Friday, October 10, 2008


In the event that you happening to be managing a bunch of cash for a group of rich Saudis, here's something to look out for...

Floyd Norris notes of the current cratering of market indexes that,
"Some of this is no doubt overdone, as the need to cut leverage forces investors to sell the good with the bad. When a bottom does come, the ensuing rally could be explosive."
To date, tax-refund checks, massive government-sponsored bailouts, interest-rate cuts (remember when that was big news? How quaint!), and $10+ Buffet-backed billion have been thrown at the crisis, to no avail. But there's got to be a bottom to sinking equity markets. At the moment, it doesn't look like individual and institutional investors will be the first to call the bottom and move into the market. Instead, expect deals like these...
"The recent plunge in the market value of BlackBerry maker Research In Motion could leave the company vulnerable to a takeover from a well-capitalized buyer such as Microsoft Corp.

RIM's shares, which were worth more than $148 on the Nasdaq market just four months ago, now are trading around the $60 mark amid the U.S. financial crisis and margin pressures the company is experiencing because of expenses related to launching new smartphones." (Full Reuters piece here.)

Microsoft's ability to complete the transaction without credit would only amplify the, in effect, already discounted RIM shares. As Mark McQueen, chief executive of Wellington Financial LP in Toronto, observes, "If you did a stock and cash deal, you wouldn't need to tap the credit markets."