Month: October 2012

High profile earnings misses keep investors skeptical

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Some high-profile earnings misses soured sentiment ahead of Friday’s reports from two big Dow stocks – McDonald’s and General Electric.

Both multinationals, expected to report before the bell, have exposure to the fallout from Europe’s sluggish economies and China’s slowdown.

Stocks were only slightly lower Thursday, even with the bizarre midday release of Google earnings, showing a big earnings miss. Google stock lost 8 percent, and its steep decline after the accidental release of its earnings by an RR Donnelly unit weighed on the Nasdaq and SandP 500. The Dow was down just eight at 13,548. Nasdaq lost a full percent, or 31 points to 3072, and the SandP 500 fell three points to 1457. Google intended to report earnings after the bell, ahead of its 4:30 p.m. conference call. RR Donelly blamed the early release on “human error.”

“It seems as though Google had become the new flavor of the day, and as a result, if people were buying it as the flavor of the day, they’re going to launch out of it just as quickly as they came to it,” said Mark Luschini, Janney Montgomery chief investment strategist. He said investors were buying into it because of caution about Apple’s latest I-phone release and fears the new I-pad mini could cannibalize other Apple product sales. Facebook and other internet stocks fell in sympathy with Google.

But after the closing bell, more misses came, from Microsoft, and Advanced Micro Devices, which had previously warned it would do worse than expected. Chipotle, a darling of momentum traders, also missed, and its stock was crushed in the afterhours session. The stock, already well off its year high of USD 442, lost as much as 12.5 percent in the afterhours session, dipping below USD 250. Chipotle said same store sales growth was trending down in October. It also said food costs are rising, and it is considering raising prices next year.

“Google’s down, Chipotle’s down…a lot of the sort of high flying stocks that people were hiding in, or owning, are not doing well,” said Steve Massocca of Wedbush Securities. “It’s not good for the market. There’s been this fear for five earnings seasons that earnings would be poor. For the first time, as predicted, it’s actually happening.”

Stocks are still up on the week with the SandP up two percent, and just below its 2012 closing high of 1464. “I think you have incredibly stimulative monetary policy. That’s going to act as a floatation device. That’s going to counteract some of this,” said Massocca.

Besides GE and McDonald’s, early morning earnings are expected from Schlumberger, Honeywell, Ingersoll Rand, Baker Hughes, Kansas City Southern, Air Products, and Parker-Hannifin.

Econorama

Friday’s sole economic report is September existing home sales, at 10 a.m. ET. Housing data has been brighter lately, and is one part of the economy that has been consistently showing positive surprises. The existing home sales are expected to be down 1.5 percent at 4.75 million.

“I think it’s going to be overshadowed by earnings news,” said Massocca. “If it’s hugely better then it will obviously have an impact, but I think people are going to be more concerned about some of these big bellwethers missing.

Goldman Sachs economists said in a note Thursday that housing has become a headwind for GDP. But they also noted that it will remain less important from a macroeconomic perspective than it had been in prior cycles.

They said housing seems to be adding about a quarter of a percent to growth now and that could rise to a half percent in 2013. “These numbers are equivalent to a move from a depressed housing market to a “normal expansion” as we defined it late last year, although they still fall well short of a ‘boom’,” they wrote.

Follow Patti Domm on Twitter: @pattidomm

Questions? Comments? Email us at marketinsider@cnbc.com

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Earnings, data could send markets closer to high water mark

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A new wave of earnings news Thursday could help push stocks toward the year’s high water mark , but overseas events may play a role in setting the course for markets.

EU leaders begin a two-day meeting, as investors await more headlines on Spain, amid speculation it is edging closer to seeking a bailout. There was also Thursday morning news expected on China’s economy, including GDP, retail sales and industrial production.

US stocks Wednesday were higher, with the SandP 500 up 4 at 1460, on the way to its 2012 high closing high of 1465, set Sept. 14. The Dow did not perform as well because of a big decline in IBM that shaved 80 points off the average. The Dow finished up five points at 13,557.

“It’s pretty mixed price action,” said Barry Knapp, head of equity portfolio strategy at Barclays. Utilities were the best performing SandP sector, up 1.3 percent. “When you look across all the sectors, you have a decent bounce in financials, and energy’s pretty strong. When you think about those three sectors they’re all beneficiaries of Fed policies.”

The market’s rise has surprised some traders and analysts, who thought earnings and the election would keep stocks heading lower. “Everybody keeps saying it’s the Fed shoveling money at things,” said Art Cashin, director of floor operations at UBS. “It’s going beyond the (Fed Chairman Ben) Bernanke put now. It’s the Bernanke Santa stocking.”

Treasury yields rose Wednesday, with the 10-year rising to 1.81 percent, its 200-day moving average. Yields move opposite to bond prices, and the 10-year yield was last that high on Sept. 14.

“We are not selling off because some of the data has looked better. Some of it has to do with the election. The seasonals this time of year are bad,” said David Ader, chief Treasury strategist at CRT Capital. “I’m very tepid about how much weakness we’ll get out of it. The seasonal patterns are negative up to the election.”

President Barack Obama’s performance improved in Tuesday’s debate, after a weak showing in the first debate two weeks ago. That debate cost him in the polls against Republican challenger Mitt Romney, who was leading Wednesday in Gallup’s tracking poll.

“The bond market saw an Obama win as more risk off and a Romney win as a more risk on. Now the field has changed somewhat,” said Ader. He said the bond market is going back and forth without a clear theme. Ader said if the data improves that would help Obama’s chance, but it could also make the possibility of a “fiscal cliff” even greater. The fiscal cliff is the expiration of Bush-era tax cuts at the end of the year, combined with automatic spending cuts that will start Jan. 1 if the lame duck Congress does not act after the election.

Earnings news is expected before the opening bell Thursday from Travelers, Verizon, Blackstone, Morgan Stanley, Philip Morris, Diamond Offshore, Nokia, Southwest Air and Union Pacific to name a few. Google and Microsoft report after the bell, as does Capital One, Advanced Micro Devices and Chipotle.

Economic reports include the 8:30 a.m. ET weekly jobless claims, expected at 365,000 after last week’s surprise, once off dip to 339,000. That decline was blamed on a technicality when one large state did not file some accumulated claims. The Philadelphia Fed survey data and leading indicators are reported at 10 a.m.

Follow Patti Domm on Twitter: @pattidomm

Questions? Comments? Email us at marketinsider@cnbc.com

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Investors were buying stocks in Q3: BlackRock’s Fink

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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After hiding out in fixed income, investors began to put money back into riskier assets like equities during the third quarter, BlackRock CEO Larry Fink told CNBC’s “Closing Bell” on Wednesday.

“What was particularly important for the quarter is that in past few quarters, we saw money go into fixed income. In the third quarter, we saw USD 20 billion going into equities,” the BlackRock CEO said. “It’s evidence investors are looking to add risk.”

He also said that he’s bullish on US banks and that investors should see volatility in Europe as a buying opportunity.

During the quarter, BlackRock’s assets under management rose 10 percent from year-ago levels to USD 3.67 trillion. The iShares exchange-traded fund business saw net inflows of USD 25.2 billion.

While there is some indication that investors are beginning to move into riskier assets like equities, Fink said that investors, consumers and business leaders are still deferring decisions given uncertainties like the “fiscal cliff” – when automatic tax increases and spending cuts take effect at the end of the year.

“If we don’t solve the fiscal cliff in a bipartisan and sensible fashion, I expect to see us drift into a zero growth economy and possibly a recession in the first quarter,” Fink warned.

While the fiscal cliff will be the first thing the president will have to deal with, regardless of who wins the election, Fink has been disappointed that there has not been a dialogue about how to address this looming problem.

Longer-term, Fink remains bullish and has even been constructive on Europe. He expects Europe to take seven years to fix, with plenty of volatility along the way.

“If you can handle the volatility, buy on the dips,” Fink advised, noting that while Italy and Spain have more work to do the trends and competitiveness are improving.

BlackRock is the second-largest shareholder in Citigroup, whose chief executive officer Vikram Pandit unexpectedly resigned on Tuesday.

“Under Vikram’s leadership, the organization has stabilized. Under his leadership the organization is moving forward. Yes, I’m not blind to the missteps,” Fink said.

“Citibank is in particularly good shape. Most of their balance sheet problems are way behind them … their brand worldwide is one of the best worldwide,” Fink said.

He said investors should not be discouraged by volatility in Europe because the outlook for the debt-ridden continent is positive, although a resolution to its crisis could take seven years.

– Reuters contributed to this article.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Risk is back as fund managers turn bullish on equities

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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While bonds have been the asset class of choice this year, equities are quickly gaining favor among global asset managers as central banks pump liquidity into the financial system and investors grow less fearful of the euro zone debt crisis.

A monthly survey by Bank of America/Merrill Lynch showed 24 percent of fund managers are overweight equities – the highest in six months – rising from 15 percent in September. The survey of 200 managers, who oversee a combined USD 561 billion, was conducted over Oct. 5-11.

European and emerging market equities have been the biggest beneficiaries of the shift in risk appetite, the survey showed. The percentage of participants bullish on emerging markets, for example, rose to 32 percent in October from 19 percent in the previous month – the biggest monthly rise in eight months.

Roman Scott, chairman of investment management firm Calamander Group, said the investment case for equities is getting stronger given the liquidity boost provided by policymakers in the West.

“This very blunt tool of monetary policy to effectively keep money very cheap, in fact almost free, is designed to force all of us into risk assets. (Federal Reserve Chairman Ben) Bernanke wants everybody to buy equities and risk assets; the European Central Bank wants the same thing. I do think there’s a good case that the risk-on position is looking more attractive,” Scott told CNBC.

The improvement in investor sentiment has been reflected in the MSCI Emerging Markets Index and the FTS Eurofirst 300 Index, which have risen 8.8 percent and 6.7 percent, respectively, over the last three months.

Graham Bibby, managing director, CEO, and CIO of Richmond Asset Management, an investment advisory firm said he has turned bullish on emerging markets in Asia, including China – the region’s worst performer – which is down over 4 percent since the start of the year.

“Asian equities will start to perform better as some people start taking profits out of the US I’m interested in China and India, those markets have underperformed, but they have started to breakout to the upside and that’s an indicator that the smart money is moving in,” Bibby said.

“When we look at momentum – or which markets are rising the fastest – Asia’s picking up steam,” he added.

When asked how more exposure to riskier assets would be funded, the majority of respondents or 37 percent, said they would sell government bonds to do so. Fund managers, however, were much less willing to let go of their corporate bond holdings to buy up higher beta plays, according to the survey.

Meantime, optimism around US equities fell for the fourth straight month, with just 10 percent of investment managers overweight the country’s stocks, compared to 13 percent in September.

While US stocks have outperformed this year, with the Dow Jones Industrial Average hitting a near five-year high earlier this month, experts say future gains could be limited due to investor nervousness about upcoming third-quarter corporate earnings and profit-taking.

-By CNBC’s Ansuya Harjani

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Why are gasoline prices suddenly falling?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A dramatic spiral for gasoline prices in some key battleground states comes just three weeks before the US presidential elections.

Ohio voters have watched prices at the gas pump drop by nearly 20 cents on average in the past week. At the same time, retail gas prices have plunged more than 10 cents in Wisconsin and Illinois.

Even in California, where the average gas price in the state reached the highest level on record on October 9, prices are now a lower by about a dime. Nationally, on average, gasoline prices have fallen 5 cents since last Wednesday to USD 3.76 a gallon.

If the steep slide in pump prices – as well as the decline in the futures market – is any indication of what is to come, voters in several states may see gasoline prices closer to the USD 3 mark by Election Day than recent highs around USD 4 a gallon, some analysts say.

“I suspect that both candidates can guarantee USD 3 to USD 3.25 gal gasoline in Ohio after this week’s gasoline debacle,” said OPIS analyst Tom Kloza. “You will see some sharp retail drops in battleground states like Ohio, Pennsylvania, Florida, Wisconsin, and Nevada in the next few weeks.”

A series of US refinery glitches and tight supplies in some regions caused gasoline prices to surge earlier this month to the highest prices since the spring. But the switch to a less expensive winter grade of gasoline, weak refinery demand and increase of supplies in certain areas caused gasoline prices to start coming down. An unexpected increase in US gasoline supplies in the past week could cause pump prices to fall even further.

November RBOB gasoline futures -a key gauge of where retail gas prices are headed-closed at the lowest price since Sept. 24 on Wednesday. Futures are 6 percent lower in just a week’s time. The rapid decline in the current session came after the US Energy Information Adminstration reported domestic gasoline supplies rose in the past week, when many analysts had forecast a decline. Meanwhile, gasoline demand over the past four weeks continued decline compared to a year ago.

In the end, supply and demand is causing prices to moderate once again.

The fall in gasoline prices “is not the result of political maneuvering,” Kloza said, “but just the normal rebalancing of inventories and the typical autumn sell-off.”

Follow Sharon on Twitter: @sharon_epperson

Disclaimer

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Why bigger isn’t better for investors

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The failed BAE-EADS merger proposal got me thinking about corporate value. What is value exactly? The advocates of that particular planned tie-up spoke glowingly about the size and implied strength of the new entity, principally about how it could “take on” US defense giants such as Boeing.

This may or not be true, but is it something the shareholders would have actually benefited from in the long run? Is size in itself a competitive advantage? Would it really have been positive for value creation?

Maybe orthodox principles can guide our thoughts on this. In the economists’ world of perfect rational investors, in theory shareholders do not need the agents who run the corporate entity on their behalf to “diversify”, because shareholders can do that for themselves.

By that thinking, if I am running an organization based in the EU, I shouldn’t use diversification as an argument to acquire a business in an emerging economy. Of course, acquisitions often occur because the buying company thinks it can do a better job of the target firm than the existing managers. Sometimes that is true, and sometimes it is not.

But what about when a firm divests businesses? Conglomerates used to be the rage in the Western economy, and are still a major factor in the Asia-Pacific region, with examples of parent organizations that run everything from engineering firms to banks. It is tempting to think that if such firms hived-off off those parts that weren’t “core” to the business, shareholders would benefit. Certainly that has been the case in the West on many occasions.

What is the primary objective set for a company’s managers? To maximize shareholder return. Today’s companies have many other objectives of course, including addressing the interests of other stakeholders and the wider community within which they operate, and rightly so. But the shareholder return objective must remain paramount, otherwise shareholders would be better off investing elsewhere. But by return we do mean genuine value creation, not (for example) short-term gains that may be illusory.

The challenge for corporates in the post-crash environment is to remain competitive. That calls for stronger engagement with customers, and sticking to one’s areas of genuine expertise. And here the size argument falls down a bit. One can’t be an expert at everything. If we are focusing on shareholder value, then the future may be the niche company, the focused operator that sticks to what it knows it has expertise in, and treats every customer as if he is their only customer.

And this is the crux of it. A retrenchment may benefit large company competitive advantage as well. The paradox would be growing smaller to remain competitive, as opposed to merging with or acquiring firms in a constant desire for “growth” and the belief that bigger is better. The part of the financial statement that necessarily needs to get larger is “return on capital”, as opposed to “assets”.

Related Links

Small Size Is Your Biggest Advantage
Start Small, Go Big: A Crash Course for Startups
Small Retailers Have Big Advantages Over Chain Stores: Opinion

© 2012 CNBC.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

I was not forced out at Citigroup: Vikram Pandit

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Vikram Pandit denied that he was forced out as Citigroup’s CEO, telling CNBC Tuesday that it was his decision to step down after five years at the bank and that he had been thinking about it for awhile.

In an exclusive interview, Pandit said that after the bank posted stronger-than-expected third-quarter earnings on Monday, he called Chairman Michael O’Neill to discuss leaving the bank.

“After five years of accomplishing what we needed to do, it was the right time” to step down, Pandit said.

While the departure was sudden, Pandit said “Citigroup has a new CEO in place and it makes no sense for the old CEO to look over his shoulder.”

Michael Corbat, who had been the head of Citi’s Europe, Middle East and Africa operation, was named the new CEO on Tuesday.

Pandit expects Corbat to continue to focus on emerging markets and core banking.

Pandit also denied his departure was about money, noting that he had worked for an annual salary of USD 1 when needed. There are no potential problems lurking at the bank either.

“If I thought there were any blowups, I wouldn’t leave,” Pandit said.

-Reported by Maria Bartiromo; Written by Justin Menza

Related Links:

What Happened at Citigroup
Meet Citi’s New Boss
Post Wall Street Jobs

© 2012 CNBC.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

The ABCs of China’s share markets

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A shares, B shares, H shares. Chinese equity listings can be confusing to global investors. I’m often asked what I think about a particular share market in China, why one is outperforming others, and which to invest in. I can’t tell you what to invest in, but I can give you some information which I hope will help you discern what choices make sense for you.

The ABCs…

Listed companies in China fall under three primary categories: “A” shares, “B” shares and “H” shares.

A shares are those of local Chinese companies denominated in Renminbi, traded primarily between local investors on the Shanghai or Shenzhen stock exchanges. Qualified Foreign Institutional Investors (QFII) who have been granted special permission by the Chinese government can also participate in this market.

B shares represent Chinese companies with a face value in Renminbi, but listed for trading to primarily international investors in US Dollars as in the Shanghai exchange, or Hong Kong Dollars as in the Shenzhen exchange. Mainland Chinese investors may also trade B shares with legal foreign currency accounts.

H shares represent Chinese companies regulated by Chinese law, but freely tradable by anyone. H shares are listed in Hong Kong and are quoted in Hong Kong Dollars-hence the “H.”

Some investors also refer to companies that may not be incorporated in China but have their primary business there as L shares (trading on the London Stock Exchange) and N shares, which trade in the US on the New York Stock Exchange, NASDAQ, or the American Stock Exchange.

The “red chips” represent companies incorporated in Hong Kong, but whose primary business interests are in mainland China.

Other investment choices include dim sum bonds (bonds denominated in Renminbi being issued in Hong Kong), RQFII (a new scheme where Chinese managers invest into mainland securities with Renminbi raised in Hong Kong), and RMB bond products, just to name a few.

Performance Differences

There are several reasons for performance differences in these markets. Overseas listed Chinese companies have varied tremendously in their risk-adjusted returns. Corporate governance in some Chinese companies listed in the US has been rather poor, while the Chinese H or red-chip shares listed in Hong Kong generally have better governance because of the more stringent regulatory framework. Since Hong Kong is a window to mainland China, the Chinese authorities generally list what they view as the “best” assets there. Usually these are the state-owned companies with dominant positions in key industries, such as telecommunications or transportation. We believe they are regarded by the Chinese regulator as better run.

In China’s A-share market, the IPO system has not been entirely objective, so what investors or analysts might consider the “best” companies have not necessarily been listed there. This is why we think it’s so important to conduct thorough research across a broad list of companies, and then to carefully screen them. In the A-share market in particular, investors also have to recognize the political risk in China; its capital market is not yet fully mature and its regulatory standards still lag leading markets like Hong Kong and Singapore.

We recognize that performance in the A-share market has been disappointing to many investors this year, for a few reasons. Chinese investors lost confidence in the market, and an excess of Chinese IPOs (including a rush of Chinese listings on US exchanges, particularly in 2010-2011), has had a dampening effect on secondary trading. Restrictions on foreign investment have also created some liquidity imbalances. The government is now allowing more investors to come in, which we find encouraging, but the amounts are still small and reform will take time.

To make the A-share market more attractive to all types of investors, we think China’s regulators should ensure that rules are fair and reasonable to all parties. In our opinion, there should be sufficient regulatory oversight and enforcement to ensure companies meet listing standards, have high corporate governance standards and are fair to minority shareholders. Rules such as “mandatory dividends” that override management decisions can discourage quality companies from listing.

Opportunities and Risks in A Shares

Despite some dampening influences, many investors feel the A-share market looks more expensive than the H-share market. That may be true if you look at the general numbers for the market overall, but that can be misleading because large-cap companies dominate the H-share market. Our research shows the premium is not as big as many believe in the A-share market. In fact, we believe the valuations of many mid- to large-cap companies in the A shares, especially in the banking, insurance, building materials and automobile sectors, are currently trading at a discount or at least in line with many H-share companies.

In our team’s opinion, there are good buying opportunities in the A-share market right now. Valuations dipped quite a bit amid a significant market decline this summer, and we have been searching for bargains in companies we think are of good quality and trading at attractive valuations relative to their intrinsic value. Consumer goods and diversified oil companies, operating inside and outside China, are sectors of particular interest to us right now. Our team also likes the pharmaceutical and biotechnology sectors, but we feel current valuations are still a bit too high.

The A-share market also offers investors a number of appealing characteristics. It contains a much larger number of listed companies than the other markets. In addition, sector representation is more balanced and diverse. For example, investors can gain exposure to some smaller companies and sectors not available via red chips or H shares, such as tourism, Chinese pharmaceuticals (traditional medicine) or spirits.

As I’ve stated before, I believe China can maintain strong long-term economic growth (even if at lower levels than the double-digit growth rates of years past) and believe there are reasons to be optimistic as an investor in its various markets. China may be growing at a somewhat slower pace, but it is slowly becoming less dependent on exports, and it is investing for its future growth. Investors should be happy to see that happen.

China’s once-a-decade leadership changeover over the next few months is adding a bit of market uncertainty. However, we believe the structural changes and market reforms that are already underway there should continue to create a more balanced growth model, and that China and its people should continue to gain clout in the global economy.

This story first appeared on Mark Mobius’ blog.

Mark Mobius is executive chairman of the Templeton Emerging Markets Team, which manages over USD 50 billion worth of emerging market assets for Franklin Templeton Investments. The veteran fund manager treks the globe in search of opportunities in emerging markets. Templeton Emerging Markets Group has analysts located in 17 offices throughout emerging markets and Dr. Mobius opened research offices in Romania, Vietnam, Malaysia and Thailand over the last two years. Read more about his globetrotting experiences at his blog.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Pandit’s sudden exit: What really happened at Citi?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Wall Street was left bewildered Tuesday at the stunning exit of Citigroup CEO Vikram Pandit, who told CNBC he stepped down voluntarily. Insiders, though, said Pandit was forced out.

Pandit shocked the Street with the announcement before the market opened that he would be leaving the company after nearly five years.

In an interview, Pandit denied he was forced out, saying it was his decision and felt it was time to leave now that Citi’s operations had stabilized. He also denied that pay was the center of a disagreement he had with the board.

“Let’s not forget, I was the one who worked for a dollar when I needed to,” he said. “It was just time after five years of accomplishing what we set out to do.”

On a conference call with analysts later Tuesday, Citigroup chairman Michael O’Neill said that “no strategic, regulatory or operating issues precipitated Pandit’s departure.”

The new CEO Michael Corbat also suggested that there would be no major change in strategy.

“We will continue to focus on growing Citigroup’s core businesses particularly those where we have a unique presence in the world’s fastest growing emerging markets,” he told analysts. The bank will also continue to shed assets in Citi Holdings.

However, there was still no explaining the unusual timing of the announcement.

Pandit’s tenure was bookended by extremes – he stepped in as the credit crisis was about to explode across the financial markets and the global economy, and he walked away just as it seemed the company might be finding some stable ground.

His exit was no less dramatic, with a portrait emerging of a clash of ideas – a bank looking to steer a post-crisis direction, being led by a chief executive whose name will always be linked with the institution’s darkest days.

“The timing and the way in which it was done are unsettling, but I think a lot of people wanted to see Vikram Pandit gone,” Erik Oja, equity analyst at Standard & Poor’s Capital IQ, said in an interview. “He just reminded them of the financial crisis. He’s been there since December 2007. Maybe it’s just nice to have a fresh new face in there in the CEO job.”

Related Links:

Read Interview With Pandit
Meet Citigroup’s New Boss
Why Citi’s Vikram Pandit Resigned
Pandit’s Departing Memo
Boardroom Bloodletting?

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CNBC stock commentator Jim Cramer reported that Pandit was forced out in a disagreement with the board, an account that jibes with the Wall Street Journal’s reports that the clash centered on strategy and performance.

One high-ranking Citi source told CNBC that company Chairman Michael O’Neill had called several operating committee members Monday night to inform them of Pandit’s impending departure. Talks apparently had been ongoing for weeks on the smoothest exit strategy as it became clearer that Pandit would be leaving soon.

Citi’s stock tumbled nearly 90 percent during his tenure, despite a reverse stock split, but shares were little changed following the announcement. The stock is up 22 percent over the previous 12 months.

On Monday, Citi reported earnings per share of $1.06 that beat analyst expectations. However, the company gave no hint that a changing of the guard was about to take place, which raised hackles Tuesday after the Pandit announcement.

“The abrupt timing of today’s announcement is all the more surprising given the lack of any mention in the course of the earnings report – potentially exposing the company to legal liability,” Sterne Agee analyst Todd L. Hagerman said in a note.

“Today’s announcement exhibited few (if any) of the characteristics of a typical CEO succession, let alone for a company of Citi’s prominence,” added Hageman, who has a “neutral” rating on the stock and a price target of USD 38.

“It’s likely the board was starting to ask some tough questions about why Citi was not such a dominant player in mortgage banking as are JPMorgan and Wells Fargo,” Oja said.

Despite misgivings over the way the departure was handled, S&P kept a “buy” rating and a USD 42 price target on the stock, anticipating that Pandit’s replacement, Mike Corbat, would help chart a new path forward.

“Mr. Pandit was more of an academic – a PhD in finance from Columbia,” Oja said. “Mr. Pandit is too cerebral and it’s time to do what all the other banks have done, which is have a banker” as CEO.

Sources said part of the dispute centered on salary, despite Pandit’s insistence to the contrary.

As the bank navigated its way out of the crisis, Pandit was taking a salary of just $1 a year. (Read More: How Citigroup, CEO Pandit Turned Themselves Around)

But his compensation had grown to nearly USD 15 million, including bonuses and options, at a company that still was struggling to overcome some notable weaknesses. Taking advantage of new “say-for-pay” authority, shareholders had in recent months voted against a raise for Pandit.

Many insiders pointed to the misfire when the company sold 49 percent of its interest in the Smith Barney brokerage to Morgan Stanley, a deal that ended up costing Citi USD 2.9 billion. Another strike against Pandit came when the bank failed its stress test.

“They didn’t get the capital they wanted,” said Fred Cannon, analyst at Keefe, Bruyette & Woods. “Pandit clearly was overpromising and underdelivering on that score.”

Still, KBW also has kept its “buy” rating on the stock.

“With nothing against Pandit, it’s a net positive for shareholders and the company,” Cannon said. “It just means you’re going to see an acceleration of dealing with the challenges they face and getting Citi back to a core global payments business, which is where they have their expertise.”

_PAGEBREAK_

Dick Bove at Rochdale Securities has a “positive” rating with a USD 40 price target on Citi. Bove told CNBC’s “Futures Now” that Citi is a “screaming buy.”

Watch Bove on CNBC.com’s Futures Now webcast discussing the Pandit resignation.

“Pandit has achieved every goal he set out to implement when he came to the company,” the vice president of equity research at Rochdale Securities said. “Remember, it was a bankrupt entity then and now it has excess liquidity and capital.”

Pandit himself offered few clues about his departure, saying only that he felt it was the right time for him to walk away.

“Citigroup is well-positioned for continued profitability and growth, having refocused the franchise on the basics of banking,” the 55-year-old outgoing executive said in a statement. “Given the progress we have made in the last few years, I have concluded that now is the right time for someone else to take the helm at Citigroup.”

Pandit had been the face of Citi when the company was fighting for its life during the financial crisis.

Analyst Meredith Whitney’s opinion that Citi would need to slash or eliminate its dividend because of toxic subprime mortgage debt on its books helped kick off the ordeal.

Then-FDIC Chairman Sheila Bair remains bitter over the favorable terms Citi got when the government became a shareholder in the company, and said Tuesday that Pandit’s depature is a positive.

“I had a lot of frustrations dealing with Citi management. It did undermine my confidence in them,” Bair said. “They’re one of the largest commercial banks in the world and they need to have somebody with some commercial banking experience, which Vikram did not have.”

Robert Benmosche, the CEO at American International Group, the insurer and another key player during the financial crisis because of its wide exposure to credit default swaps, said the move signaled a changing of the guard.

“I’m just as surprised as anybody else,” he said. “This may be a sign that he wants to move on and maybe a sign that they’re ready for the next era of leadership.”

© 2012 CNBC.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

I’d rather invest in Russia than the US: Jim Rogers

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Jim Rogers would rather invest in Russia than the US stock market.

“In 2013 and 2014 we’re going to have economic problems,” the noted investor told CNBC’s “Closing Bell” on Monday. “Either (politicians are) going to raise taxes or they’re going to bungle something.”

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He added, “Raising taxes has never made the economy grow.”

Jim Rogers is shorting US stocks, particularly technology.

“Technology has been one of the few places that is very exploited,” he said.

He is short Microsoft calls and an ETF with Apple in it, he told CNBC.

Rogers is looking at Russia instead. Having been negative on Russia his entire career, Rogers said, “I’m convinced things are changing in Russia for the first time.”

But he’s still looking for a way to invest, it might be in the stock market it might be in the currency, he said.

In September, Rogers joined Russian investment bank VTB as an advisor to their agricultural division.

Rogers is also short India and isn’t investing in China just yet. India is a “complete disaster,” with high inflation and balance of trade problems, according to Rogers.

He also only buys China when it collapses. “And it hasn’t collapsed yet,” he said.

© 2012 CNBC.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow