Too big to let fail ; Too big to save - It's WAMU WAY

There is an interesting relationship between a bank's financial state and its deposit rates: IndyMac was offering 4.85 % just before it was put into conservatorship. WaMu is still offering 5% on 12 month CD when national average is 3.69% ! Here are some facts about WaMu:

• WAMU has lost 90% of its market value in last 12 months.

• Standard and Poor lowered credit ratings on WaMu to BBB- on long-term, just shy of the "junk bond" status.

• The bank has already lost over $ 6 billions in write-offs mainly in risky mortgages; many billions to come in near future.

• Despite of the its reduced market cap to $ 9.1 billion, the huge assets over $ 300 billions make it difficult to be acquired.

Would WaMu become 12^th bank to fail in 2008 ? I don't think so. The real question is WHO will save the bank ?

(By the way, small depositors are safe; FDIC has them covered. But the outlook doesn't look too promising” Berkshire Hathaway subsidiary's plan to stop insuring bank deposits above federal limits may reflects Warren Buffett's worries about future bank failures?)

Browser Wars III – Google Strikes Back !!

Today's biggest buzz in the tech world was the news that Google would soon be launching it's own open source web browser 'Chrome'. The news came exactly three days after Microsoft released newest version of its legendary web browser - IE 8 beta.

Who cares? Web browsers are free today – Microsoft made them free years back. Interestingly, the primary function a web browser have transformed in last 15 years - from a simple browsing tool to the machine to control the web searches and thus online ad revenues. Online ads is the biggest revenue stream for Google and thats where Microsoft struggling to make its way.

On the other hand, Microsoft is fighting back on different fronts to protect its market from Apple and Google. Both Apple and Google are targeting Microsoft's core businesses. (In my view, Microsoft is the most diversified technology company today with it's businesses and operations in operating systems, business solutions softwares, online services and entertainment devices vastly dodge the risk exposure). All of these three companies are well capitalized, have constantly demonstrated satisfactory financial earnings and led by some of the greatest visionary business leaders. (Though there is significant difference in the brand characters - Apple has kind of 'Cool' brand, Google is more 'anti-establishment and maverick' while Microsoft's brand style is rather 'serious and corporate' !)

The war is getting serious everyday...

1. http://www.marketshare.hitslink.com
2. http://www.attributor.com/blog/get-your-fair-share-of-the-ad-network-pie/


© Rohit Deshpande