Equity Private

Posts by Equity Private

  • 11 Aug 2009 at 2:14 PM

Too Small To Fail(ed States)

lgtboom3.pngLiechtenstein, and its citizens, have long been more than a little strange. All microstates are a little strange, being, like Liechtenstein the, polar political opposite of failed states.
Failed states are plagued by institutions too weak to prop up the flaccid rule of law, and thereby permitting “shadow institutions” (the black market, organized crime, official corruption, non-governmental bases of power) to garner such a mass of power and influence so as to tear apart the thin threads of justice and stability merely by the centrifugal force of their motion.
Microstates enjoy an artificially stable state by virtue of their globally envied institutions. Usually, these were created during formative times in global history. Often they were augmented by the highly centralized, even imperial rule in place when the borders were drawn. In Liechtenstein, Vaduz was lorded over by no feudal subject and therefore beholden only to the Emperor (making it the early 18th century, European equivalent of North Carolina for carpet bagging). When Napoleon dismantled the Holy Roman Empire, of which Liechtenstein had officially been member, the tiny Principality, unlike her peers, dissolved into a state with no fealty at all save to its local princes.
Come World War I and World War II, the entire country is basically a big safe deposit box for Europe.
Set the way forward machine to 2008-2009. Banking is getting clobbered. In other words, the institutions (primarily Swiss) of banking secrecy and investment acumen, which permitted a country which otherwise lacked the critical mass to be even remotely interesting, much less worth using as a safe haven, to hold it together, are under siege.
The only real question is: Will Liechtenstein be annexed by Switzerland, or Austria?
UK Seals Deal To End Liechtenstein Tax Havens [Times Online]

  • 11 Aug 2009 at 1:25 PM

Spin The Bottle

flagsofour.jpgSomeday Poland will grow up and realize that issuing more debt, not selling assets, is what modern economies do during a fiscal crisis. Don’t worry though, Poland, we will still be around when you decide to join the cool kids debtors club.

Poland’s Cabinet approved a plan to sell stakes in state-owned companies including KGHM Polska Miedz SA and Grupa Lotos SA in an effort to finance its budget deficit after tax revenue slumped and public debt soared.
“The plan acknowledges the need to speed up privatization,” said Prime Minister Donald Tusk at a press conference in Warsaw today. The budget “requires a cash injection to cover basic spending.”

Comments like this one from a former Polish finance minister are why people like this are (were) finance ministers in Poland:

“It’s high time that Poland undertook real privatization,” said economist Miroslaw Gronicki, a former finance minister, by phone. “Any revenue from privatization means a reduction in debt, and as far as the budget is concerned it’s an extremely sensible move.”

Seriously, who talks like that anymore?
Polish Government Approves Asset Sales to Cover Swollen Deficit [Bloomberg]

  • 11 Aug 2009 at 12:50 PM

Some Kind Of Urgency

Caught by one of our readers, this month’s version of “juxtapositional comedy” care of the Wall Street Journal:
In Today’s Paper [The Wall Street Journal]

westche.jpgThat’s the most obvious interpretation of the news that Westchester Country ($116,916 median household income to a New York and United States average of $51,001 and $61,117 according to the 2000 census) agreed to build a slew of “affordable housing” in a settlement with the Department of Justice and HUD over Westchester’s supposed failure to enforce fair housing laws.
The Wall Street Journal is calling it a shot across the bow of other counties (they mean the wealthy ones though) and in particular jurisdictions growing fat (or just barely failing to starve) off government teats.
There’s no reason at all, when you think about it, that you shouldn’t be able to move into your new place in Scarsdale right after for filing for unemployment.

But Mr. Sims said the lawsuit had made clear that “there was a significant amount of racial segregation” in Westchester. He said studies showed that zip codes could increasingly serve as a predictor of life expectancy and illness. “It’s time to remove zip codes as a factor in the quality of life in America,” he said.

Wealthy Suburbs Accept Low-Income Homes [The Wall Street Journal]

  • 10 Aug 2009 at 5:54 PM

GM And eBay

As Dealbreaker readers will already been keenly aware, American automotive firms have been beset by difficult market conditions including too many customers, too few customers, high material prices, low material prices, insufficient resale value, excessive resale value.
You will be happy to know that the management team has been working overtime and come up with this solution.
GM, eBay to Test Online Car Sales [The Wall Street Journal]

  • 10 Aug 2009 at 3:23 PM

State Of The State Street

There is this recursive sort of double-take one does on learning that a firm is on the verge of exhausting its legal reserve. First, that the firm needed a large legal reserve. Second that it was exhausted. Third, that “large” in this instance is $650 million. Whoosh!
Somewhere there is a fantastic punch line in there when the horrified looks are placated by a quick “Yeah, it’s State Street Bank.” Everyone goes back to drinking a middling California Chardonnay. That this would be soothing should be irritating.

State Street Corp. may deplete the $625 million set aside in 2007 to settle legal claims stemming from losses linked to subprime mortgages.
The reserve “may not be sufficient to address ongoing litigation” if the U.S. Securities and Exchange Commission sues State Street and seeks monetary penalties, the Boston-based custody bank said in a regulatory filing today. The SEC told State Street that it might be sued over disclosures about and management of fixed-income investments through 2007, the company said June 25.
“We’re not going to speculate as to the amount of any potential monetary penalty,” Carolyn Cichon, a spokeswoman for State Street, said in a telephone interview.

No reason, it seems, to be alarmed. Of course the reserve got spent. That’s what it is there for.

The company declined 99 cents to $52.87 at 11:06 a.m. in New York Stock Exchange composite trading. It has gained 34 percent this year, compared with the 25 percent rise for the Standard & Poor’s index of asset managers and custody banks.

That’s a modest decline, isn’t it. Lower administration costs now that $625 million no longer resides in the building?
State Street May Exhaust $625 Million Legal Reserve [Bloomberg]

  • 10 Aug 2009 at 1:19 PM

Dealers Just Can’t Catch A Break

cuomo.jpgNew York Attorney General Andrew Cuomo is shocked, shocked to discover that misleading advertising is going on in here.
Sell too few cars? Get dropped. Sell too many? Get dropped. Turn around and start issuing misleading advertising

New York Attorney General Andrew Cuomo today told 40 auto dealers across the state to stop issuing misleading advertisements for the Federal Car Allowance Rebate System, known as “cash for clunkers.”
The government-funded clunkers program, which seeks to boost the economy, allows dealers to credit $3,500 or $4,500 for trade-ins that may be worth less. Dealers’ ads mislead consumers into believing that their trade-in vehicle qualifies for the program when it does not or that they are eligible for a several-thousand-dollar rebate, Cuomo said in a statement today.

Next thing you know they will want to eliminate introductory or teaser rate financing!
Cuomo Tells Dealers to Stop Deceptive Clunkers Ads [Bloomberg]

  • 10 Aug 2009 at 11:55 AM

Leave Lenny Ah-lone!

LennyDykstra.wow.jpgDon’t get us wrong. We know where our bread is buttered. But, that said, there seems to be a lot of piling on going on. For instance:

George Griffith of the trustee’s office said Dykstra signed a “real property questionnaire under penalty of perjury,” claiming insurance on the mansion did not expire until December. But the court filing says that on the very day Dykstra signed the document, July 14, the insurance was cancelled “for failure to pay.”
“Undoubtedly, the debtor had received prior notices that the insurance would be cancelled if the premium was not paid,” the filing said, calling Dykstra’s actions “dishonest.”

Perhaps we’re just being difficult, but it occurs to us that the policy “expiring” is not at all the same as the policy laboring under the constant risk of termination for non-payment. Of course, we only have CNBC doing translation for us here, so it is hard to tell, but when you are digging through the semantics in this kind of disclosure to try and force a Chapter 7 liquidation, you really are scraping the bottom of the barrel.
Sure, we suppose it is possible that what Lenny really penned on pain of perjury was more along the lines of “…and furthermore, there are absolutely no issues that might threaten, or cause outright, a lapse of insurance coverage at any time during the bankruptcy process….” That seems… thin.
Baseball Great Dykstra Could Face Liquidation [CNBC]