Gustavo Ballvé on August 31st, 2010

Quick post: short interview with Kapser Horsted, CEO at Henkel, the german consumer and industrial products company. While you can just click on the link and enjoy, we’ve highlighted two excerpts inside. He’s frank and most of his quotes are quite direct and of the “no-hubris” type.

Read more about Common-sense CEO

Gustavo Ballvé on August 30th, 2010

The August 2010 issue of Capital Aberto magazine has an article (in English) about the new UK Stewardship Code, designed to (take a deep breath) “enhance the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders and the efficient exercise of governance responsibilities by setting out good practice on engagement with investee companies to which the FRC believes institutional investors should aspire.” Our partner and Head of Investor Relations, Elsen Carvalho, was interviewed and shared our take on the code.

Read more about UK code and Brazilian governance

Gustavo Ballvé on August 26th, 2010

The Financial Times had a piece about Greece’s woes on August 24th – and how Brazil’s fiscal policy presents an alternative. We feel it’s our duty as Brazilians to inform the FT that they’re basically right: Greece can borrow pages from the playbook of 2002 Brazil (or Lula, since the article mentions him). 2010 Brazil’s fiscal policies, however, should not be copied. What a difference a few years make.

Read more about Greece should learn from Brazil – kind of

Gustavo Ballvé on August 25th, 2010

Relatively clueless weekend articles by the Wall Street Journal. This one, ‘Preparing for the next Black Swan’, is downright scary in the number of supposedly “heads I win, tail you lose” hedging/ ‘black swan-proof’ strategies currently pushed to customers – increasingly retail customers on top of the institutional ones. To be clear: we’re all for capital preservation, and our company’s success is built more on the back of risk aversion than of risk-taking. However, the article doesn’t do nearly enough to highlight that hedging instruments or strategies, especially untested ones, have not only flaws (have we already forgotten counter-party risk in 2008?) but most importantly costs, sometimes hidden, and in no way are these costs of a fixed nature. This has all the tell-tale signs of a fad…

Read more about ‘Black swan-proof’?

Gustavo Ballvé on August 23rd, 2010

Mr. Druckenmiller has over 30 years’ experience, his Duquesne Capital manages $12 billion and since 1986 never had a down year (although it is down 5% YTD). He worked with George Soros (while still managing Duquesne!) and was there for the famous British pound trade. So why quit? Interestingly, he’s “frustrated by his failure in the past three years to match returns that had averaged 30 percent annually since 1986.” Why, in his opinion, did it happen? “Managing more than $10 billion seems to challenge my long-term standard for investment performance.” A fund manager’s mandate is all about investment performance and not AUM growth – the opposite is not just wrong, it can also be self-defeating.

Read more about Stanley Druckenmiller shuts down Duquesne

Gustavo Ballvé on August 20th, 2010

Economies, in the plural, since two recent articles have dealt with the “unofficial” sides of the Chinese Economy. First there was a Bloomberg article on Chinese banks getting the order to move their off-balance sheet stuff to the books. It makes us wonder who still trusts short-term bank earnings in China. We suggest a “translation” to the funny part inside, along with the second article, a LEX on China’s “grey” economy, mentioning research by Credit Suisse. In it CS researches China’s “real” wealth distribution, and surprise surprise, it looks more like South than North America. Why? Because incomes may be as much as 90% higher than official stats. Would the real China please stand up?

Read more about China’s economies

Gustavo Ballvé on August 17th, 2010

Interesting way to improve funding costs, while also pleasing the banks involved. Oi, the Brazilian telecom giant, also happens to own a lot of real estate – for instance the spots in which they have antennas. It’s transferring 263 properties to an SPC, for which Oi will pay rent. At the same time the SPC raises money to pay for the property by selling these rent receivables as CRIs, the portuguese acronym for “certificates of real-estate receivables”. The flip side for banks is that they get to invest their savings accounts regulatory requirements in a “better-quality” CRI. For Oi, through the cost of this debt and the tax benefit of paying rent, they get to secure a lower cost of funding than that achieved in their recent (May ’10) bonds issue.

Read more about Oi’s corporate finance strategy

Gustavo Ballvé on August 13th, 2010

The 1st one regards AB-InBev and the fact that it’s still hard for “foreigners” to fully grasp it. Yesterday’s LEX column on the company has flattering but less than enlightened comments and puts way too much weight on the P/E ratio. The 2nd one is about Netflix, and this NYT story sheds some (more) light on the company. It’s about creative destruction stimulated by the company itself. It doesn’t guarantee Netflix will win as the technology shifts continually challenge its business model, but it gives the company a fighting chance. Again, such a shifting business model is probably not the best playground for investors, but Netflix is still worth tracking for all the other reasons.

Read more about Two small updates

Gustavo Ballvé on August 12th, 2010

In a first of what we hope to be many article collections about investors we keep track of, this one is about Glenn Greenberg of Brave Warriors Capital. He’s better know as the co-founder of Chieftain Capital, but in the end of 2009 him and John Shapiro parted ways (Mr. Shapiro and two other partners left but retained the name Chieftain Capital). Being the first to be profiled in this series isn’t a matter of order of preference at all.

Read more about Glenn Greenberg

Gustavo Ballvé on August 7th, 2010

As we blog and try to become more transparent for investors, potential investors and even invested companies, we’re aware of the dangers of over-exposure and “posing”, as these two NY Times pieces highlight. We feel good about our chances, but since we recognize we’re learning as much as everybody else is, we will prefer to err on the side of omission.

Read more about Social media and uncharted territories

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