Sirius-XM: It's about time - Jun. 16, 2008

Might the deal finally get approved? From CNN:
Sirius-XM: It's about time - Jun. 16, 2008:

"The two companies announced their merger nearly 16 months ago. Shareholders approved it in November. Many customers have been eagerly awaiting the chance to sign up for one package that would give it Sirius and XM programming.....And the Department of Justice gave the deal its blessing almost three months ago. So the only hang-up for the merger is a green light from the Federal Communications Commission....According to several published reports today, FCC chairman Kevin Martin has indicated that he would support the deal. The next step is for Martin to call for the remaining members of the FCC to vote on it this week."

From the NY Times:

"If the deal is approved, it would be a major reversal of the commission’s rules, the Post noted: The F.C.C. gave licenses to XM and Sirius in 1997 on the condition that the two satellite companies never merge.

Consumer groups have expressed concern that the merger would allow the combined entity to raise prices." "

Dealbook - CSX Grasping at Straws to End Battle - NYTimes.com

Yeah this one will definitely make it to class! Fighting a proxy vote, CSX management has turned it political. How? By making it a matter of national defense. Uh, yeah. And for good reason, you never know when the British (where the hedge funds are located) are going to launch a surprise attack to get the return of Fort Niagara.

A few highlights from the NY Times:

Dealbook - CSX Grasping at Straws to End Battle - NYTimes.com:

"CSX has managed to turn a proxy contest for 5 of 12 board seats (it is hardly a takeover, at least not yet) into a debate about national security.”"

"The column writes itself: CSX delayed its annual meeting — without first telling its shareholders — and then moved the meeting to a rail yard in the middle of nowhere...."

"Two of the six senators who sent the letter ....receiving $5,000 each this year....[the] chairwoman of the House subcommittee with jurisdiction over the rail industry, has been particularly vocal in trying to prevent TCI from getting on CSX’s board. She has received $38,750 since 1989, including $5,000 in the 2008 election cycle, from CSX....And CSX gave $25,000 to Edward Waters College, in Jacksonville, her alma mater. And then CSX’s chief executive, Michael J. Ward, personally donated another $1 million to Edward Waters College"

Yep. It will make class as a great example of how management can fight takeovers and proxy votes even if it hurts shareholders.

ETFs dominate Canada Cup -- and a looming threat to Canada's mutual funds - The Wealthy Boomer

ETFs dominate Canada Cup -- and a looming threat to Canada's mutual funds - The Wealthy Boomer:

"Seif said ETFs are popular because they're good for investors: 'They provide the ability to get exposure to the market and use them in multiple ways, whether for asset allocation or as a complement to stocks or active managers.'

Near the end of the session Seif took a direct shot at traditional mutual funds: 'High-fee index-hugging general mutual funds charging 2.5% a year that underperform the market just don't cut it any more. That's the reality.'"

I am always surprised that some still pay mutual funds such high fees for performance that mirrors (or worse) indexed performance.

At Bear, an Apology Is Met With Silence - NYTimes.com

At Bear, an Apology Is Met With Silence - NYTimes.com:

"The tally in support of the merger was 84 percent, Bear Stearns said....Inside the building, however, the mood was somber, if not tearful...The new entity will be much leaner....bout 7,500 Bear Stearns bankers have lost their jobs, along with as many as 3,500 employees of JPMorgan.

and later:

"I have no anger, only regret,” Mr. Cayne said...."I personally apologize. I feel an enormous amount of pain and management feels an enormous amount of pain.”

The audience of Bear employees, directors and investors, many of whom Mr. Cayne has known for years and who lost large parts of their savings and fortunes, received his remarks in dead silence."

Wow.

Study Casts Doubt on Key Rate - WSJ.com

Interesting...

Suppose you have two measures of something. One that is market driven (observable prices) whereas the other is based off reported data. Usually the two move together. However, when they diverge, someone must ask why and which is more correct.

That is essentially what the WSJ did in the following article. They look at LIBOR and teh credit spread to gauge the level of uncertainity in the market. Sure enough, the two usually move together, but not always.

Study Casts Doubt on Key Rate - WSJ.com:

"...beginning in late January, as fears grew about possible bank failures, the two measures began to diverge, with reported Libor rates failing to reflect rising default-insurance costs, the Journal analysis shows. The gap between the two measures was wider for Citigroup, Germany's WestLB, the United Kingdom's HBOS, J.P. Morgan Chase & Co. and Switzerland's UBS than for the other 11 banks. One possible explanation for the gap is that banks understated their borrowing rates."

Much of the paper is based on the fact that LIBOR is based BORROWING rates as reported by banks. This method of LIBOR calculation is not what I thought was done, so I learned somethig here. I always thought this was calculated by the rate banks were willing to lend at not what they were borrowing at. The two could have different numbers if the banks have an incentive to report lower rates for borrowing to assure the market their financial soundness.

How different cultures deal with free loaders

From the WSJ's Science Journal - WSJ.com:

"In the most sweeping global study yet of cooperaton, a team of experimental economists tested university students in 15 countries to see how people contribute to joint ventures and what happens to them when they don't. The European research team discovered startling differences in how groups around the world react when punishment is handed out for antisocial behavior."

Another look in:

"Among students in the U.S., Switzerland, China and the U.K., those identified as freeloaders most often took their punishment as a spur to contribute more generously. But in Oman, Saudi Arabia, Turkey, Greece and Russia, the freeloaders more often struck back, retaliating against those who punished them...."

The actual article is here.

Charges of Insider Trading for a Wall Street Luminary - NYTimes.com

Charges of Insider Trading for a Wall Street Luminary - NYTimes.com:

"Dr. Marshall, a retired professor at St. John’s University and a fixture on the Wall Street lecture circuit, was accused by the Securities and Exchange Commission in March of passing inside information about a multibillion-dollar corporate takeover to a professor at Pace University. The Pace professor, Alan L. Tucker, made more than $1 million trading on the tips in 2007, according to the S.E.C. The Justice Department has filed criminal charges"

While this was first reported back in March, the NY Times article now has nmany more details. Definitely one to use in class.

Bears Last Day on Earth - Mergers, Acquisitions, Venture Capital, Hedge Funds -- DealBook - New York Times

Bears Last Day on Earth - Mergers, Acquisitions, Venture Capital, Hedge Funds -- DealBook - New York Times:

"Bear Stearns shareholders are all but certain to approve the sale of the securities firm to JPMorgan in a vote Thursday morning. Bear will most likely be immediately merged out of existence as a public company. The Bear Stearns name will all but disappear, according to a report in Crain’s New York. To avoid the appearance of grave-dancing, J.P. Morgan will wait several weeks before etching its name on Bear’s headquarters on Madison Avenue, Crain’s said.

The Deal Professor takes the opportunity to consider what Bear’s downfall says about moral hazard, systemic risk and corporate governance."

Fear, Rumors Touched Off Fatal Run on Bear Stearns - WSJ.com

Fear, Rumors Touched Off Fatal Run on Bear Stearns - WSJ.com:

"Part One: Missed Opportunities As the firm's fortunes spiraled downward, executives squabbled over raising capital and cutting its inventory of mortgages.
Part Two: Run on the Bank Executives believed they were about to turn a corner, but rumors and fear sent clients, trading partners and lenders fleeing.
Part Three: Deal or No Deal? The Fed pressured Bear Stearns to sell itself, but a misstep in the hastily drawn agreement nearly scuttled the deal."

Wow. Possibly the best series of articles I have seen in the WSJ in years. One Look-in:

""Do you have any idea what is going on?" Mr. Minikes asked, cutting off his boss. "Our cash is flying out the door. Our clients are leaving us."

It was the beginning of a frantic 72 hours that would bring the Wall Street firm to its knees and threaten the stability of the global financial system. Interviews with more than two dozen current and former Bear Stearns executives, directors, traders and others involved show how quickly a company that took 85 years to build could unravel."

Bloomberg.com: Exclusive

Bloomberg.com: Exclusive: "

Credit-default swaps are derivatives, meaning they're financial contracts that don't contain any actual assets. Their value is based on the worth of underlying loans and bonds. Swaps are similar to insurance policies -- with two key differences.

Unlike with traditional insurance, no agency monitors the seller of a swap contract to be certain it has the money to cover debt defaults. In addition, swap buyers don't need to actually own the asset they want to protect.

It's as if many investors could buy insurance on the same multimillion-dollar home they didn't own and then collect on its full value if the house burned down

."

Yahoo Nominates Existing Board - NYTimes.com

Although the stakes are lower, this may be more exciting than the presidential election!

Yahoo Nominates Existing Board - NYTimes.com:

"Yahoo nominated 9 of its 10 existing directors for re-election to the company’s board on Thursday, setting the stage for a showdown with dissident shareholders at its annual shareholder meeting."

Court Upholds Tax Exemptions for Municipal Bonds - New York Times

Court Upholds Tax Exemptions for Municipal Bonds - New York Times:

"The Supreme Court on Monday upheld the preferential tax break that nearly all states give their residents who invest in bonds issued by the state and its municipalities. By a vote of 7 to 2, the justices rejected the argument that a state engages in unconstitutional discrimination against interstate commerce by exempting the interest on its bonds from residents’ taxable income while taxing the interest earned on the bonds of other state"

Five Basics for Building a Solid Financial Future - New York Times

Five Basics for Building a Solid Financial Future - New York Times:

"“In Defense of Food” that provides clarity amid the bounty of choices on supermarket shelves: “Eat food. Not too much. Mostly plants.”

Boiling down investing is a similar exercise: Index (mostly). Save a ton. Reallocate infrequently.

Good advice.

The rise of Islamic finance | Islamic Finance and Banking

The rise of Islamic finance | Islamic Finance and Banking: "

Finance that complies with Shariah, or Islamic law, is still a niche within the ethical investing niche. In all, there are at least $500bn worth of Islamic finance assets worldwide. That's not much in terms of global banking - US banks alone hold about $12.7 trillion in assets.

But the industry's growth is eye-catching: Islamic banking has expanded by more than 10% annually over the past decade, according to Standard & Poor's. It's grabbing the attention of some of the biggest banks in the world and changing how they do business."