Ah, vous auriez aimé des promesses d'un futur enchanteur, des voeux classiques. Rien de tout cela.
Il est probable que 2009 soit de la même veine que 2008. Il y aura peut-être un petit rebond des marchés actions qui fera croire que tout est comme avant. Mais ce ne sera qu'un feu de paille.
Tout ne sera jamais plus comme avant car la mécanique qui faisait avancer l'économie mondiale est cassée. La croissance de la première économie du monde – les Etats-Unis – se base sur de la surconsommation depuis trop longtemps.
La surconsommation consiste à acheter des biens inutiles avec de l'argent en devenir, de l'argent que l'on n'a pas encore gagné.
La surconsommation ne repartira pas car les prêteurs qui la finançaient, les pays dits émergents, Chine en tête, ont perdu beaucoup d'argent en 2008. Ils vont maintenant employer l'argent qui leur reste à éviter une catastrophe chez eux. Charité bien ordonnée commence par soi-même, les Chinois n'ignorent pas ce dicton.
Le soufflé doit encore se dégonfler
Vous trouvez que des marchés actions qui ont perdu la moitié de leur valeur et des biens immobiliers qui ont baissé de 25%, c'est suffisant pour avoir purgé la bulle. Erreur : le soufflé est bien plus monstrueux que cela.
Voici quelques repères, glanés ça et là, qui donnent une idée de ce monstrueux soufflé.
- Une dette colossale à résorber. En 1929, la dette américaine valait juste un peu plus de 1,5 le produit intérieur brut. Elle a culminé en 1933 à plus de 2,5 fois la richesse américaine. Aujourd'hui, cette dette vaut 3,3 fois le PIB des Etats-Unis.
- Une émission de papier monnaie monstrueuse. Aux Etats-Unis, comme dans les pays riches, la monnaie gonfle sans aucun rapport avec la croissance de la richesse. Entre 2007 et 2008, l'augmentation de la masse monétaire américaine a culminé à 15% tandis que le PIB augmentait au mieux de 4%. Aujourd'hui encore, la croissance de la monnaie américaine est de 10% annuellement pour une croissance nulle. Plus de la moitié de la monnaie en circulation ne correspond à aucun actif réel.
- Des actifs papiers reliés à rien. Durant les six dernières années, les contrats sur le pétrole ont augmenté trois fois plus vite que la demande réelle de pétrole. Les volumes de contrats put/call sur les marchés actions ont été multiplié par six depuis 2000.
- Une démesure financière qui ne choque plus. Avant la faillite de l'Islande, l'encours des prêts consentis par les trois plus grosses banques du pays valait dix fois le PIB du pays.
2009 : encore une année de purge
Le dégonflement de toutes ces bulles devrait se poursuivre en 2009. Une baisse supplémentaire de 25 à 30% des indices actions ne serait pas étonnante.
Le bons sens ne semble pas encore revenu dans tous les esprits financiers.
Un exemple ? Les actions General Motors se reprennent car GMAC Finance, l'établissement financier de GM – celui qui accorde des prêts aux acheteurs d'automobile – a obtenu le statut de "banque". GMAC a donc droit aux prêts gouvernementaux de renflouage, nous explique le magazine américain Forbes.
Vous avez bien compris : le gouvernement américain croit encore au schéma de la surconsommation et est prêt à renflouer un organisme financier totalement privé. Le seul but de cette "banque" est de vendre à crédit les voitures fabriquées par sa maison mère, des voitures dont personne ne veut plus. Les marchés, eux, apprécient cette situation. Les Etats-Unis sont un pays capitaliste, nous dit-on.
Un autre exemple ? Le Monde du 31 décembre note que la livre sterling est à parité avec l'euro. Bien sûr, la faiblesse de la monnaie britannique n'est pas la priorité du gouvernement, qui doit contrer la crise. Le pays, laboratoire avancé de la finance, vit du crédit et de ses dérivés depuis des années. Las, le financement de la dette publique pourrait devenir plus compliqué avec une monnaie de singe. "A terme, la faiblesse de la livre sterling pourrait détourner les capitaux étrangers des emprunts d'Etat britanniques. Le gouvernement compte sans doute sur une augmentation de l'épargne privée pour compenser cette défiance", rapporte dans le quotidien un expert de la banque Citigroup à Londres.
Le comble de l'absurdité ne choque personne : les ménages britanniques n'épargnent plus depuis belle lurette, ayant adopté un modèle de surconsommation à l'américaine. Pour surmonter la crise, le gouvernement creuse sa dette et incite ces mêmes ménages à dépenser. Les étrangers se méfient et la livre baisse. D'où surgira l'épargne privée miraculeuse dont parle l'expert ? Mystère...
Tant que des nouvelles aussi stupides que ces deux exemples émailleront les colonnes des journaux, l'économie ne sera pas assainie et la bulle loin d'être purgée.
Ne vous laissez pas séduire. Méfiez-vous des actions et considérez toute remontée comme un rebond transitoire et éphémère. Méfiez-vous des obligations à long terme, car l'inflation repartira. Investissez à court terme et avec la plus grande prudence.
lundi 5 janvier 2009
mardi 23 décembre 2008
France et Brésil signent pour 6 milliards d'euros de contrats
RIO DE JANEIRO (Reuters) - La valeur des contrats militaires signés mardi entre la France et le Brésil est de six milliards d'euros, apprend-on de source française.
Ils se décomposent en 1,9 milliard pour les hélicoptères et 4,1 milliards pour les sous-marins, a précisé cette source.
La France fournira au Brésil 50 hélicoptères de transport militaires Eurocopter EADS et quatre sous-marins conventionnels construits par DCNS, filiale de Thales.
DCNS construira aussi pour le Brésil la partie conventionnelle d'un futur sous-marin nucléaire.
Les contrats, qui comprennent également un accord sur la construction d'une base de sous-marins, ont été signés au deuxième jour de la visite de Nicolas Sarkozy au Brésil
Ils se décomposent en 1,9 milliard pour les hélicoptères et 4,1 milliards pour les sous-marins, a précisé cette source.
La France fournira au Brésil 50 hélicoptères de transport militaires Eurocopter EADS et quatre sous-marins conventionnels construits par DCNS, filiale de Thales.
DCNS construira aussi pour le Brésil la partie conventionnelle d'un futur sous-marin nucléaire.
Les contrats, qui comprennent également un accord sur la construction d'une base de sous-marins, ont été signés au deuxième jour de la visite de Nicolas Sarkozy au Brésil
lundi 22 décembre 2008
THOMSON : La perspective d'une aide du Fonds souverain enflamme le titre
contre la tendance, Thomson gagne près de 13% lundi matin à la Bourse de Paris. Les investisseurs apprécient les dernières informations sur la restructuration du groupe, lequel se retrouverait « en tête de liste » du Fonds souverain stratégique (FSI) récemment mis en place par Nicolas Sarkozy, selon une information du Figaro.
Dans son édition de samedi, le quotidien indiquait que l'intervention du FSI, qui aurait mandaté la banque d'affaires Rothschild, servirait à « faciliter la restructuration financière et stratégique de Thomson ». D'autres options seraient à l'étude, « mais toutes sont difficiles à exercer dans le contexte de crise », toujours selon le quotidien. Thomson a confirmé qu'une intervention du FSI était une des options actuellement à l'étude.
A la Bourse de Paris, l'action Thomson progresse de 12.5%, à 0.96 euro.
Dans son édition de samedi, le quotidien indiquait que l'intervention du FSI, qui aurait mandaté la banque d'affaires Rothschild, servirait à « faciliter la restructuration financière et stratégique de Thomson ». D'autres options seraient à l'étude, « mais toutes sont difficiles à exercer dans le contexte de crise », toujours selon le quotidien. Thomson a confirmé qu'une intervention du FSI était une des options actuellement à l'étude.
A la Bourse de Paris, l'action Thomson progresse de 12.5%, à 0.96 euro.
dimanche 21 décembre 2008
Les valeurs suivies à la clôture de la Bourse de Paris
ste des valeurs suivies vendredi à la Bourse de Paris, séance au cours de laquelle le CAC 40 a clôturé en baisse de 0,26% à 3.225,90 points.
* BNP PARIBAS a été le principal contributeur à la baisse du CAC et a accusé la plus forte baisse de l'indice (-7,97% à 30,37 euros) alors que les incertitudes autour du rachat des activités belges de Fortis sont loin d'être levées. Merrill Lynch a abaissé sa recommandation à "neutre" sur le titre avec un objectif de cours de 40 euros, ayant abaissé de 27% ses BPA 2009-2010. BNP avait perdu plus de 20% au cours des deux séances précédentes.
* ALSTOM a chuté de 7,01% à 41,20 euros. Son concurrent suisse ABB a annoncé qu'il a dû passer une provision avant impôts de 850 millions de dollars au 4e trimestre.
* TOTAL (-1,71% à 39,575) a également pesé sur la cote alors que le baril de pétrole brut léger américain, qui était passé sous les 34 dollars, restait sous pression (-1,16 dollar à 35,06 dollars). VALLOUREC a perdu 5,15% à 81,40 euros.
* ARCELORMITTAL a reculé de 2,23% à 17,76 euros, toujours affecté par la faiblesse des prix des métaux face à la récession. JPMorgan a abaissé sa recommandation de "surpondérer" à "neutre", avec un objectif de cours ramené de 36 à 23 euros.
* NATIXIS s'est adjugé 4,1% à 1,32 euro après l'annonce du cantonnement de ses actifs les plus risqués dans une structure spécifique et la réduction de 40% des effectifs dans les activités de marché les plus complexes.
* SOCIÉTÉ GÉNÉRALE a gagné 5,63% à 36,02 euros après l'annonce de la cession au premier semestre 2009 de sa filiale londonienne de gestion d'actifs, SGAM UK, au "hedge fund" GLG Partners. Merrill Lynch a retiré la banque de sa liste de valeurs préférées.
* DASSAULT AVIATION (-5,56% à 391,0 euros)) et l'Etat ont conclu un accord pour l'entrée de Dassault au capital de THALES (+1,57% à 29,14 euros) en remplacement d'ALCATEL-LUCENT (-0,88% à 1,569 euro). Dassault Aviation s'attend par ailleurs pour 2008 à une baisse de 10% de son chiffre d'affaires en raison de reports de livraison d'avions d'affaires Falcon.
* EADS a signé la plus forte hausse du CAC (+5,94% à 11,685).
* SANOFI AVENTIS a gagné 2,5% à 47,33 euros. Sa division spécialisée dans les vaccins, Sanofi Pasteur, a reçu pour l'antigrippal Intanza/IDflu un avis favorable du comité des médicaments à usage humain (CHMP), le comité scientifique de l'Agence européenne du médicament.
* GECINA a gagné 2,16% à 51,0 euros après avoir annoncé la suspension de l'accord de séparation avec sa maison-mère Metrovacesa. La foncière a aussi décidé de verser un acompte sur dividende de 2,50 euros par action au janvier 2009.
* BNP PARIBAS a été le principal contributeur à la baisse du CAC et a accusé la plus forte baisse de l'indice (-7,97% à 30,37 euros) alors que les incertitudes autour du rachat des activités belges de Fortis sont loin d'être levées. Merrill Lynch a abaissé sa recommandation à "neutre" sur le titre avec un objectif de cours de 40 euros, ayant abaissé de 27% ses BPA 2009-2010. BNP avait perdu plus de 20% au cours des deux séances précédentes.
* ALSTOM a chuté de 7,01% à 41,20 euros. Son concurrent suisse ABB a annoncé qu'il a dû passer une provision avant impôts de 850 millions de dollars au 4e trimestre.
* TOTAL (-1,71% à 39,575) a également pesé sur la cote alors que le baril de pétrole brut léger américain, qui était passé sous les 34 dollars, restait sous pression (-1,16 dollar à 35,06 dollars). VALLOUREC a perdu 5,15% à 81,40 euros.
* ARCELORMITTAL a reculé de 2,23% à 17,76 euros, toujours affecté par la faiblesse des prix des métaux face à la récession. JPMorgan a abaissé sa recommandation de "surpondérer" à "neutre", avec un objectif de cours ramené de 36 à 23 euros.
* NATIXIS s'est adjugé 4,1% à 1,32 euro après l'annonce du cantonnement de ses actifs les plus risqués dans une structure spécifique et la réduction de 40% des effectifs dans les activités de marché les plus complexes.
* SOCIÉTÉ GÉNÉRALE a gagné 5,63% à 36,02 euros après l'annonce de la cession au premier semestre 2009 de sa filiale londonienne de gestion d'actifs, SGAM UK, au "hedge fund" GLG Partners. Merrill Lynch a retiré la banque de sa liste de valeurs préférées.
* DASSAULT AVIATION (-5,56% à 391,0 euros)) et l'Etat ont conclu un accord pour l'entrée de Dassault au capital de THALES (+1,57% à 29,14 euros) en remplacement d'ALCATEL-LUCENT (-0,88% à 1,569 euro). Dassault Aviation s'attend par ailleurs pour 2008 à une baisse de 10% de son chiffre d'affaires en raison de reports de livraison d'avions d'affaires Falcon.
* EADS a signé la plus forte hausse du CAC (+5,94% à 11,685).
* SANOFI AVENTIS a gagné 2,5% à 47,33 euros. Sa division spécialisée dans les vaccins, Sanofi Pasteur, a reçu pour l'antigrippal Intanza/IDflu un avis favorable du comité des médicaments à usage humain (CHMP), le comité scientifique de l'Agence européenne du médicament.
* GECINA a gagné 2,16% à 51,0 euros après avoir annoncé la suspension de l'accord de séparation avec sa maison-mère Metrovacesa. La foncière a aussi décidé de verser un acompte sur dividende de 2,50 euros par action au janvier 2009.
Les valeurs suivies à la clôture de la Bourse de Paris
Liste des valeurs suivies vendredi à la Bourse de Paris, séance au cours de laquelle le CAC 40 a clôturé en baisse de 0,26% à 3.225,90 points.
* BNP PARIBAS a été le principal contributeur à la baisse du CAC et a accusé la plus forte baisse de l'indice (-7,97% à 30,37 euros) alors que les incertitudes autour du rachat des activités belges de Fortis sont loin d'être levées. Merrill Lynch a abaissé sa recommandation à "neutre" sur le titre avec un objectif de cours de 40 euros, ayant abaissé de 27% ses BPA 2009-2010. BNP avait perdu plus de 20% au cours des deux séances précédentes.
* ALSTOM a chuté de 7,01% à 41,20 euros. Son concurrent suisse ABB a annoncé qu'il a dû passer une provision avant impôts de 850 millions de dollars au 4e trimestre.
* TOTAL (-1,71% à 39,575) a également pesé sur la cote alors que le baril de pétrole brut léger américain, qui était passé sous les 34 dollars, restait sous pression (-1,16 dollar à 35,06 dollars). VALLOUREC a perdu 5,15% à 81,40 euros.
* ARCELORMITTAL a reculé de 2,23% à 17,76 euros, toujours affecté par la faiblesse des prix des métaux face à la récession. JPMorgan a abaissé sa recommandation de "surpondérer" à "neutre", avec un objectif de cours ramené de 36 à 23 euros.
* NATIXIS s'est adjugé 4,1% à 1,32 euro après l'annonce du cantonnement de ses actifs les plus risqués dans une structure spécifique et la réduction de 40% des effectifs dans les activités de marché les plus complexes.
* SOCIÉTÉ GÉNÉRALE a gagné 5,63% à 36,02 euros après l'annonce de la cession au premier semestre 2009 de sa filiale londonienne de gestion d'actifs, SGAM UK, au "hedge fund" GLG Partners. Merrill Lynch a retiré la banque de sa liste de valeurs préférées.
* DASSAULT AVIATION (-5,56% à 391,0 euros)) et l'Etat ont conclu un accord pour l'entrée de Dassault au capital de THALES (+1,57% à 29,14 euros) en remplacement d'ALCATEL-LUCENT (-0,88% à 1,569 euro). Dassault Aviation s'attend par ailleurs pour 2008 à une baisse de 10% de son chiffre d'affaires en raison de reports de livraison d'avions d'affaires Falcon.
* EADS a signé la plus forte hausse du CAC (+5,94% à 11,685).
* SANOFI AVENTIS a gagné 2,5% à 47,33 euros. Sa division spécialisée dans les vaccins, Sanofi Pasteur, a reçu pour l'antigrippal Intanza/IDflu un avis favorable du comité des médicaments à usage humain (CHMP), le comité scientifique de l'Agence européenne du médicament.
* GECINA a gagné 2,16% à 51,0 euros après avoir annoncé la suspension de l'accord de séparation avec sa maison-mère Metrovacesa. La foncière a aussi décidé de verser un acompte sur dividende de 2,50 euros par action au janvier 2009
* BNP PARIBAS a été le principal contributeur à la baisse du CAC et a accusé la plus forte baisse de l'indice (-7,97% à 30,37 euros) alors que les incertitudes autour du rachat des activités belges de Fortis sont loin d'être levées. Merrill Lynch a abaissé sa recommandation à "neutre" sur le titre avec un objectif de cours de 40 euros, ayant abaissé de 27% ses BPA 2009-2010. BNP avait perdu plus de 20% au cours des deux séances précédentes.
* ALSTOM a chuté de 7,01% à 41,20 euros. Son concurrent suisse ABB a annoncé qu'il a dû passer une provision avant impôts de 850 millions de dollars au 4e trimestre.
* TOTAL (-1,71% à 39,575) a également pesé sur la cote alors que le baril de pétrole brut léger américain, qui était passé sous les 34 dollars, restait sous pression (-1,16 dollar à 35,06 dollars). VALLOUREC a perdu 5,15% à 81,40 euros.
* ARCELORMITTAL a reculé de 2,23% à 17,76 euros, toujours affecté par la faiblesse des prix des métaux face à la récession. JPMorgan a abaissé sa recommandation de "surpondérer" à "neutre", avec un objectif de cours ramené de 36 à 23 euros.
* NATIXIS s'est adjugé 4,1% à 1,32 euro après l'annonce du cantonnement de ses actifs les plus risqués dans une structure spécifique et la réduction de 40% des effectifs dans les activités de marché les plus complexes.
* SOCIÉTÉ GÉNÉRALE a gagné 5,63% à 36,02 euros après l'annonce de la cession au premier semestre 2009 de sa filiale londonienne de gestion d'actifs, SGAM UK, au "hedge fund" GLG Partners. Merrill Lynch a retiré la banque de sa liste de valeurs préférées.
* DASSAULT AVIATION (-5,56% à 391,0 euros)) et l'Etat ont conclu un accord pour l'entrée de Dassault au capital de THALES (+1,57% à 29,14 euros) en remplacement d'ALCATEL-LUCENT (-0,88% à 1,569 euro). Dassault Aviation s'attend par ailleurs pour 2008 à une baisse de 10% de son chiffre d'affaires en raison de reports de livraison d'avions d'affaires Falcon.
* EADS a signé la plus forte hausse du CAC (+5,94% à 11,685).
* SANOFI AVENTIS a gagné 2,5% à 47,33 euros. Sa division spécialisée dans les vaccins, Sanofi Pasteur, a reçu pour l'antigrippal Intanza/IDflu un avis favorable du comité des médicaments à usage humain (CHMP), le comité scientifique de l'Agence européenne du médicament.
* GECINA a gagné 2,16% à 51,0 euros après avoir annoncé la suspension de l'accord de séparation avec sa maison-mère Metrovacesa. La foncière a aussi décidé de verser un acompte sur dividende de 2,50 euros par action au janvier 2009
jeudi 18 décembre 2008
Baisse du cours du pétrole et grande capacité d'exploitation : est-ce le moment d'investir sur Total ?
La baisse du prix du brut donne une occasion de revenir sur le titre Total. Après avoir atteint, en juillet, un pic, à 147 $ le baril, le cours du pétrole a dévissé pour passer sous la barre des 50 $, avant de se reprendre quelque peu. Cette chute abyssale fragilise fortement les valeurs pétrolières.
Le Revenu souligne néanmoins l'excellente qualité du groupe Total et recommande le titre à l'achat.
Avec l'absorption du Belge Petrofina et d'Elf Aquitaine, Total est devenu la quatrième grande compagnie pétrolière mondiale, derrière Exxonmobil, BP et Royal Dutch Shell.
Ses activités couvrent toute la chaîne de cette industrie, d'amont (exploration et production) en aval (raffinage et distribution), et la pétrochimie. L'entreprise se veut également un acteur essentiel dans le domaine gazier. Le gaz naturel liquéfié (GNL) va ainsi représenter 17% de la production du groupe en 2012.
Total s'intéresse également aux énergies nouvelles, principalement le solaire et la biomasse, et même au nucléaire, comme en témoigne l'accord conclu, début 2008, avec Suez et Areva sur un projet de centrale à Abu Dhabi.
La puissance de la société se traduit par des bénéfices particulièrement importants. Le résultat net 2007 s'élève à un imposant montant de 13,5 milliards d'euros, en quasi-doublement en cinq ans, tandis que, sur la même période, le chiffre d'affaires (158 milliards d'euros) n'augmentait que de 50%.
Et le dernier trimestre écoulé, touché, certes, par les cours encore élevés de l'or noir, enregistre un bénéfice net ajusté (hors effets de stocks) en hausse de 35%. Le résultat net, de l'ordre de 11 milliards d'euros sur les neuf premiers mois, devrait donc dépasser en 2008 les sommes de l'année précédente.
Sauf effondrement prolongé du prix du brut, un raffermissement des cours du pétrole dans une fourchette comprise entre 65 et 80 $ devrait suffire à maintenir des bénéfices voisins pour 2009.
La baisse du prix du baril a, au demeurant, quelques avantages et favorise, notamment, le rétablissement des marges de la société dans le raffinage. Le maintien à 50 $ le baril (ou moins) ne paraît guère envisageable à terme, sauf à imaginer une déflation importante et prolongée.
Comme l'a indiqué récemment le directeur de Total, Christophe de Margerie, un tel cours obère très fortement la rentabilité des nouveaux gisements. Or, la forte demande des pays émergents, Chine en tête, perturbe durablement l'équilibre précaire du marché pétrolier.
Les prix devraient repartir à la hausse courant 2009 et toute reprise boursière, même partielle, devrait s'accompagner d'une augmentation corrélative des hydrocarbures. La demande de pétrole et de gaz ne semble pas prête de se tarir et les énergies de substitution ne paraissent guère en mesure, à moyen terme, d'inverser la tendance.
Total pourra d'autant plus profiter de cette situation qu'il dispose de nombreuses réserves. En 2007, la société s'était révélée être la seule des quatre majors à pouvoir augmenter sa production. L'objectif 2006-2010 étant d'ailleurs la croissance de cette dernière de 4% par an.
Le budget exploration est passé en quelques années de 800 millions d'euros à 1,8 milliard d'euros en 2008 et le groupe dispose de réserves prouvées correspondant à plus de vingt années d'exploitation. Total opère principalement en Afrique, en mer du Nord, dans le Golfe persique et en Asie du Sud-Est. La société se lance dans l'exploitation des schistes bitumeux au Canada et collabore avec Gazprom au développement du champ gazier russe géant de Chtokman.
Comme le souligne Le Revenu, la trésorerie abondante de Total lui a permis de ne jamais réduire son dividende en vingt ans et l'action affiche un très alléchant rendement d'environ 6%.
Le Revenu souligne néanmoins l'excellente qualité du groupe Total et recommande le titre à l'achat.
Avec l'absorption du Belge Petrofina et d'Elf Aquitaine, Total est devenu la quatrième grande compagnie pétrolière mondiale, derrière Exxonmobil, BP et Royal Dutch Shell.
Ses activités couvrent toute la chaîne de cette industrie, d'amont (exploration et production) en aval (raffinage et distribution), et la pétrochimie. L'entreprise se veut également un acteur essentiel dans le domaine gazier. Le gaz naturel liquéfié (GNL) va ainsi représenter 17% de la production du groupe en 2012.
Total s'intéresse également aux énergies nouvelles, principalement le solaire et la biomasse, et même au nucléaire, comme en témoigne l'accord conclu, début 2008, avec Suez et Areva sur un projet de centrale à Abu Dhabi.
La puissance de la société se traduit par des bénéfices particulièrement importants. Le résultat net 2007 s'élève à un imposant montant de 13,5 milliards d'euros, en quasi-doublement en cinq ans, tandis que, sur la même période, le chiffre d'affaires (158 milliards d'euros) n'augmentait que de 50%.
Et le dernier trimestre écoulé, touché, certes, par les cours encore élevés de l'or noir, enregistre un bénéfice net ajusté (hors effets de stocks) en hausse de 35%. Le résultat net, de l'ordre de 11 milliards d'euros sur les neuf premiers mois, devrait donc dépasser en 2008 les sommes de l'année précédente.
Sauf effondrement prolongé du prix du brut, un raffermissement des cours du pétrole dans une fourchette comprise entre 65 et 80 $ devrait suffire à maintenir des bénéfices voisins pour 2009.
La baisse du prix du baril a, au demeurant, quelques avantages et favorise, notamment, le rétablissement des marges de la société dans le raffinage. Le maintien à 50 $ le baril (ou moins) ne paraît guère envisageable à terme, sauf à imaginer une déflation importante et prolongée.
Comme l'a indiqué récemment le directeur de Total, Christophe de Margerie, un tel cours obère très fortement la rentabilité des nouveaux gisements. Or, la forte demande des pays émergents, Chine en tête, perturbe durablement l'équilibre précaire du marché pétrolier.
Les prix devraient repartir à la hausse courant 2009 et toute reprise boursière, même partielle, devrait s'accompagner d'une augmentation corrélative des hydrocarbures. La demande de pétrole et de gaz ne semble pas prête de se tarir et les énergies de substitution ne paraissent guère en mesure, à moyen terme, d'inverser la tendance.
Total pourra d'autant plus profiter de cette situation qu'il dispose de nombreuses réserves. En 2007, la société s'était révélée être la seule des quatre majors à pouvoir augmenter sa production. L'objectif 2006-2010 étant d'ailleurs la croissance de cette dernière de 4% par an.
Le budget exploration est passé en quelques années de 800 millions d'euros à 1,8 milliard d'euros en 2008 et le groupe dispose de réserves prouvées correspondant à plus de vingt années d'exploitation. Total opère principalement en Afrique, en mer du Nord, dans le Golfe persique et en Asie du Sud-Est. La société se lance dans l'exploitation des schistes bitumeux au Canada et collabore avec Gazprom au développement du champ gazier russe géant de Chtokman.
Comme le souligne Le Revenu, la trésorerie abondante de Total lui a permis de ne jamais réduire son dividende en vingt ans et l'action affiche un très alléchant rendement d'environ 6%.
Pas d'assurance contre la bêtise
Une partie des malheurs des financiers vient de ce que tout le monde se croyait assuré contre tout. Des mathématiciens avaient accouché de savants modèles de risque. Le risque, une fois identifié et calculé, pouvait être couvert.
Premier grain de sable dans cette belle mécanique, les employeurs financiers des brillants mathématiciens ignorent tout des techniques statistiques. Parlez donc d'intervalle de confiance à un opérateur de marché et vous verrez son oeil devenir vitreux. La notion d'intervalle de confiance mesure cependant la crédibilité d'une statistique, le degré de confiance que l'on peut lui accorder. En se penchant sur les modèles de risque, on peut s'apercevoir que certains violent les règles élémentaires des statistiques.
Second grain de sable, le comportement humain et la psychologie se modélisent difficilement. Heureusement, d'ailleurs. Des bibliothèques sont remplies d'ouvrages universitaires expliquant Pavlov, Panurge, les réactions sous stress des bipèdes et, parfois, celles des bipèdes investisseurs. Mais aucun n'est capable de prévoir exactement ce qu'ils vont faire dans une situation précise.
Dans l'aéronautique, on sait qu'un bimoteur est moins fiable qu'un monomoteur. Bien sûr, sur le papier, le bimoteur est bien plus fiable que le monomoteur : quand un moteur est tombé en panne, l'autre suffit à un atterrissage d'urgence. Mais, dans la pratique, lors de multiples accidents, l'équipage a pris les mauvaises décisions. Un voyant affiche "moteur gauche en surchauffe" et... c'est le moteur droit qu'on coupe. Pourtant, en principe, les pilotes sont des gens qui ne confondent pas leur droite et leur gauche.
Si la psychologie humaine se modélise mal, la bêtise humaine se quantifie vraiment très mal. Dans ce domaine, il est difficile d'être blasé. On croit avoir tout vu, mais non. L'affaire Madoff est exemplaire. Le procédé est extrêmement grossier. En français, cela s'appelle cavalerie : on rembourse de la dette avec de la dette. Les Anglo-Saxons utilisent le terme plus chic de "finance de Ponzi". Il consiste à inventer une fable de rendement fabuleux et de payer les premiers entrants avec l'argent récolté auprès des victimes suivantes.
Le monde de la finance y croyait : au moins 30 des 50 Mds$ ont été souscrits par des établissements financiers.
Pour ceux qui réclament toutes sortes de contrôles, comment contrôler la bêtise humaine ? Voilà le véritable défi financier et... politique. Car, finalement, les banquiers croyaient en Madoff. Mais que dire des électeurs qui accordent leur confiance aux politiques qui creusent la dette
Premier grain de sable dans cette belle mécanique, les employeurs financiers des brillants mathématiciens ignorent tout des techniques statistiques. Parlez donc d'intervalle de confiance à un opérateur de marché et vous verrez son oeil devenir vitreux. La notion d'intervalle de confiance mesure cependant la crédibilité d'une statistique, le degré de confiance que l'on peut lui accorder. En se penchant sur les modèles de risque, on peut s'apercevoir que certains violent les règles élémentaires des statistiques.
Second grain de sable, le comportement humain et la psychologie se modélisent difficilement. Heureusement, d'ailleurs. Des bibliothèques sont remplies d'ouvrages universitaires expliquant Pavlov, Panurge, les réactions sous stress des bipèdes et, parfois, celles des bipèdes investisseurs. Mais aucun n'est capable de prévoir exactement ce qu'ils vont faire dans une situation précise.
Dans l'aéronautique, on sait qu'un bimoteur est moins fiable qu'un monomoteur. Bien sûr, sur le papier, le bimoteur est bien plus fiable que le monomoteur : quand un moteur est tombé en panne, l'autre suffit à un atterrissage d'urgence. Mais, dans la pratique, lors de multiples accidents, l'équipage a pris les mauvaises décisions. Un voyant affiche "moteur gauche en surchauffe" et... c'est le moteur droit qu'on coupe. Pourtant, en principe, les pilotes sont des gens qui ne confondent pas leur droite et leur gauche.
Si la psychologie humaine se modélise mal, la bêtise humaine se quantifie vraiment très mal. Dans ce domaine, il est difficile d'être blasé. On croit avoir tout vu, mais non. L'affaire Madoff est exemplaire. Le procédé est extrêmement grossier. En français, cela s'appelle cavalerie : on rembourse de la dette avec de la dette. Les Anglo-Saxons utilisent le terme plus chic de "finance de Ponzi". Il consiste à inventer une fable de rendement fabuleux et de payer les premiers entrants avec l'argent récolté auprès des victimes suivantes.
Le monde de la finance y croyait : au moins 30 des 50 Mds$ ont été souscrits par des établissements financiers.
Pour ceux qui réclament toutes sortes de contrôles, comment contrôler la bêtise humaine ? Voilà le véritable défi financier et... politique. Car, finalement, les banquiers croyaient en Madoff. Mais que dire des électeurs qui accordent leur confiance aux politiques qui creusent la dette
vendredi 12 décembre 2008
Prominent Trader Accused of Defrauding Clients
December 12, 2008
On Wall Street, his name is legendary. With money he had made as a lifeguard on the beaches of Long Island, he built a trading powerhouse that had prospered for more than four decades. At age 70, he had become an influential spokesman for the traders who are the hidden gears of the marketplace.
But on Thursday morning, this consummate trader, Bernard L. Madoff, was arrested at his Manhattan home by federal agents who accused him of running a multibillion-dollar fraud scheme — perhaps the largest in Wall Street’s history.
Regulators have not yet verified the scale of the fraud. But the criminal complaint filed against Mr. Madoff on Thursday in federal court in Manhattan reports that he estimated the losses at $50 billion. “We are alleging a massive fraud — both in terms of scope and duration,” said Linda Chatman Thomsen, director of the enforcement division at the Securities and Exchange Commission. “We are moving quickly and decisively to stop the fraud and protect remaining assets for investors.”
Andrew M. Calamari, an associate director for enforcement in the S.E.C.’s regional office in New York, said the case involved “a stunning fraud that appears to be of epic proportions.”
According to his lawyers, Mr. Madoff was released on a $10 million bond. “Bernie Madoff is a longstanding leader in the financial services industry,” said Daniel Horwitz, one of his lawyers. “He will fight to get through this unfortunate set of events.”
Mr. Madoff’s brother and business colleague, Peter Madoff, declined to comment on the case or discuss its implications for the Madoff firm, which at one point was the largest market maker on the electronic Nasdaq market, regularly operating as both a buyer and seller of a host of widely traded securities. The firm employed hundreds of traders.
There was some worry on Wall Street that Mr. Madoff’s fall would shake more foundations than his own.
According to the most recent federal filings, Bernard L. Madoff Investment Securities, the firm he founded in 1960, operated more than two dozen funds overseeing $17 billion.
These funds have been widely marketed to wealthy investors, hedge funds and other institutional customers for more than a decade, although an S.E.C. filing in the case said the firm reported having 11 to 23 clients at the beginning of this year.
At the request of the Securities and Exchange Commission, a federal judge appointed a receiver on Thursday evening to secure the Madoff firm’s overseas accounts and warned the firm not to move any assets until he had ruled on whether to freeze the assets.
A hearing on that request is scheduled for Friday.
Regulators said they hoped to have a clearer picture of the losses facing investors by that court hearing.
“We have 16 examiners on site all day and through the night poring over the records,” said Mr. Calamari of the S.E.C.
The Madoff funds attracted investors with the promise of high returns and low fees. One of Mr. Madoff’s more prominent funds, the Fairfield Sentry fund, reported having $7.3 billion in assets in October and claimed to have paid more than 11 percent interest each year through its 15-year track record.
Competing hedge fund managers have wondered privately for years how Mr. Madoff generated such high returns, in bull markets and bear, given the generally low-yielding investment strategies he described to his clients.
“The numbers were too good to be true, for too long,” said Girish Reddy, a managing director at Prisma Partners, an investment firm that invests in hedge funds. “And the supporting infrastructure was weak.” Mr. Reddy said his firm had looked at the Madoff funds but decided against investing in them because their performance was too consistently positive, even in times when the market was incredibly volatile.
But the essential drama is a personal one — one laid out in the dry language of a criminal complaint by Lev L. Dassin, the acting United States attorney in Manhattan, and a regulatory lawsuit filed by the S.E.C. According to those documents, the first alarm bells rang at the firm on Tuesday, when Mr. Madoff told a senior executive he wanted to pay his employees their annual bonuses in December, two months early.
Just days earlier, Mr. Madoff had told another senior executive he was struggling to raise cash to cover about $7 billion in requested withdrawals from his clients, and he had appeared “to have been under great stress in the prior weeks,” according to the S.E.C. complaint.
So on Wednesday, the senior executive visited Mr. Madoff’s office, maintained on a separate floor with records kept under lock and key, and asked for an explanation.
Instead, Mr. Madoff invited the two executives to his Manhattan apartment that evening. When they joined him there, he told them that his money-management business was “all just one big lie” and “basically, a giant Ponzi scheme.”
The senior employees understood him to be saying that he had for years been paying returns to certain investors out of the cash received from other investors.
In that conversation, according to the criminal complaint, Mr. Madoff “stated that he was ‘finished,’ that he had ‘absolutely nothing.’ ”
By this account, Mr. Madoff told the executives he intended to surrender to the authorities in about a week but first wanted to distribute approximately $200 million to $300 million to “certain selected employees, family and friends.”
On Thursday morning, however, he was arrested on a single count of securities fraud, which carries a maximum penalty of 20 years in prison and a maximum fine of $5 million.
According to the S.E.C., Mr. Madoff confessed to an F.B.I. agent that there was “no innocent explanation” for his behavior and he expected to go to jail. He had lost money on his trades, he told the agent, and had “paid investors with money that wasn’t there.”
Although not a household name, Mr. Madoff’s firm has played a significant role in the structure of Wall Street for decades, both in traditional stock trading and in the development of newer electronic networks for trading equities and derivatives.
In building those new trading networks, his firm had formed partnerships with some of the largest brokerage businesses on Wall Street, including Goldman Sachs and Merrill Lynch.
Mr. Madoff founded Bernard L. Madoff Investment Securities in 1960 and liked to tell interviewers about earning his initial stake by working as a lifeguard at city beaches and installing underground sprinkler systems.
By the early 1980s, his firm was one of the largest independent trading operations in the securities industry. The company had around $300 million in assets in 2000 at the height of the Internet bubble and ranked among the top trading and securities firms in the nation.
Mr. Madoff ran the business with several family members, including his brother Peter, his nephew Charles, his niece Shana and his sons Mark and Andrew.
On Wall Street, his name is legendary. With money he had made as a lifeguard on the beaches of Long Island, he built a trading powerhouse that had prospered for more than four decades. At age 70, he had become an influential spokesman for the traders who are the hidden gears of the marketplace.
But on Thursday morning, this consummate trader, Bernard L. Madoff, was arrested at his Manhattan home by federal agents who accused him of running a multibillion-dollar fraud scheme — perhaps the largest in Wall Street’s history.
Regulators have not yet verified the scale of the fraud. But the criminal complaint filed against Mr. Madoff on Thursday in federal court in Manhattan reports that he estimated the losses at $50 billion. “We are alleging a massive fraud — both in terms of scope and duration,” said Linda Chatman Thomsen, director of the enforcement division at the Securities and Exchange Commission. “We are moving quickly and decisively to stop the fraud and protect remaining assets for investors.”
Andrew M. Calamari, an associate director for enforcement in the S.E.C.’s regional office in New York, said the case involved “a stunning fraud that appears to be of epic proportions.”
According to his lawyers, Mr. Madoff was released on a $10 million bond. “Bernie Madoff is a longstanding leader in the financial services industry,” said Daniel Horwitz, one of his lawyers. “He will fight to get through this unfortunate set of events.”
Mr. Madoff’s brother and business colleague, Peter Madoff, declined to comment on the case or discuss its implications for the Madoff firm, which at one point was the largest market maker on the electronic Nasdaq market, regularly operating as both a buyer and seller of a host of widely traded securities. The firm employed hundreds of traders.
There was some worry on Wall Street that Mr. Madoff’s fall would shake more foundations than his own.
According to the most recent federal filings, Bernard L. Madoff Investment Securities, the firm he founded in 1960, operated more than two dozen funds overseeing $17 billion.
These funds have been widely marketed to wealthy investors, hedge funds and other institutional customers for more than a decade, although an S.E.C. filing in the case said the firm reported having 11 to 23 clients at the beginning of this year.
At the request of the Securities and Exchange Commission, a federal judge appointed a receiver on Thursday evening to secure the Madoff firm’s overseas accounts and warned the firm not to move any assets until he had ruled on whether to freeze the assets.
A hearing on that request is scheduled for Friday.
Regulators said they hoped to have a clearer picture of the losses facing investors by that court hearing.
“We have 16 examiners on site all day and through the night poring over the records,” said Mr. Calamari of the S.E.C.
The Madoff funds attracted investors with the promise of high returns and low fees. One of Mr. Madoff’s more prominent funds, the Fairfield Sentry fund, reported having $7.3 billion in assets in October and claimed to have paid more than 11 percent interest each year through its 15-year track record.
Competing hedge fund managers have wondered privately for years how Mr. Madoff generated such high returns, in bull markets and bear, given the generally low-yielding investment strategies he described to his clients.
“The numbers were too good to be true, for too long,” said Girish Reddy, a managing director at Prisma Partners, an investment firm that invests in hedge funds. “And the supporting infrastructure was weak.” Mr. Reddy said his firm had looked at the Madoff funds but decided against investing in them because their performance was too consistently positive, even in times when the market was incredibly volatile.
But the essential drama is a personal one — one laid out in the dry language of a criminal complaint by Lev L. Dassin, the acting United States attorney in Manhattan, and a regulatory lawsuit filed by the S.E.C. According to those documents, the first alarm bells rang at the firm on Tuesday, when Mr. Madoff told a senior executive he wanted to pay his employees their annual bonuses in December, two months early.
Just days earlier, Mr. Madoff had told another senior executive he was struggling to raise cash to cover about $7 billion in requested withdrawals from his clients, and he had appeared “to have been under great stress in the prior weeks,” according to the S.E.C. complaint.
So on Wednesday, the senior executive visited Mr. Madoff’s office, maintained on a separate floor with records kept under lock and key, and asked for an explanation.
Instead, Mr. Madoff invited the two executives to his Manhattan apartment that evening. When they joined him there, he told them that his money-management business was “all just one big lie” and “basically, a giant Ponzi scheme.”
The senior employees understood him to be saying that he had for years been paying returns to certain investors out of the cash received from other investors.
In that conversation, according to the criminal complaint, Mr. Madoff “stated that he was ‘finished,’ that he had ‘absolutely nothing.’ ”
By this account, Mr. Madoff told the executives he intended to surrender to the authorities in about a week but first wanted to distribute approximately $200 million to $300 million to “certain selected employees, family and friends.”
On Thursday morning, however, he was arrested on a single count of securities fraud, which carries a maximum penalty of 20 years in prison and a maximum fine of $5 million.
According to the S.E.C., Mr. Madoff confessed to an F.B.I. agent that there was “no innocent explanation” for his behavior and he expected to go to jail. He had lost money on his trades, he told the agent, and had “paid investors with money that wasn’t there.”
Although not a household name, Mr. Madoff’s firm has played a significant role in the structure of Wall Street for decades, both in traditional stock trading and in the development of newer electronic networks for trading equities and derivatives.
In building those new trading networks, his firm had formed partnerships with some of the largest brokerage businesses on Wall Street, including Goldman Sachs and Merrill Lynch.
Mr. Madoff founded Bernard L. Madoff Investment Securities in 1960 and liked to tell interviewers about earning his initial stake by working as a lifeguard at city beaches and installing underground sprinkler systems.
By the early 1980s, his firm was one of the largest independent trading operations in the securities industry. The company had around $300 million in assets in 2000 at the height of the Internet bubble and ranked among the top trading and securities firms in the nation.
Mr. Madoff ran the business with several family members, including his brother Peter, his nephew Charles, his niece Shana and his sons Mark and Andrew.
dimanche 7 décembre 2008
Goldman, Morgan Stanley strategies may diverge
SAN FRANCISCO -- Goldman Sachs and Morgan Stanley mark the end of an era this month when they post their first earnings since becoming commercial banks, and investors resigned to the dismal results on tap are restless for any indications about the companies' plan to grow with the less risky business model.
"Nothing that happened this year alters the core of what Goldman Sachs is," Goldman Chief Executive Lloyd Blankfein said at a conference last month. "We won't stop doing the things that made us a leading investment bank," he added, and stuck to a forecast that Goldman will generate a 20% return on tangible equity through the ups and downs that characterize the securities business.
It's understandable that Blankfein would say such things, but they are also debatable.
Amid unprecedented market turmoil in September, Goldman and Morgan Stanley gained approval to become bank holding companies. The moves gave the brokerage firms access to deposits -- considered a more stable source of funding.
But it also brought them under the tougher regulatory scrutiny of the Federal Reserve. That could limit the amount of borrowed money, or leverage, they use and restrict the types of businesses they operate. See full story.
The quarter, which ended Nov. 30, was among the toughest in decades as equity and credit markets collapsed. Rival brokerage firm Lehman Brothers (LEHMQ) filed for bankruptcy early in the quarter, while Merrill Lynch (MER), another rival, was quickly acquired by Bank of America (BAC) and insurance giant American International Group (AIG) succumbed to a government takeover.
Early signs suggest Goldman (GS) may try to retain more of its previous business model, while Morgan (MS) pushes further into retail banking.
"Morgan Stanley has been much less sanguine about the potential impact that the change of regulators may have on its business model," Brad Hintz, an analyst at Bernstein Research, wrote in a note to investors earlier this week.
Goldman Sachs and Morgan Stanley are due to report gloomy quarterly results the week of Dec. 15, but investors want to know whether their future will be brighter as the brokerage firms transform themselves into more regulated banks.
In contrast, Morgan Stanley co-President James Gorman, speaking at the same conference as Blankfein, said that limits on leverage that come with the firm's new status as a bank holding company will mean lower profitability. Return on equity may decline by three to five percentage points from a previous over-the-cycle range of 15% to 20%, he predicted.
Morgan Stanley warned in a recent regulatory filing that, as a bank holding company, some of its businesses may not "be deemed permissible financial activities," forcing it to sell them after a grace period of up to five years, Hintz noted.
The disclosure "correctly captures the uncertainty of the current environment to the business activities of these 'new' banks," he added.
Goldman is expected to report a fiscal fourth-quarter net loss of $2.62 a share, according to the average estimate of 16 analysts in a FactSet survey. Morgan Stanley is forecast to lose 23 cents a share, another FactSet analyst poll found.
However, last week both firms' shares were volatile after Credit Suisse analysts estimated that Goldman would report a $4-a-share loss for its fourth quarter. That would be dramatic, to say the least, and would be the iconic firm's first loss since going public in the late 1990s.
"Specifically, we're now forecasting total trading and principal investment revenues of negative $4.70 billion versus a positive $2.70 billion last quarter, a 25% to 30% decline in investment-banking revenues and 12% to 15% sequential-quarter declines in asset management and securities services and prime brokerage revenues," the analysts wrote.
Some of that loss will undoubtedly be due to a slowdown in the traditional underwriting and financing businesses of investment banking, but it also reflects the blowback effect of leverage the firm used to grow profits the past several years. That leverage amplifies losses as much as it does gains.
Blankfein said last month that leverage is only one part of the returns the firm generates and has not been a big driver of its performance since going public in 1999.
However, Bernstein's Hintz said he was skeptical about that, noting that Goldman's leverage and return on equity have been closely correlated.
The analyst believes Goldman will limit some of its trading and principal investing activities, which use a lot of capital. Blankfein said in November that the firm will focus on fee-based businesses such as merger and acquisitions advice, asset management and investing alongside clients.
Goldman will change its sources of funding, but Blankfein said that even banks with large deposit bases still rely a lot on wholesale funding. Regulators and investors will have to work on a longer-term solution to recent problems in wholesale funding markets, he said.
Goldman will collect deposits, either through its wealth-management business, brokered certificates of deposits or acquisitions, he said.
In contrast, Morgan Stanley is planning to develop a "complete banking product offering," including savings accounts and certificates of deposit, Gorman said last month.
The institutional securities unit will be reorganized, he added, noting that Morgan is "rationalizing" its prime brokerage, principal investing and commercial real estate origination businesses
"Nothing that happened this year alters the core of what Goldman Sachs is," Goldman Chief Executive Lloyd Blankfein said at a conference last month. "We won't stop doing the things that made us a leading investment bank," he added, and stuck to a forecast that Goldman will generate a 20% return on tangible equity through the ups and downs that characterize the securities business.
It's understandable that Blankfein would say such things, but they are also debatable.
Amid unprecedented market turmoil in September, Goldman and Morgan Stanley gained approval to become bank holding companies. The moves gave the brokerage firms access to deposits -- considered a more stable source of funding.
But it also brought them under the tougher regulatory scrutiny of the Federal Reserve. That could limit the amount of borrowed money, or leverage, they use and restrict the types of businesses they operate. See full story.
The quarter, which ended Nov. 30, was among the toughest in decades as equity and credit markets collapsed. Rival brokerage firm Lehman Brothers (LEHMQ) filed for bankruptcy early in the quarter, while Merrill Lynch (MER), another rival, was quickly acquired by Bank of America (BAC) and insurance giant American International Group (AIG) succumbed to a government takeover.
Early signs suggest Goldman (GS) may try to retain more of its previous business model, while Morgan (MS) pushes further into retail banking.
"Morgan Stanley has been much less sanguine about the potential impact that the change of regulators may have on its business model," Brad Hintz, an analyst at Bernstein Research, wrote in a note to investors earlier this week.
Goldman Sachs and Morgan Stanley are due to report gloomy quarterly results the week of Dec. 15, but investors want to know whether their future will be brighter as the brokerage firms transform themselves into more regulated banks.
In contrast, Morgan Stanley co-President James Gorman, speaking at the same conference as Blankfein, said that limits on leverage that come with the firm's new status as a bank holding company will mean lower profitability. Return on equity may decline by three to five percentage points from a previous over-the-cycle range of 15% to 20%, he predicted.
Morgan Stanley warned in a recent regulatory filing that, as a bank holding company, some of its businesses may not "be deemed permissible financial activities," forcing it to sell them after a grace period of up to five years, Hintz noted.
The disclosure "correctly captures the uncertainty of the current environment to the business activities of these 'new' banks," he added.
Goldman is expected to report a fiscal fourth-quarter net loss of $2.62 a share, according to the average estimate of 16 analysts in a FactSet survey. Morgan Stanley is forecast to lose 23 cents a share, another FactSet analyst poll found.
However, last week both firms' shares were volatile after Credit Suisse analysts estimated that Goldman would report a $4-a-share loss for its fourth quarter. That would be dramatic, to say the least, and would be the iconic firm's first loss since going public in the late 1990s.
"Specifically, we're now forecasting total trading and principal investment revenues of negative $4.70 billion versus a positive $2.70 billion last quarter, a 25% to 30% decline in investment-banking revenues and 12% to 15% sequential-quarter declines in asset management and securities services and prime brokerage revenues," the analysts wrote.
Some of that loss will undoubtedly be due to a slowdown in the traditional underwriting and financing businesses of investment banking, but it also reflects the blowback effect of leverage the firm used to grow profits the past several years. That leverage amplifies losses as much as it does gains.
Blankfein said last month that leverage is only one part of the returns the firm generates and has not been a big driver of its performance since going public in 1999.
However, Bernstein's Hintz said he was skeptical about that, noting that Goldman's leverage and return on equity have been closely correlated.
The analyst believes Goldman will limit some of its trading and principal investing activities, which use a lot of capital. Blankfein said in November that the firm will focus on fee-based businesses such as merger and acquisitions advice, asset management and investing alongside clients.
Goldman will change its sources of funding, but Blankfein said that even banks with large deposit bases still rely a lot on wholesale funding. Regulators and investors will have to work on a longer-term solution to recent problems in wholesale funding markets, he said.
Goldman will collect deposits, either through its wealth-management business, brokered certificates of deposits or acquisitions, he said.
In contrast, Morgan Stanley is planning to develop a "complete banking product offering," including savings accounts and certificates of deposit, Gorman said last month.
The institutional securities unit will be reorganized, he added, noting that Morgan is "rationalizing" its prime brokerage, principal investing and commercial real estate origination businesses
Goldman, Morgan Stanley strategies may diverge
SAN FRANCISCO Goldman Sachs and Morgan Stanley mark the end of an era this month when they post their first earnings since becoming commercial banks, and investors resigned to the dismal results on tap are restless for any indications about the companies' plan to grow with the less risky business model.
"Nothing that happened this year alters the core of what Goldman Sachs is," Goldman Chief Executive Lloyd Blankfein said at a conference last month. "We won't stop doing the things that made us a leading investment bank," he added, and stuck to a forecast that Goldman will generate a 20% return on tangible equity through the ups and downs that characterize the securities business.
It's understandable that Blankfein would say such things, but they are also debatable.
Amid unprecedented market turmoil in September, Goldman and Morgan Stanley gained approval to become bank holding companies. The moves gave the brokerage firms access to deposits -- considered a more stable source of funding.
But it also brought them under the tougher regulatory scrutiny of the Federal Reserve. That could limit the amount of borrowed money, or leverage, they use and restrict the types of businesses they operate. See full story.
The quarter, which ended Nov. 30, was among the toughest in decades as equity and credit markets collapsed. Rival brokerage firm Lehman Brothers (LEHMQ) filed for bankruptcy early in the quarter, while Merrill Lynch (MER), another rival, was quickly acquired by Bank of America (BAC) and insurance giant American International Group (AIG) succumbed to a government takeover.
Early signs suggest Goldman (GS) may try to retain more of its previous business model, while Morgan (MS) pushes further into retail banking.
"Morgan Stanley has been much less sanguine about the potential impact that the change of regulators may have on its business model," Brad Hintz, an analyst at Bernstein Research, wrote in a note to investors earlier this week.
Goldman Sachs and Morgan Stanley are due to report gloomy quarterly results the week of Dec. 15, but investors want to know whether their future will be brighter as the brokerage firms transform themselves into more regulated banks.
In contrast, Morgan Stanley co-President James Gorman, speaking at the same conference as Blankfein, said that limits on leverage that come with the firm's new status as a bank holding company will mean lower profitability. Return on equity may decline by three to five percentage points from a previous over-the-cycle range of 15% to 20%, he predicted.
Morgan Stanley warned in a recent regulatory filing that, as a bank holding company, some of its businesses may not "be deemed permissible financial activities," forcing it to sell them after a grace period of up to five years, Hintz noted.
The disclosure "correctly captures the uncertainty of the current environment to the business activities of these 'new' banks," he added.
Goldman is expected to report a fiscal fourth-quarter net loss of $2.62 a share, according to the average estimate of 16 analysts in a FactSet survey. Morgan Stanley is forecast to lose 23 cents a share, another FactSet analyst poll found.
However, last week both firms' shares were volatile after Credit Suisse analysts estimated that Goldman would report a $4-a-share loss for its fourth quarter. That would be dramatic, to say the least, and would be the iconic firm's first loss since going public in the late 1990s.
"Specifically, we're now forecasting total trading and principal investment revenues of negative $4.70 billion versus a positive $2.70 billion last quarter, a 25% to 30% decline in investment-banking revenues and 12% to 15% sequential-quarter declines in asset management and securities services and prime brokerage revenues," the analysts wrote.
Some of that loss will undoubtedly be due to a slowdown in the traditional underwriting and financing businesses of investment banking, but it also reflects the blowback effect of leverage the firm used to grow profits the past several years. That leverage amplifies losses as much as it does gains.
Blankfein said last month that leverage is only one part of the returns the firm generates and has not been a big driver of its performance since going public in 1999.
However, Bernstein's Hintz said he was skeptical about that, noting that Goldman's leverage and return on equity have been closely correlated.
The analyst believes Goldman will limit some of its trading and principal investing activities, which use a lot of capital. Blankfein said in November that the firm will focus on fee-based businesses such as merger and acquisitions advice, asset management and investing alongside clients.
Goldman will change its sources of funding, but Blankfein said that even banks with large deposit bases still rely a lot on wholesale funding. Regulators and investors will have to work on a longer-term solution to recent problems in wholesale funding markets, he said.
Goldman will collect deposits, either through its wealth-management business, brokered certificates of deposits or acquisitions, he said.
In contrast, Morgan Stanley is planning to develop a "complete banking product offering," including savings accounts and certificates of deposit, Gorman said last month.
The institutional securities unit will be reorganized, he added, noting that Morgan is "rationalizing" its prime brokerage, principal investing and commercial real estate origination businesses.
"Nothing that happened this year alters the core of what Goldman Sachs is," Goldman Chief Executive Lloyd Blankfein said at a conference last month. "We won't stop doing the things that made us a leading investment bank," he added, and stuck to a forecast that Goldman will generate a 20% return on tangible equity through the ups and downs that characterize the securities business.
It's understandable that Blankfein would say such things, but they are also debatable.
Amid unprecedented market turmoil in September, Goldman and Morgan Stanley gained approval to become bank holding companies. The moves gave the brokerage firms access to deposits -- considered a more stable source of funding.
But it also brought them under the tougher regulatory scrutiny of the Federal Reserve. That could limit the amount of borrowed money, or leverage, they use and restrict the types of businesses they operate. See full story.
The quarter, which ended Nov. 30, was among the toughest in decades as equity and credit markets collapsed. Rival brokerage firm Lehman Brothers (LEHMQ) filed for bankruptcy early in the quarter, while Merrill Lynch (MER), another rival, was quickly acquired by Bank of America (BAC) and insurance giant American International Group (AIG) succumbed to a government takeover.
Early signs suggest Goldman (GS) may try to retain more of its previous business model, while Morgan (MS) pushes further into retail banking.
"Morgan Stanley has been much less sanguine about the potential impact that the change of regulators may have on its business model," Brad Hintz, an analyst at Bernstein Research, wrote in a note to investors earlier this week.
Goldman Sachs and Morgan Stanley are due to report gloomy quarterly results the week of Dec. 15, but investors want to know whether their future will be brighter as the brokerage firms transform themselves into more regulated banks.
In contrast, Morgan Stanley co-President James Gorman, speaking at the same conference as Blankfein, said that limits on leverage that come with the firm's new status as a bank holding company will mean lower profitability. Return on equity may decline by three to five percentage points from a previous over-the-cycle range of 15% to 20%, he predicted.
Morgan Stanley warned in a recent regulatory filing that, as a bank holding company, some of its businesses may not "be deemed permissible financial activities," forcing it to sell them after a grace period of up to five years, Hintz noted.
The disclosure "correctly captures the uncertainty of the current environment to the business activities of these 'new' banks," he added.
Goldman is expected to report a fiscal fourth-quarter net loss of $2.62 a share, according to the average estimate of 16 analysts in a FactSet survey. Morgan Stanley is forecast to lose 23 cents a share, another FactSet analyst poll found.
However, last week both firms' shares were volatile after Credit Suisse analysts estimated that Goldman would report a $4-a-share loss for its fourth quarter. That would be dramatic, to say the least, and would be the iconic firm's first loss since going public in the late 1990s.
"Specifically, we're now forecasting total trading and principal investment revenues of negative $4.70 billion versus a positive $2.70 billion last quarter, a 25% to 30% decline in investment-banking revenues and 12% to 15% sequential-quarter declines in asset management and securities services and prime brokerage revenues," the analysts wrote.
Some of that loss will undoubtedly be due to a slowdown in the traditional underwriting and financing businesses of investment banking, but it also reflects the blowback effect of leverage the firm used to grow profits the past several years. That leverage amplifies losses as much as it does gains.
Blankfein said last month that leverage is only one part of the returns the firm generates and has not been a big driver of its performance since going public in 1999.
However, Bernstein's Hintz said he was skeptical about that, noting that Goldman's leverage and return on equity have been closely correlated.
The analyst believes Goldman will limit some of its trading and principal investing activities, which use a lot of capital. Blankfein said in November that the firm will focus on fee-based businesses such as merger and acquisitions advice, asset management and investing alongside clients.
Goldman will change its sources of funding, but Blankfein said that even banks with large deposit bases still rely a lot on wholesale funding. Regulators and investors will have to work on a longer-term solution to recent problems in wholesale funding markets, he said.
Goldman will collect deposits, either through its wealth-management business, brokered certificates of deposits or acquisitions, he said.
In contrast, Morgan Stanley is planning to develop a "complete banking product offering," including savings accounts and certificates of deposit, Gorman said last month.
The institutional securities unit will be reorganized, he added, noting that Morgan is "rationalizing" its prime brokerage, principal investing and commercial real estate origination businesses.
Goldman, Morgan Stanley strategies may diverge
SAN FRANCISCO Goldman Sachs and Morgan Stanley mark the end of an era this month when they post their first earnings since becoming commercial banks, and investors resigned to the dismal results on tap are restless for any indications about the companies' plan to grow with the less risky business model.
"Nothing that happened this year alters the core of what Goldman Sachs is," Goldman Chief Executive Lloyd Blankfein said at a conference last month. "We won't stop doing the things that made us a leading investment bank," he added, and stuck to a forecast that Goldman will generate a 20% return on tangible equity through the ups and downs that characterize the securities business.
It's understandable that Blankfein would say such things, but they are also debatable.
Amid unprecedented market turmoil in September, Goldman and Morgan Stanley gained approval to become bank holding companies. The moves gave the brokerage firms access to deposits -- considered a more stable source of funding.
But it also brought them under the tougher regulatory scrutiny of the Federal Reserve. That could limit the amount of borrowed money, or leverage, they use and restrict the types of businesses they operate. See full story.
The quarter, which ended Nov. 30, was among the toughest in decades as equity and credit markets collapsed. Rival brokerage firm Lehman Brothers (LEHMQ) filed for bankruptcy early in the quarter, while Merrill Lynch (MER), another rival, was quickly acquired by Bank of America (BAC) and insurance giant American International Group (AIG) succumbed to a government takeover.
Early signs suggest Goldman (GS) may try to retain more of its previous business model, while Morgan (MS) pushes further into retail banking.
"Morgan Stanley has been much less sanguine about the potential impact that the change of regulators may have on its business model," Brad Hintz, an analyst at Bernstein Research, wrote in a note to investors earlier this week.
Goldman Sachs and Morgan Stanley are due to report gloomy quarterly results the week of Dec. 15, but investors want to know whether their future will be brighter as the brokerage firms transform themselves into more regulated banks.
In contrast, Morgan Stanley co-President James Gorman, speaking at the same conference as Blankfein, said that limits on leverage that come with the firm's new status as a bank holding company will mean lower profitability. Return on equity may decline by three to five percentage points from a previous over-the-cycle range of 15% to 20%, he predicted.
Morgan Stanley warned in a recent regulatory filing that, as a bank holding company, some of its businesses may not "be deemed permissible financial activities," forcing it to sell them after a grace period of up to five years, Hintz noted.
The disclosure "correctly captures the uncertainty of the current environment to the business activities of these 'new' banks," he added.
Goldman is expected to report a fiscal fourth-quarter net loss of $2.62 a share, according to the average estimate of 16 analysts in a FactSet survey. Morgan Stanley is forecast to lose 23 cents a share, another FactSet analyst poll found.
However, last week both firms' shares were volatile after Credit Suisse analysts estimated that Goldman would report a $4-a-share loss for its fourth quarter. That would be dramatic, to say the least, and would be the iconic firm's first loss since going public in the late 1990s.
"Specifically, we're now forecasting total trading and principal investment revenues of negative $4.70 billion versus a positive $2.70 billion last quarter, a 25% to 30% decline in investment-banking revenues and 12% to 15% sequential-quarter declines in asset management and securities services and prime brokerage revenues," the analysts wrote.
Some of that loss will undoubtedly be due to a slowdown in the traditional underwriting and financing businesses of investment banking, but it also reflects the blowback effect of leverage the firm used to grow profits the past several years. That leverage amplifies losses as much as it does gains.
Blankfein said last month that leverage is only one part of the returns the firm generates and has not been a big driver of its performance since going public in 1999.
However, Bernstein's Hintz said he was skeptical about that, noting that Goldman's leverage and return on equity have been closely correlated.
The analyst believes Goldman will limit some of its trading and principal investing activities, which use a lot of capital. Blankfein said in November that the firm will focus on fee-based businesses such as merger and acquisitions advice, asset management and investing alongside clients.
Goldman will change its sources of funding, but Blankfein said that even banks with large deposit bases still rely a lot on wholesale funding. Regulators and investors will have to work on a longer-term solution to recent problems in wholesale funding markets, he said.
Goldman will collect deposits, either through its wealth-management business, brokered certificates of deposits or acquisitions, he said.
In contrast, Morgan Stanley is planning to develop a "complete banking product offering," including savings accounts and certificates of deposit, Gorman said last month.
The institutional securities unit will be reorganized, he added, noting that Morgan is "rationalizing" its prime brokerage, principal investing and commercial real estate origination businesses.
"Nothing that happened this year alters the core of what Goldman Sachs is," Goldman Chief Executive Lloyd Blankfein said at a conference last month. "We won't stop doing the things that made us a leading investment bank," he added, and stuck to a forecast that Goldman will generate a 20% return on tangible equity through the ups and downs that characterize the securities business.
It's understandable that Blankfein would say such things, but they are also debatable.
Amid unprecedented market turmoil in September, Goldman and Morgan Stanley gained approval to become bank holding companies. The moves gave the brokerage firms access to deposits -- considered a more stable source of funding.
But it also brought them under the tougher regulatory scrutiny of the Federal Reserve. That could limit the amount of borrowed money, or leverage, they use and restrict the types of businesses they operate. See full story.
The quarter, which ended Nov. 30, was among the toughest in decades as equity and credit markets collapsed. Rival brokerage firm Lehman Brothers (LEHMQ) filed for bankruptcy early in the quarter, while Merrill Lynch (MER), another rival, was quickly acquired by Bank of America (BAC) and insurance giant American International Group (AIG) succumbed to a government takeover.
Early signs suggest Goldman (GS) may try to retain more of its previous business model, while Morgan (MS) pushes further into retail banking.
"Morgan Stanley has been much less sanguine about the potential impact that the change of regulators may have on its business model," Brad Hintz, an analyst at Bernstein Research, wrote in a note to investors earlier this week.
Goldman Sachs and Morgan Stanley are due to report gloomy quarterly results the week of Dec. 15, but investors want to know whether their future will be brighter as the brokerage firms transform themselves into more regulated banks.
In contrast, Morgan Stanley co-President James Gorman, speaking at the same conference as Blankfein, said that limits on leverage that come with the firm's new status as a bank holding company will mean lower profitability. Return on equity may decline by three to five percentage points from a previous over-the-cycle range of 15% to 20%, he predicted.
Morgan Stanley warned in a recent regulatory filing that, as a bank holding company, some of its businesses may not "be deemed permissible financial activities," forcing it to sell them after a grace period of up to five years, Hintz noted.
The disclosure "correctly captures the uncertainty of the current environment to the business activities of these 'new' banks," he added.
Goldman is expected to report a fiscal fourth-quarter net loss of $2.62 a share, according to the average estimate of 16 analysts in a FactSet survey. Morgan Stanley is forecast to lose 23 cents a share, another FactSet analyst poll found.
However, last week both firms' shares were volatile after Credit Suisse analysts estimated that Goldman would report a $4-a-share loss for its fourth quarter. That would be dramatic, to say the least, and would be the iconic firm's first loss since going public in the late 1990s.
"Specifically, we're now forecasting total trading and principal investment revenues of negative $4.70 billion versus a positive $2.70 billion last quarter, a 25% to 30% decline in investment-banking revenues and 12% to 15% sequential-quarter declines in asset management and securities services and prime brokerage revenues," the analysts wrote.
Some of that loss will undoubtedly be due to a slowdown in the traditional underwriting and financing businesses of investment banking, but it also reflects the blowback effect of leverage the firm used to grow profits the past several years. That leverage amplifies losses as much as it does gains.
Blankfein said last month that leverage is only one part of the returns the firm generates and has not been a big driver of its performance since going public in 1999.
However, Bernstein's Hintz said he was skeptical about that, noting that Goldman's leverage and return on equity have been closely correlated.
The analyst believes Goldman will limit some of its trading and principal investing activities, which use a lot of capital. Blankfein said in November that the firm will focus on fee-based businesses such as merger and acquisitions advice, asset management and investing alongside clients.
Goldman will change its sources of funding, but Blankfein said that even banks with large deposit bases still rely a lot on wholesale funding. Regulators and investors will have to work on a longer-term solution to recent problems in wholesale funding markets, he said.
Goldman will collect deposits, either through its wealth-management business, brokered certificates of deposits or acquisitions, he said.
In contrast, Morgan Stanley is planning to develop a "complete banking product offering," including savings accounts and certificates of deposit, Gorman said last month.
The institutional securities unit will be reorganized, he added, noting that Morgan is "rationalizing" its prime brokerage, principal investing and commercial real estate origination businesses.
samedi 16 juin 2007
Stocks seen easing back from hefty gains next week
U.S. stocks are likely to remain flat or edge lower next week, as bullish investors take a breather following strong gains driven by benign economic numbers, strategists said.
There will be little economic data next week and only a few companies are scheduled to report financial results. The lack of a strong stimulus will give investors a chance to assess the big jumps of the last three sessions -- gains that some strategists said had pushed the market too high too quickly.
"We've had a strong recovery ... but I think we've run a bit too fast," said Michael Metz, chief investment strategist at Oppenheimer & Co. "We're overdue from some flatness or some slight declines."
Housing figures will dominate next week's economic calendar, and economists surveyed by MarketWatch expect all of the reports to reflect softer activity in the sector. The Philadelphia Federal Reserve will release its manufacturing index and the Conference Board will put out leading indicators later in the week.
Nine stocks in the S&P 500 Index are set to post results, including Morgan Stanley , FedEx Corp. , Best Buy Co. and Circuit City Stores Inc.
Investors will be watching the consumer-electronic retailers' financial results for any word on buying trends and their impact on the companies' financial outlook. Analysts surveyed by Thomson Financial expect weaker sales will hurt the companies' first-quarter results. Read earnings preview.
Joe Liro, equity strategist at Stone & McCarthy Research Associates, said that the quiet week might lead investors to rethink the sharp stock advances, including a weekly climb of 2% on the Nasdaq Composite Index and a 1.6% spike in the Dow Jones Industrial Average .
"What I fear is that idle hands will be the devil's workshop," he added, "and investors will start worrying about interest rates again and reverse some of the gains."
Central banks
Recent increases in official interest rates by the European Central Bank, the Swiss central bank and the Reserve Bank of New Zealand, along with a rise in the price of oil have sparked concern that interest rates are headed higher.
Metz said that the expiration of options on Friday may have exaggerated strength in the market. Stocks zoomed up Friday after May core consumer prices, which exclude food and energy prices, came in a tamer than expected rate of 0.1%. The headline CPI, however, ran at a hot rate of 0.7%.
Some economists after the release of the CPI report expressed concern that rising gasoline prices at some point will seep into core consumer inflation and put pressure on the Federal Reserve to raise interest rates.
"There remain significant upside risks to energy prices," wrote Richard Moody, chief economist for Mission Residential, in a note to clients. "Moreover, food prices will remain under upward pressure, thanks in no small part to the folly otherwise known as the ethanol craze." See Economic Report.
Financial markets this week began to price in slightly higher odds of a rate hike by the Fed, a shift from earlier expectations of two rates cuts by the end of the year.
But Al Goldman, chief market strategist at A.G. Edwards, said that the tamer CPI calms worries about the Fed's next move, which he said bodes well for stocks in the coming week.
"I'm surprised at how quickly [the market] has snapped back ... but the buyers are not relenting."
Reports
Figures from the housing sector will start coming in on Monday. The National Association of Home Builders index for June is expected to slip to 28 in June, from 30 in May. Readings under 50 indicate most builders consider business conditions as unfavorable.
"I'd be pleasantly shocked if there were any improvement in the building industry," said Goldman. "That's an '08 phenomenon," he added, pointing out that he doesn't expect poor housing figures to shake up the market.
May housing starts, due Tuesday, are forecast to fall to 1.47 million from 1.53 million. Also Tuesday, building permits are expected to show a decline to 1.45 million from 1.46 million. Both reports will come from the Commerce Department.
The markets will monitor testimony by Treasury Secretary Henry Paulson to the Housing Financial Services panel on Wednesday, at which he will address China currency issues.
New York Fed President Timothy Geithner -- a voting member of the central bank's rate-policy committee -- will speak about trends in Asian financial sectors on Wednesday, while Dallas Fed President Richard Fisher is scheduled to talk about the Fed and economic conditions.
The release of leading economic indicators for May will come Thursday. Economists expect an increase of 0.2%, reversing a decline of 0.5%. Also that day, the Philly Fed's business index is expected to show a pick up in regional factory activity, to 6.1 in June from a 4.2.
Friday's market
An ease in Treasury yields following the tamer than anticipated core CPI report aided the stock market's rise on Friday. The Dow surged 85 points; the tech-heavy Nasdaq rose 27 points; and the S&P 500 Index rose 9.9 points. The broad index closed the week up by 1.6%. See Market Snapshot.
The yield on the benchmark 10-year note closed at 5.17% Friday, lower than the multiyear high of 5.33% that it reached earlier this week. See Bond Report.
A steady increase in bond yields over the past two weeks has provided competition for stocks as investors look for higher investment returns. The increases also spurred worries that borrowing costs will become more expensive for consumers and businesses.
Crude-oil futures finished at $68 a barrel on Friday, their highest level since mid-April, as violence in the Middle East and Nigeria escalated. Crude prices jumped 5% for the week. Read Futures Movers.
The dollar fell against the euro but rose against the yen after the Bank of Japan left its rates unchanged. For the week, the dollar advanced 1.4% against the yen, but was little changed against the euro. See Currencies.
Gold futures closed up $2.80 at $658.70 an ounce, leaving the benchmark contract up 1.3% higher for the week. Read Metals Stocks.
There will be little economic data next week and only a few companies are scheduled to report financial results. The lack of a strong stimulus will give investors a chance to assess the big jumps of the last three sessions -- gains that some strategists said had pushed the market too high too quickly.
"We've had a strong recovery ... but I think we've run a bit too fast," said Michael Metz, chief investment strategist at Oppenheimer & Co. "We're overdue from some flatness or some slight declines."
Housing figures will dominate next week's economic calendar, and economists surveyed by MarketWatch expect all of the reports to reflect softer activity in the sector. The Philadelphia Federal Reserve will release its manufacturing index and the Conference Board will put out leading indicators later in the week.
Nine stocks in the S&P 500 Index are set to post results, including Morgan Stanley , FedEx Corp. , Best Buy Co. and Circuit City Stores Inc.
Investors will be watching the consumer-electronic retailers' financial results for any word on buying trends and their impact on the companies' financial outlook. Analysts surveyed by Thomson Financial expect weaker sales will hurt the companies' first-quarter results. Read earnings preview.
Joe Liro, equity strategist at Stone & McCarthy Research Associates, said that the quiet week might lead investors to rethink the sharp stock advances, including a weekly climb of 2% on the Nasdaq Composite Index and a 1.6% spike in the Dow Jones Industrial Average .
"What I fear is that idle hands will be the devil's workshop," he added, "and investors will start worrying about interest rates again and reverse some of the gains."
Central banks
Recent increases in official interest rates by the European Central Bank, the Swiss central bank and the Reserve Bank of New Zealand, along with a rise in the price of oil have sparked concern that interest rates are headed higher.
Metz said that the expiration of options on Friday may have exaggerated strength in the market. Stocks zoomed up Friday after May core consumer prices, which exclude food and energy prices, came in a tamer than expected rate of 0.1%. The headline CPI, however, ran at a hot rate of 0.7%.
Some economists after the release of the CPI report expressed concern that rising gasoline prices at some point will seep into core consumer inflation and put pressure on the Federal Reserve to raise interest rates.
"There remain significant upside risks to energy prices," wrote Richard Moody, chief economist for Mission Residential, in a note to clients. "Moreover, food prices will remain under upward pressure, thanks in no small part to the folly otherwise known as the ethanol craze." See Economic Report.
Financial markets this week began to price in slightly higher odds of a rate hike by the Fed, a shift from earlier expectations of two rates cuts by the end of the year.
But Al Goldman, chief market strategist at A.G. Edwards, said that the tamer CPI calms worries about the Fed's next move, which he said bodes well for stocks in the coming week.
"I'm surprised at how quickly [the market] has snapped back ... but the buyers are not relenting."
Reports
Figures from the housing sector will start coming in on Monday. The National Association of Home Builders index for June is expected to slip to 28 in June, from 30 in May. Readings under 50 indicate most builders consider business conditions as unfavorable.
"I'd be pleasantly shocked if there were any improvement in the building industry," said Goldman. "That's an '08 phenomenon," he added, pointing out that he doesn't expect poor housing figures to shake up the market.
May housing starts, due Tuesday, are forecast to fall to 1.47 million from 1.53 million. Also Tuesday, building permits are expected to show a decline to 1.45 million from 1.46 million. Both reports will come from the Commerce Department.
The markets will monitor testimony by Treasury Secretary Henry Paulson to the Housing Financial Services panel on Wednesday, at which he will address China currency issues.
New York Fed President Timothy Geithner -- a voting member of the central bank's rate-policy committee -- will speak about trends in Asian financial sectors on Wednesday, while Dallas Fed President Richard Fisher is scheduled to talk about the Fed and economic conditions.
The release of leading economic indicators for May will come Thursday. Economists expect an increase of 0.2%, reversing a decline of 0.5%. Also that day, the Philly Fed's business index is expected to show a pick up in regional factory activity, to 6.1 in June from a 4.2.
Friday's market
An ease in Treasury yields following the tamer than anticipated core CPI report aided the stock market's rise on Friday. The Dow surged 85 points; the tech-heavy Nasdaq rose 27 points; and the S&P 500 Index rose 9.9 points. The broad index closed the week up by 1.6%. See Market Snapshot.
The yield on the benchmark 10-year note closed at 5.17% Friday, lower than the multiyear high of 5.33% that it reached earlier this week. See Bond Report.
A steady increase in bond yields over the past two weeks has provided competition for stocks as investors look for higher investment returns. The increases also spurred worries that borrowing costs will become more expensive for consumers and businesses.
Crude-oil futures finished at $68 a barrel on Friday, their highest level since mid-April, as violence in the Middle East and Nigeria escalated. Crude prices jumped 5% for the week. Read Futures Movers.
The dollar fell against the euro but rose against the yen after the Bank of Japan left its rates unchanged. For the week, the dollar advanced 1.4% against the yen, but was little changed against the euro. See Currencies.
Gold futures closed up $2.80 at $658.70 an ounce, leaving the benchmark contract up 1.3% higher for the week. Read Metals Stocks.
vendredi 4 mai 2007
Home Equity Line of Credit: The Facts
A home equity line of credit can be a great way to use your home equity to finance big ticket items such as home improvements, paying off high-interest debt, or buying a second home.
What Is a Home Equity Line of Credit?
A home equity line of credit (HELOC) is a type of second mortgage . The way a HELOC works is very similar to the way a credit card works. Your home equity is used as the collateral for the loan and you receive a line of credit from which you can draw money.
Benefits of a Home Equity Line of Credit
Using your home equity line of credit for home improvements, consolidating your high-interest debts, or keeping a "rainy day" fund, is a better financial alternative than using your credit cards. Here are the top 4 home equity line of credit benefits:
You get a lower interest rate than you would with your credit cards. That means you pay less interest over the life of the loan.
You get tax advantages that are not available with credit cards. With a home equity line of credit, the interest is usually tax-deductible.* Interest on credit cards is not tax-deductible.
You get flexibility in your payment options. Lenders like Quicken Loans offer interest-only options to help make your payments more flexible. With an interest-only home equity line of credit, you have the option to pay only the interest for a pre-determined amount of time or pay interest plus as much or as little principal as you want.
You get much larger credit limits. Quicken Loans offers home equity lines of credit up to $500,000. This is a great option to have when making a large purchase, such as remodeling your kitchen or adding an addition to your home.
How Does a Home Equity Line of Credit Work?
A home equity line of credit has several unique characteristics. Here is a quick overview:
During the initial years of the loan, you are usually only required to make interest-only payments and you only make payments if and when you draw money from your account.
After the initial years of the loan, the full balance is amortized and paid off over remaining years. An initial minimum draw (taking the money in cash) is sometimes required at closing. However, Quicken Loans does not require an initial minimum draw on HELOCs.
Like any standard loan, the interest rate and annual percentage rate (APR) are calculated based on your credit score , and the combined loan-to-value ratio (CLTV) . Generally, the lower CLTV ratio you have, the lower your interest rate and APR will be.
Your interest rate adjusts as the result of an index plus a margin . The index, which can change, is the Prime Rate as published in the Wall Street Journal at the time of the adjustment period . The margin, which can not change, will be determined at the time of your application.
What Is a Home Equity Line of Credit?
A home equity line of credit (HELOC) is a type of second mortgage . The way a HELOC works is very similar to the way a credit card works. Your home equity is used as the collateral for the loan and you receive a line of credit from which you can draw money.
Benefits of a Home Equity Line of Credit
Using your home equity line of credit for home improvements, consolidating your high-interest debts, or keeping a "rainy day" fund, is a better financial alternative than using your credit cards. Here are the top 4 home equity line of credit benefits:
You get a lower interest rate than you would with your credit cards. That means you pay less interest over the life of the loan.
You get tax advantages that are not available with credit cards. With a home equity line of credit, the interest is usually tax-deductible.* Interest on credit cards is not tax-deductible.
You get flexibility in your payment options. Lenders like Quicken Loans offer interest-only options to help make your payments more flexible. With an interest-only home equity line of credit, you have the option to pay only the interest for a pre-determined amount of time or pay interest plus as much or as little principal as you want.
You get much larger credit limits. Quicken Loans offers home equity lines of credit up to $500,000. This is a great option to have when making a large purchase, such as remodeling your kitchen or adding an addition to your home.
How Does a Home Equity Line of Credit Work?
A home equity line of credit has several unique characteristics. Here is a quick overview:
During the initial years of the loan, you are usually only required to make interest-only payments and you only make payments if and when you draw money from your account.
After the initial years of the loan, the full balance is amortized and paid off over remaining years. An initial minimum draw (taking the money in cash) is sometimes required at closing. However, Quicken Loans does not require an initial minimum draw on HELOCs.
Like any standard loan, the interest rate and annual percentage rate (APR) are calculated based on your credit score , and the combined loan-to-value ratio (CLTV) . Generally, the lower CLTV ratio you have, the lower your interest rate and APR will be.
Your interest rate adjusts as the result of an index plus a margin . The index, which can change, is the Prime Rate as published in the Wall Street Journal at the time of the adjustment period . The margin, which can not change, will be determined at the time of your application.
German Finance Minister Pushes Hedge Fund Code
German Finance Minister Peer Steinbrueck reiterated on Friday (May 4) that he is seeking a code of conduct to help reduce risks to global financial markets from the activities of hedge funds.
"To back up the indirect approach I would like a strengthening of market discipline in the form of a code of conduct," Mr. Steinbrueck said at a farewell function for retiring Bundesbank board member Edgar Meister. Steinbrueck said his proposal was supported by financial regulators in the United States above all, but there was more scepticism on the issue in Britain.
There is no reason for pessimism about Germany's push for a hedge fund code of conduct at the international level, he added. "If at the end of the year we manage to start a dialogue with hedge funds ... that would be a major success," said the finance minister, adding, however, that he did not hold out much hope for a quick solution. "We are at the start of the debate," he said.
Germany has been pressing the Group of Seven major industrial nations to reach agreement on closer oversight of the lightly regulated $1.5 trillion hedge fund industry, warning that its operations could destabilise financial markets. The issue is expected to be discussed at the monthly meeting of European Union finance ministers next week ahead of June's meeting of leaders from the G8 group of industrialised nations.
European Central Bank Governing Council member Axel Weber also said he favoured a code of conduct for hedge funds, although an agreement could take several years to achieve. In the meantime it was important for the industry to govern its own affairs and provide more transparency about its operations, Mr. Weber told reporters at the Frankfurt event. "We want to pursue this in the form of a code of conduct," Weber said.
"To back up the indirect approach I would like a strengthening of market discipline in the form of a code of conduct," Mr. Steinbrueck said at a farewell function for retiring Bundesbank board member Edgar Meister. Steinbrueck said his proposal was supported by financial regulators in the United States above all, but there was more scepticism on the issue in Britain.
There is no reason for pessimism about Germany's push for a hedge fund code of conduct at the international level, he added. "If at the end of the year we manage to start a dialogue with hedge funds ... that would be a major success," said the finance minister, adding, however, that he did not hold out much hope for a quick solution. "We are at the start of the debate," he said.
Germany has been pressing the Group of Seven major industrial nations to reach agreement on closer oversight of the lightly regulated $1.5 trillion hedge fund industry, warning that its operations could destabilise financial markets. The issue is expected to be discussed at the monthly meeting of European Union finance ministers next week ahead of June's meeting of leaders from the G8 group of industrialised nations.
European Central Bank Governing Council member Axel Weber also said he favoured a code of conduct for hedge funds, although an agreement could take several years to achieve. In the meantime it was important for the industry to govern its own affairs and provide more transparency about its operations, Mr. Weber told reporters at the Frankfurt event. "We want to pursue this in the form of a code of conduct," Weber said.
Stocks to open higher on merger developments
U.S. stocks are set to open higher Friday, as a report that Microsoft Corp. wants to discuss a merger with Yahoo Inc., and other merger news, overshadowed new data showing below-forecast jobs creation in the most recent month.
In the media sector, Reuters Group plc said it received a preliminary takeover approach. The media giant didn't say who had made the approach. See full story.
The futures contract for the Dow Jones Industrial Average last was 42 points higher at 13,320.
Futures contracts for the S&P 500 and the Nasdaq 100 were up 5.4 points at 1,513.70 and 9.5 points at 1,916.0.
On Thursday stocks posted gains that were modest but still enabled the Dow Jones industrials to set a record close, following generally upbeat economic reports.
On Friday investors will focus on the merger news and the new non-farm-payrolls report.
The Labor Department said job growth slowed in April to 88,000 and the unemployment rate ticked up to 4.5%. Economists polled by MarketWatch had predicted payroll numbers would slip to 100,000 from the previous reading of 180,000.
In April, average hourly wages increased 2 cents, or 0.2%, to $17.25. Average wages rose 3.7% in the 12 months ended in April, while the average work week fell to 33.8 hours from 33.9 hours.
Charles Campbell, a trading executive at Miller Tabak, called the report "more or less in line." He said that the "whisper number" that circulated through trading rooms before the news was 80,000, which was below the MarketWatch projection.
"The view in the market is that the economy is in fine shape," Campbell said.
In the media sector, Reuters Group plc said it received a preliminary takeover approach. The media giant didn't say who had made the approach. See full story.
The futures contract for the Dow Jones Industrial Average last was 42 points higher at 13,320.
Futures contracts for the S&P 500 and the Nasdaq 100 were up 5.4 points at 1,513.70 and 9.5 points at 1,916.0.
On Thursday stocks posted gains that were modest but still enabled the Dow Jones industrials to set a record close, following generally upbeat economic reports.
On Friday investors will focus on the merger news and the new non-farm-payrolls report.
The Labor Department said job growth slowed in April to 88,000 and the unemployment rate ticked up to 4.5%. Economists polled by MarketWatch had predicted payroll numbers would slip to 100,000 from the previous reading of 180,000.
In April, average hourly wages increased 2 cents, or 0.2%, to $17.25. Average wages rose 3.7% in the 12 months ended in April, while the average work week fell to 33.8 hours from 33.9 hours.
Charles Campbell, a trading executive at Miller Tabak, called the report "more or less in line." He said that the "whisper number" that circulated through trading rooms before the news was 80,000, which was below the MarketWatch projection.
"The view in the market is that the economy is in fine shape," Campbell said.
tips for wisely tapping your home equity ( Advice Section )
Bankers love it when you borrow against your house. That's reason enough to be wary of home-equity lending.
Yet millions of Americans are buying lenders' pitches that our homes are a good source of funds for whatever our little hearts desire, from Super Bowl tickets to exotic vacations to investments in stocks and bonds. That lust for cheap cash has turned home-equity lending into the fastest-growing, and very profitable, area of consumer loans.
Mainstream home-equity lending soared 33% last year according to SMR Research, with new borrowing at nearly quadruple the level of just five years ago. The amount we owe on home-equity loans and lines of credit, $719 billion, now exceeds the balances on our Visas, MasterCards and other general-purpose credit cards.
Those figures don't include home-equity lending to people with troubled credit. So-called subprime mortgage lending rose 60% last year, said SMR vice president George Yacik, to $516 billion. Although the figure includes first mortgages, Yacik said most subprime home lending involves home-equity loans and lines of credit.
Good for banks, risky for consumers
The risk to lenders from all this debt is quite low. The amount banks actually lose on home-equity lending overall is about 0.15%, Yacik said, compared to more than 3% on credit cards.
"There's no bad debt to speak of," Yacik said. "(The borrower's) home is at stake, and they have to be deeply extended not to pay their bill."
Rising home prices mean that banks can get their money back even if they have to foreclose, and troubled borrowers typically sell the home or refinance before that happens.
The low default rate masks the real problem with home-equity lending: Most borrowers are using the loans and lines of credit to fritter away their long-term wealth on short-term spending.
"I recall one computer magazine a couple of years ago that recommended that people get home-equity loans or lines of credit to purchase computers," said Andrew Analore, editor of Inside B&C Lending, an Inside Mortgage Finance publication. Then there was the recent Associated Press article about fans calling mortgage lenders to finance Super Bowl tickets, on top of the more usual borrowing to fund big-screen TVs to watch the game.
"That kind of stuff can be problematic," Analore said, "because people sometimes don't understand that their house is on the line if, for some reason, they are unable to pay for their new computer or big-screen television."
Yet millions of Americans are buying lenders' pitches that our homes are a good source of funds for whatever our little hearts desire, from Super Bowl tickets to exotic vacations to investments in stocks and bonds. That lust for cheap cash has turned home-equity lending into the fastest-growing, and very profitable, area of consumer loans.
Mainstream home-equity lending soared 33% last year according to SMR Research, with new borrowing at nearly quadruple the level of just five years ago. The amount we owe on home-equity loans and lines of credit, $719 billion, now exceeds the balances on our Visas, MasterCards and other general-purpose credit cards.
Those figures don't include home-equity lending to people with troubled credit. So-called subprime mortgage lending rose 60% last year, said SMR vice president George Yacik, to $516 billion. Although the figure includes first mortgages, Yacik said most subprime home lending involves home-equity loans and lines of credit.
Good for banks, risky for consumers
The risk to lenders from all this debt is quite low. The amount banks actually lose on home-equity lending overall is about 0.15%, Yacik said, compared to more than 3% on credit cards.
"There's no bad debt to speak of," Yacik said. "(The borrower's) home is at stake, and they have to be deeply extended not to pay their bill."
Rising home prices mean that banks can get their money back even if they have to foreclose, and troubled borrowers typically sell the home or refinance before that happens.
The low default rate masks the real problem with home-equity lending: Most borrowers are using the loans and lines of credit to fritter away their long-term wealth on short-term spending.
"I recall one computer magazine a couple of years ago that recommended that people get home-equity loans or lines of credit to purchase computers," said Andrew Analore, editor of Inside B&C Lending, an Inside Mortgage Finance publication. Then there was the recent Associated Press article about fans calling mortgage lenders to finance Super Bowl tickets, on top of the more usual borrowing to fund big-screen TVs to watch the game.
"That kind of stuff can be problematic," Analore said, "because people sometimes don't understand that their house is on the line if, for some reason, they are unable to pay for their new computer or big-screen television."
U.S. stocks rise after slew of data
U.S. stocks rose modestly on Thursday, sending the Dow Jones Industrial Average to another record close, as mostly upbeat economic data helped offset a big earnings miss from General Motors Corp.
Trading nonetheless remained cautious ahead of the key April employment report on Friday.
The market has been staging a seemingly unstoppable advance over the past two months, with the Dow Jones Industrial Average rising in 22 out of the past 25 sessions, its longest winning streak since 1929.
"This is a market full of contradictions," said Barry Ritholtz, chief market strategist at Ritholtz Research & Analytics. "I can't recall the last time there's been such negative sentiment [in investor surveys], and yet we rarely reach a top in a market until everyone has become too optimistic."
The Dow industrials gained 29 points to 13,241, lifted by gains in shares of American Express Co. , Exxon Mobil Corp. , Microsoft Corp. and Pfizer Inc. .
Leading the advance, Verizon Corp. rose 3.7% after competitor Vonage Holdings Corp. was denied a request for a retrial in the patent-infringement it brought against Verizon.
The blue-chip average's rally has corresponded with market expectations that global growth is sustaining earnings growth for U.S. companies, even as the U.S. economy continues to slow.
"Likewise, the sectors of the market that tend to have high exposure to non-U.S. earnings streams, such as technology, industrials, energy and basic materials, all have been performing quite well," said Bob Doll, global chief investment officer at Blackrock Inc.
Elsewhere on the Dow, GM fell 5.4% after its quarterly results widely missed forecasts, hurt by its unit GMAC's losses in the subprime mortgage market. See full story.
IBM , also in the Dow, gained 0.6% after saying it has used a nanotechnology process to make computer chips for the first time in a production setting, advancing the race to boost the power and energy efficiency of semiconductors.
The S&P 500 was up 6.5 points at 1,502, crossing the key 1,500 level for the first time since September 2000.
The Nasdaq Composite rose 7.6 points to 2,565.
Trading volumes showed 1.6 billion shares exchanging hands on the New York Stock Exchange and 2.1 billion on the Nasdaq stock market. Advancing issues outpaced decliners by 18 to 13 on the NYSE, while decliners outpaced gainers by 15 to 14 on the Nasdaq.
By sector, airlines , transportation and software led the gains. Meanwhile, biotechnology and utilities were among the few sectors falling.
Trading nonetheless remained cautious ahead of the key April employment report on Friday.
The market has been staging a seemingly unstoppable advance over the past two months, with the Dow Jones Industrial Average rising in 22 out of the past 25 sessions, its longest winning streak since 1929.
"This is a market full of contradictions," said Barry Ritholtz, chief market strategist at Ritholtz Research & Analytics. "I can't recall the last time there's been such negative sentiment [in investor surveys], and yet we rarely reach a top in a market until everyone has become too optimistic."
The Dow industrials gained 29 points to 13,241, lifted by gains in shares of American Express Co. , Exxon Mobil Corp. , Microsoft Corp. and Pfizer Inc. .
Leading the advance, Verizon Corp. rose 3.7% after competitor Vonage Holdings Corp. was denied a request for a retrial in the patent-infringement it brought against Verizon.
The blue-chip average's rally has corresponded with market expectations that global growth is sustaining earnings growth for U.S. companies, even as the U.S. economy continues to slow.
"Likewise, the sectors of the market that tend to have high exposure to non-U.S. earnings streams, such as technology, industrials, energy and basic materials, all have been performing quite well," said Bob Doll, global chief investment officer at Blackrock Inc.
Elsewhere on the Dow, GM fell 5.4% after its quarterly results widely missed forecasts, hurt by its unit GMAC's losses in the subprime mortgage market. See full story.
IBM , also in the Dow, gained 0.6% after saying it has used a nanotechnology process to make computer chips for the first time in a production setting, advancing the race to boost the power and energy efficiency of semiconductors.
The S&P 500 was up 6.5 points at 1,502, crossing the key 1,500 level for the first time since September 2000.
The Nasdaq Composite rose 7.6 points to 2,565.
Trading volumes showed 1.6 billion shares exchanging hands on the New York Stock Exchange and 2.1 billion on the Nasdaq stock market. Advancing issues outpaced decliners by 18 to 13 on the NYSE, while decliners outpaced gainers by 15 to 14 on the Nasdaq.
By sector, airlines , transportation and software led the gains. Meanwhile, biotechnology and utilities were among the few sectors falling.
Townsend Clients Jump into ISE's Hybrid Pool
In a nod to the growth of equity and derivatives markets, Townsend Analytics, a trading software and service provider, on Wednesday [May 2] announced a partnership with ISE Stock Exchange LLC that opens access for Townsend's RealTick clients to the complete ISE Stock Exchange trading platform. The platform acts as a hybrid between a displayed market and MidPoint Match, a dark liquidity pool for anonymous equities trading.
"Dark pools, by their nature, are anonymous," said Jeff Wecker, chief executive of Townsend, in an interview. "They're designed to minimize information leakage about order flow to the benefit of the trader…. What's unique about MidPoint Match is they have integrated a dark pool together with a displayed marketplace."
The ISE, which integrates dark and displayed liquidity pools through its order types, aims to create an opportunity for continuous price improvement, according to the ISE web site. Users have several options when sending orders to the ISE, according to Molly McGregor, director of corporate affairs at the ISE. If traders don't want orders displayed, they can send them directly to MidPoint Match, where they will be matched or held in the MidPoint Match order book. Another alternative is to submit a displayed market order, which first will pass through MidPoint Match to check for price improvement. If no match exists, the order will be executed or rest on the displayed market order book. As a Reg NMS-compliant exchange, the ISE Stock Exchange will also route displayed market orders to other market centers if necessary to achieve the best price. This setup aims to boost traders' flexibility in the search for liquidity at the best possible price.
Townsend's existing technology can support these order types, Mr. Wecker said, adding that his firm "implemented a set of ISE-specific order types that give traders the ability to submit displayed orders and orders specific to the MidPoint Match product." Through the agreement, clients can submit orders to both the displayed and the MidPoint Match markets through the RealTick direct-market access platform interface or any of Townsend's available connectivity platforms.
"Not all traders are able to invest in the infrastructure to sweep across dark pools and public display markets as effectively as they'd like," Mr. Wecker said. "By bundling the dark pool with the stock exchange and offering order processing like MidPoint Match, you minimize the latency [that occurs] when dark liquidity is scraped first and the displayed market is taken second." Essentially, traders can place a trade order in a dark pool at the ISE without losing the opportunity to capture order flow in the displayed market.
Townsend, in cooperation with the ISE, hopes to offer traders more flexibility in their decisions to access liquidity and price improvement in the market, according to Mr. Wecker. "There are some market players that believe that exchange-based dark pools are right, and some believe that broker-sponsored are better. We are making both choices available to clients so they can select their best order type," he said.
Townsend, created in 1985, is a wholly owned, independently operated subsidiary of Lehman Brothers. It offers trading, content, exchange and risk management services to money managers, asset managers, hedge funds and mutual funds. The ISE Stock Exchange, which posted an average daily volume of 6.5 million shares in March, is part of the International Securities Exchange.
"Dark pools, by their nature, are anonymous," said Jeff Wecker, chief executive of Townsend, in an interview. "They're designed to minimize information leakage about order flow to the benefit of the trader…. What's unique about MidPoint Match is they have integrated a dark pool together with a displayed marketplace."
The ISE, which integrates dark and displayed liquidity pools through its order types, aims to create an opportunity for continuous price improvement, according to the ISE web site. Users have several options when sending orders to the ISE, according to Molly McGregor, director of corporate affairs at the ISE. If traders don't want orders displayed, they can send them directly to MidPoint Match, where they will be matched or held in the MidPoint Match order book. Another alternative is to submit a displayed market order, which first will pass through MidPoint Match to check for price improvement. If no match exists, the order will be executed or rest on the displayed market order book. As a Reg NMS-compliant exchange, the ISE Stock Exchange will also route displayed market orders to other market centers if necessary to achieve the best price. This setup aims to boost traders' flexibility in the search for liquidity at the best possible price.
Townsend's existing technology can support these order types, Mr. Wecker said, adding that his firm "implemented a set of ISE-specific order types that give traders the ability to submit displayed orders and orders specific to the MidPoint Match product." Through the agreement, clients can submit orders to both the displayed and the MidPoint Match markets through the RealTick direct-market access platform interface or any of Townsend's available connectivity platforms.
"Not all traders are able to invest in the infrastructure to sweep across dark pools and public display markets as effectively as they'd like," Mr. Wecker said. "By bundling the dark pool with the stock exchange and offering order processing like MidPoint Match, you minimize the latency [that occurs] when dark liquidity is scraped first and the displayed market is taken second." Essentially, traders can place a trade order in a dark pool at the ISE without losing the opportunity to capture order flow in the displayed market.
Townsend, in cooperation with the ISE, hopes to offer traders more flexibility in their decisions to access liquidity and price improvement in the market, according to Mr. Wecker. "There are some market players that believe that exchange-based dark pools are right, and some believe that broker-sponsored are better. We are making both choices available to clients so they can select their best order type," he said.
Townsend, created in 1985, is a wholly owned, independently operated subsidiary of Lehman Brothers. It offers trading, content, exchange and risk management services to money managers, asset managers, hedge funds and mutual funds. The ISE Stock Exchange, which posted an average daily volume of 6.5 million shares in March, is part of the International Securities Exchange.
mercredi 2 mai 2007
Morgan Stanley Hires Stadia Team
By lifting a team of 13 investment professionals from another hedge fund, Morgan Stanley has now demonstrated that it can explore the three main options available to build a hedge fund platform capable of competing with its rivals: acquisition, buying minority stakes, and now bringing on talent.
In an internal memo obtained by Lipper HedgeWorld, Morgan Stanley Investment Management (MSIM) disclosed today [May 1] that it hired a team of 13 long/short investment professionals from New York-based hedge fund Stadia Capital, including its two founders Richard Swift and John Fleming.
The Stadia team, which will remain based in New York, will join the FrontPoint Partners platform, according to the memo, which was penned by Stu Bohart, head of alternative investments at MSIM, and Mike Kelly, chief investment officer for MSIM's Absolute Return Strategies group.
"The Stadia team combines a rigorous fundamental approach to assessing companies with an intense focus on risk management, offering compelling risk-adjusted alternatives to the expanding range of absolute return strategies available to our investors," wrote Messrs. Kelly and Bohart.
In an internal memo obtained by Lipper HedgeWorld, Morgan Stanley Investment Management (MSIM) disclosed today [May 1] that it hired a team of 13 long/short investment professionals from New York-based hedge fund Stadia Capital, including its two founders Richard Swift and John Fleming.
The Stadia team, which will remain based in New York, will join the FrontPoint Partners platform, according to the memo, which was penned by Stu Bohart, head of alternative investments at MSIM, and Mike Kelly, chief investment officer for MSIM's Absolute Return Strategies group.
"The Stadia team combines a rigorous fundamental approach to assessing companies with an intense focus on risk management, offering compelling risk-adjusted alternatives to the expanding range of absolute return strategies available to our investors," wrote Messrs. Kelly and Bohart.
CQS Asia Fund Raises $375 Million For Launch
CQS Management Ltd., a hedge fund specializing in convertible, credit and equity strategies, has launched the CQS Asia Fund with confirmed committed start-up capital of $375 million, making it one of the biggest fund start-ups in the region so far in 2007. CQS had targeted $350 million when it began marketing the fund to investors in March.
The fund is a dollar-denominated absolute return fund targeting net annual returns of 15%. Its focus is on convertible arbitrage and equity strategies, investing across Asia with a volatility bias.
"We are excited about the opportunities available in Asia, which combines sophisticated and emerging markets," Michael Hintze, the chief executive of CQS, said in a release in announcing the fund's launch. "These markets are becoming increasingly accessible as regulation evolves. Along with a robust convertible and IPO calendar and, combined with the development of the derivatives market, this makes for an exciting opportunity set."
Jean-Christophe Blanc, head of Asian convertible bonds at CQS since 2002, will work with a team of 11 investment professionals based in London and Hong Kong. Convertibles strategies saw the beginning of a rebound in 2006 and the over-subscribed launch of an Asian fund by CQS shows that trend remaining intact.
Managers have been increasing their operational investments and marketing new funds to benefit from developing opportunities in Asian distressed debt and structured credit. Besides CQS, other hedge fund firms including Och-Ziff Capital Management LP and Polygon Investment Partners LLP have been developing Asian fixed-income and credit-related investment strategies.
The fund raising follows not only rapid growth in allocations to Asia but a recent increase in volatility—always an attractive prospect for hedge fund managers. What's more, many investors have wanted to allocate more to Asia but have hesitated due to a lack of funds using strategies more evolved than equity long/short.
CQS is a global asset manager established in 1999, managing a portfolio of market-neutral, absolute return funds. As of April 1, it had $6.3 billion in assets under management with regulated investment offices in London and Hong Kong and other offices in the Channel Islands, Cayman Islands and Switzerland.
The fund is a dollar-denominated absolute return fund targeting net annual returns of 15%. Its focus is on convertible arbitrage and equity strategies, investing across Asia with a volatility bias.
"We are excited about the opportunities available in Asia, which combines sophisticated and emerging markets," Michael Hintze, the chief executive of CQS, said in a release in announcing the fund's launch. "These markets are becoming increasingly accessible as regulation evolves. Along with a robust convertible and IPO calendar and, combined with the development of the derivatives market, this makes for an exciting opportunity set."
Jean-Christophe Blanc, head of Asian convertible bonds at CQS since 2002, will work with a team of 11 investment professionals based in London and Hong Kong. Convertibles strategies saw the beginning of a rebound in 2006 and the over-subscribed launch of an Asian fund by CQS shows that trend remaining intact.
Managers have been increasing their operational investments and marketing new funds to benefit from developing opportunities in Asian distressed debt and structured credit. Besides CQS, other hedge fund firms including Och-Ziff Capital Management LP and Polygon Investment Partners LLP have been developing Asian fixed-income and credit-related investment strategies.
The fund raising follows not only rapid growth in allocations to Asia but a recent increase in volatility—always an attractive prospect for hedge fund managers. What's more, many investors have wanted to allocate more to Asia but have hesitated due to a lack of funds using strategies more evolved than equity long/short.
CQS is a global asset manager established in 1999, managing a portfolio of market-neutral, absolute return funds. As of April 1, it had $6.3 billion in assets under management with regulated investment offices in London and Hong Kong and other offices in the Channel Islands, Cayman Islands and Switzerland.
lundi 30 avril 2007
BOSTON -Financial services provider State Street Corp. appointed Kevin Sullivan and Neil Wright as senior vice presidents with oversight of the firm's developing derivative processing business.
Mr. Sullivan comes off a 17-year career with Eagle Investments Systems LLC, which he co-founded in 1989 and saw acquired by Mellon Financial Corp. in 2001. He stayed on as chief technology officer until 2006. In his new position at State Street he will lay the technology infrastructure for derivative processing capabilities.
Mr. Wright was formerly with Citigroup Inc., serving as director of derivative operations, and before that was senior vice president of asset manager solutions for JP Morgan Chase Co. At State Street Mr. Wright will focus on the strategy side of derivative servicing.
State Street's investment management division, State Street Global Advisors, announced a series of promotions in its sales and relationship management group last month
Mr. Sullivan comes off a 17-year career with Eagle Investments Systems LLC, which he co-founded in 1989 and saw acquired by Mellon Financial Corp. in 2001. He stayed on as chief technology officer until 2006. In his new position at State Street he will lay the technology infrastructure for derivative processing capabilities.
Mr. Wright was formerly with Citigroup Inc., serving as director of derivative operations, and before that was senior vice president of asset manager solutions for JP Morgan Chase Co. At State Street Mr. Wright will focus on the strategy side of derivative servicing.
State Street's investment management division, State Street Global Advisors, announced a series of promotions in its sales and relationship management group last month
GAM Focuses on Managers, Performance
Over the course of 24 years of absolute return investing, Global Asset Management Ltd., better known as GAM, has evolved, but the underlying aim of matching clients with successful asset managers and funds remains the priority.
With roots in private client service, the firm now has 16% of its $68 billion under management allocated from institutions. And that part of the business is expected to grow given the attraction of GAM's portfolio of single-manager hedge funds, funds of hedge funds and actively managed long-only funds.
"Most of the institutions are going into funds of funds but there may come a time when they go into single-manager hedge funds," Melinda Carter, marketing director, institutional business with GAM, said in an interview. When that happens GAM, with nearly $5 billion in single-manager AUM, should be able to exploit the trend to kick off a new round of growth.
With its combination of proprietary data, processes and personnel, GAM is set for this. A team of 114 people at research centers in London, New York and Hong Kong scout managers for GAM's multi-manager funds.
GAM targets a universe of around 6,700 managers and use an in-house database. "We think that gives us an advantage in terms of the accuracy and quality of the data," Ms. Carter said. She noted, too, that the research team's size gives scale benefits since it deploys global teams to analyze strategy segments and select managers.
That number of hedge funds may seem on the low side compared to other estimates. But Ms. Carter noted that the higher numbers often cited in the hedge fund industry include dead funds, overlaps and different currency classes of the same fund.
Emerging and start-up managers can take encouragement from the fact that 70% of GAM's investments have gone into funds less than a year old. Illustrative of the approach is the fact that eight of the top 10 holdings in the GAM Diversity Fund were the result of seeding or day-one commitments.
With roots in private client service, the firm now has 16% of its $68 billion under management allocated from institutions. And that part of the business is expected to grow given the attraction of GAM's portfolio of single-manager hedge funds, funds of hedge funds and actively managed long-only funds.
"Most of the institutions are going into funds of funds but there may come a time when they go into single-manager hedge funds," Melinda Carter, marketing director, institutional business with GAM, said in an interview. When that happens GAM, with nearly $5 billion in single-manager AUM, should be able to exploit the trend to kick off a new round of growth.
With its combination of proprietary data, processes and personnel, GAM is set for this. A team of 114 people at research centers in London, New York and Hong Kong scout managers for GAM's multi-manager funds.
GAM targets a universe of around 6,700 managers and use an in-house database. "We think that gives us an advantage in terms of the accuracy and quality of the data," Ms. Carter said. She noted, too, that the research team's size gives scale benefits since it deploys global teams to analyze strategy segments and select managers.
That number of hedge funds may seem on the low side compared to other estimates. But Ms. Carter noted that the higher numbers often cited in the hedge fund industry include dead funds, overlaps and different currency classes of the same fund.
Emerging and start-up managers can take encouragement from the fact that 70% of GAM's investments have gone into funds less than a year old. Illustrative of the approach is the fact that eight of the top 10 holdings in the GAM Diversity Fund were the result of seeding or day-one commitments.
Global Investment House Profits Up 20% in Q1
Global Investment House, Kuwait's largest independent asset manager, yesterday [April 29] announced net profits of 22.5 million Kuwaiti dinars ($77.8 million) for the first quarter of 2007, up 20% from the first quarter a year earlier. In the same period revenues rose 33% to 34.8 million KD.
According to a press release from the firm, Global's overall return on equity and return on assets surpassed the international investment industry benchmarks, reaching 38% and 13% respectively.
"Global continued to work with high efficiency in regards to its investment operations management through cost rationalization, financial engineering, and appealing investment products which contributed in increasing return on equity and return on investments," said Global chairperson and managing director Maha Al-Ghunaim in a press release.
Global's assets under management were up slightly at 2.1 billion KD ($7.26 billion). This total excludes assets in funds launched in the first quarter of this year, namely the GCC Islamic Fund, the Jordan Fund and the Global Buyout Fund. The latter fund is currently being marketed and distributed by JP Morgan Cazenove and by Bear Stearns International to institutional clients in North America, Europe and Asia.
The Global 10 Large Cap Index Fund received the Lipper award for the best performing index fund in the Gulf Co-operation Council region. Lipper, a Reuters company, is the parent of Lipper. Also during the quarter, noted Ms. Al-Ghunaim, the firm signed an agreement with U.S. brokerage Auerbach Grayson to become that firm's exclusive partner in Kuwait.
According to a press release from the firm, Global's overall return on equity and return on assets surpassed the international investment industry benchmarks, reaching 38% and 13% respectively.
"Global continued to work with high efficiency in regards to its investment operations management through cost rationalization, financial engineering, and appealing investment products which contributed in increasing return on equity and return on investments," said Global chairperson and managing director Maha Al-Ghunaim in a press release.
Global's assets under management were up slightly at 2.1 billion KD ($7.26 billion). This total excludes assets in funds launched in the first quarter of this year, namely the GCC Islamic Fund, the Jordan Fund and the Global Buyout Fund. The latter fund is currently being marketed and distributed by JP Morgan Cazenove and by Bear Stearns International to institutional clients in North America, Europe and Asia.
The Global 10 Large Cap Index Fund received the Lipper award for the best performing index fund in the Gulf Co-operation Council region. Lipper, a Reuters company, is the parent of Lipper. Also during the quarter, noted Ms. Al-Ghunaim, the firm signed an agreement with U.S. brokerage Auerbach Grayson to become that firm's exclusive partner in Kuwait.
samedi 28 avril 2007
From CAIA
Alternative investments are often defined not by what they are, but by what they are not. That is, an alternative investment is a position in something other than a long position in either equity or debt. Generally speaking, the alternative investment markets encompass hedge funds, venture capital and private equity, real estate, and managed futures. Alternative investment securities include positions that define investment strategies within these broad groupings.
As defined, alternative assets are a subset of existing asset classes. For example, a hedge fund may be organized as a private company that takes both long and short positions in equity securities, seeking to expand the investment opportunity set available to long-only equity managers. These opportunities include capital appreciation, hedging, and diversification, among others.
Other distinguishing characteristics of alternative investments are the regulations that surround the positions that comprise these strategies, and the way that the gains and losses of these positions are taxed.
As defined, alternative assets are a subset of existing asset classes. For example, a hedge fund may be organized as a private company that takes both long and short positions in equity securities, seeking to expand the investment opportunity set available to long-only equity managers. These opportunities include capital appreciation, hedging, and diversification, among others.
Other distinguishing characteristics of alternative investments are the regulations that surround the positions that comprise these strategies, and the way that the gains and losses of these positions are taxed.
Wine Fund Performance, Like its Vintages, Improves with Age
Compared to some of its wines, the Vintage Wine Fund is still something of a youngster. But in the world of alternative assets, it is certainly one of the oldest, and quite possibly the largest wine fund around.
The fund, whose investment manager is U.K.-registered OWC Asset Management Ltd., was incorporated in the Cayman Islands in October 2002. Its stated goal was to invest in top-quality wines from around the world, but predominantly from the French regions of Bordeaux, the Rhone Valley, Burgundy and Champagne, as well as Italy's most important wine-growing regions: Tuscany and Piedmont.
In practice, Bordeaux currently dominates the portfolio, with red wines from the region accounting for 91.1% of funds invested and whites for 0.8%. Red wines from the Rhone Valley account for 1.2% of investment, Italian red wines for 0.4%, wines from "other regions" in France for 1.7% and Burgundy reds for just 0.1%. The remainder is held in cash.
From small beginnings—the fund initially launched toward the end of February 2003 with little more than 5 million euro ($6.8 million) under management—the Vintage Fund has indeed borne fruit, and now manages around 90 million euro. Paolo Cristofolini, one of the fund's three directors, said in an interview that a number of commitments have been made before the end of April, so assets under management could top 100 million euro by the beginning of May. Mr. Cristofolini has covered several positions in alternative asset management, including running the European Private Asset Management Group at Goldman Sachs between 1993 and 1998. He has also been collecting fine wines since 1987.
The fund, whose investment manager is U.K.-registered OWC Asset Management Ltd., was incorporated in the Cayman Islands in October 2002. Its stated goal was to invest in top-quality wines from around the world, but predominantly from the French regions of Bordeaux, the Rhone Valley, Burgundy and Champagne, as well as Italy's most important wine-growing regions: Tuscany and Piedmont.
In practice, Bordeaux currently dominates the portfolio, with red wines from the region accounting for 91.1% of funds invested and whites for 0.8%. Red wines from the Rhone Valley account for 1.2% of investment, Italian red wines for 0.4%, wines from "other regions" in France for 1.7% and Burgundy reds for just 0.1%. The remainder is held in cash.
From small beginnings—the fund initially launched toward the end of February 2003 with little more than 5 million euro ($6.8 million) under management—the Vintage Fund has indeed borne fruit, and now manages around 90 million euro. Paolo Cristofolini, one of the fund's three directors, said in an interview that a number of commitments have been made before the end of April, so assets under management could top 100 million euro by the beginning of May. Mr. Cristofolini has covered several positions in alternative asset management, including running the European Private Asset Management Group at Goldman Sachs between 1993 and 1998. He has also been collecting fine wines since 1987.
vendredi 27 avril 2007
Record-Breaking Quarter for Hedge Fund Inflows: HFR
CHICAGO -In theory, hedge funds are designed to protect investors' capital and deliver returns in both good times and bad. While new allocations to hedge funds slacked off in the latter half of 2006, when equity markets were good, asset inflows roared back in the first quarter of 2007, when equity markets hit some sizable snags.
According to Hedge Fund Research Inc., the $60 billion that investors pumped into hedge funds in the first three months of the year set a record for the largest-ever quarterly inflow, and put 2007 on track to top the $126 billion in new assets recorded in all of 2006—which was also a record. The $60 billion figure represents a 300% gain over the fourth quarter of 2006, when only $15.7 billion in new hedge fund allocations were reported and equity markets were riding high.
"To put the first quarter inflow into perspective, during the first three months of 2007, as much new money was invested in hedge funds as was recorded during the last six months of 2006," said Ken Heinz, HFR president, in a statement. "The trend in asset flow suggests that both individual and institutional investors are actively allocating to hedge funds, while the performance indicates hedge funds are exceeding these investors' expectations."
According to Hedge Fund Research Inc., the $60 billion that investors pumped into hedge funds in the first three months of the year set a record for the largest-ever quarterly inflow, and put 2007 on track to top the $126 billion in new assets recorded in all of 2006—which was also a record. The $60 billion figure represents a 300% gain over the fourth quarter of 2006, when only $15.7 billion in new hedge fund allocations were reported and equity markets were riding high.
"To put the first quarter inflow into perspective, during the first three months of 2007, as much new money was invested in hedge funds as was recorded during the last six months of 2006," said Ken Heinz, HFR president, in a statement. "The trend in asset flow suggests that both individual and institutional investors are actively allocating to hedge funds, while the performance indicates hedge funds are exceeding these investors' expectations."
jeudi 26 avril 2007
Jersey-ites Promote Jersey
Jersey Finance Ltd. held its sixth annual London conference this week, and a range of speakers including the island's minister for economic development spoke of how Jersey has become the gold standard in offshore financial centers.
Jersey Finance is a nonprofit organization jointly funded by the island's government and the finance industry. Its chief executive, Geoff Cook, also was one of the conference's speakers.
Mr. Cook said that Jersey is a "natural partner" for the City of London. There are 12,660 people working in the finance sector on the island, including 6,000 in international banking, 4,500 qualified trust professionals, and more than 3,000 lawyers and accountants, he said.
As if the notion of 3,000 lawyers and/or accountants on an island of only 45 square miles weren't scary enough, he also said that there are 800 people involved in fund administration and investment management.
Jersey Finance Chairman Pierre Horsfall spoke as well and said that there are 10 legal changes in the pipeline designed to meet market needs and keep Jersey the jurisdiction of choice for offshore business within Europe.
Philip Ozouf, the island's minister for economic development, said that around 400,000 square feet of land on the island's Waterfront Development has been set aside for new office development for the finance industry.
Jersey Finance is a nonprofit organization jointly funded by the island's government and the finance industry. Its chief executive, Geoff Cook, also was one of the conference's speakers.
Mr. Cook said that Jersey is a "natural partner" for the City of London. There are 12,660 people working in the finance sector on the island, including 6,000 in international banking, 4,500 qualified trust professionals, and more than 3,000 lawyers and accountants, he said.
As if the notion of 3,000 lawyers and/or accountants on an island of only 45 square miles weren't scary enough, he also said that there are 800 people involved in fund administration and investment management.
Jersey Finance Chairman Pierre Horsfall spoke as well and said that there are 10 legal changes in the pipeline designed to meet market needs and keep Jersey the jurisdiction of choice for offshore business within Europe.
Philip Ozouf, the island's minister for economic development, said that around 400,000 square feet of land on the island's Waterfront Development has been set aside for new office development for the finance industry.
Arch Capital Group quarterly profit rises
Arch Capital Group Ltd. late Thursday reported first-quarter net earnings of $205 million, up from $132.3 million last year. Net income available to common shareholders for the 2007 first quarter was $198.6 million, or $2.59 per share, compared with $129.6 million, or $1.71 per share, a year ago.
After-tax operating income available to common shareholders came in at $2.71 per share compared with $1.89 a share last year. The Bermuda-based insurer and reinsurer said total revenue in the three months ended March 31 rose to $859.8 million from $840.3 million a year ago, while net written premiums fell to $871.7 million from $873.7 million.
Analysts polled by Thomson Financial were expecting, on average, a per-share profit of $2.29 on revenue of $863 million. The company's combined ratio was 83.4% for the 2007 first quarter, compared to 88.3% for the 2006 first quarter.
After-tax operating income available to common shareholders came in at $2.71 per share compared with $1.89 a share last year. The Bermuda-based insurer and reinsurer said total revenue in the three months ended March 31 rose to $859.8 million from $840.3 million a year ago, while net written premiums fell to $871.7 million from $873.7 million.
Analysts polled by Thomson Financial were expecting, on average, a per-share profit of $2.29 on revenue of $863 million. The company's combined ratio was 83.4% for the 2007 first quarter, compared to 88.3% for the 2006 first quarter.
US Markets Today
U.S. stocks ended mostly higher Thursday, after blowout earnings from Apple Inc. and upbeat results from the likes of 3M Corp. and Ford Motor Co. helped lift the Dow Jones Industrial Average further above 13,000, allowing it to set a new record closing level.
"Earning are coming in much better than expected and the market is feeling pretty positive on this news," said Robert Pavlik, chief investment officer at Oaktree Asset Management.
The Dow Jones Industrial Average closed up 15.61 points at 13,105.50, extending its rise Wednesday when it pushed through the 13,000 level for the first time. The Dow earlier reached a new intraday record high of 13,132.
Among Dow components, 3M Corp. led the gains, jumping 4.5% after its earnings topped forecasts and Prudential Securities upgraded the stock.
General Motors Corp. rose 4.4%. Rival U.S. automaker Ford Motor Co. jumped 4% after posting a much smaller loss than analysts expected.
A sharp drop in crude oil prices also helped the market. Crude futures reversed previous gains and fell 78 cents to close at $65.06 a barrel. See Futures Movers.
Exxon Mobil Corp. still gained 0.81%. The world's largest oil company earlier posted better-than-expected earnings, even as its revenue fell short of expectations.
The Nasdaq Composite rose 6.57 points to 2,554.46, thanks to a slew of upbeat earnings. The S&P 500 index fell 1.17 points to 1,494.25.
The broad market traded lower for most of the session.
"We've been on a six-week roll here," said Art Hogan, chief market strategist at Jefferies & Co. "But at some point, we have to take a breather to assess how far we've come and how fast."
Dow at 13,000
Thursday's session follows a rally on Wednesday, which saw the Dow finish above the 13,000 level for the first time, boosted by surging profits at Amazon.com .
Shares of Amazon gained another 10% on Thursday in the wake of those results.
Continuing the trend, Apple earnings flew past expectations, with an 88% profit rise on booming iPod sales as well as the company's line of Mac computers. Its shares surged 3.1% past the $100 mark to a new all-time high. See full story.
But the market's rally may be running out of steam, according to Eliot Spar, analyst at Ryan Beck & Co. Even as the Dow jumped ahead Wednesday, he noted that gaining shares on the Nasdaq beat decliners by a narrow margin of less than 3 to 2.
"There are other divergences that I saw which leads me to believe we are going to run out of steam and have a minor dip," he wrote in a note.
On Thursday, trading volumes showed 1.698 billion shares exchanging hands on the New York Stock Exchange and 2.444 billion trading on the Nasdaq stock market. Declining issues still topped gainers by 17 to 14 on the Nasdaq, while gainers barely topped decliners by 15 to 14 on the NYSE.
By sector, technology led the gains, while transportation and banks fell.
Technology shares, already buoyed by Apple results, received a further lift from Xilinx , which rose 3.2%, after the chip maker posted better-than-forecast results.
Microsoft also rose 0.6% ahead of its results after the close.
But metals mining stocks took a tumble as gold prices fell sharply. And Newmont Mining Corp. fell 2.4% after its first-quarter profit fell sharply and was below analysts expectations, weighed down by higher costs and adverse foreign exchange effects.
Gold futures dropped $9.40 to close at $678 an ounce, amid a rebound in the dollar. See Metals Stocks.
The rebound lifted the dollar against the yen and especially against the euro, which has approached all-time highs against the U.S. currency.
There was little immediate impact on trade after comments from Dallas Federal Reserve president Richard Fisher, who said that the effects of the subprime mortgage haven't yet fully played out, according to Action Economics. Fisher does not vote on interest rates.
Separately, California lender Countrywide Financial Corp. rose 3.2%, even after its earnings missed estimates. Woes in the subprime market, it said, subtracted 22% from its profits.
Meanwhile, Fed board member Frederic Mishkin stayed clear of commenting on the U.S. economy.
Treasury bonds were under slight pressure amid rallying global stock markets and following an auction. The benchmark 10-year Treasury bond ended down 8/32 at 99 17/32, yielding 4.686%. See Bonds.
Dow 13,000, what's next?
After a better-than-expected earnings season, investors are on the look-out for catalysts to continue taking the market higher.
Most participant already expect the economy to be slowing down -- along with earnings growth -- but there are divergences about whether this trend is appropriately priced into stocks.
"We still have a full week of earnings but we'll start looking for additional catalysts," said Jefferies' Hogan. "People will want to know what [valuations] look like post earnings, to see whether the market is fairly priced, underpriced, or overpriced."
Earnings growth for the latest quarter is somewhere north of 6% year-on-year, roughly double what analysts were expecting coming into earnings season, according to Thomson Financial.
But the market's "expectations for both earnings and economic data were unrealistically low, as people were pricing in a worst-case scenario about subprime mortgages and slowing growth in China," Hogan said.
In late February, the market stumbled amid concerns that the meltdown in the subprime mortgage market might further pressure the housing market and lead the rest of the economy to a hard landing.
Yet, with expectations about the housing market already lowered, even the sharply lower results of homebuilders were celebrated on Thursday.
The Philadelphia housing sector index gained more than 3%. Beazer Homes USA Inc. rose 5% even after warning that "it has yet to see any meaningful evidence of a sustainable recovery in the housing market" and withdrawing its outlook for the year.
Likewise, Ryland Group Inc. rose 4.3% after saying that it swung to a loss in the first quarter, that it does not expect to meet its prior earnings guidance and couldn't provide new forecasts.
Pulte Homes Inc. rose 3.3% after its quarterly loss was less than analysts expected.
"Earning are coming in much better than expected and the market is feeling pretty positive on this news," said Robert Pavlik, chief investment officer at Oaktree Asset Management.
The Dow Jones Industrial Average closed up 15.61 points at 13,105.50, extending its rise Wednesday when it pushed through the 13,000 level for the first time. The Dow earlier reached a new intraday record high of 13,132.
Among Dow components, 3M Corp. led the gains, jumping 4.5% after its earnings topped forecasts and Prudential Securities upgraded the stock.
General Motors Corp. rose 4.4%. Rival U.S. automaker Ford Motor Co. jumped 4% after posting a much smaller loss than analysts expected.
A sharp drop in crude oil prices also helped the market. Crude futures reversed previous gains and fell 78 cents to close at $65.06 a barrel. See Futures Movers.
Exxon Mobil Corp. still gained 0.81%. The world's largest oil company earlier posted better-than-expected earnings, even as its revenue fell short of expectations.
The Nasdaq Composite rose 6.57 points to 2,554.46, thanks to a slew of upbeat earnings. The S&P 500 index fell 1.17 points to 1,494.25.
The broad market traded lower for most of the session.
"We've been on a six-week roll here," said Art Hogan, chief market strategist at Jefferies & Co. "But at some point, we have to take a breather to assess how far we've come and how fast."
Dow at 13,000
Thursday's session follows a rally on Wednesday, which saw the Dow finish above the 13,000 level for the first time, boosted by surging profits at Amazon.com .
Shares of Amazon gained another 10% on Thursday in the wake of those results.
Continuing the trend, Apple earnings flew past expectations, with an 88% profit rise on booming iPod sales as well as the company's line of Mac computers. Its shares surged 3.1% past the $100 mark to a new all-time high. See full story.
But the market's rally may be running out of steam, according to Eliot Spar, analyst at Ryan Beck & Co. Even as the Dow jumped ahead Wednesday, he noted that gaining shares on the Nasdaq beat decliners by a narrow margin of less than 3 to 2.
"There are other divergences that I saw which leads me to believe we are going to run out of steam and have a minor dip," he wrote in a note.
On Thursday, trading volumes showed 1.698 billion shares exchanging hands on the New York Stock Exchange and 2.444 billion trading on the Nasdaq stock market. Declining issues still topped gainers by 17 to 14 on the Nasdaq, while gainers barely topped decliners by 15 to 14 on the NYSE.
By sector, technology led the gains, while transportation and banks fell.
Technology shares, already buoyed by Apple results, received a further lift from Xilinx , which rose 3.2%, after the chip maker posted better-than-forecast results.
Microsoft also rose 0.6% ahead of its results after the close.
But metals mining stocks took a tumble as gold prices fell sharply. And Newmont Mining Corp. fell 2.4% after its first-quarter profit fell sharply and was below analysts expectations, weighed down by higher costs and adverse foreign exchange effects.
Gold futures dropped $9.40 to close at $678 an ounce, amid a rebound in the dollar. See Metals Stocks.
The rebound lifted the dollar against the yen and especially against the euro, which has approached all-time highs against the U.S. currency.
There was little immediate impact on trade after comments from Dallas Federal Reserve president Richard Fisher, who said that the effects of the subprime mortgage haven't yet fully played out, according to Action Economics. Fisher does not vote on interest rates.
Separately, California lender Countrywide Financial Corp. rose 3.2%, even after its earnings missed estimates. Woes in the subprime market, it said, subtracted 22% from its profits.
Meanwhile, Fed board member Frederic Mishkin stayed clear of commenting on the U.S. economy.
Treasury bonds were under slight pressure amid rallying global stock markets and following an auction. The benchmark 10-year Treasury bond ended down 8/32 at 99 17/32, yielding 4.686%. See Bonds.
Dow 13,000, what's next?
After a better-than-expected earnings season, investors are on the look-out for catalysts to continue taking the market higher.
Most participant already expect the economy to be slowing down -- along with earnings growth -- but there are divergences about whether this trend is appropriately priced into stocks.
"We still have a full week of earnings but we'll start looking for additional catalysts," said Jefferies' Hogan. "People will want to know what [valuations] look like post earnings, to see whether the market is fairly priced, underpriced, or overpriced."
Earnings growth for the latest quarter is somewhere north of 6% year-on-year, roughly double what analysts were expecting coming into earnings season, according to Thomson Financial.
But the market's "expectations for both earnings and economic data were unrealistically low, as people were pricing in a worst-case scenario about subprime mortgages and slowing growth in China," Hogan said.
In late February, the market stumbled amid concerns that the meltdown in the subprime mortgage market might further pressure the housing market and lead the rest of the economy to a hard landing.
Yet, with expectations about the housing market already lowered, even the sharply lower results of homebuilders were celebrated on Thursday.
The Philadelphia housing sector index gained more than 3%. Beazer Homes USA Inc. rose 5% even after warning that "it has yet to see any meaningful evidence of a sustainable recovery in the housing market" and withdrawing its outlook for the year.
Likewise, Ryland Group Inc. rose 4.3% after saying that it swung to a loss in the first quarter, that it does not expect to meet its prior earnings guidance and couldn't provide new forecasts.
Pulte Homes Inc. rose 3.3% after its quarterly loss was less than analysts expected.
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