Tuesday, December 18, 2012

Morgan Stanley is fined $5m for Facebook IPO disclosure

By on 2:35 AM

Morgan Stanley has been fined $5m (£3m) by the Massachusetts securities regulator for "improperly influencing" analysts before Facebook's share sale.

According to the regulator, there was a conflict of interest when a senior banker coached a Facebook official on what to say to analysts.

It also claimed that the two firms failed to tell all investors that revenues may be lower than forecast.

Many investors criticised Facebook as its shares fell following the listing.

The sale, which was over-subscribed and took place in May 2012, was one of the most hotly anticipated stock floatations in recent history and valued the eight-year-old firm at $104bn.

Facebook sold close to 421 million shares, at $38 a share, raising $16bn.

However, the hype surrounding the listing waned shortly after trading started on the New York stock exchange as shares fell below their listing price on concerns about the pace of future profit growth.

Facebook's shares have dipped almost 30% since its listing in May.

Morgan Stanley did not confirm or deny the allegations by the regulator.

However, it said in statement that it was pleased to have reached a settlement and to have put the matter behind it.

"Morgan Stanley is committed to robust compliance with both the letter and the spirit of all applicable regulations and laws," it added.

Mobile ads
 
The regulator's case focused on events tied to Facebook and its road show, which promoted the share sale to investors.

It alleged that during this period, Facebook informed Morgan Stanley that it expected revenue for the second-quarter of the year to be at the lower end of its forecast of between $1.1bn and $1.2bn.

Analysts had initially forecast that it would either be at the higher end of that range, or above it.

At the same time, Facebook also said that annual revenues for 2012 may miss its initial forecast of $5bn by as much as 3.5%.

The problem affecting Facebook was that an increasing number of people were visiting its website via mobile devices, such as phones or tablet computers.

Facebook warned that because it did not display advertising on the mobile versions of its website, then there may be a decline in revenue from ad sales, its biggest source of income.

According to the Massachusetts investigation, Facebook first filed an amendment to its listing documents on 3 May, in which it warned that revenue growth may be "negatively affected" by this shift from personal computers to mobile devices.

This was followed by a second amendment on 9 May in which it highlighted the weaker revenue trend for the second quarter of the year, running from the start of April to the end of June.

The Massachusetts investigation claims that Facebook told a senior Morgan Stanley investment banker on 8 May about the problem.

The banker then helped orchestrate calls between the company and analysts.

In his order, William Galvin, the Secretary of the Commonwealth of Massachusetts, said that the bank helped Facebook give out this information "without creating the appearance of not providing the underlying trend information to all investors".

In this way, Facebook said it would be able to brief analysts covering its stock about the problems, "without someone claiming we are providing any selective disclosure to big accounts only".

Obama and Boehner meet as fiscal cliff talks pick up

By on 2:33 AM

US President Barack Obama and House of Representatives Speaker John Boehner have met at the White House as talks on avoiding the "fiscal cliff" gather pace

Mr Boehner has signalled he would agree to raising tax rates for those earning more than $1m (£620,000) per year.

The 45-minute meeting follows face-to-face discussions on Thursday and a phone call between the two on Friday.

A deal must be reached by 1 January, or a combination of steep tax rises and sharp spending cuts will take effect.

Mr Boehner has reportedly also said he would accept as much as $1tn in new tax revenue over 10 years and would raise the debt ceiling to ensure the government is funded for a year.

In exchange, it is reported that he would like the White House to agree to $1tn of spending cuts.

"Our position has not changed. Any debt limit increase would require cuts and reforms of a greater amount," Boehner spokesman Brendan Buck told the Associated Press.

Neither side has released details from Monday's meeting.

'Necessary balance'
 
White House Press Secretary Jay Carney acknowledged on Monday that there had been a "change in tone, and in some cases, a change in position from different Republicans" on the issue of tax increases.

But he added: "Thus far the president's proposal is the only proposal that we have seen that achieves the balance that's so necessary."

The president's proposal to avoid the fiscal cliff had called for $1.6tn in new tax revenue over 10 years. Mr Obama has previously insisted that he will not sign a deal that does not raise tax rates on earnings over $250,000.

More recently, the White House has suggested it would agree to a deal that generates less new tax revenue. Many Republicans are philosophically opposed to raising taxes.

As the parameters of a possible deal begin to take shape, correspondents say there may now be renewed focus on whether Democrats agree to changes to popular entitlement programmes.

Harry Reid, the top Democrat in the Senate, has indicated that it is likely lawmakers will need to return to Washington between Christmas and New Year to vote on a deal to avert the fiscal cliff.

"We will see if anything changes, but it appears that we're going to be coming back the day after Christmas to complete work on the fiscal cliff," Mr Reid said on Monday.

Details of a deal
 
Correspondents say about $450bn from Mr Boehner's offer of $1tn in new tax revenue would be generated by increasing the tax rate to 39.6% from 35% for income over $1m.

The remainder would come from closing loopholes and limiting tax deductions, and by slowing inflation adjustments to tax brackets.

The $1tn in spending cuts that Mr Boehner is said to have asked for are expected to come primarily from healthcare programmes for the elderly, they say.

But some Democrats have indicated they are not prepared to consider such changes to major government provisions.

Economists have warned that the "fiscal cliff" would suck about $600bn out of the economy, possibly sending the US, which is experiencing a tepid economic recovery, back into recession.

The measures were partly put in place within a 2011 deal to curb the yawning US budget deficit.

Along with the tax rises and spending cuts due to take effect on 1 January, extended benefits for the long-term unemployed and a temporary cut to payroll taxes are also scheduled to expire at the end of the year.

Business leaders and Ben Bernanke, chairman of the US Federal Reserve, have warned that uncertainty over the fiscal cliff is already having a negative effect on the economy.

International observers, including Christine Lagarde, head of the International Monetary Fund, have warned that effects of going over the fiscal cliff would ripple out to the rest of the world.

US consumer prices fall as petrol costs drop

By on 2:28 AM

US consumers prices fell in November due to a sharp drop in petrol prices, according to official figures, as inflation in the economy remained weak.

The consumer price index fell 0.3% from October, the first decline since May, the US Labor Department said. 

The gasoline index fell 7.4% in November, which more than offset gains in prices elsewhere.

Stripping out food and energy costs, "core" prices rose by 0.1% in November, the figures showed.

Over the past year, consumer prices have risen 1.8%, while core prices have increased by 1.9%.

The US economy remains fragile and, earlier this week, the US central bank pledged to continue buying bonds to keep actual borrowing rates low until the labour market outlook improves substantially.

Though the unemployment rate fell to a four-year low of 7.7% in November, statistics suggest that much of the decline in the jobless rate since 2008 has been due to people dropping out of the workforce, either due to retirement or because they have given up seeking work.

The Federal Reserve also cut its economic outlook. It now expects the economy to grow between 1.7-1.8% this year, down from 1.7-2.0% it previously expected.

The latest data came against the backdrop of the looming "fiscal cliff" - the tax increases and spending cuts due to be implemented in January if Congress and the White House do not strike a deal.

The Fed chief said last month that all of the changes would "pose a substantial threat to the recovery".

Is Apple starting to lose its bite?

By on 2:20 AM

Apple's share price has fallen more than 25% since its record high set three months ago - no less than five analysts have lowered their price targets for the U.S. technology giant in the past few days.

To make matters worse for Apple, Android smartphones continue to reign supreme in global market share: for every one such device running on Apple's iOS, about seven smartphones running Android's operating system are computing away.

Is Apple losing its bite? In the short-term, investors and analysts seem to think so. But in the medium-term, they believe milestones exist that can put the shine back on Apple's share price and image.

Apples do fall  

On September 19, Apple's share price closed at a historic high of $702.10, exactly one week after the debut of the iPhone 5. But as the freshness of the device's latest iteration wore off, so did the bullishness for Apple's stock. On December 17, it fell below the psychological $500-mark, to slide below $497 in pre-market trading. The company's share price quickly climbed above that threshold that day but still sits at lows not seen since mid-February.

The dive in Apple's share price has also been attributed to a cut in orders from its parts suppliers. One fear is that Apple may have produced too many iPhone 5s in the current quarter and it may now need to scale back manufacturing in 2013. Analysts from UBS, Citibank, Mizuho, Canaccord and Pacific Crest all cut their price targets on Apple leading to a further drop in the Cupertino-based company's share price.

Another fear is that the iPhone 5 has not been selling as well as previous versions; however that has now been debunked. A record 19 million iPhone 5 units are estimated to have been sold in the U.S. in the fourth quarter of 2012, according to a survey by Morgan Stanley, which would represent a 33% year-on-year increase. Apple also sold more than two million iPhone 5S units in China when it debuted this past weekend.

"Customer response to iPhone 5 in China has been incredible, setting a new record with the best first weekend sales ever in China," said Tim Cook, Apple's CEO, in a press release.

"The Company remains on track to launch in 100 countries by the end of the year. In our view, this is a positive," said RBC's Amit Daryanani.

Comparing Apples To Androids

But for all the hope and the hype that surrounds Apple, Android smartphones reign supreme in terms of market share by operating system.

Investment research firm Morningstar says Apple has much work to do in 2013. "Although Apple has a robust product pipeline and ample opportunity to gain share in its various end markets, short product life cycles and intense competition will prevent the firm from resting on its laurels," it wrote in a statement.

Globally, less than two in ten smartphones that shipped in the third quarter of 2012 sported Apple's iOS operating software. But in that same period, Google's Android platform ran 75% of smartphones around the world. This also represented a 91.5% increase over the same quarter in 2011, according to International Data Corporation.

Apple's iOS claimed just under a 15% market share in the same period.

Apple's next crop

Despite the recent release of the iPhone 5, analysts are already looking ahead to Apple's potential product releases for 2013 to pull the company's share price up.

"For Apple we believe the sell-off is nearing a bottom but we acknowledge the fears around margins, maps, emerging markets, competition and execution. The company clearly needs to ease these concerns in the near future," said Barclays' Ben Reitzes. "It may take another round of new products and innovations to regain investor confidence and help drive another run."

One analyst from Jefferies predicts an iPhone 5S may ship in the summer of 2013 and that iPhone 6 prototypes already exist.

Speculation is also growing that Apple may debut an Apple television set, a so-called iTV, by the fall of 2013. In a recent Morgan Stanley survey, 47% of 1,568 respondents said they were "somewhat interested" or "extremely interested" in buying an Apple-branded TV set which could translate into 56 million units being sold in the U.S. alone.

The report added a potential iTV rollout represents a new $13 billion opportunity for the world's most valuable company.

Journal Offers Dose of Fun for Holiday

By on 1:32 AM

LONDON — Dutch and Norwegian scientists say they have solved a glowing mystery: why Rudolph the reindeer’s nose is red.

By traveling to the Arctic and using video-microscope and thermal imaging technology, the scientists showed that the glow is from tiny blood vessels that are more abundant in the noses of reindeer than in humans’. Yes, seriously. The findings are being reported next week in BMJ, formerly known as The British Medical Journal, a publication with a quirky holiday tradition. 

For the past 30 years, BMJ has devoted its Christmas-week issue to a lighter and sometimes brighter side of medicine, publishing unusual articles that vary from simply amusing to bizarre to creative or potentially important. All are based on methodologically sound science.

Alongside Rudolph on the cover of this year’s holiday issue is Cliff, a 2-year-old beagle who was trained by another Dutch team to accurately sniff out the sometimes fatal bacterial bowel infection Clostridium difficile and make the diagnosis in minutes — days faster than standard laboratory tests. The Christmas tradition began in 1982, originally intended as a one-time effort to give readers a break from stodgy scientific reports written in technical jargon. The editor then, Dr. Stephen P. Lock, recalled in an interview that he wanted to present “another side of medicine” by offering lighter reading: research oddities, bizarre stories and history. But this was no April fools’ issue: Dr. Lock insisted that the articles meet the same rigorous criteria as research published in regular issues. 

Indeed, some articles in the holiday issue are also suitable for regular issues, said Dr. Tony Delamothe, the BMJ deputy editor who has overseen the last eight Christmas issues. “We are on an incessant search for novelty,” he said.

Over the years, BMJ Christmas reports have demolished myths, including a Danish one that people could get drunk by absorbing alcohol through the feet. After soaking their feet for three hours in a basin containing three bottles of vodka and measuring their blood alcohol levels, three Danish scientists found no such absorption. 

The first Christmas issue included an account of a resuscitation from 1650 that still astounds today. An unwed 22-year-old mother in Oxford was condemned to death after being accused of murdering her premature, stillborn son and concealing his body. She was executed by hanging by the neck for half an hour while people present jerked her up and down.

At the time, the bodies of executed prisoners were given to doctors for anatomical dissection. Two doctors who opened the woman’s coffin were startled to hear raspy breaths. They revived her, and she went on to recover her memory and live another 15 years, marrying and giving birth to three children. The 17th-century doctors’ report met the criteria for a modern case report, wrote J. Trevor Hughes, the author of the 1982 article. 

Dr. Lock, the editor, also encouraged historical back stories. In 1984, Dr. Charles Fletcher wrote about how he tested ways to safely administer the first precious batches of penicillin in 1941. The initial full test was on a 43-year-old British policeman who developed the widespread bacterial infection septicemia. He showed striking improvement from small doses of the antibiotic, but he died after the scarce supply — much of it recycled from his urine — ran out.

Many Christmas issue accounts would have upset earlier BMJ editors “like mad,” Dr. Lock said. “But so what?” he added. “It was fun.” Now there is so much competition for a spot in the issue that some authors submit papers early in the year and request publication at Christmastime. 

Some articles poke fun at hoary traditions, such as diagnosing ailments in historical figures despite the lack of medical evidence. Mozart is a special favorite of armchair diagnosticians, Dr. Lucien R. Karhausen wrote in 2010 after tabulating articles reporting 140 possible causes of death and 27 mental disorders in the composer. Many, he said, were based on shoddy medical interpretations, undocumented “eyewitness accounts” or the ignoring of criteria that separate normal and abnormal behavior.

“Some causes are plausible,” Dr. Karhausen wrote, “only a few — maybe one, or maybe none of them — can be true, so most if not all are false.” 

In 2006, BMJ reported on the results of a questionnaire sent to 110 members of the Sword Swallowers’ Association International. Forty-six members responded; they reported having swallowed more than 2,000 swords in the three preceding months. Sore throats (“sword throats”) were common during the learning phase, and after frequent repeated performances. Swallowers rarely sought medical advice. Of six who perforated their pharynx or esophagus, three needed surgery. No deaths were reported.

Still other articles play on the vanity of doctors, many of whose names are attached to instruments and syndromes. An article in 2010 extended the list to food products developed by doctors, including Kellogg’s Corn Flakes, various cookies, and Penfolds and Lindeman’s, the Australian wines. 

As for the animals featured in this year’s holiday issue: The story of the infection-sniffing beagle began with a report from a nurse in the Netherlands, who mentioned that a patient’s stool had the distinctive odor of C. difficile — a bacterium that is causing serious and growing public-health problems in many countries, including the United States.

A team led by Dr. Marije K. Bomers at the VU University Medical Center in Amsterdam reasoned that it might be possible to train dogs to detect the infection, and Cliff the beagle did just that. 

Cliff was trained to sit or lie down when he smelled C. difficile in the air walking by a patient’s bedside, and he also quickly and accurately identified all 50 stool samples with C. difficile and 25 of 30 infected patients — along with 50 stool samples free of the bacteria and 265 of 270 uninfected patients.

And the Dutch team that studied reindeer, working with researchers at the University of Tromso in the Norwegian Arctic, used a hand-held video microscope to observe the deer’s nasal capillaries as they ran on a treadmill. 

The capillaries are arranged in circular clusters at different locations through the nose. Those in reindeer noses are 25 percent thicker than those observed in the human nose and are believed to perform critical roles like heating, delivering oxygen and humidifying inhaled air to keep the animal’s nose from freezing. (The leader of the team, Can Ince, a physiologist at Erasmus University Medical Center in Rotterdam, says he has a financial interest in the company that manufactures the technology, which is used to monitor reactions to various drugs and therapies among critically ill human patients.)

By showing that a large number of red blood cells flowed through the small nasal vessels, the scientists said they had unlocked the mystery of Rudolph’s red nose. May it long glow. 

In Gun Debate, a Misguided Focus on Mental Illness

By on 1:26 AM

In the wake of the terrible shooting at an elementary school in Newtown, Conn., national attention has turned again to the complex links between violence, mental illness and gun control. 

The gunman, Adam Lanza, 20, has been described as a loner who was intelligent and socially awkward. And while no official diagnosis has been made public, armchair diagnosticians have been quick to assert that keeping guns from getting into the hands of people with mental illness would help solve the problem of gun homicides.

Arguing against stricter gun-control measures, Representative Mike Rogers, Republican of Michigan and a former F.B.I. agent, said, “What the more realistic discussion is, ‘How do we target people with mental illness who use firearms?’ ”

Robert A. Levy, chairman of the Cato Institute, told The New York Times: “To reduce the risk of multivictim violence, we would be better advised to focus on early detection and treatment of mental illness.”

But there is overwhelming epidemiological evidence that the vast majority of people with psychiatric disorders do not commit violent acts. Only about 4 percent of violence in the United States can be attributed to people with mental illness.

This does not mean that mental illness is not a risk factor for violence. It is, but the risk is actually small. Only certain serious psychiatric illnesses are linked to an increased risk of violence.

One of the largest studies, the National Institute of Mental Health’s Epidemiologic Catchment Area study, which followed nearly 18,000 subjects, found that the lifetime prevalence of violence among people with serious mental illness — like schizophrenia and bipolar disorder — was 16 percent, compared with 7 percent among people without any mental disorder. Anxiety disorders, in contrast, do not seem to increase the risk at all.

Alcohol and drug abuse are far more likely to result in violent behavior than mental illness by itself. In the National Institute of Mental Health’s E.C.A. study, for example, people with no mental disorder who abused alcohol or drugs were nearly seven times as likely as those without substance abuse to commit violent acts.

It’s possible that preventing people with schizophrenia, bipolar disorder and other serious mental illnesses from getting guns might decrease the risk of mass killings. Even the Supreme Court, which in 2008 strongly affirmed a broad right to bear arms, at the same time endorsed prohibitions on gun ownership “by felons and the mentally ill.”

But mass killings are very rare events, and because people with mentally illness contribute so little to overall violence, these measures would have little impact on everyday firearm-related killings. Consider that between 2001 and 2010, there were nearly 120,000 gun-related homicides, according to the National Center for Health Statistics. Few were perpetrated by people with mental illness.

Perhaps more significant, we are not very good at predicting who is likely to be dangerous in the future. According to Dr. Michael Stone, professor of clinical psychiatry at Columbia and an expert on mass murderers, “Most of these killers are young men who are not floridly psychotic. They tend to be paranoid loners who hold a grudge and are full of rage.”

Even though we know from large-scale epidemiologic studies like the E.C.A. study that a young psychotic male who is intoxicated with alcohol and has a history of involuntary commitment is at a high risk of violence, most individuals who fit this profile are harmless.

Jeffery Swanson, a professor of psychiatry at Duke University and a leading expert in the epidemiology of violence, said in an e-mail, “Can we reliably predict violence?  ‘No’ is the short answer. Psychiatrists, using clinical judgment, are not much better than chance at predicting which individual patients will do something violent and which will not.”

It would be even harder to predict a mass shooting, Dr. Swanson said, “You can profile the perpetrators after the fact and you’ll get a description of troubled young men, which also matches the description of thousands of other troubled young men who would never do something like this.”

Even if clinicians could predict violence perfectly, keeping guns from people with mental illness is easier said than done. Nearly five years after Congress enacted the National Instant Criminal Background Check System, only about half of the states have submitted more than a tiny proportion of their mental health records.

How effective are laws that prohibit people with mental illness from obtaining guns? According to Dr. Swanson’s recent research, these measures may prevent some violent crime. But, he added, “there are a lot of people who are undeterred by these laws.”

Adam Lanza was prohibited from purchasing a gun, because he was too young. Yet he managed to get his hands on guns — his mother’s — anyway. If we really want to stop young men like him from becoming mass murderers, and prevent the small amount of violence attributable to mental illness, we should invest our resources in better screening for, and treatment of, psychiatric illness in young people.

All the focus on the small number of people with mental illness who are violent serves to make us feel safer by displacing and limiting the threat of violence to a small, well-defined group. But the sad and frightening truth is that the vast majority of homicides are carried out by outwardly normal people in the grip of all too ordinary human aggression to whom we provide nearly unfettered access to deadly force.