Greece warned of possible downgrade

Troubles in Greece heightened after Standard & Poor’s put the country’s A-minus credit rating to negative outlook, warning of a possible downgrade.  If the past were to serve as a basis, credit rating downgrade usually follows after a month. ECB President Jean-Claude Trichet also said the country needs to act “courageously” if it is to bring its budget under control.

More from the FT.


The man behind TARP

Washington Post ran this story over the weekend on the man who managed the historic $700bn Troubled Asset Relief Program.  An excerpt:

It was October 2008 when Hank Paulson announced that the government rescue operation, the Troubled Asset Relief Program (TARP), would be run by his aide, Neel Kashkari. The choice was met with considerable surprise. Who was Neel Kashkari? He was too young, too inexperienced and had ties to Wall Street, detractors said. To some, the appointment seemed all wrong. Critics described Paulson as a “Dr. Evil” figure who brainwashed Congress into giving him unprecedented financial authority so that Kashkari, his “Mini-Me,” could distribute it to Wall Street friends.

Overnight, Kashkari became the face of the biggest, and one of the most controversial, market interventions in American history. Even he questioned their chances of success.

The Friday evening he was named, he slumped over a bowl of chips in Bethesda with a childhood friend. He held his head in hands and said: “Dude, tell me something funny.”

“Man, what’s going on, Neel?”

“I’ve been tapped to put TARP together. I gotta set up these seven teams and build this thing from scratch — by Monday morning.”

 It wasn’t a stellar story but I think I’d always be interested in stories of and about people who were part of the whole financial debacle.

Link to the whole WaPo story here.

JAL might get help

The Japanese government might include a 700bn yen aid to the national flag carrier Japan Airlines in its second extra budget for the fiscal year.  The budget might be released tomorrow.  This sent the shares of JAL soaring 7 percent, but some also are seeing the possibility of high swings as traders try to take advantage from huge moves such as today to take profits.

Follow the story on Bloomberg.

Build your own Manhattan

From Bloomberg:

Nakheel PJSC creditors may win the right to seize a strip of barren waterfront land the size of Manhattan if the company defaults on the $3.5 billion bond backing the development.

Investors will be able to seek foreclosure on the property’s mortgages should the Dubai World unit fail to repay the loan, according to the bond’s prospectus. The debt is due on Dec. 14, after which Nakheel has two weeks to remedy a default. The property forms part of the Dubai Waterfront project, where Nakheel plans to build a city twice the size of Hong Kong.

Is it just me or having your own Manhattan in Dubai sounds more interesting than getting paid the debt Dubai World owes you? Provided of course, it becomes as lively as the real Manhattan and it also gives birth to a formidable competitor of the one in the Big Apple. Both, of course, are the two that make the idea very attractive.

More from Bloomberg.

New bosses don’t mean much

An excellent article from WSJ:

If you took the CEOs with the best track records and brought them in to run the businesses with the worst performance, how often would those companies become more profitable? According to economist Antoinette Schoar of Massachusetts Institute of Technology’s Sloan School of Management, who has studied the effects of hundreds of management changes, the answer is roughly 60%. That isn’t much better than the flip of a coin.

Since the 1970s, several other studies have measured what happens when companies bring in new bosses. Most of the findings have been consistent: Changes in leadership account for roughly 10% of the variance in corporate profitability on average.

The real force in corporate performance isn’t the boss, but regression to the mean: Periods of good returns are highly likely to be followed by poor results, and vice versa. High returns attract fierce new competition, driving down future profits; low returns leave the survivors with fewer rivals, leading to better results down the road.

Most researchers agree that a company’s results are determined less by its CEO than by its industry and the economy—which, in turn, are shaped by a host of factors that most CEOs can’t control, like the price of raw materials, the value of the dollar, interest rates and inflation, bursts of technological innovation and so on.

Hat tip to Abnormal Returns.

Link to the article here.

Cadbury deal might just become yummier

Bloomberg is reporting that Nestle might join Hershey in making a bid for UK-based confectionery firm Cadbury, which rejected the hostile takeover made by US-based Kraft.  Pushing through with a Hershey/Nestle tandem would give the former more cash to bid for Cadbury. 

Nestle, the world’s biggest food company, could buy back the U.S. rights to Kit Kat and Rolo brands from Hershey, giving Hershey the power to fund a combination with Cadbury that would value the U.K. company at 840 pence a share, Nomura said.

Another option would be for Nestle to acquire Cadbury’s gum unit. Nestle bidding on its own may value Cadbury at almost 900 pence a share to gain gum and then sell the chocolate division to Hershey or Ferrero SpA, according to the Nomura analysts.

Cadbury has until January 5 to accept Kraft’s offer but only until the 18th of this month to argue against a takeover or ask for a higher price. That said, I still think Kraft-Cadbury won’t happen. 

Read the rest of the entry from Bloomberg.

BHP, Rio announce joint venture deal

After some time of negotiations, the 2 mining giants finally announce the 50/50 joint venture that would allow the two companies to further develop the Pilbara iron ore operations in Western Australia.  This deal would save the companies a combine $10bn in production and capital costs. The remaining challenge for the two is to overcome regulatory hurdles, particularly that which looks into the competitive landscape of the industry and whether this deal would bring a significant antitrust issue.

Know more from the FT.