The upside of down stock markets

9:00 AM markets, stock, upside No Comments

Business Week | By Kathy Kristof, Kiplinger

Nobody likes a downturn. But play your cards right during a market crash, and you could avoid taxes on your stock gains for years to come.

Tax season reminds me just how much I love a good stock market crash.

When my accountant recently informed me that I wouldn't have to pay taxes on nearly $50,000 in profits I netted last year from the sale of stocks (including three in the Practical Investing portfolio), it occurred to me that I should share my crash-oriented portfolio-restructuring and -rebalancing strategy.

In a nutshell: I save big moves for times of crisis. That allows me to rejigger the mix of stocks, bonds and cash in my portfolio and to trigger losses at the same time. My method is not as meticulous as the regular rebalancing that most advisers encourage. But for those of us with taxable accounts who are willing to accept a little financial messiness, my strategy can work nicely.

You see, the greatest thing about capital losses is that they never expire. Tax rules allow you to use losses to offset gains, plus up to $3,000 in ordinary income, every year. When you have excess losses, you get to roll them forward to be used in future years.

So when you have an opportunity to trigger big losses -- far more than you'd be able to use in a year -- and to rebalance or restructure your portfolio at the same time, you should jump at the chance. After all, that sort of opportunity doesn't come along every day. You really need a market crash like those that occurred in 2002 and 2008. Eventually, we'll have another bear market -- and perhaps another crash -- so it pays to be prepared.

The best way to explain it is with an example. Back in 2008, when the market was falling through the floor, I sold my main mutual fund holding, Vanguard Total Stock Market Index (VTSAX). I had built up the holding over the previous ten years by making regular monthly contributions into a taxable account.

Why a taxable account? Mainly because of its flexibility. I have assets in tax-deferred retirement accounts, too. But because you have to pay income taxes on withdrawals from IRAs, 401k plans and the like (and generally penalties on withdrawals made before age 59?), you shouldn't use the money in those kinds of accounts for emergencies or, say, to buy a car. I think everyone should have money in a taxable account for such needs.

My taxable account was worth more than $300,000 at one point, well over my cost of roughly $257,000. When the market dropped in late 2008, the account's value fell to $177,000. Selling triggered an $80,000 loss.

The moment the sale cleared, I started buying. I didn't want to repurchase shares in the same fund, and I couldn't if I wanted to preserve the tax losses. (Tax rules bar claiming a tax loss when you repurchase the same or "substantially identical" shares within a month of a sale.)

My portfolio was loaded with big-company stocks, and I had wanted to shift money into smaller companies and real estate stocks for some time, but didn't want to trigger taxable gains. The market upheaval gave me the chance to make the move with positive tax consequences.

I like what this restructuring did for my portfolio, too. I put the proceeds into three exchange-traded stock index funds: Half went to Vanguard Mid-Cap ETF (VO), 25 percent to Vanguard Real Estate Investment Trust ETF (VNQ) and the rest to Vanguard Large Cap ETF (VV).

While all stock indexes have been soaring since the bull market began in 2009, the mid-cap and REIT ETFs have performed extraordinarily well. Over the past five years through March 7, both funds have more than tripled in value (including reinvested dividends). I'll have to pay taxes on those gains eventually, of course -- but not anytime soon.

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Why to buy emerging markets now

8:00 AM emerging, markets No Comments

| By James K. Glassman, Kiplinger's Personal Finance

Right now, when developing markets are flat on their backs, is the time for contrarian investors to look closely at them.

Thank goodness for emerging nations such as China, India and Brazil. By continuing to grow briskly, they kept the recession of 2007–09 and its immediate aftermath from turning into a global calamity.

Now, however, emerging economies are slipping. In India, for example, inflation is higher than in any other large country, yields on ten-year government bonds have jumped to nearly 10 percent, the rupee has lost two-fifths of its value, and growth in gross domestic product has dropped from about 9 percent to half that. China's growth rate is down by one-fourth, and Brazilian economists estimate that their nation's GDP will increase by a puny 2.9 percent in 2013.

Investors who rushed into emerging markets for protection from the economic storms at home are now heading out again. During the summer, individual investors pulled $18 billion out of emerging-markets bond funds as interest rates rose and prices plummeted, and little guys and institutions alike are fleeing stocks.

To borrow an old joke, emerging markets have become submerging markets. So far in 2013, even as U.S., European and Japanese stocks have climbed sharply, iShares MSCI Emerging Markets (EEM), an exchange-traded fund linked to a popular index for developing-market stocks, has lost 8.0 percent. Over the past three years, iShares S&P India Nifty 50 (INDY) lost 8.9 percent annualized. If you had put $10,000 into iShares MSCI Brazil Capped (EWZ) three years ago, your stake would be worth about $7,000 today; if you had put the same amount into Vanguard 500 Index (VFINX), which tracks shares of large U.S. firms, you would have $16,500 (all returns are as of September 6).

As a contrarian -- that is, someone who seeks out-of-favor investments -- all of this misery piques my interest. The best time to buy is when most investors are scared to death. Of course, you need to have confidence -- in this case, that submerging markets will reemerge. I do.

Emerging markets are highly volatile. Sharp ups and downs are in their DNA. Data compiled by Morningstar shows that emerging-markets stocks are about 50 percent riskier than U.S. stocks. Nothing goes straight up, but when stocks from developing nations come down, they usually fall hard.

Volatility is the price you pay for higher returns. If an investment produces the same return year after year (as, say, a Treasury note does), then the return is typically modest. Low risk, low return. But if you endure the sickening declines inherent in a high-risk investment, you tend to get a higher average return in the long run. There's no guarantee for the future, but over the past decade, the Brazil ETF returned an annualized 16.7 percent, and Vanguard 500 Index returned an average of 7.0 percent per year. Buy at a time like this, when emerging markets are suffering, and you have a better chance of winning in the end.

Emerging markets could, of course, be settling in for many years of decline. China's centralized control of the banking system, India's protectionism and Brazil's populism are certainly threats to economic growth. So is the new debt that both governments and businesses in such countries have issued in recent years, as lenders have stampeded to offer them cash. China's private-sector debt, for example, rose from 129 percent of the size of the economy in 2008 to 214 percent this June.

In my view, however, all of these economies -- and the governments that steward them -- are moving, in fits and starts, in the right direction, as are governments in Mexico, Indonesia, Malaysia, Chile and many other developing markets. In addition, businesses based in these countries are managed much better than they once were.

Also, emerging nations have advantages over developed countries. Most have plenty of young workers to support retirees, lack costly welfare systems that are difficult to reform and, despite recent increases in borrowing, carry low levels of government debt -- partly because after the defaults of the 1990s, lenders were reluctant for a time to extend credit. The ratio of total government debt to GDP in Brazil and India is 65 percent and 68 percent, respectively. In both China and Indonesia the figure is 23 percent. The debt-to-GDP ratio in the U.S. is 102 percent.

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Ride this market's last-gasp rally

12:00 PM lastgasp, markets, rally No Comments

| By Jim Jubak

With Fed money still rolling in, look for another six weeks of gains as a market that’s already advanced 25% this year melts up. Then get ready: A meltdown could follow.

Are we looking at a yearend "melt up"?

I think the odds are good -- very good indeed -- that we’ll see one of those big, all-animal-spirits-on-deck upward moves in U.S. stocks from now until at least mid-December.

That's assuming the markets get past this week’s Oct. 30 meeting of the Federal Reserve’s Open Market Committee without a move by the U.S. central bank to cut back on its $85 billion a month in monetary stimulus. And I think this is a relatively safe assumption after Monday’s report of a very disappointing 5.6% month-to-month drop in pending home sales in September.

Given that, I think the Standard & Poor’s 500-stock index ($INX) could easily break 1,850 within six weeks; up from a close of 1,760 on Friday, Oct. 25. That would add another 5 percentage points of return to what is already an extraordinary year for U.S. stocks. As of Oct. 25, the year-to-date return for the S&P 500 was 25.4%.

But an end-of-the-year melt up wouldn’t be all good news for traders and investors. Because it could be a last hurrah.

As the term implies, with its echo of “melt down,” stocks can fall hard after a melt up.

Jim Jubak

In a melt up, valuations run far away from any fundamentals in the economy, the market or individual stocks. A melt up is driven by momentum, as investors who have profited from the market’s gains greedily chase more and as investors who have been on the sidelines decide that they can’t take missing out any longer and join the party. Worries about risk go out the window, and often it’s the riskiest assets that climb the fastest. In a melt up, the last of every group of investors except the permanently bearish throws in the towel and finally puts cash into the market.

A melt up can be the last blowoff before a market dive.

“Can be” is, of course, the key problem. Melt ups don’t have to end in corrections or market dives. Best-case fundamental wishes can turn out to be true and provide support for valuations at exactly the right time. Extravagant hopes for the future can yield to even more extravagant hopes. Markets can calmly go through a period of consolidation rather than dropping to support levels.

Let’s start at the beginning and work through the important points one by one:

Why does this look like a melt up to me? What could make the difference between a dive, a consolidation, and a further extension of the rally? And what should you be doing now?

Almost everyone is a bull

Let’s start with sentiment indicators that say it’s very hard to find a bear right now.

The American Association of Individual Investors Sentiment Index for the week ended Oct. 23, for example, shows 49.2% of respondents are bullish -- that’s up 2.9 percentage points from the previous week. More impressively, bearish sentiment is down to just 17.6%, a drop of 7.3 percentage points. The long-term average for bearish sentiment is 30.5%, by the way.

It’s hard for a market to keep climbing when all the bears have already thrown in the towel and put their money to work on the bullish side.

Other indicators of sentiment, along with data on investor cash levels, show a similar picture of investor enthusiasm. Margin debt, money borrowed to buy stocks where the loans are secured by the value of the stock, hit a 54-year high in September at $401 billion. (The New York Stock Exchange only releases data at month’s end, so we don’t know what has happened to the total in October.) Margin debt as a percentage of GDP does not quite match the peak of 2007, but it’s in the neighborhood of previous peaks, according to Deutsche Bank.

You can see signs typical of a melt up by tracking the rise in popularity of riskier assets. For example, mutual funds and ETFs (exchange traded funds) that invest in junk bonds are popular again. Weekly flows into junk-bond funds have tripled to $2 billion, according to Lipper. That has taken total cash flow for the year back into positive territory after investors moved out of the category earlier in 2013.

Or take the willingness of Wall Street to buy what are called covenant lite loans. These corporate loans carry few covenants -- rules, for example, requiring borrowers to meet specific credit ratios or limiting the amount of additional debt borrowers can take on. Covenant lite loans had climbed to 54% of all loans this year as of September, according to Standard & Poor’s. That’s a record.

Can the rally keep rolling?

So what could keep this melt up from ending badly -- that is, in a dive or a correction? (And remember that this market hasn’t seen a 10% correction since December 2011.)

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Greek voice can markets ease, give, even if only temporarily

4:00 AM Greek, markets, temporarily, voice No Comments

By Caroline Valetkevitch, Reuters
4: 27 Pm EDT updated: NEW YORK--the elections on Sunday per bailout showed early results from Greece parties are on course to win a narrow majority, which can markets some respite, but Coalition majority looks set be narrow and may be missing necessary stability to enact painful reforms.

Regardless of the result, Europe's problems are long time not yet been completed, as the debt crisis that threatens to devour the larger economies of Spain and Italy.

All characters of the tensions in markets on Monday morning and investors will look for action by central banks of the world which are prepared according to officials to intervene if trade is turbulent.

Enters Greece the choice as investors see it, the future of the country in the euro area and possibly the future of the currency block itself may be.

Keep the Greek conservative new democracy party and Socialist PASOK, and large back a EU/IMF rescue package, Greece before the bankruptcy, looked set to secure a narrow majority in Parliament together. SYRIZA, the leading left-wing party committed to tear the terms and conditions for the bailout, conceded defeat.

"they will probably try form coalitions and the real question is, with the horse trading it is how stable?", said Doug Roberts, chief investment strategist at channel capital Research.com in Shrewsbury, New Jersey. "But now it's more like enter the can of down the road." "Either way you are not talking about a stable situation."

An official vote projection showed new democracy under 29.5 percent of the vote, with SYRIZA in second place with 27.1% and PASOK with 12.3 percent of third parties.

For 50 places bonus given to the party which comes first, the result means 300 seats 128 for 33 seats in the Parliament for PASOK and new democracy.

Roberts said whether central banks intervene depends on the markets next week. "If the markets start to the South I think he is forced," he said.

Euro hit of one of the few markets trade shortly after the official election projections in Greece a three-week high against the dollar in the early Australasian trade rose to around $1.2730 according to Reuters information from approximately $1.2655 late in New York on Friday.

But markets had tended to positive policy developments late Sunday and early Monday only to quickly undo to respond. So was it last weekend, after the EU a 100 billion euro bailout for Spanish banks announced.

Weeks of concern about the possible outcome of the Greek election have prompted a number of central banks to prepare the market problems.

Officials from the Group of 20 central banks in major economies are willing to take in order to reassure the markets, the outcome of the Greek elections should create a market storm, told of Reuters.

Among them President said European Central Bank Mario Draghi was the ECB to fund ready and viable euro zone bank that gets into trouble. The Bank of England on Thursday announced a $155 billion (?100 billion) offer of the loans to banks.

Group of 20 leading kick-off a two-day summit in Mexico on Monday and the rest of which is likely to week to not be quiet.

The Federal Reserve is a policy statement by release on Wednesday at the end of their two-day meeting and the steady stream of debt warnings and downgrades is likely to continue.

Another sign of investor nervousness was the CBOE volatility index <.VIX>, Wall Street fear gauge, for much of Friday as stocks rose, although the VIX closed lower. An inverse relationship usually have stocks and the VIX.


Many investors have tried, prepare for the worst.

"People attacking their positions in the last two weeks on the road in this weekend, secure were have", said Alec Levine, a derivatives strategist at NEWEDGE Group SA in New York.

"No matter what happens (this) week, we return to a massive game of chicken between the newly elected Greek Government, who can be, and the EU, specifically Germany."

THE FED PROVIDED

Despite the fears, shares ended the week on a positive note, marking a second week of gains. The benchmark standard & Poors is now 6.8 percent for 2012, but still good for the highest of the year index <.SPX>.


Part of what has optimism investors has spurred in recent weeks was the hope that would be the fed and other central banks, more economic stimulus. There is still speculation about, whether the Fed will engage in a third round of quantitative easing.

"We believe that QE3 expectations in the market drive one way or other," said Omar Aguilar, chief investment officer for equities at Charles Schwab Corp., in San Francisco.

But the fact that the Fed has changed no current policy could mean the economic data decision makers see is "not as bad as everyone thinks," said Aguilar.

Before the vote Russell indexes also said that certain events in Greece could mean changes in their indexes their rule "financial crisis" through implementation. Their indexes of Russell include global index.

ON RATINGS WATCH

Add to investor nervousness was a whole series of the last ratings cuts.

Under the recent Fitch Ratings on Friday downgraded Egypt's sovereign credit rating deeper into junk status. On Thursday, Egan-Jones cut sovereign creditworthiness of France.

Many investors see this trend continue as agencies try to measure the impact of the euro and other issues on the global economy.

"We are likely to see more of them", said Peterson.

Below the CNBC Sue Herrera forecasts, what next week are likely top business and financial stories.

Copyright 2011 Thomson Reuters.

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Big Pharma's shame: emerging markets bribery

12:38 AM bribery, emerging, markets, Pharmas, shame No Comments

BELGRADE — According to a signal from the electronic tag around his ankle, Nenad Borojevic last left his apartment building at 6.25 p.m. on January 10. It was the festive season in Serbia; the capital was enjoying the lull between Orthodox Christmas and New Year.

Police said Borojevic, a doctor, headed to Kosutnjak park, a popular wooded area in Belgrade dotted with restaurants and criss-crossed by jogging paths.

Borojevic had been one of Serbia's most eminent doctors, a director of the Institute for Oncology and Radiology. Now he was due in court in five days to face charges brought by the public prosecutor that he had taken bribes from international drug companies as incentives to use their products. The electronic tag was a condition of his 500,000 euro ($660,000) bail.

The next day, around noon, a passer-by found Borojevic hanging from a tree on a nylon rope five millimeters thick. Police found a suicide note in the mailbox of his wife, from whom he was separated. It had been sent from a local post office. "I couldn't take it anymore," it said.

Borojevic's story, some of which emerges here for the first time, is a particularly gruesome example of what even people in the global drugs business concede is a growing problem: bribery and corruption in emerging markets. The 51-year-old cancer specialist was one of a group of 10 Serbia-based doctors and drug company officials charged in 2010 with taking, or offering, more than 500,000 euros in bribes to persuade the medics to use specific products. The doctors are alleged to have personally gained from the choice of medicines used; the drug company representatives with illegally offering the incentives.

In recent years, Big Pharma has forked out billions of dollars to settle scandals involving improper promotion of medicines in the United States. Now bribes paid to foreign doctors and other state employees are shaping up as the next major legal liability threat for the industry. A Reuters examination of U.S. Securities and Exchange Commission (SEC) filings by the world's top 10 drug companies has found that eight of them recently warned of potential costs related to charges of corruption in overseas markets.

One factor driving the trend is a search for new business. Companies whose profit margins have been squeezed in the developed world are increasingly turning to thinly regulated emerging markets for growth. At the same time, U.S. and European governments are toughening up on bribes paid by companies overseas. The U.S. Foreign Corrupt Practices Act and Britain's new Bribery Act, which came into force last July, are both targeting drugs companies for special scrutiny, providing new impetus for the industry to clean up its act.

"There's clearly a legal risk from violating laws with the current drive into emerging markets, so mis-selling cases in these markets could become a significant legal threat for the industry," said Chris Stirling, European sector leader for pharmaceuticals at KPMG in London. "The business practices in these countries are very different from the sort you find in Western Europe and the United States."

Borojevic's suicide - police have ruled out foul play - means certain aspects of his case, which is being investigated at a national level, may never be known. The trial of the other men and women in the group is continuing. All the defendants have pleaded not guilty, though one of the six drug company representatives involved agreed a plea bargain and another turned witness for the prosecution.

Operation Crab
The probe of Borojevic, which police called Operation Crab, started with a tip-off in March 2007, according to a police source involved in the investigation.

At a later point, police received information from a former mistress of one of the accused, the investigator said, declining to name her. "After they broke up, she came to us and recited everything - names, places, contacts, how they operated, how much everyone received and from whom, when and where," said the investigator. "She even gave us some concrete evidence which helped us a great deal."

Some of Serbia's tabloid media said the informant was a former Serbian model, Katarina Rebraca, who herself, in a separate case, had in April 2010 faced charges of embezzling funds at a breast cancer charity she ran. Borojevic, the doctor, had been called as a witness for the prosecution against her, although he died before testifying.

Rebraca declined to comment. Her lawyer, Dragan Mrakovic, said: "It is not in the best interest of my client to give any information whatsoever" about the Borojevic case. "This has nothing to do with my client's case, nor does my client have anything to do with the pharmaceutical corruption case."

The informant led police to a rented apartment in Medakovic, a neighborhood of communist-era apartment blocks and family homes in Belgrade. Here a group of doctors and drugs company sales representatives would allegedly meet and hold "raunchy, loud parties with Belgrade babes, three or four times a week," said the police investigator. It was not possible to confirm who had rented the apartment.

In June 2010 police arrested Borojevic: the charges against him and four colleagues included running a criminal conspiracy in cancer drugs from 2007 to 2009. The indictment said that the alleged scheme, whereby drug company representatives gave inducements to the doctors to use their companies' products, had increased sales of a number of generic chemotherapy medicines as well as branded cancer medicines including Roche Holding AG's Avastin and Erbitux, made by Merck KGaA of Germany.

For Borojevic, the alleged gains were significant, especially in a country whose GDP per capita the IMF puts at just $6,500 a year. In total, he was accused of receiving a total of 11.2 million dinars ($138,000) in kickbacks from drug companies.

Officials at drugs companies AstraZeneca Plc, Sanofi SA and Actavis confirmed they were served in July and August 2011 with criminal indictments related to allegedly improper payments to physicians including Borojevic at his state-run institute, and said they had filed certain procedural objections. Icelandic pharmaceutical company Actavis gave the most expansive statement: "The allegations include bribery of state officials in order to obtain preferential status when it comes to the sale of oncology products in Serbia," said the company, which moved its headquarters to Zug, Switzerland in 2011.

All declined further comment on the proceedings. Also charged with alleged bribery in the case were representatives of Roche, Merck KGaA and PharmaSwiss - a unit of Canada's Valeant Pharmaceuticals International Inc - all of whom declined to comment.

Reps take the rap
In one instance, the police allege, Borojevic and his colleague Zoran Bekic, head of the Institute for Oncology and Radiology's pediatric oncology ward, received 95,000 euros from Goran Orlic, a representative for Actavis. Orlic allegedly paid the men for inside information about its business plans.

The Actavis representative received immunity from prosecution in exchange for his testimony ahead of the trial, the court said in a statement. Actavis said Orlic left the company in 2009. Neither Bekic, the pediatrician, or his lawyer would comment. Orlic could not be reached.

Another of those charged was Merck KGaA's representative, Jasmina Gutovic. She reached a plea bargain with prosecutors and admitted giving bribes, according to the judge who heard her case. While Gutovic was convicted, the court will not say what punishment she received while the rest of the case is being heard. Merck KGaA confirmed she left the company in June 2011 and she could not be reached for comment.

The indictment against Borojevic also states that he and colleagues did a deal with unnamed drug company sales staff to develop "new therapeutic applications" using their companies' drugs, as a way of further boosting sales of the products. In the months before his death, Borojevic was portrayed in Serbian media as a poisoner of children, based on suggestions in the media that he had overprescribed.

Borojevic was released on bail in November 2011. He repeatedly denied all the charges against him, saying he was the victim of a media witch hunt. "Nothing is true from the indictment," he said in a statement in May 2011.

His lawyer, Strahinja Kastratovic, said that the day before Borojevic killed himself, he had learned the apartment he had bought with his estranged wife would be seized by the court. "He said, 'I can't take this anymore, I don't know how to fight this or against whom I'm supposed to be fighting,'" said Kastratovic. He declined to elaborate.

Temptations increase
Corruption is rife in Serbia, which is ranked 86th out of 183 countries in Berlin-based Transparency International's corruption perceptions index. The drugs business is particularly exposed to corruption, Transparency International says: pharmaceuticals create vast opportunities for graft across both rich and poor countries. Its 2011 Bribe Payers' Index ranks pharmaceuticals and healthcare 13th out of 19 industries on probity - a lower ranking than defense firms, though above mining and construction.

"There are a number of classic red flags for bribery that indicate the pharma sector is particularly vulnerable," says Robert Barrington, TI's director of external affairs. These include a tradition of gifts and hospitality, a lack of transparency over pricing and the need for regulatory approval in everything.

In many parts of the world lavish gifts such as all-expenses-paid trips to resorts and golf days remain common, even though the industry has reined in such hospitality in the United States.

Temptations may increase as companies move into the developing world. IMS Health, which analyses pharmaceutical industry trends, says 17 key emerging markets will account for around 63 percent of worldwide growth in prescription drug sales between 2010 and 2015.

"It is almost guaranteed that every multinational pharmaceutical company is going to end up with these issues and is going to have to go through a painful experience," says one in-house lawyer at a major U.S. drugmaker. "Frankly, the odds are stacked against companies."

'Not ethical, but universal'
The Serbian charges and claims of corruption extend beyond Borojevic and his colleagues. In his defense, Borojevic always insisted that he could not approve drug purchases alone, but passed on recommendations to the state-run Department of Health Insurance. That itself is the target of other, unrelated corruption charges brought by the public prosecutor against its former head, Svetlana Vukajlovic, who has been in pre-trial detention since September 2011.

An example from another Balkan country, Greece, underlines how ingrained such practices can be. Earlier this month, London-based Smith & Nephew Plc, Europe's biggest maker of artificial knees and hips, agreed to pay $22 million to settle SEC allegations that it bribed doctors in Greece to use its products. Among documents the SEC released as part of the dossier was a note jotted down in 1999 by an unnamed in-house lawyer for the company.

"Pay surgeon to use prod(uct)," it read. "Not legal or ethic; but universal."

In that case, the company's Greek distributor sent an email to the firm's U.S.-based head of international sales seeking to maintain access to one of the slush funds used to pay doctors to buy S&N products: "I absolutely need this fund to promote my sales with surgeons, at a time when competition offers substantially higher rates," he wrote. The fund's "only reason for being is the need for cash incentives, a real pain in the neck but an unavoidable fact of Greek life."

S&N CEO Olivier Bohuon, who took office in 2011, long after the alleged bribery occurred, said the company had moved on but the episode showed the need to remain vigilant.

Over the past year eight of the world's top 10 drugmakers - Pfizer Inc, Novartis AG, Merck & Co Inc, Sanofi, AstraZeneca, GlaxoSmithKline Plc, Johnson & Johnson and Eli Lilly & Co - have all warned that they may face liabilities related to charges of corruption in numerous overseas markets.

Investigations into potential wrongdoing by pharmaceutical firms cover activities in countries including Argentina, Brazil, Canada, China, Germany, Italy, Poland, Russia and Saudi Arabia, according to company filings. They also involve possible improper conduct of clinical trials, which are increasingly being run in lower-cost Asian or East European countries.

'Just say no'
One reason such cases are surfacing now is the renewed vigor with which U.S. officials have enforced its foreign corruption law since November 2009. That's when U.S. assistant attorney-general Lanny Breuer told a pharmaceutical conference: "We will be intensely focused on rooting out foreign bribery in your industry."

The 1977 Foreign Corrupt Practices Act makes it illegal for U.S. companies and foreign firms whose stock is traded in the United States to bribe government officials in foreign countries. Officials at the U.S. SEC and Department of Justice (DOJ) declined to say if they planned to follow the Serbian probe with their own investigations.

Some drug firms have already started to come clean. In the first case of its kind, Johnson & Johnson settled for $78 million with U.S. and British authorities in April last year, after disclosing voluntarily to U.S. authorities back in 2007 that it had made payments to doctors in Poland, Romania and Greece who chose to use J&J medicines and surgical implants.

Pfizer, which in 2004 became the first pharmaceutical company to volunteer information about past wrongdoings to the DOJ and the SEC, is likely to be the next big firm to settle. The world's biggest drugmaker, it reached an agreement in principle with U.S. authorities towards the end of last year and is set to finalize a deal during the first half of 2012, according to people familiar with the discussions.

Under U.S. and British law, the onus is on a corporation to report improper behavior by either its own staff or outside contractors. In some cases, this has already meant radical change. AstraZeneca, for example, said last May it was ending all payments to doctors attending international scientific and medical congresses.

"I know that this is not easy," Chief Executive David Brennan told a conference at the time. "I know from my own experience as a sales representative, you will encounter people who will ask for gifts, or other inducements. And they will threaten to take their business elsewhere, if you don't acquiesce. But we have made it clear that our sales force have to say no."

Copyright 2012 Thomson Reuters.

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Megastores endanger Mexico-City markets

4:04 PM endanger, markets, Megastores, MexicoCity No Comments

Mexico City - for 30 years, Estela Moran has nearly every edible part of a cow was sold their meat in a neighborhood market. The sale of tripe, feet, tongue and good beef has brought three of their sons through school.

But all is not good at El Torito the small market in a lower class Mexico City neighborhood where Moran works. Multiple booths are free. Others are used only for storage. Morans sales, she said, gradually declined as U.S.-style supermarkets bloomed have.

Compared to her post, not other meat seller have in days on the market.

"I don't know where they are," said 60-year-old a-year Moran as leftover meat in plastic bags packed. "I will be here sell until I sick, or I can do it no longer." We earn much, but it is a life. "I have clients that depend on me."

Mexico City neighborhood markets, noisy, smelly living landmark of the concrete and corrugated cardboard, selling everything from cactus salads to Pinatas, fight, like more Mexicans in supermarkets relatively more orderly, cleaner, air conditioned and foreign migrate.

Shoppers say supermarkets have easy access have a wider variety of elements and are more secure.

"I know that from here we come to a foreign company make richer and the poorer, market vendors" 57-year-old Maria Teresa Hernandez said, as they leave their local Wal-Mart with pockets full of chocolate, fruit juices and underwear. "But they have everything here."

However, others say, is the rich offer of fresh fruits and products at low prices, what keeps them back to the local markets.

Most of the markets, such as El Torito, 50 years ago were and have aged gracefully not. Recently, a city government survey showed that 200 of 318 markets need urgent repairs on their installer and electrical wiring.

A steady decline in sales is the scarier over 70,000 suppliers.

Once a staple of daily life of this megacity, the markets in the 1950s and 1960s compared to 30 percent now, according to the City Office of economic development sold 80 percent of the city food.

A study of the 2002 by the National Autonomous University of Mexico estimated that revenues a decade almost 60 per cent had fallen.

Almost Professor Gerardo Torres says sales Salcido 10 years later, certainly still further decreased.

"There are markets that are actually dead," said Guadalupe Loaeza, columnist of the daily newspaper Reforma and writer, who was Mexican life has. "Many are in poor condition." There are rats and leaks. I remember many years ago, that no one went to the supermarket. "Now all go."

The debate on the future of the markets was sparked in April Mexico City Mayor, Marcelo Ebrard, successfully a regulation, which transferred the construction of supermarkets and convenience stores in the neighborhood, where the markets are to ban. The regulation, but has a three year service life and must be forced. Other government officials have proposed ideas such as the installation of debit card machines on the market only cash.

Still, some of the old-style markets thrive.

Also in off-peak hour was La Merced market in the historical centre of the city with activity on a recent afternoon to burst. The city is the largest retail market a seemingly endless maze of stands. It anchored a commercial area, who are on the road, leaks, where buyers find, everything from pirated porn Mexican flags made in China and grilled corn on the cob.

In addition to a contribution of spices sold belt. Children's toys hanging next to the chili-based Mole sauces. Are dinosaurs plastic a Taco fries to tripe.

The distances between the stands are similar to this city terrible car traffic, with the exception of human jams here by the carts caused product or mobile vendors of hawking soda.

Cumbia, salsa and 80s American music boom of stereos keep some manufacturers. TV shows and movies Donner at high volume. Wires in dust covered be interrupted on the stands. Flies hover close to the products.

"We come to markets, because it is part of our tradition," said shopped Pedro Ismael Marquez Hernandez, 37, as he was with his wife, mother and young daughter. "It would be sad when we lose." "It is a part of our heritage."

Marquez, Hernandez said he finds more affordable, but admitted that he would rather have some prices on the market products such as bathroom, to buy in the supermarket. Although they are more expensive, they are better quality, he said. He also said that at the local grocery stores sometimes is too good to pass up.

In this city of nearly 9 million, there are 7-Eleven or the like seemingly every other block. Walmart de Mexico is the largest private employer in the country, creation of jobs around 176,000 people, according to the discount giant has become site.

Walmart began its presence built here in 1991, one open Sam's Club. It has purchased it now 1,880 sites in Mexico, including its flagship stores, the Mexican chains and 364 restaurants.

In the year 2010, it recorded $26 billion ($ 334,5 billion pesos) from Mexico and Central American offices.

Edgar Alvarez, Director of the Association of public markets, throws decline in the markets partly on the Government, which he says, offers to international companies, while to discriminate against the markets.

If foreign companies opening a supermarket, he said "they fix sidewalks,". "they should do what they do for the multinationals for us."

At the same time, the Government of markets allows to accept food stamps, not she translated in million pesos in lost income, Alvarez said.

He said that to ban, supermarkets and shops for everything is a step that is too little, too late.

Morans market ate the remains of chicken a last afternoon, a mutt of a dog. Children ran aimlessly. Manufacturer peeled onions. The stalls were closed. It was quiet.

The market has a shrine to the Virgin Mary in a corner. The aroma of mangos and prickly pear fills the air.

Angelina Espejel, a dry cleaning booth at El Torito for eight years running has, says that markets will survive what whatever it is thrown. Still too many people from the working class serve, she said.

"You can think of unemployment when the markets gone?" Espejel asked.

Copyright 2011 of the associated press. All rights reserved. This material cannot be published, sent, rewritten or redistributed.

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Europe leads global markets back from the edge

1:41 AM Europe, Global, leads, markets No Comments

Tuesday after many official bear market bottom enter LONDON - speculation that the Fed may announce another round of Monetary Union helped facilitate stock markets recover.

A statement by the Fed is expected at 14: 15, Eastern, and hopes that it will be forced more deeds after solid gains helped the most stocks in Europe and Wall Street.

Investors worried still credit, remained however about the consequences of the United States downgrade, Europe's debt crisis and mounting expectations of a global recession. This is evident in the continued strength of traditional safer port assets, like gold and the Swiss francs, which was to take regular record highs recently.

"While we always still are not convinced, that the Fed is ready to announce important new monetary policy measures, changes in the statement, which should support of financial markets," said Vassili Serebriakov, analyst at Wells Fargo Bank.

In Europe, the FTSE 100 index of leading British shares closed up 0.3 percent to 5.085 while the French CAC-40 3.153 rose 0.8 per cent. Germany is 0.3 per cent DAX but continues to his colleagues, trade lower 5.899 exceed.

The speech-fed helped Wall Street to restore dizzying losses of the previous session - the Dow Jones industrial average was 1.9 percent to 11.022 while the broader standard & poor's 500 index rose by 2.3 percent to 1,145.

An option for the Fed is known, that it is considering an other monetary stimulus, which would be their third in the last three years. Kenneth Rogoff, a Harvard University economist, says that the only hope, the United States, to avoid a Japan-style low growth and benign prices lost decade might help.

Louise Cooper, a market analyst, BGC partners, said, a further incentive "significantly" might stock markets up although it "may not quite the same impact packaging."

Stocks around the world were after August 2010, supported, if the Fed is a currency relief, which ended up $600 billion announced in June. This relaxation ended, said "chaos followed has", Cooper.

The recovery of stocks is come, after many markets registered market area, bear them over 20 percent since their peak decreased as relatively safe assets their cash, such as gold and the Swiss franc parking investors sought.

The other great concern in the market remains Europe's debt crisis, and here again, there are signs that the recent tensions can be facilitated, if because of intervention by the European Central Bank.

The European Central Bank appeared Monday and bought billion value their bonds. Movement contributed to the returns of Spanish and Italian ten-year bonds by a percentage this week to more than 5 percent lower - a rate as now manageable. The euro was also quite lively, rising 0.3 percent to $1.4221.

Wieder.Herstellen of shares helped oil the oil markets, prices to recover. The main policy rate was up 30 cents to $81.61 per barrel. Previously, it had fallen to $75.71, the lowest level since September 2010.

Stock exchanges in the Middle East traditionally oil dependent were also volatile with the benchmark index in OPEC powerhouse Saudi Arabia, the largest economy of the region, close from 0.8% to 6.009 points. It was more than 4 percent. Egypt led the region declines, with the EGX30 index plunge 4.7 percent to 4.478 points to close. The Exchange was to temporarily trade late in the morning after broader indicators more than 5 percent declined.

In Asia, Hong Kong Hang Seng the decreases of tumbling 5.7 percent in 19,330.70. other markets fell to, including the Japanese Nikkei 225 average, which earlier acted 1.7 percent lower to 8,944.48, has 4 percent down to an end. China's main market in Shanghai have fared moderately better close less than a point only on 2,645.70.

© 2011 The associated press. All rights reserved. This material cannot be published, sent, rewritten or redistributed.

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Feels like 'Armageddon': Asian markets to plunge

3:26 PM Armageddon, Asian, Feels, markets, plunge No Comments

BANGKOK - Asian shares nose dived Monday as the first downgrade of the credit rating of the US Government had to the global financial system, strengthening fears, which is the world economy weaknesses.

Trading below $84 a barrel on expectations that weaker growth of in global demand for crude oil will crimp expands oil prices, the recent sharp losses. The dollar was lower against the yen and the euro. $ Affected also a record low against the Swiss franc from 0.7485 cents to the dollar - a drop of almost 30 percent over the previous year.

Tokyo's Nikkei closed 2.2% and the MSCI broad index of the Asia Pacific shares outside of Japan fell 4.2 percent, take its losses for the month so far more than 12 percent.

Hong Kong Hang Seng index finished 2.17 percent on 20,490.57. China enterprises index ended 2.81 percent to 11,113.45.

The Shanghai composite index its records largest single day loss since November last year, finishing 3,79 percent to 2,526.82.

"It is not Armageddon, but it feels like it," said Hong Kong-based analyst Francis LUN, added, that he the area Hang Seng index looks to below 19,000 - a decline by a further 5 percent - before he any kind of comeback.

Futures on the losses on Wall Street at opening Monday. Dow Futures was 2.1 per cent to 11,167, while the broader standard & poor's 500 futures fell 2.4 percent to 1.168.

At 6 am (ET) was Britain's FTSE 100 index of leading British shares up 1.7 percent to 5,160, while the French CAC 40 fell 2 percent to 3,214. Germany's DAX is 2.3 percent to 6,096.

However, Monday, after the European Central Bank signaled that it would buy bonds of the two countries, cut their borrowing costs rose by Spanish and Italian markets.

Late Sunday, the Central Bank said it would implement "active" his bond purchase to calm program investor concerns that Italy and Spain will be unable to pay their debts.

At 3:45 am (ET) Milan FTSE MIB was 3 percent growth to 2.4 percent during Spain.

Investors took refuge in assets traditionally viewed as safe havens in times of financial crisis, slide to a new high of $1,714 gold an ounce.

"There are some places you can... obviously hide and those, which you in can hide are very good." Is gold the beneficiary, because there is no Central Bank selling, ", said Greg Gibbs, strategist at RBS in Sydney."

Bank shares have been corrupted by fears area heavy losses could face as the sovereign debt crisis in Europe continues to brew. Industrial and commercial bank of China, the world's largest bank by market value, fell 4.2 percent. Port-operators - the lifeblood of the show and exports would be compromised if the global economy goes bust - were badly stung. Hong Kong-listed China shipping container lines co. fell to 9.7 percent.

Meanwhile a strengthening suggested yen, which makes Japanese products more expensive, if they are sent abroad, the country's powerhouse export sector. Hitachi Corp. fell by 4 percent. Sony fell by 3.8 per cent. 3.1% Lost Mazda Motor Corp..

Standard & poor's downgrade of the U.S. sovereign credit rating of AA + from first-class AAA, announced late Friday, was still yet another blow to confidence in the struggling US economy. It adds to growing fears that the world economy no. 1 can be directed in the recession.

These fears have exacerbated signs that Europe's government debt crisis threatens to consume larger economies such as Italy and Spain.

'Calm down'
David Cohen of the action of economy in Singapore, Friday said not surprisingly came the warnings, issued by the Agency weeks in advance downgrade - but that it can serve Government measures as a wake-up call for heads of State.

"People quickly enough can soothe, as long it is not a more global financial crisis," said Cohen.

Elsewhere in Asia, Australia's S & P/ASX 200 index fell 2.9 percent to 3,986.10. dived Singapore's benchmark 4.7 per cent and 3.8 percent pushed the Taiwan market.

"I think it is still a question of people is carefully given they do not really know how wild are these overseas markets react," Westpac Banking Corporation Chief Economist of Bill Evans said Australian Broadcasting Corporation television.

"I would expect that people will take the risk off the table at the moment some wait for greater clarity in the two big questions: how will the U.S. answer downgrading and will settle the Europeans down these concerns in Europe?" he said.

Search avert panic spread through financial markets, Declaration finance officials from the Group of seven developed countries a common late Sunday saying they were committed, all necessary measures, financial stability and support growth.

The G-7 statement came after the Group an emergency conference call the debt crisis in Europe and market prospects following the announcement that discuss held the first downgrade of the U.S. credit rating.

The burst of activity underscores how government debt in Europe and have - unsettled the financial markets United States and sharpened fears that debt problems global recovery from the financial crisis could derail 2007-2009.

Story: Parties ratchet up the blame on downgrade

Pending before the version later this week by China's consumer price index July was also investor nerves fray. Inflation rose to a three-year high of 6.4 percent in June and is politically dangerous for the ruling Communists, because it can fuel pump unrest.

The Dow fell 5.8 percent last week in the midst of dour U.S. business news. The worst day for the Dow plunged it 513 points on Thursday alone, since the global financial crisis broke out in 2008.

MSNBC.com staff, Reuters and the associated press contributed to this report.

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