Tuesday, September 22, 2009

Tuesday Morning

AlphaNinja - US stock futures are up this morning, following good news overseas. Positive data from the Asian Development Bank signaled an improved global economic outlook. Home improvement giant Lowe's (LOW) is off 1.5% after reducing earnings guidance for 2010.

A private equity veteran shares some thoughts on his industry.
“We all had too much money. It was just too easy.”

Arthur Laffer on taxes during economic downturns.
In 1930-31, during the Hoover administration and in the midst of an economic collapse, there was a very slight increase in tax rates on personal income at both the lowest and highest brackets. The corporate tax rate was also slightly increased to 12% from 11%. But beginning in 1932 the lowest personal income tax rate was raised to 4% from less than one-half of 1% while the highest rate was raised to 63% from 25%. (That's not a misprint!) The corporate rate was raised to 13.75% from 12%. All sorts of Federal excise taxes too numerous to list were raised as well. The highest inheritance tax rate was also raised in 1932 to 45% from 20% and the gift tax was reinstituted with the highest rate set at 33.5%.

Bernanke can do what he pleases, but if banks don't lend, the economy will not grow.
Banks have become more careful about lending. A Fed report released last week shows banks had $6.85 trillion of loans and leases outstanding to businesses and households as of Sept. 9, down for a fifth straight week and below the record $7.32 trillion in October 2008. Real estate loans, the biggest portion, stood at $3.79 trillion, up $7.5 billion from the prior week while down from a peak of $3.9 trillion.

The recession has been good to Hyundai, as they've increased market share.
After years of struggling to prove to consumers than it was more than a second-tier brand, Hyundai Motor America and its affiliate, Kia Motor America, accounted for 8 percent of the new-vehicle market in the United States in August, more than Chrysler’s 7.4 percent.

More on banks - analyst Mike Mayo insists that bank common stock is headed south, as more capital must be raised to cushion against loan writeoffs.
U.S. bank shares are set to drop because loans made for commercial real estate will sour and lenders will need to raise more capital to cover credit losses, according to Mike Mayo, an analyst at CLSA Ltd.
Regional banks will perform the worst among U.S. lenders because they have the biggest exposure to loans for commercial real estate, Mayo said today at a conference hosted by his company in Hong Kong.


Excessive leverage claims another victim, as designer Mark Ecko may be forced to sell 51% of his business.
As first reported by The Post in March, Marc Ecko this spring hired investment bank Peter J. Solomon to begin dismantling his empire to pay off debts. Officials at Peter J. Solomon declined to comment yesterday.
After defaulting on a term loan of more than $70 million from a syndicate led by embattled commercial-lending giant CIT, one source said Ecko has made the bank syndicate "comfortable" by selling off a handful of brands and licenses this summer, including the Avirex brand.


Subway trying to eat McDonald's lunch, so to speak.
As McDonald's slows down its growth in order to focus on store profitability, Subway appears to be taking the opposite tack, opening stores at breakneck speed, and closing in on the Golden Arches in the process.
According to the latest statistics, Subway is expecting to reach 31,800 stores this week, vs. the 32,158 that McDonald's has worldwide. In the US, Subway has nearly 23,000 locations.

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