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European Stocks Slump On Subprime Woes (The Wall Street Journal)
There was a small part of us that was almost fearful to turn on the computer and start scanning the headlines this morning. Did the world end overnight? Did interbank lending activity literally seize up, bringing the modern banking system to a screeching halt? Were there real runs on the bank in Europe? Did the stock market plummet by 15%. The good news is that none of those things happened. We never were assigning them a high probability, of course. That being said, European markets were pummeled for the second day in a row on all of the same concerns. Financial stocks, it goes without saying, were hit particularly hard.
Home Depot Says Sale Price of HD Supply May Be Cut (Bloomberg)
A few months ago, Home Depot set the wheels in motion to sell off its supplies business to private equity. That was before all of the madness started up, so now the company is warnings that it's likely to sell the unit at a lower price, just to get it done. It also means that the company may have to scale back a planned repurchase of its own shares. Gee, you'd think management could think of something more clever than a mere share buyback. Also, there's been a lot of chatter lately about spinoffs and demergers, which always come after long periods of M&A. It wouldn't be surprising to see a lot of units get sold at disappointing prices, as companies are desperate for any cash they can rustle up.
Asian markets plunge as panicked investors stage sell-offs (LA Times)
Asian markets also plunged overnight, as they pretty much did the same song and dance as European exchanges. Subprime, credit, liquidity -- it's always the same story. And, just to be on the same page, the government injected cash into the market. Cash injections are pretty much the only thing the government knows how to do in these situations. There should be some modification about the old saw "when you're only tool is a hammer, everything looks like a nail". "When you're only tool is a cash injection, everything looks like a liquidity crunch" Who wants to turn that into a bumper sticker or submit it to Busted Tees?
DirecTV net off; to buy back up to $1 bln in shrs (Reuters)
And here's another version of it "When your only tool is a stock buyback, your stock always looks like a good buy" Eh!?
Toyota Faces New Hybrid Drought (WSJ)
Toyota isn't known for quality problems or a failure to relentlessly innovate. Still, sometimes even the best just can't get it together. The company says that it has no plans to release new hybrid and electric vehicle models over the next few years, since it hasn't gotten the design down. In particular, it still has some safety kinks to work out. We're not sure if this is actually a big deal or not, although the company's forthrightness is laudable. Compare the tone to GM, which is facing similar issues, but is "confident" that somewhere, someone will crack the technology enabling it to sell battery powered cars by 2010.
The Last Shall Be First and the First Last (CrossingWallStreet)
Eddie puts on his Michelle Caruso-Cabrera hat and does a nice sector wrap, comparing performance across 10 sectors over the last month and the month before that. What does he find. The big winners of the previous month were this one's big losers. The sectors that were just stumbling along sort of continue to stumble along. The market is nothing if it's not just.
Boston Scientific to Unwind Advanced Bionics Deal (Dealbook)
Now this is something you definitely do not see every day, even in crazy times like these. Troubled stent maker (are there any other kind) Boston Scientific announced lat yesterday that it will unwind its purchase of Advanced Bionics, a pain management company that it bought in 2004. It will give its original owners $1.5 billion in order to buy back the company from it. Basically, Boston Scientific was faced with the prospect of owing $3 billion in future earnouts to the folks from whom its acquired the company. It didn't want to do that, so it's just giving the company back for free. It had already paid $740 million for the company. Good deal for the original shareholders it would seem.
Revised Climate Data Released (Venture Chronicles)
Oh, er, turns out that most of the hottest years of the 20th century were pre WWII. Expect this news, which was released by NASA, to receive a lot of coverage in the major media.
Profiting From The Meltdown
Ok, so technically speaking the markets are something of a zero-sum game. And so, while lots of folks are losing their shirt son this subprime stuff, there are some that are profiting handsomely, like Deutsche Bank which played these mortgages on the short side. So why doesn't the fact that some institutions are cashing in make anyone feel relieved. Well, for one thing, there seem to be a lot more losers than winners, and the losers are probably more leveraged than the winners so their impact is magnified. But in a bigger sense, the winners have already had their day. The winners are the folks that got a house they otherwise couldn't have afforded to buy. The winners were everyone in the economy who was affected by a buoyant housing market. The losers, at the time, were folks like Deutsche Bank, which wasn't seeing profits on its bets. So while winners and losers do even out, they don't do so at the same time. Right now, it's time for the losers.