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Fed's Quarterly Interest Rate Forecasts to Begin Later This Month
The Federal Reserve plans to provide quarterly updates to the public about its how long it will keep short-term interest rates at record levels. The rate forecasts will start later this month. The Fed currently plans to keep the record low short-term rate through mid-2014. Low interest rates make it difficult for people to earn very much money through savings accounts or CDs. Take a look:
The Gross Domestic Product (GDP) grew by 2.5% in the third quarter. This is the fastest pace in over a year. GDP grew by just 1.3% in the 2nd quarter. This is according to an advance estimate released by the Bureau of Economic Analysis.
The economy is probably not a strong as the 2.5% suggest. Barrons reports that Americans appear to be dipping into savings to pay for purchases. Income is also trending lower.
Netflix lost 800,000 subscribers since June. The huge loss in subscribers did not impress investors, who dumped the stock today. Netflix shares (Nasdaq: NFLX) plunged 35% on Tuesday. Some analysts have been lowering targets for Netflix. The Wall Street Journalreports that the company believes it still has plenty of working capital. Netflix has a cash level of $366 million. Take a look:
Hulu has decided not to sell itself after months of talks with possible buyers. Hulu's owners released a joint statement about the decision to terminate the sale process:
The following is a joint statement from Hulu owners News Corporation, Providence Equity Partners, The Walt Disney Company and the Hulu senior management team:
“Since Hulu holds a unique and compelling strategic value to each of its owners, we have terminated the sale process and look forward to working together to continue mapping out its path to even greater success. Our focus now rests solely on ensuring that our efforts as owners contribute in a meaningful way to the exciting future that lies ahead for Hulu.”
Reuters reports that bids ranged from $500 million to $2 billion and possible buyers include Google, Amazon, DirecTV and DISH.
UBS CEO Oswald Grubel Resigns Following Loss From Rogue Trading
UBS CEO Oswald J. Grubel has resigned from the bank following the unauthorized trading that cost the company $2.3 billion. Sergio P. Ermotti has been named Group CEO on an interim basis following Grubel's resignation.
UBS Chairman Kaspar Villiger said in a statement, "The Board regrets Oswald Grubel's decision. Oswald Grubel feels that it is his duty to assume responsibility for the recent unauthorized trading incident. It is testimony to his uncompromising principles and integrity. During his tenure, he achieved an impressive turnaround and strengthened UBS fundamentally. He steps down having helped make UBS one of the world's best capitalized banks. On behalf of the Board of Directors, I extend my heartfelt gratitude to him for everything he has done for UBS. I would like to thank Sergio Ermotti for taking over the interim leadership of UBS. With his extensive industry experience and together with the executive leadership team he will continue to implement UBS's strategic alignment."
Stocks Plunge on Fed's Pessimistic Assessment of U.S. Economy
Stocks are down this morning following an assessment from the Fed that a short term recovery is not in the cards. The Fed also says the U.S. economy has "significant downside risks to the economic outlook, including strains in global financial markets."
The assessment is not really surprising given the lack of jobs created over the past two years, but investors didn't like it. The Dow is down over 3% (337 points) and the Nasdaq and S&P 500 are each down by over 2.5%. Markets in Asia and Europe are also trading in negative territory. Take a look:
UBS Shares More Details on $2.3 Billion Loss From Unauthorized Trading
UBS shared more information today on the massive $2 billion in unauthorized trading that occured under its nose. The trading was conducted by a trader in its Global Synthetic Equity business in London. The trader in question, Kweku Adoboli, 31, was charged by UK authorities with fraud. The Guardian says Adoboli faces charges of " including dishonestly falsifying a record of an exchange traded fund and false accounting."
In its statement today, UBS says the loss from the unauthorized trading is $2.3 billion. UBS says the massive $2.3 billion loss resulted from unauthorized speculative trading in various S&P 500, DAX, and EuroStoxx index futures over the last three months.
We have now covered the risk resulting from the unauthorized trading, and the equities business is again operating normally within its previously defined risk limits. The loss arising from this matter is USD 2.3 billion. As previously stated, no client positions were affected.
The loss resulted from unauthorized speculative trading in various S&P 500, DAX, and EuroStoxx index futures over the last three months. The positions taken were within the normal business flow of a large global equity trading house as part of a properly hedged portfolio. However, the true magnitude of the risk exposure was distorted because the positions had been offset in our systems with fictitious, forward-settling, cash ETF positions, allegedly executed by the trader. These fictitious trades concealed the fact that the index futures trades violated UBS's risk limits.
Following inquiries directed to him by UBS control functions that were reviewing his positions, the trader revealed his unauthorized activity on September 14, 2011.
The father of UBS trader Kweku Adoboli says he does not question his son's integrity. He says it could be a mistake. Take a look:
Swiss bank UBS announced today that it lost $2 billion in unauthorized trading. The company released the following brief statement.
UBS has discovered a loss due to unauthorized trading by a trader in its Investment Bank. The matter is still being investigated, but UBS's current estimate of the loss on the trades is in the range of USD 2 billion. It is possible that this could lead UBS to report a loss for the third quarter of 2011. No client positions were affected.
Bloombergreports that UBS shares fell as much as 9.6% in Swiss trading. The shares recovered some in later trading, but were still down 6.3%.
Investors are going to need a better explanation for a $2 billion loss than the one given by UBS. Details will be needed as to how an employee was able to blow $2 billion and what UBS is doing to prevent this from ever happening again.
Reuters has provided a good roundup here of past trading losses by major banks, such as the Barings collapse in 1995 after a future traders lost $1.4 billion in derivatives trading.
August 2011 Was Worst August for Stocks in Ten Years
A rally at the end of the month helped offset a very tough month for stocks. Investors will be happy to see August go. CNBC reports that the major stock indexes logged their worst August in ten years. The Dow lost 4.36% in August, the Nasdaq lost 6.42% and the S&P was down 5.68%. The Dow is now barely in positive territory with a 0.31% gain on the year. The Nasdaq and S&P 500 are both in the red.
CNBC also reports that statistically September is the worst month out of the year for the Dow and the S&P 500. It has historically been a better month for the Nasdaq. None of this historical data really helps indicate what will happen in September 2011.
The major news of the day was the government filing suit to stop the AT&T's acquisition of T-Mobile. The jobs report could make a big impact on the stock market on Friday. Take a look:
S&P Downgraded Google to Sell Because of Motorola Deal
Google is currently trading near the $500 mark. S&P downgraded Google three days ago from Buy to Sell. The S&P also cut its target for Google to $500 from $700, which is not much better than it is trading now.
A Forbesarticle lists several reasons from S&P analyst Scott Kessler about why S&P downgraded Google. It has everything to do with the fact the S&P does not think the Motorola acquisition is good for Google.
S&P thinks the Motorola deal will not close as quickly as Google believes. They also don't think it will completely solve Google's patent issues. They also don't like Google in hardware and think the merger may scare off some of Google's Android partners.
Stocks Tumble on Philly Fed Data, Morgan Stanley GDP Downgrade
Stocks dived into the red this morning. There has been a slight recovery. The DOW is down over 440 points (nearly 4%) and the S&P 500 and Nasdaq are both down over 4%.
Two news items are impacting stocks this morning. Reuters reports that the Philadelphia Federal Reserve Bank said its business activity index dropped to minus 30.7 from positive 3.2 the month before. This activity level was also far below forecasts. Analysts were expecting a positive 3.7.
The other negative news item is that Morgan Stanley has slashed its 2011 and 2012 GDP estimates. Morgan Stanley cut growth for 2011 to 3.9% from 4.2%. The also reduced the 2012 GDP forecast from 4.5% to 3.8%. CNBC reports that Morgan Stanley also sees the U.S. and Europe as being "dangerously close to a recession."
The DOW has plunged over 400 points today following S&P's downgrade of U.S. debt. Worries about the Europe's financial problems are also weighing down stocks.
With two hours remaining in trading the DOW is down over 450 points, nearly 4%. The DOW has fallen below the 11,000 mark. The S&P 500 and Nasdaq are both down nearly 5%.
The plunge follows last Friday's awful day for stocks, where the DOW fell over 500 points.
CNN Money reports that experts ay the downgrade itself should not matter. They say the U.S. still has a strong credit rating.
Stocks Plunge on Economic Concerns. Dow Drops 513 Points.
Stocks plunged today on economic concerns. There is the concern that the U.S. economy will fall back into a recession. There are also concerns about major debt troubles in Spain and Italy. Tomorrow's job report is also expected to be weak, which will not help Wall Street. ADP is forecast growth of 114,000 jobs, but its estimates were way over in June.
It was an ugly day for the Dow, S&P 500 and Nasdaq. The Dow fell 513 points, which is the ninth biggest point drop on record. It is also the biggest drop since Oct. 22, 2008, when it lost 514 points.
The Dow fell by 4.31%. The percentage drops were even bigger for the S&P 500, which fell by 4.78%, and the Nasdaq, which fell by 5.08%. Investors will likely be relieved when this week is finally over.
Media stocks were particularly hammered today. CBS fell over 9%. Comacst and Time Warner each lost over 4%.
Web.com, a provider of internet services for business, has announced it will acquire Network Solutions, a provider of website services and domain names. Network Solutions is one of the original providers of domain names. Web.com paid $405 million in cash for Network Solutions, plus 18 million shares of Web.com common stock. Network Solutions is currently majority owned by General Atlantic LLC.
David Brown, Chairman and CEO of Web.com, said, "Our integration strategy will be similar to our successful acquisition of Register.com, and we will be in a strong position to cross-sell and up-sell our services to Network Solutions' approximately two million retail customers and hundreds of thousands of wholesale customers."
Tim Kelly, CEO of Network Solutions, said in a statement, "Network Solutions has been a pioneer in this industry for nearly 30 years. We are very excited to combine our expertise, resources, customers and award winning customer service with Web.com."
This is the second big purchase of a leading doman name provider this summer. GoDaddy was sold to a group of three private-equity firms in July for $2.25 billion.
Hulu has decided not to sell itself after months of talks with possible buyers. Hulu's owners released a joint statement about the decision to terminate the sale process:
UBS CEO Oswald J. Grubel has resigned from the bank following the 
Google is currently trading near the $500 mark. S&P downgraded Google three days ago from Buy to Sell. The S&P also cut its target for Google to $500 from $700, which is not much better than it is trading now.
Web.com, a provider of internet services for business, has announced it will acquire Network Solutions, a provider of website services and domain names. Network Solutions is one of the original providers of domain names. Web.com paid $405 million in cash for Network Solutions, plus 18 million shares of Web.com common stock. Network Solutions is currently majority owned by General Atlantic LLC.
