TOP STORIES:
Investors
pile on record debt to buy stocks at record highs - (www.cnbc.com) With stocks near all-time highs, investors are
taking on record levels of margin debt, something that could accelerate a
decline if the market turns south. Margin levels, or the amount borrowed to
purchase securities, climbed to a new record of $401 billion in September,
according to NYSE Euronext data released this week. The monthly increase of
4.78 percent was also the largest gain since January. The NYSE figures
represent the margin accounts of member firms. "Investors love going on
margin in a rising market environment, but when the market declines, it can be
extremely painful" says Paul Hickey, co-founder of Bespoke Investment
Group. "Don't forget that if you go on margin you also have to pay
interest on that loan, and some brokers charge pretty high rates, so you are
already starting in the hole."
Where
Does All That Food-Stamp Money Go? - (www.bloomberg.com)
Many Americans have their
doubts about food stamps -- the benefits are a burden on taxpayers, they breed
dependency and lack of controls encourages fraud, just to name a few of the
complaints. Too bad the federal government is acting as if there really is something
to hide in a program that helps more than 47 million people avoid hunger. Earlier
this week, a newspaper in South Dakota urged
an appeals court to force the U.S. Department of Agriculture to reveal
information on how much the government paid individual retailers when consumers
redeemed food stamps. The Argus Leader sought the data more than two years ago
under a Freedom of Information Act request. The government's arguments for
keeping the information under wraps are either weak, flawed or stupid. At least
the three judges on the Eighth Circuit Court of Appeals expressed a bit of skepticism when the
government made its case. Government lawyers offered three different rationales
for withholding the information. The first is circuitous: Food-stamp
transactions, and the data stream this generates, are transformed into
something confidential by the mere fact that the Agriculture Department gathers
the information. This makes no sense.
Oil’s
$5 Trillion Permian Boom Threatened by $70 Crude - (www.bloomberg.com) Bryan Sheffield, a third-generation oil
wildcatter in Texas’s Permian Basin, knows what he’ll do
if crude drops to $80 a barrel: shut down half his drilling rigs and go on a
takeover hunt for weaker rivals. Sheffield is among producers who’ve together
invested $150 billion in the Permian since 2010 seeking their piece of an oil
trove estimated to be worth as much as $5 trillion. As the money pours in,
risks are mounting of a bust as analysts including Marshall Adkins of Raymond
James & Associates Inc. forecast crude is heading down to $70 a barrel next
year, a price that would slow drilling in the most expensive U.S. shale
formation. While traditional wells have been drilled in the Permian since the
1920s, producers have become giddy over the potential of the region’s vast
overlapping layers of oil-soaked shale rock. Pioneer Natural Resources Co. (PXD) estimated
the remaining yield at the equivalent of 50 billion barrels, more than any
field on Earth except Saudi Arabia’s Ghawar. The varied geology,
though, makes it more costly to explore and develop.
Norway’s
Sovereign Wealth Fund Shuns Stocks on Reversal Bet - (www.bloomberg.com)
Norway’s sovereign wealth
fund, the world’s largest, warned that stock market gains may reverse as
Europe’s biggest equity investor said it won’t use new inflows to buy more
shares. “Our share in the stock market has been stable or falling even though
markets are rising, and that means in practice that we’re not using inflows to
buy stocks,” Yngve Slyngstad,
chief executive officer of Norges Bank Investment Management, said at a press conference
today in Oslo. The fund is preparing for a “correction” in stock prices, he
said. The warning follows a surge in stock values that added 7.6 percent to the
fund’s equity portfolio last quarter. The $810 billion Government Pension Fund
Global, the official name, returned 5 percent in the third quarter,
representing a 228 billion kroner ($39 billion) gain, it said today. Bond
investments climbed 0.3 percent and real estate holdings returned 4.1 percent,
it said.
Bank
Born Out of Black Death Struggles to Survive - (www.bloomberg.com) Siena, the medieval city renowned for its Palio
horse races, is home to the world’s oldest bank. Within its aging walls lies a
distinctly 21st century tale of devastation wrought by local politicians and
global financiers. Banca Monte dei Paschi di
Siena SpA, Italy’s third-largest lender, is struggling
to survive as it seeks to repay a second bailout or face nationalization. Its
downfall proved a boon to global investment banks. They offered merger and
investment advice to executives beholden to politicians that helped wipe out 93
percent of Monte Paschi’s value. Then they sold it complex derivatives that
hid, even worsened the losses. Efforts to rescue the 541-year-old lender have
cost Italian taxpayers 4.1 billion euros ($5.6 billion). The investment banks,
including Merrill Lynch & Co., JPMorgan Chase & Co. (JPM)and Deutsche Bank AG (DBK), earned more than
$200 million in fees from 2008 through 2011, filings and deal memos show.
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