Thursday, June 24, 2010

Nyaga Stockbrokers UPDATE

This is very old news and I should have written about it sooner BUT here it is now. The Capital Markets Authority Kenya, in their 2009 Annual Report discussed some of the remedies they designed after the failure of Nyaga Stockbrokers. If you recall, this firm essentially went in to receivership in 2008 with the CMA in charge and lots of investors lost money. At the same time several other stockbrokers in Kenya went bust.

The CMA Kenya got busy and make changes to its own rules and even compensated investors out of the Investor Compensation Fund. It was the first time that the CMA utilized the fund to compensate the investors who lost monies when Nyaga Stock Brokers went under statutory CMA Kenya management. By the end of 2009, those investors with claims of Kshs 50,000 and below were compensated.

Honestly, this is how things should be working at all CMA's. I think it a real step forward in terms of confidence in the markets. Now, how all the new Constitution and political stuff affects the markets is another thing. It never seems to be all working in the same direction at the same time. Never mind, I applaud the CMA Kenya for stepping up and improving investor confidence in the Nairobi Stock Exchange and the capital markets in Kenya.

1) Capital Markets Authority Kenya Annual Report 2009

Tuesday, June 15, 2010

Paying for recklessness

What the heck is Obama on about ? I do not understand why he gave a national address about BP’s recklessness and how they ‘will pay’. Since when does an American President have the moral standing to lecture foreign corporations? Since, like, never. And why was his speech given at the Resolute desk-a location previously reserved for war and other IMPORTANT crises. The oil spill is important, but administratively important. I think they should declare a national emergency and let FEMA get it right at least once in the Gulf region after Hurricane Katrina. This is such a domestic problem and very symbolic on a national level. It somehow cheapens the office of the Presidency to hear Obama chastising BP and assuring the public that BP will pay. OF course, it is all politics. Mid-term elections are coming.

Even so, I am baffled by the political decision to attack BP so aggressively but without any real specifics except that BP 'will pay'. I am glad that he did mention that these spills are the result of the American addiction to fossil fuels. There has been a weird lack of focus on that in news reports. I think we love our cars a little more than the environment-to say the least. The majority of complaints about the spill have focused on the loss of jobs and the damage to the seafood industry and yes, the turtles and birds as well. And there are the complaints about BP as well.

I guess Americans do not realize that US oil companies have been terrorizing the world in all sorts of ways for decades. Just this week the US Court of Appeals for the Ninth Circuit (San Francisco) heard arguments in the case of Larry Bowoto v. Chevron, 09-15641. In 1998, there was a violent altercation on a Chevron oil platform between Chevron employed ‘police officers’ and Nigerian protestors. The ‘police officers’ were Nigerian military who had been called in by Chevron to assist. 2 people died and others were beaten and shot. Chevron argued that the Nigerian protestors were armed with knives, holding hostages and threatening to set the platform on fire. The protestors claim that they were just protesting a loss of jobs and damage to the environment caused by Chevron’s activities. The appeal focuses on the burden of proof instructions for battery that the judge gave to the jury. The appeal may result in a new trial for Chevron who was acquitted of wrongful death, torture, assault, battery and negligence at trial. Now, Chevron was acquitted below so it seems really unfair to use this case as an example of evil corporate America. But Chevron acquired Unocal in 2005 and Unocal was involved in one of the first cases to utilise the Alien Tort Claims Act as a basis for US court jurisdiction over a claim brought by an alien against a US Corporation. Doe v. Unocal, 248 F.3d 915 (9th Cir. 2001). In Doe, they hired former Burmese military to ‘police’ villagers working at a Unocal facility. Lots of human rights violations occurred. Unocal settled the matter and set up a fund to compensate victims.

US Corporations are remorseless. I am sure BP will be the same. Hey, maybe we should make Goldman pay for the oil spill!! (just kidding)

We really only have ourselves to blame for all of this . I think it would have been awesome if Obama got on the telly and said, “Nation, we are switching to solar energy. Future oil spill problem –SORTED! Thank you, thank you very much.”

Thursday, June 10, 2010

More bad times for Goldman

The Financial Crisis Inquiry Commission (FCIC) had to subpoena Goldman’s documents after making many requests over many months. The FCIC is investigating the cause of the financial crisis. Then Goldman gets sued by Australian Hedge Fund Basis Yield Alpha Fund (BYAF), for securities fraud. The claim alleges that Goldman aggressively sold the Timberwolf collateralised debt obligation while shorting the market. The claim alleges that Goldman marketed Timberwolf as having assets selected by Greywolf Capital Management, when in reality Goldman traders had the final word on TImberwolf. Timberwolf became well-known during the Senate Permanent Subcommittee hearings this past Spring.

Basically Goldman marketed assets to clients that Goldman itself was shorting. This is all very similar to the analyst suits around 2003 that found that analysts were recommending stocks to clients while the firm itself was bearish on the stocks.

A lot of the reports on this lawsuit seem to think that the hedge fund should stop crying over spilt milk- which is probably true. This could all just be Goldman scape goating. Also, why are these suits so few and far between? Why aren’t all the hedge funds suing Goldman or suing other institutions?

I don’t know the answers. Right now I think it all actually might be too complex and complicated for me to understand.