Get Rich Or Die Tryin

So, have you ever heard of H&H Imports, Inc?

 

No?  Well, you must not be one of the 3.8 million Twitter followers of rapper 50 Cent, who seems to have indulged himself in a little[1] market manipulation last weekend.  His tweets included statements like "You can double your money right now.  Just get what you can afford"[2].  A few others have been archived on Thisis50.com.

 

But don't take my word for it.  Here's the chart for HNHI:

 

Pretty much $0.05/share until January 10, the first trading day after the tweets went out.  That day, HNHI opened at $0.45 and closed at $0.39, with a volume of 8.9 million shares (about 10 times greater than normal).

 

For what it's worth, it doesn't appear that Curtis Jackson III[3] was indulging in a "pump & dump" scheme, mostly because he owns 30 million shares (12.9%) of the company and there are no SEC filings indicating that he attempted to sell during that time.  On the other hand, he's got a massive stack of warrants that are really only valuable to him if HNHI manages to get its stock price above - get this - $0.50 per share.

 

What's the world coming to, when you can't trust a rapper to give you useful investment advice?

 

[1]  For purposes of this article, "little" is defined as an estimated $8.7 million.

[2]  There were others.  They have been deleted.

[3]  That's 50 Cent's real name.

U.S. Import and Export Price Indexes News Release

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The latest U. S. Import and Export Price Indexes news release (http://www.bls.gov/news.release/pdf/ximpim.pdf) was issued today by the Bureau of Labor Statistics. Highlights are below.
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U.S. import prices rose 1.1 percent in December, after increasing 1.5 percent in November and 1.1 percent in October. Import prices advanced 4.8 percent in 2010. The price index for U.S. exports increased 0.7 percent in December and 6.5 percent over the past year.

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"When Johnny Comes Marching Home Again, Hurrah, Hurrah"

"He'll find Import and Export Prices then,

"Hurrah, Hurrah!

"Tim Geithner speaks and the Beige Book comes out

"The Treasury Budget will also come out

"And we'll all place trades as Johnny comes marching home"

 

That's a convoluted and musical way of letting you know what's due out today.  I'm in a mood.  What else can I say?

 

Import and Export Prices are, of course, an index that tracks the overall change in the cost to import products and the overall revenue received from exporting products.  If export prices rise faster than import prices, that can indicate a narrowing trade deficit.  To prime the pump, both import and export prices were up 1.5% in November.  Looking to December, the Bureau of Labor Statistics shows us that import prices rose 1.1% in December (for an overall 4.8% increase for the year) while export prices only increased 0.7% in the same month (but were up 6.5% for the year).  Drilling into some specifics:

• Fuel import prices were up 4.1% for December, 11.9% for the year.  This is paltry compared to 2009, which saw a 62.2% price increase.  Import petroleum prices were up 13.7%, but import natural gas prices were down 11.3%.
• Agricultural export prices were up 1.7% for December, taking advantage of those rising world food prices and further boosted by cotton prices (up 10.5%) and soybean prices (up 5.0%).  For the year agricultural export prices were up 20.2% (with cotton prices - up 107.0% - in the driver's seat)

Meanwhile, Secretary Geithner's speech is banging the drum about how China's refusal to allow the yuan to appreciate is bad[1].  "China still closely manages the level of its exchange rate and restricts the ability of capital to move in and out of the country.  These policies have the effect of keeping the Chinese currency substantially undervalued."  China[2], however, does not appear interested in being lectured on how to maintain a viable economy by the United States[3], and Geithner even noted that this is driven more by a desire to reduce the competitive advantage possessed by Chinese exporters.

 

The Beige Book and the Treasury Budget are due out a 2 PM.

 

[1] M'kay?

[2]  Which has both a trade and a budget surplus.

[3]  Which has neither a trade nor a budget surplus.

"Over There, Over There, Say A Prayer, Say A Prayer For Over There"

"For Metrics are coming,

"Metrics are coming,

"And they've been announced Over There."

 

Let's start with Italy, shall we?  Industrial Production figures were released about 7 AM EST for that first among PIIGS nations, and results are actually not terrible.  They recorded a 1.1% increase in production for November (up 120 bps from October, and beating expectations by 0.5%).  Now if they can just get the trains running on time[1].

 

Moving on, Great Britain reported their merchandise trade figures around 4:30 AM EST, showing a trade deficit of £8.74 billion in November (expanding by £150 million from October and missing expectations by £340 million).

 

Finally, the European Union reported Industrial Production figures for the EU as a whole. November wrapped up with a 1.2% increase, unchanged from October but beating expectations by 70 bps.

 

[1] *rimshot*

Despire Failure, Most Public Pensions Safe

Well, those of you who actually still have pensions will be gratified to know this.

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View this article on our website: Despite Failure, Most Public Pensions Safe

Despite Failure, Most Public Pensions Safe

Article published on January 12, 2011
By Paul O'Dowd

Pensioners and investment management professionals need not worry about retirement plans going bankrupt, experts say, despite a recent event that saw a municipal pension in Alabama go belly-up.

Most believe the undoing of the Prichard, Ala. pension was a one-time event, one that is not likely to be repeated elsewhere. In the case of Prichard, which is a small community near Mobile, pension executives knew of the impending failure, yet chose to let the system fail. It is no longer paying benefits to its retirees.

“I think this [pension failing] can be a one-off,” says Keith Brainard, research director for the National Association of State Retirement Administrators. “Everything I have seen about this tells me that the city saw the warnings and didn’t take action.”

Brainard, who has also worked at the Arizona State Retirement System as a manager of budgets and planning, says most pensions have enough assets to continue paying benefits for years. “For the ones that don’t, if they haven’t taken action yet, they likely will take action [soon],” he states. “Based on my information, I don’t expect [this occurrence] to catch fire.”

Despite Brainard’s confidence in the public pension industry, there are numerous states which are facing funding challenges. One of the most glaring is Illinois, where several state-wide pension plans have had to sell off securities in recent months to make pension benefits.

For example, as of last month, the $10.4 billion Illinois State Board of Investments had pulled nearly $500 million from its long-only asset classes to pay benefits – a case that distinctly illustrates managers being hurt by funding issues. The pension, which has taken out $80 million per month over the past six months, has seen its assets dip by 5% as it awaits a state Senate vote to approve a bond sale – a vote that would mean a $1 billion infusion if passed. Other state pensions would also benefit from that bond issue.

Municipalities in other states are feeling pension pain too, such as the town of Vallejo, Calif. The small city near San Francisco declared bankruptcy in 2008 and is now attempting to solve its shortcomings. According to a recent Bloomberg article, Vallejo is trying to deal with $195 million worth of unfunded pension obligations, its largest liability. The city is currently drawing up blueprints for its bankruptcy exit plan.

Despite such funding issues, public pensions usually have safety nets, however, to save pensions if problems do arise, says Ray Edmondson, CEO of the Florida Public Pension Trustees Association.

“If a [Floridian] city calls for a financial emergency, the state will take over, so the [retirees] are OK,” says Edmondson, adding there are strict laws on this issue to avoid pension failures. “And then there is [pension] insurance,” he adds

There are tens of thousands of public pensions in the U.S., he says, and the fact that so few have failed should lead one to a conclusion that this is not a trend.

“The pension plans are designed not to go bankrupt,” Edmondson states. “All we ask is that if the politicians negotiate benefits, that they then fund them.”

 

Schwab to Pay $119 Million in Yieldlus Settlement With Regulators

Just to put this fine in perspective, Charles Schwab's Q3 2010 net income was $335 million.  This fine represents about 35% of that income.

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Schwab to Pay $119 Million in YieldPlus Settlement With Regulators

Article published on January 11, 2011
By Beagan Wilcox Volz

Schwab has agreed to pay $119 million to settle with the SEC, Finra and Illinois regulators over misleading statements regarding its YieldPlus Fund.

The Securities and Exchange Commission also brought fraud charges on Tuesday against the firm’s former chief investment officer for fixed income and a current executive VP. That case continues.

The SEC claims the two executives failed to inform investors adequately about the risks of investing in the fund. While the fund was described as a cash alternative with only slightly higher risk than money market funds, it was actually much riskier than money funds, the SEC says in a press release.

Schwab expects to include an after tax charge of $97 million in its fourth quarter financial results related to the settlements, according to a statement from the firm.

Schwab neither admits nor denies the SEC’s findings.

“Schwab has acted in good faith by working with the SEC and FINRA to address their concerns as well as by resolving most client claims including entering into a substantial settlement of a federal class action lawsuit,” the firm states. “We are pleased that the bulk of associated payments will go directly to YieldPlus shareholders, further reducing the impact of the credit crisis on them.”

Indeed, private litigants nationwide that have sued Schwab over losses in YieldPlus will receive $200 million in a settlement with the firm; $35 million is allocated to California investors suing under state law.

The SEC also found that the fund deviated from its concentration policy without obtaining required shareholder approval. The fund invested about 50% of its assets in private-issuer mortgage-backed securities; its concentration limit was 25%, according to its policies, the SEC says.

Schwab had argued that it did not need shareholder approval to increase the fund’s investments in mortgage-backed securities.

The fund’s assets under management hit a peak of $13.5 billion in 2007, but declined to $1.8 billion during an eight-month period due to redemptions and declining asset values, according to the SEC.

While the fund’s net asset value fell, Kimon Daifotis, the firm’s former CIO for fixed income, and Randall Merk, executive VP and formerly president of Charles Schwab Investment Management, made misstatements and omissions regarding the fund during conference calls, in issued written materials, and through other communications with investors, the agency says.

“For example, in two conference calls, Daifotis made false and misleading statements that the fund was experiencing ‘very, very, very slight’ and ‘minimal’ investor redemptions,” the SEC release states. “In fact, Daifotis knew that YieldPlus had experienced more than $1.2 billion in redemptions during the two weeks prior to the calls, which caused YieldPlus to sell more than $2.1 billion of its securities.”

In addition, the agency also charged Schwab with failing to establish, maintain and enforce policies and procedures to prevent the misuse of material, nonpublic information.

"For example, they did not have specific policies and procedures governing redemptions by portfolio managers who advised Schwab funds of funds, and did not have appropriate information barriers concerning nonpublic and potentially material information about the fund,” the SEC says. “As a result, several Schwab-related funds and individuals were free to redeem their own investments in YieldPlus during the fund's decline."

As part of the settlement, Schwab must correct all concentration disclosures for YieldPlus and the Total Bond Market Fund. The firm must also retain an independent consultant to review and make recommendations about their policies and procedures to prevent the misuse of material, nonpublic information.

 

"It is an ancient ECB, And he stoppeth two of three."

The Dow was down 37.31, the NASDAQ was up 4.63, and the S&P 500 was down 1.75.  What happened?

 

Portugal.  Portugal happened.

 

Portugal is the current albatross around the neck of the marketplace.

 

The European Central Bank kicked off the decline in the European and American markets by purchasing E113 million worth of Portuguese sovereign debt.  European markets, already jittery about the prospect of a third nation being hurled off the cliffs by Disney nature documentary makers[1], reacted by diving downwards.  Despite recent Chinese assurance that they would continue to purchase PIIGS debt, nobody wants to be caught holding the bag on bonds from nations that will be consumed by rioting[2] as their economies continue to dwindle away to nothingness.

 

The G20, meanwhile, is calling for urgent action on the current food crisis.  And no, crisis is not too strong a word.  Food prices last month passed levels that caused international food riots in 2008, and there does not appear to be an end in sight.  Drought and wheat rust in Russia drove wheat futures up 47% in 2010, sugar and meat prices are at their highest levels in 20 years, US corn prices are up 50%, and US soybean prices are up 34%.  This is what is known as a bad thing.

 

There is no word, of course, about whether the G20 called for urgent action on the current food crisis during the thyme-roasted rack of lamb (with tomato, fennel and eggplant fondue) course, or if they waited for the pear torte with huckleberry sauce before expressing concern about food prices.

 

[1]  I.E., lemming-like.

[2]  I.E., forced to implement austerity measures.