JPM Beats Guanabara to the Dining Table in Race for EcoSecurities

A unit of JPM Chase has gobbled up EcoSecurities for £122.9 million after a takeover battle with a bidding rival by the name of Guanabara. "Eco" was involved in one of the world's first CDM (Clean Development Mechanism) projects.

Santander Mulls Brazil IPO, FOMC Upbeat

Santander has released details of its Brazilian unit's IPO which, if successful, will be Brazil's biggest ever, raising up to $7.3bn. Brazil Santander will be one of the world's top 30 banks.

In the US, FOMC is upbeat, holding interest rates low and extending its plan to buy back $1.25 trillion of MBS into Q1 2010. They announced the federal funds rate will be kept low (between 0 and 0.25%) for an extended period of time. FOMC meets eight times a year.

Microsoft Merges Multiple Times but Deals Lack Gusto of Google

In 2000, Microsoft acquired Visio (now integrated into MS Office), and 2001 Great Plains Software (an accounting solutions provider, whose product is now named Microsoft Dynamics GP).

More recently (October 2008) MS acq'ed Greenfield Online Inc for $17.50 a share. Greenfield is a provider of online survey solutions. In Aug 2007, it made a more heavyweight acquisition, Internet advertising platform purveyor AQuantive for $66.50 a share. AQuantive has now been rebranded Microsoft Advertising.

G20 Protests in London

The G20 summit (consisting in fact of 22 nations) was held at the ExCel centre in London's Docklands (which has parking for 4000 cars). The protests cost £7.5m to police, with an estimated 5000 protestors gathering outside the Bank of England and police erecting a "ring of steel" around the ExCel centre to prevent protestors entering the complex.

Sarkozy and Merkel (representing France and Germany) objected to the large fiscal stimuli propounded at the G20, stressing "red lines" needed to be drawn on remuneration (i.e. bankers' bonuses), banking transparency, hedge fund regulation and tax havens.

Russian president Dmitry Medvedev, who succeeded Vladimir Putin, and Argentinian President Cristina Fernandez de Kirchner, asked for more voting power for emerging economies. China floated the idea of a new global reserve currency based on IMF special drawing rights. Brazil's President Lula da Silva stated rich nations should accept responsibility for bringing about the crisis.

The summit lasted 7 hours, versus the 22-day meeting in 1944 at Bretton Woods, out of which the IMF and the current global financial system was born. It begins with a working breakfast for leaders, finance ministers and central bankers as well as a working lunch. Japan's PM, Taro Aso at the G20, was later replaced in September 2009, by Yukio Hatoyama.

UK's Debt Crisis: Almost 60% of GDP

Unemployment (and probably people entering education) has dented tax revenues. The August figures for the UK's public sector net borrowing totalled £16.1bn, contrasts with £9.9bn a year back. Overall debt is 57.5% of GDP, a sum of £804.8bn. £140bn is due to banking sector bailouts. This news has sent the pound to a four-month low versus the euro (1 euro is equivalent to 90p). The weakest the pound has been versus the euro was 97p (reached on December 30, 2008) i.e. parity.

Around Sept,Oct2008 (Lehman crisis) the euro was trading around 80p to the pound, fairly stable. Then from November, it went to 85 on its way to 95.

Great Edifices of Corporate Hubris

Article on the Lehman Brothers skyscraper with pictures.

Options Backdating and Forward dating Techniques

Joe Grundfest, professor of Law at Stanford Law School, divides the option backdating problem into three categories:

• Backdating - setting an earlier date on the option to guarantee a lower strike price, hence bigger payoff when exercised. Amnon Landan, CEO and founder of Mercury Interactive, was accused of doing this.
  
• Forward-dating, springloading, bullet-dodging - these unseemly manipulations may even be legal assuming the company followed disclosure rules. Forward-dating involves pricing an option at a future low point in the stock. "Springloading" means awarding options prior to good news, "bullet-dodging" means holding off issuing options until bad news has passed to get a more advantageous strike price.
  

Options may be backdated as well due to administrative mistake, but, hey, that's not interesting. This month, ex-COO of Monster, James Treacy, was sentenced to 2yrs for illegal options backdating.

Merger of T-Mobile and Orange - European Telecom Consolidation

Merger between Orange-owner France Telecom and Deutsche Telekom's T-Mobile UK will see a business with sales of 9.4bn euros (£8.2bn; $13.5bn), Holding about 37% of the mobile market. It will be the UK's largest provider, overtaking O2 (owned by Telefonica).

Name five telcos in Europe.

France Telecom - did you know France Telecom actually operates ships to conduct laying and repair of undersea cables?
Deutsche Telekom
British Telecom
Telecom Italia (they use abbreviation TLC in their reports to indicate the Telecommunications sector). First half 2009 revenues are 13.9billion EUR (3.8% less than last year)
Telefonica - revs of 6.5 billion EUR first half of 2009. they like to talk about their OIBDA (operating income before depreciation and amortization)

Abu Dhabi Extends its Arms Across the Semiconductor Industry with $5.6bn offer for Chartered

Abu-Dhabi-based Atic will pay $2.5 billion for the shares and assume $3.1 billion in debt and convertible redeemable preference shares. Temasek have accepted the offer. Atic is on an acquisition spree to acquire and consolidate chip companies. Analysts say chipmakers have been struggling with excess capacity and need economies of scale to survive. TODAY newspaper in Singapore reports that the deal will help Chartered compete with Taiwanese rivals e.g.TSMC, and United Microelectronics Group (UMC). Temasek own 62% of Chartered shares.
Follow Singapore hedge fund industry here.

India Extends Export Ban on Edible Oils - Minimal Impact

India has extended its ban on edible oil exports to September 2010 to boost domestic supply. The ban does not extend to oils transported in branded consumer packs up to 5kg. Prior to the ban India was exporting mainly groundnut and coconut oils.
Industry estimates suggest vegetable oil imports in India increased 48% in February 2008, reports the Economic Times.

Washington versus Wall Street - Should Ken have invoked the MAC (change clause) and dumped Merrill?

The Atlantic has run an article on the last days of Merrill Lynch, and the coercive influence of the Fed and the Treasury. It asks the question, "Did the deal save us all from economic apocalypse?". Let's review deal terms. BoA offered $29 a share - a 70% premium over the previous Friday close, and nearly 2x book value. Andrew Cuomo, NY Attorney General (chief legal office in NY state, which borders with Quebec and Ontario in Canada, and dominated by the Great Appalachian Valley in the East), brought many of the facts to light regarding the Fed and Treasury trying to keep the firms together, once Merrill's losses became evident. They were collateralising loans with bad assets. By November, it emerged Merrill had $9bn in losses. Should Ken Lewis at this stage have invoked the MAC (material adverse change clause) to allow his banking Wal-Mart to walk away from the deal before it closed? It was now Washington versus Wall Street.

On December 5 2008, shareholders approved the deal. Prior to this, no information was revealed on the exact extent of Merrill Lynch's problems. According to Lewis, Paulson threatened to remove the board and management of Bank of America should Lewis invoke the MAC, as it would sink Merrill Lynch and create a "systemic risk" to the US economy. The flip side - shareholder litigation for not invoking the MAC.

Monetary Policy in Different Countries (India, UK, China)

To understand monetary policy in differing countries we need to have some motivating questions.

Why are interest rates on credit cards so high in India?

Money supply is controlled in India via 3 rates: bank rate, repo rate and reverse repo rate. Bank rate (currently, Sep09, is around 6%). This is the rate RBI will lend to other banks. In Oct 1991, it was 12%, 1981 it was 10%.

Why in Britain is inflation exceeding interest rates for the first time since 1981?

Edmund Conway, economics editor on the Telegraph, reported that in August 2008, Uk inflation exceeded interest rates for the first time since 1981 (27 years). This meant Britain had negative real interest rates (suggesting the Monetary Policy Committee should raise the cost of borrowing).

Cookie Jar accounting

In Jun02, MSFT was accused by the SEC of using "cookie jar" accounting, a tactic whereby revenues are shifted through reserve accounts. The SEC said between 1995 and 1998, MSFT used seven such accounts, each account containing between $200m-$900m. MSFT shares were down 1.2%.
CJA is also known as "voodoo" accounting. Utah-based iMergent lost coverage from major brokerage houses through its use of "CJ" accounting, as seekingalpha neatly describes.

Ali Baba drops Profit - Sacrificing Margin for Market Share

Alibaba, the leading online B2B marketplace in China, went public in HK in November 2007 (trading under 1688.HK), gaining 200% on its first day.

Its initial strategy was to charge high membership fees to choice importers and exporters in China, turning to a volume strategy, of subscribers paying 40% of the annual fee.

Jack Ma is founder and chairman.