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Investors Turn to Swiss Franc as Middle East Tensions Escalate

February 18, 2011

Investors Turn to Swiss Franc as Middle East Tensions Escalate

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Yvette Kantrow: Access Davos

February 13, 2011

Filled with self-styled straight shooters who claim to be beholden to no one, the blogosphere has long positioned itself as an antidote to the so-called access journalism racking the mainstream media, most infamously during the run-up to the Iraq War and, more recently, in the run-up to the financial crisis. Because they rely heavily on high-level, establishment sources for their stories, the argument goes, mainstream journos — think Judith Miller — must censor their own reporting or risk losing access to the machers in the corridors of power. The blogosphere, with its emphasis on commentary, analysis and citizen journalism, claims to be unfettered by such restraints. After all, people don’t visit blogs to read worked-over quotes by a CEO or a government official. Against that backdrop, it’s pretty weird to witness the growing army of bloggers who now flock to the World Economic Forum in Davos, the ne plus ultra of access journalism. Bloggy new-media types like Arianna Huffington and Jeff Jarvis have been schlepping to Switzerland for years, and they have more recently been joined by financial bloggers, including Business Insider’s Henry Blodget and Reuters’ Felix Salmon. Then there are the big media outlets including The New York Times , Time Inc. and CNBC, which conduct interviews with bigwig attendees from the mountaintop. Indeed, Davos seems tailor-made for access-obsessed CNBC, which specializes in providing a friendly forum for CEOs and other muckety-mucks to talk directly to viewers. But what of Salmon, Blodget and their ilk? What do they get from a conference where most of the “real” action takes place behind closed doors while reporters lurk in hallways or at parties hoping to nab a few moments with a Big Name attendee? Faced with this reality, bloggers employed a different strategy in Switzerland this year: They went to Davos not to cover it, but to mock it. Blodget, who vowed to give his readers ” The Truth About Davos ,” judged it to be “just like high school.” Salmon declared: “Just about everything in Davos is ridiculous in its own way. It’s like Disneyland.” And Harvard Business Review’s Justin Fox, in his ” Obligatory Pre-Davos Post! ,” admitted that when he was blogging for Time.com “traffic fell off markedly as soon as I started posting from the Swiss Alps… There’s seldom much in the way of news generated at Davos, and most people aren’t itching to hear a soundbite from CEO or government official rushing between meetings.” That message wasn’t lost on Timesman Andrew Ross Sorkin, who in a conference missive outed the high cost of being a Davos Man (as much as $622,000, depending on the size of your entourage). Sorkin’s piece was hailed as a standout by the New Yorker’s John Cassidy, who was not at Davos, while Blodget told readers that everyone at the event was talking about it. That’s nice, but the story seemed a tad hypocritical, given the Times ‘ symbiotic relationship with Davos. Arthur Sulzberger Jr. was at the confab, as were Thomas Friedman and Nicholas Kristof — Davos Men of the highest order — plus Sorkin and other Times scribes who were covering it. How much the cash-strapped New York Times Co. spends to have them there Sorkin’s piece did not say. Perhaps that’s because Sorkin is on his way to becoming a Davos Man himself — Blodget blogged that Sorkin is “a god” around Davos “and quite possibly the first one invited to every party.” And why would a god want to anger his people? But Sorkin’s piece was indicative of the type of snark that the media, particularly the new media, brought with it to Davos this year: sharp-tongued enough to protect itself against charges of being too cozy with the global elite, but soft enough to ensure that its authors will get invited back. Despite all the negative coverage, few journos, including bloggers, seem able to resist the invitation and the proximity to power. Indeed, after spending a few days at the conference, Blodget gave its corporate attendees a big wet kiss, concluding that for executives, the business meetings they conduct at Davos “can end up being vastly more valuable than the price of admission.” OK, fine, but if Davos is nothing more than a big networking event, doesn’t that make all the Big Thoughts a farce? In the blogosphere, only Salmon seems to have stuck to his guns and left the confab as disgusted by it as when he arrived. Moving from snark to satire, he lauded Davos for “deftly leveraging the talk around its chosen theme — ‘shared norms for the new reality’ — into an effective and timely intervention in Egypt.” Well done. But whether that conclusion required a trip to Switzerland is another question.

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New Zealand Dollar Rally At Risk, Swiss Franc Weakness To Be Short-Lived

February 8, 2011

New Zealand Dollar Rally At Risk, Swiss Franc Weakness To Be Short-Lived

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British Pound Eyes November High, Swiss Franc To Benefit From Flight To Safety

February 2, 2011

British Pound Eyes November High, Swiss Franc To Benefit From Flight To Safety

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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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Marcus Samuelsson: Marcus Samuelsson: A Dispatch From Davos

January 29, 2011

I’m so excited to be here in Davos. I was here many years ago as a student cook. It was the same principle of hard work and trying to not get yelled at in Swiss-German. I’m excited about the discussions here. I heard Medvedev, Clinton, and ran into Bill Gates, and Michael Dell came to one of my sessions. Best food? It’s a tie between the Canadian beaver tails with chocolate and the Indian Pavilion. I love the swiss cheese but can’t make a meal out of it. The hotel where I was part of a dinner had a small explosion the next morning — nobody got hurt but kind of a scary moment. The weather here has been fantastic — I find myself looking at the mountaintop often, but no skiing for me this time. I have now shared my views on food safety, cooking for the State Dinner, cooking from a diversity point of view, food in Harlem, and talked about foodrepublic.com — our site that we will launch in the next month. It’s been such a pleasure being here and I hope I get to come back next year. Gruezi as they say here in Davos, Graubünden. See you in Harlem!

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Lobster In The Mountains, Riots On The Nile

January 29, 2011

(Reuters) – The global elite, dining on Norwegian lobster and reindeer at the end of the World Economic Forum on Saturday, felt pretty chipper despite growing concerns about the inequality of the economic recovery. While they believe the global financial and euro zone debt crises are abating, the real world intruded with a different and much more acute crisis in Egypt that made their debates about inequality and food security less theoretical than anticipated. This year’s four-day talkfest in the Swiss mountain resort of Davos was a fragmented affair. The issue expected to dominate discussion, the euro zone debt crisis, turned out to be a relatively damp squib, with a growing consensus among bankers and policymakers that a resolution of the issue may be near. If there was one common strand in Davos this year it was growing divisions — whether between fast-growing emerging markets and sluggish developed world economies, or between rich and poor within countries. As residents in Cairo and Alexandria counted the cost of a further night of clashes between protesters and police on Saturday, politicians and business leaders urged Egyptian President Hosni Mubarak to start a dialogue with his people. The corporate world is nervous. Egypt has, after all, been one of the darlings of African and Middle Eastern investors, and the world is stepping into unknown territory with the rapid spread of unrest from country to country, propelled by the Internet and mobile technology. LESSON OF EGYPT “The lesson from Egypt is clear: people will no longer accept oppression, particularly when oppression is married with rising food prices, a lack of employment and the destruction of hope for a young generation,” Sharan Burrow, general secretary of the International Trade Union Confederation, told Reuters. Yet the mood among 2,500 business leaders and policy-makers in Davos was still predominantly positive, albeit tempered with caution after the worst economic slump in 75 years. “Compared to last year and the year before, there is certainly much greater confidence about stability, more optimism about the global economic outlook,” said the International Monetary Fund’s first deputy managing director John Lipsky. For many CEOs and bankers, there is simply the reassurance of having put yet another year’s distance between themselves and the collapse of Lehman Brothers in 2008, which brought the world economy to the brink. As a result, the panicky mood evident at the last two annual meetings in Davos has evaporated and business bosses are starting to look again at spending the trillions of dollars of cash sitting on their balance sheets. “It is quite obvious that the mood has changed. Everybody is much calmer,” said Swedish Finance Minister Anders Borg. “You see it in the meetings, without people speaking on their telephones or leaving the room or having to stand in the corner, having very difficult conversations.” As ever, this year’s Davos was an eclectic mix, covering everything from macroeconomics to geopolitics to management theory to science. But there was no single, dominant theme — and Adair Turner, chairman of Britain’s Financial Services Authority, reckons that, perhaps, is the most encouraging sign of all. “It is a thoroughly good thing because when the world gets gripped by one big theme it usually either means there’s a big disaster or else people are getting in the grip of some new irrational exuberance,” he said. (Additional reporting by Emma Thomasson and Dmitry Zhdannikov; editing by Michael Stott and Mark Heinrich) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Eboo Patel: Davos: The Global Village and the Local Community

January 26, 2011

The World Economic Forum — like the Clinton Global Initiative, the TED Conference, the Aspen Ideas Festival and other such global confabs — is a carnival of ideas, opportunities, dreams and confessions. It’s less manic than CGI, not quite as laid back as TED, but definitely part of the same family. And it has the added distinction of being, as far as I can tell at least, the Mothership — the event that launched the pattern in which the global meritocratic elite would gather together face-to-face to discuss a wide-ranging, even eclectic agenda. Clinton very definitely shaped his conference to be Davos-like (with the added layer of the attendees making “commitments” to do good works in the world), and while TED began life with a smaller and quirkier dream, it has morphed under Chris Anderson’s leadership to rival (in talent and ideas at least) any other gathering on the planet. Other major conferences tend to gather a narrower range of people to talk about a single subject (the World Health Organization) or have become so unwieldy as to be impossible to navigate (most UN gatherings). The World Economic Forum and its close cousins are different, and professor Klaus Schwab, the founder, knows it. In his introductory session for Davos newbies, he explained the big idea and how it came about. As a Management Professor, he advanced something called “stakeholder theory” – the idea that companies are not just responsible to their shareholders but to a broader range of stakeholders. If such stakeholders gathered to discuss issues, shape a common agenda and find resonances, not only would the company be stronger, but society would be better. Schwab wrote a book about the idea in 1970, and then decided that he wanted to build a platform to try putting it into practice. The first World Economic Forum took place in 1971. The result, 40 years later – a conference that CEOs, presidents and prime ministers feel like they have to come to, and that some happily pay literally hundreds of thousands of dollars to attend – is nothing short of astonishing. The people who come to the World Economic Forum are segmented into different communities – government leaders, media leaders, strategic partners (which are basically Fortune 500 companies, and are the ones who pay the big bucks to attend). Over time, Schwab has added other key communities — technology pioneers, young global leaders, social entrepreneurs, global growth companies (which are going to be the future Fortune 500 and are largely in China). The list of communities shows that he’s a man who is on the cutting edge without being faddish. All in all, it’s a reasonable representation of many of the groups who make things happen at the global level in our world. The more I thought about it, the more I realize that the core idea — and this is not a criticism, simply an observation — is quite old and simple: a healthy social ecology gathers its various segments every so often to bat around ideas, address recurring problems and shape a to-do list for the year or ten ahead. It’s old-school community development really, something that good alderman do in their neighborhoods and good mayors do in their cities: gather the shopkeepers and real estate developers and homeowners and cops and kids and teachers and say, “So what’s this neighborhood going to be about next year?” The fact that Professor Schwab came out of the management world simply means that his scope was global and his network was CEOs. Comparing Davos to a local community development meeting will inevitably bring up local/global issues. The image is so crystal clear it begs to be said out loud. Isn’t it quaint that a slice of the world’s ecology gathers in a Swiss hamlet to engage face-to-face. It makes that global village metaphor feel so, well, real. I wish. In a smart Atlantic piece, Chrystia Freeland explains the rub: “Today’s global super-rich are increasingly a nation unto themselves.” They move their companies where their customers are (increasingly Asia), they can’t find their way around their hometowns because they are so infrequently at home. If lifting people into the middle class in India with jobs and goods means someone has to fall out of the middle class in Indiana, well, that’s globalization. One of the reasons for the increase in the number of World Economic Forum-type events is because the group that gathers here likes to be together. The down-low on Davos is that the really exciting events – the soirees, the nightcaps, the endless-discussion dinners — happen after 10 p.m., like in a college dorm. Leading up to the World Economic Forum, I got dozens of e-mails advertising various late-night social events, and almost nothing touting the formal agenda during the day. These people like to socialize with each other. This is their community. Look, nobody expects the CEO of Citi to walk to work, become president of the PTA and support the neighborhood Little League team. But there was a time that great companies were proud of the cities they were based in. That meant something for jobs, neighborhoods, art museums, local charities. Are those days numbered? Interesting that a stakeholder-driven, community-development-like approach to shaping an agenda for a globalized world could hold such dangerous consequences for local communities. (This piece is re-posted from the Washington Post .)

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British Pound Consolidates Ahead of 4Q GDP, Swiss Franc Rally To Gather Pace

January 24, 2011

British Pound Consolidates Ahead of 4Q GDP, Swiss Franc Rally To Gather Pace

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Video: Cuggino Likes Gold, Swiss Franc, FedEx, State Street

January 21, 2011

Jan. 21 (Bloomberg) — Michael Cuggino, president and portfolio manager at Permanent Portfolio Funds in San Francisco, talks about his investment strategy and some of the holdings of the Permanent Portfolio fund, including gold, the Swiss franc, FedEx Corp. and State Street Corp. Cuggino talks with Lisa Murphy on Bloomberg Television’s “Fast Forward.” (Source: Bloomberg)

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‘Global Burnout Syndrome’ May Hurt Recovery, Official Warns

January 20, 2011

GENEVA (By Jonathan Lynn) – The world is suffering from “global burnout syndrome” and is too weak to tackle the web of interrelated threats facing businesses and governments, the head of the World Economic Forum said on Wednesday. Klaus Schwab, who chairs the WEF that organizes the annual meeting of executives and politicians at Davos, said the world had not yet fully digested the crisis that emerged from the financial crunch, and was not yet in post-crisis phase. “We have to be careful that this crisis does not become a social crisis — which it has in some countries,” the German business studies professor told a media conference on the gathering at the Swiss resort from January 26 to January 30. “We have in the world a situation where the political system and the institutions are just overwhelmed by the complexity which they have to face,” he said. The Davos meeting, protected by beefed-up Swiss security which includes the closing of local airspace, is the world’s top networking event, allowing bankers and CEOs to rub shoulders with presidents and prime ministers, and to cut deals. But the uneven economic recovery makes it a particularly challenging time to be meeting, with emerging economies rebounding but rich countries still struggling. In the rich world social tension is rising as governments bring in austerity measures to pay off debt or postpone hard decisions on borrowing, while companies return to profitability and banks resume controversial bonus payments. Global forecasting and analysis group IHS says a restructuring of eurozone sovereign debt is inevitable and while it is unlikely that fringe countries will drop out of the euro, financial markets could force the next phase of crisis management as early as this year. “This will very likely include a debt restructuring plan, with ‘haircuts’ for investors and further aid for the European banks holding much of this debt,” IHS Chief Economist Nariman Behravesh said in a briefing for the Davos forum. COMBINATION OF RISK, FAILURE OF GOVERNANCE In a report last week, the WEF identified three interrelated nexuses of risks — economic, such as fiscal, trade and currency problems; raw materials, particularly the impact of rising energy costs and dwindling water supplies on food prices; and illegal trade, corruption and failed states. “It’s not just risks in isolation, it’s the combination of risks that can be so dangerous,” said WEF Chief Business Officer Robert Greenhill. Rising economic disparity and social tension nationally and the increasing inability of the global community to tackle problems proactively exacerbates these threats. “It’s that failure of global governance… which is perhaps the greatest risk of all,” Greenhill said. Glitz and hype surround the meeting in Davos, an upmarket ski resort made famous by German novelist Thomas Mann in his novel “The Magic Mountain” written at a time when it was better known for its sanitoriums for wealthy tuberculosis sufferers. But the organizers do not claim it can actually solve the problems it discusses — although anti-capitalist campaigners denounce it as a plutocratic cabal plotting global domination. “The World Economic Forum is not a decision-making body. It fosters dialogue, it fosters understanding,” Schwab said. But Greenhill said it will try to help with the complex of threats by launching a “global risk response network” bringing together company risk officers and government policy-makers. As usual the WEF will wheel out several global leaders among its 2,500 participants. The chair of the G20, French President Nicolas Sarkozy, addresses the forum on Thursday, January 27. Among 25 government heads expected are German Chancellor Angela Merkel and Russian President Dmitry Medvedev, who opens the forum on Wednesday, January 26. Medvedev, a keen user of the micro-blogging site Twitter, will take questions from the public via “crowdsourcing” on www.wef.ch/askdmitrimedvedev. The cast list also features eight central bankers, including European Central Bank President Jean-Claude Trichet, who will also take part in an open session accessible to the public, and 14 labor leaders and more than 1,400 CEOs and other business chiefs — 400 of whom will be using Twitter as “CEO reporters.” Davos’s reputation in the past was made by several high-profile diplomatic meetings on the sidelines. This year, seven key trade ministers hosted by the European Union will meet on Friday, January 28, as part of renewed efforts to conclude the nine-year-old Doha round to free up world trade — itself one of the biggest failures of global governance. For full coverage, blogs and TV from Davos go to www.reuters.com/davos (Editing by Louise Ireland) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Swiss Whistleblower To Disclose ‘Massive Potential Tax Evasion’ To Wikileaks

January 16, 2011

The offshore bank account details of 2,000 “high net worth individuals” and corporations — detailing massive potential tax evasion — will be handed over to the WikiLeaks organisation in London tomorrow by the most important and boldest whistleblower in Swiss banking history, Rudolf Elmer, two days before he goes on trial in his native Switzerland.

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Canadian Dollar Regains Footing, Swiss Franc Weakness To Be Short-Lived

January 5, 2011

Canadian Dollar Regains Footing, Swiss Franc Weakness To Be Short-Lived

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Canadian Dollar Regains Footing, Swiss Franc Weakness To Be Short-Lived

January 5, 2011

Canadian Dollar Regains Footing, Swiss Franc Weakness To Be Short-Lived

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U.S. Dollar Weakness To Be Short-Lived, Swiss Franc and Japanese Yen At Risk For Currency Intervention

December 31, 2010

U.S. Dollar Weakness To Be Short-Lived, Swiss Franc and Japanese Yen At Risk For Currency Intervention

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Video: Bombs at Swiss, Chilean Embassies in Rome Injure Two

December 23, 2010

Dec. 23 (Bloomberg) — Bloomberg’s Flavia Rotondi discusses today’s bomb explosions at the Swiss and Chilean embassies in Rome. The first bomb, hidden in a postal package, exploded about noon at the Swiss embassy, according to a statement from the mission. The victim suffered hand injuries and was taken to a Rome hospital. An explosion also occurred later at the Chilean embassy and injured one person, police said. Rotondi speaks from Rome with Margaret Brennan on Bloomberg Television’s “InBusiness.” (Source: Bloomberg)

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Video: Bombs Explode at Swiss, Chilean Embassies in Rome

December 23, 2010

Dec. 23 (Bloomberg) — Bloomberg’s Dan Liefgreen discusses bomb explosions at the Swiss and Chilean embassies in Rome today. A package bomb exploded and injured an employee at the Swiss embassy in Rome at noon, according to a statement from the embassy. An explosion also occurred later at the Chilean embassy, news agency Ansa reported. Liefgreen speaks with Betty Liu on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)

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Euro down below 1.25 Swiss Franc

December 22, 2010

Euro down below 1.25 Swiss Franc

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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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Robert Lenzner: UBS Feeder Funds Knew Madoffr Fishy in 2006

November 28, 2010

In 2006 the UBS feeder funds to Madoff hired consultant Chris Cutler to do probably was the first due diligence on Madoff’s operation since first investing with him in 1985. It took Cutler only 4 days to discover the smoking gun; the options volume that Madoff reported to the feeder funds exceeded by far the total volume of puts and calls actually traded in those securities on the Chicago Board of Options Exchange. But, the principals of the feeder funds, Luxalpha and Acess-responsible for pouring $2 billion into Madoff’s scam, waved away the finding and took no steps to confirm that the source of their $80 million in fees was a total scam. Incredible! What’s more; Lualpha and Groupement Financier, another feeder unit, withdrew $791 million in the 90 days before BLIM filed for bankruptcy. So states the complaint filed last week in US Bankruptcy Court by the Securities Investor Protection Corporation against Bernard L. Madoff Investment Securities LLC. It concludes that “The Acess Defendants and thereby Luxalpha’s Board of Directors- which consisted of the principals of the Acess entities and of UBS(Luxembourg) SA executives knew that the volume of tradijng being reported by Madoff was impossible, but decided not to make that information public.” The suit seeks $2 billion from the deep pockets Swiss bank UBS on grounds it it sponsored the feeder funds, purportede to act as custodian of their assets and served as administrator for both of the large feeder funds. UBS, according to the complaiint, “calculated the “net asset value” of these funds based solely on the numbers and information provided by BLMIS, with no independent verification.” Curious, too, is the fact that UBS never put a cent of its own money into Madoff’s operation or recommended that any of its own wealthy European clients do so.

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Madoff Victims’ Trustee Files Dozens Of Lawsuits

November 28, 2010

NEW YORK — Relatives of both Bernard Madoff and his wife are among those being targeted in 40 lawsuits announced Friday by the trustee endeavoring to recover money for victims fleeced by the disgraced financier. Twenty-two of the lawsuits were filed against relatives of Madoff and his wife, trustee Irving H. Picard said in a news release. Eighteen lawsuits were filed against former employees of Bernard L. Madoff Investment Securities LLC, he said. An attorney for Ruth Madoff didn’t immediately respond to an e-mailed request for comment Friday night. Picard said his firm is seeking about $69 million in funds deposited by the company’s customers and stolen in the 72-year-old’s vast Ponzi scheme. Picard said the lawsuits were filed as part of an effort to recover funds from relatives and employees “who were closest to the center of the fraud and who were, in many cases, among those who benefited most from the Ponzi scheme.” Among the complaints, Madoff’s sister, Sondra M. Weiner, is accused of having “profited for decades” from the scheme, Picard said. A woman who answered the phone at Boynton Beach, Fla., listing for Weiner hung up without commenting late Friday. Picard said the lawsuits were filed after discussions with the defendants and their attorneys collapsed. Other complaints were previously filed against relatives of Madoff and senior BLMIS employees. The fresh batch of lawsuits comes three days after Picard announced a lawsuit against Swiss bank UBS AG, alleging it funneled clients to Madoff and then “looked the other way.” The bank called the allegation “completely unfounded.” Madoff is serving a 150-year sentence in federal prison in North Carolina after confessing to the nearly two-decade scheme that ensnared thousands of victims, including charities, celebrities and institutional investors. An estimated $20 billion was lost, making it the biggest investment fraud in U.S. history.

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David Isenberg: Private Military Companies as Quasi-States

November 18, 2010

Our latest entry in law journal articles on private military contractors is “Why Private Mercenary Companies Should Be Legitimized and Allowed to Enter the World Stage.” This was published in the spring 2009 issue of the New England Law Review . The author is Edieth Y. Wu , who is Professor of Law at the Thurgood Marshall School of Law at Texas Southern University. In a mere 16018 words, which is positively svelte by law journal standards, she makes the argument “Like the multinational, PMCs have the potential to impact domestic and international politics and “spread wealth, work, technologies that raise living standards and better” the lives of millions, which gives them an opportunity to participate in the global economy.” That’s a fairly bold assertion. Even PMC trade associations don’t normally make such a claim, as it puts PMCs right up there with Apple, Google, and Microsoft. And not even Eric Prince, back when Blackwater was at the top of the PMC heap, would go that far. Still, once you get past the fact that Professor You is calling PMC a “mercenary” company – you would think a law professor of all people, trained to used word with exactitude, would know better – she has some intriguing things to say regarding PMC regulation. In particular, she calls for the United Nations Security Council, to support a resolution to legitimize properly registered PMCs. She writes, “The U.N. is in the best position and can “bring[] essential assets to bear on any effort to deal with pressing problems” of PMCs. The U.N. has legitimacy because it represents the world and can call on nations to assist in situations that affect humanity as a whole. The U.N. should pass an “Emergency Private Mercenary Company Resolution” (Emergency PMC Resolution) similar to the resolutions that address measures to prevent international terrorism.” She notes there is precedent. After the September 11, 2001 attack on the United States, the U.N.’s response was decisively unprecedented and swift. Resolution 1368 was unanimously adopted by the Security Council within twenty-four hours of the attack. The Resolution called for all States to work to bring the perpetrators to justice, and it called for the “international community to redouble their efforts to prevent and suppress terrorist acts.” The same swiftness and assurance of support should accompany the Emergency PMC Resolution. The Emergency PMC Resolution would legitimize reputable companies that are willing to comply with the Emergency PMC Resolution and the augmented three-tiered process. The Emergency PMC Resolution should be drafted under Chapter VII of the Charter because it addresses threats, breaches, and aggression against the peace of the international community. The Resolution would require all member nations to pass and enforce national legislation making it compulsory for all PMCs to register with the U.N. under their home country’s membership. After the company registers, all of its employees would then be designated as having dual nationality. That is, nationals of their home state and nationals of their company’s state, analogous to the situation in the Merge case. The individual’s dominant nationality would be the nationality of his contracted employer, the PMC, based on the dominant nationality principal. A mercenary would also be subject to the municipal court system of his or her employer’s home country because of the voluntary contacts and participation in said activity. Of course, trying to define “reputable companies” is akin to determining how many angels can fit on the head of a pin. Maybe we can outsource that task to Jesuits, as they have a reputation for arguing over the obscure. But what is really breathtaking is this: First, mercenary companies should not be placed under regulations that control state-run militaries; instead, mercenary companies should be designated through a U.N. Resolution as a “Quasi-State,” a cross between a multinational corporation and a non-governmental organization. Because the designation would flow through the U.N. and its members, the necessity for global harmonization and legitimacy would be unquestioned. The “quasi-state” status would be viewed as global entities who are allowed to operate as a result of a decision by the community of nations. These Quasi-State companies would be given semi-international legal personality so that they would be subject to the International Court of Justice’s jurisdiction as well as the ICC’s, which already has the power to adjudicate individual defendants. Large PMCs are “no longer ordinary players on the international scene, [these] corporations have achieved effective global governance by virtue of their control of economic” and military expertise. Additionally, they have “rights or duties,” in the global community and should be evaluated based on the “extent to which other legal persons resemble states in their ability to bring [and have] international claims” brought against them. Corporations have been branded as “corporate states”; this is not a U.N. or state designation. To date, “states are unwilling, also, to elevate corporations to the status of a nation.” They “may be a party to a contract recognized by international law and possibly become a subject … but this does not invoke legal capacity to act like a nation.” The opportunity to bestow the quasi-state designation allows world leaders to not only place controls over a growing and specialized corporation but also allows them to protect global citizens at the same time. The insecurity concerning PMCs has created an avenue “to re-establish democratic control” n198 and enhance oversight over this growing multinational corporate segment. A clear message would be articulated that corporations “are legally not more significant than a single human being or a non-governmental organization … . False [they] are just nationals like other nationals in international law,” except they would now be subject to stricter scrutiny for acts committed as a result of their business activity, enhanced prosecutorial reach extended to the ICJ, ICC, and national courts. In one way this actually makes sense, sort of. After all Vatican City is a sovereign city-state with an area of approximately 110 acres and a population of just over 800. As the capital of the Catholic Church, it is the headquarters of a global corporation, albeit of the theological variety. By contrast Xe Services, formerly Blackwater, another multinational, has a headquarters of 7,500 acres and its firepower far outstrips that of the Swiss Guard who protects the Vatican. If they go to war someday I know who I’m putting my money on. And if a PMC decided not to play ball with this arrangement? Prof. Yu writes: PMCs that refuse to cooperate would be classified as “Rogue Companies” and could be prosecuted by another state under the principles of preemptory norm (jus cogens) ( http://definitions.uslegal.com/j/jus-cogens), if the home state refused or was unable to prosecute. Similar to the difference between pirates and legitimate privateers, unregistered companies would be treated like pirates – illegals – and would thus suffer strict and swift punishment. Illegal or unregistered companies would be subject to the U.N.’s declaration that they “violate the purposes and principles enshrined in the Charter.” As a result, states would be mandated to “take the necessary steps and to exercise the utmost vigilance against the menace posed by the activities … and to bring to trial those found responsible, or to consider their extradition, if so requested, in accordance with domestic law and applicable bilateral or international treaties.” So, if you are willing to accept the initial premise we could, theoretically, have states issue contracts to PMC to apprehend and bring to justice the perp, oops, I mean the disreputable PMC. It’s rather like the concept of issuing letters of marquee to fight pirates, which, after all, is in Article 1 of the U.S. Constitution. Hmmm, PMC as pirates? I’ll go out on a limb and say PMC probably want to avoid something that could put them in an equivalent status. After all, piracy is considered a breach of jus cogens, an international norm that states must uphold. Pirates are considered by sovereign states to be hostis humani generis (enemies of humanity). Still, I hope PMCs do get quasi-state status, if only so we can see PMC representatives pontificate like all the others at the U.N. General Assembly and the Security Council. Perhaps Eric Prince can come out of retirement and be designated Xe Services’ UN ambassador.

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UBS Employee Reportedly Leaked Info On GM IPO

November 10, 2010

DETROIT — A person briefed on the matter says Swiss bank UBS is no longer working on General Motors’ initial stock offering because a bank employee leaked information about the sale in an e-mail. GM disclosed the e-mail in a filing with the Securities and Exchange Commission on Wednesday. The filing says investors who buy GM stock could seek refunds or damages because of it. UBS and the SEC would not comment. The person would not say what the e-mail said or where it was distributed. The person did not want to be identified because the bank has not been publicly named as the source of the e-mail. GM’s owners, including the U.S. government, plan to sell about $10 billion in common stock on Nov. 18.

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Australian Dollar To Hold Range Ahead of RBA, Swiss Franc Continues To Lose Ground

November 1, 2010

Australian Dollar To Hold Range Ahead of RBA, Swiss Franc Continues To Lose Ground

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Australian Dollar To Hold Range Ahead of RBA, Swiss Franc Continues To Lose Ground

November 1, 2010

Australian Dollar To Hold Range Ahead of RBA, Swiss Franc Continues To Lose Ground

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Video: Mentel Expects `Tougher Times Ahead’ for Big Swiss Banks

October 26, 2010

Oct. 26 (Bloomberg) — Lothar Mentel, chief investment officer at Octopus Investments Ltd., talks about the impact of changes to Swiss tax laws on bank earnings. He speaks with Rishaad Salamat on Bloomberg Television’s “On The Move.”

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Symetis Closes CHF 25 Million ($25.8 Million) Financing Led by Endeavour Vision and NBGI Ventures, Eric Milledge Appointed Chairman of the Board

October 7, 2010

LAUSANNE, SWITZERLAND–(Marketwire – October 7, 2010) – Symetis SA, a private Swiss company developing new transcatheter aortic valve implantation (TAVI) systems, announced today that it has raised CHF 25 million ($25.8 million) in a new financing round co-led by Endeavour Vision and NBGI Ventures. Existing investors Truffle Capital, Novartis Venture Fund, Wellington Partners, Vinci Capital – Renaissance PME, Banexi Ventures and BiomedInvest also participated.

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Symetis Closes CHF 25 Million ($25.8 Million) Financing Led by Endeavour Vision and NBGI Ventures, Eric Milledge Appointed Chairman of the Board

October 7, 2010

LAUSANNE, SWITZERLAND–(Marketwire – October 7, 2010) – Symetis SA, a private Swiss company developing new transcatheter aortic valve implantation (TAVI) systems, announced today that it has raised CHF 25 million ($25.8 million) in a new financing round co-led by Endeavour Vision and NBGI Ventures. Existing investors Truffle Capital, Novartis Venture Fund, Wellington Partners, Vinci Capital – Renaissance PME, Banexi Ventures and BiomedInvest also participated.

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TDC sells Swiss unit for $3.26b

September 20, 2010

TDC sells Swiss unit for $3.26b

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TDC sells Swiss unit for $3.26b

September 20, 2010

TDC sells Swiss unit for $3.26b

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TDC cells its Swiss subsidiary Sunrise

September 17, 2010

TDC cells its Swiss subsidiary Sunrise

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Fred Hassan: President Obama’s Opportunity

September 8, 2010

As President Obama presents his “economic rejuvenation package” to the American people, he must use this great opportunity to send a message. He should signal that he wants to encourage private-sector capital formation, so jobs can be created, and set the course of our country toward long-term strength. Earlier this year, I prepared and delivered to the Beltway, a position paper on the subject of encouraging economic growth via encouraging long-term behavior in our country. The following is an edited version of this paper. The “Short-Termism” Problem A creeping problem I call “short-termism” is a looming American weakness on the global stage. None of our most celebrated industries are exempt these days. From autos to computers to many other science-based enterprises – it is now common thinking to conclude that an Asian or even European competitor with a long-term attitude will have an edge over American competitors in the long run. What is driving this? The American competitor is usually a captive of “short-term” thinking and goals imposed by its institutional investors. These investors now constitute up to 60% – 90% ownership in most public companies. As an example, just look at the spectacular success story in American biotechnology – Genentech. Genentech, as a young and vulnerable biotech, sold 60% of its shares to the Swiss company Roche in September 1990. This was also a particularly stressed time for the US economy, for individual companies and for Genentech. The transaction provided cover to Genentech management to invest in R&D for the long term. Roche saw losses on its investments for the first eight years before its profit situation turned positive. But the prize for Roche’s long-term thinking was historic. A strong and unprecedented flow of biotech innovations came out of Genentech. For example, drugs such as Herceptin and Avastin have revolutionized the treatment of breast cancer. And Roche’s original investment of $2.1 billion has multiplied many fold in terms of long-term return. Could such a long-term attitude have worked for US institutional investors? Unfortunately, this scenario probably would have proved too long of a wait for them – then and today – even if the rewards would be huge in the end. Just look at how things have evolved for a typical large US public company. About two decades ago, I remember the average publicly held stock turned over about 50% in a year. Now, it’s over 100%! Here’s another way to look at this. For the 12 months ending March 2009, the Dow Jones Industrials’ total trading volume was 35 times higher than the volume in the 12 months ending March 1989, or 70.9 billion shares compared with 2 billion shares respectively. In this environment, the year end annual bonus for the fund manager managing the stock portfolio has often become the driver of shareholder pressure on public company management in the US. This can supersede the vital need to invest for the long term in important areas such as innovation, jobs, equipment, training and infrastructure. Board members, in order to get re-elected every year by the same investors, are forced to make compromises in favor of the short term; CEO’s face similar pressures. It is no wonder then that some of the best ideas originating in America have seen their value being captured in Asia or Europe. A Proposal I think the tax system can be a powerful incentive to change this. One idea to encourage long-term thinking and vision – is to extend the 15% capital gains rate beyond 2010 (when Bush era tax cuts are set to expire). However, this rate would only apply on the condition that the asset be held for a minimum of five years, on a prospective basis starting January 1, 2011. With this legislation, there may be more tax revenues in 2011 as some investor’s cash out their existing holdings to invest in this opportunity. The amount of overall tax leakage over the next ten years should be relatively small with this scenario; one could hope the JCT score to be modest. However, an important statement would have been made. There will be encouragement for those who invest in the future of America for the long term – and cause a rethink among those who are caught in short-termism. On a personal note, I focused intensely on the long term when, in 2003, I took over the difficult job of stabilizing, repairing and turning around Schering-Plough. I even led the way among our peer companies by dropping financial guidance, not only for the quarterly number, but also for annual financial guidance. This action, though not popular with many in the financial community at that time, helped us get the Company focused on doing what was right for the long term. The R&D pipeline and the strong global operations that Schering-Plough ultimately built from that made it the envy of many in the pharmaceutical industry. I share this position paper with all as a concerned citizen who believes that there should be an attitude shift for the long term. This is how we can lead the way to jobs and growth. The President of the United States has a great opportunity to show the way.

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Video: UBS’s Yu Says Yen Intervention Plans Probably Won’t Work

August 26, 2010

Aug. 26 (Bloomberg) — Geoffrey Yu, currency strategist for UBS Ltd., talks about hints from Japanese policymakers they may curb the advance of the yen. Yu also discusses the prospect of the Swiss National Bank stepping in to counter gains in the franc. He speaks with Mark Barton on Bloomberg Television’s “Countdown.” (Source: Bloomberg)

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New UBS Ad Campaign: ‘We Will Not Rest’

August 23, 2010

UBS, the Swiss bank, is relying on the former astronaut Neil Armstrong, star architect Zaha Hadid and fast cars to help it win back customers. In a new advertising campaign, which started in Switzerland on Sunday, the bank shows images of celebrities and descriptions of their achievements above the slogan: “We will not rest. UBS.” The bank also said Monday it signed a global sponsorship agreement with Formula 1, the car racing competition, though it would not disclose financial details.

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Global economic crisis prompts the Swiss to save more

August 12, 2010

Global economic crisis prompts the Swiss to save more

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Eric Margolis: The World’s Biggest Debtor Urges More Debt

July 5, 2010

Broken store windows have been repaired, burned out cars and debris removed. Security barriers that turned much of downtown Toronto into a fortress are gone, and so has a small army of police and security agents. The hooligans have decamped. To everyone’s relief, the G8/G20 economic summit held in Toronto and a lake resort two hours north is over. An army of police and bands of rioters have been replaced by one million visitors feting Toronto’s annual Gay Pride extravaganza, the world’s largest gay jamboree. Watching this sober, conservative city dissolve into a gay bacchanal is always entertaining and surreal. Sustained immigration transformed “Toronto the Good” from a dour Scots Presbyterian backwater into the world’s most multicultural metropolis of over four million in which racial and ethnic groups co-exist in tranquility. Cantonese, Mandarin and Punjabi are now the most spoken languages in Canada after English and French. American visitors look with awe on Toronto’s clean streets, polite citizens, and services that are a model of good urban management. The late actor, Peter Ustinov, was once asked his opinion of Toronto. After a moment’s thought, he replied, “New York City — run by the Swiss.” The G8/G20 Toronto economic summit cost a staggering $1.1 billion, the most expensive economic meeting in anyone’s memory. That’s over $500 million per day. This gold-plated summit was designed to boost the standing of Canada’s unpopular, prime minister, Stephen Harper who runs a shaky minority government. When politicians get in trouble at home, they invariably turn to international affairs to burnish their faded images. Harper, a born-again Christian fundamentalist from Alberta is closely allied to Israel’s hard-right government and a disciple of George Bush. Harper is trying to give himself the image of a senior international statesman and basking in the glory of Canada’s banks that rode through the 2007-2008 financial crisis with flying colors because they sensibly refused to follow America’s financial debauchery and chicanery. These days, world leaders have become caught up in frantic rounds of unending political and economic meetings that are as exhausting as unproductive and costly. All the work for these meetings is accomplished in advance by staffs using phone, email, fax and video conferencing. The carefully-cultivated notion that presidents and prime ministers can fly into a city, meet around a large table for two days, and resolve thorny, complex economic and political issues is a public relations myth. Heads of states attend these summits for two good reasons unconnected to the actual agreements achieved. First, such meetings give voters the impression their leaders are actually making progress in dealing with the global financial/economic crisis. Activity is equated with achievement. Second, safety in numbers. It is by now perfectly clear that savage cuts must be made to the bloated budgets of the G8 industrial nations. The debt binge of the past decade left a mountain of dangerous obligations for private parties and governments. The time to “de-leverage,” as Wall Street calls puncturing the debt bubble, is at hand. The heart-stopping scare of 2007-2008, and risks that a global financial melt-down could again occur, are forcing most governments to slash spending. Many major European governments have announced plans for deep budget cuts to bring their debt loads down, it is hoped, to a sustainable 3% of GDP. This is causing voters to scream and, in the case of beleaguered Greece and Spain, demonstrate and riot. Politicians, caught between threats of financial melt-down and angry voters, seek the safety of numbers in these economic summits, adopting a common front they hope will convince voters that slashing spending is what everyone is doing. The International Monetary Fund used to perform this helpful mission by mandating spending cuts that politicians did not have the courage to enact. What the G8 really need, of course, is a short-term economic dictator who will slash spending and ignore ensuing protests. France offers a particularly interesting example of the current financial squeeze. While vowing budget cuts and adding only two years to its absurdly low retirement age of 58-60 years (or 50 in the case of certain professions), the Sarkozy government has been dithering and coy about making really painful cuts. France’s total private and government debt has reached over 300% of GDP. Spending cuts are urgent. But 55% of French workers are directly or indirectly employed by the government. For labor public unions, “l’etat, c’est nous.” As a result, cutting down these public sector unions that dominate and often terrorize France risks political suicide for whatever government holds power. In fact, public sector unions are now the biggest problem facing the G8. These unions became bloated during the days of credit addiction, when cheap loans created a bubble economy. Today, they can no longer be afforded, but their power remains immense. So G8 leaders are also trying to form a common front against these entrenched public unions that are undermining the economies in which they operate. Greece offers the most striking example. But the biggest of all the debtors, the United States, was notably understated at the Toronto conference. President Barack Obama flew in on Air Force One, a Boeing 747, at vast expense and much air pollution, to urge higher spending (and thus more debt) to stimulate economies. European nations rejected this plan by debt-addicted America. Treating the malady of too much debt with more debt does not make sense — except to the hopelessly addicted. The biggest fear at Toronto was that while Washington fulminates against China, it was doing nothing to curb its mammoth debt, and continuing to inflate the debt bubble, thus endangering the world economy. In the US, government debt per person, calculates the Economist , has soared from $16,000 per person in 2001 to $34,000 today. Government debt has reached a frightening 360% of US GDP. In Britain, government debt trebled in the same period. Britain’s new Tory government has announced plans to slash some $9 billion of spending. But as the US economy continues to stumble, and risk another fall back into severe recession, President Obama could not summon the political courage or Congressional votes to substantially cut government spending or to curtail the parasitic drain on the economy of America’s bloated financial industry which has become the real power in Washington. Obama failed to cut America’s gigantic, trillion-dollar military budget, which represents close to 50% of total global military spending. Instead, he increased it. The U.S. is financing its wars in Iraq and Afghanistan (now costing $7 billion monthly), and growing military operations in Pakistan and Yemen, on borrowed money, leaving the bill for the next generation of unlucky taxpayers. Add another $33 billion this year for Obama’s Afghan “surge.” A nation addicted to financial gambling and war will have a very hard time bringing itself back to fiscal reality. The world’s battered economy can’t be healed until its biggest debtor reforms its ways — but there is no sign this will happen anytime soon.

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US Dollar / Swiss Franc 06-22

June 22, 2010

US Dollar / Swiss Franc 06-22

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US Dollar / Swiss Franc 06-18

June 18, 2010

US Dollar / Swiss Franc 06-18

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US Dollar / Swiss Franc 06-18

June 18, 2010

US Dollar / Swiss Franc 06-18

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Australia Utilities Scale Debt Wall as Economy Trumps MBIA Subprime Fall

June 17, 2010

By Sarah McDonald June 18 (Bloomberg) — Bond prices show the pace of Australia’s economic growth may help infrastructure and utility companies to refinance $13 billion of debt without top credit ratings they once bought from insurers such as MBIA Inc. Envestra Ltd. , ElectraNet Ltd. and five more firms raised $2.3 billion from bonds this year, up from $140 million in 2009, according to data compiled by Bloomberg. Brisbane Airport Corp. has A$350 million ($304 million) of MBIA-backed notes due on June 30, while SP AusNet has A$185 million of bonds insured by a unit of Ambac Financial Group Inc. due in September. The nation’s central bank has led Group of 20 policymakers in increasing the benchmark cash rate six times since October on surging Asian demand for commodities and a jobs boom that has pushed down unemployment to around half that of the U.S. and Europe. The extra yield investors demand to own Australian utility debt instead of government bonds has fallen 52 basis points to 206 basis points this year while spreads for firms in the industry widened globally, Bank of America Merrill Lynch indexes show. “Investors are buying into an economy that outperformed the world through the financial crisis,” said Brad Scott , director of debt capital markets at Australia & New Zealand Banking Group Ltd. in Sydney. “Many recognize Australia is a far more attractive place to invest than previously given credit.” Infrastructure and utility firms were Australia’s biggest users of insurers to sell cheaper, longer-dated debt until MBIA and Ambac were stripped of their top ratings in 2008 amid losses on notes backed by subprime mortgages. Since then five straight quarters of growth in the country’s A$1.2 trillion economy have bolstered corporate profits, attracting investors willing to accept lower credit rankings and greater risk. U.S. Placements Investors “show strong appetite for names out of the region,” Lori Pollicino , an executive director of debt capital market private placements at JPMorgan Securities Inc. in New York, said in an e-mailed response to questions. Australian utility companies’ spreads will “modestly tighten throughout the remainder of 2010.” Between 2000 and 2006 Brisbane Airport paid spreads of between 100 basis points and 130 basis points including fees on five bond sales backed by insurers, or so-called monolines, Chief Financial Officer Tim Rothwell said in a telephone interview. While new debt is “certainly going to cost more than it did a few years ago, it’s come down from the very high margins of late 2008 and early 2009” when the airport was told it would have to pay as much as 600 basis points, Rothwell said. Miami Visit The owner of the nation’s third-busiest airport aims to pay about 200 basis points on a sale by early 2011, according to Rothwell, who was “pleasantly surprised” at U.S. interest in Australian bonds when he visited Miami last year. A basis point is 0.01 percentage point. SP AusNet, which manages a A$6.3 billion electricity and gas network and is rated A- by Standard & Poor’s, has sold bonds denominated in Swiss francs, Hong Kong dollars and Australian dollars since February. The company’s Ambac-insured notes yielded 45 basis points more than the bank bill swap rate when they were issued in 2000, according to Bloomberg data, which doesn’t show the insurer’s fee. SP AusNet, based in Melbourne, priced A$300 million of bonds to yield 160 basis points more than the swap rate in March. As companies seek to develop relationships with investors now they’re refinancing without monoline support, Australia’s economic strength is proving to be a “positive factor” in negotiations, SP AusNet Treasurer Alastair Watson said in an interview. Concentration Risk Airports, utilities and infrastructure-related issuers have A$15 billion of debt due by the end of 2011, according to Moody’s Investors Service, while S&P says utilities must refinance a third of their outstanding debt next year. S&P said in a March 5 report that it’s concerned about the concentration of maturing debt, even though companies are arranging refinancing well before their bonds and loans mature. Investors demanded about 60 basis points of extra yield to hold Australian corporate bonds rather than government debt in June 2006, a Bank of America Merrill Lynch index shows. That spread widened to as much as 433 basis points in April 2009 before shrinking to 212 as of yesterday, the index shows. Bond Returns Australia is the world’s biggest exporter of iron ore and coal, and Chinese demand helped the economy expand 2.7 percent in the first quarter of 2010 from a year earlier. Investors have profited from Australian corporate bonds every year for at least the past 13 years, according to Bank of America Merrill Lynch data, and the notes delivered a 4.18 percent return this year. Adelaide Airport Ltd. bought back A$231.5 million of MBIA- insured bonds in April and issued A$235 million of notes without a third-party guarantee. The new bonds yield 255 basis points more than the bank bill swap rate compared with 49 basis points on the insured notes, excluding MBIA’s fee, Bloomberg data show. United Energy Distribution Pty. Ltd. , which provides electricity to more than 600,000 customers in the state of Victoria, sold $435 million of four- and seven-year notes to U.S. investors in April. The bonds were priced to yield 180 basis points more than similar-maturity Treasuries, according to a person familiar with the transaction. The company, rated Baa2 by Moody’s, paid an 83 basis point spread when it sold $260 million of Ambac-insured notes in 2003, according to Bloomberg data which doesn’t show the insurer’s fees. “While these companies are paying more for their debt now than before the crisis, they’re certainly not alone,” said Michael Bush , Melbourne-based head of credit research at National Australia Bank Ltd. “The market’s so different to what it was three years ago, and all borrowers are affected.” To contact the reporter on this story: Sarah McDonald in Sydney at smcdonald23@bloomberg.net .

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Global Stocks Extend 8-Day Gain Euro, Gold, Spanish Bonds Rise

June 17, 2010

By Michael P. Regan and Kelly Bit June 17 (Bloomberg) — Stocks rose, with the MSCI World Index extending its longest advance in 11 months, as a late-day rally in technology shares helped the U.S. market reverse an early drop. The euro gained as a Spanish bond sale eased concern the region’s debt crisis will worsen. Gold rallied. The Standard & Poor’s 500 Index climbed 0.1 percent to 1,116.04 at 4 p.m. in New York, reclaiming its advance for the year along with the Dow Jones Industrial Average. The MSCI World, a gauge of equities in 24 developed markets, increased 0.2 percent for an eighth straight gain. The euro strengthened 0.6 percent to almost $1.24, while gold futures rose 1.5 percent to $1,248.70 an ounce, approaching a record. Treasuries surged. Apple Inc. climbed to a record and paced the advance in technology shares that helped the S&P 500 recover from a 0.8 percent drop spurred by a lower-than-estimated reading in the Federal Reserve Bank of Philadelphia’s factory index and an unexpected jump in jobless claims. Spanish bonds rallied as the nation sold $4.3 billion in debt, the maximum set for the auction, bolstering optimism Europe’s crisis is contained. “Although the initial reaction to the claims numbers and the Philadelphia Fed number was a kneejerk negative, a little bit more thoughtful reflection on the numbers led to a more positive conclusion,” said Hugh Johnson, who oversees $1.85 billion as chairman of Albany, New York-based Johnson Illington. “When investors had a chance to digest and assess the news, they should have reached the conclusion that the economy continues to expand, albeit at a slow pace.” Apple Hits Record Apple rallied 1.7 percent to a record price of $271.87. The customer base for the iPhone may top 100 million users next year, with demand for the soon-to-be-released iPhone 4 helping to persuade more buyers to embrace the smartphone, Morgan Stanley said. First Solar Inc. jumped 3.9 percent to lead industrial shares higher after Credit Suisse Group AG advised buying the stock. The S&P 500 tumbled 14 percent from a 19-month high in April through June 7 amid concern Europe’s debt crisis and the worst oil spill in U.S. history will stifle the economic recovery. The index has risen 6.2 percent since and may extend its rebound to 12 percent, said Ralph Acampora, whose career as a technical analyst began in 1966. “The damage in price and the damage in psychology has set us up on a very short-term basis for a good recovery,” Acampora said. Technical analysts view pessimism as a sign that stocks may rise, because it indicates investors have capacity to buy shares after avoiding the market. 200-Day Moving Average The S&P 500 today remained above its 200-day average for a third day after sinking below it for about a month. Tomorrow’s expiration of stock options, coupled with the S&P’s quarterly index rebalancing on the same day, resulted “in massive technical noise today,” said Peter Boockvar, equity strategist at Miller Tabak & Co. in New York. The late-day rally in stocks came after U.S. bond markets largely closed. Treasuries rose, pushing two-year yields to as low as 0.69 percent, after the increase in jobless claims and a drop in consumer prices spurred bets the Federal Reserve will keep interest rates low. The yield on the 10-year note fell 7 basis points, or 0.07 percentage point, to 3.19 percent. The Federal Reserve Bank of Philadelphia’s general economic index slid to a 10-month low of 8, less than half the median estimate in a Bloomberg survey of economists. Initial U.S. jobless claims rose to 472,000 last week, indicating firings remain elevated even as the economy recovers. The index of leading indicators, a gauge of the outlook for growth, climbed 0.4 percent in May, according to the Conference Board. Consumer prices decreased 0.2 percent in May, the government said. ‘Somewhat Concerning’ “The economic numbers are still somewhat concerning,” said Brett Hryb , part of a group that manages $2.6 billion at MFC Global Investment Management in Toronto. “We have a very long-tailed recovery as opposed to a V-shaped bounce back. The gain in Treasuries and gold fall into the flight to safety. Gold is the net beneficiary every time the market is unsure.” General Electric Co., through its finance arm, sold $850 million of bonds backed by credit-card payments, GE’s biggest such sale in nine months, according to a person familiar with the offering. The top-rated securities, maturing in about three years, yield 75 basis points more than the benchmark swap rate, said the person, who declined to be identified because the terms aren’t public. European Stocks The Stoxx Europe 600 Index rose 0.2 percent, paring a 0.7 percent rally. Spain sold 3.5 billion euros ($4.3 billion) of 10-year and 30-year bonds at yields lower than the prevailing market rates, attracting bids worth as much as 2.45 times the securities on offer, assuaging concern that it would face difficulty meeting bond repayments. Spain’s gauge of 35 stocks increased 0.7 percent. Spanish bonds rose, with the yield on the 10-year note falling from the highest level in almost two years. The yield dropped 11 basis points to 4.77 percent. The difference in yield, or spread, between German and Spanish 10-year government bonds narrowed 10 basis points to 211 basis points. Spain is trying to convince investors it can cut the euro- region’s third-largest deficit, while propping up the country’s savings banks and lifting the economy out of a two-year slump. Spain, which faces 24.7 billion euros of maturing debt in July, had seen the risk premium on its 10-year bonds rise to a decade high on concern it may need to tap a European rescue fund. Hayward Testifies BP Plc, battling to contain the worst oil spill in U.S. history, rallied 6.7 percent in London then lost 0.4 percent in New York. The shares have tumbled more than 45 percent on both exchanges since the April 20 explosion that triggered the spill. The company’s Chief Executive Officer Tony Hayward was denounced by U.S. lawmakers today for stonewalling as he failed to answer questions about the causes of the spill. BP scrapped dividends and pledged asset sales to meet President Barack Obama ’s demand for a $20 billion fund to help victims. The U.S. Chemical Safety and Hazard Investigation Board will look for the causes of the explosion, Chairman John Bresland said. The euro rose 0.6 percent to $1.2389 and earlier topped $1.24 for the first time in almost three weeks as Spain’s bond sale bolstered confidence in the currency. The dollar weakened against 13 of 16 major currencies, led by a 1.7 percent drop versus the Swiss franc. The Swiss franc approached an all-time high against the euro after the central bank softened its stance on fighting franc gains as deflation risks ease. The Swiss National Bank, which has been buying foreign currencies since March 2009 to counter the threat of deflation, said today that those risks have “largely disappeared.” Emerging Markets, Commodities The MSCI Emerging Markets Index rose 0.4 percent, climbing for an eighth day in the longest stretch of gains in two months. Benchmark indexes in Turkey, Indonesia, Egypt and Romania climbed at least 0.9 percent. Crude oil fell for the first time this week, slipping 1.1 percent to $76.79 a barrel. Copper futures for September delivery slid 8.95 cents, or 3 percent, to $2.924 a pound on the Comex in New York. The Reuters/Jefferies CRB Index of commodities retreated for the first time in nine days, losing 0.3 percent and snapping its longest streak of gains in three years. To contact the reporters on this story: Michael P. Regan in New York at mregan12@bloomberg.net ; Kelly Bit in New York at kbit@bloomberg.net

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EUR/CHF: Trading the Swiss National Bank Interest Rate Decision

June 16, 2010

EUR/CHF: Trading the Swiss National Bank Interest Rate Decision

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UBS Tax Deal: Switzerland Approves Treaty With U.S. On Second Try

June 16, 2010

GENEVA — The Swiss parliament on Tuesday approved a treaty with the United States that will hand thousands of files on suspected tax cheats to U.S. authorities, but obstacles remain that could delay the deal for several more months. The government hopes the agreement will eventually end UBS AG’s three-year battle with U.S. tax authorities that culminated in revelations the bank had for years helped American clients hide millions of dollars in offshore accounts. Under the treaty that was painstakingly crafted by Bern and Washington last year after months of negotiations, Switzerland has agreed to divulge the names of 4,450 UBS clients suspected of tax evasion. Swiss authorities have already transmitted the names of about 400 UBS clients who signed waivers as part of the Internal Revenue Service’s voluntary disclosure program, according the Swiss Federal Tax Administration. A further 100 UBS clients gave their consent directly to Swiss authorities. Lawmakers in Switzerland’s lower house voted 81 to 61 in favor of the government-backed deal, and 53 abstained. The vote passed after the powerful Swiss People’s Party dropped its opposition. The nationalist party and the left-wing Social Democrats blocked a first attempt last week to have parliament approve the treaty, which has been portrayed by some as a nail in the coffin for Swiss banking secrecy. But details remain to be ironed out that could yet hold up the deal. Parliament’s lower house decided Tuesday that the treaty can be put to the Swiss public in a referendum before it finally becomes law. The upper house has yet to approve such a referendum and has until Friday to deliberate. A popular ballot would make Switzerland miss a late August deadline to hand over all 4,450 names because the vote would be held in November at the earliest. Frank Keith, a spokesman for the Internal Revenue Service, said the U.S. tax agency expects Switzerland to honor an agreement to divulge the names of UBS clients suspected of tax agency. He added that the U.S. is “prepared to use all available options, including the U.S. courts, should the present efforts fail.” The deal is crucial to UBS, which has faced intense pressure from U.S. authorities since 2007. Last year the bank agreed to turn over hundreds of client files and pay a $780 million penalty in return for a deferred prosecution agreement. But Washington has signaled that unless UBS reveals the further 4,450 American names demanded in the U.S.-Swiss agreement, it may face a crippling civil investigation just at a time when the bank is recovering from the subprime crisis and seeking to rebuild its U.S. business. UBS spokesman Jean-Raphael Fontannaz said the bank will not comment as long as the decision-making process in parliament is still ongoing. Justice Minister Eveline Widmer-Schlumpf tried to disperse fears of some lawmakers that the treaty might open the door to the United States – or other countries – receiving client data from other Swiss banks. “This is about a single agreement … on a clearly defined group of clients who allegedly committed tax fraud or tax evasion,” she told parliament, adding that it will have “no impact on future cases.” Widmer-Schlumpf said she was confident that the United States would accept a delay in handing over the names if the Swiss people were asked to vote on the deal in a referendum. But William Sharp, a tax lawyer who represents some American UBS clients, said he would be surprised if the U.S. passively accepted a further delay. “The deferred prosecution agreement may be revisited in a more aggressive context, the settlement agreement may be deemed in breach, or the U.S. may seek to move Switzerland to ‘black list’ status, among other choices,” Sharp said. Shares of UBS closed up 1.97 percent in trading Tuesday, reaching 15.51 Swiss francs ($13.6) on the Zurich exchange. The Swiss business organization economiesuisse said Tuesday’s vote was an important step for Switzerland and showed it was living up to its commitments toward the U.S. Business groups have warned that failure to ratify the deal risked losing thousands of jobs should Washington decide to retaliate. ____ Associated Press Writer Frank Jordans contributed to this report.

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Merckle Drug Wholesaler Phoenix Said to Be Near $4.4 Billion Funding Deal

June 16, 2010

By Aaron Kirchfeld and Angela Cullen June 16 (Bloomberg) — Phoenix Group , the indebted drug wholesaler started by deceased billionaire Adolf Merckle , is close to obtaining as much as 3.6 billion euros ($4.4 billion) in financing, said two people familiar with the negotiations. Phoenix, based in Mannheim, Germany, may reach an agreement with banks by early next month on 2.6 billion euros in syndicated loans to refinance existing debt, said the people, who spoke on condition of anonymity. The company also has plans to sell as much as 1 billion euros in hybrid bonds, according to these people. The deal marks the final chapter in the downfall of Merckle, who committed suicide in January 2009 after wrong-way bets on the stock market that brought companies spanning the cement and drug industries to the brink of collapse. His death left son and sole heir, Ludwig, to negotiate new loans with the family’s lenders and divest assets. A spokesman for Phoenix, Olaf Teichert, couldn’t be immediately reached for comment by phone or by e-mail. Ludwig Merckle ’s spokeswoman couldn’t immediately comment. Merckle agreed to sell generic-drug maker Ratiopharm GmbH to Teva Pharmaceutical Industries Ltd. in March for 3.63 billion euros. He also sold part of his stake in HeidelbergCement AG and Swiss drugmaker Mepha Gruppe in the last 12 months. As part of the refinancing plan, Ludwig Merckle agreed to inject 500 million euros in cash and repay a loan to Phoenix, they said. Merckle’s VEM Vermoegensverwaltung GmbH investment vehicle borrowed as much as 500 million euros from Phoenix as the family patriarch sought to stem his losses, the people said. The refinancing is aimed at bolstering Phoenix’s credit standing as it considers selling as much as 25 percent of Phoenix in an initial public offering in the next year, one of the people said. Phoenix may also sell smaller assets valued at less than 200 million euros, the other person said. To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net ; To contact the reporter on this story: Angela Cullen in Frankfurt at acullen8@bloomberg.net ;

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UBS May Sidestep Swiss `Game of Chicken’ as Lawmakers Vote on U.S. Treaty

June 15, 2010

By Klaus Wille June 15 (Bloomberg) — UBS AG may escape a “game of chicken” played by Swiss lawmakers as the price of failure to back a tax treaty with the U.S. would be too high: the bank’s American operations and the country’s export industry. Deputies in Switzerland’s lower house may support the treaty in a second vote today after last week rejecting the handover of details of as many as 4,450 suspected tax dodgers to U.S. authorities, according to academics and analysts, including Georg Lutz of the University of Lausanne. The dispute stems from a U.S. crackdown on offshore tax evasion that led Switzerland to agree last August to give up account data. The parliament has to approve the accord, and the U.S. may opt to reopen a civil lawsuit and criminal prosecution unless the government honors the agreement. “What we’re seeing at the moment is a high-stakes game of chicken,” said Evan Stewart, a lawyer at Zuckerman Spaeder LLP in New York, in an interview. Further legal proceedings “would seriously jeopardize UBS’s business in the U.S.,” he said. The nationalist Swiss People’s Party, which voted against the deal last week in protest against a proposal to boost corporate taxes on bonuses, may back the accord today to avoid a clash with U.S. authorities. “The People’s Party will eventually recognize the importance of the question and support the treaty,” said Martin Naville , the chief executive of the Swiss-American Chamber of Commerce, a lobbying group for Swiss and American businesses. Georg Lutz, a political scientist at the University of Lausanne, said the party “will give in” eventually. UBS Chief Executive Officer Oswald Gruebel last week said he’s “confident” that parliament will approve the accord. Like Adolescents “Too much is at stake with this treaty,” This Jenny , a deputy in the upper house of parliament for the People’s Party, said June 9. “We can’t afford this posturing, and this going back and forth like adolescents. We should try to build bridges.” UBS, Switzerland’s biggest bank, avoided U.S. prosecution in February 2009 by paying $780 million, admitting it helped wealthy Americans evade U.S. taxes from 2000 to 2007, and handing over account data on more than 250 U.S. clients. The next day, the U.S. sued Zurich-based UBS, seeking data on 52,000 Swiss accounts. UBS settled that case in August, agreeing to hand over as many as 4,450 names to the Swiss government to review before passing them on to the Internal Revenue Service. Unless the Swiss disclose the names, the U.S. may extend the deferred- prosecution agreement beyond its term of 18 months and may reopen the lawsuit that sought 52,000 names. The People’s Party and the Swiss Social Democratic Party voted against the accord in the lower house after they tied their approval to conditions. In the upper house, where the two parties’ support wasn’t needed, the accord was rubberstamped. Parliamentary Deadline The Swiss legislature has until June 18, the last day of the current parliamentary session, to approve the treaty and circumvent a January court ruling that said the deal isn’t enforceable under current Swiss legal provisions. If the lower house votes down the treaty, there won’t be another ballot, while the two houses will negotiate again if the lower house supports the treaty but asks for a referendum. The People’s Party has said it will support the deal with the condition that lawmakers reject proposals to increase corporate taxes on bonuses. The Social Democrats are linking their support to a tax on bankers’ bonuses. The People’s Party is the biggest party in the lower house with 58 deputies, potentially tipping the balance after the treaty was rejected with 104 votes to 76 last week. UBS Plans John Cryan , UBS’s chief financial officer, said the bank would find it easier to recruit private bankers if the country backs the treaty, according to an analyst note from Helvea SA. The accord also would help boost the morale of clients and staff in the U.S., who seem to have been “particularly spooked” by last week’s vote, said Peter Thorne , an analyst at Helvea, after attending a meeting with Cryan in London. One face-saving option for the People’s Party is to accept the requests by all other parties to discourage “excessive” bonuses through higher taxation at the company level. Christoph Blocher, the party’s vice-president and a former member of the government, was quoted by Tages-Anzeiger on June 9 as saying politicians may be able to “find a way out.” Prosecution in the U.S. would put UBS “out of business the next day,” Robert Fink , a tax attorney at Kostelanetz & Fink LLP in New York, told Bloomberg News by telephone. “Financially, it could be catastrophic.” U.S. Business “They could shut down UBS in the U.S.,” said George M. Clarke III, a tax attorney of Miller & Chevalier in Washington. “They could forbid the bank from accessing the Federal Reserve system. It could get ugly.” Almost 37 percent of UBS’s 65,233 employees worked in the Americas at the end of 2009. UBS’s Wealth Management Americas unit managed 690 billion Swiss francs ($604 billion) at the end of the year. A rejection would have a “massive negative effect on the entire Swiss economy,” the Swiss-American Chamber of Commerce wrote in a May briefing note, and Justice Minister Eveline Widmer-Schlumpf has said the agreement had removed “an existential threat” from UBS. “Large and small Swiss companies with international business face uncertain times” regarding taxation, a potential tax haven status and possible discrimination in the U.S., the lobbying group said. “Overall, the potentially affected companies represent 35 percent of the Swiss economy with approximately 1 million jobs,” the chamber said. Plan B Should lawmakers fail to approve the accord, the government may seek renewed negotiations with the U.S. authorities. “I think Switzerland and UBS have a Plan B up their sleeves,” said Rainer Schweizer , a law professor at the University of St. Gallen. “I’m sure the government has examined some alternatives.” Lawmakers are aware of the consequences. “The Americans might not ask us whether they should implement retaliation measures,” Pirmin Bischof , a member of the lower house for the Christian Democrat People’s Party, said on June 7. “As a superpower, they will simply enact them, and we can gnash our teeth.” To contact the reporter on this story: Klaus Wille in Zurich at kwille@bloomberg.net

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Gulf Oil Spill: Marshall Islands, Not U.S., Had Main Responsibility For Safety Inspections

June 14, 2010

The Deepwater Horizon oil rig that exploded in the Gulf of Mexico was built in South Korea. It was operated by a Swiss company under contract to a British oil firm. Primary responsibility for safety and other inspections rested not with the U.S. government but with the Republic of the Marshall Islands — a tiny, impoverished nation in the Pacific Ocean. And the Marshall Islands, a maze of tiny atolls, many smaller than the ill-fated oil rig, outsourced many of its responsibilities to private companies. Now, as the government tries to figure out what went wrong in the worst environmental catastrophe in U.S. history, this international patchwork of divided authority and sometimes conflicting priorities is emerging as a crucial underlying factor in the explosion of the rig.

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Gulf Oil Spill: Marshall Islands, Not U.S., Had Main Responsibility For Safety Inspections

June 14, 2010

The Deepwater Horizon oil rig that exploded in the Gulf of Mexico was built in South Korea. It was operated by a Swiss company under contract to a British oil firm. Primary responsibility for safety and other inspections rested not with the U.S. government but with the Republic of the Marshall Islands — a tiny, impoverished nation in the Pacific Ocean. And the Marshall Islands, a maze of tiny atolls, many smaller than the ill-fated oil rig, outsourced many of its responsibilities to private companies. Now, as the government tries to figure out what went wrong in the worst environmental catastrophe in U.S. history, this international patchwork of divided authority and sometimes conflicting priorities is emerging as a crucial underlying factor in the explosion of the rig.

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