Friday, December 17, 2010

Picower Estate Settles For $7 billion

AP source: Madoff trustee gets $7B settlement
AP source: Madoff trustee reaches $7B settlement with estate of Fla. philanthropist

NEW YORK (AP) -- The trustee recovering money for Bernard Madoff's burned investors has reached a $7.2 billion settlement with the estate of a Florida philanthropist and businessman.

The figure was provided Friday to The Associated Press by a person familiar with the civil case against the estate of Jeffry Picower. The person was not authorized to speak publicly about the settlement and spoke on condition of anonymity.

Court-appointed trustee Irving Picard planned an announcement Friday in Manhattan.

Picower drowned after suffering a heart attack in the swimming pool of his Palm Beach, Fla., mansion on Oct. 25, 2009.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

NEW YORK (AP) -- The trustee recovering money for Bernard Madoff's burned investors has reached a settlement with the estate of a Florida philanthropist and businessman who made billions of dollars off the fraud.

Court-appointed trustee Irving Picard planned an announcement Friday in Manhattan about the estate of Jeffry Picower, who drowned after suffering a heart attack in the swimming pool of his Palm Beach, Fla., mansion on Oct. 25, 2009.

The amount of the settlement was not immediately made public.

Picower, who was 67 when he died, invested many years ago with Madoff. Picard's investigators said that, over time, he withdrew about $7 billion in bogus profits from his accounts. That amounts to more than a third of the dollars that disappeared in the scandal.

That money was supposedly made on stock trades, but authorities said that in reality it was simply stolen from other investors.

Picower's lawyers claimed he knew nothing about the scheme, but the trustee argued in court papers that he must have known that his returns were "implausibly high" and based on fraud.

Lawyers for Picower's estate have been in negotiations with the trustee for some time.

After Picower drowned, his will revealed that he had earmarked most of his fortune for charity, but his widow said in a statement that the family wished to return some of it to Madoff's victims through "a fair and generous settlement."

A huge charitable foundation that Picower had created with part of his fortune closed in 2009 after its assets were wiped out in the Madoff fraud.

It had donated hundreds of millions of dollars to colleges, libraries and other nonprofit groups.

Monday, December 13, 2010

Bernie Madoff Memoribilia: Price Plumets?

From timesonline

Madoff memorabilia sells for $1m, but watches fail to make their markChristine Seib in New York
Authorities in the United States have raised more than $1 million (£600,000) for victims of Bernard Madoff’s $65 billion Ponzi scheme after buyers paid as much as 20 times the estimates at an auction of goods that belonged to the swindler and his wife, Ruth.

Lester Miller, 77, a businessman from St Louis, Missouri, spent about $100,000 on pieces of Mrs Madoff’s jewellery, including a gold charm bracelet for which he paid $3,500, $2,500 above the estimate. He told The New York Times that he would distribute the jewellery among his daughters and granddaughters on a cruise to Mexico this weekend.

He said that he also planned to tell his granddaughters that there was a lesson to be learnt from the Madoffs: “If it’s too good to be true, it’s not right.”

Less sparkly items also excited bidders. A ring buoy from Mr Madoff’s yacht, named Bull, was valued at a maximum of $160 but fetched $7,500, while a set of three T-shirts with the Bull insignia, estimated at between $120 and $210, went for $1,300.

Buyers clamour for Madoff’s trophy properties
Dave Goodboy, who works for a New York-based hedge fund, was the proud new owner of the buoy, which he described as a Wall Street version of a relic from the Titanic.

Bidders were less enamoured with watches than the Madoffs had been. One of the prize lots — a Rolex Monoblocco, also known as the Prisoner’s Watch because the timepieces were sold to British prisoners of war during the Second World War — sold for $65,000, far below the maximum of $87,500 at which it had been valued.

Auctioneers withdrew the sale of a 1935 Rolex watch that had been valued at up to $54,000 after bids did not go higher than $35,000.

Some buyers were waiting for more esoteric items to come up for sale. Chuck Jones, who bought two wine coolers for $250, told The New York Times that he was biding his time until a lock of the swindler’s hair appeared on eBay or the like.

About 700 people packed into the ballroom of the New York Sheraton on Saturday to snap up pieces of Wall Street history, as Gaston & Sheehan, the Texan auctioneers, put 189 lots of the Madoffs’ property on the block. A further 1,000 people were bidding online for the goods, which had been seized by the US Marshals Service when they took possession of the Madoffs’ properties in Manhattan, Montauk and Palm Beach. The properties and possessions were forfeited by the Madoffs as part of the sentencing for his 20-year fraud.

Lark Mason, who was observing the auction, said: “They didn’t buy the things they were passionate about, they just wanted more and more.”

A blue satin New York Mets baseball jacket with the name Madoff stitched across the back had been valued at between $500 and $700 but went for $14,500.

Two pairs of Cartier diamond earrings owned by Mrs Madoff were sold for $70,000 each, far above their $9,800 and $21,400 estimates.

The Great American Wikigeek Bluff

originally published:

Wikileak's lead geek, Julian Assange made the threat that he intends to release information that will bring down a large American bank or two. Provided his success in terrorizing governments with the same rhetoric and actions, Assange's statement is being taken seriously by the financial sector. The media discovered Wikileak's earlier suggestions that they have an entire hard drive of data on Bank of America (NYSE:BAC) that they plan on making public. This finding has made many believe it is Bank of America (NYSE:BAC) that is the specific target of Wikileaks. However, Assange has never specifically named the institutions involved in his banking sector threat. Despite the nebulous nature of his statements, Bank of America (NYSE:BAC) shares retreated when the rumor first hit the wire. In fact, according to Fox Business Network's Senior Correcpondent, Charles Gasparino reported that Bank of America (NYSE:BAC) has set up a war room to deal with any potential fall out from the threatened Wikileak releases. Supposedly, this war room is concerned about the Countrywide acquisition in 2008, mortgage creation, and the Merrill Lynch deal.

While these three situations are sketchy, there isn't much we don't already know. The stock market appears to shrugging off Assange's threats as the financial sector has been on sharp move higher since the initial rumor hit the Street. The only way this threatened data dump will have any effect on the stock market is if the information is truly shocking. I mean nuclear bomb level material. I strongly doubt that this is the case, thus believe Wikileak's is bluffing about the severity of what they have. We have been through a lot with the financial meltdown, its going to take tremendously shocking news to create further ill effects. Smart investors will use any Wikigeek rumor driven pullbacks as opportunities to buy in the financial sector. As the famous Wall Street axiom states, sell the rumor, buy the news.

Thursday, December 09, 2010

Short Euro Now

It's time. We entered short EUR/USD when the 1.3397 figure was broken on the downside. Expecting a major drop here as the USD gains strength. Sub 1.20000 is the target.

Monday, December 06, 2010

Gold: Be Very Afraid

Gold, that storehouse of value, has had an amazing bull run over the last two years. Gold prices have nearly doubled since 2008, and it’s up more than 25% this year alone. The financial press is full of praises for gold investing and every day I notice another gold broker ad on the TV or radio attempting to attract more buyers to the yellow metal. The public has started to notice and are piling into this supposed can’t-lose-investment in untold numbers.

Gold bugs point out that prices are still well below the inflation adjusted high of $2300 per oz hit in 1980. Some of the more optimistic gold bugs are even calling for prices to eventually hit $5000 per oz before this move is over. They cite worldwide economic turmoil and potential debasement of the currency as prime reasons for the massive bull market to continue. Even analysts from respected investment houses have jumped on the bullish bandwagon. Goldman Sachs has recently issued a statement calling for gold to continue climbing into 2012 with a target price of $1750 per oz.

While many signs point toward further up-moves in price, I would suggest extreme caution in going long at these levels. It’s a basic tenant of the markets that when most are saying one thing its time to start thinking the opposite way. Remember, these firms are heavily invested in gold and are likely talking their book. John Nadler, senior analyst at Kitco Metals told that all these Wall Street buy recommendations remind him of the speculation in 2008 that drove oil to record heights.

“I don’t think gold is an opportunity at $1400 per oz. Just because the price has been above $1000 per oz for the last 14 months, everyone thinks this is a new paradigm. It’s very similar to what we heard about oil a couple of years ago,” Nadler stated.

The fact is that gold costs around $400 per oz to $500 per oz to produce and is trading near triple this cost. If that doesn’t signal a momentum bubble, I don’t know what does. In addition, the daily chart pattern looks like a double top may form in the $1424 range at the previous high. Can gold go higher? Absolutely. Is it a sure thing? No way. I believe its time to start looking to hedge your holdings or get ready to go short in the near future. You don’t want to get caught buying the top tick, or holding the bag.

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Saturday, December 04, 2010

Will A Wiki Leak Sink USS Bank of America?, a controversial dumping ground for government and corporate secrets, has made it known that it intends to make public information that it says will sink a major U.S. bank. WikiLeak founder Julian Assange stated on Tuesday that he intends to release this data sometime in 2011, fueling rumors on Wall Street that Assange is specifically targeting Bank Of America (NYSE: BAC) with an entire hard drive of negative information. This rumor sent the bank’s stock tumbling upon its publication.  However, it has since stabilized and was actually trading positively on Thursday.  The old “sell the rumor, buy the fact” mantra may be accurate in this case.

While WikiLeaks obviously has the potential to embarrass governments, does the Web site actually have the power to do anymore damage to the U.S. banking sector than has already been done?  We’re well aware of the banking crisis, what possible information could be on that supposed hard drive that the public doesn’t already know?  Bank of America has already been beat to hell by the banking crisis, and the bank’s purchase of the toxic Countrywide Mortgage Company and subsequent $45 billion bail-out has made it the poster boy for what’s wrong with the banking business.  While the bank has paid back the bail out funds, the bad taste still remains.

In my opinion, the information on that hard drive would have to show extreme criminal behavior and or a conspiracy to defraud for it to have any impact at all the stock price.  Rumors are very powerful things on the Street of Dreams; however, their impact rarely lasts long.   Clearly, being a buyer after the WikiLeaks rumor knocked down the stock price would have been a smart move.  In fact, my opinion is, Bank of America remains a smart investment decision.

Thursday, December 02, 2010

Wells Fargo Busted For Overdraft Fee Timing

Remember the mutual fund timing scandal? It rocked a couple of hedgees and others using this edge illegally. Well, a similar thing is happening now in the banking industry. I call it "Overdraft Fee Timing" and it looks like Wells Fargo may be the first bank to come under pressure for this anti consumer, greedy and down right nasty practice. What happens is banks shuffle and time your withdrawals in such a way to maximize their overdraft fees. If you ever watch how charges hit your account, you will clearly see what I mean. There is no question the process is manipulated and timed to the institutions advantage. It's high time that someone stands up and demands a refund of all the money stolen from consumers from overdraft fee timing. I am happy to see things have started to move in this direction per the article below. WHERE ARE THE CLASS ACTION LAWYERS?? THIS LOOKS LIKE A SLAM DUNK!

The following article by Marian Wang was originally published by

Read: Documents Reveal One Bank’s Plan to Squeeze Customers for More Overdrafts
by Marian Wang
ProPublica, Dec. 1, 2010, 11 a.m.
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A Wells Fargo bank branch in Berkeley, Calif. (Justin Sullivan/Getty Images)
In recent months, rules from the Federal Reserve [1] have made it harder for banks to impose hefty overdraft fees when customers try to make debit transactions or ATM withdrawals without enough money in their checking accounts.

Before the rule change, banks could automatically sign up customers for what they often referred to as overdraft coverage or overdraft protection. The so-called “protection,” it’s worth emphasizing, isn’t from overdraft fees themselves—it’s from the potential embarrassment or hassle that comes when a transaction is rejected due to insufficient funds. The “protection” also allows the bank to collect hefty fees for covering such transactions.

But if the past is any indication, banks will go to great lengths to protect those fees, which are big business. As the New York Times recently reported, banks make more on those fees [2] than they do on penalties from credit cards.

To give a glimpse of just how hard banks have worked to keep overdraft fees flowing, we review some internal e-mails and memos from earlier in the decade that Wells Fargo turned over in response to a class-action lawsuit in federal court in San Francisco. The documents—which we’ve loaded into our document viewer— sometimes veer into banker-speak, but we’ve tried to translate as needed.

“We are currently analyzing the change in frequency of overdrafts,” Wells Fargo Executive Vice President Ken Zimmerman wrote in an April 2005 e-mail [3]. The cause for concern at the time? An unexplained decline in revenue from overdrafts.

Zimmerman noted in a later e-mail [4] that they’d analyzed the decline and “if there is good news to be had,” it is that it was probably due to “increases in both the volume and size of tax refunds [5].” The tax refunds, especially when directly deposited to consumers’ bank accounts, had provided an additional cushion of cash that protected many consumers from overdrawing their accounts for a period of time, but customers would eventually resume “normal OD [overdraft] behavior [6]” after the “excess balances are depleted.”

This was good news, according to Zimmerman, because it defied the bank’s earlier suspicions. Several years before, Wells Fargo began to re-engineer the way it processed checking transactions in order to maximize the number of overdraft fees it could charge consumers. The bank was afraid that the small segment of customers that overdraft the most—the “high-OD customer segments”—would notice and react.

“Given our dependence on a small set of OD consumers [7] (4% generate 40% of total OD/NSF revenue),” Zimmerman wrote, “a small change in behavior within this group can cause a large change in revenue.”

What Wells did is by now well known: It engineered its processing of transactions to mix together different types of transactions—debit-card purchases, checks, and automated clearing house transactions—and reordered each transaction to be processed from the largest to the smallest at the close of every business day.

The changes, referred to as “Sort Order Optimization [8]” and implemented in 2001, were intended to maximize the number of fees potentially incurred by the smaller transactions that would be processed later. An August 2002 bank memo marked “HIGHLY CONFIDENTIAL” shows that this initiative was projected to boost Wells Fargo’s fee revenue by more than $40 million annually [9].

The bank had also extended what it called a “shadow line” of credit to consumers using debit cards or making ATM withdrawals, triggering more fees where previously these transactions would have just been declined. These initiatives, as part of a series of changes, were expected to together generate an additional $138 million in overdraft revenue for the bank each year, according to the bank’s memo.

For Wells Fargo, boosted revenues weren’t the official rationale, of course. One bank document explained that the changes in posting order would yield the following benefits to consumers:

More of a customer’s high dollar items will be paid, which we believe are the transactions a customer feels are most important (e.g., mortgage or rent).

In court, U.S. District Judge William Alsip didn’t buy the bank’s arguments. In a 90-page ruling against Wells Fargo, he said the bank had acted in bad faith and that its “true motives” for re-engineering its processing of transactions were “gouging and profiteering.” The ruling came down on August 10—the same day Wells Fargo told investors [10] that the Fed’s new rules on overdrafts would cost the company $500 million in fee revenue [11].

A Wells Fargo spokeswoman told me that the company is disappointed with the judge’s ruling and is appealing the decision. “We believe Wells Fargo’s method of processing transactions has been appropriate and consistent with customer’s interests and the laws and rules of governing regulatory authorities.” She also said that Wells Fargo—like many banks—offers a type of overdraft program that lets consumers link checking accounts to eligible credit cards or savings accounts to cover overdrafts, and the fees for this type of protection are typically smaller than the standard overdraft fees.

Several months have passed since the ruling against Wells Fargo and the implementation of the Federal Reserve’s new overdraft rules, but as TIME magazine notes, statistics on how many consumers have signed up for the banks’ “overdraft protection” vary depending on who you ask [12].

Consumer Reports—which has told consumers, “Don’t opt in! [13]” in order to avoid the hefty fees that were once automatic—released a poll earlier this month that found that only 22 percent of bank customers [14] chose to opt-in. An August survey by the American Bankers Association, however, put that figure higher—at 46 percent [15]—but still lower than the figure quoted by the Wall Street Journal last week: a whopping 75 percent [16]—meaning that three-quarters of bank customers supposedly chose overdraft fees over declined transactions.

What the surveys by Consumer Reports and Moebs Services—the bank-industry consulting firm whose survey was cited by the Journal—both agree on is that previous experience with overdrafts doesn’t seem to deter customers from opting in to overdraft coverage services that allow banks to keep collecting these fees, which often cost $35 or more for each transaction.

The Federal Reserve currently requires consumers to opt in to bank programs that charge fees for debit and ATM overdrafts, but it still allows banks to charge the fees by default when automated debit transactions and checks overdraw checking accounts. Last week, the Federal Deposit Insurance Corporation, which oversees state-charted banks, issued guidance to banks on how to curb abuses of overdraft protection programs [17] and help customers who chronically overdraft to find better alternatives and avoid hefty fees.

Stop, Google, Stop !!!

I remember trading back in the late 1990s; anything with a .com name would command an unbelievable valuation and stock price. Getting in on one of these IPOs was considered the holy grail of investing. Companies with zero sales and negative revenue but a good business plan could command $100′s of millions in investment dollars. Sky high stock prices had no basis in reality and the stock market soon learned a harsh economic lesson when the bubble burst.

Google’s (Nasdaq: GOOG) recent $6 billion offer for local online coupon company Groupon reminds me of the start of the Internet bubble – though there’s one big difference: the stock market is rejecting the deal. Have investors finally learned the hard earned lessons of the bubble bursting scenario? Are stock investors today far more sophisticated than they were at the turn of the 21st century? Well, it sure looks like it. Google plummeted 25 points when its offer for Groupon was made official. This represents about $8 billion in lost market valuation for the search engine giant. Hmmmm, the buy-out offer is for about $6 billion and the acquirer’s market value plummets by around $8 billion when the deal is announced? It looks like investors are sending a clear message to the buy out team at Google and the message is, DON’T DO IT.

Groupon is a thriving, fast growing business that earns about $500 million per year. This is unlike the typical non-revenue producing dream companies of the Internet bubble. However, Google’s $6 billion offer represents more than 10x earnings; an excessively high offer in anyone’s book. Groupon is a great idea that has cracked the local market. Regardless of the concept, what is Google really getting for its money? Future revenue for Groupon could easily exceed $1 billion per year but there are no barriers to entry for competitors. Their idea has been done on a small scale, off line for many years. Why doesn’t Google just launch its own or buy one of the dozen or so competitors in the same space? It would cost a fraction of the price, and with Google’s marketing power, Groupon would likely soon be playing second fiddle. Unless there is some type of proprietary information that investors are not privy to yet, Google could be making its biggest mistake ever.

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