Archive for June 26th, 2009

NEW YORK: Bernard Madoff, mastermind behind the largest and most sweeping Ponzi scheme ever, on Monday faces the possibility of spending the rest of his natural life in prison. Madoff is scheduled to appear in U.S. District Court in Manhattan before Judge Denny Chin, who could sentence him to as many as 150 years in federal prison.That is the maximum sentence that federal prosecutors requested for Madoff, who confessed on March 12 to running a Ponzi scheme that stole billions of dollars from thousands of victims. Madoff orchestrated the scam by masquerading his investment firm as a legitimate business. But in reality, Bernard L. Madoff Securities, which he founded in 1960, was nothing more than a front for the elaborate scam.In a Ponzi scheme, the scammer uses fresh money from unsuspecting investors to make payments to more mature investors, creating the false appearance of legitimate returns. In Madoff’s case, he sent statements to victims claiming that their investments had grown several times over, but in actuality he had stolen, not invested, their money.Investigators said that Madoff maintained an aura of exclusivity, while his alleged accomplices courted new investors because they needed a constant influx of fresh funds. Investigators believe that Madoff had been running his scam since at least the 1980s until he finally ran out of money in December 2008, when he admitted the fraud to family members.Sentence: 150 years, or 12?Madoff, age 71, pleaded guilty to 11 criminal counts, including fraud, money laundering, perjury, false filing with the Securities and Exchange Commission, and other crimes. Prosecutors with the U.S. Attorney’s office in New York requested the maximum sentence of 150 years, based on the number of victims, the amount of money he stole and the extent of the damage he caused.0:00
/4:18Inside Bernie’s house of cardsMany of his victims were wiped out financially by the scam and they have sent letters to the judge requesting a life sentence.But Madoff’s lawyer Ira Lee Sorkin requested a 12-year sentence. Sorkin explained, in his letter to the judge, that his septuagenarian client isn’t likely to outlive the sentence by more than a year.”Mr. Madoff is currently 71 years old and has an approximate life expectancy of 13 years,” wrote Sorkin. “A prison term of 12 years — just short of an effective life sentence — will sufficiently address the goals of deterrence, protecting the public and promoting respect for the law.”In his letter, Sorkin described Madoff as “non-violent,” noted his “voluntary surrender” to authorities and complained about the “desire for a type of mob vengeance” in the victims’ impact letters.Compensating the victimsThus far, federal investigators have identified 1,341 investors in Madoff’s firm, with losses exceeding 13 billion. They’re still tallying the damage.A group of victims sent the judge a 141-page collection of letters detailing the extent of damage that Madoff had inflicted on them. Many of the victims said they had banked their life savings with Madoff’s firm and they were ruined as a result of his scam. Eleven of the letter-writers requested, and were granted, the right to speak in court on Monday.There are two ways for victims to get compensated, or at least partially compensated, for their losses: through seized assets and through the Securities Investor Protection Corporation, an organization that shields investors in brokerage firms.Madoff’s wife Ruth is still living in their 7 million apartment in Manhattan. But many of their other assets have been seized, including a home in Palm Beach, Fla., an 800,000 yacht named The Bull, and a legitimate investment firm that Madoff kept separate from the scheme. The value of these and other assets will eventually be used to compensate victims, based on how much they invested in Madoff’s firm.Also, SIPC will pay up to 500,000 for any eligible claimant who lost money to Madoff, based on how much they put in. This coverage comes from dues paid by brokerage firms.Some victims are unhappy with this system. Joe Stewart of Las Vegas explained, in a written statement to CNNMoney.com, that as an indirect investor he is not covered by SIPC. Another victim, Dana Foy of Jemez, N.M., complained that SIPC will only compensate him for the 150,000 he invested in the firm, not the 600,000 that the firm told him his investments were worth.”In any other Ponzi scheme, the rule is [that] cash in, minus the cash [that the investor took] out, is going to be the value of your claim,” said SIPC Chief Executive Steve Harbeck to CNNMoney.com.Harbeck said that indirect investors who unknowingly gave their money to Madoff through a separate firm aren’t necessarily barred from compensation, depending on their particular case. “There are very few things in law that are black and white,” he said.Harbeck said that victims have until July 2 to file a claim with U.S. Bankruptcy Court in New York.Madoff’s next homeFor three months since his December arrest, Madoff managed to avoid jail by posting 10 million worth of bail. He spent the time under house arrest, ensconced in his Manhattan apartment.But since his confession in March, he has been incarcerated in the Metropolitan Correctional Center in lower Manhattan, a holding facility for convicts awaiting sentencing. This has given him a taste of life behind bars.Once he is sentenced, he will probably be transferred to a medium-security federal prison, according to prison consultants. Madoff’s status as a non-violent offender should keep him out of maximum-security, consultants said. But they added that the massive scale of his crimes and his hefty sentence would make him ineligible for a low-security prison or a minimum-security prison camp, which inmates usually prefer because of safety, fewer restrictions and better quality of life.In a medium-security prison, he would live in a cell, separated from the outer world by double layers of razor wire fencing with electronic detection systems, according to the Federal Bureau of Prisons. He would have to work a menial job, possibly in a kitchen or laundry room, for 12 to 40 cents an hour.The BOP will have the final say as to where Madoff will serve his sentence. BOP spokeswoman Felicia Ponce said they try to place inmates within 500 miles of their families.Keeping that in mind, Alan Ellis, attorney and author of the “Federal Prison Guidebook,” believes that Madoff will probably get sent to Federal Correctional Institute Otisville or FCI Ray Brook, both in upstate New York, FCI Fairton in New Jersey or FCI McKean in Pennsylvania.Madoff will have to learn how to survive in the medium-security environment, where there are many violent offenders, according to prison consultants.”There will be people who think that Bernie can give them stock tips, but I don’t see anyone being his big pal,” said Larry Levine, founder of Wall Street Prison Consultants who served 10 years for his ties to organized crime. “I believe he’ll be treated like an outcast.”

Source:CNN

NEW YORK: The House approved a sweeping energy and climate bill Friday which could for the first time usher in widespread government restrictions on greenhouse gases and help renewable energy become cost competitive with fossil fuels.The central part of the legislation limits the amount of carbon dioxide, the main gas behind global warming, that companies like electric utilities, gasoline refiners, chemical firms and other large users of energy can put into the atmosphere. There were previously no restrictions on carbon dioxide emissions. The bill aims to cut greenhouse gas emissions by over 80% by 2050, in-line with what scientists say is needed to avoid the worst effects of global warming.Meeting those targets is expected to cost the average household 175 a year by 2020, according to a recent analysts by the Congressional Budget Office.But that estimate is widely disputed, with opponents saying it will cost far more and supporters saying consumers will actually save money by reducing their energy use.Consumers will mainly see this cost increase in the form of higher electric bills and gas prices. The impact on the Federal budget is minimal, with one analysis suggesting that it could actually increase revenues a bit.Opposition to the bill stemmed largely from the costs. House leadership and the Obama administration struggled all week to bring their own party together on the issue, and it was a tough sell. Several Democrats from coal producing or big manufacturing states voted against the measure, afraid of what higher energy prices may mean for their constituents. Most all Republicans voted against it.While some environmental groups and lawmakers also opposed the bill on the grounds it was too weak, it has the support of many mainstream environmentalists as well as several of the industries it will regulate. The bill now heads to the Senate, which isn’t expected to take up the matter until the fall. There’s considerably more opposition to the plan in the Senate.But the Obama administration, which would like some domestic progress on cap-and-trade when U.S. negotiators show up in Copenhagen at the end of the year to hammer out a successor to the Kyoto Treaty, will likely keep pressure on Congress. This is currently being done by a thinly veiled threat to use the EPA to regulate greenhouse gases, a process most observers say would be even costlier than a cap-and-trade plan.The bill also includes a requirement that utilities get at least 20% of their power from renewable sources by 2020, hikes building efficiency standards 50% by 2016, and includes over 20 billion for electric car research and development. OriginsEnvironmentalists and other clean energy advocates have been saying for years the nation needs to put a price on carbon dioxide if it wants to let cleaner forms of energy compete with cheaper fossil fuels and avoid the potentially disastrous effects of global warming. But up until now, those efforts have failed.Just 10 years ago the Senate rejected the Kyoto Treaty – a similar plan to the one passed Friday – by a vote of 95 to zero. But in the intervening years public and scientific opinion around climate change has shifted. High energy prices, Hurricane Katrina, and the buzz over Al Gore’s movie “An Inconvenient Truth” have all been cited as reasons for the change. But mostly it’s the scientific opinion that’s changed, with scientists becoming more certain that global warming is happening, caused largely by humans and may have serious consequences. Earlier this month, government scientists at the National Oceanic and Atmospheric Administration said evidence of climate change was already apparent in the United States, and that “the current trend in the emission of greenhouse gas pollution is significantly above the worst-case scenario that this and other reports have considered.”It went on to say that heat waves will become more intense, leading to human health problems and affecting crop and livestock production; water shortages will increase; ocean waters will rise, killing coral reefs and impacting tourism and fisheries; greater outbreaks of insect infestations and wildfires will occur; and rising sea levels will inundate coastal buildings and infrastructure.If greenhouse gases are not curbed, by 2100 damages from global warming could cost the country 1.8 trillion a year, according to a study by The Natural Resources Defense Council.How cap-and-trade worksThis is where the House bill comes in. Known as Waxman-Markey after its two sponsors, Henry Waxman (D-Calif.) and Ed Markey (D-Mass.), the bill attempts to reduce greenhouse gas emissions through a system known as cap-and-trade.Under a cap-and-trade plan, the government requires companies emitting large amounts of greenhouse gases to obtain a permit for each ton they emit each year.Most of these companies are electricity generators, including big industry that generates its own power. The number of permits issued each year is then reduced. As the more limited supply of permits increases their price, companies can either pay to install cleaner equipment, fund carbon-offset projects like tree farms, or buy these permits on a secondary market from other companies that have cleaned up their operations and now have extra permits to sell.The ultimate goal is to make fossil fuels, the main source of energy and of man-made carbon emissions, more expensive and low carbon technologies like wind, solar and nuclear more competitive.0:00
/4:30Gen. Clark: ‘Wind is ready to go’While the overall costs of the program are huge – over 100 billion a year – the bill pumps much of this money back into the economy and into consumers’ pockets. It requires the electricity generators to buy the permits from local utilities, which receive them free from the government, or to buy them from the government itself.Then this money will be used for a host of programs that benefit electricity users including energy efficiency retrofits, tax credits for low income families hard hit by the price increase, and subsidies for the steel, concrete and chemical industries that might suffer from competition with companies in countries that don’t have a cap-and-trade law. This is how the CBO came to estimate the household cost as a relatively low 175. For some, any price increase is too much.”I don’t think it maters what the number is,” said Laura Henderson, a spokeswoman for the Institute for Energy Research, which opposed the bill. “We’re in a recession. People can’t afford an increase in something they need so much.”The bill is bound to face stiff opposition from Senate members hearing similar concerns from their constituents.”In a year when we haven’t seen much of an economic recovery, going forward with a bill that will raise prices is probably going to be difficult,” said Whitney Stanco, an energy policy analyst at Concept Capital.Eventually, Stanko thinks that companies will have to pay to emit carbon.”In our view Congress will likely be compelled to enact greenhouse gas emissions legislation rather than let the EPA regulate,” said Stanco, although she said that might not happen until after the 2010 elections.In the meantime, opponents will continue to use the cost issue to fight the bill, as well as a more ideological approach.Some, including most economists, say a simple carbon tax would be a more efficient way to reduce greenhouse gases.Many in the political sphere oppose a cap-and-trade plan right now because they say the benefits don’t outweigh the costs. In short, they don’t think global warming will present as big of a problem as some say, and argue that it will be far cheaper to deal with the issue in the future when the costs of cleaner energy technology falls.It’s not a view shared by most scientists that study the issue.”Implementing sizable and sustained reductions in carbon dioxide emissions as soon as possible would significantly reduce the pace and the overall amount of climate change,” the NOAA scientists wrote, “and would be more effective than reductions of the same size initiated later.”

Source:CNN

NEW YORK: Community Bank of West Georgia was closed Friday by state regulators, bringing the total number of failed banks this year to 41, according to the Federal Deposit Insurance Corporation. The FDIC said the bank had roughly 1.1 million in deposits that exceeded its 250,000 insurance limit for individual accounts. However, this amount is expected to change as the agency obtains more information from uninsured customers, the FDIC said. The FDIC will mail checks to insured depositors for their funds on Monday morning. As of mid-May, the failed bank had total assets of 199.4 million and total deposits of 182.5 million, according to the FDIC.Direct deposits from the federal government, such as Social Security and Veterans’ payments, will be transferred to United Community Bank of Blairsville.Community Bank of West Georgia operated two branches, one in Villa Rica and another in Kennesaw. It was the eighth bank to fail in Georgia this year. The total cost of Friday’s bank failure to the FDIC is 85 million, bringing the total for this year to 11.6 billion. That compares with 17.6 billion in all of 2008.The number of bank failures so far this year has already exceeded last year’s total of 25, with an average of nearly 7 failures per month.Over the next 5 years, the FDIC expects roughly 70 billion in losses due to the failures of insured institutions.The FDIC, which is funded primarily by fees paid by banks, insures individual deposits up to 250,000. The amount was increased from 100,000 late last year in response to concerns about the stability of the nation’s banks.

Source:CNN

HAWTHORNE, New York: I’m a bit intimidated entering IBM’s research center in Hawthorne, New York. After all, the company’s sales totaled 104 billion…yes, billion…last year.So not only am I traveling into the heart of one of largest tech companies in the world, but I’m about to face off against Watson, the natural language processing system that is due to appear on the television quiz show “Jeopardy!” some time next year.The sprawling complex is filled with rooms assigned generic numbers, separated by swaths of black, gray and blue-colored carpets. A quick right turn out of the elevator puts me in front of Lab 2SG85.The lab is shoddier than I would have expected — paneled walls, rickety desks and low ceilings with florescent lights, like it hadn’t been updated since the 1970s.In the small room where I’ll be battling wits with Watson, there’s a glowing red emergency electrical shut-off switch on the wall. (HAL, anyone?) There are algorithms scribbled on a white board that show how Watson arrives at a particular response.The presentation, set up by IBM researcher David Ferrucci, isn’t working. Ferrucci, who also heads up the Watson team, neglected to plug the projector into his ThinkPad laptop.”You’d think we’d be wireless by now,” he quips. He plugs the projector in, and a Jeopardy! board pops up on the screen.Alright. Ready to go. Finger on the buzzer. Watson picks geography for 400. This should be easy, I’m thinking.”Eighty percent of Algeria is covered by this desert.”I know this one! I buzz in quickly.”Player two, Watson.”Huh?”What is Sahara?” says the computer’s simulated voice.Too fast for me.How Watson works. The computer and software system, named after Big Blue founder Thomas Watson, marks an impressive big step on the path toward being able to talk with computers. Interestingly, the researchers did not load Watson up with countless databases, but rather taught it to search through text, and use context to “understand” how words relate to each other. For example, talking about a character in a novel is vastly different from talking about someone’s personal character.To get an answer, the computer considers many factors, from simple keyword matching and arithmetic, to complex, often ambiguous solutions like metonymy (substituting one concept for another, related one), and statistical paraphrasing (“Big Blue” is the same thing as “IBM”). Watson is able to do this in a fraction of a second because the program’s hardware is an IBM Blue Gene/P — one of the fastest super computers on the planet.That doesn’t mean it has all of the bugs worked out — it responded with “Barbra Streisand” to the Jeopardy! answer “This Ziegfeld star was portrayed in the film ‘Funny Girl.’” It was close, but the correct response is Fanny Brice. Streisand played Brice in the film. (It’s okay, Watson, I didn’t know the answer either.)The other reason why IBM didn’t just load Watson up with data is because it wants the technology to be accessible to any person or company looking for quick answers.Watson, coming to a business near you. The possibilities for commercial use of the technology would seem endless. If Watson can answer complex Jeopardy! questions, then perhaps it could help doctors treat patients, bankers mitigate risk or consumers plan a dinner menu at a grocery store.”The scalability of Watson combined with IBM’s drive toward cloud computing could result in everything from answering children’s queries to doing crisis management,” said Richard Doherty, research director for the Envisioneering Group, which does some consulting for IBM. “Watson is going to be deployed, and not just to the Warren Buffetts and Bill Gateses of the world — mom & pop shops will be able to use it too.”IBM (IBM, Fortune 500) certainly seems to thinks so.”The future of Watson is to get it embedded in IBM’s solutions and products to help customers deal effectively with unstructured content,” said Ferrucci.Experts agree, saying that Watson has the capability to help a broad range of customers.Near universal access to Watson would, on the surface, seem unlikely, given the fact that few businesses have the wherewithal to buy the super computer it takes to run the program. Furthermore, Doherty estimates that the project costs roughly 5% to 10% of IBM’s entire 6.3 billion R&D budget each year, putting Watson’s three-year development price tag at roughly 900 million to 1.8 billion.That’s where cloud computing, or software as a service, comes in.Doherty believes that IBM will be able to open up Watson’s capabilities to all types of businesses and consumers by offering Watson on a kind of “time share.” Got a question for Watson? Let IBM know, and for 100 per minute of use, they’ll give you the answer.And some businesses and agencies may want the whole thing to themselves. For instance, the U.S. Department of Energy is currently using a Watson test model for weather prediction.Though competing on “Jeopardy!” will be challenging for IBM, it will also allow it to showcase Watson’s capabilities for potential customers. Though IBM was reluctant to give a timeline, experts say Watson could be deployed as early as 2011.

Source:CNN

NEW YORK: So just how many stimulus jobs have been created or saved so far?The figure remains elusive, but Congress provided one of the first peeks this week by reporting that stimulus has funded 21,000 highway and transit jobs as of May 31.The number, one of the first counts of actual stimulus-based employment, is based on state reports to the House Transportation and Infrastructure Committee. Thousands of indirect jobs — such as the deli employee who prepares lunch for the construction crew or the workers who produce the steel needed for projects — were also created or sustained.The White House says the figure is in line with its projection that the 787 billion recovery act has created or saved 150,000 jobs in the administration’s first 100 days. The 150,000 number, which includes direct and indirect positions, is an estimate based on the amount of stimulus funds spent. Each 92,000 of stimulus funds spent translates into one job, according to the White House formula.Congressional Republicans, who have blasted the recovery act as wasteful spending that won’t create nearly the number of jobs promised, took issue with the figure.Rep. John Mica, R-Fla., criticized the Obama administration for not reporting a specific number of jobs created or saved by stimulus-based infrastructure spending. Mica, the ranking Republican on the transportation committee, pointed out that only 21,000 positions have been produced, though the committee’s Democrats have said that the 64.1 billion in infrastructure spending would create or sustain more than 1.8 million jobs.”This is pitiful that we can’t get people working, we can’t get the stimulus money out,” Mica said. “People want jobs and they want them now.”In his weekly address, House Republican Leader John Boehner, R-Ohio, also slammed the administration for failing to stem the rising unemployment tide. The unemployment rate rose to 9.4%, its highest level in 26 years. It’s expected to climb to 9.6% when the June numbers are released next Thursday.0:00
/2:29Stimulus blasted as wasteful”All year long, Democrats here in Washington have made plenty of promises about putting Americans back to work, but I think the question is: Where are the jobs?” he said. “We all remember the trillion-dollar stimulus bill Democrats promised would be about jobs, jobs and jobs. And clearly all it’s turned into is about spending, spending, and more spending.” Creating jobsThe administration said that the 21,000 construction jobs figure meshes with the 150,000 figure. The White House is also taking into account the jobs created or saved by stimulus money spent on tax cuts and entitlements, such as Medicaid. Much of the initial stimulus funds spent went to states to help them cope with rising Medicaid rolls.”It’s not just that we’re paving I-57 in Illinois, how many jobs did that create?” Gavin said. “It’s accounting for a much broader universe.”Testifying before the House committee Thursday, federal transportation officials updated their employment estimates. The Federal Transit Administration said that 19,000 jobs have been created or saved so far, and another 45,000 would be from the grants that are in progress. These figures are based on formulas.Some 6,000 actual jobs have been created or saved by stimulus highway money, as of the end of May, according to the Federal Highway Administration. The agency estimates the 1,500 projects currently underway will ultimately create 50,000 positions. The agency’s total 27.5 billion stimulus allocation is estimated to create or sustain 300,000 jobs by 2012.”Federal agencies, states and their local partners have demonstrated that they can deliver transportation and infrastructure projects and create urgently needed employment in the tight timeframes set forth in the recovery act,” said Rep. James Oberstar, D-Minn., who heads the transportation committee.

WASHINGTON (Reuters) — The U.S. Treasury said on Friday it will auction off bank stock warrants as quickly as possible if institutions choose not to buy them back after repaying government bailout funds.The Treasury set out procedures for the warrant repurchases that call for banks to submit their calculation of a fair market value for the warrants, which the Treasury can accept or reject.If the two sides do not agree after an arbitration process, Treasury would be able to auction the warrants to the highest bidder.Treasury received the warrants in exchange for injecting capital into banks, with the intent that taxpayers whose money was put at risk would get a chance to share in any gains as banks recovered.

Source:CNN

NEW YORK: Question 1. I’ve heard one of the requirements [for Cash for Clunkers program] is that the trade-in vehicle must be no older than 25 years old. Is this true, and if so why, since the older the car is the more pollution it would make? I would sure appreciate an official list of all requirements. — Manuel This program, now called the Car Allowance Rebate System, was signed into law yesterday. And it is true that the trade-in car must be newer than 1984. Experts say this rule was put into place because the government wanted to make sure the cars coming in were cars people were actually driving. As far as the other requirements: To get a voucher worth 3500, the new car must get at least 4 more miles per gallon than the trade-in. If you want the full 4,500 voucher, the car you’re buying should get at least 10 miles more per gallon. Your trade-in car must also be insured and in-use for at least a year. For more information go to Edmunds.com. Question 2. I’ll be closing on my house next week I just want to be prepared for what to look for when signing the documents. Are there some tips you have or suggestions as of what to really look for when signing on the closing date? — A nervous first-time homebuyer Be prepared for a long day. Here are some things you should have beforehand: A HUD-1 settlement statement. This is a final list of closing costs. Compare it to your good-faith estimate you received when you completed your loan application. Lender fees may add origination fees, lending fees and administrative fees. If these fees weren’t on the good-faith estimate, but if they show up on the HUD-1 document, make sure you say something. If you see new fees have popped up, complain immediately. You may also be hit up for gratuities or tips, but you are not under any obligation to dole out anything extra. Question 3. I just graduated college and I am having a very hard time finding a job. I am thinking about going back to school for either another degree or a Masters Degree. What do you suggest? — Clare The bottom line here is that you shouldn’t go back to school just because you’re having trouble finding a job. Make sure the career path that you’ve chosen can support the student loan debt that you may be taking on. Instead of going back to school, think about an internship or volunteering. It’s a cheaper way of getting your foot in the door rather than adding another expensive diploma to your wall. — CNN’s Jen Haley contributed to this article.

Source:CNN

(breakingviews.com) — Are banks finally in write-up territory? With most markets rallying this quarter, it’s tempting to think so. And some firms should be able to show some gains. But these won’t be as easy to track as improvements in prices imply.How so? After all, the major bond and leveraged loan indices on both sides of the Atlantic have jumped between 20% and 30% since March. And enthusiasm about the U.S. Treasury’s Public-Private Investment Partnership, meant to dispose of banks’ bad assets, and Term Asset-Backed Loan Facility, designed to revive securitizations, have helped bolster residential and commercial mortgage bond indices, though have given up some of their gains recently.That won’t make much difference to Goldman Sachs (GS, Fortune 500) and Morgan Stanley (MS, Fortune 500). They may get a boost because of the improvement in leveraged loan prices — though not huge since both have shrunk their portfolios to under 5 billion. Nor do they have that many toxic mortgage securities left.And their hedges and other positions often alleviate any pain where they do. Last quarter, for example, Morgan Stanley’s 1.5 billion of gains from taking new commercial mortgage bond positions and hedging old ones more than offset the 800 million in losses on legacy assets.It’s even less clear how commercial banks will fare. Sure, some, like Bank of America (BAC, Fortune 500) and Citigroup (C, Fortune 500), may be able to show mark-ups on any dodgy mortgage bonds and CDOs they still hold that caused their multi-billion-dollar losses.But new accounting guidelines give banks more flexibility in how to price such assets. That means decisions about taking a gain or not for the second quarter may come down to whether they need help to hit earnings estimates or whether they reckon taking gains isn’t worth it if they’ll simply revert to losses again in the next few months.What’s more, most banks don’t mark all their loan books to market; rather they take write-offs as actual losses occur — so they can’t benefit from rising valuations. In fact, with defaults increasing, problem loans may be the source of more write-offs.Even where they do peg values to the market, as with leveraged loans, it’ll hardly be gains all round: JPMorgan (JPM, Fortune 500), for example, might be able to mark up its Alliance Boots loan but will probably have to register a loss on Chrysler.And there’s another factor to remember: the U.S. accounting quirk requiring all banks to mark their own debt to market, taking gains last year as debt prices fell and losses as they now recover. That may wipe almost 2 billion off Morgan Stanley’s revenue this quarter, according to Barclays.The good news is that widespread multi-billion-dollar losses may be on hiatus this quarter — and the markets’ rally has certainly helped foster new business. But for now at least, write-up estimates are a crapshoot.

Source:CNN

NEW YORK: Don’t look now. But the dollar is starting to weaken again against the euro, pound and yen, leading some to wonder if its days as the world’s No. 1 currency are numbered. The euro was trading at about 1.406 on Friday morning, near a two-week high. Though the euro is still more than 10% below last summer’s all time-high of 1.6037, the dollar’s recent sharp slide has some concerned.On Friday, Chinese officials reiterated calls for a so-called super-sovereign reserve currency that could supplant the dollar. China’s opinion has obvious weight considering that it is the largest owner of U.S. Treasurys.But the talk of the dollar’s imminent demise appears, as Mark Twain once wrote, to be greatly exaggerated, according to some currency strategists. “Talk of moving away from the dollar as a reserve is overblown. There will still be a lot of faith in the dollar in bad economic times,” said Dan Cook, senior market analyst with IG Markets in Chicago. “The world is still looking to the U.S. to get out of this turmoil. Most blame the U.S. for getting the world into this mess after all.”Surprisingly, continued economic weakness is probably good news for the dollar because it could lead foreign investors to rush back into the dollar as a safe haven. Cook said that much of the rise in other currencies has been at the expense of the dollar because it showed that investors were starting to believe that the global economy was on the mend.In other words, they didn’t need the dollar anymore. But Cook said that the dollar could quickly rebound if next week’s jobs report for the month of June shows a continued spike in the unemployment rate. Even though stock market investors cheered the May job report, which showed that the pace of job losses was decelerating, Cook said that investors might not be so forgiving if the official unemployment rate inches closer to the psychologically important level of double-digit status. The unemployment rate hit 9.4% in May and economists are forecasting a rate of 9.6% for June, according to Briefing.com.”Next week’s jobs numbers could be huge. If the numbers are worse than expected, that could lead to sustained strength for the dollar,” Cook said. “Until the U.S. consumer is really back in the game, it will be difficult for a recovery to happen, especially if the unemployment rate is heading toward 10%.” To that end, consumers continue to save more than spend. The government reported Friday that the personal savings rate was 6.9% in May, up from 5.6% in April and the highest level in more than 15 years.Talkback: Do you think the dollar will continue to weaken? And are you concerned by the dollar’s slide? Leave your comments at the bottom of this story. Others think the dollar will bounce back soon simply because, as bad as things may seem in the United States, they’re even worse in other parts of the world — particularly Europe.In a report earlier this month, currency analysts for Bank of America Merrill Lynch in London wrote that they expect bank writedowns in Europe to lead to a big boost in dollar purchases. Here’s why. Many European banks raised deposits in the United States and by doing so, created liabilities on their balance sheet. That’s because a deposit is really a loan to a bank. These banks then used those deposits to try and make a profit by making loans in dollars or purchasing securities in dollars. 0:00
/03:04Falling dollar shockwavesBut since the value of many of those loans and securities have declined dramatically, the only way the bank can repay its liabilities is to do some from its own equity, which would be denominated in euros instead of dollars. So the banks would have to sell euro-based assets and purchase dollars in an amount equal to the writedown. The BofA Merrill analysts estimate that there is between 100 billion and 462 billion in writedowns of dollar-based assets by foreign banks still yet to come, creating a nice floor of demand for the dollar in the coming months. If the dollar does actually bounce back, that could be a welcome relief for consumers. The prices of many commodities are tied to dollars. So the dollar’s weakness is one reason behind the recent rise in oil and gasoline. A stronger dollar also makes it cheaper to buy imported goods in general.In addition, a stronger dollar would give the Federal Reserve, which left interest rates near zero at its latest meeting this week, more wiggle room to keep stimulative policies in place longer to try and ensure that the economy doesn’t take a step backward. But as long as the dollar continues to weaken and prices of commodities rise, that will spark more inflation fears, which could force the central bank to pull back on its various lending programs more quickly than it would like. Some fear bigger dollar declinesStill, not everyone is convinced that a dollar comeback is in the cards. Axel Merk, president of Merk Mutual Funds, a Palo Alto, Calif.-based money manager specializing in currency investments, said he thinks the dollar will remain under “significant pressure.”Merk argues that if the dollar was still viewed as a safe haven, it should be rallying now that there is increased skepticism about the prospects for an economic recovery. He said the reason it isn’t is because investors are worried about the potential inflationary impact of stimulus.”The U.S. government’s balance sheet has deteriorated because of all the spending. The Fed desperately wants to have higher home prices and it’s printing so much money to try and drive down rates,” Merk said. Merk calls this a “dangerous road” that could cause more investors to flock to the euro over the dollar. He said a return to last year’s highs for the euro is not out of the question.”Why have money in the dollar when other countries aren’t as reckless with their monetary policy?” Merk asked.Talkback: Do you think the dollar will continue to weaken? And are you concerned by the dollar’s slide?
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NEW YORK (Fortune) — So far, so good.Our 10 “Best Stocks for 2009 — as featured in Fortune’s annual Investor’s Guide — have returned 22.5%. That’s eight percentage points better than the total return of the Standard & Poor’s 500 (SPX) over the same period (from Dec. 1, 2008 through June 25, 2009).Only one of our picks lost money (Devon Energy), while seven boast double-digit returns. Here’s a run-down on all 10:Altria (MO, Fortune 500)We thought the cigarette maker would prove to be a good defensive stock, and indeed, Altria has returned 15.1% and still boasts an 8% dividend yield. Better still, new tobacco regulations just passed by Congress — limiting cigarette advertising and prohibit new flavors — will help protect the dominant market share of Marlboro and other Altria brands.Bottom line: Hold.Annaly Capital Management (NLY) Our argument for Annaly boiled down to the stock being misunderstood. Since then, the stock has returned 26.9% thanks in large part to Annaly’s 14% dividend yield.Structured as a REIT, Annaly is basically an investment fund that buys Fannie Mae or Freddie Mac-guaranteed mortgages with borrowed money. In this environment that sounds scary. Fact is, with the government takeovers of Fan and Fred, Annaly’s business model has never been more secure. Not only that but Annaly’s interest rate spread — the margin between what its mortgages are yielding and the interest Annaly is paying on its debt — widened to 2.08% at the end of the first quarter from 1.46% the same period last year.Bottom line: Buy.Dell (DELL, Fortune 500) delivered at 35.8% total return, but we got a little lucky with this one. We predicted that Dell’s market share gains in 2008 would continue into 2009. What happened? Dell has seen its share of the worldwide PC market fall from 14.7% to 13.1%, according to Gartner. Dell’s net income fell 63%. Bottom line: Count your blessings and take profits.Devon Energy (DVN, Fortune 500) Devon is basically a natural gas play, which explains why the stock has lost 12.8%. While oil prices have doubled since February, natural gas prices have actually fallen. That cannot hold. Bottom line: Buy.Diamond Offshore (DO) Diamond is a leading offshore driller, and the rebound in oil prices has driven Diamond stock to a 40.9% total return. We still like the stock — particularly the 8 a year in regular and special dividends — but there is something of a disconnect right now between oil prices (which are rising) and demand for drilling rigs (which is falling).Bottom line: Take profits.Fluor (FLR, Fortune 500) A construction and engineering firm, Fluor has returned 27.1% with investors betting the company will be a big beneficiary of all the new infrastructure spending included in President Obama’s stimulus plan. That’s still a wise bet.Bottom line: Hold.Johnson & Johnson (JNJ, Fortune 500) We called it a comfort stock, and the label still applies, despite underperforming the market with a 3.5% total return. Part Big Pharma, part consumer staples giant, J&J boasts a healthy dividend yield (3.6%) and a low price-earnings ratio (12).Bottom line: Hold.Medco Health Solutions (MHS, Fortune 500) The largest pharmacy benefits manager (or PBM), Medcocould be one of the biggest beneficiaries of health reform. President Obama wants to use technology to bring down healthcare costs and that’s Medco’s forte. The stock has already returned 18.9%, and we think more gains are coming. Bottom line: Hold.Pfizer (PFE, Fortune 500) A classic value play, Pfizer has been weighed down by the healthcare reform debate, which is why it’s lagged the market with a 3.7% return. But with a 4.3% dividend yield and a 6 P/E, we’re comfortable betting that whatever legislation is ultimately passed, it won’t do much to derail the demographic freight train pushing demand for pharmaceuticals ever higher. Bottom line: Hold.Potash Corp. of Saskatchewan (POT) Let this be a lesson. The next time you see a leading company in a growing industry trading at a mere three times earnings, scoop that stock up ASAP no matter how scary the overall market may seem. Potash Corp. is up 66.1% since December. While we remain fertilizer fans, locking in some of those gains makes sense. Bottom line: Take profits.

Source:CNN