John Thain has been “ousted” from Bank of America. He is leaving the firm after Merrill posted a US$15b loss in the latest quarter.

Poor John, or poor John? To me, the man has done his job.

He got Ken Lewis, the big talking bozo, to pay through his nose for Merrill Lynch, the bank which now looks like it was a crap asset.

“Lewis has spent some $130 billion on major mergers to build Bank of America, but has raised the hackles of investors who thought he rushed too quickly to buy Merrill. … Read the rest of this entry »

U.S. President-elect Barack Obama has laid out his plan for a huge economic stimulus package, with a broadband rollout, an Internet-based smart energy grid and alternative energy a major component of his plan. The giant stimulus package could cost close to $1 trillion, with investments in communications and energy infrastructure forming a major chunk of government spending. The president-elect has called the economic situation in the U.S. a “crisis unlike any we have seen in our lifetime,” hence it is no surprise that this economic stimulus package is quite unlike any other in the past several decades that the US has seen.

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As we all know, the subprime fiasco which originated in the United States has seen its hand of carnage stretch beyond the boundaries of physical geography and slap several hundred Singaporean “investors” in the face to the tune of millions of dollars in losses. And of course now that the financial weapons of mass destruction have detonated, the casualties of this “economic pearl harbour” are scrambling to apportion the blame to other parties, in hopes that they can get some sort of money back. Meanwhile, those involved in the long chain of origination and distribution of the toxic financial instruments are of course making sure that none of the blame falls on them, and the way to do that, is to blame someone else, of course.

In the midst of this clown show, which are the parties involved and what blame can you place on them, in order to avoid taking personal responsibility? Here’s my take on this comedy of errors:
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It looks like the Fed’s bailout plan is little comfort to Singapore’s investors. With Tharman Shanmugaratnam forecasting a recession that will last several quarters, the bears are in full control, pummelling stocks to new 2-year lows. This is what I saw today when I opened my trading screen watchlist: A sea of red ink!!!

My Watchlist on 6th Oct 2008

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OpenNet recently won the NetCo segment of the NGNBN. The consortium comprised Canada’s Axia NetMedia, and Singapore’s SingTel, SPH and Singpower Group. Although it might have been painted as a close “two-horse” race, I doubt if there were ever any questions as to who was going to win the bid. With the government putting up $750m to fund the NGNBN NetCo passive network, it could not afford to place its bets on the Infinity network, which would have faced stiff, cutthroat competition from SingTel, had the latter not won the tender.

And now that SingTel’s consortium has won the bid, the long term outlook for StarHub doesn’t look pretty. StarHub’s franchise lies with its cable network and its strong programming line-up. It keeps customers and prevents churn by using its exclusive cable infrastructure to tighten its stranglehold on the telecoms market with strong triple & quadruple play packages.

StarHub stock price to date (source: UOB KH)

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“Merrill was paying typical Wall Street pay… We intend to pay market instead.” – Ken Lewis

Ken Lewis, CEO of Bank of America, has gone on the record making the statement above. And while this statement may seem to make sense to some, it really betrays Ken’s confusion and fundamental lack of understanding about Wall Street and the investment banking business.

Mr Lewis seems to imply that there is a difference between “typical Wall Street pay” and “market pay.” But While Merrill Lynch gives generous pay packets to its bankers and other staff, this WAS market pay – for the investment banking business. That’s why it was typical. Typical Wall Street Market Pay!

But you see, Ken Lewis really didn’t mean to say he intended to “pay market,” because “paying market” means paying “typical Wall Street pay.” What Ken Lewis really meant was this – We intend to pay “commercial bank pay”. After all, that’s what BoA has been, is, and will continue to be, predominantly – a huge lumbering commercial bank, and a second rate investment bank. Acquiring Merrill isn’t going to change that, and here’s why:
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The key natural resource input that goes into the generation of electricity in Singapore is natural gas. All of Singapore’s power plants predominantly use natural gas to generate their electricity. Hence, one would think that it would be natural to peg to price of natural gas, to the price of natural gas. But in Singapore, the price of natural gas, alas, is pegged to oil!!! Is it no wonder, then, that our electricity prices have seen their greatest hike in recent times?

Just have a look at the chart of Natural Gas Futures traded on Nymex: the prices have fallen by half since June this year.

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SMRT, as we all know, operates the North-South MRT Line (NSL) and the East-West MRT Line (EWL). Even though SMRT has bus and taxi revenues, the majority of SMRT’s revenues come from MRT/LRT operations, and the great majority of SMRT’s profits come from operating the Rapid Transit System (RTS).

SMRT has a 30-year licence to operate the NSL and EWL. By global standards, its rail operations are massively massively profitable. Because the bus routes in Singapore to date have been designed to be “feeder systems” to channel passenger traffic through the RTS, the MRT/LRT system is therefore the ‘backbone’ of Singapore’s public transport system. As such, this, combined with an uncontestable 30-yr licence gives SMRT a virtual monopoly on its routes.

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After the collapse of Lehman Brothers, Bear Stearns, and the unwinding of the credit markets over the past year or so, several Singaporean investors have found themselves burnt, having dumped significant portions of their retirement savings in credit derivatives and other similar financial instruments. One of these products in particular, Lehman’s Minibonds, has been completely wiped out following the Chapter 11 bankruptcy of Lehman brothers.

Now, several of these investors (losers), are crying and complaining to the MAS, claiming that the authority did not do enough to protect them from the risks of these investments that are now close to worthless. As quoted in the Straits Times…

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In its short lifespan since its launch, Google’s Chrome is already starting to have an impact on the internet and the webapps landscape. As I mentioned in an earlier post, SaaS developers and cloud computing enthusiasts would be the greatest beneficiaries of Chrome’s quantum leap improvements in browser technology.

Indeed, the whole idea behind a blazing fast Javascript engine is not about the speed of the browser, it’s about providing a powerful platform to execute web apps. This idea was captured quite succintly by Brendan Eich, creator of Javascript:

Speed, after all, is not an end to itself. The reason browser performance, especially JavaScript performance, is important is because it allows developers to create Web applications to rival traditional desktop programs in speed and sophistication. “The more browser makers who take performance to the next level, the likelier people will build Web apps that can replace desktop apps,” said Eich.

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