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Deloitte & Touche: Holiday Spending Predictions

A quick glance at the windows of our nation’s retailers reveals that, once again, holiday season is upon us. While the holiday shopping frenzy is recurring and predictable, the nuances of consumer behavior during this time of year can have enormous impact on the retail industry.

Listen to Pat Conroy, vice chairman and national managing principal of the Consumer Business practice, and Ira Kalish, the director of Deloitte Research Consumer Business, as they discuss consumer trends and purchasing patterns that will likely impact retailers this holiday season.

[mp3] Listen or Download / Deloitte & Touche (22 minutes)

Drowning in zeros — computing the OTC

Nowhere is it easier to be blase about big numbers than in the market for over-the-counter derivatives. Yet the numbers released by the Bank for International Settlements this morning, charting OTC derivative activity during the first half of this year, still manage to boggle. Notional amounts covering all contract types "expanded at a brisk pace" -- up from $297,670,000,000,000 to $369,906,000,000,000 in the period. They must have big calculators in Basel.

Lest we all drown in a sea of zeros, however, the BIS points us in the direction of gross market values, which measure the cost of replacing all existing contracts. This is seen as representing a better measure of market risk at any given point in time. The numbers here are much more manageable. Such values, which net off exposures between counterparties, expanded from $9,749,000,000,000 to $10,074,000,000,000 during the first six months. Huh. In OTC land that must look like the overall market is in danger of going ex-growth.

» Search Risk-Specific Tags: International Settlements - OTC derivative
» Alphaville

Insider: A hedge fund revolution? A prominent hedge fund manager is causing ripples within the industry for using a pay structure based on the idea of delayed gratification.

Among the certain unalienable rights of finance in 2006 is that of successful hedge fund managers to make a lot of money.

That right is embedded in the compensation structure of the funds: Most managers receive 2 percent of the assets they manage as a management fee and take home 20 percent of the profits as incentive pay.

» Search Financial-Specific Tags: Hedge Fund - Compensation Structure
» International Herald Tribune

Investing: How to recognize a bubble - before it bursts

Asset bubbles, like artistic geniuses, have a reputation for going unrecognized in their lifetimes. That does not deter Ajay Kapur, Citigroup's chief global equity strategist, from trying to identify markets around the world that may be experiencing dangerous, unsustainable expansions.

Kapur claims to be able to flag bubbles one year before their peaks, on average, by using a simple criterion to define when one is in progress: returns that deviate markedly from the long-term trend. That does not seem like a high hurdle to breach, but in a study of three centuries of market action in developed economies, 7he found just 26 examples.

» Search Financial-Specific Tags: Investing - Asset Bubble - Housing Bubble
» International Herald Tribune

Study: The controversial practice of backdating stock options went hand-in-hand with poor corporate governance practices and overbearing chief executives.

The research by three academics is the first to suggest a link between lax internal controls and stock options backdating. The scandal has so far engulfed more than 130 US companies in internal and regulatory probes but the study suggests that number could climb to 720.

» Search Financial-Specific Tags: Backdating Stock Options - Corporate Governance - Stock Options
» FT.com

Straight forward VC advice from Sequoia

In the crowded field of US venture capital, where arguably too much money is chasing the available quality investments and some firms bemoaning the industry's prospects , Sequoia Capital is on something of a run. Having reaped a reported $495m - or 43-fold return - on its investment in YouTube.

VC Ratings points to a new feature on the company's website - a list of 10 characteristics that Sequoia, which backed both Yahoo! and Google, looks for in companies and advice on submitting a business plan. It is striking that - "Team DNA" aside - the list is light on high-level, empty rhetoric and full of common sense. Under "Clarity of Purpose" - Sequoia suggests summarizing a company's business on the back of a business card. No need for reams of management speak here - for a business plan a single declarative sentence is all it should take. Under "Painkillers" - "pick the one thing that is of burning importance to the customer then delight them with a compelling solution."

Whatever the product is, who could resist? And under the mysterious heading of "Inferno" - it concludes, "start with only a little money. It forces discipline and focus. A huge market with customers yearning for a product developed by great engineers requires very little firepower." How refreshing.

» Search Financial-Specific Tags: VC Advice - Venture Capital
» Alphaville
» sequoiacap.com/ideas

Algorithmic trading to take majority share in 2010

More than half of all equities trading in the US will be done using algorithmic dealing systems by the end of 2010, according to Boston-based research consultancy Aite Group.

Aite says algorithmic trading has hit the mainstream in the US equities market and is increasingly becoming the execution tool of choice for both the sell-side and the buy-side traders.

At the end of 2006 the share of algorithmic trading will approach one-third of total US equities trading volume, says Aite, but this will rise to 53% by the end of 2010.

» Search Financial-Specific Tags: Algorithmic Trading - Equities Trading
» aitegroup.com

Judge postpones criminal trial of 16 former KPMG executives accused of selling illegal tax shelters.

One of the Department of Justice’s most high-profile white-collar crime cases has been dealt a blow after a New York federal judge postponed indefinitely the criminal trial of 16 former KPMG executives accused of selling illegal tax shelters.

The ruling represents a setback for prosecutors in the US attorney’s office in the southern district of New York, who have been heavily criticised by Judge Lewis Kaplan for their role in pressing KPMG, the accounting firm, to cut off legal fees to its former employees.

» Financial Times

US economy on track for soft landing as consumer spending remained resilient

A slew of economic reports on Tuesday showed the US economy feeling the strain from the sharp slowdown in the housing sector, while offering very tentative hopes that inflation pressures could be easing.

The news came as Japan announced a stronger-than-expected 2 per cent annualised growth rate for the third quarter, raising the prospect of a second interest rate rise there.

» Search Financial-Specific Tags: US Economy - Consumer Spending - Housing Sector

Equities Swing With Harvard MBAs

Mr. Soifer tracks how many Harvard Business School graduates choose market-sensitive jobs each year. If 10% or less of that year's class take jobs in investment banking, investment management, sales & trading, venture capital, private equity, or leveraged buy-outs, it's a long-term 'buy' signal.

If 30% or more take such jobs, it's a long-term 'sell.'

This year, some 37% of Harvard Business School's graduate found work on Wall Street, up from 30% a year ago and 26% for the Class of 2004. The trend suggests that Wall Street is becoming bloated and the American economy is ripe for a slowdown.

» New York Sun

US trade gap narrows

The US trade deficit narrowed in September in a sign that economic growth may have been stronger than previously thought in the third quarter.

The Commerce Department said the trade gap shrank to $64.3bn after hitting a record high of $69bn in August, as exports climbed by $600m to a high of $123.2bn and imports fell for the first time since the start of the year after the price of foreign oil eased.

The narrowing in the trade gap was greater than economists predicted, but left the deficit close to all-time highs, underlining concerns about global imbalances.

The trade deficit with China reached a record of $23bn, a total of $166.3bn for the year to date, and put the deficit with the fast-growing Asian economy on track to surpass last year’s record of $202bn.

» Financial Times

UBS Rolls Out Buy-Side Research

The New York arm of Swiss financial services firm UBS is introducing a curious animal into stock research: internally generated buy-side research that competes with the firm's own sell-side research. The brokerage firm is assembling a group of 10 to 20 analysts who will compile stock recommendations, ostensibly intended to supplement the recommendations put together by the firm's existing staff of sell-side analysts. In putting together their recommendations, the new group would be at liberty to consult research conducted by other Wall Street firms.

» UBS Embraces the Buy Side TheStreet.com

Bank of America/MBNA — first the merger, now the song

Here's a clip of two Bank of America executives -- one on the guitar, the other doing his best Bono impression at the microphone -- celebrating the coming together of two great institutions into one great bank. It's quite shocking, particularly since it appears to be sincere. It was posted by someone calling themselves Mrfruitypants.

[video] http://www.vimeo.com/clip:114601

SEC chief gets blogging

Chairman of the SEC, Christopher Cox, has joined the blogging world.

In a comment on Sun Microsystem's chief executive, Jonathan Schwartz's blog, the SEC chief showed interest in Mr Schwartz's recent request that blogs be used as a way to expand investors' access to information. In a triumph of PR, Mr Cox posted the text of a letter he had sent last week in response to a letter from Mr Schwartz on the subject. "Since you're talking about trasparency and efficiency in communications, I though you might appreciate my taking advantage of the internet's speed and potential for broad dissemination by posting here as well," he added.

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