• 12 Jan 2009 at 6:17 PM

Breaking: Made-off Not Out Of The Woods

The U.S. Government Will Appeal The Madoff Bail Ruling.
They really don’t like this guy.

  • 24 Nov 2008 at 10:47 AM

Don’t Be Nice, Kick Her Twice

What shareholders would be the the mood for any deals in this environment? Really, it is damn ugly out there. No surprise then that Bank of America shareholders are about as interested in acquiring Merrill Lynch as a kick in the taco. Actually, though said kick has lingering effects, these are still smaller than the Merrill Lynch acquisition would be, meaning that a kick in the taco would be preferable to the Merrill Lynch acquisition. (At least according to a draft of the full page Wall Street Journal ad before the editing committee got a hold of it. Kicking is too mean to put in the Journal, it seems).
There is a sort of self-fulfilling prophecy aspect to this whole thing. Acquiring shareholders grow upset over the widening spread between current share price of the target and original offer. Shareholder approval looks less likely. Arbitrage players press spread wider, acquiring shareholders get even more upset over the widening spread between current share price of the target… etc. etc. etc.
I wonder what our government’s financial supermen and superwomen will do if that deal begins to crumble too. Backstop funding perhaps? That seems to be the most popular arrow in the quiver these days.
Merrill Flinch [New York Post]

  • 17 Nov 2008 at 4:18 PM

Corporate Communication

Linda: “Ok, I can’t see your nametag. There, Lloyd, is it? C’mon in. Take a seat anywhere. Ok. I think that’s the last of you. Let’s get started. Uh, ok… sir, uh… yes, you… Vi-car, is it? We couldn’t get the large nametags. Are you waiting for someone?”
Vikram: “It’s Vikram, and no… I most certainly am not waiting for someone, thank you very much.”
Jamie: “Relax Vikram. Don’t be a jerk. Seriously.”
Linda: “Ok, let’s take our seats. We have a lot to cover. My name is Linda. Some of you know me already. I’m a specialist in corporate communications, as well as investor and legislative relations. I have managed to keep the U.S. Auto Industry afloat for more than a dozen years with careful subsidy management, tax relief, bailouts and favorable legislation. You could say that I turn corporate frowns, upside down, really. Ok, Lloyd… since you were late, maybe it would be better if you focused your energy on paying attention instead of laughing with your neighbor, yes? Ok. So… moving on. I’m here because… somebody has a little problem with their public image and with Washington… isn’t that right everyone? Yes, well. Who here is facing bankruptcy? C’mon, hands up now. Don’t be shy. Ok, Brady? Eyes front please. Ok. Thanks. Several of you I see, yes. So. Who has the sympathy of their congressional district? I see, no one… no one? Let’s talk about working the angles here. John, how large is your labor union?”
John: “Uh, my… labor union?”

Read more »

  • 14 Nov 2008 at 10:08 AM

Feed Us. Or Else

demanding.jpgYour mother told you not to bring those filthy things inside, but you snuck them in anyhow. Now, blind, helpless, cold, foul smelling and featherless, the screaming, greedy mouths of the GSEs seem to gape endlessly, never satisfied and eager to suck more capital from the mouths of strained and frantic surrogates, forced to hunt eighteen hours a day to keep the damn things from chewing off a foot in their lust for fiscal calories, or screaming so loudly that your parents may burst in to hear which cat is being brutally tortured. No sooner have they had a hard-won, slime covered bit of roadkill been dumped into their bottomless, sucking orifices than was another immediately required.

Freddie Mac posted a $25.3 billion net loss in the third quarter on surging investment and credit losses as the company announced plans to seek an initial $13.8 billion from the Treasury Department to cover the hole in its shareholder equity.
Treasury pledged up to $100 billion each for Freddie and Fannie Mae when they were put under conservatorship in September to prevent their potential bankruptcy. The government will receive preferred stock for any money given to the firm, and Freddie expects to receive its $13.8 billion request by Nov. 29.

Freddie’s Loss Balloons to $25.3 Billion [The Wall Street Journal]

  • 13 Nov 2008 at 4:51 PM

Kuwait Is Not Taking This Sitting Down

kuwa.jpgIt was not too long ago when you could write a post-dated check to a broker in Kuwait and have it immediately credited to your account to begin trading shares in Gulf state firms. (No, we did not make that up). Not that there were many things to trade in. Becoming listed on the Kuwait Bourse required the approval of any number of obscure and financially naive authorities. This meant that any company of note was kept off the exchange to protect it from the foibles of investors. In addition, the government had a habit of pouring money into the market at the first sign of any serious crash and as a result the Kuwait exchange seemed to have a regulator enforced “price floor.” Kuwait’s business week ends on Thursday, so trading on Friday was non-existent. Three days of news built up meant that wild swings on Monday were common. Add all this up and Kuwait was not exactly the most reputable exchange on the planet.
So, it probably comes as little surprise to anyone with a sense of middle east exchange history that an administrative judge froze trading on the Kuwait exchange on the strength of this reasoning: Investors might lose money. The judge will be examining the system over the weekend. We’d invest immediately if the exchange wasn’t closed already, as, doubtless, the judge will order an immediate 25% share price hike for Monday.
Trading halted at Kuwait bourse on court order [AFP] via Alea

  • 13 Nov 2008 at 2:31 PM

Silence On Gold Not So Golden

The British have this particular way about “discretion,” or what might in some circles be called discretion. That is to say, they keep their dirt quiet, at least as long as it takes The Sun to dig it up and scream it to the world. At that point they revel in gossiping about the sleaze, comforted in the knowledge that they, themselves, remain blameless in the sleazy and revolting business of trafficking in innuendo and rumor. It’s a symbiotic cultural arrangement, really. The readers can indulge themselves in faux outrage, all the while eating up the slop like it was their first meal in a week, and the Sun is handsomely paid for its willingness to dispense with the pleasantries of English decorum.
The Bank of England, for example, is reluctant to disclose recipients of its emergency largess. The idea is to avoid creating panic. At least in times of uncertainty, the revelation that Bank X accepted funds from the Bank of England, could (in theory) cause a run on the bank.
Apparently, that’s not going to fly in the United States.

Members of Congress, taxpayers and investors urged the Federal Reserve to provide details of almost $2 trillion in emergency loans and the collateral it has accepted to protect against losses.
At least five Republican members of Congress yesterday called for the Fed to disclose which financial institutions are borrowing taxpayer money and what troubled assets the central bank is accepting as collateral. More than 300 more investors and taxpayers also pressed for more disclosure in e-mails and interviews with Bloomberg News.

Lawmakers, Investors Ask Fed for Lending Disclosure [Bloomberg]

Barclehs, ever the strange emo child of finance, has decided to go it alone, and will tell the UK to take its bailout money and go pound salt. Taking bailout money is so conformist, yeah. They want nothing to do with it. Cool emo kids take their not quite $12 billion from the much cooler capital sources, like Qatar (that’s Kay-Tur to you, pal), Abu Dhabi and such.
Of course, the decision has nothing to do with the UK executive bonus restrictions that come with taking bailout money. Making decisions based on bonus payouts is conformist. The 14% on preferred shares Barclehs will have to shell out to keep their adoptive parents from taking away the guitar and forcing a trip to Supercuts looks to us like an expensive expense (see what we did there?) to existing shareholders for the luxury of keeping senior bonus pools intact. Take that you UK financial authority conformists!
Barclays to Raise $11.8 Billion From Investor Group [Bloomberg]

  • 29 Oct 2008 at 12:25 PM

So Safe, You Can Sleep Soundly At Night

How’d you like to be an investor in only the second (and third) money market fund to “break the buck.” Yes, we decided we’d pass too.
The Reserve Fund, “the nation’s oldest money market fund” has gone mostly-quiet for the many investors who’s cash is anything but forthcoming, at least since it “broke the buck.” A lawsuit lingers, allegations of tip-offs to large investors allowing them to get their money out before the crisis are floating around. We are sympathetic. To a point.
There is a reason these funds yield greater returns than other “cash or cash equivalent” instruments. Much of the financial consumer population has gotten quite complacent about the term “cash or cash equivalent.” This, coupled with the deep rooted certainty that Americans are entitled to ever higher riskless returns, and enough sob stories might just cause you to forget that you are investing in a risky instrument. Seriously, folks. The Reserve Fund is in trouble because it had substantial holdings in Lehman debt. Oops.
It was only a matter of time before another money market fund broke the buck. You knew it could happen. It had once already. At the risk of going all Taleb on you, just because there hasn’t been a collapse in recent memory, doesn’t mean that one isn’t right around the corner.
In the end, it is the free lunch that is most expensive.
Reserve Fund’s Investors Still Await Their Cash [CNBC]