Friday, August 07, 2009

AIG Manic Depressive

AIG (AIG) Let’s put this one in perspective. They post some black ink and everyone goes gaga. If they made $1.8 billion this past quarter and they owes the Feds $180 billion it will take them 100 quarters or 25 years to earn their way out. The assets they sell will have to knock debt down faster than earnings.

Usually the stock exchanges require management to speak to sudden sharp changes in the price of shares. But the major shareholder is the Fed and who is going to tell Uncle Sam who is also the major creditor and the regulator that their actions are suspect.

If you buy a stock it’s because you believe in the going concern valuation. !00% return of earnings for 25 years is not a going concern. The stock is manic depressive. Disclosure is not transparent.

Thursday, August 06, 2009

Blackstone Investors Are Dumb

Blackstone (BX) issued results and watched the stock sell off. While I do not apologize for the likes of Blackstone you have to wonder what are investors thinking these days. We have nothing but difficult to terrible financial news. The deal making business which needs cheap money and inflated valuations has not been doing well. So when Blackstone comes out and shows large red ink you have to wonder about delusion investors who are fooled and need to sell off, dropping the stock some 5% by noon.

The real issue is what are you going to do about the assets they are holding which need to be flipped out. They are so addicted to transaction fees they forgot to think like investors. Would you like to own the asset or do you just want to stroke it on the way through.

Wednesday, August 05, 2009

NetJets New CEO What's It All Mean?

NetJets gets a new leader. Richard Santulli, chairman and chief executive of NetJets Inc is leaving. Many expect Mr. David Sokol, chairman of Berkshire utility MidAmerican Energy Holdings Co., who has long been considered a top candidate to succeed Mr. Buffett at Berkshire to temporarily replace Richard Santulli. Media reports say that this is another sign that David Sokol is to become top dog at Berkshire Hathaway (BRK).

But what about the other signs? Why is Richard Santulli leaving? Is Warren Buffet unhappy with something? Netjets is a private investment so no one has to say anything. Which means the speculation will be delicious. A reverse PR nightmare that communications experts will discuss at length.

In addition to why did he leave here are a few questions. Is NetJets doing well? Was there a disagreement about the future? Warren Buffet is an investor not a hands on operator. Why would David Sokol have to actually take over the job and who is doing his old job which sounds more important? If David Sokol needed a tutorial on the holding why did Richard Santulli have to leave? Why did NetJets not have an obvious successor in waiting?

What will Richard Santulli do next?

Tuesday, August 04, 2009

GE Fined by SEC 7 Years Late

GE (GE) settles with SEC and pays a civil fine of $50 million. GE which was the mother of quality investment plays apparently misled investors in 2002 and 2003. In the press release Robert Khuzami, director of the S.E.C.’s Division of Enforcement chastised GE saying “Overly aggressive accounting can distort a company’s true financial condition and mislead investors.”

No one mentioned any disciplinary fines against individuals, key officers or the board of directors. It appears that the infractions occurred exactly after Jack Welch left the company. Infractions of this size and nature are not the work of one individual but are reflective of corporate culture. Then again the fine is a drop in the bucket for GE and is really just a licensing fee.

The real story is that it took the SEC 7 years to nail GE.

AIG Robert Benmosche

AIG (AIG) appointed a new CEO. The last one Edward Liddy was chewed up by Congress and became a whipping boy for sins he did not commit. The new CEO Robert Benmosche, a former chief executive of Met Life is to receive a pay package of $7 to $10 million. The pay czar Kenneth Feinberg still has not ruled but everyone is announcing the deal. Will the pay czar need to fiddle with a clause to look good. How does this pay czar thing work anyway? If the employment contract is reputed to be heavily weighted to equity is that a good thing. Will Robert Benmosche be looking to maximize quarterly numbers or repay all the emergency money asap.

Monday, August 03, 2009

Bank of America Go To End Game

Bank of America (BAC) paid a $33 million traffic fine today.It settles the non disclosure of Bank of America’s agreement that Merrill Lynch could pay over $5 Billion in bonuses as it was failing. The fine is a drop in the bucket. What is significant is the order in which events seem to be transpiring. First Ken Lewis makes claims that the feds led him down the path as he made some dubious acquisitions. Add in a difficult annual meeting where Lewis gets admonished and is stripped of some of his job titles. But the board says it still has confidence in him. Then a steady parade of directors resigns. Then Sallie Krawchuk comes on stage. Then the SEC issues a fine which is more symbolic than punitive.

Can we just get to the end game. Regulators issue big fines but you cannot see their hand in the backrooms.

Google & Apple Resolve Board Dilemna

Apple (AAPL) and Google (Goog) have resolved their inter-locking board dilemma with the resignation of Eric Schmidt Google CEO. Citing ever increasing conflicts Eric Schmidt resigned. The conflict was so apparent that in May the US government started an investigation into the matter citing the Clayton Antitrust Act. Why did this take so long to resolve?

Sunday, August 02, 2009

Bank of America Revolving Board

Bank of America (BAC) announced several more directors have resigned. Media reports focus on why they were on the board. What Bank of America and the regulator need to come out with is “What is the strategy for appointing directors? The old guard leaving is good. How is the shareholder interest being protected? New directors must at least have some informal vetting from other major institutional shareholder. Also what residual liability exists for their past poor decisions? I must note that Mr Countryman who is on the Liberty Mutual Board is leaving. I have been very critical recently about Liberty Mutual’s financial reporting.

Curb Wall Street Pay

The House of Representatives has voted to curb Wall Street Pay. Or have they? The legislation still needs to be passed by the Senate. The bill would give shareholders a nonbinding vote on compensation packages and prohibit directors on compensation committees from having a financial relationship with the company and its executives.

Politicians who should understand voting, should know a non binding vote is toothless. Congressmen are playing with the average citizen and saying they are doing something. Wall Street will still need to pay its top producers. If not, everyone will just move to London.

The game is all about the optics. The average voter is losing his job, big financial firms are in jeopardy and a select few drive away in limousines. Most congressmen are up for re-election next year lets talk about campaign contributions that will be coming from Wall Street