Financial Mines

News and notes from the business reporters for the Connecticut Media Group.
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Archive for November, 2011

Comstock re-Loded?

Wednesday, November 30, 2011 by:Rob Varnon
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With gold prices continuing to tickle $1,750 an ounce, speculation in old mines remains strong evoking a rebirth in even one of the nation’s most famous strikes, the Comstock Lode in Nevada.

Comstock Mining Inc., a company founded in 1999, said earlier this month, surveys indicate there could be 1.78 million gold equivalent ounces in the old mines surrounding historic Virginia City, Nevada.

The company, trading on the NYSE’s American Exchange under the symbol LODE, reported losing $9.2 million during the first nine months of this year,  as it continues its search for gold and restarting the mines. It faces some local regulatory hurdles over its mining methods.

The Comstock Lode itself was most famous for the silver it produced, though there was gold mining in the area.

The Comstock gained international fame in 1859 when news of the silver strike spread through newspapers. It drew dreamers from many nations and from many states, including a young newspaper man named Sam Clemens. In 1861 Sam Clemens, better known as Mark Twain tagged along with his brother Orion Clemens, who had been appointed the Secretary of the Territory of Nevada.

The local newspaper featured a series on the project to restart the mines and you can find it by following by visiting its website:

http://virginiacitynews.com/index1.htm

Warren buys hometown paper

Wednesday, November 30, 2011 by:Rob Varnon
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Is the Oracle of Omaha investing with his heart, these days, trying to save his hometown newspaper, or does Buffett think there’s reason to believe readers do still value the newspapers as they transition into the digital age and fight for attention in a cluttered environment?

Buffett’s Berkshire Hathaway announced it bought the Omaha World-Herald on Thursday Nov. 30, 2011.

Here’s the release:

http://www.berkshirehathaway.com/news/NOV3011.pdf

Insurers looking for Medicare hikes

Wednesday, November 30, 2011 by:Rob Varnon
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Oxford, USAA and Monumental are all asking to raise some or all of their rates on their Medicare supplemental coverage for Connecticut residents.

The State Insurance Department has scheduled hearings for all three proposals on the same day, Dec. 21.

Oxford is seeking an across the board 7 percent hike. USAA is looking for a 15 percent increase for its plan A, a 4.5 percent increase for Plan D, an 8 percent decrease for Plan F and a 1.5 percent increase for Plan G.

Monumental wants a 5.3 percent increase for its group, prestandardized coverage.

Insurers are increasing finding it difficult to win rate approvals in an economy where average Americans have struggled with employment and stagnating income. The insurers themselves face pressure to raise revenues and return profits to investors.

Anyone interested in finding out more about the rate requests can call the Insurance Department at:

860-297-3901

S&P downgrades a pack of the world’s largest banks

Tuesday, November 29, 2011 by:Rob Varnon
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Could be a wild open Wednesday.

S&P announced Tuesday it has finished its review under new criteria of the top 37 banks in the world and has adjusted the ratings on many.

Bank of America and Citigroup both were rated A- with negative outlooks. Royal Bank of Scotland went from A stable to A- stable while UBS slipped from A+ to A with a negative outlook.

The S&P said it will hold a teleconference on the changes Wednesday morning.

The move did not sit well with banks who are battling increased regulation after years of cleaning up balance sheets.

“We are disappointed by S&P’s decisions about UBS,” UBS said in an emailed statement to Hearst. “Our strong capital liquidity and funding positions form the foundation of our strategy and we are determined to remain on of the world’s best capitalized banks.

“UBS’s experience and track record in building regulatory capital while deleveraging and reducing risk exposure is unique in the industry and we will continue to reduce risk-weighted assets in a disciplined way.”

The bank with operations in Stamford said investors and clients can draw their own conclusions about the bank’s strength based on UBS’ Nov. 17 disclosures during Investor Day.

S&P justified its ratings in brief statements. In the UBS case, the ratings agency said it was concerned that UBS faces more risk as it attempts to simplify its investment banking business. But the S&P noted it believes UBS is of systemic importance to Switzerland.

UBS is offering $5.3 billion in gold indexed securities

Tuesday, November 29, 2011 by:Rob Varnon
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UBS filed paperwork Monday and Tuesday detailing plans to offer more than $5.3 billion in buffered return optimization securities tied to a gold index. The deal offers three payment scenarios. If the spot price of gold increases during the period, the buyer will get principle plus 1.5 times the asset return. If the price doesn’t move or declines within the 20 percent range of the buffer, the investor gets the principal back. But if the price falls more than the buffer, UBS says it will repay less than the principal.

This is a supplemental offering dating back to January of 2009.

UBS said it could use the proceeds for a number of activities, including paying down other debt. The new issuance is expected to mature in November of 2014 and it will not pay interest.

Citigroup and SEC now facing the fire of a trial

Monday, November 28, 2011 by:Rob Varnon
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There’s a new sheriff in town and his name is U.S. District Judge Jed S. Rakoff who ordered the SEC to prove allegations that Citigroup knowing created a fund called ClassV Funding III, in which it dumped mortgage backed securities of dubious value and then sold the fund to misinformed investors for a profit of $160 million in 2007. The allegations also indicate, investors may have lost $700 million. He consolidated this matter with another case and ordered a trial for July 16, 2012

Rakoff has been critical of the SEC settling allegations with fines and allowing alleged abuses go.

In his opinion, Rakoff explains it is more than the amount of money that is of a concern:

“Finally, in any case like this that touches on the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives, there is an overriding public interest in knowing the truth. In much of the world, propaganda reigns, and truth is confined to secretive, fearful whispers. Even in our nation, apologists for suppressing or obscuring the truth may always be found. But the S.E.C., of all agencies, has a duty, inherent in its statutory mission, to see that the truth emerges; and if fails to do so, this Court must not, in the name of deference or convenience, grant judicial enforcement to the agency’s contrivances.
“Accordingly, the Court refuses to approve the proposed Consent Judgment…”

Shares in City had climbed as much as 9 percent to $25.48 before giving back more than half of those gains after the decision was made. Citi’s shares dropped to to $24.73 lat in the trading before rebounding to close at $25.05.

Interesting insider trading standards popping up

Monday, November 28, 2011 by:Rob Varnon
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This guy’s transgression sounds oddly familiar. He heard about an acquisition from an insider. Though he himself was not an officer or employee of the company, he bought shares and tipped off his friends and family to help them get in on the deal before anyone else.

The SEC says he betrayed the source of the information… Very interesting the standards the SEC is applying these days considering what information D.C. politicians, may or may not be acting on.

By the way, the SEC jazzed up the release noting this guy is an ex Major Leaguer, but he wasn’t an every day player. He only had at bats in three seasons, according to Baseball Almanac.com and his last game was in 1993. He hit 173 in those three years and Baseball Almanac notes, he was never caught stealing during his major league career.

Here’s the relevant info from the SEC.

SEC CHARGES FORMER PROFESSIONAL BASEBALL PLAYER JEFFREY RICHARDSON WITH INSIDER TRADING

On November 23, 2011, the Securities and Exchange Commission charged former professional baseball player Jeffrey S. Richardson with insider trading in securities of Genesis Energy, LP ahead of an April 26, 2007 announcement that Genesis would acquire several energy related businesses owned by the Davison family of Ruston, Louisiana. The Commission also alleges that Richardson tipped two family members and one friend who traded in Genesis Energy securities. Richardson has agreed to settle the matter.

According to the Commission’s complaint filed in U.S. District Court for the Southern District of New York, Richardson, who lives in Grand Island, Nebraska, received confidential information about the acquisition from a person knowledgeable about the negotiations between Genesis and the Davison family. In breach of a duty of trust and confidence he owed the source of the information, Richardson purchased units of Genesis on six separate dates between February 26 and April 25, 2007 based on the information he received regarding the acquisition. During this time, Richardson also illegally tipped two family members and one friend, who traded on the confidential information. Together, Richardson, his family members and the friend made profits of $88,026 from their illegal trading.

Without admitting or denying the complaint’s allegations, Richardson has agreed to settle the Commission’s charges by consenting to entry of a final judgment permanently enjoining him from violating Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder, and ordering him to pay $88,026 in disgorgement with $21,534 in prejudgment interest, and a civil penalty of $88,026. The settlements are subject to final approval by the court.

The Commission acknowledges the Office of Fraud Detection and Market Intelligence of the Financial Industry Regulatory Authority (“FINRA”) for its assistance in this investigation.

SEC says hedge fund was piggy bank for failing company

Wednesday, November 23, 2011 by:Rob Varnon
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The Securities and Exchange Commission has brought charges against Oakbrook, Ill. manager Patrick G. Rooney and his Solaris Management LLC. for allegedly misusing $3.6 million in investments.

Rooney, according to the SEC, redirected investments in his hedge fund into the Positron Corp, a failing company that he was chairman of and then hid the investment for years.

Here’s a link to the SEC complaint:

http://www.sec.gov/litigation/complaints/2011/comp22167.pdf

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