Tag Archive | MS

ETFs For Increased M&A Activity

As companies continue to put out good earnings reports and cash flow lending comes back to life, it appears that there is an improved market sentiment in the mergers and acquisitions spectrum.

According to a report by mergermarket and Merrill DataSite, the first six months of 2010 has a relatively active M&A season and the trend is expected to continue for the rest of the year.  The first half of 2010 witnessed 1,701 deals resulting in transactions of $362.3 billion with value increasing 8.7% from the same time period a year ago.

Another trend indicating an uptick in M&A activity is that private equity firms posted 249 exits worth a combined $41.6 billion during the first six months of the year, compared to 337 exits totaling $35 billion for the entire year of 2009.  Read More…

Three ETFs To Be Impacted By New Financial Legislation

 After weeks of deliberation, the U.S. Congress passed the final version of legislation for the first major overhaul of the nation’s financial system since the Great Depression, imposing more restrictions on Wall Street and banks having a dramatic effect on stocks and exchange traded funds (ETFs) which track the sector.

This final version will give the government new powers to break up companies that threaten the economy, create a new agency to guard consumers in their financial transactions and shine a light into shadow financial markets that escaped the oversight of regulators.  To be more specific, the law will restrict banks from prop trading by limiting the amount an institution can invest in a hedge fund or private-equity fund to a maximum 3% of the bank’s capital.  Companies most likely to be influenced by this regulation include big players like JP Morgan Chase (JPM), Goldman Sachs (GS), Bank of America (BAC), Wells Fargo (WFC) and Morgan Stanley (MS). Read More…

Financials Influenced By Derivatives Regulation

In response to the financial crisis which nearly crippled the U.S. economy and the questionable business practices at one of the world’s most successful financial institutions, Goldman Sachs (GS), President Obama and his administration is determined to provide better financial regulation which will likely influence the financial industry.

The U.S. Senate has already passed two amendments which are aimed at setting up a new government protocol for seizing and dismantling large financial firms that are in distress, overcoming the “to big to fail” philosophy.   In the proposed bills, which are expected to be enacted into law within the next few weeks, the Federal Deposit Insurance Corporation (FDIC) will be able to manage an “orderly liquidation” process for troubled firms that would pose a risk to the banking system if they were to collapse.

A second part of these amendments lessens risks by restructuring how major banks trade derivatives and by requiring most derivative contracts to be cleared by a clearinghouse, through the Wall Street Transparency and Accountability Act.  This Act may also require that derivatives be traded through public exchanges.  Read More…

Financials Could Feel The Heat

By Kevin Grewal

Although the future of reform legislation remains unclear, a recent bill proposed by Senator Christopher Dodd could potentially hinder the financial sector and its exchange traded funds (ETFs).

This new proposed reform, which is expected to be forced onto the Senate Finance Committee as early as next week, aims to give the Federal Reserve extraordinary control and power over large financial institutions.   More specifically, it would give the Fed the power to break up any large financial institution which could potentially jeopardize the stability of the financial system. 

Additionally, the bill will give the Fed authority and control over the nation’s largest bank-holding companies, those with assets of $50 billion or more, and be the focal point of oversight and regulation over mortgage-related businesses and non-bank financial firms like insurance companies.  The bill specifically aims to regulate risky financial instruments, like mortgage-backed securities.  Read More…

Financials Still Not In the Clear

By Kevin Grewal

Despite stellar quarterly earnings reports by some financial services giants like Goldman Sachs (GS) and JP Morgan Chase (JPM), the financial sector as a whole fares better than it did a year ago, but is still not in the clear.

Most recently, the nation’s largest life-insurer, Met Life (MET), disappointed Wall Street, as it reported a book value short of what was expected.  Many suggest that this was driven by the impact that financial derivatives have on balance sheets and the fact that these financial derivatives, which many blame for the recent financial crisis, is still prevalent in the financial sector. 

To put a further strain on the sector, quarterly earnings by Bank of America (BAC) and Morgan Stanley (MS) both failed to deliver.  Back of America blamed its quarterly losses on the rising defaults in credit card debt and mortgage loans as well as its obligation to pay back borrowed money from the federal government and taxpayers.  As for Morgan Stanley, the company took a hit as it continues to face struggles caused by the credit crisis and tightened its credit spreads which increased liabilities. Read More…

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