InvestMacro FX

Right now, a lot of investors and business news junkies are incensed by Freddie Mac’s move to profit by intentionally giving their customers bad service.

And they should be. They just shouldn’t be surprised…

Because this is merely the latest of many examples of the government sponsored enterprise (GSE) behaving badly.

Freddie Mac, first formed in 1970 as the Federal Home Loan Mortgage Corp., was allegedly designed “to stabilize the nation’s residential mortgage markets and expand opportunities for homeownership,” as its website claims. But as recent history has clearly shown, it and its partner in crime, Fannie Mae, have done anything but that.

One of the first publicly recognized signs of its history of corruption came in 2003, when Freddie was fined $125 million for essentially cooking its books between 2000 and 2002. But other than the measly penalty, the scandal led to nothing more than a small round of management layoffs.

No new regulations were slapped on the mortgage investment company. It was largely allowed to go about its business as usual, despite a few congressional and presidential attempts to reform the financial reprobate.

Congress Loves Freddie Mac

There’s an easy reason for why Freddie Mac got away with so much and continues to do so today: its incestuous relationship with Congress. As Politico reported on July 16, 2008:

“Over the past decade, they [Fannie Mae and Freddie Mac] have spent nearly $200 million on lobbying and campaign contributions… The two government-chartered companies run a highly sophisticated lobbying operation, with deep-pocketed lobbyists in Washington and scores of local Fannie- and Freddie-sponsored homeowner groups ready to pressure lawmakers back home. They’ve stacked their payrolls with top Washington power brokers of all political stripes…”

Put bluntly, they own key members of Congress, who know they won’t have nearly the same spending power come election time if they don’t make Freddie and Fannie very happy. Not that Congress seems all that broken up about being owned though, considering the significant investments many of them made into the companies before they both went all but belly-up.

Massachusetts Representative Barney Frank even dated a Fannie Mae executive in the 1990s, leading many to speculate whether the two were mixing business with personal gain. And it’s a documented fact that Frank, among others, fought long and hard to maintain that neither institution had any “safety and soundness problems.”

With those kinds of relationships going on, it’s no wonder that Fannie Mae’s former chief credit officer, Edward Pinto, went on to speculate that both GSEs were purposely misrepresenting their actions for years before either of them ever got caught.

The Financial Crisis and Beyond

With heavy government backing, government financing and government excuses, Freddie Mac and Fannie Mae essentially did whatever they wanted to do… which was make money by jeopardizing and ultimately wasting billions of taxpayer dollars to help push the housing market right into a dangerous position.

And that bubble eventually burst, as all of them eventually do.

As Bloomberg’s Jonathan Weil pointed out last month, they are hardly the only institutions to blame for the lingering financial crisis of 2008. The Fed, with its prolonged low interest rates and “worthless regulators or banks with excessive leverage,” deserves censure, as well.

But Fannie and Freddie still played an enormously significant part in the mess, and they did so of their own free and well informed will. So this latest round of overwhelming greed is just another example of Freddie Mac conducting business as usual.

Was it wrong that they purposely barred a majority of Americans from refinancing their homes in the midst of falling mortgage rates… then capitalized on their unethical actions by trading on that knowledge?

Of course!

Just don’t expect anything to change anytime soon. As evidenced by its past and present actions, Freddie Mac is one company that can – possibly quite literally – get away with murder in the future.

Good Investing,

Jeannette Di Louie

Article by Investment U

Source: ForexYard

Fresh concerns regarding Greece’s debt negotiations sent investors to safe-haven assets during the beginning of today’s trading session. The news resulted in the US dollar recouping some of its recent losses against the euro. The EUR/USD dropped to the 1.3085 level before staging a correction during the evening session. The greenback was not as fortunate against other riskier currencies. The AUD/USD range traded for much of the day, maintaining its recent bullish trend around the 1.0725 level.

Turning to tomorrow, traders can expect significant volatility in the marketplace as the US Non-Farm Employment Change figure is set to be released. Wednesday’s ADP Non-Farm figure, which is widely considered an accurate predictor of today’s news, came in below expectations and resulted in some bearish movement for the US dollar.

At the moment, analysts are predicting that the US added 150K jobs in January. Should the final figure come in significantly below that number, the greenback may extend its losses. At the same time, traders will want to note that the employment statistic is notoriously difficult to predict. A better than expected figure is entirely possible, and could result in dollar gains ahead of markets closing for the weekend.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

This morning, UBS raised its price target on shares of Franklin Resources (BEN) to $113 per share as funds are flowing in at a faster rate that previously expected. With the higher price target, UBS maintained its neutral rating.

This morning, Union Pacific (UNP) declared its quarterly dividend of 60 cents per share, maintaining the amount paid to shareholders last quarter. Based on the current stock price, investors can expect a yield of about 2.1% going forward.

This morning Beazer Homes USA (BZH) reported net income of $0.7 million, or diluted earnings per share of $0.01 versus a loss in the first quarter of fiscal 2011 of $48.3 million, or $0.65 per share. Revenue came in at $188.5 million, compared to $109 million in fiscal 2011.

This morning, Bank of America downgraded shares of AK Steel (AKS) from neutral to underperform as rising pension costs could force the company to raise funds in the near future. With the downgrade, Bank of America set a price target of $9 per share.

Shares of Dow Chemical (DOW) were trading lower this morning after the company released its quarterly report. Excluding items, the company reported earnings of 25 cents per share, missing analysts’ estimates of 30 cents.

As Facebook joins the roughly 5,100 public companies trading on major exchanges in the United States, only a week ago shares were swapping hands on a completely different market… the secondary market.

And, for a growing number of investors and institutions, this alternative marketplace is quickly becoming a hot spot to potentially cash in on a number of firms before they go public.

In fact, you might even be eligible to participate… and not even know it.

The Truth About Secondary Markets

According to aonetwork.com, secondary market exchanges serve to facilitate the purchase and sale of illiquid, restricted and alternative assets, such as private company stock and restricted public equity.

Facebook, Zynga (Nasdaq: ZNGA) and LinkedIn (NYSE: LNKD) all sold on secondary market exchanges before they filed to go public.

Today, well-known firms such as Twitter, Bloom Energy, e-Harmony and Foursquare can all be found on these exchanges, as well.

And many other companies, tech start-ups especially, are finding secondary markets as nice alternatives to IPOs.

LinkedIn CEO Jeff Weiner explains, “Historically when companies had established a certain level of performance and maturity, the IPO was a natural next step. The reason for that was to generate liquidity… to get access to currency… capital… and [for] credibility. The secondary market can help check the box for a few of those objectives.”

So, could secondary markets ever replace the IPO?

Not a chance. Private companies aren’t required to disclose their financial information to investors like publicly traded firms. That’s one of the major risks in this market.

But as Reuters points out, “While the amount of information that would-be investors have is surely lower than if there were a formal SEC-registered prospectus, the rise of the internet has made it much easier to do reasonably good due diligence on how much a company might be worth.”

That’s a big reason the amount of capital flowing in the private-share trading business has more than doubled in value, to $7 billion, in just the past two years.

Even more, Congress is looking to pass laws that could push even more liquidity to this market by doubling the amount of shareholders, to 1,000, that private companies are allowed before needing to publicly disclose their finances.

This is very promising news for companies, like SecondMarket and SharesPost, involved in the secondary market…

Introducing SecondMarket and SharesPost

Founded in 2004, SecondMarket offers a number of asset-backed investments – including auction-rate securities, bankruptcy claims, private company stocks and fixed income products. Meanwhile, SharesPost specializes only in the selling of private company stock.

All of the companies mentioned above (Twitter, Bloom Energy, etc.) either trade on SharesPost, SecondMarket, or both. These two companies currently dominate the secondary market space.

The main purpose of these firms is to connect buyers and sellers to trade the various assets they offer. In a way, they are sort of like e-Harmony or LinkedIn, but for investors and institutions.

For example, SecondMarket uses a proprietary matching algorithm to search through its 75,000-customer base and find good matches between buyers with sellers. After a trade is complete, the companies then take a cut of the total transaction, roughly 3%. This business model has made SecondMarket worth about $200 million, according to The Wall Street Journal.

And now a slew of new competitors are catching on…

For example, Crain’s New York Business reports financial services firm Knight Capital Group (NYSE: KCG) just established its own private-share trading business in December. And LiquidNet, an institutional brokerage firm, also entered this space last year.

As I eluded earlier, not all investors are eligible to enter this market. It’s only open to financial institutions and accredited investors. In other words, you need to be a hedge fund, investment bank, or have a net worth of $1 million and an annual income of $200,000, or a joint income of $300,000 with your spouse, to start investing.

Plus, it’s worth mentioning many of these firms have minimum transaction requirements. For instance, SecondMarket has a minimum transaction amount of $100,000. So you need to have a good amount of cash to get involved.

The Bottom Line

Of course, before entering any investment, it’s important to do your homework first and know what you’re getting into. The secondary markets are certainly not for everyone, but it is a very interesting development and is helping reshape the way companies prepare for their IPO.

Good investing,

Mike Kapsch

Article by Investment U

London Gold Market Report
from Adrian Ash
BullionVault
Thurs 2 Feb., 09:15 EST

The WHOLESALE-MARKET gold price slipped 0.5% from a new 8-week high in London Thursday morning, while global stock markets stalled after a 3-day rise and commodities also edged back.

The Euro fell from $1.32 on the forex market for the third time this week after chief finance minister Jean-Claude Juncker said new proposals for stemming the currency zone’s debt crisis – agreed at a summit on Monday – were “largely insufficient”.

The gold price in Euros touched €43,900 per kilo, a level breached only five times during the surge to all-time record highs of summer last year.

Beijing meantime said China’s full-year gold mining output in 2011 – all of which was bought domestically, since exports are banned – hit a record 361 tonnes, a rise of 5.9% on 2010.

China’s 2011 gold imports may have reached 490 tonnes, perhaps twice the 2010 level, according to Credit Suisse.

So far in 2012, imports of Gold Bullion to India – the world’s No.1 consumer – have been “significantly above average” reports UBS strategist Edel Tully, despite last month’s doubling of import duties.

The central bank of Vietnam said today it plans to “mobilize” private gold holdings via “credit institutions” which would effectively replace the private operations banned last year.

“For now, gold may well remain volatile,” says Dirk Wiedmann, head of investments at Rothschild Wealth Management, now running some €12 billion ($15.7bn) in client funds.

“[But] it is increasingly attractive as the only truly hard currency…[Our] large positions in gold seek to preserve and grow the real value of our clients’ wealth.”

“We can’t put $100 trillion of credit in a system-wide mattress,” says Bill Gross, founder and co-manager of the giant Pimco bond-funds group. “But [savers and creditors] can move in that direction by delevering and refusing to extend maturities and duration.”

Because interest rates cannot go down from zero, bond prices have little room to rise, says Gross, and so “Zero-bound money may kill as opposed to create credit.

“It may, as well, induce inflationary distortions that give a rise to commodities and gold as store of value alternatives when there is little value left in paper.”

January’s sharp rise in global stock markets, however, means that “Strategists at the biggest banks are capitulating on their bearish forecasts,” reports Bloomberg today, citing a sharp reversal in predictions and recommendations after last month’s 7% jump in emerging-economy equities.

“We have been increasing exposure to risk assets over the past six weeks,” says Andrew Cole, director of strategic policy for Baring Asset Management’s £9 billion multi-asset portfolios.

“We see a self-help cycle materialising” thanks to the European Central Bank’s long-term banking loans, Cole tells Investment Week after buying £350m in Italian government bonds.

“Italy is not going to go bust and this is our way of getting exposure to the improved liquidity.”

“We believe that the ‘risk off’ attitude of investors which took hold in the second-half of 2011 is largely over,” agrees Angelos Demaskos, chief investment officer of the £35.6 million Junior Gold Fund ($56m) at Sector Investment Managers in London to Proactive Investors earlier this week.

Anyone who “wanted to sell” junior gold mining stocks has already sold, Demaskos believes, “and there is a very strong possibility they will be re-rated to catch up with the underlying commodity.”

Over the last 12 months, Sector Investment’s Junior Gold Fund has lost 9.0% of its value, according to TrustNet.

The physical gold price has risen 29.7% in British Pound terms.

Silver bullion has risen 11.9% over the last year.

“It’s been a good month” for US silver coin demand, says Michael Kramer of authorized US Mint distributor Manfra, Tordella & Brookes, quoted by Kitco News and pointing to January as the second-strongest monthly sales of silver bullion Eagle coins on record.

Demand was “greatly” helped by the launch of new 2012 coins however, Kramer added., because “People always want the brand-new coins, so January sales are always pretty good.”

Adrian Ash
BullionVault

Gold price chart, no delay   |   Buy gold online at live prices

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

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