Wednesday, September 30, 2009

Wednesday Morning

Stocks opened up just a slight bit, after GDP decreased at a slower-than expected .7% for the second quarter. Economists had been expecting a drop of 1.2% On the downside, ADP estimates that September saw job losses of 254,000, worse than expected.

Pickup truck sales, once 15% of auto sales in the US, are down to 10% this year. NYTimes attempts to explain why. No mention of cash-for-clunkers, which steered drivers to smaller cars.
“The casual truck buyer is disappearing somewhat,” said George Pipas, the chief sales analyst at Ford. “Today people have to make choices between what they want and what they need. And the question is, Do they really need the capabilities of this type of product?” Ford, for example, sold 939,000 of its industry-leading F-Series pickup in 2004. This year, through August, the company had sold just 261,000.

While rumors of a "marriage" with Indymac fall to the wayside, CIT Group is considering offers of financing from Citigroup and Barclays.
CIT Group Inc., the commercial lender that has said it may be forced to file for bankruptcy, is considering an offer of financing from Citigroup Inc. and Barclays Capital, people familiar with the situation said. The 101-year-old company’s bondholders are also seeking to provide about $2 billion in loans as a restructuring deadline approaches tomorrow

Sugar is this year's crude oil, in terms of hedge-fund speculating.
After their infamous and massive bets on crude oil sent prices doubling and brought $5-a-gallon gasoline a year ago, hedge funds are now pouring their billions into raw sugar. Sugar prices have doubled since springtime, causing US officials to consider lifting tariff barriers so that more imported sugar can reach food and candy makers.

PIMCO's Bill Gross says with a higher savings rate and permanently lower consumer spending, people should expect a "new normal" return on equities of 5%. Worth the risk?
“Returns mimic nominal” gross domestic product, Gross, manager of the world’s biggest bond fund, said in an interview yesterday with Bloomberg Radio. “Nominal GDP is the growth rate of wealth on an annual basis. The new normal is 2 to 3 percent GDP and real growth of 1 to 2 percent.”

Carl Icahn to the rescue. He represented 30% of the new loans just made to Leon Black's Realogy, giving the entity some breathing room with it's debt load.
The company behind such big names as Century 21, Coldwell Banker and Corcoran Group, came thisclose to defaulting on its senior debt, but thanks to a deal struck with billionaire Carl Icahn, Realogy was able to pay down its senior loans and give itself some breathing room. Realogy this week said it raised $515 million in new loans, with Icahn representing 30 percent of that money. It plans to use $365 million of the proceeds to reduce senior debt.

Due to several factors, this year's big takeovers have been largely financed with company stock.
Some 36 percent of this year’s acquisitions involved at least some stock, the highest proportion in eight years, data compiled by Bloomberg show. Kraft Foods Inc. and Xerox Corp. are using their shares for proposed takeovers. Zappos.com Inc. and Marvel Entertainment Inc. demanded equity instead of cash when they sold themselves. In stock transactions, “selling shareholders get an option on an economic recovery,” said Cary Kochman, UBS AG’s Chicago- based co-head of Americas mergers and acquisitions. “It provides buyers with insurance against another downturn.”

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