The CEO of JPMorgan Chase, which disclosed a $2 billion loss last week, said he was “dead wrong” when he dismissed concerns about the bank’s trading last month.
CEO Jamie Dimon said he did not know the extent of the problem when he said in April that the concerns were a “tempest in a teapot.” After the bank reported the trading loss, investors shaved almost 10 percent off the bank’s stock price.
“We made a terrible, egregious mistake,” Dimon said in an interview that aired Sunday on NBC’s “Meet the Press.” “There’s almost no excuse for it.”
The $2 billion loss came in the past six weeks. Dimon has said it came from trading in so-called credit derivatives and was designed to hedge against financial risk, not to make a profit for the bank.
Dimon said the bank is open to inquiries from regulators. He has also promised, in an email to the bank’s employees and in a conference call with stock analysts, to get to the bottom of what happened and learn from the mistake.
Dimon told NBC that he supported giving the government the authority to dismantle a failing big bank and wipe out shareholder equity. But he stressed that JPMorgan, the largest bank in the United States, is “very strong.”
Lawmakers and critics of the banking industry have seized on the $2 billion loss to say that banks still take too much risk more than three years after the financial crisis.
A piece of the financial regulation known as the Volcker rule would prevent banks from certain kinds of trading for their own profit. Dimon has said the trading involved in the $2 billion loss would not have fallen under the rule.
Rep. Barney Frank, D-Mass., told ABC’s “This Week” that he hopes the final version of the Volcker rule will prevent the type of trading that led to the massive loss at JPMorgan.
Addressing public anger toward Wall Street, Dimon said he wants a more equitable society and does not mind paying higher taxes. But he said attacking all of business is “very counterproductive.”
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People have been hyping the death of the mall for the last two decades, but it’s not happening anytime soon, said Simon Property Group CEO David Simon.
"Time Magazine 20 years ago had that exact headline," Simon, who has been at the helm of the world’s largest mall operator since 1995, told CNNMoney at the Milken Institute Global Conference in Los Angeles. "If you look at our business and our profitability, it’s never been better."
Investors appear to agree. Simon Property Group’s () shares are up 22% in 2012, compared to an 11.7% increase in the S&P 500 ().
Simon admits growth in the United States is limited, even going so far as to say some lower-end malls around the U.S. could close. Most of Simon Property Group’s malls serve higher-end consumers.
He thinks most of Simon Property Group’s growth will come from driving sales into its existing malls by refurbishing them and adding new stores.
Simon points to Roosevelt Field mall on Long Island in New York as one example. After years of battling local community boards for approval, Simon Property Group recently landed luxury retailer Neiman Marcus as a tenant. Simon hopes such retailers will draw more high-spending customers into his malls.
For much of Simon’s tenure, buying up competing real estate investment trusts, or REITs, has driven growth. He’s spent roughly $27 billion in 17 years buying competitors, most recently paying $2 billion for a 29% stake in Europe’s largest retailer Klepierre.
Simon says to expect fewer big acquisitions going forward, yet there is one new area where he’d consider buying: technology. Simon wants to make his mall more more technologically sophisticated, and he said that buying up a technology startup could help Simon Property compete more effectively with e-commerce sites
"Ideally what I’d love to do is know when our best customers are in the mall. If you show up I want to deliver a free latte to you [and] I know exactly what kind of latte you want," said Simon.
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While aggressively courting new and existing consumers, Simon doesn’t expect to fight battles with shareholders. Last year, Simon’s board awarded him roughly $120 million after he agreed to stay at the company for the next eight years. That makes him one of the most highly paid CEOs in the United States.
Simon said he deserves it. "Nobody has had better performance over 10 years, and I expect that to continue," said Simon. "Our board took a serious look at what I contributed and the prospects for what it means to be part of the company for another eight years."
The REIT’s returns have been exceptional. Since Simon joined as CEO in 1995, Simon Property has generated annual returns of 11.2% compared to roughly 6.7% for the S&P 500.
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Swiss food and drinks giant Nestle SA forecast Friday that 2012 will be a challenging year but reported that first-quarter sales rose a healthy 5.6 percent from a year earlier, fueled by strong growth in emerging markets and higher retail prices.
The maker of Purina One, Nescafe and Haagen Dazs and said sales amounted to 21.39 billion Swiss francs ($23.34 billion), though demand in developed markets was subdued amid global financial uncertainty in the United States — its biggest market — and Europe.
Sales in developed countries grew 3.1 percent, compared with a 13 percent rise in emerging markets.
“As anticipated, 2012 is already confirming itself to be a challenging year,” CEO Paul Bulcke said in a sales update statement.
“In many developed markets where consumer confidence is low, the trading environment is subdued whilst in most emerging markets, conditions remain dynamic and rich in growth opportunities,” he said. “Our past and present investments, and continuing innovation, have enabled us to deliver good growth in the first quarter.”
The results of the Vevey, Switzerland-based company generally met or exceeded analysts’ forecasts. No profit figures were disclosed.
Europe’s food makers have been hurt by the continent’s sovereign debt crisis, which has forced governments to cut spending, seen a spike in unemployment and made consumers wary of spending. Meanwhile, higher commodity prices have made retail food prices more expensive.
Nestle results showed it managed the tricky market situation relatively well.
Andrew Wood of the Sanford C. Bernstein research firm said he had anticipated that Nestle would have a “fairly strong top-line start to the year low interest rate personal loans.” However, he does not believe it would be enough to get its stock “moving again, particularly given current lofty valuations.”
Nestle shares were trading 0.5 percent lower at 56.90 francs ($62.10).
Bulcke said a combination of retail price hikes and a predicted drop in the cost of raw materials in the second half of the year has enabled the company to confirm the full-year outlook “of delivering 5 to 6 percent organic growth” and higher earnings for shareholders.
On Thursday, Nestle held its annual general meeting in Lausanne where shareholders approved a dividend of 1.95 francs ($2.13) per share.
Like many Swiss companies, Nestle has had to cope with the strength of the Swiss franc against other currencies, but since last summer Switzerland’s central bank has moved aggressively to weaken the franc and improve the outlook for Swiss exports.
The world’s biggest food and beverage maker said its organic sales growth was a robust 7.2 percent, while real internal growth was 2.8 percent.
Nestle said organic growth was 6.2 percent in the Americas, 2.3 percent in Europe and 11.4 percent in Asia, Oceania and Africa.
The company had posted sales of 22.34 billion francs ($24.38 billion) in the first quarter of 2010.
Nestle did not comment on its bid to buy Pfizer Inc.’s infant-nutrition business for a reported $9 billion, a deal that would help the Swiss-based company to boost growth in China and maintain its position as one of the world’s largest sellers of infant formula.
The price of oil slipped to near $103 per barrel following weak economic reports out of China and Europe.
Oil, a globally traded commodity, typically swings with investor expectations for economic growth, world oil supply and demand. On Friday, traders saw signs of trouble from two continents.
China, the second-largest oil consumer after the U.S., said its economy grew by just 8.1 percent from January to March. While that would be strong growth for most countries. it was the weakest in three years for China. A slowdown in China could have major implications for oil prices, since its burgeoning cities and factories have been among the primary drivers of world oil demand.
In Europe massive national debts continued to worry investors. Yields rose on government bonds issued by Italy and Spain, meaning those countries will have to pay more to borrow money from investors personal loans for bad credit.
Benchmark U.S. crude fell by 61 cents to $103.03 per barrel on Friday in New York. Brent crude lost 55 cents to $120.97 per barrel in London.
Retail U.S. gasoline prices fell for the seventh day in a row, to a national average of $3.90 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular has dropped by about 3.5 cents in the past week.
In other energy trading, natural gas stayed near 10-year lows, unchanged at $1.981 per 1,000 cubic feet. Heating oil was up less than a cent at $3.1682 per gallon and gasoline futures lost a penny to $3.3418 per gallon.
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World stock markets were mostly higher Thursday after the U.S. central bank pledged to keep interest rates low until late 2014 to nurture the country’s stubbornly slow economic recovery.
Benchmark oil hovered below $100 per barrel while the dollar fell against the euro and the yen.
European shares were higher in early trading. Britain’s FTSE 100 rose 0.3 percent to 5,741.56. Germany’s DAX was 0.4 percent higher at 6,451.53 and France’s CAC-40 added 0.5 percent to 3,335.07. But ahead of the opening bell on Wall Street, Dow Jones industrial futures fell 0.1 percent to 12,672 and S&P 500 futures shed 0.2 percent to 1,317.90.
Gains were muted in Asia. South Korea’s Kospi rose 0.3 percent to 1,957.18.
Hong Kong’s Hang Seng Index jumped 1.6 percent to 20,439.14 on its first trading day since the Chinese New Year holiday. Benchmarks in Thailand, Singapore and New Zealand also rose.
Japan’s Nikkei was 0.4 percent lower at 8,849.47 as a weakening dollar pressured the country’s exporters. Benchmarks in Malaysia and the Philippines also fell.
Markets in Taiwan and mainland Chinese remained closed for the Chinese New Year. Markets in India and Australia were closed for public holidays.
On Wednesday, the U.S. Federal Open Market Committee said it was unlikely to raise interest rates before late 2014. It had previously said it expected to keep rates low into the middle of 2013.
The Fed cut rates to near zero in December 2008, during the financial crisis, and has held them there ever since. The announcement was a sign that the Fed expects the economy, which is improving, to need significant help for three more years.
Analysts said some stock buyers rejoiced that the Fed was leaning toward promoting economic growth.
“With the FOMC sending out a strong signal that monetary policy is likely to remain accommodative for even longer than previously expected, risk assets are in a very good position,” Stan Shamu of IG Markets in Melbourne said in an email.
Energy shares got a boost after crude briefly topped $100 per barrel on Wednesday. South Korea’s oil refiner S-Oil Corp. rose 3 percent, while China National Offshore Oil Corp., known as CNOOC, rose 2.2 percent in Hong Kong.
Hong Kong-listed Zijin Mining Group, China’s largest gold miner, jumped 5.6 percent amid rising prices in the precious metal.
But Japanese export shares didn’t fare so well. Low interest rates in the U.S. would likely weigh on the dollar, giving the tenaciously strong yen another unwelcome boost.
Yamaha Motor Corp. sank 2.3 percent, while Sony Corp. lost 1.4 percent. Toshiba Corp. was 1.2 percent down.
Lee Kok Joo, head of research at Phillip Securities in Singapore, said the Fed announcement would likely have only a short-term effect on equities.
“Beyond that, you still need to look at the macro picture,” he said, referring in particular to the sovereign debt crisis in Europe. “Things are still pretty uncertain in the European region.”
Greece, which faces an important bond repayment deadline in March, is struggling to reach a deal with creditors to prevent a chaotic default on its massive debts. A default could trigger a financial crisis in Europe and beyond.
Private sector investors that hold a large part of Greece’s debt are being asked to swap their existing bonds with new ones of a reduced value, longer maturity and lower interest rate. Greece needs the deal if it is to avoid default this spring.
Benchmark crude for March delivery was up 37 cents to $99.77 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose by 45 cents to finish at $99.40 per barrel in New York on Wednesday. At one point it was as high as $100.40.
The prospect of low interest rates dragged on the dollar, since it reduces the returns that investors get from holding assets denominated in that currency. The euro rose to $1.3110 from $1.3084 late Wednesday in New York. The dollar fell to 77.57 yen from 77.81 yen.
Sales of previously owned homes rose to an 11-month high in December and the supply of properties on the market dropped to a near 7-year low, an
industry group said on Friday, pointing to a nascent recovery in the housing market.
The National Association of Realtors said existing home sales increased 5 percent month over month to an annual rate of 4.61 million units. November’s sales pace was revised down to a 4.39 million-unit pace, previously reported as a 4.42 million-unit rate.
Economists polled by Reuters had expected sales to rise to a 4.65 million-unit sales pace. Sales in December were up 3.6 percent from a year ago. A total of 4.26 million homes were sold in 2011, up 1.7 percent from the prior year.
The third straight month of gains in sales added to hopes that a tentative recovery in the housing market was starting take shape, but progress will be painfully slow given a glut of unsold properties that is weighing down on prices.
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