Hi Everyone,

Following on from Part 1 of our review of the 2009 trading year lets kick straight on with Part 2 which covers May to August.

May – Change at the top for the Indo, US Bank Stress Test Results Announced, Intel Fined €1 billion

May saw the retirement of Sir Anthony O’Reilly as CEO of Independent News and Media. After 36 years as head and the main driving force behind the Indo’s global expansion Sir Anthony stepped aside and handed over the reins to his son, Gavin O’Reilly, who was the company’s COO for the previous 8 years. Gavin took over a company going through tough times which was battling tough advertising conditions in Ireland and abroad, a massive debt which needed to be successfully refinanced and a floundering share price – down over 90% since the highs reached in the summer of 2007.

May was also a big month for the leading US banks with the results of the Bank Stress Tests announced and for some they weren’t pretty reading. Following a review of the 19 biggest American financial institutions US regulators found that 10 of them needed to raise a combined total of almost $75 billion in extra capitalby November 2009. This massive figure was actually less than what some market analysts were expecting and as a result had little or no effect on the markets continued recovery. Bank of America accounted for almost half of the total required with an additional capital requirement of $34 billion! Other banks told to raise several billion included Wells Fargo ($13.7 billion), GMAC ($11.5 billion) and Citigroup ($5.5 billion).

In other news in May, following an 8 year investigation the European Commission levied a record €1.06 billion ($1.45 billion) fine on Intel, the world’s largest chip manufacturer with approx 80% of the computer chip market. The Commission found that Intel impeded competition by offering rebates to computer manufacturers such as Dell and HP if they purchased almost all (in the region of 95%) of their chips from Intel rather than rival Advanced Micro Devices. Interestingly the news of the largest fine every imposed by the EU had little or no effect on Intel’s share price, with the stock falling a mere 20 cent on the day, or less than half a percent. Probably not a surprise given that the $1.45 billion fine represented less than 5% of Intel’s 2008 annual revenues of $37.6 billion and the company has almost $13 billion in cash on it’s balance sheet. In fact Intel’s share price rose a further 30% by year end. But perhaps the biggest winner in this particular ruling was AMD, with Intel under pressure to be better behaved going forward under the close eye of EU competition regulators AMD is obviously in a better position to start eating into Intel’s dominate position. At least the market seems to think so with AMD more than doubling since the May ruling.

June – GM Goes Bust, Swine Flu Takes Off

June kicked off with General Motors, the 100 year old car manufacturer, filing for bankruptcy. It was the 4th largest bankruptcy filing in US history and the largest for an industrial company. As part of the restructuring plan put in place for the company GM received over $30 billion in assistancefrom the US Treasury with the US government taking a 60% stake in the new GM. The restructuring will also see GM cut four of it’s  brands including Pontiac, lay-off over 20,000 employees andcut it’s dealers from over 6,000 to around 2,500. GM’s bankruptcy follows on shortly after it’s rival Chrysler had also filed for Chapter 11 in April of this year.

June was also the month when the World Health Organisation announced that swine flu (the HINI virus) had become a global pandemic after it had spread to 74 countries and killed 144 people. Despite all the coverage and fears of a massive increase in the spread of the disease it had little or no effect on global markets.

July – US Banks Announce Massive Q2 Profits, Microsoft and Yahoo Team Up To Tackle Google

Just a few months after repaying the billions in bailout money they received from the Feb, several of the US’s biggest financial institutions posted massive Q2 profits. Goldman led the charge announcing profits of $3.44 billion. Next up was JP Morgan with profits of $2.7 billion. But it wasn’t just the big investment banks that had returned to making massive profits, Bank of America and Citibank were not to be left out either, reporting profits of $3.2 billion and $4.3 billionrespectively. The results were better than many analysts were expecting and helped the argument that the world’s financial market’s were at last stabilising. The results also helped halt a pull-back in the major US indices which had seen the DOW fall 10% in a month.

July also saw the latest instalment in Microsoft’s on-going courting of Yahoo! as it tries to gain further market share from Google in the lucrative online search market. With Yahoo! struggling to make any in-roads into Google’s dominance Microsoft launched it’s own rival search engine, Bing. Microsoft then followed the launch of Bing up with an announcement that it had signed a 10 year deal with Yahoo! which would see Bing become the exclusive search engine for all Yahoo! sites. So what does all this mean for the online search market? Well while Microsoft is certainly making some progress, Google is still the boss and Yahoo! continues to drift and count the cost of turning down Microsoft’s massive $44.6 billion bid for the company in February 2008. Today Yahoo! has a market cap of about half what Microsoft bid for the company 2 yrs ago. I wonder how long it will be before Microsoft comes back with a new offer for the former search engine giant?

August – C&C buys Anheuser Busch Assets, BernankeGets A Second Term

In one of the bigger acquisition deals by an Irish company in 2009 C&C announced in August that it had reached agreement to buy the Irish and Scottish assets of Anheuser Busch for €205 million. The deal gave C&C the right to distribute well known beer brands Tennents, Stella Artois andBecks in Ireland, Northern Ireland and Scotland. The deal was well received by the market withC&C’s share price rising from around€2.00 a share to over €3.00 in the month following the announcement.

Also in August Ben Bernanke was nominated for a 2nd term as Chairman of the US Federal Reserveby President Obama. Bernanke was arguably the most important man in steering the US (and World) economies out of the worst recession since the Great Depression of the 1930’s. The 56 year old’s nomination for a 2nd term in charge of the Fed was an obvious vote of confidence from Obama in the job Bernanke was doing but also served as an example of Obama following through on his pre-election promise to move away from the bi-partisan politics that had become commonplace in the State under previous administrations. Instead of putting a Democrat into the hotseat Obama instead decided to stick with the man he believed was most qualified for the job. Bernanke’s approach to rescuing the US from another Great Depression was to pump trillions of dollars into the ailing economy, to bailout the financial institutions to the tune of billions of dollars (earning him the nickname “Bailout Ben”) and to reduce US interest rates to all time time low of “near zero”. While we are still in the early days of recovery so far it looks like Ben’s approach has done the trick. Later in December 2009 Bernanke would receive further endorsement of his role in the global recover when named Time Magazine’s Person of the Year for 2009.

Ok that wraps up Part 2 of our look back on 2009, we’ll finish up the review of last year with Part 3 in the coming days. Until then,
Happy Trading,
SpreadTrader.ie : -)