News Analysis for the Investor on Jan. 19, 2011

Investors Continue to Flee Stock Funds

Outflows from stock funds have exceeded $400 billion over the past four years, reducing assets in some funds by half, USA Today reports, citing the latest data from Lipper, a company tracking the mutual fund industry. For most of the period, investors channeled money into bond funds, but last year they put almost eight times more money into bank accounts than they did into bond funds. The trend began in 2008 when the S&P 500 stock index lost nearly 40 percent of its value, but the outflows continued through the rallies of 2009 and 2010.

Bank deposits have attracted investors concerned with economic uncertainty and market volatility, but investors are also draining stock funds to make up for cash shortfalls or to shift assets into retirement accounts. Some investors are exiting stock funds in favor of hybrid funds, such as target date funds, and others are showing a preference for exchange traded funds.

Internet Sites Protest Piracy Bill

Wikipedia and scores of other Internet sites waged protests on Wednesday against legislation aimed at curbing Internet piracy, The New York Times reports. Wikipedia staged a blackout, while Google posted information about the piracy bills and encouraged users to sign its online petition to Congress opposing the legislation. Many smaller sites followed suit and one, HelloFax, created a tool to enable users to FAX their representatives about the bills.

Protestors argue the Senate and House bills are too broad and would threaten free speech and innovation without effectively eliminating piracy. Supporters of the bill include major entertainment companies seeking to prevent the Internet theft of copyrighted music, literature and videos.

Goldman Profits Plummet, Pay and Bonuses Cut

Beleaguered banking giant Goldman Sachs has cut its pay and bonus payments during 2011 to $1.1 billion, down 21 percent from 2010, the BBC reports. While the bank's quarterly profits topped analysts' forecasts, they were more than halved from the previous year.  Net income for the fourth quarter fell 58 percent to $1.01 billion from the same period a year earlier. Goldman said that it made 47 percent less in profits in 2011 than in 2010. Goldman said it had cut staff by 7 percent. Weak U.S. economic growth and the unresolved euro zone debt crisis have had a significant impact on the world's banks. Last week, JP Morgan also reported a drop in fourth-quarter profits, while this week Citigroup reported a profit of $11.3 billion for 2011, an increase of 6 percent over the previous year.

Man Charged in New York Federal Reserve Software Theft

A Chinese computer programmer allegedly stole software codes worth nearly $10 million from the Federal Reserve Bank of New York, prosecutors charge. Bo Zhang, 32, of Queens, New York, a contract programmer at the bank has been accused of illegally copying software to an external hard drive, Reuters reports. Zhang was arrested Wednesday morning and released on $200,000 bail after a brief court appearance. A New York Fed spokesman said in a statement that the bank immediately investigated the suspected breach when it was uncovered and promptly referred the matter to authorities. Zhang was charged with one count of stealing U.S. government property, which carries a maximum 10-year prison term. He is due back in court on Feb. 17.

Seven Charged in Inside Trader Probe

The government has accused a circle of friends with forming a trading ring that racked up $78 million in illicit profits, the Washington Post reports. Most of the profits were based on advance notice about computer-maker Dell's quarterly financial results that came from an unnamed employee in Dell's investor relations department, the government alleges. The Securities and Exchange Commission filed civil charges against Diamondback Capital Management, based in Stamford, Conn., and Level Global Investors, based in hedge-fund capital Greenwich, Conn., and against seven individuals. Level Global netted $72.6 million of illegal gains trading in securities of Dell and another company, Nvidia, the SEC said. About $53 million of that was tied to information about one quarterly earnings announcement in August 2008, the SEC said.