Thursday, April 30, 2009

President Obama Declares War on Hedge Funds

President Obama in today's press conference declared war on the hedge funds. The first battle will be over the dead corpse of Chrysler. Soon we will be looking at the governance of the hedge fund industry and the tactics that they have learned to love.

Bank of America Schizophrenic Approach

Bank of America’s (BAC) schizophrenic approach to its voting identifies the confused state of shareholders minds. The chairman is publicly rebuked for the Merrill Lynch deal. But the slate to fill the board is comfortably re-elected including Kenneth D. Lewis. Yes It would appear that Kenneth Lewis is the poster child and designated whipping boy for all things wrong at Bank of America. But where is the rest of the board in all this? The board allowed him to do it and now the shareholders are allowing the golden parachute to trigger. If the man is not good enough to be the chairman why is he good enough to be the president. Watch for a new board and chairman. The old school will not or should not have the trust of the shareholder.

Wednesday, April 29, 2009

Goodyear Ignores Raw Material

The Goodyear Tire & Rubber Company (NYSE: GT) today reported Q1 2009 financial results. Demand for tires is down as new car sales drop dramatically. Also I suspect replacement tires are not selling as well as cash strapped consumers stretch their budgets. So if sales are down their purchases of raw materials must also be dropping. But Goodyear reports that raw materials’ costing has increased. Read this quote in a Q1 context.

“Higher raw material costs, which increased 31 percent, or approximately $332 million, more than offset improved price/mix of $161 million.”

No further comment or discussion was offered in the press release. Something is seriously wrong with the pricing model on raw materials. Management needs to step up and explain this one. Yes the problem has been disclosed but not explained.

Tuesday, April 28, 2009

McGraw Hill Quiet on S&P

McGraw Hill (MHP) owner of the Standard & Poor's franchise reported downbeat results. Problems in both the educational and financial sectors contributed to disappointing results. The down draft in the financial and investment sector was to be expected. New transactions are off and the need for ratings is also off. What McGraw Hill neglected to cover was the potential for lawsuits and legal actions as a result of investor disappointment with their previous efforts in the ratings business.

Also, as the financial world continues to dig itself out of its self inflicted misery, what will S&P need to do in the future to maintain credibility and relevance. Some might accuse the analytical process of being much too superficial. If more due diligence is needed what does that do to the cost structure and pricing structure and therefore the sustainability of the S&P business model. Business as usual simply will not work in the future.

Corporate Executives are not switched on.

Monday, April 27, 2009

General Motor's Future

General Motors (GM) announced their future; with or without going through the courts. They keep wanting us to believe that they are building for the future and a 10 million unit break even point. What have they been building in the past and why is it we are going to believe in them now? The future belongs to the new models that GM needs to introduce but no one seems to be excited about. GM, a Dow 30 component blissfully drove off the cliff. All the kings horses and all the kings men so far have not put it together again. When will the king decide to look at the board of directors who presided over this problem and start making directors and senior managers accountable. If an auto worker installs a part incorrectly he is held accountable at some level. If a sales person does not meet quota he probably is released. If the board destroys a company it's not OK.

President Obama if you want to fix corporate problems you have to fix corporate boards and make them accountable.