Monday, January 18, 2010

Pinera's Not Quite Insider Trading and he's Still a Billionaire

Pinera, who was a senator for eight years and ran unsuccessfully for president in 2005, ranked 701st among the world's billionaires in March with a net worth of $1 billion.. Yes, he still seems to be worth the same $1 billion for the past 5 or so years I've been able to track. Oddly, that doesn't square well with the fact that his LAN shares are worth around $1.5 billion. And with common sense finance that tells us our money doubles every 7 years or so("The easiest way to think of it is with the rule of sevens," said Jonathan Berk, assistant professor of finance at the Haas School of Business at the University of California at Berkeley. "If you put $100 into an account and compound it, it doubles every seven years." ) with simple interest compounding. So, how much is Pinera worth?It's obviously a well kept secret-Forbes has no idea either. I think they must call and ask "so, what can we put you down for this year Sebastian?" Research would be difficult and include adding up his stakes in television network Chilevision and his reported 13% of soccer club Colo-Colo.

Not to mention, it's still difficult because I'm sure he has become as clever at creating holding and shell companies as any wealthy American. But here's one. And from a 1999 article, I saw this "Through his investment holding Inversiones Bancard, Chilean businessman Sebastian Pinera increased his stake in Entel to 4.7%. Pinera is also expected to unite support from enough partners to be elected to the Entel board." And here's a little more: Chile, May 13, 2002Bancard, the investment company from Sebastian Pinera, has been purchasing shares in the stock market, pursuing a strategy to reinforce positions in the companies where it is already a shareholder. In 2001 Bancard has acquired a 2,79% stake in the electric company Colbun. It has stakes in Lan Chile and Parque Arauco, while it is appointed board members in Pampa Calichera, and Antarchi...

Here's the deal-this is one wealthy guy and his companies all have "stakes" in each other.
It's not only an extremely tangled web of holding companies within companies within companies owning each other, it's in English and Spanish!

So, about insider trading or as Mr. Pinera might put it "it just looks like it but really it's not"-sort of 'looks like a duck, quacks like a duck but no it's not" . On July 24, 2006, Chilean businessman, ex-senator and right-wing presidential candidate Sebastian Piñera bought three million shares of Lan Airlines, the company he partly owns. The following day, Lan released its first semester earnings: profits went up by 6.4 percent. The Superintendent’s Office for Assets and Securities (SVS) found Piñera’s activity suspect, and yesterday charged him with violating a law that would have precluded him from acquiring shares, after the agency concluded its six month investigation.

According to the SVS, the regulatory body charged with overseeing financial transactions in the stock and securities markets, Piñera’s purchase of the shares the day before the company revealed its good news breached Article 165 of a 1981, which prohibits anyone with privileged information from making trades on the basis of it.

Here's the part I love: "For his part, Piñera flatly denies any wrongdoing. He defended the purchase by arguing that it was not inconsistent with market tendencies; that the share price raised because it was known that Piñera had bought more stock; and that the actual date of the transaction was decided by a foreign broker."

So the share price didn't go up because earnings were up(and that is the general consensus in the financial biz-when earnings are way up, so goes the stock but never mind) the stock went up because Pinera bought more stock. All these years and we have had it backwards-just buy what "they" buy. And his other defense was that the stock was bought by a "foreign broker". How interesting but I don't guess we'll ever know where the stock was held. And because he is Chilean, the SEC can't touch him, I'd guess. And their Chilean counterpart has to keep track of holdings here and there. Not even possible.

So, he bought 3 million shares but I can't find how much he made. Was it the Chilean stock market or the US market? So I can't research the price he paid or the price history after the earnings report came out. The fine was $680,000 to $700,000 USD depending on the account you read. The fine would be in Chilean pesos(chp) so you have the currency exchange rate to contend with.

And how are international companies and their holding companies dealt with at all? I think abolishing holding companies would be a start so we can see who owns what-for real.

Note: I see when I published. I somehow lost all my links-and there are many! I will work to get them back on.

Sunday, January 17, 2010

The 2010 Chile Presidential Election-More Thoughts

First, my opinions in regards to some interesting questions from a commenter-and ones that others may also have.

"Why do you think the current candidate Frei isn't running with high poll numbers like Bachelet's?"

Michelle Bachelet is extremely smart and likable, a good politician. Frei is...well. pretty boring and was President before(from 1994 to 2000) Look for Bachelet to run again after this 4 year term(you can run again but not consecutively here). Frei will continue policies put forth by Bachelet. So it's the old Frei but with someone else's good ideas. And President Bachelet has been fairly quiet in her support until recently, which is her character-she has never mentioned in public(to my knowledge) the well known fact that her father was killed under Pinochet-as was Frei's father and MEO's father.

"Why is the conservative Pinera doing so well?"

People want change even when they don't know what that change might be. And I think many think a wealthy man like Pinera as President means this translates to their own future wealth. I have heard comments that a wealthy man doesn't need money and therefore won't be greedy(in that case they should look to the US and Pinera's insider trading-and maybe the bank of Talca)Pinera's best issue was crime(and Bachelet's weakest). They are trying to change the system here-rights to trial etc that is a difficult transition. Also, I think most don't understand that the president's hands are tied largely because the constitution created under Pinochet is in force still and very, very difficult to change. And you still have Pinochet supporters, I think about 20%. Hard to believe but true. Pinera has distanced himself from many right wing policies knowing that he has the support of the right no matter what he says, picking up those votes in the middle.

"Also - what do you think is the effect of a rule that all must vote? Does that produce more conservative results, or more left-liberal?"

Good question. Many still don't vote at this time in spite of so-called mandatory voting. And the young voters aren't turning out in large numbers. And they recently changed the rule. People of voting age will automatically be registered in the future but it will no longer be mandatory to vote. Also Chileans that live out of the country will be able to vote absentee in future elections. The voting issue was a change due to MEO influence. And absentee voters will include leftists that expatriated during the Pinochet years(ie Isabelle Allende-the writer) as well as right wingers (Jose Pinera-famous for privatization "reforms" he instigated under Pinochet). Note: I love Isabelle Allende's books notably "My Invented Country" and really, really think Jose and his supporters should mention that these "reforms" took place under a dictatorship and are, therefore, not democratic as likes to pretend.

Pinera has made some mistakes recently. He avoided a question in the last debate when a reporter asked him if he would ask MEO to join his government-MEO came out only days later and endorsed Frei. From the NYT: "In recent weeks, the government of Michelle Bachelet, Concertación’s popular president, agreed to fast-track some initiatives espoused by Mr. Enríquez-Ominami, in the hope of helping Mr. Frei’s chances. The initiatives include education and water reforms, and a measure to make voting registration automatic but voting voluntary, reversing the current system in which voting is mandatory for life once a voter is registered. Mr. Enríquez-Ominami had blamed that system for a sharp decline in new voter registration." In other words, the Concertacion is willing to listen, the right not so much. I think Pinera thought he had this won and became complacent.

Pinera also came out against José Miguel Insulza, Secretary-General of the Organization of American States (OAS). Whatever Chilean politics, left or right, Chileans love Chileans and there is a lot of pride and patriotism-and that includes Insulza. And communist left wing poets(see Pablo Neruda). Or Victor Jara, the singer and songwriter.

I read of MEO's 20% of 1st round votes (that both candidates want) a poll found that 44 percent of those who voted for Mr. Enríquez-Ominami said they would vote for Mr. Frei while 20 percent would vote for Mr. Piñera; 21 percent said they would vote for neither candidate. With MEO's endorsement of Frei, there is a possibility of wresting some the 21% that say they won't vote as well as a real possibility that Pinera will lose some of that 20%.

And the voting has begun. I hear polls close at 4 pm.

Edit: Looks like Frei conceded. Pinera took 51.87 percent of the vote with 60.3 percent of polling stations counted, compared to 48.12 percent for Frei.

Saturday, January 16, 2010

The 2010 Chile Presidential Election

Tomorrow is the day-the runoff between Center left Eduardo Frei and Sebastian Pinera on the right.

Results from the first round of Chile’s presidential election—held on Dec. 11—placed Piñera ahead with 44.05 per cent of all cast ballots, followed by Frei with 29.60 per cent, independent candidate Marco Enríquez-Ominami with 20.13 per cent, and left-wing candidate Jorge Arrate with 6.21 per cent.

Sebastián Piñera holds a slight edge as in Chile’s presidential run-off, according to a poll by MORI. 50.9 per cent of decided voters would support the candidate of the centre-right Coalition for Change (CC) in tomorrow’s election.Former president Eduardo Frei Ruiz Tagle of the centre-left Agreement of Parties for Democracy (CPD) would finish a close second with 49.1 per cent.

The race is now dead even, for all practical purposes as the difference lies within the 3% margin of error. It has been a race to see who can garner MEO's 20% and MEO announced that he would support Frei.

"Given the uncertainty that the right could block Chile's march toward the future, it is my responsibility to contribute what I can so it doesn't happen," Enriquez-Ominami, the son of a leftist guerrilla leader slain during General Augusto Pinochet's 1973-1990 dictatorship, told a news conference in parliament.

"So I formally declare my decision to support the people's candidate who won 29 percent of the vote on December 13," he said, referring to Frei, whom he had until now refused to endorse despite repeated appeals and concessions by the ruling coalition.

You'll find the candidates promises here:

I see the main issue of privatizing CODELCO(Chile's state owned copper mine) further as Pinera would like to do and CODELCO filled Chile's treasury nicely in the past few years. Frei will keep things the way President Bachelet has or a continuation of her policies. She enjoys record high approval ratings of 80% or so. MEO's support is late but big news because the race is so tight already-a small percentage could swing things.

I have googled and read a million articles, watched debates in spanish and now know an unbelievable amount about Chilean elections. I guess I like politics.