Posts by Michael Santoli
Michael Santoli at Yahoo Finance 16 hrs ago
Wall Street is celebrating the creation of a new subprime-lending leader from the spare parts of two financial giants at the center of the global financial crisis.
Springleaf Holdings Inc. (LEAF), a former subprime lending division of American International Group Inc. (AIG),has agreed to buy Citigroup Inc.’s (C) OneMain Financial, for $4.25 billion in cash.
The deal – which has been anticipated for a while but was cut at a far lower price than analysts expected – sent Springleaf shares soaring by as much 30% this morning to more than $52.
Springleaf was apparently able to get OneMain at an attractive price because it was the most logical strategic buyer and Citi was a highly motivated seller, having publicly placed OneMain on the block as part of a broader effort by the financial conglomerate to trim down. The company edged out a few private equity firms to emerge as the presumptive buyer for OneMain in recent weeks, according to Reuters.
Michael Santoli at Yahoo Finance 1 day ago
No, small investors, Wall Street robots are not front-running your trades or picking your pocket.
In fact, it’s becoming increasingly clear that high frequency electronic trading firms are a boon to individual stock investors, who get better prices because the automated middlemen are fiercely jockeying to handle their orders.
Almost a year after Michael Lewis’s book “Flash Boys” stoked public outrage by playing up the predatory reputation of HFT players, Barron’s this weekend crunched the raw trading data produced by brokerage firms and market makers to determine that the little guy makes out nicely in this high-speed game.
As the financial weekly points out: “ The competition for retail traders’ orders actually yields a price that’s better than the published quote, on average, when small investors go to buy or sell at the market price.”
As I discuss with Yahoo Finance’s Jen Rogers in the attached video, trading for small investors has never been faster, cheaper or more certain.
More from Yahoo Finance
Michael Santoli at Yahoo Finance 4 days ago
The housing bust and Great Recession might have scared a generation of would-be construction workers away from the building trades.
That’s the strong suggestion of some new research by the Federal Reserve, which explored why shortages of construction workers are emerging even as large numbers of people who seem good candidates for that type of work remain under-employed.
A working paper by Fed economist Andrew Paciorek notes that construction employment growth has badly lagged the recovery in the labor market as a whole.
Supporting the idea that labor is tight here, a greater percentage of homebuilders reported worker shortages late last year than during the peak of the housing boom in 2004 and 2005. Builders were having the hardest time finding help for framing crews and rough carpentry – semi-skilled jobs that don’t require much formal training.
So what’s going on?
Paciorek ran statistical tests to rule out the idea that huge numbers of former construction workers are either still unemployed or have flowed out of the labor force altogether.
Michael Santoli at Yahoo Finance 5 days ago
Fidelity Investments is providing both a gentle prod and generous reward to investors saving for retirement, with a new offer to match part of their IRA contributions for three years.
Under the IRA Match program - which the company says is an industry first - customers who transfer traditional, Roth or rollover individual retirement accounts can have up to 10% of their annual IRA contributions matched by Fidelity.
The privately held Boston asset management giant is essentially bringing one of the key perks of many corporate 401(k) programs to the market for self-directed retirement products.
“We looked hard at what has worked,” says Lauren Brouhard, Fidelity’s senior vice president for retirement. “The company match in 401(k) plans has been a very powerful tool to overcome inertia” among those charged with planning for their own retirement.
Here’s how the IRA Match plan works: Investors who bring IRA accounts worth at least $10,000 to Fidelity will be eligible, with the percentage of contributions matched determined by how much is transferred. Direct rollovers from a workplace 401(k) plan are not eligible.
The battle for retirement assets
Michael Santoli at Yahoo Finance 6 days ago
In a typical bit of boastful Wall Street irony, New Media Investment Group (NEWM) is dedicated to the very Old Media business of owning small newspapers.
Yet the greater paradox might be that its stock is dazzling a New York investment world that’s otherwise more infatuated with the next global revolution than yesterday’s local news. The shares are up more than 120% in the year since New Media was spun off as an independent public company.
New Media is the country’s largest owner of community newspapers and other local publications, and is the most aggressive acquirer in the industry. It has a handful of larger dailies such as the Providence Journal and The Record of Stockton, Calif. But the majority of its 500 titles are small-town dailies, weeklies and “shoppers,” which generally are the only source of community news and the main game for local advertisers – Main Street organs such as the Daily Siftings Herald of Arkadelphia, Ark., and the Dodge City Daily Globe in Kansas.
Nearly all of New Media’s properties have been around for more than 50 years, yet some 80% of them have an online presence.
Michael Santoli at Yahoo Finance 7 days ago
With gas prices bouncing a bit this week, the idea of locking in fuel costs near their recent multiyear lows might be tempting.
Unlike loading up on paper towels when Costco has them on special, though, stockpiling a few months’ worth of flammable liquid isn’t exactly practical.
In America, of course, there’s often a business that promises to meet impractical consumer wishes. For those who want to lock in today’s pump prices for a long time, there is MyGallons.com. The company offers a way to “pre-buy” gasoline around current prices, to protect against another big surge in coming months or years.
A customer can pay the current price in his or her state for a large quantity of gas, and then “cash in” those gallons any time as prices rise. The amount of the gas-price increase is simply credited to the customer’s checking account, or is loaded on to a MyGallons prepaid debit card.
The somewhat cumbersome nature of the service and the fees involved show that freezing the cost of a volatile commodity at an attractive level isn’t so simple.
Michael Santoli at Yahoo Finance 8 days ago
On its return trip to 5000, the Nasdaq Composite reflects little of the silliness of its first visit 15 years ago.
That’s partly because the frothiest investments in Silicon Valley are in private companies whose value isn’t captured in the index, which once was the barometer of the hyper-growth tech economy.
The Nasdaq’s climb to within 1% of the 5000 level has been a sober trudge compared to the giddy rocket shot in 1999 and 2000 that resulted in the fleeting peak of the Tech Bubble.
The biggest Nasdaq companies today are cash-rich bellwethers whose shares trade at unremarkable price-to-earnings multiples. Fifteen years ago, they were wildly overpriced and in some cases barely profitable.
“Tech has always been cyclical,” says Yahoo Finance’s Henry Blodget in the attached video. “We are in a boom phase. We probably have another year or two left at most, then we’ll go into a bust.”
But, says Blodget, who famously was an Internet sector analyst in the bubble years: “It looks nothing like the late 1990s.”
Michael Santoli at Yahoo Finance 12 days ago
Like unworldly tourists who eat at McDonald’s on their European vacation, American investors are feasting on overseas stocks but don’t want to taste foreign currencies in the process.
While the stateside benchmark Standard & Poor’s 500 index led all major markets in 2014 and has recovered from its January dip to record a new all-time high, U.S. stocks are in fact among the weakest performers in the world so far this year.
The S&P 500 is up 2% to start 2015, while the rest of the world’s equities have appreciated nearly twice as much, led by European markets surging to double-digit gains.
Entering 2015, the consensus was that an accelerating domestic economy in the U.S. made American stocks the place to be. But, of course, a crowded consensus often invites comeuppance, and the outperformance of foreign stocks has drawn heavy investment flows to the rest of the developed world.
Wall Street, of course, has a packaged product built for every perceived problem, including unwelcome currency exposure of foreign stocks.
Michael Santoli at Yahoo Finance 18 days ago
American savers have had it hard enough, earning next to nothing on bank deposits and money market funds. But could it get worse, with banks here charging depositors interest to hold their money and high-quality bonds yielding nothing at all?
It might seem a curious question, given broad expectations for higher U.S. interest rates, as job growth gathers momentum and the Federal Reserve has openly hinted it is eager to end its seven-year policy of near-zero short-term interest rates.
Yet a collapse in interest rates overseas and the continuing risk of financial shocks is spurring Wall Street economists at least to mull the unlikely prospect of such a scenario developing here.
The specter of negative interest rates has been sweeping across Europe for months. The European Central Bank and those of Switzerland, Sweden and Denmark have set official overnight interest rates among banks below zero in an aggressive effort to encourage borrowing, energize economic growth and stave off deflation, a spiral in which people continually expect prices to fall.
The firm concludes that it is “extremely unlikely” that the Fed would move in this direction.
The cost of safety
Michael Santoli at Yahoo Finance 20 days ago
A growing number companies are looking to get out from under burdensome pension obligations – and this is not such a bad thing, for either retirees or investors.
Pension programs among those American companies that still have traditional defined-benefit plans have consistently been underfunded.
Yet the financial stress on these plans -- which must pay lifelong benefits to retired workers -- has become even more intense, as ultra-low interest rates make it hard to meet ballooning obligations and lifespans continue to increase.
Pension-granting companies in the Standard & Poor’s 1500 index, which includes both large and small public companies, were only 79% funded, in aggregate, as of Dec. 31, and their collective deficit more than doubled to $504 billion from a year earlier, according to consulting giant Mercer.
Often, but not always, these so-called “risk transfer” transactions involve lump-sum payments to retirees, and/or an annuity delivering regular income.