Top Stories: Business and Finance
The following are the day's top business stories:
1. Stocks Advance After Mubarak Resigns; Egyptian Debt-Default Swaps Decline 2. U.S. Consumer Confidence Hits Eight-Month High on Job Outlook, Stock Gains 3. Thain Says He Should Have `Grabbed, Shaken' U.S. Regulators to Aid Lehman 4. Level Global Investors Will Close $4 Billion Hedge Fund After Raid by FBI 5. Freescale Seeks to Raise $1.15 Billion in Biggest Tech IPO Since Google's 6. Vietnam's Record Devaluation Adds Urgency for Action on Prices, IMF Says 7. Anil Ambani's Reliance Blames Brokers' `Baseless' Claims for Stock Plunge 8. Freeman Said to Make $22.7 Million on Sigma Designs Inside Trades at Sonar 9. Bahrain Bonds to Rebound as Egypt Contagion Fades, Shaikh Al Khalifa Says 10.Workforce Dropouts Show Unemployment Rate in U.S. Is Too Low: Chart of Day 11.Madoff `Surrogate Father' Levy Moved Billions Through Account, SIPC Says 12.Bustling Business of Cheating This Time Has Nothing to Do With Wall Street
1. Stocks Advance After Mubarak Resigns; Egyptian Debt-Default Swaps Decline
Stocks rose, reversing an early drop, and the cost to insure Egyptian debt from default declined as the resignation of the nation´s President Hosni Mubarak and a jump in U.S. consumer confidence bolstered investor optimism. The Standard & Poor´s 500 Index rose 0.6 percent to 1,329.15 at 4 p.m. in New York, its highest level since June 2008. An exchange-traded fund tracking Egyptian equities rallied 4.5 percent and the cost of credit-default swaps on the nation´s debt fell 16 basis points to 322, according to CMA. The Dollar Index climbed 0.2 percent and 10-year Treasury yields fell seven basis points to 3.64 percent. Oil slid to a 10-week low. Equities turned higher as Mubarak handed power to the military, bowing to demands of protesters who have occupied central Cairo for the past 18 days to demand an end to his 30- year rule. The resignation eased concern that tensions will spread throughout a region that holds more than 50 percent of the world´s oil reserves. Stocks began rebounding earlier as consumer sentiment climbed to an eight-month high. "We should be able to forget about Egypt, at least in the near term, and focus on improving economic fundamentals," said John Praveen, the Newark, New Jersey-based chief investment strategist at Prudential International Investments Advisers, a unit of Prudential Financial Inc., which oversees $750 billion. "The consumer confidence report today was just one of a series of very positive figures that show that the recovery is on track. That should bring some short-term relief despite the uncertainties that we may still have about other governments in the Middle East and oil."
2. U.S. Consumer Confidence Hits Eight-Month High on Job Outlook, Stock Gains
Consumer confidence rose in February to the highest level in eight months as decreasing unemployment lifted Americans´ spirits. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment for the month climbed to 75.1 from 74.2 in January, in line with the median forecast of economists surveyed by Bloomberg News. Another report showed the trade gap widened in December for a second month on a jump in oil imports. The sentiment data showed households´ perceptions of the economy and job market turned positive this month for the first time in seven years, signaling consumer spending may keep contributing to the expansion. The increase in confidence and Egyptian President Hosni Mubarak´s resignation helped stocks advance, extending a second straight weekly gain. "At the end of the day, people spend on how they feel about their job prospects, and additional gains in confidence are likely to provide further support for spending," said Millan Mulraine, senior U.S. strategist at TD Securities in New York, who projected the sentiment index would climb to 75.
3. Thain Says He Should Have `Grabbed, Shaken' U.S. Regulators to Aid Lehman
Merrill Lynch & Co.´s former Chief Executive Officer John A. Thain said Wall Street leaders should have tried harder to convince U.S. regulators they needed to prevent the failure of Lehman Brothers Holdings Inc. Banking chiefs weren´t "strong enough" during 2008 meetings in insisting that then-Treasury Department Secretary Henry Paulson reverse his opposition to a U.S.-led rescue of Lehman, Thain told the Financial Crisis Inquiry Commission, according to audio files released yesterday. Lehman, based in New York, filed the largest bankruptcy in U.S. history, roiling markets and helping contribute to the bailout of insurer American International Group Inc. and the purchase of Merrill by Bank of America Corp. Days before Lehman´s September 2008 collapse, Paulson convened CEOs including Thain, Lloyd Blankfein of Goldman Sachs Group Inc. and Jamie Dimon of JPMorgan Chase & Co. to try to get the banks to help fund a rescue. "We collectively, the group of us, we should have just grabbed them and shaken them and said, `Look, you guys cannot do this,´" Thain told FCIC interviewers in a Sept. 17, 2010, interview. "Allowing Lehman to go bankrupt was the single biggest mistake of the financial crisis."
4. Level Global Investors Will Close $4 Billion Hedge Fund After Raid by FBI
Level Global Investors LP, among the hedge funds raided by the FBI in November as part of a federal insider-trading probe, decided to close and return cash to clients, according to a letter sent to investors. David Ganek, 47, who founded the $4 billion fund in 2003 with Anthony Chiasson, 37, after they both left SAC Capital Advisors LLC, said he expects the firm to sell all of its holdings by the end of March. "Unfortunately the ongoing government investigation presents significant challenges to maintaining our collective focus," Ganek said in a letter today. Level Global, which last year sold a stake to a leveraged- buyout fund run by Goldman Sachs Group Inc., was raided in November by the Federal Bureau of Investigation. The hedge fund had received withdrawal requests of about 20 percent of its assets for the end of March, according to a person familiar with the matter who asked not to be identified because the information is private.
5. Freescale Seeks to Raise $1.15 Billion in Biggest Tech IPO Since Google's
Freescale Semiconductor Inc., the chipmaker partly owned by Blackstone Group LP, plans to raise $1.15 billion in what would be the biggest initial share sale by a U.S. technology company since Google Inc. went public in 2004. The company will use proceeds to pay down the balance of a $764 million loan maturing next year and other debt, it said in a regulatory filing today. Freescale has total debt of $7.62 billion, according to the filing. Chief Executive Officer Rich Beyer aims to reduce the liabilities that have resulted in losses for the Austin, Texas- based company. He´s trying to take advantage of a rally in chip stocks that began last year. The Philadelphia Semiconductor Index, which tracks the performance of 30 of the industry´s largest companies, has climbed 51 percent since August. "Things have improved in the semiconductor industry and Freescale´s been a beneficiary of that," said Dave Novosel, an analyst in Chicago with Gimme Credit LLC.
6. Vietnam's Record Devaluation Adds Urgency for Action on Prices, IMF Says
Vietnam´s devaluation of the dong yesterday by about 7 percent, the most since at least 1993, needs to be followed with steps to curb inflation, the International Monetary Fund and Citigroup Inc. said. The dong slumped to as weak as 20,893 per dollar, compared with 19,490 on Feb. 10, and closed at 20,875 in Hanoi yesterday. The State Bank of Vietnam fixed the reference rate for the currency at 20,693 versus 18,932 the previous day, or 8.5 percent weaker. The trading band for the currency was narrowed to 1 percent on either side of the rate from 3 percent previously. Vietnam´s fourth devaluation in 15 months to curb the trade deficit and narrow the gap between official and black-market exchange rates runs the risk of spurring inflation from almost a two-year high. The IMF yesterday called for steps to check price gains, while Citigroup said the central bank should have increased interest rates at the same time. "Where is the rate hike?," Johanna Chua, the Hong Kong- based head of Asian economic research at Citigroup, said in a note. "The devaluation alone does not solve the fundamental problems of lack of domestic confidence in the dong."
7. Anil Ambani's Reliance Blames Brokers' `Baseless' Claims for Stock Plunge
Anil Ambani´s group said it knows the brokers who spread "sensational charges" after a $2.6 billion loss in value Feb. 9. The statement came after analysts predicted flagship Reliance Communications Ltd. may post a sixth straight drop in profit Monday. Reliance ADA Group said brokers sent e-mails and text messages, and made telephone calls disseminating "baseless" accusations about its firms, according to an e-mailed statement yesterday. No brokers or brokerages were named in the statement, which also didn´t detail the allegations. Ambani´s group, which has power, mobile-phone and infrastructure businesses, sought an investigation by India´s capital-markets regulator and "punitive interim orders against guilty brokers." Reliance Communications plunged 15 percent this week, the most since Nov. 2009, on expectation profit will drop raising concerns about reducing loans by India´s most indebted mobile-phone operator. "Earnings are immaterial now," said Jigar Shah, an analyst with Kim Eng Securities India Pvt. in Mumbai who has a "sell" rating on the shares. "What is critical is how they are able to reduce debt levels."
8. Freeman Said to Make $22.7 Million on Sigma Designs Inside Trades at Sonar
Noah Freeman, the Boston hedge-fund manager who pleaded guilty this week to securities fraud, made $22.7 million for Sonar Capital Management LLC on illegal insider trades in shares of semiconductor maker Sigma Designs Inc., a person with knowledge of the case said. Freeman, 34, did the alleged trading in the Milpitas, California-based company in 2006 and 2007 while he was a managing director with Sonar Capital, according to the person, who asked not to be named because the information hasn´t been made public. Freeman left the firm in May 2008 and a month later joined the Boston office of Steven A. Cohen´s SAC Capital Advisors LP, according to data compiled by Bloomberg. The alleged Sigma trades accounted for most of a $30 million scheme involving hedge-fund managers and technology firm employees selling material, nonpublic information as they moonlighted as so-called expert-network consultants, according to a civil complaint filed Feb. 8 by the U.S. Securities and Exchange Commission. On the same day, the U.S. Attorney in Manhattan unveiled criminal securities-fraud charges against Freeman and three other hedge-fund employees. "Instead of competing on a level playing field with other investors, these hedge-fund managers sought to illegally trade today on what others would not learn until tomorrow," Robert Khuzami, the SEC´s head of enforcement, said in a statement announcing the complaint.
9. Bahrain Bonds to Rebound as Egypt Contagion Fades, Shaikh Al Khalifa Says
Bahrain´s Islamic bonds will rebound as soon as next week after tumbling when anti-government protests in Egypt started, said Shaikh Mohammed bin Essa Al Khalifa, chief executive of the nation´s Economic Development Board. "This is a classic case of `buy the rumor, sell the fact,´" Al-Khalifa, 41, said in an interview today at Bloomberg´s headquarters in New York before President Hosni Mubarak resigned. "People are fearing that this will spread to Bahrain from Egypt. What many people don´t understand is we actually have one of the most liberal societies in the Gulf. It spiked, but it will come back down." Bahrain´s borrowing costs rose as investors speculated tension between the country´s Shiite majority and the Sunni minority ruling party would increase as political turmoil spread in the region. Bahrain´s 6.247 percent five-year Islamic bonds due in June 2014 have lost 1.9 percent since Jan. 25, when Egyptian protesters began demanding Mubarak´s ouster. The country´s dollar bonds due in 2020 declined, pushing yields up 99 basis points, or 0.99 percentage point, to 6.08 percent, the highest since its issuance in March. The debt selloff will be temporary because Bahrain is embracing political reform, cutting the unemployment rate and focusing on economic growth, said Al-Khalifa, who heads the public agency responsible for supporting growth in Bahrain.
10.Workforce Dropouts Show Unemployment Rate in U.S. Is Too Low: Chart of Day
U.S. joblessness would be much higher if Americans dropping out of the workforce were taken into account, according to Albert Edwards, a global strategist at Societe Generale. "The impression that unemployment has fallen" results primarily from a drop in the participation rate, Edwards wrote yesterday in a report. The rate is the percentage of working-age people who are looking for a job or already have one. The CHART OF THE DAY compares the unemployment rate, as compiled monthly by the Labor Department, with adjusted figures that assume participation was unchanged in the past decade. The adjustment produces a 12.8 percent jobless rate for January, as the top panel shows. The actual rate was 9 percent after a two- month drop of 0.8 percentage point, the steepest since 1958. Labor-force participation appears in the bottom panel. The rate declined last month to 64.2 percent, the lowest since 1984. The adjusted unemployment data is based on a rate of 67 percent, the average for 1996 through 2000.
11.Madoff `Surrogate Father' Levy Moved Billions Through Account, SIPC Says
A New York real estate broker described as a "surrogate father" to Bernard Madoff transferred more than $83 billion in and out of his account with the convicted con man from 1998 to 2001, the Securities Investor Protection Corp. said in a letter. Norman F. Levy´s transactions in those years dwarfed those of all other Madoff clients. The others put in a total of $10.2 billion and took out $8.5 billion during the same period, according to a Jan. 24 letter from the SIPC to U.S. Representative Scott Garrett, a Republican from New Jersey, who is looking into the fraud. Levy died in 2005 at age 93. Suspicious transactions by the customer dealing with Madoff´s firm "most often and in the largest dollar amount" during that time should have alerted JPMorgan Chase & Co. to the Ponzi scheme, according to allegations in a complaint against the bank demanding $6.4 billion for its role in managing Madoff´s main account. Irving Picard, named as the trustee to liquidate Madoff´s firm, claims in the complaint that JPMorgan, the second-largest U.S. bank by assets, was aware of "what appeared to be a check- kiting scheme" in December 2001 between Madoff and that customer. The client, identified only as "Customer 1," also engaged in "suspicious loan activity" involving Customer 1 and another longtime Madoff friend, according to the complaint, which was unsealed last week.
12.Bustling Business of Cheating This Time Has Nothing to Do With Wall Street
Do you want to have an affair? After hearing an ad on Howard Stern´s radio show or seeing a schlocky commercial on late-night TV, you might find yourself on AshleyMadison.com -- the premier "dating" website for aspiring adulterers. Type in the URL, and as the page loads a gauzy violet backdrop appears with a fuzzy image of a half-dressed couple going at it beyond a hotel doorway. "Join FREE & change your life today. Guaranteed!" Setting up a profile costs nothing and takes about 12 seconds, Bloomberg Businessweek reports in its Feb. 14 edition. First you check off your availability status: "attached male seeking females," "attached female seeking males," or, even though the concept of the site is that all users are in relationships and therefore equally invested in secrecy, "single female seeking males." Next you´re asked for location, date of birth, height and weight, and whether you´re looking for something "short term," "long term," "Cyber affair/Erotic Chat," "Whatever Excites Me," and so on. If you´re like me, you choose a handle based on the cupcake you most recently ate -- "redvelvet2" -- and then shave a few years and pounds off your numbers.
-0- Feb/12/2011 00:35 GMT