Platinum leaps over $1 900

(Fin24) - Platinum cleared the $1 900 an
ounce mark on Monday for the first time in its history as concerns of further supply disruptions due to power shortages continued to plague the market.

The precious white metal gained $27 to trade at $1 917.50 an ounce by 13:45 after hitting $1 890 in late after-market trade on Friday.

Additionally, Eskom's prediction that power supply problems were likely to continue for several weeks made "further gains seem inevitable with the metal potentially testing $2 000/oz in the not too distant future," said James Moore of TheBullionDesk.

South Africa's ongoing electricity concerns have already seen several precious metals producers warn that their output would drop in 2008, as Eskom restricted mines operating in the country to a power supply that equated to 90% of their average requirements.

 

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G7 discussed joint action to calm financial markets

(Reuters) - Finance leaders from the Group of Seven industrialized nations discussed collective action to calm markets if price moves become irrational, Eurogroup Chairman Jean-Claude Juncker was quoted as saying on Monday.

Juncker, who chairs the Eurogroup -- the monthly meetings of euro zone finance ministers and the European Central Bank -- told the Luxemburger Wort newspaper in an interview that turbulence on financial markets could continue for months.

"We are not yet at the end of the market crisis," Juncker was quoted as saying.

"The corrections will drag on for a few weeks, months. We have agreed in Tokyo that if there are irrational price movements in the markets, we will collectively take suitable measures to calm the financial markets," he said.

Asked what form such collective action may take, he said:

"Whoever has a strategy, should not set it out. Otherwise it will lose its effect if it is explained."

Finance ministers and central bankers from the G7 -- the United States, Canada, Japan, Britain, France, Germany and Italy -- said on Saturday in Tokyo that financial market turmoil was serious and persisting.

 

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Yahoo rejects Microsoft's bid

 (Reuters) - Yahoo Inc (YHOO.O: Quote, Profile, Research) on Monday rejected Microsoft Corp's (MSFT.O: Quote, Profile, Research) unsolicited takeover bid, currently valued at $42 billion, as too low, saying its board had unanimously concluded it was not in the best interests of shareholders.

In a statement, Yahoo said the offer "substantially undervalues" the company.

Microsoft made the half-stock, half-cash offer on February 1. It was originally worth $44.6 billion or $31 per share -- a 62 percent premium to Yahoo's stock price. Since then, Microsoft shares have fallen and the deal is now worth $41.8 billion.

 

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Wall Street Shareholders Suffer Losses Partners Never Imagined

(Bloomberg) -- Less than a decade after Wall Street's last major partnership went public, stockholders are paying the price for bankrolling the industry's expanding risk appetite.

Four of the five biggest U.S. securities firms lost about $83 billion of market value last year, almost 90 percent of their net income since 1999, data compiled by Bloomberg show. That cut the annual average return for Morgan Stanley, Merrill Lynch & Co., Lehman Brothers Holdings Inc. and Bear Stearns Cos. during those nine years to 9.7 percent from 16.8 percent.

The private partnerships that once dominated Wall Street guarded their capital, used less leverage and limited their risk to trading blocks of stock for clients and shares of companies in mergers, said Roy Smith, a finance professor at New York University's Stern School of Business and a former partner at Goldman Sachs Group Inc. Since raising money from the public, many of the biggest firms have abandoned that caution.

``If you're betting with other peoples' money, you're more willing to take risk than if it's your own,'' said Anson Beard, 71, who retired from Morgan Stanley in 1994 after 17 years at the New York-based company, where he ran the equities division and helped with the initial public offering in 1986. ``You think differently if you're paid in cash and not in ownership. It's heads you win, tails you don't lose.''

Shareholders, stung by the securities industry's losses last year on subprime mortgage-backed bonds and leveraged loans, may be in for more pain.

Shrinking Fees

Morgan Stanley, Merrill, Lehman and Bear Stearns have lost between 3 percent and 19 percent of their value this year in New York Stock Exchange trading on concern that they may be forced to take more writedowns if bond insurers like MBIA Inc. and Ambac Financial Group Inc. are stripped of their top credit ratings. Revenue from structured credit and leveraged finance has dropped and demand for takeover advice and underwriting may dwindle as the U.S. economy slows, analysts say.

Even Goldman has faltered. New York-based Goldman, which went public in May 1999, evaded last year's market losses and reaped record earnings. This year, the biggest and most profitable securities firm has lost 13 percent in NYSE trading, while analysts predict earnings will drop as equity stakes in companies such as Beijing-based Industrial & Commercial Bank of China Ltd. lose value and investment-banking fees decline.

Merrill, which went public in 1971, outperformed the Standard & Poor's 500 Index in just five of the past 10 years. The largest U.S. brokerage paid more to employees last year than it collected in revenue. Morgan Stanley, public since 1986, beat the index in four of the past 10 years. Both New York-based companies diluted investors' stock last year when they sold stakes to foreign governments to shore up capital.

Other People's Money

``Shareholders share in the downside and not necessarily in the upside, that's the whole story,'' said John Gutfreund, 78, who ran Salomon Brothers in the 1980s when it was renowned for the size of its trading bets. ``It's OPM: Other People's Money.''

To be sure, the firms have been good investments over a longer period. Merrill rose at an average annual rate of 14.7 percent, including dividends, from 1980 through the end of 2007, according to data compiled by Bloomberg. Bear Stearns returned an average 15.2 percent since the end of 1985 and Lehman's average annual gain was 25.5 percent since it became a separately listed company at the end of 1994.

While none of the companies are more than one-third owned by employees today, senior executives typically receive at least half their pay in shares. At Merrill, top managers get 60 percent of their compensation in stock; they're required to keep three quarters of it each year and are prohibited from hedging it, according to the brokerage's proxy statement.

 

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Credit Suisse Topples UBS, Dodges `Subprime Bullet'

(Bloomberg) -- Credit Suisse Group is earning more than UBS AG for the first time in almost a decade after Chief Executive Officer Brady Dougan avoided the writedowns that forced his rival to report the biggest-ever quarterly loss by a bank.

Credit Suisse may report tomorrow that net income fell 69 percent in the fourth quarter to 1.43 billion Swiss francs ($1.29 billion), according to the median estimate of 11 analysts surveyed by Bloomberg. UBS, which marked down $14 billion on securities infected by U.S. subprime mortgages, gives details of its 12.5 billion-franc quarterly loss on Feb. 14.

Dougan, a former derivatives trader who became Credit Suisse's CEO in May after making investment banking the company's most profitable unit, scaled back debt holdings before the slump led to more than $145 billion in writedowns and loan losses at the world's biggest banks. By contrast, Marcel Rohner was named UBS's CEO in July after three quarters of declining earnings, the collapse of a hedge fund and the ouster of his predecessor.

``Credit Suisse is clearly the better positioned of the two,'' said Florian Esterer, who helps oversee $56 billion at Swisscanto Asset Management in Zurich, where both companies are based. ``There are still some tough times ahead for UBS.''

UBS, the world's biggest wealth manager, said Jan. 30 it had a net loss of 4.4 billion francs in 2007, the first time it earned less than Credit Suisse since being created in a merger in 1998. Credit Suisse, which posted losses in 2001 and 2002, had an 8.65 billion-franc profit last year, analysts estimate.

Wall Street Losses

Credit Suisse earned about 1 billion francs in the fourth quarter and 8.2 billion francs in 2007, Sonntag newspaper said Feb. 10, citing an unidentified ``reliable source.'' Credit Suisse spokesman Marc Dosch declined to comment on the report.

Like New York-based Merrill Lynch & Co., Citigroup Inc. and Morgan Stanley, which also reported record losses in Wall Street's worst ever quarter, UBS has turned to sovereign funds to shore up its finances. The Swiss bank will seek shareholders' approval on Feb. 27 to sell 13 billion francs in bonds that will convert to shares to investors in Singapore and the Middle East.

Credit Suisse fell 0.1 percent to 57 francs at 11:04 a.m. in Zurich trading, and UBS declined 1.7 percent to 40.3 francs. UBS has dropped 50 percent in the past year, making it the fourth-worst performer in the 60-member Bloomberg Europe Banks and Financial Services Index. Credit Suisse is down 36 percent.

UBS is rated ``sell'' by 11 of 41 analysts tracked by Bloomberg, a rating awarded by six of 37 analysts covering Credit Suisse.

`Dodged the Bullet'

``I think Credit Suisse will have dodged the subprime bullet,'' said Dieter Buchholz, who helps manage $107 billion at AIG Private Bank in Zurich, including Credit Suisse shares. Chairman Walter Kielholz has signaled the bank probably won't have large charges in the quarter.

Credit Suisse's results may be more similar to those of Frankfurt-based Deutsche Bank AG than UBS, Buchholz said. Germany's biggest bank said last week it avoided writedowns from the subprime market and reported a 44 million-euro ($64 million) markdown on leveraged loans.

Managers at Credit Suisse's SPS mortgage-servicing unit alerted the executive board more than a year ago to concerns about subprime assets. By the end of 2006, the company had originated about 40 percent fewer subprime mortgages than in 2005, according to Dougan.

``The hardest thing in all of these is not just seeing the issue but taking action,'' Dougan, 48, told business leaders in Zurich on Feb. 5. ``It's always very difficult to say no.''

 

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CDO Losses Driving Credit-Default Swaps to Record, Analysts Say

(Bloomberg) -- Banks are driving the cost of protecting corporate bonds from default to the highest on record as they seek to hedge against losses on collateralized debt obligations, according to traders of credit-default swaps.

Contracts on the benchmark Markit iTraxx Crossover Index soared 17 basis points to 547 at 12:50 p.m. in London, according to JPMorgan Chase & Co. The Markit iTraxx Asia Ex-Japan Series 8 Index soared the most in one day, rising 15 basis points to an all-time high of 144.5, according to BNP Paribas SA. The Markit CDX North America Investment Grade Index rose 2.5 basis points to 132.25, Deutsche Bank AG prices show.

``Banks have taken losses, spreads are going wider and they are just cutting positions,'' said Andrea Cicione, a senior credit strategist at BNP Paribas in London. ``Lenders are probably reducing risk positions in a deteriorating credit environment by unwinding CDOs.''

Banks are facing mounting writedowns on CDOs, securities that package credit-default swaps, bonds or loans, as the fallout from the collapse of U.S. subprime mortgages spreads across financial markets. The Group of Seven estimates banks worldwide will suffer writedowns of $400 billion on home loans, German Finance Minister Peer Steinbrueck said at a weekend meeting of officials and central bankers in Tokyo.

Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A rise indicates worsening perceptions of credit quality; a decline, the opposite.

CDO Downgrades

Fitch Ratings may downgrade the $220 billion of CDOs it assesses that are based on corporate securities because of rising losses, the New York-based company said last week. CDOs with AAA grades that are based on credit-default swaps and aren't actively managed may face the steepest reductions of as much as five steps, the company said.

Ratings firms are responding to criticism that they failed to react quickly enough as increasing defaults on subprime mortgages caused a plunge in the value of CDOs. Fitch, a unit of Fimalac SA in Paris, lowered $67 billion of mortgage-linked CDOs in November, slashing some top-rated debt to speculative grade, or junk.

LevX Index

Falling prices for leveraged loans may be forcing banks to unwind collateralized loan obligations. UBS AG and Wachovia Corp. are trying to sell $700 million in loans because of the unwinding of their so-called market value CLOs, which package the debt and are based on the net value of the underlying loans, the Wall Street Journal reported.

The Markit iTraxx LevX Senior Index of credit-default swaps on 26 European loans fell to a record of 90.625, according to Bear Stearns Cos. A level below 100 indicates loans are worth less than face value.

The value of the most-traded U.S. leveraged loans plunged to a record low amid reports of forced CLO sales, according to Standard & Poor's.

In the European credit-default swaps market, contracts on Carlsberg A/S in Copenhagen, the largest Nordic brewer, jumped 22 basis points to 157, according to CMA Datavision in London. The company is buying brewer Scottish & Newcastle Plc with Heineken NV.

 

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