Receivers would take control of three hedge funds run by prominent money manager Ezra Merkin and linked to the Madoff fraud, lawyers for New York’s top legal officer and Merkin said Tuesday.
The lawyers said in court they had reached an agreement in principal for one receiver to handle Ariel Fund Ltd and Gabriel Capital LP and a second receiver to control Ascot Partners LP as part of an effort to recover money for defrauded investors.
"We believe this resolution in principal will be in the public interest and serve the victims of the fraud," David Markowitz, an attorney for New York Attorney General Andrew Cuomo told State Supreme Court Justice Richard Lowe.
The judge gave Cuomo’s office and Merkin’s lawyers until May 28 to finalize the agreement, which comes after the attorney general sued Merkin for civil fraud in April, accusing him of steering $2.4 billion to confessed swindler Bernard Madoff and lying to investors.
Madoff, 71, a former nonexecutive chairman of Nasdaq, pleaded guilty in March to running a fraud of up to $65 billion, Wall Street’s biggest investment scheme. He is jailed awaiting sentencing on June 29 and he is likely to spend the rest of his life in prison.
Merkin’s lawyer, Andrew Levander, said in a written statement Tuesday that the fund founder was working closely with Cuomo’s office business cards.
"As part of his continuing efforts to maximize the returns to investors in the Funds, Mr. Merkin has agreed in principle to appoint Guidepost Partners LLC, a leader in global investigations, security, and compliance, as the receiver for the Funds while he remains available to consult regarding the wind-down at no cost to the Funds," the statement said.
When Cuomo sued Merkin, Levander said Merkin performed extensive due diligence on Madoff, but he too was misled just like other investors, which number as many as 7,000, according to court documents.
Merkin also has been sued for more than $500 million by a trustee appointed in Manhattan federal bankruptcy court who is winding down the brokerage arm of Bernard L. Madoff Investment Securities LLC. Merkin faces numerous lawsuits by investors.
The proposal to appoint receivers also needs to be reviewed by lawyers for New York University, one of the institutions that sued Merkin.
The cases are People v J. Ezra Merkin and Gabriel Capital Corp 450879/2009 and New York University v Gabriel Capital Corp, J. Ezra Merkin, et al 603803/2008 in New York State Supreme Court.
A 1957 Ferrari race car was sold at auction in Italy on Sunday for a record $12 million, according to the Italian automaker.
The sale of the 250 Testa Rossa - for 9.02 million euro - blew past the previous auction record scored by a 1961 Ferrari 250 GT, which sold last year for $9.6 million in current exchange rates. The identities of both the buyer and seller were not made public.
"Ferrari prices have absolutely defied gravity for the past few years," said McKeel Hagerty, CEO of Hagerty Insurance, a company that insures high-value collectable cars in Europe and North America.
Private sales of Ferraris have fetched such premium prices before, but this is a record for a public auction. "That is what makes this pretty remarkable. It is a pretty special sale," said Hagerty.
Ferrari, headquartered in Maranello, Italy, made only 22 of the 250 Testa Rossa racecars. The car sold at auction first hit the track at the 1958 Buenos Aires 1000 km, where it came in fourth place.
All 22 models of the Testa Rossa were entered in 19 international championships between 1958 and 1961 and won 10 victories, according to a release from auction house RM Auctions.
The auction for the race car lured bidders from across the globe.
"The historical significance of this car attracted a bidding war as collectors from around the world - both in the room and on the telephone - competed to secure one of the most alluring and iconic of all Ferrari racing cars," said Max Girardo, managing director of RM Europe, in a statement paydayloans.com.
Last year, the 1961 Ferrari California Spyder set the record for a price paid at auction.
Big-ticket auction sales are usually kept confidential. But last year’s Spyder sale was different because the car had been owned by actor James Coburn, who died in 2002, and was purchased by British television and radio personality Chris Evans.
The market for collectable cars has been dented by the recession, but buyers are willing to pay top dollar for rare race cars like the Testa Rossa.
"It is literally the Van Gogh or Picasso that someone wants to have over their mantle," said Hagerty.
The record-setting auction for the Italian luxury automobile comes in the middle of a global recession that has sent U.S. automakers into a tailspin, forcing them to adhere to strict restructuring plans.
Chrysler has had to shutter 789 dealerships, or roughly 25% of the current number, as part of its bankruptcy filing. On Friday, General Motors (GM, Fortune 500) said it would be terminating contracts with 1,100 of its 6,000 dealerships.
Chrysler was forced to file for bankruptcy and entered into an alliance with Italian automaker Fiat, which owns 85% of Ferrari.
Piero Ferrari owns 10% of Ferrari and Mubadala Development Company, based out of Abu Dhabi, the capital of the United Arab Emirates, owns another 5% of the company.
A key index of prices paid by consumers fell at the sharpest rate since August 1955 due to historically low energy prices, the government said Friday.
The Labor Department said the Consumer Price Index declined 0.7% on an annual basis in April, only the second year-over-year decline in nearly 54 years following March’s 0.4% drop.
On a monthly basis, consumer prices were unchanged, in line with the consensus estimate of economists surveyed by Briefing.com.
The overall index was affected by a sharp decline in energy prices, which fell 2.4% in April, and are down 25.2% on an annual basis.
Oil prices averaged about $50 a barrel in April, down 55% from an average of about $112 a barre in April of 2008.
"When oil prices go up to near $150 and then fall sharply, your going to have an impact on CPI," said Bob Brusca, an economist at FAO Economics in New York.
While oil prices have trended higher recently as investors respond to signs of economic stabilization, there’s no reason to think inflation will rebound anytime soon given the near-term outlook, Brusca said.
"There’s a lot of slack in the economy, and so there’s not much reason to fear inflation," he said.
Meanwhile, prices excluding food and energy, the so-called core CPI, rose 0 quick pay day loan.3% in April, after a 0.2% rise the month before. Economists were expecting a 0.2% gain. Core consumer prices were up 1.9% on an annual basis.
The increase in core CPI was due to a 9.3% rise in prices for tobacco and smoking products, which jumped 11% in March. Retailers have boosted tobacco prices in response to a federal tax hike that went into effect April 1.
Excluding tobacco prices, core inflation rose 0.2% in April, according to Aaron Smith, senior economist at Moody’s Economy.com.
"There has been some genuine acceleration in core prices and that should put to rest fears of near term tilt into deflation," Smith said.
Deflation, a widespread drop in prices, is a sign of economic weakness. Lowering prices is one way businesses can cope with falling demand. But if companies can’t earn a profit selling their products at lower prices, they could be forced to cut production or lay off workers, which speeds up the pace of economic deterioration.
At the same time, Smith said the weak economy will keep "disinflationary force" on CPI for at least another year, "since slack does indeed matter."
About $1 billion has been recovered to pay back the defrauded customers of swindler Bernard Madoff, but settlements in the coming weeks will boost the number significantly, the trustee winding down the Madoff firm said on Thursday.
Trustee Irving Picard told reporters on a conference call that he has filed lawsuits to recover $10.1 billion in assets from Wall Street’s biggest investment fraud.
"This is too soon to project or speculate" the final amount that can be recovered from a fraud of up to $65 billion, Picard said.
He added that "over the course of the next few weeks, if we get some settlements, the number will certainly go up significantly from the $1 billion level, but I would not want to get into specific numbers cheap payday loans."
Madoff, 71, was arrested in December and he pleaded guilty in March to operating a huge Ponzi scheme, in which early investors are paid with money from new clients.
He is jailed awaiting sentencing, which was postponed Thursday to June 29 from June 16, and he is likely to spend the rest of his life in prison.
How can you avoid losing your shirt in this market? By paying less for it.
Last fall Seph Skerritt, 28, began selling custom-tailored men’s dress shirts online for $90 apiece through his startup, Proper Cloth. "I didn’t expect the economy to tank in September," he says from his Manhattan studio. "But everybody still needs great business attire. You can get that here without declaring bankruptcy."
Skerritt started off small, selling about 300 of his bespoke shirts from October to March, mostly through word of mouth. But thanks to a recent infusion of cash - $300,000 in venture capital - he plans to scale up his advertising fast. He aims to sell 15,000 shirts this year, which would bring in more than $1.3 million in revenues.
Ryan Tseng, CEO of WiPower in Gainesville, Fla personal loan for poor credit., was tickled with his first Proper Cloth purchase: a blue-striped shirt with pink collar accents.
"It looks sweet," he says. "The fit is better than any other shirt I’ve owned, and I’ve been to several custom tailors."
So what could cramp Skerritt’s style? Dressing-room loyalists.
"This is a hard sell," says Rob Hitt, 31, founder of I Surrender Records in Brooklyn. "Every fabric is different; you can’t know how it feels until you put it on. If you don’t feel good in it, it doesn’t matter if the shirt fits."
The price of oil is back towards $60 a barrel for the first time since November. Prices have shot up more than 70% since hitting their low point for the year in mid-February.
At first blush (or gush) it is tempting to declare that the recent spike in oil prices is bad news. Gas prices are up about 10% in the past two weeks.
And consumers remember all too well what it was like when oil was over $147 a barrel and gas prices hit more than $4 a gallon.
But I come to praise the prospect of higher oil prices, not bury them. Hear me out before sending the hate mail.
Rising oil prices are good news…
As I explained in a column three months ago, some expected oil to rally if there were signs of an economic recovery on the horizon. Increased demand usually leads to higher prices.
"The rise in oil prices is a symptom of something that’s good. We are starting to see signs of growth and that economies around the world are coming back," said David Wyss, chief economist with Standard & Poor’s.
To be sure, there are some concerns (which I share) that investors are getting ahead of themselves. The dramatic rally in stocks in the past two months is a perfect example of investors’ newfound sense of economic enthusiasm running amok.
However, there is evidence that the rise in oil prices is actually a function of improving fundamentals in the global economy.
According to reports, China’s oil imports increased nearly 14% in April from a year ago. That’s the first year-over-year rise in oil imports this year. If China’s economy is starting to improve, prices should continue to move up, especially if those "green shoots" in the U.S. economy really sprout.
"China has a huge thirst for commodities. Concrete signs of demand from China, and to some degree the U.S., are helping to lead the acceleration in oil prices. It’s more about actual demand, not just speculation," said Kathy Lien, director of currency research at GFT, a foreign exchange and futures brokerage firm.
The recent rise in oil prices also appeared overdue because crude prices, when compared to gold, were out of whack. In my February column, I pointed out how several commodity experts said that gold prices historically trade at about 15 times the price of oil.
When the so-called gold-to-oil ratio is much higher than that, it’s a sign of a panic since it means people are worried that demand for oil is low and that they should flock to gold in a flight to safety.
Well, guess what? As fears of a global depression have ebbed, gold prices have stabilized and oil prices have bounced back. So the gold-to-oil ratio is now a more normal 16.
In addition, the increase in oil prices isn’t really being fueled (pardon the pun) too much by the weakening dollar. That’s a good thing since it also points to less speculation in the market.
The price of crude, which is an asset that is priced in dollars, usually increases when the greenback loses ground against other major global currencies.
And while the dollar has given up much of the ground it gained against the euro in recent months, the dollar’s recent slide shouldn’t be pegged as the major culprit behind oil’s spike. After all, the dollar has only lost about 5% since mid-February.
"You have to pay attention to the order of magnitude," Wyss said low cost car insurance. "I don’t think the weaker dollar explains that much of the increase in oil — maybe a dollar or two."
…as long as oil doesn’t shoot up too much
Still, some wonder if the rise in oil prices might also be a sign that commodity investors are betting on a return of inflation.
While it may seem premature to talk about inflation at a time when housing prices continue to fall, some say the threat of rising prices for commodities and other goods should not be dismissed.
With the U.S. government essentially printing gobs of money to help pay for stimulus, various bailout programs and to finance the deficit, the increase in the money supply could spark inflation sooner rather than later.
And investors in U.S. Treasurys are clearly starting to worry about a glut of long-term bonds on the market and the potential for inflation to rear its ugly head again.
Bond prices have fallen in recent months — even though the Fed has been purchasing U.S. Treasurys. That’s pushed bond yields, which move in opposite directions to prices, higher. Rising yields are often viewed as a sign the bond market is more concerned with inflation than an economic slowdown.
"People are seeing inflation on the horizon and lining up their portfolios accordingly," said David Beahm, vice president of economic research with Blanchard & Company Inc, a New Orleans-based investing firm that specializes in commodities.
With all that in mind, the big question going forward is how much higher does oil need to go before people need to worry that oil prices could become something that chokes off any expansion in the economy.
Fortunately, few expect a major spike in oil prices. Beahm said a normal range for oil prices would be about $70 to $80 a barrel while Wyss said $70 to $90 a barrel makes sense. So if energy prices stabilize, they probably won’t have that big of an impact on consumers.
"The magnitude of the increase at the gas pump hasn’t been all that big to date to hurt consumers. And demand is still relatively weak. Ultimately supply and demand determine prices and we need demand to really recover to be consistent with higher prices," said Keith Hembre, chief economist with First American Funds in Minneapolis.
But crude prices don’t have to go back to last summer’s stratospheric levels in order to be a cause for concern.
Lien is hopeful that oil should level out around $65. She thinks if crude prices move much higher than that, there could be problems for this nascent recovery — if this is in fact a recovery.
"Oil at $80 is something that could be crippling for the U.S. consumer. Talk of hyperinflation could be resurrected by a further surge in commodity prices," she said.
Wyss agreed that further increases bear watching. At the very least, rising oil prices could mean that the economic rebound which investors in stocks now appear to be banking on could take longer to materialize.
"The recovery could be delayed because higher oil prices are a tax on consumers. It could slow down consumer spending and make a recovery more difficult," he said. "Every dollar you spend at the gas tank is one more dollar you don’t have to spend at the shopping mall."
Microsoft Corp. Monday sold a $3.75 billion debt issue in its first foray into the U.S. corporate bond market, joining a spate of companies taking advantage of beneficial borrowing conditions.
The cash-rich, "triple-A" rated Microsoft announced its first debt authorization last September, allowing it to issue up to $6 billion in debt. Monday’s bond sale attracted well over $10 billion in demand, market sources said.
The sale included $2 billion of five-year notes yielding about 95 basis points over comparable U.S. Treasurys, $1 billion of 10-year notes yielding about 105 basis points over Treasurys and $750 million of 30-year bonds yielding about 105 basis points over Treasurys, according to IFR, a Thomson Reuters service.
Microsoft (MSFT, Fortune 500), the world’s largest software maker, has already issued about a third of its $6 billion debt authorization in the commercial paper market.
It says it does not need financing, but will use the proceeds for general corporate purposes, including working capital and buying back stock, according to a spokesman.
The company decided to take advantage of "good market conditions and Microsoft’s great credit rating," a spokesman said. The software giant is one of only a handful of U.S. companies still rated ‘AAA’ by both Moody’s Investor Service and Standard & Poor’s.
Fitch rates it one notch lower at ‘AA-plus’.
"I think people thought it might be the only shot in a lifetime to lend money to Microsoft," said Robert Bishop, portfolio manager at SCM Advisors in San Francisco. "When a company is borrowing and they don’t really need the money, you don’t know when you’re going to get another shot at them."
As of the end of March, Microsoft reportedly had cash and short-term investments worth $25.3 billion.
The sale did well because "Microsoft is a great credit and everybody’s got a place in their portfolio for a few high quality credits," Bishop added. Still, he declined to participate because yields being offered "didn’t seem like great value."
The bond sale benefited from massive investor cash flowing into corporate bonds as tentative signs of economic recovery improve investors’ appetite for risk faxless payday loan.
"An awful lot of people want to pile into the credit markets now," Bishop said. "They think things are better but the problem is, I think they probably don’t realize how much spreads have tightened over the course of the last two months."
Corporate bonds started attracting demand when their yield spreads hit a record 656 basis points over Treasurys last December. As the market rallied, spreads have narrowed to just 444 basis points, according to Merrill Lynch data.
But companies are taking advantage of the falling yield spreads, with more than $26 billion of U.S. corporate bonds sold in just the first six business days of the month, according to Thomson Reuters data.
"It seems to me that there’s almost an urgent need for issuers to announce a deal as quickly as they can to catch the market before it does turn the other way," said Richard Lee, head of fixed income at New York broker-dealer Wall Street Access.
The corporate bond market appeared to already be softening on Monday, with spreads suffering their first widening in weeks under the spate of heavy supply.
Microsoft’s shares ended down 10 cents at $19.32 on Nasdaq.
Its bond sale was led by JPMorgan (JPM, Fortune 500) and Morgan Stanley (MS, Fortune 500), with Banc of America Securities and Citigroup (C, Fortune 500) as passive managers.
The debt sale had sparked talk that Microsoft could be readying a bid for German business management software firm SAP, in light of a recent article in Barron’s citing an analyst as saying SAP cannot remain independent forever.
SAP Co-Chief Executive Leo Apotheker, in New York unveiling an acquisition, declined to comment on a possible Microsoft bid but did say he believes his firm should stay independent.
SAP’s stock rose 2.85% in Germany.
A Federal Reserve policy maker called on Monday for U.S. government protection of the financial industry to be rolled back because it had encouraged excessive risk taking at the heart of the current crisis.
“The financial safety net, especially those parts that were more implicit and perceived than explicit and written into the laws, played a significant role in the accumulation of risks that ultimately led to the turmoil we are still experiencing,” said Richmond Federal Reserve President Jeffrey Lacker.
“While deployment of the financial safety net is often viewed as an essential response to the financial crisis, I believe we need to give serious thought to the extent to which the safety net was actually a significant cause of the crisis,” he said in remarks prepared for delivery to a banking conference in Beijing.
A text of his speech was made available to media in Washington ahead of delivery.
The U.S. government last year rescued investment bank Bear Stearns and insurer American International Group, insisting big banks take taxpayer infusions of capital and assured investors that no systemically important firm would be allowed to fail.
Last week, it completed an exhaustive stress test of its largest 19 banks to restore public confidence in their health.
It told 10 of them to raise fresh capital to ensure they could ride out an even more severe recession than currently expected, and said that if they failed to find the money from private sources, it would invest taxpayer money to make up the shortfall, and take a corresponding public stake cashadvance.
Lacker, a voting member of the Fed’s policy-setting committee this year, said the reaction of financial markets to the test results suggested they regarded them as a reliable indicator of the relative health of the U.S. banks.
“The confidence it has given that institutions will in short order escape the need for government support has done more to facilitate the process of private equity recapitalization than the other programs,” Lacker said in response to questions at the forum.
He was referring to TARP, or the Troubled Asset Relief Program, a $700 billion U.S. government fund set up to support banks.
Lacker has been an outspoken critic of the government bailouts to shore up U.S. banks and the implicit backing of firms that are deemed ‘too-big-to-fail.’
“The existence of our financial safety net actually can amplify financial instability,” he said in his speech.
“A discretionary safety net in particular, creates incentives for “too-big-to-fail” institutions to pay little attention to and underprice some of the biggest risks we face,” he said.
Such overt optimism led to massive bets on the U.S. housing market as home prices soared, then to savage losses, including on assets that banks moved off their balance sheets via securitization.
Banks provided back-stop liquidity to these so-called special purpose vehicles, which Lacker said took deliberate advantage of the public safety net.
Home mortgage rates ticked only slightly higher this week, according to a report released Thursday.
The average 30-year fixed mortgage rate jumped to 5.27%, up from 5.23% the previous week, according to Bankrate.com’s weekly national survey.
Even with the increase, rates remain at historic lows, the report said. Rates have plunged since late October, when 30-year fixed home mortgage rates averaged 6.77%.
"The movement in fixed mortgage rates remains very subdued," despite recent increases in benchmark bond yields, the report said.
"As a result, the spread between the rate paid by a mortgage borrower and the return earned by investors in risk-free government bonds continues to narrow," the report added.
For a conforming 30-year fixed rate mortgage, that spread is the narrowest since November, and on larger jumbo loans, the spread is the narrowest in a year.
That improvement is likely because of the Federal Reserve’s continuing purchases of mortgage-backed bonds, the report said.
Loans are considered "jumbo" when they are too large to be purchased or guaranteed by Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) cash advance today. Jumbo loans carry higher rates than smaller "conforming" loans that do have guarantees.
Six months ago, the average 30-year fixed mortgage rate was 6.44%, meaning a $200,000 loan would have carried a monthly payment of $1,256.25.
With the average rate now at 5.27%, the monthly payment for the same size loan would be $1,106.89, meaning homeowners who refinance now would save almost $150 per month.
Other rates: The average 15-year fixed rate mortgage jumped to 4.78% from 4.73% the week prior.
The average jumbo 30-year fixed rate inched up to 6.68% from 6.65% the week prior.
Adjustable rate mortgages were "broadly higher," the report said, with the average 3-year ARM jumping to 5.27% while 5/1 ARMs increased to 5.07% from 5.05%.
Chrysler announced a new sales incentive plan Wednesday as the carmaker seeks to spur sales while it works through bankruptcy and restructuring.
Chrysler is immediately offering up to $4,000 in cash rebates on 2009 model year vehicles. Actual cash rebates will vary by model and location. Chrysler could not immediately provide specific examples.
Additionally, current owners of Chrysler, Dodge and Jeep vehicles can get $1,000 more toward a new Chrysler vehicle.
While these offers are good, potential Chrysler customers who were expecting blow-out deals now that the automaker is officially in bankruptcy may be disappointed.
"This is not that, certainly," said Jack Nerad, editorial director for Kelley Blue Book, which provides pricing data.
There is also nothing fancy about Chrysler’s new incentives. The company is not offering to cover car payments in case of job loss; nor will it compensate buyers for losses in car value should the automaker be forced out of business.
"Consumers are telling us that the net purchase price of the vehicle is the most important factor right now," Steve Landry, Chrysler vice president for sales said in a press release. "So we are pleased to introduce incentives that address what the consumer is looking for."
Job-loss based incentives may have worked for Hyundai, which was first to offer a payment-protection plan, they didn’t have the same effect for General Motors (GM, Fortune 500) or Ford (F, Fortune 500), Nerad said. That’s because the newness factor of the protection plans had already worn off by the time the American automakers announced their versions creditreport.
"If you figure you’re going to lose your job, or the odds that that’s going to happen, you’re pretty unlikely to be considering a new car purchase in the first place," Nerad said.
Buyers who finance their vehicles through participating credit unions can also get another $1,000 toward their purchase. More than 1,500 credit unions with members in all 50 states are participating in a special low-rate financing program, the automaker said.
These rebates are expected to be combined with dealer incentives. Chrysler gives such sweeteners to dealerships, rather than to the customers, but dealers often pass on the savings by reducing the purchase price of vehicles.
A Chrysler spokeswoman would not discuss dealer incentives, which are generally not made public.
Chrysler’s "Employee Pricing Plus Plus" incentive program, which ended yesterday, offered customers up to $6,000 on Chrysler, Dodge and Jeep vehicles, including 2008 models, as well as 0% financing.
Chrysler has been the biggest spender among all auto manufacturers on incentives in the U.S. market. Last month, Chrysler spent $4,288 per vehicle on incentives, according to auto data Web site Edmunds.com.
The next highest spender was GM, which is also undergoing a government-driven restructuring and may declare bankruptcy later this month. GM spent $4,063 per sale.
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