BofA / Merrill Lynch Plot Thickens!
When Bank of America Corp.’s board met to approve the acquisition of an investment bank on Sept. 15, 2008, members thought they were going to buy Lehman Brothers Holdings Inc., not Merrill Lynch & Co., according to New York Attorney General Andrew Cuomo.
However, the story has some support for my thesis that large corporations are riskier than smaller ones, on the grounds that you get ahead by telling your boss what he wants to hear:
[Company eMails and notes] also show Merrill kept [BofA ex-Chief Financial Officer Joe] Price informed of the losses as they grew, yet he resisted pressure from his lawyers to disclose them to shareholders.
…
When Price asked for a review of whether the [October 2008] losses — then $5 billion after taxes — should be disclosed to shareholders, his general counsel Timothy Mayopoulos said they should.
…
Mayopoulos was later fired by Price and replaced by Brian Moynihan, who later became CEO, Cuomo said.
This is just a hair off-topic, but I’ve often wondered what the big deal is about atmospheric CO2 levels. I mean, assuming they’re causing problems, why not just fix it? Genetically engineer some yeast cells, or other bug, so that they eat CO2 and excrete sugar, put them in a tank and Bob’s your uncle! If you want to get fancy, put some other bugs in the tank that eat sugar and excrete polysaccharides; if you want to make some money, sell the kits in one-liter sizes so that Mr. & Mrs. Precious can reduce their carbon footprint. Why can’t this be done? Converting CO2 to sugar is no big deal – plants do it all day long and have time left over for sex with bees.
So it was a great relief to read Neil Reynolds column today, Profit motive is the solution to CO2 emissions:
A Santa Barbara, Calif., company called Carbon Sciences Inc. provides a convenient prototype. The company announced last week that it has developed a “breakthrough technology” that converts atmospheric carbon dioxide into commercial-grade gasoline, diesel fuel and jet fuel. Founded in 2006, Carbon Sciences had previously converted CO-2 into low-grade methanol using an enzyme-based technology. Now, it said, it has combined chemical and biological engineering in a bio-catalytic process that transforms carbon emissions into “a cost-efficient” energy resource.
Is the process really commercially viable, or at least on the way there? Is Carbon Sciences (OTCBB: CABN) a decent investment? I don’t know and I’d need to hire some expertise before I ventured an opinion. But I’m just glad I’m not the only person in the world who’s thought of this.
PerpetualDiscounts continued to slide today, losing 27bp on a day with sharply reduced volume. FixedResets were able to squeak out a gain of 2bp. There were only three entries for the Performance Highlights table!
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 3.10 % | 3.79 % | 27,647 | 20.08 | 1 | -0.7613 % | 1,781.5 |
| FixedFloater | 5.72 % | 3.79 % | 34,880 | 19.23 | 1 | 0.0000 % | 2,762.3 |
| Floater | 2.09 % | 1.76 % | 41,381 | 23.12 | 4 | 0.2128 % | 2,199.4 |
| OpRet | 4.86 % | -3.26 % | 109,178 | 0.09 | 13 | 0.0770 % | 2,316.3 |
| SplitShare | 6.33 % | 6.30 % | 152,629 | 3.73 | 2 | 0.0655 % | 2,122.2 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0770 % | 2,118.0 |
| Perpetual-Premium | 5.76 % | 5.45 % | 80,742 | 2.02 | 7 | 0.0000 % | 1,893.6 |
| Perpetual-Discount | 5.83 % | 5.87 % | 171,328 | 14.08 | 69 | -0.2659 % | 1,809.3 |
| FixedReset | 5.43 % | 3.61 % | 318,475 | 3.80 | 42 | 0.0157 % | 2,179.5 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| IAG.PR.A | Perpetual-Discount | -2.93 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-02-05 Maturity Price : 19.52 Evaluated at bid price : 19.52 Bid-YTW : 5.98 % |
| PWF.PR.L | Perpetual-Discount | -1.36 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-02-05 Maturity Price : 21.02 Evaluated at bid price : 21.02 Bid-YTW : 6.12 % |
| HSB.PR.C | Perpetual-Discount | -1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-02-05 Maturity Price : 22.35 Evaluated at bid price : 22.51 Bid-YTW : 5.74 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| CIU.PR.B | FixedReset | 100,016 | RBC crossed blocks of 40,000 shares, 35,000 and 20,800, all at 28.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-01 Maturity Price : 25.00 Evaluated at bid price : 28.13 Bid-YTW : 3.54 % |
| HSB.PR.E | FixedReset | 78,516 | RBC crossed blocks of 40,000 and 35,000, both at 28.05. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-30 Maturity Price : 25.00 Evaluated at bid price : 28.02 Bid-YTW : 3.86 % |
| IAG.PR.C | FixedReset | 61,100 | RBC crossed blocks of 40,000 and 21,000, both at 27.00. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-30 Maturity Price : 25.00 Evaluated at bid price : 27.25 Bid-YTW : 3.90 % |
| RY.PR.A | Perpetual-Discount | 48,048 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-02-05 Maturity Price : 19.94 Evaluated at bid price : 19.94 Bid-YTW : 5.60 % |
| GWO.PR.J | FixedReset | 45,400 | RBC crossed 38,100 at 27.45. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-30 Maturity Price : 25.00 Evaluated at bid price : 27.60 Bid-YTW : 3.34 % |
| CM.PR.I | Perpetual-Discount | 45,010 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-02-05 Maturity Price : 20.25 Evaluated at bid price : 20.25 Bid-YTW : 5.85 % |
| There were 22 other index-included issues trading in excess of 10,000 shares. | |||
Having spent some time in the technology world and venture capital game before taking on the much more predictable entertainments of pref shares, I can tell you that Carbon Sciences, with a 12c stock price is almost certainly a [poor investment (JH)] with a few nice powerpoint slides that don’t mean squat.
The main challenge to reducing atmospheric CO2, assuming one wants to, is that it is exceptionally dilute: 0.04% Assuming Carbon Sciences even has an organism that can convert more concentrated CO2 from power plants into some kind of hydrocarbon on a timely and pure basis (which there isn’t a single iota of evidence for on their web site) they would need many square miles of “bioreactors” for each plant.
Let’s stick with nice safe investments like Quebecor World Prefs.
Edited by JH
Actually, this paper by Shota Atsumi, Wendy Higashide & James C Liao in Nature Biotechnology was the kind of thing I’ve been wondering about. Direct photosynthetic recycling of carbon dioxide to isobutyraldehyde:
I don’t know if Mr. & Mrs. Precious are all that interested in isobutyraldehyde, but maybe they can be convinced to donate to a foundation that centralizes production … which also solves the problem of otherwise unemployable relatives of the promoter.
Great paper in Nature — well respected Journal.
Based on their achieved rate of isobutyraldehyde production (6 mg/L/hr) and assuming 100% conversion of CO2 (conversion wasn’t stated), then a back of the envelope calculation says a 500 MW plant generates about 400 metric tons of CO2 per hour (less for gas; more for coal).
This requires a treatment vessel containing water 30m (100 ft) deep that covers one square kilometer for each such power plant (so my first guess wasn’t bad).
On top of the physical size, we have the serious questions of what huge quantities of the biological agent might cost, and what CO2 conversion rates are achieved.
It’s a great topic for further research, but a startup company won’t have the funds to research it for 20+ years.
This requires a treatment vessel containing water 30m (100 ft) deep that covers one square kilometer for each such power plant
Granted, but remember that Carbon Sciences claims that their process involves catalysts, not just enzymes. But for sure, I won’t be celebrating the Redemption of the World until I see something a bit more concrete about this.
It’s a great topic for further research, but a startup company won’t have the funds to research it for 20+ years.
On the other hand, consider preferred share management. Omega Preferred Equity Fund is run by Intact Investment Management:
Hymas Investment Management has … er … fewer than 7,000 employees, and somewhat less than $7-billion under management.
Same thing when I was with Greydanus Boeckh. Basically, PH&N was our only serious competition (performance-wise) and compared to some of the other outfits we were tiny.
Size isn’t everything, as my girlfriend tells me whenever I tearfully apologize.
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