Hoodlum

Olympus is really looking stupid. I am surprised for company with the history and size of Olympus. Olympus Backtracks on Gyrus Adviser Fee, Says Amount Double

Here is a copy of the letter from then President and CEO, Michael Woodford to Chairman, Tsuyoshi Kikukawa on Oct 11th. Woodford suggested meeting on the 14th to discuss next steps. That was the day he was sacked. http://graphics8.nytimes.com/packages/pdf/business/20111018/letter-text.pdf "In putting the company first, the honourable way forward would be for you and Mori-san to face the consequences of what has taken place, which is a shameful saga by any stretch of the imagination. It is clear that the current situation is now untenable and to move forward positively the necessary course of action is for you both to tender your resignations from the Board. This approach would allow the situation to be managed in a discreet manner and minimise the reputational damage to both Olympus and yourselves. If your resignations are not forthcoming, then there is a principal obligation upon me in respecting my fiduciary duties, to raise, with the appropriate parties, my fundamental concerns in relation to the governance of the company."

Has anyone been following the Olympus story over the past couple of days. Stock is down 40% since the President and CEO was asked to leave. He has sent Financial and Audit documents to UK's SFO for further investigation. http://www.ft.com/intl/cms/s/2/87cbfc42-f612-11e0-bcc2-00144feab49a.html#axzz1bA6mlmiV In a statement announcing his dismissal, Olympus said Mr Woodford had diverged “from the rest of the management team” and this was ”causing problems for decision making”. The dismissal represented an abrupt reversal. When promoting Mr Woodford to chief executive two weeks ago, Tsuyoshi Kikukawa, chairman, said he was “extremely pleased” with the Briton’s leadership, which had “exceeded my expectations”. Mr Woodford stressed that he had seen no evidence that Olympus executives benefited improperly from the acquisitions. But he said large amounts of money seemed to have “disappeared” into the hands of poorly vetted outside financial advisers and investment vehicles. In a letter to Mr Kikukawa dated October 11, he described “a catalogue of calamitous errors and exceptionally poor judgment which … has resulted in the destruction of shareholder value of $1.3bn.” In the Gyrus case, the documents show that Olympus paid $687m to a Cayman Islands-registered company, AXAM, that had been named as a financial adviser but whose ultimate owners were never ascertained by Olympus. The company disappeared from the trade register three months after receiving its final payment from Olympus, Mr Woodford said. The amount paid represented about a third of the $2.2bn acquisition price. http://www.bloomberg.com/news/2011-10-18/olympus-says-fees-paid-over-gyrus-purchase-were-appropriate-.html Olympus Corp. (7733) said acquisition fees paid to unidentified advisers amounting to 30 billion yen ($391 million) were not excessive and followed “appropriate” accounting procedures. “Investors expected that management would deny everything but in fact the chairman started to admit things,” Yuuki Sakurai, president at Fukoku Capital Management Inc., said in a phone interview. “Only the numbers are different. They admitted the payment even though several years ago they didn’t disclose it. It makes you wonder if there’s more out there.”

Authorizing a 20% buyback seems like a better way of using cash than what HP is doing.

If this is a long term trend, I wonder how much impact this would have on housing demand.

And a little jab from Apple today after Steve Jobs resigns as CEO. http://www.theglobeandmail.com/globe-investor/steve-jobs-resigns-as-apple-ceo/article2140874/ “This is the right thing for Steve to do – to go out on top,” Mr. Gillis said. “I don't expect Tim is going to be spinning off the PC business any time soon.”

If there is even a hint of a future sales drop in tonight's quarterly release, Salesforce will fall very quickly. I plan on holding on to my puts for a bit yet as they are doing well in this environment.

I was surprise to see France in that list.

NBSK pricing in China has dropped 7% in the past month. Not sure if this will impact NA pricing in the coming weeks. http://www.paperage.com/foex/pulp_china.html

Either way Microsoft will make tons of profit from this.

I must have missed this. What if patent fees for Android cost as much as licensing Windows Phone? http://www.guardian.co.uk/technology/2011/jul/07/windows-phone-android-patent-seeking If Microsoft can get that money from Samsung (though it's more likely that this is an opening salvo; Samsung is said to want to get it down to $10, which isn't much of a negotiating position) then Android is going to become the best earner Microsoft has in mobile. Given that Samsung produced 19m smartphones in the first quarter, that would be $190m even at the $10 level; $285m at the $15 level. There's also a lawsuit going on against Motorola, in which it's claiming that its Android handsets infringe, and with Barnes & Noble over its Nook e-reader (which uses Android). And that's before Nokia - with which Microsoft has tied up a deal worth billions involving lots of intellectual property flowing back and forth - wades in with its patents against Android, because Nokia has got lots of patents in the mobile phone market. Microsoft would be able to litigate those for it quite successfully. Even then Microsoft isn't really finished with the patent licensing thing, because you'll recall that it was part of the consortium last week which won the bid for the Nortel patents, which all relate to mobile. Those, it will be able to litigate once the transfer of ownership is complete (Canada seems to be cutting up a little rough about it). And once that happens, then Android handset makers may really begin to wonder whether the game is worth the candle. If Windows Phone licence from Microsoft costs you around $25 (a guess), but the patent payments are costing you $24 per handset, is it really worth persisting?

Muddy waters is trying to use the SAIC to determine fraud at TRE. Here is an interesting article from February that explains why this is not possible based on how businesses need to be structured in China. http://weybenjamin.wordpress.com/2011/02/18/benjamin-wey-a-china-experts-views-on-saic-and-sec-filing-discrepancies-for-u-s-based-companies/

TRE will be volatile for a while so take advantage of it. I sold half what I bought when it was above $7 and just bought back the same shares again. Still a very small amount of my holdings. Most of TRE's Debt is due after 2013 so there is lots of time to clear the air on this. Here are some comments on the Carson Block Conference call. http://www.canadianbusiness.com/blog/business_briefings/29215--skepticism-mounts-against-sino-forest-short-seller

But that was known before their report.

The market is not perfect. The MW report had 2 main claims against TRE and that is what the press release from TRE tried to refute. Most of the rest of the MW report tried to pull stuff from the past to show some kind of trend to back up their 2 main points. The first item was clearly refuted as the revenue in question was clearly disclosed in the 2010 Q1 & Q2 MD&A. I am surprised MW missed this. The 2nd claim comes down to land ownership. MW claims they don't own the land while TRE says they do and that MW assummed they only purchased in Gengma, when they puchased in 25 other counties of Yunnam province. The auditors will likely come back and say nothing is wrong, but MW will say "where's the proof of the land records" and try to drag this out as they know TRE won't release that information for confidentiality reasons. In the end, if Paulson doesn't see anything wrong then he will buy shares at these depressed prices and there are only so many shares that can be shorted. I think MW has bitten off more than they can chew and are not accurate in their reporting of TRE, regardless of how successful they may have been in the past. I picked up some share of TRE today for the first time.

At some point this will all unravel. Salesforce’s Execs Bonus Bait and Switch

I am sure there are varying opinions on this. But do you think this is the direction certain parts of the US are headed in. And will we eventually see social unrest. http://www.thestar.com/business/article/994354--olive-america-the-world-s-sweatshop U.S. and a few Canadian manufacturers have long been relocating in the low-wage U.S. South. They’ve now been joined by European multinationals, most of which also operate in Canada. The Euros leave behind the social-justice practices of their homelands, as keen to squeeze blood from a stone as the most avaricious business operator. A stunning Human Rights Watch report from last September describes systematic exploitation of U.S. workers by such familiar European names as Ikea, Sodexo, BMW, Siemens, Daimler and Volkswagen. But China is no longer the “off-shoring” jurisdiction of choice. With annual wage gains now averaging 15 per cent to 20 per cent, combined with stagnant wages in North America, China will lose its labour-cost advantage over North America in just four years time, according to a report this month by the Boston Consulting Group.

Off the top of my head they had a strike of $100. They were small amounts as this is my first foray into puts.

What the best way to play this. I have mostly longer puts out to 2013 as I don't know how long it will take for the market to realize this.

Japan will be shutting down 3 more reactors that were not impacted by the earthquake. http://www.theglobeandmail.com/news/world/asia-pacific/japan-urges-three-reactors-be-suspended-over-safety-concerns/article2012877/ Mr. Yamada said the walls aimed to protect the pumps from damage from an earthquake and tsunami, and it will take a year or one and a half years to complete the construction. The plant provides power to around 16 million people in central Japan. Faced with a possible power crunch due to the shutdown, the prime minister sought public understanding. “We will experience some power crunch for sure. But we can overcome this with public support and understanding,” Mr. Kan said.

They had mentioned 2012 all of last year, but the lastest Q4 release mentioned that there would be no impact on earning until 2013. Still close to 2 years away.

Mercer International Q1 results. http://www.globenewswire.com/newsroom/news.html?d=220937

Well, it was a little worse than I expected. Not sure what the market was thinking over the past few weeks as it drove up the price of FFH. The same thing happened last quarter. So FFH was trading about 13% above Q1 book $354US ($337cnd).

I picked up some MERC today for the first time. It seems a better value than FBK right now.

What I find interesting with the recent rise of FFH is that it has happened at the same time the Canadian dollar has risen ($1.04) and the 10 year bond yields continue to rise (nearing February highs).