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A test program to change the way small-company stocks are traded could slow high-frequency action, though some market participants worry that the initial steps are too tepid.
The Securities and Exchange Commission announced the proposal Tuesday in which 1,200 small-cap firms will be divided into three equal-sized groups with different standards governing each. (Read the whole report here.)
One group—the "control"—essentially would trade the same as before; the second would see stock prices quoted in 5-cent increments, as opposed to the penny increments currently used; and the third also would trade in 5-cent increments but also would follow a "trade-at" requirement in which trading centers couldn't match prices unless they display the best bid or offer.
Ostensibly, the program's goal is to "enhance market quality for smaller capitalization stocks for the benefit of investors and issuers," according to the SEC. More practically, the changes are aimed at thwarting high-frequency traders who have used the lightly traded small-caps to skim profits by getting lower prices on purchase and higher prices on sales than their slower competitors.
Wall Street firm Jefferies is providing major backing to a former senior SAC Capital Advisors executive despite its own struggle with insider trading at an internal hedge fund.
On Friday, public conglomerate Leucadia National Corp., which bought $43 billion New York-based investment bank Jefferies in November 2012, announced plans to invest $400 million in Folger Hill Asset Management and that CEO Richard Handler and President Brian Friedman would join the new hedge fund's board of managers.
Set for launch in early 2015, Folger Hill is led by Sol Kumin, who was chief operating officer of Steve Cohen's SAC from 2008 to January 2014. Kumin, who helped develop the firm's international offices and recruit its many traders, was never accused of wrongdoing during his tenure at SAC since 2005. But the firm pleaded guilty last year to criminal insider trading, and eight employees were convicted or pleaded guilty to similar charges. SAC is now a family office for billionaire Cohen and renamed to Point72 Asset Management.
Jefferies made the Folger Hill investment despite one high profile brush with insider trading. The co-portfolio manager of an internal hedge fund, Joseph Contorinis, is serving a six-year federal prison term in West Virginia for making millions of dollars based on nonpublic information about supermarket company Albertsons leaked to him by a UBS banker in 2005 and 2006. He was found guilty in 2010.
The Jefferies Paragon Fund was co-managed with Contorinis by then-CEO Handler's brother Michael, who was never accused of wrongdoing. Michael Handler had been an SAC portfolio manager before joining Jefferies. The then-$70 million Paragon fund was liquidated in June 2007 and Michael Handler is now in public service as the director of administration for the city of Stamford, Conn.
Hedge funds that bet on corporate shake-ups have been the industry's darlings.
The average "event driven" fund clocked in gains virtually every month for the past year and investors poured in tens of billions of dollars into money managers who promised continued profits. A subset, so-called activist managers who actively push for change versus just predict it—like Bill Ackman of Pershing Square Capital Management and Nelson Peltz of Trian Fund Management—produced large gains for investors by practicing their signature public battles with management teams.
Then came July, when U.S. equity markets gave back some of their gains. The average event driven manager lost 0.85 percent for the month, the worst performing hedge fund strategy measured by data provider Preqin. It was also the first monthly loss for event driven strategies since August 2013.
Dan Loeb's Third Point Offshore fund fell 1.2 percent in July, likely on losses in public portfolio holdings like Sotheby's and AIG. John Paulson's Paulson Advantage lost 4.49 percent for the month in part because of positions in companies that had just reorganized and the health-care industry, according to a letter to investors. And Mick McGuire's Marcato International dropped 2.4 percent because of losses in public positions in NCR Corp. and Life Time Fitness, according to a person familiar with the situation.
But investors are far from panicked and continue to believe in a strong environment for profiting off company mergers, reorganizations and other moves.
Wall Street banks may appear to be offering higher salaries to junior employees, but the increase may not be as generous as it looks.
However, banking analyst Dick Bove said there actually may be less than meets the eye to the news, at least in terms of how much big Wall Street financial institutions actually will be spending on employee compensation.
"What they may actually be doing is shifting long-term compensation awards to salaries. Immediate payments may be rising while bonuses and deferred stock awards go down," Bove, the vice president of equity research at Rafferty Capital Markets, said in a note to clients. "Thus, overall compensation may not be changing at all."
Investors may be warming up to the stock market, but they're taking the safe way in.
Passively managed funds are all the rage now, with market participants enjoying their low cost, high liquidity and tax advantages.
No outfit has benefited more from that approach than Jack Bogle's Vanguard Group, which has seen its total assets under management swell to nearly $3 trillion thanks to the allure of the firm's funds that track market indexes rather than make individual stock picks, according to a Wall Street Journal report.
That low-risk approach has gotten the imprimatur of none other than legendary investor Warren Buffett, who gave the firm his imprimatur a few months back. In his annual letter to shareholders, he advised them to follow the directions in his will, which mandates that his $66 billion fortune be divided with 10 percent in short-term government debt and the rest "in a very low-cost S&P 500 index fund. (I suggest Vanguard's.)."
Most Americans don't realize the stock market gained 30 percent last year, and only 1 in 9 call themselves savvy about investing, according to a recent survey.
Gallup found that 37 percent of those polled believe the market increased 10 percent in 2013, a year in which the S&P 500's total return was 32 percent. Just 7 percent recognized the 30 percent gain, and 9 percent thought stocks actually decreased.
Those results mesh with a general distrust of the market. Given the choice of what to do with an extra $10,000 in cash, 41 percent said they would put it in the market, but 36 percent opted for cash and 20 percent chose a near-zero yielding certificate of deposit.
The largest public pension in the country has quietly reduced its investment in one of the largest technology investment firms.
The California Public Employees' Retirement System sold about 30 percent of its stake in private equity firm Silver Lake last year, according to Fortune. CalPERS had invested about $275 million in 2008 for a 9.9 percent stake, according to press reports at the time. The investment was in the firm's management company, separate from its positions in Silver Lake's PE funds.
Part of the appeal of investing in hedge and other private funds is their inherent exclusivity.
If you've got money with one, it's shorthand for being rich and, in the eyes of the government, sophisticated enough to understand the added risks. In other words, private funds seem sexier to some than pedestrian investments like stocks and mutual funds.
But access to those funds may get much more exclusive.
The Securities and Exchange Commission is considering changing how a so-called accredited investor is defined. In doing so, it's facing pressure from outside groups to dramatically increase the minimum savings and income requirements to invest and adding other measures of financial sophistication, like being a chartered financial analyst or having an advanced business degree. If approved, the changes would slash the number of people who the government deems wealthy and sophisticated enough to invest in hedge, private equity, venture capital and other private funds and investments.
"The new rules could significantly reduce the number of accredited investors. That would narrow the amount of eligible U.S. investors for hedge funds and others," said Steve Nadel, a private funds-focused partner at the law firm Seward & Kissel.
Forget the headlines, forget the charts: Despite the loopy stock market behavior recently, investors are downright apathetic about the way things are going.
If you looked at the values of the S&P 500 over the past 30 days, little has changed. The stock market index opened at 1,976 on July 21; it opened just 5 points above that level Wednesday. In between, though, the market turned and churned.
During that period, the index hit a low of 1,909 on Aug. 7, and many market experts predicted this was the onset of the correction that just about everyone on Wall Street has been predicting this year, even though the decline was barely 3 percent.
It wasn't to be, however, as investors quickly took advantage of the slump and again pushed the market close to record territory.
All of the reaction has been reflected fairly well in the Chicago Board Options Exchange's Volatility Index, or VIX, which measures market fear as gauged by put (right to buy) and call (right to sell) options. The gauge actually has declined slightly over the past 30 days and is off 12.4 percent for the year.
Not so long ago, Russ Holton was married, making a six-figure income and looking at a promising career ahead.
Now, seven years later, he's divorced, interviewing for $12-an-hour jobs and trying to further his education and stay afloat in a jobs market that is creating in excess of 200,000 positions a month but few that provide an opportunity to live the life to which he had become accustomed.
"I'm not finding what I'm looking for," Holton, a 45-year-old resident of Mason, Ohio, said during a phone interview that provided a break during a day of job hunting. "I just interviewed for a job that pays $12 an hour. I felt really stupid. For 12 bucks an hour, that's not right.... It's a different world right now."
While it may be a different world, it's a familiar story.
Each month the Bureau of Labor Statistics reports the number of new nonfarm payroll positions created, and for the past year the average has been 209,000. That's not a spectacular number, but it is at least in line with historical trends and has contributed to bringing down the unemployment rate from 7.3 percent to 6.2 percent during the period.
Behind those numbers, though, has been a disconcerting brew of statistics—aside from the much-cited decline in labor force participation—that shows the jobs market is far from full health. Part-time jobs continue to grow almost as quickly as full-time positions, the average duration of unemployment is still about eight months and, perhaps most disturbingly, post-recession job creation remains skewed toward lower-wage positions.
CNBC's Patti Domm and Jeff Cox discuss the jobs report and the current dilemma of long-term unemployment.
CNBC's Patti Domm and Jeff Cox discuss the recent GDP numbers and what factors have been affecting it.
Investors give and investors take away, and nowhere has that been more true lately than in value stocks.
Bank of America asked a federal judge to throw out a verdict finding it liable for fraud over defective mortgages sold by its Countrywide unit.
An influential U.S. financial services industry group is downplaying concerns about possible breaches at JPMorgan Chase and other banks.
Since 1950, September is the worst performing month for the S&P 500 index.