CTO-ville: From Adobe to Apple

Illinois Graphics Guy Hits Big at Apple (Cloud Computing Could be Brewing)

• Kevin Lynch, Adobe's Chief Technology Officer for five years, is moving to become vice president of Technology at Apple.  Well done Kevin, and hope you can leverage your Adobe technology experience to improve products at Apple!

Kevin studied Interactive Computer Graphics at the University of Illinois. Some of his influences can be read from his web page, including American electrical engineer's Vannevar Bush visionary article of 1945.

Steve Jobs was known for criticising Adobe Flash. Adobe's most recent quarter bagged $1bn in revenues. Now the time has come for those from Adobe to come to Apple.

The wider world of CTOs

What about other companies with a technology-driven culture? Take behemoth Microsoft.

• Eric Rudder is Microsoft's CTO/CSO (Chief Technical/Strategy officer) 

Eric has management responsibility over Microsoft Research. He's a graduate of Brown University (Rhode Island, East of Connecticut). He was the architect of Visual FoxPro 3.0 and has also managed developer outreach at Microsoft.

The CTO World Congress is one way to network with CTOs.

MBS Rocks 2012 .. but there are Risks

Mortgage-backed securities outperformed all other asset classes in 2012.

Why would an average person have an interest in MBS? Well, they have an attractive yield relative to Treasuries and Swaps.

The downside is an MBS portfolio requires active management. Additionally, mortgage analytics are needed for this, as is research into the housing market.

The risks of investing in MBS

MBS are subject to prepayment risk (which shortens the life of the security), When interest rates are falling, prepayments tend to rise.

17 years of Research Pays off as Japan Extracts "Ice Gas"

This opens the potential to extract energy from methane hydrates. The proof of concept was done by JOGMEC (Japan, Oil, Gas and Metals Corporation).

J's HQ is in Minato-ku, Tokyo, which is worth discussing in detail. Many embassies are located in Minato including the United States, Canada and Kazakhstan. The famous Roppongi Hills development (opened in 2003) are in Minato, constructed by building tycoon Minoru Mori.  Goldman Sachs (including Goldman Sachs Realty Japan Ltd.), Simmons and Simmons, Google Japan and the Pokemon company are located in the Mori Tower, Roppongi Hills.

Minato is also the location of the Tokyo Tower (over a 1000 feet tall, roughly the same size as the Eiffel Tower in Paris). The Tokyo Skytree is around twice the height of Tokyo Tower, taller than the Empire State Building.

JOGMEC is also responsible for stockpiling petroleum supplies to supply Japan's energy needs. Its petroleum stockpiling program began in 1978.

Jonathan takes Helm at Alibaba

Alibaba.com ("Global Trade Starts Here" (TM)) the e-commerce site has a new leader - Jonathan Liu (who led the development of the firm's payment system, AliPay). The website was started by founder-CEO Jack Ma from his apartment in 1999. 

A Nod to the Majors

"The Majors" are the most traded currency pairs in the world, there is no Lieutenant Colonel above them (to explain that statement, a Major is usually the next rank after Captain in the Army, and just before Lieutenant Colonel).

The Majors comprise the EURUSD ("probably" the most traded currency pair in the world aka. "The North Atlantic Treaty"), the USDJPY (ever so topical with the Bank of Japan regularly making statements - trading at around 93 Yen, aka "Tokyo DisneyLand"), Cable (aka The Cameron Camera) trading around $1.52, Ozzie (aka "The Kylie Minogue" - 1.02 USD; sailing very close to parity), Swissie (or The Swiss Cheese - USDCHF - roughly 92 centimes) and Loonie (USD/CAD - a largely cordial relationship since the War of 1812 - trading at 1.01 CADDIES).

The most interesting of the Majors at the moment are Tokyo-Disneyland, The North Atlantic Treaty and The CamCam.

Livingston's Cerebral Guide to the Corporate Loan Market

The corporate loan market is here explained by Livingston in no particular order.

Investment Grade versus Leveraged Loans

The "investment grade" loan market is the "golden child" of the loan market. It comprises loans to companies rated >= BBB/Baa3 with relatively low spread to LIBOR. Nothing very exciting - these are solid companies, with strong credit ratings that can finance themselves relatively cheaply.

The "leveraged loans" market, on the other hand, is a different kettle of fish. Here we deal with companies with weaker credit ratings and spread >= LIBOR + 150bps.

Side note: leveraged loans are also used in leveraged buyouts (LBOs) of companies.

Institutional Loans

Loans structured for sale to institutional investors, e.g. mutual funds, hedge funds, insurance companies, CLOs (where loans are pooled together, requires deeper explanation (later)).

Secondary Loans / Secondary Market

A secondary loan market is one in which loans trade after primary syndication completes - mostly this involves leveraged loans.

The area of banks that are dedicated to bringing these loans to the market is called loan underwriting/syndication. From the league table perspective, this has a jargon all of its own.

* Lead left - only lead bank on a transaction
* Lead bookrunner / Lead arranger - top 1 or 2 banks in the transaction (called left and right)
* (Titled) Agent - usually lead arranger
* Co-agent - involved but not from the earliest stages

Role of the Revolver

Both investment grade and leveraged loans generally involve some sort of revolver. It offers flexible financing for corporations.  With an RCF- as its sometimes known (the F stands for "facility") , the loan can be repaid and redrawn. Revolving credit is generally linked to LIBOR.

CLO

With a CLO, you pool together a bunch of loans. The payments of these loans are passed on to the owners of various tranches of the CLO. CLOs are an instrument of syndication - it's basically creating debt for companies, packaging that debt into a "marketable" format for willing investors, thus lowering the cost of capital the company.

Financial Twitter

In the "Economics and markets" category of our Twitter selection:

Check out PIMCO on Twitter. Also:
Ed Bradford on G-bonds,
StLouis Fed on all things Federal Reserve.
ZeroHedge on various, including Bonds.
Sallie Krawcheck on banking.
Roubini on Economics.
Nick Firoozye from Nomura.

You can also follow some "finance-related" institutions, such as:

NYSE Options (includes the "AMEX" market subsumed by the "NYSE")