Two very recent stories on CDSs (credit default swaps) highlight the issue of Risk. Risk has a lot of aspects to it and some get overlooked, such as counterpart risk, process risk, instrument risk (liquidity, clarity of regulations, how tested it was in real-life distressed situation etc.)… Not reading the fine print, for instance, has led more investors astray than they would like to confess. Much has been said about CDO-Squared and complex instruments in general, but the CDS was actually not supposed to be complex. Even so, investors in Greek debt CDSs are finding that “default” may not be what they thought it was… And another side of the debate is counterpart risk: what if the instrument is good, the writing is clear and so on – but the counterparts (whoever they are in this immensely interconnected financial world) just can’t honor their side of the deal?
A few notes about Day One (Monday, Oct. 17th) in the 2011 Value Investing Congress. You can follow their own live updates on Facebook or Twitter. We start with David Einhorn – he wasn’t the first speaker of the day, but things started to get interesting when he came onto the stage. Having attended both, the Ira Sohn Investment Conference is a better event: shorter in length, better attended and with better speakers, more focused and, we dare say, with more committed speakers.
Interesting Wall Street Journal editorial pointing out some contradictions within the Occupy Wall Street movement. As with all movements that start small and seem innocuous or naive at first, politicians and Wall Streeters ignore them at their own peril. How long before someone with any kind of political relevance gets tempted into picking up this flag?
“Synergy”, “two powerful minds working in unison”, “complementary skills” and so on: all that we try to achieve has to be checked against reality, especially when theory meets the REAL incentives and cultural aspects of a company. As we constantly repeat to ourselves, “culture eats strategy for breakfast”. An article notes that the two co-heads of Morgan Stanley’s Institutional Securities Group can’t stand each other and, more importantly, that this personal dispute is disrupting business. The Epicurean Dealmaker wrote a very interesting analysis of this particular dispute in light of the bigger picture of the natural conflict of interests inside an investment bank. What he finds there can be applied almost anywhere else where such conflicts are, perhaps, less obvious.
Buysiders.com is about the work done by all of us at IP, but this is a personal note – instead of the normal “we”, this post is about something I’ve watched today: a 1987 “product concept” video that’s simply impressive, not just because the “Knowledge Navigator” is a wonderful vision, but also because we’re not that far away from something like this. Think iPad + the Siri app. Sure enough, the 1987 video was Apple’s. Prof. Sasser’s point: seeing things that others didn’t was nice, but seeing it through and changing the world was Steve Jobs’ genius.
Farallon Capital’s Tom Steyer is so secretive that even a more “politically-minded” profile seems like a good excuse to collect links about him and Farallon. Mr. Steyer was one of Bob Rubin’s traders at Goldman Sachs in his famed risk-arbitrage desk from the mid-1970′s to the late-1980′s (along with other famed managers such as Eddie Lampert, Daniel Och and Richard Perry). We have a few links and videos about Mr. Steyer inside.
Landmark announcement today: the Berkshire board of directors has approved an “authorization” for a share repurchase program. Berkshire being what it is, it’s a bit different from the usual buyback: there’s no maximum amount, no set period of time and nor is there the obligation to buy any stock at all. There are only two rules: if share purchases do occur, Berkshire will not pay above 110% of book value per share and it must maintain a cash balance superior to US$ 20 billion. As Buffett likes it, there’s no “mandate” other than “intelligent investing”.
Today, on the 7th day of his passing, we remember Ruy Mendes Gonçalves, Vice-Chairman of Saraiva, who passed away on Saturday. He was a pillar of Saraiva’s success and an esteemed man for his strength of character and kindness. So on behalf of the entire team at Investidor Profissional and, we’re sure they would give us their permission to do so, on behalf of the shareholders of our funds: we’d like to send him a huge “Thank You” for all these years of dedicated service to Saraiva.
We posted some interesting links in Portuguese about Mr. Ruy Mendes Gonçalves at www.buysiders.com.br.
We’re at Day Two of the InfoTrends conference in São Paulo about Social Media. It’s been pretty interesting so far. Today we’ll try some live-blogging, and Monday we’ll post the notes from Day One. Just a teaser for the weekend: Julian Assange was the keynote speaker for day one.
Two stories in the “Social Media IPO Candidates” realm got us thinking that corporate governance might be under fire. Zynga is reportedly creating a triple-class share structure and Groupon has apparently engaged – voluntarily or not doesn’t matter – in pre-IPO marketing during its quiet period. “Buyer beware” indeed.
