Today's Reading List

CORPORATE GOVERNANCE
Satyam Chief Admits Huge Fraud
NYT, 7-Jan-09

Mr. Raju said Wednesday that 50.4 billion rupees, or $1.04 billion, of the 53.6 billion rupees in cash and bank loans the company listed as assets for its second quarter, which ended in September, were nonexistent... In the four-and-a-half page letter distributed by the Bombay stock exchange, Mr. Raju described a small discrepancy that grew beyond his control.

Satyam Computer Services, a leading Indian outsourcing company that serves more than a third of the Fortune 500 companies, significantly inflated its earnings and assets for years, the chairman and co-founder said Wednesday, roiling Indian stock markets and throwing the industry into turmoil ...

REAL ESTATE
Commercial Property Loses Shelter
WSJ, 8-Jan-08

New data from Deutsche Bank show that delinquencies on commercial mortgages packaged and sold as bonds nearly doubled during the past three months, to about 1.2%. The delinquency rate will likely hit 3% by the end of 2009... An unusually high number of the underlying CMBS loans that are going bad were made and securitized in the past three years... a $125 million mortgage secured by a shopping center in Corona, Calif. called Promenade Shops had cash flow of $6.3 million when J.P. Morgan underwrote the loan in July 2007 but the loan was based on the assumption that the cash flow would rise to about $10.5 million.

Delinquencies on mortgages for hotels, shopping malls and office buildings were sharply higher in the fourth quarter, as the weaker economy hit landlords and threatens to cause losses for investors in the $3.4 trillion market ...

VALUATION IMPAIRMENT
Timely Warning on Cable Values
WSJ, 8-Jan-08

A key determinant of asset impairment, in addition to market prices, is the long-term cash-flow generation potential of a business... By resetting the level of shareholders' equity through write-off they enhance future returns on shareholders equity.

Shareholders in cable-TV companies might have forgotten in recent weeks -- as they have congratulated themselves on their foresight in owning relatively recession-proof stocks -- that the industry isn't without its competitive challenges from phone companies and the Internet ...

TECHNOLOGY
Intel Outlook Pared Again; Rivals Unveil New Products
WSJ, 8-Jan-09

Intel said Wednesday it now expects to report $8.2 billion in revenue for the fourth quarter and the company had projected in mid-October that sales would rise 3% from the third period...The company also said that its gross profit margins will be at the bottom of the lowered estimate it issued in November of 55%, plus or minus a couple of percentage points. In mid-October, the company had said the range would center around 59%.

Intel Corp. issued a second warning about deteriorating business conditions, signaling further weakness in the computer sector ...

OIL
Bahrain Credit Outlook Is Downgraded
WSJ, 7-Jan-09

"Break even" oil prices for Iran ($90), Oman ($77), Bahrain ($75), Saudia Arabia ($49), Kuwait ($33), Qatar ($24), UAE ($23)... Bahrain holds fewer liquid assets -- such as foreign-exchange reserves or investments by government-controlled funds -- than other regional oil exporters... Last month, Saudi Arabia said it expects to run its first budget deficit in years, committing itself to spending heavily despite an expected fall in oil revenue.

Moody's Investors Service downgraded the credit outlook for the Kingdom of Bahrain on Tuesday, marking the first sovereign-rating hit to the oil-rich Persian Gulf amid tumbling crude prices and the global financial crisis ...

COMMODITIES
Steelmakers Move Cautiously To Raise Prices, Reopen Mills
WSJ, 7-Jan-09

Troubled auto makers, contractors, appliance and equipment makers have cut back on their steel purchases. The majority of mills closed over the last few months remain shuttered and many around the world are operating below 50% of their capacity... In China, several steel mills have announced price increases ranging from 5% to 25% for a variety of products.

In an early sign that some steel prices may have bottomed out, steelmakers in the U.S., China and some other countries are attempting limited price increases and reopening a handful of mills that were closed because of weak demand a few months ago ...

CREDIT
Defaults Pose a Reckoning for Stock Rally
WSJ, 7-Jan-09

U.S. investment-grade corporate-bond issuance jumped to $108 billion in December, according to Dealogic, near the record $111 billion set in May, and up from a nadir of $15 billion in September... In the U.S. alone, some $758 billion in corporate debt is coming due in 2009, according to Standard & Poor's.

Credit-worthy companies have recently found a healthy appetite for their new debt. It is the older stuff that could cause trouble, both for corporate borrowers and stock investors ...