-
IBM In Talks For Sun Microsystems: Report
Tweet Share on Facebook March 18, 2009 CommentSun Microsystems shares are up 65 percent this morning after the WSJ reported IBM is considering a $6.5 billion cash bid for the company, a nearly 100 percent premium to its Tuesday close. Sun had reportedly been shopping itself to larger rivals for some time.
Reactions:
Reuters' Eric Auchard says Sun's high-end focus finally paid off:
Sun Microsystems Inc, the darling of the dot-com boom, never really recovered from the bet it made on high-powered computers used to run the first generation of Internet datacentres.
But it's those same high-performance machines, favored by many telecom operators and financial services companies to handle high-transaction volumes in their switchboards or trading exchanges, that may prove to be its saving grace.
He calls Sun's high-end SPARC computer line the "key attraction" for IBM as it deals with Cisco's strong entry into the server market. The technological fit between IBM and Sun makes sense, even if their cultures (Silicon Valley volatile vs. staid and storied Armonk, NY) and balance sheets (Sun lost $209 million in the December quarter) might be difficult to mesh.
Kara Swisher, who called this deal a few weeks ago, says more big tech deals could be on the way, including a possible paring between Google and Twitter.
-
Jim Rogers On Bailouts: 'It's Absurd Economics And It's Absurd Morality"
Tweet Share on Facebook March 17, 2009 Comment (7)Jim Rogers, who when we last checked in was buying farmland, tells Bloomberg TV we're in for the worst time since the '30s, and the U.S. will face "civil unrest" as the economy worsens. Where to invest? He says commodities are the "only asset class where fundamental are improving."
What would he have done differently during this crisis? Pretty much everything. He would've let the worst banks go bankrupt, and says bailing out AIG is throwing good money after bad. As for the fallout, the government's bailouts will debase the currency and ultimately prove inflationary.
Bloomberg summarizes his comments here and the video is here.
-
Andrew Ross Sorkin Vs. John Carney On AIG Bonuses
Tweet Share on Facebook March 17, 2009 Comment (4)Should the government block $165 million in bonuses to AIG?
In his DealBook column, Andrew Ross Sorkin takes the unpopular position, arguing for the bonuses as a symbol of our belief in the sanctity of contracts as a "fundamental value." He writes:
That may strike many people as a bit of convenient legalese, but maybe there is something to it. If you think this economy is a mess now, imagine what it would look like if the business community started to worry that the government would start abrogating contracts left and right.
Valid point, but I'm not convinced. At Clusterstock, John Carney says the government can break contracts because, well, without the government there wouldn't be an AIG left to write bonus checks:
The key to understanding the AIG bonus issue is that AIG would be bankrupt and in the process of a court supervised liquidation but for the extraordinary government action that has kept the company afloat. If not for the government bailout, the contracts would be worthless because the employees would be unsecured creditors in a company worth less than zero.
-
Ben Bernanke On '60 Minutes'
Tweet Share on Facebook March 16, 2009 Comment (26)It takes an extraordinary set of circumstances to get a sitting Fed chief into the interview chair, but these are extraordinary times. Ben Bernanke's appearance on "60 Minutes" Sunday night was a great public relations move. Calling a lack of "political will" in stabilizing the banking system the "biggest risk" facing the economy, Bernanke is putting added pressure on an increasingly testy Congress even if the largely softball interview (including a home-town visit to Dillon, S.C., which felt a pretty forced) failed to uncover much new insight into the Fed's thinking on the crisis.
The two-part interview is here:
-
Signs Of Stress: Warren Buffett's Downgrade, China's Treasury Jitters
Tweet Share on Facebook March 13, 2009 Comment (5)Two long-held beliefs about the American financial system got taken down a peg today, namely that Warren Buffett can do no wrong, and that China will always buy our debt.
From Reuters:
Warren Buffett's Berkshire Hathaway was stripped of its 'AAA' credit rating by Fitch, barely hours after S&P cut General Electric Co's top-tier rating, as the global financial crisis pummels America's corporate titans.
Citing concerns about Berkshire's equity and derivatives investments, as well as Buffett's tight grip on the company, ratings agency Fitch cut the insurance and investment company's issuer default rating by one notch to 'AA+'.
The downgrade is another setback to Buffett, 78, coming a day after the billionaire lost his position as the world's richest man to Microsoft Inc founder Bill Gates, according to Forbes' annual list. Buffett's net worth plunged to $37 billion from $62 billion last year, the list said.
"Fitch views the company's potential earnings and capital volatility derived from its large, unhedged market exposures as inconsistent with the stability required at the 'AAA' level," the ratings agency said in its statement on Berkshire.
Berkshire had its worst year ever in 2008, and Fitch also cited the firm's "key man" risk in its downgrade due to Buffett's large ownership and vital role in running the company.
Meanwhile, China's Premier Wen Jiabao says he's "worried" about the health of China's $1 trillion worth of U.S. Treasury bonds. The consequence of a slowing U.S. economy, weakening stock market and massive government spending are threatening to send the dollar lower over time, devaluing holdings like Treasuries. That doesn't, however, mean China will sell its massive bond holdings, since there are so few places for such huge pools of capital to go these days (that of course, is not a good thing). Quoted in the Financial Times, Luo Ping, a director-general at the China Banking Regulatory Commission, put it more bluntly:
-
American Household Wealth Slumps 18 Percent
Tweet Share on Facebook March 13, 2009 Comment (3)It's official: We're poorer by almost a fifth.
The Federal Reserve reports American household wealth fell by $11.1 trillion, or nearly 18 percent, during 2008, with a huge $5.1 trillion drop occurring in just the last three months of 2008.
The drop, the largest ever quarterly decline on record at the Fed, is likely going to look worse as continued declines in stock and real estate prices erase even more wealth. It's also a much larger drop than the last big year-over-year decline in 2002, when the burst tech bubble sent household net worth down 3 percent.
The NYT has more.
-
Stewart And Cramer Go Head To Head
Tweet Share on Facebook March 13, 2009 Comment (4) -
Iceland's Long Melt
Tweet Share on Facebook March 12, 2009 Comment (7)Michael Lewis, chronicler of baseball and financial collapse, has a great piece in Vanity Fair about the economic disaster in Iceland, the tiny nation that more than any other represents the reckless abandon of the credit boom. Read the whole thing. Some highlights:
Global financial ambition turned out to have a downside. When their three brand-new global-size banks collapsed, last October, Iceland’s 300,000 citizens found that they bore some kind of responsibility for $100 billion of banking losses—which works out to roughly $330,000 for every Icelandic man, woman, and child. On top of that they had tens of billions of dollars in personal losses from their own bizarre private foreign-currency speculations, and even more from the 85 percent collapse in the Icelandic stock market. The exact dollar amount of Iceland’s financial hole was essentially unknowable, as it depended on the value of the generally stable Icelandic krona, which had also crashed and was removed from the market by the Icelandic government. But it was a lot.
-
Willis Group Holdings Moves Into Sears Tower
Tweet Share on Facebook March 12, 2009 Comment (11)From MarketWatch:
Willis Group Holdings (WSH)said Thursday that it will consolidate five Chicago-area offices and move nearly 500 associates into Sears Tower, initially occupying more than 140,000 square feet. Under an agreement with Sears Tower's owners, the building will be renamed Willis Tower, according to the global insurance broker. The company said it is not incurring any extra costs associated with the name change.
-
Madoff Heading To Jail
Tweet Share on Facebook March 12, 2009 CommentIn his own words, Bernard Madoff today explained the inner workings of his $50 billion Ponzi scheme and the details are shockingly simple.
Step 1: Get investors to give you cash. Pretend to trade. Lie about your returns.
Step 2: Put the cash in a bank account (his was at Chase Manhattan).
Step 3: Cover up questions by moving cash between New York and London, and pay out the few investors who ask for redemptions (until one too many come calling). Occasionally lie to the SEC, and operate a legitimate market-making business to keep up appearances. Falsify audit reports.
That's basically it. That, plus the ability to charm $50 billion from credulous investors. Amazing.
The WSJ has the text of Madoff's statement following his guilty plea to 11 criminal charges. Madoff told the judge he was "grateful" for the opportunity to comment publicly about his crimes, saying he was "deeply sorry and ashamed."
Related: Bloomberg says Madoff might be in for a tougher time in prison than your average white-collar felon.
