Archives for March 2010

March 2010 - Page 10 of 11 - Money Morning - Only the News You Can Profit From

Did Hedge Funds Conspire to Devalue the Euro?

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The Department of Justice is investigating whether several prominent hedge funds conspired to drive down the value of the euro as the Greek debt crisis left the currency vulnerable to sophisticated trading methods employing credit default swaps and other derivatives.

Likewise, the European Commission yesterday (Wednesday) said it would examine trades in sovereign credit-default swaps (CDS) related to the Greek crisis, which has driven the euro lower and prompted officials to warn hedge funds against trying to profit from the region's debt crisis.

The Justice Department's antitrust division "has opened an investigation into agreements among various hedge funds that trade euro contracts," including contracts to trade euros in the "cash or the derivatives market," a person familiar with the letter told The Wall Street Journal.

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Hot Stocks: GM's Robert Lutz to Retire

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General Motors Co.'s "Maximum Bob" has apparently reached his vanishing point.

General Motors Vice Chairman Robert A. "Bob" Lutz will retire from the embattled carmaker effective May 1, the executive confirmed yesterday (Wednesday). Lutz had been serving as a senior adviser to Edward E. "Ed" Whitacre Jr., GM's chairman and chief executive officer.

The move comes just one day after GM announced another shake-up in the North American unit that's supposed to be heading the company's overhaul.

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Australia Increases Rates, Canada Stays Steady as Both Cast Wary Eyes Toward Inflation

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Canada and Australia, two resource-rich nations that are recovering quickly from the global recession, yesterday (Tuesday) reaffirmed interest rate policies as both promised to remain vigilant about rising inflation.

The Reserve Bank of Australia (RBA) raised its cash rate target by a quarter of a percentage point to 4.00%, while the Bank of Canada (BOC) kept its benchmark interest rate at record lows. Both central banks said inflation and economic output have been higher than policymakers expected.

The target rate for overnight loans between commercial banks in Canada will remain at 0.25%, the same level it's been since April 2009, exactly in line with predictions by 22 economists surveyed by Bloomberg News. The central bank also repeated a pledge to leave it unchanged through June unless the current inflation outlook shifts.

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Prudential-AIG Deal Another Case of Corporate Empire Building

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To inattentive observers, the recent announcement that the British insurance company Prudential PLC (NYSE ADR: PUK) would pay $35.5 billion for American International Group Inc.'s (NYSE: AIG) Asian insurance operation, AIA, might seem like just another belated expansion of the old British Empire – a strange contrast to the sale of the premier British chocolate company Cadbury PLC (NYSE ADR: CBY) to Kraft Foods Inc. (NYSE: KFT) last month.

Yet in reality both deals are examples of Empire-building that for shareholders is much more dangerous than the benign British variety – Empire-building by corporate management that runs contrary to capitalist ideals.

To read more about why the Prudential-AIG deal contradicts capitalism, click here...

Brazil's Stock Market is Heating Up at Just the Right Time

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With risk mounting in other places around the world, Brazil's stock market is heating up at just the right time. The country's benchmark Bovespa Index has risen for four straight days since hitting its cheapest level since May last week.

What's more is that Brazil's stocks are poised to surge even further as its economy storms back from recession and investment firms rush to cash in on the country's upside.

"The investment environment is probably the best in 20 years," Geoffrey David Cleaver, who manages a $500 million private equity infrastructure fund at the Sao Paulo unit of Banco Santander SA (NYSE ADR: STD), said last week at an event in New York.

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Senate's Proposal Calls for Fed to Increase Its Role in Consumer Protection

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The Senate's journey to agreement on a financial reform bill could lead to consumer protection responsibilities remaining in the hands of the Federal Reserve.

After much back-and-forth among senators, Senate Banking Committee Chairman Christopher Dodd (D-CT) is proposing a consumer protection unit that will be housed in the Fed. Sen. Bob Corker, R-TN, offered the idea as an alternative to Dodd's earlier proposal of creating a consumer protection division in the Treasury Department.

Dodd's revision aims to appeal more to Republicans than earlier proposals, in hopes the Senate can move forward with U.S. financial regulation overhaul. The proposal is expected to scale back the measures approved by the House of Representatives in December 2009.

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Can Democrats Dislodge the Debate Over Healthcare Reform?

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If U.S. President Barack Obama goes ahead with a plan to have Democrats invoke a parliamentary gambit known as "reconciliation" to pass healthcare reform, a little known provision in the budget cycle ensures that Washington politicians will get to the endgame in less than 60 days.

One of the peculiarities of reconciliation is that it is a creation of the 1974 Budget Act and is linked to the annual budget cycle in Congress. It has been used to pass more than 22 tax cuts and deficit reductions over the years.

But the Budget Act specifies that Congress must complete action on its budget resolution by April 15 of each year. Once the budget resolution conference report is adopted by both the House of Representatives and the Senate, its terms govern the remainder of the budget process for that year – meaning no further spending measures can be introduced, including healthcare reform.

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Prudential Takes Control of Asian Insurance Market With Purchase of Foreign AIG Unit

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London-based Prudential PLC (NYSE ADR: PUK) showed its confidence in Asian market profitability by agreeing to buy American International Group Inc.'s (NYSE: AIG) Asian insurance-unit – AIA Group Ltd.

The news follows AIG'S announcement Friday that it lost $8.9 billion last quarter and would continue to divest assets to repay its billions in debt. AIG was planning on an initial public offering for AIA Group in Hong Kong, but recognized a sale to Prudential as a better deal.

Showcasing its bullish outlook, Prudential will pay $35.5 billion for AIA – $25 billion in cash and $10.5 billion in stock and other securities. The company plans to raise $20 billion in a rights offering and sell $5 billion in bonds to finance the deal's cash portion.

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Bulls Vs. Bears: Who's Winning Wall Street's Biggest Battle?

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Two big economic reports dampened the mood on Wall Street in the past week: The Standard & Poor's/Case-Shiller Home Price Index and the Conference Board's Consumer Confidence Index.

But despite what the bears would have you believe, several strong companies have shrugged such data aside and broken through to new highs. In fact, long-term, we continue to see evidence that a robust business-led recovery is underway.

To find out what companies are leading a new bull market click here...

How to Profit from the Next Spike in Oil Prices

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Earlier this week, British company Desire PLC (Pink Sheets: DSPMF) began drilling in an offshore block of the Falkland Islands. Immediately, Argentina President Cristina Fernandez de Kirchner let loose with a howl of rage, and the Summit of Latin American and Caribbean Unity issued a protest against the British company's drilling operations.

Argentina's claim to the Falklands had remained dormant since the war 28 years ago, yet the moment the drill bit touched seabed the years rolled away. This showed yet again that oil remains salient to international politics and the world economy in a way shared by no other commodity. So how should investors play it?

For the best ways to profit from rising oil prices, read on…

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