liquid assets, the highest level since 1959, the Wall Street Journal reports . With high unemployment and families still limiting their spending, corporate America is backing away from expansion. But with interest rates on the heaps of cash so low, that $1.3 trillion might as well be stuffed in a mattress. “The corporate sector is looking at the household sector and saying, this is not the environment where we should expand our business,” Deutsche Bank economist Torsten Slok told the Journal . Some of the nation’s biggest name brands topped the list, according to data collected by Standard and Poors. Foreign companies like China Mobile and Brazilian gas company Petrobras also ranked near the top of the list. Earlier this week, Apple’s impressive earnings report revealed almost $40 billion in its cash stockpile. However, S&P lists Apple’s cash pile lower, at $25.6 billion, since Apple’s estimate also included “long-term marketable securities,” while S&P only counts the lines on a company’s balance sheet marked as cash or short-term investments. Which other companies are keeping a tight grip on their cash? Check out the list below:

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Economic Growth Still Not Good Enough To Dent Jobs Crisis

January 28, 2011

The American economy sped up in the last three months of 2010, but economic growth is still dramatically short of where it needs to be to make a significant dent in the unemployment rate. Gross domestic product — the output of goods and services produced by the American economy — grew at a rate of 3.2 percent annual rate in the last quarter of 2010 according to the Commerce Department’s report . This is good news, but not, as Josh Biven, an economist at the Economic Policy Institute, sees it, good enough. “The headline number — the 3.2 percent growth — if we sustain that rate of growth throughout 2011 that would do very little to push down the unemployment rate,” Biven said. Three percent growth is what you need just to keep the economy stable. To see any kind of real improvement, as Biven calculates, the GDP would need to be improving at a rate of 5 percent, month-over-month for an entire year — and that would only lower the unemployment rate by one percentage point. “The growth is nowhere near fast enough to start pushing down the overall unemployment,” he said. Bart van Ark, chief economist at the Conference Board, likewise does not see much to celebrate. In a widely circulated email, van Ark wrote: Continued woes in the housing market and weakness in the labor market will prevail throughout 2011. We anticipate a post-holiday pullback in consumer spending, a rise in the personal savings rate, further cuts in spending by state and local municipalities, and a deceleration in business investment in inventories in the current and next quarters. Consequently, economic growth will register only a sluggish 2 percent in the first half of 2011. One positive sign inside the Commerce Department’s report was picked up by the Wall Street Journal ‘s Kelly Evans, who tweeted : Wow. Excluding inventories, GDP up 7.1% in Q4 – most since 1984. Now that’s more like a recovery! (Evans was referring to ” real final sales ,” which discounts the effect that increased inventory levels — essentially unsold goods — has on GDP.) But Biven, at least, doesn’t see that 7.1% percent as a very accurate indicator of economic recovery. “The 3.2 percent is the better measure of the trend of the economy,” he said. “I don’t expect inventories are going to take away a bunch of growth again in coming quarters. There are reasons to think the 3.2 percent number is a little closer to what the economy is actually doing right now.” Steve Benen, at Political Animal , summarizes the situation nicely: While better growth is obviously good news, 3.2% is still only modest growth. Under normal circumstances, this would point to a fairly healthy economy, humming right along. But given the severity of the Great Recession, our circumstances are anything but normal — to have a robust recovery and make a real dent in the unemployment rate, we’ll still need to do better than this. Accelerating growth is encouraging, but if you hear policymakers and pundits today use this as an excuse to justify hitting the brakes, please know that they’re completely wrong. We’re slowly getting out of a ditch — pursuing massive budget cuts, taking money out of the economy, and deliberately putting people out of work (i.e., the vision embraced by House Republicans) would very likely push us backwards in a hurry.

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Video: John Paulson Said to Have Made $5 Billion in 2010

January 28, 2011

Jan. 28 (Bloomberg) — John Paulson made a personal profit of $5 billion in 2010 after making $4 billion in 2007, the Wall Street Journal reported, citing people close to his investment firm Paulson & Co. Inc. Bloomberg’s Deirdre Bolton reports in today’s Movers & Shakers. (Source: Bloomberg)

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Kristie Arslan: Economic Recovery Starts with Small Business

January 26, 2011

Getting our economy back on track depends on the success of our nation’s small businesses. Critical measures enacted last year like the Small Business Jobs and Credit Act and the extension of the Bush-era tax cuts delivered much needed tax relief to small businesses, especially the self-employed and micro-businesses, helping business owners keep their doors open and even expand their operations. The latest messaging from the White House signals that President Obama is serious about continuing to support the small business community. During his State of the Union address, the President stated that he is open to fixing an element of the health care reform law that unwittingly created a significant regulatory burden for small business owners: Now, I’ve heard rumors that a few of you have some concerns about the new health care law. So let me be the first to say that anything can be improved. If you have ideas about how to improve this law by making care better or more affordable, I am eager to work with you. We can start right now by correcting a flaw in the legislation that has placed an unnecessary bookkeeping burden on small businesses. The President is referring to a small, but incredibly onerous provision buried in the health care reform bill requiring small business owners to submit IRS Form 1099 for every purchase of goods and services over $600, which will increase the time and money spent on tax preparation for three out of four business owners. This is the type of burdensome regulation that prevents small businesses from thriving. It is also the type of burden that the President seems eager to eliminate with his vision for a 21st century regulatory system. This goal was recently promoted by the President in the pages of the Wall Street Journal . In the lead up to the State of the Union, the President issued an executive order addressing the overwhelming regulatory burden on small businesses, especially our nation’s smallest businesses — the self-employed. A key component directs federal agencies to consider the cost/benefit analysis of proposed regulations and choose the least burdensome path for small business. The executive order is a step in the right direction as agencies have all too often issued regulations without considering their impact on small business, creating onerous compliance costs and difficulties. There is, however, a glaring problem with the E.O. and the Regulatory Flexibility Act: the agency with the single largest impact on small business — the IRS — is exempt from this law. The IRS is not required to perform any sort of analysis regarding the impact of their regulations on small business. Without addressing the elephant in the room, there is only so much benefit this E.O. will deliver to the majority of small businesses. Enhancing competitiveness and expanding employment are solid economic goals. But policies to get us there have to take into account the demographics of our nation’s businesses. Policymakers need to continue legislating to the majority of small businesses , not just to the corporate giants.

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Former Treasury Advisor Starting Company That Could Help Small Banks

January 20, 2011

In an effort to restore a crucial segment of the economy that was wounded in the financial crisis, a former government official is starting a company aimed at helping small banks. Lee Sachs, a former advisor in the Treasury department, is teaming with John Delaney, former chief executive of the bank CapitalSource, to launch a firm designed to allow small banks to make loans that otherwise would have been out of their league, the Wall Street Journal reports. By giving small banks opportunities to extend portions of big loans, the firm, called BancAlliance, will attempt to help revitalize the small bank industry. Focusing on banks with assets between $200 million and $10 billion, BancAlliance will serve as a middleman, finding big loans and then allowing banks to underwrite pieces of them, the WSJ says. By collaborating, these banks could, in theory, compete with the giants of the banking industry. Small banks have traditionally shared a close relationship with small businesses, making small lenders a key ingredient in a healthy economy. Small businesses crave the personal attention a small bank can provide. Especially now, with many banks shell-shocked from the crisis, small business owners, who might not have much concrete proof of reliability, can benefit from working with bank executives who trust them. Small businesses contribute about 70 percent of the nation’s jobs, according to the Obama administration’s estimate. New businesses , which often rely on bank loans to get going, contribute about 20 percent of new jobs, according to a recent Bank of America Merrill Lynch study. The health of small banks, then, is essential in a functioning economy. Late last year, the Federal Deposit Insurance Corp., which currently guarantees the savings parked at about 7,665 American banks, revealed that the number of banks it considers troubled swelled to 860 from 829 during the summer months. The vast majority of these additions to the “problem” list are small banks. In theory, BancAlliance would help strengthen small banks by giving them access to loans outside their traditional sphere. While small banks typically have much of their assets tied to the local economy — in commercial real estate, for instance — this new company would theoretically let them expand their reach. “This is designed to give large-bank capabilities to small banks,” Sachs said, according to the WSJ . It remains to be seen, though, whether BancAlliance would spur lending to small businesses. Sachs is a Treasury veteran, having served as assistant secretary under Robert Rubin, during Clinton’s second term. Under Rubin’s watch, lawmakers rolled back Depression-era regulation, paving the way for banks to grow larger, a development that experts say contributed to the financial crisis less than a decade later.

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Goldman Sachs’ Top Execs Got Huge Stock Windfall During Crisis

January 19, 2011

Goldman Sachs’ wealthiest clients may be angry that an exclusive offer to invest in Facebook was pulled from under their feet, but the bank’s executives are posed to reap a windfall from stock options granted during the financial crisis. A new study of Goldman’s regulatory filings and internal documents conducted by the New York Times and Footnoted.com, reveals some startling details about the composition and compensation of Goldman’s top employees. The study documents the members of a group of partners made up of Goldman’s star performers. There are 475 current members and the average length of membership in this elite club is 7 years. In 2008, during the height of uncertainty in the financial world, Goldman issued nearly 36 million stock options (a tenfold increase from the prior year) — primarily to partners. Now, business is booming again, and the bank’s stock price has more than doubled. The Times lays out the numbers: The documents illustrate just how much wealth the partnership owns and has cashed out over the years. Goldman has almost 860 current and former partners, the documents show. In the last 12 years, they have cashed out more than $20 billion in Goldman shares and currently hold more than $10 billion in Goldman stock. Of those 860, only six percent are female. Current and former members include CEO Lloyd Blankfein; chief operating officer Gary D. Cohn; former Treasury Secretaries Henry M. Paulson Jr. and Robert E. Rubin; the former governor of New Jersey Jon Corzine; and William C. Dudley, the president of the Federal Reserve Bank of New York. Meanwhile, Goldman’s elite U.S. clients are growing anxious after they were told they couldn’t invest in Facebook just two weeks after Goldman persuaded them to. Wary of regulatory scrutiny and “intense media attention,” the bank announced Monday that it would not sell Facebook stock to its U.S. clients. The deal has been called a “serious embarrassment” for the bank. The Wall Street Journal talks to some of those slighted. “Before this deal, if they told me to buy something, I’d buy it,” he said. “Now I’m paying attention to the fees. And I’m going to tell all my friends who are Goldman clients to look at their fees. I can’t see how that’s good for them in the long term.”

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Wall Street’s Secret Society Elects New Members

January 16, 2011

This weekend a tight-lipped group of power brokers elected two new members into Kappa Beta Phi , Wall Street’s secret society founded in 1929, Bloomberg reported. The organization, dubbed ” Wall Street’s Frat ” by the WSJ elected Barclays M&A chief Paul Parker and Leon Black, a senior managing director at buyout firm the Apollo Group, in a posh ceremony at Manhattan’s St. Regis Hotel. While the group’s members aren’t fond of talking to the press, there is reportedly a loose hierarchy of members. The group reportedly uses titles like “grand swipe, grand smudge and grand loaf,” Bloomberg notes. Bloomberg reporter Max Abelson was seated outside the lobby and relayed this strange anecdote. Here’s Abelson : “As the evening began, a reporter seated in the lobby watched people enter the hotel, where a night in the Astor Suite costs about $1,050. When a man appeared holding a photograph of the reporter in a gray T-shirt giving a thumbs-up sign — a profile photo from his Facebook page — the reporter promptly left.” Last year, the Wall Street Journal got rare access to a Kappa Beta Phi induction ceremony , even nabbing one of the event’s pamphlets. Among those listed as the organization’s “Exalted Avisory Council (Past Grand Swipe’s)” were former Bear Stearns CEOs Jimmy Cayne and Alan D. Schwarz and Home Depot co-founder Kenneth Langone. Inductees, referred to as “neophytes” by members, are traditionally required to sit at tables with long black table cloths, and, at least in last year’s ceremony, are required to preform for the crowd. Last year, shipping magnate Peter Georgiopoulos reportedly performed a version of the “What a Feeling” song from the 1980s hit “Flashdance.”

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Bailed Out Banks Teeter Towards Collapse

December 27, 2010

Nearly 100 banks previously rescued by the federal government are again poised to fail, despite billions of dollars of support from the American Treasury. The number of banks on the brink of collapse rose from 86 to 98 during the summer months, according to analysis of federal data from the Wall Street Journal . The banks in question have received $4.2 billion dollars in aid through the Troubled Asset Relief Program ( TARP ). Most of the troubled institutions are relatively small. The latest sign of distress in the financial system suggests the bailout may have simply been a stopgap solution for a sector still contending with the aftershocks of the greatest banking crisis in 80 years. The continued weakness of some banks now threatens to impede a tentative economic recovery, say experts. With many banks still troubled, lending remains tight, depriving businesses of capital to expand and hire. With expansion and hiring rare, the economy remains weak, depriving the banks of healthy customers–in short, a feedback loop of trouble. The Wall Street Journal defined “troubled banks” as those with less than 6 percent of their primary assets both reliable and liquid. Through TARP, the government has purchased hundreds of billions of troubled assets from banks in danger. Though the program was purportedly meant to benefit healthy institutions with a good chance of survival, these latest failures suggest that many banks were in tenuous shape to begin with. Seven TARP recipients have already failed, at a loss of $2.7 billion. But some analysts pointed to the fact that most of the failing institutions are relatively small in dismissing concerns. “If Citibank and Bank of America were going under, that would be a problem,” said Mark Blyth, a political economy professor at Brown and a fellow of the Watson Institute for International Studies . “The bailout was meant to deal with a global systemic crisis. It was not to make sure that some bank in Utah with dodgy commercial real estate would be okay.” Blyth expects some smaller banks to continue to fall, due in large part to the lack of growth in the economy. “People aren’t borrowing,” he said. “The reason they’re not borrowing is because they’re up to their eyeballs in debt.”

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Rescued Banks Teeter Towards Collapse

December 27, 2010

Nearly 100 banks previously rescued by the federal government are again poised to fail, despite billions of dollars of support from the American Treasury. The number of banks on the brink of collapse rose from 86 to 98 during the summer months, according to analysis of federal data from the Wall Street Journal . The banks in question have received $4.2 billion dollars in aid through the Troubled Asset Relief Program ( TARP ). Most of the troubled institutions are relatively small. The latest sign of distress in the financial system suggests the bailout may have simply been a stopgap solution for a sector still contending with the aftershocks of the greatest banking crisis in 80 years. The continued weakness of some banks now threatens to impede a tentative economic recovery, say experts. With many banks still troubled, lending remains tight, depriving businesses of capital to expand and hire. With expansion and hiring rare, the economy remains weak, depriving the banks of healthy customers–in short, a feedback loop of trouble. The Wall Street Journal defined “troubled banks” as those with less than 6 percent of their primary assets both reliable and liquid. Through TARP, the government has purchased hundreds of billions of troubled assets from banks in danger. Though the program was purportedly meant to benefit healthy institutions with a good chance of survival, these latest failures suggest that many banks were in tenuous shape to begin with. Seven TARP recipients have already failed, at a loss of $2.7 billion. But some analysts pointed to the fact that most of the failing institutions are relatively small in dismissing concerns. “If Citibank and Bank of America were going under, that would be a problem,” said Mark Blyth, a political economy professor at Brown and a fellow of the Watson Institute for International Studies . “The bailout was meant to deal with a global systemic crisis. It was not to make sure that some bank in Utah with dodgy commercial real estate would be okay.” Blyth expects some smaller banks to continue to fall, due in large part to the lack of growth in the economy. “People aren’t borrowing,” he said. “The reason they’re not borrowing is because they’re up to their eyeballs in debt.”

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Andy Plesser: The Huffington Post Hits Record 23 Million Unique Visitors in November, Now Ranked Number Two "Newspaper," comScore

December 17, 2010

The Huffington Post has registered 26 million unique monthly visitors in the United States, a record for the site, according the comScore November data for the “Newspaper Sites.”

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Megabank’s 43-Page Dress Code Warns Employees Not To Show Underwear

December 15, 2010

It took no fewer than 43 pages for the human resources department at the Swiss bank UBS AG to establish what bank personnel should consider acceptable corporate attire. The Wall Street Journal has the goods on the clothing guidelines for the bank that was embroiled in a nasty tax evasion scandal that lead to UBS paying the U.S. government $780 million in fines. The UBS look book commands that employees wear suits of dark grey, black or navy blue, since these colors “symbolize competence, formalism and sobriety.” Among the “dos” and “don’ts” for women: “Make sure to touch up hair regrowth regularly if you color your hair.” Men are commanded to, “Schedule barber appointments every four weeks to maintain your haircut shape.” Neither sex is allowed to “allow their underwear to appear,” wear short-sleeved shirts or, strangely, cuff links. You can see the entire brochure here (courtesy of John Carney at CNBC’s NetNet , who’s pulled a French-language page that walks you through how to properly tie a proper tie.) Read the entire WSJ piece here .

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Michael Port: Why Entrepreneurs Should Ditch The Elevator Pitch

December 15, 2010

A primary reason that many professional service providers fail to build thriving businesses is that they struggle to articulate in a clear and compelling way exactly what solutions and benefits they offer. They don’t know how to talk about what they do without sounding confusing or bland or like everyone else — and without using an elevator speech. You know, that 30-second commercial that’s supposed to wow someone with what you do in the time it takes an elevator to go from the first to the fifth floor. No one wants to listen to your elevator speech. I’ve been polling audiences of thousands for years on this issue. During each speech I ask, “How many of you love, love, love listening to someone else’s elevator speech?” No hands go up. I then ask, “How many of you love, love, love giving your elevator speech?” Same thing. No hands. So what gives? If we don’t like listening to or giving the speech, why is it still being taught? Because, of course, we need to be able to talk about what we do — I get the concept. However, in this case, the elevator speech has been inappropriately appropriated by the service professional. Not only does it not work well, it makes us look foolish, or, worse yet, obnoxious. The elevator speech does not help sell professional services. The elevator pitch is designed for the entrepreneur to pitch an idea to a venture capitalist or angel investor in the hopes of receiving funding, not for the service professional to try to build a relationship of trust with a potential client. Venture capitalists often judge the quality of an idea on the basis of the quality of its elevator pitch. Makes perfect sense, in that situation. But this is not how a relationship develops between a client and a service professional. You’re trying to earn the status of a trusted adviser, not trying to raise money to create some new product like metal-detecting sandals. Totally different context. Totally different dynamic. So, how do you talk about what you do? By using this crazy concept that I call a conversation. You know when two people actually care about what the other has to say? Shocker, I know. Creative — but not scripted! — conversations will spark curiosity and interest about you and your services, products, and programs. If you know, and I mean really know, who you help, what challenges they face, how you help them, and the results and benefits they get from your services — you can talk about what you do any which way ’till Sunday; 30 seconds, three minutes, three hours, it doesn’t matter. Or, you could go with an overblown, high-falutin, hyperbole-laden elevator speech that’s supposed to make you look like a rock star in 30 seconds. Unfortunately, I doubt the excessively exuberant elevator pitch is going to compel the listener to whip out his credit card right then and there. Developing Your ‘ Book Yourself Solid ‘ Dialogue Let’s put it all together with a simple five-part exercise that will help you talk about what you do. Part I: Summarize your target market in one sentence. Part II: Identify and summarize the three biggest and most critical problems that your target market faces (what they want to get away from). Part III: Identify and summarize your target markets’ three most tangible desires (what they want to get to) Part IV: Identify the number one most relevant result you help your clients achieve. Part V: List the benefits your clients’ experience as an outcome of the result you provide. You now have an outline that will help you clearly articulate what you do without sounding confusing or bland. In fact, you’ll sound like a superstar because you can use this outline or framework to have a meaningful conversation with another human being. Reminder: this is not a speech. Don’t stay married to the format. Be sure to improvise. Using the structure can be helpful but you may not need to go through every element of this framework in every conversation. The person you’re engaged with might end up doing all the talking and even supply your side of the dialogue accurately. Then you can just sit back and relax. The point is, if you’re prepared with these five elements, you have the required ingredients for talking about what you do so you can cook up a sweet and tasty business, booked solid with high-paying, high-value clients. Called “an uncommonly honest author” by the Boston Globe and a “marketing guru” by The Wall Street Journal , Michael Port can be seen regularly on MSNBC and is a New York Times Bestselling author of four books including Book Yourself Solid , Beyond Booked Solid , The Contrarian Effect and The Think Big Manifesto . Get free chapters from Book Yourself Solid at www.BookYourselfSolid.com

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Economists Now A Lot More Cheery About 2011

December 13, 2010

Economists have grown more optimistic about the outlook for U.S. growth next year, predicting the expansion will accelerate as 2011 progresses, according to the latest Wall Street Journal forecasting survey. The 55 respondents, not all of whom answer every question, raised their growth projections for gross domestic product for nearly every period, including the current quarter. On average, the economists now predict GDP will grow 2.6% in the current quarter at a seasonally adjusted annual rate, up from the 2.4% growth they projected in last month’s survey. The economy grew 2.5% in the third quarter.

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Dan Solin: The Market Is Rigged Against You

November 24, 2010

Every day millions of shares of stocks and mutual funds are traded on the national exchanges. The system is premised on an equal playing field. Buyers and sellers are supposed to have access to the same information in order to make decisions about whether to buy or sell. Many have long suspected this premise is false. We know the “big boys” have access to super computers which provide trading information nanoseconds before it’s available to others, giving them the opportunity to use this data before it’s known to the average investor. It’s called “high frequency trading” but it’s really nothing more than legalized front running . According to an article in the Wall Street Journal , this is child’s play compared to the inside trading that pervades the markets. The article reports a three year investigation by federal authorities that could “ensnare consultants, investment bankers, hedge-fund and mutual-fund traders and analysts across the nation…” Who is on the wrong side of these trades? The average Joe who is trying to save enough for retirement. Even without this illegal activity, the securities industry practically insures most investors squander their money. The industry wants you to believe some “guru” (usually your friendly broker) has the skill to pick stocks or mutual funds that will beat market returns. A recent study by Standard and Poors demonstrates the confusion between luck and skill which is fostered by these “experts.” The study found that, over the five years ending September 2009, only 4.27% of large-cap funds, 3.98% mid-cap funds, and 9.13% small-cap funds were able to repeat their top-half or top quartile rankings. No large- or mid-cap funds, and only one small-cap fund maintained a top quartile ranking over the same period. Over longer periods, persistence of performance generally was less than you would expect from random chance. Other studies support the view that stellar performance by actively managed mutual funds can be attributed to luck and not skill. The ramifications of the insider trading scandals and these studies are profound and largely ignored by retail investors. If mutual fund managers had skill, you would expect a high correlation between past returns and future returns. This correlation does not exist. Since they don’t have skill, relying on them to produce outsized returns is gambling and not investing. While that is depressing enough, add the fact that the entity on the other side of your trade may have inside information that gives them an unfair edge. The conclusion is both inescapable but elusive for most investors: Your goal should be to capture market returns, using a globally diversified portfolio of low cost index funds, in an asset allocation appropriate for you. This means firing your market beating broker or advisor and selling all of your individual stocks, bonds and actively managed mutual funds. You can be a victim or victor in your quest for financial security. You are looking for guidance in all the wrong places if you a relying on the securities industry to help you get there. The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. Returns from index funds do not represent the performance of any investment advisory firm. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services. Readers who require investment advice should retain the services of a competent investment professional. The information on this blog is not an offer to buy or sell, or a solicitation of any offer to buy or sell any securities or class of securities mentioned herein. Furthermore, the information on this blog should not be construed as an offer of advisory services. Please note that the author does not recommend specific securities nor is he responsible for comments made by persons posting on this blog. Here is the trailer for my new book, Timeless Investment Advice .

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WATCH: Video Shows Rise Of Food Stamp Use

November 21, 2010

A new time-lapse video illustrates the depressing rise of food stamp usage throughout the U.S. The video’s creator, Zero Hedge’s John Lohman , points to the alarming levels — food stamps now feed a record 43 million — and warns that the program is the only thing keeping Americans from going “postal.” Sinatra’s upbeat tune “I’ve Got The World By A String” serves as an especially disturbing soundtrack. According to a recent Wall Street Journal repor t, food stamp usage has increased almost 60 percent since 2007. Click here to see states where usage increased the most. WATCH:

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Will Ferrell Loses Lawsuit Against JPMorgan, Slapped With $600,000 Penalty

November 18, 2010

Will Ferrell lost a lawsuit against JPMorgan Chase and now has to pay a big legal fee, NYT ‘s DealBook reports. The suit , which the actor filed in 2008 with his wife and a business manager, and with fellow funnyman Larry David’s trust, claimed the bank had “engaged in the unauthorized and unsuitable purchases” of $18 million of securities in the accounts of two “unnamed” parties. A Financial Industry Regulatory Authority arbitration panel not only ruled against Ferrell and the others but also decided they have to pay JPMorgan $600,000 to cover legal fees, and an additional $22,500 for “discovery abuse” and not following legal rules during the case. The NYT and the Wall Street Journal say this sort of penalty on investors is highly unusual. “It’s about time,” Jonathan Uretsky, a securities lawyer, told the WSJ . “I think this should happen more often.” Read the ruling: Finra Ruling Against Will Ferrell and Others

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WATCH: Fed President: It Could Take Years To End Fed’s Easy Money Policies

November 16, 2010

WASHINGTON – A top U.S. Federal Reserve official defended the Fed’s controversial bond-buying program on Tuesday, saying it could be years before pulling back easy money policies is warranted. “This exit could be years away,” New York Federal Reserve President William Dudley said an interview on CNBC. A transcript of the interview was made public. The dollar fell against the euro and the yen on the comments. WATCH CNBC’s interview with Dudley: Dudley cautioned that it will take months of adding 200,000 to 300,000 jobs to foster a meaningful recovery, and said the Fed’s program to buy $600 billion in longer-term Treasuries is unlikely to generate a spurt of growth. “Modest effect. It’s not a fantasy. It’s not a magic wand,” he said. “It’s going to make the economy grow a little bit faster. It’s going to generate a little bit more employment growth. But you know, we have a long bumpy road to travel,” Dudley said. Criticism has rained down on the Fed internationally and domestically since it announced in early November it would buy $600 billion in longer-term Treasuries by the middle of next year to spur more robust growth. Among those taking issue are international trading partners of the United States who have said that the weaker dollar hurts growth elsewhere by weakening their exports. Fed officials at the center of support for the policy were out in force to respond to disparagement of the policy that has heightened in recent days. Fed Vice Chairwoman Janet Yellen, in another unusual on-the-record interview in the Wall Street Journal, said the easing program is not intended to push down the dollar, but to address unusually high unemployment and sluggish growth. Dudley, a permanent voter on the Fed’s policy setting panel, echoed Yellen’s comments, saying the U.S. central bank’s sole aim is to stimulate growth in the United States, not to devalue the currency at the expense of other economies around the world. “What we’re doing is actually in their long-term interests,” he said. The sooner the United States recovers fully, the more quickly monetary policy authorities can pull back from extraordinary policies, he added. “The goal of our policy is a very simple one, to ease financial conditions,” Dudley said. “We’re not trying to push the dollar to any particular level.” In addition to criticism from overseas, the Fed faces an unusually high degree of second-guessing at home. Leaders of the Republican Party, which scored big gains in November elections on anti-government backlash, have slammed the Fed’s easing program in recent days saying it undermines the dollar, sows the seeds of future inflation, and strays outside its mandate and into the domain of fiscal authorities. On top of that, a number of Fed officials have questioned the policy. “It’s not surprising as the Fed gets to unusual, unconventional policy tools that there can be disagreement about whether the benefits outweigh the costs,” Dudley said. (Reporting by Mark Felsenthal; editing by Kazunori Takada) Copyright 2010 Thomson Reuters. Click for Restrictions .

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NCUA Sets Price On 55 Bln RMBS

November 11, 2010

The National Credit Union Administration is said to have set the price on its offering of 5482 billion in residential mortgagebacked securities reports The Wall Street Journal

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NCUA Sets Price On 55 Bln RMBS

November 11, 2010

The National Credit Union Administration is said to have set the price on its offering of 5482 billion in residential mortgagebacked securities reports The Wall Street Journal

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Robert Teitelman: Sorkin on the transparency dilemma

November 9, 2010

Like a drum major, Andrew Ross Sorkin leads his marching band to DealB%k’s new page right after Itineraries in today’s New York Times. Welcome to dead-tree media. In his Tuesday M&A column, Sorkin tackles a big issue, transparency, though it’s a little hard to tell where he comes down on it. He’s for it, of course; only communists and denizens of dark markets could possibly be against transparency. But it’s confounding. Sorkin himself admits that he once thought that allowing companies to announce news off their websites was a swell idea. After all, the Internet, birthplace of DealB%k (do we all have to use that damn “%” now?), represented the closest thing to ubiquity that we have. But then Microsoft tried it out, and while the globe still spins, Sorkin got a call from the chairman and CEO of PR Newswire and Business Wire, both of which are threatened by the development, complaining of confusion and delays. Let’s sort this out. There undoubtedly was some confusion, although it’s not necessarily clear that, as Sorkin says, “the system doesn’t work nearly as well [as the old].” Any change requires adjustment. And the biggest problem, slight delays, would seem to affect mostly the high-frequency trading crowd, which has done more to bring opacity back into equity trading than any other group this side of the dark market folks. Should we worry that some high-frequency traders might have to wait? Should the standards of dissemination be set by the cutting edge of speculative trading? And most importantly, have we confused dissemination with transparency? These are difficult questions. Sorkin cites Regulation Fair Disclosure, or Reg FD, which the Securities and Exchange Commission launched in 2000 to “combat selective disclosure.” When Reg FD became effective, the howls, mostly from the media (notably The Wall Street Journal), were loud and strident. The then-mainstream business media worried that banning “selective” disclosure meant that sources would dry up; and indeed orchestrated deal placements did fizzle out. Generally, nearly everyone hated Reg FD except the lawyers: Companies didn’t know what the rules really meant, analysts felt able to cater to some clients and not others (Eliot Spitzer was lurking as well), and investors felt the policy would simply be used to justify disseminating less information. It was a hassle, but while it’s hard to tell whether Reg FD made the world better or worse, the situation has long since settled down. Still, Reg FD did represent a subtle shift, which is exacerbated by the Web-based transmission of information. First, Reg FD was not about transparency as content, but about transparency as a sort of equality of dissemination: No one should have an advantage by getting information first. Second, Reg FD was an acknowledgment by the SEC that fair-trading was important; it was an attempt to level the playing field between institutions and individuals (the fact that it appeared at the height of the dot-com bubble is important). In that sense, Reg FD was a response to abundant Internet data, which gave the appearance of leveling the informational disparity that had long defined the two groups. And of course even then, the Internet had all but destroyed the timeliness and relevance of market quotes and data in the business pages of hard-copy newspapers. In short, Reg FD attempted to set rules for markets defined not by long-term investors, but by short-term speculators. The debate over Internet disclosure took this further. Transparency is not just the equal dissemination of information; it’s immediacy of access: No one should struggle to find information. The issue now is not that newspaper stock pages are rendered obsolete, but that media websites, fed by PR Newswire and Business Wire, find themselves scrambling to pick up information from corporate websites. They’re like everyone else out there. The advantage here goes to those who can quickly and easily monitor corporate sites, which may (or may not be) Reuters, Bloomberg, The Wall Street Journal or The New York Times, but could as easily be any organization with sophisticated RSS feeds. (Meaning, of course, day traders remain at a disadvantage.) Sorkin now finds himself uncomfortably caught between the omnipresence of the Web and traditional news intermediaries, like PR Newswire and the Times itself. The issue capsulizes the mounting difficulties of transparency in an age of increasingly rapid-fire speculation — and not just for traditional news organizations. Regulators have spent so much time and effort chasing the chimera of the level playing field that they have lost any sense of improving “transparency-as-content” in an age that, through intensive technology and innovation, has made it harder and harder to understand what’s going on out there. More and more, we are struggling to regulate a thin slice of trading time that has little to do with traditional investing and everything to do with capturing the tiny perturbations of stocks, most of which have no “meaning” at all. Meanwhile, derivatives, dark markets, the interconnectivity of markets, remain enormous black boxes. Robert Teitelman is editor in chief of The Deal.

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Robert Teitelman: Sorkin on the transparency dilemma

November 9, 2010

Like a drum major, Andrew Ross Sorkin leads his marching band to DealB%k’s new page right after Itineraries in today’s New York Times. Welcome to dead-tree media. In his Tuesday M&A column, Sorkin tackles a big issue, transparency, though it’s a little hard to tell where he comes down on it. He’s for it, of course; only communists and denizens of dark markets could possibly be against transparency. But it’s confounding. Sorkin himself admits that he once thought that allowing companies to announce news off their websites was a swell idea. After all, the Internet, birthplace of DealB%k (do we all have to use that damn “%” now?), represented the closest thing to ubiquity that we have. But then Microsoft tried it out, and while the globe still spins, Sorkin got a call from the chairman and CEO of PR Newswire and Business Wire, both of which are threatened by the development, complaining of confusion and delays. Let’s sort this out. There undoubtedly was some confusion, although it’s not necessarily clear that, as Sorkin says, “the system doesn’t work nearly as well [as the old].” Any change requires adjustment. And the biggest problem, slight delays, would seem to affect mostly the high-frequency trading crowd, which has done more to bring opacity back into equity trading than any other group this side of the dark market folks. Should we worry that some high-frequency traders might have to wait? Should the standards of dissemination be set by the cutting edge of speculative trading? And most importantly, have we confused dissemination with transparency? These are difficult questions. Sorkin cites Regulation Fair Disclosure, or Reg FD, which the Securities and Exchange Commission launched in 2000 to “combat selective disclosure.” When Reg FD became effective, the howls, mostly from the media (notably The Wall Street Journal), were loud and strident. The then-mainstream business media worried that banning “selective” disclosure meant that sources would dry up; and indeed orchestrated deal placements did fizzle out. Generally, nearly everyone hated Reg FD except the lawyers: Companies didn’t know what the rules really meant, analysts felt able to cater to some clients and not others (Eliot Spitzer was lurking as well), and investors felt the policy would simply be used to justify disseminating less information. It was a hassle, but while it’s hard to tell whether Reg FD made the world better or worse, the situation has long since settled down. Still, Reg FD did represent a subtle shift, which is exacerbated by the Web-based transmission of information. First, Reg FD was not about transparency as content, but about transparency as a sort of equality of dissemination: No one should have an advantage by getting information first. Second, Reg FD was an acknowledgment by the SEC that fair-trading was important; it was an attempt to level the playing field between institutions and individuals (the fact that it appeared at the height of the dot-com bubble is important). In that sense, Reg FD was a response to abundant Internet data, which gave the appearance of leveling the informational disparity that had long defined the two groups. And of course even then, the Internet had all but destroyed the timeliness and relevance of market quotes and data in the business pages of hard-copy newspapers. In short, Reg FD attempted to set rules for markets defined not by long-term investors, but by short-term speculators. The debate over Internet disclosure took this further. Transparency is not just the equal dissemination of information; it’s immediacy of access: No one should struggle to find information. The issue now is not that newspaper stock pages are rendered obsolete, but that media websites, fed by PR Newswire and Business Wire, find themselves scrambling to pick up information from corporate websites. They’re like everyone else out there. The advantage here goes to those who can quickly and easily monitor corporate sites, which may (or may not be) Reuters, Bloomberg, The Wall Street Journal or The New York Times, but could as easily be any organization with sophisticated RSS feeds. (Meaning, of course, day traders remain at a disadvantage.) Sorkin now finds himself uncomfortably caught between the omnipresence of the Web and traditional news intermediaries, like PR Newswire and the Times itself. The issue capsulizes the mounting difficulties of transparency in an age of increasingly rapid-fire speculation — and not just for traditional news organizations. Regulators have spent so much time and effort chasing the chimera of the level playing field that they have lost any sense of improving “transparency-as-content” in an age that, through intensive technology and innovation, has made it harder and harder to understand what’s going on out there. More and more, we are struggling to regulate a thin slice of trading time that has little to do with traditional investing and everything to do with capturing the tiny perturbations of stocks, most of which have no “meaning” at all. Meanwhile, derivatives, dark markets, the interconnectivity of markets, remain enormous black boxes. Robert Teitelman is editor in chief of The Deal.

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Bloomberg: Congress ‘Can’t Read’ And Some Members Don’t Know What, Or Where China Is

November 6, 2010

New York City Mayor Michael Bloomberg said Saturday that some newly elected members of Congress “can’t read” and don’t know what or where China is. Bloomberg delivered his stinging assessment of Washington’s newcomers during an interview with The Wall Street Journal . “If you look at the U.S., you look at who we’re electing to Congress, to the Senate–they can’t read,” he said. “I’ll bet you a bunch of these people don’t have passports.” The three-term, billionaire mayor warned against a trade war with China — something both major parties found politically helpful in last Tuesday’s election — and suggested that America assess its policies for answers: “I think in America, we’ve got to stop blaming the Chinese and blaming everybody else and take a look at ourselves,” he said. Last month, The New York Times reported that at least 29 candidates on both sides of the aisle ran ads critical of China and opponents who would support policies that help foreign workers–not Americans. In one of its last acts before the midterm elections, Congress passed legislation retaliating against China , contending that the nation is undervaluing its currency. Time ‘s Zachary Karabell believes Americans are wrong: The U.S., leading the charge for developed nations, has convinced itself that China has purposely kept its currency undervalued to make its exports more attractive. Our new conventional wisdom is that China’s policy leads to escalating trade deficits and the loss of American manufacturing jobs. It has also allowed China to accumulate $2.5 trillion in foreign reserves — and become the most significant foreign creditor for the U.S. and its ballooning debts. We’re even irked because the Chinese are saving way more than they consume, worsening the global imbalances that are supposedly imperiling the tenuous recovery from the financial turmoil that shook the world. To rectify these problems, China must allow its currency to appreciate dramatically — 20% to 40% — quickly Like Bloomberg, Karabell believes its us, not them: When did we collectively go through the looking glass and end up in this distorted economic universe? The idea that the U.S. is not responsible for its own economic stagnation, housing bubble and unemployment is a black-is-white, up-is-down view that only insecurity can breed. It’s not us; it’s them and their cheap goods. Bloomberg travelled to Hong Kong as the new leader of the C40, a coalition of 40 cities, and was there to attend the organization’s conference. According to the group, 1 in 12 people worldwide live in one of its 40 cities. The mayor argued that city authorities are often better placed than national governments to combat climate change and vowed to promote the use of electric taxis.

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8 Ways To Bootstrap A Business Without Going To A Bank

November 4, 2010

For startups, credit is like “experience” for job applicants — you can’t get it if you don’t already have it. Despite a recent push by banks to give more loans to small companies, only the strongest small firms, with cash and collateral, are receiving loans and lines of credit, reports the Wall Street Journal . Fledgling small businesses looking to land a loan from a bank confront a Catch-22: banks refuse to cut a check until they see evidence of positive cash flow, but startups can’t boost sales until they secure capital to launch their products or services. In the current economic climate, entrepreneurs have to do what they do best: get creative. Now, more than ever, small business owners are looking to non-profits, professional investors, to the government and even to ordinary folks in their families and communities to bootstrap their businesses. Thankfully, an array of organizations and online tools can make this search easier. Here are 8 ways to fund your business without going to a bank:

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Fannie Freddie Bailout Cost To Exceed 150B

October 25, 2010

The final cost to American taxpayers from the bailout of mortgage giants Fannie Mae and Freddie Mac is expected to exceed 150 billion but adverse scenarios could see the total grow higher according to The Wall Street Journal

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G20 Split Over Trade Balancing Proposal

October 25, 2010

Members nations of the Group of 20 have been split by a proposal aimed at preventing a global currency war and correct international trade imbalances according to The Wall Street Journal

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FDIC Said To Eye First CMBS Sale

October 23, 2010

The Federal Deposit Insurance Corp is reportedly planning its first sale of commercial mortgagebacked securities by either the end of this year or in early 2011 reports The Wall Street Journal

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8232FHFA Taps Law Firm For MBS8232

October 23, 2010

The Federal Housing Finance Agency has retained the Los Angelesbased law 8232firm Quinn Emanuel Urquhart Sullivan to prepare potential litigation 8232aimed at recovering billions in bad mortgagebacked securities reports The Wall Street Journal

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Moodys Downgrades Bear Stearns RMBS8232

October 23, 2010

Moodys Investors Service has lowered the ratings on most of 31 billion8232 of firstlien fixed and adjustablerate residential mortgagebacked 8232securities reports The Wall Street Journal

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Taxpayer Investment Watch: AIG, Mortgage Bond Program Showing Positive Signs

October 22, 2010

In two tentative signs of hope that taxpayers will be repaid for the financial sector bailout, AIG used share sales to free up billions, and government investments in risky mortgage securities returned 36 percent. The news is good, just so long as it keeps moving in that direction. AIG, the insurance giant that received a roughly $130 billion government bailout (with the ability to use up to $182.3 billion), raised $17.8 billion from selling shares in its Hong Kong insurance unit, Bloomberg reports, noting that the sale was the biggest stock offering in Hong Kong history. As part of its recently hatched plan to repay taxpayers , AIG’s first task is to repay the Federal Reserve Bank of New York. The sale of this Asian insurance unit, AIA, will go toward that roughly $19.3 billion debt to the Fed. Earlier this month, Treasury’s chief restructuring officer Jim Millstein told the New York Times he expected the AIA sale to bring in between $12 and $15 billion. But a lot still has to go right for taxpayers to be made whole. Reuters ‘ Felix Salmon has quibbled with NYT ‘s Andrew Ross Sorkin over the likelihood of taxpayers earning a profit. To achieve success, AIG and the government must smoothly execute a massive stock conversion and gradual stock sale, the success of which is dependent on AIG’s stock price. Another government investment, controlled by the so-called Public-Private Investment Program, which was created last year to buy risky mortgage securities, has returned 36 percent during its first year, Bloomberg says. On its face, that’s not half bad, especially considering it’s close to the returns of the giant hedge fund Bridgewater Associates. The Wall Street Journal reported today that Bridgewater, which manages $86 billion, saw its flagship fund rise 38 percent in 2010. But Jeffrey Phlegar, who runs one of the PPIP funds, gave a caveat. “Returns are not a function of better fundamental data,” he told Bloomberg . Instead, they’re a function of the behavior of investors in the bond market. And that 36 percent figure, Bloomberg notes, is only on $18.6 billion, less than a fourth of Bridgewater’s capital.

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Jamie Dimon, JPMorgan CEO: I Was Never ‘In Love’ With Obama

October 19, 2010

Jamie Dimon, CEO of JPMorgan Chase, was never “in love” with President Obama, he told Fortune ‘s Duff McDonald in an interview released Tuesday. The banker touched on, among other topics, financial regulation, Elizabeth Warren and the ways the real estate slump has personally affected him. Responding to the perception that Dimon and the president were one-time pals who’ve since had a falling out (“Did Obama just dump his best friend on Wall Street?” The New Republic asked this summer), the banker was evasive. “We were neither in love nor have we fallen out. I still talk to the folks in the administration,” he said. “He may have close relations, but I am not one of them.” At least one blogger is skeptical. “That’s right, rewrite the past because the truth hurts too much,” Dealbreaker ‘s Bess Levin opines. Dimon spent much of the interview quelling or clarifying rumors. When McDonald asked about Elizabeth Warren, the Harvard professor who has been charged with setting up the Consumer Financial Protection Bureau , Dimon was diplomatic. Although Warren has called the banker’s theories “wrong” on the pages of the Wall Street Journal , Dimon said he wished her all the best. “The things she has said about me? I don’t take them personally,” he said. As the financial world collapsed around him, Dimon and his company have done relatively well. JPMorgan was among the first of the large banks to repay their portion of the TARP bailout. Even as scandal now mounts over alleged foreclosure fraud, the bank said its profit rose 23 percent in the third quarter of this year. Dimon’s had one bit of rough luck of late, though. His Chicago mansion is set to sell for about half of its original asking price. “If that makes people happy, that’s sad,” Dimon said. “But I am sympathetic if anyone who lost money in real estate feels a little better that I did as well. Misery wants company.” Read the full interview.

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Video: Rotenberg Says FTC Should Examine Privacy on Facebook: Video

October 18, 2010

Oct. 18 (Bloomberg) — Marc Rotenberg, executive director of the Electronic Privacy Information Center, talks about issues related to privacy settings on Facebook Inc.’s website. Facebook’s top 10 applications have been have been transmitting data that can be utilized to identify users to advertising and Internet-tracking firms, the Wall Street Journal reported, citing its own investigation. Rotenberg speaks with Margaret Brennan on Bloomberg Television’s “InBusiness.” (Source: Bloomberg)

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Facebook Apps Transmitting, Selling Personally Identifying Information

October 18, 2010

Many of the most popular applications, or “apps,” on the social-networking site Facebook Inc. have been transmitting identifying information–in effect, providing access to people’s names and, in some cases, their friends’ names–to dozens of advertising and Internet tracking companies, a Wall Street Journal investigation has found. The issue affects tens of millions of Facebook app users, including people who set their profiles to Facebook’s strictest privacy settings. The practice breaks Facebook’s rules, and renews questions about its ability to keep identifiable information about its users’ activities secure. The problem has ties to the growing field of companies that build detailed databases on people in order to track them online–a practice the Journal has been examining in its What They Know series. It’s unclear how long the breach was in place. On Sunday, a Facebook spokesman said it is taking steps to “dramatically limit” the exposure of users’ personal information.

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US Trade Gap Swells On Record Deficit With China

October 17, 2010

The US trade gap was pushed even wider in August by a rapid increase in imports spurred by a record trade deficit with the countrys leading trading partner China according to The Wall Street Journal

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HuffPost TV: Arianna Slams Wall Street On CNN’s ‘Parker Spitzer’: They’re Not Making Things, They’re Making Things Up (VIDEO)

October 16, 2010

Arianna appeared on CNN’s “Parker Spitzer” tonight together with Stephen Moore, senior economics writer for The Wall Street Journal to debate the government’s role in fixing the economy. “We’ve got to grow the economy,” Arianna said. “And we’re not going grow the economy with Republican policies which basically are all about cutting taxes, including for those making over 250,,000 a year. “The job creators,” Moore interjected. “Those include a lot of people on Wall Street who have moved from making things to making things up,” Arianna responded. “They’re not exactly job creators. They’re not wealth creators. They’re just casino gamblers. That’s one of the problems we are facing, and you have to come to terms with that and stop defending them.” “On top of it,” Arianna said to Moore, “you guys have got to get serious about our military spending. If you are serious about the deficit, you cannot ignore the fact that we are spending $2.8 billion a week on Afghanistan, on a war that is unnecessary, propping up a corrupt regime. What’s your excuse for that?” WATCH:

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Bruce Bartlett: Neocons Talk Deficit but Won’t Budge on Defense Cuts

October 9, 2010

Establishment conservatives love to talk about the need to cut government spending, but they always seem to find an excuse whenever there is a serious effort to actually do it. Last year, for example, they opposed cutting Medicare as part of health care reform. Now they are banding together to stop cuts in defense spending, which is a fifth of the federal budget, even as they also insist that the deficit is our most critical problem. This hypocrisy was on full display on Oct. 4, as American Enterprise Institute president Arthur Brooks, Heritage Foundation president Ed Feulner, and Weekly Standard editor Bill Kristol penned a joint op-ed for the right-wing Wall Street Journal editorial page on why the defense budget should be totally off limits to budget cutters.

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Bull Vs. Bear: David Rosenberg, Jim Paulsen Square Off (VIDEO)

October 6, 2010

Bloomberg hosted the wonkish equivalent of the Ultimate Fighting Championship on Wednesday, which pitted a famously pessimistic economist against a famously optimistic one. Anchor Margaret Brennan played referee. (Scroll down for video.) Gluskin Sheff chief economist David Rosenberg had been speaking on Bloomberg TV when Brennan introduced Wells Capital chief investment strategist Jim Paulsen, whom she called a “bright, shining optimist.” With the bull released into the bear’s den, Brennan stepped aside and let them do battle. Paulsen began with a qualification (“It’s not like there aren’t issues and problems”) but soon launched into his main argument: The recovery only seems weak, and, compared to the previous two recoveries, in the early 1990s and early 2000s, it’s right on track. He took a subtle dig at the pessimistic “new normal” idea championed by Bill Gross and Mohamed El-Erian of Pimco, and said that in terms of real GDP, this recovery has been the strongest in 25 years. “I just think the attitudes are so much worse than the reality on the ground,” he said. “And that differential leaves a lot of room for stock prices to go higher.” Rosenberg was quick to respond, saying Paulsen was ignoring just how damaging this recent recession has been. The previous two recessions, which were followed by recoveries that Rosenberg likened to “a blink of an eye,” do not compare to this one. By focusing on GDP, Rosenberg said, Paulsen wasn’t taking a broad enough view. “Practically every single variable outside of exports is not anywhere even close to where it was in December 2007,” Rosenberg said. Paulsen again pointed to history, saying the GDP growth of the past 25 years has been slower than most people realize, so that the current seemingly weak growth isn’t actually that weak — relatively speaking. Rosenberg, for his part, said the government has “injected” “steroids” into the economy with the “most aggressive monetary, fiscal and bailout policy of all time,” and yet consumer confidence is anemic and unemployment is near 10 percent. Any positive development, Rosenberg said, has to be weighed against the fact that the economy currently does not “stand on its own two feet.” Brennan had to step in, and the session ended without compromise. When September’s unemployment data is released early Friday morning , one economist will be vindicated. This wasn’t the first time Rosenberg and Paulsen had faced off. In July, the Wall Street Journal published an interview with both of them, in which they expressed largely the same positions they did Wednesday. Paulsen said a major drain on the economy was the widespread bad attitude, calling the current age the “era of ‘irrational pessimism.’” In one of his daily letters last year (hat tip to Business Insider ), Rosenberg railed against Paulsen, whom Barron ‘s had recently called “a favorite market strategist,” claiming Paulsen had simply gotten lucky. WATCH the video below:

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The New ‘Hot’ Wall Street Trend: ‘Boring’ Banks

October 5, 2010

The “hot” trend on Wall Street, the Wall Street Journal reports, is to be boring. In response to the soon-to-be-implemented international banking regulations ( Basel III ) and the recent reduction in stock trading volume , the WSJ reports that banks are gradually returning to their traditional business practices, which include trading, managing and advising on behalf of their clients. The Basel requirements will force banks to hold more capital to guard against losses. With bigger piles of unused money, banks likely won’t be able to generate the kinds of profits they were seeing in the years before the crash. (In theory, this also means they’ll be less risky.) The WSJ says Thomson Reuters predicts Goldman Sachs and Morgan Stanley will see a 23 percent drop in profit from 2006 peaks. The July financial reform legislation has also inspired some banks to trim or cut their proprietary trading desks, which make trades for the banks’ own account. The WSJ reported last month that JPMorgan was phasing out its proprietary trading operations entirely. Soon after, Bloomberg Businessweek reported Goldman would likely follow suit. At the end of the month, Businessweek reported that Bank of America would fire almost a third of its prop traders. In his Bloomberg column last week, Michael Lewis , author of The Big Short , wondered why banks were taking such drastic steps to cut prop trading, given that lobbyists were able to massage the reform into allowing banks to use up to 3 percent of their money for their own bets. An explanation, Lewis says, could be that banks have realized proprietary trading isn’t as profitable as it once was. With increased government (and media) scrutiny, taking big risks, at least visibly, seems to have fallen out of style. As Paul Krugman wrote last year, banking used to be “boring.” But starting in the 1980s, regulations were lifted, including the 1999 repeal of the Depression-era Glass-Steagall Act . Government officials, including President Obama, have said deregulation helped cause the financial crisis.

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Video: Alvarez Says Skype-Facebook Accord Would Be `Brilliant’: Video

October 4, 2010

Oct. 4 (Bloomberg) — Vanessa Alvarez , an analyst at Frost & Sullivan, talks about the prospects for a possible accord between Facebook Inc. and Skype SA. Facebook, the social-networking site, and Skype, which provides Internet telephone services, are in talks over a deal to allow Facebook users easy access to Skype’s text, voice and video links, the Wall Street Journal reported, citing a person familiar with the plan. (Source: Bloomberg)

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US Manufacturing Growth Slower After Consumer Spending Gains

October 4, 2010

US consumers increased spending in August as incomes were seen somewhat higher but the latest economic data was mixed as manufacturing growth was seen weakening during September according to The Wall Street Journal

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Unemployment Could Rise To 10.1 Percent In 2011, Economists Say

September 27, 2010

Even as the economy continues to grow, unemployment could rise over the next year to as high as 10.1 percent, according to a new paper by the San Francisco Fed (hat tip to the Wall Street Journal ). The paper’s authors, economists David Lang and Kevin Lansing, say that if the economic growth in the first half of 2011 is “at or below” the potential for growth, then unemployment will rise. And, they say, it’s looking like growth won’t meet its potential, which is estimated to be at least 2.1 percent annually for the next five years. Citing a rule called “Okun’s law,” the economists say that changes in the unemployment level generally correspond to changes in GDP, or economic output. If GDP growth remains lackluster, then unemployment could increase to 10.1 percent, from its current 9.6 percent. The National Bureau of Economic Research said last week that the recession ended in June 2009 , a technical demarcation that means the economy stopped shrinking and started growing. Indeed, according to data from the St. Louis Fed , the GDP bottomed out during that period and grew steadily over the next four quarters. Still, growth was modest. The seasonally adjusted annual growth rate for the GDP, according to St. Louis Fed data , was 0.9 percent in the second quarter of this year. Economists, such as Minneapolis Fed president Narayana Kocherlakota , have argued that the unemployment problem is “structural,” or that there is a “mismatch”: “Firms have jobs, but can’t find appropriate workers. The workers want to work, but can’t find appropriate jobs,” Kocherlakota said last month. “There are many possible sources of mismatch — geography, skills, demography — and they are probably all at work.” Others, though, such as Paul Krugman , have dismissed that theory as “foolish,” saying the problem is simply that companies don’t want to hire — that demand for labor is low. “Job openings have plunged in every major sector, while the number of workers forced into part-time employment in almost all industries has soared. Unemployment has surged in every major occupational category,” Krugman writes. The economic picture for most of the country remains bleak, as the net worth of American households and non-profits dropped in the second quarter of this year to a level not seen since the third quarter of 2009.

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BofJ Officials Signal Possible Policy Easing Ahead

September 26, 2010

A member of the Bank of Japans policy committee suggested on Wednesday that further easing of monetary policy could be in the works if the economic recovery fails to gain momentum according to The Wall Street Journal

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Vikram Pandit, Citigroup CEO: No Longer Working For $1 Per Year

September 24, 2010

Vikram Pandit may soon be getting an extremely big raise. Early in 2009, the CEO of Citigroup vowed to work for a salary and bonus of just $1 per year until the bank returned to profitability. Now that the bank has posted two straight profitable quarters Citi’s board will review Pandit’s compensation package , the Wall Street Journal reports. How much will Pandit get? JPMorgan chief — and 2009 “Banker of the Year” — Jamie Dimon pulled in $17 million last year, including a $1 million salary. Bank of America CEO Brian Moynihan will pull in a salary of $950,000 in 2010 (exclusive of bonus). But because the U.S. government still owns roughly 17 percent of Citigroup, there are limits on how much it can pay its top executives. The Emergency Economic Stabilization Act of 2008, the WSJ notes , “restricts the bonuses for a bank’s 25 highest paid executives to no more than one-third of the employee’s overall compensation for a given year.” Here’s the WSJ : “The Board is very pleased with the progress that the management team is making in restoring Citi to profitability,” Mr. Parsons said in a statement on Friday. Mr. Pandit’s “performance would merit” higher compensation, he said. The CEO’s “decision is admirable but, beginning in 2011, the Board intends to compensate Vikram commensurate with the job of CEO of Citi.” CItigroup has also issued huge boosts in the salaries of its top executives, according to regulatory filings released today. The AP has more details: John Havens, head of the bank’s institutional clients group, will get a salary of cash and stock $9.5 million, with likely bonus of $4.75 million. Manuel Medina-Mora, head of consumer banking for the Americas gets $8 million, and a bonus of $4 million. Chief Financial Officer John Gerspach will receive $4.17 million, and a bonus of $2 million. The government still owns a 17 percent stake in Citigroup.”

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