Goldman Sachs Board Rejects Shareholder Demands on Pay Restrictions
No surprise this request from Goldman shareholders fell on deaf ears. This issue will only be settled in the courts. Goldman has a reputation of lavish compensation and that creates an environment that makes smart people who want to work hard and make oddles of cash. That could be the reason why the board didn’t want to do anything that could possible tarnish that image regardless of the the public opinion is off their compensation.
Wall Street Journal - Goldman Sachs Group Inc. said its board of directors rejected demands from shareholders that the investment bank investigate excessive compensation and take steps to recoup some awards given to executives.
The company reported in a filing with the Securities and Exchange Commission that it received several letters from shareholders asking for the firm to revamp the way it pays out salaries, benefits and compensation. Goldman’s board “rejected the demands,” according to the filing.
Popularity: 1%
Bankruptcy Bloodbath May Hit Municipal Bond Owners Next
This is one of the great questions, will the U.S. federal government let the states default or will they bail them out? Investors are betting they will be made whole if the states default and if they aren’t, we will see a major backlash especially after the bailout of Fannie Mae and Freddie Mac. It will be interesting to see who is right in the end.
Public officials shouldn’t think about filing for Chapter 9 municipal bankruptcy to solve mounting labor costs and pension liabilities. Even talking about this action will invite an inquiry from Fitch Ratings, the company said in a report published Jan. 27.
Popularity: 1%
Morgan Stanley CEO John Mack declines bonus for third year in a row
It is refreshing to see a CEO that understands the unprecedented backstop put up by taxpayers to help a practically insolvent banking system. John Mack is to be congratulated for taking this action and hopefully it will send the right message and maybe we can get a more humbled Wall Street that appreciated the early Christmas we provided them. Happy Holidays John.
Morgan Stanley’s outgoing CEO John Mack has declined a bonus for the third year in a row.
In a memo sent to the investment bank’s employees on Friday, Mack said he recommended to the board last week that he receive no year-end bonus “given this unprecedented environment and the extraordinary financial support governments provided to our industry.”
Morgan Stanley was one of hundreds of U.S. banks that received assistance through the Troubled Asset Relief Program to help it manage through last fall’s credit crisis. Morgan Stanley repaid the $10 billion it owed the government in June.
Mack said financial firms cannot ignore the lessons of the market crisis, and called for the need for more regulatory reform, including efforts to better align executive compensation with long-term performance.
Mack will step down as CEO on Jan. 1, but will remain at the company as chairman. He is being succeeded by co-president James Gorman.’
Source: AP
Popularity: 1%
Fed Officials Said Low Rates May Fuel Speculation - Ya Think?
May? I would say that low interest rates for low or extended periods of time, always creates speculation. It is not because people are greedy but more they are “forced” to speculate on other and riskier asset classes that traditional government debt like Treasuries. Many investors rely on fixed income investments because they need a guaranteed rate of return, like retirees, pensions funds and insurance companies.
When we keep rates artificially low, they are forced to invest in other assets even if they are fundamentally not sound investments, when enough money does this, you see prices rise even during a bad economics environment. Right now with 10% plus unemployment in the United States, I would say that is happening right now.
Federal Reserve officials said record-low interest rates might fuel “excessive” speculation in financial markets and possibly dislodge expectations for low inflation, according to minutes of their meeting released today.
“Members noted the possibility that some negative side effects might result from the maintenance of very low short-term interest rates for an extended period,” minutes of the Nov. 3-4 meeting said, “including the possibility that such a policy stance could lead to excessive risk-taking in financial markets or an unanchoring of inflation expectations.”
While policy makers agreed that the chances of such effects were “relatively low, they would remain alert to these risks,” the minutes showed. Fed officials at their meeting indicated the benchmark lending rate would remain near zero “for an extended period” as long as inflation expectations are stable and unemployment fails to decline.
Source: Bloomberg
Popularity: 1%
Galleon Group winding down hedge funds after founder arrested for insider trading
After the bombshell dropped on the public and Galleon investors that the funds founder Raj Rajaratnam was allegedly involved in a insider trading operation that was helping generate attractive profits to many investors including some college endowments. Redemption requests were over 1/3rd of the hedge funds total capital at the time of this writing.
Mr. Rajaratnam has claimed his innocence and he plans to fight these charges in court and closing down the fund was needed so he could focus on this defense in a statement made in the press release.
Reuters, New York - Hedge fund firm Galleon Group said it is winding down its funds, less than a week after its founder was arrested and charged with running one of the biggest insider-trading schemes ever involving a hedge fund.
Popularity: 1%
Citigroup shares may be not worthless?
Well this may be correct, with the amount of losses Citi has written-off and the “assistance” Uncle Sam has extended to them, yes the shares may be have some real value. I still don’t agree with the bailout and the socializing the losses but it is done now so we have take a look at their value. Even Jim Cramer called it when it was at $3.75 per share that it was a “buy”. he laid out a case for the purchase of the shares and it pains me to agree with his assessment. They still have massive derivative exposure so if somehow those are triggered then they would be in serious trouble, unless we bailed them out again. Could happen, seriously.
DISCLOSURE: I am not a financial advisor and this article or any articles in this website should not be taken as a recommendation to purchase this or any other securities. Please talk to a registered financial advisor before making any investment decisions.
Reuters, New York - Citigroup Inc is slowly regaining favor among institutional investors, a development that could help the U.S. government unload its 34 percent stake in the still-troubled bank. A series of bailouts has put taxpayers on the hook for tens of billions of dollars of potential losses, but left Citigroup with some of the strongest capital ratios in banking.
Popularity: 1%
Barrick Announces Plan to Eliminate Gold Hedges
This is pretty big news in my opinion. Barrick, being one of the world’s largest gold producers is now going “unhedged”. If you don’t know what that means then here is short little lesson to help you understand the depth is this article. Hedging works sort of like the futures market does for agriculture. Mining is a very capital intensive process and it literally takes years to bring new mines online. Mining producers need to lock in a price for the material they mine (in this case gold) so when they bring it to market, they get a price that is above the cost of production because of the lag time between digging it up and selling the finished product.
This is where the hedge comes in, they basically sell forward delivery commitments on the gold they are going to produce so they “lock” in the price. This work great when the price drops below the contract value but in Barrick’s case, it has hurt their profitability because they had hedges that were way below the market price of gold. Now that they are going “unhedged” and if they gold price continues at these levels, you should see more profits coming from this company among others with all things being equal. DISCLOSURE: I am not a financial advisor and this article or any articles in this website should not be taken as a recommendation to purchase this or any other securities. Please talk to a registered financial advisor before making any investment decisions.
News (MSN Money Central):
Barrick Gold Corporation announced today that it has entered into an agreement with a syndicate of underwriters, led by RBC Capital Markets, Morgan Stanley & Co. Incorporated, J.P. Morgan Securities Inc. and Scotia Capital Inc., for a bought deal public offering for gross proceeds of approximately $3.0 billion representing 81.2 million common shares of Barrick at a price of $36.95 per share.
Popularity: 1%