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Archive for the ‘Corporate Finance’ Category

Berkshire Hathaway Annual report 2008 / a must read

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http://www.berkshirehathaway.com/2008ar/2008ar.pdf

You can’t be mistaken when you are reading from the greatest punters in the Financial space – Warren Buffett. The Chairman’s letter to shareholders did not dissappoint me. It was filled with the usual interesting titbits on his insurance ops and business, the concept of insurance ‘float’, his profit margins, the stake he took in Goldman Sachs, GE etc. during the troubling cashflow starved times of late 2008, the usual caveats on on the derivatives business and the future of Berkshire! Oh btw – there was no mention of “fruit of the loom” as marketwatch said there would be!

As I have said many times before, I am a self proclaimed protege of Warren Buffett and anything he does interests me. His annual reports are always looked forward to by much ado and this time was especially different to get the views of the man who I consider is king in stock market investing alongwith with his mentor Ben Graham and associate, Charlie Munger.

The Satyam fiasco – Ramalinga Raju’s misadventures

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Sorry for not blogging about this earlier. I did not have access to broadband Internet at my home for the last 3 days and was working off my Blackberry for office related tasks.

While the economic and financial implications have been written about far and wide and everyone is busy reading the tea leaves, what are the lessons one take’s away from this? Before I begin my analysis, I would like to remind my readers that I had blogged on Corporate governance and sound accounting practices as early as 1.5 years ago on this very blog: https://ecofin.wordpress.com/2007/07/06/importance-of-accounting-for-the-business-world/ and on http://www.accounting101.wordpress.com AND on Corporate Ethics here: https://ecofin.wordpress.com/2006/11/16/corporate-ethics/ more than TWO years ago! Read the rest of this entry »

Wall Street – the movie / 1987

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http://en.wikipedia.org/wiki/Wall_Street_(film)

I saw this captivating movie on TV today and it really sums up what has been happening. A great movie about a young broker who decides to go the fast track unethical way of conveying insider information but thankfully stops short but does get nailed towards the end.

Michael Douglas (Gordon Gekko in the movie) and Charlie Sheen (Bud Fox in the movie) have acted well! Can’t believe that 21 years ago, they still had good old PC’s and big satellite phones to communicate which is pretty much what we have today but more compact and sophisticated machines – as one would expect. But, the point is, it could well have been 2008 and not 1987!

US Government bails out CITIGROUP

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As expected, the US Government bails out CITIGROUP. They are extending a lifeline of $20 billion at a higher rate of interest than that given by the TARP plan. Also, they plan to absorb some of the bad assets provided CITI takes the initial $5 billion followed by the US Government followed by the FDIC (the total gurantee amount by the US Government, FDIC and Federal reserve might amount to almost $300+ billion). In return, the US Government gets preferred shares of CITI (NYSE: C). Bonuses of executives (executive compensation) would have to have the Government’s approval.

Let’s see how it pans out but allowing a 200 year old bank operating in 106 countries to fail would have proved catastrophic.

Can large banks fail / CITIBANK on the brink

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I saw the developments of the last week where CITI (NYSE: C) shares really fell to $3 a share and was in danger of going bust as public confidence was eroding sharply. CITI faces a real threat of a collapse.

There were two options open to the board: 1. Fire the CEO, Vikram Pandit as a sacrificial lamb, 2. split the company and sell the parts or whole of the company. Read the rest of this entry »

Why am I crazy about Wall Street/US monetary policies?

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Simply because, it has a huge impact – no matter where you are in this world!

What happens out there impacts every single country in this world. It impacts you you and you. It impacts the decision making we make on our jobs etc. It impacts our local domestic economy. No matter how much we claim of ourselves being insulated from Wall Street, the truth is its just an eyewash. We will all get affected by the mayhem on Wall Street and the effects take at least 6 months to trickle into economies such as India and China. This is what happened in the dot com bubble burst of late 2000. Read the rest of this entry »

CITIGROUP takes over Wachovia banking operations

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The tumble continues. The Fed’s $250 billion immediate injection to buy toxic assets of troubled financial institutions, followed by the $100 billion based on President’s approval followed by another $350 billion subject to approval of Congress did not help. Read the rest of this entry »

Wachovia is in trouble

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It looks like Wachovia is going to be the next casuality to get acquired. Potential suitors include Citigroup (NYSE:C), Wells Fargo among others.

http://www.nytimes.com/2008/09/27/business/27bank.html?hp

The $ 700 billion bailout is taking time but taking its casualities as well.

Going forward – I will blog more about the correlation between this credit crunch and a more economics, freakonomics type approach to understanding this credit crisis that will be of more interest to my readers. Watch this space as the new trend unfolds. It will have facts and figures to support it.

Written by Naveen Athresh

September 27, 2008 at 11:30 pm

WaMu goes to JPMChase

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Washington Mutual is the largest bank failure in US history. It went up for grabs yesterday as JPMorgan Chase & Co. quickly acquired it for $ 1.9 billion.

This continues the series of fallouts of companies since last week when Lehman announced bankruptcy and Merrill got acquired by Bank of America.

How did JPMorgan stay clear of this mess? The answer might be here – http://money.cnn.com/2008/08/29/news/companies/tully_jpmorgan.fortune/index.htm?postversion=2008090216. I have a lot of respect and admiration for CEO of JPMChase (NYSE: JPM), Jamie Dimon for staying clear of this.

Fed tries to come up with a solution

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In what is termed as the worst crisis to hit the financial landscape of Corporate America since the 1930’s and the great depression, the Fed made an emergency attempt to get the Congress to agree to a $ 700 billion rescue plan aimed to stem the current financial turmoil by purchasing the bad assets from financial companies at a deep discount and sell it at a later date when things are more bright. This will help take the bad assets off from the financial companies’ balance sheets helping ease the stress and load on the financial system. Read the rest of this entry »