| | Tuesday 9 October 2012 THOUGHT FOR THE DAY  Hello Share Mates,
There are times when I start to write something here and then, half way through, I begin to realise I am changing my mind as I scribble. What seems to be a good wheeze for making money on the share front, gradually falls apart as I write about it.
When this happens, I have to do the honourable thing and start all over again on a different subject. It's tempting to try and get back on the argument, but once faith has gone, it's not fair to inflict the wheeze upon you.
This happened just before I started this contribution. Halfway through a radical piece about the Chancellor and his plans for cuts, my computer crashed. So even it didn't believe what I was saying.
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Paper round BAE, Reckitt Benckiser, IMF
Investor opposition to the proposed tie-up between Europe's aerospace and defence champions is mounting, with more than 30 per cent of shareholders in BAE Systems expressing significant concerns about the deal with EADS. Ahead of a takeover deadline on Wednesday, some of the biggest investors in the British company backed reservations outlined by Invesco Perpetual, BAE's largest shareholder with a 13 per cent stake, putting the deal in jeopardy. A meeting of Nato defence ministers on Tuesday is expected to prove crucial in deciding whether to extend the deadline set by Britain's Takeover Panel. Although none of the shareholders have said they would block the deal, at least six of the biggest 20 are warning that they support Invesco, which has expressed public misgivings about the tie-up. BAE is likely to need 75 per cent of the company's shareholders to support the deal with European aerospace group EADS, The Financial Times says.
The chief executive of Reckitt Benckiser pledged millions of pounds of shares in the company to secure a personal loan more than two years ago without investors being told, it has emerged. Rakesh Kapoor, who earned £736,000 last year, used shares currently worth £7.4m as collateral for a personal loan with Bank of America Merrill Lynch. More shares were added after the loan was taken out in June 2010, taking the total value of the shares to £8.7m at today's prices. The position was only revealed to shareholders after the company consulted with the Financial Services Authority. Regulations make it clear the market must be informed if shares are used as collateral for loans. The company also disclosed that Freddy Caspers, a member of the company's executive committee, sold 200,000 shares in December 2008. The shares are worth £7.3m at today's prices, The Telegraph reports.
The International Monetary Fund has slashed its growth forecast for large parts of the world economy and warned of a full-blown global slump if policymakers in Europe or the US mishandle serious threats. "Risks for recession in the advanced economies are alarmingly high," said the Fund's latest World Economic Outlook. "The intensity of the euro area crisis has not abated as assumed in previous projections." Spain's economy is expected to contract by 1.5 per cent this year and 1.3 per cent next as austerity bites, pushing public debt to 97 per cent of GDP in 2013. The estimate was 84 per cent as recently as April, showing how quickly the debt dynamics have gone horribly wrong. Italy will shrink by 2.3 per cent this year and 0.7 per cent next, pushing the debt ratio to an all-time high of 128 per cent. The report said fiscal austerity in Europe was doing more damage than "expected", according to The Telegraph.
Royal Bank of Scotland (RBS) chief executive Stephen Hester has signalled the end of the "big shrinkage" of the company and said it would soon start to grow again. He said the bank had become "too big" but it was returning to "normal" after cleaning up its balance sheet and disposing of assets worth £700bn. In a wide-ranging interview with The Scotsman, Mr Hester offered a cautious yet generally upbeat outlook for RBS and its prospects, but said its success was tied to the success of the economy. "The restructuring, I hope, will be completed next year and out of that comes a normal-looking bank," he said. "We need to make sure that this normal bank is built into a really good bank which will give the opportunity to take money out of us and for RBS to stop shrinking and start growing again." He said he was determined to ensure the 15,000 Scottish employees understood what he was trying to do.
BP's plans to exit its troublesome Russian venture TNK-BP were mired in fresh confusion on Monday night after the oil major's oligarch partners said they could sell their stake in the business. The British company is negotiating with both AAR and with state-controlled Rosneft to sell its 50 per cent stake, estimated to be valued at $25bn (£15.4bn). AAR is planning to table a cash offer by an October 17 deadline. But the oligarchs yesterday notified BP they could sell their own shares, to a third party or through a flotation. They are most likely to pursue these options if they lose out to Rosneft in a bidding war for BP's stake and find themselves partners to the state company. Sources close to the oligarchs said they doubted Rosneft's capabilities to expand TNK-BP, The Telegraph says.
BG Group boss Sir Frank Chapman has warned that Britain may not be able to replicate the US shale gas revolution, even as the Chancellor ushered in new tax breaks for the controversial energy source. Chapman told the Mail that the 'jury is out' on whether Britain's shale gas resources can be exploited easily and profitably. Shale firms are in line for a boost after George Osborne said that he would bring in tax breaks to 'stimulate investment' in the industry and create jobs, the newspaper explains.
China's "big four" state-owned banks have refused to attend the annual meetings of the International Monetary Fund and World Bank, because the two events are taking place in Japan. The decision by the banks, which amounts to a boycott of one of the most critical global economic summits on the calendar, follows months of embittered wrangling between Tokyo and Beijing over a group of disputed islets in the East China Sea. The petulant move by four of the world's biggest banks follows a warning last week by IMF head Christine Lagarde that the world cannot afford for its second and third largest economies to let their dispute drag on, The Times writes.
THE LATEST ON THE CRAZY BOARD The top 5 hot company threads on the Bulletin Board: Scotgold Rivington Street Holdings Zetar Range Resources The Running Trading Thread
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BOOK OF THE WEEK  By Robert Dubil
A book review by Emanuil Halicioglu The whole is worth the sum of its parts. Even the most complex structured bond, credit arbitrage strategy or hedge trade can be broken down into its component parts, and if we understand the elemental components, we can then value the whole. We can quantify the risk that is hedged and the risk that is left as the residual exposure. If we learn to view all financial trades and securities as engineered packages of building blocks, then we can analyse in which structures some parts may be cheap and some may be rich. It is this relative value arbitrage principle that drives all modern trading and investment.
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