Last-ditch accord leads European Parliament to approve EMIR | Asian regulators tighten oversight of interest-rate setting | N.Y. AG reportedly investigates major rating agencies
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08 February 2013
CFA Institute: Financial NewsBrief
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Einhorn seeks to prevent Apple proxy vote in court
David Einhorn, president of Greenlight Capital, is seeking an injunction against Apple's proposed proxy vote, which would change its corporate charter to eliminate preferred stock. Einhorn, who says he owns 1.3 million shares of Apple, has called for the company to spend its cash pile on a dividend. Reuters (07 Feb.), The New York Times (tiered subscription model)/DealBook blog (07 Feb.), Financial Times (tiered subscription model) (07 Feb.), The Wall Street Journal (tiered subscription model)/Deal Journal blog (07 Feb.)
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Last-ditch accord leads European Parliament to approve EMIR
At the last minute, the European Commission crafted a compromise on over-the-counter derivatives rules, turning an expected rejection into approval by the European Parliament. The deal means nonfinancial users of swaps, which typically use them for hedging, will be subject to the law eventually, instead of right away. Official sign-off on the European Market Infrastructure Regulation is set for Feb. 19. The Trade News (U.K.) (tiered subscription model) (07 Feb.), Reuters (07 Feb.), Financial Times (tiered subscription model) (07 Feb.)
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Asian regulators tighten oversight of interest-rate setting
Regulators in Hong Kong, Japan and other Asian financial centers are cracking down on the way key interest rates are determined amid a global investigation into possible manipulation of the London Interbank Offered Rate and other similar rates. The Hong Kong Monetary Authority, for example, is phasing out a few versions of the Hong Kong Interbank Offered Rate. HKMA has also taken away control of rate setting from an industry group. The Wall Street Journal (tiered subscription model) (07 Feb.)
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N.Y. AG reportedly investigates major rating agencies
Eric Schneiderman, attorney general for New York, has started looking into Standard & Poor's, Moody's Investors Service and Fitch Ratings, said a source familiar with the matter. Schneiderman's move comes after a U.S. Department of Justice lawsuit against S&P over its rating of mortgage bonds before the global financial crisis. The DOJ's decision to sue S&P and not other rating agencies has prompted questions and speculation among investors and other market participants. Reuters (07 Feb.), Bloomberg (07 Feb.)
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Ireland reaches debt deal with ECB
An Irish agreement with the European Central Bank focuses on promissory notes issued in a failed attempt to save Anglo Irish Bank and Irish Nationwide Building Society. The ECB has agreed to replace the notes with longer-term bonds, easing Ireland's need to borrow during the next 10 years by €20 billion. The deal might help Ireland re-enter international bond markets in 2014. Bloomberg (07 Feb.), The Wall Street Journal (tiered subscription model)/Dow Jones Newswires (07 Feb.)
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Market Activity
Most Asian-Pacific markets up after China issues economic data
Most Asian-Pacific markets were upbeat Friday after China released economic figures. China's Shanghai Composite rose 0.6%. Hong Kong's Hang Seng Index inched up 0.2%. Australia's S&P/ASX 200 climbed 0.7%. Japan's Nikkei 225 fell 1.8%. India's Sensex was down 0.5%. Friday was the final day of trading before Lunar New Year. The Economic Times (India) (26 Feb.), The Wall Street Journal (tiered subscription model) (08 Feb.)
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NYSE plans to close NYBX because of lack of interest
The New York Stock Exchange told regulators that it will shut down the New York Block Exchange on Feb. 28. "The exchange is ceasing operations of NYBX facility because after years of operations the facility has not garnered enough volume to achieve critical mass," NYSE said. Bloomberg (07 Feb.)
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Economics
Draghi says ECB will pay attention to euro's value
Although the European Central Bank, as expected, did not change interest rates, President Mario Draghi has waded into the currency-war discussion. Draghi emphasized that the ECB's mandate is to control inflation, but he highlighted attention to the euro. "We want to see if this appreciation is sustained and if it alters our assessment of price stability," he said. Some analysts have taken that as an indication that the ECB is more willing to loosen currency conditions than previously thought. Reuters (07 Feb.), Financial Times (tiered subscription model) (07 Feb.)
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Nations clash over EU budget
Budget battle lines have been drawn as U.K. Prime Minister David Cameron, frequently supported by Germany, the Netherlands and Sweden, pushes for more austerity in the EU budget, while France, Italy and most of Eastern Europe resist cuts to support programs. Any deal must be approved by all 27 EU nations, and if no deal is reached, the existing budget will roll over for 2014 to 2020. Financial Times (tiered subscription model) (08 Feb.), The Wall Street Journal (tiered subscription model) (08 Feb.)
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Despite OECD suggestion, BoE resists additional stimulus
The Bank of England maintained interest rates and declined to put more money into the economy. The decisions come after the Organization for Economic Cooperation and Development called for stimulus should the economy stay weak. Incoming BoE Governor Mark Carney advocates explicit growth targeting. BBC (07 Feb.)
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Machinery leads manufacturing higher in U.K.
Production of machinery equipment and chemical products led British manufacturing in December to its highest monthly increase since July. Increased demand from outside the eurozone spurred the growth, easing fears of another recession in the U.K. Bloomberg (07 Feb.)
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U.S. jobless claims indicate real economic recovery
Initial jobless claims decreased 5,000 last week, and retailers reported a 5% increase in same-store sales last month compared with January 2012, pointing to a slow but real recovery in the U.S. economy. The slow pace of improvement, however, leads many experts to think the Federal Reserve will continue stimulus well into next year. Reuters (08 Feb.)
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Capital Economics finds sluggish Eastern European growth
Eastern Europe's growth has slowed more compared with other emerging economies, Capital Economics says. "Prospects look worst in emerging Europe, reflecting the region's close links to the stricken euro zone and limited room for policy support," Managing Director Roger Bootle wrote in an e-mail. He singles out Hungary, Ukraine and Turkey as at risk if the sovereign-debt crisis were to worsen. Bloomberg (07 Feb.)
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Behavioral Finance: From Theory to Practice
7-10 April 2013
University of Virginia Darden School of Business
Charlottesville, Virginia, United States

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Geopolitical/Regulatory
Carney prefers Vickers to Volcker
Incoming Bank of England Governor Mark Carney says he favors the ring-fencing philosophy behind the U.K.'s Vickers reform over the U.S. Volcker rule, which forces banks to move proprietary trading into a separate unit. "It's extremely difficult to draw the line between market making and proprietary trading ... It would unnecessarily divert the supervisors' attention from ensuring the ring fence is respected," he told U.K. lawmakers. Reuters (07 Feb.)
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Analysis: Fed governor is on the lookout for bubbles
Jeremy Stein, who joined the Federal Reserve last year, says he considers spotting and preventing bubbles a top priority. Stein is focusing on areas that he considers of particular concern, including high-yield bonds and mortgage-backed securities. His vigilance is somewhat at odds with traditional central-banking policy, which shies from using interest rates to combat distortion in specific asset classes. The New York Times (tiered subscription model)/DealBook blog (07 Feb.)
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Volcker rule forces banks to change private-equity business
The Volcker rule, set to be finalized this summer, is poised to significantly reduce Goldman Sachs' investment in its private-equity funds. Meanwhile, a spokeswoman for Bank of America says the company has decided to exit the private-equity business. Citigroup is looking at its options, a spokeswoman said. The Wall Street Journal (tiered subscription model) (07 Feb.)
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Senate panel sets hearing to check Dodd-Frank progress
Next week, the Senate banking committee will hear from seven regulatory officials on their progress in instituting Dodd-Frank Act rules. Elisse Walter, chairman of the Securities and Exchange Commission; Gary Gensler, chairman of the Commodity Futures Trading Commission; and Richard Cordray, director of the Consumer Financial Protection Bureau are among those scheduled to testify. Reuters (07 Feb.)
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Financial Products
Schwab widens commission-free ETF trading
Charles Schwab is expanding its program of commission-free exchange-traded funds by joining with Invesco and State Street. "This is about responding to investors, and investors tell us that commissions are a barrier to trading," said Beth Flynn, Schwab's vice president of ETF platform management. Bloomberg (07 Feb.)
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