3Q 2011 Profits are "Turning Point" for BP

3Q profits came in at $5.14bn - near tripling of the replacement cost profit in same period 1 yr ago."Replacement cost profit" is an accounting practice for reporting profits in the oil industry. BP is still paying for the cleanup in the Gulf of Mexico and compensating victims.

MS Debt More Risky than Bank of America, says CDS

495 basis points is the highest level it's been in 2.5 years, implying a cost of $495,000 a year to insure $10m of Morgan Stanley bonds for 5 years (more expensive than Bank of America). At 500bps premium, bonds are regarded to have junk status, say Markit. Shares in MS fell 10% to $13.51. The main driver for the concerns is MS' exposure to European bank debt, in particular France.

Nat Gas trading around $3.87

Price is per MMBTU (per million BRITISH thermal units - the MM being a legacy of Roman times when M denoted 1,000. Hence MM is one million or one thousand times one thousand). Look how Natgas futures on NYMEX are doing here.  ONE BTU is roughly 1,055 Joules, so 1 MMBTU must be a BILLION JOULES.

Recap question: When is a million equal to one billion?  Answer: when converting MMBTU into Joules. 1 MMBTU (million BTUs) is one billion Joules.

Standard contract size for Henry Hub natural gas is 10,000 MMBtu.

We can think of energy also in terms of light. A 100 Watt light bulb consumes 100 Joules/second.  in one minute, consume 6,000 Joules, roughly 6 BRITISH THERMAL UNITS.

HPQ the world's largest IT company by revs, buys Autonomy

Fiscal 2010 revenues of HPQ was $126 billion, making it the world's largest IT company (number 11 in Fortune 500). How long it will remain so depends on management's progress in plans to break up the company.

HP is paying £25.50 per share for Autonomy for all outstanding shares (valuing the company at around £7bn) - a transaction recommended by its Board of Directors. Autonomy has been the subject of bid speculation before (September 2010, when the shares rose 4% when the FTSE was flat, and Microsoft and Oracle were flagged as possible bidders).

Funds seem to react to the move, switching more allocations to tech stocks, interpreting the takeover as a sign of increased M&A activity in the sector. ARM, Microfocus and Blinkx (video search engine) also saw their share prices rise.

References:
The UK takeover code can be found here.

SNB on Intervention Spree as EURCHF heads to 1.0

The SNB has needed to intervene in currency markets to halt appreciation of the Swiss franc (CHF in ISO-speak, or "Schweizerfranken" / "Franken"). Amongst other things, it makes Swiss exports less competitive ("menacing for the export sector" might be one way to express it), detracts tourism (or at least deters tourists from spending) and reduces the value of the SNB's reserves in Swiss francs.

The cause for the recent appreciation has been capital flight into "safe haven" CHF, owing to the US downgrade. The Greek crisis also spurred the acceleration of the CHF.

SNB in 1978 purchased 10.6bn CHF (6.6% of GDP) of foreign currency to weaken the franc, following which the CHF relaxed - a resounding success. At the time, the bank had an explicit exchange rate target against the Deutschmark.

Double Debt Crisis Emergency Talks: US is AA+

Sunday is a day of conference calls for finance officials as the twin debt crises of Europe and the US gets discussed, urged on by S&P's downgrade of US debt rating from AAA to AA+. The US Treasury has retorted with a headline called "the $2trillion mistake" regarding S&P's analysis.

Last week the US avoided sovereign default by raising the debt ceiling. But what is the debt ceiling anyway?

The US Constitution gives Congress the sole power to borrow money on the credit of the United States. Right from founding of Congress to 1917, each debt issuance had to be authorised separately. To provide more flexibility in financing from WWI onwards, the concept of "debt ceiling" was introduced, basically limiting the total value of bonds that could be issued.

The largest holders of US debt are China, Japan, UK and Brazil.

Obama Signs New Debt Bill into Law

Obama has increased the US debt ceiling!!! Senate voted in favour, 74 votes to 26 (74% yes)!