Newsletter 2

THIS ISSUE
The Greek Debt Crisis p.2

Dear Friends,
Time has flown with the speed of light and so it is the moment for the second iFund Newsletter. Regardless of whether youre struggling with EBP summaries or IE assignments, the newsletter is a perfect remedy to forget about studies and immerse a little bit in the financial world. The Euro will collapse! This is the end to European idea of unity! Actually, it is very common to read such quotes in the financial press since people are seriously concerned about the future of the EMU (European Monetary Union). And the main culprit for that is still Greece, whose unsustainable debt is created lots of anxiety and fear. Could there be a way out to save the Eurozone, we shall try to give you some idea. Every internet user knows such search engines as Google and Yahoo, although the latter is usually used less frequently. Maybe this is the reason why the company has been struggling so fiercely during the past five years and is desperate for moves that could get the company out of such distress. As always, comments and suggestions are more than welcome, so we hope you will enjoy reading the newsletter. Yours financially, iFund

We all recall from our high school literature classes that the Greeks are especially adept at the art of the tragedy. We can see that expertise playing out in Athens today, and the grand finale is somewhere under way. One thing we do not know is how the whole epopoeia will finish. Yahoo and its prospects p.3

Remember the dot.com bubble when countless IT and internet companies collapsed. Yahoo was a rare exception to that, yet now it seems as though the old problems are starting to return. The article will try to give a detailed coverage on what awaits the company in the nearest future. Board updates Upcoming Events p.4 p.4

Whoops! Greece has problems. Still.

The issue surrounding the Greek debt crisis remains a primary topic in the economic world. We shall look at the recent developments in the Greek case.

Learn more about the topic

For a short crash-course on the problems the country faces, this site will be very useful: http://www.forbes.com/sites/timwor stall/2011/06/16/explaining-thegreek-debt-crisis/ The forecasts for the Greek yearend budget deficit look rather gloomy:

During the first week of September three influential institutions International Monetary Fund (IMF), European Central Bank (ECB) and European Union (EU) gathered to look through the Greek accounting books and check if everything with government spending, additional taxation and privatization is on a right track. In other words to check whether Greece is lowering its budget deficit what is a crucial point of deal if they want to get a financial aid package which amounts to 8 billion euro from these organizations. Results of this analysis showed completely opposite situation than expected. Greece will overshoot its budget deficit target by at least one percentage point and will be bigger than expected 8.6% of GDP. The main reasons why Greece has come to such point are: 1) World economic slowdown (Greece GDP should fall about 5.5% this year); 2) delay in implementing decisions; 3) worse than expected yield from already implemented tools; 4) not enough willingness from private corporate bonds owners to contribute. If pointing out exact numbers and problems several should be mentioned first. Greek government until the end of September should have sold its equity to private owners amounting to 1.7 billion euros and even though it is September already they are still missing 1.3 billion. Until the end of the year

they have to earn 5 billion euros from privatization but at this point it looks a tough task for Greece. Another problem comes from private government bond owners because Greek government need at least 90% of them to rollover the bonds which will mature until 2020. Unfortunately at this point of time they have only 70% of owners willing to keep their money in Greek bonds what means in numbers - shortage equal to 22.5 billion which will be needed like oxygen in the future to buy bonds that have matured. Big problems with unemployment that reached record of 16.6% in May just deepen the spread between actual situation and plans. After such news European stock markets drop and the ones in the Baltics did the same. So volatility can be seen in the graphs and fear in investors eyes. Nothing new in this situation ate least if comparing with whole August. By Martynas Samulionis

http://www.cnbc.com/id/44360807 http://www.cnbc.com/id/44368769 Also the mood in the financial markets does not sound so much rosy. In case youre not familiar, a CDS is a derivative as form of insurance against the debtor (Greece) going into default (bankruptcy): http://www.economist.com/node/18 775351 The considerations of Greece leaving the Eurozone have been much debated over the last months: http://theeconomiccollapseblog.co m/archives/the-greek-debt-crisisescalates-is-greece-threatening-toleave-the-euro The potential collapse of the EMU has also been the subject of wide discussion. Heres a nice opinion on it: http://geofftalk.com/?p=1023 Goldman Sachs, a major investment bank, is already thinking of ways how to profit from the potential euro crisis: http://www.economywatch.com/ec onomy-business-and-financenews/goldman-sachs-secret-reporteurozone-collapse-and-how-toprofit/08-09.html Also, here is an opinion by Morten Hansen, whom you will meet quite soon during the Micro course: http://www.ir.lv/2011/8/15/why-theeurozone-won-t-break-up-i-think

Yahoo. Where it goes?

Even after years of struggle to stabilize its internal situation the company seems to remain quite a decent deal-breaker for potential investment.
Big, influential, well-known and with bright future. Are these words still about Yahoo? Currently many changes are happening and that can turn the company towards destruction or a new gold age. For last five years the Yahoo was struggling without innovations and expansion strategy. Its CEO Carol Bartz and CFO Tim Morse were only focusing on cost cutting. And that is for sure not what a company working in such industry as the Yahoo does should concentrate on. Shareholders have noticed that and during last five years value of the Yahoo has tumbled more than 50% even though there was a serious bounce in the markets a year ago. Now, more about the fresh news from Yahoo. Carol Bartz is not a CEO of the Yahoo anymore she was replaced by Tim Morse, previous CFO. So, according to many shareholders that will not give the result everybody is expecting. Actually Carol Bartz was fired in a very impolite way as the Chairman of the board called her by phone and expressed his decision. It is not the way such thing are being done and is against all the ethical rules because such big company as the Yahoo is should care about its image in the market especially during the time of changes. At the same time according to the Wall Street Journal the Yahoo has engaged in bidding war to win control of Hulu a very hot property working in streaming video industry. Competitors look seriously as well: Google, Amazon and Direct TV. Actually this is held as a disastrous decision made by the Yahoo because they couldnt gain from Hulu or in the worst scenario could spoil the By Martynas Samulionis Many years ago the Yahoo had a possibility to be acquired by Microsoft with 60% bonus, they refused and now they are in a big trouble. Only time will show who was right. Nevertheless the Yahoo has hired big institutions such as UBS bank and Allens & Co to help to solve problems. And rumors about possible merger are in the air. One of the potential partners is AOL but at the moment companies are not commenting on this fact. Furthermore, Dan Loeb the manager of Third Point LLC has recently acquired 5.15% stake in the Yahoo and now Third Point is the third largest outside shareholder. Despite the fact that the Yahoo has made many mistakes Loeb believes that the company is highly undervalued and has big potential to grow. After all these news stocks in the market rose and doesnt show any signs of turning. current position of Hulu (doubling earnings this year).

Learn more about the topic:

The complete story of Dan Loebs opinion on Yahoos current value: http://www.benzinga.com/tradingideas/longideas/11/09/1907701/can-danloeb-agitate-yahoo A good story of how Yahoo is trying to raise the value of its shares: http://www.cnbc.com/id/44447162 Here is a discussion on Carol Bartzs case and why not only he should be subject of being fired: http://www.benzinga.com/tradingideas/longideas/11/09/1904075/yahoointerim-ceo-tim-morse-is-clueless Can a marriage of AOL and Yahoo save the fading Web titans? This site gives complete coverage on the issue: http://arstechnica.com/techpolicy/news/2011/09/can-amarriage-of-aol-and-yahoo-savethe-fading-webtitans.ars?utm_source=rss&utm_me dium=rss&utm_campaign=rss Actually it might not be such a good idea of merging to struggling companies, the Bloomberg reporter Paul Kiedrovsky reports: http://www.clipsyndicate.com/video /playlist/1778/2832569?cpt=8&title= bloomberg&wpid=2057 What about he companys nearest future? The Los Angeles Times considers it to be rather pessimistic, to say the least: http://www.southcoasttoday.com/a pps/pbcs.dll/article?AID=/20110910 /NEWS/109100356/-1/rss02

Board updates
Here the iFund board posts weekly updates on what has been done or achieved during the week by the board: 1. The first seminar was held on Thursday, 8th September where Y1 students were introduced to the basic of the financial markets. After giving a verbal agreement for support, Swedbank eventually decided not to support us because of their new marketing strategy. Linedata Services has expressed its willingness to support us during the Investment Game. Currently the board is negotiating with Orion Securities about establishing a trust fund where we could trade during this year and create a portfolio. Negotiations about contract renewals with Finasta and PwC will be commenced this week.

2.

Upcoming Events
Guest lecture: Striving Towards Success: the Story of Vadims and His Way to Barclays Capital M&A Division in the United Kingdom
September 20, 17.00 18.00 in W-32

3.

4.

Seminar 2: Introduction to Financial Markets II

September 29, 16.00 17.00 in 303 or 311 (TBA)
5.

Seminar 3: Introduction to Financial Markets III

September 3, 13.00 14.00 in 311 (TBA)

Movie Night: Wall Street

October 9, 17.00 19.00 in Soros (TBA)

SSE Riga Investment Fund

Strlnieku iela 4a, Rga LV-1010, Latvia Ifund.sseriga@gmail.com http://www.ifund.lv