- English: Platts logo (Photo credit: Wikipedia)
Some of the world’s biggest oil companies may have a new mess on their hands.
The European Commission raided the offices of Shell, BP and Norway’s Statoil this week as part of an investigation into suspected attempts to manipulate global oil prices spanning more than a decade.
None of the companies have been accused of wrongdoing, but the controversy has brought back memories of the Libor rate-rigging scandal that rocked the financial world last year.
UBS (UBS), Royal Bank of Scotland (RBS) and Barclays (BCS) have already reached settlements with regulators in the U.S. and U.K. over Libor-rigging, paying over $2.5 billion in fines after admitting to attempts to manipulate interest rates to appear more credit-worthy and to benefit trading positions. Roughly a dozen other global banks remain under scrutiny over rate-rigging, and three people have been arrested so far.
Reams of email and instant-message transcripts disclosed in the settlements so far reveal how the banks’ scheme worked, and experts have since warned that influential pricing data from publishers serving the oil market could be similarly vulnerable to manipulation.
A review ordered by the British government last year in the wake of the Libor revelations cited “clear” parallels between the work of the oil-price-reporting agencies and Libor.
Libor-setting is overseen by the British Bankers Association, an industry trade group, though U.K. law was changed last month to allow financial regulators to supervise the process.
Oil-price benchmarks are set by independent “price-reporting agencies,” the most influential of which is Platts, a division of McGraw-Hill (MHFI). Platts’ data is used help set prices for billions of dollars’ worth of physical oil and derivatives contracts.
As the Libor scandal gathered force last year, Platts and its fellow price-reporting agencies, Argus and ICIS, issued a joint statement emphasizing what they called the “fundamental differences” between their “reliable and robust” methods and those used in calculating Libor. Some observers, however, say the processes are similarly vulnerable.
There are also concerns about the fact that reporting to Platts is done by traders voluntarily. In a report issued in October, the International Organization of Securities Commissions — an association of regulators — said the ability “to selectively report data on a voluntary basis creates an opportunity for manipulating the commodity market data” submitted to Platts and its competitors.
Responding to questions from IOSCO last year, French oil giant Total said the price-reporting agencies, or PRAs, sometimes “do not assure an accurate representation of the market and consequently deform the real price levels paid at every level of the price chain, including by the consumer.” But Total called Platts and its competitors “generally… conscientious and professional.”
“While there is the risk of market actors voluntarily submitting false data to the PRA assessment process, most PRAs have effective processes to verify submissions and generally avoid this problem,” Total said.
Platts describes its methods as “structured” and “highly transparent,” saying the submissions it collects must reflect verifiable transactions or executable bids and offers. The agency vets submitters and restricts them from altering their bids and offers beyond defined increments to mitigate against sudden price swings.
Platts declined to comment in detail on the European Commission investigation, saying only that investigators visited its office in London on Tuesday and that it is “cooperating fully” with the probe.
- Us dept of commerce building (Photo credit: Wikipedia)
Ground-breaking for new U.S. homes plummeted more than expected in April from an almost five-year high, but applications to build new homes shows the housing sector could still contribute to the strengthening economic recovery.
The Commerce Department said on Thursday that starts at building sites for homes fell 16.5 percent last month to a 853,000-unit annual rate. That was below analysts’ expectations of a 945,000-unit rate.
The housing recovery, driven by growing demand and record-low mortgage rates, has started to boost other sectors of the economy in the first part of the year.
Builders appear to be ramping up for more construction projects. Newly issued building permits, a gauge of future construction, rose 14.3 percent from a month earlier to an annual rate of 1.017 million, the highest level since June 2008.
Permits for single-family homes, which comprise about two thirds of the total, rose 3 percent to a 617,000-unit rate, the highest since May 2008.
|English: Fraz Wahlah receiving the International Asia Pacific Information & Communications Technology Award (APICTA), known as technology Oscar, in Kuala Lumpur Malaysia. Fraz Wahlah won the technology Oscar for the first time for Pakistan in the eHealth Category. Each year World’s leading economies contest for APICTA including Australia, Malaysia, China, Korea, Thailand, Pakistan, Brunei , Taiwan, Singapore, etc. (Photo credit: Wikipedia)
Asia continues to outpace the rest of the world in growth of healthcare spending. With growing incomes, populations, and average age, the region’s demand for healthcare services is huge, and so is the opportunity for medical suppliers and providers. India has made expansion of primary care a policy priority and its spending is expected to rise by an average of 16.1% a year in US-dollar terms over the forecast period. China aims to create a system that provides “safe, effective, convenient and affordable” healthcare to rural and urban residents by 2020; its healthcare spending is expected to reach US$831.6 bn by 2016. Indonesia and the Philippines are also likely to see double-digit annual growth as they expand their health insurance systems, while Thailand, Malaysia, Pakistan, Singapore and South Korea will be around the 8% mark.
- Image via CrunchBase
Dell’s board of directors wants more information from Carl Icahn and Southeastern Asset Management before considering their pitch for buying the world’s third-largest PC maker.
Icahn and Southeastern—which, combined, hold about 13 percent of outstanding Dell stock—in a letter to the board May 9 harshly criticized the $24.4 billion bid by CEO Michael Dell and Silver Lake Partners to buy Dell and take it private, calling it a “giveaway agreement” that benefits Michael Dell at the expense of shareholders.
In the letter, they proposed a plan that would keep the company public, return more money to investors and essentially remove Michael Dell from the company.
The special committee that Dell’s directors created to review proposals for the company, in a letter to Icahn and Southeastern May 13, said more information is needed before considering their proposal. One thing they want to know is whether the two are actually making a bid for the company.
Backed by its own survey data, Microsoft asserts that consumers value their online privacy. Will Web services providers heed the warning?
The majority of Web users are concerned about their online privacy, according to new survey results from Microsoft.
The software giant polled 4,000 consumers in the U.S., France, Germany and the U.K. as part of the Your Privacy Type campaign, which launched in April. Mary Snapp, deputy general counsel for Microsoft, said in an April 22post in the Microsoft on the Issues blog that in addition to targeted ad campaigns in Washington, D.C., and Kansas City, Mo., the company had implemented “a new online resource for consumers that will help them learn about their privacy behaviors and take steps to shape their online personas.”
The online resource includes a quiz to help visitors determine their “privacy type”—from a carefree Web surfer to a locked-down, privacy-conscious social media user and points in between. After taking the quiz in her own home, Snapp reported: “I’m a ‘Privacy Please’ individual, while my husband is more of the ‘Carefree Surfer’ type.”
Microsoft’s latest data indicates that most Web surfers side with her, at least in spirit.
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Major central banks did not face calls to do more to boost the world economy when Group of Seven finance officials met on Saturday, European Central Bank President Mario Draghi said.
Before the meeting Britain’s finance minister, George Osborne, said ministers would “consider what more monetary activism can do to support the recovery” – something that he is keen for the Bank of England to do.
But Draghi said the ECB, which cut interest rates to a record low last week, did not come under pressure to take further steps.
“There wasn’t any call to do more,” he told reporters after the meeting. “It is quite clear that all central banks have done a lot, each one within its own mandate. So (the meeting) was just taking note of this … All of us have really been active.”
The ECB is also looking at whether it can do more to promote small business lending in the euro zone via asset-backed securities (ABS), but Draghi said the central bank was better placed to assist other European institutions rather than take a leading role itself.
ABS allow banks to move some credit risk off their balance sheets by packaging loans up and selling them on to other investors. Credit markets were paralyzed during the financial crisis when such securities became toxic due to the default of housing loans that underpinned them.
“What is the role of the ECB in this? I think it is mostly catalytic, because the ECB works with the European Investment Bank and the (European) Commission, and I think it will be very much up to these actors to act, rather than the ECB,” Draghi said.
He played down suggestions that the ECB was considering a program similar to the Bank of England’s Funding for Lending Scheme, noting that the ECB already allowed banks to use small business loans as collateral in its financing operations.
- Logo of the United States Federal Communications Commission, used on their website and some publications since the early 2000s. (Photo credit: Wikipedia)
The Federal Communications Commission (FCC) took action to expand the availability of in-flight broadband connectivity to airline passengers, an announcement that is sure to delight bandwidth-hungry Web surfers cruising the skies.
The FCC announcement said more options for in-flight broadband are likely to increase competition, improve the quality of service, and lead to lower prices. The Commission proposes to establish an air-ground mobile broadband service, using a ground-based network to communicate with planes, by taking advantage of technical innovations to expand sharing of certain spectrum among users.
In addition, improved connectivity benefits business and leisure travelers alike in their desire for ubiquitous broadband access to keep in touch with work, family, and friends while flying. Expanded availability of in-flight WiFi will also help meet demand from travelers to connect to a full range of communications services while flying in the contiguous United States.
There are two types of current in-flight broadband service: satellite-based and air-to-ground and both are licensed by the FCC. The satellite systems, known as Earth Stations Aboard Aircraft (ESAA), use satellite antennas installed on the top of planes to communicate with satellite space stations. This service, operated by multiple licensees, shares 1 GHz of spectrum among the licensees and with many other Fixed-Satellite Service operators. Air-to-ground systems deliver in-flight broadband through a ground-based network that communicates with an antenna on the bottom of a plane, which connects to an onboard WiFi system providing service throughout the cabin.
Hedge fund billionaire John Paulson is one of the biggest losers in this year’s gold rout, with his gold fund of under $1 billion losing 27 percent in April alone, according to performance figures provided by a person familiar with the fund.
The jarring one-month decline in the Paulson gold fund brings the year-to-date loss for the fund to about 47 percent, the source said.
The April selloff in gold was particularly fierce and came as a surprise to many hedge fund managers who were long either gold bullion or the SPDR Gold Trust, the most popular gold exchange-traded fund.
Hedge fund manager David Einhorn said on a conference call on Tuesday, “We were somewhat surprised by the swift decline in the price of gold in April.”
The majority of the money invested in the Paulson gold fund is believed to be the billionaire’ s own. Paulson rose to fame for making $15 billion betting against the housing market on the eve of the financial crisis in 2007. But since then he has struggled to duplicate that success, and his portfolio of funds has struggled in recent years.
Paulson disclosed the gold fund loss to investors on Monday along with results for his other funds, the source said.
Over a two week stretch in April, the price of gold plunged 17 percent, from $1,603 per ounce to a low of $1,321 on April 16, before starting to rebound. As of Tuesday, the metal was trading near $1,446.
Regulatory filings show that at the end of last year Paulson & Co Inc, the firm that manages Paulson’s hedge funds, was the largest holder of the SPDR Gold ETF, with 21.8 million shares. Paulson has not yet disclosed its latest position in the gold ETF. Since the beginning of the year, the gold ETF has fallen about 14 percent.
Paulson’s hedge funds also are large investors in shares of gold mining companies, which similarly have sold off this year.
May 21, 2013, the day of JPMorgan Chase’s annual shareholder meeting, is judgment day for Jamie Dimon. Signs are mounting that the judgment could be harsh.
JPMorgan Chase’s (JPM, Fortune 500) larger-than-life CEO appeared to survive the London Whale — the bank’s big bet on derivatives that resulted in nearly $6 billion in losses – with his power undiminished.
But one year later, he is under fire from a wide swath of shareholders who are pushing the board to strip him of his role of chairman.
On top of that, one of the most influential shareholder advisory firms, ISS Proxy Advisory Services, also recommended that shareholders vote against three of the bank’s long-serving board members. The three directors, Honeywell’s (HON, Fortune 500) CEO David Cote, private investment adviser Henry Crown, and the American Museum of National History’s CEO Ellen Futtter, all served on the bank’s risk oversight committee, and were most responsible for overseeing the trading operations that led to the London Whale losses.
If ISS ultimately holds sway, Jamie Dimon could be faced with a new, less agreeable board.
ISS also criticized JPMorgan’s entire board for a lack of independence. In the face of the massive London Whale trading losses, “the board appears to have been largely reactive, making changes only when it was clear that it could no longer maintain the status quo,” ISS said.