Being Bound to Swear to The Dogmas of No Master known as ...ufdcimages.uflib.ufl.edu/UF/00/08/42/49/01819/03-28-2011.pdf · 3/28/2011 · Bluewater was a deal made on behalf of the

EDITOR, The Tribune.

Having read your articles onthe Bahamas Real Estate Asso-ciation (BREA) over the pastfew weeks, I became intriguedon what all of the fuss andapparent hostility was about. Inthe spirit of keeping an openmind I decided to attend theAnnual General Meeting onThursday, March 24, 2011. Tosay the least, I was shocked atthe incredible turnaround theAssociation finds itself in just ashort year under the currentPresident and Board.

Miss Patricia Ann KellerBirch and BREA’s Board havebrought the Association out ofa debt crisis deeper than the pitof hell and have put the Asso-ciation on sound financial foot-ing, an incredible feat in thesedire economic times. Miss Birchis a tireless, energetic, selflessBahamian woman! From herhospitality days in Androsdecades ago, to becoming oneof The Bahamas’ leading Bro-kers, and now becoming an

exceptional President forBREA, I say a job very welldone! Without sounding con-descending I say Miss Birch andthe Board should take bow forenhancing the integrity, disci-pline, and financial foundationof the Bahamas Real EstateAssociation. I am so proud ofeveryone on the Board and amhonoured to call Miss Birch my

Bahamian sister.Good luck in the upcoming

year of what is for sure to bechallenges and your member-ship supports you.

CHRISTOPHERARMALYNassau,March 25, 2011.


Mr. McCartney recentlyresigned from the govern-ment, (as he should have),remaining in Parliament as anindependent MP, and rumourhas it he will start a new polit-ical party to contest the nextgeneral election.

Upon hearing this one ofmy nephew's e-mailed fromAbaco to say how excitingthis was and felt this new par-ty would win if they couldfield some good candidates.

My response, after con-sulting my political crystalball, was that he might noteven win the Constituency hecurrently represents, (Bam-boo Town) again, much lessthe government based onwhat we know about him andhis policies and how he pro-poses to implement them todate.

Exactly what do we knowabout Mr. McCartney so far?

1. He thinks illegalHaitians should be repatriat-ed.

2. He thinks Bahamiansshould be able to succeed.

3. He is opposed to Cable& Wireless buying BTC.

Now what do we find whenwe look at what the FNM andPLP think about these things?

Believe it or not, Mr.McCartney, or "Bran" as he isaffectionately known, agreeswith both the major politicalparties on the first two points,and agrees with the PLP onthe third, since they changedtheir position on privatisationthat is. So what's he got thatthe other two parties don'thave? Problem is we don'tknow yet.

Until Mr. McCartneyreleases a position paper onmajor issues and how he will"plan or fix" things soBahamians can get to knowhim, he stands for nothing

original at this point. In facthe just might be so national-istic that he sets the countryback even further than the"devils" we know.

This quote from NobelLaureate and economist, F.A.Hayek from his masterpiece,The Road to Serfdom, seemsappropriate:

"The effect of the people'sagreeing that there must becentral planning, withoutagreeing on the ends, will berather as if a group of peoplewere to commit themselves totake a journey together with-out agreeing where they wantto go; with the result that theymay all have to make a jour-ney which most of them donot want at all."

In the meantime it will befun watching the political pos-turing until his cards areplayed for all to see becauseat this point Mr. McCartney islittle more than an enigma.

RICK LOWENassau,March 27, 2011.

EDITORIAL/LETTERS TO THE EDITOR

PAGE 4, MONDAY, MARCH 28, 2011 THE TRIBUNE

The Tribune LimitedNULLIUS ADDICTUS JURARE IN VERBA MAGISTRI

Being Bound to Swear to The Dogmas of No Master

LEON E. H. DUPUCH, Publisher/Editor 1903-1914

SIR ETIENNE DUPUCH, Kt., O.B.E., K.M., K.C.S.G., (Hon.) LL.D., D.Litt .

Publisher/Editor 1919-1972Contributing Editor 1972-1991

EILEEN DUPUCH CARRON, C.M.G., M.S., B.A., LL.B.Publisher/Editor 1972-

Published Daily Monday to Saturday

Shirley Street, P.O. Box N-3207, Nassau, BahamasInsurance Management Building., P.O. F-485, Freeport, Grand Bahama

WEBSITEwww.tribune242.com – updated daily at 2pm

AFTER a 14-year search for a suitablestrategic partner and a lengthy, often acri-monious debate over the past few days, BTCopens its doors today as a privately ownedcompany. Cable & Wireless, with a soundinternational reputation and solid financingis the new owner. Bluewater Ventures Ltd,the choice of the PLP government, is nowhistory leaving a trail of mystery in its wake.

When one examines details of the bidsthat were published, it is difficult to under-stand why Bluewater — the only companynot to produce financials — was the PLPgovernment’s company of choice. Manythings have been suggested. Finance Minis-ter Zhivargo Laing considered it a “fronting”operation with Bahamians hidden in thebackground. Whatever it was, all that hasbeen made public — and much is still hid-den— suggests that it was a company hasti-ly thrown together especially for this bid-ding process.

At the end of a heated exchange betweenOpposition leader Perry Christie, whose gov-ernment pushed the Bluewater deal to ahasty conclusion, and Prime Minister Ingra-ham who eliminated Bluewater, Mr Ingra-ham accepted that Mr Christie’s last gesturebefore he left office “was beneficial to theBahamas.”

As he put out the embers of his dyinggovernment, Mr Christie took up his penand ended the Bluewater deal.

“I would recommend,” he wrote, “thatthe matter not proceed any further at thistime.”

Mr Christie argued that as his govern-ment had been voted out of office, it wasonly right that the final decision on the futureof BTC be left for the new government.

Reading from the records on Monday,April 30, 2007 —two days before the gener-al election — Mr Ingraham said the PLPCabinet met with Prime Minister Christie’sapproval. Mr Christie himself was absent,and so the deputy prime minister was in thechair. Mr Obie Wilchcombe was also absentfrom that meeting. It was at that meetingthat the decision was made to sell BTC toBluewater.

When asked by a House member what heknew about the Bluewater transaction, MrIngraham said he knew of a meeting alsoheld at the Ministry of Finance when thenMinister Bradley Roberts, “Brave” Davis,lawyer for Bluewater, and a “man fromBluewater” returned to the room and said“we have a deal.”

Mr Ingraham said that before the 2007election he had announced at an FNM rallythat the PLP government had sold what wasthen BaTelCo to Bluewater. His specula-

tion was that at the end “they ran scared,”which caused the last minute change of mind.

As our readers will recall the hand-over in2007 from one government to the next didnot go smoothly. Although the FNM becamethe government on May 2, it was not untilMay 4th that it was able to assume office.

In the meantime several ministers of theformer PLP government, said Mr Ingraham,went around announcing that the Bluewaterdeal had been approved and recommendedthat the persons involved should go to theCabinet office to get “the letter.”

By then the Ingraham government was incharge. Mr Ingraham said that the Secre-tary to the Cabinet came to him one day toinform him that “some people” were at theoffice saying that they wanted “the letter” —obviously the letter approving the sale ofBaTelCo to Bluewater.

Mr Ingraham thanked Mr Christie forgoing to London to testify at the hearingwhen Bluewater was demanding to beindemnified for the loss of BaTelCo. In Blue-water’s agreement with the PLP, the Ingra-ham government would have had to pay $2.5million if the exclusivity clause in the agree-ment had been breached. To get out of theBluewater deal, the $2.5 million penaltyclause was negotiated down to $1.9 million.

Mr Ingraham argued that although MrChristie did not attend the Cabinet meet-ing that approved the sale of BaTelCo toBluewater, the fact that he had given Cabi-net members permission to meet, and agreedwho should chair the meeting, he could notthen unilaterally rescind their decision with-out another meeting and discussion. MrChristie argued that he did not change thedeal, but decided that his government was atan end and suspended it.

Mr Ingraham knows, said an angeredOpposition leader, that “this was a processthat I was going to guarantee the integrity of— if only because Brave Davis was thelawyer — I was not going to allow this mat-ter to compromise the integrity of my gov-ernment under no circumstances.”

In a heated moment, Mr Christie proba-bly suggested more than he intended. Obvi-ously, he was not happy with the deal. Hisbehaviour at the end shows a great deal ofdoubt. Already he had started the handwashing process.

Bluewater was a deal made on behalf ofthe Bahamian people. They are entitled toknow the facts — especially why Bluewaterwas given so many preferential concessions.

We feel it the duty of the Ingraham gov-ernment to lay the whole Bluewater trans-action on the table of the House so that itwill be available for public scrutiny.

The enigmaknown asBranville

[email protected] is the whole truth behind Bluewater?

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I remember John Baily as the magistrate that gave us a stifflecture but no fine or jail time, after myself, then 19, alongwith my three friends appeared before him after the policecharged us with trespassing on private property, after we createda disturbance in the lobby of the Sheraton British ColonialHotel, now the Hilton Hotel, and then refused the doorman'sdemand to leave the hotel's property.

That doorman was none other than the well known Mr.Ferguson, who I'm sure a lot of you will remember him as therather full-size man who took no nonsense from anyone, muchless four rowdy trouble makers. He was always decked out in hisofficial spotless black and white doorman’s uniform, completewith his white helmet style hat. Mr. Ferguson, the Sheraton’sdoorman/security guard for umpteen years, who regardless ofthe hour, morning, night or in the wee hours, if you turnedaround, there stood Mr. Ferguson, watching your every move.Nobody, and I mean nobody, could get away with anything ifMr. Ferguson was on shift. He was a wonderful and kind giantof a man, but even when I was years older I still didn’t mess withhim, Doorman Ferguson. I am happy to know a much olderJohn Baily is still around.

TAL RUSSELL,Nassau,March 25, 2011.

THE TIME JOHN BAILY GAVE US A STIFF LECTURE

Miss Birch and BREA Board should take a bow!

SECTION B • [email protected]

M O N D A Y , M A R C H 2 8 , 2 0 1 1

T H E T R I B U N E

$5.10

$5.12

$5.11

By NEIL HARTNELLTribune Business Editor

Bahamas First Holdings,the Bahamian general insur-ance group, has told TribuneBusiness it will suffer“absolutely zero” financialimpact despite a courtawarding a $7 million judg-ment against its CaymanIslands subsidiary - thelargest civil payout in thoseislands’ history.

BAHAMAS FIRST: ‘ZERO’ EFFECTFROM $7M CAYMAN AWARD

SEE page 7BIAN FAIR


The offer to acquire theGrand Bahama PortAuthority (GBPA) by aninvestment vehicle linked tothe Abu Dhabi Royal Fam-ily remains on the table buttalks appear to be goingnowhere fast, sources closeto the situation haverevealed to Tribune Busi-ness, with the price offered -and the one sought by thetwo shareholder families -

some way apart. Freeportwas a crowded town lastweek, with many of the prin-cipal players in the poten-tial deal present in the cityfor one reason or another,with sources suggesting that- at one point at least - theAbu Dhabi offer was notjust for the GBPA but forsome, or all, of HutchisonWhampoa’s Freeport assets,too.

With the principals in thedeal all based many thou-sands of miles from Grand

Bahama, in locations suchas London, Abu Dhabi andHong Kong, obtaining accu-rate information on thedeal’s progress has been dif-ficult. However, diligentinvestigations carried outover several weeks by Tri-bune Business have provid-ed a good indication,although all those spoken torequested anonymity.

Chris Gray, the formerHutchison Whampoa exec-

Abu Dhabi’s Portoffer still ‘on table’n But talks not progressing quickly, althoughround of meetings scheduled for Middle East earlynext monthn Haywards and St George’s said to want $300mcollectively, some $100m more than initial offern Deal said to have at one point included offer forHutchison’s Grand Bahama assets

SEE page 5B


“Every” investment fundcategory experienced a year-over-year decline in 2010apart from SMART funds,Securities Commission ofthe Bahamas data hintingthat this nation continues tolose competitiveness in thisfinancial services segment,the total number of fundsregistered here falling from788 to 753 - a drop of 4.6 percent.

“Every category of invest-ment funds from year-end2009 to 2010 experienced anoverall decline except forSMART funds,” the Com-mission said in its latestindustry report publication.“The decline is a result ofthe number of investmentfunds that have liquidated,are in the process of liqui-dating and have transferredout of the jurisdiction.”

SMART, or Specific Man-date Alternative RegulatoryTest funds, are likely to bedoing well because they are

DOMICILED FUNDS DROP 4.6% IN ’10

* All investment fundcategories apart fromSMART funds in decline,says Commission* Standard and ForeignFunds drop 15% and14% respectively* Only growth categoryFinancial and CorporateServices Providers

SEE page 8B

By ALISON LOWEBusiness [email protected]

Although lacking thedirect taxation employed byits Tax InformationExchange Agreement(TIEA) counterparties, theMinistry of Finance’s toplegal advisor believes theBahamas could use thesetreaties to help crack downon its own tax evaders.

While acknowledging thatit is not clear whether theGovernment will seek to usethe TIEAs for this purpose,Rowena Bethel said thatdespite initial perceptionsthat the benefits from the 24agreements would only flowin only one direction, infor-mation gathering for taxevasion investigations in theBahamas is a benefit thisnation could gain from theagreements.

“The Bahamian govern-ment now has the ability togo to the tax authority overthere and get whatever infor-mation is held there to assistwith whatever investigation isbeing done here....We can dothat in relation to all of the

TIEA taxevasionprobebenefits

SEE page 10B


Claims that Bahamasair isengaging in unfair and“predatory”businessstrategies tothe detri-ment of thedomestic avi-ation indus-try havebeen dis-missed by agovernmentminister as“utter nonsense”.

Captain Randy Butler, SkyBahamas chief executive,charged last week that the"game is fixed" against the

Airline’s predatoryprice claim is‘utter nonsense’

SEE page 6B


Kerzner International(Bahamas) president hasreiterated that the Atlantisowner’s operations “remainvery strong” with “ampleliquidity”, as media reportspersists that the companycould default on a multi-million dollar debt as earlyas next month, leading to“refinancing of its $3 billiontotal debt, asset sales orownership changes”.

A Bloomberg news arti-

Kerzner: $3bndebt restructureto be ‘seamless’

* Atlantis chief says operations ‘remain very strongwith ample liquidity to invest in properties’* Says no impact on Paradise Island operations,despite Bloomberg story’s fears of default as earlyas next month

GEORGE MARKANTONIS

SEE page 9B

CAPT. RANDYBUTLER

BY ROYALFIDELITYCAPITAL MARKETS

It was yet another busyweek of trading in theBahamian stock market.Investors traded in 13 out ofthe 24 listed securities, withfive advancers and twodecliners.

EQUITY MARKETA total of 47,736 shares

changed hands, represent-ing an increase of 3,038shares compared to the pre-vious week's trading volumeof 44,698 shares.

Finance Corporation ofthe Bahamas (FIN) was thebig advancer, trading a vol-ume of 1,500 shares to see its

stock price increase by $1.40to close at $7.50. CableBahamas (CAB) was the bigdecliner, trading a volumeof 2,250 shares to see itsshare price fall by $0.18 toclose at $9.25.

LeaderAML Foods (AML) was

the volume leader, tradinga volume of 13,614 shares,its stock increasing by $0.10to close at $1.19.

Bank of the Bahamas(BOB) traded a volume of11,021 shares, climbing $0.27to close at $5.20.

FOCOL Holdings (FCL)traded a volume of 1,200shares, its stock price

increasing by $0.01 to closeat $5.48.

Commonwealth Bank(CBL) traded a volume of12,330 shares to closeunchanged at $6.82.

ICD Utilities (ICD) trad-ed a volume of 1,550 shares,its stock declining $0.10 toclose at $7.30.

BOND MARKETFidelity Bank Bahamas

Series C Notes (FBBSC)traded a volume of $2,000notes at par value.

Fidelity Bank BahamasLimited Series D Notes(FBBSD) traded a volumeof $3,000 notes at par value.

COMPANY NEWSEarnings Releases:There were no earnings

report released last week.

Dividend Notes:Commonwealth Bank

(CBL) has declared a divi-dend of $0.06 per share,payable on March 31, 2011,to all ordinary shareholdersof record date March 21,2011.

Cable Bahamas (CAB)has declared a dividend of$0.08 per share, payable onMarch 31, 2011, to all ordi-nary shareholders of recorddate March 18, 2011.

BUSINESS

PAGE 2B, MONDAY, MARCH 28, 2011 THE TRIBUNE

RoyalFidelity Market Wrap

EQUITY MARKET - TRADING STATISTICS

Week ending 25.03.11

BISX CLOSING WKLY PRICE VOLUME YTD PRICESYMBOL PRICE CHANGE CHANGE

AML $ 1.19 $0.10 13,614 22.68%BBL $ 0.18 $- 0 0.00%BOB $ 5.20 $0.27 11,021 6.12%BPF $ 10.63 $- 0 0.00%BSL N/A $- 0 0.00%BWL $ 2.70 $- 250 0.00%CAB $ 9.25 $-0.18 2,250 -11.57%CBL $ 6.82 $- 12,330 -2.57%CHL $ 2.40 $- 2,000 0.00%CIB $ 9.30 $- 1,460 -0.96%CWCB $ 2.27 $0.02 561 24.04%DHS $ 1.40 $- 0 -12.50%FAM $ 5.25 $- 0 -13.51%FBB $ 1.96 $- 0 -9.68%FCL $ 5.48 $0.01 1,200 -0.37%FCLB $ 1.00 $- 0 0.00%FIN $ 7.50 $1.40 1,500 3.73%ICD $ 7.30 $-0.10 1,550 -1.35%JSJ $ 9.82 $- 0 0.00%PRE $ 10.00 $- 0 0.00%

INTERNATIONALMARKETS

FOREX Rates Weekly %ChangeCurrency

CAD 1.0189 0.32GBP 1.6046 -1.22EUR 1.4088 -0.69

Commodities Weekly %ChangeCommodity

Crude Oil 115.97 1.67Gold 1,436.00 1.13

BOND MARKET - TRADING STATISTICS

BISX DESCRIPTION VOLUME PAR VALUESYMBOL

FBB13 FBB Series C 2 $1,000Notes Due 2013

FBB15 FBB Series D 3 $1,000Notes Due 2015

FBB17 FBB Series A 0 $1,000Notes Due 2017

FBB22 FBB Series B 0 $1,000Notes Due 2022

INTERNATIONAL STOCKMARKET INDEXES

Index Weekly % Change

DJIA 12,220.59 3.05

S&P 500 1,313.80 2.70

NASDAQ 2,743.06 3.76

Nikkei 9,536.13 3.58INSIGHT

For the stories behind the news, read Insight on Mondays


The Bahamas ElectricityCorporation (BEC) is seek-ing to negotiate a reductionin the length of time andcost of a contract it is soonto award for the installationof an upgraded 10.5 miletransmission line, which willallow the new Wilson CityPower Plant to fully serviceAbaco’s power needs, afterthe lowest bid came in at$4.6 million.

Expectations of when thatkey power line will be fullyoperation have now beenpushed back from an initialmid-May completion, as sug-gested by Minister for theEnvironment, EarlDeveaux, in January, to an“end of June, early July”date, Tribune Business hasbeen informed.

While no contract has yetbeen formally signed, it islikely the contract for theupgraded line’s installationwill go to a joint venturegroup led by a Canadiancompany, K-Line Interna-tional, who will be responsi-ble for the engineering andmaterial procurement, inconjunction with a Bahami-an company called Triple WGeneral Contractors. Triple

W will undertake the physi-cal construction work on theproject.

K-Line International spe-cialises in engineering,design, procurement, con-struction, commissioningand maintenance of highvoltage power delivery sys-tems, while Triple W is saidto have constructed severalmajor power lines for BECand been involved in elec-trical infrastructure installa-tion for private developers.

Tribune Business under-stands that the joint venturegroup submitted the lowestbid from among a group ofpotential contractors in aclosed tendering process,where several contractorsdeemed competent wereselected and invited to makea bid.

The closed process wasused due to the need for theproject to be completed inan expedited timeframe, asource close to the mattertold Tribune Business. Workis now expected to begin asearly as next week.

Officials from BEC andthe Bahamas EnvironmentScience and Technology(BEST) Commission joinedPeter Medford - operationsmanager for Triple W - as asurvey of the proposed routefor the line was conducted

last week. The transmissionline is needed so that anenhanced power voltage canbe carried from the WilsonCity power plant, which iscapable of producing up to48 megawatts of power.Abaco’s peak summer pow-er demand at present isaround 25 megawatts.BEC’s Marsh Harbour Pow-er Plant was last year inca-pable of fully meeting thisdemand, leading to lengthyand ongoing blackouts forseveral months and a nega-tive impact on businesses,residents and tourists.

BEC has committed toundertaking upgrades of itsgeneration equipment at theMarsh Harbour Plant toensure that peak demandcan still be met ahead of thenew plant and power linebecoming fully operational.

This investment would notbe a “waste”, BEC chair-man Michael Moss previ-ously told Tribune Business,as the generation units willbe moved to other locationsafter they are no longerneeded in Abaco.

BUSINESS

THE TRIBUNE MONDAY, MARCH 28, 2011, PAGE 3B

BEC seeks reduced time,cost on $4.6m power line

MICHAEL MOSS EARL DEVEAUX

Share your newsThe Tribune wants to hearfrom people who aremaking news in theirneighbourhoods. Perhapsyou are raising funds for agood cause, campaigningfor improvements in thearea or have won anaward.If so, call us on 322-1986and share your story.


Pulling increased Canadi-an foreign direct investmentand tourists to the Bahamas,and raising awareness of thisnation’s economic and busi-ness offerings, are theintended outcomes of atrade and investment pro-motion tour led by PrimeMinister Hubert Ingraham,along with several key Cab-inet ministers.

Minister of state forfinance, Zhivargo Laing,who is one of those minis-ters, told Tribune Businessthat Canada “made sense”as a destination for a tradeand investment promotiontour at this time for severalreasons, both practical andstrategic.

“Firstly, we are in Calgary,Canada, to attend annualmeetings of the Ministers ofFinance of the Americasand the Inter-AmericanDeveloment Bank. Theseare official meetings attend-ed by ministers annually.We thought to take advan-tage of our time in Canadato do some trade and invest-ment promotion,” Mr Laingsaid.

“As you know, Canadafared well during the recentcrisis, has recovered betterthan many developed coun-tries and has a strong cur-rency. We also recently con-

cluded a Tax InformationExchange Agreement withCanada that has some dou-ble taxation provisions. Cal-gary is a good source oftourists for us, having directflights by West Jet. For allthese reasons, Canada madesense.”

Mr Laing, the Prime Min-ister and the rest of thegroup left the Bahamas thisweekend for Canada.

The minister said theGovernment team will betaking the message to Cana-da that, along with a “longhistory of political and eco-nomic success”, investorsshould consider theBahamas because “we haveand are considerably trans-forming our business envi-ronment to ensure the great-est ease of doing business,as well as compliance withinternational best practicesin regulations, and we are ajurisdiction with a diversity

of offerings that makes usone of the best places inwhich to live, work and vis-it.”

Helping to push this mes-sage along with Mr Ingra-ham and Mr Laing are Min-ister of Tourism, VincentVanderpool Wallace, Attor-ney General and Minister ofLegal Affairs, John Delaney,representatives of theBahamas InvestmentAuthority, including theDirector of Investments, theBahamas Maritime Author-ity, the Bahamas FinancialServices Board, the NassauAirport Development Com-pany, Heads of the Nassau/Paradise Island PromotionBoard and Out Island Pro-motion Board, the BahamasReal Estate Association, theGrand Bahama PortAuthority and BORCO.

Potential investors, busi-ness persons, lawyers,accountants and the Cana-dian media are on the list tomeet and greet.

In a press conference onFriday in which he discussedthe trip, Mr Ingraham notedthat a luncheon scheduledto take place at the TorontoBoard of Trade, duringwhich both government andprivate sector presentationswill be made to promote theBahamas, some 218 peopleare registered to attend.Other seminars and lun-cheons are planned, includ-ing BFSB-led seminars inboth Calgary and Torontoon business and investmentopportunities in this nation.

New promotional materi-al in the form of an updatedversion of a booklet entitledThe Bahamas - A Paradisefor Many Reasons and threeindividual flyers, for tourism,financial services and GrandBahama, will be taken fordissemination in Canada.

BUSINESS


Government targets Canada FDI, tourists

ZHIVARGO LAING

utive who previously headedits Grand Bahama-basedFreeport Container Port andFreeport Harbour Compa-ny, and is now the ‘pointman’ for the Abu Dhabioffer, was said to multiplesources to have been inFreeport for several dayslast week on an agenda thatincluded meetings at theGBPA. “A lot of peoplehave seen him,” one sourceadded.

What was discussed isunclear, but also in Freeportwere said to be severalmembers of the late EdwardSt George’s family, plus akey behind-the-scenesGBPA power broker,Derek Harrington. Sir JackHayward, who heads thefamily holding the remaining50 per cent GBPA stake,was said to have been inFort Lauderdale.

And also present in theBahamas’ second city wassaid to have been JohnMeredith, the Hong Kong-based head of HutchisonPort Holdings, the con-glomerate’s worldwide portsdivision.

However, Tribune Busi-ness’s sources cautioned thathe was unlikely to be in theBahamas to discuss the AbuDhabi deal, his priorityinstead being to sort outHutchison’s troubled OurLucaya resort, which recent-ly laid-off 200 staff. Hutchi-son is understood to haverestructured its Freeport-based assets to place themunder the control of theContainer Port and Hutchi-son Port Holdings, and therehas been speculation thatthe company wants to again

take over management ofthe property and place itunder its Harbour Baybrand, which has been suc-cessful in Asia.

AssetsThis newspaper, though,

was informed that at onestage, at least, the AbuDhabi offer included some -or all - of Hutchison Wham-poa’s Freeport assets.Sources familiar with devel-opments, though, suggestedthat Mr Meredith was ‘cool’to the prospects of any suchtransaction - either as a cashtransaction or asset swap -especially if the FreeportContainer Port was includ-ed, given that its geographiclocation off the US eastcoast and near the PanamaCanal approaches, make itof vital strategic importance.

“There’s a lot of rumoursgoing on right now withregard to this whole AbuDhabi deal,” one source toldTribune Business. “There’sa lot of misinformationgoing around right now.

“As far as I know, there isno deal, there hasn’t been adeal. They’re still talking,and are heading over tomeet in Abu Dhabi in earlyApril.”

Suggesting that the StGeorge and Hayward fami-lies were themselves unsureof what they wanted, the

source said: “Maybe they’relooking for a strategic part-ner, maybe they want to sell.I don’t think they know.”

In response to the initialoffer, which was said to havecome in January 2011 froman Abu Dhabi Royal Fami-ly investment vehicle thatholds a significant share-holding in Dubai PortsWorld, the Haywards and StGeorges are understood tohave informed the suitorthat they considered the bidlow.

However, they have alsoasked JP Morgan, theinvestment bank, to crunchthe numbers and do a finan-cial evaluation of the GBPAand its Port Group Ltd affil-iate to determine their truevalue.

“The fact they are heremeeting is helpful, but theyare very far apart on price.The families want $300 mil-lion, but Abu Dhabi is offer-ing $200 million - maybeless,” one source close todevelopments told TribuneBusiness. “Something’scooking; we’ll have to seehow it play out.”

Such pricing would valuethe Hayward and St Georgestakes at $150 million each.Sir Jack told a UK newspa-per earlier this year that hewanted £80 million (close to$130 million) for his GBPAstake.

Tribune Business reportedlast year that the Haywardsand St Georges had appoint-ed JP Morgan to search fora buyer for their respective50 per cent stakes, althoughSir Jack at the same saidthat efforts to sell the GBPAwould be akin to "flogging adead horse".

"It's not going to be aneasy sell," Sir Jack said then,of his and the St George'ssearch for a buyer for theirrespective 50 per cent stakesin the GBPA and PortGroup Ltd.

Asked whether bothshareholders had appointedan investment bank to seekout the right purchaser andfilter out all the unsuitableprospects, he added: "We

haven't at the moment.We're considering it, but Ithink they're flogging a deadhorse."

The GBPA is somethingof an unusual asset toacquire, because apart fromits equity stakes in numer-ous infrastructure-relatedassets such as the GrandBahama DevelopmentCompany and FreeportHarbour Company (and ahost of other entities, such asBourbon Street Ltd, ownerof Lucaya Marketplace), italso retains quasi-govern-mental powers as Freeport'sregulatory and governmen-tal authority.

Any buyer will thus haveto be of the highest reputeand integrity, especially giv-en that they will have tomeet with the Bahamiangovernment's approval

BUSINESS


Abu Dhabi’s Portoffer still ‘on table’

FROM page 1B

“As far as I know, there is no deal,there hasn’t been a deal. They’re stilltalking, and are heading over to meetin Abu Dhabi in early April.”

private sector due to the Gov-ernment “acting as both oper-ator and regulator”, whichallows the national flag carri-er to offer "predatory prices"underwritten by multi-milliondollar taxpayer subsidies.

Captain Butler suggested

promotions such as Bahama-sair's 'March Madness' cam-paign were anti-competitivewith tickets sold "below mar-ket" value, safe in the knowl-edge that its rivals could not

follow suit, and that it wouldbe protected by its taxpayersubsidy.

"Why are we getting thatfrom a government airline,"Captain Butler said, ques-

tioning the strategy behindsuch a move.

Yet Neko Grant, who asminister of works and trans-port has ministerial responsi-bility for Bahamasair, said thenational flag carrier has “as aplayer in the market, a rightto market as they see fit toensure their share is not fur-ther eroded.

“Should Bahamasair, irre-spective of being subsidised,sit on its hands and allow itsmarket share to be eroded bythe very low fares SkyBahamas and others contin-ue to offer?” he questioned.

Noting that Captain Butlerhas also recently “boasted”

about “off the chain” growthat Sky Bahamas, Mr Grantstated: “Where did thatgrowth come from? He istalking utter nonsense [aboutpredatory pricing].”

Speaking to the RotaryClub of West Nassau lastweek, Captain Butler sug-gested that Bahamasairshould now be “top of thelist” of government assets andentities set for privatisation,after the sale of the BahamasTelecommunications Compa-ny (BTC) to Cable and Wire-less Communications.

He questioned whether theairline was “living up to itsmandate of bringing tourists

to the Bahamas”, and sug-gested that the best way for-ward for the airline should beconversion into an interna-tional long-distance carrier,with the primary role of bring-ing tourists into this nation'sinternational airports from allover the world.

He said the airline couldthen partner with smaller, pri-vately owned Bahamian air-lines who would transport vis-itors to their chosen FamilyIsland destinations once theyarrived in Nassau or Freeport.

Asked about the prospectsfor privatisation of the state-owned carrier, Mr Grantwould not elaborate, statingsimply: “The Government hasnot decided the way forwardas it relates to privatisation.”

BUSINESS


FROM page 1B Airline’s predatory price claim is ‘utter nonsense’

Ian Fair, Bahamas First’schairman, said the casewould have no impact onthe insurance groupbecause, having come up asa potential liability duringdue diligence, the potentialfinancial ramifications fromthe court case were “ringfenced” or excluded fromthe transaction that saw itlast year acquire a 75.24 percent majority stake in Sagi-cor General Insurance (Cay-man).

Explaining that liabilityfor any eventual payoutwould rest with the previ-ous owners, namely Sagicor,Mr Fair pointed out that thematter was also likely to beappealed,

The issue arose aftermembers of the Hurlstonefamily, and their companies,together with CrawfordAdjusters (Cayman) andothers, counter-sued Sagi-cor General Insurance (Cay-man) for abuse of processand malicious prosecution.This resulted from an initialSagicor writ that hadclaimed fraud and conspira-cy against them, but wasabandoned on the verge oftrial in December 2008when it was determined thatthe insurer’s allegationsagainst them could not besustained.

Contacted in the US,where he is currently onbusiness, Mr Fair told Tri-bune Business that the Sagi-cor General-Hurlstone law-suit “was ring-fenced” whenBahamas First purchased its

majority stake in the Cay-man general insurer, whichmeant any financial reper-cussions for the group were“actually none”.

Impact“The impact for Bahamas

First is zero,” Mr Fair elab-orated, “and it’s fully pro-vided for in terms of thedeal. Bahamas First is basi-cally fully protected on thisone.

“It did not form part ofthe transaction. The finan-cial impact on BahamasFirst is totally zero.”

The Bahamas First chair-man added that the Caymancourt ruling was “subject tolikely appeal”, and said: “It’sthe previous owner thatneeds to determine whetheran appeal is necessary.”

The Hurlstone plaintiffshad alleged that their char-acters and business affairshad suffered greatly as aresult of the allegationsbrought by Sagicor General

Insurance (Cayman) whenit was called Cayman Gen-eral Insurance Company.

It was claimed that FrankDelessio, the insurer’s nowdeceased vice-president,brought the initial actionafter suggesting that figureson work done at a develop-ment called Windsor Villagehad been inflated. It wasbased on a report laterfound to be erroneous atbest, and not inclusive of allrelevant costs for workdone.

The Hurlstones were alsosubjected to a Marevainjunction that froze theirassets.

But the Cayman courtfound that Mr Delessio’sdislike of one of the plain-tiffs was a key factor behindthe initial allegations, andSagicor General was shownto have “never possessed abody of evidence capable ofproving it was defrauded orwas the victim of a conspir-acy”.

Given that plaintiffs whoobtained injunctions fraud-

ulently or maliciously wereto be held liable for theiractions, the Cayman courtawarded $6.938 million plusinterest for loss of profit andloss of market share to Hurl-stone Construction. Otherdamages were also awardedto the Hurlstones individu-ally.

In response, Cayman Firstsaid: “Notwithstanding thefact that the matters at issuein the proceedings predate

the involvement of the newmajority owners, definitivesteps have been taken toensure that policyholder andother stakeholder interestsare adequately protected.

Assurances“Further, the ultimate

parent company of [CaymanFirst] has provided assur-ances that it will take appro-priate and timely steps to

ensure that the capital baseof the company is main-tained at a level to meet therequirements mandated bythe Cayman Islands Mone-tary Authority.”

Cayman First said it haddetermined, based on exist-ing information, that thecompany’s capital and abili-ty to operate will not beimpaired by any ramifica-tions associated with thejudgment.

BUSINESS


BAHAMAS FIRST: ‘ZERO’ EFFECT FROM $7M CAYMAN AWARDFROM page 1B

“The impact for Bahamas First iszero, and it’s fully provided for interms of the deal. Bahamas First isbasically fully protected on thisone. It did not form part of thetransaction. The financial impacton Bahamas First is totally zero.”

Ian Fair

BUSINESS


an investment fund producttailored to meet the needsof the Bahamas’ core pri-vate wealth managementclient base. They grew year-over-year by 6.8 per cent,from 264 in 2009 to 282 atDecember 31, 2010.

The other categories,though, all showed declines.The number of Standardfunds domiciled in theBahamas fell by 14.6 percent year-over-year, from 82to 70 at year-end 2010, whileProfessional Funds droppedby 6.2 per cent to 243 from259.

Meanwhile, RecognisedForeign Funds dropped by13.7 per cent, from 183 atyear-end 2009 to 158 a yearlater.

And, combined with theeffects of the recession andstock market plunges, thenet asset values (NAVs) ortotal value of assets undermanagement in Bahamas-domiciled funds also contin-ued to fall as funds liquidat-ed or moved jurisdiction.While the figures for 2010are not yet available, theyare likely to represent fur-ther declines in what hastaken place in previousyears.

Despite the fall in fundnumbers and their NAVasset values, the number ofBahamas-based fund admin-istrators has remained flatover the past two to threeyears. After falling from 66at year-end 2008 to 64 in2009, their total recoveredslightly to 65 at year-end2009.

“During 2010, there wasan increase of one Unre-stricted and one RestrictedInvestment Fund Adminis-

trator,” the Securities Com-mission said. “ExemptInvestment Fund adminis-trators decreased by one.”

Still, all this adds up to animpression of a Bahamianfund administration andmanagement segment thatis not growing. While therecession and stock marketdownturn are important fac-tors, it is clear that theBahamas has also beenunable to counter the com-petitive threat posed by thelikes of the Cayman Islands,the so-called ‘offshore’leader for investment funds.

The Bahamian securitiesindustry, too, remains sta-ble, with the total numberof registered Bahamas-domiciled firms increasingfrom 112 at year-end 2009to 115 at December 31,2010. While the number ofBroker/Dealer 1s remainedat 17, Broker/Dealer IIsgrew from 47 to 48, whileSecurities Investment Advi-sors expanded from 48 t0 50.

“During the year, Bro-ker/Dealer II firms experi-enced an overall increase ofone firm (two firms werelicensed and one firmclosed), while SecuritiesInvestment Advisors had anoverall increase of two firms(six firms were licensed andfour firms were no longerlicensed),” the SecuritiesCommission found.

There was better news,though, on the Financial andCorporate Services

Providers front. The totalnumber registered rose year-over-year to 282 at Decem-ber 31, 2010, compared to267 the year before.

Describing this as “a moresignificant increase” com-pared to the previous year,the Securities Commissionsaid: “In 2010, the overallnumber of renewal licensesincreased by seven, whilethe overall number of newlicenses increased by eight(compared to 2009, whichsaw an overall increase of15 renewals and a decreaseof 14 new licences).”

On the legislative front,the Securities Commissionsaid it had begun moved toamend the template for theSMART Fund four modelso as to allow any legal enti-ty, rather than just privateinvestment companies, to beeligible for licensing as thismodel. The work is beingdone in collaboration withthe Bahamas Financial Ser-vices Board’s (BFSB) FundsWorking Group.

Comprehensive reviews ofthe Investment Funds Actand Financial and Corpo-rate Services Providers Actwill also be conducted thisyear.

To determine which com-panies require licensing asFinancial and CorporateServices Providers, theCommission has adoptedthe World Trade Organisa-tion (WTO) definition ofthese entities.

DOMICILED FUNDS DROP 4.6% IN ’10FROM page 1B

“During 2010, there was an increaseof one Unrestricted and one RestrictedInvestment Fund Administrator.Exempt Investment Fund administra-tors decreased by one.”

BUSINESS


cle late last week suggestedthat “people with knowl-edge of the matter” believeKerzner International Hold-ings, the company whichbuilt and owns Atlantis andthe One & Only OceanClub on Paradise Island,faces a loan covenant testwhich could trigger a defaulton a $450 million debt “asearly as next month”.

In a Friday statementreleased in response to Tri-bune Business’s queries,George Markantonis, presi-dent and managing directorof Kerzner International(Bahamas), said: “As wehave addressed previously,Kerzner International is inconstructive discussions withour lenders. This processwill be seamless for ouremployees, our guests andthe communities in whichwe operate.

“Our operations remainvery strong, and the compa-ny has ample liquidity tocontinue to invest in ourproperties and our people.We continue to provide ourguests with the ultimatetravel experience.”

Such claims continue to

come after it was revealedlast year that Kerzner hadhired Blackstone Group LPand lawyers, Kirkland &Ellis LLP, as advisers on therestructuring of a total $3billion in debt that it tookon when Sol Kerzner andhis late son, Butch, took thecompany private in 2006.

In a previous statementabout the restructuring, thenoted that the impact of theeconomic downturn over thepast several years resulted“in a business climate thatwas not anticipated prior to2008”.

However, Mr Markanto-nis said at the time heexpects the debt restructur-ing to be “concludedfavourably”.

In the Bloomberg articlepublished last Friday, it wasalleged that sources close tothe matter believe Kerznermay “fail the test” on anestimated $450 million por-tion of the total $3 billiondebt that it owes numerouscreditors as soon as nextmonth. The debt is backedin part by management con-tracts and equity in someproperties, said the article.

A default on so-calledoperating company debtmay lead to the refinancingof Kerzner’s $3 billion totaldebt, asset sales or owner-ship changes, according toBloomberg’s sources.Restructuring advisers havecontacted hedge funds andprivate-equity firms, includ-

ing Paulson & Company,about investing new equity,but no agreements havebeen reached, one ofBloomberg’s sourcescharged.

Kerzner International hasstruggled with the debt sincethe 2008 financial crisis hithotel values, visitor arrivalsand room rates.

Future threats include theopening of a new competitorin the form of the Baha Marresort on Cable Beach, andthe fact Kerzner Interna-tional will lose a 2.5 per centroyalty fee the company col-lects on revenue from theMohegan Sun casino inConnecticut at the end of2014, noted Bloomberg.

Kerzner: $3bndebt restructureto be ‘seamless’

FROM page 1B

TOURISM MAGNET: Atlantis in Paradise Island.

BUSINESS


treaties we’ve signed,” MsBethel said, during a presen-tation to the Institute of Inter-nal Auditor at Breezes Super-club last wekk.

She added that despitelacking income tax, theBahamas does impose other“subtle” taxes, in the form ofbusiness license fees, proper-ty tax, import duties andstamp tax.

“So, for example, you mayhave a property owner whois presenting different factsabout an asset here in theBahamas to other authoritiesthat may assist us in deter-mining whether the properassessment is being done onthat property here. We alsonow have the opportunity, interms of imports coming intothe country, to ascertain whatthe true value is in order todetermine the true duty...”said Ms Bethel. She suggestedthat such information couldbe readily gathered with theassistance of a foreign author-ity via the provisions of aTIEA with a partner nation.

Ms Bethel mentioned this

potential as one of four mainbenefits of having a “wideTIEA network”. However,she admitted that this is notthe primary motivationbehind the signing of the 24TIEAs the Bahamas current-ly has in place with othernations, and the indefinitelylarger number that may be onthe way.

StandardsIn addition to the12 TIEAs

that were required by theOECD for each country to beremoved from its 2009 ‘grey’list of countries deemed notcooperative or not fully coop-erative with internationalstandards on tax informationexchange, Ms Bethel notedthat today the standard hasevolved to the point wherethe expectation is that allcountries will sign agreementswith “anyone who comesknocking”.

“They are now asking forjurisdictions to sign TIEAswith ‘all relevant partners’.There is some discussion overwhat ‘relevant partner’means, but essentially itmeans anyone who comes

knocking. All countries arerequired to broaden their net-work,” Ms Bethel explained.

She added that since 2009the number of TIEAs in exis-tence “exploded” to around450 globally. The Bahamas,with 24, is not significantlyfurther ahead in the numberof TIEAs it has signed incomparison to its regionalcompetitors, and some coun-tries now have more than 100TIEAs.

Within TIEAs there areprovisions for access by part-ner countries to informationheld by a government author-ity or financial institutionwithin the other country’sborders that may be “fore-seeably relevant” to the othercountry as it seeks to enforceits domestic tax laws.

Ms Bethel noted that asidefrom ensuring our removalfrom “negative lists” such asthe OECD ‘grey’ list in 2009,the signing of TIEAs“received positive recognitionof achievement by majoreconomies”, such as the US,Canada and Mexcio.

A wide TIEA network also“opens avenues for strength-ening and growing trade rela-

tions with other economies”,suggested the attorney, with“broader and deeper” com-mercial and economic ties apossible outcome of theremoval of the “lack of trans-parency” that may have seencitizens of certain OECDnations penalised by theirhome countries for investingin the Bahamas.

Ms Bethel added: “In aglobally integrated communi-ty and open economy such asthat which we have, where weseek to broaden, deepen andwiden our economic compet-itiveness, for me (TIEAs) arevery valuable tools for build-ing the framework that willadvance that particular objec-tive.

“Without it we would be ata bit of a disadvantage interms of being able to prop-erly position ourselves in theglobal framework. Withoutthem there is the threat thatcountries will be squeezedout, because there is a fearthat the transparency beingobserved in the global com-munity is not being observedin that country. There areadvantages to be gained byadapting to the new context.”

TIEA tax evasion probe benefitsFROM page 1B

ELAINE KURTENBACH,AP Business WritersSHARON SILKE CARTY,AP Business WritersTOKYO

The auto industry disruptionstriggered by Japan's earthquakeand tsunami are about to getworse.

In the weeks ahead, car buy-ers will have difficulty findingthe model they want in certaincolors, thousands of auto plantworkers will likely be told tostay home, and companies suchas Toyota, Honda and otherswill lose billions of dollars inrevenue. More than two weekssince the natural disaster, inven-tories of crucial car supplies —from computer chips to paintpigments — are dwindling fastas Japanese factories that makethem struggle to restart.

Because parts and suppliesare shipped by slow-movingboats, the real drop-off has yetto be felt by factories in theU.S., Europe and Asia. Thatwill come by the middle ofApril.

"This is the biggest impactever in the history of the auto-mobile industry," said KojiEndo, managing director atAdvanced Research Japan inTokyo.

Much of Japan's auto indus-try — the second largest sup-plier of cars in the world —remains idle. Few plants wereseriously damaged by thequake, but with supplies ofwater and electricity fleeting,no one can say when factorieswill crank up. Some auto ana-lysts said it could be as late asthis summer.

Hitachi Automotive Systems,which makes parts such as air-flow sensors and drive controlsystems, is waiting for its sup-

pliers to restart while dealingwith its own problems. Itsplants are without water andgas, and have rolling electricityblackouts. Workers are repair-ing crumpled ceilings, fallenwalls and cleaning up shatteredglass. A spokesman said hedoesn't know when its plantswill reopen.

The uncertainly has suppli-ers, automakers and dealersscrambling. And it exposes thevulnerability of the world'smost complex supply chain,

where 3,000 parts go into singlecar or truck. Each one of thoseparts is made up of hundredsof other pieces supplied by mul-tiple companies. All it takes isfor one part to go missing orarrive late, and a vehicle can'tbe built. When General Motorsbriefly shut a pickup plant inShreveport, Louisiana, due to alack of parts, it caused the par-tial closing of a New York fac-tory that supplies engines forthose trucks. Sweden's Volvohas warned that its productioncould be disrupted because itis down to a week's worth ofsome parts. Car buyers willsoon see higher prices and few-er choices. Some car colors willbe harder to get because a paintpigment factory in Japan wasdamaged and shut production.As a result, Ford is telling deal-ers to stop ordering "tuxedoblack" models of its F-150 pick-up and Expedition and Navi-gator SUVs. It's also shiftingaway from some reds. Themoves are precautionary, Fordsaid. Chrysler told dealers itwas temporarily restrictingorders of vehicles in 10 colors.

That worries some dealers,especially when popular colorslike black could be in short sup-ply

"It's hard enough to sell a

$60,000 Navigator in this econ-omy," said Fortunes O'Neal,general manager at Park CitiesFord in Dallas. "We don't wantto have to tell customers,'You've got to pick another col-or.'"

Customers also face risingprices for models like Toyota'sPrius, which is made only inJapan. Fears of falling supplyhave some dealers driving ahard bargain with customerswho want the fuel-efficienthybrid as gasoline prices rise.Recent discounts of 5 to 10 per-cent on that car are disappear-ing. Japanese carmakers, whohave shut most of their domes-tic plants, are warning thatsome of their overseas facto-ries will stop running, too, inan effort to conserve supplies.Toyota and Honda expect shut-downs at North Americanplants. Honda said productioncould be interrupted after April

1. Even though most of its partsare sourced in the region, a fewcritical ones still come fromJapan. Goldman Sachs esti-mates the shutdowns are cost-ing the Japan automakers $200million a day, which adds up to$2.8 billion for just the past twoweeks. Each week of continuedshutdowns costs $1.4 billion. Bycomparison, Toyota made $2.3billion in all of 2010, and itssudden acceleration recalls cost$2 billion. The cost of damagefrom Japan's natural disastercould dwarf that recall, whichwas considered Toyota's biggestcrisis ever.

Much depends on how manyspare components automakershave in stock — which is prob-ably very few.

Japan's automakers spear-headed lean manufacturing,under which parts are deliveredto plants the same day they areused.

BUSINESS


As Japan shutdowns drag on, auto crisis worsens

(AP Photo/The Shreveport Times, file) ASSEMBLY PLANT: This 2003 aerial file photo shows General MotorsCorp.’s Shreveport assembly plant and the surrounding area. The autoindustry disruptions triggered by Japan’s earthquake and tsunami areabout to get worse. When General Motors briefly shut the pickup plant inShreveport, La., due to a lack of parts, it caused the partial closing of a NewYork factory that supplies engines for those trucks.

FRANCESCA LEVY,AP Business WriterNEW YORK

The markets may be rationalafter all.

The threat of severe nuclearcontamination from a breachedJapanese nuclear reactor stilllooms. The outcome of theescalating war in Libya is uncer-tain. Yet The Standard &Poor's 500 index ended the

week up 2.7 percent. The DowJones industrial average rose3.1 percent. So what happenedto all that headline-drivenvolatility from two weeks ago?

If you look at historical pat-terns, this week's rebound isn'tso surprising. The numbers sug-gest stocks will likely keep ris-ing for the next few months.Catastrophic events can movestock prices dramatically: at onepoint during the week after

Japan's devastating earthquakeand tsunami, the Dow gave upall its gains for the year. Withinsix trading days it had returnedto where it was before the dis-aster.

That may seem quick, but it'snot. Brian Gendreau, strategistfor the Financial Network, anadvisory firm, studied the effecton the Dow of six major disas-ters. In all but one case theindex declined at first, butreturned to its pre-disaster lev-el in an average of fewer thanfour days. In the fifth case, lastyear's oil spill in the Gulf ofMexico, it didn't decline at all.

The Dow fell as much as 4.6percent after each of the fiveother calamities Gendreaulooked at: the 1979 nuclear acci-dent at Pennsylvania's ThreeMile Island; the 1986 Cher-nobyl nuclear accident; the 6.9-magnitude earthquake thatstruck Kobe, Japan, in 1995; the2004 Indian Ocean Tsunami;and Hurricane Katrina in 2005.The longest it took the Dow to

recover was 15 days, after theKobe earthquake. In the case ofChernobyl, the Dow recoveredin a day. In that context, lastweek's stock recovery tookslightly longer than average.

There's another clue that therebound is for real, in spite ofthe recent dips and leaps in themarket. It can be found in the50-day moving average of theS&P 500, which measures the

average value of the index overthe most recent 50 days.

Comparing an index level toits moving average shows whatgeneral direction the market istaking, without the interferenceof short-term spikes andplunges. Analysts fretted whenthe S&P 500 fell below its 50-day moving average on March10. On Thursday, it climbedback above the average.

But the moving average canalso signal longer-term trends.Before March 10, the S&P 500had stayed above its 50-daymoving average for more than100 days. That has only hap-pened five other times since1980, says Ryan Detrick, strate-gist for Schaeffer's InvestmentResearch. After each of thoseblocks ended, the index rose byan average of 6 percent in thefollowing three months. Fourout of those five times, it rosean average of 3.3 percent afterjust a month.

Then there's the macroeco-nomic view. Barry Knapp, chiefeconomist for Barclay's Capital,says stocks are probably safefrom a steep drop for the nextsix months. He expects theeconomy to follow the patternsof the last three recessions.

In the last three economicdownturns, the Federal Reservestarted to unwind the interven-tions it had made to keep mar-kets afloat well after the eco-nomic picture started toimprove. Knapp calls the six-month periods leading up toeach of those turning points inFed policy a "sweet spot," andsays the economy is in one now.

The Fed raised interest ratesin May 1983, six months afterthe economy began to recoverfrom the 1981-1982 recession.The Fed waited nearly threeyears to raise rates after therecession that lasted from July1990 to March 1991. And inJanuary 2004, three years afteran eight-month recession, theFed reversed what Knapp callsits "unconventional policy" ofpledging to keep interest rateslow, although it didn't raiserates until June.

Knapp expects the Fed toend its purchases of Treasurys,allow its balance sheet toshrink, and eventually raiseinterest rates between Septem-ber and November.

In past sweet spots, the S&P500 didn't fall more than 7 per-cent. That's less than the 10percent drop market analystscall a "correction," or a tempo-rary downturn within a bullmarket.

BUSINESS


Markets are more predictable than you think

MARKET REBOUND: In this photo taken March 14, 2011, traders workon the floor of the New York Stock Exchange.

Documents

Being Bound to Swear to The Dogmas of No Master known as ...ufdcimages.uflib.ufl.edu/UF/00/08/42/49/01819/03-28-2011.pdf · 3/28/2011 · Bluewater was a deal made on behalf of the