Finance News on Hiatus

Dear friends and fans of Finance News--Finance News will be on hiatus until after the 4th of July. I'll be attending the American Library Association's annual conference in New Orleans and then on a short vacation.

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While at the conference, I'll be busy with various BRASS (Business Reference and Services Section) activities. Check out our website, including the Best of the Best Business Web Sites section.

In the meantime, you can still return to the Finance News web site for updated news headlines which will be continually refreshed along the righthand sidebar
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Wharton Istanbul Forum: Perspectives on Investing in Emerging Markets

A Special Section from this week's Knowledge @ Wharton newsletter: The Wharton Global Alumni Forum, held June 8-9, 2006, focused on the theme of building bridges between markets, cultures and continents. The event was held in Istanbul, a city that straddles both Europe and Asia, and is itself a bridge between ancient civilizations and today's modern secular world. Those who made presentations during the conference included "insiders" -- ranging from Turkey's prime minister to CEOs of Turkish companies -- as well as "outsiders," including members of private equity firms and executives of multinationals like Coca-Cola and Citigroup. All are looking to invest in Turkey and other emerging markets, not just in their economies but in their future as participants in an increasingly interconnected global community...Read coverage of the event, including different perspectives on investing in emerging markets, the challenges multinationals face when they move into developing economies, and the increasingly important role of logistics in connecting the global marketplace HERE.

As Workers' Pensions Wither, Those for Executives Flourish

From the front page of today's WSJ: To help explain its deep slump, General Motors Corp. often cites "legacy costs," including pensions for its giant U.S. work force. In its latest annual report, GM wrote: "Our extensive pension and [post- employment] obligations to retirees are a competitive disadvantage for us." Early this year, GM announced it was ending pensions for 42,000 workers. But there's a twist to the auto maker's pension situation: The pension plans for its rank-and-file U.S. workers are overstuffed with cash, containing about $9 billion more than is needed to meet their obligations for years to come. Another of GM's pension programs, however, saddles the company with a liability of $1.4 billion. These pensions are for its executives. This is the pension squeeze companies aren't talking about: Even as many reduce, freeze or eliminate pensions for workers -- complaining of the costs -- their executives are building up ever-bigger pensions, causing the companies' financial obligations for them to balloon. Read the whole article HERE.

(Wire) Tapping Into the Piggybank

From the front page of today's WSJ: Since shortly after the Sept. 11, 2001 terrorist attacks, the U.S. Treasury Department has been secretly tracking suspected terrorist financing through a far-reaching program that gives it access to records from the network that handles nearly all international financial transfers. The information comes from a Belgian firm known by its acronym, Swift (Society for Worldwide Interbank Financial Telecommunication), which manages much of the world's financial-message traffic. Under the program, U.S. counter-terrorism analysts query Swift's vast database of billions of financial transactions for information on activity by suspected terrorists. The program operates under a series of broad U.S. subpoenas. U.S. officials say the Terrorist Finance Tracking Program has been highly successful both in leading to the apprehension of terrorism suspects and in thwarting terrorist operations. People familiar with the program said, for example, that it yielded useful information on the bombings last July 7 in London. The program "has helped to disrupt terrorist cells and operations and has helped save lives," Treasury said in a statement to The Wall Street Journal. Still, disclosure of its existence may be controversial in Europe and other parts of the world and within the global banking industry, which has long worried about the privacy of transactions. U.S. officials said few American citizens would have financial data that fall under the program, because they are unlikely to engage in international money transfers. Read the whole article HERE.

S.E.C. Investigating Hedge Fund; Congress Investigating the Investigation

From the front page of today's NYT: One of the nation's most prominent hedge funds, Pequot Capital Management, is under investigation by the Securities and Exchange Commission for possible insider trading, according to government officials briefed on the case...At the same time, the S.E.C.'s handling of the Pequot inquiry has itself come under scrutiny by Congress and the Office of Special Counsel, a federal agency that examines whistle-blower complaints. These officials are examining charges by Gary J. Aguirre, the S.E.C. lawyer who ran the Pequot investigation until last summer, that senior S.E.C. officials had backed his inquiry — including the issuance of scores of subpoenas — until he sought the testimony of an influential Wall Street executive.

Read the whole article on the NYT website HERE or use LexisNexis (search on hedge fund in the headline)

Bigger bond business for the Big Board?

From today's WSJ: THE NEW YORK Stock Exchange says its planned merger with Euronext NV will help the Big Board expand its bond-trading business, which has been in steady decline. NYSE Group Inc., the parent of the New York Stock Exchange, has been working for months to get approval from the Securities and Exchange Commission to increase the number of corporate bonds that trade on its electronic system, but that regulatory effort has been going slowly. While the NYSE has been known mainly as a place to trade stocks, NYSE Group Chief Executive Officer John Thain sees a major source of potential revenue in bringing together buyers and sellers of the $5.1 trillion of bonds outstanding from U.S. companies. The NYSE's corporate-bond trading volume slipped to less than $1 billion in 2005, down from about $4 billion in the late 1990s. Euronext owns a minority stake in a European system for trading bonds that has expanded much faster than the NYSE's own fixed-income effort. Euronext is "much further along" in bonds, Mr. Thain said, with "a well-established marketplace. Here, we're just starting." The main appeal of the Euronext deal for Mr. Thain remains the European exchange operator's stock listings and its derivatives platform. Euronext operates stock exchanges in Amsterdam, Brussels, Paris and Lisbon, and a futures and options market, Euronext.liffe, in London.
Read the whole article HERE.

The Millionaire down the Street Was Right, But Now What's in Store for Real Estate?

From this week's Knowledge @ Wharton newsletter: For many across the U.S., the real estate market has been the latest get-rich-quick craze. Indeed, hordes of homeowners and investors have become wealthier as they watched their home values increase or their investment properties sell for multiples of what they paid for them just a few years ago. But the run-up in real estate may be ending. Federal Reserve chairman Ben Bernanke last month said the housing market is "cooling." Around the same time, former Fed chairman Alan Greenspan told the Bond Market Association that the U.S. housing market's "extraordinary boom" is over.

While few would dispute these assessments, what's in store for real estate is difficult to predict. Read the whole article HERE.

The value of an MBA

From Sunday's NYT: An HBS grad investigates the question: What is the real-world value of a master's in business administration, especially one from the iviest of Ivies? Is it, as widely perceived, an ace in the hole, a get-out-of-jail-free card, a ticket to the good life? Read the article online from the NYT website HERE or use LexisNexis HERE(search on Ellin as author)

Trading floor sounds--provided by software, not traders

From the front page of today's WSJ: When professional investor Ken Sullivan bought a big pile of Treasury notes recently, he did it surrounded by the sounds of people shouting out prices. It was almost as if he were right there among the brokers on the floor of Chicago's bond-trading pits. Mr. Sullivan was actually a few miles up the city's Chicago River, sitting in the office cubicle where he works. And the shouting didn't come from any humans. It came from his copy of MarketSound, computer software that cranks out pretend trading noises. "I never turn it off," said Mr. Sullivan, a 15-year bond-trading veteran. MarketSound is one of a wave of products capturing an unusual niche: former financial traders who miss the bustle of the trading pit, and believe they drew energy and even trading ideas from the noise. The sounds ebb and flow based on the size of trades and price movements. In general, the sounds get louder as the size of trades and volume increase.

Read the whole article HERE

Goldman Sachs: World Cup and Economics 2006 report available

Goldman Sachs present their third World Cup and Economics report (.pdf file). Read it for all kinds of information on the World Cup and Economics and everything in between! Article authors include UK Chancellor Gordon Brown, Former German Foreign Minister, Joschka Fischer and Captain of the England Team, David Beckham.

Equity markets fall when home teams lose World Cup matches

From an article in this weekend's Guardian: New research shows that equity prices fall by almost half a per cent when a team is knocked out of the World Cup. Read the article online HERE. Read the paper detailing these findings which will appear in a forthcoming issue of the J. of Finance HERE (.pdf file).

New issue of the J. of Finance available

The lastest issue of the Journal of Finance (Vol. 61 No. 3, June 2006) is now available through DePaul's Electronic Collections Online database. You can access it using the link on the sidebar to the right ---->

Articles in the lastest issue include:

**Credit Ratings and Capital Structure
**Corporate Equity Ownership and the Governance of Product Market Relationships
**Does a Parent-Subsidiary Structure Enhance Financing Flexibility?
**Distance Constraints: The Limits of Foreign Lending in Poor Economies

Mixed market messages as big companies put record $ into buybacks

U.S. companies are spending record sums repurchasing their own stock, a move that could boost per-share earnings of many at a time when the stock market has been gyrating, often downward. The companies in the Standard & Poor's 500-stock index -- generally the biggest in the U.S. -- plowed more than $100 billion into their own shares in the first quarter, up more than 22% from a year earlier, according to data to be released today by S&P, a unit of McGraw-Hill Cos. In the year ended March 31, they spent a record $367 billion on so-called stock buybacks, an amount so large it could cover this year's Medicare budget...The onslaught of buybacks has been made possible by record corporate earnings, and is partly motivated by pressure from investors impatient with skimpy returns on their stocks. Read the whole article HERE

(Un)Friendly's CEO compensation battle

From the front page of today's WSJ: Full disclosure: I scooped ice cream one summer back in the 1980's at a Friendly's in NH. I never once double-dipped improperly, nor did I ever get to ride on the company jet.

WILBRAHAM, Mass: Three years ago, S. Prestley Blake, the 91 year old co-founder of the Friendly's restaurant chain, filed a lawsuit seeking to make the chairman of Friendly, Donald N. Smith, repay part of the cost of operating an $8 million company jet he used to fly across the U.S.

Mr. Blake has prodded the company to acknowledge some unreported personal use of the plane and has uncovered details of transactions between Friendly and another company Mr. Smith once controlled. Although Friendly disclosed these as related-party transactions, Mr. Blake says the fresh information he discovered shows that Mr. Smith and the other company owe Friendly $12 million for flight expenses, food purchases and other deals that benefited him at the expense of Friendly. Mr. Blake also wants Mr. Smith to repay hundreds of thousands of dollars in pay he received while serving for a time as Friendly chief executive but -- as he acknowledges -- working only part time.

Read the whole article HERE

Reassessing risk tolerance as foreign markets decline

From the front page of today's WSJ: Stock markets outside the U.S. suffered one of their worst days in years, buckling under growing fears that interest rates world-wide are rising and economic growth is slowing. This worrisome combination is causing investors to reassess their appetite for riskier assets. With central banks moving steadily to curtail a long period of plentiful credit, the most speculative stocks and bonds, which have been the globe's star performers for the past three years, are now being hit the hardest...

Read the whole article HERE

An empire built on derivatives

From yesterday's WSJ: LONDON -- As a young broker in London in the early 1980s, Michael Spencer was fired from one job for making a bad bet on gold and another for trying to hide losses on futures contracts. His career in tatters, he scraped together $60,000 with three partners to play another hunch: There was money to be made acting as middleman between big banks trading complex financial instruments. That wager has turned Mr. Spencer into one of Britain's richest men. As more banks, corporations, and big investors began using derivatives to hedge risk, Mr. Spencer, 51 years old, built his company, ICAP PLC, into a derivatives-industry giant. Today, ICAP is one of the world's largest brokers of the complex financial instruments. Mr. Spencer's stake in the publicly traded company is valued at about $1.1 billion. Now, big change is sweeping through this arcane corner of the financial markets. Operators of traditional stock and commodities exchanges -- many of them newly public companies -- are searching for new sources of revenue, and the booming derivatives market looks like fertile ground...Read the whole article HERE

IBM announces $6 billion investment in India

In the last hour: IBM CEO Samuel Palmisano said Tuesday that Big Blue will invest $6 billion in India over the next three years, tripling the $2 billion the company invested over the previous three years. The investment is the largest sum ever committed by a U.S. company to India. Last year Microsoft, Cisco Systems, and Intel announced investments totaling $3.9 billion. Read the rest of the article from the Red Herring web site HERE.

Frank inflation warning from Bernanke makes investors nervous

From today's WSJ: A surprisingly frank inflation warning from Federal Reserve Chairman Ben Bernanke stoked fears of further interest-rate increases, adding to investor jitters and knocking the Dow Jones Industrial Average down almost 200 points to its lowest finish since March 9. Speaking at an international bankers' conference in Washington, Mr. Bernanke warned that inflation in recent months has been running "at or above the upper end of the range that many economists, including myself, would consider consistent with price stability." He said Fed policy makers would remain "vigilant" to ensure that recent inflation readings don't become the norm.

Read the whole article HERE.

Academic Journal Impact Factors--Behind the Scenes

From yesterday's WSJ: Just as television shows have Nielsen ratings and colleges have the U.S. News rankings, science journals have impact factors. Now there is mounting concern that attempts to manipulate impact factors are harming scientific research. Conceived 40 years ago, impact factors are essentially a grading system of how important the papers a journal publishes are. "Importance" is measured by how many other papers cite it, indicating that the discoveries, methodologies or insights it describes are advancing science. Impact factors are calculated annually for some 5,900 science journals by Thomson Scientific, part of the Thomson Corp., of Stamford, Conn. Numbers less than 2 are considered low. Top journals, such as the Journal of the American Medical Association, score in the double digits. Researchers and editors say manipulating the score is more common among smaller, newer journals, which struggle for visibility against more established rivals...Impact factors matter to publishers' bottom lines because librarians rely on them to make purchasing decisions. Annual subscriptions to some journals can cost upwards of $10,000.

While this article focuses primarily on scientific journals and some of the ways they manipulate their impact factors, it provides an interesting glimpse into the realm of academic journal rankings. Read the whole article HERE.

Questions about journal rankings or impact factors or how the library purchases journals? Please contact Celia or use the Ask A Librarian service.

Deutsche Börse vs. NYSE: Battle continues for Euronext

In the last hour: As top officials from Euronext and the New York Stock Exchange defended a $9.96 billion deal to create the first trans-Atlantic exchange, Deutsche Börse of Germany said today it would stick to plans for a central role in changes sweeping the industry by pushing to join forces with Euronext.
Read an NYT article HERE and a Reuter's update HERE

May's Market Collapse: What's an Investor to Do?

From this week's Knowledge @ Wharton newsletter: American investors have poured money into foreign stocks in recent years, lured by the hope of outsized gains. They have been well rewarded in the past 12 months, but in May, markets plummeted around the world. Mutual funds investing in foreign stocks, for example, lost more than 8% in the two weeks ending May 25, although their previous stunning performance left them up nearly 31% for the 12 months ending on that date. The late-May plunge was especially severe in emerging markets. Is this another bubble bursting, the way the tech-stock bubble collapsed several years ago? Wharton professors offer their take on the downturn and its implications for nervous investors. Read the whole article HERE.