A Few ETF/ETN Picks – One Year Later

July 28, 2009

Here is an update on our ETF/ETN picks that are one year old today.

Not your normal 12 months by any stretch.

Staying disciplined and taking what the market gives leaves us well ahead of the market in even the worst of times.

ETF/ETN picks after 1 year

ETF/ETN picks after 1 year


Apple, Dell, HP laptop owners sue Nvidia over faulty graphics

July 27, 2009

Five plaintiffs join forces to demand class-action lawsuit
By Gregg Keizer
May 11, 2009 12:00 PM ET

Computerworld – Owners of Apple (AAPL), Dell (DELL) and Hewlett-Packard (HPQ) laptops have combined their lawsuits against Nvidia (NVDA) in an attempt to force the graphics chip maker to replace allegedly flawed processors, according to court documents.

If granted class-action status, the case could involve millions of laptop computer owners, the plaintiffs said.

The five plaintiffs, including a Louisiana man who bought an Apple MacBook Pro a year ago, filed an amended complaint last week in a San Francisco federal court, accusing Nvidia of violating consumer-protection laws.

Nvidia admitted to the problem in July 2008, when it said some older chipsets that had shipped in “significant quantities” of notebooks were flawed. In a subsequent filing with the U.S. Securities and Exchange Commission (SEC), the company argued that its chip suppliers, the laptop makers and even consumers were to blame.

Nvidia later told the SEC that it would take a $196 million charge to pay for replacing the graphics processors.

Apple, Dell and HP have all told users that some of their laptops contain faulty Nvidia chipsets. Apple, in fact, essentially said that Nvidia had misled it. “Nvidia assured Apple that Mac computers with these graphics processors were not affected,” Apple said in a support document posted last October. “However, after an Apple-led investigation, Apple has determined that some MacBook Pro computers … may be affected.”

Although Apple promised it would repair any defective MacBook Pro for two years after its purchase date, whether it was in warranty or not, HP and Dell first issued BIOS updates designed by Nvidia that boosted fan speed. The increased fan speed was intended to ward off chip failure. Later, however, both companies also extended warranties for the affected laptops, and in some cases offered free repairs.

The plaintiffs in the combined lawsuit said that anything other than a replacement of the flawed chips was insufficient. “This is a grossly inadequate ‘remedy,’ as it results in additional manifest defects, including, without limitation, further degraded battery life, system performance and increased noise in the Class Computers,” the complaint read.

“Worse, this ‘remedy’ fails to solve the actual problem. Instead, this measure only ensures that the Class Computers will fail after the OEM’s express warranty period expires, potentially leaving consumers with a defective computer and no immediate recourse,” the lawsuit continued. “Finally, even after this purported ‘update,’ video and system performance is still degraded due to unacceptably high heat and part failures.”

Todd Feinstein of Louisiana was the one plaintiff who had purchased an Apple laptop. After buying a MacBook Pro in April 2008, the computer ran hot, periodically shut down without warning and displayed only gray or black at times, Feinstein said.

He sent a letter to Nvidia in September 2008 demanding that the company fix his MacBook. “Nvidia has failed to respond,” he said in the complaint.

Other plaintiffs who live in California, Illinois, New Jersey and New Mexico bought Dell or HP notebooks.

The lawsuit requests the case be granted class-action status, and if it prevails, that Nvidia replace the faulty chips and pay unspecified damages.

Last September, a New York law firm sued Nvidia, accusing the company of breaking U.S. securities laws by concealing the existence of a serious defect in its graphics chip line for several months before admitting the problem. That case has been put on hold awaiting a decision by an appellate court.


SEC makes emergency rule targeting ‘naked’ short-selling permanent

July 27, 2009

By Marcy Gordon, AP Business Writer
Monday July 27, 2009, 8:03 pm EDT

WASHINGTON (AP) — Federal regulators on Monday made permanent an emergency rule put in at the height of last fall’s market turmoil that aims to reduce abusive short-selling.

The Securities and Exchange Commission announced that it took the action on the rule targeting so-called “naked” short-selling, which was due to expire Friday.

Short-sellers bet against a stock. They generally borrow a company’s shares, sell them, and then buy them when the stock falls and return them to the lender — pocketing the difference in price.

“Naked” short-selling occurs when sellers don’t even borrow the shares before selling them, and then look to cover positions sometime after the sale.

The SEC rule includes a requirement that brokers must promptly buy or borrow securities to deliver on a short sale.

Brokers acting for short sellers must find a party believed to be able to deliver the shares within three days after the short-sale trade. If the shares aren’t delivered within that time, there is deemed to be a “failure to deliver.” Brokers can be subject to penalties if the failure to deliver isn’t resolved by the start of trading on the following day.

At the same time, the SEC has been considering several new approaches to reining in rushes of regular short-selling that also can cause dramatic plunges in stock prices.

Investors and lawmakers have been clamoring for the SEC to put new brakes on trading moves they say worsened the market’s downturn starting last fall. SEC Chairman Mary Schapiro has said she is making the issue a priority.

Some securities industry officials, however, have maintained that the SEC’s emergency order on “naked” short-selling brought unintended negative consequences, such as wilder price swings and turbulence in the market.

The five SEC commissioners voted in April to put forward for public comment five alternative short-selling plans. One option is restoring a Depression-era rule that prohibits short sellers from making their trades until a stock ticks at least one penny above its previous trading price. The goal of the so-called uptick rule is to prevent selling sprees that feed upon themselves — actions that battered the stocks of banks and other companies over the last year.

Another approach would ban short-selling for the rest of the trading session in a stock that declines by 10 percent or more.

Schapiro said last week the SEC could decide on a final course of action in “the next several weeks or several months.”

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Investors dump brokers to go it alone online

July 24, 2009

Fri Jul 24, 2009 12:31pm EDT

By Rachel Chang

NEW YORK, July 24 (Reuters) – The collapse of Lehman Brothers (LEH) last September marked the start of a downward spiral for big investment banks. For a smaller fraternity of Internet brokerages, it has set off a dramatic spurt of growth.

Since the start of the financial crisis, $32.2 billion has flowed into the two largest online outfits, TD Ameritrade Holding Corp (AMTD) and Charles Schwab Corp (SCHW), company records show.

By contrast, investors have pulled more than $100 billion from traditional full-service brokerages like Citigroup Inc’s Smith Barney (C) and Bank of America-Merrill Lynch (BAC).

Of course, Americans still keep more of their wealth with established brokerages. According to research firm Gartner, 43 percent of individual investors were with full-service brokers last year, compared with 24 percent with online outfits.

And while figures for 2009 are not yet available, the flow of investors in the past 10 months has clearly been in the direction of the online brokerages, according to analysts both at Gartner and research consultancy Celent.

Joining the exodus is Ben Mallah, who says he lost $3 million in a Smith Barney account in St. Petersburg, Florida, as the markets crashed last year.

“I will never again trust anyone who is commission-driven to manage my portfolio,” said Mallah. “If they’re not making money off you, they have no use for you.”

This trend, a product of both the financial crisis and the emergence of a new generation of tech-savvy, cost-conscious young investors, is positioning online outfits as increasingly important in the wealth management field.

The numbers reflect a loss of faith in professional money managers as small investors dress their wounds from the hammering they took over the last year, the Internet brokerages say.

“There has been an awakening,” said Don Montanaro, chief executive of TradeKing, which reported a post-Lehman spike in new accounts of 121 percent. Investors now realize they alone are responsible for their money, he said.

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Private rescue of CIT marks shift in crisis

July 21, 2009

Denied federal bailout, CIT taps $3B private rescue; may be strategy for other troubled banks

By Daniel Wagner and Stevenson Jacobs, AP Business Writers
Tuesday July 21, 2009, 12:44 am EDT

WASHINGTON (AP) — With bondholders coming to the rescue of troubled commercial lender CIT Group Inc. (CIT), and not the government, a new reality is setting in for investors.

With federal bailouts drying up and the economy still in distress, many more financial firms could face bankruptcy. When they do, it will be major private lenders that will have to decide whether to rescue the companies or allow them to fail.

It signals a return to the traditional path for financially troubled firms after nearly a year of government aid.

“It wasn’t clear that Treasury wanted this to be a turning point, but that’s the way it’s worked out,” said Simon Johnson, a former chief economist with the International Monetary Fund, now a professor at the Massachusetts Institute of Technology’s Sloan School of Management.

Johnson said the markets took so kindly to CIT’s quest for private-sector cash that the government “would feel pretty comfortable about” threatening bankruptcy for firms with less than $100 billion in assets.

Bondholders’ $3 billion rescue of CIT marks the first time since the banking crisis erupted that private investors have stepped in to save a big financial firm without federal help or oversight.

The lifeline for CIT, whose clients include Dunkin’ Donuts franchises and clothing maker Eddie Bauer, aims to sustain the company long enough for it to rework its heavy debt load, which includes $7.4 billion due in the first quarter of next year. It does not guarantee CIT will avoid bankruptcy.

CIT said late Monday that the rescue includes a $3 billion secured term loan with a 2.5-year maturity, which will ensure that its small and midsized business customers continue to have access to credit. Term loan proceeds of $2 billion are committed and available immediately, with an additional $1 billion expected to be committed and available within 10 days.

The short-term financing comes at a high price — an interest rate of about 10.5 percent, said a person close to the negotiations who was not authorized to discuss the matter publicly.

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