Obligations of independent directors - Kenmark eye opener

Friday June 11, 2010

Obligations of independent directors - Kenmark eye opener

Whose business is it anyway - by John Zinkin

IN conversations since Sime Darby Bhd and Kenmark Industrial Co (M) Bhd hit the headlines, I was struck forcefully by how often the people I met did not realise fully what the obligations or liabilities of independent directors actually are.

Perhaps it is timely to restate in simple terms what independent directors are supposed to do; and why being an independent director should not be seen as a reward for past services that does not require an active involvement in the deliberations of the board.

It is a serious duty that requires much more than just being honest and attending the required number of board meetings. As such, directors must continuously upgrade their skills and understanding of the environment in which their companies operate, investing in training to do so.

Directors must act honestly and in good faith in the best interests of the company on whose board they sit. This means that if there is conflict between the interests of the company and the people they represent as nominees, they are required by law to think of the best interests of the company and not of the people who nominated them. This is easy to say, but often difficult to do.

Ethical behaviour does not just require directors to behave ethically personally; it also requires them to see to it that the company conducts its business in accordance with the law and with a high standard of commercial morality.

This raises interesting issues about whether a company should break the law and pay the associated fine because it costs less to do so in the short term than complying with the law. Ethical behaviour would suggest not breaking the law even if it was cheaper to do so.

It is also important to remember that directors’ fiduciary duty means that they must comply with the spirit of the law and not just the letter of the law – which explains why Goldman Sachs looked so bad when they were testifying to Congress, justifying their actions on the grounds that they were legal only. As the cross-examination demonstrated, fiduciary duty of directors is not just to shareholders, but also to customers and clients as well; all the more so, if what is being offered is highly technical, complex and opaque with the potential to lose clients their money.

Directors should remember this and insist on a wider fiduciary duty if they are serious about preserving the company’s “licence to operate” in the long term.

Being diligent

This does not just mean attending the requisite number of board meetings and preparing for each board meeting by reading the board papers. Directors must devote enough time to remain familiar with the changing nature of the company’s business and environment, including mastering the impact on the business and its risk profile of the evolving political, legal, social and competitive context in which the company operates.

At a minimum this means directors must understand the make-up of the revenues and costs in the profit and loss account and be able to ask probing questions when the ratios show signs of changing as these are early warning indicators of eroding profitability.

They also must understand the asset intensity of the business and how it changes over time by being able to relate the balance sheet items to the amount of business they generate: for example, how much working capital is needed to generate a dollar of sales, how does it compare over time and with the competition?

Are there legitimate ways of reducing the asset intensity of the business and improving the return on capital employed, or are the means by which this is being done through the use of off-balance sheet items merely a form of dangerous financial engineering?

It also means that directors must personally know the first- and second-line managers of their company well enough to be able to contribute intelligently to the succession planning process for which they are responsible. They need to know this if they are to undertake that most difficult role of all – terminating the non-performing CEO without causing a major disruption to the business.

One of the most difficult roles is to ensure that minority shareholder rights are respected when there is a controlling shareholder – be it the founding family or the government. There are the obvious issues raised by differing perspectives on strategy caused by different risk appetites and time horizons of majority and minority shareholders.

There is also the issue of related party transactions which need to be vetted carefully to ensure that money invested by public shareholders is not being “upstreamed” or siphoned off to the advantage of the controlling shareholder via a related party transaction.

Directors must avoid all conflicts of interest wherever possible. Should a conflict arise, they must adhere scrupulously to the provisions laid down by the law and the constitution of the company in dealing with such conflicts. Should the conflict be continuous or material, the director involved should consider resigning after taking into account the impact of resignation on the other members of the board.

Directors cannot disclose confidential information without prior agreement from the board even if the people who nominated them require it – this is because their primary duty is to the company on whose board they sit.

It goes without saying that directors cannot abuse their access to confidential information and use such information for “insider trading”.

# The writer is CEO of Securities Industry Development Corp, the training and development arm of the Securities Commission.

Benefits Of Trailing Stops

Benefits Of Trailing Stops

Jun.08, 2010

One great way of playing the market is by using a trailing stop to simply follow the stock up. A trailing stop is ideal because it follows the stock up when the stock does go up, but it does not pull back as the stock pulls back. This allows you to limit your losses and secure your gains.

There are a ton of advantages to using trailing stops.

1. It Limits Your Losses

Everybody has wins and losses. They key is to limit any losses that you do have. This way any loss you do have will play a minimum role in your overall return.

If you decided to place a 10% stop for instance you would be risking only 10% of the investment that you just made. If the stock suddenly pulled back 50% you would get out near the top and could wait for it to turn around before getting back in.

2. It Does Not Limit Gains

A second advantage of using trailing stops is that it does not limit the potential gain of the position. If you bought a stock and placed a 10% stop loss on it you would not be limiting your gains, only your losses. The stock could double and you would still be in it. Only once the stock starts to turn around 10% or more would your stop be activated and your position would be sold.

3. Takes Emotions Out

Emotions have a big impact on our trading. We want to hold onto a stock when it is going up and we want to keep holding on and convince ourselves everything will be ok when it is crashing.

Sometimes you can create your own plan of action and end up side stepping that plan because you got scared. Well the great thing about trailing stops is that they are automated. You just have to set them up and then forget about them.

The trailing stop will follow the stock up and the trailing stop will eventually get you out of the position (hopefully for a profit). The only thing you need to do is to figure out how far behind you want to trail the stock and then walk away.

This is a perfect way to “stick to the game plan” when you cannot trust yourself to do it.

3 Questions to Ask Yourself When Buying a Stock

3 Questions to Ask Yourself When Buying a Stock

May.03, 2010

Trading in the stock market can be a very emotional experience. It can be hard to focus on logic and actually make rash decisions when your money is on the line. That is why, whenever you are thinking about investing into a stock you should ask yourself these three questions.

1. Why Am I Getting Into This Stock


Why are you actually getting into the stock? Is it because you heard somewhere that it is going to go up and you didn’t want to “miss out”? Or you have some fundamental or technical reason for getting into the stock. Unless there is something solid backing your decision it may be better to just walk away.

2. How Am I Going to Limit My Risk


Even if you have found a stock which you believe with 100% confidence will make you money, you may be wrong. Something may change. It happens, a lot of successful traders invest into bad stocks the trick is limiting your losses.

Maybe you want to only risk a small portion of your account on that one stock, or maybe you want to place some sort of stop to get you out of the position if the stock falls against you too much. Either way, it is important to limit your risk; otherwise you will lose all of your money on the first bad trade you make.

3. When Will I Get Out?


Something that people often forget is their exit strategy. Sure it is important to know when to enter, but even the best entry signal in the world will not help you out that much if you lose it all by holding onto the stock for too long. Figure out what you are trying to accomplish beforehand.

Why Would Someone Start Trading Stocks

Why Would Someone Start Trading Stocks

Apr.20, 2010

Trading in the stock market is a fantastic way to gain some extra money, grow your long term wealth, and to keep your mind sharp. There is basically no limit to the amount of money that a stock trader can make off of their investment and this can translate into unbelievable wealth.

What are the reasons to trade in the stock market? Below are the 4 reasons why someone would want to trade in the stock market.

1. It Can Be Very Profitable


There is no limit to the amount of money that someone can make in the stock market. There is also really no limit to how fast someone can make money. This is why you hear stories about people turning small amounts of money into millions of dollars in just a couple years.

Of course that is not the norm, but it does happen from time to time.

2. Extra Cash Flow


It is always nice to have some extra income and the stock market is one of those places that people can go about getting it. The only thing to remember is that it the extra income it brings is a byproduct of months or even years of experience. If you need the extra income tomorrow this is not the best way to get it.

3. Early Retirement


The Stock Market can make you a lot of money and in many cases it can even lead to financial freedom. All you need is the ability to make a decent return on the money and the ability to get enough money together and you can trade away living off of the money that you make off of the market alone.

4. Keeping Your Mind Sharp


When you trade the stock market you are constantly learning from your mistakes. This helps to challenge you a little bit and keep your mind sharp, which can actually be a good thing and help you have a quicker mind well into old age.

Should You Start Stock Trading?

Should You Start Stock Trading?

Jun.10, 2010

The stock market can be a terrific place to grow your money and to grow your overall wealth. Trading stocks can be extremely powerful and can lead to large gains. But it is not for everyone, most people will quit after they find out how much work is involved in learning to trade.

In addition to all the effort that it takes to make it big in the stock market there are also a few things that you will need to have in order to be successful trading stocks.

1. A lot of Confidence

A trader needs to be confident in themselves and in their own trading method in order to make it big in the stock market. Most newbies fail because instead of making decisions for themselves they listen to everyone else. The problem with this is that they never learn from their mistakes or even know why they are buying the stock in the first place. If you make your own decisions you may have losses here and then, but at least you can learn from them and try to do better next time.

So confidence can help you get past any problems you may have.

2. The Ability to Control Your Emotions

Trading in the stock market can definitely be an emotional thing. If your stock goes up you automatically want to hold onto it forever and you dream of becoming a millionaire. If stocks are going down you start panic selling and just try to get out without losing your shirt. Really whenever money is involved our emotions are going to be connected with it and they will impact how we make decisions.

Having the ability to control your emotions is an essential thing for all traders.

3. Eager to Learn

There are always going to be bumps in the road when it comes to the stock market, or really when it comes to anything in life. The best thing that you can do is to continue to learn from your mistakes and improve over time.

If you lose money, figure out why. If you make money also look at what that was. The more you learn the better you will do in the future so being a little curious can be a good thing in life.

Long Term Investing Vs Short Term Trading

Long Term Investing Vs Short Term Trading

Jun.10, 2010

Investing into stocks over the long term and trading stocks are two conflicting points of view. So, which one is better? Well this really depends; each strategy has its advantages and disadvantages.

Long term investing is simply the process of buying strong companies and holding onto them for the long term. Because the companies are fundamentally strong they are unlikely to go out of business any time soon and in fact they are very likely to increase in price as time goes by.

Trading stocks in the short term is actually a completely different strategy. Instead of holding onto stocks for the long term short term traders tend to use things such as chart patterns and technical indicators to attempt to catch the short term movements of stocks and hopefully make a larger profit then if they were to simply buy and hold the stock.

Which strategy is best? There are defiantly advantages and disadvantages to each method. The best strategy for you really depends on you and where you are at.

Trading stocks in the short term does have a lot more potential then buying and holding. If you can make short term gains relatively consistent over the long term then you can do pretty well for yourself. However it does take a lot of work and there are no guarantees that you will make any money. It is like starting a business most people will fail their first time around, but those who can keep getting back up and learning from their mistakes will likely do well eventually.

If you are willing to put all of the time and energy into short term trading the rewards can be pretty nice.
However if you just want something that is considered to be safe yet does have some potential then you can take a look at long term investing. The main advantages of long term investing are that it is passive and it is a relatively secure way of making a decent return over the span of a couple decades.

Basically it comes down to this, if you want to earn a relatively safe return passively then investing in the stock market can be a great idea. If however you want to attempt to increase your returns and put some extra time into it then trading stock might be better suited for you.

What Are the Advantages of Long Term Investing?

What Are the Advantages of Long Term Investing?

Apr.19, 2010

Long term investing is a simple strategy that lets you make money over the long term. The only thing you need to do to take advantage of this is to buy stocks in strong companies and hold onto them for as long as you can.

There are a few big benefits to doing this.


1. This is backed by History


While over the short term there is no guarantee of making money in the stock market, over the long term it can actually be relatively safe and likely to make you money. Time after time strong stocks have gone up over the long term and it is likely to stay that way for the foreseeable future.

Over time this slowly but surely investment style can actually add up pretty nicely.

2. Low Maintenance


A second advantage of long term investing is that you don’t need to constantly watch the market and be active in the day to day news. In fact doing so will only stress you out and have next to no affect on what your portfolio is actually doing. Instead, the only thing you really need to do in order to invest into the long term property and hopefully build a lot of wealth is to buy a 20 or more stocks in companies that you really believe in and just hang onto them over the long term.

3. Dividends
The last advantage of investing into stocks over the long term is that many of them will pay their investors a nice consistent passive cash flow in the form of a dividend. Dividends can add up over time, in fact many professional investors consider dividends to be the part of the investment that makes them the most money. Regardless of that, it can be a nice way to make some passive income.

Common Stock Market Mistakes

Common Stock Market Mistakes

 Jun.02, 2010

Stock market trading can be an interesting way of building your wealth and can lead to a lot of interesting learning experiences. There are a few mistakes that most newbie’s tend to repeat over and over again which harm their returns.

The first mistake that people tend to make when investing into the stock market is watching the news. The only thing the news is good for is making you panic and bringing emotions into the mix. You don’t need to watch the news to be a great trader. In fact staying away from other opinions and trusting yourself can be a bonus in the market.

The news has the tendency of pushing your emotional button and makes you do foolish things that you will regret later on. Instead of making decisions based on fear and greed conduct your own research to see how strong a company is yourself and create a game plan for what qualifies as a good buy,


One other mistake that people tend to make is to second guess themselves. They may enter into a position for one reason but get out for a completely different reason and not follow their original game plan. This is not always a bad thing. If you got into a stock because it was a hot stock tip and you really had no reason to get into it in the first place, (which you should never do), then of course second guessing that decision is important.

But if you actually have a plan that is another story. If you bought a stock at $50 and planed to exit out at $65 or cut your losses short at $45 there is no point in getting out at $49 just because you are scared that you might actually lose more money. Create a plan and stick with it.

The last major mistake that people make is not limiting their losses. Having some plan on limiting your losses whether it be through diversification or stop losses and money management every successful market participant limits their losses.

If you work hard at it there is no limit to what you can do with the stock market. It can be a very powerful tool for creating wealth.

A Primer On Random Walks In The Stock Market

A Primer On Random Walks In The Stock Market

Jun.10, 2010

What does it mean for stock market prices to be like a random walk? What is a random walk? Financial economists have come up with an interesting scenario to introduce the random walk to laymen. Imagine if you will, they say, a drunk who has been left at a lamp post. The drunk wants to get home, but every step he takes is in a random direction. What emerges is a very erratic trail, where the position of the drunk over time starts drifting away from lamp post but occasionally coming back to where he started.

Most economists and investors are acutely cognizant of the fact that high yield mutual funds, money market deposit accounts, and general security prices have erratic up-and-down movements from day to day. Furthermore, looking at security prices from hour to hour and minute to minute continue to show these fluctuations albeit at reduced magnitudes. These observations provided the basis for the idea that like the drunkard’s walk, stock prices move up and down and drift while adhering to strict statistical properties.

Being able to map the behavior of a stock price to a mathematical theory means that the stock price should have certain statistical properties. For example, the price of a stock, bond, or mutual fund (and its yield we suppose) should move around a mean value. Moreover, the deviation away from this mean on a daily basis should never be too positive or too negative, but instead fits into a normal distribution. Interestingly many securities show these statistical behaviors which gives credence to the theory.

The proposal that the stock market (specifically in the options market) has these mathematical properties is the basis the Nobel Prize in economics being awarded to the economists Merton and Scholes. Interested readers may find that brushing up on calculus and venturing into the field of differential equations will be helpful to understanding the mathematics.

While the success of the random walk theory is not arguable, the extent to which it is true is very much in contention. Instead of strictly fluctuating around a mean, many stock prices show “trending” or consistent movement up or down ove time. And instead of fluctuation, during stock market crashes, the price of stocks, bonds, mutual funds show precipitous declines. These inconsistencies have driven development of more accurate models but the issue is not resolved.

To the regular, layman investor who is engaged in low risk investments, mutual funds, and GNMA mutual funds over the long term, such information is not so useful for calculating returns and yields. On the other hand the veteran day trader who moves in and out of positions within hours may derive some value from these ideas.

As BP stock plunges and rises, is it buy or sell?

As BP stock plunges and rises, is it buy or sell?

By Adam Shell, USA TODAY

NEW YORK — BP's stock has been gushing red ink as investors view the fallout from a leaking oil well through a barrel-half-empty prism.

With BP's stock down almost 50% — or almost $90 billion in value — since the April 20 rig disaster in the Gulf of Mexico, is it screaming, "Buy me, I'm on sale," or warning, "Sell me, more risk ahead"?

BP rebounded Thursday from a 16% drop a day earlier, rallying 12.3%, to $32.78. The stock is down 46% since April 20. Analysts attributed the rally to a report from an Asian firm, Standard Chartered, which said it makes sense for PetroChina, the Chinese oil company, to buy BP.

BP presents a dilemma for investors: Buy or sell a stock in crisis?

•The bearish case. Given that there are still so many unknowable, unquantifiable facts surrounding BP and the oil spill, now isn't the time to dive headlong into the stock, despite its steep drop, says Philip Weiss, senior energy analyst at Argus Research.

BP still hasn't plugged the leak, so the full extent of the environmental damage is unknown. There is no way to know how much BP will have to spend to clean up the mess and other related costs.

As a result, "Taking a short-term position in BP amounts to speculation, not investing," Weiss says.

A big fear is that BP will suspend or reduce the payout of its dividend, which now yields a hefty 9%. The Obama administration is calling on BP to not make dividend payouts until the spill is cleaned up.

Investors got rattled Wednesday when some U.S. lawmakers said BP should pay for the wages lost by oil-related employees in the Gulf whose jobs have been put on hold during the six-month moratorium on deep-water drilling.

Many investors also fear that BP will be forced to file for bankruptcy protection.

•The bullish case. Fadel Gheit, an analyst at Oppenheimer, says BP's stock is currently pricing in a worst-case scenario. His advice: "If you don't own the stock, buy it. If you own it, don't sell it." He has a 12- to 18-month price target on the stock of $55 per share. That's nearly 70% higher than Thursday's closing price.

Many investors began to fear that BP's liabilities will balloon after President Obama and lawmakers talked tough about the expenses that BP should pay, Gheit says. But there's "not a chance" the government can force such payments on BP, he says, making a bankruptcy filing unlikely.

How To Start Investing In Stock Market – Ultimate Guide For Beginners

How To Start Investing In Stock Market – Ultimate Guide For Beginners

Stock market proven to be the goldmine to most sophisticated investors. However, not many beginners really know how to start investing in stock market. As a result, they end up losing their hard earned money. In this article, I’ll share with you my personal insight on how beginners should start their stock investing career.
How to Start Investing in Stock Market with Long Term Stock Investing

From my personal stock investing experience, invest for long term growth proven to be the most profitable money-making strategy. Most importantly, due to its nature that prone to short to medium term price volatility can offer the least downside risk for most beginners. After all the wealthiest people in the planet (Warren Buffet) make fortune from this exact same strategy!

Sound’s too good to be true?

However, if you have significant short term financial commitment (retirement, children’s education, medical expenses etc) for your investment sum, it’s better to avoid this strategy in the first place. Reason being, you might lose money to short term price volatility should you cash out on such situations.

In order to make thousands if not millions from this simple strategy, you must first start with short listing great stocks that have huge growth and profit potentials. You may use several key financial ratios to begin with; such as Return on Equity (ROE), Earnings per Share Growth Rate (EPSGR) and Debt to Equity Ratio (D/E).

Secondly, determine how much the company worth for. You can do this by calculating its intrinsic value. As there are various ways to calculate intrinsic value, evaluate each of them with grain of salt. The truth is nobody knows exactly the intrinsic value of the company; including the CEO of the company itself.

Therefore, you must consider margin of safety when investing in such stocks to reduce risk exposure. Depending on your risk tolerance, buying stock that is below 40 to 60 per cent of its intrinsic value should be good enough. This will not only reduce the risk of losing money, it will also reward you with more than 15 per cent return per year!

How to Start Investing in Stock Market with Momentum Stock Investing

Despite huge benefits of long term stock investing mentioned above, the real challenge to new stock investors are buying great stocks at discounted price. I said it is the real challenge because you might have to wait years before the opportunities come to you or you can be sceptical when the opportunity nicely presented to you.

The first one should not be a big deal, but the second one is.

Reason being, great stocks can only drop in price when most investors pessimistic of the overall future of the country, industry or the company itself. At that situation, you must be tough on yourself and proceed with your investment plan. Otherwise, you have to wait for years before it can come back to you.

While waiting for the opportunities come, you can ride on the bull market with momentum stock investing strategy. If investing for long term is about “buy-low-sell-high”, momentum investing is about “buy-high-sell-higher”. With this method, you are basically betting on the trend as the stock price rallies.

The real challenge of this investing method is you don’t want to buy the stock at its peak since you can be the ultimate prey when the trend reverses. There are two ways to overcome this; keep yourself informed on news that relates to your stock and implement stop lose strategy. This will not avoid the risk of losing money though, but at least, you can minimize the losses.


You can rake in millions of dollars if you know how to invest in stock market the right way.

http://www.03808.com/how-to-start-investing-in-stock-market-ultimate-guide-for-beginners

'You can beat the stock market!' Invest in a college degree

'You can beat the stock market!' Invest in a college degree

By Casey Selix | Published Thu, Jun 10 2010 9:01 am

Narayana Kocherlakota

My headline is not a subject line from a junk email.
It’s lifted from the commencement speech of Narayana Kocherlakota, the newly minted president (since last October) of the Federal Reserve Bank in Minneapolis.

Kocherlakota delivered a pep talk and a bit of an investment strategy session in May to graduates of the University of Minnesota’s College of Liberal Arts.

Kocherlakota, a former chairman of the U’s Department of Economics, said the annual rate of return on a college degree is better than the stock market’s.

"What is the expected return on investing in a college education — that is, what will you get back in terms of increased wages per dollar that you invested? Recent studies estimate that finishing college over high school delivers a return of somewhere between 8 percent and 10 percent per year. Is this a big number? Well, historically, the rate of return on the stock market is around 6-7 percent per year. So, by investing in a college education, you can beat the stock market! That’s especially true because the return to a college education is much less risky."

If I had been a parent or grad sitting in that audience, I’d have wondered: If that’s true, why’s it so difficult to find a job after plunking down $40,000 or so in tuition?

Kocherlakota anticipates the reactions from the fresh crop of critical thinkers and their parents.

'Complicating factor'

"Now, there is a complicating factor to this somewhat rosy scenario that’s probably occurred to all of you: We are coming out of one of the worst economic downturns since the Great Depression. Jobs are not in abundance."

Then he recalls the job market upon his graduation in 1983, "when the unemployment rate was actually even higher than it is today."

"Now it is true that when I graduated, the slack job market put downward pressure on all wages, including those of college grads. However, over time, the wages of these June 1983 grads did rise, and the negative effects of the recession were largely lost. Even in a tough job market, my cohort found that college remained a good investment."

If any critical thinkers still feel skeptical, Kocherlakota’s speech is available on the Federal Reserve Bank’s website and it includes a footnote citing the source of his investment information — a National Bureau of Economic Research working paper titled "Earnings functions, rates of return, and treatment effects: The Mincer equation and beyond."

While I was in the cyber-neighborhood, I couldn’t resist checking out the president’s online bio. He was born in Maryland. His degrees came from Princeton and the University of Chicago. He’s the 12th president in the history of the Minneapolis Federal Reserve Bank.

But one of the niftiest features is in a summary on another page — an audio pronunciation of Narayana Kocherlakota.

Trust me. This is exceptionally helpful info for anyone who has to interview Nair-ah-yah-nah Koach-er-lah-ko-tah or introduce him to a crowd.

http://www.minnpost.com/nextdegree/2010/06/10/18805/you_can_beat_the_stock_market_invest_in_a_college_degree

Something Useful to know when the Market Corrects Hugely

What's new in NEM?

New council for Bumi agenda
By Kamarul Yunus
Published: 2010/06/11

Prime Minister Datuk Seri Najib Razak will lead a high-level council to plan, coordinate and monitor the implementation of a Bumiputera development agenda

A HIGH-LEVEL council will be set up to plan, coordinate and monitor the implementation of a Bumiputera development agenda, which aims to safeguard and uphold the interest of the Bumiputeras under the 10th Malaysia Plan (10MP) (2011-2015).

Prime Minister Datuk Seri Najib Razak will lead the proposed council, to be made up of relevant Cabinet ministers, senior government officials and representatives from the private sector.

"The Economic Planning Unit in the Prime Minister's Department will be the secretariat to the council, while the project management unit in the Finance Ministry will monitor the implementation of programmes to ensure their efficient and effective implementation," he said when tabling the 10th Malaysia Plan in the Parliament in Kuala Lumpur yesterday.

The proposed council is one of five strategic initiatives identified to strengthen the Bumiputera development agenda. Other initia-tives include increasing Bumiputeras' equity and property ownership; improving skill and entrepreneurial development programmes and funding; and developing professional Bumiputera employment in a more holistic manner.

In trying to increase Bumiputera equity ownership through institutionalisation, Najib said private equity programmes in government-linked investment companies such as Permodalan Nasional Bhd (PNB), Lembaga Tabung Angkatan Tentera and Tabung Haji will be renewed, strengthened and expanded to consolidate and pool various funds to broaden ownership and control of Bumiputera equity.

In this context, he said Equity Nasional Bhd (Ekuinas) was established recently as a Bumiputera private equity investment institution.

"Ekuinas has a similar function as PNB, with special emphasis to invest in high-potential medium-sized companies to be supported to become champions and leaders in their respective sectors," he said.

He said Ekuinas will adopt a new approach, which is more market-friendy and merit-based, backed with the government support to take their businesses to a higher level at the domestic, regional and international arena.

On property ownership, Najib said Pelaburan Hartanah Bhd, a group set up to boost Bumiputera holdings of properties will establish a Real Estate Investment Trust to facilitate Bumiputera investment in commercial and industrial properties and benefit from property appreciation.

In addition, he said Kampung Baru, a valuable Bumiputera asset in the heart of Kuala Lumpur, will be redeveloped to enable landowners to realise and unlock the value of their properties without affecting the Malay ownership.

On funding to improve skill and entrepreneurial development programmes among Bumiputeras, Najib said an integrated developement package will be provided to the Bumiputera Commercial and Industrial Community to strengthen their competitiveness and resilience.

"The package will include entrepreneurial training, technical assistance, financing, consulting services, promotion and marketing," he said.

To improve access to financing facilities, Najib said half of the additional RM3 billion allocated under the Working Capital Guarantee Scheme will be allocated to Bumiputera entrepreneurs.

"Entrepreneurial development organisations such as MARA and Perbadanan Usahawan Nasional Bhd will also be strengthened. For this, an allocation of RM3 billion will be provided," he said.

Najib said the government also wants to develop professional Bumiputera employment in a more holistic manner although Bumiputeras currently can be seen participating in all professions and even lead in the fields of engineering, medicine, law, surveying and architecture.

The Malay Businessmen and Industrialist Association of Malaysia (Perdasama) yesterday said the proposed council is a good move, but hoped that the government would take into consideration contribution from non-governmental organisations (NGOs).

"The government has recently strongly emphasised the role of NGOs, but every time they set up a council, the NGOs are not (represented) there," Perdasama president Datuk Moehamad Izzat Emir said.

"The NGOs who are also from the business community can sit and contribute. They can play an active role in such a council. The government should nominate one or two (NGOs) so as to be more transparent in what they want to do," he added.

Kuala Lumpur Malay Chamber of Commerce president Datuk Syed Amin Aljeffri said the setting up of the high-level council shows the commitment of the Prime Minister in safeguarding the interest of the Bumiputeras.

"In actual fact, Bumiputera interest is always in his mind. I think that is the reason why he wants to lead (the council). He (Prime Minister) wants to walk the talk," he said.

Read more: New council for Bumi agenda
http://www.btimes.com.my/Current_News/BTIMES/articles/konsel/Article/index_html#ixzz0qUrtcTs3

Buffett (2002): Three suggestions to help an investor avoid firms with management of dubious intentions.

After enthralling readers with a wonderful treatise on how good corporate governance need to be practiced at firms in his 2002 letter to shareholders, Warren Buffett rounded off the discussion with three suggestions that could go a long way in helping an investor avoid firms with management of dubious intentions. What are these suggestions and what do they imply? Let us find out.

The 3 that count

The master says,  "First, beware of companies displaying weak accounting.There is seldom just one cockroach in the kitchen." If a company still does not expense options, or if its pension assumptions are fanciful, watch out. When managements take the low road in aspects that are visible, it is likely they are following a similar path behind the scenes.

On the second suggestion he says, "Unintelligible footnotes usually indicate untrustworthy management. If you can't understand a footnote or other managerial explanation, its usually because the CEO doesn't want you to."

And so far the final suggestion is concerned, he concludes, "Be suspicious of companies that trumpet earnings projections and growth expectations. Businesses seldom operate in a tranquil, no-surprise environment, and earnings simply don't advance smoothly (except, of course, in the offering books of investment bankers)."

Attention to detail

From the above suggestions, it is clear that the master is taking the age-old adage,  'Action speak louder than words', rather seriously. And why not! Since it is virtually impossible for a small investor to get access to top management on a regular basis, it becomes important that in order to unravel the latter's conduct of business; its actions need to be scrutinized closely. And what better way to do that than to go through the various filings of the company (annual reports and quarterly results) and get a first hand feel of what the management is saying and what it is doing with the company's accounts. Honest management usually does not play around with words and tries to present a realistic picture of the company. It is the one with dubious intentions that would try to insert complex footnotes and make fanciful assumptions about the company's future.

We would like to draw curtains on the master's 2002 letter to shareholders by putting up the following quote that dispels the myth that manager ought to know the future and hence predict it with great accuracy. Nothing could be further from the truth.

CEOs don't have a crystal ball

The master has said, "Charlie and I not only don't know today what our businesses will earn next year; we don't even know what they will earn next quarter. We are suspicious of those CEOs who regularly claim they do know the future and we become downright incredulous if they consistently reach their declared targets. Managers that always promise to 'make the numbers' will at some point be tempted to make up the numbers."

Hence, next time you come across a management that continues to give profit guidance year after year and even meets them, it is time for some alarm bells.

http://www.equitymaster.com/p-detail.asp?date=8/20/2008&story=2

Buffett (2002): The primary job of an Audit committee and the four questions the committee should ask auditors.

Buffet explained some key corporate governance policies in his 2002 letter to shareholders. After driving home his views on independent directors and their compensation, he has now turned his attention towards the audit committees that are present at every company.

Audit committees - Substance and not form

The primary job of an audit committee, says Buffett, is to make sure that the auditors divulge what they know. Hence, whenever reforms need to be introduced in this area, they have to be introduced keeping this aspect in mind. He was indeed alarmed by the growing number of accounting malpractices that happened with the firm's numbers. And he believed this would continue as long as auditors take the side of the CEO (Chief Executive Officer) or the CFO (Chief Financial Officer) and not the shareholders. Why not? So long as the auditor gets his fees and other assignments from the management, he is more likely to prepare a book that contains exactly what the management wants to read. Although a lot of the accounting jugglery may well be within the rule of the law, it nevertheless amounts to misleading investor. Hence, in order to stop such practices, it becomes important that the auditors be subject to major monetary penalties if they hide something from the minority shareholders behind the garb of accounting. And what better committee to monitor this than the audit committee itself! Buffett has also laid out four questions that the committee should ask auditors and the answers recorded and reported to shareholders. What are these four questions and what purpose will they serve? Let us find out.

The acid test
As per Buffett, these questions are -

1.  If the auditor were solely responsible for preparation of the company's financial statements, would they have in any way been prepared differently from the manner selected by management? This question should cover both material and nonmaterial differences. If the auditor would have done something differently, both management's argument and the auditor's response should be disclosed. The audit committee should then evaluate the facts.

2.  If the auditor were an investor, would he have received - in plain English - the information essential to his understanding the company's financial performance during the reporting period?

3.  Is the company following the same internal audit procedure that would be followed if the auditor himself were CEO? If not, what are the differences and why?

4.  Is the auditor aware of any actions - either accounting or operational - that have had the purpose and effect of moving revenues or expenses from one reporting period to another?

Toe the line or else...

Buffett goes on to add that these questions need to be asked in such a manner so that sufficient time is given to auditors and management to resolve any conflicts that arise as a result of these questions. Furthermore, he is also of the opinion that if a firm adopts these questions and makes it a rule to put them before auditors, the composition of the audit committee becomes irrelevant, an issue on which the maximum amount of time is unnecessarily spent. Finally, the purpose that these questions will serve is that it will force the auditors to officially endorse something that they would have otherwise given nod to behind the scenes. In other words, there is a strong chance that they resisting misdoings and give the true information to the shareholder.

 http://www.equitymaster.com/p-detail.asp?date=8/13/2008&story=1

Buffett (2002): Guidelines for choosing independent directors who will think for the shareholders and not against them.

We learnt how independent directors at a lot of investment partnerships have put up disastrous performance through Buffett’s 2002 letter to shareholders. Let us further go down the same letter and see what other investment wisdom he has on offer.

Of practicing and preaching

Ok, we have heard a lot about the failings of independent directors and their apathy towards shareholders. However, preaching is one thing and practicing and offering a solution is completely another. Since Buffett himself runs a company, it will be fascinating to understand the guidelines he has set forth for choosing independent directors on his company's board as well as the compensation he pays them. He has the following views to offer on the kind of 'independent' directors he would like to have on his company's board:

Buffett says, "We will select directors who have huge and true ownership interests (that is, stock that they or their family have purchased, not been given by Berkshire or received via options), expecting those interests to influence their actions to a degree that dwarfs other considerations such as prestige and board fees."

Interesting, isn't it? If a person derives most of his livelihood from a firm and if he is made a director of the firm, he is quite likely to take decisions that result in maximum value creation. While this approach may not be completely foolproof, it is indeed lot better than approaches at other firms where such a criteria is not set forth while looking for independent directors.

Furthermore, on the compensation issue, Buffett has the following to say:

"At Berkshire, wanting our fees to be meaningless to our directors, we pay them only a pittance. Additionally, not wanting to insulate our directors from any corporate disaster we might have, we don't provide them with officers' and directors' liability insurance (an unorthodoxy that, not so incidentally, has saved our shareholders many millions of dollars over the years). Basically, we want the behavior of our directors to be driven by the effect their decisions will have on their family's net worth, not by their compensation. That's the equation for Charlie and me as managers, and we think it's the right one for Berkshire directors as well."

Buffett's superb understanding of human psychology is on full display here. If a person is not behaving rationally, force him to behave rationally by smothering his options.

• First, choose those people that have a large and true ownership in a firm so that they really think of what is good and what is bad for the firm in the long run. 
• Secondly, pay them a pittance so that like other shareholders, they too derive greater portion of their income from the firm's profits and not take a higher proportion of its expense. This is also likely to pressurise them further to take decisions that are in the shareholders' interest. 

Indeed, some great lessons on how an independent director should be chosen and to ensure that he continues to think for the shareholders and not against them.

http://www.equitymaster.com/detail.asp?date=8/6/2008&story=1

Buffett (2002): "Independent" directors: How independent are they?

Warren Buffett complained about failings of independent directors in his letter to shareholders for the year 2002. Let us go further down the same letter and see what other investment wisdom he has on offer.

'Independent' directors: How independent are they?


It is a known fact that Buffett pays a great deal of attention to the management of companies before investing in them. And the reasons behind this obsession may not be difficult to find. Since it is the management that is responsible for making most of the capital allocation decisions in a business, which in turn are central for creating long-term shareholder value, it is imperative that a management allocates capital in the most rational manner possible.

However, as we saw in the last article, the list of managers or CEOs with a 'quick rich' syndrome is swelling to dangerous proportions, thus forcing shareholders to pin all their hopes on the board of a company or more importantly on the independent directors for a bail out. But as mentioned by Buffett, most independent directors (including him) on several occasions have failed in their attempt to protect the interest of shareholders owing to a variety of reasons.

After narrating his experience as an independent director, the master moves on and gives one more example where independent directors have failed miserably to protect shareholder interest. The companies under consideration are investment companies (mutual funds). The master says that directors in these companies have only two major roles, 

• that of hiring the best possible manager and 
• negotiating with him for the best possible fee. 

However, even while performing these basic duties, the independent directors have failed their shareholders and he goes on to cite a 62-year case study from which he has derived his findings.

Even in an era where shareholdings have gotten concentrated, some institutions find it difficult to make management changes necessary to create long-term shareholder value because these very institutions have been found to be sailing in the same boat i.e., neglecting shareholder value so that only a handful of people benefit. Buffett goes on to add that thankfully there have been some people at some institutions that by virtue of their voting power have forced CEOs to take rational decisions.

Let us hear in Buffett's own words, his take on the issue:

Master's golden words


Buffett says, "So that we may further see the failings of 'independence', let's look at a 62-year case study covering thousands of companies. Since 1940, federal law has mandated that a large proportion of the directors of investment companies (most of these mutual funds) be independent. The requirement was originally 40% and now it is 50%. In any case, the typical fund has long operated with a majority of directors who qualify as independent. These directors and the entire board have many perfunctory duties, but in actuality have only two important responsibilities:

• obtaining the best possible investment manager and 
• negotiating with that manager for the lowest possible fee. 

When you are seeking investment help yourself, these two goals are the only ones that count, and directors acting for other investors should have exactly the same priorities. Yet when it comes to independent directors pursuing either goal, their record has been absolutely pathetic."

On the increased ownership concentration and how certain people are forcing managers to act rational, Buffett has the following to say - "Getting rid of mediocre CEOs and eliminating overreaching by the able ones requires action by owners - big owners. The logistics aren't that tough: The ownership of stock has grown increasingly concentrated in recent decades, and today it would be easy for institutional managers to exert their will on problem situations. Twenty, or even fewer, of the largest institutions, acting together, could effectively reform corporate governance at a given company, simply by withholding their votes for directors who were tolerating odious behavior."

He goes on, in my view, this kind of concerted action is the only way that corporate stewardship can be meaningfully improved. Unfortunately, certain major investing institutions have 'glass house' problems in arguing for better governance elsewhere; they would shudder, for example, at the thought of their own performance and fees being closely inspected by their own boards. But Jack Bogle of Vanguard fame, Chris Davis of Davis Advisors, and Bill Miller of Legg Mason are now offering leadership in getting CEOs to treat their owners properly. Pension funds, as well as other fiduciaries, will reap better investment returns in the future if they support these men."

Buffett (2002): "Independent" directors must be business-savvy, interested and shareholder oriented, and who think and speak "independently".

In Warren Buffett's 2002 letter to shareholders, we got to know the master's views on derivatives and the huge risks associated with them. Let us go further down the same letter and see what other investment wisdom the master has to offer.

The demise of the good CEO?

The great bull run of the 1980s-1990s in the US also brought with it a host of corporate scandals. A lot many CEOs, in their attempt to amass wealth quickly did not think twice to do so at the expense of their shareholders. It is fine for a CEO to take home a hefty pay package if the company he heads has put up an impressive performance. But to rake in millions when the shareholders i.e., the real owners of the business get nothing or only a tiny percentage of what the CEOs earn, amounts to nothing but daylight robbery. This is of course impossible without the complicity of the board of directors, whether voluntary or forced. Sadly, these people are increasingly failing to rise to the responsibilities entrusted to them by the shareholders, allowing CEOs to get away scot-free. It is this very issue of corporate governance that the master has talked about at length in his 2002 letter to shareholders. Alarmed by the rising incidents of CEO misconduct, Buffett argues that in a room filled with well-mannered and intelligent people, it will be 'socially awkward' for any director to stand up and speak against a CEO's policies and hence he fully endorses board meetings without the presence of the CEO. Furthermore, he is also in favour of 'independent' directors provided they have three essential qualities. What are these essential qualities and why he deems them to be so important? Let us find out in the master's own words.

The master's golden words
On the nature of directors, Buffett said, "The current cry is for ‘independent’ directors. It is certainly true that it is desirable to have directors who think and speak independently - but they must also be business-savvy, interested and shareholder oriented."

He goes on to add, "In my 1993 commentary, those are the three qualities I described as essential. Over a span of 40 years, I have been on 19 public-company boards (excluding Berkshire's) and have interacted with perhaps 250 directors. Most of them were ‘independent’ as defined by today's rules. But the great majority of these directors lacked at least one of the three qualities I value. As a result, their contribution to shareholder well-being was minimal at best and, too often, negative. These people, decent and intelligent though they were, simply did not know enough about business and/or care enough about shareholders to question foolish acquisitions or egregious compensation. My own behavior, I must ruefully add, frequently fell short as well: Too often I was silent when management made proposals that I judged to be counter to the interests of shareholders. In those cases, collegiality trumped independence."

A Simple, Winning Stock Picking Strategy

A Simple, Winning Stock Picking Strategy










Not advocating or practising this method. However, it is nice to know what other investors do.

Risks to global economy have 'risen significantly', top IMF official warns

Risks to global economy have 'risen significantly', top IMF official warns

The risks to a robust global recovery have 'risen significantly' as many governments struggle with debt, a leading official from the International Monetary Fund has warned.


Published: 9:24AM BST 09 Jun 2010
10 Comments

The G20 summit in April. 2009, was the high watermark for international co-operation in tackling the financial and economic crisis.

“After nearly two years of global economic and financial upheaval, shockwaves are still being felt, as we have seen with recent developments in Europe and the resulting financial market volatility,” Naoyuki Shinohara, the IMF's deputy managing director, said in Singapore on Wednesday. “The global outlook remains unusually uncertain and downside risks have risen significantly.”

Countries across Europe are under pressure to tackle their deficits that were deepened by the financial crisis and governments own response to it. Some economists fear that moves by countries ranging from Britain to Spain to rein in public spending at the same time will set back a global recovery.

Stock markets have declined in the past couple of months as Europe's debt crisis and the prospect of higher interest rates in the faster-growing Asian economies cast a shadow over the recovery.

“Adverse developments in Europe could disrupt global trade, with implications for Asia given the still important role of external demand,” Mr Shinohara said. “In the event of spillovers from Europe, there is ample room in most Asian economies to pause the withdrawal of fiscal stimulus.”

Mr Shinohara, the former top currency official in Japan, added that "a key concern is that the room for continued policy support has become much more limited and has, in some cases, been exhausted.”

http://www.telegraph.co.uk/finance/economics/7812903/Risks-to-global-economy-have-risen-significantly-top-IMF-official-warns.html

Aussie firm sues Goldman over 'shitty deal': Basis Yield Alpha Fund (Master) v. Goldman Sachs Group Inc

Aussie firm sues Goldman over 'shitty deal'

June 10, 2010 - 6:42AM

An Australian hedge fund is suing Goldman Sachs Group over an investment in a subprime mortgage-linked security that contributed to the fund's demise in 2007.

The lawsuit, filed Wednesday afternoon, New York time, accuses Goldman of misrepresenting the value of the notorious Timberwolf collateralized debt obligation, which garnered a lot of attention during a recent congressional hearing.

Basis Yield Alpha Fund sued Goldman to recoup the $US56 million ($67.5 million) it lost on the CDO, said Eric Lewis, a Washington-based lawyer for the fund. The suit also seeks $US1 billion in punitive damages.

The litigation is the latest in a string of legal and public relations headaches for Goldman. In April, US securities regulators charged the powerful Wall Street bank with civil fraud in connection with the structuring and sale of another CDO called Abacus 2007.

The hedge fund decided to file suit after months of settlement talks with Goldman broke down. Reuters on Tuesday first reported on the likelihood of a lawsuit. The suit was filed in US District Court for the Southern District of New York.

The 36-page complaint opens with a rhetorical flourish that repeats a Goldman executive's description of the Timberwolf CDO as "one shitty deal."

The suit alleges that Goldman pitched the Timberwolf deal to Basis even as the bank's sales force and mortgage traders knew the market for CDOs could soon crumble. In June 2007, Basis paid $US78 million for two pieces of the CDO with a face value of $US100 million.

Basis, which financed the transaction with a loan from Goldman, said it lost more than $US50 million when the bank began making margin calls on the product just weeks after selling the deal. Basis said the margin calls quickly forced it into insolvency.

"You can't say you are basically selling a strong performing high-yielding security that you know is going to tank," said Lewis, a partner with the law firm Baach Robinson & Lewis.

'Misguided attempt'

Goldman called the suit "a misguided attempt by Basis ... to shift its investment losses to Goldman Sachs."

Michael DuVally, a Goldman spokesman, said, "Basis is now trying to recoup its losses based on false allegations that it was misled about aspects of the transaction and market conditions."

The $US1 billion Timberwolf CDO and the aggressive tactics Goldman employed to sell the deal were a focal point of an April hearing by the Senate Permanent Subcommittee on Investigations. One of the documents unearthed by the panel was an email in which former Goldman mortgage executive Thomas Montag called Timberwolf "one shitty deal," just days after the firm completed the sale to Basis.

The hedge fund's lawsuit, which draws on other documents introduced by the Senate panel, alleges that Goldman misrepresented the value of the Timberwolf securities and failed to disclose that Goldman's trading desk had a role in working with Greywolf Capital Management in picking Timberwolf's underlying securities.

Goldman coordination

During the Senate subcommittee hearing in April, Goldman Chief Executive Lloyd Blankfein said the bank's employees are often unaware of what strategies are being employed elsewhere at the firm.

"We have 35,000 people and thousands of traders making markets throughout our firm," Blankfein said in response to a question from Senator Carl Levin. "They might have an idea. But they might not have an idea."

But the Basis lawsuit raises new questions about the coordination between Goldman's trading desks and its sales staff.

David Lehman, who joined Goldman in 2004 and worked as a managing director in Goldman's mortgage trading operation, met with representatives of Basis to convince them that the prices Goldman was selling the Timberwolf deal at were fair and legitimate.

The lawsuit alleges that Goldman's sales and trading desks worked together to sell the deal, while Goldman itself was betting against the performance of the CDO.

"This is not a bad case for dealing with the whole issue of how Goldman was conducting its business," said Lewis. "They were selling bonds like they were used cars, in that you say what you need to get it done."

More lawsuits?

Other investors in Goldman's CDO products are likely to keep a close eye on the Basis case.

"If they can prove there is some smoke there, many investors could feel they have a right to say they were also harmed in some way," said Matt McCormick, a portfolio manager and banking analyst at Bahl & Gaynor Investment Counsel in Cincinnati.

Still, lawsuits against firms over the marketing of toxic CDOs have been rare.

Scott Berman, a partner with Friedman Kaplan Seiler & Adelman who frequently represents institutional investors, said it's a bit of mystery that the financial crisis hasn't spawned more private litigation over CDOs and other exotic investments.

"Some of it may be being dealt with in private arbitration rather than litigation," said Berman. "It's also possible that many institutions are simply wary of suing each other."

The case is Basis Yield Alpha Fund (Master) v. Goldman Sachs Group Inc, US District Court, Southern District of New York, No. 10-04537.

Reuters

BP shares slip to 14 year-low on oil spill

BP shares slip to 14 year-low on oil spill

June 10, 2010 - 8:20AM
British energy giant BP's stock price plunged to a 14-year low in US trading on Wednesday as the Obama administration threatened to impose new penalties on it over the worst oil spill in US history.

Turning up the heat on the beleagured company, a senior US Justice Department official said after the markets closed that the department was "planning to take action" to ensure BP had enough money on hand to cover damages from the Gulf of Mexico spill.

Earlier, BP depositary shares trading in New York fell nearly 16 percent to close at $US29.20, their lowest level since August 1996, on growing worries about the costs the company will have to assume.

US Interior Secretary Ken Salazar told a Senate hearing he would ask the British oil giant to repay the salaries of any workers laid off because of the six-month moratorium on deepwater exploratory drilling imposed by the US government after the spill.

BP's total bill so far, including cleanup costs, has reached $US1.25 billion ($1.5 billion) and the US government has already said it will have to pay billions more in penalties.

The White House echoed Salazar's comments.

"The moratorium is as a result of the accident that BP caused. It is an economic loss for those workers, and ... those are claims that BP should pay," White House spokesman Robert Gibbs told a briefing.

White House showdown

BP believes it may be heading for a showdown with the White House over widening demands on spill-related costs, a BP source said. While the company has said it will pay for the clean-up and direct damages to those affected by the spill, the moratorium was a government decision and costs related to it were a different matter, the source said.

Earlier, the company's stock closed down 4 percent in London on concerns the company might have to suspend its dividend payment. US politicians have been calling for this, saying the company should put its cash into paying for legal claims and environmental damage in the Gulf.

At a congressional hearing on Wednesday, one lawmaker asked US Associate Attorney General Thomas Perrelli whether the Justice Department had the ability to issue an injunction against BP to stop it paying its dividend.

"We are looking very closely at this and we are planning to take action," he said.

BP officials have said they have enough cash to handle the crisis. But the market has shown less confidence. With Wednesday's share price drop in New York, BP has given up more than half its market value since the crisis began.

"The confidence in BP being able to stop the oil leak and deal with the ecological aftermath has disappeared," said TD Ameritrade chief derivatives strategist Joe Kinahan.

Illustrating analysts' anxiety about BP's dividend, in the past two days alone, seven have cut their expectations on the likely payout.

The cost of protecting BP's debt against default hit new highs on Wednesday.

The spill began on April 20 after an oil rig exploded, killing 11 workers and rupturing the deep-sea well. It has caused environmental devastation along the US Gulf Coast and threatens lucrative fishing and tourist industries.

The Obama administration, facing growing voter discontent over its own handling of the crisis, has sought to distance itself from the company. President Barack Obama has also toughened his rhetoric in recent days and said in an interview this week he would fire BP CEO Tony Hayward if he worked for him.

In a further sign of the administration's pressure on BP, Coast Guard Admiral Thad Allen, who is leading the government relief effort, demanded that the company provide more information and transparency on how it was meeting damages claims by individuals and businesses affected by the spill.

"The federal government and the public expects BP's claims process to fully address the needs of impacted individuals and businesses," Allen said in a June 8 letter to BP.

BP has paid out close to $US50 million in damages claims so far along the Gulf Coast -- mostly to fishermen, shrimpers, oystermen and boat operators who say their livelihoods have been impacted by the spill.

Meanwhile, BP America President Lamar McKay, along with top executives from Exxon Mobil Corp, Chevron Corp, ConocoPhillips and Shell Oil Co, were called to testify at a June 15 congressional hearing that will look at the oil spill and America's energy future.

At the scene of the spill, BP continued to siphon off oil from its blown-out oil well in the Gulf of Mexico.

Allen told reporters that BP planned to move another rig to the spill site on June 14. This would enable the company to boost its capacity to collect oil from the well to 28,000 barrels (1.18 million gallons/4.45 million liters) a day, he said.

Allen did not indicate this meant the flow rate of the oil could be as high as 28,000 barrels a day, but his comments are likely to underscore that neither BP nor the government have yet managed to determine just how much oil is gushing out.

Government scientists have estimated that the leak spews 12,000-19,000 barrels a day, with one estimate as high as 25,000 barrels. They are due to present revised estimates later this week or early next week.

Fouled wildlife refuges

The spill has already fouled wildlife refuges in Louisiana and barrier islands in Mississippi and Alabama. It has also sent tar balls ashore on beaches in Florida. One-third of the Gulf's federal waters remains closed to fishing and the toll of dead and injured birds and marine animals is climbing.

BP's latest containment effort, which follows a series of earlier failed attempts, involved placing a containment cap with a seal on a deep-sea pipe from which the oil is gushing.

But the ultimate solution to the leak lies in the drilling of a relief well and that won't be completed before August.

Reuters

http://www.smh.com.au/business/world-business/bp-shares-slip-to-14-yearlow-on-oil-spill-20100610-xxep.html

My oath! What Wall Street's pledging

My oath! What Wall Street's pledging

MICHAEL LEWIS
June 10, 2010 - 7:15AM


 A few weeks ago Bloomberg News reported that, in just the past year, hundreds of students at the Harvard Business School have taken something called the MBA Oath.

Endorsed by Harvard's dean, and replicated by other business schools, the oath comes in two sizes: an important sounding long version, and a punchy executive summary, consisting of seven crisp bullet points.

(Sample bullet point: ''I will refrain from corruption, unfair competition, or business practices harmful to society.'')

The gist of even the short version can be reduced further, to a single sentence: ''Wherever I face a choice between my self-interest, and the interests of the wider world, I pledge to act in the interests of the wider world.''

News of the oath naturally aroused the interest of cynics everywhere, and led them to raise hard questions: Isn't the underlying premise of free-market capitalism, and the typical business school education, that by doing well for oneself one is also doing well for the wider world?

Is the typical business school graduate actually capable of seeing any difference between his own interest and the world's? Does this sort of mushy, vague-sounding oath serve society or the oath taker, who hopes that society will be duped into thinking that he is acting in its interests rather than his own?

And anyway, if they are so keen to serve society instead of themselves, why do so many of these oath-takers wind up working on Wall Street, and, more specifically, for Goldman Sachs - a company whose CEO has been singled out by one of the oath's creators for its blindness to the social consequences of his firm's actions?
Passion for oaths

Lost in this orgy of nay-saying was the mounting evidence that the MBA Oath already has had one clear practical consequence. In the past year graduates of the Harvard Business School have flooded Wall Street, as graduates of Harvard Business School tend to do, and brought with them their new passion for oaths.

It's too early to say if oath-taking has attained a permanent new high, or we are living through some kind of ''oath bubble.'' What is clear is that many Wall Street firms, and Wall Street people, have found the need to have their own private oaths. In recent weeks several of these have leaked to Bloomberg News. We report them without further comment:

-- The Goldman Sachs Oath:
We pledge not to call what we do ''God's work,'' even though it is.

We pledge to meet and even get to know ordinary people who do not work for Goldman Sachs, so that we might better understand their irrational behavior, and exploit it only when necessary.

We pledge to create Wall Street's best-in-class oath.

-- The Morgan Stanley Oath:
We pledge to stop trying to do whatever Goldman Sachs is doing.

We, too, pledge to create Wall Street's best-in-class oath.

-- The Merrill Lynch Oath:
We're just grateful to be asked if we have an oath. We do!

We pledge to help the approximately 74,322 American dentists forget that we sold them auction-rate securities and equity tranches of subprime backed CDOs.

We also pledge that, the next time Wall Street plays crack the whip, we will decline Goldman Sachs's offer to play the role of the little fat kid who gets catapulted through the second- story window of the house across the street.

-- The Citigroup Oath:
In our continued quest to make peace with the US taxpayer, we pledge to sell our oath to the highest foreign bidder, the minute we decide what that oath should be.

-- The Oath of Hedge Fund Man:
I pledge to short the credit spreads of only those public corporations and great nations that truly are doomed.

I thus pledge to accelerate Darwinian forces that elevate the strong and destroy the weak.

And even though that should be enough goodness for one lifetime, I pledge to bid generously for the sexier items at the next Robin Hood auction.

-- The Warren Buffett Oath:
I pledge, even in the privacy of my own bedroom, to seem nothing like the abovementioned hedge fund manager.

I pledge to remain the go-to moral compass of the American money culture.

To that end I pledge to learn less than I typically do about the Wall Street businesses in which I invest, so that, after they are discovered to have lied, cheated or stolen, I can plausibly claim to have known nothing about it.

Specifically, I pledge to remain unable to find the corporate headquarters of Moody's Inc. on a New York City map. (Really, I have no idea where the place is!)

-- The Moody's Oath:
We pledge to do whatever we must to persuade Warren Buffett to hold on to at least some of his shares in our company.

Failing that, we pledge to just shoot ourselves.

-- The S&P Oath:
We pledge to do whatever Moody's does, without the pretension of being somehow ``upper crust.''

-- The AIG Oath:
Our deal to sell our oath to some Asian people having hit a snag, we pledge to continue to manage our oath to maximize its returns, assuming, of course, that our contracts are honored, and our bonuses are paid.

-- The SEC Oath:
We pledge to figure out who on Wall Street the American people most hate, and to sue them, even if we are sure to lose.

-- The Oath of the Financial Crisis Inquiry Commission:
We pledge to find out, by the year 2050, what exactly happened on Wall Street in the early part of this century.

We pledge to reform Wall Street. Or, failing that, to be taken seriously. Or, at a bare minimum, to attract a bit of media.

-- The Oath of the US Treasury:
We pledge to appear as if we have everything under control even when we actually have no idea what we are doing.

We pledge to dissuade newspaper reporters and magazine writers from describing our leader as ''elfin.''

We pledge, when he is arguing with foreign rulers, or Wall Street CEOs, that he will strive to seem a bit more powerful, perhaps even physically intimidating. At any rate, less of a wuss.

-- The Oath of the Federal Reserve:
We pledge to regulate these oaths to prevent others from doing so.

( Michael Lewis, most recently author of the best-selling ''The Big Short,'' is a columnist for Bloomberg News. The opinions expressed are his own.)


http://www.smh.com.au/business/world-business/my-oath-what-wall-streets-pledging-20100610-xx87.html