With our investment news briefs, Money Morning provides investors with a quick overview of the most important investing news stories from all around the world.
U.S. Government to Hold Hearings on Futures Trading; Boeing to Acquire 787 Fuselage Maker; Job Losses Contribute to Rising Credit Delinquencies; Ex-Goldman Sachs Worker May Have Stolen Crucial Code; Declining Southwest Traffic Prompts Deep Fare Discounts; GM Asks U.S. to Let It Drop Dealers, Parts Maker Files for Bankruptcy
Regulators will hold hearings this month and next to possibly limit the holdings of energy futures traders, including index and exchange-traded funds. The U.S. Commodity Futures Trading Commission (CFTC) will hold hearings in the next two months to consider the need for government-imposed restrictions on speculative trading in oil, gas and other energy markets, Chairman Gary Gensler said in a statement. "Our first hearing will focus on whether federal speculative limits should be set by the CFTC to all commodities of finite supply, in particular energy commodities such as crude oil, heating oil, natural gas, gasoline and other energy products," Gensler said in the statement. "This will include a careful review of the appropriateness of exemptions from these limits for various types of market participants." The CFTC did not give dates on when the hearings would be held or who would speak at them.
Boeing Co. (NYSE: BA) will acquire Vought Aircraft Industries, which makes the fuselage for Boeing's oft-delayed 787 Dreamliner as well as parts for other aircraft including the 747 and 737. Boeing will pay $580 million in cash and release Vought of its obligation to repay $422 million in cash advances for work on the 787, according to a report in The Wall Street Journal.The acquisition gives Boeing access to Vought's North Charleston, S.C. plant, marking the second time the aircraft maker has taken over a key part of the supply chain for the 787. "We take great pride knowing that we have been able to satisfy the technological and physical demands of the 787 program alongside much larger companies," said Elmer Doty, Vought president and CEO. Last June, Boeing acquired a separate Vought facility in South Carolina that does fuselage subassembly.
Rising unemployment is taking its toll on credit card delinquencies, which escalated to 6.6% in the first quarter, up from 5.5% in the fourth quarter, according to a American Bankers Association (ABA) report. More than a third of the 6 million jobs lost since the recession began in December 2007 occurred in the first quarter of this year, the ABA said. Late payments on home equity loans increased from 3% to 3.5%. "The number one driver of delinquencies is job loss," said ABA chief economist James Chessen. "When people lose their jobs, they can't pay their bills. Delinquencies won't improve until companies start hiring again and we see a significant economic turnaround."
Goldman Sachs Groups Inc. (NYSE: GS) is facing the loss of a proprietary trading code and millions of dollars from increased competition if software stolen by a former employee falls into the wrong hands, a prosecutor said in a Bloomberg News report. An ex-computer programmer for the bank, Sergey Aleynikov, was arrested last Friday after arriving at Liberty International Airport in Newark, N.J., U.S. officials said. Aleynikov transferred the multi-million dollar code to a server in Germany, where others may have had access to it, said Assistant U.S. Attorney Joseph Facciponti. "The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways," Facciponti said, according to a recording of the hearing made public. "The copy in Germany is still out there, and we at this time do not know who else has access to it." Aleynikov's attorney, Sabrina Shroff, said in court the government's allegations are "preposterous," adding that Goldman Sachs was aware that Aleynikov was downloading programs to his personal computer to work from home and did not disseminate the code. "Someone stealing that code is basically stealing the way that Goldman Sachs makes money in the equity marketplace," Larry Tabb, founder of market research firm TABB Group told Bloomberg.
Hot on the heels of the revelation that its June year-on-year traffic fell 2.1%, low-cost air carrier Southwest Airlines Co. (NYSE: LUV) offered an steep discount on faresfor flights between September 9 and November 18. For two days through today (Wednesday), the airline will charge $30 for flights 400 miles or less, including one of its newest legs between New York's LaGuardia Airport and Baltimore. For flights between 401 and 750 miles, Southwest is charging $60 and $90 for longer trips. As with many airline specials, there are restrictions such as limited seating and the deal will not apply to Friday or Sunday flights. Southwest shares closed down 1.82% yesterday (Tuesday), settling in at $6.48.
General Motors Corp. (OTC: GMGMQ) asked a federal bankruptcy court yesterday (Tuesday) for permission to drop 38 U.S. dealers who rejected GM's buyout offer, Reuters reported. The breakup between the automaker and its dealers would take effect this week if the court approves GM's request. Roughly 4,100 dealerships have signed agreements to continue with the new government-backed GM, which is expected to emerge from bankruptcy this week. In related auto news, parts and car seat maker Lear Corp. (NYSE: LEAR), which saw 25% of its revenue come from GM, has filed for Chapter 11 bankruptcy protection, The New York Times reports. The filing is the latest among auto part makers, with the last ones coming in May from Visteon Corp. (OTC: VSTN) and Metaldyne Corp.Lear last week obtained an additional $500 million in bankruptcy financing from JPMorgan Chase & Co. (NYSE: JPM) and Citigroup (NYSE: C), The Times reported.