Showing posts with label AIG. Show all posts
Showing posts with label AIG. Show all posts

Friday, April 12, 2013

Who Will Knock Exxon Mobil off?

A quick look at FY2010’s top Profit-Making US firms (B&E US Power 100, 2011), and on how these Powerhouses will Perform in 2011 and a Decade later. Will there be a New #1 or will Big Oil Dominate forever?

The signs are everywhere. From General Motors (GM) to Ford, from Citigroup to AIG – the list of those who have defied the quotient of “sustainability” in the modern capitalistic era is to say the least, very long. Once they were the original model of success in profit-making – an archetype to emulate for all profit-loving corporations for years together. But in time, their brains which over decades were hardwired to be optimistic, were forced to live through the pain-filled sensation of losses; the glorious assembly lines and conference rooms turned a Golgotha. You ask – how could GM – a company that until 2008 had been America’s most profitable in 30 of the past 50 years – suddenly go bust? GM was what made Detroit – it made America audacious, a characteristic that was thereon inculcated into other big corporations in other First World nations as well, making them all recklessly bold characters in defiance of convention. But, it happened. Stripped naked by the US government, GM even got delisted. Ford fell too. Only, it needed no foodpack from the government to survive. AIG, a one time pride of insurance-loving America became a $170 billion headache for taxpayers when 2008 ended. Its books got laden with a loss of $99.3 billion in FY2008 alone. The following year, it lost another $10.3 billion. Then there was Citigroup – the hero of America’s private banking revolution. After recording $127.56 billion in bottomlines since the turn of the century till FY2007, the company delivered two consecutive years of losses until FY2009 ($29.28 billion). None of these companies found a place in the list of America’s 100 most profitable companies list for FY2009.

Ashamed & dethroned. But the pendulum has swung back, saving these companies a lifetime at the museum. Going by this year’s B&E US Power 100 list (FY2010), these very fallen angels are back. GM features on #27 (profit of $6.17 billion), Ford on #25 ($6.56 billion), AIG on #22 ($7.79 billion) & Citi on #17 ($10.60 billion). And unlike last time, this time around, they are back to defy the theorem of “sustainable loss-making”. That they have crawled back is good news, but the reverse can occur as fast. History does repeat. This oscillating bob is therefore ‘the’ concern for all profit-making powerhouses today.

How impressive is 80% as an indicator to a trend? Quite. If compared to a similar list prepared fifty years back, 80% of the names that appeared on this year’s America’s 100 most profitable list are new. This implies, on an average, every decade, 16 companies on the list are replaced by new ones. Digestable? Not if you understand how the dynamics of the current globalised scenario is bringing new names to the fore, faster than ever before. As per the 2011 B&E US Power 100 list, compared to a decade back, 56 new companies have knocked-off as many names from the ranking – much higher (and dangerously so for existing names) than the average replacement rate. This brings a new question to the front – how sustainable are the current profit-making schemes of the top names on the 2011 B&E US Power 100 list? Will the top names in the list retain their places when we repeat this exercise next year? And a decade later, can we imagine a new dominant #1 or will oil companies continue to flash? Many questions, one answer – read on.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
 
For More IIPM Info, Visit below mentioned IIPM articles
 
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Tuesday, April 2, 2013

Is SEC Setting us up?

Out of 26 Odd People Under Trial in The Galleon case, Gupta is in The Few Facing Civil Instead of Criminal Proceedings. Is The SEC setting The Stage for an Escape Route?

The verdict is finally out, loud & clear. Good guys have won yet another round (apparently)! The nailing of Galleon Group hedge fund (managing over $7 billion before closing in October 2009) tycoon Raj Rajaratnam has been brandished around by SEC in an attempt to project the view that the US legal setup is still not a set-up in US when it comes to chasten influential financial-world figures. One has to accept to SEC’s credit, the Galleon case is the biggest blow against insider trading in a generation as the trial involved some of the most high-profile executives on the Wall Street. But hold on to your beer barrels, we just might have been had by the SEC.

First the empirical evidence. No doubt, there have been cases in the past where people have been caught for their crimes, but almost all of them (except a few; see chart) surprisingly escaped unscathed. Even the government has tried to curb cases and incidences of insider trading by putting in place laws like SOX (the Sarbanes-Oxley Act of 2002), but much in vain. According to data compiled by Bloomberg, while there were just 70 hedge funds managing $39 billion in 1990, the number had grown to a whopping 2,600 (managing $1.7 trillion) by the end of 2010. And so, one may presume, the cases of insider trading.

However, this time, thanks to the diligent prosecutors and FBI agents involved in the case that Rajaratnam, a Sri Lanka born US citizen, was finally found guilty of conspiracy and securities fraud on all 14 counts, and now awaits sentencing on July 29, 2011, which is most likely to put him behind bars for the next decade or so (or even more!). Rajaratnam is said to have made over $60 million by illegally trading on secret tips from bankers, consultants, traders, directors, and former employees of some big companies, including Goldman Sachs (GS) and McKinsey. Apart from Rajaratnam, there are more than 40 people who are now facing insider trading charges stemming from a nationwide investigation that has roots going back to 1998.

But now that Rajratnam is down, what awaits Rajat Gupta?
As one would know, the United States Securities and Exchange Commission (SEC), on March 1, 2011, accused Gupta of illegally tipping Rajaratnam with insider information about Goldman Sachs and Procter & Gamble while serving on the boards of both companies. For instance, in October 2008, Gupta apparently attended a Board meeting of Goldman Sachs where it was revealed that Berkshire Hathway, owned by the legendary investor Warren Buffett, would invest $5 billion in the company to bail it out of trouble. SEC has evidence that Gupta passed on this information to Rajaratnam, who in turn made a killing. In fact, wiretaps of phone conversations between Gupta and Rajaratnam released by prosecutors during Rajaratnam’s trial clearly show that Gupta discussed the details of Goldman Sachs board meetings with Rajaratnam, including the company’s plan to buy some other financial firms like Wachovia and AIG.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist). For More IIPM Info, Visit below mentioned IIPM articles

 
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