(BN) Asia Hedge Funds Face a Year of Attrition After Most Closures Since 2008

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Asia Hedge Funds Face Attrition Amid Most Closures Since '08

Jan. 5 (Bloomberg) -- Asia's hedge-fund industry is set to shrink in 2012 after a year in which growth stagnated, performance faltered and managers struggled to raise capital.

There were 123 Asian hedge funds that closed in the first 10 months of 2011, compared with 125 in all of 2010 and a record 184 in 2008 when the collapse of Lehman Brothers Holdings Inc. roiled markets, according to Singapore-based data provider Eurekahedge Pte. Artradis Fund Management Pte, once Singapore's biggest hedge fund, shut, while managers returning money to investors included CoreVest Partners and Kilometre Capital Management Ltd.

Asia's hedge funds are dwindling as most managers haven't made money as a business or for investors, said Peter Douglas, principal of Singapore-based GFIA Pte. Hedge funds in the region manage $125 billion, lower than the peak of $176 billion in 2007, according to Eurekahedge.

"2012 will be the year of major attrition," said Douglas, whose firm advises investors seeking to allocate money to hedge funds and runs a wealth-management business. "People's stamina will increasingly give out; regardless of your commitment and personal wealth, the number of years that you can go pursuing your dream without any kind of compensation is a stretch."

Asian hedge funds lost on average 8.7 percent in 2011 through November, their second-worst year on record, according to Eurekahedge. The MSCI Asia Pacific Index declined 17 percent during the same period amid concern that the European sovereign- debt crisis would lead to a global slowdown.

Difficult Climate

About 32 percent of Asia-focused hedge funds tracked by Eurekahedge generated positive returns in the first 11 months of 2011, down from 75 percent the year before.

Asian hedge fund startups also slowed. There were 122 new hedge funds in the region last year through October, compared with 183 in all of 2010, according to Eurekahedge.

"The investment climate is difficult with correlations remaining stubbornly high across global markets," said Ben Williams, a Hong Kong-based director of Asia-Pacific financing sales at Bank of America Merrill Lynch. The first half of 2012 "is not going to be easy performance for anyone."

About 80 percent of Asia hedge funds are under their high watermarks, the historical peak net asset value above which they can charge performance fees on returns, Williams estimated based on data from Merrill Lynch and hedge-fund databases. Some have yet to rebound above their pre-2008 high watermarks.

Institutional Money

Institutional allocations have preferred bigger managers. Most of the $18.2 billion in capital inflows since the second half of 2009 went to larger funds, Eurekahedge said in a report in October.

Managers that joined the expanding pool of billion-dollar hedge funds in Asia last year included Dymon Asia Capital in Singapore, and Azentus Capital Management Ltd., the Hong Kong- based fund set up by former Goldman Sachs Group Inc. proprietary trader Morgan Sze that raised about $2 billion.

Dymon, which started in 2008 with capital from Tudor Investment Corp., plans to limit the size of its Dymon Asia Macro Fund at $2.5 billion, after assets rose to about $2.1 billion in December, Willy Ballmann, the firm's chief operating officer said. The fund gained about 20 percent after fees last year, he said.

"In Asia, we have a small number of managers that have been able to generate positive returns during the 2008 crisis and since then," said Stephane Pizzo, founder of Singapore- based hedge-fund investing firm Lotus Peak Capital Pte. "Those should be able to survive and possibly thrive in 2012, which might be even more challenging than this year."

Fortress Asia

Money is also flowing to the Asian desks of global hedge funds. Global-mandated funds accounted for 19 percent of the assets in Asia's hedge-fund industry as of August, compared with 12 percent in 2007, according to Eurekahedge.

Fortress Investment Group LLC, the New York-based manager of buyout and hedge funds, started an Asia-focused macro fund in March that gained 0.4 percent through November, according to a filing with the Securities and Exchange Commission. The firm didn't disclose the size of the Fortress Asia Macro Fund.

Artradis, which made $2.7 billion for investors as markets seesawed in 2007 and 2008, said in January last year it would close and return money to investors in its AB2 Fund and Barracuda Fund. Artradis managed about $800 million as of Dec. 31, 2010, compared with assets of almost $5 billion in 2008.

Traders who used to profit from price swings are struggling as record stock market volatility perseveres, making it more expensive to employ the strategy. Swings in the Chicago Board Options Exchange Volatility Index rose to a record in the second half of last year.

'Poor Risk-Reward'

"Playing capital markets has been a poor risk-reward," said Stephen Diggle, who set up Vulpes Investment Management after liquidating Artradis's volatility funds. "There has been no obvious easy opportunity. Governments have intervened a lot everywhere."

Singapore-based RSR Capital, set up by a group of derivatives traders from firms including Goldman Sachs Group Inc. and Barclays Capital, is returning most of outside investors' money in its hedge fund as bets on volatility are "not profitable enough," said Serge Handjian, one of the partners. RSR will continue to trade mainly the founding partners' money as it shifts its investment strategy.

"The implied value of those options is so high that the expected returns are not enough to offset the price that you pay," Handjian said.

RSR plans to open its Caerus Arbitrage Asia Fund to a small group of investors, said Handjian. The fund has been flat since it started trading in August 2010, and had assets of $62 million in May before client withdrawals, including a "decent amount" in July, ahead of the market's collapse in August, he said.

'Disappointing Performance'

K.H. Paik, the Singapore-based chief investment officer of CoreVest, decided to close down his fund at the end of last year and return money to investors after setting up the business 13 years ago, according to an e-mail to investors in December.

"Disappointing performance the last few years and market conditions that are not optimal for our strategy are the main reasons for the fund's closure," said the firm, which manages an Asian long-short equity fund focusing on Korea.

Boyer Allan Investment Management LLP told investors in December that it will liquidate most of its funds and shut the business set up by Jonathan Boyer and Nicholas Allan in 1998, said a person with knowledge of the matter.

Funds shut include the $235.9 million flagship Boyer Allan Pacific Fund, said the person who asked not to be identified because the information is private. The fund lost 19 percent in the first 11 months of 2011, according to data compiled by Bloomberg.

Kilometer, Pangu

The Pacific Fund returned more than 15 percent a year on average in its 13-year history, based on data in a May document distributed to potential investors. James Sweeney, Boyer Allan's Hong Kong-based chief executive officer, declined to comment

Kilometre Capital founder Chris Hsu decided to return investors' money in the fourth quarter because of health reasons, said a person with knowledge of the matter who declined to be identified as the information is private.

The Hong Kong-based hedge fund, which started trading in May 2010 with backing of Paloma Partners LLC and oversaw as much as $300 million, returned 47 percent in 2010 and lost 7 percent in the first five months of last year, said two people with knowledge of the matter. Steven Ho, Kilometre's operations manager, declined to comment.

Partners' Money

Pangu Capital shut down Pangu Opportunity Fund, whose assets peaked at $23 million, after 22 months, said a person with knowledge of the matter. Pangu decided to return all capital in the fourth quarter after its main investor asked to redeem a large portion of its money in October, having added capital in August, the person said. After September, the investor and the fund's co-managers also differed on investment philosophies, the person said

The Greater China-focused fund generated positive returns in 2011 through August, said the person, who asked not to be identified because the information is private.

LionRock Capital Pte, run by a founding partner of TPG-Axon Capital Management LP, said in July it would stop seeking outside investors for its hedge fund that will focus on managing the partners' money. The Singapore-based multistrategy fund had about $100 million of assets under management from $75 million of initial capital when founder Hari Kumar started it in 2009.

Nine Masts

"For smaller managers it's simply a question that they cannot afford the opportunity cost of continuing," said Paul Smith, chief executive officer of Hong Kong-based asset manager and hedge-fund distributor Triple A Partners Ltd. "I am pessimistic on asset raising. I can't see that things will improve. There is too much global uncertainty which keeps investors on the sidelines."

Still, Hong Kong-based Nine Masts Capital Ltd., set up by two former employees of Deutsche Bank AG's Saba proprietary trading desk and an ex-DKR Oasis Management Co., was one smaller hedge fund that managed to grow assets during 2011.

Nine Masts stopped accepting new money in September after assets hit $500 million, almost five times the beginning of the year figure, said a person with knowledge of the matter. It is expected to post a high single-digit return for 2011, the person said, asking not to be identified as the information is private. Elaine Davis, Nine Masts' chief operating officer, declined to comment.

"Both sizes of manager are finding asset raising in the current climate impossible unless their investment performance has been exceptional," said Triple A's Smith. "Business conditions have never been more inimical."

To contact the reporter on this story: Netty Ismail in Singapore nismail3@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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(BN) Hu Says West Is Trying to Divide China by Using Ideology, Cultural Weapons

There is a ghost in that cupboard. It comes out every night and haunts me.

Bloomberg News, sent from my iPad.
Hu Says West Is Trying to Divide China by Using Cultural Weapons

Jan. 3 (Bloomberg) -- The West is using cultural means to divide China, which needs to be alert to this threat, President Hu Jintao said in a Communist Party magazine.

"International forces are trying to Westernize and divide us by using ideology and culture," Hu wrote in an article in Qiushi. "We need to realize this and be alert to this danger."

Many countries, especially Western powers, are attempting to expand their influence through cultural hegemony, and China must deepen and promote its own values of "socialism with Chinese characteristics," Hu wrote in the article, which was published on the government's website on Jan 1. China needs to strengthen its cultural values as it faces possible challenges from the West, he said.

Hu's comments are part of a wider push by the party to reassert its influence over Chinese culture and society, including in television and the arts. China's leaders are grappling with the best way to manage Twitter-like social-media sites such as Sina Corp.'s Weibo service that are hard for government censors to control.

The Communist Party's Central Committee said it will supervise the world's biggest online community more closely, promote "constructive" websites and punish the spread of "harmful information," according to a communique from its Oct. 15-18 meeting released by the official Xinhua News Agency.

Members of the party's Politburo visited web companies after a deadly train crash in July. Internet users criticized the government's handling of the crash and spread commentary and photos of the accident at odds with the official line.

Competitive Edge

The Central Committee's communique also focused on television, with the Communist Party vowing to "promote more fine literary and artistic works" in fields such as television, movies and photography.

That coincided with an announcement that new limits would be imposed on the number of "overly entertaining and vulgar" reality and talent shows aired on television. Starting this year, the nation's 34 satellite channels must limit themselves to two such programs every week, according to an Oct. 25 statement on China's State Administration of Radio, Film and Television's website.

In a globalized world in which people are exposed to many ideologies and values, the country with the most cultural influence will gain a competitive advantage, Hu wrote.

To contact Bloomberg News staff for this story: Liza Lin in Shanghai at llin15@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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Me & My Money Series: Charity the most important investment

If I had read this and listened 20 years ago, I would have shaved 5-10 years of time experimenting and making big money mistakes. 

Me & My Money Series: Charity the most important investment

Former top investment banker flies economy and discount airlines for business and pleasure so that he can use the money saved to help others.

By Joyce Teo, The Straits Times

Former top investment banker Michael Dee will bust all your ideas of what a typical banker should be.

The man does not own a car in Singapore and he flies economy and discount airlines everywhere, whether it is for business or pleasure.

‘I think of myself as a personal business and make the same decisions in my personal life as I do in my business life,’ he says.

Money is to him, he tells me, just a transference of value. ‘If I can transfer my money into an emotional connection, then it has a lot of value to me.’

Personal happiness has nothing to do with one’s portfolio. ‘Money can create dysfunction in families, conflict among nations, arrogance and a belief that monetary wealth means one’s life is better than another’s of less wealth.’

It should never control one’s compassion for others nor cloud one’s ability to do the right thing, says the 55-year-old.

Mr Dee flew economy more often at the peak of his earning power, which helped his company cut costs, ‘by hundreds of thousands of dollars a year’.

It was money he could use to improve other people’s lives. ‘There is no greater feeling than flying to Brazil in economy knowing that I can provide $10,000 or more to a charity.’

And charity, he says, should be thought of as your most important investment.

Mr Dee has clocked 26 years at Morgan Stanley and ‘while the economic advantages were good, it was never about the money, it was about loving what you do’. He was also with Temasek Holdings for 2 1/2 years.

A United States citizen, he has spent 18 of the past 30 years working overseas. Now based in Singapore, he is an investor, a job which he says he has come to believe is ‘the world’s hardest profession, because everything affects the market and every day is different’.

Mr Dee is married to Shelly, 52, a housewife and philanthropist. They have four children – Matthew and Christopher, both 17, David, 15 and Diana, 12.

Q: Are you a spender or saver?

An investor. What I spend on, I look at as an investment of money and/or time. Money as a commodity to be spent or saved is a vastly overrated concept.

Time is the most important commodity people can consider, because you can’t save it and you don’t even know how much you have. If you don’t invest a given minute, it is a lost minute and they can add up.

What most affects people’s lives is when they realise how little time they have. Their value of time begins to change and they become more focused and discriminating.

Society needs to realise that there is a much greater return to be made investing in our youth than in our elderly years due to the compounding effect. The challenge is to extend people’s productive capacity as they age, so that the retirement burden does not fall heavily on youth as the population ages.

I spend on travel as my wife and family are inveterate travellers and love to see the world in all its glory to seek understanding and adventure. This summer, my three sons climbed Mount Kilimanjaro with two intellectually disabled Special Olympics athletes from Tanzania and Singapore, while my wife and daughter spent the week working with street children in Moshi, Tanzania.

Q: How much do you charge to your credit cards every month?

I have two credit cards, one in Singdollars and one in US dollars. I charge everything and collect frequent flier miles. I have never in 30 years had a balance on my credit card and never will. I carry very little cash but my wife is my ATM when I’m short.

Q What financial planning have you done for yourself?

Mostly it’s asset allocation, tax and estate planning, as there is global taxation for Americans. I get heartburn when I think of the taxes I have to pay while outside the US.

I am underweight fixed income and heavily weighted to high quality equities which are income generating. We have a few funds but generally the fees are too high to justify them. We also have a relatively high proportion of cash.

Exchange-traded funds (ETFs) are increasingly our choice for diversification, because of their low fees and liquidity. I also like high yielding non-financial, non-telecom stocks with a record of growing payouts, high cash balances and solid credit ratings, which can pay dividends out of free cash flow.

My wife, a Harvard Business School graduate, enjoys stock picking more than I do. As most relationship problems revolve around money, I prefer to focus on making it, keeping it and thus the bigger picture is my zone of focus.

My wife and I have life insurance mostly in a second-to-die policy as it reduces the cost substantially. Life insurance is just disaster insurance. It’s health insurance that has real value to me.

Q: What advice would you give to investors?

You should never let your money out of your sight or delegate your finances to a third party.

Do your homework, keep it simple with diversification, maintain liquidity and never trade on rumours. The rumours often come from insiders who are not trying to make you rich, or from complete idiots.

Smart money does not tell people specifically what they are doing.

Every child, teenager, young adult should be taught the value of compound interest in school. Saving as much as you can, as young as you can, is the hidden secret to wealth accumulation.

Other issues that are often overlooked are:

•fees drastically reduce returns over the long haul and should be minimised;

•taking less risk the older you get allows you to sleep better at night;

•asset allocation is more important than stock picking;

•growing and stable dividends are the most undervalued asset; and

•real estate returns are overrated because most people do not account for the very high leverage or believe that prices can go down (and they do).

Q: Moneywise, what were your growing-up years like?

I grew up in a small town outside Buffalo, New York. When I was young, my relationship with my dad was based on me working with him every weekend. He was an electrical contractor. He worked very hard, loved what he did and was a perfectionist. You could count on his work and in particular the bits you would never see. As I put on his tombstone, he was ‘A Great Guy’.

My fiercely independent mother is 84 and she has been teaching figure skating for over 60 years. Till today, she puts on her skates and goes on the ice to teach. She embodies all that is great about excellent teachers.

In the 1950s, the idea of working women and, in particular, an entrepreneurial woman, was virtually unheard on.

My parents knew the value of education and even though neither ever went to college, they drove me crazy drilling college into me. We never had much money and most of what my parents had went to my education. I graduated from the Wharton School of the University of Pennsylvania in 1981. They were both all about helping others and they taught me value and values. I hope I have lived up to their lessons.

I have one sister, Anne, who has Down syndrome, which is why I support the Special Olympics.

Q: How did you get interested in investing?

When I was young, I saved as much as I could in every tax deferred plan I could find. Because I started early, those plans are now worth many multiples of what I invested.

I learnt about the value of delayed gratification when I spent my summer savings as a 16-year-old on some fancy racing tyres for my car. They cost US$500 and were stolen a week after I had bought them.

Had I invested that money at a 10 per cent annual rate, I would have had US$22,000 today. My dad showed me the maths just to make the point about how I had wasted my money and it made a huge impression on me. Now, I keep it simple and look to invest in things I generally feel will have long-term value.

My very first stock was in a tin can packaging company called American Can. It later became Citibank. I sold it much later and made 30 times my investment.

Q: What property do you own?

We own very little real estate. I don’t like the debt that goes with it. If people had to pay cash for a house, they would save and be more rational in their finances.

I have had zero debt almost my entire life and have no interest in owing any bank any money. I would rather rent and invest my money.

For what a good class bungalow costs here, we could buy hundreds if not thousands of acres of the world’s most beautiful land in the US.

Q: What’s the most extravagant thing you have bought?

I lost my mind when I bought a Porsche in Singapore. I had driven one when I was 16 and always wanted one to relive that drive of my youth.

But driving in Singapore is boring and analogous to the garage as people treat their cars with the greatest of care. The real value and action was in Malaysia at the F1 track on the weekends. Fortunately I’m over that phase of my life, although I still keep my American Muscle car in Texas.

I bought the used Porsche for about $300,000, at a 35 per cent discount to the new price after its first owner had had it for six weeks, and I sold it for about the same price four years later.

Q: What’s your retirement plan?

Retirement is for the unimaginative or the lazy. No interest, thanks. (Former prime minister) Lee Kuan Yew is setting a fine example and raising the bar for everyone. At a minimum, as we get older we should give back to children of the disadvantaged, but never give up completely.

I am financially independent but still have the drive to develop businesses and people and to ensure the next generation has the opportunity to fund my efforts to help others.

The whole concept of old age has radically changed in the last 40 years and will continue to do so. Current retirement ages are far too low, given life expectancy and should be raised immediately.

At the same time, the concept of retaining older workers should change also. Companies could take out life insurance policies on workers to fund current health care costs, for example. Capital and labour are on a collision course as the population ages and pensions and government plans need to get in front of the curve.

Q: Home is now….

A rented five-bedroom house with a pool in the Bukit Timah area.

Q: I drive….

I take the taxi. I will not own a car in Singapore because it is the worst investment I can think of here (my wife has a used car for the kids). Singapore has one of the lowest tax regimes in the world until you buy a car, then it’s in the middle.

Most people drive their cars for about two hours a day, or 700 hours a year. It’s ridiculous when you consider the capital outlay and depreciating asset versus the annual cost and the opportunity cost of not investing it.

joyceteo@sph.com.sg

—————————————-

WORST AND BEST BETS

Q: What is your best investment to date?

It was the investment in the company I committed half my life to, Morgan Stanley. I joined when it was a private company with only 1,100 people.

I bought my first stock at a discount during the initial public offering, and sold a large portion of it in 2000 at $104 a share. I made more than 30 times my money.

Q: And your worst?

Without question, it was the energy giant Enron Corp. I love pipelines and it had been a great investment for decades.

My first shares were at about $5, and the stock rocketed, rising over 17 times. Enron collapsed in 2001, after a false accounting scandal erupted. Its stock price, which hit a high of US$90 per share in mid-2000, plunged to below $1 by the end of 2001.

(BN) Hedge-Fund Millionaire Diggle to Offer Farms, Introduce Life Sciences Fund

30.5m, with 30m of partners money => 500k of Other Peoples Money....the 3bn days are over..

Bloomberg News, sent from my iPad.

Hedge-Fund Millionaire Diggle Bets on Farms, Life Sciences

Dec. 28 (Bloomberg) -- Stephen Diggle, who co-founded a hedge fund that made $2.7 billion in 2007 and 2008, plans to open his personal farmland portfolio to investors and start a fund that will trade life-sciences companies.

Diggle will transfer the farm assets from his family office to Singapore-based Vulpes Investment Management, which he set up in April after liquidating his previous firm's volatility funds. Diggle's family also holds "significant stakes" in life sciences, including biotechnology companies, which will be moved to a fund he plans to set up next year, the 47-year-old said.

"Everything that we are investing in personally is available to investors," Diggle said in an interview. "We have got capital committed, we are focused on a number of things where we think there's a compelling opportunity to make money."

Diggle is widening his new firm's investments after starting a volatility fund in May and taking over the Russian Opportunities Fund and Testudo Fund from Artradis Fund Management Pte, which he and co-founder Richard Magides closed in March. Once Singapore's biggest hedge-fund manager, Artradis's funds, which sought to profit from price swings, lost $700 million as volatility declined in 2009 and 2010.

"The one thing I didn't want to do was to spend the rest of my life talking about how great 2008 was," Diggle said. "You have to move on and find new challenges. That's what gets you up in the morning."

Volatility Cost

Vulpes, which focuses on alternative investments, started its long Asian volatility and arbitrage fund, LAVA, on May 1 with $30.5 million, of which $30 million was the founding partners' money. The fund size has increased to about $50 million after some of Artradis's former clients returned to invest Diggle. The fund has gained 6 percent since May, he said.

LAVA seeks to produce returns that aren't correlated with the market by trading instruments that thrive on volatility, such as options, warrants, and convertible bonds. The fund uses strategies such as arbitraging or profiting from disparities in the price of similar securities simultaneously traded on more than one market, and tends to work well when markets go down.

"The cost of being long volatility on a daily basis as a buy and hold strategy is not going to make money in the next few years," Diggle said. "You have to be more deft in your timing and more selective in what you own."

Farmland Transfer

Diggle plans to transfer ownership of his farmland into a holding company, in which outside investors can hold shares, he said. Vulpes, which currently manages about $200 million, will own and operate the company. After buying farms in Uruguay and Illinois, as well as a kiwi-and-avocado orchard in New Zealand, he plans to pour money into Africa and eastern Europe as global food prices soar.

The value of farmland in the U.S. has probably gained 20 percent to 30 percent in the last two years, while Diggle's investments in Uruguay may have risen 50 percent as sheep and cattle prices almost doubled in Latin America this year, he said.

Agriculture would be the "single most interest opportunity over the next 10 to 20 years," Diggle said.

Vulpes favors investments in metals, energy and food, and "dislikes" government bonds, he said.

"Being long stuff in the ground is going to be a better place to be than holding pieces of paper," Diggle said.

The firm's Testudo Fund, which is heavily invested in precious metals and the mining industry, has gained 2.5 percent this year. The Russian Opportunities Fund has declined about 10 percent in the same period.

'Biggest Risk'

Governments and their policies represent the biggest threat to investors, he said. "The biggest risk will come from governments: government interference in markets, government debt and government manufacturing of paper money to pay off the debt," he said.

Diggle said he's focusing on "new exciting commercially viable technology" in the life sciences industry that will find cures for illnesses including cancer and Parkinson's disease.

"We certainly see a lot of interest by big pharma in small innovative biotechnology," Diggle said. "If we can find those small new exciting biotechnology companies before big pharma gets to them, there's a big uptick in terms of valuation if they can prove their work."

To contact the reporter on this story: Netty Ismail in Singapore nismail3@bloomberg.net .

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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One of the stupidest articles around.

What can you do? these people could turn to geniuses if you would pay them more instead of paying them like monkeys. 

THE INNOVATION ENGINE November 08, 2011, 2:28 PM EST

Three Types of People to Fire Immediately

Want a more innovative company? Get rid of these folks. Today

By G. Michael Maddock and Raphael Louis Vitón

“I wanted a happy culture. So I fired all the unhappy people.”
—A very successful CEO (who asked not to be named)

We (your authors) teach our children to work hard and never, ever give up. We teach them to be grateful, to be full of wonder, to expect good things to happen, and to search for literal and figurative treasure on every beach, in every room, and in every person.

But some day, when the treasure hunt is over, we’ll also teach them to fire people. Why? After working with the most inventive people in the world for two decades, we’ve discovered the value of a certain item in the leadership toolbox: the pink slip.

Show of hands: How many of you out there in Innovationland have gotten the “what took you so long?” question from your staff when you finally said goodbye to a teammate who was seemingly always part of problems instead of solutions?

We imagine a whole bunch of hands. (Yep, ours went up, too.)

These people—and we going to talk about three specific types in a minute—passive-aggressively block innovation from happening and will suck the energy out of any organization.

When confronted with any of the following three people—and you have found it impossible to change their ways, say goodbye.

1. The Victims
“Can you believe what they want us to do now? And of course we have no time to do it. I don’t get paid enough for this. The boss is clueless.”

Victims are people who see problems as occasions for persecution rather than challenges to overcome. We all play the role of victim occasionally, but for some, it has turned into a way of life. These people feel persecuted by humans, processes, and inanimate objects with equal ease—they almost seem to enjoy it. They are often angry, usually annoyed, and almost always complaining. Just when you think everything is humming along perfectly, they find something, anything, to complain about. At Halloween parties, they’re Eeyore, the gloomy, pessimistic donkey from the Winnie the Pooh stories—regardless of the costume they choose.

Victims aren’t looking for opportunities; they are looking for problems. Victims can’t innovate.

So if you want an innovative team, you simply can’t include victims. Fire the victims. (Note to the HR department: Victims are also the most likely to feel the company has maliciously terminated them regardless of cause. They will often go looking for someone—anyone—who will agree that you have treated them unjustly. Lawyers are often left to play this role. So have your documentation in order before you let victims go, because chances are you will hear from their attorneys.

2. The Nonbelievers
“Why should we work so hard on this? Even if we come up with a good idea, the boss will probably kill it. If she doesn’t, the market will. I’ve seen this a hundred times before.”

We love the Henry Ford quote: “If you think you can or think you cannot, you are correct.” The difference between the winning team that makes industry-changing innovation happen and the losing one that comes up short is a lack of willpower. Said differently, the winners really believed they could do it, while the losers doubted it was possible.

In our experience, we’ve found the link between believing and succeeding incredibly powerful and real. Great leaders understand this. They find and promote believers within their organizations. They also understand the cancerous effect that nonbelievers have on a team and will cut them out of the organization quickly and without regret.

If you are a leader who says your mission is to innovate, but you have a staff that houses nonbelievers, you are either a lousy leader or in denial. Which is it? You deserve the staff you get. Terminate the nonbelievers.

3. The Know-It-Alls
“You people obviously don’t understand the business we are in. The regulations will not allow an idea like this, and our stakeholders won’t embrace it. Don’t even get me started on our IT infrastructure’s inability to support it. And then there is the problem of ….”

The best innovators are learners, not knowers. The same can be said about innovative cultures; they are learning cultures. The leaders who have built these cultures, either through intuition or experience, know that in order to discover, they must eagerly seek out things they don’t understand and jump right into the deep end of the pool. They must fail fearlessly and quickly and then learn and share their lessons with the team. When they behave this way, they empower others around them to follow suit—and presto, a culture of discovery is born and nurtured.

In school, the one who knows the most gets the best grades, goes to the best college, and gets the best salary. On the job, the person who can figure things out the quickest is often celebrated. And unfortunately, it is often this smartest, most-seasoned employee who eventually becomes expert in using his or her knowledge to explain why things are impossible rather than possible.

This employee should be challenged, retrained, and compensated for failing forward. But if this person’s habits are too deeply ingrained to change, you must let him or her go. Otherwise, this individual will unwittingly keep your team from seeing opportunity right under your noses. The folks at Blockbuster didn’t see Netflix (NFLX)‘s ascendancy. The encyclopedia companies didn’t see Google (GOOG) coming. But the problem of expert blindness existed well before the Internet.

Two of our favorites from rinkworks.com: “This ‘telephone’ has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us.” —Western Union internal memo, 1876.

And “The wireless music box has no imaginable commercial value. Who would pay for a message sent to nobody in particular?” —David Sarnoff’s associates in response to his urgings for investment in the radio in the 1920s.

At one point in his career, Thomas A. Edison had dozens of inventors working for him at the same time. He charged each with the task of failing forward and sharing the learning from each discovery. All of them needed to believe that they were part of something big. You want the same sort of people.

You don’t want the victims, nonbelievers, or know-it-alls. It is up to you to make sure they take their anti-innovative outlooks elsewhere.

G. Michael Maddock is chief executive, and Raphael Louis Vitón is president of Maddock Douglas, an innovation consultancy that helps clients invent, brand, and launch new products, services, and business models. Maddock is author of the upcoming book Brand New: Solving the Innovation Paradox—How Great Brands Invent and Launch New Products, Services, and Business Models (Wiley, April 2011).

(BN) Paulson Gold Fund Said to Lose 10.5% in 2011 Even as Metal Heads for Gain

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Paulson's Gold Fund Said to Fall 10.5% in 2011 as Metal Rises

Dec. 23 (Bloomberg) -- John Paulson, the billionaire money manager mired in the worst slump of his career, lost 10.5 percent in his Gold Fund this year even as the metal heads for its 11th straight annual gain, according to people familiar with the fund's performance.

The fund, which invests in mining stocks and other gold- related securities, remains the best performer in Paulson's $28 billion fund family this year. His Paulson Advantage Fund, which seeks to profit from corporate events such as takeovers and bankruptcies, has fallen about 35 percent. The performance numbers for the two funds are from Dec. 28, 2010, through Dec. 20, 2011, and may not reflect returns for all shareholders, said the people, who asked not to be identified because the information is private.

Armel Leslie, a spokesman for Paulson, declined to comment on the firm's returns.

Paulson & Co., based in New York, has lost money this year on investments including Citigroup Inc., Bank of America Corp. and Sino-Forest Corp., the Chinese forestry company accused by short-seller Carson Block of overstating timberland holdings. Paulson, 56, cut the so-called net exposure in his main hedge funds to 30 percent last month and reduced bullish bets across all his funds.

Net exposure is calculated by subtracting the percentage of a hedge fund's short positions, or bets on falling securities, from its longs, or wagers on rising stocks and bonds.

Gold BUGS Index

Gold has climbed 13 percent this year, holding onto gains after peaking at $1,891 an ounce on Aug. 22. The 17-company NYSE Arca Gold BUGS Index fell 11 percent as investors fled equities amid the turmoil caused by the European sovereign-debt crisis.

Paulson was the largest holder of American depositary receipts in AngloGold Ashanti Ltd., the third-biggest gold producer. Paulson also owned shares or ADRs of Gold Fields Ltd., NovaGold Resources Inc., Randgold Resources Ltd., Agnico-Eagle Mines Ltd., Iamgold Corp., Barrick Gold Corp. and International Tower Hill Mines Ltd.

To contact the reporter on this story: Katherine Burton in New York at kburton@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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(BN) IPad Beat on Power, Speed by New Non-Clones: Rich Jaroslovsky

Ive no idea what he is trying to say. 

Bloomberg News, sent from my iPad.

IPad Beat on Power, Speed by New Non-Clones: Rich Jaroslovsky

Dec. 22 (Bloomberg) -- We're finally beginning to see some distinctive 10-inch Android tablets that are more than iPad knockoffs.

Earlier this year, Sony released its wedge-shaped Tablet. Now, two more entries provide features and functionality beyond Apple Inc.'s offerings: Asustek Computer Inc.'s Eee Pad Transformer Prime and the Droid Xyboard 10.1 from Motorola Mobility Holdings Inc. and Verizon Wireless.

Granted, every Android tablet comes at an automatic disadvantage to the iPad: Unlike in wireless phones, where the Google Inc. operating system is attracting a rapidly growing number of applications, the marketplace for tablet apps remains thin. Meanwhile, the iPad has more than 140,000 apps, and they tend to be higher-quality.

A prerequisite for luring developers is getting more Android tablets into users' hands. And that means giving customers more reasons to buy them.

The Transformer Prime offers several. It is as pretty a tablet as you're likely to find anywhere. It weighs about 1.3 pounds and measures less than a third of an inch thick, making it marginally thinner and lighter than the iPad 2. The metallic back has a cool, spun finish marred only by the ill fit of the Apple-style multipin cable used for charging the device. The tablet's angled edges leave even more of the connector's metal exposed than does the iPad's, which has a similar issue.

Paperclip Rescue

My time with the Transformer Prime didn't start auspiciously. The unit from Asus appeared to charge normally but refused to boot. Eventually, with the help of a handy paperclip, I was able to reset it.

Under the hood, the Prime is powered by Nvidia Corp.'s Tegra 3 quad-core microprocessor. A chip that powerful is overkill for many tablet tasks, like reading e-books. But if you play games, you'll quickly gain an appreciation, as I did through many sets of Zen Pinball and frantic races in Riptide GP. The play was fast and fluid and graphics on the 10.1-inch screen were little short of stunning.

All that, of course, requires battery power and a lot of it. The Transformer does pretty well on that score. I got more than seven hours on a charge, using it to surf the Web, check e- mail and watch a movie. While that's considerably less than on an iPad, the Transformer also offers an option to downshift the computer into two lower-power modes to extend battery life.

Transforming the Transformer

There's one other way to keep things going: buying and attaching the optional $150 metallic keyboard that gives the Transformer Prime its name, converting it into a netbook-PC replacement. The keyboard has its own six-hour battery, plus an SD expansion-card slot and a USB port. Using the keyboard and intense battery management, Asus claims you can coax up to 18 hours of use between charges.

The Transformer Prime comes in two Wi-Fi-only models, one with 32 gigabytes of storage for $500, the other with 64 gigabytes for $600 -- both $100 cheaper than the comparable iPads. They run "Honeycomb," Google's first-generation tablet operating system. An upgrade to the new version of Android, "Ice Cream Sandwich," is promised. If you're looking for an iPad alternative, you can't do much better.

Speed Demon

Unless, that is, your most important criterion for a tablet is how fast it connects to the Internet when you're on the move or don't have a Wi-Fi connection. In that case, the Droid Xyboard 10.1 -- known outside the U.S. as the Xoom 2 -- is the way to go.

The Droid Xyboard runs on Verizon's LTE 4G network, the fastest wireless data network out there, and it is mighty swift: Using Ookla's SpeedTest app, I regularly registered download speeds of 10 to 20 megabits per second in the San Francisco Bay Area.

That's faster than many home broadband connections, and it makes the Xyboard roar when it's engaged in Internet-intensive tasks like surfing the Web, downloading apps or streaming movies and videos. Unlike some LTE phones, battery life isn't terrible.

I got about six hours of continuous use on the high-speed Verizon network. You can expect to do better in normal use, since I was deliberately trying to stress the battery by doing things like streaming videos and not taking advantage of Wi-Fi networks. And at 1.3 pounds, the Xyboard is right in line with the Transformer Prime and iPad 2.

Unfortunately, several other aspects of the Xyboard are less satisfying. Although it also runs the Honeycomb operating system (and will be upgradeable), it feels noticeably more sluggish than the Transformer when it comes to things like scrolling through apps or even waiting for the screen to reorient itself when you turn the unit sideways.

Tacky to Touch

Perhaps some of the difference stems from its less powerful dual-core processor -- but I've used plenty of tablets with dual-core processors that felt zippier than this.

Matters aren't helped by a water-repellent coating Motorola has added to the Xyboard's touchscreen. It's supposed to help protect against accidental spills, but I found it a little tacky to the touch.

Then there's the price. The Xyboard starts at $530 for a 16-gigabyte version, up to $730 for 64 gigabytes. At first glance, that seems to be $100 cheaper than the comparable iPad 2 models. But there's a big difference: While Verizon and AT&T Inc. allow users of 3G-equipped iPads to decide month by month whether they want service, Verizon requires Xyboard buyers to sign a two-year contract. Otherwise, the price zooms to an uncompetitive $700 for even the least expensive model.

At those prices, the Droid Xyboard's appeal may be limited to those with a real need for speed. Still, being the fastest tablet -- or in the case of the Transformer Prime, the most powerful -- counts for something.

(Rich Jaroslovsky is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the reporter on this story: Rich Jaroslovsky in San Francisco at rjaroslovsky@bloomberg.net .

To contact the editor responsible for this story: Manuela Hoelterhoff at mhoelterhoff@bloomberg.net .

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(BN) BlueCrest’s Platt Says Most European Banks Insolvent, Debt Crisis Growing

If he talks less maybe he will make more than his 5%..

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BlueCrest's Platt Says European Banks Insolvent, Crisis Growing

Dec. 15 (Bloomberg) -- Michael Platt, the founder of the $30 billion hedge fund BlueCrest Capital Management LLP, said most of the banks in Europe are insolvent and the situation will worsen in 2012 as the region's debt crisis accelerates.

"I do not take any exposure to banks at all if I can avoid it," Platt said in an interview on Bloomberg Television today. If European lenders had to mark their books to markets every day in the same way hedge funds do, most would be proven "insolvent," he said.

BlueCrest is pouring money into U.S. Treasuries and short- term German debt because of concerns about market volatility and counterparty risk, Platt said. BlueCrest Capital International, the fund he personally manages in Geneva, has risen about 5.6 percent in 2011, posting gains when hedge funds broadly are on pace to have their second-worst year ever.

Platt said he's disappointed in the measures that came out of last week's meeting of European leaders, saying they were too focused on budget cuts. Austerity will ultimately lead to slower growth in Europe, making the region's debt woes even worse, he said. A solution will come when the European Central Bank pumps significant amounts of money into economies, something it lacks a mandate to do, Platt said.

"We need much more radical measures," he said. The continuing crisis will make European nations look "more like Greece," he said.

Brussels Agreement

The debt crisis began two years ago in Greece and has spread to Ireland, Portugal, Italy and Spain. At last week's meeting in Brussels, European leaders proposed their fifth attempt at a solution since May 2010, agreeing on a closer fiscal union and a willingness to add 200 billion euros ($260 billion) to International Monetary Fund coffers.

While hedge funds have had bearish views on Europe, they've struggled to make money on the crisis. Global market volatility has prompted hedge funds to decline 4.4 percent on average this year through November, according to Chicago-based Hedge Fund Research. The industry lost a record 19 percent in 2008.

Hedge funds have struggled because there hasn't been an obvious trend and there have been periods of bullishness that have confused traders, Platt said.

"The process has been unfolding over two years," he said. "It has been extremely gradual and there's been a lot of optimism that a solution will be found."

To contact the reporters on this story: Stephanie Ruhle in New York at sruhle2@bloomberg.net Jesse Westbrook in 東京 at jwestbrook1@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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(BN) Paulson’s Bright Spot Amid Slump May Fade as Gold Drops to Five-Month Low

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Paulson's Bright Spot May Fade as Gold Plunges to Five-Month Low

Dec. 15 (Bloomberg) -- John Paulson, the hedge-fund manager enduring the worst year in his career, may be facing a final blow from this month's selloff in gold, an investment that mitigated losses at his $28 billion firm earlier in 2011.

The SPDR Gold Trust exchange-traded fund, of which Paulson was the largest shareholder as of Sept. 30, fell 10 percent from the end of last month, and all eight of his gold stocks slumped with a 9.6 percent decline for bullion. The declines would translate into a $672.1 million paper loss on those securities for Paulson & Co., assuming his holdings haven't changed since the end of the third quarter, when the firm reported its equity stakes in a regulatory filing.

Until this month, gold had been the bright spot for Paulson & Co. clients, who can choose to invest in gold-denominated shares of the hedge funds. Gains in bullion had alleviated losses of 46 percent, in the dollar share class, for one of the firm's biggest funds this year through November. Paulson also offers a dedicated Gold Fund, its best performer this year.

"With the dramatic moves of gold and the recent decline from its peak, I think some investors will be deciding whether they want to continue to invest in that share class," said Don Steinbrugge, managing partner of Agecroft Partners LLC, a Richmond, Virginia-based firm that advises hedge funds and investors.

Scaling Back

Paulson, who turned 56 yesterday, has lost money this year on investments including Citigroup Inc., Bank of America Corp. and Sino-Forest Corp., the Chinese forestry company accused by short-seller Carson Block of overstating timberland holdings. Paulson cut the so-called net exposure in his main funds to 30 percent last month and reduced bullish bets across all his funds on stocks including gold companies.

Net exposure is calculated by subtracting the percentage of a fund's short positions, or bets on falling securities, from its longs, or wagers on rising stocks and bonds.

Armel Leslie, a spokesman for Paulson, declined to comment on the firm's potential gold-related losses.

Paulson & Co. held shares of SPDR Gold Trust and eight gold companies in the third quarter, according to its 13F filing. The firm, which uses the ETF to denominate the gold share classes of his funds, pared its stake in the gold trust to 20.3 million shares from 31.5 million as of June 30.

The firm was the largest holder of American depositary receipts in AngloGold Ashanti Ltd., the third-biggest gold producer. Paulson also owned shares or ADRs of Gold Fields Ltd., NovaGold Resources Inc., Randgold Resources Ltd., Agnico-Eagle Mines Ltd., Iamgold Corp., Barrick Gold Corp. and International Tower Hill Mines Ltd.

200-Day Average

Gold's plunge to a five-month low sent it below its 200-day moving average for the first time in almost three years, signaling more declines to traders who follow technical analysis. Bullion fell below $1,600 an ounce yesterday to settle at the lowest level in five months as a stronger dollar curbed demand for the metal as an alternative asset. Gold futures for February delivery dropped 4.6 percent to settle at $1,586.90 at 1:44 p.m. on the Comex in New York, the lowest closing level since July 13. The 200-day moving average was near $1,613.

The metal was up about 12 percent in 2011 and still heading for an 11th straight annual gain, the longest winning streak in at least nine decades. It has outperformed commodities, global equities and Treasuries.

11% Gain

The Paulson Gold Fund, which can buy derivatives and other gold-related investments, rose 11 percent in this year's first 11 months.

Paulson's biggest funds, Advantage Plus and Advantage, seek to profit from corporate events such as takeovers and bankruptcies and have $11 billion in combined assets. The Advantage Plus Fund fell 46 percent in 2011 in its dollar shares and 29 percent in its gold shares. The Advantage Fund lost 32 percent in its dollar class and 13 percent in its gold class.

The Paulson Partners Enhanced Fund, which invests in the shares of merging companies, decreased 18 percent in its dollar class and 0.9 percent in its gold class.

The Recovery Fund, which invests in assets Paulson believes will benefit from a long-term economic upturn, declined 28 percent in its dollar shares and 12 percent in its gold class. Paulson has been betting on a U.S. economic recovery by the end of 2012.

Paulson's Credit Opportunities Fund dropped 18 percent in its dollar shares and gained 0.3 percent in its gold shares.

To contact the reporter on this story: Kelly Bit in New York at kbit@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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(BN) Credit Agricole to Report a Loss for Full Year, Eliminate 2,350 Positions

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Credit Agricole to Report a Loss for 2011, Cut 2,350 Jobs

Dec. 14 (Bloomberg) -- Credit Agricole SA, France's second- largest bank by assets, said it expects to report a loss for 2011 and will eliminate 2,350 jobs at its investment-banking and consumer finance units.

Credit Agricole will book about 2.5 billion euros ($3.24 billion) in writedowns on investments, including its stake in Spain's Bankinter SA and Banco Espirito Santo SA of Portugal, the bank, based outside Paris, said in an e-mailed statement today.

The company scrapped its dividend for 2011 and said it can't confirm its 2014 goals because of "the lack of visibility on the economic and financial climate." The lender joins BNP Paribas SA and Societe Generale SA in reducing corporate- and investment-banking staff.

Moody's Investors Service cut the credit ratings of Credit Agricole, BNP Paribas and Societe Generale last week, citing funding constraints and deteriorating economic conditions amid Europe's two-year-old debt crisis. Moody's lowered the long-term debt ratings of Credit Agricole and BNP Paribas by one level to Aa3, the fourth-highest investment grade.

To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at

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(BN) Leslie’s James Caird Will Liquidate Main Hedge Fund, Investor Letter Shows

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Ex-Moore Trader Leslie to Liquidate $1.6 Billion Hedge Fund

Dec. 14 (Bloomberg) -- James Caird Asset Management LP, the London-based firm run by former Moore Capital Management LLC trader Tim Leslie, plans to liquidate a $1.6 billion credit hedge fund after eight years.

"I have been frustrated by our performance during the current year," Leslie wrote today in a client letter, a copy of which was obtained by Bloomberg News. He said he plans to start giving money back to investors in the JCAM Global Fund in January.

The JCAM fund lost 8.9 percent for 2011 through November, according to a person familiar with the matter, who asked not to be identified because the information is private. Hedge funds have lost an average 3.8 percent this year, according to data compiled by Bloomberg.

Leslie joins an increasing number of money managers who've shuttered hedge funds in recent months after Europe's debt crisis roiled markets and limited investment opportunities. The number of funds liquidating in the third quarter rose to 213, the worst three-month period for the industry since the first quarter of 2010, according to Chicago-based Hedge Fund Research. In the second quarter, 191 hedge funds shut.

Leslie attributed the losses to "poor liquidity and the unfolding crisis in financial markets." He said the lack of market liquidity is "structural" and not something that will go away any time soon. As a result, he plans to start a smaller hedge fund with a "narrower trading focus," according to the letter.

New Hedge Fund

The new fund will start next year and be managed by Robert Miller, who has worked with Leslie since 2003, according to the letter. Leslie seeks to raise $500 million for the new fund and cap assets at about that level, the person said.

Leslie wasn't available to comment, according to a spokesman for James Caird.

Leslie started the JCAM Global fund in 2003 while trading for Moore, the New York-based firm founded by Louis M. Bacon. He left Moore in 2008 and continued managing the JCAM fund at his new firm. Moore is an investor in the JCAM fund.

James Caird also manages two other hedge funds, the $150 million Vintage II fund and the $70 million Mortgage Opportunities fund. The firm will continue running those two funds, the person said.

To contact the reporters on this story: Jesse Westbrook in london at jwestbrook1@bloomberg.net Saijel Kishan in New York at skishan@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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(BN) Clinton Offers Path to Ease Myanmar Sanctions, Hails Opposition’s Suu Ky

A joke isn't it? Blessed by US and lift sanctions and get aid of 1.2m from US and investments from (bankrupt ) western countries.  Currently $25bn invested by china Thai and others.....

Clinton Offers Path to Ease Myanmar Sanctions, Hails Suu Kyi

Dec. 3 (Bloomberg) -- U.S. Secretary of State Hillary Clinton laid out a path to ease sanctions during a trip to Myanmar as she aimed to embolden reformers trying to roll back five decades of military rule.

Clinton met separately with Myanmar's president, Thein Sein, and its most prominent dissident and democracy icon, Aung San Suu Kyi, during her three-day visit, telling both that the U.S. stands ready to lift punitive measures if the government builds upon moves to grant greater political freedoms. Suu Kyi, who Clinton called an "inspiration," said the visit may pave the way for a "new future" in Myanmar.

"I am cautiously hopeful," Clinton told reporters in Yangon yesterday before departing. "Reformers both inside and outside the government have our support, and it will increase as we see actions taken that will further the hopes and aspirations of the people."

Clinton's visit may help ease the international isolation of Myanmar, one of Asia's poorest countries, where Internet and phone usage is sparse and cash is required for most transactions. Thein Sein has released hundreds of political prisoners, eased censorship and started a dialogue with Suu Kyi since his junta-backed party won an election last year to end five decades of military rule.

"This will be the beginning of a new future for all of us provided we can maintain it," Suu Kyi said before embracing Clinton yesterday on the veranda of the lakeside home, where she spent 15 years under house arrest. "Because of this engagement, our way ahead will be clearer and we will be able to trust that the process of democratization will move forward."

U.S. Assistance

Clinton said the U.S. would provide assistance to groups providing microcredit, health care, English-language training and help for land-mine victims. The programs will cost the U.S. $1.2 million, according to an administration official who briefed reporters on condition of anonymity.

Clinton's "confidence-building measures" may help reformers come forward, said Derek Tonkin, a former U.K. ambassador to Vietnam, Thailand and Laos and now chairman of Network Myanmar, a U.K.-based group that promotes reconciliation.

"There are probably many people sitting on the fence, wondering what they ought to be doing," Tonkin said of reform- minded members of the government. "What she has done is very important. The longer this process is maintained the more likely that the changes that we've seen will be sustained and in due course be irreversible."

Market Access

A political breakthrough would allow U.S. and European companies greater access to a market of 62 million people who are dependent on neighbors China, India and Thailand to grow one of Asia's smallest economies. Those countries poured more than $25 billion into ports, power plants and pipelines to capitalize on Myanmar's rich natural resources and strategic location on the Indian Ocean.

U.S. sanctions against Myanmar, formerly known as Burma, have been tightening since 1988, when President Ronald Reagan suspended aid and banned arms sales after soldiers killed about 3,000 student protesters, according to an estimate by Human Rights Watch. A series of congressional acts and presidential orders since then have banned imports, restricted money transfers, curbed aid money, frozen assets, prevented engagement by the World Bank and other agencies and targeted jewelry with gemstones originating in Myanmar.

Easing Sanctions

Before President Bill Clinton banned new investment in 1997, boycott threats prompted U.S. companies such as PepsiCo Inc., Levi-Strauss & Co. and Apple Inc. to leave Myanmar. Chevron Corp., based in San Ramon, California, is one of the few U.S. businesses operating in the country, having obtained a 28.3 percent stake in a gas field and pipeline that stretches to Thailand through its 2005 purchase of Unocal Corp., which made its investment prior to the 1997 ban.

Clinton told Thein Sein that the U.S. would loosen restrictions on engagement by the World Bank and the United Nations, she told reporters on Dec. 1. Other measures leading toward an end to sanctions, including an upgrade in diplomatic relations, would occur if Myanmar takes additional steps, such as releasing more than 1,000 political prisoners still behind bars, she said.

"We agreed that an important test of the government's stated commitment to reform and change will be the unconditional release of all prisoners of conscience," Clinton said after meeting with Suu Kyi.

Thein Sein told Clinton that his government would release more political prisoners, sever military ties with North Korea and seek new ways to ease violence with ethnic groups seeking more autonomy, according to a U.S. official speaking on condition of anonymity.

Political Freedom

At a Dec. 1 dinner with Clinton, Suu Kyi said the U.S. should support reformers in Myanmar's government and encourage officials who are still unsure to join them in fighting hardliners opposed to more political freedom, the official said.

Yesterday, Clinton and Suu Kyi strolled through the yard in front of her two-story paint-chipped house, where dozens of local and foreign journalists had gathered. During their meeting, Suu Kyi acknowledged opposition in some parts of the U.S. to engagement with Myanmar, and made the point that it was important to listen to voices inside the country, the U.S. official said.

Suu Kyi, 66, will run in an election for the first time after her party voted to rejoin the political process on Nov. 18. Last month, she said Thein Sein was "very genuine in his desire for the process of democratization."

The Nobel laureate called for international agencies to help improve health and education in Myanmar. She also said her country aims to maintain "good, friendly" relations with China.

"If we go forward together, I'm confident that there will be no turning back from the road towards democracy," Suu Kyi told reporters in a 10-minute joint appearance with Clinton. "We are not on that road yet, but we hope to get there as soon as possible with the help and understanding of our friends."

To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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(BN) Legg Mason’s Bill Miller Will Exit Main Fund After It Falls Behind Peers

Fall of a Titan...it could happen to anyone. 

Bloomberg News, sent from my iPad.

Legg Mason's Miller to Exit Main Fund After Falling Behind Peers

Nov. 17 (Bloomberg) -- Bill Miller, the Legg Mason Inc. manager known for beating the Standard & Poor's 500 Index for a record 15 years through 2005, will step down from his main fund after trailing the index for four of the past five years.

Miller, 61, will be succeeded by Sam Peters as manager of Legg Mason Capital Management Value Trust on April 30, the Baltimore-based firm said today in an e-mailed statement. Miller will remain chairman of the Legg Mason Capital Management unit while Peters will assume the role of chief investment officer.

Miller, known for picking stocks he deems cheap based on financial yardsticks such as earnings, became mired in the worst slump of his career as he wagered heavily on financial stocks during the 2008 credit crisis. Value Trust lost 55 percent that year as the S&P 500 dropped 37 percent, including dividends, prompting a wave of withdrawals. The fund's assets have plunged from a peak of $21 billion in 2007 to $2.8 billion as of Nov. 15, according to data compiled by Bloomberg.

Miller, who has been a manager of Value Trust since its 1982 inception, in 2010 named Peters, a former Fidelity Investments stockpicker who joined the firm in 2005, to become his co-manager and eventually his successor. Miller initially co-managed Value Trust with Ernie Kiehne, then took sole responsibility in 1990, the year before his winning streak started. Research firm Morningstar Inc. named him fund manager of the decade for his performance in the 1990s.

Betting on Recovery

As markets rebounded in 2009 and 2010, Miller bet the U.S. economy would return to its old strength by investing in financial stocks and consumer-oriented companies. The fund topped peers and the S&P 500 with a 41 percent return in 2009 as markets rebounded, only to fall behind benchmarks again last year with a 6.7 percent gain. Value Trust declined 5.5 percent this year through Nov. 16, trailing 60 percent of similar funds, according to data compiled by Bloomberg.

Over the past five years, the fund has fallen at an average annual pace of 9.6 percent, ranking near the bottom of his peer group.

The inability of famed stock pickers such as Miller to protect investors from the market declines has spurred withdrawals from actively managed equity funds as clients shift money into bonds and index products.

Rival firms have revamped their portfolio-management teams this year in an effort to improve returns and win back customers. In September, Boston-based Fidelity named Jeffrey Feingold to run the Magellan Fund, replacing Harry Lange after the stock fund trailed 85 percent of competitors over the previous five years.

Miller worked in the research unit of Legg Mason before being named portfolio manager of Value Trust. He earned an economics degree from Washington & Lee University, where he graduated in 1972. After graduating, Miller served as a military intelligence officer overseas and then pursued graduate studies in philosophy in the Ph.D. program at Johns Hopkins University.

To contact the reporter on this story: Sree Vidya Bhaktavatsalam in Boston at sbhaktavatsa@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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(BN) Biggest Oil Find in Decades, Kashagan Becomes $39 Billion Cautionary Tale

Will mongolia go this way too?

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Biggest Find in Decades Becomes $39 Billion Cautionary Tale

Nov. 17 (Bloomberg) -- After 11 years and $39 billion of investment, Exxon Mobil Corp., Royal Dutch Shell Plc and their partners have yet to sell a drop of oil from what was touted as the world's biggest discovery in four decades.

Centered on a man-made island 70 kilometers (44 miles) from Kazakhstan's coast, the Kashagan project is just months away from completion, $15 billion over budget and 8 years behind schedule. As the milestone of first oil nears, the Kazakh government is pressuring the group for a commitment on an even- bigger second phase, a project the oil companies are undecided on and one analyst says may not make money.

"The biggest worry is whether the project can ever be profitable given the huge cost escalation and start-up delays," said Julian Lee, a senior analyst for the Centre for Global Energy Studies in London. It may be "impossible for investors to earn a return on any investment in a second phase before their contract for the field expires" in 2041.

Kashagan, which may hold enough oil to supply the world for six months, has become a cautionary tale for oil companies worldwide as they spend an estimated $20 trillion through 2035 finding supplies in ever more difficult places. Expenses mounted as engineers underestimated the complexity of drilling under a region of the Caspian Sea that's frozen almost half the year. The government accused the partners, which are allowed to recoup spending before sharing the oil, of inflating costs.

'Colossal' Work

Nursultan Nazarbayev, Kazakhstan's leader-for-life, toured Kashagan in September and declared it a "colossal" work defining his 20-year rule since the Soviet Union's collapse, which included building a new capital city in the middle of the country's steppe. When the oil project starts production it will be a milestone for the Central Asian republic of 16.5 million that's four times the size of Texas.

The project is vital to Nazarbayev because the country relies on oil for 18 percent of gross domestic product and is rebuilding the economy after a devastating banking crisis. Kazakhstan's national oil company believes expansion can be achieved by 2017. The partners in the project aren't so ready to rush in.

"We will finish phase one and then we will look at phase two afterwards," Peter Voser, chief executive officer of The Hague-based Shell, said in an interview at the Group of 20 Summit in Cannes, France. "It's not immediate."

Christophe de Margerie, CEO of France's Total SA, echoed his sentiments, saying "let's start Kashagan one" when asked about prospects for the second phase.

Lethal Concentration

Kashagan has proved potentially lethal as well as complicated. The crude oil, locked 4,200 meters (2.6 miles) below the seabed in a highly pressurized reservoir, has a high concentration of poisonous "sour gas," according to North Caspian Operating Co., or NCOC, the venture formed to manage the project.

Gas sensors dot the island, scanning for any leaks of the vapor, which has a 15 percent concentration of flammable hydrogen sulfide. Weekly emergency drills are carried out with the 5,500 people living and working on the biggest of five islands. That number will drop to about 250 when the first phase becomes operational.

The project's structures are wrapped in impermeable membranes to keep contamination from the Caspian, home to seals and caviar-bearing sturgeon, and surrounded by barriers to fend off ice. The water at the site is only 3 to 6 meters deep and with low salinity and winter temperatures below minus 30 degrees Celsius (minus 22 Fahrenheit), the northern Caspian Sea freezes for almost five months of the year.

Main Partners

The geology, islands and ice and have inflated costs for the first phase to $39 billion from $24 billion estimated by the government in 2008.

The prize for the five main partners is as much as 252,000 barrels of crude a day each from peak output once the second phase is running. That kind of production is growing harder to find worldwide as existing fields age and governments in the Middle East, Russia and Latin America reserve control for state companies.

Exxon, Shell, Total, Rome-based Eni SpA and KazMunaiGaz National Co., the state oil company, hold 16.8 percent of NCOC each. Houston-based ConocoPhillips has 8.4 percent and Japan's Inpex Corp. 7.6 percent.

'Big Beasts'

"The fact you had big beasts with equal shares in the project who were thus able to slow down areas where they had different views shows the Kazakh model hasn't been an optimal one," Stuart Joyner, an oil industry analyst at Investec Securities Ltd. in London, said. "The cost, complexity and delays have significantly impacted the economics."

The partners aim to find a "preferred" expansion plan by the end of this year that can be sent to the government for approval, according to NCOC.

"We don't have clarity either about the time-frame and cost or about the planned production volumes at the second stage," Kazakh Oil and Gas Minister Sauat Mynbayev said last month.

One option is building more islands, similar to the existing 1.9 square-kilometer (0.7 square mile) manned collection hub and four surrounding structures, NCOC said. The cluster was built from 7 million metric tons of rock carried 300 kilometers from an ice-free port to the south.

Makes Sense

Expanding Kashagan makes more sense economically than halting at the first phase, KazMunaiGaz's former Chief Executive Officer Kairgeldy Kabyldin said on Oct. 4, before he stepped down from the post. Still, there are signs that some partners may be willing to cut their losses.

ConocoPhillips Chief Financial Officer Jeff Sheets said on an Oct. 26 conference call that Kashagan is in the "general category of looking around our portfolio in places where we have maybe not long-term strategic good opportunities."

Oil & Natural Gas Corp., India's largest energy explorer, and GAIL India Ltd., the nation's biggest natural-gas distributor, have made a non-binding offer for Exxon Mobil's 16.8 percent stake in Kashagan, two people with direct knowledge of the matter said in June.

The stake may cost $6 billion, the Financial Chronicle said Oct. 17, citing an unidentified official involved in talks. D.K. Sarraf, managing director of ONGC Videsh Ltd., ONGC's overseas unit, declined to comment on Kashagan.

Exxon 'Speculation'

Exxon plans to remain a major investor in Kazakhstan and reports of a Kashagan exit are "speculation," Charlie Engelmann, a Houston-based spokesman for the Irving, Texas-based company said in a statement.

There are no talks about any partners leaving the project, Andrey Sukhov, Shell's regional head of taxation in Russia and the Caspian region, said Oct. 21.

Kashagan's delays already forced one reorganization of the project. In 2008, Rome-based Eni gave up operatorship of the project to the newly formed NCOC, which agreed to pay higher royalties to Kazakhstan.

"After many difficulties and setbacks, and in the face of ballooning costs and much acrimony and debate, the companies had to start over and reallocate roles," oil industry historian Daniel Yergin said in his book The Quest, published in September. "All of this has infuriated the Kazakh government, which is having to wait years longer that anticipated for Kashagan revenues to flow."

Double Production

Kashagan may initially produce 370,000 barrels a day, which will rise to 450,000 barrels a day by 2016, Kazakhstan's Mynbayev said Oct. 4. The expansion would more than triple that to 1.5 million barrels a day, according to President Nazarbayev. That's almost double Kazakhstan's current production of about 1.6 million barrels a day, about the same as Libya produced before the revolt against Muammar Qaddafi.

Completing the expansion as early as 2017 is only possible if the partners choose a plan by early next year, KazMunaiGaz National CEO Bolat Akchulakov said in an interview in Astana, the capital, on Oct. 25.

"Phase two won't move ahead simply, it will be later than people anticipate," Investec's Joyner said. "Kashagan will be a million-barrel-a-day field, but from a value perspective it's been disappointing."

To contact the reporter on this story: Nariman Gizitdinov in Almaty at ngizitdinov@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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