Category Archives: security division

Microsoft, Yahoo Upgrades Shows Snowden Won, Obama Failed

According to Bloomberg,

Former U.S. National Security Agency contractor Edward Snowden succeeded where President Barack Obama couldn’t — getting Microsoft Corp., Google Inc. and Yahoo! Inc. to upgrade computer security against hackers.

The companies are adopting harder-to-crack code to protect their networks and data, after years of largely rebuffing calls from the White House and privacy advocates to improve security. The new measures come after documents from Snowden revealed how U.S. spy programs gain access to the companies’ customer data — sometimes with their knowledge, sometimes without — and that’s threatening profits at home and abroad.

“These companies actively fought against numerous mechanisms that would have mandated far more secure data,” Sascha Meinrath, director of the Open Technology Institute at the New America Foundation in Washington, said in a phone interview. “Now they are paying the literal price.”

While Google, Yahoo, Microsoft and Facebook Inc. provide data to the government under court orders, they are trying to prevent the NSA from gaining unauthorized access to information flowing between computer servers by using encryption. That scrambles data using a mathematical formula that can be decoded only with a special digital key.

The NSA has tapped fiber-optic cables abroad to siphon data from Google and Yahoo, circumvented or cracked encryption, and covertly introduced weaknesses and back doors into coding, according to reports in the Washington Post, the New York Times and the U.K.’s Guardian newspaper based on Snowden documents. He is now in Russia under temporary asylum.

‘Government Snooping’

Microsoft is the latest company considering measures to ensure the protection of customer data and strengthen security “against snooping by governments,” according to Brad Smith, general counsel for the Redmond, Washington-based company.

Microsoft’s networks and services were allegedly hacked by the NSA, the Washington Post reported Nov. 26. Documents disclosed by Snowden suggest, without proving, that the NSA targeted Microsoft’s Hotmail and Windows Live Messenger services under a program called MUSCULAR, the newspaper said.

“These allegations are very disturbing,” Smith said in an e-mailed statement. “If they are true these actions amount to hacking and seizure of private data and in our view are a breach of the protection guaranteed by the Fourth Amendment to the Constitution.”

Smith didn’t provide details about what the company is considering doing.

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London Gold Fix Calls: Draw Scrutiny Amid Heavy Trading

According to Bloomberg,

Every business day in London, five banks meet to set the price of gold in a ritual that dates back to 1919. Now, dealers and economists say knowledge gleaned on those calls could give some traders an unfair advantage when buying and selling the precious metal.

The U.K. Financial Conduct Authority is scrutinizing how prices are set in the $20 trillion gold market, according to a person with knowledge of the review who asked not to be identified because the matter isn’t public. The London fix, the benchmark rate used by mining companies, jewelers and central banks to buy, sell and value the metal, is published twice daily after a telephone call involving Barclays Plc (BARC), Deutsche Bank AG (DBK), Bank of Nova Scotia, HSBC Holdings Plc (HSBA) and Societe Generale SA. (GLE)

The process, during which gold is bought and sold, can take from a few minutes to more than an hour. The participants also can trade the metal and its derivatives on the spot market and exchanges during the calls. Just after the fixing begins, trading erupts in gold derivatives, according to research published in September. Four traders interviewed by Bloomberg News said that’s because dealers and their clients are using information from the talks to bet on the outcome.

“Traders involved in this price-determining process have knowledge which, even for a short time, is superior to other people’s knowledge,” said Thorsten Polleit, chief economist at Frankfurt-based precious-metals broker Degussa Goldhandel GmbH and a former economist at Barclays. “That is the great flaw of the London gold-fixing.”

Gold Capital

Barclays and HSBC Holdings Headquarters in London (Bloomberg)

Barclays and HSBC Holdings Headquarters in London (Bloomberg)

The U.K. capital is the biggest center for gold trading in the world, according to the London Bullion Market Association, which said more than $33 billion changed hands there each day in 2012, exceeding the $29 billion of futures traded on Comex, the New York commodities exchange, data compiled by Bloomberg show. Financial instruments including cash-settled swaps and options are priced off the London fix, according to the LBMA website.

In private meetings this year, the U.S. Commodity Futures Trading Commission, which regulates derivatives, discussed reviewing how gold prices are set, according to a person with knowledge of the talks. The FCA review is preliminary and not a formal investigation, another person said. The people wouldn’t say what’s being looked at or if regulators suspect wrongdoing.

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RBS Appoints Clifford Chance to Conduct Lending Probe

According to Bloomberg,

Royal Bank of Scotland Group Plc appointed Clifford Chance LLP to investigate whether it pushed companies that owed it money into difficulties to boost profit.

RBS said in an e-mailed statement today it appointed the law firm after a report by Lawrence Tomlinson, chairman and founder of LNT Group Ltd., said that once companies were in default, the bank could charge them advisory fees and buy their assets at reduced prices. Business Secretary Vince Cable has referred RBS to the Financial Conduct Authority.

U.K. banks, including 81 percent taxpayer-owned RBS, have been criticized by the government for holding back lending to businesses since the 2008 financial crisis as they boost capital reserves and clean up their balance sheets. The Bank of England earlier this year extended its plan to provide cheap loans to companies and consumers and make credit available for small firms to help support the economy.

“There are many devastating stories of how RBS has wrecked good businesses and the ruinous impact this has on the lives of the business owners,” Tomlinson said in an e-mailed statement.

RBS shares rose 0.4 percent to 331.50 pence in London. They have gained 2.2 percent this year, making them the second-worst performer among Britain’s five largest banks.

‘Serious Problems’

Royal Bank of Scotland (Bloomberg)

Royal Bank of Scotland (Bloomberg)

Chris Hamilton, a spokesman for the FCA in London, declined to comment on the report, as did a spokesman for the U.K.’s Prudential Regulation Authority. RBS said that Clifford Chance is scheduled to report its findings in 2014.

Cable has previously signaled concerns about small and medium-sized companies’ access to finance and in 2010 called bankers “spivs and gamblers.” Tomlinson, entrepreneur in residence at Cable’s department, compiled allegations about companies’ difficulties with their banks during the recession and turned them into a report for Cable. Chancellor of the Exchequer George Osborne today called the results “shocking.”

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Americans Recover Home Equity at Record Pace: Mortgages

According to Bloomberg,

The number of Americans who owe more on their mortgages than their homes are worth fell at the fastest pace on record in the third quarter as prices rose, a sign supply shortages may ease as more owners are able to sell.

The percentage of homes with mortgages that had negative equity dropped to 21 percent from 23.8 percent in the second quarter, according to a report today from Seattle-based Zillow Inc. The share of owners with at least 20 percent equity climbed to 60.8 percent from 58.1 percent, making it easier for them to list properties and buy a new place.

“Home sales will pick up very nicely when people gain the equity they need to sell their house and have a down payment for the next one,” said Neal Soss, chief economist at Credit Suisse Group AG in New York. “There’s a magnifying effect on sales — people are able to list their home and sell it, and odds are they’re going to go on and buy another one.”

A shortage of inventory has forced homebuyers to compete, driving up prices and leaving some shoppers out of the market, said Thomas Lawler, a former Fannie Mae economist who now is a housing consultant. The number of homes for sale reached a low of 1.8 million in early 2013, the fewest in more than a decade, according to data from the National Association of Realtors.

“The pent-up demand from people who now have enough equity to sell their homes will help next year,” said Lawler, president of Lawler Economic & Housing Consulting LLC in Leesburg, Virginia. “We’ll see the effect during the spring selling season. Not a lot of people put their homes on the market during the holidays.”

Price Gains

While the supply of homes limited sales, it boosted price growth, said Michelle Meyer, a senior U.S. economist at Bank of America Corp. in New York. Shortages have caused buyers to compete for properties by raising the price they offer, she said. The median price of an existing home rose 12.8 percent last month, the Realtors’ group reported yesterday. In August, it jumped 13.4 percent, the fastest rate since the height of the real estate boom in 2005.

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U.S. Stocks Fall as Best Buy Drops Before Bernanke Speech

According to Bloomberg,

U.S. stocks fell after disappointing forecasts from Best Buy (BBY) Co. and Campbell Soup Co. while investors awaited a speech from Federal Reserve Chairman Ben S. Bernanke to gauge the prospect of continued stimulus.

Best Buy slid 11 percent, the most in almost a year, after saying it will work to keep pace with competitors’ discounts in the holiday season, hurting fourth-quarter profitability. Campbell Soup fell 6.2 percent after cutting its profit forecast. Home Depot Inc. (HD) gained 0.9 percent after boosting its earnings forecast as rising home prices spurred homeowners to splurge on renovations. Tyson Foods Inc. climbed 4.6 percent for a sixth day of gains as sales beat analysts’ expectations.

The Standard & Poor’s 500 Index fell 0.2 percent to 1,787.87 at 4 p.m. in New York. Yesterday, the gauge briefly surpassed 1,800 (SPX) for the first time. The Dow Jones Industrial Average lost 8.99 points, or less than 0.1 percent, to 15,967.03. About 5.8 billion shares changed hands on U.S. exchanges, about 3 percent below the three-month average.

“The economy is not doing badly, and the Fed is remaining very aggressive and very friendly toward the market,” Bruce Bittles, chief investment strategist at RW Baird & Co., said by phone from Sarasota, Florida. His firm oversees $100 billion. “We’ve had a big run. My suspicion is that the market might go sideways now for a little while before we encounter a year-end rally in December.”

The S&P 500 is up 25 percent this year, putting it on track for the biggest annual gain since 2003, as the Fed kept its monetary stimulus to spur economic growth and corporate earnings topped analysts’ estimates.

‘More Hopeful’

BlackRock's Fink on Equities, Regulatory Oversight

BlackRock’s Fink on Equities, Regulatory Oversight

Bernanke is scheduled to speak in Washington today after Fed Bank of New York President William Dudley said yesterday that while he’s “more hopeful” the U.S. economy is strengthening, it’s not enough to warrant stimulus cuts yet.

Chicago Fed President Charles Evans, among the most vocal advocates for additional easing from the Fed, said today that while the central bank is going to deliver highly accommodative policy until it can get the economy where it wants, the biggest challenge is credibility.

The Organization for Economic Cooperation and Development cut global growth forecasts for this year and next as emerging-market economies including India and Brazil cool. The world economy may expand 2.7 percent this year and 3.6 percent next year, instead of the 3.1 percent and 4 percent predicted in May, the Paris-based OECD said in a report today. Growth in the U.S. will be 1.7 percent and 2.9 percent this year and next, broadly similar to the outlook in May.

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Obamacare Failure May Shave 30% From U.S. Drug Sales

According to Bloomberg,

Potential shortfalls in enrollment for President Barack Obama’s health-care overhaul would put a 30 percent dent in projections for U.S. prescription-drug sales in 2017, a report from IMS Health Inc. shows.

That worst-case scenario would translate to $320 billion in drug spending, according to the report. The best case is supposed to be $460 billion, boosted by demand from the health law’s expansion of insurance coverage and medical screenings, and removal of restrictions on pre-existing conditions.

Expenditures in the $2.7 trillion U.S. health-care system have doubled since 1980, growing to 18 percent of gross domestic product and leading to financial success for drugmakers, hospitals and insurers. The 2010 health law’s promise of making medical coverage an affordable possibility for at least 25 million uninsured people was projected to provide another boost.

“There’s a lot at stake,” Michael Kleinrock, director of research at the IMS Institute for Healthcare Informatics, said in a telephone interview. “This would be a very dramatic decline. We don’t think that that kind of sky-is-falling scenario is most likely, but it is not off the table.”

Last month, 106,185 people enrolled in private health plans through insurance exchanges that debuted Oct. 1 as part of the Patient Protection and Affordable Care Act of 2010. U.S. health officials had a goal of enrolling 800,000 people through November and an estimated 7 million sign-ups were predicted for the first year.

Global Spending

A middle ground that involves a slower coverage expansion would generate as much as $380 billion in U.S. drug spending in 2017, according to the report from Kleinrock’s group, which is the research arm of IMS Health, a drug sales analysis company based in Danbury, Connecticut. Drug spending in 2012 was about $328 billion, the group said.

Still, global spending on drugs is projected to surpass $1 trillion in 2014 for the first time, and reach $1.2 trillion in 2017. The growth of as much as $235 billion from 2012 to 2017 would roughly match the $234 billion increase in the prior five years, according to the report.

Oncology drugs will see the most spending in developed countries, with sales of as much as $84 billion in 2017, followed by $39 billion on diabetes drugs, IMS said. Pain medicines will lead the way in emerging markets, with as much as $25 billion in spending.

Spending on generic drugs may make up 21 percent of sales in developed countries in 2017 from 16 percent in 2012, the report found.

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