L.A. firm accused of stealing millions from investors shut down

The Securities and Exchange Commission has obtained an emergency court order shutting down a Los Angeles company that claimed to invest in life insurance policies, but instead allegedly used investor money to finance the owner’s luxury lifestyle.

The SEC accused Daniel C.S. Powell and his company, Christian Stanley Inc., of defrauding investors by making false claims that it invested in so-called life settlements. Powell raised at least $4.5 million from at least 50 investors nationwide but never used the money to buy life insurance policies as he said would, the SEC said. Instead, he spent the money on luxury hotels, expensive cars and visits to nightclubs and restaurants, the SEC said.

At the request of the SEC, U.S. District Judge George H. King issued a temporary restraining order freezing the assets of the company and placing a receiver in charge of the company’s assets. Powell could not be reached for comment.

Life settlements are transactions in which policy holders sell life insurance policies to third parties.

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Photo: The Securities and Exchange Commission. Credit: Jonathan Ernst/Reuters 

Long-term interest rates plunge on hopes for new Fed stimulus [Updated]

Long-term Treasury bond yields tumbled Friday as investors bet that the grim employment picture will force the Federal Reserve to launch a new bond-buying economic stimulus program.

The 10-year T-note yield, a benchmark for mortgages and other long-term interest rates, plunged to 2.01% by about 11:40 a.m. PDT, down from 2.13% on Thursday.

If the yield closes at current levels it will mark a new generational low, falling below the previous low of 2.06% reached in mid-August. [Updated at 2:40 p.m.: The 10-year yield ended at 1.99%, the lowest since at least 1950.]

Shorter-term Treasury yields, however, were slightly higher. The two-year T-note edged up to 0.20% from 0.18% on Thursday.

The reason for the split performance: With short-term rates already near zero, Wall Street now expects the Fed to launch a Treasury-bond-buying program specifically aimed at pulling down longer-term interest rates.

The Fed tried a similar program in the early 1960s. It was dubbed “Operation Twist” because the goal was to twist the so-called yield curve, bringing longer-term rates down while holding shorter-term rates steady or allowing them to rise modestly.

Rather than print new money to finance purchases of longer-term bonds, the Fed could sell some of its shorter-term Treasury holdings and reinvest the proceeds in longer-term issues, such as the 10-year T-note. Fed Chairman Ben S. Bernanke has hinted in recent months that the central bank could turn to that option if the economy needed more help. The Fed owns $2.6 trillion in Treasury and mortgage securities in all.

The next Fed stimulus plan “would most likely come in the form of an ‘Operation Twist’-like approach, whereby the Fed sells shorter-maturity assets to purchase longer-maturity assets,” economists at Deutsche Bank Securities said in a report Friday. “The size of the Fed’s balance sheet will remain unchanged, but presumably longer-term interest rates would fall.”

If the result is to pull mortgage rates down further, that could allow more homeowners to refinance their loans -- assuming that they have equity left in their homes.

The 30-year T-bond yield also was sharply lower Friday, falling to a two-year low of 3.32% from 3.50% on Thursday.

Bank of America Merrill Lynch economists said that even if the Fed resorted to selling shorter-term Treasuries, it was unlikely to cause a “significant” rise in yields on those securities because demand remains robust from other investors, including money market funds and foreign central banks.

And if the stock market keeps tumbling, more spooked equity investors are likely to join the rush back to Treasuries. The Dow Jones industrials were down 251 points, or 2.2%, to 11,241 at about 11:40 a.m. PDT as recession fears flared anew.

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Photo: The Federal Reserve Building in Washington. Credit: Karen Bleier / AFP / Getty Images

Podcast: Job Creation, Cantor Fitzgerald and Keynes

The government’s report on hiring, which showed no gain in jobs in August, provided fresh evidence that the recovery has fizzled without ever gaining momentum.

The report increases the pressure on President Obama as he prepares to deliver an address next week about job creation, on Republicans who have a starkly different approach to economic revival, and on the Federal Reserve, whose policy makers have been divided over what to do next, Shaila Dewan says in a conversation in the new Weekend Business podcast.

While the new data was worse than expected, several economists said the problem is not that companies have been laying off their employees, though there was an uptick in announced layoffs, but that they have delayed investing in new workers.

The 10-year anniversary of the Sept. 11 attacks on New York and Washington is approaching, and perhaps more than any other company, the brokerage firm Cantor Fitzgerald came to symbolize the horrors of that tragedy. Almost one-fourth of the people killed in New York City that morning worked for the firm. In a podcast conversation, Susanne Craig talks about the strategy of Howard W. Lutnick, who ran Cantor then and still does today. Mr. Lutnick has defied those who said that he and Cantor were finished, and he has rebuilt his firm.

In another podcast conversation and in the Economic View column in Sunday Business, Robert J. Shiller contends that the surge of stock market volatility over the last month cannot be explained by conventional means. He turns to the work of John Maynard Keynes, who once compared the stock market to a beauty contest. Keynes described a newspaper contest in which 100 photographs of faces were displayed, and readers were asked to choose the six prettiest. The winner would be the reader whose list of six came closest to the most popular of the combined lists of all readers. The best strategy, Keynes said, is to select those faces that you think others will think prettiest. Better yet, he said, move to the “third degree” — by picking the faces you think that others think that still others think are prettiest. Translated into the current market, investors appear to be trying to outguess one another.

　You can find specific segments of the podcast at these junctures: Shaila Dewan on the jobs report (23:36); news summary (19:23); Susanne Craig on Cantor Fitzgerald (17:23); Robert Shiller (8:05); the week ahead (1:05).

As articles discussed in the podcast are published during the weekend, links will be added to this post.

You can download the program by subscribing from The New York Times’s podcast page or directly from iTunes.

Gold, silver rocket as recession fears deepen

Gold and silver zoomed again Friday, ignoring strength in the dollar, as the dismal U.S. jobs report for August drove some investors back into haven-seeking mode.

Near-term gold futures in New York closed with a gain of $47.70, or 2.6%, to $1,873.70 an ounce. It was the metal’s biggest one-day advance since early August, and left it just 0.8% below the record closing high of $1,888.70 set on Aug. 22.

Silver also rocketed, rising $1.54, or 3.7%, to $43.02 an ounce. Silver remains below its 30-year high of $48.58 reached on April 29.

The government’s report that the economy created no net new jobs last month stoked fears that recession is becoming a self-fulfilling prophecy, after the global market turmoil in August. With stocks crumbling worldwide Friday, gold and silver attracted frightened money, just as they did for much of last month.

“This economy is in real trouble,” said Matt Zeman, a market strategist at Kingsview Financial in Chicago. What’s more, even though the Federal Reserve is expected to try another rescue by aiming to pull long-term interest rates lower, falling rates could help the case for gold by making bond yields less attractive as an alternative investment.

Gold and silver also got a boost as Europe’s never-ending debt crisis took another bad turn, as Greece fell behind on austerity measures it must meet to qualify for more euro-zone aid.

While the Dow Jones industrial average slumped 253.51 points, or 2.2%, to 11,240.26 on Friday, the average blue-chip stock in Europe fared much worse, tumbling 3.7%.

Europe’s latest mess helped bolster the dollar. The euro fell 0.4% to $1.419, its lowest level since Aug. 10. The dollar also gained against a number of other currencies.

Historically, what’s good for the dollar usually is bad for gold, its archrival. But gold has been in its own bullish world for much of the summer, paying little attention to the dollar’s moves.

The metal now looks primed to try another run for $2,000 an ounce. Gold reached $1,917 intraday on Aug. 22, then was slammed by profit-taking that took the price as low as $1,707 on Aug. 25.

With the economic backdrop worsening, “I think we’re going to see $2,000 gold here very, very shortly,” Zeman said.

The bigger question may be this one: If gold does top $2,000, does that spark another round of profit-taking -- or a panic rush in by investors who've so far missed gold's 11-year bull market?

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Photo: Gold bars at gold and silver separating plant in Vienna. Credit: Lisi Niesner / Reuters

California taxable sales rise in 2nd quarters of 2010 and 2011

 
Taxable sales in California rose by an estimated 9% in this year's second quarter, based on a preliminary review of cash receipts, the state's tax collection agency reported.

"This latest taxable sales report shows that our state began moving toward recovery in early 2010 and continues to show positive signs in early 2011,"  Jerome E. Horton, chairman of the California Board of Equalization, said Friday. "I remain optimistic that California's economy will continue moving forward."

Horton released the estimate together with final numbers for the same second-quarter period in 2010. Those sales rose by $5.2 billion, or 4.6%, over the same period in the prior year when the state was stuck in a deep recession.

Some of the strongest growth in 2010 occurred in Los Angeles County, where sales were up 3.6% in the second quarter of 2010. They increased by 3.8% in the city of Los Angeles and 16.1% in Long Beach.

By category, the biggest rise in sales was for gasoline, 15.5%,  mainly because of jumps in pump prices, the board said. Motor vehicles and parts were up by 19.4%. Electronic and appliance store sales rose by 7.9%.

Compiling the detailed report for 2010, which includes breakdowns for location and category of sales goods, is a complex task that takes almost a year to complete, said Anita Gore, a spokeswoman for the board.

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Calif. Legislature OKs bill to raise auto-sale documentation fees

 

The documentation fees auto dealers charge car buyers will go up by at least $25 if a state bill that has passed in both houses of the California Legislature is signed by Gov. Jerry Brown.

AB 1215 by Assemblyman Bob Blumenfield (D-Woodland Hills) passed the state Assembly with a 67-4 vote after a state Senate vote of 30 to 4 on Tuesday.

Under the bill, auto retailers will be able to raise the documentation fees charged for processing auto purchases and lease agreements to $80 from $55 for new- and used-car purchases and from $45 for car leases.

Dealers would also be required to run the vehicle identification number of any used auto for sale on their lots through the National Motor Vehicle Title Information System to check whether the auto has a so-called branded title. Any vehicles showing up as having been totaled or bought back through a lemon law or a victim of some other catastrophe would get a red window sticker warning potential buyers of the auto's history.

Insurance carriers, repair shops, towing companies and salvage yards must report totaled vehicles to the database, overseen by the U.S. Justice Department.

The legislation is supported by law enforcement agencies, consumer groups and the California New Car Dealers Assn.

“This bill unleashes the power of technology to provide first in the nation consumer protections, cut red tape, and help save the state millions,” Blumenfield said.  “Buying a car, especially a used one, requires some detective work to determine its safety and value.  By requiring junk cars and death traps to be flagged with a warning sticker, consumers can see these vehicles for what they really are when shopping for a car.”

Blumenfield said California is the nation’s largest car market.  Last year, more than 800,000 used cars were sold through dealerships.

The bill is on Gov. Brown's desk for his signature or veto. 

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Photo: Assemblyman Bob Blumenfield (D-Woodland Hills), left, looks on as state Sen. Mark Leno (D-San Francisco) questions Michael Cohen, chief deputy director of the Department of Finance, during a state budget hearing at the Capitol in Sacramento on Feb. 23. Credit: Rich Pedroncelli / Associated Press

Industry veteran Bob Lutz rejoins General Motors

 

The outspoken and colorful auto industry veteran Robert A. Lutz, who has worked for all the major American car companies and retired from General Motors Co. in May, has resurfaced. He is going back to GM to work as a part-time consultant.

Lutz, 79, started a second stint at GM in 2001, charged with revitalizing the automaker's vehicle lineup. He stayed with the company through its brief sojourn into bankruptcy in 2009.  He helped push a new generation of GM autos -- including the Buick LaCrosse, Cadillac SRX, GMC Terrain, Chevrolet Equinox and Chevrolet Camaro -- into the marketplace.

The vehicles have sold well,  helping GM to rebuild its brand. Through the first eight months of this year, GM has accounted for one out of every autos sold nationwide.

Lutz retired from his post as vice chairman of General Motors Co., ending a 47-year career in the industry, a little more than a year ago, but did some consulting work for Lotus, the British sports car company.

He’s known for his blunt speech and love of cars.

"Look, people," Lutz quotes himself in his recently published memoir, "Car Guys vs. Bean Counters: The Battle for the Soul of American Business," as once having told a group of executives at General Motors. "I tend to have a lot of ideas and strong views which are not necessarily correct.... I know I'm full of crap a lot of the time."

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Photo: Bob Lutz with a GMC Acadia SUV. Credit: General Motors