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Rising Exports Putting Dent in Trade Gap

Over half of the 9.1 million vehicles General Motors produced last year were sold in foreign countries... With the slumping housing market taking a toll on its business at home, Caterpillar is counting on sales of equipment and diesel engines in Europe, Asia and the Middle East to keep growing… Faster growth in Europe and Asia is helping to cushion the blow of a collapsing housing boom that has hampered domestic consumer spending, creating more demand from elsewhere for goods and services made in the United States.

» nytimes.com [ Contribute: submit link / submit article / submit company ]

US Fed Survey: Subprime Lenders Tightening Standards; Prime Lending Business As Usual

In its periodic Senior Loan Officer Opinion Survey on Bank Lending Practices released Monday, the Fed found that while bankers have become more stringent when dealing with subprime and nontraditional mortgages, policy toward standard loans remains largely unchanged. 56% of the banks responding reported tightening standards on subprime loans, and 46% did the same on nontraditional mortgages (such as interest-only loans and loans with minimal income verification), while only 15% said they changed requirements for prime residential mortgages (see graphic; click to enlarge). About one-third said they had tightened lending standards on commercial real estate. 36% said loan demand for all loans was softer while 52% said it was unchanged. 10% said business loan requests dropped, hinting to a possible pullback in business spending. The Mortgage Bankers Association expects home-purchase loan activity to fall 7% this year and refinancing activity to drop 10%.

» federalreserve.gov [ Contribute: submit link / submit article / submit company ]

SEC steps up action on insider trading

International stock ex­changes and electronic trading are changing the way US regulators detect and punish insider trading, forcing them to speed up their investigations and take court action more quickly. During the past year and a half, the US Securities and Exchange Commission has gone to court to freeze accounts belonging to residents of Croatia, Pakistan and Switzerland in an effort to stop the profits of suspected insider trading from disappearing overseas.

Steve Forbes says the American economy is stable, but anxiety remains.

“There may be yet another villain at work: inflation. Many of us are familiar with John Maynard Keynes' quote, "There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." True, prices are not rising in the fashion in which they rose in the 1970s and early 1980s. But the inflation the Fed mistakenly fired up three years ago has certainly distorted the economy, thereby unnecessarily stirring up anxieties.”

Steve focuses on housing.

“Housing construction was crackling before 2004 because of Congress' virtual elimination of the capital gains tax on primary residences in 1997. But the Fed-fed inflation fired up the housing boom to white-hot levels. Flush with cash, lenders lowered loan standards, and new players entered the mortgage market. Fraud blossomed--why examine too closely a borrower's 1040 when rising prices will bail you out if the borrower gets in trouble? Speculators paid people to file mortgage applications to buy houses and apartments and quickly flip them. Now the sale price of houses is falling in many parts of the country. To add insult to injury, property taxes continue to climb as assessments catch up with housing values.”

» forbes.com

Big rise in suspicious trades

US stock and options exchanges are spotting more suspicious trading connected to high-profile deals, such as News Corp’s bid for Dow Jones, and are making more referrals to US regulators for investigation of possible insider trading.

Between January 1 and April 20 of this year, the New York Stock Exchange referred 45 potential instances of insider trading to the Securities and Exchange Commission, compared with 111 for all of last year. The NASD, which monitors Nasdaq, the American Stock Exchange and the over-the-counter markets, has not released any 2007 data. But it referred 119 instances of suspicious trading to the SEC last year, up from 102 in 2005.

» ft.com

Regulators probe trading in Dow Jones before Murdoch's bid

US authorities have reportedly launched investigations into suspicious trading in Dow Jones Co. before a bid for the company by Rupert Murdoch's News Corp.

Dow Jones received a subpoena from the New York state attorney general's office and an inquiry from the Securities and Exchange Commission (SEC), a company spokesman told the Wall Street Journal.

Top 3 fund managers earn over $1bn

The combined earnings of the world's top 25 hedge fund managers of almost $15bn exceeded the national income of Jordan last year and three individuals took home more than $1bn, according to an industry survey.

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

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