Municipal Bond Markups are Still Excessive
(Mar 2014)
Monday's Wall Street Journal article, Muni Bond Costs Hit Investors in Wallet: Investors Pay Twice as Much for Municipal Debt as for Corporate Bonds, points out yet again that investors pay far more to buy and sell municipal bonds than they pay to buy and sell similar quantities of corporate bonds or common stocks. The article cites a recent S&P study that finds investors buying a $100,000 municipal bond pays an average spread of 1.73% or $1,730 - twice as much as the 0.87% average spread...
SEC Scrutinizing Exchange Traded Notes
(Dec 2013)
Risk.net is reporting that the Office of Capital Markets Trends of the Securities and Exchange Commission (SEC) is looking into the details of exchange traded notes (ETNs). The office, headed by Amy Starr, is looking into the fees and the disclosure of risks and formulas used to determine ETN indicative values according to statements made by Starr at the Structured Products conference in Washington, DC on December 10.
ETNs have been a frequent subject on the blog and regulators have issued...
Non-Transparent ETFs and Foreign Stock Funds
(Dec 2013)
Typically, it's better to know more about an investment rather than less. When it comes to mutual funds and exchange-traded funds (ETFs), transparency means knowing what the fund is buying and selling, and therefore the underlying investment strategy.
Some commentators have claimed that fund transparency is a bad thing for investors. If a fund has a predictable investment strategy, then traders can front-run its trades, which may be large enough to move prices. The criticism is even louder...
Study Finds that the Average PE Investor Just Breaks Even
(Nov 2013)
Brendan Conway over at Barron's pointed out an interesting new study from the National Bureau of Economic Research entitled: Valuing Private Equity. Private Equity (PE) investments -- typically called limited partnerships (LPs) -- are long-term, illiquid securities representing (perhaps not surprisingly) an equity interest in a private company. Investors are typically referred to as limited partners. The study notes that while private equity returns tend to be high, "it remains controversial...
Fidelity to Launch Mutual Fund Based on Hedge Fund Strategy
(Oct 2013)
We see it again and again: complex investment strategies packaged into traditionally conservative investments. We have seen corporate debt linked to exotic derivatives positions (structured products), exchange-traded products linked tocomplex futures positions (commodities and volatility ETPs), variable annuities linked to options strategies (structured product based variable annuities), and even certificates of deposit with complex payoff structures (structured CDs). Now, we are seeing more...
Goldman Sachs Sued Over Aluminum Storage
(Aug 2013)
We mentioned a couple of weeks ago that Goldman Sachs has been in the business of aluminum metal storage for quite a while. A NY Times investigation found that, through a subsidiary, Goldman Sachs has been artificially inflating the prices of aluminum by magnifying storage costs.
Bloomberg News, the NY Times, and Law360 arereporting that Superior Extrusion Inc., a Michigan-based aluminum processor, has filed a class action lawsuit that alleges Goldman Sachs and theLondon Metal Exchange (LME)...
JP Morgan to Exit the Physical Commodities Business
(Jul 2013)
The Wall Street Journal is reporting that JP Morgan plans to sell their physical commodities assets "amid heightened regulatory scrutiny of Wall Street's ownership of such assets."1 JP Morgan joins several other investment banks, including Goldman Sachs and Morgan Stanley, who are looking to sell or wind down their stakes in physical commodities.
According to the WSJ, the sale by JP Morgan will include trading desks that trade metals, power and fossil fuels. JP Morgan has drawn particular...
Regulators Impose Record Fine for Brokerage Firm's Supervisory Failures
(Jul 2013)
Yesterday evening, the Wall Street Journal reported that FINRA and several US exchanges fined the brokerage firm Newedge USA, LLC $9.5 million over alleged failures to adequately restrict automated client trading activity that "sought to manipulate U.S. markets for nearly four years." The trading activity took place on several exchanges including NYSE Euronext, NASDAQ OMX, and BATS Global Markets according to the WSJ article. FINRA's press release can be found on the FINRA website.
Newedge...
Hedge Funds and Private Placements May Soon Solicit Retail Investors
(Jul 2013)
According to the Wall Street Journal, the SEC will soon lift the ban on soliciting shares of hedge funds and other private placement investments to the general public, "a move that's expected to unleash a wave of ads touting such investments." We've been covering this story for some time, as the SEC has seemed reluctant to implement this new rule due to concerns from Congress and others over the lack of investor protections.
However, the SEC may have no choice. Lifting the ban was required by...
