Hell Freezes Over!
Well, not quite but it sure seems like it. After at least six years of trying, legislation was finally written, debated, passed and now signed by the President.You may not have heard much about this act before or since it was signed into law April 4, 2012
The STOCK act stands for Stop Trading On Congressional Knowledge. (We could debate if congressional knowledge is an oxymoron – let’s leave that for another day.)
The STOCK act “prohibits public servants, whether in the legislative or executive branch from trading stocks based on non-public ‘market moving’ information.” Thanks to several articles by The Wall Street Journal, and a November 2011 expose by 60 Minutes, the White House, members of Congress and their staffs now have to abide by insider trading laws that apply to you and me.
Even if loopholes are found (and should be closed) it’s nice to see those making the laws have to also comply with them. Now if we could just get Washington to do the same for Social Security, Income Tax payments, Health Care coverage, etc., etc., etc.
25 All-Stars in just one morning
You are up early; it’s a travel day for your business meetings with IBM staffers. You turn up the lights and get ready for your day. You remember to add to your Costco shopping list family size shampoo, shave cream and toothpaste (the kids like Crest).
You check your Google email on your IPad, which searches the internet using your wireless Cisco router. You pay your Verizon bill using your on line account at JPMorgan Chase. An email pops up telling you the new book you’ve been waiting for is now available through Amazon. A few clicks later you charge this to your American Express card, and the book will be shipped today via FedEx.
Since it’s a casual travel day, you throw on a Ralph Lauren Shirt and Blazer, with a pair of casual slacks you bought at Nordstrom’s and tie up those new Nike shoes. After a quick bowl of Cheerios and a muffin from Whole Foods, you head to the airport in your Honda Accord to catch your flight on Southwest.
You grab a tall latte at Starbucks after you’ve gone through security and begin work on your Office documents. Once you land, you grab a Big Mac and a Coke, pick up your rental Toyota Corolla, and check-in at the Marriott.
So far, it’s a pretty normal day for many of us. What you might not notice is that the 25 companies or products you’ve been using all share something in common. They are some of The 50 All- Stars of Fortune Magazine’s 2012 list of the World’s Most Admired Companies.
The top 10 All-Stars are: Apple, Google, Amazon, Coca Cola, IBM, FedEx, Berkshire Hathaway, Starbucks, Procter and Gamble and Southwest Airlines. The entire All-Star list is an impressive group.
It’s amazing how many of the All-Stars are part and parcel of our everyday lives, and perhaps are part of your portfolios as well. Please call if you’d like a copy of, or the link to, the Fortune magazine article.
No where to run, nowhere to hide.
One of the best Octobers for our markets gave way to a very rough opening in November.
If you’d like to put a name and a face on one reason for the most recent market swoon, look no further than New Jersey’s own Jon Corzine. He’s a former Goldman Sachs senior partner, US Senator and governor of New Jersey and most recently, the CEO of MF Global Holdings.
Boasting of his credentials and connections, Jon raised a lot of money and made huge bets. The markets do not care who you are, as Jon found out. After only 20 months as CEO, MF Global posted a quarterly loss of $192 million, and $6.3 billion in wrong way bets on the infamous European debt. Their $40 billion bankruptcy petition is on the scale of Chrysler’s.
The regulators are left to sort out this filing, and to find an estimated $600 million that is “missing” from customer accounts. The good news is that MF Global is not a bank, will not be bailed out by taxpayers, and has a new CEO. Jon had plenty of help in getting to this bankruptcy, and unlike most politicians, there is nowhere for him to hide. The bad news is that there is always another Jon Corzine waiting in the wings.
And in this corner
A couple of young up-starts battle it out in the ring to become the next “Champ.” Media hype is everywhere. Followers of each fighter are loud and passionate. The promoters are enjoying the attention and making side bets. I think of my father’s favorite boxers as he listened to the Friday night fights – guys like Tunney, Dempsey, Louis, Marciano, and Ali to name a few.
Well, we have a new style of Friday night fights. The Champ is the 219 year old New York Stock Exchange.
The Big Board, as it is affectionately known, is now a compilation by merger of the NYSE Group and Euronext – the European combined stock market.
The contenders for the title are DB and N/ICE.
DB – is the Deutsche Börse, AG that can trace its trading origins back to 1585! This exchange was formed through a series of mergers, the last in 1992. It’s a large and formidable challenger.
N/ICE is in the other corner. This contender promises the one-two punch of the NASDAQ, established in 1971, and ICE, the Intercontinental Exchange that began in the late 1990s as an exchange for trading energy commodities. They are fast, light and nimble.
The fight began February 15, 2011 with the announcement that Germany’s Deutsche Börse and NYSE had agreed to merge in an all stock deal. DB would have 60% ownership, NYSE, 40%. They would incorporate the merged company in Amsterdam, with the name of the merged exchanges still undecided. Estimated value of this merger is $9.64 billion.
The news hit the Street like a sucker punch – NYSE in the hands of a foreign exchange! Whaddya mean no NYSE? How could we lose an icon of American Capitalism?
The second punch was thrown by N/ICE – their offer comes in at $11.3 billion – offering cash and stock, and keeping “The Big Board” a US company.
The last round will begin on April 28th. That’s the date of the NYSE shareholder meeting to vote on the DB, or N/ICE merger offer.
This is a classic fight. Cigar smoke all but obscures the ring. I’m cheering for the underdog to win and keep the title- and the “Big Board” in the US.
A hard day at the Reserve
December 2010
A hard day at the Reserve
As Chairman of the Federal Reserve, Ben Bernanke seems to have no friends, hardly any backers and a hoard of analysts ready to dissect every word the poor guy speaks.
Ben has been discussing and debating policy with members of the Federal Open market Committee (FOMC) as they make key decisions about our interest rates and growth of our money supply and economy.
Recent criticism is based on this November’s announcement that the Fed would begin QE2- aka-Quantitative Easing – Round 2. This newest round is meant to compliment QE1 that began in the free fall days after Lehman Brothers collapse in September 2008.
In the first round of QE, the Fed announced it would buy up to $600 billion of direct obligations of Fannie Mae, Freddie Mac and the Federal Home Loan Banks, and mortgaged backed securities (MBS) backed by Fannie, Freddie, Ginnie Mae. Thankfully, QE1 worked in keeping our financial system from collapsing. (What to do about Fannie and Freddie is another huge issue)
According to the November 3, 2010 Federal Reserve’s press release, it notes that based on the slow pace of our economic recovery and “to help ensure that inflation, over time, is at levels consistent with its mandate (to foster maximum employment and price stability), the Committee decided today to expand its holdings of securities.”
The FOMC will be buying a “further $600 billion of longer –term Treasury securities by the end of June, 2011 or about $75 billion per month. Their goal is/was to lower interest rates.
Stay tuned as QE2 works its way through the bond and stock markets, the economy, pundits and politicians.
Happy Thanksgiving 2010
Our Wisconsin weather has finally turned colder – it feels and looks like November with our forecast of wind and rain and snow ushering in this Thanksgiving.
Take time to enjoy all of your blessings – we do have so many.
Take time to enjoy your families and friends – even if the gathering gets a bit hectic.
Take time to enjoy all the freedoms we have – and keep a place in your hearts and in your prayers for those service men and women and their families who will be worlds apart this Thanksgiving.
Take time to enjoy the health you are blessed with – even those aches and pains of everyday life.
From my family, to yours, our very best wishes for a Happy Thanksgiving filled with family, friends, love, and laughter. Safe travels to all!
