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Friday, 25 July 2008
Temasek Selling Merrill Lynch
One writer said, “Should we just move on? I do not think so. The patently huge mistake is not merely the result of recklessness but rather a systemic lack of accountability in making some of our largest investments.
Half or total of 87m shares have been sold off at a loss, according to US recorded filings.
By Seah Chiang Nee Jul 24, 2008
Temasek Holdings has sold off half its ill-timed investment in Merrill Lynch - or about 87m shares, according to a mutual funds report on institutional trades on US stocks.
The online report, MFFAIRS (Mutual Fund Facts About Individual Stocks), reported it sold off 86,949,594 shares (50%), leaving a current holdings of 86,949,594 shares (50%), according to the filings made public.
The report gave no exact date or price of the sale.
Neither has there been any confirmation from Temasek, which had paid US$48 a share last year. http://www.mffais.com/newsarticles/2008-07-22/2473637-211738.html
Last week Merrill Lynch was traded at $31.
At that price Temasek would have suffered a loss of $17 a share - or a total loss of about US$1.48b for the 87mil shares.
Despite massive write-downs and capital injection, Merrill Lynch’s outlook remains uncertain, reports Bloomberg.
The company’s equity capital position is weak relative to competitors, said Brad Hintz, a New York-based analyst at Sanford C Bernstein, reports Ambereen Choudhury.
“With $19.9b in CDOs still frozen on the balance sheet and with counterparty risk rising on the hedges underlying these troubled positions, the potential for additional material write-downs remains a concern,” Hintz said.
The New York-based firm’s credit rating was cut last week by Moody’s Investors Service to A2 from A1.
The third-biggest US securities firm probably will report a loss of $6.57 a share this year, compared with an earlier forecast of $1.07, Hintz said.
The revised estimate assumes the company generates no earnings in the second half.
Merrill may have to take an additional $10 billion of pre-tax write-downs related to its holdings of mortgage securities, Moody’s estimates.
Huge paper losses
The disposal leaves Temasek Holdings and the Government Investment Corporation (GIC) still holding substantial parts of big troubled Western banks.
Its remaining investments in UBS (Switzerland), Citigroup, Barclays and Merrill Lynch - at an original cost of US$21.88b - have declined on by some 47 percent in value.
That is a paper loss of US$10.28b. However, Minister Mentor Lee Kuan Yew had said these investments were made as a long-term strategy of 30 years.
But as the Merrill Lynch sale shows, Temasek is not inflexible about cutting losses, if things threaten to get worse.
The political leadership has defended its investment of these sub-prime banks as “an opportunistic” foray that can happen once in a long while.
It believes these companies will survive the crisis and emerge stronger.
Some experts believe that Temasek has made an error of judgment.
Investment guru Jim Rogers said in July he believed that US bank stocks could fall further and predicted that Singapore’s state investors would lose money on Citigroup and Merrill Lynch.
“I’m shorting investment banks on Wall Street,” the successful investor said. “It grieves me to see what Singapore is doing. They are going to lose money.”
At the Nomura Dialogue recently, Minister Mentor Lee Kuan Yew reported to investment mistakes, but that no one had benefited from it.
Singaporeans who want to see greater transparency in the government’s investments in troubled companies are unhappy with this vague answer to a serious problem.
One writer said, “Should we just move on? I do not think so. The patently huge mistake is not merely the result of recklessness but rather a systemic lack of accountability in making some of our largest investments.
“Let it be clear, the harm is terminally done. The entire reserves system must be re-examined and audited.”
Said slohand, “I saw the interview on TV last night and felt short-changed.
“He brushed aside the issues with the logic that since the officers who made the decisions were not the beneficiaries in any sense of the word, such lapses are mistakes and are therefore acceptable...
“..The size indicates that it can only come from the very top.”
The skies are dark but the storm has not broken yet.
Much has been made in recent years of private/public partnerships. The US government is about to embark on another example of such a partnership, in which the private sector takes the profits and the public sector bears the risk. The proposed bail-out of Fannie Mae and Freddie Mac entails the socialisation of risk – with all the long-term adverse implications for moral hazard – from an administration supposedly committed to free-market principles.
Defenders of the bail-out argue that these institutions are too big to be allowed to fail. If that is the case, the government had a responsibility to regulate them so that they would not fail. No insurance company would provide fire insurance without demanding adequate sprinklers; none would leave it to “self-regulation”. But that is what we have done with the financial system.
Even if they are too big to fail, they are not too big to be reorganised. In effect, the administration is indeed proposing a form of financial reorganisation, but one that does not meet the basic tenets of what should constitute such a publicly sponsored scheme.
First, it should be fully transparent, with taxpayers knowing the risks they have assumed and how much has been given to the shareholders and bondholders being bailed out.
Second, there should be full accountability. Those who are responsible for the mistakes – management, shareholders and bondholders – should all bear the consequences. Taxpayers should not be asked to pony up a penny while shareholders are being protected.
Finally, taxpayers should be compensated for the risks they face. The greater the risks, the greater the compensation.
All of these principles were violated in the Bear Stearns bail-out. Shareholders walked away with more than $1bn (€635m, £500m), while taxpayers still do not know the size of the risks they bear. From what can be seen, taxpayers are not receiving a cent for all this risk-bearing. Hidden in the Federal Reserve-collateralised loans to JPMorgan that enabled it to take over Bear Stearns were almost surely interest rate and credit options worth billions of dollars. It would have been easy to design a restructuring that was more transparent and protected taxpayers’ interests better, giving some compensation for their risk-bearing.
But the proposed bail-out of Fannie Mae and Freddie Mac makes that of Bear Stearns look like a model of good governance. It sets an example for other countries of what not to do. The same administration that failed to regulate, then seemed enthusiastic about the Bear Stearns bail-out, is now asking the American people to write a blank cheque. They say: “Trust us.” Yes, we can trust the administration – to give the taxpayers another raw deal.
Something has to be done; on that everyone is agreed. We should begin with the core of the problem, the fact that millions of Americans were made loans beyond their ability to pay. We need to help them stay in their homes, including by converting the home mortgage deduction into a cashable tax credit and creating a homeowners’ Chapter 11, an expedited way to restructure their liabilities. This will bring clarity to the capital markets – reducing uncertainty about the size of the hole in Fannie Mae’s and Freddie Mac’s balance sheets.
The government should set a limit to the size of the bail-out, at the same time making it clear that, while it will not allow Fannie Mae and Freddie Mac to fail, neither will it be extending a blank cheque. There may need to be a drastic reorganisation. There should be a charge for the “credit line” (any private firm would do as much) and, given the risk, it should be at a higher than normal rate.
The private sector knows how to protect its interests; the government should do no less. As long as the credit line is extended, no dividends should be paid. To ensure that the government is not simply bailing out creditors who failed in due diligence, at least, say, 25 per cent of any notes, loans or bonds coming due that are not lent again should be set aside in an escrow account, to be paid only after it is established that taxpayers are not at risk. Any government loans should be cumulative preferred debt: the taxpayers get paid before any other creditors receive a dime. To discourage moral hazard the interest rate should be at a penalty rate and, reflecting the rising risk, increase with the amount borrowed. Finally, the government should participate in the upside potential as well as the downside risk: for instance, by taking shares (which it might later sell) or, as it did in the Chrysler bail-out, warrants.
We should not be worried about shareholders losing their investments. In earlier years, they were amply rewarded. The management remuneration packages that they approved were designed to encourage excessive risk-taking. They got what they asked for. Nor should we be worried about creditors losing their money. Their lack of supervision fuelled the housing bubble and we are now all paying the price. We should worry about whether there is a supply of liquidity to the housing market, so that those who wish to buy a home can get a loan. This proposal provides the necessary liquidity.
A basic law of economics holds that there is no such thing as a free lunch. Those in the financial market have had a sumptuous feast and the administration is now asking the taxpayer to pick up a part of the tab. We should simply say No.
The writer, 2001 recipient of the Nobel Prize for economics, is university professor at Columbia University. He is co-author with Linda Bilmes of The Three Trillion Dollar War: the True Cost of the Iraq Conflict
Scottish business urged to rally behind struggling banks
Edinburgh business boss urges critics to maintain a sense of proportion in face of global slowdown
By Colin Donald 20 July 2008
EDINBURGH'S FUTURE AS ONE of the top five financial services centres of Europe is more endangered by "hysterical" market commentary than by any threat to Scotland's largest financial institution, the capital's pre-eminent business leader has warned.
After a week of grim market speculation caused by the slumping share prices of Scotland's two biggest banks - RBS and HBOS - Ron Hewitt, the chief executive of Edinburgh Chamber of Commerce, lashed out at media suggestions that mismanagement of the banking giants had made them vulnerable to foreign takeover, and had endangered Scotland's international reputation for financial prudence and good judgement.
Although shares in RBS rallied by 10% in Friday trading to 197p, and shares in HBOS by 5.13% to 282p - too late to encourage investors to take up the latter bank's planned £4 billion cash call - sentiment surrounding the banks, said Hewitt, was "neither justified nor helpful in the current economic climate".
Next month marks the first anniversary of formal shareholder approval of the RBS-led consortium's bruising takeover battle for the ailing Dutch bank ABN Amro. The deal's timing on the brink of the credit crunch, and perceived "overpayment", would have disastrous consequences on market confidence in RBS. Hewitt said that a tendency to "talk up doom and gloom" was in danger of becoming self-fulfilling.
Said Hewitt: "Nobody expects the media to create false optimism but we are not in the situation where our economy has suddenly collapsed. These issues are all down to confidence and how that has been dented by poor banking decisions, primarily in the US. The recapitalisation of both the major Scottish players and other financial houses has put them in a position of considerable strength compared to international competitors. Whilst the share price might have tumbled there is no significant depression of the balance sheet.
"Both of these companies have performed exceptionally well for Scotland over the years and business leaders need to stand four-square behind them, to recognise the excellence of their performance and their value to the Scottish economy."
Hewitt also defended HBOS's decision to cut its workforce by 160, describing it as "prudent financial management as all companies have to do from time to time."
"The job losses represent less than half a percent of HBOS's workforce, largely through natural wastage as parts of the SME-facing business are merged. I don't see the slightest suggestion that we should be concerned for the company and its survival as a Scottish-based company."
With Scottish financial institutions and their leadership facing criticism of unprecedented severity, John Swinney, cabinet secretary for finance, declined to comment on the fortunes of individual companies but authorised his spokesperson to say: "Scotland's financial services industry makes a critical contribution to increasing sustainable economic growth. Financial services, and indeed Scotland's economy more generally, is not immune from global economic conditions, but has continued to show encouraging signs of resilience."
The recent updraft is probably an illusion. There's no indication the bear market has ended and plenty of evidence it has a long way to fall yet.
By Jon Markman 7/24/2008
Investors praying that the most inept federal government since the Hoover administration has engineered an end to the credit crisis with a plan to rescue Fannie Mae and Freddie Mac may be on track to see their delusions shattered.
At the root of investors' hopes in recent days has been a sharp jump in the shares of banks and brokerages even after the companies reported terrible second-quarter earnings and acknowledged that profits will likely be impaired for at least a year to come.
Yet optimism -- and a trading phenomenon known as a "short squeeze" -- can take banks' shares only so far before the laws of financial gravity take over. So make no mistake: Those shares are headed back to where they came from unless Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke can pull a miracle out of their briefcases.
Even though Congress is lending a helping hand, for once, with its passage Wednesday of a bill to help struggling mortgage holders, that miracle is looking less likely. Consider, for instance, that American Express on Monday revealed the biggest open secret in the world: Its portfolio had suffered massive levels of defaults in California and Florida, as customers strapped for the money to pay delinquent mortgages on overpriced homes weren't paying their credit card bills either. Fancy that. AmEx shares plunged, but bank stocks remained stubbornly buoyant, which was a bad sign.
A field guide to bears
Why is hopefulness bad? It's because bear markets can end only when everybody has found their inner Eeyore. Bear markets are all about extinguishing hopes, crushing dreams and, most of all, smashing idols of the previous bull market. They end only when no one even wants to think about stocks anymore. So fake-out advances will be a fixture of trading until all optimism fades.
To help you prepare for the next downdraft -- which should start once the Dow Jones Industrial Average reaches the 11,750-to-12,100 level or the S&P 500 Index gets to around 1,325 -- I've prepared a compact Bear Market Users Manual:
• There's no credible evidence that the market has bottomed. You can talk all you want about sentiment being too low, pessimism being too rampant, financial crises setting bottoms and all the other subjective fluff that is thrown around. It's all speculation and wishful thinking. The reality is that pessimism alone cannot set a bottom. There have to be enough buyers. And for now there is no proof that big investors at mutual funds, pension funds and hedge funds have been aggressively acquiring stocks from panicked sellers. Quite the opposite.
• Evidence suggests the worst of the bear market lies ahead, not behind. The first sign of a new bear market occurs when an index or a stock trades below its average price of the past 12 months. That happened to the Dow in late December. But now we need to focus on the importance of the 200-week average. When that level breaks, veteran independent analyst Michael Belkin says, damage is so great that there is little hope for a market to recover quickly. The Dow has had four straight weekly closes below its 200-week average and remains there now. As a market falls, volatility also intensifies. Expect to see many more days ahead when the Dow sinks or rises by about 250 points.
• A market that falls below its 200-week (3.8-year) average usually heads straight for its 200-month (16-year) average. I learned this concept from Belkin during the past bear market, and it was great guidance to the then-shocking deterioration in Intel, Cisco Systems Oracle. Lest you think that's a crazy idea, the Philadelphia KBW Bank Index, which encompasses Bank of America and Wachovia, already is well below this level. So are General Motors, insurer American International Group, International Paper and Merck. General Electric is close. Moreover, you should know that the 200-month average was the exact spot where the plummeting Nasdaq Composite Index finally bounced and recovered in 2002. The 200-month averages for the big indexes now are 981 for the S&P 500 Index, 1,771 for the Nasdaq and 8,360 for the Dow industrials.
• The best course in a bear market is to use rallies to close out all long positions in the riskiest groups, including tech, consumer durables and cyclicals. It's a tough game to try to hold on to the seemingly best sectors or best stocks in those sectors. You might pick out the one or two that survive, but it's unlikely. The majority of your funds should be in cash, with some risk money devoted to selective buying of well-behaving groups, some spot speculation in the worst groups and some short-selling. Beware of rumors of government intervention or the widespread belief that trillions of dollars are on the sidelines ready to be invested, or the removal of a single threat, such as higher energy prices. None of these things matters until you get a firm signal that buyers are really coming back to the market with intensity. Bull markets may rise along a "wall of worry"; bear markets fall along a "slope of hope."
Long-lasting bear markets
• Long bear markets are usually deep. The average bear market of the past century has lasted less than a year and generated losses of 30%. But ones that lasted more than 12 months showed an average loss of 42%. All of these figures are averages with relatively few examples, however, and thus deceiving in their exactitude. The current bear market was caused by a perfect storm of trouble: a real-estate collapse, a credit disaster, an oil price mega-spike, recession and inflation. Will it persist for only an average amount of time and decline by only an average amount? That's an open question. Put me down as doubtful. For your score card, this bear market has so far lasted 12 months and generated a loss of 17%.
• A reversal higher can be swift and big, and it is usually disbelieved at the start. Eventually, all bear markets end -- very often with a roar and when least expected. The only statistical measure that I have seen work effectively in the past 20 years to signify the end of a major bear phase is a one-two punch in which the market experiences a session in which 90% of prices and 90% of volume is to the downside, and then, within three days, the opposite occurs: a 90% upside day. Most recently, this measure -- invented by the nation's oldest technical research firm, Lowry's Reports -- kicked in to signify the end of a 3-year-old bear market in late March 2003. When that massive buying occurs, most investors don't believe the inflection point is really occurring and consider it just one more rally to sell into or short. But in reality, that has been the signature of the end of a bear. Despite recent highly volatile up-and-down trading, this combination has not yet occurred.
When the time comes to rally out of this bear, gains could surpass 30% in the first six months. In the meantime, bear markets are difficult times for our psyches and our wealth. The market gods are clever in their attempts to encourage us to lean the wrong way.
An unlikely miracle
Despite all the drama of recent days, the benchmark S&P 500 Index is still under water in July and is down 13% for the year, while the Dow down 12.5% for the year and the Nasdaq Composite down 13%. Meanwhile, broad measures of technology and health care stocks are down 12% for the year, a measure of banking stocks is down 24%, and a measure of Chinese stocks is down 18%.
I checked in with Paul Desmond over at Lowry's Reports for his view of the past week, and he affirmed that the midweek rally had all the characteristics of an upside "correction" within a continuing bear market rather than the start of a bull market. He pointed out that the vast majority of past major market bottoms were preceded by a series of 90% downside days, otherwise known as panic selling, just before the final low that was followed by a 90% upside day that marked the start of the bull cycle.
In the present case, Desmond notes, the last 90% downside day was registered back on June 26, which was 13 days before last week's rally began Wednesday. And a 90% upside day, which should be recorded within just a few days of the last 90% downside day, has yet to occur, Desmond says. So that is why the probabilities suggest the past week has been a lot of sound and fury, signifying nothing.
I would love nothing more than to be wrong and to discover in a few months that the Federal Reserve and Treasury Department had pulled off the greatest coup in financial history by crushing both financial short sellers and crude-oil speculators while simultaneously turning banks' losses into profits and stemming inflation. So here's an all-clear signal to watch at home: If the Dow closes the month above 12,784 or the S&P 500 closes above 1,406, then the bear is dead -- long live the bull.
Fine print
To give you an idea of how persistent a bear market can be, consider that Cisco Systems, Intel and Sony, three of the finest, strongest companies in the world, have never actually left their 2000 bear markets. We'll probably look back at the financial stocks in five years and say the same thing.
When do the words “not guaranteed” actually mean “guaranteed”? Whenever the mortgage giants Fannie Mae and Freddie Mac are involved. The two companies have long been required to tell investors that their securities are not guaranteed by the federal government. But in the financial markets everyone has always assumed that this demurral was just window-dressing, and everyone, it turns out, was right. Last week, when fears of a possible collapse of the two companies threatened to spark a major financial crisis, the Treasury Department and the Federal Reserve quickly came up with a rescue package. What had been an implicit guarantee became an explicit one.
Fannie and Freddie are the duck-billed platypuses of the financial world. They’re profit-driven corporations, owned by shareholders and, in theory, beholden only to them. But they’re also so-called “government-sponsored enterprises,” set up by the state with the explicit mission of fostering homeownership, by buying and selling home mortgages. Unlike ordinary corporations, they’re exempt from most state and local taxes and certain S.E.C. requirements, and they have access to a government credit line. Other G.S.E.s play similar roles in other markets: the Federal Home Loan Banks make loans to banks, credit unions, and thrifts; the Farm Credit Banks facilitate the flow of credit to farmers; and Farmer Mac buys up farm and rural-housing mortgages. In each case, the government saw a hole in the marketplace and chartered a company to fill it.
The G.S.E.s are curious, because there’s no obvious reason for them to exist in the form they do: instead of creating private companies to do all these jobs, the government could just do them itself. In fact, that’s how Fannie Mae got started, back in 1938: originally, it was a government agency endowed with the authority to buy mortgages, in the hope that this would expand the supply of credit to homeowners. It wasn’t until 1968 that Fannie was privatized. (Freddie Mac was created two years later, and was private from the start.) The main reason for the change was surprisingly mundane: accounting. At the time, Lyndon Johnson was concerned about the effect of the Vietnam War on the federal budget. Making Fannie Mae private moved its liabilities off the government’s books, even if, as the recent crisis made clear, the U.S. was still responsible for those debts. It was a bit like what Enron did thirty years later, when it used “special-purpose entities” to move liabilities off its balance sheet.
Making Fannie and Freddie into these weird hybrids may have spruced up the budget, but in the long run it also made it easy for the companies to grow too big, too fast. Because everyone assumed that the government would make good on Fannie’s and Freddie’s debts, they could borrow money more cheaply than their competitors. They used this cheap debt to increase the number of mortgages they bought. Had Fannie and Freddie been ordinary private companies, there would have been a natural check: companies with more debt are usually seen as riskier, and that makes shareholders and bondholders less willing to invest in them. Or, had Fannie and Freddie been government agencies, budget constraints would likely have limited the scope of their lending. Since neither the market nor the state checked their growth, they were able to swell extravagantly. (Regulators might have reined the companies in, but, thanks in part to ardent lobbying by Fannie and Freddie, Congress failed to provide them with sufficient power to do so.)
The result of all this was that the companies reaped the rewards of the private sector while enjoying the security of the public sector. Seemingly insulated from all harm, they became reckless. They constructed a giant pyramid of debt on a very small base of capital (eighty-one billion dollars, by the most recent publicly available figures), and by May, 2008, either owned or guaranteed more than five trillion dollars in mortgages. As a result, even though just a small percentage of Fannie’s and Freddie’s mortgages are delinquent, the potential losses are huge. That’s why, in recent weeks, investors finally lost faith in them.
Whatever their sins, Fannie and Freddie clearly couldn’t be allowed to fail, but that’s no argument for letting them go on as they are. Either they should be forced to make it as private companies or they should be nationalized. Given that their business depends on the promise of government assistance and that their current state remains woeful (despite an upturn in their fortunes late last week), nationalization seems more sensible. If Fannie and Freddie are going to run up a tab and stick taxpayers with the bill, why should shareholders profit?
Beyond that question, though, is a more important one: Do we need Fannie and Freddie at all? Their supposed reason for being is that their ability to borrow money at low rates lowers borrowing costs for homeowners. But a paper by the economist Wayne Passmore, of the Federal Reserve, suggests that in fact Fannie and Freddie have only a small effect on the interest rates that homeowners pay, saving them less than one-tenth of a percentage point. More important, if the last few years have taught us anything, it’s that homeownership is not an unalloyed economic good, and that we should be cautious about using gimmicks to make it more attractive. The government already offers homeowners a subsidy, in the form of a mortgage tax break. Given everything else we could be spending taxpayer money on, does the government really need to be in the mortgage-buying business, too?
Temasek sold '5m Merrill shares', not half its stake
Filing error made it look as if investor incurred a huge loss on the disposal
By Grace Ng July 26, 2008
DID Temasek Holdings really sell half its stake in troubled financial giant Merrill Lynch at a disastrous loss? This was the talk of town yesterday, as speculation and e-mail messages flew across Singapore, citing a report claiming the Singapore investment company had sold about 87 million Merrill shares.
Stunned market watchers quickly calculated that, if the report were true, Temasek would have suffered tens of millions of dollars in losses based on Merrill's current market prices.
Temasek did not confirm or deny the report yesterday. It said it 'does not comment on speculation from dubious sources'.
But The Straits Times understands that Temasek has in fact not sold half its stake - it only appeared to do so due to a reporting glitch.
A source said that a mistake was made in a routine filing with the United States Securities and Exchange Commission (SEC) on Tuesday, which was intended to show that Temasek held 86.95 million shares in Merrill.
This stake was unchanged from what it had declared in May. The announcement would not have raised eyebrows as the current holdings are just a few million shares fewer than that disclosed in an earlier filing in January.
But a data entry error made it appear that Temasek held 87 million Merrill shares, after earlier disposing of another 87 million, said the source.
The erroneous information was picked up by a California-based firm Mutual Fund Facts About Individual Stocks, which cited the filing in a brief public statement.
This sparked off a furore yesterday among Singapore investors and bloggers, who noted that Merrill's share price has fallen about 46 per cent since Dec 24 last year, when Temasek announced its purchase of the bank's stock at US$48 per share.
Reuters said the market rumours even prompted a dip in the US dollar against the yen and the euro.
Temasek spokesman Myrna Thomas said: 'Investors and the interested public are advised to refer only to official sources of information for announcements on major transactions'.
A check by The Straits Times found a Jan 3 SEC filing by Temasek showed that the company held 91.67 million shares, or 9.4 per cent of Merrill, as at Dec 24.
Then, on May 15, Temasek made another filing stating that it owned 86.95 million shares in Merrill as at March 31. That represents a stake of 8.85 per cent, according to Bloomberg data on June 30.
So, in other words, Temasek did not sell 87 million Merrill shares, but more like five million.
The Straits Times understands that Temasek had to trim its total stake after it exercised the option to purchase an additional 12.5 million shares in February.
This is to keep below the 10 per cent threshold for foreign investors' shareholdings in a US financial institution, mandated by the authorities.
So it may have sold off a few million shares to meet the requirements, say sources.
Temasek had invested a total of US$5 billion (S$6.8 billion) to buy a stake in Merrill. It was among a handful of sovereign wealth funds from Asia and the Middle East that have injected capital into global banks bleeding from huge losses related to the US sub-prime mortgage crisis.
Merrill Lynch last week reported a bigger-than-expected loss of US$4.65 billion for the second quarter. Its shares closed at US$29.04 on Thursday in US trading.
Temasek dismisses talk that it sold Merrill shares
Online report claims the company had disposed of 86.95m shares
By LYNETTE KHOO July 26, 2008
TEMASEK Holdings yesterday dismissed rumours that it has sold half of its stake in Merrill Lynch.
Calling this a mischievous market speculation, Temasek spokeswoman Myrna Thomas said: 'Investors and interested public are advised to refer only to official sources of information for announcements on major transactions.'
This comment was made in response to rumours triggered by an online report, MFFAIRS (Mutual Fund Facts About Individual Stocks), which had erroneously said that Temasek sold off 86.95 million shares on July 22, by assuming Temasek's original stakeholdings in Merrill is double that amount to begin with.
The report triggered a wave of e-mail messages among the broking community, and speculation was rife on the implication of this said divestment.
But Temasek has not reduced its shareholding in Merrill Lynch.
The Securities and Exchange Commission (SEC) filings made by Temasek on July 22 also showed that it only holds 86.95 million shares on July 11, the same amount as at May 15.
The Singapore sovereign fund had invested a total of US$5 billion in Merrill Lynch in December and February at US$48 a share, at a time when sovereign funds from Asia and the Middle East were propping up global banks reeling from sub-prime related credit losses.
The erroneous report of a share sale by Temasek came after Merrill Lynch posted a fourth consecutive quarter in the red over the weekend.
Merrill's US$4.65 billion loss for its second quarter ended June 30 means that it has piled up US$19 billion in losses over the past year - which works out to about US$52 million a day.
But fund managers said that given Temasek's long-term view in its investments, the current short-term market uncertainties are unlikely to trigger a divestment of its stake in Merrill Lynch.
'Short-term volatility isn't likely to result in them taking any particular type of adjustments that are in response to market drops,' said Wong Sui Jau, general manager of Fundsupermart.
10 comments:
Temasek Selling Merrill Lynch
Half or total of 87m shares have been sold off at a loss, according to US recorded filings.
By Seah Chiang Nee
Jul 24, 2008
Temasek Holdings has sold off half its ill-timed investment in Merrill Lynch - or about 87m shares, according to a mutual funds report on institutional trades on US stocks.
The online report, MFFAIRS (Mutual Fund Facts About Individual Stocks), reported it sold off 86,949,594 shares (50%), leaving a current holdings of 86,949,594 shares (50%), according to the filings made public.
The report gave no exact date or price of the sale.
Neither has there been any confirmation from Temasek, which had paid US$48 a share last year. http://www.mffais.com/newsarticles/2008-07-22/2473637-211738.html
Last week Merrill Lynch was traded at $31.
At that price Temasek would have suffered a loss of $17 a share - or a total loss of about US$1.48b for the 87mil shares.
Despite massive write-downs and capital injection, Merrill Lynch’s outlook remains uncertain, reports Bloomberg.
The company’s equity capital position is weak relative to competitors, said Brad Hintz, a New York-based analyst at Sanford C Bernstein, reports Ambereen Choudhury.
“With $19.9b in CDOs still frozen on the balance sheet and with counterparty risk rising on the hedges underlying these troubled positions, the potential for additional material write-downs remains a concern,” Hintz said.
The New York-based firm’s credit rating was cut last week by Moody’s Investors Service to A2 from A1.
The third-biggest US securities firm probably will report a loss of $6.57 a share this year, compared with an earlier forecast of $1.07, Hintz said.
The revised estimate assumes the company generates no earnings in the second half.
Merrill may have to take an additional $10 billion of pre-tax write-downs related to its holdings of mortgage securities, Moody’s estimates.
Huge paper losses
The disposal leaves Temasek Holdings and the Government Investment Corporation (GIC) still holding substantial parts of big troubled Western banks.
Its remaining investments in UBS (Switzerland), Citigroup, Barclays and Merrill Lynch - at an original cost of US$21.88b - have declined on by some 47 percent in value.
That is a paper loss of US$10.28b. However, Minister Mentor Lee Kuan Yew had said these investments were made as a long-term strategy of 30 years.
But as the Merrill Lynch sale shows, Temasek is not inflexible about cutting losses, if things threaten to get worse.
The political leadership has defended its investment of these sub-prime banks as “an opportunistic” foray that can happen once in a long while.
It believes these companies will survive the crisis and emerge stronger.
Some experts believe that Temasek has made an error of judgment.
Investment guru Jim Rogers said in July he believed that US bank stocks could fall further and predicted that Singapore’s state investors would lose money on Citigroup and Merrill Lynch.
“I’m shorting investment banks on Wall Street,” the successful investor said. “It grieves me to see what Singapore is doing. They are going to lose money.”
At the Nomura Dialogue recently, Minister Mentor Lee Kuan Yew reported to investment mistakes, but that no one had benefited from it.
Singaporeans who want to see greater transparency in the government’s investments in troubled companies are unhappy with this vague answer to a serious problem.
One writer said, “Should we just move on? I do not think so. The patently huge mistake is not merely the result of recklessness but rather a systemic lack of accountability in making some of our largest investments.
“Let it be clear, the harm is terminally done. The entire reserves system must be re-examined and audited.”
Said slohand, “I saw the interview on TV last night and felt short-changed.
“He brushed aside the issues with the logic that since the officers who made the decisions were not the beneficiaries in any sense of the word, such lapses are mistakes and are therefore acceptable...
“..The size indicates that it can only come from the very top.”
The skies are dark but the storm has not broken yet.
Fannie’s and Freddie’s free lunch
By Joseph Stiglitz
July 24 2008
Much has been made in recent years of private/public partnerships. The US government is about to embark on another example of such a partnership, in which the private sector takes the profits and the public sector bears the risk. The proposed bail-out of Fannie Mae and Freddie Mac entails the socialisation of risk – with all the long-term adverse implications for moral hazard – from an administration supposedly committed to free-market principles.
Defenders of the bail-out argue that these institutions are too big to be allowed to fail. If that is the case, the government had a responsibility to regulate them so that they would not fail. No insurance company would provide fire insurance without demanding adequate sprinklers; none would leave it to “self-regulation”. But that is what we have done with the financial system.
Even if they are too big to fail, they are not too big to be reorganised. In effect, the administration is indeed proposing a form of financial reorganisation, but one that does not meet the basic tenets of what should constitute such a publicly sponsored scheme.
First, it should be fully transparent, with taxpayers knowing the risks they have assumed and how much has been given to the shareholders and bondholders being bailed out.
Second, there should be full accountability. Those who are responsible for the mistakes – management, shareholders and bondholders – should all bear the consequences. Taxpayers should not be asked to pony up a penny while shareholders are being protected.
Finally, taxpayers should be compensated for the risks they face. The greater the risks, the greater the compensation.
All of these principles were violated in the Bear Stearns bail-out. Shareholders walked away with more than $1bn (€635m, £500m), while taxpayers still do not know the size of the risks they bear. From what can be seen, taxpayers are not receiving a cent for all this risk-bearing. Hidden in the Federal Reserve-collateralised loans to JPMorgan that enabled it to take over Bear Stearns were almost surely interest rate and credit options worth billions of dollars. It would have been easy to design a restructuring that was more transparent and protected taxpayers’ interests better, giving some compensation for their risk-bearing.
But the proposed bail-out of Fannie Mae and Freddie Mac makes that of Bear Stearns look like a model of good governance. It sets an example for other countries of what not to do. The same administration that failed to regulate, then seemed enthusiastic about the Bear Stearns bail-out, is now asking the American people to write a blank cheque. They say: “Trust us.” Yes, we can trust the administration – to give the taxpayers another raw deal.
Something has to be done; on that everyone is agreed. We should begin with the core of the problem, the fact that millions of Americans were made loans beyond their ability to pay. We need to help them stay in their homes, including by converting the home mortgage deduction into a cashable tax credit and creating a homeowners’ Chapter 11, an expedited way to restructure their liabilities. This will bring clarity to the capital markets – reducing uncertainty about the size of the hole in Fannie Mae’s and Freddie Mac’s balance sheets.
The government should set a limit to the size of the bail-out, at the same time making it clear that, while it will not allow Fannie Mae and Freddie Mac to fail, neither will it be extending a blank cheque. There may need to be a drastic reorganisation. There should be a charge for the “credit line” (any private firm would do as much) and, given the risk, it should be at a higher than normal rate.
The private sector knows how to protect its interests; the government should do no less. As long as the credit line is extended, no dividends should be paid. To ensure that the government is not simply bailing out creditors who failed in due diligence, at least, say, 25 per cent of any notes, loans or bonds coming due that are not lent again should be set aside in an escrow account, to be paid only after it is established that taxpayers are not at risk. Any government loans should be cumulative preferred debt: the taxpayers get paid before any other creditors receive a dime. To discourage moral hazard the interest rate should be at a penalty rate and, reflecting the rising risk, increase with the amount borrowed. Finally, the government should participate in the upside potential as well as the downside risk: for instance, by taking shares (which it might later sell) or, as it did in the Chrysler bail-out, warrants.
We should not be worried about shareholders losing their investments. In earlier years, they were amply rewarded. The management remuneration packages that they approved were designed to encourage excessive risk-taking. They got what they asked for. Nor should we be worried about creditors losing their money. Their lack of supervision fuelled the housing bubble and we are now all paying the price. We should worry about whether there is a supply of liquidity to the housing market, so that those who wish to buy a home can get a loan. This proposal provides the necessary liquidity.
A basic law of economics holds that there is no such thing as a free lunch. Those in the financial market have had a sumptuous feast and the administration is now asking the taxpayer to pick up a part of the tab. We should simply say No.
The writer, 2001 recipient of the Nobel Prize for economics, is university professor at Columbia University. He is co-author with Linda Bilmes of The Three Trillion Dollar War: the True Cost of the Iraq Conflict
Scottish business urged to rally behind struggling banks
Edinburgh business boss urges critics to maintain a sense of proportion in face of global slowdown
By Colin Donald
20 July 2008
EDINBURGH'S FUTURE AS ONE of the top five financial services centres of Europe is more endangered by "hysterical" market commentary than by any threat to Scotland's largest financial institution, the capital's pre-eminent business leader has warned.
After a week of grim market speculation caused by the slumping share prices of Scotland's two biggest banks - RBS and HBOS - Ron Hewitt, the chief executive of Edinburgh Chamber of Commerce, lashed out at media suggestions that mismanagement of the banking giants had made them vulnerable to foreign takeover, and had endangered Scotland's international reputation for financial prudence and good judgement.
Although shares in RBS rallied by 10% in Friday trading to 197p, and shares in HBOS by 5.13% to 282p - too late to encourage investors to take up the latter bank's planned £4 billion cash call - sentiment surrounding the banks, said Hewitt, was "neither justified nor helpful in the current economic climate".
Next month marks the first anniversary of formal shareholder approval of the RBS-led consortium's bruising takeover battle for the ailing Dutch bank ABN Amro. The deal's timing on the brink of the credit crunch, and perceived "overpayment", would have disastrous consequences on market confidence in RBS. Hewitt said that a tendency to "talk up doom and gloom" was in danger of becoming self-fulfilling.
Said Hewitt: "Nobody expects the media to create false optimism but we are not in the situation where our economy has suddenly collapsed. These issues are all down to confidence and how that has been dented by poor banking decisions, primarily in the US. The recapitalisation of both the major Scottish players and other financial houses has put them in a position of considerable strength compared to international competitors. Whilst the share price might have tumbled there is no significant depression of the balance sheet.
"Both of these companies have performed exceptionally well for Scotland over the years and business leaders need to stand four-square behind them, to recognise the excellence of their performance and their value to the Scottish economy."
Hewitt also defended HBOS's decision to cut its workforce by 160, describing it as "prudent financial management as all companies have to do from time to time."
"The job losses represent less than half a percent of HBOS's workforce, largely through natural wastage as parts of the SME-facing business are merged. I don't see the slightest suggestion that we should be concerned for the company and its survival as a Scottish-based company."
With Scottish financial institutions and their leadership facing criticism of unprecedented severity, John Swinney, cabinet secretary for finance, declined to comment on the fortunes of individual companies but authorised his spokesperson to say: "Scotland's financial services industry makes a critical contribution to increasing sustainable economic growth. Financial services, and indeed Scotland's economy more generally, is not immune from global economic conditions, but has continued to show encouraging signs of resilience."
Market at bottom? Don't believe it
The recent updraft is probably an illusion. There's no indication the bear market has ended and plenty of evidence it has a long way to fall yet.
By Jon Markman
7/24/2008
Investors praying that the most inept federal government since the Hoover administration has engineered an end to the credit crisis with a plan to rescue Fannie Mae and Freddie Mac may be on track to see their delusions shattered.
At the root of investors' hopes in recent days has been a sharp jump in the shares of banks and brokerages even after the companies reported terrible second-quarter earnings and acknowledged that profits will likely be impaired for at least a year to come.
Yet optimism -- and a trading phenomenon known as a "short squeeze" -- can take banks' shares only so far before the laws of financial gravity take over. So make no mistake: Those shares are headed back to where they came from unless Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke can pull a miracle out of their briefcases.
Even though Congress is lending a helping hand, for once, with its passage Wednesday of a bill to help struggling mortgage holders, that miracle is looking less likely. Consider, for instance, that American Express on Monday revealed the biggest open secret in the world: Its portfolio had suffered massive levels of defaults in California and Florida, as customers strapped for the money to pay delinquent mortgages on overpriced homes weren't paying their credit card bills either. Fancy that. AmEx shares plunged, but bank stocks remained stubbornly buoyant, which was a bad sign.
A field guide to bears
Why is hopefulness bad? It's because bear markets can end only when everybody has found their inner Eeyore. Bear markets are all about extinguishing hopes, crushing dreams and, most of all, smashing idols of the previous bull market. They end only when no one even wants to think about stocks anymore. So fake-out advances will be a fixture of trading until all optimism fades.
To help you prepare for the next downdraft -- which should start once the Dow Jones Industrial Average reaches the 11,750-to-12,100 level or the S&P 500 Index gets to around 1,325 -- I've prepared a compact Bear Market Users Manual:
• There's no credible evidence that the market has bottomed. You can talk all you want about sentiment being too low, pessimism being too rampant, financial crises setting bottoms and all the other subjective fluff that is thrown around. It's all speculation and wishful thinking. The reality is that pessimism alone cannot set a bottom. There have to be enough buyers. And for now there is no proof that big investors at mutual funds, pension funds and hedge funds have been aggressively acquiring stocks from panicked sellers. Quite the opposite.
• Evidence suggests the worst of the bear market lies ahead, not behind. The first sign of a new bear market occurs when an index or a stock trades below its average price of the past 12 months. That happened to the Dow in late December. But now we need to focus on the importance of the 200-week average. When that level breaks, veteran independent analyst Michael Belkin says, damage is so great that there is little hope for a market to recover quickly. The Dow has had four straight weekly closes below its 200-week average and remains there now. As a market falls, volatility also intensifies. Expect to see many more days ahead when the Dow sinks or rises by about 250 points.
• A market that falls below its 200-week (3.8-year) average usually heads straight for its 200-month (16-year) average. I learned this concept from Belkin during the past bear market, and it was great guidance to the then-shocking deterioration in Intel, Cisco Systems Oracle. Lest you think that's a crazy idea, the Philadelphia KBW Bank Index, which encompasses Bank of America and Wachovia, already is well below this level. So are General Motors, insurer American International Group, International Paper and Merck. General Electric is close. Moreover, you should know that the 200-month average was the exact spot where the plummeting Nasdaq Composite Index finally bounced and recovered in 2002. The 200-month averages for the big indexes now are 981 for the S&P 500 Index, 1,771 for the Nasdaq and 8,360 for the Dow industrials.
• The best course in a bear market is to use rallies to close out all long positions in the riskiest groups, including tech, consumer durables and cyclicals. It's a tough game to try to hold on to the seemingly best sectors or best stocks in those sectors. You might pick out the one or two that survive, but it's unlikely. The majority of your funds should be in cash, with some risk money devoted to selective buying of well-behaving groups, some spot speculation in the worst groups and some short-selling. Beware of rumors of government intervention or the widespread belief that trillions of dollars are on the sidelines ready to be invested, or the removal of a single threat, such as higher energy prices. None of these things matters until you get a firm signal that buyers are really coming back to the market with intensity. Bull markets may rise along a "wall of worry"; bear markets fall along a "slope of hope."
Long-lasting bear markets
• Long bear markets are usually deep. The average bear market of the past century has lasted less than a year and generated losses of 30%. But ones that lasted more than 12 months showed an average loss of 42%. All of these figures are averages with relatively few examples, however, and thus deceiving in their exactitude. The current bear market was caused by a perfect storm of trouble: a real-estate collapse, a credit disaster, an oil price mega-spike, recession and inflation. Will it persist for only an average amount of time and decline by only an average amount? That's an open question. Put me down as doubtful. For your score card, this bear market has so far lasted 12 months and generated a loss of 17%.
• A reversal higher can be swift and big, and it is usually disbelieved at the start. Eventually, all bear markets end -- very often with a roar and when least expected. The only statistical measure that I have seen work effectively in the past 20 years to signify the end of a major bear phase is a one-two punch in which the market experiences a session in which 90% of prices and 90% of volume is to the downside, and then, within three days, the opposite occurs: a 90% upside day. Most recently, this measure -- invented by the nation's oldest technical research firm, Lowry's Reports -- kicked in to signify the end of a 3-year-old bear market in late March 2003. When that massive buying occurs, most investors don't believe the inflection point is really occurring and consider it just one more rally to sell into or short. But in reality, that has been the signature of the end of a bear. Despite recent highly volatile up-and-down trading, this combination has not yet occurred.
When the time comes to rally out of this bear, gains could surpass 30% in the first six months. In the meantime, bear markets are difficult times for our psyches and our wealth. The market gods are clever in their attempts to encourage us to lean the wrong way.
An unlikely miracle
Despite all the drama of recent days, the benchmark S&P 500 Index is still under water in July and is down 13% for the year, while the Dow down 12.5% for the year and the Nasdaq Composite down 13%. Meanwhile, broad measures of technology and health care stocks are down 12% for the year, a measure of banking stocks is down 24%, and a measure of Chinese stocks is down 18%.
I checked in with Paul Desmond over at Lowry's Reports for his view of the past week, and he affirmed that the midweek rally had all the characteristics of an upside "correction" within a continuing bear market rather than the start of a bull market. He pointed out that the vast majority of past major market bottoms were preceded by a series of 90% downside days, otherwise known as panic selling, just before the final low that was followed by a 90% upside day that marked the start of the bull cycle.
In the present case, Desmond notes, the last 90% downside day was registered back on June 26, which was 13 days before last week's rally began Wednesday. And a 90% upside day, which should be recorded within just a few days of the last 90% downside day, has yet to occur, Desmond says. So that is why the probabilities suggest the past week has been a lot of sound and fury, signifying nothing.
I would love nothing more than to be wrong and to discover in a few months that the Federal Reserve and Treasury Department had pulled off the greatest coup in financial history by crushing both financial short sellers and crude-oil speculators while simultaneously turning banks' losses into profits and stemming inflation. So here's an all-clear signal to watch at home: If the Dow closes the month above 12,784 or the S&P 500 closes above 1,406, then the bear is dead -- long live the bull.
Fine print
To give you an idea of how persistent a bear market can be, consider that Cisco Systems, Intel and Sony, three of the finest, strongest companies in the world, have never actually left their 2000 bear markets. We'll probably look back at the financial stocks in five years and say the same thing.
似是故人来
唱：梅艳芳 (Anita Mui)
词：罗大佑
曲：罗大佑
同是过路，同做过梦
本应是一对
人在少年，梦中不觉
醒后要归去
三餐一宿，也共一双
到底会是谁
但凡未得到
但凡是过去
总是最登对
台下你望，台上我做
你想做的戏
前世故人，忘忧的你
可曾记得起
欢喜伤悲，老病生死
说不上传奇
恨台上卿卿
或台下我我
不是我便你
俗尘渺渺
天意茫茫
将你共我分开
断肠字点点
风雨声连连
似是故人来
何日再在，何地再聚
说今夜真美
无份有缘，回忆不断
生命却苦短
一种相思，两段苦恋
半生说没完
在年月深渊
望明月远远
想象你幽怨
俗尘渺渺
天意茫茫
将你共我分开
断肠字点点
风雨声连连
似是故人来
留下你或留下我
在世间上终老
离别以前
未知相对当日那么好
执子之手
却又分手
爱得有还无
十年后双双
万年后对对
只恨看不到
抱緊眼前人 (Embrace The One In Front Of You) - Anita Mui
本应相爱本应相衬
命里注定同行却未能
舍不得不爱把不得一世
唯愿抱紧眼前人
匆匆一世深深一吻
就此以后无从爱别人
若只得今晚可偷偷走近
谁又理得天锁禁
爱你就算将跌入永远黑暗
但这一刻抱紧
多么确实无用再觅寻
浮沉人在世快乐循环又伤心
但愿爱得最动人
一宵的爱一生的印
尽管最后如同过路人
舍不得不爱巴不得一世
唯愿抱紧眼前人
爱你就算将跌入永远黑暗
但这一刻抱紧
多么确实无用再觅寻
浮沉人在世快乐循环又伤心
但愿爱得最动人
一宵的爱一生的印
尽管最后如同过路人
舍不得不爱巴不得一世
唯愿抱紧眼前人
唯愿抱紧眼前人
Sponsoring Recklessness
by James Surowiecki
July 25, 2008
When do the words “not guaranteed” actually mean “guaranteed”? Whenever the mortgage giants Fannie Mae and Freddie Mac are involved. The two companies have long been required to tell investors that their securities are not guaranteed by the federal government. But in the financial markets everyone has always assumed that this demurral was just window-dressing, and everyone, it turns out, was right. Last week, when fears of a possible collapse of the two companies threatened to spark a major financial crisis, the Treasury Department and the Federal Reserve quickly came up with a rescue package. What had been an implicit guarantee became an explicit one.
Fannie and Freddie are the duck-billed platypuses of the financial world. They’re profit-driven corporations, owned by shareholders and, in theory, beholden only to them. But they’re also so-called “government-sponsored enterprises,” set up by the state with the explicit mission of fostering homeownership, by buying and selling home mortgages. Unlike ordinary corporations, they’re exempt from most state and local taxes and certain S.E.C. requirements, and they have access to a government credit line. Other G.S.E.s play similar roles in other markets: the Federal Home Loan Banks make loans to banks, credit unions, and thrifts; the Farm Credit Banks facilitate the flow of credit to farmers; and Farmer Mac buys up farm and rural-housing mortgages. In each case, the government saw a hole in the marketplace and chartered a company to fill it.
The G.S.E.s are curious, because there’s no obvious reason for them to exist in the form they do: instead of creating private companies to do all these jobs, the government could just do them itself. In fact, that’s how Fannie Mae got started, back in 1938: originally, it was a government agency endowed with the authority to buy mortgages, in the hope that this would expand the supply of credit to homeowners. It wasn’t until 1968 that Fannie was privatized. (Freddie Mac was created two years later, and was private from the start.) The main reason for the change was surprisingly mundane: accounting. At the time, Lyndon Johnson was concerned about the effect of the Vietnam War on the federal budget. Making Fannie Mae private moved its liabilities off the government’s books, even if, as the recent crisis made clear, the U.S. was still responsible for those debts. It was a bit like what Enron did thirty years later, when it used “special-purpose entities” to move liabilities off its balance sheet.
Making Fannie and Freddie into these weird hybrids may have spruced up the budget, but in the long run it also made it easy for the companies to grow too big, too fast. Because everyone assumed that the government would make good on Fannie’s and Freddie’s debts, they could borrow money more cheaply than their competitors. They used this cheap debt to increase the number of mortgages they bought. Had Fannie and Freddie been ordinary private companies, there would have been a natural check: companies with more debt are usually seen as riskier, and that makes shareholders and bondholders less willing to invest in them. Or, had Fannie and Freddie been government agencies, budget constraints would likely have limited the scope of their lending. Since neither the market nor the state checked their growth, they were able to swell extravagantly. (Regulators might have reined the companies in, but, thanks in part to ardent lobbying by Fannie and Freddie, Congress failed to provide them with sufficient power to do so.)
The result of all this was that the companies reaped the rewards of the private sector while enjoying the security of the public sector. Seemingly insulated from all harm, they became reckless. They constructed a giant pyramid of debt on a very small base of capital (eighty-one billion dollars, by the most recent publicly available figures), and by May, 2008, either owned or guaranteed more than five trillion dollars in mortgages. As a result, even though just a small percentage of Fannie’s and Freddie’s mortgages are delinquent, the potential losses are huge. That’s why, in recent weeks, investors finally lost faith in them.
Whatever their sins, Fannie and Freddie clearly couldn’t be allowed to fail, but that’s no argument for letting them go on as they are. Either they should be forced to make it as private companies or they should be nationalized. Given that their business depends on the promise of government assistance and that their current state remains woeful (despite an upturn in their fortunes late last week), nationalization seems more sensible. If Fannie and Freddie are going to run up a tab and stick taxpayers with the bill, why should shareholders profit?
Beyond that question, though, is a more important one: Do we need Fannie and Freddie at all? Their supposed reason for being is that their ability to borrow money at low rates lowers borrowing costs for homeowners. But a paper by the economist Wayne Passmore, of the Federal Reserve, suggests that in fact Fannie and Freddie have only a small effect on the interest rates that homeowners pay, saving them less than one-tenth of a percentage point. More important, if the last few years have taught us anything, it’s that homeownership is not an unalloyed economic good, and that we should be cautious about using gimmicks to make it more attractive. The government already offers homeowners a subsidy, in the form of a mortgage tax break. Given everything else we could be spending taxpayer money on, does the government really need to be in the mortgage-buying business, too?
Temasek sold '5m Merrill shares', not half its stake
Filing error made it look as if investor incurred a huge loss on the disposal
By Grace Ng
July 26, 2008
DID Temasek Holdings really sell half its stake in troubled financial giant Merrill Lynch at a disastrous loss?
This was the talk of town yesterday, as speculation and e-mail messages flew across Singapore, citing a report claiming the Singapore investment company had sold about 87 million Merrill shares.
Stunned market watchers quickly calculated that, if the report were true, Temasek would have suffered tens of millions of dollars in losses based on Merrill's current market prices.
Temasek did not confirm or deny the report yesterday. It said it 'does not comment on speculation from dubious sources'.
But The Straits Times understands that Temasek has in fact not sold half its stake - it only appeared to do so due to a reporting glitch.
A source said that a mistake was made in a routine filing with the United States Securities and Exchange Commission (SEC) on Tuesday, which was intended to show that Temasek held 86.95 million shares in Merrill.
This stake was unchanged from what it had declared in May. The announcement would not have raised eyebrows as the current holdings are just a few million shares fewer than that disclosed in an earlier filing in January.
But a data entry error made it appear that Temasek held 87 million Merrill shares, after earlier disposing of another 87 million, said the source.
The erroneous information was picked up by a California-based firm Mutual Fund Facts About Individual Stocks, which cited the filing in a brief public statement.
This sparked off a furore yesterday among Singapore investors and bloggers, who noted that Merrill's share price has fallen about 46 per cent since Dec 24 last year, when Temasek announced its purchase of the bank's stock at US$48 per share.
Reuters said the market rumours even prompted a dip in the US dollar against the yen and the euro.
Temasek spokesman Myrna Thomas said: 'Investors and the interested public are advised to refer only to official sources of information for announcements on major transactions'.
A check by The Straits Times found a Jan 3 SEC filing by Temasek showed that the company held 91.67 million shares, or 9.4 per cent of Merrill, as at Dec 24.
Then, on May 15, Temasek made another filing stating that it owned 86.95 million shares in Merrill as at March 31. That represents a stake of 8.85 per cent, according to Bloomberg data on June 30.
So, in other words, Temasek did not sell 87 million Merrill shares, but more like five million.
The Straits Times understands that Temasek had to trim its total stake after it exercised the option to purchase an additional 12.5 million shares in February.
This is to keep below the 10 per cent threshold for foreign investors' shareholdings in a US financial institution, mandated by the authorities.
So it may have sold off a few million shares to meet the requirements, say sources.
Temasek had invested a total of US$5 billion (S$6.8 billion) to buy a stake in Merrill. It was among a handful of sovereign wealth funds from Asia and the Middle East that have injected capital into global banks bleeding from huge losses related to the US sub-prime mortgage crisis.
Merrill Lynch last week reported a bigger-than-expected loss of US$4.65 billion for the second quarter. Its shares closed at US$29.04 on Thursday in US trading.
Temasek dismisses talk that it sold Merrill shares
Online report claims the company had disposed of 86.95m shares
By LYNETTE KHOO
July 26, 2008
TEMASEK Holdings yesterday dismissed rumours that it has sold half of its stake in Merrill Lynch.
Calling this a mischievous market speculation, Temasek spokeswoman Myrna Thomas said: 'Investors and interested public are advised to refer only to official sources of information for announcements on major transactions.'
This comment was made in response to rumours triggered by an online report, MFFAIRS (Mutual Fund Facts About Individual Stocks), which had erroneously said that Temasek sold off 86.95 million shares on July 22, by assuming Temasek's original stakeholdings in Merrill is double that amount to begin with.
The report triggered a wave of e-mail messages among the broking community, and speculation was rife on the implication of this said divestment.
But Temasek has not reduced its shareholding in Merrill Lynch.
The Securities and Exchange Commission (SEC) filings made by Temasek on July 22 also showed that it only holds 86.95 million shares on July 11, the same amount as at May 15.
The Singapore sovereign fund had invested a total of US$5 billion in Merrill Lynch in December and February at US$48 a share, at a time when sovereign funds from Asia and the Middle East were propping up global banks reeling from sub-prime related credit losses.
The erroneous report of a share sale by Temasek came after Merrill Lynch posted a fourth consecutive quarter in the red over the weekend.
Merrill's US$4.65 billion loss for its second quarter ended June 30 means that it has piled up US$19 billion in losses over the past year - which works out to about US$52 million a day.
But fund managers said that given Temasek's long-term view in its investments, the current short-term market uncertainties are unlikely to trigger a divestment of its stake in Merrill Lynch.
'Short-term volatility isn't likely to result in them taking any particular type of adjustments that are in response to market drops,' said Wong Sui Jau, general manager of Fundsupermart.
赤壁：一朵鲜花插在刘备上
[落花飞扬的最新文章]
2008-07-26
连蔡康永那样的同志也称赞金城武是人间绝色，那么《赤壁》对我而言不外乎是一场美男盛宴。光听名字就知道：梁朝伟、金城武、胡军、张丰毅、张震。两岸三地的一线美男型男忧郁男集中在一起，外加一个别具新鲜感的中村狮童，是女人不看这场戏都亏了。
也许你会说还有林志玲呀，还有大眼赵薇呀，不怕刺激吗？可是看完这部戏你就知道：当赵薇如何顽皮一笑也难以遮掩浮现眼角的皱纹，林志玲更不是时装杂志上的肤如凝脂，同样长着小痘痘，天啦！我们女人何必每天花两个小时为同样的原因在镜子前自怨自艾？
我得承认，读熟过《三国演义》之后，接受历史人物口里蹦出来的现代词汇是相当别扭的事情，还好，比起《见龙卸甲》，《赤劈》显然强了很多，赵薇的“匹女有责”被侯勇接上“匹马也有责”时并不那么刺耳。
总的来说，这是一部综合了各种现代流行元素于一身的大戏。列举如下：
琼瑶元素：林志玲从声音到眼神，从情节到对白，无一不体现了琼瑶戏的精髓。尤其是“答应我，萌萌长大之后，不可以让它做战马。”哎呀我的妈，差点以为男主角是马景涛。
武侠元素：胡军的赵子龙相当之好，相比之下华仔哥哥太花瓶啦。且看他长枪短剑，大开大合，宛若乔峰附体，乱军之中勇救阿斗，更有燕云十八骑首领之威势。
新闻元素：张震梁朝伟赵薇并马疾奔外出狩猎，林子里隐隐出现了九个月来深为广大网友熟悉的老朋友“华南虎”。我兴奋的呀，这是真的虎啊它的名字叫正龙！
奥运元素：张飞在八卦阵中攒拳跑步上前暴发的呐喊，完全可以看出是在向刘翔百米跨栏的英姿致敬。周瑜入阵从马上飞跃而起接着转体三周半反手一箭插死曹将，更是揉和了体操与跳水名将的经典动作于一身。最明显的是大敌当前，东吴士兵举起右手高呼“奥运！”“奥运！”——朋友狠狠推我一下，人家明明喊的是“胜利”“胜利”。
……以上证明，我看这部电影时心情是良好的，态度是端正的，保证没有笑场的，笑场也是小声的。
话题回到美男身上来，同看戏的朋友说电影名应该叫《三国之同志传》，暗指金城武与梁朝伟眼神之间传达的暖昧。依我看这是回形针恋，金城武与张震，张震与梁朝伟，梁朝伟再与金城武，两把羽扇都心有灵犀，卿怜我我怜卿惺惺惜惺惺。害得周瑜小乔那一场床戏是如此多余，葡萄架结出个水蜜桃，好看是好看，就是不晓得跟葡萄藤有什么关系。
以下是一句话点评：
根据散文写作形散神不散的定义，《赤壁》版关羽演出了神似形不似的效果。一赞。
金城武算不上绝色，舌战群儒中只有投机取巧，媚眼相勾（张震），而无对答如流，器宇轩昂。
梁朝伟不愧是要大婚的人了，每一个出场都春风满面，每一个反问都柔情似水——幸福的表演总是相似的。
张震此次阴柔，寡断，毫无吸引力——古龙说女人最好的装饰是骄傲，那男人最好的装饰应该是果断。
尤勇，啊他什么时候扮刘备我都不反对，他草鞋编的那么形式主义我也不反对。——只有赵薇扮孙尚香的情况下我反对，为什么？因为自古就有一句话，叫做一朵鲜花插在刘备上。既然还有下集，那么希望下集这朵鲜花换个花瓶吧。
赵薇的直、傻、愣是可爱的，孙尚香也是如此，这跟演技无关，跟历史无关，只跟我个人偏好有关。
林志玲的温柔、低徊、楚楚动人，梨花带雨，嫣然一笑……综合起来都是一句话：我要征服你。（这令我想起有共同点的章子怡，一定是要具有此野心才能大红吧？同样的东西在杨紫琼巩俐身上就变成：我能征服你。）
秉着赏美男宴的心态，这部电影没有令我很失望。周星星早说过看看而已何必当真呢？
我傻乎乎地看了一百四十分钟，据和菜头说这部电影是一百五十分钟，存疑。拍了N次掌，期待了N次火烧，忍受了N次宋佳黑寡妇式幽怨（还有什么比“丞相，你宠幸我三天了”更雷人的台词？）并暗地里复习了一遍小学课文《草船借箭》，总以为高潮就要来到，眼看周瑜终于一把火烧了小纸船，屏幕打出几个大字：赤壁之战——且看下回分解。
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