Berkshire and Brazilian firm will buy Heinz in $28B deal | SEC investigates suspicious trading ahead of Heinz deal | European transaction-tax proposal comes under fire
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15 February 2013
CFA Institute: Financial NewsBrief
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Berkshire and Brazilian firm will buy Heinz in $28B deal
Warren Buffett's Berkshire Hathaway and Brazilian financial firm 3G Capital signed a $28 billion deal to acquire food giant H.J. Heinz. The buyers will pay $72.50 a share, a 20% premium to Heinz stock's closing price Wednesday, and assume existing debt. Day-to-day management of Heinz will be in the hands of 3G Capital, which also took control of Burger King two years ago. The New York Times (tiered subscription model)/DealBook blog (14 Feb.), Latin American Herald Tribune (Venezuela)/Agencia EFE (Spain) (14 Feb.), Pittsburgh Post-Gazette (14 Feb.)
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SEC investigates suspicious trading ahead of Heinz deal
The Securities and Exchange Commission launched an insider trading inquiry related to Berkshire Hathaway and 3G Capital's acquisition of H.J. Heinz. The commission became suspicious after noticing a spike in trading activity for Heinz options Wednesday. The New York Times (tiered subscription model)/DealBook blog (14 Feb.), Bloomberg (14 Feb.), Financial Times (tiered subscription model) (14 Feb.)
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European transaction-tax proposal comes under fire
Market participants and other interested parties are voicing opposition to Europe's proposed tax on financial transactions, including stocks, bonds and derivatives. The tax could be collected by 11 nations as early as next year. An industry group says the levy could become "another brake on economic growth" and that a transaction tax "with extraterritorial reach runs counter to that important objective" of cooperation among Group of 20 countries. Bloomberg (14 Feb.)
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Analysis: Huge M&A deals return after half-decade of doldrums
After a dry spell that lasted half a decade, the volume of multibillion-dollar mergers and acquisitions soared at the beginning of 2013. A key factor is the more than $1 trillion of cash accumulated by Standard & Poor's 500 corporations that is generating almost no returns. The renewed health of U.S. banks is also driving the trend. The New York Times (tiered subscription model)/DealBook blog (14 Feb.)
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Market Activity
Most Asian-Pacific markets decline ahead of G-20 meeting
Asian-Pacific markets were mostly lower Friday as traders edged away from risk awaiting the outcome of the Group of 20 meeting this weekend in Moscow. Japan's Nikkei 225 dropped 1.2%. Australia's S&P/ASX 200 closed down slightly less than 0.1%. Hong Kong's Hang Seng Index advanced 0.1%. South Korea's Kospi closed up less than 0.1%. India's Sensex was down 0.2%. Exchanges in Taiwan and China remained closed for Lunar New Year. The Wall Street Journal (tiered subscription model) (15 Feb.), The Economic Times (India) (26 Feb.)
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IPO orders value Moscow Exchange at $4B
Investors' bids for shares of the Moscow Exchange's initial public offering valued Russia's principal securities bourse at $4 billion. Chengdong Investment, a unit of China Investment, likely will take as much as 25% of the shares offered, sources said. The exchange has said it hopes to raise at least $500 million in the offering. The New York Times (tiered subscription model)/DealBook blog (14 Feb.), Bloomberg (14 Feb.)
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Nasdaq aims to start premarket trading 3 hours earlier
Nasdaq OMX Group said it wants to change the starting time for premarket trading from 7 a.m. to 4 a.m. Eastern. The change requires Securities and Exchange Commission approval and would be implemented no sooner than March 18, Nasdaq said. Bloomberg Businessweek (14 Feb.)
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Economics
Surprise GDP contraction points to deepening eurozone recession
In a development that surprised economists, gross domestic product in the eurozone dropped 0.6% in the fourth quarter compared with Q3, Eurostat said. The data indicate that the eurozone's recession deepened as it extended into a third quarter. Germany's economy, the biggest in Europe, took its sharpest downturn since the depths of the global financial crisis. Deutsche Welle (Germany)/Agence France-Presse/The Associated Press (14 Feb.), Reuters (14 Feb.), The Telegraph (London) (tiered subscription model) (14 Feb.)
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Central bankers step aggressively to the fore
If the Bank of Japan's next governor adopts aggressive policy complementing that of Prime Minister Shinzo Abe, he will be joining a new breed of central banker willing to do whatever it takes. Ben Bernanke at the Federal Reserve, Mario Draghi at the European Central Bank and the incoming Mark Carney at the Bank of England all have records of aggressive action. Bloomberg (13 Feb.)
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Analysis: U.S., Japanese monetary policy should be celebrated
Quantitative easing in the U.S. and Japan is being criticized as the possible start of a global currency war, but the policy should be applauded by trading partners, particularly those in Europe, according to The Economist. If quantitative easing "is successful in reviving domestic demand, it will eventually lead to higher imports," the magazine notes. The Economist (tiered subscription model) (16 Feb.)
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More advisers favor life insurance for college savings
Life insurance with a cash balance that can be withdrawn for college expenses is becoming increasingly popular with financial advisers who are helping parents prepare to pay for higher education. A survey by Financial Research found that in 2012, 29% of advisers recommended life insurance for college savings, compared with 23% in 2011 and 21% in 2009. InvestmentNews (free registration) (14 Feb.)
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Geopolitical/Regulatory
Russia urges G-20 to oppose currency manipulation
Russia is calling on the Group of 20 to make a clearer and stronger statement opposing exchange-rate manipulation, saying the world might be headed toward a currency war. "The G-20 countries have always held the position that currency policy should be based on market conditions," Russian Finance Minister Anton Siluanov said. "I think we should take a more specific stance on this." Bloomberg (15 Feb.), The New York Times (tiered subscription model)/Reuters (15 Feb.)
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U.S. lawmaker asks regulators about lack of prosecution
U.S. Sen. Elizabeth Warren used her first Senate banking committee hearing to question officials from the Commodity Futures Trading Commission, the Securities and Exchange Commission and other regulators about prosecution of Wall Street companies. Sen. Tim Johnson, chairman of the committee, said regulators should focus on completing Dodd-Frank Act rules before addressing the issue of "too big to fail." Reuters (14 Feb.), The Hill/On the Money blog (14 Feb.), Bloomberg (14 Feb.), WealthManagement.com (U.S.)/Rulebook blog (14 Feb.), The Wall Street Journal (tiered subscription model)/Washington Wire blog (14 Feb.)
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EU and U.S. agree to implement Basel III ASAP, Barnier says
EU Internal Market Commissioner Michel Barnier says he and Federal Reserve Governor Daniel Tarullo have "agreed it was essential that effective implementation of the new regulatory framework should be done as soon as possible." The EU and the U.S. missed a January deadline for launching a six-year phase-in of Basel III rules. Reuters (14 Feb.)
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FASB proposal would give banks flexibility when valuing assets
A rule proposed by the Financial Accounting Standards Board would reduce the importance of market value when banks report the worth of assets on financial statements. The rule would give banks broad flexibility in establishing the value of financial assets. Reuters (14 Feb.), The New York Times (tiered subscription model) (14 Feb.)
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Russian regulator warns against too much regulation
Rather than adding market supervision, the Russian government should spur financial growth, said Dmitry Pankin, head of the Federal Financial Markets Service. "It's very dangerous to pass such a huge new wave of regulation. Really, we don't need more regulation; we need effective regulation," Pankin said. "In our past life, we had a very relevant example of the Soviet Union, when we tried to regulate everything, to introduce regulation in every process, but the result was that the whole system collapsed." Bloomberg (14 Feb.)
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Financial Products
PowerShares prepares debut of 2 low-volatility ETFs
Invesco PowerShares is set to launch two exchange-traded funds investing in low-volatility stocks. The PowerShares S&P MidCap Low Volatility Portfolio will pick stocks from the Standard & Poor's MidCap 400 Low Volatility Index. The PowerShares S&P SmallCap Low Volatility Portfolio will select equities from the S&P SmallCap 600 Low Volatility Index. Benzinga.com (13 Feb.), IndexUniverse.com (13 Feb.), ETF Trends (13 Feb.)
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Ethics
Former Stanford execs are sentenced to 20 years in prison
A U.S. judge has sentenced two executives to 20 years in prison for helping Allen Stanford run a $7.2 billion Ponzi scheme. Prosecutors say Gilbert Lopez, former chief accounting officer of Stanford Financial Group, and former Controller Mark Kuhrt were aware Allen Stanford was misusing investors' assets and helped him conceal it. Reuters (14 Feb.)
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