1st paper done, 2 more to go!

Finally my strategic management paper is cleared! Next is distribution channels and global marketing. Tomorrow is 1st of May, which is labor day, a public holiday in Singapore. Good time to take a short break and relax for a while and at the meantime, study hard for the final 2 papers! The outbreak of the swine flu has been fast and furious, as more and more countries are having cases occurring. Singapore has stepped up its alertness by turning from yellow to amber. Some of the headlines for today:

Chrysler to file for bankruptcy:
Some lenders refuse offer to reduce debt,
leading to likely bankruptcy filing. But Chrysler expected to remain in business and complete deal with Fiat.

Chrysler asked Treasury for $6 billion in additional help in order to stay in business and weather the current crisis. But that amount assumed that Chrysler would not need to file for bankruptcy. It is possible that even more federal help may be required to fund operations during a bankruptcy reorganization.

Chrysler is only a fraction of its former self. It has about 39,000 U.S. employees, only about 40% of the total it had at the beginning of the decade. It has fallen behind not only Toyota Motor (TM) in sales, but it is close to being overtaken by Honda (HMC) for the No. 4 spot for U.S. sales.

-------------

I think the merge with Fiat does alot of good for Fiat, to enter the U.S market. Over the years, Fiat has did quite a good job in its series of cars, from the Punto to the Bravo. The design of the cars is quite sporty and fuel consumption is relatively solid too.

Fiat:



v.s.

Chrysler:



Your pick?

Ken Lewis out as BofA chairman

Activist shareholders win major victory as bank names board member Walter Massey as new chairman; Lewis to remain as CEO.

By David Ellis, CNNMoney.com staff writer

Last Updated: April 29, 2009: 6:40 PM ET

NEW YORK (CNNMoney.com) -- Bank of America chief executive officer Ken Lewis was ousted from his role as chairman of the bank after shareholders approved a proposal to require that the company have an independent chairman.

The bank announced Thursday that Lewis would remain president and CEO of the company. Long-time Bank of America director Dr. Walter E. Massey, a former president of Morehouse College, will replace Lewis as chairman.

Lewis, Massey and 16 other company directors were reelected to the board by comfortable margins at the company's annual shareholder meeting, the bank said.

But in a separate vote, shareholders narrowly approved a resolution to separate the chairman and CEO roles. This represents a significant victory for shareholder activists who ran an aggressive campaign aimed at stripping Lewis of his chairman title.

Wall Street was keeping a close eye on Wednesday's outcome after the results of the election were delayed by several hours due to a heavy volume of votes cast.

Votes at annual shareholder meetings usually do not reach this level of controversy, as large institutional investors like mutual funds tend to vote with management.

A number of highly criticized incumbent directors at Citigroup (C, Fortune 500), for example, easily won re-election last week despite a major shareholder campaign to push them out.

But the support for Lewis appeared to erode in recent days as major institutional investors like CalPERS, California's pension fund for workers in the public sector threw their support behind the shareholder measure earlier this week.

While there were many signs of shareholder support for Lewis at Wednesday's meeting, several investors were not shy about making known their feelings about how the nation's biggest bank by deposits has been run over the past year.

Investors from as far away as San Francisco and Boston groused about the extensive government support offered to Bank of America (BAC, Fortune 500), the bank's toxic assets and the company's bold acquisitions over the past year - mortgage lender Countrywide Financial and Merrill Lynch.

Investors irked by lack of Merrill disclosure

Several of those who spoke at Wednesday's meeting in Bank of America's hometown of Charlotte, N.C., focused on Merrill, a last-minute purchase Bank of America announced just as Lehman Brothers was on the verge of collapse.

"You knew what was going on with Merrill. You kept it from us and you are still keeping it from us," said one attendee at the meeting in Bank of America's hometown of Charlotte, N.C.

The company's decision to buy Merrill has become a major problem for Lewis, a 40-year veteran of the firm and its predecessors who has been at the helm since 2001.

In mid-January, the company revealed that it needed $20 billion in government funds, along with guarantees on $118 billion in assets, to help the company absorb its purchase.

That came on top of $25 billion Bank of America had already received -- which included $10 billion for Merrill Lynch -- from the government as part of the Troubled Asset Relief Program, or TARP.

Lewis has been heavily criticized by shareholders for not telling investors more about how bad things were at Merrill.

The two activist shareholder groups which ran the campaign aimed at stripping Lewis of his title as chairman -- CtW Investment Group, an investment advisor to pension funds and Finger Interests, which holds 1.1 million in company shares -- argued that he deserved blame for allowing the deal to go through.

But there have been revelations in recent days that Lewis may have had little choice in the matter.

Documents released last week by New York Attorney General Andrew Cuomo revealed that Lewis approached former Treasury Secretary Henry Paulson and current Federal Reserve Chairman Ben Bernanke about nixing the Merrill deal in late December after discovering the scope of the losses on that firm's balance sheet.

At the time of his testimony, Lewis said Paulson threatened a change in management should Bank of America back out of the deal.

Lewis defends Merrill deal

Lewis, however, maintained Wednesday that the company's decision to go ahead with the Merrill purchase was not based on that threat but was done in the best interest of shareholders. He added that backing out could have delivered a severe blow to the nation's financial system, which many argue was teetering on the brink at the time.

"We took very seriously the likelihood of a systemic meltdown," Lewis said in a speech to investors.

In his remarks, Lewis took pains to acknowledge many shareholder criticisms, but he defended the purchase of Merrill as a way to help the company reach its of becoming a more diverse financial services company.

Shareholder frustration over Lewis has only been further fueled by the sharp decline in BofA's stock price.

Even though shares of BofA have enjoyed a rebound in recent weeks along with other banks, shares are still down more than 40% this year and 75% since the Merrill deal was announced in mid-September.

Swine Flu ... what it is and how to fight it?

It's a common respiratory ailment in pigs, but this strain appears to be a subtype never before seen in pigs or humans. Here are answers to questions you may have about swine flu.

Q: What is swine flu?
A: It's a common respiratory disease in pigs that doesn't usually spread to people. When pigs catch this flu, many get quite sick, and 1% to 4% die, according to the World Health Organization. In the past, people have sometimes caught swine flu if they worked directly with pigs.

Q: How is this swine flu virus different?
A: This strain appears to be a subtype not seen before in humans or pigs, with genetic material from pigs, bird and humans, according to WHO. Unlike most cases of swine flu, this one can spread from person to person, said Richard Besser, the acting director of the Centers for Disease Control and Prevention, at a White House press conference Sunday. One of the confirmed cases in the USA caught swine flu from a spouse, who had been to Mexico.

Q: Were pigs the carriers of this virus?
A: It's closer to say that pigs were the mixing bowl for this virus. Birds can't pass bird flu to people. But pigs are uniquely susceptible to getting flu viruses that infect birds. Experts have long worried that a pig would catch a bird strain of the flu and then the virus would mutate inside the pig to a form that could also infect other mammals. That may be what happened in this case. Pigs can also be infected with more than one influenza virus at a time, allowing the viruses to share genes, called "genetic reassortment," creating new & potentially much more virulent
viruses.

Q: Can you catch swine flu from eating pork?
A: No, according to WHO. Pigs coming in to slaughter facilities are monitored for flu symptoms, and those that are ill are not allowed to enter the food supply. Cooking also kills the virus. People who work with pigs, however, can catch the virus. The Department of Agriculture is conducting tests to confirm that the food supply is safe, said Janet Napolitano, secretary of the Department of Homeland Security.

Q: Is there a vaccine against swine flu?
A: No, but government scientists could try to create one, according to the CDC. "We've identified the virus," Besser said. "Should we decide to manufacture a vaccine, we can work toward that goal very quickly." CDC scientists don't know if this year's flu vaccine offers any protection.

Q: What about antivirals? Can they prevent swine flu?
A: This strain of swine flu does appear sensitive to the antiviral drugs Relenza and Tamiflu, but not to amantadine, or Symmetrel, and rimantadine, or Flumadine, Besser said. With normal seasonal flus, if taken within the first 48 hours after symptoms appear, antivirals can help people recover a day or two sooner. Doctors sometimes prescribe antivirals to household members of people with the flu to prevent them from getting sick.

Q: What are the symptoms?
A: The most common symptoms are fever, fatigue, lack of appetite and coughing, although some people also develop a runny nose, sore throat, vomiting or diarrhea, according to the CDC.

Q: What should you do if you have these symptoms?
A: Stay home from work or school, to avoid spreading your illness to other people, Besser said. Don't get on an airplane. People should call their doctors to ask about the best treatment, but should not simply show up at a clinic or hospital that is unprepared for their arrival.

Q: How can people protect themselves?
A: As always, people should wash their hands frequently, Besser said. In the past, the CDC has said there isn't conclusive evidence to support using face masks. Surgical masks are designed to prevent the wearer from spreading germs, but may also catch large respiratory droplets if someone sneezes nearby. In a 2007 statement, the CDC said these masks could be worn if someone needs to go to a crowded place, such as a grocery store, for a short time. N95 respirator masks filter out 95% of particles to prevent the wearer from breathing them in. These must be fitted properly around the nose to create a seal, so they can make breathing difficult.

Q: What does it mean for the government to declare a public health emergency?
A: While the declaration "sounds more severe than it is," Napolitano said Sunday, it will free up funds and allow health officials to use medications and tests that aren't normally used. The government also issued a public health declaration during recent floods in North Dakota and Minnesota, she said, and noted that the government often issues such declarations when hurricanes are approaching. The federal government is also releasing 25% of the 50 million doses of antiviral medications in the nation's Strategic National Stockpile, Napolitano said. The Department of Defense is also making 7 million doses available.

Q: Why has the virus been so much deadlier in Mexico, where 1,300 have become ill and more than 80 people have died, than in the USA?
A: "What we've seen in this country is not anywhere near the severity of what we're seeing in Mexico," Besser said. Doctors don't yet know why cases have been milder in the USA, where only person has been hospitalized, although 20 cases have been confirmed, Besser said.

AIG: Doomed to fail?

As the bailed-out insurer moves to sell off its assets to repay the government, experts say the company will have a hard time surviving as a scaled-down life insurer.

By David Goldman, CNNMoney.com staff writer

Last Updated: April 28, 2009: 5:54 PM ET

NEW YORK (CNNMoney.com) -- Once a titan in the insurance world, AIG is a shadow of its former self, and experts say the company is likely doomed for failure.

That's partly because AIG (AIG, Fortune 500) is slowly getting rid of its strong, moneymaking businesses as it attempts to pay back the roughly $130 billion it has borrowed on its $182 billion government bailout.

The company had to give up more than it had anticipated to pay back taxpayers because of the horrid credit environment, and analysts believe AIG may be giving up too much for it to survive on its own. Not that there was much choice.

"The plan has been, since the first days of the bailout, to sell off the crown jewels including its investment arm and very strong insurance units, because that's all the market will accept now," said Julie Grandstaff, managing director of StanCorp Investment Advisers. "It was the only way to save the organization, but it's questionable if there will be a freestanding AIG in the end."

What AIG is losing: On March 2, AIG transferred its property and casualty businesses into a new, separate company called AIU Holdings. AIG did the same with its AIA Asian life insurance business and ALICO foreign life insurance unit.

The government will eventually take a stake in AIA and ALICO, and on April 22, AIG began the process of selling off a minority stake in AIU to investors. Eventually, all three companies will have their own boards, management and could even trade on the stock market separately from AIG.

AIG has also attempted to sell off many of its other subsidiaries, but those purchases have been small in number and value. The largest of the 10 sold-off units was AIG's car insurance unit, which the company earlier this month announced it would sell for $1.9 billion. The next largest unit was its Hartford Steam Boiler unit, which fetched $745 million.

While that's not chump change, it pales in comparison to the more than $60 billion the company took in from its healthiest insurance units last year.

In addition to its asset sales, AIG continues to wind down its financial products division (FP), which was at the root of the company's meltdown.

Though the company's core insurance businesses had been stable and profitable, the AIG-FP business model was built on a house of cards. That unit wrote credit-default swaps -- essentially insurance contracts -- on complex derivatives that had a danger of losing value in the event of a steep drop in the housing market.

That business began to collapse in the summer of 2007, when the U.S. housing market began to deteriorate, and clients asked AIG to post more and more collateral to back the insurance contracts on the devalued assets, such as mortgage-backed securities.

What's left: Without AIA, ALICO, AIU, FP and a number of its subsidiaries, all that will remain of the parent company is AIG's domestic life insurance and retirement company, along with a handful of subsidiaries.

"In today's environment, the only thing that will sell are self-supporting entities," said Stewart Johnson, portfolio manager at Philo Smith & Co. "Those that AIG is having difficulty selling, there's a reason for that. But if they can only sell things that stand on their own, what are they left with?"

In addition to the small number of businesses it directly controls, AIG will maintain a majority stake in its three spin offs. Though AIG could eventually part ways completely with those companies, a spokeswoman for the insurer said the parent company needs to hang onto the stakes for now.

In order to maintain its credit rating and obligations to its bondholders, AIG needs a certain level of income that might not be achievable if it simply severed ties with AIA, ALICO and AIU immediately.

An AIG spokeswoman declined to comment on possible outcomes for the parent company once its restructuring is fully in place, only acknowledging that the AIG brand will likely be replaced.

"The absolute plan is to sell AIG's healthy companies to pay off the government," she said. "That's our focus right now."

Slim chance of survival: The insurance companies that AIG has already gotten rid of and others that it hopes to sell off are solid moneymakers, in contrast with what AIG will have left after its restructuring is complete.

The companies that the insurer transferred to AIU alone wrote $36 billion in premiums in 2008, and recorded $44.7 billion in revenue last year. ALICO and AIA wrote about $29.9 billion in premiums combined and took in $20.1 billion in sales in 2008.

But the domestic life and retirement insurance companies, which would remain in AIG after its restructuring, wrote about $7 billion in premiums and took in $15 billion in revenue last year. That's about a quarter of the revenue and a tenth of the premiums of the companies with which AIG is parting ways.

Johnson said a stripped-down AIG will face pressures from many different sources, including higher credit costs. One of the reasons why AIG functioned so well in its heyday was because of its sheer size. But as AIG loses revenue analysts believe the company's credit rating will slip and its cost of borrowing will increase, cutting into the insurer's profitability.

AIG will also get hammered as customers and employees continue to head for the exits, Johnson said. Anxious customers are opting for insurers who can offer more security and top talent have been getting better offers from other companies.

"As AIG sells its business units, it's left with an adverse selection of customers, employees and businesses," Johnson said. "If you ask me if AIG will be able to survive, I'd have to say no."

Citi seeking OK to award bonuses - report

Financial giant is seeking approval from Treasury to pay out special bonuses to retain employees, Wall Street Journal says.

April 29, 2009: 4:17 AM ET

LONDON (CNNMoney.com) -- Citigroup is seeking U.S. government approval to award special bonuses to several of its key employees, the Wall Street Journal reported Wednesday.

The bank wants to use the bonuses to retain staff and raise morale among employees, the newspaper said, citing people familiar with the matter.

The report said that Citigroup (C, Fortune 500) CEO Vikram Pandit pushed for stock-based bonuses at a meeting with Treasury Secretary Timothy Geithner earlier this month.

Taxpayers have lashed out at bonuses paid out to employees of bailed out financial institutions. Bonuses at American International Group (AIG, Fortune 500) and Merrill Lynch (MER) incited rage and created a storm in Washington.

Star awards that ended last night

It was .. to me a "unique" star awards, as for the first time, I saw 2 winners in the best support female role!

Strangely, I always believed there can only be 1 best. But nevertheless, the winners for that night were:

Best Supporting Female Actress awards: Xiang Yun and Ng Hui


Best Supporting Male Actress award: Chew Chor Meng


Best Newcomer award: Dai Yang Tian


Best Info—ed Programme Host: Belinda Lee for "Find Me A Singaporean II"


Best Variety Show Host award: Guo Liang for "Celebritea Break"


Best Male Actor award: Chen Han Wei for "By My Side"


Best Actress award: Joanne Peh for "The Little Nyonya"


Best Drama Serial award: "The Little Nyonya"


There was some drama during the whole event, where Chen Han Wei won the best actor. I think I can see how shocked Qi Yu Wu and Tay Ping Hui was when their series were the block busters. Ou Xuan's face was slightly .. I don't know, when they announced Joanne Peh to be the winner. Even at the last award for top 10 most popular female actress, she was the last and she was like saying she was fixed!

Finally, I have finished 1 paper today and 2 more to go next week!

An article to greatly debate on: Stop Buying These Stocks

By Rich Greifner

April 26, 2009 | Comments (21)

A few weeks ago, my Foolish friends Brian Richards and Tim Hanson profiled five stocks they felt investors should avoid. Their argument struck me as pretty straightforward: Investors would be well-served to avoid companies with opaque financial statements (like Citigroup (NYSE: C)) or complicated government ties (like, um, Citigroup).

Apparently many members of our community disagreed.

Pointing to their significant short-term gains in stocks such as Bank of America (NYSE: BAC) and Ford (NYSE: F), many readers (rather rudely, in my opinion) insisted that Brian and Tim’s analysis was invalid.

This comment from IronBob is a good representation of the feedback that Brian and Tim received:

INCREDIBLE! Thanks for the advice! I'm glad I'm ignoring it as I almost doubled my money on Ford in less than two months!

While I’m happy for IronBob, I’d like to caution readers that his returns are hardly typical -- and that short-term speculating in no-moat companies is simply not a sound investing strategy.

Just say no ... to short-term speculation

Jumping in and out of stocks is certainly exciting, and -- if you're lucky -- it can result in some satisfying short-term profits. But over the long haul, active trading is a loser's game.

For starters, you have to correctly predict both the direction and the timing of a stock's move, which most experts agree is impossible to do with any consistency. Anyone can get lucky once or twice, but repeatedly? Forget it.

...

What this means for you
In other words, if you're interested in preserving your capital and accumulating long-term wealth, stay away from short-term speculation in subpar companies.

...

So what should I buy, smart guy?
That's easy. Concentrate on buying great businesses -- companies with straightforward business models, sound balance sheets, strong financial statements, and shareholder-friendly management. If you buy such businesses when they trade at a significant discount to intrinsic value, it's highly likely that you'll make a lot of money over the long term.

...

------

I have cut shorted the article by a few paragraphs as I find the remaining portions quite repetitive. Now, here's the thing, this article bashes traders who plays the market on a short term basis, meaning buy-sell within minutes to within days or just a very short span of time.
Apparently, the stocks that the author suggested to avoid like Ford, Citi, Bank of America etc, well.. kinda made a huge turn back over the past 1-2 months, like gaining more than 100%.

With Citi lowest at $0.90, and BAC at $3+ during February lows, current trading price is at Citi $3.19, and BAC at $9.10, you can't help but say, hey, that's more than 100% increase in my portfolio! There's a huge debate as well in the comments, take a read at the comments:
http://www.fool.com/personal-finance/general/2009/04/26/stop-buying-these-stocks.aspx#commentsBoxAnchor

Now, if you are a trader, this profit margin is very good as markets in the short run is very, very efficient. Any news will either sink or tank the stock to its recent new highs or lows. The trade off is, you got to monitor the market very closely to beat the market.

Next is if you are an investor, the author is simply implying that you should not bother about the companies mentioned above because in the long run, these companies are least likely to return to their glorious moments like Citi, $60+? Take note of the key word, least likely, because in the long run, its no longer about efficiency. It's more about fundamentals, profitability and the business model of the company.

Lastly, I was a trader when I first started off, and it did gain me alot of knowledge and profits, but as time moves fast, markets became more and more unpredictable and losses start emerging. At the same time, it took a toll on my job as it was very difficult to concentrate on your job when you are losing money and now, I read alot on annual reports and invest in profitable companies which I have a clear understanding on. Although I still look at the markets occasionally, it is quite a tough habit to kick away.

Recently, I have been buying into Celestial again, averaging down to approximately $0.45 per share. After the recent surge to $0.185 and trending down to $0.155, the AGM tomorrow will be interesting as they are seeking votes to approve the rights issuance. Will the market be interested in the rights issue of Celestial? Remember my previous article on investing in a good company, here is the snapshot of its past 9 years again:

year	revenue	profit after expenses	profit after tax	EPS	ROE	ROTA	ROC	Price per share	P/E ratio	dividend	Total Equity
2000	51,100	15,100	14,300						-
2001	131,200	46,200	43,900						-
2002	226,400	89,100	71,900		51.7%		51.7%		-		139,104
2003	288,463	115,800	93,100	0.110	38.0%	18.1%	38.0%		0.00		245,203
2004	432,168	148,888	117,393	0.250	25.2%	11.5%	25.2%		0.00		465,297
2005	802,572	281,147	281,006	0.520	29.0%	13.9%	27.9%	0.58	1.12		967,680
2006	1,158,161	369,995	369,995	0.610	26.5%	8.3%	14.1%	1.51	2.48		1,397,569
2007	1,799,657	484,760	487,829	0.660	27.9%	9.3%	15.9%	1.03	1.56	0.02	1,751,164
2008	2,301,500	595,319	499,200	0.780	22.8%	8.6%	14.6%	0.12	0.15		2,185,157

My study on rights issuance is, normally the price will fall after a rights issuance as dilution of EPS is relatively high. Unfortunately, Celestial has gone to this step is due to the Convertible bonds that are due coming June/July 2009. They can choose to finance a loan to service this CB payouts, but most likely, they are using this rights issuance to raise capital to prepare for a full payment if all the bond holders decide to bail out.

There's no win-win situation definitely, as you take a loan, you pay interest rates that may kill you, or you issue rights and dilute the earnings per share. My prediction (personal opinion) is that, once this CB saga is over and the company is more less back on the right track, they may do a reverse stock spilt again to reconsolidate the available shares on the market, depending on the number of rights issued.

9 ways to get happy in the next 30 minutes

1. Raise your activity level to pump up your energy. If you're on the phone, stand up and pace. Walk to a coworker's office instead of sending an e-mail. Put more energy into your voice. Take a brisk 10-minute walk. Even better...

2. Take a walk outside. Research suggests that light stimulates brain chemicals that improve mood. For an extra boost, get your sunlight first thing in the morning. Find the best walking workout for your exercise style.

3. Reach out. Send an e-mail to a friend you haven't seen in a while, or reach out to someone new. Having close bonds with other people is one of the most important keys to happiness. When you act in a friendly way, not only will others feel more friendly toward you, but you'll also strengthen your feelings of friendliness for other people.

4. Rid yourself of a nagging task. Deal with that insurance problem, purchase something you need, or make that long-postponed appointment with the dentist. Crossing an irksome chore off your to-do list will give you a rush of elation.

5. Create a more serene environment. Outer order contributes to inner peace, so spend some time organizing bills and tackling the piles in the kitchen. A large stack of little tasks can feel overwhelming, but often just a few minutes of work can make a sizable dent. Set the timer for 10 minutes and see what you can do. In that time, take a quick look around the house and see how to get organized using everyday items.

6. Do a good deed. Introduce two people by e-mail, take a minute to pass along useful information, or deliver some gratifying praise. In fact, you can also...

7. Save someone's life. Sign up to be an organ donor, and remember to tell your family about your decision. Do good, feel good―it really works!

8. Act happy. Fake it 'til you feel it. Research shows that even an artificially induced smile boosts your mood. And if you're smiling, other people will perceive you as being friendlier and more approachable. There's no need to walk around in a constant state of worry. After all, what's the worst that can happen if you bounce a check or leave wet clothes in the dryer?

9. Learn something new. Think of a subject that you wish you knew more about and spend 15 minutes on the Internet reading about it, or go to a bookstore and buy a book about it. But be honest! Pick a topic that really interests you, not something you think you "should" or "need to" learn about.

Something light for the weekend

Recently there's this S factor show going on every Sunday at 10pm. Here's some entertaining clips on the girls:




It's a no brainer show, so don't think when you watch this!

Exams around the corner; heatwave again; flash flood and huge winds last night

Hmm, quite a number of things happening together these few nights. The heatwave in Singapore was so bad that I had to bath quite a number of times at night! When you thought it was over, it's starting back again now!

Anyway, last night was a very big windy night and a flash rain came suddenly as well. Apparently, it was due to some bad weather in Indonesia and my dog was freaked out.

Exams are coming this Monday and I have been mugging my notes for the past 1 week. Only today, I got the chance to go SMU to study for a few hours. I just hope I can get past this last huddle so I can fully focus on my job!

Curry anyone?

It seems that after deadly rojak and steamboat in Singapore, the next big thing is curry!

Quote:
Japanese curry killer loses death sentence appeal
TOKYO (AFP) - - A Japanese woman who killed four people and poisoned 63 with arsenic-laced curry lost her appeal against a death sentence Tuesday, a Supreme Court spokeswoman said.

Hayashi was convicted for mixing arsenic into curry served at a community festival in 1998, killing two children and two adults, in Wakayama prefecture, 450 kilometres (280 miles) southwest of Tokyo.

Ok, this is slightly different as this was kinda obvious she was trying to kill with arsenic.

Other local news which caught my attention was Ming Yi's current trial. Apparently he broke down during his court trial, speaking of his tough times while setting up Ren Ci and his other aids for the public. He also speaks of his mother, who opposes of him of being a monk as well.

Well, it's really tough for any man to setup his own business or organization, especially for non profit organizations where they depend heavily on donations. It is also not wrong for the person to receive donations from donors too. It's just socially not correct to use such donations for luxury items. Can you imagine you donated $100 to this organization and the next thing you see the chairman or person in charge inside a posh restaurant eating away almost everyday?

China's economic outlook brightens

People's Bank of China, Goldman Sachs and other prognosticators say government stimulus efforts are working.

April 22, 2009: 6:09 AM ET

BEIJING (Reuters) -- China's central bank on Wednesday declared the economy to be on the road to recovery as Goldman Sachs joined a rush to upgrade growth forecasts on the back of aggressive government efforts to boost investment.

China's gross domestic product growth in the first quarter slowed to 6.1% from a year earlier, the lowest rate on record, from 6.8% in the final three months of 2008.

But Yi Gang, a vice governor of the People's Bank of China, expressed confidence that expansion for the whole year would turn out to be close to the official target of 8%.

"In terms of quarter-on-quarter data, actually the fourth quarter of last year was the bottom of this cycle in terms of industrial output, electricity use, transportation and so on and so forth," Yi told the annual meeting of the International Swaps and Derivatives Association.

As well as rolling out a 4 trillion yuan ($585 billion) two-year stimulus package, Beijing has successfully prompted state-owned banks to turn on the lending taps.

New loans in the first quarter totaled 4.58 trillion yuan after a record leap of 1.89 trillion yuan ($276.6 billion) in March alone.

Yi said the surge in lending had helped to quash deflationary expectations and to stabilize China's property and equity markets. It had prompted companies to speed up restocking and, more importantly, it had helped restore confidence.

The upshot had been some positive signs of recovery.

"The economy is going forward as the stimulus package started working. And looking into the future, the second quarter and the remainder of this year will continue this recovery trend," said Yi, who was speaking in English.

Bullish Goldman

Goldman Sachs on Wednesday became the latest bank to take a rosier view of prospects for the world's third-largest economy.

Goldman marked up its projection for GDP growth this year to 8.3% from 6% and stuck its neck out with a forecast for 2010 of 10.9%, up from 9%.

"We acknowledge that policy stimulus has been more determined and persistent and the response from domestic demand has come in earlier and more strongly than we envisaged previously," Goldman economists Helen Qiao and Yu Song said in a report.

UBS, Royal Bank of Scotland and Barclays Capital all raised their forecasts after last Thursday's first-quarter GDP figures and accompanying data for March, which showed a marked pick-up in growth in industrial output and fixed-asset investment.

By contrast, Standard Chartered Bank on Wednesday reiterated its forecast of 6.8% growth this year, while a senior official said the foundations of China's recovery were shaky.

Lou Qinjian, deputy minister of industry and information technology, said overcapacity, including in the steel and auto sectors, was intensifying due to weak domestic and global demand.

"We can not easily conclude that the economy has bottomed out. The industrial situation remains serious," he told a forum.

Loan growth worries

Some economists are concerned that the jump in lending will add to the excess capacity that worries Lou, eventually saddling China's banks with a new crop of bad loans.

Wu Xiaoling, a former PBOC vice governor, told Reuters the lending surge would be no good for the economy if it continued.

Speaking on the sidelines of the conference, she urged banks to recognize the risks they are taking and to apply the brakes.

Yi said: "We realize the negative side and possible risks, but overall it's a positive development. For the remainder of this year, I hope that lending will stabilize at a sustainable rate. That is the best scenario."

Media reports of an outright decline in bank lending in early April weighed on the Shanghai stock market, which dropped 2.9%, the second-steepest fall in six weeks.

Paris-based Michala Marcussen, head of strategy and economic research at Societe Generale's asset management unit, said she shared concerns about a possible rise in sour loans and fretted that part of the 35% rally in Shanghai stocks so far this year had been fueled by breakneck credit growth.

"Having said that, I also believe Chinese equity market is attractively priced and I still believe that to be the case," Marcussen told reporters in Singapore.

Yi said Beijing was comfortable about a slowdown in the pace at which it is accumulating foreign exchange reserves, which grew just $7.7 billion in the first quarter to $1.9537 trillion. In all of 2008 the stockpile increased $417.8 billion.

"We have a 'take it easy' attitude. We already have enough reserves," Yi said. "We hope it will stabilize and that in the future we will have more or less balanced payments."

Yi said China, as a large holder of dollars, sees itself as a responsible long-term investor, not a short-term speculator. As such its reserve management policy follows the principles of safety, liquidity and investment returns, in that order.

China is of course concerned about the outlook for the dollar and hopes the policies of the government in Washington and of the Federal Reserve will stabilize the U.S. currency, Yi said.

Citi shareholders fume at annual meeting

Despite all gloomy and not-so-positive news, Citigroup manage to get a 10% jump from its trading yesterday. Overhaul of the board of directors is the 1st step, I believe there's more to come moving forward in the company's strategic direction and what doesn't kill you, just simply makes you stronger in the future.

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But key initiatives, including plans to oust long-standing Citigroup directors, fall flat.

By David Ellis, CNNMoney.com staff writer

Last Updated: April 21, 2009: 5:17 PM ET

NEW YORK (CNNMoney.com) -- Investor outrage boiled over during Citigroup's annual shareholder meeting Tuesday, as shareholders picked apart company management for what they viewed as a litany of failures over the past year.

But even as tensions flared, efforts aimed at reshaping the bank, including ejecting long-standing directors, fell flat.

Ten incoming members of the company's board of directors, some of whom have been in place for two decades, were affirmed by shareholder votes, according to preliminary results released by the company.

Investors also confirmed four new directors to its board that were proposed in March, including former U.S. Bancorp (USB, Fortune 500) chief Jerry Grundhofer, onetime Federal Reserve Bank of Philadelphia President Anthony Santomero and ex-Pimco executive William Thompson.

A wide variety of shareholder proposals, including one that would have effectively established an election for directors, was among those that failed.

With an estimated 1,500 shareholders in attendance, Tuesday's event became a forum for angry investors that have seen their personal fortunes evaporate over the past year.

Much of that blame was squarely aimed at Citi's top management, including many of its long-standing board of directors.

"These directors have served long enough - it is time for them to go!" said Richard Ferlauto, the director of corporate governance and pension investment at the American Federation of State, County and Municipal Employees, or AFSCME.

"This great institution was brought to its knees by a very few people," roared another investor.

Others groused about how members of the board were chosen, contending that it bordered on communism, leaving investors virtually no choice in the matter.

"The election you are holding today is very similar to the one they held in Cuba to re-elect Raul Castro," said William Steiner, one shareholder who sponsored one of the nine shareholder proposals that were put up for a vote this year.

There were also some jeers for former interim chairman Robert Rubin, who stepped down from the company's board earlier this year following scrutiny about his role in allowing the financial giant to overextend itself in the U.S. housing market.

Attempting to defuse some of the tension was long-time board member and current chairman Richard Parsons as well as current Citigroup CEO Vikram Pandit. (Parsons was formerly chairman and CEO of Time Warner, the parent company of CNNMoney.com.)

Pandit, who was installed to lead the bank in late 2007 just as Citigroup's troubles began to compound, pledged to complete efforts aimed at turning around the embattled bank. But he acknowledged that "challenges" remained ahead.

"I intend to see this through," Pandit said.

There has been increased speculation recently that Pandit's days at Citigroup could be numbered if the company winds up requiring an additional capital injection. So far, Citigroup has been one of the biggest recipients of taxpayer assistance, taking in $45 billion in government funds.

The government is currently conducting stress tests of the nation's largest banks to determine if banks need more capital. The results of those tests are due to be announced in early May.

Pandit, however, maintained that the company will repay every dollar under the Troubled Asset Relief Program, or TARP, with a great return for taxpayers.

The company is expected to make $3.4 billion in dividend payments to the government every year in exchange for the funds.

Tuesday's meeting comes less than a week after the company delivered its first profitable quarter in more than a year, surprising Wall Street analysts.

Citigroup (C, Fortune 500) shares soared Tuesday, finishing more than 10% higher on the New York Stock Exchange.

What will happen to Singapore after LKY?

This appeared in the Yahoo news today. An interesting quote as below:

Quote:
A People’s Action Party (PAP) split by internal schisms. Future leaders bereft of the "huge political legitimacy" that could be gained from endorsement by the man with unmatched moral and historical authority. These are some of the leadership fates that could befall a post—Lee Kuan Yew Singapore, as hotelier Ho Kwon Ping sees it.

I think this is related to my previous post on Jackie Chan's comment on Chinese. One can't help but to see the number of rules and regulations in Singapore and how it has controlled us over the past 40-50 years.

Anyway, my exams are around the corner and I got to mug my notes for the last round! I guess I won't be studying for another paper for at least 3-4 years! The 2.5 years of studying part time has drained me significantly and I think I need to get a life!

Big banks have a big credit problem

Bank of America and Citigroup have been sinking billions into rainy day funds, but problem loans are growing even faster.

By Colin Barr, senior writer

Last Updated: April 20, 2009: 1:31 PM ET

NEW YORK (Fortune) -- Banks are socking away funds for future loan losses at a record clip. But at the sickliest institutions, problem loans are rising even faster.

On Monday, Bank of America (BAC, Fortune 500) became the latest big bank to report a stronger-than-expected quarterly profit, posting net income of $4.2 billion, or 44 cents a share. Analysts had expected a profit of just 4 cents a share.

Like its rivals Citigroup (C, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Wells Fargo (WFC, Fortune 500), Charlotte-based BofA pointed to strong fixed-income trading results and a big rise in earnings from its mortgage business.

BofA managed to post the big profit even as it set aside more than $6 billion to cover future loan losses. The bank's loan loss reserve now stands at $30 billion -- double its year-ago level.

BofA expects more borrowers will fall behind on payments or default on their loans as job losses deepen and the economy struggles through its worst recession in decades.

"We understand that we continue to face extremely difficult challenges primarily from deteriorating credit quality driven by weakness in the economy and growing unemployment," CEO Ken Lewis said in a statement Monday morning.

Yet as much money as BofA is putting away, both it and Citi -- the two big banks that have received multiple infusions of federal aid over the past year -- are reporting sharp rises in problem loans, particularly on their big credit card portfolios. BofA posted a $1.8 billion loss in its global cards business in the latest quarter.

These high credit costs could weigh on the banks' earnings for many quarters -- and perhaps even affect the regulatory stress tests whose results are due to be revealed in coming weeks.

Not keeping pace

While BofA has doubled its loan loss reserve, nonperforming assets -- loans that are no longer producing income as borrowers fall behind on payments -- have more than tripled, reflecting the weakening economy and the acquisition of troubled Countrywide and Merrill Lynch.

As a result, BofA's loan loss reserve now covers just 121% of its nonperforming loans -- down from 203% a year ago.

That means the bank has a thinning cushion just as the industry braces for rising losses on commercial and industrial loans, as well as continuing declines in residential real estate.

Another bank with a thin cushion is Citi, which reported an unexpected $1.6 billion first-quarter profit Friday even as credit costs doubled from a year ago.

Though Citi's loan loss reserve has jumped 78% from a year earlier, nonperforming assets have more than doubled over the same span. As a result, Citi's loan-loss coverage ratio has slipped to 121%, from 177% a year earlier.

In contrast, the stronger big banks -- JPMorgan, which posted a $2.1 billion first-quarter profit last Thursday, and Wells Fargo, which said earlier this month it expects to make $3 billion in the quarter -- have healthier coverage ratios, thanks to extensive reserve building.

At JPMorgan, for instance, nonperforming assets have jumped to $11 billion from $4 billion in the span of a year. But the bank has been bulking up its reserves at a similar pace.

As a result, JPMorgan's loss reserves at the end of the first quarter amounted to 241% of nonperforming assets -- double the coverage at Citi and BofA, although down from 271% a year ago.

And Wells Fargo's reserve ratios have risen significantly over the past year, in large measure due to a $37 billion writedown of bad loans associated with its Dec. 31 acquisition of Charlotte-based lender Wachovia.

Wells' reserves were 255% of nonperforming assets at the end of the first quarter, according to estimates by analysts at Fox-Pitt Kelton, up from 134% a year earlier. (The bank has yet to report its full results for the first quarter.)

While coverage ratios are far from the only indicator of a bank's health heading into a prolonged period of economic distress, they are likely to be one factor in the stress tests being conducted by federal regulators.

The Federal Reserve and Treasury are expected to begin informing the 19 big banks taking the tests of their results in coming weeks. Those that with lower scores are expected to be forced to raise capital, though the terms and the timing aren't clear. Concerns about the health of the banking sector helped to send shares of most big banks down in midday trading Monday.

Still, even BofA -- the biggest loser Monday with a 15% decline -- has experienced a stunning rally since the sector hit its recent low in early March. At their lows Monday, BofA shares had tripled off their March 6 floor.

'Banking is a very good business unless you do dumb things,' says Wells Fargo's largest shareholder.

An article speaking with the oracle of Omaha. He speaks about the difference between Wells Fargo and the other big banks like Citigroup, Bank of America, JP Morgan etc.

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Fortune: How is Wells Fargo unique?

Warren Buffett: It's sort of hard to imagine a business that large being unique. You'd think they'd need to be like any other bank by the time they got to that size. Those guys have gone their own way. That doesn't mean that everything they've done has been right. But they've never felt compelled to do anything because other banks were doing it, and that's how banks get in trouble, when they say, "Everybody else is doing it, why shouldn't I?"

What about all the smart analysts who think no big bank can survive in its present form, including Wells Fargo?

Almost 20 years ago they were saying the same thing. In the end banking is a very good business unless you do dumb things. You get your money extraordinarily cheap and you don't have to do dumb things. But periodically banks do it, and they do it as a flock, like international loans in the 80s. You don't have to be a rocket scientist when your raw material cost is less than 1-1/2%. So I know that you can have a model that works fine and Wells has come closer to doing that right than any other big bank by some margin. They get their money cheaper than anybody else. We're the low-cost producer at Geico in auto insurance among big companies. And when you're the low-cost producer - whether it's copper, or in banking - it's huge.

Then on top of that, they're smart on the asset size. They stayed out of most of the big trouble areas. Now, even if you're getting 20% down payments on houses, if the other guy did enough dumb things, the house prices can fall to where you get hurt some. But they were not out there doing option ARMs and all these crazy things. They're going to have plenty of credit losses. But they will have, after a couple of quarters of getting Wachovia the way want it, $40 billion of pre-provision income.

And they do not have all kinds of time bombs around. Wells will lose some money. There's no question about that. And they'll lose more than the normal amount of money. Now, if they were getting their money at a percentage point higher, that would be $10 billion of difference there. But they've got the secret to both growth, low-cost deposits and a lot of ancillary income coming in from their customer base.

Guangzhou Man Killed By Exploding Cell Phone

So guys, remember not to put your handphone in your pockets before they destroy your future generation!

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News broke today of a fatal incident occurring Saturday involving a computer store employee in Guangzhou and a cell phone. The man charged the battery to his Nokia mobile phone, put his newly-charged phone into the breast pocket of his shirt and according to a coworker, there was a loud bang, and the guy was on the floor dead in a pool of blood.

A CNET report Tuesday claimed the exploding phone had severed the man’s carotid artery and he bled to death, but details from the Chinese media on the incident are, not surprisingly, scant. According to a Times Online piece, local authorities reported that this is the ninth such incident of an exploding cell phone in China since 2002, which begs the question, “can this happen in the U.S.?” Well, since nobody really knows how a cell phone can spontaneously combust, technically the answer is yes. However, as with most items in China, the batteries to mobile phones there can be pirated and thus do not undergo the same testing a properly manufactured battery would. Either way, what a tragedy. And I’ll think of this guy always when someone’s phone rings and they say, “I’m blowin’ up.” It really could happen.

Latest update in our local community on Ming Yi

Apparently, he owns labels such as Montblanc and Louis Vuitton! Hell my most expensive branded stuff is only Burberry! His rationale on this branded goods was this:

Quote:
The last 20 pages of the auditor's 120-page report reveal details of how the man had managed his personal finances. He was quizzed about his 'quite substantial expenditures', especially on brand-name goods from labels such as Montblanc and Louis Vuitton. His choice of hotels included top-end names such as St Regis, The Regent, Four Seasons and Banyan Tree.

Ming Yi's explanation for his lifestyle was: 'I think we are living in a modern world.' When asked what he meant by that, he replied: 'The modern world. I think the world is different, right? The world has changed. It's different.' He added: 'A lot of religious people, not only myself, are very different now.' He referred to the perception some people have that Buddhist monks should be garbed in torn clothes, remain in the temple and not 'go anywhere'.

Is this the correct thing to think of?

Quote:
He said that some of his spending was personal but he also bought things for friends, who would reimburse him. Justifying his preference for brand-name goods, Ming Yi said: 'You may say some of these things really last for a long time.'

The kind of hotels he stays in, the kind of branded goods he buys, I must say this "duty" or job is better off than any degree students looking so hard for a job in this current economy? In my opinion, he's right to say the world has changed. It has really changed into a place where greed is rampant. TT Durai was the first of its kind with its lavish golden taps. Now we have a branded monk? I understand the need to eat and have proper clothing and shelter, but I do not see a "want" becoming a "need". I believed probably even an Adidas bag can last as long (or even longer) as a LV bag!

Next, his argument of using people's private donations to him is very.. ambigious. Why do I say that? If you are a monk and I donated $10,000 to you, do you need $10,000 for a month? What do you need in your daily life? Probably just breakfast, lunch, dinner and transportation. How much does that cost?

I'm sure after this saga, more non-profit organizations (NPOs) will be under heavy scrunity in the eyes of the public. The one best thing I learn from SAF was, "do anything, don't get caught. You get caught, you pay for the price."

My exams are around the corner and I'm feeling the stress building up! I can't help but to worry as this is my final huddle before my graduation!

Jackie Chan's comments on China

Recently, Jackie Chan commented on the freedom given to Chinese and sparked a controversy within the community. This was one of his comments:

Quote:
"I'm not sure if it's good to have freedom or not," Chan said Saturday. "I'm gradually beginning to feel that we Chinese need to be controlled. If we're not being controlled, we'll just do what we want."

Apart from this comment, he was speaking about the corporate goverance in China and he preferred Japanese TVs compared to China TVs. The melamine issue in China has brought alot of scrutiny to the operations of the China companies and aparently, he is very disturbed.

Quote:
The action hero complained that Chinese goods still have too many quality problems. He became emotional when discussing contaminated milk powder that sickened tens of thousands of Chinese babies in the past year.

Speaking fast with his voice rising, Chan said, “If I need to buy a TV, I’ll definitely buy a Japanese TV. A Chinese TV might explode.”

Source: http://www.japantoday.com/category/world/view/jackie-chan-chinese-people-need-to-be-controlled

What do you think?

Be Wary of Risk Assets and Citi's 'Profit'

Quite a number of articles on Citi, and this may be quite insightful for investors who are thinking of investing in Citi for a long term period. Looking at the credit swaps of Citi compared to others, it still looms some slight worry.

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Author: Chris Ciovacco
Date: April 19, 2009

Before we get into the NASDAQ (QQQQ) recent new high and our possible approach to the markets, let's shed some light on Citigroup's earnings. Citigroup posted a $1.6 billion "profit" this morning, after a $2.5 billion "gain" because their bonds are worth less in the open market (you read that right, worth less). Note the use of the word "possibility" in the Bloomberg story:

Citigroup posted a $2.5 billion gain because of an accounting change adopted in 2007. Under the rule, companies are allowed to record any declines in the market value of their own debt as an unrealized gain. The rule reflects the possibility that a company could buy back its own debt at a discount, which under traditional accounting methods would result in a profit.

The bank still faces speculation about its survival prospects, as reflected in the elevated prices for its credit- default swaps, a type of instrument that investors use to insure against a debt default. Citigroup’s credit-default swaps as of yesterday were trading at 557, up from 193 at the end of last year. By comparison, rival New York-based bank JPMorgan Chase & Co.’s swaps are trading at 174. Lehman Brothers Holdings Inc.’s swaps were at 322 a week before the U.S. securities firm filed for bankruptcy last September.

When a credit default swap moves from 193 to 557 (188% gain), it shows the market thinks the chance of Citigroup defaulting has increased quite substantially since January 1, 2009.

Our Approach To Current Bullish Conditions: This detailed article acknowledges the possibility of a bottoming process in some risk assets and stresses the need for patience.

This old Bloomberg article sites research that found "retests of bear market lows occur 86% of the time", which clearly supports remaining patient.

It May Be Time for the Fed to Go Negative

An interesting article to take a read, when it may seem that the economy may be turning out for the better after most of the major banks in corporate America has reported profits? What kind of fiscal policies will governments do? Raising back interest rates again?

Will the day come where we see negative interest rates and borrowing 100% and returning 97% be possible?

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By N. GREGORY MANKIW

Published: April 18, 2009

WITH unemployment rising and the financial system in shambles, it’s hard not to feel negative about the economy right now. The answer to our problems, however, could well be more negativity. But I’m not talking about attitude. I‘m talking about numbers.

Let’s start with the basics: What is the best way for an economy to escape a recession?

Until recently, most economists relied on monetary policy. Recessions result from an insufficient demand for goods and services — and so, the thinking goes, our central bank can remedy this deficiency by cutting interest rates. Lower interest rates encourage households and businesses to borrow and spend. More spending means more demand for goods and services, which leads to greater employment for workers to meet that demand.

The problem today, it seems, is that the Federal Reserve has done just about as much interest rate cutting as it can. Its target for the federal funds rate is about zero, so it has turned to other tools, such as buying longer-term debt securities, to get the economy going again. But the efficacy of those tools is uncertain, and there are risks associated with them.

In many ways today, the Fed is in uncharted waters.

So why shouldn’t the Fed just keep cutting interest rates? Why not lower the target interest rate to, say, negative 3 percent?

At that interest rate, you could borrow and spend $100 and repay $97 next year. This opportunity would surely generate more borrowing and aggregate demand.

The problem with negative interest rates, however, is quickly apparent: nobody would lend on those terms. Rather than giving your money to a borrower who promises a negative return, it would be better to stick the cash in your mattress. Because holding money promises a return of exactly zero, lenders cannot offer less.

Unless, that is, we figure out a way to make holding money less attractive.

At one of my recent Harvard seminars, a graduate student proposed a clever scheme to do exactly that. (I will let the student remain anonymous. In case he ever wants to pursue a career as a central banker, having his name associated with this idea probably won’t help.)

Imagine that the Fed were to announce that, a year from today, it would pick a digit from zero to 9 out of a hat. All currency with a serial number ending in that digit would no longer be legal tender. Suddenly, the expected return to holding currency would become negative 10 percent.

That move would free the Fed to cut interest rates below zero. People would be delighted to lend money at negative 3 percent, since losing 3 percent is better than losing 10.

Of course, some people might decide that at those rates, they would rather spend the money — for example, by buying a new car. But because expanding aggregate demand is precisely the goal of the interest rate cut, such an incentive isn’t a flaw — it’s a benefit.

The idea of making money earn a negative return is not entirely new. In the late 19th century, the German economist Silvio Gesell argued for a tax on holding money. He was concerned that during times of financial stress, people hoard money rather than lend it. John Maynard Keynes approvingly cited the idea of a carrying tax on money. With banks now holding substantial excess reserves, Gesell’s concern about cash hoarding suddenly seems very modern.

If all of this seems too outlandish, there is a more prosaic way of obtaining negative interest rates: through inflation. Suppose that, looking ahead, the Fed commits itself to producing significant inflation. In this case, while nominal interest rates could remain at zero, real interest rates — interest rates measured in purchasing power — could become negative. If people were confident that they could repay their zero-interest loans in devalued dollars, they would have significant incentive to borrow and spend.

Having the central bank embrace inflation would shock economists and Fed watchers who view price stability as the foremost goal of monetary policy. But there are worse things than inflation. And guess what? We have them today. A little more inflation might be preferable to rising unemployment or a series of fiscal measures that pile on debt bequeathed to future generations.

Ben S. Bernanke, the Fed chairman, is the perfect person to make this commitment to higher inflation. Mr. Bernanke has long been an advocate of inflation targeting. In the past, advocates of inflation targeting have stressed the need to keep inflation from getting out of hand. But in the current environment, the goal could be to produce enough inflation to ensure that the real interest rate is sufficiently negative.

The idea of negative interest rates may strike some people as absurd, the concoction of some impractical theorist. Perhaps it is. But remember this: Early mathematicians thought that the idea of negative numbers was absurd. Today, these numbers are commonplace. Even children can be taught that some problems (such as 2x + 6 = 0) have no solution unless you are ready to invoke negative numbers.

Maybe some economic problems require the same trick.

N. Gregory Mankiw is a professor of economics at Harvard. He was an adviser to President George W. Bush

China Wealth Fund to Boost Investments

By JASON DEAN
APRIL 18, 2009, 11:58 A.M. ET

BOAO, China -- China Investment Corp. plans to expand its international investment this year, including in European countries that it had shunned because they tried to set limits on its investments, the Chinese sovereign-wealth fund's chairman said Saturday.

Speaking to a meeting of business and political leaders here, Lou Jiwei reiterated complaints about resistance last year from Western governments to the fund, known as CIC. Some foreign politicians worried that the fund, which was established in 2007 to invest $200 billion of China's foreign-exchange reserves, was motivated by political as well as financial factors.

Mr. Lou indicated that such that such resistance, especially in Europe, had contributed to CIC's reluctance to deploy its capital last year -- and shielded it from sharp market losses. But he said the environment has changed this year.

"Key countries in Europe are now welcoming us. So we'll actively consider that, because we have also discovered some opportunities," he said on a panel at the Boao Forum for Asia. "We will prudently, but also resolutely, expand our investment to an appropriate scale, including in Europe." Mr. Lou didn't elaborate on CIC's investment plans.

CIC has taken large paper losses on stakes it bought in 2007 in Morgan Stanley and Blackstone Group LP. CIC officials have said they were reluctant to invest last year in Western financial firms even as prices plunged. Much of the fund's money available for overseas investments is believed to be in relatively low-risk assets, meaning it avoided much of the damage last year as global markets imploded.

Some analysts say CIC may have been the world's best-performing sovereign-wealth fund last year. Mr. Lou wrote in a Chinese magazine last month that CIC had booked only "small losses" in its overseas investments in 2008, and had outperformed other sovereign funds.

Mr. Lou on Saturday poked fun at the European officials he said had resisted CIC, suggesting that their reluctance prevented CIC from making investments it would have lost money on. He pointed specifically to restrictions that they demanded on the size of CIC's stakes in European companies, or on its ability to obtain voting rights in those companies.

"Officials in Europe told me they wanted me to state clearly that we wouldn't take stakes of more than 10%, or ask for voting rights. I said I can't accept this. They said Europe doesn't welcome me, so I said fine, if Europe doesn't want me, I won't go, " Mr. Lou said. "So I want to thank these financial protectionists, because as a result, we didn't invest a single cent in Europe."

Since the global financial crisis worsened late last year, however, countries have been more open to CIC investments, he said. "There has been a change," he said. "Europe is now very welcoming to us, and isn't talking about such conditions any more."

Now, he said, "People suddenly look at us as a lovable force."

-- Aaron Back contributed to this article.

No party for Citi's owners: You and me

The bank is back in black, but common shareholders - a group soon to include Joe Taxpayer - get stuck with the costs of the past year's restructuring.

By Colin Barr, senior writer

Last Updated: April 17, 2009: 11:38 AM ET

Citigroup's health is slowly improving, but the bank's owners are stuck paying for its costly rehabilitation.

The New York-based financial giant returned to the black Friday after five quarterly losses, saying it swung to a $1.6 billion profit. Citi (C, Fortune 500) cited stronger trading results and a 23% drop in operating costs, driven by 13,000 job cuts during the latest quarter.

But common shareholders, who are the ultimate owners of the struggling bank, are still waiting to enjoy the fruits of CEO Vikram Pandit's turnaround push.

That's because as accounting rules dictate, Citi calculated its profit before deducting the costs related to preferred shares. The bank has issued these in droves in recent years, to the government and private investors alike, in a bid to bolster its capital cushion against souring loans and trading bets gone bad.

Paying for the preferred shares has gotten expensive, as a look at Friday's earnings statement shows. In the first quarter alone, Citi paid out $1.2 billion in preferred stock dividends. It also took a $1.3 billion hit when the price on some convertible preferred shares it sold in January 2008 reset.

Those costs come out of common shareholders' pockets - which is why the bank ended up posting a loss of 18 cents a share in a quarter that was otherwise profitable.

The unusual split - a profit for the bank but a loss for the shareholders - highlights the cost of the blizzard of preferred stock Citi has issued since Pandit took over at the end of 2007.

In his first two months at the bank's helm, Citi issued $30 billion in preferred shares to private investors around the globe. Since last fall, the bank has issued an additional $45 billion of preferred stock to the government.

Despite the huge sums raised by Citi via the preferred share sales, investors have continued to fret about the health of the bank's balance sheet as real estate prices tumble and more consumers fall behind on their auto and credit card payments.

In hopes of quelling worries about the bank's capital and ending talk of nationalization, the government announced a plan in February to convert the bulk of Citi's preferred shares to common shares.

Citi said Friday that the conversion, which had been scheduled to take place this month, will be delayed until regulators complete their stress tests on the 19 biggest U.S. banks. Results are expected by early May.

As a result of the swap, private sector holders of existing preferred shares will end up owning 38% of Citi and taxpayers will own 36%.

The conversion will reduce Citi's preferred dividends. That should mean that when Citi posts a profit in future quarters, common shareholders will share in them.

But the downside for current shareholders is that the preferred-to-common conversion will result in the issuance of billions of new common shares - which will reduce their stake in the company by three-quarters.

Still, given how poorly Citi has done since the collapse of the credit boom nearly two years ago - it had rung up $28 billion in losses since its last profit back in the third quarter of 2007, and saw its shares dip below a dollar each earlier this year - investors and taxpayers will gladly take even modest progress.

And there were signs Friday that Citi is, like the other giant financial institutions that have posted their first-quarter numbers this month, enjoying the benefits of cheap government-backed funding and less competitive financial markets.

Thanks to federal programs that allow big financial companies to borrow at low, subsidized rates, Citi's net interest margin - the difference between the bank's lending rates and its borrowing costs - rose half a percentage point from a year ago, to 3.3%.

Like its rivals JPMorgan Chase (JPM, Fortune 500) and Goldman Sachs (GS, Fortune 500), Citi posted a strong quarter in its trading business. The bank's securities and banking unit posted a first-quarter profit of $2 billion, reversing the year-ago loss of $7 billion, which was driven by writedowns of Citi's exposure to subprime mortgage securities.

Citi said revenue at its fixed income markets business hit $4.7 billion, "as high volatility and wider spreads in many products created favorable trading opportunities."

But as with its peers, there are questions as to whether Citi will be able to replicate that trading performance in coming quarters.

More than half of the first quarter's fixed income revenue - $2.5 billion worth - came from a valuation adjustment on Citi's derivatives books, mostly due to a widening of the bank's credit default swap spreads.

Credit default swaps are insurance-like contracts. Widening spreads reflect a greater belief that a company may not be able to pay back its debt. So in a sense, Citi was profiting from increased bets that it and other banks were in danger of failing. Those fears may subside a bit following the release of the stress test results.

Consumer credit headaches loom

Perhaps more alarming for Citi -- as well as JPMorgan, Wells Fargo (WFC, Fortune 500) and Bank of America (BAC, Fortune 500), which will report its first-quarter results Monday -- is just how high losses on consumer loans such as credit cards could go later this year.

Citi's North American cards business swung to a $209 million loss in the first quarter, reversing the year-earlier $537 million profit. Credit costs - reflecting loans gone bad and expenses tied to reserving against future losses - nearly doubled.

The surging losses reflect "rising unemployment, higher bankruptcy filings and the housing market downturn," Citi said - national trends that show few signs of slowing any time soon.

Altogether, credit losses on the global cards business rose to 9.49% in the first quarter from 5.39% a year ago.

But consumers also appear to be doing a better job of keeping their cards in their wallets. The company reported an 18% decline in North American credit card purchase sales during the quarter. This drop will add to the pressure on the company's card portfolio.

Those declines were mitigated somewhat, however, by a rise in interest and fee revenue, as already debt-laden consumers ran bigger balances on their cards and made smaller payments.

So no matter how you look at the results, it seems that the taxpayer -- especially those who also happen to be Citi customers -- still have little reason to celebrate with the bank's return to profitability.