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Finance NetNet


  Wednesday, 23 Sep 2015 | 8:53 AM ET

Former Bear CEO Cayne caught in bridge scandal

Posted By: Kate Kelly

As the financial crisis simmered, Bear Stearns Chief Executive Jimmy Cayne's love of bridge drew him away from the office at critical times. Eight years, a job departure and one whistleblower later, the cerebral card game is again causing him public headaches.

Late in August, two of Cayne's teammates on the competitive bridge circuit, Lotan Fisher and Ron Schwartz, were accused of cheating, casting doubt on the legitimacy of a key tournament victory.

A nasty fight has since erupted between the rival who made the allegations and the pair he is targeting. The 81-year-old Cayne, who fellow players say paid the accused players for their participation on his team, has offered to forfeit a long-sought championship title the group won if they are found culpable.

It's an unusually public contretemps in the sleepy world of bridge, a sport favored by sharp logicians that often resurrects images of grandmothers and great aunts and rarely makes headlines beyond the game's fan sites. Warren Buffett and Bill Gates are both avid players, but they don't frequent the competitive scene, where Cayne—who left his job at Bear Stearns just months before the firm's collapse in 2008—is among the biggest names.

And Cayne isn't the only sponsor to face allegations of teammate misconduct.

In recent weeks, four other prominent players have also been fingered as cheaters: No. 1 and No. 2 ranked players Fulvio Fantoni and Claudio Nunes, members of the Monaco team who have so far declined to comment on the accusations; and German team players Josef Piekarek and Alex Smirnov, who have admitted to "some ethical violations" and have dropped out of the upcoming Bermuda Bowl, a highly anticipated matchup that starts Saturday in Chennai, India.

Several bridge organizations are investigating the allegations against the six players, and the World Bridge Federation, the governing body of international competition, has threatened action against any proven cheaters.

Cayne himself does not stand accused of cheating, but the issues his two players now face have dealt at least a temporary strategic blow. That's because of the structure of top-ranked bridge teams, many of which are sponsored by a single, deep-pocketed player who hires other talent to participate in groups of six individuals.

Cayne can play on a team of four without Fisher or Schwartz, or replace them with one or more players in upcoming tournaments, say other players, but top teammates can prove elusive at this point in the bridge year, which starts in earnest during the summer, when new groups are often formed.

For their part, the top-ranked Monaco team players, Fantoni and Nunes, have said little publicly about their predicament.

"We will not comment on allegations at this time reserving our rights to reply in a more appropriate setting," reads a Sept. 14 post placed on the website fulviofantoni.com, which describes itself as Fantoni's official website. (Fantoni has not responded to a direct message posted on his site, and Nunes could not be reached.)

»Read more
  Monday, 21 Sep 2015 | 3:19 PM ET

Fed's window for 2015 rate hike is closing quickly

Posted By: Jeff Cox

The Federal Reserve may have missed its last, best chance to raise interest rates this year.

With the U.S. central bank passing last week on what was once supposed to be a lead-pipe cinch for a rate hike, the likelihood is rising that there may not be a move at all in 2015.

There are just two Federal Open Market Committee meetings left in the year, and both present problematic scenarios for action.

October lacks a scheduled post-meeting news conference, which Chair Janet Yellen uses once a quarter to explain rationale behind the FOMC's thinking both in its rate decisions and economic forecasts. Yellen has insisted that should the committee decide to act in October, it simply could schedule an impromptu news conference. Doing so, though, would tip the Fed's hand immediately and risk causing a market shock.

December is considered a likely scenario by many market participants, but that presents challenges as well. Market activity slows to a crawl around the holiday season, meaning that any jolt to the market, particularly the fixed income side, could be magnified.

In all, a year that was supposed to represent a return to normal, or at least steps in the that direction, is now turning into more of the same for the U.S. central bank.

»Read more
  Monday, 21 Sep 2015 | 11:32 AM ET

Bove: Don't fear the Fed for bank stocks

Posted By: Jeff Cox

Banks are likely to be the bellwether of how financial markets accept rising interest rates, so it's not surprising to see the sector take a hit as of late.

Investors bailed on the group last week as the market anticipated a Federal Reserve rate hike Thursday, only to see the U.S. central bank again back off a move. Banks were the worst-performing S&P 500 sector for the week, collectively losing about 2.5 percent.

Analyst Dick Bove thinks the selloff was a mistake.

"Right now the values in bank stocks are incredibly high," the vice president of equity research at Rafferty Capital Markets told clients in a note Monday. "Major commitment of funds to the sector makes sense."

»Read more
  Friday, 18 Sep 2015 | 1:55 PM ET

The Fed has to deal with its own zombie apocalypse

Posted By: Jeff Cox

The Federal Reserve is scared—of lots of things, some obvious, some not so much.

Thursday's Fed decision to delay yet again the long-awaited liftoff from zero rates gave rise to still more speculation about why the U.S. central bank seems so perpetually reticent to normalize monetary policy.

There are all the usual suspects, such as low inflation, weak wage gains despite strong job growth and China plus the rest of the emerging global economy.

One reason that hasn't gotten much attention is the need for the Fed to keep rates low both for government debt and the corporations that now have $12.5 trillion in debt.

Among the prime beneficiaries of zero interest rates have been low-rated companies that have been able to borrow money at rates often in the 5 to 6 percent range.

A move to higher rates, even a small one, could have outsized impacts on those bad balance sheet companies.That puts the Fed in a bit of a Faustian bargain with issuers and holders that has become hard to break.

»Read more
  Wednesday, 16 Sep 2015 | 12:26 PM ET

Here's why the Fed knows better than to hike now

Posted By: Jeff Cox

There's one very good reason the Federal Reserve won't vote to raise interest rates: History.

While many surveys of Wall Street experts—including one by CNBC—indicate a belief that the Federal Open Market Committee will vote Thursday in favor of a rate increase for the first time in more than nine years, futures traders are betting against it.

That alone, according to a Morgan Stanley analysis, will be enough for the Fed to wait at least one more month before liftoff.

Lessons learned in 1994 that reverberated into 1999 and 2004 will preclude a rate hike until the futures market prices one in, analysts Guneet Dhingra and Matthew Hornbach said in a note to clients.

"The Fed prefers to avoid delivering big surprises," they said.

»Read more
  Thursday, 17 Sep 2015 | 9:25 AM ET

When the Fed raises rates, here's what happens

Posted By: Jeff Cox

A rate hike will come and the bull market will stumble, bond yields will climb and the economy will slip into a recession.

This we know.

What we don't know is how long all of that will take and how long it will last.

For the economy specifically, history offers little guide about timing. A recession has come as quickly as 11 months after the first rate hike and as long as 86 months.

The Federal Reserve's aggressiveness in raising rates is often, though not always, a determinant in how the economy and financial assets respond. That's why officials at the U.S. central bank have stressed so vigorously that investors should not be focused on when it starts raising rates but rather the trajectory of how long it will take to normalize.

There are, indeed, multiple variables at play. In the end, however, market participants may find that all the rate-hike fuss may have been overdone.

"The first hike from the Fed since the global financial crisis will inevitably be interpreted by some as signaling the end of the era of 'cheap money,' " Julian Jessop, chief global economist at Capital Economics, said in a note to clients. "In contrast, we do not expect the gradual return of U.S. interest rates to more normal but still low levels to be the seismic shock that many seem to fear."

That's not to say there won't be effects, however. Here's a look at how some areas of the economy could react, based on historical trends:

»Read more
  Saturday, 12 Sep 2015 | 5:00 PM ET

More choose to leave the US rather than pay taxes

Posted By: Linda Dimyan

More Americans renounced their citizenship and terminated their long-term residency in the first three months of the year than ever before, courtesy of the crackdown in foreign tax rules.

The upsurge subsided some in the second quarter but has been ongoing since the Treasury Department and the Internal Revenue Service began aggressively enforcing tax rules for American expatriates. The crackdown on the Foreign Bank Account Report is fresh, though the law has been in existence since 1970. Under the law, U.S. taxpayers are required to file if they held one or more foreign accounts totaling more than $10,000 over the course of a year.

"Many people have been getting caught up on their U.S. tax filings and then renouncing," said Andrew Mitchel, an international tax lawyer who analyzes Treasury Department data.

For a U.S. citizen or resident alien, the rules for filing income, estate and gift tax returns and paying estimated taxes are generally the same whether one is in the country or abroad. A person's worldwide income is subject to U.S. income tax, regardless of where he or she resides.

The Foreign Account Tax Compliance Act is intended to ensure that the Internal Revenue Service obtains information on accounts held abroad by U.S. taxpayers at foreign financial institutions.

»Read more
  Friday, 11 Sep 2015 | 11:27 AM ET

Consumers may have just blocked a Sept rate hike

Posted By: Jeff Cox

If there was any doubt beforehand, a key economic number Friday finally may have taken September off the table for an interest rate hike.

Consumer sentiment tumbled in September, with a reading of 85.7 in the latest University of Michigan monthly survey.

While that number often garners a fair mount of attention on Wall Street and can move the market, it takes on added importance because of recent comments from New York Federal Reserve President William Dudley.

The influential Federal Open Market Committee member said on Aug. 26 that the confidence survey would play an important role in his thinking when the panel meets next Wednesday and Thursday. That statement came during a press briefing at which he said the case for a September rate hike has become "less compelling" in recent days.

"That loss of confidence feeds back into the real economy through lower spending, and that's what the Fed is very concerned about," said Jeff Rosenberg, chief investment strategist for fixed income at BlackRock, the $4.7 trillion asset manager. "That concern ... that's registered in market expectations that the Fed is unlikely to raise rates. I think the weak data has certainly taken down those probabilities, along with the uptick in financial market uncertainty."

»Read more
  Tuesday, 8 Sep 2015 | 2:20 PM ET

Bye-bye branches: Banking hits 'inflection point'

Posted By: Jeff Cox

The successful bank of the future will have fewer branches but better branding, with technological advancements getting priority over the traditional neighborhood touch, according to an analysis that sees an industry "inflection point" at hand.

Bank branches have been in a modest decline over the past several years, but an acceleration in the trend is one of the major changes that many experts see occurring in the future.

Amid shifting customer needs and demands to find new ways to make money as regulatory pressures increase, banks are adjusting their models toward improving the mobile experience and continuing customer service with less of a physical footprint.

Of the 12 largest banks in terms of branches, only two—Wells Fargo and U.S. Bancorp—are increasing branches. Expect the trend to continue, according to financial services firm Keefe, Bruyette & Woods.

Read More Bank branches slowly fading away in neighborhoods

"We believe that reducing the number of branches and reinvesting some of that savings in brand enhancement will be the winning retail bank strategy of the next 10 years," KBW analysts said in a report for clients.

Commercial bank branches edged lower in 2014 to 82,613 from 82,860 a year earlier, according to FDIC data. The number peaked at 83,663 in 2013.

»Read more
  Friday, 4 Sep 2015 | 11:47 AM ET

Fed closer to 'monetary Y2K,' but not there yet

Posted By: Jeff Cox

The last of the big economic data points is in. Now it's up to the Federal Reserve to start sending clear signals to the financial markets regarding its interest rate intentions at its meeting later this month.

Market confusion over the course of policy itself could be the Fed's biggest enemy at a time when markets are in flux and volatile. Investors are concerned over how and when the central bank will proceed amid a flurry of mixed signals.

"The heightened uncertainty about whether the Fed will go in September was not what the Fed was hoping for," Ryan Sweet, an economist at Moody's Analytics, said in a phone interview. "They've had September circled for some time. The plan was in late August to start signaling that they're going. The last thing they want to do is surprise markets. From a communication perspective, September is much more difficult than the Fed was hoping it would be."

Friday's nonfarm payrolls report showed the economy created 173,000 jobs in August, a number less than expected but likely to be revised substantially higher in the months ahead if historical trends hold. Other recent U.S. data points show an economy on the mend, though third-quarter gross domestic product appears to have slowed quite a bit.

Read MoreWhat's the real unemployment rate?

Sweet still thinks the Fed will lift off this month, but he makes way for the possibility that the uncertainty could lead to a further delay. Should the Federal Open Market Committee move on rates at the Sept. 16-17 meeting, he expects Chair Janet Yellen to signal a "one and done" approach that will see a single rate hike this year then no further moves until sometime in 2016.

»Read more

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