The U.S. and China aren't to blame for the sharp appreciation in currencies in nations like Brazil, said World Bank President Robert Zoellick, who also urged Group of Seven nations to set a model for emerging markets on currency policies.
'I don't think (currency appreciation in Brazil and elsewhere) is driven either by the Fed or primarily by Chinese policies,' Mr. Zoellick said, referring to the U.S. Federal Reserve Board. In an interview with The Wall Street Journal ahead of the World Bank and International Monetary Fund spring meetings, he added, 'The greatest driver (is) fundamental recovery and growth dynamics.'
The Brazilian real and others currencies are appreciating rapidly, Mr. Zoellick said, because growth in emerging markets is so much faster than it is in wealthy nations. Capital flows to the faster-growing nations, boosting the value of their currencies, he added.
Debate over currency policy is likely to be a big part of the Washington gatherings, which include meetings of the G-7 industrialized nations and the broader Group of 20 nations. Some developing nations blame the ultra-low interest rates of the Fed on the one hand and China's undervalued currency on the other hand for producing a flood of capital into their countries, which is hard for them to manage.
Mr. Zoellick urged China to 'move toward a flexible exchange rate and appreciate its currency.' But he said the pace and depth of currency appreciation depends on China's ability to fundamentally shift its growth model so it depends less on investment and exports and more on domestic consumption. China's leaders have recognized that such changes are in the country's long-term interest, but the government has made little progress in making the transition.
Mr. Zoellick said the World Bank is working with Chinese authorities to help make structural changes. The organization is offering advice on pension systems, so consumers won't feel they have to save so much for their old age, and urging China to change its dividend policy for its state-owned companies, so the firms pay more of their profits to the government. That money could be used to fund social programs, many analysts have urged.
Unless China feels that its economy depends less on a cheap currency to help exporters, Mr. Zoellick said, it will be wary of letting its currency appreciate faster.
'Rather than endlessly debate (the issue of Chinese exchange rates), one wants to explain to China and others the benefits of flexible exchange rates and independent monetary policies, including dealing with things like inflation,' he said. 'Then you can encourage the structural change that they think is an important prerequisite' for freeing up their currencies.
Mr. Zoellick also argued that the G-7--the U.S., Canada, Britain, France, Germany, Italy and Japan--could help set standards in currency policy that ultimately would be adopted by emerging markets. 'The G-7 should have an understanding or norms' on currency policy, he said. 'They should agree to have flexible exchange rates and not intervene unless they all agree' to do so, as occurred during the recent intervention to halt the rise in value of the yen.
'Then they can try to move emerging markets toward (those norms),' he said, recognizing the process will take some time.
Monday, April 11, 2011
Sunday, April 10, 2011
DJ Late Quake Leaves Tokyo on Edge, Again
With the clock ticking round toward midnight, nearly four weeks after the March 11 disaster, and no major alarms at the ravaged Fukushima Daiichi nuclear plant for many a day, most Tokyoites were settling down on a quiet, pleasant spring night Thursday.
At 11:32 p.m. local time, though, things changed in an instant. The magnitude 7.4 earthquake that shook the coast off Miyagi prefecture began to slowly rattle central Tokyo buildings and residents once again, growing to a silent, growling intensity stretching into minutes in the biggest tremor the capital has felt since the cycle of scores of quakes began. (The U.S. Geological Survey later downgraded Thursday’s quake to 7.1.) The menace was real, and all too familiar, the tension that haunted the city in the early hours and days after March 11 snapping back immediately, as if it never left.
Some TV channels quickly shifted to by now expected earthquake programming: footage of newsrooms shaking vigorously, concerned workers holding on to desks, monitors and papers, cutting away to long shots from remote, high-placed cameras in distant towns rocking violently.
With tsunami warnings issued, but for waves much smaller than those that hit March 11, other channels opted to stick with regular broadcasts ─ mostly game shows or light-hearted comedy programs at this time of the evening ─ but with a map of the affected area super-imposed on screen.
Still, Twitter again buzzed with messages from and for concerned Tokyoites. State broadcaster NHK swiftly reinstated the English-language programming it ran for many days after the 9.0 March 11 earthquake and tsunami.
At 11:32 p.m. local time, though, things changed in an instant. The magnitude 7.4 earthquake that shook the coast off Miyagi prefecture began to slowly rattle central Tokyo buildings and residents once again, growing to a silent, growling intensity stretching into minutes in the biggest tremor the capital has felt since the cycle of scores of quakes began. (The U.S. Geological Survey later downgraded Thursday’s quake to 7.1.) The menace was real, and all too familiar, the tension that haunted the city in the early hours and days after March 11 snapping back immediately, as if it never left.
Some TV channels quickly shifted to by now expected earthquake programming: footage of newsrooms shaking vigorously, concerned workers holding on to desks, monitors and papers, cutting away to long shots from remote, high-placed cameras in distant towns rocking violently.
With tsunami warnings issued, but for waves much smaller than those that hit March 11, other channels opted to stick with regular broadcasts ─ mostly game shows or light-hearted comedy programs at this time of the evening ─ but with a map of the affected area super-imposed on screen.
Still, Twitter again buzzed with messages from and for concerned Tokyoites. State broadcaster NHK swiftly reinstated the English-language programming it ran for many days after the 9.0 March 11 earthquake and tsunami.
Wednesday, April 6, 2011
Cleopatra starring Jolie confirmed to "Yu-po, " Taylor Tribute
Angelina Jolie to play Cleopatra - Marc Antony still a secret
Angelina Jolie has signed to play Cleopatra, but is not known yet who will be her king. Although there are four candidates for this role but is not yet known who will play Marc Antony. So here comes the big question...Who should wear Marc Antony`s gladiator sandals?
It's official: Angelina Jolie has signed an agreement whereby it undertook to interpret Queen Cleopatra. Ill-intentioned people haven`t lost the opportunity to launch and gave negative comments,saying that Angelina and Cleopatra have something in common: Both have seduced married men! But even so we cann`t stop wondering who will be her king! First, we think of Brad Pitt, star of 'Troy' and Jolie's husband. We already know that Angelina`s husbund looks very sexy in a toga, and director David Fincher will never need to worry about the chemistry between the two on the set, just thinking about the movie Mr. and Mrs. Smith where they seem to be the perfect pair .
Another actor who could be Cleopatra`s partner on the big screen is George Clooney, an friend of Hollywood actress . He earned the trust and sympathy of the audience through movies like 'The Red
Colin Firth, awarded last month an Oscar for his performance in "King's speech" is the fourth actor who could be Angelina Jolie partener in Cleopatra. .
Angelina Jolie isn`t on her first interpretation of a historical character. She was the mother of Alexander the Great in "Alexander. "
Cleopatra is a historical figure of great renown and many famous actresses and gave live to this great character so far on the big and small screens. Tedda Bara, Leonor Varela, Vivien Leigh, Elizabeth Taylor and Monica Bellucci have had the most success by giving life to this famous character.
Brangelina confess and said that she wants to play the Egyptian queen in an utterly different from Elizabeth Taylor, arguing that it could never be as "pretty" as her famous predecessor. Unlike the famous Cleopatra in 1963 played by Elizabeth Taylor, the new project will be based on a screenplay adapted from the biography of Cleopatra: A Life, written by Stacy Schiff, and will focus on the legendary queen cunning in politics and business.
Angelina Jolie has signed to play Cleopatra, but is not known yet who will be her king. Although there are four candidates for this role but is not yet known who will play Marc Antony. So here comes the big question...Who should wear Marc Antony`s gladiator sandals?
It's official: Angelina Jolie has signed an agreement whereby it undertook to interpret Queen Cleopatra. Ill-intentioned people haven`t lost the opportunity to launch and gave negative comments,saying that Angelina and Cleopatra have something in common: Both have seduced married men! But even so we cann`t stop wondering who will be her king! First, we think of Brad Pitt, star of 'Troy' and Jolie's husband. We already know that Angelina`s husbund looks very sexy in a toga, and director David Fincher will never need to worry about the chemistry between the two on the set, just thinking about the movie Mr. and Mrs. Smith where they seem to be the perfect pair .
Another actor who could be Cleopatra`s partner on the big screen is George Clooney, an friend of Hollywood actress . He earned the trust and sympathy of the audience through movies like 'The Red
Colin Firth, awarded last month an Oscar for his performance in "King's speech" is the fourth actor who could be Angelina Jolie partener in Cleopatra. .
Angelina Jolie isn`t on her first interpretation of a historical character. She was the mother of Alexander the Great in "Alexander. "
Cleopatra is a historical figure of great renown and many famous actresses and gave live to this great character so far on the big and small screens. Tedda Bara, Leonor Varela, Vivien Leigh, Elizabeth Taylor and Monica Bellucci have had the most success by giving life to this famous character.
Brangelina confess and said that she wants to play the Egyptian queen in an utterly different from Elizabeth Taylor, arguing that it could never be as "pretty" as her famous predecessor. Unlike the famous Cleopatra in 1963 played by Elizabeth Taylor, the new project will be based on a screenplay adapted from the biography of Cleopatra: A Life, written by Stacy Schiff, and will focus on the legendary queen cunning in politics and business.
Thursday, November 25, 2010
Federal agents on Wednesday arrested a former executive at a California 'expert network' firm
The executive, Don Ching Trang Chu, 56 years old, of Somerset, N.J., was arrested before a trip to Taiwan he had scheduled for Sunday, prosecutors said.
Mr. Chu, a naturalized U.S. citizen and Taiwan native, has been charged with one count of conspiracy to commit securities fraud and one count of conspiracy to commit wire fraud and fraud in connection with securities. The first count carries a maximum sentence of five years and the second up to 25 years. Both carry a potential fine of $250,000 or twice the gross gain or loss from the offense, prosecutors said.
Mr. Chu was listed earlier this week as an Asia expert on the website of Primary Global Research LLC. The Mountainview, Calif.-based firm, which was not identified by prosecutors in their complaint against Mr. Chu filed Wednesday, pairs hedge funds and other investment companies with current and former employees at publicly traded corporations to provide insight into their companies and industries.
In a statement Wednesday, Primary Global said Mr. Chu served as the company's Taiwan liaison and had been with the company for about seven years. 'Based upon recent events, PGR has severed its relationship with Mr. Chu,' the company said.
Mr. Chu briefly appeared in Manhattan federal court on Wednesday. He was released on $1 million bail, to be secured by his New Jersey home. He surrendered his passport and his travel was restricted to parts of New York, Pennsylvania and New Jersey.
James R. DeVita, a lawyer for Mr. Chu, declined comment Wednesday.
Prosecutors said Mr. Chu built a relationship in 2008 with Richard Choo-Beng Lee, a hedge-fund manager.
Mr. Lee pleaded guilty and agreed to cooperate with prosecutors in their insider trading investigation of the Galleon Group hedge fund, which resulted in charges against 23 defendants and 14 guilty pleas.
A lawyer for Mr. Lee didn't immediately respond to a request for comment.
Mr. Lee's hedge fund was a client in late 2008 and early 2009 of Mr. Chu's expert-network firm, according to prosecutors. Mr. Chu allegedly provided inside information about public companies directly to Mr. Lee and by arranging conversations for him with consultants who worked at public companies.
Mr. Chu, a naturalized U.S. citizen and Taiwan native, has been charged with one count of conspiracy to commit securities fraud and one count of conspiracy to commit wire fraud and fraud in connection with securities. The first count carries a maximum sentence of five years and the second up to 25 years. Both carry a potential fine of $250,000 or twice the gross gain or loss from the offense, prosecutors said.
Mr. Chu was listed earlier this week as an Asia expert on the website of Primary Global Research LLC. The Mountainview, Calif.-based firm, which was not identified by prosecutors in their complaint against Mr. Chu filed Wednesday, pairs hedge funds and other investment companies with current and former employees at publicly traded corporations to provide insight into their companies and industries.
In a statement Wednesday, Primary Global said Mr. Chu served as the company's Taiwan liaison and had been with the company for about seven years. 'Based upon recent events, PGR has severed its relationship with Mr. Chu,' the company said.
Mr. Chu briefly appeared in Manhattan federal court on Wednesday. He was released on $1 million bail, to be secured by his New Jersey home. He surrendered his passport and his travel was restricted to parts of New York, Pennsylvania and New Jersey.
James R. DeVita, a lawyer for Mr. Chu, declined comment Wednesday.
Prosecutors said Mr. Chu built a relationship in 2008 with Richard Choo-Beng Lee, a hedge-fund manager.
Mr. Lee pleaded guilty and agreed to cooperate with prosecutors in their insider trading investigation of the Galleon Group hedge fund, which resulted in charges against 23 defendants and 14 guilty pleas.
A lawyer for Mr. Lee didn't immediately respond to a request for comment.
Mr. Lee's hedge fund was a client in late 2008 and early 2009 of Mr. Chu's expert-network firm, according to prosecutors. Mr. Chu allegedly provided inside information about public companies directly to Mr. Lee and by arranging conversations for him with consultants who worked at public companies.
Tuesday, November 23, 2010
Contagion once again emerged in Europe as investors turned from Ireland's debt crisis and set their sights on Portugal and Spain
Both Spanish and Portuguese bond prices fell sharply Tuesday, and the yields above German bunds rose to records. The euro slid below $1.34 for the first time in two months, though part of the weakness came as investors turned to the safe-haven status of the U.S. dollar after North Korean artillery attacks on South Korea.
'People that are betting on contagion are probably making the right bet here,' said David Gilmore, a strategist at Foreign Exchange Analytics. 'There's not really anything to stop the markets from pushing the next domino over.'
The unease over Europe, combined with the events in Korea, spread to U.S. markets as well. The Dow Jones Industrial Average slumped 142.21 points, or 1.3%, to 11036.37.
Prices of Treasurys, typically seen as a haven investment, jumped.
Highlighting the concerns about European financial markets, German Chancellor Angela Merkel called Ireland's crisis 'very worrying' for the region.
The sudden turn in Europe has caught many traders off guard.
The focus in recent weeks has been on the impact of the Federal Reserve's easing measures. And at the tail end of last week, many investors had assumed the Irish situation was on its way to being resolved. But with the unraveling of Ireland's coalition government Monday, contagion is back on the minds of investors.
Ireland's request for a bailout from the European Union and the International Monetary Fund followed government capital injections to prop up banks that suffered big loan losses. This has turned the spotlight to banks in Spain and Portugal.
Meanwhile, Portugal reported on Monday that its 10-month budget deficit widened from a year ago. Tuesday, Spain issued short-term debt at a significantly higher cost than a month ago.
'I think that's the market's realization; that these are systemic problems that are going to need a systemic solution,' said Brian Yelvington, fixed-income strategist at Knight Capital. 'This is not a one-off problem with an individual country.'
Rising spreads have hit one country after the other, moving from Greece to Ireland and now to Portugal and Spain.
The worry is that those rising borrowing costs eventually may prove prohibitive, forcing countries to seek some sort of bailout.
Contagion, broadly defined as when a loss of market confidence in one economy transmits to others, can occur through trade connections, economic similarities or financial linkages. An economic downturn in one country can hit its trading partner's exports or reduce tourism revenue.
A collapse in value of financial assets in one country can hit confidence about banks in another if those banks hold a lot of those assets.
A second source of contagion is where investors look across from a troubled economy and see similar problems elsewhere.
While Portugal doesn't have banking problems of the scale of Ireland's or a budget deficit as big as Greece's, it does have a combination of budget deficits, high government debt and low growth that worries some investors.
A third transmission mechanism for contagion is through investor portfolios, in which price declines in one asset class cause some investors to sell other assets.
Particularly noteworthy is the focus on Spain. Tuesday, the gap between German and Spanish bonds rose 0.30 percentage point overnight, to 2.36 percentage points, the highest since the euro was introduced in 1999, well above the previous record of 2.21 percentage points set in May, according to RBC Capital Markets.
That selloff is notable because while Greece, Portugal and Ireland are facing significant fiscal and economic woes, those economies are relatively small. Bailouts of all three are seen as manageable.
But should Spain fall into a death spiral, where its interest payments rise so much that the country can't afford to borrow, a bailout is seen by many in the markets as impractical and more likely to require a restructuring of debt that would inflict losses on bondholders, many of whom happen to be European banks.
Traders said those banks likely were among those selling either Spanish, Portuguese and even Italian bonds Tuesday, as well as buying insurance against default by those countries as a hedge.
For hedge funds and other money managers, figuring out how best to trade in the turmoil has been complicated by several factors.
Many said they are hesitant to make big speculative bets through the market for credit-default swaps, because trading in Portuguese and Spanish swaps is relatively infrequent. That makes buying and selling much more difficult. Credit-default swaps act like insurance, protecting bondholders in the event of a default.
There also is a concern among hedge funds that governments quickly could change the rules on trading credit-default swaps on sovereign debt as they did with financial stocks during the 2008 crisis.
Instead, some managers are looking to trade the debt of financial companies in countries such as Ireland and Portugal by betting that some of that debt will fall in price.
It also is harder to place bets against the euro, now that the Federal Reserve is pumping the financial system with money.
'People that are betting on contagion are probably making the right bet here,' said David Gilmore, a strategist at Foreign Exchange Analytics. 'There's not really anything to stop the markets from pushing the next domino over.'
The unease over Europe, combined with the events in Korea, spread to U.S. markets as well. The Dow Jones Industrial Average slumped 142.21 points, or 1.3%, to 11036.37.
Prices of Treasurys, typically seen as a haven investment, jumped.
Highlighting the concerns about European financial markets, German Chancellor Angela Merkel called Ireland's crisis 'very worrying' for the region.
The sudden turn in Europe has caught many traders off guard.
The focus in recent weeks has been on the impact of the Federal Reserve's easing measures. And at the tail end of last week, many investors had assumed the Irish situation was on its way to being resolved. But with the unraveling of Ireland's coalition government Monday, contagion is back on the minds of investors.
Ireland's request for a bailout from the European Union and the International Monetary Fund followed government capital injections to prop up banks that suffered big loan losses. This has turned the spotlight to banks in Spain and Portugal.
Meanwhile, Portugal reported on Monday that its 10-month budget deficit widened from a year ago. Tuesday, Spain issued short-term debt at a significantly higher cost than a month ago.
'I think that's the market's realization; that these are systemic problems that are going to need a systemic solution,' said Brian Yelvington, fixed-income strategist at Knight Capital. 'This is not a one-off problem with an individual country.'
Rising spreads have hit one country after the other, moving from Greece to Ireland and now to Portugal and Spain.
The worry is that those rising borrowing costs eventually may prove prohibitive, forcing countries to seek some sort of bailout.
Contagion, broadly defined as when a loss of market confidence in one economy transmits to others, can occur through trade connections, economic similarities or financial linkages. An economic downturn in one country can hit its trading partner's exports or reduce tourism revenue.
A collapse in value of financial assets in one country can hit confidence about banks in another if those banks hold a lot of those assets.
A second source of contagion is where investors look across from a troubled economy and see similar problems elsewhere.
While Portugal doesn't have banking problems of the scale of Ireland's or a budget deficit as big as Greece's, it does have a combination of budget deficits, high government debt and low growth that worries some investors.
A third transmission mechanism for contagion is through investor portfolios, in which price declines in one asset class cause some investors to sell other assets.
Particularly noteworthy is the focus on Spain. Tuesday, the gap between German and Spanish bonds rose 0.30 percentage point overnight, to 2.36 percentage points, the highest since the euro was introduced in 1999, well above the previous record of 2.21 percentage points set in May, according to RBC Capital Markets.
That selloff is notable because while Greece, Portugal and Ireland are facing significant fiscal and economic woes, those economies are relatively small. Bailouts of all three are seen as manageable.
But should Spain fall into a death spiral, where its interest payments rise so much that the country can't afford to borrow, a bailout is seen by many in the markets as impractical and more likely to require a restructuring of debt that would inflict losses on bondholders, many of whom happen to be European banks.
Traders said those banks likely were among those selling either Spanish, Portuguese and even Italian bonds Tuesday, as well as buying insurance against default by those countries as a hedge.
For hedge funds and other money managers, figuring out how best to trade in the turmoil has been complicated by several factors.
Many said they are hesitant to make big speculative bets through the market for credit-default swaps, because trading in Portuguese and Spanish swaps is relatively infrequent. That makes buying and selling much more difficult. Credit-default swaps act like insurance, protecting bondholders in the event of a default.
There also is a concern among hedge funds that governments quickly could change the rules on trading credit-default swaps on sovereign debt as they did with financial stocks during the 2008 crisis.
Instead, some managers are looking to trade the debt of financial companies in countries such as Ireland and Portugal by betting that some of that debt will fall in price.
It also is harder to place bets against the euro, now that the Federal Reserve is pumping the financial system with money.
Federal authorities, capping a three-year investigation, are preparing insider-trading charges that could ensnare consultants
The criminal and civil probes, which authorities say could eclipse the impact on the financial industry of any previous such investigation, are examining whether multiple insider-trading rings reaped illegal profits totaling tens of millions of dollars, the people say. Some charges could be brought before year-end, they say.
The investigations, if they bear fruit, have the potential to expose a culture of pervasive insider trading in U.S. financial markets, including new ways non-public information is passed to traders through experts tied to specific industries or companies, federal authorities say.
One focus of the criminal investigation is examining whether nonpublic information was passed along by independent analysts and consultants who work for companies that provide 'expert network' services to hedge funds and mutual funds. These companies set up meetings and calls with current and former managers from hundreds of companies for traders seeking an investing edge.
Among the expert networks whose consultants are being examined, the people say, is Primary Global Research LLC, a Mountain View, Calif., firm that connects experts with investors seeking information in the technology, health-care and other industries.
'I have no comment on that,' said Phani Kumar Saripella, Primary Global's chief operating officer.
Primary's chief executive and chief operating officers previously worked at Intel Corp., according to its website.
In another aspect of the probes, prosecutors and regulators are examining whether Goldman Sachs Group Inc. bankers leaked information about transactions, including health-care mergers, in ways that benefited certain investors, the people say. Goldman declined to comment.
Independent analysts and research boutiques also are being examined. John Kinnucan, a principal at Broadband Research LLC in Portland, Ore., sent an email on Oct. 26 to roughly 20 hedge-fund and mutual-fund clients telling of a visit by the Federal Bureau of Investigation.
'Today two fresh faced eager beavers from the FBI showed up unannounced (obviously) on my doorstep thoroughly convinced that my clients have been trading on copious inside information,' the email said. '(They obviously have been recording my cell phone conversations for quite some time, with what motivation I have no idea.) We obviously beg to differ, so have therefore declined the young gentleman's gracious offer to wear a wire and therefore ensnare you in their devious web.'
The email, which Mr. Kinnucan confirms writing, was addressed to traders at, among others: hedge-fund firms SAC Capital Advisors LP and Citadel Asset Management, and mutual-fund firms Janus Capital Group, Wellington Management Co. and MFS Investment Management.
SAC, Wellington and MFS declined to comment; Janus and Citadel didn't immediately comment. It isn't known whether clients are under investigation for their business with Mr. Kinnucan.
The investigations have been conducted by federal prosecutors in New York, the FBI and the Securities and Exchange Commission. Representatives of the Manhattan U.S. Attorney's office, the FBI and the SEC declined to comment.
Another aspect of the probe is an examination of whether traders at a number of hedge funds and trading firms, including First New York Securities LLC, improperly gained nonpublic information about pending health-care, technology and other merger deals, according to the people familiar with the matter.
Some traders at First New York, a 250-person trading firm, profited by anticipating health-care and other mergers unveiled in 2009, people familiar with the firm say.
A First New York spokesman said: 'We are one of more than three dozen firms that have been asked by regulators to provide general information in a widespread inquiry; we have cooperated fully.' He added: 'We stand behind our traders and our systems and policies in place that ensure full regulatory compliance.'
Key parts of the probes are at a late stage. A federal grand jury in New York has heard evidence, say people familiar with the matter. But as with all investigations that aren't completed, it is unclear what specific charges, if any, might be brought.
The action is an outgrowth of a focus on insider trading by Preet Bharara, the Manhattan U.S. Attorney. In an October speech, Mr. Bharara said the area is a 'top criminal priority' for his office, adding: 'Illegal insider trading is rampant and may even be on the rise.' Mr. Bharara declined to comment.
Expert-network firms hire current or former company employees, as well as doctors and other specialists, to be consultants to funds making investment decisions. More than a third of institutional investment-management firms use expert networks, according to a late 2009 survey by Integrity Research Associates in New York.
The consultants typically earn several hundred dollars an hour for their services, which can include meetings or phone calls with traders to discuss developments in their company or industry. The expert-network companies say internal policies bar their consultants from disclosing confidential information.
Generally, inside traders profit by buying stocks of acquisition targets before deals are announced and selling after the targets' shares rise in value.
The SEC has been investigating potential leaks on takeover deals going back to at least 2007 amid an explosion of deals leading up to the financial crisis. The SEC sent subpoenas last autumn to more than 30 hedge funds and other investors.
Some subpoenas were related to trading in Schering-Plough Corp. stock before its takeover by Merck & Co. in 2009, say people familiar with the matter. Schering-Plough stock rose 8% the trading day before the deal plan was announced and 14% the day of the announcement.
Merck said it 'has a long-standing practice of fully cooperating with any regulatory inquiries and has explicit policies prohibiting the sharing of confidential information about the company and its potential partners.'
Transactions being focused on include MedImmune Inc.'s takeover by AstraZeneca PLC in 2007, the people say. MedImmune shares jumped 18% on April 23, 2007, the day the deal was announced. A spokesman for AstraZeneca and its MedImmune unit declined to comment.
Investigators are also examining the role of Goldman bankers in trading in shares of Advanced Medical Optics Inc., which was taken over by Abbott Laboratories in 2009, according to the people familiar with the matter. Advanced Medical Optics's shares jumped 143% on Jan. 12, 2009, the day the deal was announced. Goldman advised MedImmune and Advanced Medical Optics on the deals.
A spokesman for AstraZeneca and its MedImmune unit declined to comment.
In subpoenas, the SEC has sought information about communications─related to Schering-Plough and other deals─with Ziff Brothers, Jana Partners LLC, TPG-Axon Capital Management, Prudential Financial Inc.'s Jennison Associates asset-management unit, UBS AG's UBS Financial Services Inc. unit, and Deutsche Bank AG, according to subpoenas and the people familiar with the matter.
Representatives of Ziff Brothers, Jana, TPG-Axon, Jennison, UBS and Deutsche Bank declined to comment.
Among hedge-fund managers whose trading in takeovers is a focus of the criminal probe is Todd Deutsch, a top Wall Street trader who left Galleon Group in 2008 to go out on his own, the people close to the situation say. A spokesman for Mr. Deutsch, who has specialized in health-care and technology stocks, declined to comment.
Prosecutors also are investigating whether some hedge-fund traders received inside information about Advanced Micro Devices Inc., which figured prominently in the government's insider-trading case last year against Galleon Group hedge fund founder Raj Rajaratnam and 22 other defendants.
Fourteen defendants have pleaded guilty in the Galleon case; Mr. Rajaratnam has pleaded not guilty and is expected to go to trial in early 2011.
The investigations, if they bear fruit, have the potential to expose a culture of pervasive insider trading in U.S. financial markets, including new ways non-public information is passed to traders through experts tied to specific industries or companies, federal authorities say.
One focus of the criminal investigation is examining whether nonpublic information was passed along by independent analysts and consultants who work for companies that provide 'expert network' services to hedge funds and mutual funds. These companies set up meetings and calls with current and former managers from hundreds of companies for traders seeking an investing edge.
Among the expert networks whose consultants are being examined, the people say, is Primary Global Research LLC, a Mountain View, Calif., firm that connects experts with investors seeking information in the technology, health-care and other industries.
'I have no comment on that,' said Phani Kumar Saripella, Primary Global's chief operating officer.
Primary's chief executive and chief operating officers previously worked at Intel Corp., according to its website.
In another aspect of the probes, prosecutors and regulators are examining whether Goldman Sachs Group Inc. bankers leaked information about transactions, including health-care mergers, in ways that benefited certain investors, the people say. Goldman declined to comment.
Independent analysts and research boutiques also are being examined. John Kinnucan, a principal at Broadband Research LLC in Portland, Ore., sent an email on Oct. 26 to roughly 20 hedge-fund and mutual-fund clients telling of a visit by the Federal Bureau of Investigation.
'Today two fresh faced eager beavers from the FBI showed up unannounced (obviously) on my doorstep thoroughly convinced that my clients have been trading on copious inside information,' the email said. '(They obviously have been recording my cell phone conversations for quite some time, with what motivation I have no idea.) We obviously beg to differ, so have therefore declined the young gentleman's gracious offer to wear a wire and therefore ensnare you in their devious web.'
The email, which Mr. Kinnucan confirms writing, was addressed to traders at, among others: hedge-fund firms SAC Capital Advisors LP and Citadel Asset Management, and mutual-fund firms Janus Capital Group, Wellington Management Co. and MFS Investment Management.
SAC, Wellington and MFS declined to comment; Janus and Citadel didn't immediately comment. It isn't known whether clients are under investigation for their business with Mr. Kinnucan.
The investigations have been conducted by federal prosecutors in New York, the FBI and the Securities and Exchange Commission. Representatives of the Manhattan U.S. Attorney's office, the FBI and the SEC declined to comment.
Another aspect of the probe is an examination of whether traders at a number of hedge funds and trading firms, including First New York Securities LLC, improperly gained nonpublic information about pending health-care, technology and other merger deals, according to the people familiar with the matter.
Some traders at First New York, a 250-person trading firm, profited by anticipating health-care and other mergers unveiled in 2009, people familiar with the firm say.
A First New York spokesman said: 'We are one of more than three dozen firms that have been asked by regulators to provide general information in a widespread inquiry; we have cooperated fully.' He added: 'We stand behind our traders and our systems and policies in place that ensure full regulatory compliance.'
Key parts of the probes are at a late stage. A federal grand jury in New York has heard evidence, say people familiar with the matter. But as with all investigations that aren't completed, it is unclear what specific charges, if any, might be brought.
The action is an outgrowth of a focus on insider trading by Preet Bharara, the Manhattan U.S. Attorney. In an October speech, Mr. Bharara said the area is a 'top criminal priority' for his office, adding: 'Illegal insider trading is rampant and may even be on the rise.' Mr. Bharara declined to comment.
Expert-network firms hire current or former company employees, as well as doctors and other specialists, to be consultants to funds making investment decisions. More than a third of institutional investment-management firms use expert networks, according to a late 2009 survey by Integrity Research Associates in New York.
The consultants typically earn several hundred dollars an hour for their services, which can include meetings or phone calls with traders to discuss developments in their company or industry. The expert-network companies say internal policies bar their consultants from disclosing confidential information.
Generally, inside traders profit by buying stocks of acquisition targets before deals are announced and selling after the targets' shares rise in value.
The SEC has been investigating potential leaks on takeover deals going back to at least 2007 amid an explosion of deals leading up to the financial crisis. The SEC sent subpoenas last autumn to more than 30 hedge funds and other investors.
Some subpoenas were related to trading in Schering-Plough Corp. stock before its takeover by Merck & Co. in 2009, say people familiar with the matter. Schering-Plough stock rose 8% the trading day before the deal plan was announced and 14% the day of the announcement.
Merck said it 'has a long-standing practice of fully cooperating with any regulatory inquiries and has explicit policies prohibiting the sharing of confidential information about the company and its potential partners.'
Transactions being focused on include MedImmune Inc.'s takeover by AstraZeneca PLC in 2007, the people say. MedImmune shares jumped 18% on April 23, 2007, the day the deal was announced. A spokesman for AstraZeneca and its MedImmune unit declined to comment.
Investigators are also examining the role of Goldman bankers in trading in shares of Advanced Medical Optics Inc., which was taken over by Abbott Laboratories in 2009, according to the people familiar with the matter. Advanced Medical Optics's shares jumped 143% on Jan. 12, 2009, the day the deal was announced. Goldman advised MedImmune and Advanced Medical Optics on the deals.
A spokesman for AstraZeneca and its MedImmune unit declined to comment.
In subpoenas, the SEC has sought information about communications─related to Schering-Plough and other deals─with Ziff Brothers, Jana Partners LLC, TPG-Axon Capital Management, Prudential Financial Inc.'s Jennison Associates asset-management unit, UBS AG's UBS Financial Services Inc. unit, and Deutsche Bank AG, according to subpoenas and the people familiar with the matter.
Representatives of Ziff Brothers, Jana, TPG-Axon, Jennison, UBS and Deutsche Bank declined to comment.
Among hedge-fund managers whose trading in takeovers is a focus of the criminal probe is Todd Deutsch, a top Wall Street trader who left Galleon Group in 2008 to go out on his own, the people close to the situation say. A spokesman for Mr. Deutsch, who has specialized in health-care and technology stocks, declined to comment.
Prosecutors also are investigating whether some hedge-fund traders received inside information about Advanced Micro Devices Inc., which figured prominently in the government's insider-trading case last year against Galleon Group hedge fund founder Raj Rajaratnam and 22 other defendants.
Fourteen defendants have pleaded guilty in the Galleon case; Mr. Rajaratnam has pleaded not guilty and is expected to go to trial in early 2011.
Monday, November 22, 2010
If this month has felt like a wild ride for stock investors, it has been positively hair-raising for those in the commodities market
Price swings for raw materials reached the highest levels in more than a year as investors initially celebrated the prospect of U.S. monetary easing and then panicked at the possibility China would be too severe in its attempts to cool its economy.
Prices of everything from gold to copper and cotton leapt to new highs, only to be slapped down just as quickly. Trading volume in many commodities roared to records, including for silver, cotton and corn.
Since the beginning of October, the Dow Jones-UBS Commodity Index's 30-day realized volatility has doubled to 25%, the highest since September 2009.
The moves were particularly striking because stock-market volatility has been relatively benign, even with triple-digit moves in the past few sessions. The same measure of 30-day volatility in the Standard & Poor's 500-stock index is near six-month lows.
For commodities, the overarching reason for the volatility is the outsize reaction to new signs that China has stepped up its moves to tighten credit and contain inflation. But the huge amount of money flooding into commodities markets appears to be helping exaggerate those moves.
With that money has come a new breed of investors more focused on trading in and out of commodities to profit from price moves rather than the standard producers and consumers relying on the market to manage their risks.
Since August, money managers, such as hedge funds, have raised their bullish bets on oil, copper, soybeans and many other markets. These funds' total net-long positions all peaked in the week ended Nov. 9, before being cut in the past week, according to the Commodity Futures Trading Commission.
All this suggests volatility will at least be around, if not increase, in the short term, even if many people believe commodities overall have a lot further to rally.
'When you have this large [speculative] exposure built up, you do run a risk,' said Tim Evans, a commodity analyst at Citi Futures Perspective, a commodity-research arm of Citigroup. Because 'you've used up your potential to draw in more new money -- that's the time when you are vulnerable to a reversal.'
That may have started.
Since Nov. 9, the Dow Jones-UBS Commodity Index has declined 7%, amid waves of selling triggered by China's moves to tackle inflation.
Of all the commodities that were whipped around, those directly affected by demand from China suffered most. Zinc sank 16%, cotton shed 15%, and crude oil fell 7%.
Investors 'are getting more and more nervous as we get close to year end,' said Andy Smith, senior commodity strategist at Bache Commodities. They are 'not sure whether they should take the money off the table and run for the year or stay in the game.'
Commodity consumers around the world are making real-time assessments about whether they should jump in and buy now or wait for better prices.
Many are balancing not just fundamental supply-and-demand data but also macro forces such as monetary policy in China and the U.S.
The debate over how fast China's economy may expand and whether other emerging markets will step down hard on their economies also is driving some of the price swings.
The current volatility is a 'fundamental manifestation of uncertainty about the pace of rising demand,' said Colin P. Fenton, head of global commodities research and strategy at J.P. Morgan Chase.
Consumer prices in China rose 4.4% in October from a year earlier, a 25-month high, setting off a slew of anti-inflation moves, including an increase in bank reserve requirements and talk of possible price controls.
China has been the main source of demand growth for many commodities.
This year, the country's oil consumption is expected to increase 820,000 barrels a day, or 35% of the world's total oil consumption growth, according to the International Energy Agency.
The country has an even bigger influence in other markets, accounting for 70%, 57% and 46% of this year's global consumption rise for cotton, copper and soybeans, respectively.
'If you think China will grow less as a result of these policies, the next logical conclusion will be commodity demand from that country will also moderate given its importance' in terms of generating demand growth, said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas.
Some expect China's measures will only temporarily damp price increases for raw materials and won't hurt the nation's real appetite for commodities. Even if China's economy expands at a slightly slower rate, it will be a huge force in the commodities market.
'The steps that they're taking so far will have only a marginal impact,' said Dwight Anderson, managing partner at Ospraie Management LLC, a hedge fund specializing in commodities.
Soon, the markets will come to 'conclude that the global economic recovery is intact and there will be sustained growth, especially in the emerging markets, for commodity imports,' Mr. Fenton said.
Other analysts even see a silver lining to China's cooling moves.
China is taking pre-emptive measures to tackle inflation. In 1994, when inflation ran up to 27.7%, the country's central bank didn't increase interest rates but waited until a year later when the economy lost steam.
Prices of everything from gold to copper and cotton leapt to new highs, only to be slapped down just as quickly. Trading volume in many commodities roared to records, including for silver, cotton and corn.
Since the beginning of October, the Dow Jones-UBS Commodity Index's 30-day realized volatility has doubled to 25%, the highest since September 2009.
The moves were particularly striking because stock-market volatility has been relatively benign, even with triple-digit moves in the past few sessions. The same measure of 30-day volatility in the Standard & Poor's 500-stock index is near six-month lows.
For commodities, the overarching reason for the volatility is the outsize reaction to new signs that China has stepped up its moves to tighten credit and contain inflation. But the huge amount of money flooding into commodities markets appears to be helping exaggerate those moves.
With that money has come a new breed of investors more focused on trading in and out of commodities to profit from price moves rather than the standard producers and consumers relying on the market to manage their risks.
Since August, money managers, such as hedge funds, have raised their bullish bets on oil, copper, soybeans and many other markets. These funds' total net-long positions all peaked in the week ended Nov. 9, before being cut in the past week, according to the Commodity Futures Trading Commission.
All this suggests volatility will at least be around, if not increase, in the short term, even if many people believe commodities overall have a lot further to rally.
'When you have this large [speculative] exposure built up, you do run a risk,' said Tim Evans, a commodity analyst at Citi Futures Perspective, a commodity-research arm of Citigroup. Because 'you've used up your potential to draw in more new money -- that's the time when you are vulnerable to a reversal.'
That may have started.
Since Nov. 9, the Dow Jones-UBS Commodity Index has declined 7%, amid waves of selling triggered by China's moves to tackle inflation.
Of all the commodities that were whipped around, those directly affected by demand from China suffered most. Zinc sank 16%, cotton shed 15%, and crude oil fell 7%.
Investors 'are getting more and more nervous as we get close to year end,' said Andy Smith, senior commodity strategist at Bache Commodities. They are 'not sure whether they should take the money off the table and run for the year or stay in the game.'
Commodity consumers around the world are making real-time assessments about whether they should jump in and buy now or wait for better prices.
Many are balancing not just fundamental supply-and-demand data but also macro forces such as monetary policy in China and the U.S.
The debate over how fast China's economy may expand and whether other emerging markets will step down hard on their economies also is driving some of the price swings.
The current volatility is a 'fundamental manifestation of uncertainty about the pace of rising demand,' said Colin P. Fenton, head of global commodities research and strategy at J.P. Morgan Chase.
Consumer prices in China rose 4.4% in October from a year earlier, a 25-month high, setting off a slew of anti-inflation moves, including an increase in bank reserve requirements and talk of possible price controls.
China has been the main source of demand growth for many commodities.
This year, the country's oil consumption is expected to increase 820,000 barrels a day, or 35% of the world's total oil consumption growth, according to the International Energy Agency.
The country has an even bigger influence in other markets, accounting for 70%, 57% and 46% of this year's global consumption rise for cotton, copper and soybeans, respectively.
'If you think China will grow less as a result of these policies, the next logical conclusion will be commodity demand from that country will also moderate given its importance' in terms of generating demand growth, said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas.
Some expect China's measures will only temporarily damp price increases for raw materials and won't hurt the nation's real appetite for commodities. Even if China's economy expands at a slightly slower rate, it will be a huge force in the commodities market.
'The steps that they're taking so far will have only a marginal impact,' said Dwight Anderson, managing partner at Ospraie Management LLC, a hedge fund specializing in commodities.
Soon, the markets will come to 'conclude that the global economic recovery is intact and there will be sustained growth, especially in the emerging markets, for commodity imports,' Mr. Fenton said.
Other analysts even see a silver lining to China's cooling moves.
China is taking pre-emptive measures to tackle inflation. In 1994, when inflation ran up to 27.7%, the country's central bank didn't increase interest rates but waited until a year later when the economy lost steam.
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