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Boston Globe - TODAY American International Group releases third-quarter results. The insurance giant is expected to post a loss of 90 cents a share, compared with a $1.35-a-share profit last year.
Starbucks Corp. releases fourth-quarter financial results and is expected to earn 13 cents a share, down from 31 cents last year.
TOMORROW TJX Cos. reports third-quarter results. Last year, the Framingham retailer posted net income of 54 cents a share.
WEDNESDAY The House Financial Services Committee holds a hearing on mortgages.
Macy’s Inc. is expected to report a third-quarter loss of 19 cents a share, compared with year-ago net income of 10 cents a share.
THURSDAY The House Oversight and Government Reform Committee holds a hearing on regulation of hedge funds.
Boston Globe - On Day 2 of the fall auction season, a Russian masterpiece expected to sell for up to $3 million at auction did not find a buyer yesterday, further underscoring the impact of the global financial crisis on the art market.
Not one hand went up when "View of St. Petersburg" by Alexei Petrovich Bogoliubov was offered at Sotheby’s morning sale of important Russian works from the impressionist and modern periods.
Many other works sold at or below their presale estimates; others did not sell at all.
It was the second day of lackluster bidding at the annual fall art season. On Monday, Sotheby’s kicked off the season with masterpieces by Edgar Degas, Kazimir Malevich, and Edvard Munch that fetched impressive prices. But a high percentage also went unsold - 25 works did not sell while 45 did.
Boston Globe - Evergreen Solar Inc. got a shock when Lehman Brothers Holdings Inc. went bankrupt last month: The solar panel maker lost control of almost 31 million shares of its stock.
How that happened is the subject of a lawsuit the Marlborough company filed yesterday against Lehman and the defunct investment bank’s new owner, Barclays Capital. It also sheds light on the kinds of complex deals that had become common on Wall Street before the market meltdown.
Evergreen, when it needed to raise money in July to build a plant at the old Fort Devens site, arranged a $375 million bond deal with Lehman. But there was a catch. As part of the transaction, Evergreen had to lend Lehman 30.9 million shares of its own stock - so that hedge funds could borrow them and short them, or bet the stock would fall. That’s right: Evergreen had to provide its own shares for hedge funds to short.
Boston Globe - Hedge funds usually thrive when markets turn volatile. But even these fast-money investors are struggling to cope with the wild swings in the markets, raising concern that some may not survive.
Even before the Bush administration proposed its vast bailout for financial institutions, the hedge funds - those secretive, sometimes volatile investment vehicles for the rich - were on course for their worst year on record. The average fund is down nearly 5 percent so far this year.
One major hedge fund investor said he had started to buy Morgan Stanley at $23 on Wednesday, convinced the rumors of Morgan Stanley’s demise were unfounded. But as the stock began to plummet, he canceled his trade and watched with amazement as the stock sank to a low of $12 on Thursday.
Boston Globe - US Representative Barney Frank yesterday staked out the next battlefront in the economic crisis gripping the world: more regulation of hedge funds, investment banks, and other financial institutions.
Frank, who heads the House Financial Services Committee, blamed a lack of strict oversight for the failures of Wall Street investment banks such as Bear Stearns Cos. and Lehman Brothers Holdings Inc., as well as dozens of subprime mortgage companies. He said hedge fund investments in arcane securities based on those mortgages deepened the crisis, which has spread worldwide. In contrast, heavily regulated commercial banks escaped the crisis largely unscathed, Frank said.
"The cause of this problem was a lack of financial regulation in the industry," the Massachusetts Democrat said at a Newton City Hall press conference, one of two events he held in the Boston area yesterday. "If the regulated institutions had made loans, we would not be in the crisis we’re in."
Boston Globe - Hedge funds usually thrive when markets turn volatile. But even these fast-money investors are struggling to cope with the wild swings in the markets, raising concern that some may not survive.
Even before the Bush administration proposed its vast bailout for financial institutions, the hedge funds - those secretive, sometimes volatile investment vehicles for the rich - were on course for their worst year on record. The average fund is down nearly 5 percent so far this year.
One major hedge fund investor said he had started to buy Morgan Stanley at $23 on Wednesday, convinced the rumors of Morgan Stanley’s demise were unfounded. But as the stock began to plummet, he canceled his trade and watched with amazement as the stock sank to a low of $12 on Thursday.
Boston Globe - Morgan Stanley and Goldman Sachs are responding to the credit crisis with a system that uses the market’s view of their own creditworthiness as a basis for lending decisions, the Financial Times reported.
Wall Street’s second-largest investment bank Morgan Stanley is essentially tying its promise to provide financing to hedge fund clients to the price of credit insurance on its own debt, it said.
If the cost of the protection rises to a certain level, that would trigger a reduction in Morgan Stanley’s commitments to hedge funds, the quoted people familiar with the situation as saying.
The message is that "if our firm is in trouble, we would rather fund ourselves than fund you (hedge funds)," the paper quoted a brokerage executive with knowledge of the arrangements as saying.
Boston Globe - Massachusetts again has some of the best money managers in the world. But unless you’re a public employee or the parent of a Harvard student, you won’t benefit much from this tremendous talent.
Harvard University’s endowment, already the nation’s largest university endowment, earned 7 to 8 percent over the past year, a period when stock markets tanked and many investment professionals lost substantial sums. Harvard’s performance, first reported yesterday by The Wall Street Journal and confirmed by a financial industry source briefed on the school’s returns, puts it at the top of an elite group of institutional investors.
Financial firm Northern Trust col lects returns on 87 endowments and foundations but not Harvard. Nevertheless, the Cambridge university’s performance would put it "at the top of the class," said Northern Trust spokesman John O’Connell.
Boston Globe - A federal judge barred Samuel Israel, the convicted founder of hedge fund firm Bayou Group LLC, from entering a plea to bail jumping, saying his addiction to methadone may have impaired his judgment.
A US judge cited Bayou Group founder Samuel Israel’s methadone addiction and his ability to understand the proceedings.
Israel, who sought to plead guilty yesterday in US District Court in White Plains, N.Y., told US District Judge Kenneth Karas that his ability to understand the proceedings was "60 to 70 percent."
Prosecutors said the 49-year-old faked suicide and fled the day he was to begin a 20-year sentence for his conviction in a $400 million fraud.
"I have to be satisfied that you’re competent," Karas said, rejecting the plea to one count of failure to appear. "The fact that there is some doubt about that makes it imprudent to go forward today."
Boston Globe- Dozens of hedge funds and broker-dealers are scrambling to send reams of e-mails and trading records to regulators probing suspected stock price manipulation, several sources at hedge funds said.
The Securities and Exchange Commission recently sent subpoenas to more than 50 firms concerning trading in investment banks Bear Stearns, which was rescued in March, and Lehman Brothers Holdings Inc., whose shares have been hurt badly by rumors about its financial health, said four sources, who have seen the documents but were not authorized to speak about them publicly.
Among those receiving subpoenas were investment bank Goldman Sachs Group Inc. and prominent hedge fund firms SAC Capital Advisors LLC and Citadel Investment Group.
Boston Globe- The Securities and Exchange Commission yesterday said that it and other regulators would begin examining rumor-spreading intended to manipulate securities prices.
The timing of the announcement, made before the markets opened in Asia, was meant to warn broker-dealers, hedge funds, and investment advisers to quell any spreading of rumors before trading started today.
The SEC has been engaged in an internal debate over what kind of investigation to mount with respect to rumors. The turbulence in the markets last week, with rumors adding to concerns about fundamentals affecting commercial banks, investment banks, and the government-chartered enterprises Fannie Mae and Freddie Mac, sped the decision to begin the examination and make it public.
"Traders know there is false information in the market. They need to think twice if they are going to pass it on," said Lori Richards, an SEC official.
Boston Globe- Carl Icahn has hit the roughest patch of his hedge fund career.
His $7.9 billion in hedge funds fell 7 percent between October and April, the biggest peak-to-trough loss since the funds opened in November 2004, according to investors. That compares with an average annual return on his investments of 53 percent from 1996 to mid-2004.
Icahn has lost money on cellular-phone maker Motorola Inc., his biggest investment. The 72-year-old billionaire also failed to persuade executives at Yahoo Inc. and Biogen Idec Inc. to take his advice for boosting their stock.
While falling equity markets and the slowing economy are beyond Icahn’s command, the setbacks at Yahoo and Biogen Idec don’t bode well for his future as an activist shareholder, said Brett Barth, a partner at New York-based BBR Partners, which has invested $1 billion in hedge funds.