GMAC set to receive 1 bln usd from GM; warns on US mortgage sector (Forbes)
We don't really believe the numbers, but GM claims to have made a profit of $950 million in its most recent quarter. However, the company took in an extra $770 million associated with the sale of 51% of GMAC, its lending arm . So without that, the company's profit would've only been $180 million. Alright, that's quite a bit less, but for a company like GM to be reporting anything in the black is a cause worthy of celebration, right? Well, just to complicate things, GM will have to make a $1 billion cash injection to GMAC following heavy losses associated with subprime mortgages, proving that everything revolves around mortgages right now.
Europe, Asia Stocks Slide on U.S. Growth Concern; Banks Drop (Bloomberg)
For about a week and a half there global markets managed to break the back-and-forth downward cycle whereby Asian markets would freak out about US markets, and then the next morning, the US markets would return the favor. We seem to be heading back to this state, following a rough night in the rest of the world, which followed our rough day, yesterday. Again, it's all about mortgages, as investors are paring back their exposure to foreign lenders for fear that they'll get caught up in the mess.
Bear and UBS Subpoenaed Over Subprime Research (Dealbook)
Just for today, our Opening Bell motto has to be "All Subprime All The Time", cause that's all anyone seems to be interested in. In an event reminiscent of the internet bubble days, the AG of Massachusetts has asked UBS and Bear Stearns to turn over documents relating to their analyst research on New Century Financial. He's curious as to whether positive notes were put out on the stock as a favor to other divisions within the banks. Of course, several banks pledged, following the bubble, to put up a wall between the two sides of the business to prevent anything like this from happening. We'll see if that did anything.
Citigroup Won't Raise $13.4 Billion Nikko Bid Further (Bloomberg)
Now listen here, if you don't like $13.4 billion, you can shove it, because that's as high as Citigroup is planning to go in its bid for Nikko. The offer expires on April 26th, and if shareholders don't approve the deal, then they're going to have to pay a whopping $43 million breakup fee.
Dubai Inc. and the Parliament of Whores (Controlled Greed)
We wish we could've talked about this a little more, as we're still fascinated by Halliburton's decision to head off to Dubai. Controlled Greed has a nice post on the subject, looking at the hypocrisy and absurdity of the US politicians freaking out about the move. Dubai didn't get to be what it is today on accident. It made a concerted effort to modernize and Westernize its legal structure, making it the most inviting place for capital in the region, despite the fact that it's running out of oil. As Mr. Controlled Greed point out, instead of slamming Halliburton, politicians should be holding Dubai and saluting them for being shining example of what's possible in the region. Agreed.
Mutual Funds at Some Risk on Mortgages (NYT)
Does Gretchen Morgenson always do a Wednesday column? Either way, today she bring us a startling revelation that the Subprime fallout may hurt Main St. investors because, yup, some mutual funds own shares in companies like New Century Financial; some funds even owned their debt. It's not clear what her point is with this. Perhaps she thinks that Mom & Pop investors should be insulated in risk in some way, or that everytime people loses money there's gotta be a scandal. Oh wait, we know she thinks all that.
Goldman Goes Hunting In Battered Loan Sector After a Record Quarter (WSJ)
Goldman, as we know, had relatively less exposure to the subprime market, compared to other banks. But that may not last for long. The company thinks it knows a bargain when it sees one, and is interested in aggressively upping its activity in this space. That's awesome. You gotta love the aggressor that buys when everyone else sells, since, of course, that's where the money is.
Cadbury Schweppes Soars on Peltz Stake (BusinessWeek)
Shares of Cadbury Schweppes jumped following news that activist investor Nelson Peltz has bought a stake in the company, fueling speculation that the company could break up or make some other move to increase shareholder value. It's not clear what Peltz has in mind with the company. Perhaps he thinks they should spin off their chocolate eggs business, and focus their energy exclusively on ginger ale, which the company is definitely very good at. Also, Peltz is said to be interested in getting the company more exposed to subprime mortgage assets, which he feels are dirt cheap right now.