Opening Bell: 11.12.08

Posted by Dealbreaker, Nov 12, 2008, 7:53am

Picture 167.pngAMEX After $3.5B In TARP Money (WSJ)
American Express, after becoming a Bank Holding Company on Monday, is seeking aid to the tune of $3.5B to cover losses because of bad lines of credit and increasing costs. There's a bit of an ethical question floating about, namely whether or not this is the intended use of Taxpayer money.

China Retail Sales Up 22% (Bloomberg)
China's retail sales rose 22% in October in spite of global economic woes, which is a hell of an accomplishment. China's working hard not to let the numbers slip into "average" growth territory, you'll remember a couple of days ago (Monday) they announced ~$600B in aid to improve fundamentals. Right now it looks like their chief concern is Real Estate devaluations undermining investments, which in turn is leading to a constriction in investment spending across the board.

You'll Probably Be Getting Coal For Christmas Anyway (Reuters)
American Research Group released its numbers for Christmas Spending, and they're calling for a cut - the first in more than 20 years. Apparently those surveyed are planning on spending less per gift and buying fewer gifts, which led to the ARG projecting a -1% growth in retail spending.

Have Americans finally gotten the point? It seems rather obvious people can't afford the crap their buying: if you make 40k a year you can't afford a 40k car, 200k house, and 20k in credit lines. It's just not possible. You can't afford that crap at 80k a year, though I'm sure you could show me some spreadsheet that proves beyond a shadow of a doubt that if you account for 98% of your earnings and you stretch the car loans out to 6 years, you can just make it.

Treasury May Call For PE Backer To Injections (WSJ)
The Treasury is pulling a classic girlfriend move here, calling for extra terms after it's handed a little of the "good stuff" out. They might be moving to require that firms seeking capital from the TARP program raise a minimum requirement through Private Equity before becoming eligible. The new rules would most probably come into effect after (if) Congress approves the remaining $350B in aid money, as they only have $60B left in the original disbursement.

Also of note, the article touches on how the Treasury isn't using the money to buy troubled assets but rather for direct injections, presumably (though not implicitly mentioned) through buying Preffereds.

Just a thought here, but if you (Mr. Government) had your shit together you could put all these preferred's in the SWF proposed in yesterday's OB, and actually put the money towards something meaningful, like saving SS so we don't (collectively) have to pay for our parent's fucking retirement out of pocket.

Pershing's Ackman Says GM Should Reorganize (CNBC)
Ackman has reportedly come down on the side of reorganization, and while he doesn't explicitly cite me as the grand master architect of GMs salvation, it's obvious we're on the same page:

"GM should be allowed to succeed," Ackman, who runs New York-based Pershing Square Capital Management, told Reuters Tuesday. "And the only way GM can succeed is if it has a balance sheet its business can support."

Pelosi Furthers Socialist Endeavors (NYT)
The Auto Manufacturers are failing because they're a financial nightmare, not because they're caught in the credit squeeze, so it makes absolute sense that we should bail them out - always seek a short term solution costing Billions of dollars whenever possible.

BOE Cut Looming (Bloomberg)
We could see a cut coming from the BOE, as recent efforts to calm contraction have failed; I'd look for 25/50bps in the near future.

Oil Markets May Have Rough Future (Reuters)
An American was shot in Pakistan (now owned by China) yesterday, and Iran was test firing missiles (Russia's new lap dog); there's obviously a sense of calm in the air.

--William Richards

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