EU gains further authority to oversee national budgets | Boeing reportedly will propose Dreamliner battery fix to FAA | Italy aims to regulate HFT with transaction tax
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21 February 2013
CFA Institute: Financial NewsBrief
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Opposition to continued bond buying grows within Fed
Federal Reserve policymakers increasingly are arguing that the central bank's bond-buying program should be scaled back or shut down before the unemployment rate declines significantly, according to minutes of the Fed's January meeting. News that the Fed is leaning toward withdrawing stimulus sent markets tumbling. Reuters (20 Feb.), Bloomberg (20 Feb.), The New York Times (tiered subscription model) (20 Feb.)
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EU gains further authority to oversee national budgets
The European Commission and the European Parliament have compromised on a plan to give the commission power to review eurozone members' budgets and request changes if they do not meet the bloc's rules. "This will mean that the euro area can benefit from a more integrated and effective policy-setting framework already for the 2014 budgetary cycle," said Olli Rehn, EU economic and monetary affairs commissioner. Reuters (20 Feb.)
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Boeing reportedly will propose Dreamliner battery fix to FAA
U.S. Federal Aviation Administration chief Michael Huerta will meet with Boeing executive Ray Conner on Friday to hear the company's plan to fix battery problems that have grounded the 787 Dreamliner, a source familiar with the matter said. The Dreamliner could fly again by April if Transportation Secretary Ray LaHood approves the plan, the source said. Reuters (20 Feb.), AviationWeek.com (20 Feb.), The Seattle Times (20 Feb.)
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Italy aims to regulate HFT with transaction tax
Italy recently introduced a tax on financial transactions, including equities and derivatives, that focuses on high-frequency trading. The move provides a test for governing such trading strategies. Financial Times (tiered subscription model) (19 Feb.)
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2 Democratic lawmakers push for transaction tax
The political momentum for a U.S. financial-transaction tax seems weak, but two Democrats -- Sen. Tom Harkin of Iowa and Rep. Peter DeFazio of Oregon -- are ready to reintroduce a bill that would impose a 0.03% tax on bond and equity transactions. Derivatives would be taxed, too, though at a rate yet to be determined. Industry experts say such levies would curb economic growth and shrink trading volume. The Trade News (U.K.) (tiered subscription model) (20 Feb.)
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FSA prepares to publish internal Libor review
The U.K. Financial Services Authority has promised a parliamentary committee that it will publish an internal review of an investigation into manipulation of the London Interbank Offered Rate in coming weeks. The Treasury Select Committee has expressed concern that despite the FSA's assertion that it worked with U.S. regulators, its investigation seemed to lag significantly. Reuters (21 Feb.), Bloomberg (21 Feb.), The Wall Street Journal (tiered subscription model)/Dow Jones Newswires (20 Feb.)
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Morningstar Direct Whitepaper in CFA Institute Selected Content Newsletter
We are very pleased to have been included on this "recommended reading" list. The paper discusses ways to quantify the results from portfolio-level decisions like asset allocations, manager selections, timing decisions, and more. Click here to read our whitepaper.
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Market ActivityAdvertisement
Asian-Pacific markets fall amid fears of Fed tightening
Asian-Pacific markets fell Thursday after Federal Reserve minutes from January indicated that the central bank is leaning toward a tightening of monetary policy. Hong Kong's Hang Seng Index fell 1.7%. China's Shanghai Composite dropped 3%. Japan's Nikkei 225 gave up 1.4%. South Korea's Kospi slid 0.5%. Australia's S&P/ASX 200 lost 2.3%. India's Sensex was down 1.6%. MarketWatch (21 Feb.), The Economic Times (India) (26 Feb.)
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Funding values Pinterest at $2.5B
Social networking company Pinterest says it has obtained about $200 million, in a deal that values the San Francisco startup at $2.5 billion. Valiant Capital Management led the fundraising, with earlier investors joining in. Los Angeles Times (tiered subscription model)/Tech Now blog (20 Feb.)
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Economics
House Republicans reject tax increases to avert sequester
Republican leaders in the House of Representatives dismissed President Barack Obama's call to avert $85 billion of spending cuts set to take effect March 1. Obama's plan includes a mix of tax increases and reduced spending. The House is working on a legislative agenda that assumes the deep spending cuts will take effect and remain unchanged through the end of 2013. The New York Times (tiered subscription model) (20 Feb.)
BoE was divided in stimulus debate, minutes show
Minutes from the last Bank of England meeting show that despite Governor Mervyn King's public skepticism about increased quantitative easing, he, along with two other policymakers, voted for further bond buying. The minutes also display the central bank's "willingness to bring inflation back to the target over a longer time horizon than usual." Reuters (20 Feb.), Bloomberg (20 Feb.), The Wall Street Journal (tiered subscription model) (20 Feb.)
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Rate cuts must reach beyond eurozone core, Noyer says
Interest-rate adjustments are effective only if they materially change conditions in the entire eurozone, European Central Bank Governing Council member Christian Noyer says. "The exact level of the ECB's main refinancing rate has been considered to have much less importance because of its low level and because our main problem was transmission [of monetary policy]," he said. The Wall Street Journal (tiered subscription model) (20 Feb.)
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Starts increase for single-family houses
U.S. housing starts declined 8.5% last month, but builders broke ground on the most single-family homes since July 2008, the Commerce Department says. A sharp drop in multifamily construction, traditionally a volatile indicator, drove the overall decline, the department says. Permit issuance, an indicator of future construction, reached its highest level since June 2008. Reuters (20 Feb.)
Advisers: Wait until retirement to put funds in Roth IRA
Some financial decisions are best made through procrastination, and deciding when to move savings into a Roth individual retirement account is one of them, advisers say. Waiting until retirement to shift funds usually results in a lower tax rate than making the move during midcareer, they say. Reuters (20 Feb.)
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Analysis: Economists' market-stability theories are flawed
The financial crisis demonstrated that an assumption by developed-world economists that markets are naturally stable and optimal is out of touch with reality, Harvard Business School research associate Jonathan Schlefer writes. Latin America and Asia took a more pragmatic approach to financial and economic policy and, as a result, largely escaped harm, Schlefer writes. Harvard Business Review online (tiered subscription model)/HBR Blog Network (19 Feb.)
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Analysis: Prepaid cards bring banking to the poor
About 1 in 12 U.S. households lacks a bank account, but improvement in prepaid cards offers hope of bringing financial services to the poor, according to The Economist. "Pre-paid cards are not perfect: their fees can be sizeable and opaque, and they offer limited consumer protection," the magazine notes. "But they are convenient and a growing part of America's consumer-finance landscape." The Economist (tiered subscription model) (16 Feb.)
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Reining in Risk
CFA Institute report: Investors need better disclosure of derivatives and hedging activities

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Geopolitical/Regulatory
White House debuts program to fight trade-secret theft
The White House says the government is implementing procedures to stop China, Russia, India and other countries from stealing billions of dollars worth of trade secrets from U.S. businesses. Countries that attempt theft of intellectual property will be placed on a watch list, which will be used to coordinate efforts to stop them from succeeding. The Washington Post (tiered subscription model) (20 Feb.), The National Law Journal (free registration) (20 Feb.), SlashGear (20 Feb.)
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SEC's Aguilar calls on companies to offer pay details
Luis Aguilar, a member of the Securities and Exchange Commission, is urging companies to voluntarily disclose compensation details to shareholders. "The relative pay of different classes of employees, such as the ratio between CEO compensation and median pay, can ... create risks to an enterprise, including the risk of employee, customer and shareholder discontent," Aguilar said. Industry groups have expressed concern about gathering and disclosing such information. Reuters (20 Feb.)
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Financial Products
ClearBridge and Legg Mason aim to combine 2 funds
Legg Mason Capital Management and ClearBridge Investments plan to seek shareholder approval to merge the Legg Mason Capital Management All Cap and ClearBridge Large Cap Value funds. The Legg Mason units recently announced a plan to combine operations. Money Management Executive (free content) (20 Feb.)
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