From Bloomberg
By Antonio Ligi and Richard Weiss
Oct. 19 (Bloomberg) -- Wal-Mart Stores Inc.’s new line of food containers made from corn starch also hold the promise of a revolution by global chemical companies including BASF SE.
BASF is developing chemicals from bacteria and fungi instead of processing oil derivatives, cutting back on smokestacks that belch carbon dioxide into the atmosphere. Royal DSM NV will start a project by year-end with enzymes to produce succinic acid for car coolants. Mass production may start 2012.
“It’s not voodoo anymore,” said Claus Bollschweiler, a trained biologist who heads up BASF’s research into hydrophobin proteins derived from fungi. “This is a good investment.”
Engineering acids and substances from cells is the nascent part of a biotech chemical industry that’s fueled by demand for bioethanol and set to grow in sales by one-half to 153 billion euros ($227 billion) between 2007 and 2012, McKinsey & Co. estimates. The migration from food, fuels and drugs to basic industrial chemicals is a potential lifeline for BASF and rivals that have struggled to compete with oil-rich Middle East peers.
Bollschweiler’s lab is a dot on the landscape of BASF’s Ludwigshafen headquarters, a 4 square-mile complex dominated by interconnecting pipes, chimneys and plants. The hydrophobins he’s researching can be used for shoe waterproofing or cosmetics that are easier to apply. A venture with bakery ingredients supplier CSM NV to ferment succinic acid will start next year.
‘Reality’
Bollschweiler’s efforts underscore the fallout from volatile crude costs that threaten to return to near $100 a barrel by 2012, according to a Bloomberg analyst survey, forcing chemicals suppliers to seek alternative sources of production.
Sales from industrial biotech-derived chemicals totaled about 230 million euros in 2008, only a fraction of BASF’s 62 billion euros in total revenue. The world’s largest chemical company has spent 135 million euros to research bio-chemicals over three years. Total research spending will be about 1.35 billion euros this year, BASF said in May.
DSM, based in Heerlen, the Netherlands, has closed traditional chemical factories for biotech sites, responding to demands from companies like Walmart who seek more environmentally friendly materials. Procter & Gamble Co., the largest consumer-goods company, is looking for bio-based compounds for diapers to replace acrylics.
DSM’s new succinic acid is produced by the fermentation of glucose in large stainless steel vats, avoiding the need for a cracker that breaks oil and gas down into components like naptha that’s used in plastics and adhesives. The biotech version may cut energy use by 40 percent as well as reduce carbon dioxide emissions, the company said.
Takeovers
“This is no longer just a promise,” Volkert Claassen, head of DSM’s unit developing the acid, said in an interview. “It’s reality. Two years ago we made the strategic decision to sell our chemical production route for succinic acid. We will be one of the front runners. Companies close to the consumer are driving this change.”
Saudi Basic Industries Corp. bought General Electric Co. plastics business for $11.6 billion in 2007, highlighting the move nearer to the consumer by Middle East petrochemical companies. Both BASF and Dow Chemical Co. are exiting styrene markets after inflated oil prices reduced margins.
Crude approached almost $80 a barrel last week on optimism demand will increase amid improved prospects for a U.S. recovery. That’s an impetus to the so-called white biotech industry. The label contrasts with red biotech for medicinal applications, and green biotech for gene-modified seeds.
Price Issue
With oil at $65 a barrel, Novozymes A/S’s enzyme-based acrylic acid in the U.S. is competitive with oil-based equivalents, said Thomas Schaefer, the Bagsvaerd, Denmark-based company’s senior research director. If made in lower-cost Brazil, it would be competitive with oil at $45.
“As a strategist or top manager, you have to think what you will offer in 10 years that is not a commodity and not in complete competition with rivals because then it is a price issue,” said Harald Gruber, a Silvia Quandt Bank analyst based in Frankfurt. “Some day in the future, fossil fuels will become scarce. The oil price will again increase.”
DuPont Co. is looking to broaden its bio-chemical range after creating propanediol by fermenting corn sugar and adding it to fabrics that make carpets and clothes more stain resistant, said biomaterials head John Ranieri. The Wilmington, Delaware-based company’s product pipeline includes thermoplastic elastomers, a rubber-plastic cross used in tubing and hoses.
More Complex, Better
“Four or five years ago, we would have said we are just looking for new specialties products,” Ranieri said in an interview. “Now it’s different, we are looking at all.”
Novozymes will announce two contracts for different chemicals over this year and next, adding to its acrylic acid for diapers. Within 30 to 50 years, biotech refineries will have sprung up all over the countryside, replacing the old-school plants and chemical complexes typically located in ports where the crude arrives, CEO Steen Riisgaard said in an interview.
Wacker Chemie AG is assessing if its success in producing acetic acid, used to make polymers, can be translated into large-scale production, said Guenter Wich, Wacker’s head of biotechnology.
“The more complex the chemistry, the greater the opportunities for white biotech are,” he said.
Showing posts with label bloomberg. Show all posts
Showing posts with label bloomberg. Show all posts
Tuesday, October 20, 2009
Wednesday, September 16, 2009
"New Japanese Government Means Old Bureaucrats Afflict Hatoyama"
This is interesting. Given how our own government is a revolving door of senior officials, scholar "mandarins" and other entrenched interests, it begs a similar question of how well any political party (other than the PAP) could function (much less rule effectively) were they actually to take power in Singapore.
Winning elections is one thing. Governing effectively despite the bureaucracy is another. We shall see how robust Japan's democracy actually is.
From Bloomberg News
By Stuart Biggs and Sachiko Sakamaki
Sept. 16 (Bloomberg) -- Incoming Japanese Prime Minister Yukio Hatoyama plans to wrest power from Japan’s bureaucracy starting when his parliament convenes today. His own party, which has never governed, may prove his biggest obstacle.
Novice lawmakers will be up against civil servants who control much of policymaking, from approving construction projects to bestowing government aid, said Steven R. Reed, a political science professor at Chuo University in Tokyo. During 50 years of single-party rule, the opposition wasn’t given information that would allow effective oversight, he said.
“Opposition politicians haven’t known what’s going on,” Reed said in an interview. “Even for an American congressman there are things like, where is the bathroom, what’s the first step for submitting a bill. Those kinds of things are real, but there are more of them in Japan. Bureaucratic power comes from expertise, secrecy and time.”
The freshman legislators’ inexperience will make it harder to create a government that is more independent of what Hatoyama has called Japan’s triangle of special-interest groups: bureaucrats, politicians and industries such as construction. He says he will send 100 lawmakers into the ministries to cut personnel expenses by 20 percent and free up cash for policies including raising child benefits and eliminating highway tolls.
Hatoyama’s Democratic Party of Japan won 308 seats in Aug. 30 elections. Almost half went to first-time legislators and only 12 to lawmakers who have served in a cabinet. Their average age is 48, compared with 55 for the Liberal Democratic Party, which has four ex-prime ministers and four former finance chiefs among its 119 lower-house members.
More Bonds
London-based Barclays Plc and New York-based Morgan Stanley say that DPJ plans to increase spending on child care and employment while lowering corporate and gasoline taxes and eliminating tolls may force the government to issue more bonds.
Yields on Japan’s benchmark 10-year bond are likely to rise to 1.39 percent by the end of the year from 1.31 percent, according to a Bloomberg News survey of economists and analysts that puts a heavier weighting on more recent forecasts.
The elections brought to the Diet such new faces as Hirotaka Matsuoka, 27, the body’s youngest member. His experience is as a “company employee,” according to the DPJ Web site. The next-youngest, Katsuhito Yokokume, 28, worked as a lawyer for two years.
“Not having experience also means that the ruling party is free of constraints, and that is a strength,” Yokokume said in a telephone interview.
Matsuoka declined an interview request, citing time limitations while preparing to take office.
Only on Winning
“These young people don’t know anything about parliament,” said Hirohisa Fujii, a DPJ lawmaker asked by Hatoyama, 62, to postpone retirement and run again, at the age of 77, to add experience to the ticket. “Many of them only focused on winning the race.”
The DPJ is pitting itself against Japan’s main source of stimulus since its bubble economy burst two decades ago. Government spending on dams, roads and bridges was 4.4 percent of gross domestic product last year as the LDP drove public debt to almost twice GDP or $175,000 for every Japanese household.
“It’s going to be an enormous challenge,” said Takako Ebata, 49, a DPJ freshman who defeated former Defense Minister Yuriko Koike. “It’s not something politicians can accomplish on their own. The question is how many bureaucrats agree and cooperate with us.”
Democratic Party leaders know they need experienced people in key positions, said Fujii, a former LDP lawmaker who was finance minister in 1993. The Nikkei newspaper reported yesterday that he will get the post again.
Budget Decisions
The DPJ’s Naoto Kan, 62, a former health minister, will head a new National Strategy Bureau responsible for budget decisions. Ichiro Ozawa, 67, who formerly held the No. 2 position in the LDP, is the party’s secretary general. Makiko Tanaka is an ex-foreign minister.
The DPJ’s coalition partner chiefs are also getting cabinet posts. People’s New Party leader Shizuka Kamei, 72, a former construction minister for the LDP, is the minister for financial services. Social Democrat leader Mizuho Fukushima, 53, will be the consumer affairs minister, the Nikkei newspaper said.
The LDP pushed the inexperience theme before the election, arguing the DPJ’s campaign pledges would cost more than forecast. Former prime minister Junichiro Koizumi, who led the LDP to a landslide victory in 2005, said during an Aug. 17 rally that he looked forward to watching the DPJ fail.
The DPJ’s lawmakers have focused on specific areas of policy as professionals or in opposition more than their LDP counterparts, helping offset any disadvantage they may face negotiating with bureaucrats, Chuo University’s Reed said.
Shinsuke Amiya, 51, is a former Merrill Lynch & Co. vice chairman in Japan. Takatane Kiuchi, 43, worked at Merrill and the brokerage units of Deutsche Bank AG and UBS AG.
Still, many lawmakers will be in a similar position to Ebata this week. She will walk into the Diet building for only the third time in her life, after a sixth-grade school visit and last year with other DPJ candidates.
“There are so many old customs and I’m honestly wondering how much I can achieve as a newcomer,” she said. “But people elected me out of their strong desire for me to change things.”
Wednesday, June 24, 2009
Acai berries
I'm a fruit juice fanatic.
In fact, I drink only small amounts of plain water everyday. In decreasing quantities, I drink fruit juice, soy or grain (rice, oat, etc.) milk, and then water. I almost never drink coffee or tea.
Now, while I quite like the taste of the new, locally promoted Peelfresh Powerberries juice, I'm not a big fan for the addition of acai berries.
I like the product, but I'll probably won't drink too much of it.
Income and career choices
As a corollary to my most recent rant, here's a few news stories that were fortuitously published within a few days of each other.
Amherst Grads Shun Wall Street, Save World as $45,500 Teachers, partly due to wilted Wall Street prospects. Funny, for all those high-sounding ideals, if finance jobs were plentiful and sign-on bonuses were de riguer, I'm pretty sure we wouldn't hear about Amherst graduates going “My experience in finance just wasn’t as satisfying.”. And now that many people can't afford to spend as much as they used to because of the recession, hankering for material goods and conspicuous consumption are suddenly so gauche.
Citigroup is said to be raising pay, while despite recession, demand for skilled labor is high. For all the demand for skilled welders and petroleum geotechnical engineers (petroleum engineers!), who actually do something productive and useful, the pay for these two kinds of jobs is still lower than bankers who, with pay increases, will make about as much this year as last year.
A geotechnical engineer's job, or a critical care nurse's job, is not as hard as a banker's, nor does it require as much training.
It's waaay harder, requires much more training, and lives are actually at stake. And yet, at $65,000 a year, or $100,000 a year, it's a fraction of what a banker rakes in.
Thursday, November 20, 2008
"Lobbyist-Bashing by Obama Doesn't Dim Industry's Boom Forecast"
From Bloomberg News
By Jonathan D. Salant and Kristin Jensen
Nov. 20 (Bloomberg) -- Lobbyists Heather and Tony Podesta took over a Denver restaurant during the Democratic National Convention in August to host a party for lawmakers and other power brokers. Their guests wore Barack Obama buttons. The Podestas were wearing a label of their own: a scarlet ``L.''
The tags were an allusion to President-elect Obama's demonization of lobbyists throughout the campaign, even banning them from raising money for him or making contributions.
Now, with Obama ready to take office in January, lobbyists aren't quavering with fear. Many view the changed political landscape in Washington as a potential boon for their firms, which will be called upon to help clients navigate Congress and a new administration.
``We're not worried,'' said former Democratic Representative Vic Fazio of California, now a senior adviser at the law and lobbying firm Akin Gump Strauss Hauer & Feld LLP. ``We will do well.''
Obama has a number of people affiliated with lobbying firms on his transition team, and yesterday, former Senate Majority Leader Tom Daschle accepted an offer to be secretary of Health and Human Services. Daschle, who will lead the new administration's effort to revamp the U.S. health-care system, works for Alston & Bird LLP.
Daschle has been able to serve as an Obama campaign adviser because he wasn't registered as a lobbyist, though his firm earned $3.5 million this year lobbying for the health industry, including companies such as Woonsocket, Rhode Island-based CVS/Caremark Corp. and Birmingham, Alabama-based HealthSouth Corp. The health industry accounted for 60 percent of the firm's lobbying revenue during the first nine months of 2008.
Lobbyist-Bashing
Fazio and other prominent members of the influence-peddling community said the lobbyist-bashing by Obama, 47, and Republican nominee John McCain, 72, hasn't had a lasting impact. It is one thing to rail against lobbyists in a campaign and another to curb their influence in practice, they said.
``Both men are sophisticated enough to know lobbyists play a vital First Amendment role in our governmental process,'' said former Republican Representative Robert Walker of Pennsylvania, now chairman of Wexler & Walker Public Policy Associates, a Washington lobbying firm.
During the campaign, both Obama and Arizona Senator McCain criticized the influence of lobbyists and the interests they represent.
`Status Quo'
``When we come together, our voices are more powerful than the most entrenched lobbyists, or the most vicious political attacks, or the full force of a status quo in Washington that wants to keep things just the way they are,'' Obama said at a rally in Florida on Nov. 3, the day before the election.
After winning, Obama announced that lobbyists would be prohibited from contributing to his transition committee, and that they couldn't serve as advisers on any issues where they had been paid to represent a company's interests.
Even so, firms such as Walker's, which was paid $6 million to lobby in the first nine months of 2008, and Patton Boggs LLP, which received $29.8 million, report an increase in business from companies and other interest groups.
With the election past, ``people are a lot nicer to me,'' said Gerry Sikorski, a former Democratic lawmaker from Minnesota who runs the government section at Holland & Knight LLP, which was paid $11.1 million. ``I know I'm not a better person today than I was Nov. 3.''
Lobbyists expect the demand to continue.
`Respected People'
``People will want to hire knowledgeable and respected people in Washington who have a lot of insight and knowledge about the players and the ability to fashion appropriate outreach to decision makers,'' said Fazio, whose firm was paid $26.9 million to lobby during the first nine months of 2008, second only to Patton Boggs in revenue, according to the Center for Responsive Politics, a Washington-based research group.
There also will be a new demand for Washington veterans who aren't registered to lobby but nonetheless wield influence because of their knowledge of the White House and Capitol Hill such as Daschle, said former Democratic National Committee National Chairman Joe Andrew.
``What you will find is a return of the Washington lawyer, someone who is not a lobbyist but has legitimate substantive experience,'' said Andrew, who isn't registered to lobby, though his law firm, Sonnenschein Nath & Rosenthal LLP, was paid $5.1 million in 2008.
Internet Grassroots
Still, the lobbying industry recognizes that it will have to function in a new environment. For one thing, lobbyists will face competition from the Internet, which Obama's campaign showed can be a powerful tool to generate grassroots support for candidates or issues. Lobbyists will be pressured to demonstrate that their position has broad support or to show why a lawmaker should support their client's position in the face of a grassroots uprising for the other side.
``You're going to have traditional lobbying side by side with e-lobbying side by side with new transparency side by side with diverse groups and interests and causes,'' Sikorski said. ``It'll be a new field for all of us to work in.''
Besides, said Nick Allard, a partner at Patton Boggs, lobbyist-bashing isn't a recent phenomenon.
``Lobbyists have been around at least since the Garden of Eden, when the serpent persuaded Eve that knowledge was a good thing,'' Allard said. ``Look at what reward the serpent got.''
By Jonathan D. Salant and Kristin Jensen
Nov. 20 (Bloomberg) -- Lobbyists Heather and Tony Podesta took over a Denver restaurant during the Democratic National Convention in August to host a party for lawmakers and other power brokers. Their guests wore Barack Obama buttons. The Podestas were wearing a label of their own: a scarlet ``L.''
The tags were an allusion to President-elect Obama's demonization of lobbyists throughout the campaign, even banning them from raising money for him or making contributions.
Now, with Obama ready to take office in January, lobbyists aren't quavering with fear. Many view the changed political landscape in Washington as a potential boon for their firms, which will be called upon to help clients navigate Congress and a new administration.
``We're not worried,'' said former Democratic Representative Vic Fazio of California, now a senior adviser at the law and lobbying firm Akin Gump Strauss Hauer & Feld LLP. ``We will do well.''
Obama has a number of people affiliated with lobbying firms on his transition team, and yesterday, former Senate Majority Leader Tom Daschle accepted an offer to be secretary of Health and Human Services. Daschle, who will lead the new administration's effort to revamp the U.S. health-care system, works for Alston & Bird LLP.
Daschle has been able to serve as an Obama campaign adviser because he wasn't registered as a lobbyist, though his firm earned $3.5 million this year lobbying for the health industry, including companies such as Woonsocket, Rhode Island-based CVS/Caremark Corp. and Birmingham, Alabama-based HealthSouth Corp. The health industry accounted for 60 percent of the firm's lobbying revenue during the first nine months of 2008.
Lobbyist-Bashing
Fazio and other prominent members of the influence-peddling community said the lobbyist-bashing by Obama, 47, and Republican nominee John McCain, 72, hasn't had a lasting impact. It is one thing to rail against lobbyists in a campaign and another to curb their influence in practice, they said.
``Both men are sophisticated enough to know lobbyists play a vital First Amendment role in our governmental process,'' said former Republican Representative Robert Walker of Pennsylvania, now chairman of Wexler & Walker Public Policy Associates, a Washington lobbying firm.
During the campaign, both Obama and Arizona Senator McCain criticized the influence of lobbyists and the interests they represent.
`Status Quo'
``When we come together, our voices are more powerful than the most entrenched lobbyists, or the most vicious political attacks, or the full force of a status quo in Washington that wants to keep things just the way they are,'' Obama said at a rally in Florida on Nov. 3, the day before the election.
After winning, Obama announced that lobbyists would be prohibited from contributing to his transition committee, and that they couldn't serve as advisers on any issues where they had been paid to represent a company's interests.
Even so, firms such as Walker's, which was paid $6 million to lobby in the first nine months of 2008, and Patton Boggs LLP, which received $29.8 million, report an increase in business from companies and other interest groups.
With the election past, ``people are a lot nicer to me,'' said Gerry Sikorski, a former Democratic lawmaker from Minnesota who runs the government section at Holland & Knight LLP, which was paid $11.1 million. ``I know I'm not a better person today than I was Nov. 3.''
Lobbyists expect the demand to continue.
`Respected People'
``People will want to hire knowledgeable and respected people in Washington who have a lot of insight and knowledge about the players and the ability to fashion appropriate outreach to decision makers,'' said Fazio, whose firm was paid $26.9 million to lobby during the first nine months of 2008, second only to Patton Boggs in revenue, according to the Center for Responsive Politics, a Washington-based research group.
There also will be a new demand for Washington veterans who aren't registered to lobby but nonetheless wield influence because of their knowledge of the White House and Capitol Hill such as Daschle, said former Democratic National Committee National Chairman Joe Andrew.
``What you will find is a return of the Washington lawyer, someone who is not a lobbyist but has legitimate substantive experience,'' said Andrew, who isn't registered to lobby, though his law firm, Sonnenschein Nath & Rosenthal LLP, was paid $5.1 million in 2008.
Internet Grassroots
Still, the lobbying industry recognizes that it will have to function in a new environment. For one thing, lobbyists will face competition from the Internet, which Obama's campaign showed can be a powerful tool to generate grassroots support for candidates or issues. Lobbyists will be pressured to demonstrate that their position has broad support or to show why a lawmaker should support their client's position in the face of a grassroots uprising for the other side.
``You're going to have traditional lobbying side by side with e-lobbying side by side with new transparency side by side with diverse groups and interests and causes,'' Sikorski said. ``It'll be a new field for all of us to work in.''
Besides, said Nick Allard, a partner at Patton Boggs, lobbyist-bashing isn't a recent phenomenon.
``Lobbyists have been around at least since the Garden of Eden, when the serpent persuaded Eve that knowledge was a good thing,'' Allard said. ``Look at what reward the serpent got.''
Friday, November 7, 2008
Can you say "Tang Dynasty Village"?
I had mused several months ago to myself that the Integrated Resorts would open just in time for a recession.
Now, it looks like they might not even open at all.
Las Vegas Sands is in talks with Singapore banks and the government. No public information however, is available. The Bloomberg story is here.
Las Vegas Sands is probably asking for any of several things: funding (either debt or equity financing), an extension or suspension of the resort opening date, a relaxation of contractual obligations, or a severe cutback in terms of project scope.
The Singapore government now has to decide whether to invest more money in order to keep this project alive and to recover 'sunk costs (and face)', or to cut back now to avoid 'throwing good money after bad'. An unenviable position that many stock market investors (especially those who trade on margin) have had to make in the last several tumultous weeks.
If Singapore ponies up our (yes, taxpayers') money, then the project (but maybe not the company) will probably survive. Just don't count on it working wonders for our economy.
If Las Vegas Sands defaults on its debt (the likeliest reason will be due to breached covenants and an inability to refinance debt), we can expect:
1.An immediate plunge in the STI
2.Many local companies, especially those in the construction industry, to get crushed under the burden of bad debts traced directly or indirectly to Las Vegas Sands.
3.Lots of work for local bankruptcy lawyers.
4.A sharp fall in GDP and a concomitant climb in unemployment figures.
5.A half-baked Integrated Resort a la Tang Dynasty Village.
6.Huge holes in the balance sheets of the local banks that were part of the lending syndicate to Las Vegas Sands.
7.A general loss of confidence in the economy.
Now, it looks like they might not even open at all.
Las Vegas Sands is in talks with Singapore banks and the government. No public information however, is available. The Bloomberg story is here.
Las Vegas Sands is probably asking for any of several things: funding (either debt or equity financing), an extension or suspension of the resort opening date, a relaxation of contractual obligations, or a severe cutback in terms of project scope.
The Singapore government now has to decide whether to invest more money in order to keep this project alive and to recover 'sunk costs (and face)', or to cut back now to avoid 'throwing good money after bad'. An unenviable position that many stock market investors (especially those who trade on margin) have had to make in the last several tumultous weeks.
If Singapore ponies up our (yes, taxpayers') money, then the project (but maybe not the company) will probably survive. Just don't count on it working wonders for our economy.
If Las Vegas Sands defaults on its debt (the likeliest reason will be due to breached covenants and an inability to refinance debt), we can expect:
1.An immediate plunge in the STI
2.Many local companies, especially those in the construction industry, to get crushed under the burden of bad debts traced directly or indirectly to Las Vegas Sands.
3.Lots of work for local bankruptcy lawyers.
4.A sharp fall in GDP and a concomitant climb in unemployment figures.
5.A half-baked Integrated Resort a la Tang Dynasty Village.
6.Huge holes in the balance sheets of the local banks that were part of the lending syndicate to Las Vegas Sands.
7.A general loss of confidence in the economy.
Friday, October 24, 2008
Minibonds compensation
Now that DBS, among other banks, is starting to compensate investors, this opens up whole new issues to consider.
For starters, the definition of who's going to get compensated is bound to make some people very happy, and some very unhappy. Frankly, I think the whole episode of compensation stinks. It just seems so arbitrary who's going to be made whole and who's going to be left out in the rain.
I like the Hong Kong plan better as it forces banks to make a market for these highly illiquid securities. Now do bear in mind that investors will have to swallow major losses by selling these securities at 'market' prices back to the banks (it remains to be seen how market prices will be arrived at when these securities were never meant to be traded on a secondary market).
The reason why I dislike the Singapore version of the Minibond resolution is that it conflates the two issues of investment risk and legal liability for product misrepresentation/mis-selling.
Everyone who bought the Minibonds should be on the hook for losses, regardless of educational level, retiree status, life savings on the line etc. But if investors feel hard done by misrepresentation or mis-selling of the Minibonds, then it should be the courts and the legal system that should decide if the banks should pay damages to the investors (which may be the total sum invested, or perhaps even more to take into account 'emotional distress' and the like). And in the public interest, perhaps it should be a regulatory authority like the MAS that undertakes legal action on behalf of all investors, and not just those that lost money in this Minibonds fiasco. In doing so, MAS could also seek to impose a punitive penalty on banks that actively hard-sell such risky products to retail investors, and hence discourage such behavior in the future.
Instead, we have some banks (and not every bank who sold the Minibonds) arbitrarily deciding who to make whole based on some in-house measure of whether the product should have been sold to so such and such investors or not. That is just so wrong. But then again, maybe this is what our vaunted monetary regulatory authority wants: to leave "doing the right thing" open to interpretation so it absolves itself of responsibility, doesn't have to take an unambiguious stand (in any direction), and hence doesn't have to offend anyone at all.
As for other peripheral issues:
DBS shareholders are probably none too pleased by this turn of events, but frankly, bad publicity is more costly than just $80-$90 million dollars. DBS had already committed itself to this fiasco when it decided to distribute this risky structured product. Oh, and my previous comment on how this will indirectly cost taxpayers still holds.
Thus far, it appears that DBS will compensate those investors it has decided to make whole out of its own funds. However, if I were one of those investors not compensated, I would be mighty suspicious about whether the compensation were to be at my expense, that is, if the compensation monies could possibly have come out, at least in part, from the dregs of what remains of the Minibonds. This is a very remote possibility, but if I were such an investor, this would be exactly what I would be asking DBS management.
Wednesday, October 22, 2008
Some quick thoughts on the Minibond fiasco
I have less time these days to blog in-depth about topics I am interested in, but nonetheless, I will pen down some quick thoughts. This post is on the Lehman Brothers Minibond fiasco.
I wrote a post on structured products about 3 months ago, and it is as relevant now as it was before.
Notwithstanding the plight of retirees losing their lifesavings (which is regrettable), I can't say I have much sympathy for the people who lost thousands of dollars in this most recent investment debacle. The golden rule is: don't know, don't touch. If people were more diligent with their investments, asked a few more questions, had a healthy dose of skepticism, and weren't swayed by the greed for an improved yield of a few percentage points over the fixed deposit rate, without questioning the disproportionately higher level of risk they were shouldering, they wouldn't find themselves in this situation today, gullible things that they are.
As it stands, my opinion is that their only case for getting their money back is to sue for misrepresentation of the product they were sold. And the chances of success for that are slim to none. After all, information on the product could be found in the prospectus, in black and white. The investor should take responsibility for their own actions. Even if he or she was unable or unwilling to read and understand the prospectus, he or she could have sought professional advice in doing so.
[To would-be flamers, please note that I am NOT indulging in an exercise in schadenfreude. I just think that investors should bear some responsibility as well for their losses. Ignorance is a poor defence for one's actions.]
Some other quick thoughts:
How much do I think investors will get upon dissolution of Minibonds? At best, pennies on the dollar, and more likely, nothing at all. Numbers like 50-70% are pure fantasy.
Separately, if the local banks (like DBS) do compensate investors out of their own balance sheets under overwhelming public pressure, you should realize that this comes indirectly out of taxpayers' money. Why do I say that? Because the government has recently tweaked the laws to allow it to spend more of our reserves, and the government owns large stakes in many banks (including DBS and Citibank) through its sovereign wealth fund holdings. I am not presuming a judgment call on whether bailing out the 10000 disgruntled Singaporeans (including impoverished retirees) is the right thing to do (or not). I am merely stating categorically that thanks to the government's byzantine layers of ownership of stakes in local banks, there are taxpayer dollars involved here should investors be compensated.
As for MAS's laughable comment on local banks to "do the right thing" and PM Lee's remarkable silence on the fiasco:
MAS is showing how toothless it really is. It can say anything it wants on this matter, but it either lacks the power or (perhaps more likely) the political will to enforce any of it.
As for the PM, I think it's a good move (for him) to say nothing. As the old adage goes, if you have nothing good to say, don't say anything at all. If the PM comes out with a speech that is anything less than in strong favor of making investors whole, investors who have been incessantly portrayed in the media as being impoverished retirees who have lost their life savings, he risks huge loss in credibility, empathy, political capital...you name it. On the other hand, if he does make such a speech, you can kiss goodbye to all the hedge funds, slush funds, private equity and other monies that have made their way here thanks to our friendly, welcoming, lightly regulated, and most importantly, discreet and circumspect environment.
I wrote a post on structured products about 3 months ago, and it is as relevant now as it was before.
Notwithstanding the plight of retirees losing their lifesavings (which is regrettable), I can't say I have much sympathy for the people who lost thousands of dollars in this most recent investment debacle. The golden rule is: don't know, don't touch. If people were more diligent with their investments, asked a few more questions, had a healthy dose of skepticism, and weren't swayed by the greed for an improved yield of a few percentage points over the fixed deposit rate, without questioning the disproportionately higher level of risk they were shouldering, they wouldn't find themselves in this situation today, gullible things that they are.
As it stands, my opinion is that their only case for getting their money back is to sue for misrepresentation of the product they were sold. And the chances of success for that are slim to none. After all, information on the product could be found in the prospectus, in black and white. The investor should take responsibility for their own actions. Even if he or she was unable or unwilling to read and understand the prospectus, he or she could have sought professional advice in doing so.
[To would-be flamers, please note that I am NOT indulging in an exercise in schadenfreude. I just think that investors should bear some responsibility as well for their losses. Ignorance is a poor defence for one's actions.]
Some other quick thoughts:
How much do I think investors will get upon dissolution of Minibonds? At best, pennies on the dollar, and more likely, nothing at all. Numbers like 50-70% are pure fantasy.
Separately, if the local banks (like DBS) do compensate investors out of their own balance sheets under overwhelming public pressure, you should realize that this comes indirectly out of taxpayers' money. Why do I say that? Because the government has recently tweaked the laws to allow it to spend more of our reserves, and the government owns large stakes in many banks (including DBS and Citibank) through its sovereign wealth fund holdings. I am not presuming a judgment call on whether bailing out the 10000 disgruntled Singaporeans (including impoverished retirees) is the right thing to do (or not). I am merely stating categorically that thanks to the government's byzantine layers of ownership of stakes in local banks, there are taxpayer dollars involved here should investors be compensated.
As for MAS's laughable comment on local banks to "do the right thing" and PM Lee's remarkable silence on the fiasco:
MAS is showing how toothless it really is. It can say anything it wants on this matter, but it either lacks the power or (perhaps more likely) the political will to enforce any of it.
As for the PM, I think it's a good move (for him) to say nothing. As the old adage goes, if you have nothing good to say, don't say anything at all. If the PM comes out with a speech that is anything less than in strong favor of making investors whole, investors who have been incessantly portrayed in the media as being impoverished retirees who have lost their life savings, he risks huge loss in credibility, empathy, political capital...you name it. On the other hand, if he does make such a speech, you can kiss goodbye to all the hedge funds, slush funds, private equity and other monies that have made their way here thanks to our friendly, welcoming, lightly regulated, and most importantly, discreet and circumspect environment.
Monday, September 15, 2008
Whither now, Temasek's investment in Merrill Lynch?
Bank of America is buying Merrill Lynch. It should be all over the papers tomorrow, along with Lehman Brothers going into bankruptcy.
I mentioned Temasek's ratchet provisions in a previous post on its investment in Merrill Lynch.
I estimate that netting out the ratchet provision, Temasek's investment in Merrill Lynch was done at approximately $21 a share [Not verified]. Given that BofA is paying about $29 a share for Merrill, that's good news for Singapore taxpayers.
Then again, BofA is paying for Merrill Lynch in what looks to be an all stock deal. The credit crisis is hardly close to finishing; we could be looking at further losses. Who knows? Perhaps even BofA might go belly up further along the line.
I mentioned Temasek's ratchet provisions in a previous post on its investment in Merrill Lynch.
I estimate that netting out the ratchet provision, Temasek's investment in Merrill Lynch was done at approximately $21 a share [Not verified]. Given that BofA is paying about $29 a share for Merrill, that's good news for Singapore taxpayers.
Then again, BofA is paying for Merrill Lynch in what looks to be an all stock deal. The credit crisis is hardly close to finishing; we could be looking at further losses. Who knows? Perhaps even BofA might go belly up further along the line.
Friday, July 18, 2008
"IBM Studies Cocoa, Eye for $6 Billion 'Secret Sauce'"
From Bloomberg
Published July 17 2008
IBM Studies Cocoa, Eye for $6 Billion `Secret Sauce' (Update2)
By Melita Marie Garza
July 17 (Bloomberg) -- International Business Machines Corp. credits its No. 2 spot on the Dow Jones Industrial Average this year to more than 3,000 workers like Michael C. Pitman.
He's not an Internet wizard or a supercomputer designer. He spends his time studying how the light receptor works in the human eye.
One of the last corporations to still emphasize basic research, IBM attributes part of the stock's 17 percent gain this year to expanding the development budget when competitors like Bell Labs fell behind. IBM spent $6.2 billion in 2007, 30 percent more than it did in 2002, on projects with little discernable impact on the company's day-to-day work. Instead, its scientists are tracing migratory patterns of humans and studying the DNA of cocoa trees.
``Research is IBM's secret sauce, the special house dressing that allows all the divisions to stay competitive,'' said Richard Doherty, research director at Seaford, New York-based technology analyst Envisioneering Group Inc.
Chief Executive Officer Sam Palmisano is following in the tracks of Lou Gerstner, who overhauled research strategy while he ran IBM from 1993 to 2002. Now scientists, not just sales staff, meet with customers. IBM, the biggest computer-services company, today has more than 75 development centers worldwide.
IBM today may report a 10 percent increase in second-quarter profit, the fourth period in five when the Armonk, New York-based company's earnings grew at least that fast, according to the average estimates in a Bloomberg survey of analysts.
Xerox, Bell
IBM's research budget, which includes the science projects and development of new products like server computers, grew by $1.4 billion from 2002 to 2007. In 2007, for the 15th straight year, IBM won the most U.S. patents of any company, 3,148. R&D totaled 6.2 percent of sales in 2007.
Xerox Corp., whose Palo Alto Research Center in California developed the graphical user interface, spent $912 million on research last year -- about the same as it did in 2002, according to its annual reports. That's 5.3 percent of sales.
Hewlett-Packard Co., the world's largest personal-computer maker and No. 10 on the patent list, said in March it would fund fewer projects. It spent $3.6 billion on research in 2007, a little more than in 2002, or about 3.5 percent of sales.
The former Bell Telephone Laboratories, which developed the transistor, were absorbed into Alcatel-Lucent SA in 2006. Research spending for the two companies combined was $4.3 billion in 2007, a 6.5 percent decrease from 2002, or 17 percent of sales as orders slipped.
`Heyday'
``Their heyday seems to be over,'' Jonathan Eunice, an analyst with Nashua, New Hampshire-based researcher Illuminata Inc., said of Bell and Xerox PARC. ``What IBM did was it figured out how to get value out of the R&D process.''
IBM, which trails only Wal-Mart Stores Inc. in Dow members this year, rose 58 cents to $126.52 at 4 p.m. in New York Stock Exchange composite trading. The Dow average has declined 14 percent in 2008.
At Thomas J. Watson Research Center in Yorktown Heights, New York, one of IBM's eight major labs, Ted van Kessel and Bob Sandstrom stood in the sunshine on a June day. Like children burning leaves with a magnifying glass, they focused 230 watts of sunlight through a lens onto a solar cell 1 centimeter square.
The cell converted the energy into 70 watts of usable electricity, about five times what a cell that size typically generates. The trick lies in cooling the tiny square as it absorbs enough heat to melt stainless steel.
Solar Market
IBM doesn't plan to make or sell solar panels. It intends to license the technology to a solar-power company or form a partnership with a utility. Sales of solar cells totaled $20.3 billion last year and could triple in the next decade, according to Clean Edge Inc., a Portland, Oregon-based research firm.
Last year, IBM got about 10 percent of profit -- almost $1 billion -- from licensing its technology.
Elsewhere at the lab, Pitman, an expert in biomolecular dynamics, and Ajay Royyuru, senior manager for IBM's computational biology program, led a three-dimensional tour through the light detector of the human eye.
On three 48-square-foot screens, Pitman projected a blue, green, red and white model of rhodopsin, the membrane protein responsible for dim-light vision. Pitman and a team of scientists created the simulation using IBM's Blue Gene supercomputer.
Working with the National Institutes of Health and university researchers, IBM showed for the first time that a significant amount of water resides in the protein structure during light detection in the eye. Understanding the make-up of the protein is critical to drug development in a market worth tens of billions of dollars.
`Drug Discovery'
``As we develop faster and faster supercomputers, it's not always clear how to use them most effectively, and this is one example of how use them to advance drug discovery,'' said Pitman, who has worked at IBM for 12 years.
Blue Gene, the world's second-fastest computer, is also helping IBM study the genetic code of cocoa trees. The project, announced in June, is part of a $10 million, five-year investment by candy maker Mars Inc. to save the world's chocolate supply. The maker of M&M candies and Snickers bars seeks to identify the plants best able to withstand blights.
IBM teamed with the National Geographic Society on a five- year, $40 million project to collect at least 100,000 DNA samples from indigenous groups to trace the roots of the human family tree.
``Our investments in research enable IBM to see and develop the right technologies,'' said Mark Dean, vice president of systems in IBM Research.
Published July 17 2008
IBM Studies Cocoa, Eye for $6 Billion `Secret Sauce' (Update2)
By Melita Marie Garza
July 17 (Bloomberg) -- International Business Machines Corp. credits its No. 2 spot on the Dow Jones Industrial Average this year to more than 3,000 workers like Michael C. Pitman.
He's not an Internet wizard or a supercomputer designer. He spends his time studying how the light receptor works in the human eye.
One of the last corporations to still emphasize basic research, IBM attributes part of the stock's 17 percent gain this year to expanding the development budget when competitors like Bell Labs fell behind. IBM spent $6.2 billion in 2007, 30 percent more than it did in 2002, on projects with little discernable impact on the company's day-to-day work. Instead, its scientists are tracing migratory patterns of humans and studying the DNA of cocoa trees.
``Research is IBM's secret sauce, the special house dressing that allows all the divisions to stay competitive,'' said Richard Doherty, research director at Seaford, New York-based technology analyst Envisioneering Group Inc.
Chief Executive Officer Sam Palmisano is following in the tracks of Lou Gerstner, who overhauled research strategy while he ran IBM from 1993 to 2002. Now scientists, not just sales staff, meet with customers. IBM, the biggest computer-services company, today has more than 75 development centers worldwide.
IBM today may report a 10 percent increase in second-quarter profit, the fourth period in five when the Armonk, New York-based company's earnings grew at least that fast, according to the average estimates in a Bloomberg survey of analysts.
Xerox, Bell
IBM's research budget, which includes the science projects and development of new products like server computers, grew by $1.4 billion from 2002 to 2007. In 2007, for the 15th straight year, IBM won the most U.S. patents of any company, 3,148. R&D totaled 6.2 percent of sales in 2007.
Xerox Corp., whose Palo Alto Research Center in California developed the graphical user interface, spent $912 million on research last year -- about the same as it did in 2002, according to its annual reports. That's 5.3 percent of sales.
Hewlett-Packard Co., the world's largest personal-computer maker and No. 10 on the patent list, said in March it would fund fewer projects. It spent $3.6 billion on research in 2007, a little more than in 2002, or about 3.5 percent of sales.
The former Bell Telephone Laboratories, which developed the transistor, were absorbed into Alcatel-Lucent SA in 2006. Research spending for the two companies combined was $4.3 billion in 2007, a 6.5 percent decrease from 2002, or 17 percent of sales as orders slipped.
`Heyday'
``Their heyday seems to be over,'' Jonathan Eunice, an analyst with Nashua, New Hampshire-based researcher Illuminata Inc., said of Bell and Xerox PARC. ``What IBM did was it figured out how to get value out of the R&D process.''
IBM, which trails only Wal-Mart Stores Inc. in Dow members this year, rose 58 cents to $126.52 at 4 p.m. in New York Stock Exchange composite trading. The Dow average has declined 14 percent in 2008.
At Thomas J. Watson Research Center in Yorktown Heights, New York, one of IBM's eight major labs, Ted van Kessel and Bob Sandstrom stood in the sunshine on a June day. Like children burning leaves with a magnifying glass, they focused 230 watts of sunlight through a lens onto a solar cell 1 centimeter square.
The cell converted the energy into 70 watts of usable electricity, about five times what a cell that size typically generates. The trick lies in cooling the tiny square as it absorbs enough heat to melt stainless steel.
Solar Market
IBM doesn't plan to make or sell solar panels. It intends to license the technology to a solar-power company or form a partnership with a utility. Sales of solar cells totaled $20.3 billion last year and could triple in the next decade, according to Clean Edge Inc., a Portland, Oregon-based research firm.
Last year, IBM got about 10 percent of profit -- almost $1 billion -- from licensing its technology.
Elsewhere at the lab, Pitman, an expert in biomolecular dynamics, and Ajay Royyuru, senior manager for IBM's computational biology program, led a three-dimensional tour through the light detector of the human eye.
On three 48-square-foot screens, Pitman projected a blue, green, red and white model of rhodopsin, the membrane protein responsible for dim-light vision. Pitman and a team of scientists created the simulation using IBM's Blue Gene supercomputer.
Working with the National Institutes of Health and university researchers, IBM showed for the first time that a significant amount of water resides in the protein structure during light detection in the eye. Understanding the make-up of the protein is critical to drug development in a market worth tens of billions of dollars.
`Drug Discovery'
``As we develop faster and faster supercomputers, it's not always clear how to use them most effectively, and this is one example of how use them to advance drug discovery,'' said Pitman, who has worked at IBM for 12 years.
Blue Gene, the world's second-fastest computer, is also helping IBM study the genetic code of cocoa trees. The project, announced in June, is part of a $10 million, five-year investment by candy maker Mars Inc. to save the world's chocolate supply. The maker of M&M candies and Snickers bars seeks to identify the plants best able to withstand blights.
IBM teamed with the National Geographic Society on a five- year, $40 million project to collect at least 100,000 DNA samples from indigenous groups to trace the roots of the human family tree.
``Our investments in research enable IBM to see and develop the right technologies,'' said Mark Dean, vice president of systems in IBM Research.
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