One of the biggest risks to a corporation's future comes from blunders of the CEO and the Board of Directors in making large acquisitions near the top of the market. We can see this playing out in the RTP FUBAR. Rio Tinto overpayed for aluminum maker Alcan, taking on much debt. And RTP's CEO foolishly turned down BHP's merger offer.
So now RTP has too much debt in a weak market for it's products. What doe sit intend to do ?
"The Australian reports the co and Chinalco (ACH) are setting up a mammoth $20 billion deal that would give China stakes in Australia's largest iron ore operations and key aluminium projects, while solving Rio's debt problems in one fell swoop. As part of the deal, it is understood Chinalco would increase its stake in the dual-listed miner to between 15 and 20% through the issue of more than $5 billion of convertible notes. " [From Briefing.com online]
Good job ... buying high, selling low. That's pretty normal for corporate CEOs. They do it with stock buybacks all the time, too.
The corporate boards of directors really need to be restructured to give shareholders real power, not the current rubber-stamp variety. That could solve a lot of problems that are now appearing: over paid executives, excessive risk, etc.
Credit markets are really improving a lot - I've noticed a large number of new issues that were well-subscribed, even in junk bonds.
Word of the Day
"Besotted" - adjective [$10]
Besotted means 1. infatuated; 2. foolish, confused; 3. intoxicated, stupefied.
"Besot" - verb, transitive [$100]
Besot means 1. to intoxicate or stupefy with drink; 2. to make stupid or foolish (a mind besotted with fear and superstitions.); 3. to infatuate, obsess (He is besotted by her youth and beauty.)
Sentence: Was it drink that besotted the mind of Lyndon ... oops George W. Bush as he adopted that foolish post-invasion, "Rodney King" Iraq pacification strategy? Or was he simply a weak mind under the influence of McNamara .. ooops Rumsfeld ?
Le Mot du Jour
"Sot / Sotte" - adjective (m/f) and noun (m/f)
Sot means (adjective) silly, foolish, stupid; (noun) fool, idiot. Sotte is the feminine form for both the adjective and the noun.
La Phrase: La crise financière révèle beaucoup de sottes conduites des banques.
English Sentence: The financial crisis is revealing a lot of foolish behaviors of the banks.
[There are other French words for "foolish" or "stupid", such as bête and stupide. I wasn't sure about the position of the adjective, but the dictionary example for "sot" placed it before the noun.]