Randomly Noted

There was probably a lot of high-fiving and hand clapping when the Tesla Motors IPO was priced and closed the day $6.89 higher – a remarkable feat for an IPO these days and especially given how poorly the stock market in general performed.

So, maybe I am taking the glass half full approach, but, it seems to me the underwriters really mispriced it and left a lot of money on the table. The company itself sold 11.88 million shares. If the deal had been priced closer to where it closed rather than the original $17 price this morning, the company (a novel electric car maker) would have taken in an additional $81 million or so in proceeds. And for the selling shareholders? They would have pocketed nearly $10 million more.

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Sliding global market sentiment – resulting in dramatic stock and bond price movements today – demonstrates investors’ shock of recognition that there’s no one left to help.

Like a young adult leaving home after the comfort of parental aid, most of the major Western economies have gotten the help they are going to get from fiscal and monetary policies. The long slog towards truer economic recovery doesn’t create great prospects right now for stock prices.

For the umpteenth time the Dow Jones Industrial Average slid under 10,000 today, a solemn reminder to would-be stock bulls that the broad market’s been at best in a holding pattern since the DJIA first shot through 10,000 in 1999.

The 10-year Treasury note, in a sign of pretty severe risk aversion and little hope for palpable economic growth, is posting a yield just below 3%. In April, a time of more vigorous economic outlook, the yield was a full percentage point higher.

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News that Congressional conferees last week agreed to essentially change the nature of U.S. public company boards of directors hasn’t gotten much attention.

It’s hasn’t the star power of  handling too-big-to-fail financial institutions or demanding more transparency in mortgages offered to home buyers, but these governance matters are important to the basic power grid within companies.

In essence, what the conferees agreed and what’s almost certain to soon be signed into law by President Barack Obama makes it harder for incumbents to stay on a company’s board of directors. Another provision raises the possibility directors will find themselves in comfortable chairs in a dark paneled board room next to someone nominated by shareholders who might have causes to push beyond maximizing investor returns.

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You have to hand it to the cleverness of the political minds and their busy aides summing up the Group of 20 meeting. They’ve managed to defang language in their attempt to soften the edges of the hard choices facing most major Western nations.

So in the communique that represents the consensus of leaders who gathered in sometimes embattled Toronto, the remarkable phrase “growth friendly” is used to describe the need, in some cases urgent, for certain member nations to take better control of their spiraling fiscal deficits and their climbing debt-to-gross-domestic-product ratios.

To use a phrase like “growth friendly” to describe the cost cutting and/or tax raising needed, both usually growth unfriendly practices, is somewhat akin to talking about pious heathens or regimented anarchy. Indeed, this weekend’s meetings were colored by a destructive and decidedly unfunny brand of anarchic lawlessness that caused damage to Toronto police cars and widespread concern amid the heavy, heavy security.

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He might be in Canada for back-to-back summits with other world leaders, but U.S. President Barack Obama still has one eye on domestic politics and some still unfinished business: the overhaul of financial regulation.

Conferees from the House and Senate settled on a final, sweeping bill, but Obama, in his weekly radio address, pushed the legislators to take the reform bill “over the finish line.”

Two interesting points from Obama’s talk. Number one: while others are still debating the causes of the subprime housing-inspired severe credit crisis, the President lays it squarely on the lack of effective regulation.

“We’re still digging ourselves out of an economic crisis that happened largely because there wasn’t strong enough oversight of Wall Street,” he said.

Obama also said the bill agreed by the conferees encapsulated 90% of what he wanted from reform.

Maybe the Group of 20 nations can only find unity of action in the face of true crisis. Maybe that’s okay.

It’s just the beginning of a weekend of multinational and bilateral meetings, with various protests and other side shows thrown in, that will constitute the G20 session here in Toronto.

But it’s likely to end up a meeting of no new big agreements. There will be a big tent erected to incorporate all nations on the continue-the-stimulus/rein-in-the-deficits spectrum. Countries will be told to impose bank levies if they feel the need, but no worries if you do not.

There will be a lot of statements of the obvious. For example: fiscal deficits are a real problem that must eventually be dealt with, but not at the expense of cutting the underpinnings from the still questionable global economic recovery.

The bigger issue about that uneven global recovery is one not fully in control of the political powers gathered here. That’s how to get the private sectors to take over and start hiring in real numbers. Solve that and the rest pretty much falls into place.

Behind the non-agreements likely to emerge here is this reality: we are in a place that can afford non-agreement. For all of the remaining problems, the global economy is far enough out of the woods for that.

Of course, it’s not so simple as the U.S. is for stimulus, Germany and the United Kingdom are for cutting deficits. Even in the U.S. the unease, including in Congress, is growing along with the swollen federal debts. Meanwhile, the more deficit-reduction-focused nations are carving out long-term plans for cuts and higher taxes and they’ll have a difficult enough time making them work. No one is just saying halt.

The G20 might be judged too harshly if this turns into a weekend of non-agreements. That’s because it will be seen against the backdrop of seemingly heroic unity of proper actions taken at the height of the credit crisis.

That recent heritage was summed up nicely by the finance minister of host country Canada, Jim Flaherty. “The fact that we’re in the midst of a recovery, however fragile that recovery may be, is due to the efforts of the G20.”

There’s value in these high-level get-togethers, even when they produce only lots of words and few new or different actions by the sovereign participants. They keep the gears well greased for when actual unified action is essential to avert financial disaster.

In a world where forecasters of all sorts are typically not held to account, give some credit to the predictive powers of Rep. Barney Frank, D-MA, who chairs the U.S. House Financial Services Committee.

Sure, as the committee chairman and leader of the House conferees who helped hammer out a final financial services regulatory overhaul bill, Frank had some special insight into and influence upon the plight of the sweeping legislation.

Still, politics is a fickle business, so it is worth noting that back at the end of January, Frank predicted publicly that President Barack Obama would sign a “pretty good” financial regulation bill in the Spring. Frank spoke then at the annual World Economic Forum in Davos, Switzerland.

Well, Frank missed by a season, but just barely. The bill will be signed soon and a broad new era of financial regulation, no doubt filled with unexpected and unforeseen consequences for the banking and securities industries, will be ushered in.

Greece is thousands of miles away. But the debt crisis of that country and others in the Euro-region have had implications for companies big and small here – especially those with low credit ratings. These companies have been unable to borrow money, either from banks or the public debt markets, because of the renewed concerns of leverage. Investors and banks worry about a borrowers ability to repay principal and make interest payments.

The chart above, which accompanies a story by Jodi Xu on Dow Jones Newswires, shows the drop off in issuance of new loans and bonds in the below-investment grade arena. As Xu noted in her story, just when confidence was returning to the markets earlier this year, along came the Greek debt concerns and the ripple effect touched here – even for companies with no link to what was going on in Greece.

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Given everything that has happened to the financial services industry here and in Europe over the past few years, you’d think it might be a hard sell for a bank to consider selling its shares to the public. But that’s exactly what a small Seattle bank is proposing to do later this year in an offering designed to not only shore up its capital base, but prepare it to make acquisitions.

Fortune Bank wants to raise as much as $400 million in new capital in an offering that has yet to be filed with the Securities and Exchange Commission but one, the company said in a press release, will be underwritten by major Wall Street firms (to be named in the future). So, here we have this tiny bank ($126.2 million in assets), that wants to raise almost three times that amount so it can go out and buy other banks in FDIC or non-FDIC acquisitions. By the way, it lost $133,000 in the most recent quarter (end of March) and lost $5.5 million in the December quarter.

So, with so little details behind its plans and how small the bank is, why would someone want to buy into the offering?

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A mutiny in Australian politics is not unheard of, but certainly this one has caught many people by surprise.
Kevin Rudd was increasingly unpopular as prime minister in voter opinion polls for a number of reasons—his rollback of a pledge on a carbon emissions scheme and a plan to levy a new tax on profits in the mining sector–but to remove him so close to an election, with one expected within a matter of months, is a high-stakes gamble.

The anecdotal feedback among voters so far is that the manner in which the centre-left Labor party leadership has ousted Rudd, and installed Julia Gillard as the country’s first female prime minister, was all a bit unpleasant.

The move came swiftly, and most probably in response to internal party polling that would have shown Rudd–who came to power on a wave of optimism and popularity in late 2007–would struggle to win a federal election against his Liberal party counterpart, Tony Abbott. The government was in danger of becoming the first since before World War II not to secure a second term.

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