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20 December 2012
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  Top Stories 
  • Memo: Libor fraud might have cost Fannie and Freddie $3B
    U.S.-controlled mortgage-finance companies Fannie Mae and Freddie Mac might have lost as much as $3 billion through manipulation of the London Interbank Offered Rate, according to a memo by the inspector general for the Federal Housing Finance Agency. The memo recommends that the agency consider taking banks involved in Libor manipulation to court. The Washington Post (19 Dec.), Reuters (19 Dec.) LinkedInFacebookTwitterEmail this Story
Sector SPDRs carve the S&P 500 into nine sector exchange-traded funds (ETFs) that conveniently, efficiently, and affordably provide sector exposure while giving investors the unique ability to customize the S&P 500 to meet specific investment objectives.
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  Reader Survey 
  • Do annual market forecasts commonly circulated by Wall Street's sell side have value to professional investors?
    They are interesting to read but of limited value  65.66%
    No, they amount to nothing more than marketing gimmicks  25.87%
    Yes, they help in positioning portfolios for the year ahead  8.47%
  • Poll analysis: More than 90% of 861 respondents to this week's poll believe that the annual market forecasts that Wall Street's sell-side firms typically roll out this time of year (often in the form of "Top 10" lists) have little to no value. Nevertheless, nearly two-thirds of respondents regard the predictions as interesting to read. At the same time, 26% of respondents look at the forecasts as nothing more than marketing gimmicks. A distinct minority, about 8% of respondents, find Wall Street forecasts to be helpful in positioning their portfolios for the year ahead (presumably in concert with their own independent judgment and analysis). What is Wall Street's track record when it comes to picking stocks? A 1995 study by Hemang Desai and Prem Jain examined the performance of stock recommendations at Barron's Roundtable from 1968 to 1991 and found the excess return to be essentially zero. Despite their limited utility, annual forecasts are probably here to stay because they've proved themselves to be effective marketing tools and they appeal to the herding instinct of investors. Of course, annual forecasts also can occasionally include a winning idea or two. We previously explored this topic in "Forecast Fatigue: What's the Value of Annual Market Predictions?" -- David T. Larrabee, CFA, Director, Member and Corporate Products, CFA Institute LinkedInFacebookTwitterEmail this Story
  Market Activity 
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  • Fed will give up collective opinion on economic forecast
    The Federal Reserve said it will no longer try to forge a consensus opinion about a forecast of the U.S. economy. Federal Reserve Bank of Dallas President Richard Fisher suggested that Fed Chairman Ben Bernanke's news conferences can still be relied on to show the way. Reuters (19 Dec.) LinkedInFacebookTwitterEmail this Story
  • Confidence continues to improve at Germany companies
    For the second consecutive month, German business optimism rose in December. However, concerns remain. "There's a good chance we will see a recovery sometime next year," said Alexander Koch, an economist at UniCredit Research. "At the same time, downside risks remain for the German economy, coming mainly from its euro-area partners." Bloomberg (19 Dec.) LinkedInFacebookTwitterEmail this Story
  • Analysis: Free trade is rich nations' gift to the world
    Rich countries have done a lot of good for their people, and for those elsewhere, by advocating freer trade, but there is more to be done and further benefits to be enjoyed, according to The Economist. "By championing freer trade and open markets, the West taught the rest of the world how to grow," the magazine notes. "Nowadays, globalisation is associated with the surging middle classes of the emerging world, and some illiberal dictatorships. Let 2013 be the year when the West claims back its creed -- and its oomph." The Economist (22 Dec.) LinkedInFacebookTwitterEmail this Story
  • Most investors have multiple advisers, analysis shows
    About 70% of clients have placed their assets under the management of more than one financial adviser or directed brokerage account, but few advisers are aware of the situation, according to an analysis by Cerulli Associates. Only 17% of advisers are aware of clients' accounts that aren't under their supervision, Cerulli found. InvestmentNews (free registration) (19 Dec.) LinkedInFacebookTwitterEmail this Story
  • European Commission unveils AIFMD, adopts OTC derivatives rules
    The European Commission has published the Alternative Investment Fund Managers Directive, which details rules for hedge funds, private equity, real estate and other parts of the asset-management industry. The commission also announced that it has adopted rules governing trade repositories, central counterparties and over-the-counter derivatives. "The adoption of these technical standards is the final step in achieving the mandatory clearing and reporting of OTC derivatives and in meeting our [Group of 20] commitments," Internal Market Commissioner Michel Barnier said. "This will improve transparency in the trading of derivatives." Financial News Online (U.K.) (subscription required) (19 Dec.), New Europe (19 Dec.) LinkedInFacebookTwitterEmail this Story
  • Court sides with Milan in derivatives case against 4 banks
    An Italian court ruled that four banks defrauded Milan when they sold derivatives. Deutsche Bank, Depfa Bank, JPMorgan Chase and UBS were found guilty of lying about risks and thereby making €100 million in illicit profit. The court ordered that €90 million be seized, and each bank was fined €1 million. The outcome might hold precedence for lawsuits pertaining to derivatives deals gone sour. Reuters (19 Dec.) LinkedInFacebookTwitterEmail this Story
  Financial Products 
  • IMF report criticized China because of U.S. influence, auditor says
    The International Monetary Fund's internal watchdog says the U.S. used its influence as the fund's biggest shareholder to steer research in a way that criticized Chinese economic policy and pressured the country to change it. A report by the Independent Evaluation Office says an IMF report criticized China's large foreign exchange holdings as harmful, despite findings that were "not persuasive." The Washington Post (19 Dec.) LinkedInFacebookTwitterEmail this Story
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