Tag Archives: Markets coverage
by Liz Hester
Falling commodities prices could signal that global inflation will remain low. It’s also an interesting story that touches all aspects of business from raw materials to investors’ portfolios.
The Wall Street Journal had an interesting piece on what it means for businesses and consumers alike:
Lower prices for commodities from cotton to copper are helping U.S. businesses by reducing their raw-material costs and buoying consumers by keeping a lid on prices paid.
Copper, used in many goods including electronics, is off nearly 10% this year. Silver, which has various industrial uses, has tumbled more than 25%, and wheat is down more than 10%.
While lower commodity prices are bad for producers and countries reliant on exporting raw materials, they are good for Alabama Chanin, a Florence, Ala., maker of high-end clothing. Cotton prices are up a bit this year, but they are down about 50% since a surge two years ago. The cost of organic cotton—a niche product that Alabama Chanin uses exclusively in its wares—has roughly tracked that price movement.
But those lower cost goods also signal some economic weakness, the story said:
Cheaper commodities have a dark side, as they reflect weak global growth. But they also act as a subtle economic stimulus. Consumers paying less for clothes have more to spend on cars and dinners out, while companies pay less for many costly supplies.
Lower commodity prices are one reason inflation remains subdued. U.S. consumer prices rose 1.1% in April from a year earlier, well below the Federal Reserve’s target of about 2%. In The Wall Street Journal’s latest survey of economists, 47.5% said weakness in commodity prices was a worrying sign, but 52.5% saw an encouraging signal of lower costs for businesses and consumers.
The lower commodity prices “will be a tailwind, a gentle tailwind,” said Nariman Behravesh, chief economist at IHS, who projects the U.S.’s gross domestic product will grow 2.5% to 3% over the long term—instead of 2% to 2.5%—because of lower commodity prices, especially energy. Since the U.S. recovery began in mid-2009, the economy has grown at an annualized rate of just 2% on average.
Fortune cites three reasons why falling commodity prices might be good for consumer and investors:
Bigger retail sales
Lower gasoline prices may be signaling slower growth throughout the world’s major economies, but they have also left U.S. consumers with some extra spending money.
What they aren’t spending to refuel their cars, they’re spending on everything from electronics to clothes. In April, retail sales unexpectedly edged up 0.1% after a 0.5% decline in March.
Investors typically see gold as a hedge against rapidly rising prices. But with global inflation falling, gold prices have tumbled – officially entering a bear market last month.
Lower grocery bills
The decline in corn, soybean, and wheat prices may have left some traders scrambling, but it should bring good news to shoppers in U.S. grocery stores.
Farmers this year are expected to harvest record crops, after recovering from the worst drought to ravage the industry in decades. With bigger supplies, corn prices are forecast to average $4.80 per bushel, down a third from the previous year’s average, according to the U.S. Department of Agriculture. Corn prices are closely tied to supermarket prices, since it’s a key ingredient in many foods and used as feed for livestock. Soybeans are expected to average $10.50 a bushel, down 27%; wheat is forecast to decline by 11% to $7 a bushel.
Either way, if prices remain depressed, look for money managers to review portfolio allocations and attempt to predict which way inflation is heading. With the Federal Reserve’s current monetary policy, many have been waiting to see inflation creep up. Seems that depressed parts of the rest of the global economy may keep that from happening.
It’s an interesting business story, especially given all the moving parts that go into determining commodities prices. And with growing season beginning in the U.S., look to see a swing in futures prices as well as farmers try to lock in a decent payout for their upcoming harvests.
by Chris Roush
Bloomberg L.P. Thursday unveiled a new chat service for foreign-exchange traders across various banks, developed in collaboration with Citigroup, reports William Launder of The Wall Street Journal.
Launder writes, “The product is part of a broader effort by banks to take direct control of employee-communications services, at a time when the security of chat platforms has been called into question and the financial industry is looking to reduce its technology costs.
“The chat service, called IB Dealing, allows users to negotiate, make and report trades on a centralized platform. Foreign-exchange traders at more than 100 banks already have been testing the service. Thursday’s announcement represents its formal unveiling.
“Citi worked with Bloomberg to develop the product, which aims to cut operating costs by making banks less dependent on multiple outside communication services.
“The unveiling comes just a week after The Wall Street Journal reported that Citi was moving more of its internal group-chat functions away from Bloomberg to a proprietary internal-messaging service called CitiFXWire.”
Read more here.
by Chris Roush
Foxman writes, “Alternatives to Bloomberg chat are already out there, the most prominent offered by Thomson Reuters itself since 2002. In fact, according to a source, Thomson Reuters Messenger has long been part of the media giant’s plans to win back Wall Street from Bloomberg—well before the Bloomberg snooping scandal.
“‘They know that they can’t match the data side,’ said the source, who had access to data on Reuters’ Messenger but spoke to Quartz on condition of anonymity. ‘But Reuters is much stronger in Europe and Asia, where the Bloomberg terminal hasn’t had as much penetration. Reuters Messenger is really popular there.’ The existing technology is expected to serve as a jumping-off point for Open Federated Chat; the main difference seems to be that the new service will have the backing of Markit and major banks.
“Thomson Reuters gives Messenger to Wall Street users free of charge, both as a standalone platform that synchronizes with chat networks like AOL and Yahoo, and as part of Reuters’ Eikon terminal interface. It offers more features than Bloomberg’s chat service, particularly in its chat rooms. The most recent of these, launched in January of this year, was the Global Markets Forum, which is run by a handful of Reuters editorial staff. Like the existing Global Oil Forum and Global Ags Forum, it encourages users to banter about the markets. Big-name economists and investors like Société Générale’s Kit Juckes and HSBC’s Steven Major are invited on to stimulate the discussion. Other chat rooms are locked to journalists.”
Read more here.
by Chris Roush
Ryan Chittum of Columbia Journalism Review writes about how The Motley Fool faced attempts to manipulate some of its writers into posting items about a questionable penny stock.
Chittum writes, “Richards reports the site ‘has banned four bloggers because they submitted suspiciously glowing posts on Goff.’ He also notes that SeekingAlpha, a competitor stock-blogging site, published four positive Goff posts during the pump.
“And hats off to the blogger, whom Motley Fool doesn’t name, for having the integrity to turn down the bribe. Because others didn’t think anything of it. Here’s one of the banned Motley Fool bloggers:
When we questioned the nature of his Goff post, he said it wasn’t a big deal: ‘I am on a regular basis offered compensation to write about multiple firms.’
“The obvious question here is: How prevalent is corrupt user-generated content like this on the financial blogs? And since the answer to that question is unknowable, how can you trust any of it? Richards reports that Motley Fool has ‘strict rules against publishing stories on micro-cap companies with limited liquidity and/or low share prices to avoid manipulation of stock price, intentional or not,’ but it clearly didn’t work here, at least until it was too late.
“But give Motley Fool a lot of credit here for simply doing the story, much less diving into it. Richards doesn’t shy away from reporting how his site’s own blogging platform got abused in the matter. It would have been much easier for Motley Fool to let this story slide.”
Read more here.
by Chris Roush
Jim Cramer writes Thursday on TheStreet.com that business journalists spend too much time coverage the buying and selling of stocks by hedge funds when they file 13F documents with the Securities and Exchange Commission.
Cramer writes, “Here’s a visionary memo I am writing now for people in the press one year from now:
”‘As of today, we will no longer do ‘wall-to-wall’ coverage of 13F filings, because it doesn’t help our viewers or our readers.’ The visionary memo continues: ‘This cottage industry of looking at filings, most of which are extremely dated, causes people who aren’t sophisticated enough in the process to make wrong moves.’
“But, because the writer of the memo doesn’t want to push back 100%, he adds, ‘There will be exceptions. We will continue to cover what Warren Buffett buys and sells, because his fund is not a hedge fund darting in and out of stocks. We will also, if we believe it to be the case, cover funds that seem to be struggling, like John Paulson’s gold fund. But, beyond this, we are simply going to de-emphasize the breathless reporting on these matters, because at a certain point we have to conclude that it is our equivalent of prurience and nothing more than that.’
“I know, harsh memo. I am a harsh guy.
“Honestly, though, the obsession with this stuff is nonsense. I remember having an assistant fill out these forms and thinking, ‘Oh yeah, I remember firing that guy and having to dump his portfolio,’ or, ‘Gee, I got rid of that position right after this filing was due, but I have to include it.’
“Plus, let’s face it, these filings are really late — so who knows? I am sure there are plenty of people who are back in who had left a position at the time of the filing.”
Read more here.
by Chris Roush
Francesco Guerrera, the money & investing editor for The Wall Street Journal, sent out the following announcement on Tuesday:
We are delighted to announce that Jim Sterngold is joining the WSJ as a senior special writer focusing on the hedge-fund industry. Jim is one of the most experienced, skilled and tough financial journalist around and his eye for a story, ability to work with others and knowledge of Wall Street will be a terrific addition to Money & Investing.
Jim previously spent 20 years at The New York Times covering Wall Street and then as a correspondent in Tokyo and Los Angeles, writing about topics ranging from economics and politics to national security, the prison system and culture and the arts. While at the Times, Jim shared a Pulitzer for the paper’s coverage of 9/11. After several years doing magazine writing and working at Bloomberg/Businessweek, Jim joined SmartMoney Magazine as a Senior Writer and then was a contributor at Fortune.
He is just completing a book, which he co-authored, on cancer research and treatment. Jim’s SmartMoney article on the weakness of mutual fund boards is a finalist for a Deadline Club award and his Businessweek article on Richard Fuld of Lehman was named best magazine financial article of 2010 by the Foreign Press Association.
In his new role, Jim will report to Brad Reagan, our recently appointed Investing Editor.
by Chris Roush
Nina Mehta, who covered exchanges and trading for Bloomberg News, quit her job on Friday to write a book about her beat.
“I left Bloomberg News to write a book about what I’ve been covering for more than a decade: the structure of U.S. equity markets and how it’s changed over the last 15 years,” said Mehta in a message to Talking Biz News.
Mehta had been with Bloomberg since January 2010. She wrote about U.S. market structure, equity and options exchanges, institutional trading, dark pools, regulatory topics, market making,
broker-dealers, wholesalers, electronic trading, algorithms, and technology.
Before that, she was a senior editor at Traders magazine, where she wrote about U.S. institutional equities and options trading, exchanges, ECNs, dark liquidity, broker-dealers, market-making, market structure, Reg NMS and other regulatory issues.
She was also managing editor of Derivatives Strategy from 1998 to 2001. She wrote about risk management, equity derivatives, the developing credit derivatives market, regulation, exchanges and the OTC markets, hedge funds and technology for the main U.S. monthly magazine for financial derivatives professionals. The magazine ceased publication in June 2001.
Mehta has a bachelor’s degree from Wesleyan University and a master’s degree from Columbia.
by Chris Roush
Julia LaRoche of Business Insider is reporting that Bloomberg News reporters also used the company’s terminal to glean important information about the actions of JP Morgan bankers during its London Whale trading losses last year.
Bloomberg has come under criticism from Goldman Sachs recently and has agreed to limit with its editorial staffers can see on the terminals.
LaRoche writes, “According to a JP Morgan source, Bloomberg reporters would call JPMorgan CIO traders on their home phone numbers or personal cellphones and say, ‘Hey, I noticed you haven’t used your Bloomberg Terminal in a while are you still with the bank?’
“Bankers at JPMorgan expressed frustration with this to multiple Bloomberg reporters, a source said.
“The source also said that this has happened in broader instances at JP Morgan and not just with the ‘London Whale’ traders. But the ‘London Whale’ event is when it became apparent to JP Morgan that Bloomberg reporters were using their private client information to spy on them.
“‘They were pretty blatant about saying they noticed if you haven’t logged into your Bloomberg or you haven’t been trading in a while,’ a JPMorgan source said.
“The general sense is that the behavior of these Bloomberg News reporters was outrageous.
“As one JP Morgan source said, when you buy a Bloomberg Terminal, ‘You don’t think someone’s tracking your every move.’”
“If you’re not already familiar with the Bloomberg Terminal, it’s basically a computer that’s targeted toward financial professionals so they can message other users, obtain real-time market data, news, stock quotes among many other functions.”
by Liz Hester
In a made for New York-only story, hedge fund manger Phillip Falcone is settling with the Securities and Exchange Commission.
It’ll only cost him two years of his career. Here are some of the details from the Bloomberg story:
Philip Falcone, the billionaire hedge-fund manager sued by U.S. regulators over claims he improperly used client money to pay taxes, agreed to be barred from acting as an investment adviser in a proposed settlement.
In addition to the two-year ban, Falcone’s hedge fund Harbinger Capital Partners LLC would pay about $18 million in disgorgement, interest and penalties to resolve Securities and Exchange Commission claims filed in June, Harbinger Group Inc. (HRG) said today in a public filing. The agreement is subject to approval by SEC commissioners and a U.S. court.
The proposed settlement doesn’t bar Falcone, 50, from serving as an officer or director of a company, which means he can continue as chief executive officer and chairman of Harbinger, according to the filing. Still, during the two-year bar from the securities industry, Falcone can’t perform any management functions of Harbinger’s subsidiary advisers or make any recommendations about the purchase or sale of securities.
The Wall Street Journal added this bit of context to what his next role might entail:
The settlement marks a reversal of Mr. Falcone’s previous stance on the case. The hedge-fund manager had fought the charges and in February his lawyers argued in court for their dismissal, saying the SEC failed to show Mr. Falcone or his firm committed any illegal actions. Settlement talks started again in March, soon after the hearing of that motion to dismiss.
Although Mr. Falcone may after two years seek the SEC’s consent to have the ban lifted, the ban raises the hurdles he would face in resuming his career as a hedge-fund manager. Already, his investment firm is dealing with client redemptions that it has been having difficulty meeting, with billions of dollars tied up in a bankrupt wireless venture. He now faces two years of limitations on his ability to manage the hedge funds, along with additional constraints on his ability to oversee acquisitions by his publicly traded firm.
What’s more, investors in Harbinger funds are pushing for it to be wound down and their money returned to them, although they expect the process to drag on as Harbinger grapples with hard-to-sell assets, according to people involved in discussions with investors Thursday.
Mr. Falcone, meanwhile, has said he likes the idea of investing with a permanent pool of money that isn’t subject to requests for withdrawals by investors, as hedge funds are. Recently, he has been transitioning to more of a private-equity style of investment with acquisitions such as LightSquared Inc., the wireless-networking venture that has filed for bankruptcy.
Also as part of the settlement, the hedge-fund firm, Harbinger Capital, agreed to be overseen by a monitor, who will supervise the firm and ensure Harbinger is complying with the agreement, which includes provisions that his hedge-fund firm not raise capital or draw on certain capital commitments from existing investors.
The New York Times offered this description of his sins:
In one case, it accused Mr. Falcone of carrying out an illegal “short squeeze,” in effect, cornering the market in a particular category of bonds. Mr. Falcone, the S.E.C. said, “hijacked the market for the bonds and illegally manipulated their price and availability.”
In a separate action, the S.E.C. accused Mr. Falcone of allowing three unnamed banks and investment firms – Goldman Sachs, HSBC and Pamco, according to people close to the case – to withdraw funds from his hedge fund when others could not. In exchange for the special treatment, and in what the S.E.C. called a quid pro quo, the investors voted to allow Mr. Falcone to suspend other redemptions.
The S.E.C. also took aim at Mr. Falcone for taking a $113.2 million loan from his fund to pay his own tax bill in 2009. He borrowed the money, the S.E.C. said, at a time when the fund had blocked investor redemptions, and then kept the deal secret for five months.
Mr. Falcone’s lawyer, Matthew S. Dontzin, has argued that Mr. Falcone took the loan only after a prominent law firm signed off on the arrangement. The S.E.C. claimed, however, that Mr. Falcone hired the firm “to give the appearance of legality,” but kept the lawyers in the dark about some information.
Now I realize that Falcone is a huge name in finance and that this is a particularly juicy story for these national outlets. What I don’t understand is why all the ink being devoted to it since no one outside of high finance or major cities cares. It’s an inside baseball story, one that likely isn’t winning any readers for these publications.
It is interesting to note that the SEC seems to be continuing its enforcement actions under the new leadership, something many people outside New York are likely to applaud.
by Chris Roush
Jack Shafer of Reuters writes about the folly of those who are now investigating how a political intelligence group was able to report to its clients about new Medicare policy, allowing its customers to buy up publicly traded health care stocks before others got the news.
Shafer writes, “Obscure, untraceable people talking to people they know or don’t know, gathering information from congressional or agency sources, asking questions that appear to be innocent but turn out to be valuable to businessmen. Say, doesn’t that sound a lot like what the financial press does every nanosecond of every minute of every hour around the world? Isn’t this what we call … journalism, as practiced by the reporters at the Wall Street Journal, Reuters, Bloomberg, the Financial Times, CQ, financial newsletters, CNBC, Fortune, Businessweek, business news sites and elsewhere? Not to mention the pricey financial information vended through the Bloomberg terminal or from my mother company, Thomson Reuters.
“Bloomberg View columnist Jonathan Weil arrived at a similar conclusion in early April as the ‘scandal’ was just revealing itself, describing the 75-word note Height Securities analyst Justin Simon sent to his company’s clients as an’“amazing scoop.’
“‘Maybe someone told Simon something without permission, but that wouldn’t be the analyst’s problem,’ wrote Weil. ‘Journalists get stories all the time by sweet-talking people into blabbing things they shouldn’t. There’s nothing wrong with that.’
“There’s been nothing wrong with it for five or six centuries, as Chris Roush’s 2006 history of business journalism, Profits and Losses: Business Journalism and Its Role in Society, informs us. The earliest business journalism from the 15th and 16th centuries pushed both financial data and political intelligence to readers, Roush writes. Acting quickly on government news has always been lucrative, he points out in an interview, citing a favorite historical example: Treasury Secretary Alexander Hamilton’s January 1790 decision to reorganize the young country’s debt and ‘refund the existing debt at face value,’ as he words it in his book. Informed investors boarded ships bound for Southern states to beat the news trickling down by land. Once they arrived in Georgia, South Carolina and North Carolina, they reaped windfall profits by purchasing debt at 10 percent to 20 percent of face value from the unsuspecting. Roush shrugs his shoulders at the Height Securities story. ‘This is nothing new, this is using information to make money in the market,’ he told me.”
Read more here.