Moody’s Acquisition Not Transparent

Moody’s Corporation (MCO) announced today that it has received all necessary regulatory approvals and has closed its acquisition of Fermat International, a leading provider of risk and performance management software to the global banking sector, according to the terms announced on September 15th, 2008. But they have not announced any details. Given Moody’s stature in the economy you would think they could take a moment and explain a few things.

After all this is what they say about themselves “Moody's is an essential component of the global capital markets, providing credit ratings, research, tools and analysis that contribute to transparent and integrated financial markets”

Pier One What Does Strong Mean?

Pier One Imports (PIR) comes to the market and lets everyone know Sept same store sales are awful. Kudo’s to management for having the balls to tell the truth in a timely fashion. But you can still see how the spin management still creeps into the press release.

Sales declined 11.7%. Traffic declined 8%. OK that’s the unvarnished truth and given the state of the world investors should be expecting news like this. Then the spin master try’s to juice up the words and throws this quote in

“Despite the sharp decline in traffic in September, our underlying business remained strong.” The business is not strong; 11.7% sales declines are not strong fellows. You just had the Company’s President and Chief Executive Officer, Alex W. Smith say “If we continue to experience traffic levels like those seen in recent weeks, we will not meet the current consensus for earnings expectations for the back half of the fiscal year.”

Alex Smith, investors thank you for your sobering but realistic thoughts. But you need to slap someone in the Investor Relations Dept.

LDK Solar Further Review

LDK (LDK) announced an updated guidance for Q3. The Q3 ended Sep 30, 2008. So they must be feeling pretty confident. But then they pull their punches and say it’s all subject to ...well just read the quote.

“This outlook for the three months ended September 30, 2008 is an estimate. Results are subject to change based on further review by the management. LDK Solar plans to report its full third quarter results in mid-November 2008. Once the reporting date is finalized, LDK Solar will issue a press release announcing the date and details of its third quarter conference call.”

Guy’s when you issue global statements for all investors I do not want to see weasel words about further review. You need to build credibility. Take the lawyers out of the room and put some skin into the game.

Carl Icahn United Shareholders of America

Carl Icahn has announced the United Shareholders of America (USA): The Icahn Plan. Just a few weeks short of the presidential elections and most likelyanticipating a new regulatory regime in financial services Carl Icahn is aggregating voices and hoping to create additional influence. His comments are usually well respected but he has a habit of making big complaints, getting onto boards and then making some kind of a deal with exit features for himself. Not sure if I want to surf with this guy even if he is very rich and does not need a day job

YUM Eats Its Own Cash

Yum announced Q3 results telling the world worldwide system sales are up 10%. China is looking very good with an increase of 21%. But worldwide profits grew 2%. Something is very wrong when revenues grow five times faster than profits. I would say the model is not leveraged correctly. They are trying to tell us that EPS grew 16%.

More importantly Yum generated $1.14 Billion in cash from operating activities. They have returned $1.7 Billion in the past three quarters and plan to take that number to $2 Billion.

Let’s cut to the chase. YUM is eating its own cash faster than it can generate it. This is not a start up. It should be on the other side of this graph and generate more cash than it needs. Right now it is buying its stock at expensive lows. Wrong Wrong and still Wrong.

AIG Conference Call Redux

Last Friday AIG had a conference call designed to bring investors up to date. Many analysts asked supposedly pointed questions. No one is the wiser after the call. The new Chairman and CEO Edward M Liddy maintains that while 61 billion of the 85 billion has been used the business is solid, well capitalized and operating well; except for the liquidity side of things.

No one could get a handle on what was going to be sold. Liddy kept promising that it will not be a fire sale. The political pressure will be to sell quickly. The American tax payer is very suspicious these days. Probably a few things will go for cash just to make it look good and keep the vigorish down.

Watch for a bust up of AIG similar to the Standard Oil bust up a century ago. They will establish several bite size entities where it is possible to do due diligence and come to a view on business prospects. The prospects will be capitalized and spun off allowing the $85 billion lifeline to be repaid. A small rump of difficult to peddle assets will be left over and swept under the carpet within several years.

The shareholders will be induced to look to the spin off’s. Someone with deep pockets and patience will take on the rump and make some quite big profits out of eyesight of the financial press.

Bail Out Influences Wall Street Golden Parachutes

The Congressional bail out of Wall Street attempts to limit golden parachutes for senior officers; especially for those that are walking away from impaired or bankrupt companies. The political optics are good. Lots of little people are suffering so we should make sure the big guys take some pain also.

Most compensation specialists are scoffing at the present legislation saying it will not effect or affect anything. They speak from a backroom technical perspective. Watch for the next bankruptcy or financial difficulty. If the CEO and other senior officers get golden parachutes the issue will become political. Investigations, audits, reviews will all become tools to get the bad business man.

Then let’s not forget that in a few weeks we will have a new administration. One way or the other the new guy’s will want to put their stamp on the bail out. Just handing out billions of dollars does not go un-noticed by politicians. They will keep their finger in the pie.