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14 October 2008
MetLife Bucks The Trend
Reuters, 8 October 2008
Amid the sound and the fury are a few optimistic voices. MetLife announced on Wednesday that it is looking to sell 75 million common shares in a bid to raise approximately $2.5 billion in supplementary capital. The company says that this will be used for general corporate purposes and future strategic initiatives. This echoes a story we covered earlier this week from The Economist describing how Japanese firms, flush with cash and lacking opportunities at home, are already on the acquisition trail.
Our view: Reflecting on his conversations with heads of corporate development in our member network, Seth Verry, Director of the Corporate Strategy Board's Mergers and Acquisitions Forum had the following response: "To acquire in the current environment begins with the ability and willingness to act. First, you must posses the balance sheet capacity for dealmaking (and, of course, cash is the only accepted currency these days). You must also be willing to commit those resources to deals, as opposed to, say, saving it as a 'just in case' buffer. Further, you must be willing to accept the risks of buying troubled or distressed companies—those, increasingly, are the targets now in play. Making an offensive move is interesting when viewed as an option (albeit a pricey one) for coming off the sidelines should the right opportunity materialize. In a highly uncertain environment, call options of this nature can make for very prudent investing."
Analysis of the Credit Crisis
This American Life Podcast, 3 October 2008
This easy-to-understand podcast explains the origins of the credit crisis.
Cox suggests EDGAR's replacement could have prevented financial crisis
CFO.com, 8 October 2008
At Wednesday's SEC roundtable discussion, the chairman blamed "insufficient transparency" for the credit crisis and claimed that the 21st Century Disclosure Initiative would improve this in the future. Cox said that IDEA, the XBRL electronic-tagged filing system that will replace EDGAR, will be up and running within three years.
Our view: While the new system will undoubtedly improve transparency, this defensive stance by the SEC was an attempt to avoid the most recent in a chain of blame targets in the crisis. Clearly, the credit crisis is the result of a much more complicated combination of factors than merely the lack of user-friendliness of the current EDGAR system.
Frozen Credit Markets Cause Meltdown in Iceland
The Economist, 9 October 2008
Coverage of the events that led Iceland to become what is probably the rich world’s first emerging economy. Suffused with investments in green technology and aluminum smelting, the economy looked to be on a sure footing, but its three largest banks have expanded rapidly since two of them were privatized in 2003. They held assets of about €125 billion (US$180 billion) at the end of 2007 in an economy worth just €14.5 billion. One other statistic to think about: Britons currently owe their creditors 169% of their disposable income, Americans 140%. Iceland’s citizens? 213%.
Personal Finance - CD Rates Rising
Bloomberg.com, October 9
Banks are issuing CDs that pay up to five times what U.S. treasuries pay, making them a good option for storing cash safely during the market turmoil.
Daily Capital Markets Review: Credit, Recession Fears Drive Stocks Lower
Corporate Executive Board, 9 October 2008
This five-page summary includes news items regarding global liquidity, the TED spread, commercial paper and T-bill rates, currencies and commodities, and corporate debt spreads.
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