If youre really rich, the market turmoil of late may threaten your retirement lifestyle. But if youre middle class, the effect is likely to be smaller. Heres why.
Saturday, March 22, 2008
Wednesday, March 12, 2008
New arrest in SocGen trading scandal
(Reuters) - Police arrested another employee of Societe Generale on Wednesday as they probe the world's biggest rogue trading scandal, Paris prosecutors said.
In January, France's second-biggest listed bank SocGen unveiled 4.9 billion euros ($7.53 billion) of losses which it blamed on rogue deals carried out by Jerome Kerviel, a 31-year old junior trader at the bank.
The losses have made SocGen a possible bid target.
The Paris prosecutor's office identified the latest person being held as a trader from a subsidiary of SocGen.
A source close to the matter said the person being held works for SG Securities, the bank's share brokerage arm.
SocGen declined to identify the person or the division.
Societe Generale Says Another Employee Held by Police
(Bloomberg) -- Societe Generale SA, the French bank stung by a record trading loss of 4.9 billion euros ($7.6 billion), said a second employee has been taken into police custody as part of the investigation into unauthorized trades.
The headquarters of France's second-biggest bank in La Defense, just outside Paris, were searched by police today, who took some documents, Societe Generale spokeswoman Laura Schalk said in an interview.
The latest development deepens a probe that began after the bank said in January that 31-year-old trader Jerome Kerviel amassed 50 billion euros in trades backed by fake hedges and false documents. Unwinding his bets resulted in the biggest trading loss in banking history and forced Societe Generale to replenish depleted capital.
``It's normal for the investigation to widen, and we will see where this brings us, given that many people said Kerviel could not have acted alone,'' said Arnaud Scarpaci, who helps manage about $235 million at Agilis Gestion SA in Paris. ``At an image level, it's not the best for the company.''
Societe Generale failed to follow up on 75 warnings on bets by Kerviel, independent board members concluded in a report last month. While the board has twice turned down Chairman Daniel Bouton's offer to resign, the document highlighted the shortcomings of Societe Generale's management supervision that allowed Kerviel to forge documents and emails undetected for more than two years.
Unidentified Broker
The Societe Generale employee taken into custody today is the second broker to be questioned in the Kerviel case. Moussa Bakir, a 32-year-old broker at Newedge, was questioned and released last month. Kerviel passed trades through Societe Generale's Fimat unit, which merged in January with Credit Agricole SA's futures brokerage to form Newedge.
The police are questioning the second broker, Isabelle Montagne, a spokeswoman for Paris prosecutors, said today in a telephone interview. She declined to name the broker. She said the broker was taken into custody mid-morning and would be held for 24 hours. The detention could be extended to up to 48 hours.
Kerviel, who admitted to exceeding his trading limits and faking documents to show his bets were covered by hedges, has been interrogated six times since he was incarcerated on Feb. 8. He has been charged with hacking into the bank's computers, falsifying documents and breach of trust.
The latest development comes just two days before a hearing at the Paris appeals court to consider his release.
Dollar Falls to Record Low on Concern Fed Package Won't Succeed
(Bloomberg) -- The dollar fell to a record below $1.55 per euro on concern that the Federal Reserve's plan to provide funds to banks won't be enough to break the gridlock in money-market lending and stem credit losses.
The U.S. currency erased more than half of yesterday's 1.6 percent rally versus the yen, the biggest in six months, which came after the Fed said it would extend $200 billion of credit to financial institutions to spur lending. Traders bet the Fed will cut rates by as much as three quarters of a percentage point next week to avert a recession, while the European Central Bank keeps borrowing costs unchanged.
``It's difficult for the dollar to gain traction,'' said Paresh Upadhyaya, who helps manage $50 billion in currency assets at Putnam Investments in Boston. ``The Fed is probably running out of options; the market is fixated on interest-rate differentials, which are clearly negative for the dollar.''
The dollar fell to $1.5504 per euro, the weakest since the euro's 1999 debut, and traded at $1.5492 at 10:12 a.m. in New York, from $1.5338 yesterday. The previous historic low was set yesterday. It dropped to 102.32 yen from 103.42, within one yen of an eight-year low. The euro traded at 158.59 yen from 158.61.
Euro gains were limited after Luxembourg Finance Minister Jean-Claude Juncker said he is ``very vigilant'' on the euro in current circumstances and that exchange rates should reflect fundamentals. He spoke to reporters in Brussels.
Gulf Pegs
The yen climbed against major currencies, including a 1.3 percent rally versus South Africa's rand, as a government report showed Japan's economy grew an annualized 3.5 percent last quarter, faster than the 2.3 percent median forecast of economists surveyed by Bloomberg News.
Forward contracts to buy United Arab Emirates dirhams rose the most in two weeks after Economy Minister Sultan Bin Saeed Al Mansouri said the dirham's dollar peg is ``contributing'' to record inflation.
A Qatari official denied in a telephone interview that Gulf central bankers will consider dropping the dollar peg when they meet next week. Gulf countries are under pressure to revalue their currencies or drop dollar pegs after the U.S. currency fell 10 percent against the euro last year and the Fed cut rates. The weaker dollar boosts the cost of imports from Europe, while Gulf states have to follow rate cuts, stoking inflation.
The euro extended its gains against the dollar earlier after a European Union report showed industrial production in the region increased for the first time in three months in January. It rose 0.9 percent from the prior month, more than twice the rate forecast by economists surveyed by Bloomberg.
`Stay Short Dollars'
The euro also rose on speculation ECB President Jean-Claude Trichet will highlight inflation risks today at a press conference. ECB council member Axel Weber yesterday said that he sees ``no room'' to lower rates.
The ECB's main rate is 1 percentage point above the Fed's 3 percent target rate for overnight loans between banks.
Policy makers in the U.S., U.K., Canada, Switzerland and the euro region agreed yesterday on a second round of emergency- loans to curb rising money-market rates. The Fed said it will lend Treasuries through a new lending tool and widen the collateral it accepts to include mortgage-backed securities.
``Read the need for such new measures as being a symptom of what ails the world and not a panacea for its problems,'' said David Simmonds, the London-based global head of currency research at Royal Bank of Scotland Plc, the world's fourth- biggest foreign-exchange trader. ``Stay short dollars.''
Monday, March 10, 2008
Blackstone says tough conditions hit results
(Reuters) - Private equity and real estate company Blackstone Group LP (BX.N: Quote, Profile, Research) posted lower-than-expected quarterly results on Monday, citing tough market conditions and a write-down of bond insurer FGIC, and said it did not know when business would improve.
Under a measure known as economic net income (ENI), Blackstone earned a fourth-quarter profit of $128.2 million, or 8 cents a share, compared with a pro forma adjusted figure of $894.9 million, or 72 cents, a year ago.
Analysts polled by Reuters had expected it to report 16 cents a share.
"Lack of available financing in the U.S. and Europe for large leveraged transactions limited our transaction fees," Blackstone's Chairman and Chief Executive Stephen Schwarzman said in a statement. "Difficult market conditions in the U.S. and Europe continue in 2008 and there is little visibility on when these conditions might improve."
The company cited decreases in the value of Blackstone's portfolio investment in Financial Guaranty Insurance Company, which was hit by turmoil in the credit markets, and lower net appreciation of portfolio investments in other sectors as compared with the prior year.
ENI is net income excluding income taxes, noncash charges related to vesting of equity-based compensation and amortization of intangible assets. Blackstone prefers to focus on ENI because of the huge payouts associated with its more than $4 billion initial public offering in June.
On a generally accepted accounting principles basis, Blackstone posted a net loss of $170 million. That compares with net income of $1.18 billion a year earlier.
McDonald's February Sales Increase 12%, Led by Europe
(Bloomberg) -- McDonald's Corp.'s February sales rose more than analysts estimated as the world's biggest restaurant company lured customers with burgers and chicken sandwiches in Europe and breakfast in China.
The stock rose the most in more than a month in New York trading.
Sales at U.S. outlets open more than 13 months rose 8.3 percent, the Oak Brook, Illinois-based company said today in a statement. Comparable-store sales in Europe advanced 15 percent while gaining 11 percent in the region encompassing Asia, the Middle East and Africa. Last month's extra day for the leap year added 4 percentage points to worldwide same-store sales.
Specialty burger and chicken sandwiches spurred sales in Europe, McDonald's largest region by revenue, while breakfast boosted sales in China and longer hours helped out in Australia. In the U.S., a McSkillet breakfast burrito promotion and dollar- menu advertising lured consumers pinched by declining home values and higher fuel prices.
``McDonald's put up another remarkably strong result in Europe,'' Jason West, an analyst at Deutsche Bank Securities, wrote in a note today. The U.S. results suggest ``McDonald's is not losing share to U.S. competitors as some may have feared.''
McDonald's climbed $1.79, or 3.4 percent, to $54.06 at 10:14 a.m. in New York Stock Exchange composite trading, the biggest increase since Jan. 31. The stock dropped 11 percent this year through last week after rising in each of the past five years.
The median estimate of four analysts in a Bloomberg survey was for an increase of 7.3 percent in same-store U.S. sales.
Oil Rises to Record $107 as Returns Outpace Financial Markets
(Bloomberg) -- Crude oil rose to a record $107 a barrel in New York as investors purchased futures because the returns have outpaced those of financial markets.
Oil in New York has surged 77 percent over the past year as the S&P 500 and Dow averages dropped. Hedge-fund managers and other large speculators increased net-long positions, or bets on higher oil prices, in the week ended March 4, a Commodity Futures Trading Commission report showed.
``We're witnessing an ongoing flow of fund buying, which isn't particularly motivated by the particulars of the petroleum market,'' said Tim Evans, an energy analyst at Citigroup Global Markets Inc. in New York. ``Prices have rallied to such an extent where sellers have backed off. Any time prices go lower the buyers come right back into the market.''
Crude oil for April delivery rose $1.36, or 1.3 percent, to $106.51 a barrel at 10:55 a.m. on the New York Mercantile Exchange. Futures surged to $107 a barrel today, the highest since trading began in 1983.
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