Today's Top Stories Also Noted: Spotlight On... Hedge fund start ups rebound News From the Fierce Network:
Today's Top News1. Remediation consultants become targets of investigation
One major goal of last month's sweeping settlement of flawed mortgage and foreclosure charges by big banks was to correct the untenable situation of independent reviews by third-party companies of individual mortgages. The process was taking too long and costing banks outrageously, about $2 billion. Those reviews were mandated by another settlement struck the previous April. DealBook reports that, "Critics concede that regulators have little choice but to hire outsiders for certain responsibilities after they find problems at the banks. The government does not have the resources to ensure that banks follow the rules. Still, consultants like Deloitte & Touche and the Promontory Financial Group can add to regulators' headaches, the government documents and interviews indicate. Some banks that work with consultants continue to run afoul of the law. At other times, consultants underestimate the extent of the misdeeds or facilitate them, preventing regulators from holding institutions accountable." But it will be hard to break the grip of the remediation industry. The government can't ensure compliance and processes with companies that settle charges simply because the resources aren't there. So at some point, third party review companies become necessary. Of course, they have every incentive to milk to the situation for as much money as possible. We may see some charges brought against some of these consulting firms, as the issue turns into a political hot potato. For more: Related articles:
Read more about: settlements, mortgages
2. Higher yield products aimed at individuals souring fast
There once was a day when people could grow old and live comfortably off of their savings. Recall just how high interest rates were back in the 1980s. The long slow bull market in bonds since then has unfortunately wreaked havoc with the savings of all people, not just seniors, as the hunt for yield has led to lots of quacks and fraud artists marketing dubious products. "Tens of thousands of them put money into speculative bets promoted by aggressive financial advisers. The investments include private loans to young companies like television production firms and shares in bundles of commercial real estate properties," notes The New York Times. "Those alternative investments have now had time to go sour in big numbers, state and federal securities regulators say, and are making up a majority of complaints and prosecutions." The state of Massachusetts recently fined LPL Financial $2.5 million for various practices regarding the sale of non-trading REITs. Elsewhere, regulators have noted a spike in cases regarding alternative investments offering stunning high yields being marketed to Mom-and-Pop investors. This is quite similar to the lunge by big institutional investors for higher-yielding fare that prompted so many to embrace risky CDOs and the like. In the end, every sector fell victim to the stunning bull market in fixed income that had such a profound effect on the investing landscape. It certainly highlights the strong demand for sound wealth management services at the retail level. Investing for the future has rarely been as challenging as it is now. For more: Read more about: bonds, High Yield 3. Debate over fairness of Dell valuation
For Michael Dell, the writing is on the wall. His effort to take his computer company private, the one he famously founded in his dorm room in college, will not occur without opposition. A big debate has already broken out about whether the $24.4 billion deal ($13.65 a share) is fair to shareholders not named Michael Dell. Much of the news surrounded Southeastern Asset Management, the largest outside shareholders, which has indicated it will fight the deal. But others seem to be willing to join the cause. CRN quoted on portfolio manager who said, "I'm fed up about the offer. I thought the [rumored] price [of up to $16 per share] going into Friday was good. I've been a long-term shareholder and I'm tired of these management 'buy-unders' crammed down shareholders' throats...It's really just a transfer of value from shareholders to Dell and Silver Lake. It's a self-dealing offer." Self-dealing! Such rhetoric is common in these sorts of transaction. Still, the urgency is palpable. At least two law firms are already girding to file class-action suits. So is the offer from management fair? Wells Fargo analyst Maynard Um recently put fair value of a Dell leveraged buyout at roughly $15 per share, nearly 10% higher than the actual deal. "We believe this would be a fair deal for equity shareholders given the continued lackluster stock performance and few, if any, near-term catalysts to realize a comparable price," Um wrote to clients, as noted by TheStreet.com. And Raymond James analyst Brian Alexander has noted to clients that "an offer price in the $14-$16 range would be reasonable, based on his math." All that said, it's unlikely that a higher offer will materialize in the 45-day go-shop period. This ultimately may end up as a courtroom drama instead of a bidding war. For more: Related articles:
Read more about: lbo, Dell 4. Goldman Sachs targeted by hacker group
The "hacktivist" group Anonymous has declared war on Goldman Sachs, a potent symbol of capitalism to be sure. Specifically, the group says it will launch an online on February 14. As noted by the International Business Times, "Anonymous released several e-flyers in several languages from its various Twitter accounts. All the e-flyers say the attack will involve three steps: First, Anonymous is encouraging supporters to report the Goldman Sachs Facebook and Twitter accounts as spam. Then, the flyer provides a URL where users can fill out an abuse form on Twitter (you can do the same on Facebook), reporting Goldman Sachs for Twitter malfeasance. In the final step, Anonymous followers are asked to make 'friendly' phone calls to Goldman Sachs' offices in London, Paris or Dublin, depending on which flyer they saw." These sorts of threats are always a bit nebulous. There have been times when similar declarations against financial companies were publicized and then ostensibly retracted. But it's also fair to say that this isn't the first time that a hacker group has tangled with Goldman Sachs. In 2011, the group published personal information about CEO Lloyd Blankfein on the Internet as a protest. Anonymous seems to be stepping up its activity. Not too long ago, the Fed was targeted in an attack that exposed information about various bankers. If its social media operations were impaired, it would not be the end of the world. Still, Goldman Sachs is no doubt taking this threat seriously. For more: Related articles: Read more about: Goldman Sachs, Hackers 5. Greenlight Capital offensive might expand to other tech companies
What's behind Greenlight Capital's aggressive stance on Apple and the board's ability to create alternative classes of preferred shares? It may owe just a bit to the somewhat surprising low returns the fund generated in 2012. The Financial Times notes that Greenlight limited partners earned 7.9 percent in 2012, well below its average annual return of 19.4 per cent, after fees and expenses since David Einhorn founded the company in 1996. It reports that, "Mr. Einhorn's response to the setback was typical for a man who last year reacted to a stinging £7.2m fine for market abuse by the UK's Financial Services Authority by holding a press conference to castigate the authorities over the case he had just settled: He attacked." Einhorn is certainly accustomed to staking out controversial positions and doing what he can to publicize them. In this case, he could be laying the groundwork for similarly aggressive attacks on other cash-rich technology companies. If he succeeds in getting his preferred shares, why wouldn't he seek such shares at other companies that fit the profile? Microsoft comes to mind. That said, investors aren't necessarily applauding his every move in this area, and proxy advisory firm ISS has come out in support of Apple's attempts to modify its charter to make it less likely that it will issue preferred shares without first seeking common shareholders' approval. CalPERS also supports the company on this issue. "Moreover, should the board decide at some future date that an issuance such as Greenlight has proposed makes sense, and can demonstrate the benefit to shareholders, obtaining the requisite shareholder support to reinstate the provision is not likely to be an insurmountable obstacle," ISS said in a research note, as noted by Reuters. For more: Related articles: Read more about: Apple, preferred shares Also NotedSPOTLIGHT ON... Hedge fund start ups rebound Last year proved to be banner year for hedge fund launches, according to Absolute Return, It notes that 71 new funds were launched in 2012, the highest total since 2007, when 81 funds were launched. The funds launched with nearly $25 billion in AUM, compared with $31 billion in 2007. Two new funds launched with more than $1 billion right out of the gate. The launches coincided with a generally tough market climate for hedge funds, making the totals all the more impressive. Article Company News:
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Tuesday, February 12, 2013
| 02.12.13 | Goldman Sachs targeted by hacker group
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