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STORIES:
Market Savior? Stocks Might Be 50% Lower Without Fed - (www.cnbc.com) A report from the Federal Reserve Bank of New
York suggests that the bulk of equity returns for more than a decade are due to
actions by the US central bank. Theoretically, the S&P
500 would be more than 50 percent lower—at the 600 level—if the bullish
price action preceding Fed announcements was excluded, the study showed. Posted
on the New York Fed’s web site
Wednesday, the study sought out to explain why equities receive such a high
premium over less risky assets such as bonds. What they found was that the Federal Reserve has had an outsized
impact on equities relative to other asset classes.
Here Comes the Catch in Home Equity Loans - (www.nytimes.com)
During the initial years of
home equity credit lines, borrowers must pay only interest. Borrowers can also
pay down principal if they wish, but many homeowners, short on cash, haven’t done
so. At Wells Fargo, for example, in the quarter ended March 31, some 44 percent
of the bank’s home equity borrowers paid only the minimum amount due. Being
required to pay only the interest on these loans has
made them easier for troubled borrowers to carry. But these easy terms are
about to get tougher. What’s known as the initial draw period for home equity
lines of credit is coming to an end for many borrowers. Soon, they will have to
pay principal as well. Ten days ago, the Office of the Comptroller of the Currency published some
frightening figures about the looming payments. In its spring 2012 “Semiannual
Risk Perspective,” it said that almost 60 percent of all home equity line
balances would start requiring payments of both principal and interest between
2014 and 2017.
JPMorgan Traders May Have Hidden Losses - (www.washingtonpost.com) JPMorgan Chase revealed Friday morning that its
traders may have hid the losses incurred from a multibillion-dollar trading
blunder by the bank’s chief investment office in London. The bank now estimates
that the “London Whale” trades dealt the bank a $5.8 billion blow in the year
to date — nearly three times the amount the firm had originally estimated. “Recently
discovered information raises questions about the integrity of the trader
marks, and suggests that certain individuals may have been seeking to avoid
showing the full amount of the losses being incurred in the portfolio during
the first quarter,” JPMorgan said in its most recent filing to the Securities
and Exchange Commission. The London Whale transactions were massive bets on
U.S. corporate bonds that went wrong. The trades were supposed to be a hedge
against risk, but their size and nature have raised the suspicion that the
traders involved were betting to make big profits.
Goldman Sachs and the $580million black hole - (www.nytimes.com) THE business deal from hell
began to crumble even before the Champagne corks were popped. The deal, the
$580 million sale of a highflying technology company, Dragon Systems, had just
been approved by its board and congratulations were being exchanged. But even
then, at that moment of celebration, there was a sense that something was
amiss. The chief executive of Dragon had received a congratulatory bottle from
the investment bankers representing the acquiring company, a Belgian competitor
called Lernout & Hauspie. But he hadn’t heard from Dragon’s own bankers at Goldman
Sachs. “I still have not received anything from Goldman,” the
executive wrote in an e-mail to the other bank. “Do they know something I
should know?” More than a decade later, that question is still reverberating in
a brutal legal battle between Goldman and the founders of Dragon Systems —
along with a host of other questions that go to the heart of how financial
giants like Goldman operate and what exactly they owe their clients.
Govt.
erects wall of secrecy for govt. while it erodes individual privacy - (www.capitalismwithoutfailure.com)
While individual privacy is
being eroded, government is erecting a wall of secrecy for itself: At the
same time that the government is enacting legislation to deprive every citizen
of privacy, the government has been erecting an enormous wall of secrecy to
protect government from prying eyes. The US government reflexively labels
everything that it does "classified" and "secret". This is
a radical reversal of how things are supposed to work: There is supposed to be
transparency for government; individuals are supposed to live in a sphere
of privacy. This basic tenet of democracy has been reversed.
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