Equity Carve-outs Popular in 2009 sparking copycat action in 2010!

Equity carve-outs (aka partial spinoffs) where a parent company sells off a minority stake in a subsidiary for an IPO or rights offering. JPM collected $2.2 bn in fees from underwriting in 2009. Reuters reports.

Economists Arbitrarily Warn Pound May Fall Below Parity with Euro, Deflation in Japan may lead to Monetary Easing

This has been sparked by what the Times calls "unconvincing plans" to deal with the government's £178m budget deficit. The pound is trading at 1.10 versus the euro. The closest it got to parity was 1.02 one year back. Expectation of a Tory election win and consequent tougher action to tackle the currency slide is preventing the pound falling further, some observers say. Douglas McWilliams, Chief Exec of CEBR, is betting on parity being broken. A heightened risk of a downgrade to Britain's sovereign debt rating has been mentioned too. More technical currency stories can be read about here.

Japan had 9 months of deflation in November, with weak demand hitting prices. This is putting pressure on BoJ for monetary easing. Japan's public debt is currently around 200% of GDP. Japan's GDP per capita has been decreasing since the bubble burst in 1990. Japan's IIP at year end 2008 was 225 trillion yen, a 9.9% decrease from the previous year, the first decrease in 3 years, mainly due to appreciation of the yen (and resultant decrease in value of foreign-currency denominated assets). Assets included derivative products (mainly currency options held by banks).

Banking on America: Brian Moynihan is Crowned the New Ken Lewis

Senior exec Brian M. has now been appointed BoA CEO having successfully dislodged John Thain. He originally came from FleetBoston which was acquired by BoA in 2004. He worked for FleetBoston for 11 years. Scrutiny over the ML deal proved too much for Ken Lewis who will retire on Dec 31.

Nobel Laureate Warns of US Contraction in 2nd half of 2010

Joseph Stiglitz from Gary, Indiana, is a Nobel-prize winning economist. He was an active member of the debate team at Amherst College (where the endowment per student is around $740,000), about 2 hours from downtown Boston. He won the Nobel Prize for his work on screening, where one agent attempts to rectify an information asymmetry. Stiglitz has also written about information economics.

Private Equity Attacks Invesment Banking: Citi Assailed by Guy Hands' "Solid Earth"

Terra Firma (Latin for "solid earth"), the PE group of Guy Hands which he spun out of Nomura International, is suing Citigroup over the EMI deal in 2007 in which it paid £2.5bn (which they referred to as a "fraudulently inflated price", or was it £4bn?) at the height of the buyout boom. Citi acted as adviser to EMI. Guy is a graduate in PPE from Mansfield College, Oxford (founded on the principle that "dissenters" had the right to study at Oxford).

Edinburgh More Wealthy Than Imperial, but University of Denver Beats them All

Endowment, transfer of money (from donations) to an institution usually stipulating principal must remain intact for a stipulated time period, to allow the donation to have more impact than if it were spent all at once. The only UK universities with significant endowments relative to the US are Oxford and Cambridge (£2bn), which would put them in about 15th place when ranked against US universities. Harvard has an endowment of $18bn, Yale $11bn, Princeton $8bn. Imperial College is not even in top 10 in UK. 3rd place (below Oxbridge) is Edinburgh with £160m.

1000=10, North Korea's Aggressive Redenomination strikes at Inflation

N Korea is redenominating won currency according to NY times. Two zeroes are being removed from the nominal value of bills to fight inflation; 1,000 won notes are being exchanged for 10-won notes.

EURUSD 1.4998
GBPUSD 1.6523

Markets Stuffed on Thanksgiving Day - Thanks to Dubai's Delayed Repayment

Market trauma was caused by the news of Dubai today. FTSE showed biggest one day fall since March (3.2%). Bank stocks got hit with investor fears over "emirate exposure".

Equities and riskier currencies suffered as Dubai World, state-owned holding company, announced delayed repayment of the company's $59bn liabilities. In addition, glitches on LSE meant trading did not start until 2pm.

Dubai is one of the 7 emirates in the UAE. 75% of population is expatriates. It has the world's first 7 star hotel, the Burj al Arab, 20 km south of Dubai. It is designed to resemble the sails of an Arabian dhow and features an underwater themed restaurant, the Al Mahara (mainly seafood, the name Al Mahara means oyster) which serves Green pea Gazpacho (a cold Spanish, raw vegetable soup).

JP Morgan devours JV Partner in Billion Pound Feeding Frenzy

Having fully digested Bear Stearns and having chewed through the subprime of WaMu, "JPMorgan will on Thursday unveil a £1bn deal to buy Cazenove, the UK broker with which it has had a joint venture for the past five years" says the FT.

Hedgies on the Move

BlueCrest Capital (the third largest hedge fund manager in Europe, size $15.5bn) founded in 2000 by Bill Reeves and Mike Platt of JPMorgan (not to be confused with Bill Reeves, one of the founders of Pixar), is relocating 50 out of 300 staff to Geneva. Brevan Howard, Europe's largest hedge fund, also expressed similar desires earlier in the year.

Hedge Funds by Size

1. Brevan Howard
2. ???
3. BlueCrest

Nokia's War on iPhone - Patent Lawsuit Looks Weak

Nokia on Thursday 22 October lobbed a lawsuit versus Apple pleading patent infringement. "They should spend their money on R&D rather than lawyers" accused one disgruntled observationist.

Morgan Stanley Back in the Black, Bye Bye John Mack

Morgan Stanley reported its first quarterly profit in the last three quarters, chiming in at $757m (having made a loss of $159m the previous quarter). Chief exec, John Mack, announced he is stepping down at the end of December. Shares were up 6.5%.

Royal Mail's Pension Deficit highlights Britain's Corporate Pension Crisis

Royal Mail is planning cuts due to reduced turnover of mail. The quarrel with unions is over the size of the cuts and how it will affect those who stay. Royal Mail also faces a pensions deficit of around £8bn. This deficit has caused problems in finding a private partner to take over Royal Mail. Royal Mail is not the only UK company with a pension deficit. ITV has one of £580m.

McKinsey and Bear Stearns Executives Alleged to have Aided Fraud

Investor Raj Rajaratnam together with former McKinsey and Bear Stearns executives, have been charged in a $20m insider trading case. It is claimed to be the first insider-trading case where court-authorised wire-taps were used.

The Market for Lemons

This thesis by George Arkelof (PhD MIT) was applied to used cars in the United States. It has also been applied to wages and immigration. Arkelof spent a year in the Indian Statistical Institute in New Delhi.

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.

Japan's Democratic party wins over Taro Aso's LDP - Historic

The political landscape of the world's second largest economy has been redrawn.

The Conservative LDP has been in power ever since the post-war recovery in Japan, a period of over 50 years. It formed a so-called "iron triangle" consisting of itself, the bureaucracy and Japanese business. Defeated LDP president and PM, Taro Aso, said he would step down as party leader. Among the criticisms levelled at the LDP was that it was "sluggish" to respond to the economic crisis.

Japan has a bicameral Parliament (i.e. two houses). e.g. US -> House of Representatives, House of Councillors (upper house), UK -> House of Commons, House of Lords. (one house to represent aristocracy, one house to represent commoners - concept was the aristocrats are wealthier and wiser than the commoners).

Together they are known as the National Diet of Japan.

Latest Land Registry Results show Rise in UK House Prices, Lloyds Rumours

The Land Registry in the UK (aka Her Majesty's Land Registry) has been a government department since 1862 that keeps a register of title to freehold and leasehold land in England and Wales. Scottish land titles are maintained by RoS ("Registers of Scotland"). LR said prices rose by 1.7% in July, the biggest monthly leap in 5 years, though prices are overall 11% lower than last year.

LloydsTSB is rumoured to be ruminating a sale of businesses following its bailout, including Scottish Widows, its insurance and money management division, and Clerical Medical.

BGI is now Blackrock Global Investors!! (BlackRock + ETFs)

BGI-Blackrock - following deal with BGI (Barclays asset management), Blackrock will oversee about $3 trillion in assets. The board of Barclays recommended shareholders accept Blackrock's $13.5 billion cash and share offer for BGI. The new entity will take the name "Blackrock Global Investors".

Win for Blackrock, Win for Barclays

* PLUS POINTS FOR BLACKROCK
This gives Blackrock exposure to the ETF business, allowing investors to invest in areas which may otherwise be difficult to acquire, like precious metals or foreign stocks.

* PLUS POINTS FOR BARCLAYS
Provides much-needed capital to boost the balance sheet. (Barclays previously relied on Middle Eastern governments to effectively "bail it out" of credit crunch).

Negatives?

Blackrock rejects the initial offer from CVC Capital Partners to acquire its ETF business.

A-shares versus H-shares and Australia's Biggest Ever Trade Deal

Asia's largest oil company, PetroChina (Energize, Harmonize. Realize.), did a deal worth AUD 50bn to buy LNG from Western Australia. Ossie PM Kevin Rudd said the deal would create up to 6,000 jobs.

PetroChina issued H-shares in April 2000. H-shares are shares of companies incorporated in mainland China but listed on HKSE or any other foreign exchange. A-shares are similar but trade on mainland Chinese exchanges e.g. Shanghai, Shenzhen. Generally, only mainland citizens can invest in A-shares.

The Economist's "Jack Welch MBA" - Bad Use of Off Balance Sheet Financing? Pros and Cons? What does off-balance-sheet financing really mean?

The Economist in Jun 09 came out with an article called "The Jack Welch MBA" which describe how a hypothetical MBA program would be run if it was run by Jack Welch (in response to his $12m investment in Chancellor University in Ohio).

Performance Principles/Targets:
1. If a business in a given industry is not first or second, should be sold or closed.
2. Fire the worst performing managers annually (bottom 10%).

More controversial principles, to manipulate the apparent performance/liquidity/financial state etc of the company:
3. Accounting - prolific use of off-balance sheet vehicles
4. Opaque finanical arm, GE Capital, used to top up profits in bad years

Taking a closer look at GE's financing, here...

First, a "Sesame Street" definition of off-balance sheet financing. You want to keep large capital expenditures off the balance sheet, e.g. since you want a low debt/equity ratio.

A lot of Enron's problems were due to off-balance-sheet financing. Enron is worthy of further study. The scandal destroyed accounting firm Arthur Andersen (the firm founded by Arthur Andersen and Clarence DeLany in 1913).

Blackberries and Blu-Rays - Technology Defies Recession

RIM - Blackberry Curve is top-selling smartphone in US.

Sigma Designs ("Powering the Digital Media Generation") is a successful chipmaker for Blu-ray players. One catchphrase they use is "SoC" solutions ("system-on-chip"). Why would you buy Blu-Ray instead of normal DVD - well, it has 5 times the storage capacity of DVD - which makes it suitable for storing HD video. Blu-ray has industry support, since it was developed by manufacturers like Apple, Dell, Hitachi, Samsung, Sharp, Sony, TDK. Where does the name Blu-Ray come from? It comes from the blue laser, as opposed to red laser used for DVD. The light from blue laser has a much shorter wavelength so the laser spot can be focused with greater precision.

Does Further QE make sense? What's the impact on cable?

Three major economic issues:
1. Ballooning fiscal deficit (projected to exceed 12% of GDP, the highest amongst all industrialised nations)
2. Quantitative easing (what you do when you can't lower interest rates any further, flooding banks with excess liquidity). QE was used in the US in the 1930s and by the Bank of Japan in 2001 to stimulate the country's stagnant economy).
3. Deepest recession since Second World War
The rise in QE has undermined sterlings rally.

Calyon is targetting $1.75 in cable by year-end 2009 and $1.90 by 2010 year-end.

RBS - Focusing on Home Markets, ANZ - expanding in Asia

RBS has sold off its Asia businesses to ANZ for a paltry $550m. This makes ANZ more able to compete with rivals HSBC and Standard Chartered in the fast-growing markets of Asia. ANZ will get closer to its goal of generating a fifth of its revenue from Asia by 2012.

End of Nortel - Ericsson Sweeps up Wireless Assets

2009 has seen the end of Nortel (formely Canada's Northern Electric, who manufactured Canada's first gramaphones in 1900), which filed for bankruptcy protection in January.

Ericsson is now paying $1.13bn for Nortel's assets. The auction of its CDMA business and LTE (Long Term Evolution) Access assets was concluded on July 25th 2009. Some dubiety still exists over its Metro Ethernet Networks business, described as one of Nortel's "crown jewels".

Where did Nortel go wrong? What mistakes were made in Nortel's strategy/execution?

CIT, the symbolic bridge between Wall St and Main St, verges on collapse as Washington wavers on issue of Moral Hazard

The score: CIT group styles itself as a "bridge between Wall Street and Main Street". Based in NY, CIT is a lender to small and mid-sized companies, which received $2.3bn in taxpayer funds in December (reported by CNN). Jul09, over six months later, it is trying to persuade policymakers/regulators to extend the aid package. CIT share price has been slashed 37% in the past month to $1.35. CDS has skyrocketed. Lawyers have apparently been hired to explore a bankruptcy filing.

Washington is in a quandary - what should it do? You are Washington.

on the one hand,
a) you need to hold the private sector accountable for its actions.

On the other hand,

b) you need to evaluate the impact of non-intervention on the health of the financial system.

The old issue of moral hazard and bailouts.

The cash crunch faced by CIT is described by CNN as follows: "Like many finance companies, CIT funded its operations by borrowing in the debt markets. Question: to what extent did debt market funding contribute to CIT's collapse?

But the collapse of Lehman all but closed those markets to finance companies -- prompting CIT and bigger players, ranging from Goldman Sachs (GS, Fortune 500) and American Express (AXP, Fortune 500), to hurriedly convert themselves to banks." The problem with debt is you have to keep paying it off. CIT has $1bn in debt to pay off next month.

Banks Risky Funding Sources

When Nevada's Silver State Bank failed in September around two thirds of its loan portfolio comprised real estate development and construction loans. The practice of "hot money" or brokered deposits has also been blamed for small bank failures in the US.

European Bank Reforms - Bad for British Business?

The House of Lords sub-committee on economic and finanical affairs has warned of increased INTERVENTION in bank regulation from Brussels and has branded the EC's reforms as "the greatest competitive threat that the UK faces". Their concerns imply that the reforms will increase the cost of doing business in the UK and that they were "emotive rather than rational" (quote from Stuart Fraser, chair of the policy and resources committee). Stuart urged UK finanical institutions to come up with their own suggestions.

The EC wants to intervene in domestic fiscal (taxation) policy.

Is Paulson the Greatest Trader Ever?

Hedge fund manager John Paulson who made $3.7bn betting against sub-prime (and UK banks like RBOS), has cut his short position in Barclays, the day before Abu Dhabi investment corporation (IPIC) pushed the share price down 5% after offloading 1.3bn shares (IPIC wants to maintain a strategic relationship with Barclays however). Paulson's position was cut on 2 June from 1.17 percent to below 0.25% (threshold for disclosure).

Paulson is thought to have lost £100m by holding his short position from November until June09 as Barclays shares have rocketed five-fold, since hitting 51p low in January. He has a property in the Hamptons.

Paulson's fame came from recognising there was a housing bubble in the United States and ACTING ON IT in 2006 while playing with spreadsheets. He made $1.25bn in a single morning from a five-point fall in the markets (late 2007). Initally, Paulson and his aide Paolo Pelligrini looked at buying puts on the S&P but they were just too darn expensive. So they started buying CDS, insurance on debt, which were very cheap. Paulson has since become the subject of a book "The Greatest Trade Ever" by Gregory Zuckerman of the WSJ.

In other news, Intel acquired embedded software provider WindRiver, a synergistic union ($11.50 per share in cash).

And the FSA banned CFD broker Blue Index who were based at St Dunstan's Hill near Old Billingsgate Market.

Stress Tests: Banks need over $74 BILLION!!!

10 of America's 19 largest banks failed stress tests and will need to raise a combined total of $74.6bn in new capital to cover "worst-case" losses. BoA will need $33.9bn (BoA has already absorbed $45bn in federal capital).

A hungry Jamie Dimon Bemoans "Too Many Banks in the United States")

hint(acquisitions, jpm).
acquired(jpm, bearstearns, 2008), acquired(jpm, assets(wamu), 2008).
largestbank(switzerland, creditsuisse, 2009), largestbank(switzerland, ubs, 2008).
ceo(ubs, oswaldgrubel).
loss(sfr(2bn), ubs, q1(2009)), loss(gbp(1.2bn), gbp, q1(2009)).
eurofighter(enter(raf, july(2007)).

purchase( oracle, sun ) && purchase( oracle, java )

before(oracle(software)), after(oracle(software) and oracle(hardware)).
dealvalue( oraclesun, usd(7.4bn) ).
dealtype( oraclesun, cash ).
dealtype( oraclesun, vertical ).

highmargin(oracle), lowmargin(sun) -> ?
ellison(synergies, hardware, software) e.g. iPhone.

communicate to a) shareholders, b) market, c) customers, d) employees, why the acquisition makes sense.

Infrastructure == road to growth?

http://news.bbc.co.uk/1/hi/business/7935778.stm

brightspark(fincrisis, X). ? X = posco

business(posco, X). ? X = koreanSteelMaker
founded( X, Y ). ? X = 1968, Y = taeJoonPark.
posco_bondissue = bondissue( Value, Term, Time ). ? Value = usd(700m), Term = years(5), Time = mar09.
concerns( posco_bondissue, X). ? X = shortTermNegativeOutlookSteelSector, heightendMilitaryTensionsPyongyang.

pyongyang == capital of north korea.

"First USD offering from an Asian corporate since Hong Kong & China Gas $1bn issue in July 2008" (source: financeasia).

Barclays Mulling its share of the Bailout, brightsparks(_fincrisis, X). ? X =att

Barclays have up to 31 March to join the Treasury's asset insurance scheme for "toxic loans". Barclays have submitted three portfolios of assets to the government for consideration. Barclays profit for 2008 was £6.08bn ($9bn) - a profit despite the fallout in financial markets.

AT&T is creating 3000 jobs as it plans to ramp up capital spending in '09 by investing in broadband and wireless networks. It added data traffic on its network was growing 50% YoY.

3i invests $161m in Krishnapatnam Ports Company Ltd

3i took a minority stake in KPCL in Feb2009 for $161m, promoted by Navayuga Group, who are also involved in medical transcription services. "The port ... is being developed by a highly experienced management team", said Anil Ahuja, Head of Asia at 3i and IIT Delhi graduate. The investment forms part of the $1.2bn India Infrustructure fund. 3i had previously invested in Mundra port in June 2007 with capital of $50m. Unloading times in India's ports lag behind other Asian ports.

crating(_GECapital, downgrade(_AAA, -4)) :- payout(_GECapital, usd(8bn)) [Fortune, GE10K]

GE has become the economy's bellwether (MARKET THERMOMETER, LEADING SHEEP) company. (p.s. what is the meaning of bellwether - seems this is a term used by a lot of financial analysts and economists. what is the meaning? wiktionary describes bellwether as the leading sheep of a flock, anything that indicates future trends or a stock/bond indicative of the overall temperament of the marketplace). We should pay careful attention to bellwether stocks.

ceo( _GE, X). ? X = "Jeffrey Immelt".
mba(jeffimmelt, hbs).

CD = crating(_GECapital, downgrade(_AAA, -4))

estEarnings( _GE, 2009, X). ? X = usd(12bn).
estEarnings( _GE, 2009, X), CD :- X = usd(4bn).
divfreq( _GE, X). ? X = quarterly.
exchange( _GE, X). ? X = nyse.

business( _GE, X). ? X = selling(Y), servicing(Z), financing(A). Y=advancedGasTurbines, Z=aircraftEngines, A=businesses, A=consumers.

diamond(CD):- reasons(X). ? X=cashflowstress, X=deterioratingAssetquality, X = not(diamond(borrow( _GE, money)))

motto( _GE, X ). ? X = "imagination at work".

FTSE loses billions of pounds (~helprequest(_AIG, _USGovt, 2009).)

down(_FTSE, percent(5.3), 3625). % lowest since outbreak of Iraq war May03
down(_HSBC, percent(10), pence(399)).
down(_Lloyds, percent(15), pence(49.4)).

helprequest(_AIG, _USGovt, 2008) -> bailout(_AIG, usd(150bn), 2008).
helprequest(_AIG, _USGovt, 2009) -> bailout(_AIG, usd(30bn), 2009). % emerg.aid

countries(_AIG, 130), customers(_AIG, 74m).
max( aircraft_owner(X), world). ? X = _AIG.

stock(_AIG, dollars(46), 2008), stock(_AIG, cents(42), 2009).

restructure( _CarolBartz, _Yahoo ). fraud( _AllenStanford, usd(8bn)).

Technology

ceo( _Yahoo, _CarolBartz).
formerceo( _Yahoo, _TerrySemel).
formerceo( _Yahoo, _JerryYang).

expandedrole( _Yahoo, _CTO, _AriBalogh).
expandedrole( _Yahoo, _USAdvertisingExec, _HilarySchneider).
ousted( _Yahoo, _CFO, _BlakeJorgensen).
newrole( _Yahoo, _CMO, _ElisaSteele).
newrole( _Yahoo, _ChiefOfStaff, _JoelJones).

The management team is detailed on YHOO's shareholder website.

Financial Fraud

fraud( _AllenStanford, usd(8bn) ).
seized( companies(_AllenStanford, X) ). ? antigua_registered(X).
owns( _AllenStanford, floridamansion(usd(10m) ).

What do we mean by Earnings?

If we say: akres8 :- results(_AKZO, Q4, 2008). earnings(akres8, X). ? X = eur(259m), what does that mean? In this context, it means EBIT (before "fair value" adjustments). In other cases it might mean net income (net of tax).

brightsparks ( X, _FinCrisis). ? X = _ThomsonReuters. X = _Spirent

origin(_Spirent, X). ? X=english. business(_Spirent, X). ? X =telecomsTesting. customers(_Spirent, X). ? X = _Cisco. X = _ATT. hq(_Spirent, X). ? X = crawley. ceo(_Spirent, X). ? X=williamBurns.

exchange(_Spirent, X). ? X=lse.
shareprice(_Spirent, 20080226, X). ? X=46p.
volume(_Spirent, X). ? X=2.3m. volume_3mavg(_Spirent, X). ? X=938K.
range_52wk(_Spirent, 20080226, X, Y). ? X=32.0, Y=84.0. peratio(_Spirent, 20080226, X). ? X=15.3x.

paintmanufacturingSuperPower(X), restructuring ( X , 2009 ). ? X = _AKZO

origin(_AKZO, X). ? X=_Dutch, hq(_AKZO, X). ? X=amsterdam.
business(_AKZO, X). ? X = paintmaker, ceo(_AKZO, X). ? X = hansWijers.

exchange(_AKZO, X). ? X=amsterdam.
shareprice( _AKZO, 20090225, eur(27.81) ).
52weekrange( _AKZO, 20090225, 22.39, 46.60 ).
volume(_AKZO, 2009025, 1.6m).
peratio(_AKZO, 20090225, 18.66x).

akres8 :- results(_AKZO, Q4, 2008)., akres7 :- results(_AKZO, Q4, 2007).
earnings(akres8, X). ? X = eur(259m), earnings(akres7, X). ? X = eur(595m)
writedowns(akres, X, Y). ? X = eur(1.2bn), Y=acquisition(_AKZO, _ICI).

external_reaction(_AKZO, _FinCrisis, X). ? X = reassureinvestors.
internal_reaction(_AKZO, _FinCrisis, Y). ? Y = jobcuts, Y = plantclosures.
problems(_AKZO, _FinCrisis, Y). ? Y = refinancingNeeds, Y=sharebuybackSuspended.
brands(_ICI, X). ? X = Dulux, Alabastine, Polyfilla.

Today's motto: motto(_Lexus, [The Pursuit of Perfection]).

appoint( honda, ceo, X).

? engineer(X), age(X, 55), operationshead(honda, X), X=takanobu_ito.

carpurchases(down, reason(X)). ? X=frozencreditmarkets.

launch( stephenkeating:- formerdirector(3i, X), privetcapital).
focus(privetcapital, X). ? X=lowermidmarketdeals, X=ukdistressedprivateequitydeals.

slashdividend(jpm, percent(X)). ? X=87.
slashdividend(jpm, centspershare(X), centspershare(Y)). ? X=38,Y=5.
ceo(jmp, jamiedimon).
mba(jamiedimon, hbs).

bank.balanceSheets(A, L). ? A= badassets

Dow closed at a 6yr low as fears spread about the banking sector and the prospect of a prolonged recession. While this happened,

investors.flock(hardAssets) {
Tbond.rally(); // reducing yields
Gold.rally(); // record levels }
bank.balanceSheets(A, L). ? A= badassets
nationalisation_fears(Bank) ? Bank = _boa. Bank = _citi.

New Banking Act comes into Force

The new banking act gives greater powers of intervention to the BoE. The Bank will be allowed to give hidden help to stricken banks to maintain financial stability. Critics attack the secrecy aspect of the Act saying it could harm consumers.

3i Sells Stake in Morse

3i, the oldest private equity fund in the UK, has sold its stake in IT consultancy Morse. Morse reported a half-year operating loss (£17.7m pre-tax) and scrapped its interim dividend. Morse has appointed Mike Phillips as its CEO (and started the search for a finance director). Mike was formerly a Group Finance Director at Microgen PLC (based in Fleet, Hampshire).

nationalisationfears( lloyds ), brightsparks(X) ? X=kfc, X=gameaccount.

Downside

takeover(lloyds, hbos, X) ? X = jan09.
megabank(uk, lloydshbos).

expectedloss(lloyds, gbp(8.5bn)),reasons(X). ? X=default(hbosloanbook, gbp(11bn)), X=lloyds_stricter_accountingrules.


Upside
brightsparks(X) ? X=kfc, X=gameaccount.
newjobs(kfc, uk, X) ? X = 9000. stores(kfc, uk, X). ? X=760.
spend(gbp(150m), U, V).? U = threeyears, V=fiveyears.
partner(gameaccount, X). ? X = williamhill, X = galacoral.
stakedvia(gameaccount, gbp(100m), X). X=lastquarter.

Protest over Fortis asset Firesale

The largest shareholder (5%) in Belgo-Dutch Fortis is China's Ping An insurance company. Ping An said it would vote against the sale of the bank's Belgian assets to France's BNP Paribas.

The main creditor of Baugur, Landsbanki, has appointed PWC as administrator of the company to ensure "stability and continuity for the UK companies in which it has shareholdings".

Treasury Orders Probe into Banks and Outrageous use of Bailout Money

The Treasury has ordered an inquiry into how banks are managed, Chancellor Alistair Darling has stated. Gordon Brown insisted Thursday that there should be "no reward for failure".

RBS, bailed out by £20bn by the government last year, will pay up to £1bn in bonuses to its 177,000 staff.

In Asia, Nomura has opened and equity sales, trading and investment banking office in India, which is becoming increasingly important for Japanese companies. For example, Nomura advised Daiichi Sankyo acquired generic drugs maker Ranbaxy in 2008.

Ranbaxy started its research program in the late 1970s.

Whopping $885bn Increase in Deficit for new Senate Plan

Figures released by CBO (Congressional Budget Office), which aims to provide Congress with analysis to aid economic and budgetary decisions.

Stimulus Plan from the Senate: A Whopping $885bn

Analysis by the CBO (Congressional Budget Office) reveals Senate will increase deficit by $885bn over 10 years. CBO estimate 78% of the monies will be spent by 2010. That's a very high rate of spending!!

restructuring( X,2009 ) ? X = _GSK.

X=Pharma giant GSK

1. headcount(_GSK, _Global, Current, Future). ? Current=100,000, Future=?.
2. headcount(_GSK, _UK, Current, Future).? Current=18,000 Future =?
3. per_sales(_GSK, _UK, X). ? X=0.1
4. brands(_GSK, X). ? X=_Horlicks, X=_Lucozade, X=_Panadol
5. competitors(_GSK, X). ? X = GenericDrugMakers.
6. yrs_exist(_GSK, X). ? X ~ 300.
7. former_names(_GSK, X). ? X = _PloughCourtPharmacy, X=_Beecham, X=_SKB.
8. business(_Beecham, Y). ? Y = laxatives
9. merge( SKB, GlaxoWellcome. 2000).

Shell posts highest ever annual profits for a European company, Ford posts worst loss in its History, Hedge Funds Unleash Recessionary Innovation

Oil giant Shell posted a Q4 loss (the first quarterly loss for 10 years) with oil prices falling to a record low.

NEVERTHELESS, annual profits reached a RECORD level up 14% from $27.6 to $31.4bn. Shell warned conditions remained "challenging". CEO Jeroen Van der Veer,born in Utrecht, boosted dividend by 11%. He said the company would continue "competitive and progressive dividend payouts". Oil is trading below $50 after a record high in mid July 2008 of $147.

China Premier's Wen Jiabao's comments at Davos, that the country had been hit hard by the world financial crisis, raised concerns on falling demand for oil. he also commented that financial regulators had failed to keep pace with "financial innovation" thus facilitating the credit crisis.

Offsetting Shell profits, Ford posted a full year loss for 2008 of $14.6bn, the worst ever performance in its 105 year history (FMC was incorporated in 1903). US rivals GM and and Chrysler have received billions in emergency bailout funding from the US government.

Ford pioneered the moving assembly line, allowing workers to stay in one place and do the same task repeatedly.

Meanwhile, hedge funds fight back with "recessionary innovation" to entice investors "sitting on the sides" in this recession. Osmium Capital Management, a hedge fund based in Bermuda, with $178m worth of assets under management, is launching a new class of shares denominated in troy ounces as opposed to euros, dollars or sterling. The fund hedges its exposure to gold by selling gold for cash and buying gold forward on a monthly basis.

Rights Issues Rampant in City of London

Industrial materials firm Cookson has launched a rights issue. They are asking for £240m at 37% discount. The underwriters are JP Morgan / Merrill Lynch. The company is also cutting 1,250 jobs. Last December Cookson sold off its ceramic filters business to companies owned by Sud-Chemie AG, a chemicals company specialising in adsorbents. The history of ceramic filters, including piezoelectric ceramics, is detailed in this article by Satoru Fujishima. Cookson is a member of various trade organizations, such as the CEA, which has over 2000 member companies.

A rights issue is when a company issues new shares (which it usually offers at a deep discount to the prevailing market price; 20% is not uncommon) to existing shareholders. For this reason, the share price of a company usually falls after a rights issue. Essentially, a rights issue gives shareholders first refusal on the right to buy additional shares as compensation for the price fall after a rights issue (pre-emption rights, in other words).

Highly leveraged Xstrata also announced a heavily discounted (66%) rights issue in a bid to slash its debt from $16.3bn to $12.6bn. The issue ran into controversy that major shareholder Glencore was being offered favourable terms (underwriters: Glencore, JPM and DB). Dissenters included the ABI whose members, 400-strong, constitute 20% of investments in the London stock market.

Friends Down, Pfizer eats Wyeth, Steel down 50% since Sep08

The Sales for Friends Provident (the UK pensions and insurance tout) were down 27%, but only down 4% in the fourth quarter. Current CEO Trevor Matthews (formerly with Standard Life) joined as CEO in July 2008. It is interesting to understand the origins of Friends Provident. Friends was founded in Bradford in 1832 and has Quaker origins (Samuel Tuke and Joseph Rowntree). Their aim was "to provide the security of life assurance" to Quakers and their families. 45 friends put up an initial £10,700 Guarantee Bond. The company demutualised in 2001, with a big IPO advertising campaign entitled "You're better off with Friends". Its debt issuer credit rating is BBB (good). 

Pfizer, the world's biggest pharmaceutical company, is expected to conduct a blockbuster takeover of US rival Wyeth for between $65bn and $70bn (editor: deal closed at $68bn). 

Pfizer, being advised by Merrill Lynch and Goldman Sachs, is under pressure from investors to replace >$12bn revenues the company may lose in three years (that's an average $4bn a year) when Lipitor, the cholesterol pill and best-selling medicine in history, faces competition from generic drug makers (the patent expires in November 2011). 

Wyeth is being advised by MS and Evercore Partners (based in East 52nd Street, New York). Pfizer's R&D investment is impressive; at Sandwich, Kent, over 2000 drug-searching scientists are employed. The transaction consisted of cash, debt and stock. 

Corus, the largest steelmaker in the UK and a subsidiary of Tata Steel, is expected to announce the loss of 3,500 jobs as demand falls from carmakers and the construction industry. Steel prices have dropped 50% since September. Steel derivatives on the LME offer risk management for the steel industry. Hot places to trade steel derivatives include the LME, CME, Shanghai Futures Exchage, India and Dubai. 

India is the world's fifth largest steel maker, China is the largest.

BoA drops 13% Thursday, Thain Leaves Merrills, Tech Ups and Downs, KBC Bailout

Ex-Merrill chief John Thain is ejected from Bank of America.

mba(thain,hbs).

BoA's general counsel Brian Moynihan replaces Thain. ML announced a loss of $15.3 billion in the fourth quarter, or $9.62 a share.

Microsoft, the maniacal operating system giant, announced it was cutting 5,000 employees indicating few companies are immune to recession. Fiscal discipline is necessary for all technology companies in this climate.

Commented one investment firm manager, "it's tough to do well in this environment, and if a company succeeds, it's a huge compliment to management" adding "Microsoft has turned into the big old sluggish company that IBM used to be".

KBC has been bailed out to the tune of €2 billion from the Flemish government (Flemish is Dutch as spoken in Belgium) fueling a rebound in its shares (adding to the existing bailout paid in October). KBC announced it will concentrate its activities on home markets, reduce costs and market risk. It would scale down its derivatives business.

BoA drops 29%, FBR claims bank needs more than $80 billion

BoA (BAC:NYSE) closed at $5.10.

RBS shares fall 67% to 11.6p (Low of the Day 10p), KBC drops 20%, $19m Compensation for Bartz

RBS, 58% owned by the government, slumped to a 23 year low today. FTSE closed at 4108.5 (38.6 points down).

KBC, whose stock trades on Euronext Brussels, slumped 20%, going from about 16 euro to 12 euro and finishing around 13 euro. The stock has been tumbling since a Moody's report Thursday said it had revised assumptions used to evaluate KBC's CDOs. KBC were forced to issue a statement saying the share price had come under pressure as a result of rumours circulating in the market.

In tech, Yahoo's new CEO, Carol Bartz, will reportedly get $19m in compensation, in addition to bonus and stock options (base == $1m). She will not be able to exercise her options until after 4 years. Carol's board memberships are detailed here. She made her career at Autodesk, her profile is here. In 2007 rumours of a Microsoft bid for Yahoo send YHOO stock up 18% in one day. Will Microsoft bid again for Yahoo in 2009?

RBS set to reveal "Biggest Loss in UK Corporate History"

"Royal Bank of Scotland is on Monday expected to announce it suffered a £20bn loss last year as the state-controlled lender unveiled further damage as a result of the credit crunch" reports the FT, exceeding Vodafone's record trading deficit of £15bn in 2006. £7-8bn comes from the writedown of complex debt-related securities and more than £19bn loss has been generated in the second half of 2008 alone.

Barclays Bank Shares Tumble 25% in Friday Trading, BoA drops 13.7% on Q4 Results

Barclays shares fell 25%, hours after the ban on short-selling was lifted. Speculation surrounds further credit writedowns at Barclays Capital (managed by this team). Are we heading for nationalisation of Barclays?

BoA reported 2008 full-year profit of $4.01 billion compared with net income of $14.98 billion for 2007. The full-year profit was greatly impacted by a Q4 loss of $1.79 billion. These results include Countrywide Financial, acquired 1 Jan 2009, but not Merrill Lynch. Bank of America this month raised $2.8 billion by selling under 15% of its shares in China’s second-largest bank, China Construction Bank.

According to their press release, Bank of America ended 2008 with a Tier 1 capital ratio of 9.15 percent. Additional capital from the Treasury will boost the company's Tier 1 capital ratio to approximately 10.70 percent, on a pro-forma basis. T1C is a Basel-measure, measuring the ratio of the bank's core equity capital to risk-weighted assets. The Basel accord specifies capital adequacy requirements for banks, "le contrôle bancaire".

Morgan Stanley Smith Barney is Born

Citi Sale

Citigroup has sold a majority stake in Smith Barney for $2.7 billion in cash in return for a 51% share in the Joint Venture (creating the world's biggest wealth manager with $1.7 trillion in client assets). Citi is expected to reveal up to $10bn in losses on Jan 22 when it releases figures for Q4 2008, including a$5bn credit-value adjustment on derivative positions, excluding monolines.

Deal Rationale

The JV is expected to achieve cost savings of about $11bn, partly by rationalizing and consolidating key functions e.g. technology, operations, support, product development and marketing, which consitute approximately 15% of the combined firm's expense base (excluding FinAdvisor commission compensation).

US broker Ameritrade expands into Options Market

America's 3rd largest online stockbroker TD Ameritrade agreed to acquire Thinkorswim Group for $606m (€444m) in cash and stock, in a move to push further into the fast-growing options market and build up its investor-education programs, reports efinancialnews. Other online options brokers include optionsexpress.

The FT reports the deal is expected to close in six months, subject to shareholder and regulatory approval. Ameritrade is being advised by Merrill Lynch, while thinkorswim is being advised by Park Avenue-based Paragon Capital Partners.

In other banking news, BoA has completed its acquisition of Merrill Lynch, creating the world's largest wealth management business. BoA expects to make $7bn in pre-tax expense savings, fully realised by 2012. Sources of cost reduction include elimination of positions, reduction of overlapping technology, vendor and marketing expenses.

Exxon Flush With Cash (Forty Billion Dollars)

Exxon Mobil has nearly $40bn in cash reserves, thanks to conservative investment and high oil prices in 2008. Add to this $225 billion in repurchased stock, and Exxon has enough resources to buy oil major Shell for a 60% premium. Shell India is currently importing LNG at a price of $9.06 per mmBtu (1 mmBtu == 1 GJ or 1 thousand million Joules of energy) from Australia's North West Shelf. The gas is destined for Hazira terminal, Gujarat (India West Coast), a joint venture between Shell and Total. Hazira was developed at a cost of Rs 3,000 crore (which is 30 billion rupees). Currently (Jan09) 1USD is about Rs 50, so the cost of the terminal is about $600m (at current x-rates). Shell owns 74% of the Hazira companies.

Exxon CEO Rex Tillerson from Wichita Falls, Texas has also spoken out about opening up US supplies of oil and natural gas which would boost jobs.

Need to brush up on SI Units? Check out this data sheet from Berlin.

Return of the Mac: A Recipe for Buying and Selling America's Failed Banks

Two of the America's top banking regulators - the OCC (Office of the Comptroller of the Currency) and FDIC (Federal Deposit Insurance Corporation) have widened the pool of buyers for failed banks by opening up bidding to both investor groups and individuals.

The bidding process was previously opened only to chartered banks and savings institutions but now virtually anyone can put up money to buy a bank. Open Sesame!

The recipe appears to have worked, with IndyMac being sold to a private group of investors (which included Michael Dell) for $13.9bn. (The Federal government took control of IndyMac in July 2008, a historical move documented in this CNN report entitle "The Fall of IndyMac"). The article also covers the rise of IndyMac and its asset class of "Alt A" loans (which has more relaxed documentation requirements than "A-paper" - considered to be "prime" lending).

GazProm saga continues...IMF extends loans...Rouble Devaluation Results

Gazprom accuses Ukraine of stealing gas.

In the supply dispute of 2006 there were similar claims.

25% of EU gas consumption (it is estimated) comes from Russia. 80% of the 25% comes from Ukraine, the rest through Belarus (landlocked country south of Lithuania) and Poland.

Belarus also landed a $2.5bn loan from the IMF following a sharp decline in its international reserves, sparked by falling demand for exports and lack of external financing (a direct result of the global financial turmoil). The Central Bank of Belarus allowed the Belarusian rouble to tumble thus increasing competitiveness of exports and stemming the decline in reserves, something the IMF insisted on as a precondition for the loan. Earlier the Russian government had agreed to grant Belarus a $2bn stabilization loan.