They discussed yesterday’s blog regarding the problems that CIT Group clients are experiencing and the role of the U.S. government in solving CIT’s funding situation. The interview link is here.

AO

While CIT would be the largest American bank to fail since Lehman Brothers collapsed last fall, the company is relatively small, and few analysts say its failure would threaten the broader financial system. Nonetheless, given CIT’s historical role in financing smaller businesses, President Obama was briefed on its status Wednesday morning.

“Even though it was a large company, it was ‘small enough to fail,’ ” said David Hendler, a research analyst at CreditSights. He said the Treasury Department’s message was clear: firms not vital to the inner workings of the financial system “will probably be shut out” of the government’s rescue efforts.

“We have a comprehensive and aggressive strategy to restore stability to the financial system,” the Treasury said in a statement. “Even during periods of financial stress, we believe that there is a very high threshold for exceptional government assistance to individual companies.”

Despite what we all might think, the U.S. banking system isn’t entirely cured of its ails. Just yesterday, for example, one U.S.-based borrower complained that its cheques were being bounced even though it was onside every covenant and had received no communication from its midsized financial institution that something was awry. One of those cheques was an automatic transfer to cover payroll, and the companies financial backers were left to scramble to inject more capital to make good on the employee payments.

Suspicions are that the lender didn’t have enough capital to maintain all of its the drawn revolvers across its portfolio, and rather than go through with the hassle of “demanding” each loan, it jumped that step and partially repaid itself using the borrowers’ existing cash on hand.

If you manage a growing business in the SME universe and would like to test the financing market, please give us a call at Wellington Financial (Amy is the place to start at 416-682-6002; if you can’t reach her, I’m Mark McQueen at 416-682-6000). Our capital comes from Canadian pension funds, life insurance companies and a AAA-rated Crown Corporation owned by the Canadian government; and we don’t use additional warehouse lines to lever our loan portfolio. Every loan facility and operating line we provide is 100% backed by equity, unlike other lenders who are levered anywhere from 3x to 24x their equity base.

Wellington Financial LP is a privately held specialty finance firm providing operating lines of credit from $1 million to $5 million; term and amortizing loans up to $40 million; and venture debt loans up to $10 million. Wellington Financial LP is currently deploying a $450 million investment program via its third fund. The fund’s clients vary in size and business model, but generally have current year revenue in excess of $5 million.

Hopefully, the U.S. Treasury Secretary will fix the CIT challenge over the next couple of days; once you save Bear Stearns, you’re preggers. One million SME clients shouldn’t be thrown to the wind; leaving aside the esoteric issue of whether CIT fits the “too big to fail” definition or not.

In the meantime, if you are a CFO and worried about where the overall loan market is going, give us a call. We have half of our capital base currently loaned to clients, which leaves plenty for other good companies to access.

MRM

Given Mr. Chretien’s position against Conrad Black’s nomination to the British House of Lords, also a Regal designation, I assume that Mr. Chretien will take his own advice and respectfully decline the Queen’s gracious invitation.

It’s not like he has any choice in the matter. As Mr. Chretien said in his defence of the lawsuit Black v. Chretien, he was merely following “the claimed long-standing Canadian opposition to titular honours”.

To accept a titular honour now would not only appear hyprocritical, it would also give Mr. Black the chance to sue him again for perjury or abuse of process on the original Court action.

MRM

Here are the links to his Buffett and Goldman pieces.

AO

Softchoice Corp. BUY

SO-TSX
C$3.85 Target: C$9.50

Building for 2010 - Initiating Coverage with Buy Rating

. IT Spending to Rebound: Our discussions with IT professionals and published reports suggest IT spending may have bottomed and should gradually recover through 2010. As a software reseller, Softchoice should see increased business.

. Microsoft Upgrade Cycle Near: The next upgrade to Windows is expected to be released in October and should stimulate business in 2010. Microsoft represents about 33% of Softchoice revenue and more than 50% of gross margin.

. Cost Structure: SO acquired three businesses in late 2007, 2008. Following cost cutting in the past six months, we believe Softchoice has a more appropriate cost structure.

. Forecasts above Street: Our forecasts of EPS US$0.35 in 2009, $0.75 in 2010 are generally above Street views.

. Risk: Trends in cloud computing and new web-based programs like Salesforce.com represent a potential risk of disintermediation for resellers.

. Target of C$9.50 based on 11x 2010 EPS of US$0.75 and C$ at US$0.85. We initiate coverage with a BUY rating.

MRM

It is difficult to ascertain whether or nor Goldman has dramatically increased the risk tolerance on their trading desk, but one thing is for sure — the universe is a happy place for anyone who trades commodities, currency or fixed income products.

Since the financial world went through its forced restructuring last year, the reality is that there are fewer firms trading, most “tradeable items” are experiencing volatility, and spreads are wider as a result.

With wider spreads, those who make markets are bound to make out like bandits.

The Goldman experience will be a sign of how the 2009 fiscal year is going for the Canadian banks who make markets in many of the products that Goldman specializes in. Look at the charts on things oil, gold, the Canadian dollar, or government bonds. What you don’t see are nice flat lines.

Instead, it’s up, down, up, down.

This trading pattern makes clients less sensitive to “the quote”, and frankly more interested in just getting the trade done. Which is great for the intermediary, particularly if that intermediary also plays the role of market maker and counterparty, as so many Canadian bank trading desks do.

The Goldman quarter may well serve as a harbinger of what’s to come for the Canadian Chartered banks this October. And the equity issuances have been incredibly strong so far this year in Canada, at least for all of the ECM desks who played in the recapitalization equity and pref offerings by Canada’s financial services industry.

Control the credit reserves, and let the market volatility drive trading spreads wider. Which winds up going straight to the bottom line.

What we do know, however, is that unlike Goldman, compensation won’t reach $600k per employee here in Canada. Bank boards have been waiting for years to restructure their investment banking bonus pools, and having survived the crisis — while preserving far more i-banking jobs than expected — this bonus season will likely be the demarcation line.

But there still will be plenty to go around at the banks, which makes for far happier days on Bay Street this summer than one could ever have imagined just four or five months ago.

MRM
(disclosure - I own GS and some of the CDN banks)

Executive Director, Jordan Johnston, will be joining UBS Securities on the Equity Sales Trading Team. Previously, Jordan was at BMO Capital Markets.

Brian Mok has joined Union Securities from Max Capital Markets as Senior Mining Analyst in Toronto.

MFC Global Investment Management has named Francoys Levert Managing Director, Sales & Relationship Management. Previously Francoys was at State Street Global Markets as Managing Director on the Institutional Foreign Exchange Sales Team.

Tommy Trinh has joined Ubequity Capital Partners as an Associate. Most recently, Tommy was at M Partners.

Noah Gordon has joined Liquidation World as Director of Real Estate. Most recently, he was an Associate at CIBC.

Cumberland Private Wealth Management has announced the appointment of Bruce Jackson as President. Most recently Bruce was Founder and Managing Director of Barrantagh Investment Management.

Salesmen, Dave Irwin and Stan Liberty will be joining the Electronic Trading Team at Wellington West Capital Markets from industry.

Ontario Teachers’ Pension Plan has appointed Jennifer Newman Vice President, Investment Finance Operations. Most recently, Jennifer was at CIBC as Vice President, Process Reengineering & Special Projects.

Zeeshan Mukaddam has joined Fraser Mackenzie from M Partners as an Associate, Investment Banking.

MRM

Danny King was featured today on the Ontario PGA website .  Wellington has proudly sponsored Danny since 2007. Good Luck Danny!

- 2008 Ontario PGA Champion Danny King will be looking to join some select company this coming Tuesday. If King is successful in his championship defense he will become only the second player in tournament history to win four times. King has previously won the Ontario PGA Championship in 2004, 2005 and 2008. Herb Holzscheiter is the only other four time winner of the Ontario PGA Championship. Holzscheiter won the OPGA in 1976, 78, 80 and 1982.

“It would be a thrill to win a fourth Ontario PGA Championship,” said King, who has been focusing on short game shots especially from 100 yards and in. “Barrie is all about second shots and managing where you hit them, it’s really easy to short side yourself on those greens,” added King.

The greens at Barrie are some of the trickiest greens the players play on all year. Canadian PGA Golf Professional of the year and Barrie Head Professional Bill Wogden has been putting on them for 17 seasons and still has difficulty on the four and five footers.

 ”You really need to pay attention to the contours that surround the green and on the greens,” said Wogden. “They all break a little more and roll a little quicker than most people initially think, which is what makes them fun to putt on,” added Wogden.

 So far in 2009 King has played well finishing in second spot at the Spring Championship as well as the VIA Rail Canada Cup in Montreal. In two Great Lakes events this year, King has one top 10 finish.

“The only thing I can control is the way I prepare myself,” said King. “Like I said, to win four would be great but for now I am focusing on sticking to my game plan and preparing myself mentally.”

The Titleist & FootJoy Ontario PGA Championship begins on Monday July 13 at 7AM sharp.
 -

AO

Salida runs about US$300 million according to the story. Assuming that Salida’s annual management fees approach industry norms, they earn about US$6 million each year in fees from their investor’s funds — money that is charged to cover rent, salaries, research services, travel and so forth.

Assuming that the US$1.68 million is being paid from that annual management fee, one has to ask themselves what exclusive market insight Salida expects to hear from Mr. Buffett to justify the tidy lunch tab. Plus the jet to get them to Omaha and back.

Those same management fees could be used to hire 10 or 15 researchers and fraud detection specialists to comb the books of dozens of companies looking for the next short– or a lunch with Warren. Even if the lunch is used to entertain Salida’s largest limited partners, some might wonder if the quantum of management fees are really needed if there is enough left over for this kind of expense.

I’m all for GPs donating to charities — that’s something we do each and every year. But US$1.68 million? It’ll just serve to confirm the suspicions of those institutional LPs who think funds have become too large, and the fees too rich.

MRM

They discussed the current momentum trends in the stock market. The interview link is here.

AO