Wednesday's Economic Calendar
7:00 MBA Mortgage Applications
9:00 Hearing: Subprime Lending and Securitization and the GSEs
9:30 Business Roundtable CEO Survey
10:00 SEC Meets on Asset-Backed Securities
10:30 EIA Petroleum Inventories
12:05 BoJ Rate Decision
12:15 PM Fed's Dudley: Economic Outlook
1:30 PM Fed's Bernanke: Economic Challenges
2:00 PM Fed's Hoenig: 'What About Zero?'
3:00 PM Consumer Credit
Wednesday, April 7, 2010
Wall Street Morning News
Wall Street Breakfast: Must-Know News
by SA Editor Eli Hoffmann
Fed's foot still on the brakes. Minutes from the most-recent FOMC meeting suggest the Fed could keep target interest rates near zero for even longer than investors anticipate if the outlook worsens or inflation drops. Minutes from the March 16 meeting indicated most board members were in no hurry to raise rates, and still have some concerns over the U.S. economic recovery. KC Fed's Hoenig again dissented, advocating for a more flexible commitment to keep rates low "for some time" rather than the "for an extended period" formulation that appeared in the Fed's statement.
Eurozone recovery hits a snag. Eurozone growth came to an unexpected halt in Q4 on weak consumer and investment spending. Eurostat had previously pegged Q4 growth at 0.1%, but in its final estimate said output was unchanged from Q3, while output in seven of 16 member nations actually fell. Looking forward, recent business surveys indicate that the eurozone economy grew in Q1, with private sector growth at its strongest rate in 31 months, fueled by a surge in Germany.
Macarthur snubs Peabody bid. Macarthur Coal rebuffed Peabody Energy's (BTU) second bid to acquire the company, saying the A$14/share offer was unattractive. Macarthur recommended its shareholders back an alternative plan to take over smaller rival Gloucester Coal, and give a 25% stake in Macarthur to Gloucester's main shareholder, Noble Group (NOBGF.PK). A Peabody spokesman said the company will continue to attempt to engage the Macarthur board "in what we feel is a far superior bid to the Noble bargain basement price that is under consideration right now," but would not say whether Peabody would make another offer before Monday, when shareholders meet to vote on the Gloucester plan.
Goldman: We didn't bet against clients. In its annual report released this morning, Goldman Sachs (GS) denied it bet against clients in the mortgage-derivatives market, adding that most of its successful bets against residential mortgage-related products only helped the firm lose less money in the collapse, but did not generate profits. Goldman also gave thanksgiving to world governments for stepping in and protecting the global financial system from complete collapse, "and we recognize that our firm and our shareholders benefited from it."
China appears to be preparing for yuan rise. Treasury Secretary Geithner will hold talks in Beijing tomorrow amid new signals that Beijing might be paving the way to let the yuan rise. China's top economic planner, the National Development and Reform Commission (NDRC), said China would monitor exchange rate risks facing exporters, and suggested keeping the yuan "basically stable at a balanced and reasonable level." An economist from the agency also said Beijing should edge towards a more flexible yuan.
SEC to mull ABS clampdown. An SEC open-meeting this morning will consider whether to propose new rules to force issuers of asset-backed securities to retain 5% of the credit risk, and to disclose in-depth information on every loan in a mortgage-backed security. The proposal comes as regulators try to revive a securitization market that dried up during the financial meltdown. The FDIC is expected to provide "safe harbor" protection to securitized assets for which issuers provide better disclosure and underwriting.
Comcast deals FCC Net Neutrality blow. Comcast (CMCSA) won a key verdict against the FCC after a federal appeals court ruled the government agency does not have the authority to force Comcast to refrain from withholding bandwidth from traffic-intensive downloads like movies. The court said the FCC failed to show that it had the necessary authority to impose such restrictions. The ruling is a blow to the so-called Net Neutrality initiative, which believes all internet traffic should be treated equally.
Putting HFT on a leash. Sources say the SEC may formulate a plan to improve oversight of high-frequency trading by keeping track of executed transactions through issuing firms unique identifiers that would tag every trade. Regulators are trying to get a better handle on so-called HFT, which is currently thought to account for about 40% of all U.S. futures trading.
Time to buy a house? Nearly two-thirds of Americans think the time is right to buy a house, and that prices will be the same or higher over the coming year, according to a Fannie Mae survey. The 64% of respondents that said it's a good time to buy is just shy of the 66% that said the same thing in 2003, as the housing market took flight. But most also said that it would be tougher for them to get a loan than it was for their parents. The survey notes most Americans still "strongly believe" in upholding their financial commitments, though that weakens once people know someone who is defaulting.
Chicago Fed manufacturing slips. Midwest manufacturing tapered off in February, largely due to a decline in auto production, the Chicago Fed reported Tuesday. The Midwest Manufacturing Index fell 0.8% to 82.6, paring back a 2% gain in January. Compared to a year ago, the index was -0.5% in the midwest, and +2% nationwide.
Fisher sees no price pressures. Dallas Fed President Richard Fisher - previously known as an inflation hawk - believes the global economy is burdened by such large amounts of unused industrial capacity and idle labor that consumer prices face little risk of shooting higher. "Because of the enormous slack in the system, and as you know I tend to be very vigilant about inflation, we're just not seeing price pressures right now," Fisher said in an interview yesterday. "If anything, the tail risks are on the deflationary side."
FTC may challenge Google/AdMob combo. Sources say the FTC is preparing to challenge Google's (GOOG) proposed $750M acquisition of mobile-ad provider AdMob on antitrust grounds. The FTC reportedly sent letters to AdMob's competitors asking them to testify about the potential impact of the purchase, and has assembled an internal team of litigators if it decides to block the deal. Many analysts believe mobile search will eclipse traditional search traffic in coming years. "It is therefore of vital importance to be wary of any transaction that would create undue market dominance of search- or application-based advertising on mobile devices such as smart phones," Sen. Herb Kohl, a vehement opponent of the deal, wrote in a letter to the FTC Tuesday.
by SA Editor Eli Hoffmann
Fed's foot still on the brakes. Minutes from the most-recent FOMC meeting suggest the Fed could keep target interest rates near zero for even longer than investors anticipate if the outlook worsens or inflation drops. Minutes from the March 16 meeting indicated most board members were in no hurry to raise rates, and still have some concerns over the U.S. economic recovery. KC Fed's Hoenig again dissented, advocating for a more flexible commitment to keep rates low "for some time" rather than the "for an extended period" formulation that appeared in the Fed's statement.
Eurozone recovery hits a snag. Eurozone growth came to an unexpected halt in Q4 on weak consumer and investment spending. Eurostat had previously pegged Q4 growth at 0.1%, but in its final estimate said output was unchanged from Q3, while output in seven of 16 member nations actually fell. Looking forward, recent business surveys indicate that the eurozone economy grew in Q1, with private sector growth at its strongest rate in 31 months, fueled by a surge in Germany.
Macarthur snubs Peabody bid. Macarthur Coal rebuffed Peabody Energy's (BTU) second bid to acquire the company, saying the A$14/share offer was unattractive. Macarthur recommended its shareholders back an alternative plan to take over smaller rival Gloucester Coal, and give a 25% stake in Macarthur to Gloucester's main shareholder, Noble Group (NOBGF.PK). A Peabody spokesman said the company will continue to attempt to engage the Macarthur board "in what we feel is a far superior bid to the Noble bargain basement price that is under consideration right now," but would not say whether Peabody would make another offer before Monday, when shareholders meet to vote on the Gloucester plan.
Goldman: We didn't bet against clients. In its annual report released this morning, Goldman Sachs (GS) denied it bet against clients in the mortgage-derivatives market, adding that most of its successful bets against residential mortgage-related products only helped the firm lose less money in the collapse, but did not generate profits. Goldman also gave thanksgiving to world governments for stepping in and protecting the global financial system from complete collapse, "and we recognize that our firm and our shareholders benefited from it."
China appears to be preparing for yuan rise. Treasury Secretary Geithner will hold talks in Beijing tomorrow amid new signals that Beijing might be paving the way to let the yuan rise. China's top economic planner, the National Development and Reform Commission (NDRC), said China would monitor exchange rate risks facing exporters, and suggested keeping the yuan "basically stable at a balanced and reasonable level." An economist from the agency also said Beijing should edge towards a more flexible yuan.
SEC to mull ABS clampdown. An SEC open-meeting this morning will consider whether to propose new rules to force issuers of asset-backed securities to retain 5% of the credit risk, and to disclose in-depth information on every loan in a mortgage-backed security. The proposal comes as regulators try to revive a securitization market that dried up during the financial meltdown. The FDIC is expected to provide "safe harbor" protection to securitized assets for which issuers provide better disclosure and underwriting.
Comcast deals FCC Net Neutrality blow. Comcast (CMCSA) won a key verdict against the FCC after a federal appeals court ruled the government agency does not have the authority to force Comcast to refrain from withholding bandwidth from traffic-intensive downloads like movies. The court said the FCC failed to show that it had the necessary authority to impose such restrictions. The ruling is a blow to the so-called Net Neutrality initiative, which believes all internet traffic should be treated equally.
Putting HFT on a leash. Sources say the SEC may formulate a plan to improve oversight of high-frequency trading by keeping track of executed transactions through issuing firms unique identifiers that would tag every trade. Regulators are trying to get a better handle on so-called HFT, which is currently thought to account for about 40% of all U.S. futures trading.
Time to buy a house? Nearly two-thirds of Americans think the time is right to buy a house, and that prices will be the same or higher over the coming year, according to a Fannie Mae survey. The 64% of respondents that said it's a good time to buy is just shy of the 66% that said the same thing in 2003, as the housing market took flight. But most also said that it would be tougher for them to get a loan than it was for their parents. The survey notes most Americans still "strongly believe" in upholding their financial commitments, though that weakens once people know someone who is defaulting.
Chicago Fed manufacturing slips. Midwest manufacturing tapered off in February, largely due to a decline in auto production, the Chicago Fed reported Tuesday. The Midwest Manufacturing Index fell 0.8% to 82.6, paring back a 2% gain in January. Compared to a year ago, the index was -0.5% in the midwest, and +2% nationwide.
Fisher sees no price pressures. Dallas Fed President Richard Fisher - previously known as an inflation hawk - believes the global economy is burdened by such large amounts of unused industrial capacity and idle labor that consumer prices face little risk of shooting higher. "Because of the enormous slack in the system, and as you know I tend to be very vigilant about inflation, we're just not seeing price pressures right now," Fisher said in an interview yesterday. "If anything, the tail risks are on the deflationary side."
FTC may challenge Google/AdMob combo. Sources say the FTC is preparing to challenge Google's (GOOG) proposed $750M acquisition of mobile-ad provider AdMob on antitrust grounds. The FTC reportedly sent letters to AdMob's competitors asking them to testify about the potential impact of the purchase, and has assembled an internal team of litigators if it decides to block the deal. Many analysts believe mobile search will eclipse traditional search traffic in coming years. "It is therefore of vital importance to be wary of any transaction that would create undue market dominance of search- or application-based advertising on mobile devices such as smart phones," Sen. Herb Kohl, a vehement opponent of the deal, wrote in a letter to the FTC Tuesday.
Monday, April 5, 2010
Today's Economic Calendar
Monday's Economic Calendar
10:00 ISM Non-Manufacturing Index
10:00 Existing Home Sales
10:00 Employment Trends Index
10:00 ISM Non-Manufacturing Index
10:00 Existing Home Sales
10:00 Employment Trends Index
Wall Street Morning News
Wall Street Breakfast: Must Know News
by Mary Hunt
Jobs growth arrives. Nonfarm payrolls rose by 162K in March, the biggest monthly advance in three years and the first convincing evidence since the recession began that the job market is recovering. Job creation was spread across industries, suggesting the uptick reflects broad economic momentum. Still, the duration of unemployment remains near record highs, and the number of long-term unemployed (+27 weeks) rose by 414K to 6.5M. Economist Heidi Shierholz summed up the Street's cautious optimism: "We have had this massive disaster, but we're at a place now where things are stabilizing. But it's nowhere near the level of growth we need to start moving the dial." Stock markets were closed Friday, giving investors the long weekend to mull the data's significance going into the new week.
Geithner delays call on China currency manipulation. Treasury's Tim Geithner is delaying his April 15 report to Congress on the exchange rate policies of major U.S. trading partners, buying time to decide whether to label China as a currency manipulator. Geithner urged China to move toward a more flexible currency, and said the goal of the delay is to capitalize on "the G-20 and S&ED meetings with China to make material progress in the coming months." In another indication of a possible China-U.S. detente over the yuan, Li Daokui, a member of China's central bank monetary policy committee, said the countries' currency disagreement can be easily solved as long as the U.S. respects China's "core interests." The delay, and Li's comments, come ahead of Chinese President Hu Jintao's trip to Washington D.C. on April 12-13.
NBER official says recession has ended. There's been no official word from the National Bureau of Economic Research, but a key official says the recession is likely over. Robert Hall, head of the NBER's Business Cycle Dating Committee, referencing Friday's payrolls figure, said he "personally put lots of emphasis on employment. I would say 'pretty clear' is a good description" for whether the economic contraction has ended. An official announcement from the NBER may still be some time away, however, as the committee won't make a declaration until it can assign a precise end date to the recession, a process which usually takes 6-18 months.
Criminal charges unlikely in AIG probe. Two years after federal prosecutors launched an investigation into the role of AIG's (AIG) executives in the insurer's collapse, the probe will likely end without a single criminal charge, sources say. Former AIG executive Joseph Cassano has been at the center of the probe, but the case against him has reportedly "hit a brick wall," with investigators unable to uncover evidence that Cassano lied to his bosses or shareholders about the company's financial problems.
iPad debut. Apple (AAPL) enthusiasts lined up Saturday morning to get their hands on a spanking new iPad (teardown), but once doors opened things were relatively tame, with some reports of sellouts, but many store managers saying they were well stocked. Piper Jaffray analyst Gene Munster - a respected Apple authority - estimates first-weekend sales at 600-700K, vastly stronger than his initial projection of 200-300K. But launch sales could be tempered by the fact that customers have been able to pre-order the iPad for home delivery, and because 3G-enabled iPads only begin selling later this month.
Backlash against iron ore pricing. The China Iron and Steel Association (CISA) has asked domestic steel companies and traders with import licenses not to buy iron ore from Vale (VALE), Rio Tinto (RTP) and BHP Billiton (BHP) in the next two months, in protest of the new quarterly iron ore pricing system. CISA believes global iron ore producers have made "unreasonable requests for price hikes," and Chinese steelmakers have enough iron ore inventory to sustain a two-month buying moratorium.
Faulty paperwork at center of foreclosure probe. Docx, a unit of Lender Processing Services (LPS) - which provides backoffice services for banks in the foreclosure process - is being investigated by federal prosecutors for criminal violations. A U.S. government lawyer who monitors bankruptcy courts believes some of LPS's loan documents were "patently false or misleading"; among the docs being reviewed is one that names "Bogus Assignee" as the owner of a loan (a company spokesman says that this phrase is used as a placeholder and was inadvertently not updated). Faulty paperwork has been an ongoing issue in foreclosure proceedings since the housing crisis began.
Signs of life in real estate? Two possible signs of a possible real-estate rebound, one each from the west and east coasts. Home prices in so-called sand states - the sandy, sunny retreats that lured investors during the boom and were among the hardest hit in the bust - are starting to recover. In areas of California, prices for single-family homes are up 8.5%-14.7%, and in Arizona prices are up 7.4%. Florida and Nevada, in contrast, have yet to see a meaningful bounce. And in Manhattan, apartment sales doubled in Q1 as bargain hunters scooped up condos at prices about 29% below the peak.
CEO pay falls for the second year. Pay czar Kenneth Feinberg is making his mark. A report analyzing the compensation for 200 chief executives of public companies found that pay dropped 15% in 2009, the second annual decline. The average total was $9.5M in 2009, roughly comparable with 2004. However, last year's drop was largely due to a decline in the value of stock and option awards, which means a handful of lucky CEOs received a windfall when share prices rose. Alan Mulally of Ford (F), for example, saw his 2009 options package grow nearly 10 times in value, to more than $50M.
by Mary Hunt
Jobs growth arrives. Nonfarm payrolls rose by 162K in March, the biggest monthly advance in three years and the first convincing evidence since the recession began that the job market is recovering. Job creation was spread across industries, suggesting the uptick reflects broad economic momentum. Still, the duration of unemployment remains near record highs, and the number of long-term unemployed (+27 weeks) rose by 414K to 6.5M. Economist Heidi Shierholz summed up the Street's cautious optimism: "We have had this massive disaster, but we're at a place now where things are stabilizing. But it's nowhere near the level of growth we need to start moving the dial." Stock markets were closed Friday, giving investors the long weekend to mull the data's significance going into the new week.
Geithner delays call on China currency manipulation. Treasury's Tim Geithner is delaying his April 15 report to Congress on the exchange rate policies of major U.S. trading partners, buying time to decide whether to label China as a currency manipulator. Geithner urged China to move toward a more flexible currency, and said the goal of the delay is to capitalize on "the G-20 and S&ED meetings with China to make material progress in the coming months." In another indication of a possible China-U.S. detente over the yuan, Li Daokui, a member of China's central bank monetary policy committee, said the countries' currency disagreement can be easily solved as long as the U.S. respects China's "core interests." The delay, and Li's comments, come ahead of Chinese President Hu Jintao's trip to Washington D.C. on April 12-13.
NBER official says recession has ended. There's been no official word from the National Bureau of Economic Research, but a key official says the recession is likely over. Robert Hall, head of the NBER's Business Cycle Dating Committee, referencing Friday's payrolls figure, said he "personally put lots of emphasis on employment. I would say 'pretty clear' is a good description" for whether the economic contraction has ended. An official announcement from the NBER may still be some time away, however, as the committee won't make a declaration until it can assign a precise end date to the recession, a process which usually takes 6-18 months.
Criminal charges unlikely in AIG probe. Two years after federal prosecutors launched an investigation into the role of AIG's (AIG) executives in the insurer's collapse, the probe will likely end without a single criminal charge, sources say. Former AIG executive Joseph Cassano has been at the center of the probe, but the case against him has reportedly "hit a brick wall," with investigators unable to uncover evidence that Cassano lied to his bosses or shareholders about the company's financial problems.
iPad debut. Apple (AAPL) enthusiasts lined up Saturday morning to get their hands on a spanking new iPad (teardown), but once doors opened things were relatively tame, with some reports of sellouts, but many store managers saying they were well stocked. Piper Jaffray analyst Gene Munster - a respected Apple authority - estimates first-weekend sales at 600-700K, vastly stronger than his initial projection of 200-300K. But launch sales could be tempered by the fact that customers have been able to pre-order the iPad for home delivery, and because 3G-enabled iPads only begin selling later this month.
Backlash against iron ore pricing. The China Iron and Steel Association (CISA) has asked domestic steel companies and traders with import licenses not to buy iron ore from Vale (VALE), Rio Tinto (RTP) and BHP Billiton (BHP) in the next two months, in protest of the new quarterly iron ore pricing system. CISA believes global iron ore producers have made "unreasonable requests for price hikes," and Chinese steelmakers have enough iron ore inventory to sustain a two-month buying moratorium.
Faulty paperwork at center of foreclosure probe. Docx, a unit of Lender Processing Services (LPS) - which provides backoffice services for banks in the foreclosure process - is being investigated by federal prosecutors for criminal violations. A U.S. government lawyer who monitors bankruptcy courts believes some of LPS's loan documents were "patently false or misleading"; among the docs being reviewed is one that names "Bogus Assignee" as the owner of a loan (a company spokesman says that this phrase is used as a placeholder and was inadvertently not updated). Faulty paperwork has been an ongoing issue in foreclosure proceedings since the housing crisis began.
Signs of life in real estate? Two possible signs of a possible real-estate rebound, one each from the west and east coasts. Home prices in so-called sand states - the sandy, sunny retreats that lured investors during the boom and were among the hardest hit in the bust - are starting to recover. In areas of California, prices for single-family homes are up 8.5%-14.7%, and in Arizona prices are up 7.4%. Florida and Nevada, in contrast, have yet to see a meaningful bounce. And in Manhattan, apartment sales doubled in Q1 as bargain hunters scooped up condos at prices about 29% below the peak.
CEO pay falls for the second year. Pay czar Kenneth Feinberg is making his mark. A report analyzing the compensation for 200 chief executives of public companies found that pay dropped 15% in 2009, the second annual decline. The average total was $9.5M in 2009, roughly comparable with 2004. However, last year's drop was largely due to a decline in the value of stock and option awards, which means a handful of lucky CEOs received a windfall when share prices rose. Alan Mulally of Ford (F), for example, saw his 2009 options package grow nearly 10 times in value, to more than $50M.
Thursday, April 1, 2010
Today's Economic Calendar
Thursday's Economic Calendar
6:00 Auto sales
6:00 Monster Employment Index
7:30 Challenger Job-Cut Report
8:30 Initial Jobless Claims
10:00 ISM Manufacturing Index
10:00 Construction Spending
10:30 EIA Natural Gas Inventory
4:30 PM Fed Balance Sheet
4:30 PM Money Supply
5:00 PM Fed's Dudley: 'Economic Outlook for 2010'
6:00 Auto sales
6:00 Monster Employment Index
7:30 Challenger Job-Cut Report
8:30 Initial Jobless Claims
10:00 ISM Manufacturing Index
10:00 Construction Spending
10:30 EIA Natural Gas Inventory
4:30 PM Fed Balance Sheet
4:30 PM Money Supply
5:00 PM Fed's Dudley: 'Economic Outlook for 2010'
Wall Street Morning News
Wall Street Breakfast: Must-Know News
by SA Editor Rachael Granby
NY Fed releases Maiden Lane data. Late yesterday afternoon, the New York Federal Reserve disclosed nearly all the details related to the Maiden Lane holdings, the three limited liability companies that became storehouses for assets from Bear Stearns and AIG (AIG). The disclosure, which came after months of political pressure, shows that the government is stuck holding a portfolio of questionable loans and property that have lost their value and are facing the threat of rising defaults. Though the general size of the portfolio had already been known, the new information shows the range of properties covered in the portfolio.
GGP files bankruptcy exit plan. General Growth Properties (GGP) filed a plan to exit bankruptcy and laid out a two-round bidding process. In the standalone plan, Brookfield Asset Management (BAM), Fairholme Capital Management and William Ackman's Pershing Square Capital will invest $6.55B to fund the firm's bankruptcy exit, receiving in return a majority interest and warrants to buy another 120M shares. However, other interested firms, like Simon Property Group (SPG), will be able to submit rival bids. GGP wants first-round bids by April 19, a final deal in place by July 2 and a bankruptcy exit by September 30.
Obama expands offshore drilling. The White House unveiled a "comprehensive strategy for energy security" yesterday that allows offshore oil and natural gas drilling in a huge section of East Coast waters and in other protected areas in Alaska and the Gulf of Mexico. The decision could help U.S. producers hold down the cost of exploration, and could impact the country's domestic and foreign policies as "we are going to need vital energy sources to maintain our economic growth and our security."
Borders surges on EPS jump. Borders Group (BGP) rocketed nearly 34% in after hours trading after announcing its Q4 earnings per share had risen to $0.91 from $0.48 the year before, and that it had secured new credit facilities of nearly $800M. Though its profit rose, helped in part by an income tax benefit and cost cuts, sales fell 13%. The company plans to put more emphasis on "growing market share by acquiring, engaging and retaining customers through a transformation of the Borders brand."
EMI breaches debt covenants. Terra Firma's EMI music company breached its debt covenants yesterday after failing to reach a licensing deal with either Universal Music Group (VIVDY.PK) or Sony Music (SNE). Terra Firma will now have to turn to its investors to raise £120M ($183M) by June 12, or face a seizure of EMI by lender Citigroup (C).
Mixed messages on mortgages. In its monthly summary, Fannie Mae (FNM) reported the serious delinquency rate for single-family houses hit a new record of 5.52% in January, a jump from December's 5.38% and nearly double the 2.77% registered in Jan. 2009. However, an industry trade group reported that for the first time in four years, borrowers catching up on overdue mortgages outnumbered new delinquencies. Last month 80,758 privately insured homeowners got back on track vs. 68,675 that fell into default. Yesterday also marked the end of the Federal Reserve's $1.25T program to purchase mortgage-backed securities.
Report faults China on unfair trade. In its annual report on trade barriers, the U.S. Trade Representative's office accused China of engaging in several dubious measures meant to keep foreign companies from competing fairly in its market. Though China has reduced official trade tariffs and quotas, its "willingness to encourage domestic or 'indigenous' innovation at the cost of foreign innovation and technologies" is troubling. The report sidestepped China's policies on the yuan.
Credit Suisse may buy hedge fund stake. Credit Suisse (CS) may buy a minority stake in hedge-fund giant York Capital, sources said, though talks could still fall apart. Tie-ups between big banks and hedge funds aren't new, but there have been few such deals lately. Perhaps more importantly, the talks suggest that at least some on Wall Street think regardless of whatever financial reform legislation is ultimately passed, large financial firms will be allowed to continue owning hedge-fund stakes.
Yahoo gets hacked. Several activists and journalists working on issues related to China and Taiwan reported yesterday that their Yahoo (YHOO) email accounts were hacked into, making this the latest of a string of internet incidents involving China. Yahoo "condemns all cyber attacks regardless of origin or purpose," but a spokeswoman declined to discuss the latest breach for privacy reasons.
Google's China business starts to fall apart. Google's (GOOG) China business is starting to show signs of strain. Earlier this week, the company accused China of blocking searches on its Hong Kong website, and as of yesterday, searches out of China remained problematic. As a result, advertisers say they are seeing a major drop-off in traffic, and are inclined to respond by switching to other search engines. According to some analysts, the returns in China from Google's search ads have dropped 30-50% as compared to before Chinese search was moved to the Hong Kong site.
Hartford repays TARP. Hartford Financial Services (HIG) said yesterday that it had bought back $3.4B in TARP preferred shares but doesn't plan to repurchase 52M warrants. With the government repaid, the company is "well positioned from both a capital and balance sheet perspective." Shares closed up 1.4% yesterday.
MSFT, Ford team up on electric cars. Microsoft (MSFT) will expand its Hohm consumer energy management software to work with Ford's (F) electric cars. The partnership will allow drivers to determine the best time to recharge their vehicles at home. As more people use electric cars and want to recharge the batteries after coming home from work, "the demand placed on the energy grid will be momentous. Addressing the challenge of how that demand is managed in a smart and affordable way is absolutely going to be critical."
IPOs fare favorably. A handful of companies made their market debuts, with most of the initial public offerings showing favorable results. Wireless network provider Meru Networks (MERU) closed nearly 28% above its IPO price, while financial services software maker SS&C Technologies (SSNC) opened 6.7% above its IPO price (though it closed up only 0.5%). Primerica (PRI), Citigroup's (C) life insurance unit, sold 21.4M shares instead of the 18M expected, and priced at $15 instead of the $12-14 expected. Crude oil and petroleum transporter Scorpio Tankers (STNG) performed worse-than-expected, closing 3.4% below its IPO price.
by SA Editor Rachael Granby
NY Fed releases Maiden Lane data. Late yesterday afternoon, the New York Federal Reserve disclosed nearly all the details related to the Maiden Lane holdings, the three limited liability companies that became storehouses for assets from Bear Stearns and AIG (AIG). The disclosure, which came after months of political pressure, shows that the government is stuck holding a portfolio of questionable loans and property that have lost their value and are facing the threat of rising defaults. Though the general size of the portfolio had already been known, the new information shows the range of properties covered in the portfolio.
GGP files bankruptcy exit plan. General Growth Properties (GGP) filed a plan to exit bankruptcy and laid out a two-round bidding process. In the standalone plan, Brookfield Asset Management (BAM), Fairholme Capital Management and William Ackman's Pershing Square Capital will invest $6.55B to fund the firm's bankruptcy exit, receiving in return a majority interest and warrants to buy another 120M shares. However, other interested firms, like Simon Property Group (SPG), will be able to submit rival bids. GGP wants first-round bids by April 19, a final deal in place by July 2 and a bankruptcy exit by September 30.
Obama expands offshore drilling. The White House unveiled a "comprehensive strategy for energy security" yesterday that allows offshore oil and natural gas drilling in a huge section of East Coast waters and in other protected areas in Alaska and the Gulf of Mexico. The decision could help U.S. producers hold down the cost of exploration, and could impact the country's domestic and foreign policies as "we are going to need vital energy sources to maintain our economic growth and our security."
Borders surges on EPS jump. Borders Group (BGP) rocketed nearly 34% in after hours trading after announcing its Q4 earnings per share had risen to $0.91 from $0.48 the year before, and that it had secured new credit facilities of nearly $800M. Though its profit rose, helped in part by an income tax benefit and cost cuts, sales fell 13%. The company plans to put more emphasis on "growing market share by acquiring, engaging and retaining customers through a transformation of the Borders brand."
EMI breaches debt covenants. Terra Firma's EMI music company breached its debt covenants yesterday after failing to reach a licensing deal with either Universal Music Group (VIVDY.PK) or Sony Music (SNE). Terra Firma will now have to turn to its investors to raise £120M ($183M) by June 12, or face a seizure of EMI by lender Citigroup (C).
Mixed messages on mortgages. In its monthly summary, Fannie Mae (FNM) reported the serious delinquency rate for single-family houses hit a new record of 5.52% in January, a jump from December's 5.38% and nearly double the 2.77% registered in Jan. 2009. However, an industry trade group reported that for the first time in four years, borrowers catching up on overdue mortgages outnumbered new delinquencies. Last month 80,758 privately insured homeowners got back on track vs. 68,675 that fell into default. Yesterday also marked the end of the Federal Reserve's $1.25T program to purchase mortgage-backed securities.
Report faults China on unfair trade. In its annual report on trade barriers, the U.S. Trade Representative's office accused China of engaging in several dubious measures meant to keep foreign companies from competing fairly in its market. Though China has reduced official trade tariffs and quotas, its "willingness to encourage domestic or 'indigenous' innovation at the cost of foreign innovation and technologies" is troubling. The report sidestepped China's policies on the yuan.
Credit Suisse may buy hedge fund stake. Credit Suisse (CS) may buy a minority stake in hedge-fund giant York Capital, sources said, though talks could still fall apart. Tie-ups between big banks and hedge funds aren't new, but there have been few such deals lately. Perhaps more importantly, the talks suggest that at least some on Wall Street think regardless of whatever financial reform legislation is ultimately passed, large financial firms will be allowed to continue owning hedge-fund stakes.
Yahoo gets hacked. Several activists and journalists working on issues related to China and Taiwan reported yesterday that their Yahoo (YHOO) email accounts were hacked into, making this the latest of a string of internet incidents involving China. Yahoo "condemns all cyber attacks regardless of origin or purpose," but a spokeswoman declined to discuss the latest breach for privacy reasons.
Google's China business starts to fall apart. Google's (GOOG) China business is starting to show signs of strain. Earlier this week, the company accused China of blocking searches on its Hong Kong website, and as of yesterday, searches out of China remained problematic. As a result, advertisers say they are seeing a major drop-off in traffic, and are inclined to respond by switching to other search engines. According to some analysts, the returns in China from Google's search ads have dropped 30-50% as compared to before Chinese search was moved to the Hong Kong site.
Hartford repays TARP. Hartford Financial Services (HIG) said yesterday that it had bought back $3.4B in TARP preferred shares but doesn't plan to repurchase 52M warrants. With the government repaid, the company is "well positioned from both a capital and balance sheet perspective." Shares closed up 1.4% yesterday.
MSFT, Ford team up on electric cars. Microsoft (MSFT) will expand its Hohm consumer energy management software to work with Ford's (F) electric cars. The partnership will allow drivers to determine the best time to recharge their vehicles at home. As more people use electric cars and want to recharge the batteries after coming home from work, "the demand placed on the energy grid will be momentous. Addressing the challenge of how that demand is managed in a smart and affordable way is absolutely going to be critical."
IPOs fare favorably. A handful of companies made their market debuts, with most of the initial public offerings showing favorable results. Wireless network provider Meru Networks (MERU) closed nearly 28% above its IPO price, while financial services software maker SS&C Technologies (SSNC) opened 6.7% above its IPO price (though it closed up only 0.5%). Primerica (PRI), Citigroup's (C) life insurance unit, sold 21.4M shares instead of the 18M expected, and priced at $15 instead of the $12-14 expected. Crude oil and petroleum transporter Scorpio Tankers (STNG) performed worse-than-expected, closing 3.4% below its IPO price.
Wednesday, March 31, 2010
Double Dip on Housing Prices?
Home prices in January 2010 showed only minimal decline from a year earlier, according to the latest Standard & Poor’s (S&P)/Case-Shiller US National Home Price Index.
The annual declines in the 10-city and 20-city composites show improvement from December’s declines, but mixed results underscore the threat of a double dip in house prices.
The 10-city index showed no change from January 2009, and the 20-city index declined only 0.7% during the same time. S&P/Case-Shiller notes in the latest report that annual rates for the two composites have not been so close to “a positive print” in three years, since January 2007. Both indices showed seasonally unadjusted declines and are back to their autumn 2003 levels:
“While we continue to see improvements in the year-over-year data for all 20 cities, the rebound in housing prices seen last fall is fading,” said David Blitzer, managing director and chairman of the S&P Index Committee, in a press statement. “Fewer cities experienced month-to-month gains in January than in December 2009, on both a seasonally adjusted and unadjusted basis.”
Blitzer is not the only one seeing mixed results in the January report.
Paul Dales, the US economist at Toronto-based Capital Economics, notes in e-mailed commentary that although house prices on the 20-city composite have yet to reverse recent increases, “it is only a matter of time before the index records a double-dip in prices, much like that already seen on the alternative [Federal Housing Finance Agency] FHFA measure.”
Dales pointed out the 0.4% monthly decline in the seasonally unadjusted 20-city composite index from December 2009 — the fourth fall in as many months. But a “normal softness” in the market meant seasonally adjusted prices rose 0.3% in the same time — the eighth increase in as many months, according to Dales.
“This run-up in prices primarily reflects the increase in sales generated by the [first-time homebuyer] tax credit towards the end of last year, which reduced the excess supply,” he said. “The real test for the market will therefore come when the tax credit expires at the end of June. At that point, we think that demand will fall back and foreclosures will continue to boost supply.”
Dales added: “Such a toxic combination will push prices lower again. The FHFA index, which fell in the two months to January, suggests these trends may have already begun to weigh on prices even before the tax credit has expired.”
Capital Economics projects prices on the Case-Shiller measure to fall back by at least 5%, undermining the “still fragile household sector” as well as the strength and sustainability of the overall economic recovery seen so far, Dales said.
As of January 2010, S&P/Case-Shiller said average home prices are now at similar levels seen in the autumn of 2003. The 10-city composite fell 33.5% and the 20-city composite fell 32.6% from the peak in June and July 2006 to the April 2009 trough. The peak-to-date differences through January 2010 are -30.2% and -29.6% respectively.
The annual declines in the 10-city and 20-city composites show improvement from December’s declines, but mixed results underscore the threat of a double dip in house prices.
The 10-city index showed no change from January 2009, and the 20-city index declined only 0.7% during the same time. S&P/Case-Shiller notes in the latest report that annual rates for the two composites have not been so close to “a positive print” in three years, since January 2007. Both indices showed seasonally unadjusted declines and are back to their autumn 2003 levels:
“While we continue to see improvements in the year-over-year data for all 20 cities, the rebound in housing prices seen last fall is fading,” said David Blitzer, managing director and chairman of the S&P Index Committee, in a press statement. “Fewer cities experienced month-to-month gains in January than in December 2009, on both a seasonally adjusted and unadjusted basis.”
Blitzer is not the only one seeing mixed results in the January report.
Paul Dales, the US economist at Toronto-based Capital Economics, notes in e-mailed commentary that although house prices on the 20-city composite have yet to reverse recent increases, “it is only a matter of time before the index records a double-dip in prices, much like that already seen on the alternative [Federal Housing Finance Agency] FHFA measure.”
Dales pointed out the 0.4% monthly decline in the seasonally unadjusted 20-city composite index from December 2009 — the fourth fall in as many months. But a “normal softness” in the market meant seasonally adjusted prices rose 0.3% in the same time — the eighth increase in as many months, according to Dales.
“This run-up in prices primarily reflects the increase in sales generated by the [first-time homebuyer] tax credit towards the end of last year, which reduced the excess supply,” he said. “The real test for the market will therefore come when the tax credit expires at the end of June. At that point, we think that demand will fall back and foreclosures will continue to boost supply.”
Dales added: “Such a toxic combination will push prices lower again. The FHFA index, which fell in the two months to January, suggests these trends may have already begun to weigh on prices even before the tax credit has expired.”
Capital Economics projects prices on the Case-Shiller measure to fall back by at least 5%, undermining the “still fragile household sector” as well as the strength and sustainability of the overall economic recovery seen so far, Dales said.
As of January 2010, S&P/Case-Shiller said average home prices are now at similar levels seen in the autumn of 2003. The 10-city composite fell 33.5% and the 20-city composite fell 32.6% from the peak in June and July 2006 to the April 2009 trough. The peak-to-date differences through January 2010 are -30.2% and -29.6% respectively.
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