UBS hit by $2 billion loss from rogue trader

LONDON (MarketWatch) — Swiss bank UBS AG said Thursday that a rogue trader in its investment-banking division ran up $2 billion of losses, which could push the firm’s third-quarter results into the red.

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The announcement followed the early-morning arrest of a 31-year-old man in London on suspicion of ”fraud by abuse of position,” according to a statement from City of London police. The suspect remains in custody.

A spokesman for UBS CH:UBSN +5.23%   UBS +4.12%   declined to name the trader, but The Wall Street Journal identified him as Kweku Adoboli, an employee in the firm’s exchange-traded funds unit.

The bank, which has battled a string of high-profile crises over the past couple of years, said it may now report a loss for the current quarter, but added that none of its clients were affected.

Shares in UBS dropped 9.9% in afternoon trading.

According to his profile on networking site LinkedIn, Adoboli is a director of ETF and Delta One — a class of derivatives that are intended to move in very close step with the underlying asset.

Delta One is also the division at Societe Generale SA FR:GLE +3.44%  where Jerome Kerviel was a trader in 2008, when Kerviel’s unauthorized trades cost the French bank 4.9 billion euros ($6.7 billion).

In that case, Kerviel was accused of placing €50 billion of bets on stock-market futures — more than the entire market capitalization of SocGen at the time.

Latest crisis

The latest scandal for UBS comes on the back of several major setbacks in recent years.

The bank took some of the heftiest write-downs in Europe following the subprime crisis and was at the center of a recent high-profile tax-evasion scandal. It agreed to hand over the names of thousands of possible tax dodgers to U.S. authorities as part of a settlement.

UBSN 10.26, +0.51, +5.23% 2

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The loss of confidence among clients led to a massive outflow of funds from the group’s private-banking operations, which it had only recently managed to stem.

Deutsche Bank analyst Matt Spick said a $2 billion loss would more than wipe out his current forecast for a third-quarter pretax profit of 1.5 billion francs ($1.7 billion).

On top of that, the announcement “may undo some of the reputational improvement in the private bank,” he added.

“Perhaps the silver lining is that this event could accelerate the decision-making progress at UBS on how to position and right-size the investment- banking operations within the group,” Spick said in a note to clients.

The investment-banking arm has struggled compared with rivals such as Credit Suisse Group AG CH:CSGN +4.75% CS +2.47% , leading the group to announce last month that it will cut around 3,500 jobs in the face of weaker earnings and slowing economic growth.

Where iPhone 5 might be lost in Silicon Valley

By Therese Poletti, MarketWatch

WOODSIDE, Calif. (MarketWatch) — Martin Eberhard, a co-founder and former chief executive of Tesla Motors Inc., laughed when he heard the premise of this column: to feature some Silicon Valley watering holes and hangouts where we might be able to find the next lost iPhone.

By serendipitous coincidence, Eberhard — who was having lunch at the famous Buck’s in tony Woodside, Calif. — showed me his email signature on his iPhone, which reads: “Sent from my iPhone 5 prototype, which I found in a bar.” Just a little geek humor after the latest incident, I suppose.

No, Eberhard did not have that appended to outgoing messages after the news earlier this month that another Apple Inc. AAPL +1.92%  iPhone prototype — this time an iPhone 5, apparently — was left at a drinking establishment (this time at a tequila bar in San Francisco). Read CNET story on iPhone 5 found in a Mission district bar.

Therese Poletti/MarketWatch

From left: Matthew Neher, CEO of start-up Greentech Mining; Kevin Kanning, VP and COO of Greentech; and Dennis Di Ricco, an investor who lists Buck's address as one of his offices on his business card. On the wall is a shrink-wrapped box of Microsoft Windows 1.0.

He’s had that email signature since the top-secret prototype of the iPhone 4 was lost in March last year at Gourmet Haus Staudt, a German bar and beer garden in Redwood City, Calif. “I am beginning to think this is a marketing strategy of Apple,” he said, only half joking. “It might be a new way to test-market a product.” Read more on the first lost iPhone saga.

Eberhard, who won’t talk about what he has been working on since he left Palo Alto, Calif.-based Tesla TSLA +3.95% , is not the lone voice of that theory. But others say that the secretive Apple would never purposely want an employee to leave another iPhone prototype anywhere in public.

“They certainly don’t need the publicity,” argues analyst Ashok Kumar of Rodman & Renshaw. Also, “working at Apple is like working at the CIA.”

Besides, he added, the company certainly would not want to tip off rivals in the smartphone business as to what it will do next: “These products have a really short shelf life.”

Still, hopeful and inquiring minds wanted to know where else in Silicon Valley the next top-secret lost iPhone will turn up. See a slide show of bars and hangouts where you might find the next iPhone.

“We have seen a lot of stuff that is stamped confidential, but confidential to one person is another person’s garbage,” quipped Jamis MacNiven, the owner of Buck's, who’s also written a book, “Tales from the Pancake Guy.”

Eberhard pointed out that it might be hard to spot such a device in the clutter of Buck’s, a favorite haunt for venture capitalists and entrepreneurs. Every bit of wall space is taken up with MacNiven’s collectibles — from Cracker Jack prizes of the 1920s and 1930s and a shrink-wrapped box of Microsoft Corp ‘s. MSFT +0.48%  Windows 1.0 to a soapbox car, a relic from the Sand Hill Challenge derby of the dot-com boom.

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One could stay all day in Buck’s, but sadly it’s time to move on. Not far is Sand Hill Road, where the swish Rosewood Sand Hill resort has one of the most elegant bars seen on this Valley pub crawl, simply called the Bar. Power banker Frank Quattrone scurried away after a quick hi, avoiding annoying questions about lost gadgetry or deals he has in the works. After a divine $5 pomegranate mojito sans alcohol, it’s time to leave.

Next, Cupertino, Calif., seems like a good bet. The old Peppermill next door to Apple’s campus is now gone. It’s been replaced by BJ’s Restaurant and Brewhouse, where you can see the main One Infinite Loop building from the parking lot. One BJ’s worker admits he always looks at the phones Apple employees have to see if they are new, yet-to-be-released iPhones.

“Nothing top-secret has ever been left here,” said Treavor Morris, general manager of BJ’s Cupertino. “We’ve found a few iPads, but they come right over and pick them up.” Well, there’s always a first time.

Another likely candidate is a pub, the Duke of Edinburgh on North Wolfe Road, on the other side of the 280 freeway in Cupertino, where Apple’s new campus will be built. Hewlett-Packard Co. HPQ +1.12%  still has some people working there and Apple occupies some buildings nearby. The Duke, as it is called, has a charming, and likely little-used, red London phone booth outside, and its interior is said to have been made in England.

“They talk about doing business at the Duke,” said J.C. Deacha, one of the owners of the Duke, of the H-P employees and previously Tandem workers. But no, “we haven’t found anything like that,” he said when asked about ever seeing any clandestine prototype devices.

Alas, the Mexican cantina Pedro’s in Santa Clara, Calif., hasn’t had any shenanigans with drunken engineers leaving confidential products behind either. “I found an iPhone in the bathroom,” reported Dora Garcia, the manager. Its sobered-up owner claimed it the next day.

But Pedro’s — known as a watering hole for Intel Corp. INTC +2.00% employees, as well as those of EMC Corp. EMC +0.31%  and Qualcomm Inc. QCOM +0.45% — might be a place where a Johnny-come-lately in smartphones might want to “accidentally” leave a working device with chips (not of the tortilla variety) based on the microprocessor giant’s new partnership with Google Inc. GOOG +0.76% . Read more about Intel's deal with Google.

Heading north: So many bars, so little time. One stop is Fred’s Place on Old Middlefield Way in Mountain View, Calif., a local dive that’s something of an institution, having been a stone’s throw from the original Fairchild Semiconductor offices on Charleston Road. It’s not clear if Fred’s was also a big hangout of the early chip cowboys (like the now-demolished Wagon Wheel was, which stood at East Middlefield and Whisman Roads). But given Fred’s location and age, it’s pretty likely.

“Lots of companies have started here on a napkin,” said Paul Partti, who has co-owned the 51-year-old Fred’s for the last 11 years. He declined to be more specific, giving his bar a mysterious allure — visible by its magenta neon sign, complete with glowing martini glass and olive. The usual things have been forgotten, typically cell phones, but nothing top-secret or in development. “It’s funny that this happened to Apple twice,” he mused.

Torn between the chichi bar at the Four Seasons Hotel just off the 101 highway and downtown Palo Alto, I decided to continue exploring dives. “Most of the geeks I know go into bars on University Avenue or California in Palo Alto,” said Trip Chowdhry, a Global Equities Research analyst.

Antonio’s Nut House on California Avenue is a favorite of some Facebook Inc. and AOL Inc. AOL -2.91%  employees as well as Stanford students. Disappointed only to find peanut shells covering the floor, and nary an iPhone prototype hidden among them, it was time to call it a night.

Therese Poletti is a senior columnist for MarketWatch in San Francisco.

Bank of America's 30000 Job Cuts Biggest in U.S. This Year

Bank of America is delivering the U.S. its biggest job-cut blow of the year as the nation is battling unemployment woes.

The bank will eliminate about 30,000 jobs in an effort to restore investor confidence and turn a negative tide that has swelled after the recession and amid the slow-growth economy.

A Bank of America shareholder walks into the corporate headquarters prior to the start of the Bank of America annual shareholders meeting in Charlotte, North Carolina May 11, 2011. The company will slash as many as 30,000 jobs as part of a cost-savings plan announced Monday.


A Bank of America shareholder walks into the corporate headquarters prior to the start of the Bank of America annual shareholders meeting in Charlotte, North Carolina May 11, 2011. The company will slash as many as 30,000 jobs as part of a cost-savings plan announced Monday.
The jobs cut is the single largest job reduction by a U.S. company this year, and the most since the U.S. Postal Service said last year it wanted to cut an additional 30,000 jobs. Earlier this year Merck & Co. said it would cut 13,000 jobs, and Bank of America's is the largest since General Motors cut 47,000 jobs in 2009.
Bank of America is trying to cut costs as its Countrywide mortgage unit continues to suffer massive losses.
The cuts fall in line with massive job reductions at financial companies in the U.S. and abroad. However, as already this year the 50 largest global banks had announced nearly 60,000 job cuts, the fastest pace since the recession-plagued year of 2008. As the economy in the U.S. and Western Europe stagnates, banks have had to reduce costs to become or remain profitable.
Bank of America said the elimination of 30,000 jobs will help the company cut $5 billion annually in expenses by 2014.
"As the company implements the thousands of decisions from Project New BAC over time," BofA said in a statement, "it intends to become a more focused, leaner, and more efficient company, providing all of its customers and clients with the best financial services, generating strong revenues, carefully managing expenses and risks and delivering long-term value for shareholders."
The company already announced job cuts of 6,000 earlier this year, but the latest move is a significant downsizing effort for the bank, which employed 288,000 workers as of June 30. The company's shares have been clobbered this year amid struggles from its mortgage units and concerns over the need to raise more capital in the global economic turmoil, shedding 47 percent in 2011.
On Monday, Bank of America's shares traded up seven cents on news of the job cuts, to $7.05. The 52-week low for Bank of America  is $6.01, but the company's shares have plummeted this year, down from a yearly high of $15.31.
The downsizing is part of the bank's first phase of a cost-cutting program -- "Project New BAC" -- that the company hopes will ultimately result in the full $5 billion in annual savings. The company issued a statement on the "new BAC" job cuts plan Monday at the Barclays Capital 2011 Global Financial Services Conference in New York.
"It's time to simplify the organization, streamline the organization and make sure our business processes are relevant when you have a smaller, more focused company. We just don't need to be the biggest," Bank of America CEO Brian Moynihan said in a Sept. 6 interview.
Bank of America said its goal isn't a "given number" of job cuts, but rather implementation of the New BAC decisions. The company said as those decisions are made, employment levels in certain areas under review are expected to be reduced.
Bank of America acquired Countrywide at the time the federal government was involved in TARP bailouts of many financial companies.
Among recent moves by Bank of America was taking a $5 billion investment from investor Warren Buffett, selling half of the company's China Construction Bank investment for $8.3 billion, and ousting consumer bank head Sallie Krawcheck.
In a meeting in New York on Monday with analysts, Moynihan also didn't close the door on other drastic moves, including a bankruptcy filing for Countrywide, which has cost Bank of America tens of billions in losses. When asked if he would consider putting Countrywide into bankruptcy Moynihan replied, "We look at all our options."

US:Record poverty last year as household income dips

Median household income declines; families ‘doubled up’

 

By Ruth Mantell, MarketWatch

WASHINGTON (MarketWatch) — A record number of people were in poverty last year as households saw their income decrease, according to data from the Census Bureau Tuesday, demonstrating the weakness of the economy even after the official end of the recession.

The 46.2 million people in poverty in 2010 was the most for the 52 years that estimates have been published, and the number of people in poverty rose for the fourth consecutive year as the poverty rate climbed to 15.1% — the highest since 1993 — up from 14.3% in 2009.

Meanwhile, real median household income in 2010 was $49,445, down 2.3% from the prior year and below pre-recession levels.

“I would frame this report as giving us a look at whether the so-called recovery that started in June 2009 has had any widespread benefits for American families,” said Larry Katz, a labor economist at Harvard University.

Economists say the recession officially ended in 2009, but employment remained weak in 2010, with a national employment gain of only about 940,000 jobs — less than half the growth in the civilian population that’s outside prisons and the military. Also, the unemployment rate remained elevated, declining to 9.4% by the end of 2010 from a peak of 10.1% in 2009.

While the data released Tuesday paint a grim picture, the results could have been even worse without government benefits such as extended unemployment insurance that were “pretty good at plugging some holes in the safety net and preventing even more people from falling into poverty,” said Harry Holzer, a public-policy professor at Georgetown University.

Still, times are likely to be tough for a while, according to Edwin Park, vice president for health policy at the Center on Budget and Policy Priorities.

“Looking ahead, poverty seems unlikely to improve because of the way the economy is going,” he said. “State and local governments are retrenching, cutting spending, which will slow economic growth.”

The Census report also noted a gain in “doubled-up households” — those formed by combining households with other families or individuals to deal with the tough economic times. This year, about 5.9 million adults between 25 and 34 live in their parents’ households, up 25% from 4.7 million before the recession. Between spring 2007 and spring 2011, the number of doubled-up households rose 2 million to 21.8 million.

The data on poverty come as Congress debates a jobs package President Barack Obama introduced last week that includes payroll-tax reductions, and as Republican presidential candidates and congressional lawmakers debate the best way forward for the economy.

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For 2010, the poverty threshold for a four-person family, including two kids, was about $22,000. The official definition of poverty excludes certain benefits, such as food stamps and housing assistance.

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Private insurance covered about 64% of people in 2010, down from about 64.5% in the prior year, with such coverage trending down since 2001. Those covered by employment-based insurance ticked down to 169.3 million from 170.8 million. Those covered by government insurance rose to 31% from 30.6%. In 2010, about 9.8% of children under 18 were not insured.

Real median income for family households fell 1.2% to $61,544 in 2010, while nonfamily households’ income dropped 3.9% to $29,730. By region, income in 2010 fell about 2.9% in the West, 2.5% in the Midwest, 1.9% in the South and 1.2% in the Northeast. By race, income fell 3.2% for black households and 1.7% for whites.

By sex, real median income fell 0.4% in 2010 for men who are full-time workers, compared with a gain of 0.1% for women. In 2010, women made about $36,931 — 77% of $47,715 for men.

Among children under 18, the poverty rate reached 22% in 2010, compared with 13.7% among those 18 to 64. In 2009, the poverty rate among kids was 20.7%, compared with 12.9% among those 18 to 64.

By race, the poverty rate among blacks was 27.4% in 2010, compared with 26.6% among Hispanics, 13% among whites and 12.1% among Asians. By region, the poverty rate was 16.9% in the South, 15.3% in the West, 13.9% in the Midwest and 12.8% in the Northeast.