Archive for June, 2009

NEW YORK: The Big Easy is making a big comeback. New Orleans has steadily won back some of the population it lost in the wake of Hurricane Katrina in 2005, according to a government report released Wednesday.New Orleans lost more than half its residents during the deluge. Few large U.S. cities have ever had to cope with a disaster on that scale. Since then, it has been one of the country’s fastest growing cities.Only a couple of instances can compare. Galveston, Texas, was also devastated by a hurricane in 1900, a storm that remains the most lethal natural disaster in U.S. history with a toll of about 6,000 deaths. And San Francisco was almost leveled by the earthquake and fire of 1906.New Orleans is now growing rapidly. Its population is up 8.2% in the 12 months that ended July 1, 2008, gaining 23,740 people to 311,853, according to the Census Bureau. That still leaves it well below its pre-storm population of 484,674.For sheer numerical increase, New York City trumped the birthplace of jazz. During the same 12-month period, Gotham added nearly 53,500 residents, more than any other city. That represented a growth rate of only 0.6%.Following New York City were Phoenix, which added 33,184 residents (2.1%) to a total of 1,567,924, and Houston, up 33,063 to 2,242,193 (1.5%).The top percentage winners, after New Orleans, were Round Rock, Texas, part of the Austin metropolitan area, which grew by 8.2% to 104,446; Cary, N.C., which gained 6.9% to 129,545; and Gilbert, Ariz., which swelled by 5% to 216,449.New York retained its position as the largest U.S. city by far. Its nearly 8.4 million folks crammed into 303 square miles is more than twice the number of people who live in sprawling Los Angeles, the nation’s second biggest city with 3,833,995 people. Chicago, once the nation’s second city, has fallen nearly a million behind Los Angeles with 2,853,114.Most old Midwestern and Northeastern cities have shrunk in population since World War II as heavy industry waned in importance to the overall economy. Much of the growth in these areas occurred in suburban towns and were not counted in central city population figures.Meanwhile, many Sun Belt towns exploded with growth as job opportunities in new technology industries proliferated. Northerners, including retirees, also moved south and west, lured by the warmer winters and relaxed life styles.Among old-line cities, New York has been one of the few to buck this trend. In the years since the last census in 2000, it has gained 355,056 residents, a substantial gain and more than the total number of people who live in St. Louis. The highest rate of growth since 2000 was reported by McKinney, Texas, which more than doubled to 121,211 from 54,369. Gilbert, Ariz., was second with an 88.7% jump to 216,449.Few losersOf the 25 largest cities, only a handful experienced population loss. Detroit, suffering from the turmoil in the auto industry, fell 0.5% to 912,062. The population of Philadelphia dipped slightly to 1,447,395 from 1.446,631. Baltimore dropped 0.5% to 636,919 and Memphis fell at about the same percentage rate to 660,651.There have been some changes this year to the 25 largest cities.For one thing, Denver moved into 24th place with 598,707 residents. It replaced Nashville, which dropped out of the top 25.In addition, Dallas (1,279,910) edged past San Diego (1,279,329) to eighth place from ninth. San Francisco also moved up to 12th place; its population (808,976) surpassed Jacksonville (807,815). And Austin (757,688) blew past Columbus (754,885) to 15th. Charlotte (687,456) leapfrogged Memphis (669,651) to 18th and El Paso (613,190) passed Boston (609,023) to 21st.

Source:CNN

WASHINGTON: In the debate over how to prevent the next financial crisis, the first fight has already erupted — and it’s over a proposal to create a new agency to protect consumers.On Tuesday, the Treasury Department sent to Congress a 150-page draft of a bill with new details about its plan for a regulator for mortgages, credit cards and other financial products. The Consumer Financial Protection Agency would be run by a presidentially-appointed, five-member board and wield subpoena power and wide-ranging investigative clout.The proposal has the support of consumer groups and populist fervor at its back. When it was proposed by President Obama earlier this month, Senate Banking Committee Chairman Chris Dodd, D-Conn., very publicly asked industry groups, such as the U.S. Chamber of Commerce, that were blasting the idea: “What planet are you living on?”However, as a House panel last week started to look at the best ways to create such an agency, the questioning from lawmakers of both parties suggested that establishing the agency won’t be an easy slam dunk for White House.Top Republicans are criticizing the proposal as more bureaucracy, saying that regulators failed to enforce current rules. And a few Democrats voiced concerns about the kinds of powers the regulator should get.”I think there’s a high probability that this ends up going into law, but the fights will be over how it’s being done, who’s being covered and how wide the net should be cast,” said Douglas Elliott, an economist and former investment banker at the Brookings Institution in Washington.New details releasedObama had already announced that the new agency would be tasked with making it easier for consumers to understand mortgages, credit cards and other financial products.One of its jobs would be to enforce a set of recently enacted credit card protections aimed at preventing banks and card-issuers from hiking fees and interest rates, according to the legislation released Tuesday.The bill also proposes an even broader swath of industry players that could fall under the regulator’s realm. These include title insurers, payday lenders and some smaller investment advisers not already registered with other regulators.Also, the bill suggests that the agency would be paid for through fees levied on the companies it regulates as well as congressional appropriations. But that means industries would have to dig into their pockets.One powerful lobbying group, the Financial Services Roundtable, which represents big banks, came out swinging.The proposed regulator “would actually harm consumers by increasing the cost of financial products, and reducing the availability of credit and consumer choices,” Steve Bartlett, the group’s chief executive, said in a statement Tuesday.For their part, Treasury officials sounded confident that opposition by banks will be a tough sell.”That’s a very hard argument for a bank to make: that the status quo was protective enough,” Michael Barr, an assistant Treasury secretary, told reporters Tuesday. “I don’t envy them that position to have to argue.”Points of contentionYet lawmakers are likely to scrutinize the Obama proposal. The House Financial Services Committee last week heard from a panel of experts, including Elizabeth Warren, a Harvard University Law professor considered the author of the idea for the new agency.Republicans openly blasted the idea.”What’s troubling is that … a panel of consumer experts couldn’t even agree amongst themselves what financial products rose to the level of being anti-consumer,” Rep. Jeb Hensarling, R-Texas, said in a statement Tuesday. “How then, do they propose to come to a consensus on what to regulate in the open market?”However, there will be some differences of opinions among Democrats, as well.House Financial Services Chairman Barney Frank, D-Mass., suggested that he agreed with consumer advocates who don’t like the proposal’s plan to give the the new regulator power to enforce the Community Reinvestment Act, which pushes banks to make loans to low-income households.And Rep. Brad Sherman, D-Calif., warned last week that he was concerned that Congress would cede some of its consumer law-making power to the executive branch if it established the agency.”Is the goal here to create a law enforcement executive branch agency, or to create a law making agency that would decide all the issues that I spent 13 years on this committee arguing about?” Sherman asked on Thursday.

Source:CNN

NEW YORK: When New Frontier Bank failed in April, regulators failed to find a buyer, forcing the FDIC to absorb the roughly 2 billion in assets that were once owned by the Colorado-based lender.But what the FDIC may not have anticipated at the time was that the agency would be stuck with a grab-bag of other exotic assets including a white Bentley Arnage, three lawnmowers, a Fleetwood Motor home and more than two dozen works of art, most of which reflected the bank’s rural surroundings in northern Colorado.The demise of New Frontier is just one example of the asset messes regulators are often stuck with once a bank is shuttered. At an auction held last month, regulators auctioned off a combined 300 copiers, printers and scanners that were once owned by the California mortgage lender IndyMac (IDMCQ), which collapsed last July in one of the biggest bank failures in history.”It is just a potpourri of stuff,” said Chip MacDonald, partner in the capital markets group at Jones Day, a law firm headquartered in Cleveland.As of the end of March, the Federal Deposit Insurance Corp. had roughly 16 billion worth of failed bank assets just waiting to be liquidated, according to an agency report published earlier this month.But that number is poised to climb higher as more banks fail. Last Friday, regulators seized five institutions across the country, the largest one-day instance of failures in years. Experts widely believe that that hundreds more banks could fail in the years ahead as a result of the current recession, which means plenty of work for the FDIC.When a bank fails, the FDIC typically tries to find a buyer for the deposits and branches first before. If it’s unsuccessful, as was the case with New Frontier, the FDIC then looks to sell off the bank’s remaining assets.Some of that work is handled by the agency itself, but much of it is farmed out to private-firms that specialize in managing and selling assets.Regulators have largely looked to two firms – First Financial Network and DebtX – to market existing bank loans. Next month, Boston-based DebtX will oversee an auction for nearly 67 million in non-performing agriculture, consumer and business loans that were once owned by Illinois lender Corn Belt Bank and Trust Company, which failed in February.The agency also recently struck agreements with a trio of auctioneer firms to handle the sale of everyday items used by the bank, such as computers, desks and other office furnishings, as well as cars, boats and industrial equipment a bank might have seized from borrowers that defaulted on their loans.Helping to manage and sell both commercial and real estate properties for the FDIC is the Florida-based asset manager Prescient and commercial real estate giant CB Richard Ellis Group (CBG, Fortune 500) .Time is moneyWhile regulators can shut down and sell an ailing bank to a healthier institution over the course of a weekend, winding down an orphan bank can take a bit longer.For example, regulators have had to cautiously dismantle the Atlanta-based Silverton Bank after creating a bridge bank to take over the company in early May.Given the firm’s role as a so-called “bankers’ bank” providing everyday services to small-town lenders, it could take a total of five months to wind down the institution, MacDonald said, referring to the situation as “a mess.” Timing, however, can be everything when a bank fails, especially as regulators scramble to squeeze every dime out of a failed bank’s remaining assets.Consider the case of Downey Financial (DWNFQ). Last fall, just two months before regulators seized the California-based lender, the company was shopping its twin-towered, six-story headquarters in Newport Beach for a reported 115 million. 0:00
/4:22Bailout culture clashThe nearly 43,000-square-foot piece of property is still up for grabs, albeit at a deep discount. Prescient is currently asking for 59 million for the property, according to its Web site.Bliss Morris, president and CEO of First Financial Network, a 20-year-old Oklahoma-City-based firm, said the same holds true in trying to sell loans on behalf of the FDIC — the longer it takes to make a sale, the more likely it is that the loans will lose even more of their value.Hoping to avoid some of those headaches, regulators have tried to forge loss-sharing arrangements with acquiring banks. Under such an arrangement, buyers agree to take on some of the bad assets in exchange for having the FDIC absorb some losses — typically over the next five to 10 years.Regulators brokered such a deal with a consortium of private equity firms in May before authorities shuttered the Florida lender BankUnited FSB.”The agency works very hard to sell as many assets they can with the deposit franchise,” said Robert Hartheimer, a Washington, D.C.-based consultant and adviser to Promontory Financial Group, who once served as director of the FDIC division charged with overseeing bank failures. Competing with the vulturesEven as such moves may soften the blow to the FDIC’s deposit insurance fund, it is clear that the agency needs to get the maximum possible value it can from failed bank assets. In the first quarter, the value of the deposit insurance fund fell by 4.3 billion, or nearly a quarter of its value, to just over 13 billion.Luckily, the demand for failed bank assets have been robust by all accounts.Auctions of the more mundane items like office furniture have attracted everyone from fellow bankers to a school administrator in Atlanta who was looking to add new desks for her growing student population.”Everything we have attempted to sell has been sold,” said Rick Levin, president of the Chicago-based firm Rick Levin & Associates, one of the auction firms assisting the FDIC with its asset sales. “We are finding strong demand.”And while the bidding for real estate and loans sales has been dominated by institutional investors so far, there are indications that average Joes are also starting to express interest in scooping up toxic assets.Bill Bartmann, a former distressed bank debt investor who recently published a book entitled “Bailout Riches” aimed at teaching people how to profit from buying bad loans on the cheap, notes several of his students have invested as little as 5,000 in loans once owned by failed banks. While such investments come with plenty of risk, it stands to reason that individual investors could generate similar returns to “vulture investors” who are gambling millions of dollars on the possibility that there is still some value in those loans.”It doesn’t always take a Morgan Stanley or Goldman Sachs to come to the table,” he said. “This really is an opportunity.”

NEW YORK (CNMMNoney.com) — With gas prices rising and car sales in the dumps, Hyundai is offering new car buyers gas at 1.49 a gallon for a year. The offer is called the Hyundai Assurance Gas Lock promotion. As with the Hyundai Assurance program the carmaker instituted in January which enabled buyers to give back their car at no cost in the event of a job loss, the Korean automaker is again using promotions aimed at easing car buyers’ economic concerns.As an alternative, buyers can take a 1,000 rebate instead of the gas incentive. Other cash rebates are still available whether or not the customer opts for the cheap gas.Hyundai expects gas prices to reach about 2.70 a gallon in July with some areas experiencing 3.00 a gallon gas.0:00
/3:09Ford’s flashy hybridWith gas currently at about 2.60 a gallon, Hyundai America’s vice president for marketing, Joel Ewanick, expects about a third of buyers to take the gas card instead of the cash. With gas prices at 2.70, someone driving a V6 Hyundai Sonata, one of its most popular models, for 12,000 miles over the course of a year would save about 580 with the gas price promotion, given the Sonata’s EPA-estimated 25 miles per gallon fuel economy in combined city and highway driving. Gas prices would need to average about 3.60 a gallon or more for a typical Sonata buyer to benefit from the gas card instead of the cash.The gas cards would presumably be more attractive to purchasers of larger Hyundai vehicles like the Hyundai Veracruz seven-seat crossover SUV which gets 18 mpg.Chrysler had a similar promotion last summer when gas prices topped 4 a gallon. Customers could get a years worth of gas at 2.99 a gallon. Ironically, few buyers of large Chrysler SUVs like the Dodge Durango took the gas card, said Chrysler spokesman Rick Deneau. The gas cards were most popular with buyers of small cars like the Dodge Caliber, even though those buyers would get little or no financial benefit, he said.To use the incentive, Hyundai owners would receive a Hyundai assurance credit. Gasoline purchases billed to that card would be passed through to the customer’s regular credit card at a rate of 1.49 a gallon with Hyundai paying the difference. (Mid-grade and premium gasolines would be passed through at slightly higher prices.)Hyundai credits its Assurance guarantee, which protects buyers against job loss, with helping boost sales this year.”We know of a 12% lift, which is way beyond our expectations,” Ewanick said.Hyundai will announce its June sales on Wednesday and industry trackers at Edmunds.com expect them to be down 18% from the same month last year, but that would be much better than the overall industry which is expected to be down 28%.

Source:CNN

NEW YORK: AIG shareholders, a.k.a. U.S. taxpayers, ousted the majority of the company’s leadership at AIG’s annual shareholders meeting Tuesday, removing the overseers of one of the biggest corporate unravelings in American history.Just three of the 11 directors that oversaw the company’s downward spiral in September remained on AIG’s board. Two directors who were placed on the board after the company came undone, including Chief Executive and Chairman Edward Liddy, also stayed in place. AIG’s three trustees, who represent the government’s near-80% controlling interest in the company, elected the new directors on behalf of the taxpayers.The six directors who did not stand for re-election were not in attendance at the annual meeting.The company’s longer-term shareholders stood before Liddy and a small group of about 150 other shareholders, voicing loud objections to the old board. Many tied irresponsible management by AIG’s board to the near-catastrophic losses of shareholders’ stakes in the company.”I notice none of the [outgoing] directors are here today,” said one shareholder, Kenneth Steiner. “They left like rats leaving a sinking ship. Well, goodbye and good riddance.”AIG’s new leadership will oversee AIG’s repayment of more than 80 billion in debt owed to taxpayers as well as the company’s roadmap to recovery, nicknamed “Project Destiny.” The new board includes former executives from American Express (AXP, Fortune 500), Boeing (BA, Fortune 500), KPMG, Delphi, Sears (SHLD, Fortune 500) and Northwest Airlines (DAL, Fortune 500). Liddy called them all “extremely talented,” and suggested they they were well suited to help oversee the company’s transition over the next several years.Liddy, who announced last month that he would relinquish his two positions, said that he expects the new board will find a replacements “soon.” The CEO and chairman positions are expected to be split. 0:00
/4:26AIG could not failTaxpayers to hold onto AIG for a while. The company has previously said that it could take up to five years before the government is fully repaid. Liddy said Tuesday that there is “an excellent chance” the company will be able to repay the taxpayers.For long-time AIG shareholders, the government’s stake has been an onerous burden, vastly reducing the value of their holdings. One shareholder, Jon Levin, suggested that AIG lobby the government to cut taxpayers’ 80% stake in the company as the government begins to pay the insurer back, calling the large stake “a disaster suffered by the shareholders.”But Liddy said he could give no assurances that the government will ever reduce its stake in the company. Shares of AIG (AIG, Fortune 500) tumbled Tuesday afternoon after shareholders ratified a 20-1 reverse stock split, which will take effect at 5 p.m. ET. The stock was trading at about 1.15 a share in afternoon trading, down 14% from Monday’s close. Though shares have nearly quadrupled in the recent near four-month stock market rally, AIG’s stock is still down more than 90% from the day before the company’s bailout was announced in September.Angry shareholders. A number of times throughout the 45-minute meeting, Liddy said he felt bad for the many shareholders whose holdings were nearly wiped out by the company’s collapse. In response to one unidentified shareholder who was looking for guidance after telling Liddy that her AIG shares were worth just 2% of their peak value, Liddy conceded that though AIG’s stock “could recover, the question is, will another stock recover faster?”"I’m sorry for what’s happened to you,” added Liddy. “I wish you luck.”In an effort to prevent future collapses of the company, groups of shareholders proposed three motions for adoption, including curbs on executive compensation, reincorporation in shareholder-friendly North Dakota and the ability to hold special meetings to elect a new board of directors mid-term.”Perhaps we could have avoided the problems we are facing now by putting a new board in place” through special elections, said Steiner, who proposed the latter two motions. “We lost 99% of our money, and no one is being held accountable,” he added.The trustees voted down Steiner’s motion as well as the other two shareholder proposals.

Source:CNN

(CNN) — A government advisory panel began voting Tuesday on recommendations for reducing the risk of serious liver injury associated with acetaminophen, found in over-the-counter drugs such as Tylenol and NyQuil.The panel, assembled by the Food and Drug Administration, is weighing several options, including reducing recommended dosages of acetaminophen or pulling combination drugs, such as NyQuil, from stores’ shelves entirely.After voting on nine options, the panel will be asked to rank the recommendations in order of importance for over-the-counter medications and, separately, for prescription medications.Its final recommendations will come from that vote, the FDA said.Although it is one of the most commonly used drugs in the United States for treating pain and fever, overdoses of acetaminophen have been linked to 56,000 emergency room visits, 26,000 hospitalizations and 458 deaths during the 1990s, according to the FDA, citing one study.The agency cited another study, a 2007 Centers for Disease Control and Prevention population-based report, that estimated that acetaminophen was the likely cause of most of the estimated 1,600 acute liver failures each year.The advisory panel could vote to pull over-the-counter drugs that use acetaminophen in combination with other ingredients that treat flu and cold symptoms, allergies or sleeplessness.These combination drugs include NyQuil, Pamprin and Allerest.The FDA is not required to follow the recommendations of its advisory committees, although the agency typically does.The Consumer Healthcare Products Association (CHPA), an over-the-counter trade organization, said in a briefing memo that combination over-the-counter drugs comprise only a small portion of acetaminophen overdoses.”Serious liver injuries are rarely due to OTC combination products (less than 10 percent of all cases), with many more cases attributable to Rx combination products. CHPA strongly opposes the elimination of OTC acetaminophen containing combination products,” the organization wrote.

Source:CNN

NEW YORK: Many owners of our country’s bonds are worried that the federal government is spending like inebriated sailors on shore leave to try and get the nation out of this economic mess.It’s unclear whether amassing more debt will solve a problem that was caused by too much debt in the first place. However, even as the government has approved one bailout after another, consumers have taken the opposite approach. They are digging in their heels and saving more.The Commerce Department reported last week that the personal savings rate hit a more than 15-year high of 6.9% in May. And interestingly, even though the stock market has rallied since March on hopes that the worst is over, consumers have stepped up their penny-pinching ways. The savings rate was just 4.1% in February. Consumers have come a long way in a relatively short period of time. The savings rate mostly hovered between zero and 1% from 2005 through the middle of last year. There is some debate as to whether the recent rise in savings is just a blip due to this year’s stimulus package. After all, there was a 1.4% increase in disposable income in May thanks to stimulus payments. But personal income rose by half that amount in April, and the savings rate still jumped. So it does appear that consumers have changed their behavior. Kevin Mabe, chief economist with Farmers Insurance Group in Los Angeles, said that one clear area where consumers have cut back is in purchasing new vehicles. The bankruptcies of GM (GMGMQ) and Chrysler and weak sales at Ford (F, Fortune 500), Toyota (TM) and Honda (HMC) are clear evidence of that.”We are seeing a consumer pullback, especially in big ticket items like autos,” Mabe said. “Money may not be all going into the bank because there could be some debt reduction going on. But it is surprising how savings have bounced from zero to where it is now so quickly.”This newfound sense of frugality is undeniably a good thing. If consumers are no longer willing to amass unhealthy piles of debt for things they can’t afford, then we can hopefully avoid such severe recessions. But the increase in the savings rate also raises some tough questions. Are consumers now saving too much? If the economy really is about to turn, do we risk killing the recovery prematurely by clamping down on spending? It’s a phenomenon known as the paradox of thrift.Talkback: Do you think consumers are now saving too much and hurting the economy? Or should people continue to be frugal and save even more? Leave your comments at the bottom of this story. One economist thinks consumers will start spending more as the economy continues to improve. “The significant improvement in financial markets through [the second quarter] has helped improve the balance sheet of households to the point where an additional increase in the savings rate does not seem to be justified,” said Stefane Marion, chief economist and strategist with National Bank Financial in Montreal, in a report last weekMarion wrote that he expects the level of savings to head back toward 5% as the effect of stimulus wanes. Still, while 5% is obviously much better than zero, one could argue that consumers still are not saving enough. Even though the savings rate is at its highest since December 1993, there’s a long way to go before consumers are as thrifty as they were during the last major consumer-led recession in 1991. What’s more, the savings rate was routinely above 10% during tough economic times in the mid-1970s and early 1980s.Keith Springer, president of Capital Financial Advisory Services, a Sacramento, Calif.-based investment advisory firm with about 100 million in assets, thinks that the savings rate will hit 10% again. “We are turning from a nation of spenders to a nation of savers. You’ve had two bear markets this decade. It has an effect on the psyche of the American investor and consumer,” he said. “Savings were down to ridiculous levels and now people are panicking and holing up in their house.” 0:00
/2:29Stimulus blasted as wastefulIf that continues, we could be in for a prolonged stretch of consumers spending less and saving even more. That could lead to a slower and more gradual climb out of this recession. But that might be just what is needed. “The unfortunate thing is that high savings in the short run is not good in terms of the recession ending,” said Mabe. “But what savings allows us to do is to use money for long-term growth. We can’t spend anymore. The consumer is tapped out.” After all, the 2001 recession begat super-low interest rates for an extended period of time. That helped create the conditions for the housing bubble in the middle of this decade. And it’s the bursting of that bubble that caused all those risky mortgages to become toxic and led to the credit market meltdown. Do we really want that to happen again? Is a sharp recovery this year and in 2010 worth it if it will only lead to another painful recession in 2015 or 2016? I hope people have learned their lesson and we won’t be faced with yet another bubble in a few years. But some experts aren’t convinced. So let’s continue to prove the skeptics wrong. Even though some might argue that it’s your patriotic duty to help boost the economy by taking advantage of July 4th sales on new cars and flat-screen TVs this coming weekend, I think there’s nothing wrong with sticking close to home and spending just a little money on some beer and burgers.”For the long term it’s necessary for the savings rate to increase. Saving is like sleeping. You may go one night or two nights without sleeping and be okay. We went five years without sleeping,” Springer said.Talkback: Do you think consumers are now saving too much and hurting the economy? Or should people continue to be frugal and save even more?
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NEW YORK (Reuters) — U.S. investigators believe 10 or more people associated with imprisoned swindler Bernard Madoff could be criminally charged in the coming months or beyond, a law enforcement source said on Tuesday.The source, who asked not be identified because of the ongoing investigation into the multibillion-dollar Madoff fraud, said the FBI was “closer to the beginning than the end” of the probe.Disgraced financier Madoff, 71, was sentenced to 150 years imprisonment on Monday after he pleaded guilty in March to orchestrating a worldwide investment scheme of as much as 65 billion. Madoff has not named accomplices in the classic “cash in, cash out” fraud and the only other person charged so far is his outside accountant.”There will probably be more people charged,” the law enforcement source said. “It is likely to be 10 or more, but it is going to be a lengthy process that could take months or more.”0:00
/5:05Madoff saga far from overA spokeswoman for the Office of the U.S. Attorney in Manhattan, which prosecuted Madoff and accountant David Friehling, declined to comment on the investigations.Federal investigators have declined to identify who is the focus of their inquiries, but they are skeptical of the claims by some people who worked at the Madoff firm that they had no knowledge of the scheme.Lawyers and white-collar crime experts have said all along that Madoff’s decades-long scheme appeared to be too complex to have been the work of one person alone.Bernard L. Madoff Investment Securities LLC in New York had a brokerage unit and an investment advisory business. The court-appointed trustee winding down the firm said the nefarious activity took place on the investment side.The trustee and regulators have sued several businessmen, who made billions in handling Madoff money through so-called feeder funds, charging that they knew or should have known the financier was running a fraud.

Source:CNN

(breakingviews.com) — U.S. car sales are in a ridiculous funk. Even with a strong June, the current annualized rate of about 10 million vehicles isn’t enough to compensate for scrapped cars and population growth. Yet the best investment play on an American recovery may not be a car or parts maker. Curiously, it may be Sirius XM Radio, which operates the radio in the dashboard.This is partly a process of elimination. Two of Detroit’s Big Three — Chrysler and General Motors (GMGMQ) — are in bankruptcy. Ford Motor (F, Fortune 500) is, of course, an option. But some 40% of Ford’s sales come outside the U.S., so it’s not a pure play on the domestic market. True, there are parts companies uniquely focused on the U.S. market. But given the serious margin pressures they face from bankrupt carmakers and rivals they look like very risky investments.Now consider the virtues of satellite radio operator Sirius XM (SIRI). Nearly all of the 2.4 billion in sales the company should rack up this year come from car owners. They pay around 17 per month to listen to its 300 channels, which include stations dedicated to, among others, the Grateful Dead and Metropolitan Opera; talk radio from left to right; and entertainers like Martha Stewart and Howard Stern.Its services are only available in the U.S. and to a lesser degree Canada. Moreover, with the merger of XM Satellite and Sirius Satellite Radio last summer, the group has a monopoly on the business. So Sirius XM is more leveraged to a recovery in the U.S. car market than pretty much any car or parts company.Of course, as investors in Sirius XM found out much to their chagrin in recent years that’s not always an advantage when the U.S. market goes south. The company had to refinance a chunk of debt just as credit markets shut. The resulting liquidity squeeze meant it had to turn to media mogul John Malone for an emergency injection of cash in February. This removed concerns the company would default on its 2.4 billion of net borrowings. Only 263 million of debt matures by the end of next year, which looks manageable.So what could a pick-up in the U.S. car market be worth to Sirius XM? Assume the company increases its 19 million subscribers by 15% per annum over the next ten years to 75 million in ten years’ time. That’s fast, but achievable. That would be less than a third of all vehicles. In contrast, more than 80% of all homes have pay TV.Investors currently value cable TV subscribers at about 1,000 each, according to Sanford Bernstein research. Satellite radio subscriptions cost less than half those of television, so let’s assume each may be worth 450. At 75 million customers, that’s a total value of some 34 billion by 2019. Now a dollar that might appear tomorrow isn’t worth the same as a dollar today. So let’s discount the value of those subscribers by 15% annually.On that basis, Sirius XM’s future subscriber growth should be worth about 6.6 billion today. After subtracting debt and accounting for Malone’s shares, that equates to about 4.2 billion of equity value, or around 65 cents a share. That represents an upside of more than 50% to today’s stock price of 43 cents.Of course, the company has disappointed shareholders before — and its subscriber penetration goals are indeed ambitious. But investors keen to wager on the U.S. auto industry’s rebound may want to switch on the radio.

Source:CNN

NEW YORK (Fortune) — You say, “potato,” I say, “netbook.” That’s a bit how I feel when Michael Rayfield, who heads up the mobile computing effort at graphics chip specialist Nvidia, drops a tiny computer on my desk. Branded Mobinnova, it had an almost 9″ diagonal screen and a solid keyboard that folded around a tube stuffed with batteries and various connectors.It is light enough to toss across the room like a Frisbee (not recommended, by the way). If I carried a purse, it would fit inside no problem. “It’s a netbook, right?” I ask Rayfield. “No, it’s a smartbook,” Rayfield replies.Right…a smartbook. I haven’t heard that one yet.There are notebooks, netbooks, mobile internet devices (MIDs), and web pads. There are smartphones and not-so smartphones. There are media players like the iPod Touch and the Zune. Last week I was shown a Hewlett Packard ultralight. Today, it was a smartbook from Mobinnova, which is the consumer brand of Foxconn, the Taiwan-based computer manufacturing giant that makes gear for pretty much everyone.Why isn’t it called a netbook? Not sure. What the champagne and black-colored machine on my desk is — what all these gadgets are — is a mobile computer. And for chip manufacturers like Nvidia (NVDA), it’s the future.0:00
/2:46HP laptops smaller but strongerThe Mobinnova is set up to run Windows CE, a lightweight operating system, so it’s not for someone looking to do heavy-duty computing. The ideal user performs mostly web-based tasks: e-mail, messaging, and game playing. It is based on ARM architecture, not Intel’s competing x86 design, so it won’t run Office or Windows 7 when it arrives.It does play video like a champ, and claims 10 hours of HD quality video due to its battery-sipping design. When it hits the market around the holidays, the Mobinnova “lan” ought to sell in the range of 100 to 200, Rayfield estimates. So one notable difference in the “smartbook” category is price; Rayfield’s quote is a marked discount to the 300 to 700 most netbooks cost today.The other difference is that Nvidia is doing all the processing inside this machine with what it calls Tegra.Tegra is an all-in-one-computer on a chipset — a system-on-a-chip — that rolls eight different processors into one tiny package. Nvidia’s core business is graphics processors; its chips power the graphics inside Apple’s entire lineup as well as other computers either as standard equipment or aftermarket upgrades.With Tegra, Nvidia doesn’t need Intel or AMD (AMD, Fortune 500) processors alongside its chips. Tegra is the whole package, and with more than 500 million invested in its development it is by far the largest commitment Nvidia has made to a technology outside of its core graphics business.The reason for spending that huge chunk of change is that Nvidia is betting that mobile is going to be the growth engine of its business. At a financial analysts meeting earlier this month, NVIDIA CEO and co-founder Jen-Hsun Huang said that Tegra will comprise about half of the company’s revenue within several years. For the twelve months that ended January 25 Nvidia posted 3.4 billion in sales.Like Intel (INTC, Fortune 500), and every other chipmaker out there, Nvidia sees the traditional computer industry changing, shrinking before its eyes — both in terms of size and the price that machines and their chips inside can fetch. “A year ago you could get a mediocre laptop for 1,000 Rayfield says. “Now you can get a kick-ass laptop for 400 — the market is never going back.”That is true, but at the moment the great variety of form-factors and capabilities in these machines is more bewildering than anything else. Do I want a smartbook? A netbook? An ultralight? Do I just stick with my Blackberry and a laptop? What the hell is a web-pad?Today, there are compromises inherent in all those devices. You need to weigh price against portability and performance. But what Tegra promises, as well as Intel’s future generations of Atom, and Qualcomm’s Snapdragon, is a mobile future without much compromise.The way gizmos are being cranked out like Mobinnova’s “lan,” it seems like the time will come very soon (my guess, two years tops) where all the marketing monikers disappear. You will be able to pick the size mobile computer you want — pocket-size or purse-size — and the features you need at a price that rivals what most people pay for spiffy smartphones today. Will these be a primary computer? For many people, yes. For those with heavy computing tasks, say video editing, you’ll need a beefier machine.It’s a future PC makers and PC chip companies like Nvidia are scrambling to adapt to, to plant their flag in the mobile marketplace. The stakes are simple: they either win huge, or watch their business slowly but surely shrivel. And while it is a bit confusing at the moment for consumers, hang in there. It’s about to be a great time to go shopping for a computer that fits your wallet and your needs perfectly.

Source:CNN