US Traders Dislike Greek Bailout Package
Well, it didn’t take long for me to get the emails started telling me how wrong I am, again… WOW! Of course, I wonder where these people have been the last nine years, as when nine years ago I was the first writer to issue a whitepaper calling for the long-term downtrend for the dollar… [...]
US Traders Dislike Greek Bailout Package originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”
Democratic Leaders Go to Albany to Meet With Paterson – New York Times
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Democratic Leaders Go to Albany to Meet With Paterson
New York Times Democratic legislative leaders traveled to the Executive Mansion in Albany on Tuesday to meet with Gov. David A. Paterson and discuss “moving forward” amid the widening scandal over the embattled governor's involvement in an … Paterson's Silver lining: Embattled gov. gets much needed endorsement from …New York Daily News Paterson asked by top legislative Democrats to resignBuffalo News Democrats Press New York's Paterson to ResignWall Street Journal Vanity Fair -NBC New York -BusinessWeek all 679 news articles » |
Senate panel calls NHTSA response to Toyota safety issues ‘deeply troubling’ – Los Angeles Times
 Globe and Mail |
Senate panel calls NHTSA response to Toyota safety issues 'deeply troubling'
Los Angeles Times The Senate Commerce Committee says the agency lacks the expertise to handle complex auto electronics systems and questions whether government officials are too cozy with the industry they oversee. By Jim Puzzanghera Reporting from Washington – Senators … US May Set Rule Requiring Brake Override System on CarsNew York Times Senators question NHTSA reviews of Toyota modelsDetroit Free Press Toyota Sudden Acceleration Tied to 43 Fatal CrashesBusinessWeek MarketWatch -The Associated Press -USA Today all 2,940 news articles » |
Postmaster General Calls for Cuts – U.S. News & World Report
 FOXNews |
Postmaster General Calls for Cuts
U.S. News & World Report When Postmaster General John Potter told US News back in September that the best way to get the US Postal Service back on its feet was to cut back service to five days, it seemed like a distant and not-too-pressing eventuality. … Postmaster delivers bundle of bad newsWashington Post US Postal Service delivers bad news: No Saturday mail delivery?Christian Science Monitor RAW DATA: Fast Facts About Postal Service Budget ProblemsFOXNews Wall Street Journal -Milwaukee Journal Sentinel -ABC News all 748 news articles » |
Fla. Court Sides With Settlement Firm
A Florida state appeals court says the Florida Office of Insurance Regulation cannot use a 2007 law to get the authority to publish information submitted in confidence by a life settlement firm before the law was adopted.
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Libya sends out mixed signals
Swiss businessman Max Göldi has received a visit in his Tripoli jail from Hannibal Gaddafi, son of Libyan leader Moammar Gaddafi.
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Arson attacks turn up heat on Basel police
Fifty-eight fires, reward money, false trails and clueless police – what sounds like a Hollywood crime drama is in fact Switzerland’s worst-ever case of arson.
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Is the Pru being Prudent?
Companies that expand by acquisition are what they eat.
And sometimes a company buys something so big that it changes them almost beyond recognition.
Vodafone was transformed from ambitious British upstart into the world’s biggest mobile operator with its purchase of Mannesmann a decade ago.
BP was promoted to the premier league of oil companies with its acquisition of Amoco.
And, if anything, the Prudential is attempting an even more radical reconstruction of what it is, with its takeover of AIA, the Asian arm of the battered, US insurance giant, AIG.
The £20bn plus transaction would more than double the size of the Pru and would make it the biggest life insurer in Asia.
The sale has been approved by the US government, which rescued AIG in the autumn of 2008, and by AIG’s board: there’s likely to be formal confirmation later today.
In the meantime, the Pru has requested that trading in its shares should be suspended. Which, I think, is almost without precedent for a business of the Pru’s size and importance.
But the Pru takes the view that it’s very hard for investors to value its shares, prior to disclosure of precisely what it is buying and how.
The price for AIA will be around $35bn or well over £20bn.
It will be financed by a rights issue of around that magnitude, which would probably be the biggest ever rights issue of new shares by a British company – and possibly one of the biggest ever rights issues by any company anywhere.
In the UK, only the emergency rescue rights issues of Royal Bank of Scotland and Lloyds have come anywhere close in respect of amount of money raised.
What’s the point?
Well it would turn the venerable old Pru – a company whose history is woven into the thread of Britain’s financial and industrial past – into the market leader in life insurance in Asia.
It is already number two in Asia. And the takeover of AIA would make it the clear number one, with more than 40,000 employees and hundreds of thousands of tied agents.
The Pru believes it would become the HSBC of the life insurance world – viz a company with headquarters in old-economy London, but with the bulk of assets and its prospects in new-economy China, India, South Korea, Singapore and so on.
And the point about being in that region is not just that it is growing fast. It is also that the inhabitants save vastly more than we do here in the UK, even though their living standards on the whole remain much lower than ours.
That said, there are always risks – very substantial risks – in swallowing something bigger than oneself (don’t think about that too long, or you’ll feel queasy).
The Pru’s powers of corporate digestion – and its management – will be seriously tested.
UPDATE, 08:57: I suppose anyone looking for a silver lining for UK companies in the credit crunch that wreaked so much havoc in the City would note that Barclays and now the Pru have taken advantage of others misfortunes to pursue empire-building ambitions.
The resonant and important question – as is always the case with big takeovers – is whether those imperial ambitions are for the benefit of shareholders, the owners, or of managers, the directors.
UPDATE, 11:18: Now that the details have been published, it’s quite difficult to argue that the Pru is buying AIA at a fire sale price.
At a purchase price of $35.5bn, the Pru is paying 1.69 times “embedded value” (the conventional measure of life insurers’ assets) and 25 times last year’s operating profits after tax of $1.4bn.
That profit figure sounds very much like “profit with inconvenient bad bits taken out” – but we’ll have to wait for more detailed audited figures to assess that.
And at 25 times, the Pru would initially be making a 4% return on shareholders’ money – which isn’t fabulous even in the low interest rate world.
But apparently this is what decent Asian insurers cost. And, as I’ve said, the Pru believes this is a once-in-a-generation (or longer) opportunity.
The Pru’s owners, it shareholders, have a good few weeks to evaluate whether they agree, before deciding whether to stump up their share £13bn share of the purchase price in the jumbo rights issue.
That said, the Pru knows it has the money – because the rights issue has been underwritten (which means that other financial institutions will provide the necessary cash, if the Pru’s shareholders balk).
The Pru will finance the rest of the deal by borrowing more than £3bn and issuing almost £7bn of new stock to AIG.
That will give AIG a stake in the Pru of almost 11%.
As and when AIG recovers, it’ll be interesting to see whether that 11% is a symbol of a fruitful partnership or a Trojan horse.
Can an investment banker and a hedgie save Man Utd?
Even as an Arsenal supporter, it’s difficult not to feel the pain of Man Utd fans for the supposed devastation wreaked by the Glazers at the club they bought at the end of 2004/5 season.
Let’s look at the record of shame and degradation.
Since the Glazers bought Man U, the team has won the Premier League three times (in successive seasons), they’ve won the League Cup three times, they’ve won the Champions League, and they’ve won the Fifa Club World Cup.
Let’s not beat about the bush: the takeover has been an unmitigated disaster.
Not.
Some might say that the Glazers are entitled to ask why on earth they are detested by fans even more than most owners of clubs (and for reasons that are slightly unclear, football is the probably the last home of explicit class warfare and 1930s socialism, in that fans are rarely enamoured of proprietors).
Of course, the resonant issue about the Glazers is whether the debt they’ve heaped on the club – some £700m odd through the complicated corporate structure they’ve created – will curtail its success in the future. This was an issue I raised here back in early January (see Can Man Utd Spend?).
And there’s a related question – which has gained considerable traction as a result of the diligent analysis of contractual details in Man Utd’s recent £500m bond issue by the Andersred blog – about whether the Glazers are planning to maximise the financial squeeze on the club by draining every last penny of available cash for their own benefit.
The problem for the publicity-hating Glazers is that the principle of “beyond reasonable doubt” simply doesn’t apply to their trial on the terraces. In the absence of any public statements by them, it is simply assumed that they are planning to rape the club in a financial sense and leave it destitute.
So what is the verdict of today’s authoritative survey of football club finances by the accounting firm Deloitte? Well Man Utd fell from second to third in Deloitte’s league table of clubs ranked by revenues.
But there is a slightly spurious element to the gap that has opened between the turnover of Man Utd versus that of Real Madrid and Barcelona – which is that (as you probably noticed) the pound has weakened considerably against the euro in the relevant period, which benefits the Spanish clubs when translating income into a common currency.
All that said, the debt-heavy financial structural of Man Utd does look unfortunate.
In the run-up to the credit crunch of 2007, leveraging up – loading up a business with debt – was the financial structure of choice for all manner of financial organisations.
As readers of this column will be only too aware, the rising leverage of banks, non-financial businesses, households and governments all made their contribution to the worst recession the UK (and the world) has seen since the 1930s.
And it has become something of cliche that we have to start saving more and get the debt down – which will become something of an imperative when central banks cease their emergency help for the global economy and start raising interest rates back to more normal levels.
So many would say that Man Utd, like the British government, would probably be advised to start making plans to reduce its indebtedness.
Which brings me to an initiative by a senior Goldman Sachs partner and one of London’s most successful hedge fund managers to rally to the alleged cause of true Man Utd fans and organise a buyout of Man Utd.
This is one of those “you couldn’t make it up” moments.
The heroes of the moment, Jim O’Neill of Goldman and Paul Marshall of Marshall Wace, have made colossal personal fortunes over the past few years thanks to their firms’ use of leverage or debt.
There are some who believe that the likes of Goldman and Marshall Wace – even when operating on reduced leverage or borrowing ratios – still pose a threat to the stability of the global economy.
But – apparently – it’s the leverage ratios of Man Utd and its stability which is rather more important.
It is also worth noting that although they’ve mooted a price of £1bn to acquire the club, no detail has been provided about how much of that would be funded by debt and how much by equity.
So Man Utd fans should ask to see the small print before rallying to their cause, because there would be no benefit to them of replacing one debt-heavy financial structure for another.
Also, it’s incredibly early days for these buyout plans: there’s been one meeting of the putative bidders and a barrage of media hysteria.
And, to state the bloomin’ obvious, the Glazers don’t have to sell and have shown no inclination to do so.
Man Utd is an important business for the UK, generating considerable overseas earnings and international goodwill for this country.
But the Glazers own it. And the last time I checked, the protection of property rights – even at football clubs – was a not unimportant pillar of our capitalist democracy.
PS For more on this and other aspects of football finance, tune in to our live debate at 8pm on Radio 5 Live and the BBC News channel.