Today's Top Stories Also Noted: Spotlight On... Madoff trustee seeks millions from family News From the Fierce Network:
Today's Top News1. Banks ponder research changes from JOBS Act
We noted recently that the JOBS Act--the Jumpstart Our Business Startups Act--relaxed the rules that governed stock research authored by analysts who work for the bank underwriting an IPO. Typically, underwriters may not release research, which is invariably bullish, on these newly public companies until 40 days after the day the IPO was priced. It had been assumed that his new rule would supersede the rule laid in the global settlement of the tainted research stock scandal. That settlement was struck in 2003. Some portions of the bill expired in five years, so many thought the JOBS Act would take priority. As it turns out, it's not yet clear what the exact legal obligation is right now for banks, many of whom would like some regulatory guidance on the issue. For now, big banks seems to be operating under the assumption that old rules will still apply to them. So they are "said to be pressing regulatory bodies to level the playing field between themselves and smaller competitors. That could potentially include creating a new 'master agreement' for underwriters, said one person involved in the discussions. Altering the agreement would make it difficult for brokerages not bound by the global settlement to use the act's relaxation of the rules." It makes most sense for all underwriters, large and small, to tread carefully when it comes to research on companies they take public. It would be better not to run the risk of being perceived as publishing booster pieces disguised as research. For more: Related articles: Read more about: analysts, Stock Research 2. Wells Fargo number one in retail mortgage market
It's been suggested recently that Bank of America was withdrawing somewhat from the home mortgage market, amid lots of evidence that it simply wasn't as aggressive at the retail ground level as other banks, notably Wells Fargo. On that note, the recent report by Inside Mortgage Finance (noted by Reuters) that found that Wells Fargo accounted for a record 33.9 percent of U.S. mortgage loans in the first quarter was not surprising. Wells Fargo's loan volume more than tripled the 10.6 percent market share of the number player, JPMorgan Chase. U.S. Bancorp made a surprising jump, to third place from fifth. As for Bank of America, it was once the largest mortgage company by far by dint of its Countrywide purchase. But as of the first quarter, it remained mired in fourth place, even as its total volume fell by more than 25 percent to $16 billion from the fourth quarter. Citigroup came in fifth. You really have to like what Wells Fargo has done. The steep downturn in business over the last few years presented a golden opportunity for it to expand its footprint, as other banks continued to struggle with legacy issues. Now that we seem to be moving past the nadir, it has the infrastructure in place to really benefit from an upturn in business, which may still be a year or so away. For more: Related articles: Read more about: Wells Fargo, mortgages 3. Bank of America meeting: lots of drama in the making?
Bank of America's annual meeting is set for Wednesday, and the early indication is that it could be every bit as eventful as the Wells Fargo meeting. The usually quiet city of Charlotte expects up to 1,000 protesters and it has designated the meeting an extraordinary event, which means that people will face some restriction on what they can bring to the protests. While the big bank's stock has rallied this year, it is still well below its peak and it still trades at a significant discount to book value. So shareholders will have some basic concerns, but the bank will face a lot more than shareholders angry about their portfolios. The bank has become something of a lightning rod for a host of alleged corporate abuses by dint of its leading role in the financial crisis. This in some ways is unfair, but the bank--if only because of its name--has nevertheless become a big rallying point for protestors. They will press their case on a host of issues, not necessarily related to the on-going fallout from the mortgage crisis, political contributions, environmental issues, and the like. Of course nothing galvanizes protestors quite like a compensation plan that seems out over-the-top. Unlike Citigroup, Bank of America has not been targeted by influential proxy advisory groups. It will likely win the say-on-pay vote. So the board's got that going for it at least. We'll just have to see what kind of theater emerges from the confluence of protestors. For more: Related articles: Read more about: Bank of America, Annual Meetings 4. Dan Loeb has upper hand against Yahoo!
Dan Loeb, of Third Point, has long used letters to executives and directors as a way to gain publicity and make his views heard. As an activist investor, he's not afraid of getting dirty laundry into public air. He's now locked in a bitter showdown with the Yahoo! board. He's questioned the company's strategy and choice of new directors and is waging a proxy battle for board seats. He recently found an explosive weapon: A padded resume by the CEO and a board member. "Irreparable damage to Yahoo's culture will continue every day that the board allows Mr. (Scott) Thompson and Ms. (Patti) Hart to remain at the helm of the company after having clearly demonstrated that they lack even the 'minimum qualifications for service as a director of the company," Mr. Loeb wrote, in one his signature letters. "If there is a good explanation for the apparent discrepancies regarding the academic records of Mr. Thompson and Ms. Hart, we are confident that it will be provided promptly. However, in the event that there is no good explanation, we expect the Board to take immediate action." To be sure, he has raised the letter to the directors to a near art form. When he has a wedge as powerful as this, he's on really firm ground. This portends what could be a very memorable annual meeting. Loeb notes that the meeting has not yet been scheduled. The board will find it increasingly difficult to stick to its guns, and some sort of transition at the top and on the board may be in the offing. Will Carol Bartz be back? For more: Related articles:
Read more about: Hedge Funds, Dan Loeb 5. Dearth of volume driven by retail investors
The drop-off in trading volume in recent years has been huge news. Usually, the issue is couched in terms of high-frequency trading, which has accounted for up to half the volume at its zenith. But as the New York Times makes clear, the tail wagging the dog in some respects is the retail sector. One big-name high-frequency trader was quoted: "On a typical trade, two high-frequency trading firms will not trade against each other." If ordinary investors "don't want to trade, there's really simply nothing for us to do." You can't discount the impact of the wariness retail investors have shown. It's as if they believe the market is rigged against by the high-frequency trader set. That may not be fair, but perception is often reality. As of now, it's unclear if we're at a critical historical inflection point. "The decline stands in marked contrast to past economic recoveries, when Americans regained their taste for stock trading within two years of economic shocks in 1987 and 2001." The pullback as of now may last longer, as seniors decide to protect their nest eggs and as young people stream into other asset classes. My sense is that the recession has been profound, and it will take a while for the good times to roll again. Once it does, stocks will eventually regain their allure. As of now, we're a long way away from the next retail buying frenzy. For more: Related articles:
Read more about: volume, retail investors Also NotedSPOTLIGHT ON... Madoff trustee seeks millions from family Irving Picard is going after the Madoff family for more than $255 million, saying that family members who were involved in business with Bernard were "completely derelict" and should have known about the massive Ponzi scheme. The defendants in this suit are Madoff's brother Peter, who was the firm's chief compliance officer; son Andrew, who was co-director of trading; the estate of another son Mark, who was also co-director of trading and subsequently committed suicide, and niece Shana, also a compliance officer. The suit also includes the spouses of these family members and in once case an ex-spouse. We'll see if these new charges hold up in court. Article Company News: > Security Bank fails. Article Industry News: Regulatory News: And Finally…Fugitive couple caught after 12 years. Article
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Tuesday, May 8, 2012
| 05.08.12 | Banks ponder research changes from JOBS Act
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