Tag Archives: Markets coverage
by Chris Roush
Andrew Ross Sorkin of The New York Times writes about how some bankers and lawyers like to leak to the business media the deals they are working on.
Sorkin writes, “Of course, the topic of this column hits a little too close to home. I will share a bit more, but not too much. A magician, as they say, never reveals his secrets.
“First, leaks become exponentially more likely as more people are added to a transaction, whether it be people inside the acquirer or target, or perhaps, as additional advisers are included in the process. If a big deal needs financing — as in debt from banks — the risk of leaks jumps. Every bank contacted then knows about the deal, as does the bank’s law firm. And it is not just one or two bankers and lawyers who were first contacted — it’s often dozens of them. Every banker or lawyer who brings on a new client must clear the new assignment with a ‘conflicts committee.’ That committee can have half a dozen or more people on it — and those people may have to check with others at the firm who are working on competitive projects. This is true not just of banks and law firms but of consulting firms, accounting firms and public relations firms.
“The private equity world poses its own problem. Those firms often have large investment committees and also employ armies of outside consultants and law firms that typically do much of the heavy lifting when it comes to going through the books and records of prospective targets.
“By the time deal talks begin in earnest, it is almost impossible that fewer than 100 people know about it; more likely it’s many more. If there is a ‘bake-off’ — a competition among advisers for the assignment — the number is even higher. And if there is an auction, well, forget about it.”
Read more here.
by Chris Roush
Amy Chozick and Nicole Perlroth of the New York Times write Monday about how social media is affecting the stock market in the wake of the fake tweet last week from the Associated Press.
Chozick and Perlroth write, “The decision to allow market information on social media came after Reed Hastings, chief executive of Netflix, had posted on Facebook that the service had exceeded one billion hours of streamed video a month, sending its stock price up.
“‘We appreciate the value and prevalence of social media channels in contemporary market communications, and the commission supports companies seeking new ways to communicate,’ the S.E.C. said on April 2.
“Two days later, Bloomberg introduced a feature on its financial data terminals that incorporates a stream of relevant Twitter posts delivered to investors. All of Bloomberg’s more than 310,000 subscribers, who pay at least $20,000 a year for access to the terminals, now have access to those posts, which the company says are clearly identified as Twitter messages.
“‘The S.E.C.’s decision reflects the reality that we were dealing with in that this information is being distributed by companies and investors are consuming it and we needed to get it on the terminal,’ said Brian Rooney, the company’s core product manager for news, adding, ‘We’re not in a world where people live in a vacuum.’
“At the same time, the use of algorithms designed to peruse millions of sources of information like blogs and social media to analyze and execute trades is only becoming more widespread.”
Read more here.
by Liz Hester
Trading on the Chicago Board Options Exchange was delayed for more than three hours Thursday due to a software glitch, once again highlighted the fragile nature of making money trading.
Here are some of the details from Bloomberg:
The Chicago Board Options Exchange opened for trading three-and-a-half hours late today after a problem with its computer systems shut the derivatives market as its top executives gathered for an industry event in Las Vegas.
CBOE Holdings Inc (CBOE).’s exchange, which accounts for about 25 percent of options trading, said the technical problems were not the result of a computer hacker, spokeswoman Gail Osten said. Ed Provost, chief business development officer, said at the conference that a “software glitch” caused the outage. Trading in Standard & Poor’s 500 Index products started at 12:50 p.m. New York time and the rest of the exchange opened at 1 p.m. rather than the usual 9:30 a.m., CBOE said.
CBOE is the exclusive venue for options based on the Standard & Poor’s 500 Index and the so-called VIX (VIX) gauge of volatility. The delay highlights the fragility of U.S. equity exchanges in a week when a false report of explosions at the White House briefly wiped out $136 billion from the S&P 500 in about two minutes.
“We are doing zero business,” Greg Richards, who trades VIX and S&P 500 options as an institutional broker at Chicago- based PTR Inc. on the CBOE floor, said in an interview during the shutdown. “It is not good for the CBOE in a competitive atmosphere.”
The Wall Street Journal offered this context and what the delay could mean for the CBOE and the industry:
The system outage at CBOE was the latest in a spate of technology outages that have raised questions about the stability of the complex computer networks that underpin business in U.S. financial markets. The issues also came as CBOE’s functions as a regulator have been the subject of an investigation by the Securities and Exchange Commission, which is scrutinizing whether regulatory officials at the exchange maintained a too-cozy relationship with some customers.
The delayed opening meant that two critical tools for hedging stock-market risk—options on the S&P 500 index and the CBOE Volatility Index, or VIX—were unavailable to banks, institutions and trading firms on Thursday morning. Both options are traded solely on the Chicago-based exchange.
Financial firms had to hunt for alternatives such as options on similar exchange-traded funds, though traders said these generally are imperfect substitutes.
“Not being able to trade the VIX and SPX is a big deal,” said Mark Sebastian, chief operating officer of Option Pit, which provides tools for stock-options traders.
In communications with traders, the exchange cited a “download problem,” according to one trader who had received the message. An SEC spokesman said regulators were “monitoring the situation.”
The trading outage affected both floor and electronic trading, prompting several traders to complain that during past electronic outages, CBOE’s physical trading floor had been able to carry on.
“Unfortunately, all the traders that are there to provide liquidity were here this morning, but because of the evolution of electronic trading, customers couldn’t trade in and out of their positions this morning on the CBOE, which is pretty sad,” said Gavin Farley, an options trader for CMZ Trading, who works in the S&P options pit.
CNN Money quoted one trader as saying it was actually not that big of a deal that the exchange experienced delays:
Just days ago, on April 16, the exchange broke its record for volume, with 1,399,863 contracts changing hands.
One options trader, the head of trading at a major investment bank, said it wasn’t that unusual to see a trading delay in one of the 11 exchanges on which options are traded.
He says these types of delays happen once a month.
It’s generally not too disruptive since banks can just reroute orders from one exchange to another.
I find that argument a bit hard to believe since it’s the only exchange that trades VIX. Also, anytime confidence in the system is rattled, it’s a blow to the whole industry. While the problem likely had little effect on individuals, banks are likely seeing yet another weakness in the system with certain options only traded on one exchange. It will be interesting to see if some of the other exchanges try to step in and grab more share after today’s glitch.
by Chris Roush
Michael Scarchilli has been named editor in chief of The Bond Buyer, which provides news, data and analysis of the $3.7 trillion United States municipal finance market.
A story on its website states, “Scarchilli, an eight-year veteran of The Bond Buyer, takes the top editorial role effective immediately. He will lead a 25-member staff distributed across the nation, overseeing content development and creation for the brand’s online service and its daily digital and print editions. Scarchilli is charged with serving and expanding The Bond Buyer’s diverse readership base, which extends from public-sector finance officers to investment bankers and bond lawyers with online enhancements and deep coverage of the crucial issues facing the market.
“‘Adding my name to the long list of leaders of this 122-year-old institution is an absolute honor and privilege,’ said Scarchilli. ‘I look forward to spearheading The Bond Buyer’s continued development as a real-time online news service, and maintaining its long-standing reputation as required reading for participants in the municipal bond market.’
“Scarchilli was previously Managing Editor, responsible for the day-to-day operations of the brand’s web site and newspaper. In that role, he was a key contributor to the development of The Bond Buyer’s redesigned web site, which was introduced in June 2012. Among other things, he led the introduction of video content and redesigned the Daily Briefing e-newsletter to give subscribers easier access to exclusive content about bond sales, and national policy debates impacting the market. Before becoming an editor, Scarchilli was The Bond Buyer’s senior market correspondent, covering the cross-market fallout from the subprime debt crisis, and earlier was a regional reporter covering issuers in the Northeast.”
Read more here. He replaces Gavin Murphy.
by Liz Hester
Just weeks after entering settlement talks, the bankruptcy trustee for MF Global sued former CEO Jon Corzine for actions leading to the collapse of the brokerage.
Here’s the story from the New York Times:
The action by the trustee, Louis J. Freeh, comes just weeks after he agreed to postpone the lawsuit and enter mediation with Mr. Corzine. Now, by filing litigation that appeared to catch the MF Global executives off-guard, Mr. Freeh may have jeopardized those talks.
A spokesman for Mr. Corzine, Steven Goldberg, disputed the accusations and questioned why Mr. Freeh was even bringing the case. “We question why the trustee chose to file this lawsuit, which is filled with seriously flawed allegations, while he is participating in court-ordered mediation of these very claims.”
Mr. Freeh, who represents hedge funds and other creditors of MF Global, said on Tuesday that “the mediation process is ongoing,” and that it was “in the best interests of the Chapter 11 estates to file the complaint.”
Details of the allegations seem to come from a previously released report by Freeh, according to the Wall Street Journal story:
In the lawsuit, Mr. Freeh highlighted the alleged “acts and omissions” of the executives that he says “culminated in the business collapse of the company and the bankruptcies of the debtors.”
When the men were running MF Global, Mr. Freeh said they “dramatically changed” the company’s business plan without addressing “systemic weaknesses.”
Mr. Corzine, the suit alleges, engaged in “risky trading strategies” that strained MF Global’s liquidity. Mr. Freeh says the firm’s “inadequate” controls and procedures failed to properly monitor those strategies.
The lawsuit seeks to hold Mr. Abelow and Mr. Steenkamp, whom the suit calls Mr. Corzine’s “hand-picked deputies,” responsible for those controls and procedures.
“Between defendant Corzine’s arrival at the company and the commencement of the bankruptcies of the debtors, MF Global lost well in excess of a billion dollars in value, not including any shortfalls in customer funds,” the lawsuit alleges.
The lawsuit seeks damages from the men in an amount to be determined at trial. Any recoveries would go to the holding company’s creditors, not customers of its brokerage. MF Global has about $200 million in insurance coverage available to pay legal judgments.
The complaint appears to be drawn from a report into the origins of MF Global’s bankruptcy that Mr. Freeh released earlier this month. The document attributed much of the blame for the brokerage’s failure to Mr. Corzine.
Marketwatch.com had a thoughtful analysis of what the charges could mean to other Wall Street executives. Given the high profile nature of the CEO and the charges, I’m sure this will be closely watched in C-suites across the country. Here’s an excerpt:
The main issue, and the one that will be of the greatest import to Wall Street, is where risk-taking ends and negligence begins. MF Global bet $6.3 billion on European sovereign debt in the midst of a worsening credit crisis. Those sour bets led to the firm’s implosion in October 2011.
Was it bone-headed? Yes. Was is negligence and/or malfeasance? That is less clear.
The case may ultimately hinge on what managers knew and when they knew it. In the court filing, Freeh suggests management knew of faulty controls as early as a year before the firm’s collapse.
The Freeh lawsuit isn’t the only criticism of Corzine’s role in reshaping and, perhaps, destabilizing MF Global. Should it succeed, however, it would represent a seismic legal shift.
Wall Street CEOs just don’t get pinned for the fortunes of their firms and the fates of customers. They may lose a job, some reputation and suffer embarrassment, but they are not, in general, held responsible in a legal sense.
I’m sure there are more than a few CEOs watching the case who are nervous that Corzine entered talks only to have charges filed a few weeks later. The case could set precedence for other bankruptcies and holding executives responsible for actions. At the least, it’s a public setback for a well-known CEO.
by Chris Roush
Financial news company TheStreet Inc. announced Monday that it has acquired the financial newsletters and databases, The DealFlow Report, The Life Settlements Report and the PrivateRaise database from DealFlow Media Inc.
Financial terms of the deal were not disclosed.
“The DealFlow report covers the microcap equity markets including initial public offerings and private placements, while The Life Settlements Report focuses on life insurance settlements. The content of both newsletters will be made available to The Deal Pipeline subscribers. The target has 10 employees, half based in Petaluma, Calif., and the others in Woodbury, N.Y.
“DealFlow will continue to operate its DealFlow and Life Settlement conferences under a licensing agreement with The Deal. DealFlow founder and chief executive Steven Dresner will stay on during the transition period through a consulting arrangement. ‘The combination of our leading small cap finance content with The Deal’s M&A reporting is a natural fit,’ he said in a statement. TheStreet has used The Deal’s content as a growth platform to help increase revenue from subscription and licensing services.”
Read more here.
by Chris Roush
Kelly O’Mara of RIABiz writes about the launch of a publication called FA IQ by the Financial Times that is aimed at financial advisors.
O’Mara writes, “Financial Times-owned Money-Media has launched a free online publication aimed at independent financial advisors. Managing editor Joan Warner says that FA IQ, which made its debut April 11, will fill a different niche than Money-Media’s other investment-oriented publications, Ignites and FundFire, with very little cross-over among them. But in a crowded marketplace (which includes RIABiz), competitors are skeptical about the online publication’s chances of finding an audience.
“‘There’s lots of apples and oranges, and if all you come to market with is a different variety of orange, good luck,’ says Jim Lowell, who publishes a newsletter about Fidelity and edits Forbes’ ETF Advisor publication.
“Warner says that FundFire and Ignites, which are subscription-based publications, ‘already have a fairly substantial readership coming from advisors.’ However, FundFire is primarily about separately managed accounts, and Ignites serves the mutual fund industry. ‘Over the years, we just heard a clamoring [from advisors] for a publication of their own.’
“Warner is hoping that FA IQ, which focuses on practice management and client relationships, will meet that need. While other Money-Media publications are all relatively news-focused, FA IQ will do primarily ‘service-y’ articles with a timely element, she says.”
Read more here.
by Chris Roush
Nick Elliott, the Dow Jones managing editor overseeing private equity coverage, sent out the following staff announcement on Friday:
Private Equity has come a long way since Barbarians at the Gate was published in 1990, exposing the machinations behind a landmark leveraged buyout. It’s now a much bigger part of the business landscape and has spread across most industries and parts of the world. At Dow Jones we have the leading publications covering the goings-on in private equity, including Private Equity News, an online-and-print product that is the leading source of news for European private equity professionals.
We’re now looking for a London-based reporter/editor to lead news coverage. The weekly magazine, which feeds stories to Financial News, Private Equity Analyst, Dow Jones Newswires and the Wall Street Journal, requires someone with a strong focus on scoops and a track record of breaking stories in a secretive market. Editing experience is preferable but not essential. The candidate will help manage and edit stories as well as writing news and features. Applications to email@example.com.
by Liz Hester
Remember when the market was peaking? Well, it seems that all that optimism on corporate performance was misplaced. Several companies have reported earnings that missed analysts estimates, prompting investors to pair back exposure to stocks.
Let’s start with the Wall Street Journal’s coverage of the market:
Technology and consumer stocks led the market’s decline following a basket of lackluster earnings reports.
The Dow Jones Industrial Average fell 63 points, or 0.4%, to 14559, in late trading Thursday. The Standard & Poor’s 500-stock index slid nine points, or 0.6%, to 1543, on pace for its lowest level since early March. The Nasdaq Composite Index sank 40 points, or 1.3%, to 3164.
Stocks have seen big swings this week, alternating between gains and losses, starting with Monday’s 266-point decline, the Dow’s biggest of the year. Tuesday’s rebound was nearly washed away by Wednesday’s 138-point drop for the blue chips.
Quarterly earnings reports from a host of major corporations set the tone of trading.
Through Thursday morning, first-quarter earnings growth for 82 of the S&P 500′s companies had declined 0.4%, according to FactSet, on pace to mark the second year-over-year decline in earnings in the past three quarters. Meanwhile, corporate revenue is expected to rise 3.2% in the first quarter, well below growth of 6% in the first quarter last year, according to S&P Capital IQ.
“The revenue side of the equation looks challenged on the whole,” said Bill Stone, chief investment strategist at PNC Asset Management Group. “That’s a testament, unfortunately, to a global economy that continues to struggle.”
Reuters decided that the declines were due to “weak economic data” and said it was the third day of losses:
Stocks fell on Thursday for the third day this week after data showed signs of slower growth ahead for the U.S. economy, while bearish technical signals added to doubts about the market’s strength.
Bloomberg led with earnings, but included the Philadelphia region manufacturing numbers, then returned with context about the quality of earnings this season.
Stocks kept losses after a measure of manufacturing in the Philadelphia region expanded at a slower pace and the index of U.S. leading indicators unexpectedly declined for the first time in seven months. The S&P 500 fell below its 50-day moving average for the first time this year. That level, currently at around 1543, is watched by some analysts to gauge the trend of the market.
Almost 30 companies in the S&P 500 were scheduled to post results today. Of the 82 that have reported since the season began, 74 percent have beaten analysts’ estimates for profit and 49 percent have exceeded sales forecasts, according to data compiled by Bloomberg. Analysts project first-quarter results dropped 1.4 percent, the first contraction since 2009.
The Chicago Board Options Exchange Volatility Index (VOL), or VIX, increased 4.9 percent to 17.31. The gauge briefly erased losses for the year after climbing as much as 10 percent. The VIX, which moves in the opposite direction to the S&P 500 about 80 percent of the time, reached a six-year low in March and has since risen 53 percent.
“When we were heading into this earnings season, the estimates had come down, but the S&P itself was still in a situation where sentiment was high and correcting,” Sam Turner, a fund manager with Richmond, Virginia-based Riverfront Investment Group LLC, said in the phone interview. His firm manages $3.7 billion. “That can play itself out with a consolidation.”
And for the international perspective, let’s look at the Financial Times, which said investors were worried about global growth prospects:
Equity and commodity markets in the US and Europe had a choppy time as investors struggled to shake off lingering concerns about the prospects for global economic growth.
Gold also experienced a fresh bout of volatility but managed to keep intact its recovery from a two-year low struck earlier this week. The yellow metal was up 0.8 per cent to $1,387 an ounce, although silver edged back slightly.
The latest economic reports out of the US did little to quell worries that a slowdown could be under way.
The Philadelphia Federal Reserve’s April survey of manufacturing activity weakened slightly while the index of leading indicators for March also fell. Meanwhile, initial jobless claims edged up slightly last week – the survey period for the Bureau of Labour Statistics’ April non-farm payrolls report.
“The spring and summer dips in economic activity that dominated 2011 and 2012 look to be repeating this year again,” said Steven Ricchiuto, chief economist at Mizuho Securities USA.
The data kept alive the sense of uncertainty in the markets prompted earlier in the week by unexpectedly weak Chinese GDP figures, some worrying numbers from Germany and the International Monetary Fund’s downgrade to its 2013 global growth forecasts. Indeed, Andrew Kenningham at Capital Economics argued that the IMF’s projections – while far from bullish – still looked too optimistic.
Either way, seems some of that investor optimism is heading out the door and money is being pulled out of the markets. No matter what you blame it on, it seems the stock market party might be over.
by Chris Roush
Dan Solin writes for The Huffington Post that CNBC “Mad Money” host Jim Cramer‘s talk at the recent Society of American Business Editors and Writers’ conference in New York was full of misstatements, including when he said he was among the “best of the best.”
Solin writes, “If Cramer was really ‘the best of the best,’ he would disclose the puny odds of ‘beating the market’ by relying on his stock and funds picks and those of his colleagues. If you are relying on his advice, you are chasing rainbows. Instead, you should heed the advice of Jonathan Clements, the former personal finance columnist at The Wall Street Journal, who said: ‘It’s the big lie that, repeated often enough, is eventually accepted as truth. You can beat the market. Trounce the averages. Outpace the index. Beat the street. An entire industry strokes this fantasy.’
“It’s your choice. You can follow the bloviating hype of Cramer or the sound research of William F. Sharpe and many others. Which do you think is really ‘the best of the best’?”
Read more here.